The information in this free writing prospectus may be amended and/or supplemented prior to the time of sale. The information in this free writing prospectus supersedes any contrary information contained in any prior free writing prospectus relating to the subject securities and will be superseded by any contrary information contained in any subsequent free writing prospectus prior to the time of sale. In addition, certain information regarding the subject securities is not yet available and, accordingly, has been omitted from this free writing prospectus.
The depositor has filed a registration statement (including a prospectus) with the SEC (SEC File No. 333-142235) for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the depositor has filed with the SEC for more complete information about the depositor, the issuing entity and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the depositor, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling toll free 866-500-5408.
FREE WRITING PROSPECTUS
(to Prospectus dated May 10, 2007)
$2,264,889,000
(Approximate)
ML-CFC Commercial Mortgage Trust 2007-8
as Issuing Entity
Commercial Mortgage Pass-Through Certificates, Series 2007-8
Merrill Lynch Mortgage Investors, Inc.
as Depositor
Countrywide Commercial Real Estate Finance, Inc.
Merrill Lynch Mortgage Lending, Inc.
KeyBank National Association
as Sponsors and Loan Sellers
We are Merrill Lynch Mortgage Investors, Inc., the depositor with respect to the securitization transaction that is the subject of this free writing prospectus. Only the classes of commercial mortgage pass-through certificates listed in the table below are being offered by this free writing prospectus and the accompanying base prospectus. The offered certificates represent beneficial interests only in the issuing entity identified above and will not represent obligations of or interests in the depositor, any sponsor or any of their respective affiliates. The assets of the issuing entity will consist primarily of a pool of 218 commercial, multifamily and manufactured housing community mortgage loans with an initial mortgage pool balance of approximately $2,435,364,704 and the other characteristics described in this free writing prospectus.
Investing in the offered certificates involves risks. You should carefully review the factors described under ‘‘Risk Factors’’ beginning on page S-47 of this free writing prospectus and on page 20 of the accompanying base prospectus.
The holders of each class of offered certificates will be entitled to receive monthly distributions of interest, principal or both, commencing in September, 2007. The offered certificates will accrue interest from August 1, 2007. The pass-through rates for some classes of the offered certificates will be variable. Credit enhancement for any particular class of the offered certificates is being provided through the subordination of various other classes, including multiple non-offered classes, of the certificates.
Expected
Ratings
(Fitch/S&P)
Approximate
Initial
Total Principal
Balance or Notional
Amount
Approximate
Initial
Pass-Through
Rate
Assumed Final
Distribution
Date
Rated Final
Distribution
Date
Class A-1
AAA/AAA
$
37,262,000
%
June 2012
August 2049
Class A-2
AAA/AAA
$
[122,485,000]
(1)
%
May 2016
August 2049
Class A-SB
AAA/AAA
$
72,678,000
%
March 2017
August 2049
Class A-3
AAA/AAA
$
[438,559,000]
(1)
%
July 2017
August 2049
Class A-1A
AAA/AAA
$
1,033,771,000
%
July 2017
August 2049
Class AM
AAA/AAA
$
[243,536,000]
(1)
%
July 2017
August 2049
Class AJ
AAA/AAA
$
[210,050,000]
(1)
%
August 2017
August 2049
Class B
AA+/AA+
$
12,177,000
%
August 2017
August 2049
Class C
AA/AA
$
39,575,000
%
August 2017
August 2049
Class D
AA−/AA−
$
27,398,000
%
August 2017
August 2049
Class E
A+/A+
$
9,132,000
%
August 2017
August 2049
Class F
A/A
$
18,266,000
%
August 2017
August 2049
(footnotes to table begin on page S-5)
No one will list the offered certificates on any national securities exchange or any automated quotation system of any registered securities association. The Securities and Exchange Commission and state securities regulators have not approved or disapproved of the certificates offered to you or determined if this free writing prospectus or the accompanying base prospectus is adequate or accurate. Any representation to the contrary is a criminal offense.
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc., Banc of America Securities LLC and Bear, Stearns & Co. Inc. are the underwriters of this offering. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Countrywide Securities Corporation are acting as joint bookrunning managers in the following manner: Countrywide Securities Corporation is acting as sole bookrunning manager with respect to % of the class certificates, and Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as sole bookrunning manager with respect to the remainder of the class certificates and all other classes of offered certificates. KeyBanc Capital Markets Inc., Banc of America Securities LLC and Bear, Stearns & Co. Inc. will act as co-managers. We will sell the offered certificates to the underwriters, who will sell their respective allotments of those securities from time
to time in negotiated transactions or otherwise at varying prices to be determined at the time of sale. The underwriters expect to deliver the offered certificates to purchasers on or about August 24, 2007. We expect to receive from this offering approximately $ in sale proceeds, plus accrued interest on the offered certificates from and including August 1, 2007, before deducting expenses payable by us. Not every underwriter will have an obligation to buy offered certificates from us.
Merrill Lynch & Co.
Countrywide Securities Corporation
KeyBanc Capital Markets
Banc of America Securities LLC
Bear, Stearns & Co. Inc.
The date of this prospectus supplement is August , 2007
The information in this free writing prospectus is preliminary, and may be
superseded by an additional free writing prospectus provided to you prior to the
time you enter into a contract of sale. The mortgage pool information presented
in this free writing prospectus is preliminary and may differ materially from
the mortgage pool information delivered to you prior to the time you enter into
a contract of sale. This preliminary free writing prospectus is being delivered
to you solely to provide you with information about the offering of the
securities referred to herein. The securities are being offered when, as and if
issued. In particular, you are advised that these securities, and the asset
pools backing them, are subject to modification or revision (including, among
other things, the possibility that one or more classes of securities may be
split, combined or eliminated), at any time prior to issuance or availability of
a final prospectus. As a result, you may commit to purchase securities that have
characteristics that may change, and you are advised that all or a portion of
the securities may not be issued that have the characteristics described in
these materials. Our obligation to sell securities to you is conditioned on the
securities and the underlying transaction having the characteristics described
in these materials.
A contract of sale will come into being no sooner than the date on which
the relevant class has been priced and we have confirmed the allocation of
securities to be made to you; any "indications of interest" expressed by you,
and any "soft circles" generated by us, will not create binding contractual
obligations for you or us. You may withdraw your offer to purchase securities at
any time prior to our acceptance of your offer.
Any legends, disclaimers or other notices that may appear at the bottom of
the email communication to which this free writing prospectus may be attached
relating to (1) these materials not constituting an offer (or a solicitation of
an offer), (2) no representation that these materials are accurate or complete
and may not be updated or (3) these materials possibly being confidential are
not applicable to these materials and should be disregarded. Such legends,
disclaimers or other notices have been automatically generated as a result of
these materials having been sent via Bloomberg or another system.
IMPORTANT NOTICE ABOUT THE INFORMATION CONTAINED IN THIS FREE WRITING
PROSPECTUS AND THE ACCOMPANYING BASE PROSPECTUS
Information about the offered certificates is contained in two separate
documents--
o this free writing prospectus, which describes the specific terms of
the offered certificates; and
o the accompanying base prospectus, which provides general
information, some of which may not apply to the offered
certificates.
You should read both this free writing prospectus and the accompanying
base prospectus in full to obtain material information concerning the offered
certificates. We have not authorized any person to give any other information or
to make any representation that is different from the information contained in
this free writing prospectus and the accompanying base prospectus.
The annexes attached to this free writing prospectus are hereby
incorporated into and made a part of this free writing prospectus.
This free writing prospectus and the accompanying base prospectus do not
constitute an offer to sell or a solicitation of an offer to buy any security
other than the offered certificates, nor do they constitute an offer to sell or
a solicitation of an offer to buy any of the offered certificates to any person
in any jurisdiction in which it is unlawful to make such an offer or
solicitation to such person.
This free writing prospectus is also referred to herein as this
"prospectus supplement." Certain capitalized terms are defined and used in this
prospectus supplement and the prospectus to assist you in understanding the
terms of the certificates offered in this prospectus supplement and this
offering. The capitalized terms used in this prospectus supplement are defined
on the pages indicated under the caption "Glossary" beginning on page S-244 in
this prospectus supplement. The capitalized terms used in the prospectus are
defined on the pages indicated under the caption "Glossary" beginning on page
184 in the prospectus.
Merrill Lynch Mortgage Investors, Inc., which is the depositor for the
subject securitization transaction, has prepared this free writing prospectus
and the accompanying base prospectus. Accordingly references to "we,""us,""our" and "depositor" in either this free writing prospectus or the accompanying
base prospectus refer or relate to Merrill Lynch Mortgage Investors, Inc.
NOTICE TO RESIDENTS OF UNITED KINGDOM
The issuing entity described in this prospectus supplement is a collective
investment scheme as defined in the Financial Services and Markets Act 2000
("FSMA") of the United Kingdom. It has not been authorized, or otherwise
recognized or approved, by the United Kingdom's Financial Services Authority
and, as an unregulated collective investment scheme, accordingly cannot be
marketed in the United Kingdom to the general public.
The distribution of this prospectus supplement (A) if made by a person who
is not an authorized person under the FSMA, is being made only to, or directed
only at, persons who (i) are outside the United Kingdom, or (ii) have
professional experience in matters relating to investments, or (iii) are persons
falling within Article 49(2)(a) through (d) ("high net worth companies,
unincorporated associations, etc.") of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2001 (all such persons together being referred
to as "FPO Persons"); and (B) if made by a person who is an authorized person
under the FSMA, is being made only to, or directed only at, persons who (i) are
outside the United Kingdom, or (ii) have professional experience in
participating in unregulated collective investment schemes, or (iii) are persons
falling within Article 22(2)(a) through (d) ("high net worth companies,
unincorporated associations, etc.") of the Financial Services and Markets Act
2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (all
such persons together being referred to as "PCIS Persons" and, together with the
FPO Persons, the "Relevant Persons"). This prospectus supplement must not be
acted on or relied on by persons who are not Relevant Persons. Any investment or
investment activity to which this prospectus supplement relates, including the
offered certificates, is available only to Relevant Persons and will be engaged
in only with Relevant Persons.
Potential investors in the United Kingdom are advised that all, or most,
of the protections afforded by the United Kingdom regulatory system will not
apply to an investment in the issuing entity and that compensation will not be
available under the United Kingdom Financial Services Compensation Scheme.
Each underwriter has represented and agreed, and each further underwriter
appointed under the Programme will be required to represent and agree, that
o it has only communicated or caused to be communicated and will only
communicate or cause to be communicated an invitation or inducement
to engage in investment activity (within the meaning of Section 21
of the FSMA) received by it in connection with the issue or sale of
any offered certificates in circumstances in which Section 21(1) of
the FSMA does not apply to the Issuer; and
o it has complied and will comply with all applicable provisions of
the FSMA with respect to anything done by it in relation to any
offered certificates in, from or otherwise involving the United
Kingdom.
EUROPEAN ECONOMIC AREA
In relation to each Member State of the European Economic Area which has
implemented the Prospectus Directive (each, a Relevant Member State), each
underwriter has represented and agreed, and each further underwriter appointed
under the Programme will be required to represent and agree, that with effect
from and including the date on which the Prospectus Directive is implemented in
that Member State (the Relevant Implementation Date) it has not made and will
not make an offer of offered certificates to the public in that Relevant Member
State, except that it may, with effect from and including the Relevant
Implementation Date, make an offer of offered certificates to the public in that
Relevant Member State:
(a) in (or in Germany, where the offer starts within) the period
beginning on the date of publication of a prospectus in relation to
those offered certificates which has been approved by the competent
S-2
authority in that Relevant Member State or, where appropriate,
approved in another Relevant Member State and notified to the
competent authority in that Relevant Member State, all in accordance
with the Prospectus Directive and ending on the date which is 12
months after the date of such publication;
(b) at any time to legal entities which are authorised or regulated to
operate in the financial markets or, if not so authorised or
regulated, whose corporate purpose is solely to invest in
securities;
(c) at any time to any legal entity which has two or more of (1) an
average of at least 250 employees during the last financial year;
(2) a total balance sheet of more than (euro)43,000,000; and (3) an
annual net turnover of more than (euro)50,000,000, as shown in its
last annual or consolidated accounts; or
(d) at any time in any other circumstances which do not require the
publication by the Issuer of a prospectus pursuant to Article 3 of
the Prospectus Directive.
For the purposes of this provision, the expression an "offer of offered
certificates to the public" in relation to any offered certificates in any
Relevant Member State means the communication in any form and by any means of
sufficient information on the terms of the offer and the offered certificates to
be offered so as to enable an investor to decide to purchase or subscribe the
offered certificates, as the same may be varied in that Member State by any
measure implementing the Prospectus Directive in that Member State and the
expression Prospectus Directive means Directive 2003/71/EC and includes any
relevant implementing measure in each Relevant Member State.
S-3
DEALER PROSPECTUS DELIVERY OBLIGATION
Until the date that is ninety days from the date of the prospectus
supplement, all dealers that effect transactions in the offered certificates,
whether or not participating in this distribution, may be required to deliver a
prospectus supplement and the accompanying prospectus. This is in addition to
the obligation of dealers acting as underwriters to deliver a prospectus
supplement and the accompanying prospectus with respect to their unsold
allotments and subscriptions.
S-4
SUMMARY OF PROSPECTUS SUPPLEMENT
This summary contains selected information regarding the offering being
made by this prospectus supplement. It does not contain all of the information
you need to consider in making your investment decision. To understand more
fully the terms of the offering of the offered certificates, you should read
carefully this prospectus supplement and the accompanying base prospectus in
full.
OVERVIEW OF THE SERIES 2007-8 CERTIFICATES
The offered certificates will be part of a series of commercial mortgage
pass-through certificates designated as Commercial Mortgage Pass-Through
Certificates, Series 2007-8, and issued in multiple classes. The immediately
following table identifies and specifies various characteristics for those
classes of certificates, both offered and non-offered, that bear interest.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
APPROX. %
APPROX. % APPROX. INITIAL OF INITIAL PASS- WEIGHTED
EXPECTED TOTAL TOTAL PRINCIPAL MORTGAGE THROUGH APPROX. INITIAL AVERAGE
RATINGS FITCH/ CREDIT BALANCE OR POOL RATE PASS-THROUGH LIFE PRINCIPAL
CLASS S&P SUPPORT NOTIONAL AMOUNT BALANCE DESCRIPTION RATE (YEARS) WINDOW
----- -------------- --------- --------------- ---------- ----------- --------------- -------- ---------
Offered Certificates
A-1 AAA/AAA 30.000% $37,262,000 1.530% % 2.98 9/07-6/12
A-2 AAA/AAA 30.000% $[122,485,000](1) [5.029]% % 7.02 6/14-5/16
A-SB AAA/AAA 30.000% $72,678,000 2.984% % 7.29 6/12-3/17
A-3 AAA/AAA 30.000% $[438,559,000](1) [18.008]% % 9.75 3/17-7/17
A-1A AAA/AAA 30.000% $1,033,771,000 42.448% % 8.70 9/07-7/17
AM AAA/AAA 20.000% $[243,536,000](1) [10.000]% % 9.88 7/17-7/17
AJ AAA/AAA 11.375% $[210,050,000](1) [8.625]% % 9.96 7/17-8/17
B AA+/AA+ 10.875% $12,177,000 0.500% % 9.97 8/17-8/17
C AA/AA 9.250% $39,575,000 1.625% % 9.97 8/17-8/17
D AA-/AA- 8.125% $27,398,000 1.125% % 9.97 8/17-8/17
E A+/A+ 7.750% $9,132,000 0.375% % 9.97 8/17-8/17
F A/A 7.000% $18,266,000 0.750% % 9.97 8/17-8/17
Certificates Not Offered
A-2FL AAA/AAA 30.000% $[______](1) [___]%(1) Floating LIBOR + [__]%(2) 7.02 6/14-5/16
A-3FL AAA/AAA 30.000% $[______](1) [___]%(1) Floating LIBOR + [__]%(2) 9.75 3/17-7/17
AM-FL AAA/AAA 20.000% $[______](1) [___]%(1) Floating LIBOR + [__]%(2) 9.88 7/17-7/17
AJ-FL AAA/AAA 11.375% $[______](1) [___]%(1) Floating LIBOR + [__]%(2) 9.96 7/17-8/17
G A-/A- 6.125% $21,309,000 0.875% % 9.97 8/17-8/17
H BBB+/BBB+ 4.750% $33,486,000 1.375% % 9.97 8/17-8/17
J BBB/BBB 3.750% $24,354,000 1.000% % 9.97 8/17-8/17
K BBB-/BBB- 3.125% $15,221,000 0.625% % 9.97 8/17-8/17
L BB+/BB+ 2.500% $15,221,000 0.625% % 9.97 8/17-8/17
M BB/BB 2.125% $9,133,000 0.375% % 9.97 8/17-8/17
N BB-/BB- 2.000% $3,044,000 0.125% % 9.97 8/17-8/17
P B+/B+ 1.875% $3,044,000 0.125% % 9.97 8/17-8/17
Q B/B 1.625% $6,089,000 0.250% % 9.97 8/17-8/17
S B-/B- 1.500% $3,044,000 0.125% % 9.97 8/17-8/17
T NR/NR 0.000% $36,530,703 1.500% % 10.38 8/17-8/22
X AAA/AAA N/A $2,435,364,703 N/A Variable % N/A N/A
_____________________
(1) The principal allocations between each of the class A-2 and class A-2FL
certificates, the class A-3 and class A-3FL certificates, the class AM and
class AM-FL certificates and the class AJ and class AJ-FL certificates,
respectively, will be determined by market demand up to the initial
principal balance indicated on the respective fixed rate class.
S-5
(2) Under certain circumstances described in this prospectus supplement, the
pass-through rate applicable to the class A-2FL, class A-3FL, class AM-FL
and class AJ-FL certificates may convert to either (a) a fixed rate; (b) a
variable rate equal to the weighted average of the adjusted net mortgage
interest rates on the mortgage loans (excluding the additional interest
distributable to the class Y and class Z certificates) from time to time;
(c) a variable rate equal to the lesser of (i) % per annum and (ii) a
weighted average of the adjusted net mortgage interest rates on the
mortgage loans (excluding the additional interest distributable to the
class Y and class Z certificates) from time to time; or (d) a variable
rate equal to the weighted average of the adjusted net mortgage interest
rates on the mortgage loans (excluding the additional interest
distributable to the class Y and class Z certificates) from time to time
less a specified percentage.
In reviewing the foregoing table, prospective investors should note that--
o The class A-1, A-2, A-2FL, A-SB, A-3, A-3FL, A-1A, AM, AM-FL, AJ,
AJ-FL, B, C, D, E, F, G, H, J, K, L, M, N, P, Q, S and T
certificates are the only certificates identified in the table that
have principal balances and are sometimes referred to in this
prospectus supplement as principal balance certificates. The
principal balance of any of those certificates at any time
represents the maximum amount that the holder may receive as
principal out of cash flow received on or with respect to the
mortgage loans.
o The class X certificates do not have principal balances. They are
interest-only certificates and will accrue interest on a notional
amount.
o For purposes of calculating the amount of accrued interest on the
class X certificates, that class of certificates will have a total
notional amount equal to the total principal balance of the class
A-1, A-2, A-SB, A-3, A-1A, AM, AJ, B, C, D, E, F, G, H, J, K, L, M,
N, P, Q, S and T certificates and the class A-2FL, class A-3FL,
class AM-FL and class AJ-FL REMIC II regular interests outstanding
from time to time.
o The actual total principal balance or notional amount, as
applicable, of any class of certificates at initial issuance may be
larger or smaller than the amount shown above, depending on the
actual size of the initial mortgage pool balance or for other
reasons. The actual size of the initial mortgage pool balance may be
as much as 5% larger or smaller than the amount presented in this
prospectus supplement.
o The ratings shown in the table are those expected from Fitch, Inc.
and Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., respectively. It is a condition to the issuance of the offered
certificates that they receive ratings no lower than those shown in
the table. The rated final distribution date for the offered
certificates is the distribution date in August 2049. See "Ratings"
in this prospectus supplement.
o The percentages indicated under the column "Approx. % Total Credit
Support" with respect to the class A-1, A-2, A-2FL, A-SB, A-3, A-3FL
and A-1A certificates represent the approximate credit support for
those classes of certificates, collectively. The percentages
indicated under the column "Approx. % Total Credit Support" with
respect to the class AM and class AM-FL certificates represent the
approximate credit support for those classes of certificates,
collectively, and with respect to the class AJ and class AJ-FL
certificates, represent the approximate credit support for those
classes of certificates, collectively. No class of certificates will
provide any credit support to any of the class A-2FL, A-3FL, AM-FL
or AJ-FL certificates for a failure by the swap counterparty to make
any payment under the related swap agreement.
o Each class of offered certificates identified in the table above
will have a pass-through rate equal to (a) a "Fixed" pass-through
rate that will remain constant at the initial pass-through rate
shown for that class in the table, (b) a "WAC Cap" variable
pass-through rate equal to the lesser of (x) the initial
pass-through rate identified in the table with respect to that
class, and (y) a weighted average of the adjusted net mortgage
interest rates on the mortgage loans (without regard to the
additional interest distributable to the class Y and class Z
certificates) from time to time, or (c) a "WAC-x%" variable
pass-through rate equal to either: (x) a weighted average of the
adjusted net mortgage interest rates on the mortgage loans
(excluding amounts payable to the class Y and class Z certificates)
from time to time; or (y) a weighted average of the adjusted net
mortgage interest
S-6
rates on the mortgage loans (without regard to the additional
interest distributable to the class Y and class Z certificates) from
time to time, minus a specific percentage.
o The assets of the issuing entity will include swap agreements that
relate to each of the class A-2FL, A-3FL, AM-FL and AJ-FL
certificates. No class of offered certificates will have any
beneficial interest in any swap agreement.
o The pass-through rate for the class X certificates will equal the
weighted average of the respective strip rates at which interest
accrues from time to time on the respective components of the total
notional amount of the subject class of certificates. The total
principal balance of each class of principal balance certificates
will constitute a separate component of the total notional amount of
the class X certificates. The class X strip rate applicable to the
accrual of interest on any particular component of the total
principal balance of the class X certificates will generally equal
the excess, if any, of--
1. a weighted average of the adjusted net mortgage interest rates
on the mortgage loans (without regard to the additional
interest distributable to the class Y and class Z
certificates) from time to time, over
2. the weighted average of the pass-through rates from time to
time on the classes of certificates identified in the table
that have principal balances and that constitute components of
the subject class (or, in the case of each of the A-2FL,
A-3FL, AM-FL and/or AJ-FL classes, the pass-through rate from
time to time on the related REMIC II regular interest).
See "Description of the Offered Certificates--Calculation ofPass-Through Rates" in this prospectus supplement.
o The initial pass-through rates listed in the table for the class X
certificates and each class of certificates identified in the table
as having a WAC Cap pass-through rate are approximate.
o As to any given class of offered certificates, the weighted average
life is the average amount of time in years between the assumed
settlement date for that class of certificates and the payment of
each dollar of principal of that class of certificates.
o As to any given class of offered certificates, the principal window
is the period during which holders of those certificates would
receive distributions of principal. The distribution date in the
last month of the principal window for any class of offered
certificates would be the final principal distribution date for that
class.
o The weighted average lives and principal windows for the respective
classes of offered certificates have been calculated based on the
assumptions, among others, that--
1. each mortgage loan with an anticipated repayment date is paid
in full on that date,
2. each mortgage loan which converts from a fixed rate of
interest to a floating rate of interest is paid in full on its
first open prepayment date,
3. no mortgage loan is otherwise prepaid prior to maturity,
4. no defaults or losses occur with respect to the mortgage
loans, and
5. no extensions of maturity dates of mortgage loans occur.
See "Yield and Maturity Considerations--Weighted Average Lives" in this
prospectus supplement.
S-7
o The certificates will also include the class R-I, R-II, Y and Z
certificates, which are not presented in the table. The class R-I,
R-II, Y and Z certificates do not have principal balances or
notional amounts and do not accrue interest. The class R-I, R-II, Y
and Z certificates are not offered by this prospectus supplement.
o When we refer to the "adjusted net mortgage interest rate" of a
mortgage loan in the bullets above, we mean the mortgage interest
rate for that mortgage loan in effect as of the date of initial
issuance of the certificates--
1. without regard to any increase in the mortgage interest rate
that may occur in connection with a default,
2. without regard to any modification of the mortgage interest
rate that may occur after the date of initial issuance of the
certificates,
3. without regard to any increase in the mortgage interest rate
that may occur if that mortgage loan, if it has an anticipated
repayment date, is not repaid in full on or before that
anticipated repayment date,
4. without regard to any change in the mortgage rate that may
occur when certain of the mortgage loans in this pool convert
from fixed rate to floating rate; and
5. net of the sum of the per annum rates at which the related
master servicing fee (which is inclusive of primary servicing
fees with respect to each mortgage loan) and the trust
administration fee accrue,
as that net mortgage interest rate for that mortgage loan, unless it
accrues interest on the basis of a 360-day year consisting of twelve
30-day months, may be adjusted in the manner described in this prospectus
supplement for purposes of calculating the pass-through rates of the
various classes of interest-bearing certificates.
The offered certificates will evidence beneficial ownership interests in
the assets of the issuing entity. The primary assets of the issuing entity will
consist of a segregated pool of commercial, multifamily and manufactured housing
community mortgage loans. When we refer to mortgage loans in this prospectus
supplement, we are referring to the mortgage loans that we intend to transfer to
the issuing entity, unless the context clearly indicates otherwise. We identify
the mortgage loans that we intend to transfer to the issuing entity on Annex A-1
to this prospectus supplement.
The governing document for purposes of issuing the offered certificates,
as well as the other certificates, and forming the issuing entity will be a
pooling and servicing agreement to be dated as of August 1, 2007. The pooling
and servicing agreement will also govern the servicing and administration of the
mortgage loans and the other assets that back the certificates. The parties to
the pooling and servicing agreement will include us, a trustee, two master
servicers and a special servicer. A copy of the pooling and servicing agreement
will be filed with the Securities and Exchange Commission as an exhibit to a
current report on Form 8-K following the initial issuance of the certificates.
The Securities and Exchange Commission will make that current report on Form 8-K
and its exhibits available to the public for inspection. See "AvailableInformation" in the accompanying base prospectus.
RELEVANT PARTIES
ISSUING ENTITY ........................... ML-CFC Commercial Mortgage Trust 2007-8, a New York common law trust, is
the entity that will hold and own the mortgage loans and in whose name the
certificates will be issued. See "Transaction Participants--The IssuingEntity" in this prospectus supplement and "The Trust Fund--IssuingEntities" in the accompanying base prospectus.
S-8
DEPOSITOR ................................ We are Merrill Lynch Mortgage Investors, Inc., the depositor of the series
2007-8 securitization transaction. We are a special purpose Delaware
corporation. Our address is 4 World Financial Center, 16th Floor, 250 Vesey
Street, New York, New York10080 and our telephone number is (212)
449-1000. We will acquire the mortgage loans and transfer them to the
issuing entity. We are an affiliate of Merrill Lynch Mortgage Lending,
Inc., one of the sponsors, and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, one of the underwriters. See "Transaction Participants--TheDepositor" in this prospectus supplement and "The Depositor" in the
accompanying base prospectus.
SPONSORS / MORTGAGE LOAN SELLERS ......... Countrywide Commercial Real Estate Finance, Inc., Merrill Lynch Mortgage
Lending, Inc. and KeyBank National Association will be the sponsors with
respect to the series 2007-8 securitization transaction. Merrill Lynch
Mortgage Lending, Inc. is our affiliate, an affiliate of Merrill Lynch,
Pierce, Fenner & Smith Incorporated, one of the underwriters, and an
affiliate of Merrill Lynch Capital Services, Inc., the swap counterparty.
Countrywide Commercial Real Estate Finance, Inc. is an affiliate of
Countrywide Securities Corporation, one of the underwriters. KeyBank
National Association is an affiliate of KeyCorp Real Estate Capital
Markets, Inc., one of the master servicers, and KeyBanc Capital Markets
Inc., one of the underwriters. The sponsors are also referred to as
mortgage loan sellers in this prospectus supplement.
We will acquire the mortgage loans that will back the certificates from the
mortgage loan sellers, each of which originated or acquired from a third
party the mortgage loans to be transferred to the issuing entity. The
mortgage loan identified on Annex A-1 to this prospectus supplement as
Empirian Portfolio Pool Two was originated by Arbor Commercial Funding, LLC
and has since been acquired by Merrill Lynch Mortgage Lending, Inc.
The following table shows the number of mortgage loans that we expect will
be sold to us by each mortgage loan seller and the respective percentages
that those mortgage loans represent of the initial mortgage pool balance,
the initial loan group 1 balance and the initial loan group 2 balance.
AGGREGATE
NUMBER OF CUT-OFF DATE % OF INITIAL % OF INITIAL % OF INITIAL
MORTGAGE PRINCIPAL MORTGAGE LOAN GROUP 1 LOAN GROUP 2
MORTGAGE LOAN SELLER LOANS BALANCE POOL BALANCE BALANCE BALANCE
--------------------------------------- --------- -------------- ------------ ------------ ------------
1. Countrywide Commercial Real Estate 165 $1,136,902,105 46.7% 56.3% 33.7%
Finance, Inc.
2. Merrill Lynch Mortgage Lending, Inc. 21 $874,784,080 35.9% 19.0% 58.8%
3. KeyBank National Association 32 $423,678,518 17.4% 24.7% 7.5%
--------- -------------- ------------ ------------ ------------
218 $2,435,364,704 100.0% 100.0% 100.0%
See "Transaction Participants--The Sponsors" and "--The Mortgage Loan
Seller" in this prospectus supplement and "The Sponsor" in the accompanying
base prospectus.
TRUSTEE .................................. Upon initial issuance of the certificates, LaSalle Bank National
Association, a national banking association with corporate trust offices
located in Chicago, Illinois, will act as trustee and custodian of the
assets of the issuing entity on behalf of all the certificateholders. The
trustee will be primarily responsible for back-up advancing, distributing
S-9
payments to certificateholders and deliveries or otherwise making available
certain reports to certificateholders that provide various details
regarding the certificates and the mortgage loans.
The trustee will also be responsible for maintaining possession of the
promissory notes for the mortgage loans and various other important loan
documents.
See "Transaction Participants--The Trustee" in this prospectus supplement."
MASTER SERVICERS ......................... Upon initial issuance of the certificates, KeyCorp Real Estate Capital
Markets, Inc., an Ohio corporation, and Wells Fargo Bank, National
Association, a national banking association, will act as the master
servicers with respect to the mortgage loans. KeyCorp Real Estate Capital
Markets, Inc. is an affiliate of KeyBank National Association, one of the
sponsors and a mortgage loan seller, and an affiliate of KeyBanc Capital
Markets Inc., one of the underwriters.
KeyCorp Real Estate Capital Markets, Inc. will act as master servicer with
respect to the mortgage loans that we acquire from Merrill Lynch Mortgage
Lending, Inc. and KeyBank National Association and which we will transfer
to the issuing entity. Wells Fargo Bank, National Association will act as
master servicer with respect to the mortgage loans that we acquire from
Countrywide Real Estate Finance, Inc. and which we will transfer to the
issuing entity.
The master servicers will be primarily responsible for servicing and
administering, directly or through sub-servicers: (a) mortgage loans as to
which there is no default or reasonably foreseeable default that would give
rise to a transfer of servicing to the special servicer; and (b) mortgage
loans as to which any such default or reasonably foreseeable default has
been corrected, including as part of a work-out. In addition, the master
servicers will be the primary parties responsible for making delinquency
advances and servicing advances (except with respect to the Georgia-Alabama
Retail Portfolio trust mortgage loan) under the pooling and servicing
agreement. See "--Georgia-Alabama Primary Servicer and Special Servicer"
below. See also "Transaction Participants--The Master Servicers and theSpecial Servicer" in this prospectus supplement.
SPECIAL SERVICER ......................... Upon initial issuance of the certificates, Midland Loan Services, Inc., a
Delaware corporation, will act as special servicer with respect to the
mortgage loans and any related foreclosure properties. However, with
respect to the mortgage loan known as Georgia-Alabama Retail Portfolio, the
special servicer will be Midland Loan Services, Inc. pursuant to the ML-CFC
2007-7 pooling and servicing agreement applicable to the securitization
containing the related non-trust pari passu loan. The special servicer will
be primarily responsible for making decisions and performing certain
servicing functions, including work-outs and foreclosures, with respect to
the mortgage loans that, in general, are in default or as to which default
is reasonably foreseeable and for liquidating foreclosure properties that
are acquired as part of the assets of the issuing entity. Midland Loan
Services, Inc. is an affiliate of a company that is the external manager of
an entity that may be the initial controlling class representative. See
"Transaction Participants--
S-10
The Master Servicers and the Special Servicer" in this prospectus
supplement.
SIGNIFICANT OBLIGORS ..................... The mortgage loans identified on Annex A-1 to this prospectus supplement as
Farallon Portfolio and Empirian Portfolio Pool Two, each represent a
portion of the initial mortgage pool balance in excess of 10% and
therefore, each of the related borrowers will be considered a significant
obligor. See Annex C, "Preliminary Structural and Collateral TermSheet--Farallon Portfolio" and "--Empirian Portfolio Pool Two" in this
prospectus supplement.
GEORGIA-ALABAMA PRIMARY SERVICER
AND SPECIAL SERVICER ..................... The mortgage loan identified on Annex A-1 to this prospectus supplement as
Georgia-Alabama Retail Portfolio is serviced and administered pursuant to
the ML-CFC 2007-7 Commercial Mortgage Trust Commercial Mortgage
Pass-Through Certificates, Series 2007-7 pooling and servicing agreement
(the governing document for the ML-CFC 2007-7 securitization, which
contains the related non-trust pari passu loan), which provides for
servicing arrangements that are similar but not identical to those under
the pooling and servicing agreement. In that regard--
o LaSalle Bank National Association, which is the trustee under the
ML-CFC 2007-7 pooling and servicing agreement, is, in that capacity,
the mortgagee of record for the mortgage loan secured by the
Georgia-Alabama Retail Portfolio mortgaged real property;
o Wachovia Bank, National Association, which is one of the master
servicers under the ML-CFC 2007-7 pooling and servicing agreement,
is, in that capacity, the primary servicer for the Georgia-Alabama
Retail Portfolio trust mortgage loan; and
o Midland Loan Services, Inc., which is the special servicer under the
ML-CFC 2007-7 pooling and servicing agreement, is, in that capacity,
the special servicer for the Georgia-Alabama Retail Portfolio trust
mortgage loan.
Wachovia Bank National Association, as master servicer, will be responsible
for making servicing advances for the related loan combination. The
controlling class representative will not be permitted to replace the
special servicer under the ML-CFC 2007-7 pooling and servicing agreement
unless and until any appraisal reduction amount with respect to the subject
loan combination reduces the initial principal balance of the related
B-note non-trust loan below 25% of its original principal balance.
References in this prospectus supplement, however, to the trustee, the
applicable master servicer and the special servicer will mean the trustee,
the master servicer and the special servicer under the series 2007-8
pooling and servicing agreement unless the context clearly indicates
otherwise.
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CONTROLLING CLASS OF CERTIFICATEHOLDERS .. The holders--or, if applicable, beneficial owners--of certificates
representing a majority interest in a designated controlling class of the
certificates will have the right, subject to the conditions described under
"Servicing of the Mortgage Loans--The Controlling Class Representative andthe Loan Combination Controlling Parties" and "--Replacement of the SpecialServicer" in this prospectus supplement, to--
o replace the special servicer; and
o select a representative that may direct and advise the special
servicer on various servicing matters with respect to the mortgage
loans.
except with respect to the mortgage loans known as (x) Georgia-Alabama
Retail Portfolio (loan number 7), (y) Farallon Portfolio (loan number 2)
and (z) Peninsula Beverly Hills (loan number 4), the holder of a related
B-note loan or non-trust loan, which holder is described under "--The Loan
Combination Controlling Parties" below, may exercise those, or similar
rights or other rights specified herein, with respect to such mortgage
loans.
Unless there are significant losses on the mortgage loans, the controlling
class of certificateholders will be the holders of a non-offered class of
certificates. The initial controlling class of certificateholders will be
the class T certificateholders.
THE LOAN COMBINATION
CONTROLLING PARTIES ................... As indicated under "--The Mortgage Loans and the Mortgaged RealProperties--The Loan Combinations" below, five (5) mortgage loans are each
part of a loan combination that is comprised of that mortgage loan, which
will be transferred to the issuing entity, and one or more pari passu
A-notes and/or subordinate B-note loans and/or other non-trust loans that
will not be transferred to the issuing entity.
In the case of one (1) of the five (5) loan combinations referred to above,
which is secured by the mortgaged real property identified on Annex A-1 to
this prospectus supplement as Farallon Portfolio, the related trust
mortgage loan consists of five A-note trust loans and five B-note trust
loans, and the related non-trust loans consist of one or more A-note
non-trust loans that are generally pari passu in right of payment to the
A-note trust loan and one or more B-note non-trust loans that are generally
subordinate to the A-note trust loan and the A-note non-trust loans and
generally pari passu to the B-note trust loans. The holder or holders (and
their respective successors and assigns) of all or any portion of the
non-trust fixed-rate A notes which are not held by the trust, as designated
by Merrill Lynch Mortgage Lending, Inc. and which may be Merrill Lynch
Mortgage Lending, Inc., will have the right to replace the special servicer
for the Farallon Portfolio loan combination and to direct and advise the
master servicer and special servicer, and have certain approval rights,
with respect to various servicing matters and major decisions relating to
the Farallon Portfolio loan combination. The controlling class of the
ML-CFC Commercial Mortgage Trust 2007-8, Commercial Mortgage Pass-Through
Certificates, Series 2007-8 securitization transaction will not have such
rights. In connection with future securitizations involving all or any
portion of the fixed rate notes that comprise the Farallon Portfolio loan
S-12
combination, Merrill Lynch Mortgage Lending, Inc. may designate the
controlling class of any such securitization as the controlling holder for
the Farallon Portfolio loan combination in which case such controlling
holder shall have such rights and Merrill Lynch Mortgage Lending, Inc. (or
its successors or assigns, as applicable), as holder of any remaining
portion of the Farallon Portfolio loan combination, will have certain
non-binding consultation rights with respect to matters relating such
rights.
In the case of one (1) of the five (5) loan combinations referred to above,
which loan is secured by the mortgaged real property identified on Annex
A-1 to this prospectus supplement as Executive Hills Portfolio, such loan
combination consists of the related trust mortgage loan and a B-note
non-trust loan that is subordinate to the related trust mortgage loan. The
holder of the B-note non-trust loan will have the right to replace the
special servicer for this mortgage loan and the right to direct and advise
the applicable master servicer on various servicing matters until an
appraisal reduction with respect to the loan combination reduces the
principal balance of the B-note non-trust loan below 25% of its original
principal balance, or the holder of more than 50% of the principal balance
of the B-note non-trust loan is the related borrower or its affiliates.
In the case of one (1) of the five (5) loan combinations referred to above,
which loan is secured by the mortgaged real property identified on Annex
A-1 to this prospectus supplement as Peninsula Beverly Hills, such loan
combination consists of the related trust mortgage loan and a B-note
non-trust loan that is subordinate to the related trust mortgage loan. The
holder of the B-note non-trust loan will have the right to replace the
special servicer for this mortgage loan and the right to direct and advise
the applicable master servicer and special servicer on various servicing
matters until an appraisal reduction with respect to the loan combination
reduces the principal balance of the related B-note non-trust loan below
25% of its original principal balance, at which time, such rights will be
with the controlling class representative.
In the case of one (1) of the five (5) loan combinations referred to above,
which loan is secured by the mortgaged real properties identified on Annex
A-1 to this prospectus supplement as Georgia-Alabama Retail Portfolio, such
loan combination consists of the related trust mortgage loan (which
consists of an A-note trust loan and a B-note trust loan), an A-note
non-trust loan that is pari passu in right of payment to the related A-note
trust mortgage loan and a B-note non-trust loan that is pari passu in right
of payment to the B-note trust loan and subordinate in right of payment to
the A-note trust mortgage loan and the A-note non-trust loan. The
controlling class representative (as designee of the holder of the B-note
trust loan) and the holder of the B-note non-trust loan, together will have
the right, under certain circumstances, to replace the special servicer
under the ML-CFC 2007-7 pooling and servicing agreement and the right to
direct and advise such master servicer and the special servicer under the
ML-CFC 2007-7 pooling and servicing agreement on various servicing matters
regarding the related loan combination until an appraisal reduction with
respect to the subject loan combination reduces the principal balance of
the related B-note trust loan and B-note non-trust loan below 25% of
S-13
their original outstanding principal balance, at which time, such rights
will be solely with the controlling class representative.
In the case of one (1) of the five (5) loan combinations referred to above,
which is secured by the mortgaged real property identified on Annex A-1 to
this prospectus supplement as Timbercreek Apartments, subject to certain
limitations with respect to modifications and the right to purchase the
related trust mortgage loan, the holder of the related B-note loan will
have no voting, consent or other rights with respect to any servicing
actions (other than in some cases, non-binding consultation rights or the
right to consent to certain modifications).
See "Description of the Mortgage Pool--The Loan Combinations-- The FarallonPortfolio Loan Combination,""--The Executive Hills Portfolio LoanCombination,""--The Peninsula Beverly Hills Loan Combination,""--TheGeorgia-Alabama Retail Portfolio Loan Combination" and "--The MezzCap LoanCombinations," and "Servicing of the Mortgage Loans--The Controlling ClassRepresentative and the Loan Combination Controlling Parties" in this
prospectus supplement.
SWAP COUNTERPARTY ........................ It is expected that Merrill Lynch Capital Services, Inc., one of our
affiliates and an affiliate of Merrill Lynch Mortgage Lending, Inc., one of
the mortgage loan sellers, and of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, one of the underwriters, will be the counterparty under the
swap agreements relating to the class A-2FL, A-3FL, AM-FL and AJ-FL
certificates. The obligations of Merrill Lynch Capital Services, Inc. under
the swap agreements will be guaranteed by Merrill Lynch & Co., Inc.,
another of our affiliates. As of the date of this prospectus supplement,
Merrill Lynch & Co., Inc. has been assigned senior unsecured debt ratings
of "AA-" by S&P and "AA-" by Fitch. See "Description of the Swap
Agreements" in this prospectus supplement.
None of the holders of any offered certificate will have any beneficial
interest in any swap agreement.
RATING AGENCIES .......................... It is a condition to the issuance of the offered certificates that they
receive ratings from Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ("S&P") and Fitch, Inc. ("Fitch"), no lower than those
shown in the table on page S-5. See "Ratings" in this prospectus
supplement.
RELEVANT DATES AND PERIODS
CUT-OFF DATE ............................. References in this prospectus supplement to the "cut-off date" mean,
individually and collectively, as the context may require, with respect to
each mortgage loan, the related due date of that mortgage loan in August,
2007 or, with respect to any mortgage loan that has its first due date in
September, 2007, August 1, 2007. All payments and collections received on
each mortgage loan after the cut-off date, excluding any payments or
collections that represent amounts due on or before that date, will belong
to the issuing entity.
CLOSING DATE ............................. The date of initial issuance for the offered certificates will be on or
about August 24, 2007.
S-14
DETERMINATION DATE ....................... For any distribution date, the eighth day of each month, or if such eighth
day is not a business day, the business day immediately succeeding,
commencing in September, 2007.
Notwithstanding the foregoing, the applicable master servicer may make its
determination as to the collections received in respect of certain mortgage
loans as of a later date during each month because those mortgage loans
provide for monthly debt-service payments to be due on a day later than the
first day of each month, but which, subject to the applicable business day
convention, is not later than the eighth day of each month.
With respect to any distribution date, references in this prospectus
supplement to "determination date" mean, as to each mortgage loan, the
applicable determination date occurring in the same month as that
distribution date.
DISTRIBUTION DATE ........................ Payments on the offered certificates are scheduled to occur monthly,
commencing in September, 2007. During any given month, the distribution
date will be the fourth business day after the related determination date.
RECORD DATE .............................. The record date for each monthly payment on an offered certificate will be
the last business day of the prior calendar month. The registered holders
of the offered certificates at the close of business on each record date
will be entitled to receive any payments on those certificates on the
following distribution date, except that the last payment on any offered
certificate will be made only upon presentation and surrender of that
certificate.
RATED FINAL DISTRIBUTION DATE ............ The rated final distribution date for each class of the offered
certificates is the distribution date in August 2049.
ASSUMED FINAL DISTRIBUTION DATES ......... Set forth opposite each class of offered certificates in the table below is
the distribution date on which the principal balance of that class is
expected to be paid in full, assuming, among other things, no
delinquencies, losses, modifications, extensions of maturity dates,
repurchases or, except as contemplated by the next sentence, prepayments of
the mortgage loans after the initial issuance of the certificates. For
purposes of the table, each mortgage loan with an anticipated repayment
date is assumed to be repaid in full on its anticipated repayment date and
each mortgage loan which converts from a fixed rate of interest to a
floating rate is assumed to be repaid in full on its first open prepayment
date.
MONTH AND YEAR OF ASSUMED FINAL
CLASS DISTRIBUTION DATE
-------------------------------- --------------------------------------
A-1 June 2012
A-2 May 2016
A-SB March 2017
A-3 July 2017
A-1A July 2017
AM July 2017
AJ August 2017
B August 2017
C August 2017
D August 2017
E August 2017
F August 2017
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See the maturity assumptions described under "Yield and MaturityConsiderations" in this prospectus supplement for further assumptions that
were taken into account in determining the assumed final distribution
dates.
COLLECTION PERIOD ........................ On any distribution date, amounts available for payment on the offered
certificates will depend on the payments and other collections received,
and any advances of payments due, on the mortgage loans during the related
collection period. In general, each collection period--
o will relate to a particular distribution date;
o will be approximately one month long;
o will begin on the day after the determination date in the immediately
preceding month or, in the case of the first collection period, will
begin immediately following the cut-off date; and
o will end on the determination date in the month of the related
distribution date.
However, the collection period for any distribution date for certain
mortgage loans may differ from the collection period with respect to the
rest of the mortgage pool for that distribution date because the
determination dates for those mortgage loans may not be the same as the
determination date for the rest of the mortgage pool. Accordingly, there
may be more than one collection period with respect to some distribution
dates.
With respect to any distribution date, references in this prospectus
supplement to "collection period" mean, as to each mortgage loan, the
applicable collection period ending in the month in which that distribution
date occurs.
INTEREST ACCRUAL PERIOD .................. The amount of interest payable with respect to the offered certificates on
any distribution date will be a function of the interest accrued during the
related interest accrual period. The interest accrual period with respect
to each class of interest-bearing offered certificates and the class A-2FL,
class A-3FL, class AM-FL and class AJ-FL REMIC II regular interests for any
distribution date will be the calendar month immediately preceding the
month in which that distribution date occurs. Interest will be calculated
with respect to each class of interest-bearing offered certificates and the
class A-2FL, class A-3FL, class AM-FL and class AJ-FL REMIC II regular
interests assuming that each interest accrual period consists of 30 days
and each year consists of 360 days.
S-16
DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL .................................. The issuing entity will issue multiple classes of certificates with an
approximate total principal balance at initial issuance equal to
$2,435,364,703. Twelve (12) of those classes of the certificates are being
offered by this prospectus supplement. The classes offered by this
prospectus supplement are identified on the cover hereof. The remaining
classes of the certificates will be offered separately in a private
offering.
REGISTRATION AND DENOMINATIONS............ We intend to deliver the offered certificates in book-entry form in
original denominations of $25,000 initial principal balance and in any
whole dollar denomination in excess of $25,000.
You will initially hold your offered certificates, directly or indirectly,
through The Depository Trust Company and they will be registered in the
name of Cede & Co. as nominee for The Depository Trust Company. As a
result, you will not receive a fully registered physical certificate
representing your interest in any offered certificate, except under the
limited circumstances described under "Description of the OfferedCertificates--Registration and Denominations" in this prospectus supplement
and under "Description of the Certificates--Book-Entry Registration" in the
accompanying base prospectus.
PAYMENTS
A. GENERAL ............................... For purposes of making distributions with respect to the class A-1, A-2,
A-SB, A-3 and A-1A certificates and the class A-2FL and A-3FL certificates
(through the respective REMIC II regular interests), the mortgage loans
will be deemed to consist of two distinct groups, loan group 1 and loan
group 2. Loan group 1 will consist of 162 mortgage loans, with an initial
loan group 1 balance of $1,401,593,530 and representing approximately 57.6%
of the initial mortgage pool balance, that are secured by the various
property types that constitute collateral for those mortgage loans. Loan
group 2 will consist of 56 mortgage loans, with an initial loan group 2
balance of $1,033,771,173 and representing approximately 42.4% of the
initial mortgage pool balance, that are secured by multifamily and
manufactured housing community properties. Annex A-1 to this prospectus
supplement sets forth the loan group designation with respect to each
mortgage loan.
S-17
On each distribution date, to the extent of available funds attributable to
the mortgage loans as described below, which available funds will be net of
specified expenses of the issuing entity, including all servicing fees,
trust administration fees and other compensation, the trustee will make
payments of interest and, except in the case of the class X certificates,
principal to the holders of the following classes of certificates (or, in
the case of the reference to "A-2FL" below, with respect to the class A-2FL
REMIC II regular interest, in the case of the reference to "A-3FL" below,
with respect to the class A-3FL REMIC II regular interest, in the case of
the reference to "AM-FL" below, with respect to the class AM-FL REMIC II
regular interest, and in the case of the reference to "AJ-FL" below, with
respect to the class AJ-FL REMIC II regular interest), in the following
order:
PAYMENT ORDER CLASS
--------------------------------- -------------------------------
1 A-1, A-2, A-2FL, A-SB, A-3,
A-3FL, A-1A and X
2 AM and AM-FL
3 AJ and AJ-FL
4 B
5 C
6 D
7 E
8 F
9 G
10 H
11 J
12 K
13 L
14 M
15 N
16 P
17 Q
18 S
19 T
In general, payments of interest in respect of the class A-1, A-2, A-SB and
A-3 certificates, and the class A-2FL and class A-3FL REMIC II regular
interests will be made pro rata, based on entitlement, out of available
funds attributable to the mortgage loans in loan group 1. Payments of
interest in respect of the class A-1A certificates will be made out of
available funds attributable to the mortgage loans in loan group 2.
Payments of interest on the class X certificates will be made out of
available funds attributable to both loan groups. However, if the funds
available for those distributions of interest on any distribution date are
insufficient to pay in full the total amount of interest to be paid with
respect to any of the class A-1, A-2, A-SB, A-3, A-1A and/or X
certificates, the class A-2FL and/or class A-3FL REMIC II regular
interests, then the funds available for distribution will be allocated
among all these classes pro rata in accordance with their interest
entitlements, without regard to loan groups.
The allocation of principal payments among the class A-1, A-2, A-SB, A-3
and A-1A certificates, the class A-2FL certificates (through the class
A-2FL REMIC II regular interest) and the class A-3FL certificates (through
the class A-3FL REMIC II regular interest) also
S-18
takes into account loan groups and is described under "--Payments--Paymentsof Principal" below. See also "Description of the OfferedCertificates--Payments--Priority of Payments" in this prospectus
supplement.
No payments or other collections on the non-trust loans described under
"--The Mortgage Loans and the Mortgaged Real Properties--Loan Combinations"
below, which are not assets of the issuing entity, will be available for
distributions on the certificates. See "Description of the MortgagePool--Loan Combinations" in this prospectus supplement.
B. PAYMENTS OF INTEREST .................. Each class of certificates (other than the class Y, Z, R-I and R-II
certificates) and the class A-2FL, class A-3FL, class AM-FL and class AJ-FL
REMIC II regular interests will bear interest. With respect to each
interest-bearing class of certificates and the class A-2FL, class A-3FL,
class AM-FL and class AJ-FL REMIC II regular interests, that interest will
accrue during each interest accrual period based upon--
o the pass-through rate applicable for the particular class of
certificates, the class A-2FL REMIC II regular interest, the class
A-3FL REMIC II regular interest, the class AM-FL REMIC II regular
interest or the class AJ-FL REMIC II regular interest, as the case
may be, for that interest accrual period;
o the total principal balance or notional amount, as the case may be,
of the particular class of certificates, the class A-2FL REMIC II
regular interest, the class A-3FL REMIC II regular interest, the
class AM-FL REMIC II regular interest or the class AJ-FL REMIC II
regular interest, as the case may be, outstanding immediately prior
to the related distribution date; and
o the assumption that each year consists of twelve 30-day months (or,
in the case of each of the class A-2FL, A-3FL, AM-FL and AJ-FL
certificates, for so long as the related swap agreement is in effect
and there is no continuing payment default under any swap agreement
on the part of the swap counterparty, based on the actual number of
days in the applicable interest accrual period and the assumption
that each year consists of 360 days).
A whole or partial prepayment on a mortgage loan may not be accompanied by
the amount of one full month's interest on the prepayment. As and to the
extent described under "Description of the OfferedCertificates--Payments--Payments of Interest" in this prospectus
supplement, these shortfalls may be allocated (in the case of the class
A-2FL certificates, through the class A-2FL REMIC II regular interest, in
the case of the class A-3FL certificates, through the class A-3FL REMIC II
regular interest, in the case of the class AM-FL certificates, through the
class AM-FL REMIC II regular interest, and in the case of the class AJ-FL
certificates, through the class AJ-FL REMIC II regular interest) to reduce
the amount of accrued interest otherwise payable to the holders of the
respective interest-bearing classes of the certificates (other than the
class X certificates).
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On each distribution date, subject to available funds and the payment
priorities described under "--Payments--General" above, you will be
entitled to receive your proportionate share of: (a) all interest accrued
with respect to your class of offered certificates during the related
interest accrual period; plus (b) any interest that was payable with
respect to your class of offered certificates on all prior distribution
dates, to the extent not previously paid; less (c) except in the case of
the class X certificates, your class's share of any shortfalls in interest
collections due to prepayments on mortgage loans that are not offset by
certain payments made by, in each case, the applicable master servicer.
If, as described below under "--Payments of Principal," collections of
principal are insufficient to make a full reimbursement for nonrecoverable
advances, those amounts may be reimbursed from interest on the mortgage
loans, thereby reducing the amount of interest otherwise distributable on
the interest-bearing certificates on the related distribution date.
See "Description of the Offered Certificates--Payments--Payments ofInterest,""--Payments--Priority of Payments" and "--Calculation ofPass-Through Rates" in this prospectus supplement.
C. PAYMENTS OF PRINCIPAL ................. The class X, R-I, R-II, Y and Z certificates do not have principal balances
and do not entitle their holders to payments of principal. Subject to
available funds and the payment priorities described under
"--Payments--General" above, however, the holders of each class of
principal balance certificates will be entitled to receive a total amount
of principal over time equal to the initial principal balance of their
particular class. The trustee will be required to make payments of
principal in a specified sequential order (in the case of the class A-2FL
certificates, through the class A-2FL REMIC II regular interest, in the
case of the class A-3FL certificates, through the class A-3FL REMIC II
regular interest, in the case of the class AM-FL certificates, through the
class AM-FL REMIC II regular interest, and in the case of the class AJ-FL
certificates, through the class AJ-FL REMIC II regular interest) to ensure
that--
o no payments of principal will be made to the holders of the class G,
H, J, K, L, M, N, P, Q, S or T certificates until the total principal
balance of the offered certificates and the class A-2FL, class A-3FL,
class AM-FL and class AJ-FL REMIC II regular interests are reduced to
zero;
o no payments of principal will be made to the holders of the class AM,
AM-FL (through the class AM-FL REMIC II regular interest), AJ, AJ-FL
(through the class AJ-FL REMIC II regular interest), B, C, D, E or F
certificates until, in the case of each of those classes, the total
principal balance of all more senior classes of offered certificates
and the class A-2FL and A-3FL REMIC II regular interests is reduced
to zero; and
o except as described under "--Amortization, Liquidation and Payment
Triggers" below, payments of principal will be made--
(i) to, first, the holders of the class A-1 certificates, until the
total principal balance of such certificates is reduced to
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zero, second, the holders of the class A-2 certificates and
class A-2FL REMIC II regular interest, on a pro rata basis by
principal balance, until the total principal balance of such
classes is reduced to zero, third, the holders of the class
A-SB certificates, until the total principal balance of such
certificates is reduced to zero, fourth, the holders of the
class A-3 certificates and class A-3FL REMIC II regular
interest, on a pro rata basis by principal balance, until the
total principal balance of such classes is reduced to zero, in
an aggregate amount equal to the funds allocated to principal
with respect to mortgage loans in loan group 1 and, after the
total principal balance of the class A-1A certificates has been
reduced to zero, the funds allocated to principal with respect
to mortgage loans in loan group 2, provided that, on each
distribution date the total principal balance of the class A-SB
certificates must, subject to available funds, be paid down, if
necessary, to the scheduled principal balance for that class
for that distribution date that is set forth on Annex E to this
prospectus supplement before any payments of principal are made
with respect to the class A-1, A-2 and/or A-3 certificates or
the class A-2FL and/or A-3FL REMIC II regular interests,
(ii) to the holders of the class A-1A certificates, until the total
principal balance of such certificates is reduced to zero, in
an aggregate amount equal to the funds allocated to principal
with respect to mortgage loans in loan group 2 and, after the
total principal balance of the class A-1, A-2, A-SB and A-3
certificates and the class A-2FL and class A-3FL REMIC II
regular interests has been reduced to zero, the funds allocated
to principal with respect to mortgage loans in loan group 1.
The total payments of principal to be made on the principal balance
certificates on any distribution date will generally be a function of--
o the amount of scheduled payments of principal due or, in some cases,
deemed due on the mortgage loans during the related collection
period, which payments are either received as of the end of that
collection period or advanced by the applicable master servicer or
the trustee; and
o the amount of any prepayments and other unscheduled collections of
previously unadvanced principal with respect to the mortgage loans
that are received during the related collection period.
However, if the applicable master servicer, the special servicer or the
trustee reimburses itself out of general collections on the mortgage pool
for any advance, together with any interest accrued on that advance, that
it has determined is not ultimately recoverable out of collections on the
related mortgage loan, then that advance, together with interest accrued on
that advance, will be reimbursed first out of payments and other
collections of principal on all the mortgage loans, thereby reducing the
amount of principal otherwise distributable in respect of
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the principal balance certificates on the related distribution date, prior
to being reimbursed out of payments and other collections of interest on
all the mortgage loans.
Additionally, if any advance, together with interest accrued on that
advance, with respect to a defaulted mortgage loan remains unreimbursed
following the time that the mortgage loan is modified and returned to
performing status, then (even though that advance has not been deemed
nonrecoverable from collections on the related mortgage loan) the
applicable master servicer, the special servicer or the trustee, as
applicable, will be entitled to reimbursement for that advance, with
interest, on a monthly basis, out of payments and other collections of
principal on all the mortgage loans after the application of those
principal payments and collections to reimburse any party for advances that
are nonrecoverable on a loan-specific basis as described in the prior
paragraph, thereby reducing the amount of principal otherwise distributable
in respect of the principal balance certificates on the related
distribution date.
Reimbursements of the advances described in the prior two paragraphs will
generally be made first from principal collections on the mortgage loans
included in the loan group which includes the mortgage loan in respect of
which the advance was made, and if those collections are insufficient to
make a full reimbursement, then from principal collections on the mortgage
loans in the other loan group. As a result, distributions of principal with
respect to the class A-1, A-2, A-SB, A-3 or A-1A certificates, the class
A-2FL certificates (through the class A-2FL REMIC II regular interest) or
the class A-3FL certificates (through the class A-3FL REMIC II regular
interest) may be reduced even if the advances being reimbursed were made in
respect of mortgage loans included in the loan group that does not
primarily relate to such class of certificates.
If any advance described above is not reimbursed in whole on any
distribution date due to insufficient principal collections and, solely in
the case of an advance that is nonrecoverable on a loan-specific basis,
interest collections on the mortgage pool during the related collection
period, then the portion of that advance which remains unreimbursed will be
carried over, and continue to accrue interest, for reimbursement on the
following distribution date.
The payment of certain default-related or otherwise unanticipated expenses
with respect to any mortgage loan may reduce the amounts allocable as
principal of that mortgage loan and, accordingly, the principal
distributions on the principal balance certificates.
See "Description of the Offered Certificates--Payments--Payments ofPrincipal" and "--Payments--Priority of Payments" in this prospectus
supplement.
D. AMORTIZATION, LIQUIDATION
AND PAYMENT TRIGGERS .................. As a result of losses on the mortgage loans and/or default-related or other
unanticipated expenses of the issuing entity, the total principal balance
of the class AM, AM-FL, AJ, AJ-FL, B, C, D, E, F, G, H, J, K, L, M, N, P,
Q, S and T certificates could be reduced to zero at a time when the class
A-1, A-2, A-2FL, A-SB, A-3, A-3FL and A-1A certificates remain outstanding.
See "--Description of the Offered
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Certificates--Allocation of Losses on the Mortgage Loans and Other
Unanticipated Expenses" below. If the total principal balance of the class
AM, AM-FL, AJ, AJ-FL, B, C, D, E, F, G, H, J, K, L, M, N, P, Q, S and T
certificates is reduced to zero at a time when the class A-1, A-2, A-2FL,
A-SB, A-3, A-3FL and A-1A certificates, or any two or more of those
classes, remain outstanding, any payments of principal will be distributed
to the holders of the outstanding class A-1, A-2, A-2FL, A-SB, A-3, A-3FL
and A-1A certificates (in the case of the class A-2FL and A-3FL
certificates, through the class A-2FL and class A-3FL REMIC II regular
interests, respectively), pro rata, rather than sequentially, in accordance
with their respective principal balances and without regard to loan groups.
E. PAYMENTS OF PREPAYMENT
PREMIUMS AND YIELD
MAINTENANCE CHARGES ................... You may, in certain circumstances, also receive distributions of prepayment
premiums and yield maintenance charges collected on the mortgage loans. Any
distributions of those amounts would be in addition to the distributions of
principal and interest described above.
If any prepayment premium or yield maintenance charge is collected on any
of the mortgage loans, then the trustee will pay that amount in the
proportions described under "Description of the OfferedCertificates--Payments--Payments of Prepayment Premiums and YieldMaintenance Charges" (other than to the holders of any class A-2FL, class
A-3FL, class AM-FL and class AJ-FL certificates for so long as the related
swap agreement is in effect) in this prospectus supplement, to--
o the holders of any of the class A-1, A-2, A-SB, A-3, A-1A, AM, AJ, B,
C, D, E, F, G, H, J and/or K certificates and/or the class A-2FL
REMIC II regular interest, the class A-3FL REMIC II regular interest,
the class AM-FL REMIC II regular interest and/or the class AJ-FL
REMIC II regular interest that are then entitled to receive payments
of principal with respect to the loan group that includes the prepaid
mortgage loan; and/or
o the holders of the class X certificates.
All prepayment premiums and yield maintenance charges payable as described
above will be reduced, with respect to specially serviced mortgage loans,
by an amount equal to certain expenses of the issuing entity and losses
realized in respect of the mortgage loans previously allocated to any class
of certificates.
See "Description of the Offered Certificates--Payments--Payments ofPrepayment Premiums and Yield Maintenance Charges" in this prospectus
supplement.
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F. FEES AND EXPENSES ..................... The amounts available for distribution on the certificates on any
distribution date will generally be net of the following amounts:
TYPE / RECIPIENT AMOUNT/SOURCE FREQUENCY
------------------------------- --------------------------------------------------- --------------
FEES
Master Servicing Fee / Master Payable with respect to each and every mortgage Monthly
Servicers loan held by the issuing entity, including each
specially serviced mortgage loan, if any, and each
mortgage loan, if any, as to which the
corresponding mortgaged real property has been
acquired as foreclosure property as part of the
assets of the issuing entity. With respect to
each such mortgage loan, the master servicing fee
will: (1) generally be calculated for the same
number of days and on the same principal amount as
interest accrues or is deemed to accrue on that
mortgage loan; (2) accrue at an annual rate that
ranges from 0.02000% to 0.10000% per annum; and
(3) be payable (a) monthly from amounts allocable
as interest with respect to that mortgage loan
and/or (b) if the subject mortgage loan and any
related foreclosure property has been liquidated
on behalf of, among others, the
certificateholders, out of general collections on
the mortgage pool. Master servicing fees with
respect to any mortgage loan will include the
primary servicing fees payable by the applicable
master servicer to any sub-servicer with respect
to that mortgage loan.
Additional Master Servicing o Prepayment interest excesses collected Time to time
Compensation / Master Servicers on mortgage loans that are the subject
of a principal prepayment in full or in
part after their respective due dates
in any collection period;
o All interest and investment income earned Monthly
on amounts on deposit in accounts
maintained by a master servicer, to the
extent not otherwise payable to the
borrowers;
o On non-specially serviced mortgage loans, Time to time
late payment charges and default interest
actually collected with respect to the
subject mortgage loan during any
collection period, but only to the extent
not otherwise allocable to pay the
following items with respect to the
subject mortgage loan: (i) interest on
advances; or (ii) additional trust fund
expenses currently payable or previously
paid with respect to the subject mortgage
loan or related mortgaged real property
from collections on the mortgage pool and
not previously reimbursed; and
S-24
TYPE / RECIPIENT AMOUNT/SOURCE FREQUENCY
------------------------------- --------------------------------------------------- --------------
o With respect to any non-specially Time to Time
serviced mortgage loan, 100%--or, if the
consent of the special servicer is
required with respect to the subject
action, 50%-- of each assumption
application fee, assumption fee,
modification fee, extension fee other
similar fee or fees paid in connection
with a defeasance of a mortgage loan that
is actually paid by a borrower in
connection with the related action.
Special Servicing Fee / Payable with respect to each mortgage loan that is Monthly
Special Servicer being specially serviced or as to which the
corresponding mortgaged real property has been
acquired as foreclosure property as part of the
assets of the issuing entity. With respect to each
such mortgage loan, the special servicing fee will:
(a) accrue for the same number of days and on the
same principal amount as interest accrues or is
deemed to accrue from time to time on that mortgage
loan; (b) accrue at a special servicing fee rate of
0.25% per annum; and (c) be payable monthly from
general collections on the mortgage pool.
Workout Fee / Special Servicer Payable with respect to each specially serviced Time to time
mortgage loan that the special servicer successfully
works out. The workout fee will be payable out of,
and will be calculated by application of a workout
fee rate of 1.0% to, each collection of interest and
principal received on the subject mortgage loan for
so long as it is not returned to special servicing
by reason of an actual or reasonably foreseeable
default.
Principal Recovery Fee / Subject to the exceptions described under "Servicing Time to time
Special Servicer of the Mortgage Loans--Servicing and OtherCompensation and Payment of Expenses--PrincipalSpecial Servicing Compensation--The PrincipalRecovery Fee" in this prospectus supplement, payable
with respect to: (a) each specially serviced
mortgage loan--or any replacement mortgage loan
substituted for it--as to which the special servicer
obtains a full or discounted payoff from the related
borrower; and (b) any specially serviced mortgage
loan or foreclosure property as to which the special
servicer receives any liquidation proceeds, sale
proceeds, insurance proceeds or condemnation
proceeds. As to each such specially serviced
mortgage loan or foreclosure property, the principal
recovery fee will be payable from, and will be
calculated by application of a principal recovery
fee rate of 1.0% to, the related payment or
proceeds.
Additional Special Servicing o All interest and investment income earned Monthly
Compensation / Special Servicer on amounts on deposit in accounts
maintained by the special servicer;
S-25
TYPE / RECIPIENT AMOUNT/SOURCE FREQUENCY
------------------------------- --------------------------------------------------- --------------
o On specially serviced mortgage loans, Time to time
late payment charges and default interest
actually collected with respect to the
subject mortgage loan during any
collection period, but only to the extent
not otherwise allocable to pay the
following items with respect to the
subject mortgage loan: (i) interest on
advances; or (ii) additional trust fund
expenses currently payable or previously
paid with respect to the subject mortgage
loan or related mortgaged real property
from collections on the mortgage pool and
not previously reimbursed;
o With respect to any specially serviced Time to time
mortgage loan, 100% of assumption fees or
modification fee actually paid by a
borrower with respect to any assumption
or modification; and
o With respect to any non-specially Time to time
serviced mortgage loan, if the consent of
the special servicer is required with
respect to the subject action, 50% of
assumption application fees, assumption
fees, modification fees and other fees
actually paid by a borrower with respect
to any assumption, modification or other
agreement entered into by the applicable
master servicer.
Trust Administration Fee / Payable out of general collections on the mortgage Monthly
Trustee pool and, for any distribution date, will equal one
month's interest at 0.00085% per annum with respect
to each and every mortgage loan held by the issuing
entity, including each specially serviced mortgage
loan, if any, and each mortgage loan, if any, as to
which the corresponding mortgaged real property has
been acquired as foreclosure property as part of the
assets of the issuing entity.
Additional Trust All interest and investment income earned on amounts Monthly
Administration on deposit in accounts maintained by the trustee.
Compensation/Trustee
EXPENSES
Servicing Advances / Trustee, To the extent of funds available, the amount of Time to time
Master Servicers or Special any servicing advances.(1)
Servicer
Interest on Servicing Advances At a rate per annum equal to a published prime Time to time
/ Master Servicers, Special rate, accrued on the amount of each outstanding
Servicer or Trustee servicing advance.(2)
P&I Advances / Master To the extent of funds available, the amount of Time to Time
Servicers and Trustee any P&I advances.(1)
Interest on P&I Advances / At a rate per annum equal to a published prime Time to Time
Master Servicers and Trustee rate, accrued on the amount of each outstanding
S-26
TYPE / RECIPIENT AMOUNT/SOURCE FREQUENCY
------------------------------- --------------------------------------------------- --------------
Indemnification Expenses / Amount to which such party is entitled to Time to time
Trustee and any director, indemnification under the pooling and servicing
shareholder, officer, employee agreement.(3)
or agent of the Trustee;
Depositor, Master Servicers or
Special Servicer and any
shareholder, director,
officer, employee or agent of
Depositor, the Master
Servicers or Special Servicer
____________________
(1) Reimbursable out of collections on the related mortgage loan, except that:
(a) advances that are determined not to be recoverable out of related
collections will be reimbursable first out of general collections of
principal on the mortgage pool and then out of other general collections
on the mortgage pool; and (b) advances that remain outstanding after a
specially serviced mortgage loan has been worked out and the servicing of
that mortgage loan has been returned to the applicable master servicer may
be reimbursable out of general collections of principal on the mortgage
pool.
(2) Payable out of late payment charges and/or default interest on the related
mortgage loan or, in connection with or after reimbursement of the related
advance, out of general collections on the mortgage pool, although in some
cases interest on advances may be payable first or solely out of general
collections of principal on the mortgage pool.
(3) Payable out of general collections on the mortgage pool. In general, none
of the above specified persons are entitled to indemnification for (1) any
liability specifically required to be borne by the related person pursuant
to the terms of the pooling and servicing agreement, or (2) any loss,
liability or expense incurred by reason of willful misfeasance, bad faith
or negligence in the performance of, or the negligent disregard of, such
party's obligations and duties under the pooling and servicing agreement,
or as may arise from a breach of any representation or warranty of such
party made in the pooling and servicing agreement.
The foregoing fees and expenses will generally be payable prior to
distribution on the offered certificates. If any of the foregoing fees and
expenses are identified as being payable out of a particular source of
funds, then the subject fee or expense, as the case may be, will be payable
out of that particular source of funds prior to any application of those
funds to make payments with respect to the offered certificates. In
addition, if any of the foregoing fees and expenses are identified as being
payable out of general collections with respect to the mortgage pool, then
the subject fee or expense, as the case may be, will be payable out of
those general collections prior to any application of those general
collections to make payments with respect to the offered certificates.
Further information with respect to the foregoing fees and expenses,
including information regarding the general purpose of and the source of
payment for these fees and expenses, as well as information regarding other
fees and expenses, is set forth under "Description of the OfferedCertificates--Fees and Expenses" in this prospectus supplement.
G. PAYMENTS OF ADDITIONAL INTEREST ....... On each distribution date, any additional interest collected during the
related collection period on a mortgage loan that converts from a fixed
rate of interest to a floating rate of interest (accruing at a rate in
excess of the initial fixed interest rate) will be distributed to the
holders of the class Y certificates, and any additional interest collected
during the related collection period on a mortgage loan with an anticipated
repayment date will be distributed to the holders of the class Z
certificates. See "Description of the OfferedCertificates--Payments--Payments of Additional Interest" in this prospectus
supplement.
S-27
H. ALLOCATION OF LOSSES ON THE
MORTGAGE LOANS AND OTHER
UNANTICIPATED EXPENSES ................ Because of losses on the mortgage loans, reimbursements of advances
determined to be nonrecoverable on a loan-specific basis and/or
default-related and other unanticipated expenses of the issuing entity
(such as interest on advances, special servicing fees, workout fees and
liquidation fees), the total principal balance of the mortgage pool, less
any related outstanding advances of principal, may fall below the total
principal balance of the principal balance certificates. For purposes of
this determination only, effect will not be given to any reductions of the
principal balance of any mortgage loan for payments of principal collected
on the mortgage loans that were used to reimburse any advances outstanding
after a workout of another mortgage loan to the extent those advances are
not otherwise determined to be nonrecoverable on a loan-specific basis. If
and to the extent that those losses, reimbursements and expenses cause the
total principal balance of the mortgage pool, less any related outstanding
advances of principal, to be less than the total principal balance of the
principal balance certificates following the payments made on the
certificates on any distribution date, the total principal balances of the
following classes of principal balance certificates (or, in the case of the
reference to "A-2FL" below, the class A-2FL REMIC II regular interest, in
the case of the reference to "A-3FL" below, the class A-3FL REMIC II
regular interest, in the case of the reference to "AM-FL" below, the class
AM-FL REMIC II regular interest and in the case of the reference to "AJ-FL"
below, the class AJ-FL REMIC II regular interest) will be successively
reduced in the following order, until the deficit is eliminated:
REDUCTION ORDER CLASS
---------------------------------- ---------------------------------------
1 T
2 S
3 Q
4 P
5 N
6 M
7 L
8 K
9 J
10 H
11 G
12 F
13 E
14 D
15 C
16 B
17 AJ, AJ-FL
18 AM, AM-FL
19 A-1, A-2, A-2FL, A-SB, A-3, A-3FL
and A-1A
Any reduction to the total principal balances of the class A-1, A-2, A-SB,
A-3 and A-1A certificates and the class A-2FL and A-3FL REMIC II regular
interests will be made on a pari passu and pro rata basis in accordance
with the relative sizes of those principal balances, without regard to loan
groups. Any reduction to the total principal balances of
S-28
the class AM certificates and class AM-FL REMIC II regular interest will be
made on a pari passu and pro rata basis in accordance with the relative
sizes of those principal balances. Any reduction to the total principal
balances of the class AJ certificates and class AJ-FL REMIC II regular
interest will be made on a pari passu and pro rata basis in accordance with
the relative sizes of those principal balances.
Any losses realized on the mortgage loans or additional trust fund expenses
allocated in reduction of the principal balance of any class of principal
balance certificates will result in a corresponding reduction in the
notional amount of the class X certificates.
See "Description of the Offered Certificates--Reductions to CertificatePrincipal Balances in Connection with Realized Losses and Additional TrustFund Expenses" in this prospectus supplement.
I. ADVANCES OF DELINQUENT
MONTHLY DEBT SERVICE PAYMENTS ......... Except as described below, each master servicer will be required to make
advances of principal and/or interest due on the mortgage loans master
serviced thereby with respect to any delinquent monthly payments, other
than balloon payments. In addition, the trustee must make any of those
advances that the applicable master servicer is required to but fails to
make. As described under "Description of the Offered Certificates--Advancesof Delinquent Monthly Debt Service Payments and Reimbursement of Advances"
in this prospectus supplement, any party that makes an advance will be
entitled to be reimbursed for the advance, together with interest at a
published prime rate, as described in that section of this prospectus
supplement.
Notwithstanding the foregoing, none of the master servicers or the trustee
will be required to make any advance that it determines, in its reasonable
judgment, will not be recoverable (together with interest accrued on that
advance) from proceeds of the related mortgage loan. The trustee will be
entitled to rely on any determination of non-recoverability made by a
master servicer. The special servicer may also determine that any interest
and/or principal advance made or proposed to be made by a master servicer
or the trustee is not or will not be, as applicable, recoverable, together
with interest accrued on that advance, from proceeds of the mortgage loan
to which that advance relates, and the applicable master servicer and the
trustee will be entitled to rely on any determination of nonrecoverability
made by the special servicer and will be required to act in accordance with
that determination. The special servicer, however, will not have the right
to determine as recoverable any advance that has been determined by the
applicable master servicer to be nonrecoverable.
In addition, if any of the adverse events or circumstances that we refer to
under "Servicing of the Mortgage Loans--Required Appraisals" in, and
described in the glossary to, this prospectus supplement occur or exist
with respect to any mortgage loan or the mortgaged real property for that
mortgage loan, the special servicer will be obligated to obtain a new
appraisal or, at the special servicer's option in cases involving mortgage
loans with relatively small principal balances, conduct a valuation of that
property. If, based on that appraisal or other valuation, subject to the
discussion below regarding the loan combinations, it is determined that:
S-29
o the sum of the principal balance of the subject mortgage loan plus
other delinquent amounts due under the subject mortgage loan exceeds
o an amount generally equal to:
1. 90% of the new estimated value of the related mortgaged real
property, which value may be reduced by the special servicer
based on its review of the related appraisal and other relevant
information; plus
2. certain other amounts such as escrow funds,
then the amount otherwise required to be advanced with respect to interest
on that mortgage loan will be reduced in the same proportion that the
excess, sometimes referred to as an appraisal reduction amount, bears to
the principal balance of the mortgage loan, which will be deemed to be
reduced by any outstanding advances of principal in respect of that
mortgage loan. In the event advances of interest are so reduced, funds
available to make payments on the certificates then outstanding will be
reduced.
The calculation of any appraisal reduction amount in respect of any trust
mortgage loan that is part of a loan combination will take into account any
related A-note and/or B-note loan, as applicable. The special servicer will
determine whether an appraisal reduction amount exists with respect to any
of those loan combinations based on a calculation that generally treats the
subject loan combination as if it were a single mortgage loan. Any
resulting appraisal reduction amount with respect to any of those loan
combinations will be allocated, first (if applicable) to the related B-note
loan or loans (up to the amount of the outstanding principal balance of
that B-note loan or loans), and then to the related mortgage loan held by
the issuing entity and any other related A-note mortgage loans not held by
the issuing entity, on a pro rata basis. The amount of advances of interest
on each of the mortgage loans held by the issuing entity that is part of a
loan combination will be reduced so as to take into account any appraisal
reduction amount allocable to the subject mortgage loan.
None of the master servicers or the trustee will be required to make
advances of principal and/or interest with respect to any mortgage loan
that is not held by the issuing entity.
See "Description of the Offered Certificates--Advances of DelinquentMonthly Debt Service Payments and Reimbursement of Advances" and "Servicingof the Mortgage Loans--Required Appraisals" in this prospectus supplement.
See also "Description of the Governing Documents--Advances" in the
accompanying base prospectus.
J. REPORTS TO CERTIFICATEHOLDERS ......... On each distribution date, the trustee will make available on its internet
website, initially located at www.etrustee.net, or provide on request, to
the registered holders of the offered certificates, a monthly report
substantially in the form of Annex D to this prospectus supplement. The
trustee reports will detail, among other things, the distributions made to
the certificateholders on that distribution date and the performance of the
mortgage loans and the mortgaged real properties.
S-30
You may also review on the trustee's website, initially located at
www.etrustee.net, or, upon reasonable prior notice, at the trustee's
offices during normal business hours, a variety of information and
documents that pertain to the mortgage loans and the mortgaged real
properties for those loans.
See "Description of the Offered Certificates--Reports toCertificateholders; Available Information" in this prospectus supplement.
K. OPTIONAL AND OTHER TERMINATION ........ Specified parties to the transaction may purchase all of the mortgage loans
and any foreclosure properties held by the issuing entity, and thereby
terminate the issuing entity, when the aggregate principal balance of the
mortgage loans, less any outstanding advances of principal, is less than
approximately 1.0% of the initial mortgage pool balance, prior to the
application of principal payments and losses in the related collection
period.
In addition, if, following the date on which the total principal balance of
the offered certificates and the class A-2FL, A-3FL, AM-FL and AJ-FL REMIC
II regular interests, are reduced to zero, all of the remaining
certificates (but excluding the class Y, Z, R-I and R-II certificates) are
held by the same certificateholder, the issuing entity may also be
terminated, subject to such additional conditions as may be set forth in
the pooling and servicing agreement, in connection with an exchange of all
the remaining certificates (other than the class Y, Z, R-I and R-II
certificates) for all the mortgage loans and any foreclosure properties
held by the issuing entity at the time of exchange.
See "Description of the Offered Certificates--Termination" in this
prospectus supplement.
THE MORTGAGE LOANS AND THE MORTGAGED REAL PROPERTIES
GENERAL .................................. In this section, we provide summary information with respect to the
mortgage loans that we intend to transfer to the issuing entity. For more
detailed information regarding those mortgage loans, you should review the
following sections in this prospectus supplement:
o "Description of the Mortgage Pool";
o "Risk Factors--Risks Related to the Mortgage Loans";
o Annex A-1--Certain Characteristics of the Mortgage Loans;
o Annex A-2--Certain Statistical Information Regarding the Mortgage
Loans;
o Annex A-3--Haverly Park Apartments Trust Mortgage Loan Amortization
Schedule;
o Annex B--Certain Characteristics Regarding Multifamily Properties in
Loan Group 2; and
o Annex C--Preliminary Structural and Collateral Term Sheet.
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When reviewing the information that we have included in this prospectus
supplement with respect to the mortgage loans that are to be transferred to
the issuing entity, please note that--
o all numerical information provided with respect to the mortgage loans
is provided on an approximate basis;
o all cut-off date principal balances assume the timely receipt of the
scheduled payments for each mortgage loan and that no prepayments
occur prior to the cut-off date;
o all weighted average information provided with respect to the
mortgage loans reflects a weighting of the subject mortgage loans
based on their respective cut-off date principal balances; the
initial mortgage pool balance will equal the total cut-off date
principal balance of the entire mortgage pool, and the initial loan
group 1 balance and the initial loan group 2 balance will each equal
the total cut-off date principal balance of the mortgage loans in the
subject loan group; we show the cut-off date principal balance for
each of the mortgage loans on Annex A-1 to this prospectus
supplement;
o when information with respect to the mortgage loans is expressed as a
percentage of the initial mortgage pool balance, the initial loan
group 1 balance or the initial loan group 2 balance, the percentages
are based upon the cut-off date principal balances of the subject
mortgage loans;
o when information with respect to the mortgaged real properties is
expressed as a percentage of the initial mortgage pool balance, the
initial loan group 1 balance or the initial loan group 2 balance, the
percentages are based upon the cut-off date principal balances of the
related mortgage loans;
o if any mortgage loan is secured by multiple mortgaged real
properties, the related cut-off date principal balance has been
allocated among the individual properties based on any of (i) an
individual property's appraised value as a percentage of the total
appraised value of all the related mortgaged real properties,
including the subject individual property, securing that mortgage
loan, (ii) an individual property's underwritten net operating income
as a percentage of the total underwritten net operating income of all
the related mortgaged real properties, including the subject
individual property, securing that mortgage loan and (iii) an
allocated loan balance specified in the related loan documents;
o unless specifically indicated otherwise, statistical information
presented in this prospectus supplement with respect to any funded
mortgage loan held by the issuing entity that is part of a loan
combination includes the related A-note loans not included in the
issuing entity;
o other than with respect to Farallon Portfolio and Georgia-Alabama
Retail Portfolio and unless specifically indicated otherwise,
statistical information presented in this prospectus
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supplement with respect to any mortgage loan held by the issuing
entity that is part of a loan combination excludes the related B-note
loan not included in the issuing entity;
o statistical information regarding the mortgage loans may change prior
to the date of initial issuance of the offered certificates due to
changes in the composition of the mortgage pool prior to that date,
which may result in the initial mortgage pool balance being as much
as 5% larger or smaller than indicated;
o the sum of numbers presented in any column within a table may not
equal the indicated total due to rounding;
o when a mortgage loan is identified by loan number, we are referring
to the loan number indicated for that mortgage loan on Annex A-1 to
this prospectus supplement; and
o when a mortgage loan does not have a fixed interest rate for the loan
term, the interest rate shown or used in calculations throughout is
the initial interest rate, unless otherwise specified.
SUBSTITUTIONS, ACQUISITIONS AND
REMOVALS OF MORTGAGE LOANS ............ On or prior to the date of initial issuance of the offered certificates, we
will acquire the mortgage loans from the sponsors and will transfer the
mortgage loans to the issuing entity. Except as contemplated in the
following paragraphs regarding the replacement of a defective mortgage
loan, no mortgage loan may otherwise be added to the assets of the issuing
entity.
Each sponsor, with respect to each mortgage loan transferred by it to us
for inclusion in the pool as assets held by the issuing entity, will:
o make, as of the date of initial issuance of the offered certificates,
and subject to any applicable exceptions, the representations and
warranties generally described under "Description of the MortgagePool--Representations and Warranties" in this prospectus supplement;
and
o agree to deliver the loan documents described under "Description ofthe Mortgage Pool--Assignment of the Mortgage Loans" in this
prospectus supplement.
If there exists a breach of any of those representations and warranties, or
if there exists a document defect with respect to any mortgage loan, which
breach or document defect materially and adversely affects the value of the
subject mortgage loan or the interests of the certificateholders, and if
that breach or document defect is not cured within the period contemplated
under "Description of the Mortgage Pool--Repurchases and Substitutions" in
this prospectus supplement, then the affected mortgage loan will be subject
to repurchase or substitution as described under "Description of theMortgage Pool--Repurchases and Substitutions" in this prospectus
supplement.
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If any mortgage loan experiences payment defaults similar to the payment
defaults that would result in a transfer of servicing from the applicable
master servicer to the special servicer, then it will be subject to a fair
value purchase option on the part of the special servicer, the holder--or,
if applicable, the beneficial owner--of certificates representing the
largest percentage interest of voting rights allocated to the controlling
class or an assignee of the foregoing, as described under "Servicing of theMortgage Loans--Realization Upon Defaulted Mortgage Loans--Fair Value Call"
in this prospectus supplement; provided, however, that with respect to the
Farallon Portfolio trust mortgage loan, one or more of the holders of the
non-trust loans will have the right to purchase the Farallon Portfolio
trust mortgage loan prior to the special servicer or the controlling class
representative; provided, further, with respect to the Georgia-Alabama
Retail Portfolio trust mortgage loan, the holders of the B-note trust loan
and the B-note non-trust loan each have the right to exercise a purchase
option and purchase (at par) both the related trust mortgage loan and the
A-note non-trust loan, and, if such right is not exercised by such B-note
holders, the controlling class representative of the securitization
containing the A-note non-trust loan has a fair value right to purchase the
related A-note non-trust loan and the special servicer or the controlling
class representative has a fair value purchase option with respect to the
trust mortgage loan. See "Description of the Mortgage Pool--The LoanCombinations--The Farallon Portfolio Loan Combination" and "--TheGeorgia-Alabama Retail Portfolio Loan Combination" in this prospectus
supplement.
If, in the case of any mortgage loan held by the issuing entity, there
exists additional debt that is secured by the related mortgaged real
property or by an interest in the related borrower, which additional debt
is not held by the issuing entity, then the lender on that additional debt
may be entitled to acquire that mortgage loan--generally at a price no less
than the unpaid principal balance of the subject mortgage loan, plus
interest, exclusive of default interest, accrued thereon--upon the
occurrence of a default or, in some cases, a reasonably foreseeable
default.
The issuing entity will be subject to optional termination as discussed
under "Description of the Offered Certificates--Termination" in this
prospectus supplement.
PAYMENT AND OTHER TERMS................... Each of the mortgage loans is the obligation of a borrower to repay a
specified sum with interest. Each of the mortgage loans is secured by a
first mortgage lien on the fee and/or leasehold interest of the related
borrower or another party in one or more commercial, multifamily or
manufactured housing community real properties. Each mortgage lien will be
subject to the limited permitted encumbrances that we describe in the
glossary to this prospectus supplement.
All of the mortgage loans are or should be considered nonrecourse. None of
the mortgage loans is insured or guaranteed by any governmental agency or
instrumentality, by any private mortgage insurer, by any sponsor or by any
of the parties to the pooling and servicing agreement.
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Each of the mortgage loans currently accrues interest at the annual rate
specified with respect to that loan on Annex A-1 to this prospectus
supplement. Except as otherwise described below with respect to mortgage
loans that have anticipated repayment dates or that are converting mortgage
loans or the mortgage loan identified on Annex A-1 to this prospectus
supplement as Haverly Park Apartments, the mortgage interest rate for each
mortgage loan is, in the absence of default, fixed for the entire term of
the mortgage loan.
A. Amortizing Balloon Loans .............. Seventy-seven (77) of the mortgage loans, representing approximately 15.7%
of the initial mortgage pool balance (fifty-six (56) mortgage loans in loan
group 1, representing approximately 17.9% of the initial loan group 1
balance, and twenty-one (21) mortgage loans in loan group 2, representing
approximately 12.6% of the initial loan group 2 balance), provide for:
o the amortization of principal commencing, in each such case, no later
than the first regular payment date following origination;
o an amortization schedule that is significantly longer than its
remaining term to stated maturity; and
o a substantial payment of principal on its maturity date.
These 77 balloon mortgage loans do not include any of the balloon mortgage
loans described under "--Partial Interest-Only Balloon Loans" or
"--Interest-Only Balloon Loans" below.
B. Partial Interest-Only Balloon Loans
or ARD Loans ......................... Ninety (90) of the mortgage loans, representing approximately 48.3% of the
initial mortgage pool balance (seventy-three (73) mortgage loans in loan
group 1, representing approximately 47.2% of the initial loan group 1
balance, and seventeen (17) mortgage loans in loan group 2, representing
approximately 49.7% of the initial loan group 2 balance), require:
o the payment of interest only on each due date until the expiration of
a designated period;
o the amortization of principal following the expiration of that
interest-only period based on an amortization schedule that is
significantly longer than its remaining term to stated maturity; and
o a substantial payment of principal on its maturity date.
C. Interest-Only Balloon Loans ........... Thirty-nine (39) of the mortgage loans, representing approximately 31.2% of
the initial mortgage pool balance (twenty-four (24) mortgage loans in loan
group 1, representing approximately 26.6% of the initial loan group 1
balance, and fifteen (15) mortgage loans in loan group 2, representing
approximately 37.3% of the initial loan group 2 balance), require the
payment of interest only until the related maturity date and provide for
the repayment of the entire principal balance on the related maturity date.
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D. ARD Loans ............................. Five (5) of the mortgage loans, representing approximately 4.2% of the
initial mortgage pool balance and approximately 7.2% of the initial loan
group 1 balance, respectively, which are commonly referred to as
hyper-amortization loans or ARD Loans, provide for material changes to
their terms to encourage the related borrower to pay the mortgage loan in
full by a specified date. We consider that date to be the anticipated
repayment date for such ARD Loans. There can be no assurance, however, that
these incentives will result in any of these mortgage loans being paid in
full on or before its anticipated repayment date. The changes to the loan
terms, which, in each case, will become effective as of the related
anticipated repayment date, include:
o accrual of interest at a rate in excess of the initial mortgage
interest rate with the additional interest to be deferred and payable
only after the outstanding principal balance of the subject mortgage
loan is paid in full; and
o applying excess cash flow from the mortgaged real property to pay
down the principal amount of the subject mortgage loan, which payment
of principal will be in addition to the principal portion of the
normal monthly debt service payment.
Certain of the above-identified ARD Loans require:
o the payment of interest only until the expiration of a designated
period; and
o the amortization of principal following the expiration of that
interest-only period.
E. Fully Amortizing Loans ................ Seven (7) of the mortgage loans, representing approximately 0.7% of the
initial mortgage pool balance, four (4) mortgage loans representing
approximately 1.0% of the initial loan group 1 balance and three (3)
mortgage loans representing approximately 0.3% of the initial loan group 2
balance, respectively, have a payment schedule that provides for the
payment of principal of the subject mortgage loan substantially in full by
its maturity date.
F. Converting Loans ...................... Four (4) mortgage loans, representing approximately 0.2% of the initial
mortgage pool balance, approximately 0.1% of the initial loan group 1
balance and approximately 0.3% of the initial loan group 2 balance, convert
from a fixed rate loan to a floating rate loan commencing ten years after
the first payment date. Such mortgage loans are fully amortizing loans and
the related loan documents provide that until the first adjustment period,
the interest rate must be at least as high as the related fixed interest
rate specified in this prospectus supplement, but thereafter, the interest
rate may adjust to a rate that is lower than the initial fixed interest
rate, without any floor. The earliest date that any converting mortgage
loan will convert to a floating interest rate is May 8, 2017.
LOAN COMBINATIONS ........................ Five (5) mortgage loans are, in each case, part of a loan combination
comprised of two (2) or more mortgage loans that are obligations of the
same borrower, only one of which (or, in the case of Farallon Portfolio,
ten of which) will be transferred to the issuing entity. The remaining
mortgage loans in each loan combination will not be transferred to the
issuing entity, however all of the mortgage loans in the subject loan
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combination are together secured by the same mortgage instrument(s)
encumbering the same mortgaged real property or properties. In the case of
each such loan combination (other than the Farallon Portfolio loan
combination and the Georgia-Alabama Retail Portfolio loan combination), the
mortgage loan that will not be transferred to the issuing entity is, in
general, subordinate in right of payment with the mortgage loan in the same
loan combination that has been transferred to the issuing entity, but only
to the extent set forth in the related co-lender or intercreditor
agreement.
In the case of the Farallon Portfolio loan combination, the mortgage loans
transferred to the issuing entity consist of five A-note mortgage loans and
five B-note mortgage loans. The (x) A-note Farallon Portfolio mortgage
loans that will not be transferred to the issuing entity are, in general,
pari passu in priority in respect of payment of interest and principal
(other than principal payments that are made specifically on such A-note
Farallon Portfolio mortgage loans by the related borrower pursuant to the
mortgage loan documents) with the portion of the Farallon Portfolio trust
mortgage loan that constitutes an A-note and senior in priority in respect
of payment of interest and principal with the portion of the Farallon
Portfolio trust mortgage loan that constitutes a B-note and (y) B-note
Farallon Portfolio mortgage loans that will not be transferred to the
issuing entity are, in general, junior in priority in respect of payment of
interest and principal with the portion of the Farallon Portfolio trust
mortgage loan that constitutes an A-note and pari passu in priority in
respect of payment of interest and principal (other than principal payments
that are made specifically on such B-note Farallon Portfolio mortgage loans
by the related borrower pursuant to the mortgage loan documents) with the
portion of the Farallon Portfolio trust mortgage loan that constitutes a
B-note but, in each case, only to the extent set forth in the related
co-lender or intercreditor agreement.
In the case of the Georgia-Alabama Retail Portfolio loan combination, the
mortgage loans transferred to the issuing entity consist of an A-note trust
mortgage loan and a B-note trust mortgage loan. One of the loans that will
not be transferred to the issuing entity will be equal in priority in
respect of payment with the A-note trust mortgage loan and senior in
priority in respect of payment with the B-note trust mortgage loan. The
other loan that will not be transferred to the issuing entity will be
subordinate in priority with respect to the A-note trust mortgage loan and
equal in priority in respect of payment with the B-note trust mortgage
loan, but, in each case, only to the extent set forth in the related
co-lender or intercreditor agreements.
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The following mortgage loans are each part of a loan combination:
U/W DSCR (NCF) AND CUT-OFF DATE
MORTGAGE LOANS THAT ARE RELATED LOAN-TO-VALUE RATIO OF ENTIRE
PART OF A LOAN COMBINATION NON-TRUST LOANS LOAN COMBINATION
% OF
TRUST MORTGAGE LOAN CUT-OFF DATE INITIAL ORIGINAL CUT-OFF DATE
(AS IDENTIFIED ON ANNEX A-1 TO THIS PRINCIPAL MORTGAGE PRINCIPAL LOAN-TO-VALUE
PROSPECTUS SUPPLEMENT) BALANCE POOL BALANCE BALANCE U/W NCF DSCR(2) RATIO(2)
Farallon Portfolio(1) $250,000,000 10.3% $1,325,500,000 1.50x 79.7%
Executive Hills Portfolio $99,900,000 4.1% $11,100,000 1.24x 79.3%
Peninsula Beverly Hills $79,300,000 3.3% $60,700,000 1.40x 63.2%
Georgia-Alabama Retail $39,926,997 1.6% $40,000,000 1.24x 79.3%
Portfolio(3)
Timbercreek Apartments $5,317,000 0.2% $331,300 1.08x 84.9%
(1) The Farallon Portfolio trust mortgage loan consists of ten promissory
notes, five (5) of which are A-notes in the aggregate original principal
amount of $116,225,000 and five (5) of which are B-notes in the aggregate
original principal amount of $133,775,000. The debt service coverage ratio
and the cut-off date loan-to-value ratio were determined taking into
consideration, in the case of the debt service coverage ratio, the
aggregate annualized amount of debt service that will be payable under the
related trust mortgage loans and the related non-trust mortgage loans
(including the related subordinate B-note non-trust loans) and, in the case
of the cut-off date loan-to-value ratio, the cut-off date principal balance
of the related trust mortgage loans and the related non-trust mortgage
loans (including the related subordinate B-note non-trust loans). The U/W
NCF DSCR calculations include cash flow from the rental housing portfolio
owned by affiliates of the related borrowers. A pledge of the equity in
such affiliates was obtained as additional collateral for the loan and will
be released when a certain debt service coverage ratio is satisfied. The
U/W NCF DSCR excluding cash flow from the Farallon Portfolio rental housing
portfolio is 1.27x. See Annex C, "Preliminary Structural and CollateralTerm Sheet--The Farallon Portfolio."
(2) In the case of the Executive Hills Portfolio, Peninsula Beverly Hills and
Timbercreek Apartments trust mortgage loans, the debt service coverage
ratio and the cut-off date loan-to-value ratio were determined taking into
consideration, in the case of the debt service coverage ratio, the
aggregate annualized amount of debt service that will be payable only under
the related trust mortgage loans (and not the related subordinate B-note
loans) and, in the case of the cut-off date loan-to-value ratio, the
cut-off date principal balance of the related trust mortgage loans (and not
the related subordinate B-note loans).
(3) The Georgia-Alabama Retail Portfolio loan combination consists of an A-Note
trust loan with an original principal balance of $33,000,000, an A-note
non-trust loan with an original principal balance of $33,000,000, a B-note
trust loan with an original principal balance of $7,000,000 and a B-note
non-trust loan with an original principal balance of $7,000,000. The debt
service coverage ratio and the cut-off date loan-to-value ratio were
determined taking into consideration, in the case of the debt service
coverage ratio, the aggregate annualized amount of debt service that will
be payable under the related loan combination and, in the case of the
cut-off date loan-to-value ratio, the cut-off date principal balance of the
related loan combination.
See "Description of the Mortgage Pool--The Loan Combinations" in this
prospectus supplement for a more detailed description, with respect to each
loan combination, of the related co-lender arrangement and the priority of
payments among the mortgage loans constituting such loan combination. Also,
see "Description of the Mortgage Pool--Additional Loan and PropertyInformation--Additional and Other Financing" in this prospectus supplement.
DELINQUENCY STATUS ....................... None of the mortgage loans was 30 days or more delinquent with respect to
any monthly debt service payment as of its cut-off date or at any time
since the date of its origination. None of the mortgage loans has
experienced any losses of principal or interest (through forgiveness of
debt or restructuring) since origination.
PREPAYMENT LOCK-OUT PERIODS .............. Except as described under "Description of the Mortgage Pool--Terms andConditions of the Mortgage Loans--Prepayment Provisions" in this prospectus
supplement with respect to one hundred ninety-one (191) mortgage loans
representing 81.3% of the initial mortgage pool balance (one hundred fifty
(150) mortgage loans in loan group 1, representing approximately 88.4% of
the initial loan group 1 balance, and forty-one (41) mortgage loans in loan
group 2, representing
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approximately 71.7% of the initial loan group 2 balance)) restrict
prepayment for a particular period commonly referred to as a lock-out
period and, in most cases (see "--Defeasance" below), a period during which
the subject mortgage loan may be defeased but not prepaid. The weighted
average remaining prepayment lock-out period and defeasance period of the
mortgage loans as of the cut-off date is approximately 92 months
(approximately 93 months for the mortgage loans in loan group 1 and
approximately 92 months for the mortgage loans in loan group 2).
DEFEASANCE ............................... One hundred fifty-two (152) of the mortgage loans, representing
approximately 82.1% of the initial mortgage pool balance (one hundred
nineteen (119) mortgage loans in loan group 1, representing approximately
74.2% of the initial loan group 1 balance, and thirty-three (33) mortgage
loans in loan group 2, representing approximately 92.7% of the initial loan
group 2 balance), permit the related borrower, under certain conditions, to
obtain a full or, in certain cases, a partial release of the mortgaged real
property from the mortgage lien by delivering U.S. Treasury obligations or
other non-callable government securities as substitute collateral. None of
these mortgage loans permits defeasance prior to the second anniversary of
the date of initial issuance of the certificates; provided, however two (2)
of these mortgage loans, representing 10.7% of the initial mortgage pool
balance, 0.8% of the initial loan group 1 balance and 24.2% of the initial
loan group 2 balance permit voluntary prepayments with the payment of
prepayment consideration prior to the beginning of the defeasance period.
The payments on the defeasance collateral are required to be at least equal
to an amount sufficient to make, when due, all debt service payments on the
defeased mortgage loan or portion thereof allocated to the related
mortgaged real property, including any balloon payment.
PREPAYMENT CONSIDERATION ................. All of the mortgage loans that we intend to include in the trust provide
for one or more of the following:
o a prepayment lock-out period, during which the principal balance of
the mortgage loan may not be voluntarily prepaid in whole or in part;
o a defeasance period, during which voluntary prepayments are
prohibited, but the related borrower may obtain a full or partial
release of the related mortgaged real property through defeasance;
o a prepayment consideration period, during which voluntary prepayments
are permitted, subject to the payment of a yield maintenance premium
or other additional consideration for the prepayment;
o a prepayment consideration period, during which voluntary prepayments
are permitted, subject to the payment of a yield maintenance premium
or other additional consideration for the prepayment followed by a
defeasance period, during which voluntary prepayments are prohibited,
but the related borrower may obtain a full or partial release of the
related mortgaged real property through defeasance; and/or
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o a prepayment consideration period, during which voluntary prepayments
are permitted, subject to the payment of a yield maintenance premium
or other additional consideration for the prepayment followed by a
period during which the related borrower may obtain a full or partial
release of the related mortgaged real property through defeasance or
make voluntary prepayments subject to the payment of a yield
maintenance premium.
See "Description of the Mortgage Pool--Terms and Conditions of the MortgageLoans--Prepayment Provisions" in this prospectus supplement.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY.]
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ADDITIONAL STATISTICAL INFORMATION ....... The mortgage pool will have the following general characteristics as
of the cut-off date:
MORTGAGE POOL LOAN GROUP 1 LOAN GROUP 2
-------------- -------------- --------------
Initial mortgage pool/loan group balance $2,435,364,704 $1,401,593,530 $1,033,771,173
Number of mortgage loans 218 162 56
Number of mortgaged real properties 664 259 405
Percentage of investment grade, shadow rated loans(1) 3.3% 5.7% 0.0%
Average cut-off date principal balance 11,171,398 8,651,812 18,460,200
Largest cut-off date principal balance 335,000,000 99,900,000 335,000,000
Smallest cut-off date principal balance 494,011 898,482 494,011
Weighted average mortgage interest rate 5.9865% 5.9747% 6.0026%
Highest mortgage interest rate 6.8100% 6.8100% 6.5226%
Lowest mortgage interest rate 5.1100% 5.2900% 5.1100%
Number of cross-collateralized loan groups 2 0 2
Cross-collateralized loan groups as a percentage of initial
mortgage pool/loan group balance 1.3% 0.0% 3.0%
Number of multi-property mortgage loans 11 8 3
Multi-property mortgage loans as a percentage of initial
mortgage pool/loan group balance 35.3% 18.9% 57.7%
Weighted average underwritten debt service coverage ratio(2) (3) (4) 1.36x 1.40x 1.31x
Highest underwritten debt service coverage ratio(2) (3) (4) 3.06x 2.99x 3.06x
Lowest underwritten debt service coverage ratio(2) (3) (4) 1.11x 1.13x 1.11x
Weighted average cut-off date loan-to-value ratio(2) (3) (4) 71.6% 68.3% 76.2%
Highest cut-off date loan-to-value ratio(2) (3) (4) 89.2% 89.2% 80.1%
Lowest cut-off date loan-to-value ratio(2) (3) (4) 24.2% 24.2% 27.0%
Weighted average original term to maturity or anticipated
repayment date (months) 114 118 110
Longest original term to maturity or anticipated repayment
date (months) 360 300 360
Shortest original term to maturity or anticipated repayment
date (months) 60 60 60
Weighted average remaining term to maturity or anticipated
repayment date (months) 113 116 108
Longest remaining term to maturity or anticipated repayment
date (months) 358 298 358
Shortest remaining term to maturity or anticipated repayment
date (months) 54 58 54
_____________________
(1) It has been confirmed to us by each of S&P and Fitch, in accordance with
their respective methodologies, that loan number 4 has credit
characteristics consistent with investment grade-rated obligations.
(2) In the case of one (1) mortgage loan (loan number 127) the related debt
service coverage ratio and/or loan-to-value ratio was calculated by taking
into account a holdback amount and/or a letter of credit that was taken
subject to the financial performance of the related mortgaged real
property. Additionally, with respect to certain other mortgage loans (as
described in the footnotes to Annex A-1), the related debt service
coverage ratio and/or loan-to-value ratio was calculated by taking into
account various assumptions regarding the financial performance of the
related mortgaged real property on a "stabilized" basis. See the footnotes
to Annex A-1 to this prospectus supplement for more information regarding
the calculations of debt service coverage ratios and loan-to-value ratios.
(3) In the case of the Executive Hills Portfolio, Peninsula Beverly Hills and
Timbercreek Apartments trust mortgage loans, the debt service coverage
ratio and the cut-off date loan-to-value ratio were determined taking into
consideration, in the case of the debt service coverage ratio, the
aggregate annualized amount of debt service that will be payable only
under the related trust mortgage loans (and not the related subordinate
B-note loans) and, in the case of the cut-off date loan-to-value ratio,
the cut-off date principal balance of the related trust mortgage loans
(and not the related subordinate B-note loans). In the case of the
Georgia-Alabama Retail Portfolio trust mortgage loan, the debt service
coverage ratio and the cut-off date loan-to-value ratio were determined
taking into consideration, in the case of the debt service coverage ratio,
the aggregate annualized amount of debt service that will be payable under
the related loan combination and, in the case of the cut-off date
loan-to-value ratio, the cut-off date principal balance of the related
loan combination.
(4) The Farallon Portfolio trust mortgage loan consists of ten promissory
notes, five (5) of which are A-notes in the aggregate original principal
amount of $116,225,000 and five (5) of which are B-notes in the aggregate
original principal amount of $133,775,000. The debt service coverage ratio
and the cut-off date loan-to-value ratio were determined taking into
consideration, in the case of the debt service coverage ratio, the
aggregate annualized amount of debt service that will be payable under the
related trust mortgage loans and the related non-trust mortgage loans
(including the related subordinate B-note non-trust loans) and, in the
case of the cut-off date loan-to-value ratio, the cut-off date principal
balance of the related trust mortgage loans and the related non-trust
mortgage loans (including the related subordinate B-note non-trust loans).
S-41
PROPERTY TYPE............................. The table below shows the number of and the total cut-off date principal
balance and percentages of the initial mortgage pool balance, the loan
group 1 balance and the loan group 2 balance, respectively, secured by
mortgaged real properties operated primarily for each indicated purpose:
NUMBER OF
MORTGAGED TOTAL CUT-OFF % OF INITIAL % OF INITIAL % OF INITIAL
REAL DATE PRINCIPAL MORTGAGE POOL LOAN GROUP 1 LOAN GROUP 2
PROPERTY TYPES PROPERTIES BALANCE(1) BALANCE(1) BALANCE(1) BALANCE(1)
----------------------- ---------- -------------- ------------- ------------ ------------
Multifamily 408 $1,057,175,674 43.4% 1.7% 100.0%
Multifamily 128 $758,965,534 31.2% 1.7% 71.2%
Manufactured Housing 280 $298,210,139 12.2% 0.0% 28.8%
Retail 151 $628,459,626 25.8% 44.8% 0.0%
Anchored 29 $341,827,984 14.0% 24.4% 0.0%
Unanchored(2) 48 $189,598,065 7.8% 13.5% 0.0%
Convenience Store 62 $39,926,997 1.6% 2.8% 0.0%
Shadow Anchored(3) 7 $30,433,581 1.2% 2.2% 0.0%
Single Tenant 5 $26,673,000 1.1% 1.9% 0.0%
Office(4) 35 $269,573,155 11.1% 19.2% 0.0%
Hospitality 10 $192,020,082 7.9% 13.7% 0.0%
Self Storage 34 $154,017,053 6.3% 11.0% 0.0%
Industrial 14 $87,067,565 3.6% 6.2% 0.0%
Mixed Use 10 $42,081,549 1.7% 3.0% 0.0%
Land 2 $4,970,000 0.2% 0.4% 0.0%
---------- -------------- ------------- ------------ ------------
TOTAL: 664 $2,435,364,704 100.0% 100.0% 100.0%
_____________________
(1) For mortgage loans secured by multiple mortgaged real properties, the
related cut-off date principal balance has been allocated among those
individual properties based on any of (i) an individual property's
appraised value as a percentage of the total appraised value of all the
related mortgaged real properties, including the subject individual
property, securing the same mortgage loan, (ii) an individual property's
underwritten net operating income as a percentage of the total
underwritten net operating income of all the mortgaged real properties,
including the subject individual property, securing the subject mortgage
loan and (iii) an allocated loan balance specified in the related loan
documents.
(2) One of the mortgage loans secured by the mortgaged real properties
identified on Annex A-1 as the Georgia-Alabama Retail Portfolio is secured
by sixty-two (62) retail properties, which represent security for
approximately 1.6% of the initial mortgage pool balance and approximately
2.8% of the loan group 1 balance, which are fee interests in gas stations
with convenience stores and other retail stores located in Georgia (sixty
(60) such properties) and Alabama (two (2) such properties). In addition,
certain other retail properties securing mortgage loans in the pool may
have gas stations as part of the retail mix.
(3) A mortgaged real property is classified as shadow anchored if it is
located in close proximity to an anchored retail property.
(4) In the case of six (6) mortgaged real properties (securing loan numbers
38.01, 38.02, 64, 109, 196 and 202), representing approximately 1.3% of
the initial mortgage loan pool balance, and approximately 2.3% of the
initial loan group 1 balance, the related mortgaged real properties are
medical offices.
S-42
PROPERTY LOCATION......................... The mortgaged real properties are located in 42 states. The following table
sets forth the indicated information regarding those states where 5% or
more of mortgaged real properties, based on allocated loan balance, are
located.
NUMBER OF TOTAL CUT-OFF % OF INITIAL % OF INITIAL % OF INITIAL
MORTGAGED REAL DATE PRINCIPAL MORTGAGE POOL LOAN GROUP 1 LOAN GROUP 2
STATE PROPERTIES BALANCE(1) BALANCE(1) BALANCE(1) BALANCE(1)
-------------- -------------- -------------- ------------- ------------ ------------
California 61 $431,846,443 17.7% 27.7% 4.2%
Southern(2) 51 $339,808,043 14.0% 21.5% 3.8%
Northern(2) 10 $92,038,401 3.8% 6.3% 0.4%
Texas 84 $249,172,695 10.2% 6.6% 15.2%
Florida 49 $231,413,829 9.5% 2.3% 19.3%
Georgia 102 $212,450,232 8.7% 9.4% 7.8%
Other 368 $1,310,481,504 53.8% 54.1% 53.5%
-------------- -------------- ------------- ------------ ------------
TOTAL: 664 $2,435,364,704 100.0% 100.0% 100.0%
_____________________
(1) For mortgage loans secured by multiple mortgaged real properties, the
related cut-off date principal balance has been allocated among those
individual properties based on any of (i) an individual property's
appraised value as a percentage of the total appraised value of all the
mortgaged real properties, including the subject individual property,
securing the same mortgage loan, (ii) an individual property's
underwritten net operating income as a percentage of the total
underwritten net operating income of all the mortgaged real properties,
including the subject individual property, securing the subject mortgage
loan and (iii) an allocated loan balance specified in the related loan
documents.
(2) For purposes of determining whether a mortgaged real property is located
in Northern California or Southern California, Northern California
includes areas with zip codes of 93600 and above, and Southern California
includes areas with zip codes below 93600.
ENCUMBERED INTERESTS...................... The table below shows the number of, as well as the total cut-off date
principal balance and percentage of the initial mortgage pool balance, the
initial loan group 1 balance and the initial loan group 2 balance,
respectively, secured by mortgaged real properties for which the
significant encumbered interest is as indicated:
ENCUMBERED INTEREST NUMBER OF TOTAL CUT-OFF % OF INITIAL % OF INITIAL % OF INITIAL
IN THE MORTGAGED MORTGAGED REAL DATE PRINCIPAL MORTGAGE POOL LOAN GROUP 1 LOAN GROUP 2
REAL PROPERTY PROPERTIES BALANCE(1) BALANCE(1) BALANCE(1) BALANCE(1)
------------------- -------------- --------------- ------------- ------------ ------------
Fee(2) 656 $ 2,347,735,563 96.4% 93.8% 99.9%
Leasehold 7 $ 74,071,140 3.0% 5.2% 0.1%
Fee/Leasehold 1 $ 13,558,000 0.6% 1.0% 0.0%
-------------- --------------- ------------- ------------ ------------
TOTAL: 664 $ 2,435,364,704 100.0% 100.0% 100.0%
_____________________
(1) For mortgage loans secured by multiple mortgaged real properties, the
related cut-off date principal balance has been allocated among those
individual properties based on any of (i) an individual property's
appraised value as a percentage of the total appraised value of all the
mortgaged real properties, including the subject individual property,
securing the same mortgage loan, (ii) an individual property's
underwritten net operating income as a percentage of the total
underwritten net operating income of all the mortgaged real properties,
including the subject individual property, securing the subject mortgage
loan and (iii) an allocated loan balance specified in the related loan
documents.
(2) In circumstances where both the fee interest and the overlapping leasehold
interest in a mortgaged real property are encumbered, a mortgage loan is
considered to be secured by the fee interest in the subject mortgaged real
property.
S-43
LEGAL AND INVESTMENT CONSIDERATIONS
FEDERAL INCOME TAX CONSEQUENCES .......... The trustee or its agent will make elections to treat designated portions
of the assets of the issuing entity as two separate real estate mortgage
investment conduits or REMICs under sections 860A through 860G of the
Internal Revenue Code of 1986, as amended. The designations for each of
those two REMICs are as follows:
o REMIC I, the lower tier REMIC, which will consist of, among other
things--
1. the mortgage loans, and
2. various other related assets; and
o REMIC II, which will hold the non-certificated regular interests in
REMIC I.
The class R-I and R-II certificates will represent the respective residual
interests in those REMICs.
The issuing entity will also hold (i) the class A-2FL REMIC II regular
interest, the class A-3FL REMIC II regular interest, the class AM-FL REMIC
II regular interest, the class AJ-FL REMIC II regular interest, each
related swap agreement and each related trustee's floating rate account,
which will be represented by the related class of Floating Rate
Certificates, (ii) the portion of the assets of the issuing entity that is
represented by the class Y certificates that will entitle the holders of
those certificates to receive any additional interest accrued as to payment
with respect to the mortgage loan that converts from a fixed rate of
interest to a floating rate of interest and (iii) the portion of the assets
of the issuing entity that is represented by the class Z certificates that
will entitle the holders of those certificates to receive any additional
interest accrued and deferred as to payment with respect to each mortgage
loan with an anticipated repayment date that remains outstanding past that
date, which portions will constitute one or more grantor trusts for federal
income tax purposes and will not be part of the REMICs referred to above.
The offered certificates will be treated as regular interests in REMIC II.
This means that they will be treated as newly issued debt instruments for
federal income tax purposes. You will have to report income on your offered
certificates in accordance with the accrual method of accounting even if
you are otherwise a cash method taxpayer. The offered certificates will not
represent any interest in the grantor trust referred to above.
It is anticipated that the class , class and class certificates will be
issued at a premium and that the other classes of offered certificates will
be issued with [a de minimis amount of] original issue discount. If you own
an offered certificate issued with original issue discount, you may have to
report original issue discount income and be subject to a tax on this
income before you receive a corresponding cash payment.
S-44
The prepayment assumption that will be used in determining the rate of
accrual of original issue discount, market discount and premium, if any,
for U.S. federal income tax purposes, will be that, subsequent to any date
of determination--
o each mortgage loan with an anticipated repayment date will be paid in
full on that date,
o no mortgage loan will otherwise be prepaid prior to maturity, and
o there will be no extension of maturity for any mortgage loan.
However, no representation is made as to the actual rate at which the
mortgage loans will prepay, if at all.
For a more detailed discussion of the federal income tax aspects of
investing in the offered certificates, see "Federal Income TaxConsequences" in this prospectus supplement and "Federal Income TaxConsequences" in the accompanying base prospectus.
ERISA CONSIDERATIONS ..................... We anticipate that, subject to satisfaction of the conditions referred to
under "ERISA Considerations" in this prospectus supplement, employee
benefit plans and other retirement plans or arrangements subject to--
o Title I of the Employee Retirement Income Security Act of 1974, as
amended, or
o section 4975 of the Internal Revenue Code of 1986, as amended,
will be able to invest in the offered certificates without giving rise to a
prohibited transaction. This is based upon individual prohibited
transaction exemptions granted to Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation and Bear, Stearns & Co.
Inc. by the U.S. Department of Labor.
If you are a fiduciary of any employee benefit plan or other retirement
plan or arrangement subject to Title I of ERISA or section 4975 of the
Internal Revenue Code of 1986, as amended, you are encouraged to review
carefully with your legal advisors whether the purchase or holding of the
offered certificates could give rise to a transaction that is prohibited
under ERISA or section 4975 of the Internal Revenue Code of 1986, as
amended. See "ERISA Considerations" in this prospectus supplement and in
the accompanying base prospectus.
LEGAL INVESTMENT ......................... The offered certificates will not be mortgage related securities for
purposes of the Secondary Mortgage Market Enhancement Act of 1984.
All institutions whose investment activities are subject to legal
investment laws and regulations, regulatory capital requirements or review
by regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the offered certificates will be
legal investments for them. See "Legal Investment"
S-45
in this prospectus supplement and in the accompanying base prospectus.
INVESTMENT CONSIDERATIONS ................ The rate and timing of payments and other collections of principal on or
with respect to the mortgage loans -- and, in particular, in the case of
the class A-1, A-2, A-2FL, A-SB, A-3 and A-3FL certificates, on or with
respect to the mortgage loans in loan group 1, and in the case of the class
A-1A certificates, on or with respect to the mortgage loans in loan group 2
-- may affect the yield to maturity on each offered certificate. In the
case of offered certificates purchased at a discount, a slower than
anticipated rate of payments and other collections of principal on the
mortgage loans -- and, in particular, in the case of the class A-1, A-2,
A-2FL, A-SB, A-3 and A-3FL certificates, on or with respect to the mortgage
loans in loan group 1, and in the case of the class A-1A certificates, on
or with respect to the mortgage loans in loan group 2 -- could result in a
lower than anticipated yield. In the case of the offered certificates
purchased at a premium, a faster than anticipated rate of payments and
other collections of principal on the mortgage loans -- and, in particular,
in the case of the class A-1, A-2, A-2FL, A-SB, A-3 and A-3FL certificates,
on or with respect to the mortgage loans in loan group 1, and in the case
of the class A-1A certificates, on or with respect to the mortgage loans in
loan group 2 -- could result in a lower than anticipated yield.
The yield on any offered certificate with a variable or capped pass-through
rate, could also be adversely affected if the mortgage loans with
relatively higher net mortgage interest rates pay principal faster than the
mortgage loans with relatively lower net mortgage interest rates.
In addition, depending on timing and other circumstances, the pass-through
rate for the Class X Certificates will vary with changes in the relative
sizes of the total principal balances of the Principal Balance
Certificates.
See "Yield and Maturity Considerations" in this prospectus supplement and
in the accompanying base prospectus.
S-46
RISK FACTORS
The offered certificates are not suitable investments for all investors.
In particular, you should not purchase any class of offered certificates unless
you understand and are able to bear the risks associated with that class.
The offered certificates are complex securities and it is important that
you possess, either alone or together with an investment advisor, the expertise
necessary to evaluate the information contained in this prospectus supplement
and the accompanying base prospectus in the context of your financial situation.
YOU SHOULD CONSIDER THE FOLLOWING FACTORS, AS WELL AS THOSE SET FORTH
UNDER "RISK FACTORS" IN THE ACCOMPANYING BASE PROSPECTUS, IN DECIDING WHETHER TO
PURCHASE ANY OFFERED CERTIFICATES. THE "RISK FACTORS" SECTION IN THE
ACCOMPANYING BASE PROSPECTUS INCLUDES A NUMBER OF GENERAL RISKS ASSOCIATED WITH
MAKING AN INVESTMENT IN THE OFFERED CERTIFICATES.
THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND UNDER "RISK FACTORS" IN
THE ACCOMPANYING BASE PROSPECTUS ARE NOT THE ONLY ONES RELATING TO YOUR OFFERED
CERTIFICATES. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR
THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR YOUR INVESTMENT.
THIS PROSPECTUS SUPPLEMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING RISKS DESCRIBED BELOW, ELSEWHERE IN THIS PROSPECTUS
SUPPLEMENT AND IN THE ACCOMPANYING BASE PROSPECTUS.
IF ANY OF THE FOLLOWING EVENTS OR CIRCUMSTANCES IDENTIFIED AS RISKS
ACTUALLY OCCUR OR MATERIALIZE, YOUR INVESTMENT COULD BE MATERIALLY AND ADVERSELY
AFFECTED.
Risks Related to the Offered Certificates
THE CLASS AM, AJ, B, C, D, E AND F CERTIFICATES ARE SUBORDINATE TO, AND ARE
THEREFORE RISKIER THAN, THE CLASS A-1, A-2, A-SB, A-3 AND A-1A CERTIFICATES
If you purchase class AM, AJ, B, C, D, E and F certificates, then your
offered certificates will provide credit support to other classes of offered
certificates and to the class A-2FL, A-3FL and X certificates (in the case of
the A-2FL certificates, through the A-2FL REMIC II regular interest, and in the
case of the A-3FL certificates, through the A-3FL REMIC II regular interest). As
a result, you will receive payments after, and must bear the effects of losses
on the mortgage loans before, the holders of those other classes of
certificates.
When making an investment decision, you should consider, among other
things--
o the payment priorities of the respective classes of the
certificates;
o the order in which the principal balances of the respective classes
of the certificates with principal balances will be reduced in
connection with losses and default-related shortfalls; and
o the characteristics and quality of the mortgage loans.
See "Description of the Mortgage Pool" and "Description of the OfferedCertificates--Payments" and "--Reductions to Certificate Principal Balances inConnection with Realized Losses and Additional Trust Fund Expenses" in this
prospectus supplement. See also "Risk Factors--The Investment Performance of
Your Offered Certificates Will Depend Upon Payments, Defaults and Losses on the
Underlying Mortgage Loans; and Those Payments, Defaults and Losses May Be Highly
Unpredictable,""--Any Credit Support for Your Offered Certificates May BeInsufficient to Protect You Against All Potential Losses" and "--Payments on theOffered Certificates Will Be Made Solely from the Limited Assets of the RelatedTrust, and Those Assets May Be Insufficient to Make All Required Payments onThose Certificates" in the accompanying base prospectus.
S-47
CHANGES IN MORTGAGE POOL COMPOSITION CAN CHANGE THE NATURE OF YOUR INVESTMENT
If you purchase any of the offered certificates that are expected to have
relatively longer weighted average lives, you will be more exposed to risks
associated with changes in concentrations of borrower, loan or property
characteristics than are persons who own offered certificates that are expected
to have relatively shorter weighted average lives. See "Risk Factors--Changes inPool Composition Will Change the Nature of Your Investment" in the accompanying
base prospectus.
THE OFFERED CERTIFICATES WILL HAVE LIMITED LIQUIDITY AND MAY EXPERIENCE
FLUCTUATIONS IN MARKET VALUE UNRELATED TO THE PERFORMANCE OF THE MORTGAGE LOANS
Your offered certificates will not be listed on any national securities
exchange or traded on any automated quotation systems of any registered
securities association, and there is currently no secondary market for your
offered certificates. While one or more of the underwriters currently intend to
make a secondary market in the offered certificates, they are not obligated to
do so. Additionally, one or more purchasers may purchase substantial portions of
one or more classes of offered certificates. Moreover, if a secondary market
does develop, there can be no assurance that it will provide you with liquidity
of investment or that it will continue for the life of your offered
certificates. Accordingly, you may not have an active or liquid secondary market
for your offered certificates. Lack of liquidity could result in a substantial
decrease in the market value of your offered certificates. The market value of
your offered certificates also may be affected by many other factors, including
the then prevailing interest rates and market perceptions of risks associated
with commercial mortgage lending, and no representation is made by any person or
entity as to what the market value of any offered certificate will be at any
time. See "Risk Factors--Lack of Liquidity Will Impair Your Ability to Sell YourOffered Certificates and May Have an Adverse Effect on the Market Value of YourOffered Certificates" and "--The Market Value of Your Offered Certificates May
Be Adversely Affected by Factors Unrelated to the Performance of Your Offered
Certificates and the Underlying Mortgage Assets, such as Fluctuations in
Interest Rates and the Supply and Demand of CMBS Generally" in the accompanying
base prospectus.
THE OFFERED CERTIFICATES HAVE UNCERTAIN YIELDS TO MATURITY
The yield on your offered certificates will depend on--
o the price you paid for your offered certificates; and
o the rate, timing and amount of payments on your offered
certificates.
The frequency, timing and amount of payments on your offered certificates
will depend on:
o the pass-through rate for, and other payment terms of, your offered
certificates;
o the frequency and timing of payments and other collections of
principal on the mortgage loans or, in some cases, a particular
group of mortgage loans;
o the frequency and timing of defaults, and the severity of losses, if
any, on the mortgage loans or, in some cases, a particular group of
mortgage loans;
o the frequency, timing, severity and allocation of other shortfalls
and expenses that reduce amounts available for payment on your
offered certificates;
o repurchases of mortgage loans--or, in some cases, mortgage loans of
a particular group--for material breaches of representations or
warranties and/or material document defects;
o the collection and payment of prepayment premiums and yield
maintenance charges with respect to the mortgage loans or, in some
cases, a particular group of mortgage loans; and
o servicing decisions with respect to the mortgage loans or, in some
cases, a particular group of mortgage loans.
S-48
In general, the factors described in the preceding paragraph cannot be
predicted with any certainty. Accordingly, you may find it difficult to analyze
the effect that these factors might have on the yield to maturity of your
offered certificates. Further, in the absence of significant losses on the
mortgage pool, holders of the class A-1, A-2, A-SB and A-3 certificates should
be concerned with the factors described in the second through seventh bullets of
the preceding paragraph primarily insofar as they relate to the mortgage loans
in loan group 1. Until the class A-1, A-2, A-2FL, A-SB, A-3 and A-3FL
certificates are retired, holders of the class A-1A certificates would, in the
absence of significant losses on the mortgage pool, be affected by the factors
described in the second through seventh bullets of the preceding paragraph
primarily insofar as they relate to the mortgage loans in loan group 2.
See "Description of the Mortgage Pool,""Servicing of the Mortgage Loans,""Description of the Offered Certificates--Payments" and "--Reductions toCertificate Principal Balances in Connection with Realized Losses and AdditionalTrust Fund Expenses" and "Yield and Maturity Considerations" in this prospectus
supplement. See also "Risk Factors--The Investment Performance of Your Offered
Certificates Will Depend Upon Payments, Defaults and Losses on the Underlying
Mortgage Loans; and Those Payments, Defaults and Losses May Be Highly
Unpredictable" and "Yield and Maturity Considerations" in the accompanying base
prospectus.
THE INVESTMENT PERFORMANCE OF YOUR OFFERED CERTIFICATES MAY VARY MATERIALLY AND
ADVERSELY FROM YOUR EXPECTATIONS BECAUSE THE RATE OF PREPAYMENTS AND OTHER
UNSCHEDULED COLLECTIONS OF PRINCIPAL ON THE MORTGAGE LOANS IS FASTER OR SLOWER
THAN YOU ANTICIPATED
If you purchase any offered certificates at a premium relative to their
principal balances, and if payments and other collections of principal on the
mortgage loans--and, in particular, in the case of the class A-1, A-2, A-SB and
A-3 certificates, on the mortgage loans in loan group 1, and in the case of the
class A-1A certificates, on the mortgage loans in loan group 2--occur with a
greater frequency than you anticipated at the time of your purchase, then your
actual yield to maturity may be lower than you had assumed at the time of your
purchase. Conversely, if you purchase any offered certificates at a discount
from their principal balances, and if payments and other collections of
principal on the mortgage loans--and, in particular, in the case of the class
A-1, A-2, A-SB and A-3 certificates, on the mortgage loans in loan group 1, and
in the case of the class A-1A certificates, on the mortgage loans in loan group
2--occur with less frequency than you anticipated, then your actual yield to
maturity may be lower than you had assumed. You should consider that prepayment
premiums and yield maintenance charges may not be collected in all circumstances
and no prepayment premium or yield maintenance charge will be paid in connection
with a purchase or repurchase of a mortgage loan. Furthermore, even if a
prepayment premium or yield maintenance charge is collected and payable on your
offered certificates, it may not be sufficient to offset fully any loss in yield
on your offered certificates.
Some of the mortgage loans may require the related borrower to make, or
permit the lender to apply reserve funds to make, partial prepayments if
specified conditions, such as meeting certain debt service coverage ratios
and/or satisfying certain leasing conditions, have not been satisfied. The
required prepayment may need to be made even though the subject mortgage loan is
in its lock-out period. See "Description of the Mortgage Pool--Terms andConditions of the Mortgage Loans--Other Prepayment Provisions; Mortgage LoansWhich May Require Principal Paydowns" in this prospectus supplement.
The yield on the offered certificates with variable or capped pass-through
rates could also be adversely affected if the mortgage loans with higher net
mortgage interest rates pay principal faster than the mortgage loans with lower
net mortgage interest rates. This is because those classes bear interest at
pass-through rates equal to, based upon or limited by, as applicable, a weighted
average of the adjusted net mortgage interest rates derived from the mortgage
loans.
Prepayments resulting in a shortening of weighted average lives of the
offered certificates may be made at a time of low interest rates when investors
may be unable to reinvest the resulting payment of principal on their
certificates at a rate comparable to the yield anticipated by them in making
their initial investment in those certificates, while delays and extensions
resulting in a lengthening of those weighted average lives may occur at a time
of high interest rates when investors may have been able to reinvest principal
payments that would otherwise have been received by them at higher rates.
S-49
The rate at which voluntary prepayments occur on the mortgage loans will
be affected by a variety of factors, including:
o the terms of the mortgage loans;
o the length of any prepayment lockout period;
o the level of prevailing interest rates;
o the availability of mortgage credit;
o the applicable yield maintenance charges or prepayment premiums;
o the applicable master servicer's or the special servicer's ability
to enforce yield maintenance charges and prepayment premiums;
o the failure to meet certain requirements for the release of escrows;
o the occurrence of casualties or natural disasters; and
o economic, demographic, tax, legal or other factors.
A borrower is generally less likely to prepay its mortgage loan if
prevailing interest rates are at or above the mortgage interest rate borne by
that mortgage loan. On the other hand, a borrower is generally more likely to
prepay its mortgage loan if prevailing rates fall significantly below the
mortgage interest rate borne by that mortgage loan. Borrowers are less likely to
prepay mortgage loans with lock-out periods or yield maintenance charge
provisions, to the extent enforceable, than otherwise identical mortgage loans
without these provisions, with shorter lock-out periods or with lower or no
yield maintenance charges. None of the master servicers, the special servicer or
the trustee will be required to advance any yield maintenance charges.
With respect to the mortgage loan identified on Annex A-1 to this
prospectus supplement as Farallon Portfolio, representing approximately 10.3% of
the initial mortgage pool balance and approximately 24.2% of the initial loan
group 2 balance, one of the related non-trust A-note mortgage loans is a
floating rate note and several of the other non-trust mortgage loans are
comprised of A-notes and B-notes with initial five-year maturities, and all of
such non-trust loans and notes are secured by the same mortgaged real property
as the mortgage loan included in the issuing entity. Such non-trust loans and
notes have shorter maturity dates than a portion of the mortgage loans included
in the issuing entity, and as such, the related borrower may refinance the
entire mortgage loan (inclusive of the portion of such loan being deposited into
the issuing entity) before the stated maturity date of the mortgage loan
included in the issuing entity.
Provisions requiring yield maintenance charges may not be enforceable in
some states and under federal bankruptcy law, and may constitute interest for
usury purposes. Accordingly, we cannot assure you that the obligation to pay any
yield maintenance charge will be enforceable. Also, we cannot assure you that
foreclosure proceeds will be sufficient to pay an enforceable yield maintenance
charge.
Additionally, although the collateral substitution provisions related to
defeasance do not have the same effect on the certificateholders as prepayment,
we cannot assure you that a court would not interpret those provisions as
requiring a yield maintenance charge. In certain jurisdictions, those collateral
substitution provisions might be deemed unenforceable under applicable law or
public policy, or usurious.
See "Description of the Mortgage Pool--Terms and Conditions of theMortgage Loans--Prepayment Provisions" in this prospectus supplement for a
discussion of prepayment restrictions with respect to the mortgage loans. No
assurance can be given to you that the related borrowers will refrain from
prepaying their mortgage loans due to the existence of yield maintenance charges
or that involuntary prepayments will not occur.
S-50
In addition, if a mortgage loan seller repurchases any mortgage loan from
the issuing entity due to material breaches of representations or warranties or
material document defects, the repurchase price paid will be passed through to
the holders of the certificates with the same effect as if the mortgage loan had
been prepaid in part or in full, and no yield maintenance charge will be
payable. A repurchase or the exercise of a purchase option may adversely affect
the yield to maturity on your certificates.
A HIGH RATE AND EARLY OCCURRENCE OF BORROWER DELINQUENCIES AND DEFAULTS MAY
ADVERSELY AFFECT YOUR INVESTMENT
The actual yield to maturity of your offered certificates will be lower
than expected and could be negative under certain extreme scenarios if (a) you
calculate the anticipated yield of your offered certificates based on a default
rate or amount of losses lower than that actually experienced by the mortgage
loans and (b) the additional losses are allocable to or otherwise required to be
borne by your class of offered certificates. The actual yield to maturity of
your offered certificates will also be affected by the timing of any loss on a
liquidated mortgage loan if a portion of the loss is allocable to or otherwise
required to be borne by your class of offered certificates, even if the rate of
defaults and severity of losses are consistent with your expectations. In
general, the earlier you bear a loss, the greater the effect on your yield to
maturity. Delinquencies on the mortgage loans may result in shortfalls in
distributions of interest and/or principal to the holders of the offered
certificates for the current month if the delinquent amounts are not advanced.
Furthermore, no interest will accrue on this shortfall during the period of time
that the payment is delinquent. Losses on the mortgage loans may affect the
weighted average life and/or yield to maturity of a particular class of offered
certificates even if those losses are not allocated to, or required to be borne
by the holders of, that class of offered certificates. The special servicer may
accelerate the maturity of the related mortgage loan in the case of any monetary
or material non-monetary default, which could result in an acceleration of
payments to the certificateholders. In addition, losses on the mortgage loans
may result in a higher percentage ownership interest evidenced by a class of
offered certificates in the remaining mortgage loans than would otherwise have
been the case absent the loss, even if those losses are not allocated to that
class of offered certificates. The consequent effect on the weighted average
life and/or yield to maturity of a class of offered certificates will depend
upon the characteristics of the remaining mortgage loans.
THE RIGHT OF THE MASTER SERVICERS, THE SPECIAL SERVICER AND THE TRUSTEE TO
RECEIVE INTEREST ON ADVANCES, SPECIAL SERVICING FEES, PRINCIPAL RECOVERY FEES
AND WORKOUT FEES WILL AFFECT YOUR RIGHT TO RECEIVE DISTRIBUTIONS
To the extent described in this prospectus supplement and provided in the
pooling and servicing agreement, the master servicers, the special servicer and
the trustee will each be entitled to receive interest (which will generally
accrue from the date on which the related advance is made through the date of
reimbursement) on unreimbursed advances made by it. In addition, the special
servicer will be entitled to receive, in connection with its servicing,
liquidation and/or workout of defaulted mortgage loans, compensation consisting
of special servicing fees, principal recovery fees and workout fees,
respectively. The right to receive these amounts is senior to the rights of
certificateholders to receive distributions on the offered certificates and,
consequently, may result in shortfalls and losses being allocated to the offered
certificates that would not have otherwise resulted.
YOUR LACK OF CONTROL OVER THE TRUST FUND CAN CREATE RISKS
You and other holders of the offered certificates generally do not have a
right to vote and do not have the right to make decisions with respect to the
administration of the issuing entity. See "Description of the OfferedCertificates--Voting Rights" in this prospectus supplement. Those decisions are
generally made, subject to the express terms of the pooling and servicing
agreement, by a master servicer, the trustee or the special servicer, as
applicable. Any decision made by one of those parties in respect of the assets
of the issuing entity, even if that decision is determined to be in your best
interests by that party, may be contrary to the decision that you or other
holders of the offered certificates would have made and may negatively affect
your interests. See "--One of the Mortgage Loans That We Intend to Transfer to
the Issuing Entity is Being Serviced and Administered Pursuant to the Servicing
Arrangements for a Different Securitization; Therefore, Certificateholder of Our
ML-CFC 2007-8 Securitization Will Have Limited Ability to Control the Servicing
of That Mortgage Loan" below.
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POTENTIAL CONFLICTS OF INTEREST WITH RESPECT TO THE MASTER SERVICERS, THE
SPECIAL SERVICER AND THE CONTROLLING CLASS REPRESENTATIVE
KeyCorp Real Estate Capital Markets, Inc., an initial master servicer, is
an affiliate of KeyBank National Association, one of the sponsors and mortgage
loan sellers, and an affiliate of KeyBanc Capital Markets Inc., one of the
underwriters. These affiliations could cause a conflict with that master
servicer's duties to the issuing entity under the pooling and servicing
agreement notwithstanding the fact that the pooling and servicing agreement
provides that the mortgage loans serviced pursuant to that agreement must be
administered in accordance with the servicing standard described in this
prospectus supplement without regard to an affiliation with any other party
involved in the transaction.
A master servicer, the special servicer or any affiliate of a master
servicer or the special servicer may acquire certificates. This could cause a
conflict between a master servicer's or the special servicer's duties to the
issuing entity under the pooling and servicing agreement and its or its
affiliate's interest as a holder of certificates issued under that agreement. In
addition, the master servicers, the special servicer and each of their
affiliates own and are in the business of acquiring assets similar in type to
the assets of the issuing entity. Accordingly, the assets of those parties and
their affiliates may, depending upon the particular circumstances including the
nature and location of those assets, compete with the mortgaged real properties
for tenants, purchasers, financing and in other matters related to the
management and ownership of real estate. See "Servicing of the MortgageLoans--Modifications, Waivers, Amendments and Consents" in this prospectus
supplement.
The special servicer will have the right to determine that any P&I advance
made or to be made by a master servicer or the trustee is not recoverable from
proceeds of the mortgage loan to which that advance relates. The applicable
master servicer or the trustee will then be required to not make a proposed
advance or may obtain reimbursement for a previously made advance from
collections of principal and, in some cases, interest, which may reduce the
amount of principal and, in some cases, interest that will be paid on your
offered certificates.
In addition, in connection with the servicing of the specially serviced
mortgage loans, the special servicer may, at the direction of the controlling
class representative (or with respect to the Farallon Portfolio Loan, the
Farallon Portfolio Controlling Party), take actions with respect to the
specially serviced mortgage loans that could adversely affect the holders of
some or all of the classes of offered certificates. Similarly, the special
servicer may, at the direction of the holder of a (i) non-trust subordinate
B-note or its designee (prior to the occurrence of a "change of control" event
with respect to that non-trust loan) or (ii) A note non-trust loan (after the
occurrence of a "change of control" event with respect to that non-trust loan)
or (iii) with respect to the Farallon Portfolio Loan, a non-trust loan or note,
take generally similar but not identical actions with respect to the related
loan combination that could adversely affect the holders of some or all of the
classes of offered certificates. Furthermore, the holders of certain non-trust
loans may have par purchase options and, in some cases, cure rights with respect
to the related A-note mortgage loans that will be the assets of the issuing
entity, upon the occurrence of specified adverse circumstances with respect to
the related loan combination. See "Description of the Mortgage Pool--The Loan
Combinations and "Servicing of the Mortgage Loans--The Controlling ClassRepresentative and the Loan Combination Controlling Parties" in this prospectus
supplement.
The controlling class representative will be selected by the holders of
certificates representing a majority interest in the controlling class. The
controlling class of certificateholders and the holders of the non-trust loans
may have interests that conflict with those of the holders of the offered
certificates. As a result, it is possible that the controlling class
representative may direct the special servicer to take actions which conflict
with the interests of the holders of certain classes of the offered
certificates. However, the special servicer is not permitted to take actions
which are prohibited by law or violate the servicing standard or the terms of
the mortgage loan documents.
ONE OF THE MORTGAGE LOANS THAT WE INTEND TO TRANSFER TO THE ISSUING ENTITY IS
BEING SERVICED AND ADMINISTERED PURSUANT TO THE SERVICING ARRANGEMENTS FOR A
DIFFERENT SECURITIZATION; THEREFORE, CERTIFICATEHOLDERS OF OUR ML-CFC 2007-8
SECURITIZATION WILL HAVE LIMITED ABILITY TO CONTROL THE SERVICING OF THAT
MORTGAGE LOAN
The mortgage loan secured by the mortgaged real property identified on
Annex A-1 to this prospectus supplement as Georgia-Alabama Retail Portfolio,
which mortgage loan represents approximately 1.6% of the initial mortgage pool
balance and approximately 2.8% of the initial loan group 1 balance, is part of a
loan combination
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consisting of the trust mortgage loan (which consists of an A-note trust loan
and a B-note trust loan), a pari passu A-note non-trust loan and a subordinate
B-note non-trust loan that are secured by the same mortgage instruments
encumbering the same mortgaged real properties. The A-note non-trust loan is an
asset in the ML-CFC 2007-7 Commercial Mortgage Trust. The B-note non-trust loan
is currently held by Countrywide Commercial Real Estate Finance, Inc., or an
affiliate of Countrywide Commercial Real Estate Finance, Inc., and may be sold
to a third-party or separately securitized in a future commercial mortgage
securitization. An intercreditor agreement governs the relationship between the
holders of the Georgia-Alabama Retail Portfolio loan combination. The loan
combination is being serviced and administered pursuant to the ML-CFC 2007-7
Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series
2007-7 pooling and servicing agreement. The applicable master servicer and the
applicable special servicer under the ML-CFC 2007-7 Commercial Mortgage Trust
pooling and servicing agreement are required to service the Georgia-Alabama
Retail Portfolio whole loan in accordance with the servicing standard set forth
in the ML-CFC 2007-7 Commercial Mortgage Trust pooling and servicing agreement
on behalf of the ML-CFC 2007-7 Commercial Mortgage Trust certificateholders, the
series 2007-8 certificateholders and the other holders of an interest in the
Georgia-Alabama Retail Portfolio, as a collective whole. Neither the series
2007-8 certificateholders nor the trustee on their behalf will have any right,
title or interest in or to, or any other claim to any asset of the ML-CFC 2007-7
Commercial Mortgage Trust issuing entity, including as security for or in
satisfaction of any claim arising from the performance or failure of performance
by any party under the ML-CFC 2007-7 Commercial Mortgage Trust pooling and
servicing agreement, except as related to the 2007-8 issuing entity's rights to
receive payments of principal and interest on the Georgia-Alabama Retail
Portfolio mortgage loan and certain rights to payments of servicing fees and to
reimbursement for advances. However, the 2007-8 issuing entity, as the holder of
the Georgia-Alabama Retail Portfolio mortgage loan, is a third-party beneficiary
of the ML-CFC 2007-7 Commercial Mortgage Trust pooling and servicing agreement.
The applicable master servicer, the special servicer and trustee under the
series 2007-8 pooling and servicing agreement may not independently exercise
remedies following a default with respect to the Georgia-Alabama Retail
Portfolio mortgage loan. Furthermore, the controlling class representative,
acting alone, will not be permitted to replace the special servicer under the
ML-CFC 2007-7 Commercial Mortgage Trust pooling and servicing agreement unless
the holders of the B-note non-trust loan and B-note trust loan agree to do so in
accordance with the related co-lender agreement and only for so long as any
appraisal reduction amount with respect to the subject loan combination does not
reduce the initial principal balance of such B-note non-trust loans below 25% of
its original principal balance. Thereafter, the controlling class representative
may replace the special servicer under the ML-CFC 2007-7 Commercial Mortgage
Trust pooling and servicing agreement.
Risks Related to the Mortgage Loans
CONCENTRATION OF MORTGAGED REAL PROPERTY TYPES SUBJECT THE TRUST TO INCREASED
RISK OF DECLINE IN A PARTICULAR INDUSTRY
The inclusion, among the assets of the issuing entity, of a significant
concentration of mortgage loans that are secured by mortgage liens on a
particular type of income-producing property makes the overall performance of
the mortgage pool materially more dependent on the factors that affect the
operations at and value of that property type.
MULTIFAMILY PROPERTIES ARE SUBJECT TO UNIQUE RISKS WHICH MAY REDUCE PAYMENTS ON
YOUR CERTIFICATES
One hundred twenty-eight (128) of the mortgaged real properties, which
represent security for approximately 31.2% of the initial mortgage pool balance
(three (3) properties securing mortgage loans in loan group 1, representing
approximately 1.7% of the initial loan group 1 balance, and one hundred
twenty-five (125) properties securing mortgage loans in loan group 2,
representing approximately 71.2% of the initial loan group 2 balance) are fee
and/or leasehold interests in multifamily properties. Mortgage loans that are
secured by liens on multifamily properties are exposed to unique risks
particular to multifamily properties, including, for instance, in some cases,
restrictions on rent that may be charged or restrictions on the age of tenants
who may reside at a multifamily property.
For a more detailed discussion of factors uniquely affecting multifamily
properties, you should refer to the section in the accompanying base prospectus
captioned "Risk Factors--Various Types of Income-Producing
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Properties May Secure Mortgage Loans Underlying a Series of Offered Certificates
and Each Type of Income-Producing Property May Present Special Risks as
Collateral for a Loan--Multifamily Rental Properties."
OFFICE PROPERTIES ARE SUBJECT TO UNIQUE RISKS WHICH MAY REDUCE PAYMENTS ON YOUR
CERTIFICATES
Thirty-five (35) of the mortgaged real properties, which represent
security for approximately 11.1% of the initial mortgage pool balance and
approximately 19.2% of the initial loan group 1 balance, are fee and/or
leasehold interests in office properties. Mortgage loans that are secured by
liens on those types of properties are exposed to unique risks particular to
those types of properties.
For a more detailed discussion of factors uniquely affecting office
properties, you should refer to the section in the accompanying base prospectus
captioned "Risk Factors--Various Types of Income-Producing Properties May Secure
Mortgage Loans Underlying a Series of Offered Certificates and Each Type of
Income-Producing Property May Present Special Risks as Collateral for a
Loan--Office Properties."
In the case of six (6) mortgaged real properties representing
approximately 1.3% of the initial mortgage pool balance, and approximately 2.3%
of the initial loan group 1 balance, the related mortgaged real properties are
medical offices. Mortgage loans secured by liens on medical office properties
are also exposed to the unique risks particular to health care related
properties. For a more detailed discussion of factors uniquely affecting medical
offices, you should refer to the section in the accompanying base prospectus
captioned "Risk Factors--Various Types of Income-Producing Properties May Secure
Mortgage Loans Underlying a Series of Offered Certificates and Each Type of
Income-Producing Property May Present Special Risks as Collateral for a
Loan--Health Care Related Properties."RETAIL PROPERTIES ARE SUBJECT TO UNIQUE RISKS WHICH MAY REDUCE PAYMENTS ON YOUR
CERTIFICATES
One hundred fifty-one (151) of the mortgaged real properties, which
represent security for approximately 25.8% of the initial mortgage pool balance
and approximately 44.8% of the initial loan group 1 balance, are fee and/or
leasehold interests in retail properties. Mortgage loans that are secured by
liens on those types of properties are exposed to unique risks particular to
those types of properties.
Gas Stations and Related Convenience Stores.
One of the mortgage loans secured by the mortgaged real properties
identified on Annex A-1 as the Georgia-Alabama Retail Portfolio is secured by
sixty-two (62) of the retail properties described above, which represent
security for approximately 1.6% of the initial mortgage pool balance and
approximately 2.8% of the loan group 1 balance, which are fee interests in gas
stations with convenience stores and other retail stores located in Georgia
(sixty (60) such properties) and Alabama (two (2) such properties). In addition,
certain other retail properties securing mortgage loans in the pool may have gas
stations as part of the retail mix. Demand for gas stations and the related
convenience stores depend on location of the station and volume of car driving,
which in turn depends on cost of gas and general economic conditions.
Profitability is impacted by the cost of gasoline, the product mix at the
convenience store, credit card fees (which have been escalating) and the
addition of pay at the pump technology at stations (which has been cited as a
potential cause of revenue loss in the related convenience store). A property
with a gas station also raises environmental concerns because gasoline, motor
oil and other hazardous products are sold at these properties. For additional
information regarding environmental concerns with respect to the Georgia-Alabama
Retail Portfolio properties, see "--Lending on Income-Producing Real PropertiesEntails Environmental Risks" below.
For a more detailed discussion of factors uniquely affecting retail
properties, you should refer to the section in the accompanying base prospectus
captioned "Risk Factors--Various Types of Income-Producing Properties May Secure
Mortgage Loans Underlying a Series of Offered Certificates and Each Type of
Income-Producing Property May Present Special Risks as Collateral for a
Loan--Retail Properties."
HOSPITALITY PROPERTIES ARE SUBJECT TO UNIQUE RISKS WHICH MAY REDUCE PAYMENTS ON
YOUR CERTIFICATES
Ten (10) of the mortgaged real properties, which represent security for
approximately 7.9% of the initial mortgage pool balance and approximately 13.7%
of the initial loan group 1 balance, are fee and/or leasehold
S-54
interests in hospitality properties. Mortgage loans secured by liens on those
types of properties are exposed to unique risks particular to those types of
properties. In addition, for certain of the mortgage loans secured by
hospitality properties that are a franchise of a national or regional hotel
chain, the related franchise agreement is scheduled to terminate during the term
of the related mortgage loan.
For a more detailed discussion of factors uniquely affecting hospitality
properties, you should refer to the section in the accompanying base prospectus
captioned "Risk Factors--Various Types of Income-Producing Properties May Secure
Mortgage Loans Underlying a Series of Offered Certificates and Each Type of
Income-Producing Property May Present Special Risks as Collateral for a
Loan--Hospitality Properties."INDUSTRIAL FACILITIES ARE SUBJECT TO UNIQUE RISKS WHICH MAY REDUCE PAYMENTS ON
YOUR CERTIFICATES
Fourteen (14) of the mortgaged real properties, which represent security
for approximately 3.6% of the initial mortgage pool balance and approximately
6.2% of the initial loan group 1 balance, are fee and/or leasehold interests in
industrial properties. Mortgage loans that are secured by liens on those types
of properties are exposed to unique risks particular to those types of
properties.
For a more detailed discussion of factors uniquely affecting industrial
properties, you should refer to the section in the accompanying base prospectus
captioned "Risk Factors--Various Types of Income-Producing Properties May Secure
Mortgage Loans Underlying a Series of Offered Certificates and Each Type of
Income-Producing Property May Present Special Risks as Collateral for a
Loan--Industrial Properties."SELF STORAGE FACILITIES ARE SUBJECT TO UNIQUE RISKS WHICH MAY REDUCE PAYMENTS ON
YOUR CERTIFICATES
Thirty-four (34) of the mortgaged real properties, which represent
security for approximately 6.3% of the initial mortgage pool balance and
approximately 11.0% of the initial loan group 1 balance, are fee interests in
self storage facility properties. Mortgage loans that are secured by liens on
those types of properties are exposed to unique risks particular to those types
of properties.
For a more detailed discussion of factors uniquely affecting self storage
facilities, you should refer to the section in the accompanying base prospectus
captioned "Risk Factors--Various Types of Income-Producing Properties May Secure
Mortgage Loans Underlying a Series of Offered Certificates and Each Type of
Income-Producing Property May Present Special Risks as Collateral for a
Loan--Warehouse, Mini-Warehouse and Self Storage Facilities."
MANUFACTURED HOUSING COMMUNITIES, MOBILE HOME PARKS AND RECREATIONAL VEHICLE
PARKS ARE SUBJECT TO UNIQUE RISKS WHICH MAY REDUCE PAYMENTS ON YOUR CERTIFICATES
Two hundred eighty (280) of the mortgaged real properties, which represent
security for approximately 12.2% of the initial mortgage pool balance (which
mortgage loans are in loan group 2, representing approximately 28.8% of the
initial loan group 2 balance), are fee and/or leasehold interests in
manufactured housing community properties, mobile home parks and/or recreational
vehicle parks. Mortgage loans that are secured by liens on those types of
properties are exposed to unique risks particular to those types of properties.
For a more detailed discussion of factors uniquely affecting manufactured
housing community properties, you should refer to the section in the
accompanying base prospectus captioned "Risk Factors--Various Types of
Income-Producing Properties May Secure Mortgage Loans Underlying a Series of
Offered Certificates and Each Type of Income-Producing Property May Present
Special Risks as Collateral for a Loan--Manufactured Housing Communities, Mobile
Home Parks and Recreational Vehicle Parks."
RISKS ASSOCIATED WITH ALTERNATIVE FORMS OF PROPERTY OWNERSHIP
Four (4) mortgage loans (loan numbers 98, 111, 127 and 181), representing
in the aggregate approximately 0.6% of the initial mortgage pool balance (which
mortgage loans are in loan group 1, representing approximately 1.1% of the
initial loan group 1 balance), are, or may become, secured by the related
borrower's interest in residential and/or commercial condominium units.
Condominiums may create risks for lenders that are not present
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when lending on properties that are not condominiums. See "Risk Factors--Lendingon Condominium Units Creates Risks for Lenders That Are Not Present When Lendingon Non-Condominiums" in the base prospectus.
REPAYMENT OF THE MORTGAGE LOANS DEPENDS ON THE OPERATION OF THE MORTGAGED REAL
PROPERTIES
The mortgage loans are secured by mortgage liens on fee and/or leasehold
(which may include sub-leasehold) interests in commercial, multifamily and
manufactured housing community real property. The risks associated with lending
on these types of real properties are inherently different from those associated
with lending on the security of single-family residential properties. This is
because, among other reasons, such mortgage loans are often larger and repayment
of each of the mortgage loans is dependent on--
o the successful operation and value of the mortgaged real property;
and
o the related borrower's ability to sell or refinance the mortgaged
real property.
See "Risk Factors--Repayment of a Commercial or Multifamily Mortgage Loan
Depends upon the Performance and Value of the Underlying Real Property, Which
May Decline Over Time, and the Related Borrower's Ability to Refinance the
Property, of Which There Is No Assurance" and "Risk Factors--Various Types of
Income-Producing Properties May Secure Mortgage Loans Underlying a Series of
Offered Certificates and Each Type of Income-Producing Property May Present
Special Risks as Collateral for a Loan" in the accompanying base prospectus.
THE MORTGAGED REAL PROPERTY WILL BE THE SOLE ASSET AVAILABLE TO SATISFY THE
AMOUNTS OWING UNDER A MORTGAGE LOAN IN THE EVENT OF DEFAULT
The mortgage loans will not be an obligation of, or be insured or
guaranteed by, us, any sponsor, any governmental entity, any private mortgage
insurer, any mortgage loan seller, any underwriter, either master servicer, the
special servicer, the trustee or any of their respective affiliates or any other
person or entity.
All of the mortgage loans are or should be considered nonrecourse loans.
If the related borrower defaults on any of the mortgage loans, only the related
mortgaged real property (together with any related insurance policies or other
pledged collateral), and none of the other assets of the borrower, is available
to satisfy the debt. Consequently, payment prior to maturity is dependent
primarily on the sufficiency of the net operating income of the mortgaged real
property. Payment at maturity is primarily dependent upon the market value of
the mortgaged real property or the borrower's ability to refinance the mortgaged
real property. Even if the related loan documents permit recourse to the
borrower or a guarantor, the issuing entity may not be able to ultimately
collect the amount due under a defaulted mortgage loan. We have not evaluated
the significance of the recourse provisions of mortgage loans that may permit
recourse against the related borrower or another person in the event of a
default. See "Risk Factors--Repayment of a Commercial or Multifamily Mortgage
Loan Depends upon the Performance and Value of the Underlying Real Property,
Which May Decline Over Time, and the Related Borrower's Ability to Refinance the
Property, of Which There Is No Assurance" in the accompanying base prospectus.
RESERVES TO FUND CAPITAL EXPENDITURES MAY BE INSUFFICIENT AND THIS MAY ADVERSELY
AFFECT PAYMENTS ON YOUR CERTIFICATES
Although many of the mortgage loans require that funds be put aside for
specific reserves, certain of the mortgage loans do not require any reserves. We
cannot assure you that any such reserve amounts will be sufficient to cover the
actual costs of the items for which the reserves were established. We also
cannot assure you that cash flow from the related mortgaged real properties will
be sufficient to fully fund any ongoing monthly reserve requirements.
OPTIONS AND OTHER PURCHASE RIGHTS MAY AFFECT VALUE OR HINDER RECOVERY WITH
RESPECT TO THE MORTGAGED REAL PROPERTIES
The borrower under certain of the mortgage loans has given to one or more
tenants or another person a right of first refusal in the event a sale is
contemplated or an option to purchase all or a portion of the related mortgaged
real property. These rights, which may not be subordinated to the related
mortgage, may impede the
S-56
lender's ability to sell the related mortgaged real property at foreclosure or
after acquiring the mortgaged real property pursuant to foreclosure, or
adversely affect the value and/or marketability of the related mortgaged real
property. However, in certain cases, the holder of the right to purchase the
related mortgaged property has agreed that such purchase right will not apply in
a foreclosure or similar proceeding. Additionally, the exercise of a purchase
option may result in the related mortgage loan being prepaid during a period
when voluntary prepayments are otherwise prohibited and/or without any yield
maintenance consideration.
In the case of one mortgage loan (loan number 7, secured by the mortgaged
real properties identified on Annex A-1 to this prospectus supplement as
Georgia-Alabama Retail Portfolio, representing approximately 1.6% of the initial
mortgage pool balance and approximately 2.8% of the initial loan group 1
balance), the related borrower is obligated under an agreement with Exxon Mobil
Corporation ("Exxon") to use and sell Exxon products at certain of the
individual mortgaged real properties. The borrower's failure to do this triggers
an option by Exxon to purchase the particular individual mortgaged real property
at a price equal to the greater of: (i) 90% of the current appraised value of
the applicable individual mortgaged real property (ii) 90% of the fair market
value of the applicable individual mortgaged real property, or (iii) the
allocated loan amount of the applicable individual mortgaged real property.
In Maryland, mortgage loans may be structured with a borrower (obligated
under the related note) that is different from the owner of the mortgaged real
property. In such cases, the related property owner, although not obligated
under the note, will guaranty all amounts payable by the borrower under the
related note which guaranty is secured by an indemnity deed of trust in favor of
the lender executed by the property owner. With respect to certain references to
the borrower in this prospectus supplement, such references may apply to such
property owner instead.
INCREASES IN REAL ESTATE TAXES DUE TO TERMINATION OF PAYMENT-IN-LIEU-OF-TAXES OR
OTHER TAX ABATEMENT ARRANGEMENTS MAY REDUCE PAYMENTS TO CERTIFICATEHOLDERS
In the case of some of the mortgage loans, the related mortgaged real
properties may be the subject of municipal payment-in-lieu-of-taxes programs or
other tax abatement arrangements, whereby the related borrower pays payments in
lieu of taxes that are less than what its tax payment obligations would be
absent the program or pays reduced real estate taxes. These programs or
arrangements may be scheduled to terminate or provide for significant tax
increases prior to the maturity of the related mortgage loans or may require
increased payments in the future, in each case resulting in increased payment
obligations (which could be substantial) in the form of real estate taxes or
increased payments in lieu of taxes, which could adversely impact the ability of
the related borrowers to pay debt service on their mortgage loans.
IN SOME CASES, A MORTGAGED REAL PROPERTY IS DEPENDENT ON A SINGLE TENANT OR ON
ONE OR A FEW MAJOR TENANTS
In the case of one hundred eighty one (181) mortgaged real properties,
securing approximately 33.0% of the initial mortgage pool balance and
approximately 57.4% of the initial loan group 1 balance, the related borrower
has leased the property to one or more tenants each occupying 25% or more of the
particular property. In the case of one hundred nine (109) of those properties,
securing approximately 15.4% of the initial mortgage pool balance and
approximately 26.8% of the initial loan group 1 balance, the related borrower
has leased the particular property to a single tenant that occupies 50% or more
of the particular property. In the case of sixty-eight (68) mortgaged real
properties, securing approximately 8.3% of the initial mortgage pool balance and
approximately 14.5% of the initial loan group 1 balance, the related borrower
has leased the particular property to a single tenant that occupies 100% of the
particular property. Not included in the sixty-eight (68) mortgaged real
properties is one mortgage loan (loan number 2) that is secured by manufactured
housing properties of which an affiliate of the related borrower has master
leased portions of the mortgaged properties, and in turn subleases individual
manufactured homes and lots to residential subtenants. Accordingly, the full and
timely payment of each of the related mortgage loans is highly dependent on the
continued operation of the major tenant or tenants, which, in some cases, is the
sole tenant, at the mortgaged real property. In addition, the leases of some of
these tenants may terminate on or prior to the term of the related mortgage
loan. For information regarding the lease expiration dates of significant
tenants at the mortgaged real properties, see Annex A-1 to this prospectus
supplement. See "Risk Factors--Repayment of a Commercial or Multifamily Mortgage
Loan Depends upon the Performance and Value of the Underlying Real Property,
Which
S-57
May Decline Over Time and the Related Borrower's Ability to Refinance the
Property, of Which There Is No Assurance" in the accompanying base prospectus.
THE BANKRUPTCY OR INSOLVENCY OF A TENANT WILL HAVE A NEGATIVE IMPACT ON THE
RELATED MORTGAGED REAL PROPERTY
The bankruptcy or insolvency of a major tenant, or a number of smaller
tenants, in retail, industrial and office properties may adversely affect the
income produced by a mortgaged real property. Under the Bankruptcy Code, a
tenant has the option of assuming or rejecting any unexpired lease. If the
tenant rejects the lease, the landlord's claim for breach of the lease would be
a general unsecured claim against the tenant (absent collateral securing the
claim) and the amounts the landlord could claim would be limited. One or more
tenants at a particular mortgaged real property may have been the subject of
bankruptcy or insolvency proceedings. See "Risk Factors--Bankruptcy ProceedingsEntail Certain Risks" in this prospectus supplement and "Risk Factors--The
Investment Performance of Your Offered Certificates Will Depend Upon Payments,
Defaults and Losses on the Underlying Mortgage Loans; and Those Payments,
Defaults and Losses May Be Highly Unpredictable--Dependence on a Single Tenant
or a Small Number of Tenants Makes a Property Riskier Collateral" in the
accompanying base prospectus.
CERTAIN ADDITIONAL RISKS RELATING TO TENANTS
The income from, and market value of, the mortgaged real properties leased
to various tenants would be adversely affected if, among other things:
o space in the mortgaged real properties could not be leased or
re-leased;
o substantial re-leasing costs were required and/or the cost of
performing landlord obligations under existing leases materially
increased;
o tenants were unwilling or unable to meet their lease obligations;
o a tenant goes "dark";
o a significant tenant were to become a debtor in a bankruptcy case;
or
o rental payments could not be collected for any other reason.
Repayment of the mortgage loans secured by retail, office and industrial
properties will be affected by the expiration of leases and the ability of the
respective borrowers to renew the leases or relet the space on comparable terms
and on a timely basis. Certain of the mortgaged real properties may be leased in
whole or in part by government-sponsored tenants who have the right to cancel
their leases at any time or for lack of appropriations. Additionally, mortgaged
real properties may have concentrations of leases expiring at varying rates in
varying percentages, including single-tenant mortgaged real properties, during
the term of the related mortgage loans and in some cases most or all of the
leases on a mortgaged real property may expire prior to the related anticipated
repayment date or maturity date. Even if vacated space is successfully relet,
the costs associated with reletting, including tenant improvements and leasing
commissions, could be substantial and could reduce cash flow from the mortgaged
real properties. Moreover, if a tenant defaults in its obligations to a
borrower, the borrower may incur substantial costs and experience significant
delays associated with enforcing its rights and protecting its investment,
including costs incurred in renovating and reletting the related mortgaged real
property.
The risks described above are increased if there is a concentration of
tenants in a particular industry at one or more of the mortgaged real
properties. For example, if a particular industry experiences an economic
downturn, a concentration among tenants of any mortgaged real property in that
industry may lead to losses on the related mortgage loan that are substantially
more severe than would be the case if its tenants were in diversified
industries. In addition, business objectives for tenants at mortgaged real
properties may change over time. A business may downsize, creating a need for
less space, or a business may expand or increase its size and/or number of
employees, creating a need for more space.
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Additionally, in certain jurisdictions, if tenant leases are subordinated
to the liens created by the mortgage but do not contain attornment provisions
(provisions requiring the tenant to recognize as landlord under the lease a
successor owner following foreclosure), the leases may terminate upon the
transfer of the property to a foreclosing lender or purchaser at foreclosure.
Accordingly, if a mortgaged real property is located in such a jurisdiction and
is leased to one or more desirable tenants under leases that are subordinate to
the mortgage and do not contain attornment provisions, such mortgaged real
property could experience a further decline in value if such tenants' leases
were terminated.
Certain of the mortgaged real properties may have tenants that are related
to or affiliated with a borrower. In such cases a default by the borrower may
coincide with a default by the affiliated tenants. Additionally, even if the
property becomes a foreclosure property, it is possible that an affiliate of the
borrower may remain as a tenant. If a mortgaged real property is leased in whole
or substantial part to an affiliate of the borrower, it may be more likely that
a landlord will waive lease conditions for an affiliated tenant than it would
for an unaffiliated tenant. We cannot assure you that the conflicts arising
where a borrower is affiliated with a tenant at a mortgaged real property will
not adversely impact the value of the related mortgage loan. In some cases the
affiliated lessee may be physically occupying space related to its business; in
other cases, the affiliated lessee may be a tenant under a master lease with the
borrower, under which the tenant is generally obligated to make rent payments
but does not occupy any space at the mortgaged real property. These master
leases are typically used to bring occupancy to a "stabilized" level but may not
provide additional economic support for the mortgage loan. We cannot assure you
the space "master leased" by a borrower affiliate will eventually be occupied by
third party tenants and consequently, a deterioration in the financial condition
of the borrower or its affiliates can be particularly significant to the
borrower's ability to perform under the mortgage loan as it can directly
interrupt the cash flow from the related mortgaged real property if the
borrower's or its affiliate's financial condition worsens.
If a mortgaged real property has multiple tenants, re-leasing expenditures
may be more frequent than in the case of mortgaged real properties with fewer
tenants, thereby reducing the cash flow available for debt service payments.
Multi-tenant mortgaged real properties also may experience higher continuing
vacancy rates and greater volatility in rental income and expenses.
MORTGAGE LOANS SECURED BY MORTGAGED REAL PROPERTIES SUBJECT TO ASSISTANCE AND
AFFORDABLE HOUSING PROGRAMS ARE SUBJECT TO THE RISK THAT THOSE PROGRAMS MAY
TERMINATE OR BE ALTERED
Certain of the mortgaged real properties may be secured by mortgage loans
that are eligible (or may become eligible in the future) for and have received
(or in the future may receive) low income housing tax credits pursuant to
Section 42 of the Internal Revenue Code in respect of various units within the
related mortgaged real property or have a material concentration of tenants that
rely on rent subsidies under various government funded programs, including the
Section 8 Tenant Based Assistance Rental Certificate Program of the United
States Department of Housing and Urban Development. With respect to certain of
the mortgage loans, the related borrowers may receive subsidies or other
assistance from government programs. Generally, in the case of mortgaged real
properties that are subject to assistance programs of the kind described above,
the subject mortgaged real property must satisfy certain requirements, the
borrower must observe certain leasing practices and/or the tenant(s) must
regularly meet certain income requirements. No assurance can be given that any
government or other assistance programs will be continued in their present form
during the terms of the related mortgage loans, that the borrower will continue
to comply with the requirements of the programs to enable the borrower to
receive the subsidies or assistance in the future, or that the owners of a
borrower will continue to receive tax credits or that the level of assistance
provided will be sufficient to generate enough revenues for the related borrower
to meet its obligations under the related mortgage loans even though the related
mortgage loan seller may have underwritten the related mortgage loan on the
assumption that any applicable assistance program would remain in place. Loss of
any applicable assistance could have an adverse effect on the ability of a
borrower whose property is subject to an assistance program to make debt service
payments. Additionally, the restrictions described above relating to the use of
the related mortgaged real property could reduce the market value of the related
mortgaged real property.
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GEOGRAPHIC CONCENTRATION EXPOSES INVESTORS TO GREATER RISKS ASSOCIATED WITH THE
RELEVANT GEOGRAPHIC AREAS
Mortgaged real properties located in California, Texas, Florida and
Georgia will represent approximately 17.7%, 10.2%, 9.5% and 8.7%, respectively,
by allocated loan amount, of the initial mortgage pool balance; mortgaged real
properties located in California, Georgia, Texas, Nevada and Virginia will
represent approximately 27.7%, 9.4%, 6.6%, 5.4% and 5.1%, respectively, by
allocated loan amount, of the initial loan group 1 balance; and mortgaged real
properties located in Florida, Texas, Georgia, Maryland, Ohio and Indiana will
represent approximately 19.3%, 15.2%, 7.8%, 6.3%, 6.3% and 5.7%, respectively,
by allocated loan amount, of the initial loan group 2 balance. The inclusion of
a significant concentration of mortgage loans that are secured by mortgage liens
on real properties located in a particular state makes the overall performance
of the mortgage pool materially more dependent on economic and other conditions
or events in that state. See "-- Certain State-Specific Considerations" below
and "Risk Factors--Geographic Concentration Within a Trust Exposes Investors toGreater Risk of Default and Loss" in the accompanying base prospectus.
CERTAIN STATE-SPECIFIC CONSIDERATIONSCalifornia. Sixty-one (61) mortgaged real properties representing
approximately 17.7%, by allocated loan amount, of the initial mortgage pool
balance are located in California. Mortgaged real properties located in
California are generally secured by deeds of trust on the related real estate.
Foreclosure of a deed of trust in California may be accomplished by a
non-judicial trustee's sale under a specific provision in the deed of trust or
by judicial foreclosure. Public notice of either a trustee's sale or the
judgment of foreclosure is given for a statutory period of time after which the
mortgaged real estate may be sold by a trustee, if foreclosed pursuant to a
trustee's power of sale, or by court appointed sheriff under a judicial
foreclosure. Following a judicial foreclosure sale, the borrower or its
successor in interest may, for a period of up to one year, redeem the property.
California's "one action rule" requires the lender to exhaust the security
afforded under the deed of trust by foreclosure in an attempt to satisfy the
full debt before bringing a personal action (if otherwise permitted) against the
borrower for recovery of the debt, except in certain cases involving
environmentally impaired real property. California case law has held that acts
such as an offset of an unpledged account constitute violations of such
statutes. Violations of such statutes may result in the loss of some or all of
the security under the loan. Other statutory provisions in California limit any
deficiency judgment (if otherwise permitted) against the borrower following a
foreclosure to the amount by which the indebtedness exceeds the fair value at
the time of the public sale and in no event greater than the difference between
the foreclosure sale price and the amount of the indebtedness. Further, under
California law, once a property has been sold pursuant to a power-of-sale clause
contained in a deed of trust, the lender is precluded from seeking a deficiency
judgment from the borrower or, under certain circumstances, guarantors.
California statutory provisions regarding assignments of rents and leases
require that a lender whose loan is secured by such an assignment must exercise
a remedy with respect to rents as authorized by statute in order to establish
its right to receive the rents after an event of default. Among the remedies
authorized by statute is the lender's right to have a receiver appointed under
certain circumstances.
Texas. Eighty-four (84) mortgaged real properties representing
approximately 10.2%, by allocated loan amount, of the initial mortgage pool
balance are located in Texas. Texas law does not require that a lender must
bring a foreclosure action before being entitled to sue on a note. Texas does
not restrict a lender from seeking a deficiency judgment. The delay inherent in
obtaining a judgment generally causes the secured lender to file a suit seeking
a judgment on the debt and to proceed simultaneously with non-judicial
foreclosure of the real property collateral. The desirability of non-judicial
foreclosure of real property is further supported by the certain and defined
non-judicial foreclosure procedures. In order to obtain a deficiency judgment, a
series of procedural and substantive requirements must be satisfied, and the
deficiency determination is subject to the borrower's defense (and, if
successful, right of offset) that the fair market value of the property at the
time of foreclosure was greater than the foreclosure bid. However, the
availability of a deficiency judgment is limited in the case of the mortgage
loan because of the limited nature of its recourse liabilities.
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THE MORTGAGE POOL WILL INCLUDE MATERIAL CONCENTRATIONS OF BALLOON LOANS AND
LOANS WITH ANTICIPATED REPAYMENT DATES
Two hundred five (205) of the mortgage loans, representing approximately
94.7% of the initial mortgage pool balance (one hundred fifty two (152) mortgage
loans in loan group 1, representing approximately 91.1% of the initial loan
group 1 balance, and fifty-three (53) mortgage loans in loan group 2,
representing approximately 99.7% of the initial loan group 2 balance), are
balloon loans that will each have a substantial remaining principal balance at
their stated maturity dates. In addition, six (6) mortgage loans, representing
approximately 4.6% of the initial mortgage pool balance and approximately 7.9%
of the initial loan group 1 balance, provide material incentives for the related
borrower to repay the related mortgage loan by an anticipated repayment date
prior to maturity. The ability of a borrower to make the required balloon
payment on a balloon loan at maturity, and the ability of a borrower to repay a
mortgage loan on or before any related anticipated repayment date, in each case
depends upon its ability either to refinance the mortgage loan or to sell the
mortgaged real property. The ability of a borrower to effect a refinancing or
sale will be affected by a number of factors, including--
o the value of the related mortgaged real property;
o the level of available mortgage interest rates at the time of sale
or refinancing;
o the borrower's equity in the mortgaged real property;
o the financial condition and operating history of the borrower and
the mortgaged real property,
o tax laws;
o prevailing general and regional economic conditions;
o the fair market value of the related mortgaged real property;
o reductions in applicable government assistance/rent subsidy
programs; and
o the availability of credit for loans secured by multifamily or
commercial properties, as the case may be.
Although a mortgage loan may provide the related borrower with incentives
to repay the mortgage loan by an anticipated repayment date prior to maturity,
the failure of that borrower to do so will not be a default under that mortgage
loan. See "Description of the Mortgage Pool--Terms and Conditions of theMortgage Loans" in this prospectus supplement and "Risk Factors--The Investment
Performance of Your Offered Certificates Will Depend Upon Payments, Defaults and
Losses on the Underlying Mortgage Loans; and Those Payments, Defaults and Losses
May Be Highly Unpredictable" in the accompanying base prospectus.
Additionally, one (1) mortgage loan (loan number 2), which is secured by
the mortgaged real property identified on Annex A-1 to this prospectus
supplement as Farallon Portfolio (representing approximately 10.3% of the
initial mortgage pool balance and approximately 24.2% of the initial loan group
2 balance) and which mortgage loan is part of a loan combination, the various
loans making up such loan combination have various maturity dates, and the
related borrower may prepay the portion of the mortgage loan being contributed
to the issuing entity with a seven-year initial maturity at maturity and during
its related open period immediately prior to maturity by effectuating property
releases provided the related borrower satisfies various tests in accordance
with the related loan documents. See "The Farallon Portfolio" in Annex C to this
prospectus supplement and "Description of the Mortgage Pool--The LoanCombinations--The Farallon Portfolio" in this prospectus supplement.
THE MORTGAGE POOL WILL INCLUDE SOME DISPROPORTIONATELY LARGE MORTGAGE LOANS AND
GROUPS OF CROSS-COLLATERALIZED MORTGAGE LOANS
The inclusion in the mortgage pool of one or more loans that have
outstanding principal balances that are substantially larger than the other
mortgage loans can result in losses that are more severe, relative to the size
of the
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mortgage pool, than would be the case if the total balance of the mortgage pool
were distributed more evenly. In this regard:
o The largest mortgage loan or group of cross-collateralized mortgage
loans to be included in the assets of the issuing entity represents
approximately 13.8% of the initial mortgage pool balance. The
largest mortgage loan or group of cross-collateralized mortgage
loans in loan group 1 represents approximately 7.1% of the initial
loan group 1 balance, and the largest mortgage loan or group of
cross-collateralized mortgage loans in loan group 2 represents
approximately 32.4% of the initial loan group 2 balance.
o The five (5) largest mortgage loans and groups of
cross-collateralized mortgage loans to be included in the assets of
the issuing entity represent approximately 34.5% of the initial
mortgage pool balance. The five (5) largest mortgage loans and
groups of cross-collateralized mortgage loans in loan group 1
represent approximately 23.5% of the initial loan group 1 balance,
and the five (5) largest mortgage loans and groups of
cross-collateralized mortgage loans in loan group 2 represent
approximately 68.0% of the initial loan group 2 balance.
o The ten (10) largest mortgage loans and groups of
cross-collateralized mortgage loans to be included in the assets of
the issuing entity represent approximately 42.4% of the initial
mortgage pool balance. The ten (10) largest mortgage loans and
groups of cross-collateralized mortgage loans in loan group 1
represent approximately 31.9% of the initial loan group 1 balance,
and the ten (10) largest mortgage loans and groups of
cross-collateralized mortgage loans in loan group 2 represent
approximately 78.6% of the initial loan group 2 balance.
See "Description of the Mortgage Pool--General,""--Cross-Collateralized
and Cross-Defaulted Mortgage Loans, Multi-Property Mortgage Loans and Mortgage
Loans with Affiliated Borrowers" and "--Significant Mortgage Loans" in this
prospectus supplement and "Risk Factors--Loan Concentration Within a TrustExposes Investors to Greater Risk of Default and Loss" in the accompanying base
prospectus.
THE EXERCISE OF CERTAIN RIGHTS AND POWERS BY THE HOLDER OF A NON-TRUST LOAN THAT
IS PART OF A LOAN COMBINATION WITH A MORTGAGE LOAN INCLUDED IN THE MORTGAGE POOL
MAY CONFLICT WITH YOUR INTERESTS
One (1) mortgage loan (loan number 2), which is secured by the mortgaged
real property identified on Annex A-1 to this prospectus supplement as Farallon
Portfolio (representing approximately 10.3% of the initial mortgage pool balance
and approximately 24.2% of the initial loan group 2 balance) will be part of a
group of loans that we refer to as a loan combination, made to the same borrower
and that is secured by a single mortgage instrument on the same mortgaged real
property. Certain of the non-trust loans will generally be pari passu with the
mortgage loan and certain non-trust loans will generally be subordinate to the
A-note portion of the mortgage loan being deposited in the issuing entity, but
in each case, will not be included as an asset of the issuing entity. The holder
or holders (and their respective successors and assigns) of all or any portion
of the non-trust fixed-rate A notes which are not held by the trust, as
designated by Merrill Lynch Mortgage Lending, Inc. and which may be Merrill
Lynch Mortgage Lending, Inc., will have the right to replace the special
servicer for the Farallon Portfolio loan combination and to direct and advise
the master servicer and special servicer, and have certain approval rights, with
respect to various servicing matters and major decisions relating to the
Farallon Portfolio loan combination. The controlling class of the ML-CFC
Commercial Mortgage Trust 2007-8, Commercial Mortgage Pass-Through Certificates,
Series 2007-8 securitization transaction will not have such rights. In
connection with future securitizations involving all or any portion of the fixed
rate notes that comprise the Farallon Portfolio loan combination, Merrill Lynch
Mortgage Lending, Inc. may designate the controlling class of any such
securitization as the controlling holder for the Farallon Portfolio loan
combination in which case such controlling holder shall have such rights and
Merrill Lynch Mortgage Lending, Inc. (or its successors or assigns, as
applicable), as holder of any remaining portion of the Farallon Portfolio loan
combination, will have certain non-binding consultation rights with respect to
matters relating to such rights.
One (1) mortgage loan (loan number 99), which is secured by the mortgaged
real properties identified on Annex A-1 to this prospectus supplement as
Timbercreek Apartments (representing approximately 0.2% of the initial mortgage
pool balance and 0.5% of the initial loan group 2 balance), is a part of a group
of loans, that we
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refer to as a loan combination, made to the same borrower and that is secured by
a single mortgage instrument on the same mortgaged real property or properties.
The other loan in this loan combination will not be included as an asset of the
issuing entity. The holder of such B-note non-trust loan will not have any
voting, consent or other rights (other than, in some cases, non-binding
consultation rights or consent rights with respect to certain loan
modifications) with respect to the servicing of such loan combination, but may
have purchase rights and/or cure rights with respect to the related trust
mortgage loan.
Three (3) mortgage loans (loan numbers 3, 4 and 7), which are secured by
the mortgaged real properties identified in Annex A-1 to this prospectus
supplement as Executive Hills Portfolio, Peninsula Beverly Hills and the
Georgia-Alabama Retail Portfolio (representing approximately 9.0% of the initial
mortgage pool balance and 15.6% of the initial loan group 1 balance), are each
part of a loan combination, pursuant to which the right to replace the special
servicer for each such mortgage loan and to direct and advise the applicable
master servicer and the special servicer on various servicing matters regarding
the related loan combination will be, for so long as such loan combination has
an outstanding principal balance, as deemed reduced by any appraisal reduction
amount with respect to the subject loan combination that is allocable to the
related B-note non-trust loan (and the B-note trust loan, in the case of the
Georgia-Alabama Retail Portfolio loan combination), that is equal to or greater
than 25% of its original outstanding principal balance, with the holder of the
related B-note non-trust loan (and the B-note trust loan, in the case of the
Georgia-Alabama Retail Portfolio loan combination) and after such time, with the
controlling class representative. In addition, with respect to the mortgage loan
identified as Peninsula Beverly Hills, the holder of the related B-note
non-trust loan is Pacific Life Insurance Company. It is anticipated that this
entity will be the primary servicer for the related loan combination pursuant to
a sub-servicing agreement between Pacific Life Insurance Company and Wells Fargo
Bank, National Association, the master servicer for this mortgage loan, under
which Pacific Life Insurance Company will be responsible for, among other
things, the collection of monthly payments from the borrower and the remittance
of such amounts to such Master Servicer. In addition, under the related
intercreditor agreement, the holder of the related B-note non-trust loan
(provided it is the controlling party for such mortgage loan) has the right to
appoint Pacific Life Insurance Company as special servicer within 90 days
following the closing date (so long as such entity is on the S&P Select Servicer
List as a U.S. Commercial Mortgage Servicer).
In connection with exercising the foregoing rights, the holder of a B-note
non-trust loan may have interests that conflict with your interests.
See "Description of the Mortgage Pool-- The Loan Combinations" in this
prospectus supplement.
THE MORTGAGE POOL WILL INCLUDE LEASEHOLD MORTGAGE LOANS AND LENDING ON A
LEASEHOLD INTEREST IN REAL PROPERTY IS RISKIER THAN LENDING ON THE FEE INTEREST
IN THAT PROPERTY
In the case of seven (7) mortgaged real properties representing
approximately 3.0% of the initial mortgage pool balance and approximately 5.2%
of the initial loan group 1 balance, and approximately 0.1% of the initial loan
group 2 balance, the related mortgage constitutes a lien on the related
borrower's leasehold interest, but not on the corresponding fee interest, in all
or a material portion of the related mortgaged real property, which leasehold
interest is subject to a ground lease. Because of possible termination of the
related ground lease, lending on a leasehold interest in a real property is
riskier than lending on an actual fee interest in that property notwithstanding
the fact that a lender, such as the trustee on behalf of the issuing entity,
generally will have the right to cure defaults under the related ground lease.
In addition, the terms of certain ground leases may require that insurance
proceeds or condemnation awards be applied to restore the property or be paid,
in whole or in part, to the ground lessor rather than be applied against the
outstanding principal balance of the related mortgage loan. Finally, there can
be no assurance that any of the ground leases securing a mortgage loan contain
all of the provisions, including a lender's right to obtain a new lease if the
current ground lease is rejected in bankruptcy that a lender may consider
necessary or desirable to protect its interest as a lender with respect to a
leasehold mortgage loan. See "Description of the Mortgage Pool--Additional Loanand Property Information--Ground Leases" in this prospectus supplement. See also
"Risk Factors--Lending on Ground Leases Creates Risks for Lenders that Are NotPresent When Lending on an Actual Ownership Interest in a Real Property" and
"Legal Aspects of Mortgage Loans--Foreclosure--Leasehold Considerations" in the
accompanying base prospectus.
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SOME OF THE MORTGAGED REAL PROPERTIES ARE LEGAL NONCONFORMING USES OR LEGAL
NONCONFORMING STRUCTURES
Some of the mortgaged real properties are secured by a mortgage lien on a
real property that is a legal nonconforming use or a legal nonconforming
structure. This may impair the ability of the borrower to restore the
improvements on a mortgaged real property to its current form or use following a
major casualty.
Certain of the mortgaged real properties that do not conform to current
zoning laws may not be legal non-conforming uses or legal non-conforming
structures. The failure of a mortgaged real property to comply with zoning laws
or to be a legal non-conforming use or legal non-conforming structure may
adversely affect market value of the mortgaged real property or the borrower's
ability to continue to use it in the manner it is currently being used or may
necessitate material additional expenditures to remedy non-conformities.
In addition, certain of the mortgaged real properties may be subject to
certain use restrictions imposed pursuant to reciprocal easement agreements,
operating agreements, historical landmark designations or other covenants and
agreements. Use restrictions could include, for example, limitations on the
character of the improvements or the properties, limitations affecting noise and
parking requirements, among other things, and limitations on the borrowers'
rights to operate certain types of facilities within a prescribed radius. These
limitations could adversely affect the ability of the related borrower to lease
the mortgaged real property on favorable terms, thereby adversely affecting the
borrower's ability to fulfill its obligations under the related mortgage loan.
See "Description of the Mortgage Pool--Additional Loan and PropertyInformation--Zoning and Building Code Compliance" in this prospectus supplement
and "Risk Factors--Changes in Zoning Laws May Adversely Affect the Use or Valueof a Real Property" in the accompanying base prospectus.
A BORROWER'S OTHER LOANS MAY REDUCE THE CASH FLOW AVAILABLE TO THE MORTGAGED
REAL PROPERTY WHICH MAY ADVERSELY AFFECT PAYMENT ON YOUR CERTIFICATES; MEZZANINE
FINANCING REDUCES A PRINCIPAL'S EQUITY IN, AND THEREFORE ITS INCENTIVE TO
SUPPORT, A MORTGAGED REAL PROPERTY
Five (5) mortgage loans, which represent approximately 19.5% of the
initial mortgage pool balance, approximately 15.6% of the initial loan group 1
balance and approximately 24.7% of the initial loan group 2 balance, are each,
individually or together with one or more other loans that will not be included
in the assets of the issuing entity, senior loans in multiple loan structures
that we refer to as loan combinations. The other loans will not be included in
the trust but are secured in each case by the same mortgage instrument on the
same mortgaged real property or properties that secures or secure the related
trust mortgage loan. See "Description of the Mortgage Pool--The LoanCombinations" and "Description of the Mortgage Pool--Additional Loan andProperty Information--Additional and Other Financing" in this prospectus
supplement.
In the case of thirteen (13) mortgage loans (loan numbers 2, 3, 4, 7, 15,
16, 61, 68, 78, 99, 146, 171 and 173) representing approximately 22.8% of the
initial mortgage pool balance (eight (8) mortgage loans in loan group 1,
representing approximately 18.9% of the initial loan group 1 balance, and five
(5) mortgage loan in loan group 2, representing approximately 28.0% of the
initial loan group 2 balance), the related borrower has incurred or is permitted
to incur in the future additional debt that is secured by the related mortgaged
real property as identified under "Description of the Mortgage Pool--AdditionalLoan and Property Information--Additional and Other Financing" in this
prospectus supplement.
Except as indicated above, the mortgage loans do not permit the related
borrowers to enter into additional subordinate or other financing that is
secured by their mortgaged real properties without the lender's consent.
In the case of thirty-five (35) of the mortgage loans, representing
approximately 21.1% of the initial mortgage pool balance (twenty-seven (27)
mortgage loans in loan group 1, representing approximately 26.8% of the initial
loan group 1 balance, and eight (8) mortgage loans in loan group 2, representing
approximately 13.2% of the initial loan group 2 balance), as identified under
"Description of the Mortgage Pool--Additional Loan and PropertyInformation--Additional and Other Financing" in this prospectus supplement,
direct and indirect equity owners of the related borrower have pledged, or are
permitted in the future to pledge, their respective equity interests to secure
financing generally referred to as mezzanine debt. Holders of mezzanine debt may
have the right to purchase the related borrower's mortgage loan from the issuing
entity if certain defaults on the mortgage loan occur and, in some cases, may
have the right to cure certain defaults occurring on the related mortgage loan.
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In the case of one mortgage loan (loan number 2) secured by the mortgaged
real property identified on Annex A-1 to this prospectus supplement as Farallon
Portfolio, representing approximately 10.3% of the initial mortgage pool balance
and approximately 24.7% of the initial loan group 2 balance, certain affiliates
of the related borrower are permitted to enter into a revolving credit facility
secured by a non-controlling interest in the related borrower, in the maximum
amount of up to (x) $15,000,000 during the first year of the related mortgage
loan and (y) $25,000,000 thereafter.
Under certain of the mortgage loans, the borrower has incurred or is
permitted to incur additional financing that is not secured by the mortgaged
real property. In addition, borrowers that have not agreed to certain special
purpose covenants in the related loan documents are not generally prohibited
from incurring additional debt. Such additional debt may be secured by other
property owned by those borrowers. Also, certain of these borrowers may have
already incurred additional debt. In addition, the owners of such borrowers
generally are not prohibited from incurring mezzanine debt secured by pledges of
their equity interests in those borrowers.
The mortgage loans generally do not prohibit the related borrower from
incurring other obligations in the ordinary course of business relating to the
mortgaged real property, including, but not limited to, trade payables, or from
incurring indebtedness secured by equipment or other personal property located
at or used in connection with the operation of the mortgaged real property.
We make no representation with respect to the mortgage loans as to whether
any other subordinate financing currently encumbers any mortgaged real property,
whether any borrower has incurred material unsecured debt or whether a third
party holds debt secured by a pledge of an equity interest in a related
borrower.
Debt that is incurred by an equity owner of a borrower and is the subject
of a guaranty of such borrower or is secured by a pledge of the equity ownership
interests in such borrower effectively reduces the equity owners' economic stake
in the related mortgaged real property. While the mezzanine lender has no
security interest in or rights to the related mortgaged real property, a default
under the mezzanine loan could cause a change in control of the related
borrower. The existence of such debt may reduce cash flow on the related
borrower's mortgaged real property after the payment of debt service and may
increase the likelihood that the owner of a borrower will permit the value or
income producing potential of a mortgaged real property to suffer by not making
capital infusions to support the mortgaged real property.
When a mortgage loan borrower, or its constituent members, also has one or
more other outstanding loans, even if the loans are subordinated or are
mezzanine loans not directly secured by the mortgaged real property, the issuing
entity is subjected to additional risks. For example, the borrower may have
difficulty servicing and repaying multiple loans. Also, the existence of another
loan generally will make it more difficult for the borrower to obtain
refinancing of the mortgage loan or sell the related mortgaged real property and
may thus jeopardize the borrower's ability to make any balloon payment due under
the mortgage loan at maturity or to repay the mortgage loan on its anticipated
repayment date. Moreover, the need to service additional debt may reduce the
cash flow available to the borrower to operate and maintain the mortgaged real
property. If the mortgaged real property depreciates for whatever reason, the
related borrower's equity is more likely to be wiped out, thereby eliminating
the related borrower's incentive to continue making payments on its mortgage
loan.
Additionally, if the borrower, or its constituent members, are obligated
to another lender, actions taken by other lenders or the borrower could impair
the security available to the issuing entity. If a junior lender files an
involuntary bankruptcy petition against the borrower, or the borrower files a
voluntary bankruptcy petition to stay enforcement by a junior lender, the
issuing entity's ability to foreclose on the mortgaged real property will be
automatically stayed, and principal and interest payments might not be made
during the course of the bankruptcy case. The bankruptcy of a junior lender also
may operate to stay foreclosure by the issuing entity. Further, if another loan
secured by the mortgaged real property is in default, the other lender may
foreclose on the mortgaged real property, absent an agreement to the contrary,
thereby causing a delay in payments and/or an involuntary repayment of the
mortgage loan prior to maturity. The issuing entity may also be subject to the
costs and administrative burdens of involvement in foreclosure proceedings or
related litigation.
In addition, in the case of those mortgage loans which require or allow
letters of credit to be posted by the related borrower as additional security
for the mortgage loan, in lieu of reserves or otherwise, the related borrower
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may be obligated to pay fees and expenses associated with the letter of credit
and/or to reimburse the letter of credit issuer or others in the event of a draw
upon the letter of credit by the lender.
See "Description of the Mortgage Pool--Additional Loan and PropertyInformation--Additional and Other Financing" in this prospectus supplement for a
discussion of additional debt with respect to the mortgaged real properties and
the borrowers. See also "Risk Factors--Additional Secured Debt Increases theLikelihood That a Borrower Will Default on a Mortgage Loan Underlying YourOffered Certificates" in the accompanying base prospectus.
COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS MAY RESULT IN LOSSES
A borrower may be required to incur costs to comply with various existing
and future federal, state or local laws and regulations applicable to the
related mortgaged real property securing a mortgage loan. Examples of these laws
and regulations include zoning laws and the Americans with Disabilities Act of
1990, which requires all public accommodations to meet certain federal
requirements related to access and use by disabled persons. For example, not all
of the mortgaged real properties securing the mortgage loans comply with the
Americans with Disabilities Act of 1990. See "Risk Factors--Compliance with theAmericans with Disabilities Act of 1990 May Be Expensive" and "Legal Aspects ofMortgage Loans--Americans with Disabilities Act" in the accompanying base
prospectus. The expenditure of such costs or the imposition of injunctive
relief, penalties or fines in connection with the borrower's noncompliance could
negatively impact the borrower's cash flow and, consequently, its ability to pay
its mortgage loan.
In addition, under the Federal Fair Housing Act, analogous statutes in
some states and regulations and guidelines issued pursuant to those laws, any
and all otherwise-available units in a multifamily apartment building must be
made available to any disabled person who meets the financial criteria generally
applied by the landlord, including implementing alterations and accommodations
in certain circumstances. The costs of this compliance may be high and the
penalties for noncompliance may be severe. Thus, these fair housing statutes,
regulations and guidelines present a risk of increased operating costs to the
borrowers under the mortgage loans secured by multifamily apartment buildings,
which may reduce (perhaps significantly) amounts available for payment on the
related mortgage loan.
MULTIPLE MORTGAGED REAL PROPERTIES ARE OWNED BY THE SAME BORROWER OR AFFILIATED
BORROWERS OR ARE OCCUPIED, IN WHOLE OR IN PART, BY THE SAME TENANT OR AFFILIATED
TENANTS
Seventeen (17) separate groups of mortgage loans, representing
approximately 12.8% of the initial mortgage pool balance, are loans made to
borrowers that, in the case of each of those groups, are the same or under
common control. Mortgaged real properties owned by affiliated borrowers are
likely to:
o have common management, increasing the risk that financial or other
difficulties experienced by the property manager could have a
greater impact on the pool of mortgage loans; and
o have common general partners or managing members, which could
increase the risk that a financial failure or bankruptcy filing
would have a greater impact on the pool of mortgage loans.
See "Description of the Mortgage Pool--Cross-Collateralized and
Cross-Defaulted Mortgage Loans, Multi-Property Mortgage Loans and Mortgage Loans
with Affiliated Borrowers" in this prospectus supplement.
In addition, there may be tenants which lease space at more than one
mortgaged real property securing mortgage loans. There may also be tenants that
are related to or affiliated with a borrower. See Annex A-1 to this prospectus
supplement for a list of the three most significant tenants at each of the
mortgaged real properties used for retail, office and industrial purposes.
The bankruptcy or insolvency of, or other financial problems with respect
to, any borrower or tenant that is, directly or through affiliation, associated
with two or more of the mortgaged real properties could have an adverse effect
on all of those properties and on the ability of those properties to produce
sufficient cash flow to make required payments on the related mortgage loans.
See "Risk Factors--Repayment of a Commercial or Multifamily Mortgage Loan
Depends upon the Performance and Value of the Underlying Real Property, Which
May Decline
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Over Time, and the Related Borrower's Ability to Refinance the Property, of
Which There Is No Assurance," "--Borrower Concentration Within a Trust ExposesInvestors to Greater Risk of Default and Loss" and "--Borrower BankruptcyProceedings Can Delay and Impair Recovery on a Mortgage Loan Underlying YourOffered Certificates" in the accompanying base prospectus.
THE MORTGAGE LOANS HAVE NOT BEEN REUNDERWRITTEN BY US
We have not reunderwritten the mortgage loans. Instead, we have relied on
the representations and warranties made by the mortgage loan sellers, and the
mortgage loan sellers' respective obligations to repurchase, cure or substitute
a mortgage loan in the event that a representation or warranty was not true when
made and such breach materially and adversely affects the value of the mortgage
loan or the interests of the certificateholders. These representations and
warranties do not cover all of the matters that we would review in underwriting
a mortgage loan and you should not view them as a substitute for reunderwriting
the mortgage loans. If we had reunderwritten the mortgage loans, it is possible
that the reunderwriting process may have revealed problems with a mortgage loan
not covered by representations or warranties given by the mortgage loan sellers.
In addition, we cannot assure you that the mortgage loan sellers will be able to
repurchase or substitute a mortgage loan if a representation or warranty has
been breached. See "Description of the Mortgage Pool--Representations andWarranties" and "--Repurchases and Substitutions" in this prospectus supplement.
ASSUMPTIONS MADE IN DETERMINING UNDERWRITTEN NET CASH FLOW MAY PROVE TO BE
INAPPROPRIATE
As described under "Glossary" in this prospectus supplement, underwritten
net cash flow means cash flow as adjusted based on a number of assumptions used
by the mortgage loan sellers. No representation is made that the underwritten
net cash flow set forth in this prospectus supplement as of the cut-off date or
any other date is predictive of future net cash flows. In certain cases,
co-tenancy provisions were assumed to be satisfied and vacant space was assumed
to be occupied and space that was due to expire was assumed to have been re-let,
in each case at market rates that may have exceeded current rent. Each
originator of commercial mortgage loans has its own underwriting criteria and no
assurance can be given that adjustments or calculations made by one originator
would be made by other lenders. Each investor should review the assumptions
discussed in this prospectus supplement and make its own determination of the
appropriate assumptions to be used in determining underwritten net cash flow.
In addition, net cash flow reflects calculations and assumptions used by
the mortgage loan sellers and should not be used as a substitute for, and may
vary (perhaps substantially) from, cash flow as determined in accordance with
GAAP as a measure of the results of a mortgaged real property's operation or for
cash flow from operating activities determined in accordance with GAAP as a
measure of liquidity.
The debt service coverage ratios set forth in this prospectus supplement
for the mortgage loans and the mortgaged properties vary, and may vary
substantially, from the debt service coverage ratios for the mortgage loans and
the mortgaged properties as calculated pursuant to the definition of such ratios
as set forth in the related mortgage loan documents. See the footnotes to Annex
A-1 to this prospectus supplement. Also see "Glossary" for a discussion of the
assumptions used in determining net cash flow. The underwriters express no
opinion as to the accuracy of the determination of, or the appropriateness or
reasonableness of the assumptions used in determining, net cash flow.
SOME MORTGAGED REAL PROPERTIES MAY NOT BE READILY CONVERTIBLE TO ALTERNATIVE
USES
Some of the mortgaged real properties securing the mortgage loans may not
be readily convertible to alternative uses if those properties were to become
unprofitable for any reason. For example, any vacant theater space would not
easily be converted to other uses due to the unique construction requirements of
theaters. Converting commercial properties to alternate uses generally requires
substantial capital expenditures. The liquidation value of any such mortgaged
real property consequently may be substantially less than would be the case if
the property were readily adaptable to other uses. See "--Retail Properties areSubject to Unique Risks Which May Reduce Payments on Your Certificates,""--Industrial Facilities are Subject to Unique Risks Which May Reduce Paymentson Your Certificates,""--Self Storage Facilities are Subject to Unique RisksWhich May Reduce Payments on Your Certificates" and "--Manufactured Housing
Community Properties, Mobile Home Parks and Recreational Vehicle Parks are
Subject to Unique Risks Which May Reduce Payments on Your Certificates" above.
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LENDING ON INCOME-PRODUCING REAL PROPERTIES ENTAILS ENVIRONMENTAL RISKS
The issuing entity could become liable for a material adverse
environmental condition at one of the mortgaged real properties securing the
mortgage loans. Any potential environmental liability could reduce or delay
payments on the offered certificates.
If an adverse environmental condition exists with respect to a mortgaged
real property securing a mortgage loan, the issuing entity will be subject to
certain risks including the following:
o a reduction in the value of such mortgaged real property which may
make it impractical or imprudent to foreclose against such mortgaged
real property;
o the potential that the related borrower may default on the related
mortgage loan due to such borrower's inability to pay high
remediation costs or difficulty in bringing its operations into
compliance with environmental laws;
o liability for clean-up costs or other remedial actions, which could
exceed the value of such mortgaged real property or the unpaid
balance of the related mortgage loan; and
o the inability to sell the related mortgage loan in the secondary
market or to lease such mortgaged real property to potential
tenants.
A third-party consultant conducted an environmental site assessment, or
updated a previously conducted assessment (which update may have been pursuant
to a database update), with respect to all of the mortgaged real properties for
the mortgage loans. Generally, if any assessment or update revealed a material
adverse environmental condition or circumstance at any mortgaged real property
and the consultant recommended action, then, depending on the nature of the
condition or circumstance, one of the actions identified in this prospectus
supplement under "Description of the Mortgage Pool--Assessments of PropertyCondition--Environmental Assessments" was taken. See "Description of theMortgage Pool--Assessments of Property Condition--Environmental Assessments" for
further information regarding these environmental site assessments and the
resulting environmental reports, including information regarding the periods
during which these environmental reports were prepared.
In some cases, the identified condition related to the presence of
asbestos-containing materials, lead-based paint, mold and/or radon. Where these
substances were present, the environmental consultant generally recommended, and
the related loan documents generally require, the establishment of an operation
and maintenance plan to address the issue or, in some cases involving
asbestos-containing materials, lead-based paint, mold and/or radon, an abatement
or removal program.
We cannot assure you that the environmental assessments identified all
environmental conditions and risks, that the related borrowers will implement
all recommended operations and maintenance plans, that such plans will
adequately remediate the environmental condition, or that any environmental
indemnity, insurance or escrow will fully cover all potential environmental
issues. In addition, the environmental condition of the mortgaged real
properties could be adversely affected by tenants or by the condition of land or
operations in the vicinity of the properties, such as underground storage tanks.
With respect to the mortgage loan identified on Annex A-1 to this
prospectus supplement as Georgia-Alabama Retail Portfolio, which is secured by
sixty-two (62) gas station/convenience store properties, which represent
security for approximately 1.6% of the initial mortgage pool balance and
approximately 2.8% of the loan group 1 balance, although all of the mortgaged
properties conform in all material respects to the 1988 Environmental Protection
Agency standards for the design, construction and operation of underground
storage tanks that hold petroleum, thirteen (13) of the mortgaged properties
have documented releases of petroleum or petroleum products which are the
subject of ongoing investigations, remediation or post-remediation monitoring
activities. Of these sites, (i) two (2) of the mortgaged properties have an
investment grade responsible party, (ii) four (4) of the mortgaged properties
have remediation activities which are being supervised by the state and the
contractor bills the Georgia Underground Storage Tank ("GUST") trust fund
directly for remediation costs, (iii) one (1) of the mortgaged properties has a
non-investment grade responsible party (but is also being reimbursed by the GUST
trust fund), (iv) one (1) of the mortgaged properties has either not yet
commenced or has suspended remediation activities
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due to the responsible party being in bankruptcy, (v) three (3) of the mortgaged
properties have completed remediation and a request for a no further action
letter is pending and (vi) two (2) of the mortgaged properties have been
designated or a contractor has requested that they be designated as
monitoring-only. The environmental consultant estimated that the reasonably
likely cost of investigation and remediation or monitoring of the sites over the
next five years would be approximately $602,400. There can be no assurance that
other properties in the portfolio will not have releases or that the 13
properties described above or other properties will not experience additional
expenses related to environmental conditions that may arise at the related
mortgaged property. At loan closing, the borrower obtained a five-year pollution
legal liability ("PLL") policy from Zurich with a $5 million per claim and $10
million aggregate limit, with a self-insured retention of $1,100,000 for
petroleum related releases and $500,000 for non-petroleum releases. At loan
closing, Countrywide Commercial Real Estate Finance, Inc. reserved $224,090 for
the payment of renewal premiums. The reserve funds may only be used to pay the
renewal premium and are not collateral for the Georgia-Alabama Retail Portfolio
Loan in the event of a default. The reserve funds are to be returned to
Countrywide Commercial Real Estate Finance, Inc. (i) at the time the lender is
given notice that the PLL policy will not be renewed or has been cancelled or
(ii) on the maturity date. The PLL policy covers (i) the costs of remediation
and potential legal liability as a result of historical contamination and (ii)
costs for future releases in excess of coverage under a UST Policy (described
below). In addition to the PLL policy, the borrower also obtained a tank policy
("UST Policy") that covers future petroleum releases from the underground
storage tanks, including the petroleum related release deductible under the PLL
policy, subject to a $5,000 deductible. The UST Policy renews annually and the
related premium is included in the price paid for petroleum products to an
affiliate of the borrower by the operator at each Georgia-Alabama Retail
Portfolio property.
See "Description of the Mortgage Pool--Assessments of PropertyCondition--Environmental Assessments." Also see "Risk Factors--EnvironmentalLiabilities Will Adversely Affect the Value and Operation of the ContaminatedProperty and May Deter a Lender from Foreclosing" and "Legal Aspects of MortgageLoans--Environmental Considerations" in the accompanying base prospectus.
LENDING ON INCOME-PRODUCING PROPERTIES ENTAILS RISKS RELATED TO PROPERTY
CONDITION
Licensed engineers inspected all of the mortgaged real properties that
secure the mortgage loans, in connection with the originating of such mortgage
loans to assess--
o the structure, exterior walls, roofing, interior construction,
mechanical and electrical systems; and
o the general condition of the site, buildings and other improvements
located at each property.
The resulting reports may have indicated deferred maintenance items and/or
recommended capital improvements on the mortgaged real properties. We, however,
cannot assure you that all conditions requiring repair or replacement were
identified. No additional property inspections were conducted in connection with
the issuance of the offered certificates. See "Description of the MortgagePool--Assessments of Property Condition--Engineering Assessments" for
information regarding these engineering inspections and the resulting
engineering reports, including the periods during which these engineering
reports were prepared. Generally, with respect to many of the mortgaged real
properties for which recommended repairs, corrections or replacements were
deemed material, the related borrowers were required to deposit with the lender
an amount ranging from 100% to 125% of the licensed engineer's estimated cost of
the recommended repairs, corrections or replacements to assure their completion.
See "Risk Factors--Risks Related to the Mortgage Loans--Reserves to Fund CapitalExpenditures May Be Insufficient and This May Adversely Affect Payments on YourCertificates" in this prospectus supplement.
INSPECTIONS AND APPRAISALS PERFORMED ON MORTGAGED REAL PROPERTIES MAY NOT
ACCURATELY REFLECT VALUE OR CONDITION OF MORTGAGED REAL PROPERTIES
Any appraisal performed with respect to a mortgaged real property
represents only the analysis and opinion of a qualified expert and is not a
guarantee of present or future value. One appraiser may reach a different
conclusion than the conclusion that would be reached if a different appraiser
were appraising that property. Moreover, appraisals seek to establish the amount
a typically motivated buyer would pay a typically motivated seller and, in
certain cases, may have taken into consideration the purchase price paid by the
borrower. That amount could be significantly higher than the amount obtained
from the sale of a mortgaged real property under a distress or
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liquidation sale. We cannot assure you that the information set forth in this
prospectus supplement regarding appraised values or loan-to-value ratios
accurately reflects past, present or future market values of the mortgaged real
properties. See "Description of the Mortgage Pool--Assessments of PropertyCondition--Appraisals" in this prospectus supplement for a description of the
appraisals that were performed with respect to the mortgaged real properties.
Any engineering reports or site inspections obtained with respect to a mortgaged
real property represents only the analysis of the individual engineers or site
inspectors preparing such reports at the time of such report, and may not reveal
all necessary or desirable repairs, maintenance or capital improvement items.
See "Description of the Mortgage Pool--Assessments of PropertyCondition--Property Inspections" and "--Engineering Assessments" in this
prospectus supplement for a description of the engineering assessments and site
inspections that were performed with respect to the mortgaged real properties.
LIMITATIONS ON ENFORCEABILITY OF CROSS-COLLATERALIZATION AND MULTI-BORROWER
ARRANGEMENTS; MULTI-PROPERTY MORTGAGE LOANS
The mortgage pool will include thirteen (13) mortgage loans, representing
approximately 36.6% of the initial mortgage pool balance (eight (8) mortgage
loans in loan group 1, representing approximately 18.9% of the initial loan
group 1 balance, and five (5) mortgage loans in loan group 2, representing
approximately 60.7% of the initial loan group 2 balance), that may involve
multiple borrowers (or in some cases, a single borrower owning multiple
properties) and are, in each case, individually or through
cross-collateralization with other mortgage loans, secured by two or more real
properties and, in the case of cross-collateralized mortgage loans, are
cross-defaulted with the mortgage loans with which they are
cross-collateralized. However, the amount of the mortgage lien encumbering any
particular one of those properties may be less than the full amount of the
related mortgage loan or group of cross-collateralized mortgage loans, as it may
have been limited to avoid or reduce mortgage recording tax. The reduced
mortgage amount may equal the appraised value or allocated loan amount for the
particular mortgaged real property. This would limit the extent to which
proceeds from the property would be available to offset declines in value of the
other mortgaged real properties securing the same mortgage loan or group of
cross-collateralized mortgage loans. These mortgage loans are identified in the
tables contained in Annex A-1. The purpose of securing any particular mortgage
loan or group of cross-collateralized mortgage loans with multiple real
properties or multiple properties within a single mortgaged real property is to
reduce the risk of default or ultimate loss as a result of an inability of any
particular property to generate sufficient net operating income to pay debt
service. However, certain of these mortgage loans, as described under
"Description of the Mortgage Pool--Cross-Collateralized and Cross-Defaulted
Mortgage Loans, Multi-Property Mortgage Loans and Mortgage Loans with Affiliate
Borrowers" in this prospectus supplement, entitle the related borrower(s) to
obtain a release of one or more of the corresponding mortgaged real properties
and/or a termination of any applicable cross-collateralization, subject, in each
case, to the fulfillment of one or more specified conditions.
Six (6) of the mortgage loans referred to in the preceding paragraph,
representing approximately 28.3% of the initial mortgage pool balance (three (3)
mortgage loans, in loan group 1 representing approximately 6.7% of the initial
loan group 1 balance and three (3) mortgage loan in loan group 2 representing
approximately 57.7% of the initial loan group 2 balance), are secured by deeds
of trust or mortgages, as applicable, on multiple properties or parcels that,
through cross-collateralization arrangements or otherwise, secure the
obligations of multiple borrowers. Such multi-borrower arrangements could be
challenged as fraudulent conveyances by creditors of any of the related
borrowers or by the representative of the bankruptcy estate of any related
borrower if one or more of such borrowers becomes a debtor in a bankruptcy case.
Generally, under federal and most state fraudulent conveyance statutes, a lien
granted by any such borrower could be voided if a court determines that:
o such borrower was insolvent at the time of granting the lien, was
rendered insolvent by the granting of the lien, was left with
inadequate capital or was not able to pay its debts as they matured;
and
o the borrower did not, when it allowed its mortgaged real property to
be encumbered by the liens securing the indebtedness represented by
the other cross-collateralized loans, receive "fair consideration"
or "reasonably equivalent value" for pledging such mortgaged real
property for the equal benefit of the other related borrowers.
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We cannot assure you that a lien granted by a borrower on a
cross-collateralized loan to secure the mortgage loan of another borrower, or
any payment thereon, would not be avoided as a fraudulent conveyance. See
"Description of the Mortgage Pool--Cross-Collateralized and Cross-Defaulted
Mortgage Loans, Multi-Property Mortgage Loans and Mortgage Loans with Affiliated
Borrowers" in this prospectus supplement and Annex A-1 to this prospectus
supplement for more information regarding the cross-collateralized mortgage
loans. No mortgage loan is cross-collateralized with a mortgage loan not
included in the assets of the issuing entity.
Six (6) mortgage loans, representing approximately 33.4% of the initial
mortgage pool balance and approximately 16.3% of the initial loan group 1
balance and approximately 56.6% of the initial loan group 2 balance, are, in
each case, secured by real properties located in two or more states. Foreclosure
actions are brought in state court and the courts of one state cannot exercise
jurisdiction over property in another state. Upon a default under any of these
mortgage loans, it may not be possible to foreclose on the related mortgaged
real properties simultaneously.
THE BORROWER'S FORM OF ENTITY OR STRUCTURE MAY CAUSE SPECIAL RISKS AND/OR HINDER
RECOVERY
The borrowers under forty (40) mortgage loans, representing in the
aggregate approximately 3.5% of the initial mortgage pool balance (twenty-five
(25) mortgage loans in loan group 1, representing 4.2% of the initial loan group
1 balance, and fifteen (15) mortgage loans in loan group 2, representing 2.4% of
the initial loan group 2 balance), are either individuals or are not structured
to diminish the likelihood of their becoming bankrupt and some of the other
borrowers so structured may not satisfy all the characteristics of special
purpose entities. Further, some of the borrowing entities (including some that
are currently structured to satisfy the characteristics of a special purpose
entity) may have been in existence and conducting business prior to the
origination of the related mortgage loan. For example, with respect to the
mortgage loans identified on Annex A-1 to this prospectus supplement as Farallon
Portfolio, Peninsula Beverly Hills and SAC/U-Haul Self Storage Portfolio,
representing approximately 16.6% of the initial mortgage pool balance, 11.0% of
the initial loan group 1 balance and 24.2% of the initial loan group 2 balance,
the related borrower (or in some cases, certain of the related borrowers) are
not newly formed special purpose entities. In addition, certain borrowers may
own other property that is not part of the collateral for the mortgage loans
and, even with respect to those currently structured to satisfy the
characteristics of a special purpose entity, may not have always satisfied all
the characteristics of special purpose entities. The related mortgage documents
and/or organizational documents of certain borrowers may not contain the
representations, warranties and covenants customarily made by a borrower that is
a special purpose entity (such as limitations on indebtedness and affiliate
transactions and restrictions on the borrower's ability to dissolve, liquidate,
consolidate, merge, sell all of its assets, or amend its organizational
documents). These provisions are designed to mitigate the possibility that the
borrower's financial condition would be adversely impacted by factors unrelated
to the related mortgaged real property and the related mortgage loan.
Borrowers not structured as bankruptcy-remote entities may be more likely
to become insolvent or the subject of a voluntary or involuntary bankruptcy
proceeding because such borrowers may be:
o operating entities with businesses distinct from the operation of
the property with the associated liabilities and risks of operating
an ongoing business; and
o individuals that have personal liabilities unrelated to the
property.
However, any borrower, even an entity structured to be bankruptcy-remote,
as owner of real estate will be subject to certain potential liabilities and
risks. We cannot assure you that any borrower will not file for bankruptcy
protection or that creditors of a borrower or a corporate or individual general
partner or managing member of a borrower will not initiate a bankruptcy or
similar proceeding against such borrower or corporate or individual general
partner or managing member.
With respect to those borrowers that are structured as special purposes
entities, although the terms of the borrower's organizational documents and/or
related loan documents require that the related borrower covenants to be a
special purpose entity, in some cases those borrowers are not required to
observe all covenants and conditions which typically are required in order for
such an entity to be viewed under the standard rating agency criteria as a
special purpose entity. For example, in many cases, the entity that is the
related borrower does not have an independent director.
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In certain jurisdictions, mortgage loans may be structured with a borrower
(obligated under the related note) that is different from the owner of the
mortgaged property. In such cases, the related property owner, although not
obligated under the note, will guaranty all amounts payable by the borrower
under the related note and the guaranty will be secured by an indemnity deed of
trust in favor of the lender executed by the property owner. With respect to
certain references to the borrower in this prospectus supplement, such
references may apply to the related property owner instead.
Furthermore, with respect to any related borrowers, creditors of a common
parent in bankruptcy may seek to consolidate the assets of such borrowers with
those of the parent. Consolidation of the assets of such borrowers would likely
have an adverse effect on the funds available to make distributions on your
certificates, and may lead to a downgrade, withdrawal or qualification of the
ratings of your certificates. See "Legal Aspects of Mortgage Loans--BankruptcyLaws" in the accompanying base prospectus.
RISKS RELATED TO REDEVELOPMENT AND RENOVATION AT THE MORTGAGED REAL PROPERTIES
Certain of the mortgaged real properties are properties which are
currently undergoing or are expected to undergo redevelopment or renovation in
the future. There can be no assurance that current or planned redevelopment or
renovation will be completed, that such redevelopment or renovation will be
completed in the time frame contemplated, or that, when and if redevelopment or
renovation is completed, such redevelopment or renovation will improve the
operations at, or increase the value of, the subject property. Failure of any of
the foregoing to occur could have a material negative impact on the related
mortgage loan, which could affect the ability of the related borrower to repay
the related mortgage loan.
In the event the related borrower fails to pay the costs of work completed
or material delivered in connection with such ongoing redevelopment or
renovation, the portion of the mortgaged real property on which there are
renovations may be subject to mechanic's or materialmen's liens that may be
senior to the lien of the related mortgage loan.
TENANCIES IN COMMON MAY HINDER RECOVERY
Eighteen (18) of the mortgage loans, representing approximately 6.6% of
the initial mortgage pool balance (fourteen (14) mortgage loans in loan group 1,
representing approximately 7.2% of the initial loan group 1 balance, and four
(4) mortgage loans in loan group 2, representing approximately 5.8% of the
initial loan group 2 balance), have borrowers that own the related mortgaged
real properties as tenants-in-common. In addition, some of the mortgage loans
may permit the related borrower to convert into a tenant-in-common structure in
the future. Generally, in tenant-in-common ownership structures, each
tenant-in-common owns an undivided share in the subject real property. If a
tenant-in-common desires to sell its interest in the subject real property and
is unable to find a buyer or otherwise desires to force a partition, the
tenant-in-common has the ability to request that a court order a sale of the
subject real property and distribute the proceeds to each tenant-in-common owner
proportionally. To reduce the likelihood of a partition action, except as
discussed in the paragraph below, each tenant-in-common borrower under the
mortgage loan(s) referred to above has waived its partition right. However,
there can be no assurance that, if challenged, this waiver would be enforceable
or that it would be enforced in a bankruptcy proceeding.
The enforcement of remedies against tenant-in-common borrowers may be
prolonged because each time a tenant-in-common borrower files for bankruptcy,
the bankruptcy court stay is reinstated. While a lender may seek to mitigate
this risk after the commencement of the first bankruptcy of a tenant-in-common
by commencing an involuntary proceeding against the other tenant-in-common
borrowers and moving to consolidate all those cases, there can be no assurance
that a bankruptcy court would consolidate those separate cases. Additionally,
tenant-in-common borrowers may be permitted to transfer portions of their
interests in the subject mortgaged real property to numerous additional
tenant-in-common borrowers.
The bankruptcy, dissolution or action for partition by one or more of the
tenants-in-common could result in an early repayment of the related mortgage
loan, a significant delay in recovery against the tenant-in-common borrowers, a
material impairment in property management and a substantial decrease in the
amount recoverable upon the related mortgage loan. Not all tenants-in-common for
these mortgage loans may be special purpose entities and some of those
tenants-in-common may be individuals.
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BANKRUPTCY PROCEEDINGS ENTAIL CERTAIN RISKS
Under federal bankruptcy law, the filing of a petition in bankruptcy by or
against a borrower will stay the sale of the mortgaged real property owned by
that borrower, as well as the commencement or continuation of a foreclosure
action. In addition, even if a court determines that the value of the mortgaged
real property is less than the principal balance of the mortgage loan it
secures, the court may prevent a lender from foreclosing on the mortgaged real
property (subject to certain protections available to the lender). As part of a
restructuring plan, a court also may reduce the amount of secured indebtedness
to the then-current value of the mortgaged real property, which would make the
lender a general unsecured creditor for the difference between the then-current
value and the amount of its outstanding mortgage indebtedness. A bankruptcy
court also may: (1) grant a debtor a reasonable time to cure a payment default
on a mortgage loan; (2) reduce periodic payments due under a mortgage loan; (3)
change the rate of interest due on a mortgage loan; or (4) otherwise alter the
mortgage loan's repayment schedule.
Moreover, the filing of a petition in bankruptcy by, or on behalf of, a
junior lienholder may stay the senior lienholder from taking action to foreclose
on the junior lien. Additionally, the borrower's trustee or the borrower, as
debtor-in-possession, has certain special powers to avoid, subordinate or
disallow debts. In certain circumstances, the claims of the special servicer on
behalf of the issuing entity may be subordinated to financing obtained by a
debtor-in-possession subsequent to its bankruptcy. Under federal bankruptcy law,
the lender will be stayed from enforcing a borrower's assignment of rents and
leases. Federal bankruptcy law also may interfere with the master servicers' or
special servicer's ability to enforce lockbox requirements. The legal
proceedings necessary to resolve these issues can be time consuming and costly
and may significantly delay or diminish the receipt of rents. Rents also may
escape an assignment to the extent they are used by the borrower to maintain the
mortgaged real property or for other court authorized expenses.
Additionally, pursuant to subordination agreements for certain of the
mortgage loans, the subordinate lenders may have agreed that they will not take
any direct actions with respect to the related subordinated debt, including any
actions relating to the bankruptcy of the borrower, and that the holder of the
mortgage loan will have all rights to direct all such actions. There can be no
assurance that in the event of the borrower's bankruptcy, a court will enforce
such restrictions against a subordinated lender. In its decision in In re 203
North LaSalle Street Partnership, 246 B.R. 325 (Bankr. N.D. Ill. March 10,2000), the United States Bankruptcy Court for the Northern District of Illinois
refused to enforce a provision of a subordination agreement that allowed a first
mortgagee to vote a second mortgagee's claim with respect to a Chapter 11
reorganization plan on the grounds that pre-bankruptcy contracts cannot override
rights expressly provided by the Bankruptcy Code. This holding, which one court
has already followed, potentially limits the ability of a senior lender to
accept or reject a reorganization plan or to control the enforcement of remedies
against a common borrower over a subordinated lender's objections.
As a result of the foregoing, the special servicer's recovery on behalf of
the issuing entity with respect to borrowers in bankruptcy proceedings may be
significantly delayed, and the aggregate amount ultimately collected may be
substantially less than the amount owed.
LITIGATION OR OTHER LEGAL PROCEEDINGS MAY HAVE ADVERSE EFFECTS ON BORROWERS
From time to time, there may be legal proceedings pending or threatened
against the borrowers, sponsors, managers of the mortgaged real properties and
their affiliates relating to the business of, or arising outside of the ordinary
course of business of, the borrowers, sponsors, managers of the mortgaged real
properties and their affiliates, and certain of the borrowers, sponsors,
managers of the mortgaged real properties and their affiliates are subject to
legal proceedings relating to the business of, or arising outside of the
ordinary course of business of, the borrowers, sponsors, managers of the
mortgaged real properties or their affiliates. It is possible that such legal
proceedings may have a material adverse effect on any borrower's ability to meet
its obligations under the related mortgage loan and, therefore, on distributions
on your certificates.
From time to time, there may be condemnations pending or threatened
against one or more of the mortgaged real properties securing the mortgage
loans. The proceeds payable in connection with a total condemnation may not be
sufficient to restore the related mortgaged real property or to satisfy the
remaining indebtedness of the related mortgage loan. The occurrence of a partial
condemnation may have a material adverse effect on the continued use of, or
income generation from, the affected mortgaged real property. Therefore, we
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cannot assure you that the occurrence of any condemnation will not have a
negative impact upon distributions on your certificates.
PRIOR BANKRUPTCIES OR OTHER PROCEEDINGS MAY BE RELEVANT TO FUTURE PERFORMANCE
Certain borrowers, principals of borrowers and affiliates thereof have
been a party to bankruptcy proceedings, foreclosure proceedings or deed-in-lieu
of foreclosure transactions, or other material proceedings, in the past.
Additionally, there can be no assurance that certain other borrowers, or any
principals of borrowers or affiliates thereof, have not been a party to
bankruptcy proceedings, foreclosure proceedings or deed-in-lieu of foreclosure
transactions, or other material proceedings, in the past or that certain
principals or their affiliates have not been equity owners in other mortgaged
real properties that have been subject to foreclosure proceedings. In addition,
there may be pending or threatened foreclosure proceedings or other material
proceedings of the borrowers, the borrower principals and the managers of the
mortgaged real properties or their affiliates securing the pooled mortgage loans
and/or their respective affiliates.
If a borrower or a principal of a borrower or affiliate has been a party
to such a proceeding or transaction in the past, we cannot also assure you that
the borrower or principal will not be more likely than other borrowers or
principals to avail itself or cause a borrower to avail itself of its legal
rights, under the Bankruptcy Code or otherwise, in the event of an action or
threatened action by the mortgagee or its servicer to enforce the related
mortgage loan documents, or otherwise conduct its operations in a manner that is
in the best interests of the lender and/or the mortgaged real property. We
cannot assure you that any foreclosure proceedings or other material proceedings
will not have a material adverse effect on your investment.
Certain of the mortgage loans detailed below have sponsors that have filed
for bankruptcy protection in the last ten years. In each case, the related
entity or person has emerged from bankruptcy. With respect to one mortgage loan
(identified as loan number 95 on Annex A-1 to this prospectus supplement),
representing 0.2% of the initial mortgage pool balance and 0.4% of the initial
loan group 1 balance, the related sponsor filed for bankruptcy protection in
1997 and emerged from bankruptcy protection in 1998.
From time to time, there may be condemnations pending or threatened
against one or more of the mortgaged real properties securing the mortgage
loans. The proceeds payable in connection with a total condemnation may not be
sufficient to restore the related mortgaged real property or to satisfy the
remaining indebtedness of the related mortgage loan. The occurrence of a partial
condemnation may have a material adverse effect on the continued use of, or
income generation from, the affected mortgaged real property. Therefore, we
cannot assure you that the occurrence of any condemnation will not have a
negative impact upon distributions on your certificates.
POOR PROPERTY MANAGEMENT WILL LOWER THE PERFORMANCE OF THE RELATED MORTGAGED
REAL PROPERTY
The successful operation of a real estate project depends upon the
property manager's performance and viability. The property manager is
responsible for:
o responding to changes in the local market;
o planning and implementing the rental structure;
o operating the property and providing building services;
o managing operating expenses; and
o assuring that maintenance and capital improvements are carried out
in a timely fashion.
Properties deriving revenues primarily from short-term sources, such as
short-term or month-to-month leases or daily room rentals, are generally more
management intensive than properties leased to creditworthy tenants under
long-term leases. We make no representation or warranty as to the skills of any
present or future managers. In many cases, the property manager is the borrower
or an affiliate of the borrower and may not manage properties
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for non-affiliates. Additionally, we cannot assure you that the property
managers will be in a financial condition to fulfill their management
responsibilities throughout the terms of their respective management agreements.
MORTGAGE LOAN SELLERS MAY NOT BE ABLE TO MAKE A REQUIRED REPURCHASE OR
SUBSTITUTION OF A DEFECTIVE MORTGAGE LOAN
Each mortgage loan seller is the sole warranting party in respect of the
mortgage loans sold by such mortgage loan seller to us. Neither we nor any of
our affiliates (except, in certain circumstances, for Merrill Lynch Mortgage
Lending, Inc. in its capacity as a mortgage loan seller) are obligated to
repurchase or substitute any mortgage loan in connection with either a material
breach of any mortgage loan seller's representations and warranties or any
material document defects, if such mortgage loan seller defaults on its
obligation to do so. We cannot assure you that the mortgage loan sellers will
have the financial ability to effect such repurchases or substitutions. Any
mortgage loan that is not repurchased or substituted and that is not a
"qualified mortgage" for a REMIC may cause the issuing entity to fail to qualify
as one or more REMICs or cause the issuing entity to incur a tax. See
"Description of the Mortgage Pool--Assignment of the Mortgage Loans,""--Representations and Warranties" and "--Repurchases and Substitutions" in this
prospectus supplement and "Description of the GoverningDocuments--Representations and Warranties with Respect to Mortgage Assets" in
the accompanying base prospectus.
ONE ACTION JURISDICTION MAY LIMIT THE ABILITY OF THE SPECIAL SERVICER TO
FORECLOSE ON THE MORTGAGED REAL PROPERTY
Some states (including California) have laws that prohibit more than one
judicial action to enforce a mortgage obligation, and some courts have construed
the term judicial action broadly. Accordingly, the special servicer is required
to obtain advice of counsel prior to enforcing any of the issuing entity's
rights under any of the mortgage loans that include mortgaged real properties
where this rule could be applicable. In the case of either a
cross-collateralized and cross-defaulted mortgage loan or a multi-property
mortgage loan which is secured by mortgaged real properties located in multiple
states, the special servicer may be required to foreclose first on properties
located in states where such "one action" rules apply (and where non-judicial
foreclosure is permitted) before foreclosing on properties located in the states
where judicial foreclosure is the only permitted method of foreclosure. As a
result, the special servicer may incur delay and expense in foreclosing on
mortgaged real properties located in states affected by one action rules. See
"--Risks Related to Geographic Concentration""--Certain State-SpecificConsiderations" in this prospectus supplement. See also "Legal Aspects ofMortgage Loans--Foreclosure--One Action and Security First Rules" in the
accompanying base prospectus.
LIMITED INFORMATION CAUSES UNCERTAINTY
Some of the mortgage loans are loans that were made to enable the related
borrower to acquire the related mortgaged real property. Accordingly, for
certain of these loans limited or no historical operating information is
available with respect to the related mortgaged real properties. As a result,
you may find it difficult to analyze the historical performance of those
properties.
TAX CONSIDERATIONS RELATED TO FORECLOSURE
The special servicer, on behalf of the issuing entity, may acquire one or
more mortgaged real properties pursuant to a foreclosure or deed in lieu of
foreclosure. The issuing entity will be able to perform construction work on a
foreclosed real property only through an independent contractor (more than 90
days after acquisition), and then only if construction was at least 10% complete
at the time default on the related mortgage loan became imminent. Any net income
from the operation and management of any such property that is not qualifying
"rents from real property," within the meaning of section 856(d) of the Internal
Revenue Code of 1986, as amended, and any rental income based on the net profits
of a tenant or sub-tenant or allocable to a service that is non-customary in the
area and for the type of property involved, will subject the issuing entity to
federal (and possibly state or local) tax on such income at the highest marginal
corporate tax rate (currently 35%), thereby reducing net proceeds available for
distribution to certificateholders. The risk of taxation being imposed on income
derived from the operation of foreclosed property is particularly present in the
case of hotels and other property types that rely on business rather than rental
income. The pooling and servicing agreement permits the special servicer to
cause the issuing entity to
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earn "net income from foreclosure property" that is subject to tax if it
determines that the net after-tax benefit to certificateholders is greater than
another method of operating or net-leasing the subject mortgaged real
properties. In addition, if the issuing entity were to acquire one or more
mortgaged real properties pursuant to a foreclosure or deed in lieu of
foreclosure, the issuing entity may in certain jurisdictions, particularly in
New York or California, be required to pay state or local transfer or excise
taxes upon liquidation of such properties. Such state or local taxes may reduce
net proceeds available for distribution to the certificateholders. See "FederalIncome Tax Consequences" in this prospectus supplement and in the accompanying
base prospectus.
With respect to the mortgage loan identified on Annex A-1 to this
prospectus supplement as Farallon Portfolio, until such time as a certain debt
service coverage ratio is satisfied, a pledge of equity in the owners of certain
entities that own rental homes dispersed throughout the communities where the
related mortgaged properties are located was granted by the owner of such
entities (which pledgor is currently an affiliate of the related borrowers) as
additional collateral for such loan. See Annex C, "Preliminary Structural andCollateral Term Sheet--Farallon Portfolio" in this prospectus supplement. Such
pledged equity interest may not qualify as an interest in real property or as
personal property incidental to real property for purposes of the REMIC
provisions. If any such pledged equity interest does not so qualify, the REMIC
regulations will restrict the trust from taking title to any such pledged
interest and, in such case, upon the occurrence of an event of default under the
related mortgage loan, the trust may not be permitted to take title to such
pledged interests, but rather will be required to exercise the legal remedies
available to it under applicable law and the related loan documents to sell any
such pledged equity interests and apply the proceeds toward the repayment of
such mortgage loan. Depending on market conditions, the proceeds from the sale
of any such pledged equity interest could be less than the proceeds that would
be received if the special servicer would have foreclosed on such interest and
sold them at a later date.
POTENTIAL CONFLICTS OF INTEREST WITH RESPECT TO PROPERTY MANAGERS, THE BORROWERS
AND THE MORTGAGE LOAN SELLERS
Property managers and borrowers may experience conflicts of interest in
the management and/or ownership of the mortgaged real properties securing the
mortgage loans because:
o a substantial number of the mortgaged real properties are managed by
property managers affiliated with the respective borrowers;
o the property managers also may manage and/or franchise additional
properties, including properties that may compete with the mortgaged
real properties; and
o affiliates of the property managers and/or the borrowers, or the
property managers and/or the borrowers themselves, also may own
other properties, including competing properties.
Conflicts of interest may arise between the trust fund, on the one hand,
and the mortgage loan sellers and their affiliates that engage in the
acquisition, development, operation, financing and disposition of real estate,
on the other hand. Those conflicts may arise because a mortgage loan seller and
its affiliates intend to continue to actively acquire, develop, lease, finance
and dispose of real estate-related assets in the ordinary course of their
businesses. During the course of their business activities, the respective
mortgage loan sellers and their affiliates may acquire, sell or lease
properties, or finance loans secured by properties (or by ownership interests in
the related borrowers) which may include the mortgaged properties securing the
pooled mortgage loans or properties that are in the same markets as those
mortgaged real properties.
Further, certain mortgage loans may have been refinancings of debt
previously held by a mortgage loan seller or an affiliate of one of the mortgage
loan sellers and/or the mortgage loan sellers or their affiliates may have or
have had equity investments in the borrowers or mortgaged real properties under
certain of the mortgage loans. Each of the mortgage loan sellers and its
affiliates have made and/or may make loans to, or equity investments in, or
otherwise have business relationships with, affiliates of borrowers under the
mortgage loans. For example, in the case of certain of the mortgage loans, the
holder of related mezzanine debt secured by a principal's interest in the
related borrower may be the related mortgage loan seller, which relationship
could represent a conflict of interest.
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In the circumstances described above, the interests of those mortgage loan
sellers and their affiliates may differ from, and compete with, the interest of
the trust fund. Decisions made with respect to those assets may adversely affect
the amount and timing of distributions on the certificates.
THE ABSENCE OF OR INADEQUACY OF INSURANCE COVERAGE ON THE PROPERTY MAY ADVERSELY
AFFECT PAYMENTS ON YOUR CERTIFICATES
All of the mortgage loans require the related borrower to maintain, or
cause to be maintained, property insurance (which, in some cases, is provided by
allowing a tenant to self-insure). However, the mortgaged real properties that
secure the mortgage loans may suffer casualty losses due to risks that are not
covered by insurance or for which insurance coverage is not adequate or
available at commercially reasonable rates. In addition, some of those mortgaged
real properties are located in California, Florida, Texas and Louisiana and in
other coastal areas of certain states, which are areas that have historically
been at greater risk of acts of nature, including earthquakes, hurricanes and
floods. The mortgage loans generally do not require borrowers to maintain
earthquake, hurricane or flood insurance and we cannot assure you that borrowers
will attempt or be able to obtain adequate insurance against such risks.
Moreover, if reconstruction or major repairs are required following a
casualty, changes in laws that have occurred since the time of original
construction may materially impair the borrower's ability to effect such
reconstruction or major repairs or may materially increase the cost thereof.
After the terrorist attacks of September 11, 2001, the cost of insurance
coverage for acts of terrorism increased and the availability of such insurance
decreased. In response to this situation, Congress enacted the Terrorism Risk
Insurance Act of 2002 (TRIA), which was amended and extended by the Terrorism
Risk Insurance Extension Act of 2005 (TRIA Extension Act), signed into law by
President Bush on December 22, 2005. The TRIA Extension Act requires that
qualifying insurers offer terrorism insurance coverage in all property and
casualty insurance policies on terms not materially different than terms
applicable to other losses. The federal government covers 90% (85% for acts of
terrorism occurring in 2007) of the losses from covered certified acts of
terrorism on commercial risks in the United States only, in excess of a
specified deductible amount calculated as a percentage of an affiliated
insurance group's prior year premiums on commercial lines policies covering
risks in the United States. This specified deductible amount is 17.5% of such
premiums for losses occurring in 2006, and 20% of such premiums for losses
occurring in 2007. Further, to trigger coverage under the TRIA Extension Act,
the aggregate industry property and casualty insurance losses resulting from an
act of terrorism must exceed $5 million prior to April 2006, $50 million from
April 2006 through December 2006, and $100 million for acts of terrorism
occurring in 2007. The TRIA Extension Act now excludes coverage for commercial
auto, burglary and theft, surety, professional liability and farm owners'
multiperil. The TRIA Extension Act will expire on December 31, 2007. The TRIA
Extension Act applies only to losses resulting from attacks that have been
committed by individuals on behalf of a foreign person or foreign interest, and
does not cover acts of purely domestic terrorism. Further, any such attack must
be certified as an "act of terrorism" by the federal government, which decision
is not subject to judicial review. As a result, insurers may continue to try to
exclude from coverage under their policies losses resulting from terrorist acts
not covered by the TRIA Extension Act. Moreover, the TRIA Extension Act's
deductible and co-payment provisions still leave insurers with high potential
exposure for terrorism-related claims. Because nothing in the TRIA Extension Act
prevents an insurer from raising premium rates on policyholders to cover
potential losses, or from obtaining reinsurance coverage to offset its increased
liability, the cost of premiums for such terrorism insurance coverage is still
expected to be high.
We cannot assure you that all of the mortgaged real properties will be
insured against the risks of terrorism and similar acts. As a result of any of
the foregoing, the amount available to make distributions on your certificates
could be reduced.
Each master servicer, with respect to each of the mortgage loans that it
is servicing, including those of such mortgage loans that have become specially
serviced mortgage loans, and the special servicer, with respect to mortgaged
real properties acquired through foreclosure, which we refer to in this
prospectus supplement as REO property, will be required to use reasonable
efforts, consistent with the servicing standard under the pooling and servicing
agreement, to cause each borrower to maintain for the related mortgaged real
property all insurance required by the terms of the loan documents and the
related mortgage in the amounts set forth therein which are to
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be obtained from an insurer meeting the requirements of the applicable loan
documents. Notwithstanding the foregoing, the master servicers and the special
servicer will not be required to maintain, and will not be required to cause a
borrower to be in default with respect to the failure of the related borrower to
obtain, all-risk casualty insurance that does not contain any carve-out for
terrorist or similar acts, if and only if the special servicer has determined in
accordance with the servicing standard under the pooling and servicing agreement
(and other consultation with the controlling class representative) that either--
o such insurance is not available at commercially reasonable rates,
and such hazards are not commonly insured against by prudent owners
of properties similar to the mortgaged real property and located in
or around the region in which such mortgaged real property is
located, or
o such insurance is not available at any rate.
If the related loan documents do not expressly require insurance against
acts of terrorism, but permit the lender to require such other insurance as is
reasonable, the related borrower may challenge whether maintaining insurance
against acts of terrorism is reasonable in light of all the circumstances,
including the cost. The applicable master servicer's efforts to require such
insurance may be further impeded if the originating lender did not require the
subject borrower to maintain such insurance, regardless of the terms of the
related loan documents.
If a borrower is required, under the circumstances described above, to
maintain insurance coverage with respect to terrorist or similar acts that was
not previously maintained, the borrower may incur higher costs for insurance
premiums in obtaining that coverage which would have an adverse effect on the
net cash flow of the related mortgaged real property. Further, If the federal
insurance back-stop program referred to above is not extended or renewed,
premiums for terrorism insurance coverage will likely increase and/or the terms
of such insurance may be materially amended to enlarge stated exclusions or to
otherwise effectively decrease the scope of coverage available (perhaps to the
point where it is effectively not available). In addition, to the extent that
any policies contain "sunset clauses" (i.e., clauses that void terrorism
coverage if the federal insurance backstop program is not renewed), then such
policies may cease to provide terrorism insurance coverage upon the expiration
of the federal insurance backstop program.
Most of the mortgage loans specifically require terrorism insurance, but
such insurance may be required only to the extent it can be obtained for
premiums less than or equal to a "cap" amount specified in the related loan
documents, only if it can be purchased at commercially reasonable rates, only in
limited amounts, only for specified or commonly insured hazards (in comes cases,
for similar properties in the region where the related mortgaged real property
is located) and/or only with a deductible at a certain threshold. For example,
with respect to one mortgage loan (loan number 4), representing approximately
3.3% of the initial mortgage pool balance and 5.7% of the initial loan group 1
balance, the related terrorism insurance premium cap is $325,000, and with
respect to one mortgage loan (loan number 8), representing approximately 1.5% of
the initial mortgage pool balance and 2.6% of the initial loan group 1 balance,
the related terrorism insurance premium cap is $24,170 subject to annual
consumer price index adjustment.
With respect to twelve (12) mortgage loans (loan numbers 102, 165, 198,
199, 203, 209, 212, 213, 214, 215, 217 and 218), representing approximately 0.7%
of the initial mortgage pool balance, approximately 0.2% of the initial loan
group 1 balance and approximately 1.5% of the initial loan group 2 balance, the
borrower does not currently maintain insurance against terrorist acts. With
respect to one (1) mortgage loan (loan number 2) representing approximately
10.3% of the initial mortgage pool balance and approximately 24.2% of the
initial loan group 2 balance, the borrower is not required to maintain insurance
against terrorist acts.
Additionally, there can be no assurance that mortgaged real properties
currently covered by terrorism insurance will continue to be so covered or that
the coverage is, or will remain, adequate. See "Description of the MortgagePool--Additional Loan and Property Information--Hazard, Liability and OtherInsurance" in this prospectus supplement.
IN THE EVENT THAT ANY MORTGAGED REAL PROPERTY SECURING A MORTGAGE LOAN
SUSTAINS DAMAGE AS A RESULT OF AN UNINSURED ACT OR IF THE INSURANCE POLICIES
WITH RESPECT TO THAT MORTGAGED REAL PROPERTY DO NOT ADEQUATELY COVER THE DAMAGE
SUSTAINED, SUCH DAMAGED MORTGAGED REAL PROPERTY MAY NOT GENERATE ADEQUATE CASH
FLOW TO PAY, AND/OR PROVIDE ADEQUATE COLLATERAL TO SATISFY, ALL AMOUNTS OWING
UNDER SUCH MORTGAGE LOAN,
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WHICH COULD RESULT IN A DEFAULT ON THAT MORTGAGE LOAN AND, POTENTIALLY, LOSSES
ON SOME CLASSES OF THE CERTIFICATES.
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS (MERS)
The mortgages or assignments of mortgages for some of the mortgage loans
have been or may be recorded in the name of MERS, solely as nominee for the
related mortgage loan seller and its successor and assigns. Subsequent
assignments of those mortgages are registered electronically through the MERS
system. The recording of mortgages in the name of MERS is a new practice in the
commercial mortgage lending industry. Public recording officers and others 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 real properties
could result. Those delays and the additional costs could in turn delay the
distribution of liquidation proceeds to certificateholders and increase the
amount of losses on the mortgage loans.
CAPITALIZED TERMS USED IN THIS PROSPECTUS SUPPLEMENT
From time to time we use capitalized terms in this prospectus supplement.
Frequently used capitalized terms will have the respective meanings assigned to
them in the glossary attached to this prospectus supplement.
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying base prospectus includes
the words "expects,""intends,""anticipates,""estimates" and similar words and
expressions. These words and expressions are intended to identify
forward-looking statements. Any forward-looking statements are made subject to
risks and uncertainties which could cause actual results to differ materially
from those stated. These risks and uncertainties include, among other things,
declines in general economic and business conditions, increased competition,
changes in demographics, changes in political and social conditions, regulatory
initiatives and changes in consumer preferences, many of which are beyond our
control and the control of any other person or entity related to this offering.
We discuss some of these risks and uncertainties under "Risk Factors" in this
prospectus supplement and the accompanying base prospectus. The forward-looking
statements made in this prospectus supplement are accurate as of the date stated
on the cover of this prospectus supplement. We have no obligation to update or
revise any forward-looking statement.
DESCRIPTION OF THE MORTGAGE POOLGENERAL
We intend to include the 218 mortgage loans identified on Annex A-1 to
this prospectus supplement in the trust. The mortgage pool consisting of those
loans will have an initial mortgage pool balance of $2,435,364,704. However, the
actual initial mortgage pool balance may be as much as 5.0% smaller or larger
than such amount if any of those mortgage loans are removed from the mortgage
pool or any other mortgage loans are added to the mortgage pool. See "--Changesin Mortgage Pool Characteristics" below. The mortgage loan identified on Annex
A-1 to this prospectus supplement as Farallon Portfolio consists of an A-note
mortgage loan and a B-note mortgage loan. See "--The Farallon Portfolio LoanCombination" below. In addition, the mortgage loan identified on Annex A-1 to
this prospectus supplement as Georgia-Alabama Retail Portfolio consists of an
A-note mortgage loan and a B-note mortgage loan. See "--The Georgia-AlabamaRetail Portfolio Loan Combination" below.
For purposes of making distributions with respect to the class A-1, A-2,
A-2FL, A-SB, A-3, A-3FL and A-1A certificates, as described under "Descriptionof the Offered Certificates," the pool of mortgage loans will be deemed to
consist of two loan groups, loan group 1 and loan group 2. Loan group 1 will
consist of 162 mortgage loans, representing approximately 57.6% of the initial
mortgage pool balance that are secured by the various property types that
constitute collateral for those mortgage loans. Loan group 2 will consist of 56
mortgage loans, representing approximately 42.4% of the initial mortgage pool
balance, that are secured by multifamily and
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manufactured housing community properties. Annex A-1 to this prospectus
supplement indicates the loan group designation for each mortgage loan.
The initial mortgage pool balance will equal the total cut-off date
principal balance of the mortgage loans included in the trust. The initial loan
group 1 balance and the initial loan group 2 balance will equal the cut-off date
principal balance of the mortgage loans in loan group 1 and loan group 2,
respectively. The cut-off date principal balance of any mortgage loan is equal
to its unpaid principal balance as of the cut-off date, after application of all
monthly debt service payments due with respect to the mortgage loan on or before
that date, whether or not those payments were received. The cut-off date
principal balance of each mortgage loan is shown on Annex A-1 to this prospectus
supplement. The cut-off date principal balances of all the mortgage loans in the
trust range from $494,011 to $335,000,000 and the average of those cut-off date
principal balances is $11,171,398; the cut-off date principal balances of the
mortgage loans in loan group 1 range from $898,482 to $99,900,000, and the
average of those cut-off date principal balances is $8,651,812; and the cut-off
date principal balances of the mortgage loans in loan group 2 range from
$494,011 to $335,000,000, and the average of those cut-off date principal
balances is $18,460,200.
When we refer to mortgage loans in this prospectus supplement, we are
referring to the mortgage loans that we intend to include in the trust and do
not, unless the context otherwise indicates, include the non-trust loans, which
will not be included in the trust.
Each of the mortgage loans is an obligation of the related borrower to
repay a specified sum with interest. Each of those mortgage loans is evidenced
by a promissory note and secured by a mortgage, deed of trust or other similar
security instrument that creates a mortgage lien on the fee and/or leasehold
interest of the related borrower or another party in one or more commercial,
multifamily and manufactured housing community mortgaged real properties. That
mortgage lien will be a first priority lien, subject only to Permitted
Encumbrances.
You should consider each of the mortgage loans to be a nonrecourse
obligation of the related borrower. You should anticipate that, in the event of
a payment default by the related borrower, recourse will be limited to the
corresponding mortgaged real property or properties for satisfaction of that
borrower's obligations. In those cases where recourse to a borrower or guarantor
is permitted under the related loan documents, we have not undertaken an
evaluation of the financial condition of any of these persons. None of the
mortgage loans will be insured or guaranteed by any governmental entity or by
any other person.
We provide in this prospectus supplement a variety of information
regarding the mortgage loans. When reviewing this information, please note
that--
o all numerical information provided with respect to the mortgage
loans is provided on an approximate basis;
o all cut-off date principal balances assume the timely receipt of the
scheduled payments for each mortgage loan and that no prepayments
occur prior to the cut-off date;
o all weighted average information provided with respect to the
mortgage loans reflects a weighting of the subject mortgage loans
based on their respective cut-off date principal balances; the
initial mortgage pool balance will equal the total cut-off date
principal balance of the entire mortgage pool, and the initial loan
group 1 balance and the initial loan group 2 balance will each equal
the total cut-off date principal balance of the mortgage loans in
the subject loan group; we show the cut-off date principal balance
for each of the mortgage loans on Annex A-1 to this prospectus
supplement;
o if any mortgage loan does not have a fixed interest rate for the
related loan term, then the interest rate used to calculate the
weighted average mortgage interest rate is the initial interest rate
for such loan as shown in this prospectus supplement;
o when information with respect to the mortgage loans is expressed as
a percentage of the initial mortgage pool balance, the percentages
are based upon the cut-off date principal balances of the subject
mortgage loans;
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o when information with respect to the mortgaged real properties is
expressed as a percentage of the initial mortgage pool balance, the
percentages are based upon the cut-off date principal balances of
the related mortgage loans;
o if any mortgage loan is secured by multiple mortgaged real
properties, the related cut-off date principal balance has been
allocated among the individual properties based on any of (i) an
individual property's appraised value as a percentage of the total
appraised value of all the related mortgaged real properties,
including the subject individual property, securing that mortgage
loan, (ii) an individual property's underwritten net operating
income as a percentage of the total underwritten net operating
income of all the related mortgaged real properties, including the
subject individual property, securing that mortgage loan and (iii)
an allocated loan balance specified in the related loan documents;
o unless specifically indicated otherwise, statistical information
presented in this prospectus supplement with respect to any mortgage
loan that is part of a Loan Combination includes the related A note
non-trust loan and excludes the related B note non-trust loan;
provided, that with respect to the Farallon Portfolio Trust Mortgage
Loan and the Georgia-Alabama Retail Portfolio Trust Mortgage Loan,
statistical information presented includes the related A note
non-trust loan(s) and the related B-note non-trust loan(s);
o statistical information regarding the mortgage loans may change
prior to the date of initial issuance of the offered certificates
due to changes in the composition of the mortgage pool prior to that
date, which may result in the initial mortgage pool balance being as
much as 5% larger or smaller than indicated;
o the sum of numbers presented in any column within a table may not
equal the indicated total due to rounding; and
o when a mortgage loan is identified by loan number, we are referring
to the loan number indicated for that mortgage loan on Annex A-1 to
this prospectus supplement.
SOURCE OF THE MORTGAGE LOANS
The mortgage loans that will constitute the primary assets of the trust
fund will be acquired on the date of initial issuance of the certificates by us
from the mortgage loan sellers, who acquired or originated the mortgage loans.
Countrywide Commercial Real Estate Finance, Inc. originated or acquired
165 of the mortgage loans to be included in the trust fund, representing
approximately 46.7% of the initial mortgage pool balance (comprised of 117
mortgage loans in loan group 1, representing approximately 56.3% of the initial
loan group 1 balance, and 48 mortgage loans in loan group 2, representing
approximately 33.7% of the initial loan group 2 balance).
Merrill Lynch Mortgage Lending, Inc. originated or acquired 21 of the
mortgage loans to be included in the trust fund, representing approximately
35.9% of the initial mortgage pool balance (comprised of 18 mortgage loans in
loan group 1, representing approximately 19.0% of the initial loan group 1
balance, and 3 mortgage loans in loan group 2, representing approximately 58.8%
of the initial loan group 2 balance).
KeyBank National Association originated or acquired 32 of the mortgage
loans to be included in the trust fund, representing approximately 17.4% of the
initial mortgage pool balance (comprised of 27 mortgage loans in loan group 1,
representing approximately 24.7% of the initial loan group 1 balance, and 5
mortgage loans in loan group 2, representing approximately 7.5% of the initial
loan group 2 balance).
CROSS-COLLATERALIZED AND CROSS-DEFAULTED MORTGAGE LOANS, MULTI-PROPERTY MORTGAGE
LOANS, MULTI-BORROWER ARRANGEMENTS AND MORTGAGE LOANS WITH AFFILIATED BORROWERS
The mortgage pool will include thirteen (13) mortgage loans, representing
approximately 36.6% of the initial mortgage pool balance (eight (8) mortgage
loans in loan group 1, representing approximately 18.9% of the
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initial loan group 1 balance and five (5) mortgage loans in loan group 2,
representing approximately 60.7% of the initial loan group 2 balance), that may
involve multiple borrowers (or in some cases, single borrowers owning multiple
properties) and are, in each case, individually or through
cross-collateralization with other mortgage loans or multiple parcels within a
single mortgaged real property, secured by two or more real properties or
parcels and, in the case of cross-collateralized mortgage loans, are
cross-defaulted with the mortgage loans with which they are
cross-collateralized. These mortgage loans are identified in the tables
contained in Annex A-1. However, the amount of the mortgage lien encumbering any
particular one of those properties may be less than the full amount of the
related mortgage loan or group of cross-collateralized mortgage loans, as it may
have been limited to avoid or reduce mortgage recording tax. The reduced
mortgage amount may equal the appraised value or allocated loan amount for the
particular mortgaged real property. This would limit the extent to which
proceeds from the property would be available to offset declines in value of the
other mortgaged real properties securing the same mortgage loan or group of
cross-collateralized mortgage loans.
Ten (10) of the mortgage loans referred to in the prior paragraph entitle
the related borrower(s) to obtain a release of one or more of the corresponding
mortgaged real properties or multiple parcels within a single mortgaged real
property and/or a termination of any applicable cross-collateralization and
cross-default provisions, subject, in each case, to the fulfillment of one or
more of the following conditions--
o the pay down or defeasance of the mortgage loan(s) in an amount
equal to a specified percentage, which is usually 110% to 125% (but
could be as low as 100% in certain cases), of the portion of the
total loan amount allocated to the property or properties to be
released;
o the satisfaction of certain criteria set forth in the related loan
documents;
o the satisfaction of certain leasing goals or other performance
tests;
o the satisfaction of debt service coverage and/or loan-to-value tests
for the property or properties that will remain as collateral;
and/or
o receipt by the lender of confirmation from each applicable rating
agency that the action will not result in a qualification, downgrade
or withdrawal of any of the then-current ratings of the offered
certificates.
For additional information relating to mortgaged real properties that
secure an individual multi-property mortgage loan or a group of
cross-collateralized mortgage loans, see Annex A-1 to this prospectus
supplement.
The table below shows each group of mortgaged real properties that:
o are owned by the same or affiliated borrowers; and
o secure in total two or more mortgage loans that are not
cross-collateralized and that represent in the aggregate over 1.0%
of the initial mortgage pool balance.
NUMBER OF STATES
WHERE THE AGGREGATE CUT-OFF % OF INITIAL
PROPERTIES ARE DATE PRINCIPAL MORTGAGE POOL
GROUP PROPERTY NAMES LOCATED(1) BALANCE BALANCE
----- -------------------------------- ---------------- ----------------- -------------
2 Evergreen Pointe Apartments 1 $ 8,000,000 0.3%
2 Park at Lakeside Apartments $ 23,500,000 1.0%
2 Eagles Landing Apartments $ 11,000,000 0.5%
------------- -------------
TOTAL $ 42,500,000 1.7%
============= =============
1 Hilltop Plaza 2 $ 24,600,000 1.0%
1 Edgewater in Denver $ 17,600,000 0.7%
------------- -------------
TOTAL $ 42,200,000 1.7%
============= =============
1 Celebration at Six Forks 1 $ 13,370,000 0.5%
1 Raleigh Eastgate Shopping Center $ 6,000,000 0.2%
1 Alexander Village at Brier Creek $ 13,150,000 0.5%
------------- -------------
TOTAL $ 32,520,000 1.3%
============= =============
1 Corisa Square 2 $ 10,670,000 0.4%
1 Sparks Mercantile $ 19,045,000 0.8%
------------- -------------
TOTAL $ 29,715,000 1.2%
============= =============
1 The Lumberyard Shopping Center 1 $ 21,500,000 0.9%
1 221 North Brand Boulevard $ 4,750,000 0.2%
------------- -------------
TOTAL $ 26,250,000 1.1%
============= =============
1 Southridge Plaza 2 $ 13,800,000 0.6%
1 Mapleridge Shopping Center $ 12,100,000 0.5%
------------- -------------
TOTAL $ 25,900,000 1.1%
============= =============
_____________________
(1) Total represents number of states where properties within the subject group
are located.
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TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Due Dates. Thirty-three (33) of the mortgage loans, representing
approximately 27.7% of the initial mortgage pool balance, provide for monthly
debt service payments to be due on the first day of each month. One hundred
eighty-four (184) of the mortgage loans, representing approximately 71.5% of the
initial mortgage pool balance, provide for monthly debt service payments to be
due on the eighth day of each month. One (1) of the mortgage loans, representing
approximately 0.8% of the initial mortgage pool balance, provide for monthly
debt-service payments to be due on the fifth day of each month.
Mortgage Rates; Calculations of Interest. In general, except as specified
in the next sentence and as described below under "--ARD Loans" and
"--Converting Loans," each of the mortgage loans included in the issuing entity
bears interest at a mortgage interest rate that, in the absence of default, is
fixed until maturity. One (1) mortgage loan (loan number 11), provides that the
interest rate will vary throughout the mortgage loan term as follows: a fixed
interest rate of 5.11% from April 30, 2007 through and including May 7, 2010 and
a fixed interest rate of 5.77% from May 8, 2010 through and including the
mortgage loan maturity date. For purposes of aggregating interest rates in the
tables throughout, the 5.11% interest rate was used. With respect to debt
service coverage calculations, 5.77% was used for the interest rate on this
mortgage loan. However, as described below under "--ARD Loans", such mortgage
loans have an anticipated repayment date that will accrue interest after that
date at a rate that is in excess of its mortgage interest rate prior to that
date, but the additional interest will not be payable until the entire principal
balance of the subject mortgage loan has been paid in full.
The mortgage interest rate for each of the mortgage loans is shown on
Annex A-1 to this prospectus supplement. The mortgage interest rates of the
mortgage loans range from 5.1100% per annum to 6.8100% per annum and, as of the
cut-off date, the weighted average of those mortgage interest rates was 5.9865%
per annum. The mortgage interest rates of the mortgage loans in loan group 1
range from 5.2900% to 6.8100% per annum and, as of the cut-off date, the
weighted average of those mortgage interest rates was 5.9747% per annum. The
mortgage interest rates of the mortgage loans in loan group 2 range from 5.1100%
to 6.5226% per annum and, as of the cut-off date, the weighted average of those
mortgage interest rates was 6.0026% per annum.
Except in the case of mortgage loans with anticipated repayment dates,
none of the mortgage loans provides for negative amortization or for the
deferral of interest.
Two hundred eighteen (218) of the mortgage loans, representing
approximately 100% of the initial mortgage pool balance (162 mortgage loans in
loan group 1, representing approximately 100% of the initial loan group 1
balance, and 56 mortgage loans in loan group 2, representing approximately 100%
of the initial loan group 2 balance), will accrue interest on an Actual/360
Basis.
Amortizing Balloon Loans. Seventy-seven (77) of the mortgage loans,
representing approximately 15.7% of the initial mortgage pool balance (fifty-six
(56) mortgage loans in loan group 1, representing approximately 17.9% of the
initial loan group 1 balance, and twenty-one (21) mortgage loans in loan group
2, representing approximately 12.6% of the initial loan group 2 balance), are
characterized by--
o an amortization schedule that is significantly longer than the
actual term of the subject mortgage loan; and
o a substantial payment being due with respect to the subject mortgage
loan on its stated maturity date.
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These 77 mortgage loans do not include any of the subject mortgage loans
described under "--Partial Interest-Only Balloon Loans" above and
"--Interest-Only Balloon and ARD Loans" below.
Partial Interest-Only Balloon Loans or ARD Loans. Ninety (90) of the
mortgage loans, representing approximately 48.3% of the initial mortgage pool
balance (seventy-three (73) mortgage loans in loan group 1, representing
approximately 47.2% of the initial loan group 1 balance, and seventeen (17)
mortgage loans in loan group 2, representing approximately 49.7% of the initial
loan group 2 balance), provide for the payment of interest only to be due on
each due date until the expiration of a designated interest-only period, and the
amortization of principal commencing on the due date following the expiration of
such interest-only period on the basis of an amortization schedule that is
significantly longer than the remaining term to stated maturity, with a
substantial payment of principal to be due on the maturity date.
Interest-Only Balloon Loans. Thirty-nine (39) of the mortgage loans,
representing approximately 31.2% of the initial mortgage pool balance
(twenty-four (24) mortgage loans in loan group 1, representing approximately
26.6% of the initial loan group 1 balance, and fifteen (15) mortgage loans in
loan group 2, representing approximately 37.3% of the initial loan group 2
balance) require the payment of interest only until the related maturity date
and provide for the repayment of the entire principal balance on the related
maturity date.
Fully Amortizing Loans. Seven (7) of the mortgage loans, representing
approximately 0.7% of the initial mortgage pool balance (four (4) mortgage loans
in loan group 1, representing approximately 1.0% of the initial loan group 1
balance, and three (3) mortgage loans in loan group 2, representing
approximately 0.3% of the initial loan group 2 balance), is characterized by--
o constant monthly debt service payments throughout the substantial
term of the mortgage loan; and
o amortization schedules that are approximately equal to the actual
terms of the mortgage loan.
This fully amortizing loan has neither--
o an anticipated repayment date; nor
o the associated repayment incentives.
ARD Loans. Five (5) of the mortgage loans, representing approximately 4.2%
of the initial mortgage pool balance and approximately 7.2% of the initial loan
group 1 balance, are characterized by the following features:
o a maturity date that is more than 10 years following origination;
o the designation of an anticipated repayment date that is generally 5
to 10 years following origination; the anticipated repayment date
for such mortgage loans are listed on Annex A-1 to this prospectus
supplement;
o the ability of the related borrower to prepay the mortgage loan,
without restriction, including without any obligation to pay a
prepayment premium or a yield maintenance charge, at any time on or
after a date that is generally one to six months prior to the
related anticipated repayment date;
o until its anticipated repayment date, the calculation of interest at
its initial mortgage interest rate;
o from and after its anticipated repayment date, the accrual of
interest at a revised annual rate that will be in excess of its
initial mortgage interest rate;
o the deferral of any additional interest accrued with respect to such
mortgage loan from and after the related anticipated repayment date
at the difference between its revised mortgage interest rate and its
initial mortgage interest rate. This post-anticipated repayment date
additional interest may, in some cases, compound at the new revised
mortgage interest rate. Any post-anticipated repayment date
additional interest accrued with respect to such mortgage loan
following its
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anticipated repayment date will not be payable until the entire
principal balance of the mortgage loan has been paid in full; and
o from and after its anticipated repayment date, the accelerated
amortization of such mortgage loan out of any and all monthly cash
flow from the corresponding mortgaged real property which remains
after payment of the applicable monthly debt service payments,
permitted operating expenses, capital expenditures and/or funding of
any required reserves. These accelerated amortization payments and
the post-anticipated repayment date additional interest are
considered separate from the monthly debt service payments due with
respect to the mortgage loan.
As discussed under "Ratings" in this prospectus supplement, the ratings on
the respective classes of offered certificates do not represent any assessment
of whether the mortgage loan having an anticipated repayment date will be paid
in full by its anticipated repayment date or whether and to what extent
post-anticipated repayment date additional interest will be received.
In the case of the ARD Loans, the related borrower has agreed to enter
into a cash management agreement prior to the related anticipated repayment date
if it has not already done so. The related borrower or the manager of the
corresponding mortgaged real property will be required under the terms of that
cash management agreement to deposit or cause the deposit of all revenue from
that property received after the related anticipated repayment date into a
designated account controlled by the lender under such mortgage loan.
Any amount received in respect of additional interest payable on the ARD
Loans will be distributed to the holders of the class Z certificates. Generally,
additional interest will not be included in the calculation of the mortgage
interest rate for a mortgage loan, and will only be paid after the outstanding
principal balance of the mortgage loan together with all interest thereon at the
mortgage interest rate has been paid. With respect to such mortgage loans, no
prepayment premiums or yield maintenance charges will be due in connection with
any principal prepayment after the anticipated repayment date.
Converting Loans. Four (4) of the mortgage loans, representing
approximately 0.2% of the initial mortgage pool balance, approximately 0.1% of
the initial loan group 1 balance and approximately 0.3% of the initial loan
group 2 balance are fully amortizing loans, which have a fixed interest rate for
the first 10 years of the related mortgage loan term, followed by an adjustable
interest rate period. The loan documents provide that until the first adjustment
period, the interest rate must be at least as high as the related fixed interest
rate specified in this prospectus supplement but thereafter, the interest rate
may adjust to a rate that is lower than the initial fixed interest rate, without
any floor.
Any additional interest (accruing at a rate in excess of the initial fixed
interest rate) payable and received on the Converting Loan will be distributed
to the holders of the class Y certificates. Generally, additional interest will
not be included in the calculation of the mortgage interest rate for a mortgage
loan, and will only be paid after the outstanding principal balance of the
mortgage loan together with all interest thereon at the mortgage interest rate
has been paid. No prepayment premiums or yield maintenance charges will be due
in connection with any principal prepayment after the related open prepayment
period.
Recasting of Amortization Schedules. Some of the mortgage loans will, in
each case, provide for a recast of the amortization schedule and an adjustment
of the monthly debt service payments on the mortgage loan upon application of
specified amounts of condemnation proceeds or insurance proceeds, or in certain
cases, upon a partial prepayment, to pay the related unpaid principal balance.
Prepayment Provisions.
Prepayment Lock-out, Defeasance, Prepayment Consideration and Open
Periods. All of the mortgage loans provide for one or more of the following:
o a prepayment lock-out period, during which the principal balance of
a mortgage loan may not be voluntarily prepaid in whole or in part;
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o a defeasance period, during which voluntary principal prepayments
are still prohibited, but the related borrower may obtain a release
of the related mortgaged real property through defeasance;
o a prepayment consideration period, during which voluntary
prepayments are permitted, subject to the payment of a yield
maintenance premium or other additional consideration for the
prepayment; and
o an open period, during which voluntarily prepayments are permitted
without payment of any prepayment consideration.
Notwithstanding otherwise applicable lock-out periods, defeasance periods
or prepayment consideration periods, certain prepayments of some of the
underlying mortgage loans may occur under the circumstances described under
"--Other Prepayment Provisions; Mortgage Loans Which May Require PrincipalPaydowns" below. The prepayment terms of each of the mortgage loans are more
particularly described in Annex A-1 to this prospectus supplement.
The table below shows, with respect to all of the mortgage loans, the
prepayment provisions in effect as of the cut-off date.
PREPAYMENT PROVISIONS AS OF THE CUT-OFF DATE
NUMBER OF LOANS
--------------------------------
% INITIAL % INITIAL
% INITIAL LOAN LOAN
MORTGAGE LOAN LOAN MORTGAGE GROUP 1 GROUP 2
PREPAYMENT PROVISIONS POOL GROUP 1 GROUP 2 POOL BALANCE BALANCE BALANCE
------------------------ ---------- --------- --------- -------------- ----------- ----------
L, Def, O 144 112 32 66.0% 64.2% 68.5%
YM1%, Def, O 1 0 1 10.3% 0.0% 24.2%
L, Def or YM1%, O 31 24 7 6.9% 10.1% 2.5%
YM1%, Def or YM1%, O 4 3 1 4.8% 7.6% 1.1%
L, Def, Def or YM1%, O 3 3 0 4.0% 7.0% 0.0%
YM1%, O 14 6 8 1.9% 2.3% 1.3%
L, Def or YM, O 1 1 0 1.5% 2.6% 0.0%
L, Def, Def or Dec%, O 3 3 0 1.2% 2.0% 0.0%
L, YM1%, O 3 3 0 0.8% 1.4% 0.0%
YM3%, Def, O 1 1 0 0.5% 0.8% 0.0%
L, YM1%, Def or YM1%, O 3 2 1 0.4% 0.4% 0.5%
YM, O 1 1 0 0.4% 0.7% 0.0%
YM5%, O 2 1 1 0.4% 0.2% 0.6%
YM3%, YM2%, YM1%, O 1 0 1 0.4% 0.0% 0.9%
L, Def, Def or YM3%, Def
or YM2%, Def or
YM1%, O 1 1 0 0.2% 0.4% 0.0%
L, Def or Dec%, O 1 1 0 0.2% 0.3% 0.0%
Dec%, O 3 0 3 0.1% 0.0% 0.3%
L, Dec%, O 1 0 1 0.0% 0.0% 0.1%
---------- --------- --------- -------------- ----------- ----------
TOTAL 218 162 56 100.0% 100.0% 100.0%
For the purposes of the foregoing table, the letter designations under the
heading "Prepayment Provisions" have the following meanings, as further
described in the first paragraph of this "--Prepayments Provisions" section--
o "L" means a prepayment or defeasance lock-out period;
o "Def" means a defeasance period;
o "YM" means a prepayment consideration period during which the
mortgage loan is prepayable together with payment of a yield
maintenance charge;
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o "YM1%" a prepayment consideration period during which the mortgage
loan is prepayable together with payment of the greater of (i) a
yield maintenance charge and (ii) at least 1% of the prepaid amount;
o "YM3%" a prepayment consideration period during which the mortgage
loan is prepayable together with payment of the greater of (i) a
yield maintenance charge and (ii) at least 3% of the prepaid amount;
o "YM5%" a prepayment consideration period during which the mortgage
loan is prepayable together with payment of the greater of (i) a
yield maintenance charge and (ii) at least 5% of the prepaid amount;
o "Def or YM" means a period during which the borrower either (i) has
the option to defease the mortgage loan or prepay the mortgage loan
together with payment of a yield maintenance charge or (ii) is
required to defease if the cost to defease the mortgage loan is less
than the cost to prepay the mortgage loan with a yield maintenance
charge;
o "Dec%" means a prepayment consideration period during which the
mortgage loan is prepayable together with payment of a percentage of
the prepaid amount that declines over time; and
o "O" means an open period.
Set forth below is information regarding the remaining terms of the
prepayment lock-out and prepayment lock-out/ defeasance periods, as applicable,
for the 193 mortgage loans for which a prepayment lock-out period is currently
in effect:
o the maximum remaining prepayment lock-out or prepayment
lock-out/defeasance period as of the cut-off date is 119 months with
respect to the entire mortgage pool, 119 months with respect to loan
group 1 and 117 months with respect to loan group 2;
o the minimum remaining prepayment lock-out or prepayment
lock-out/defeasance period as of the cut-off date is 21 months with
respect to the entire mortgage pool, 21 months with respect to loan
group 1 and 22 months with respect to loan group 2; and
o the weighted average remaining prepayment lock-out or prepayment
lock-out/defeasance period as of the cut-off date is 92 months with
respect to the entire mortgage pool, 93 months with respect to loan
group 1 and 92 months with respect to loan group 2.
The aggregate characteristics of the prepayment provisions of the mortgage
loans will vary over time as:
o lock-out periods expire and mortgage loans enter periods during
which prepayment consideration may be required in connection with
principal prepayments and, thereafter, enter open prepayment
periods; and
o mortgage loans are prepaid, repurchased, replaced or liquidated
following a default or as a result of a delinquency.
Prepayment premiums and yield maintenance charges received on the mortgage
loans, whether in connection with voluntary or involuntary prepayments, will be
allocated and paid to the certificateholders in the amounts and in accordance
with the priorities described under "Description of the OfferedCertificates--Payments--Payments of Prepayment Premiums and Yield MaintenanceCharges" in this prospectus supplement. However, limitations may exist under
applicable state law on the enforceability of the provisions of the mortgage
loans that require payment of prepayment premiums or yield maintenance charges.
In addition, in the event of a liquidation of a defaulted mortgage loan,
prepayment consideration will be one of the last items to which the related
liquidation proceeds will be applied. As a result, proceeds received in
connection with the liquidation of any defaulted mortgage loan in the trust fund
may be insufficient to pay any prepayment premium or yield maintenance charge
due in connection with such involuntary prepayment. Neither we nor the
underwriters make, and none of the
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mortgage loan sellers has made, any representation or warranty as to the
collectability of any prepayment premium or yield maintenance charge with
respect to any of the mortgage loans or with respect to the enforceability of
any provision in a mortgage loan that requires the payment of a prepayment
premium or yield maintenance charge. See "Risk Factors--Yield Maintenance
Charges or Defeasance Provisions May Not Fully Protect Against Prepayment Risk"
in this prospectus supplement, "Risk Factors--Some Provisions in the MortgageLoans Underlying Your Offered Certificates May Be Challenged As BeingUnenforceable--Prepayment Premiums, Fees and Charges" and "Legal Aspects ofMortgage Loans--Penalty Interest and Limitations on Prepayments" in the
accompanying base prospectus.
Other Prepayment Provisions; Mortgage Loans Which May Require Principal
Paydowns. Generally, the mortgage loans provide that condemnation proceeds and
insurance proceeds may be applied to reduce the mortgage loan's principal
balance, to the extent such funds will not be used to repair the improvements on
the mortgaged real property or given to the related borrower, in many or all
cases without prepayment consideration. In addition, some of the mortgage loans
may also in certain cases permit, in connection with the lender's application of
insurance or condemnation proceeds to a partial prepayment of the related
mortgage loan, the related borrower to prepay the entire remaining principal
balance of the mortgage loan, in many or all cases without prepayment
consideration.
Investors should not expect any prepayment consideration to be paid in
connection with any mandatory partial prepayment described in the prior
paragraph.
Additionally, the exercise of a purchase option by a tenant or other
person or entity with respect to all or a portion of a mortgaged real property
may result in the related mortgage loan being prepaid during a period when
voluntary prepayments are otherwise prohibited.
Certain of the mortgage loans are secured by letters of credit or cash
reserves that in each such case:
o will be released to the related borrower upon satisfaction by the
related borrower of certain performance related conditions, which
may include, in some cases, meeting debt service coverage ratio
levels and/or satisfying leasing conditions; and
o if not so released, will (or, in some cases, at the discretion of
the lender, may) prior to loan maturity (or earlier loan default or
loan acceleration), be drawn on and/or applied to prepay the subject
mortgage loan if such performance related conditions are not
satisfied within specified time periods.
Due-on-Sale and Due-on-Encumbrance Provisions. All of the mortgage loans
contain both a due-on-sale clause and a due-on-encumbrance clause. In general,
except for the permitted transfers discussed in the next paragraph, these
clauses either--
o permit the holder of the related mortgage to accelerate the maturity
of the mortgage loan if the borrower sells or otherwise transfers or
encumbers the corresponding mortgaged real property without the
consent of the holder of the mortgage; or
o prohibit the borrower from transferring or encumbering the
corresponding mortgaged real property without the consent of the
holder of the mortgage.
See, however, "Risk Factors--The Investment Performance of Your Offered
Certificates Will Depend Upon Payments, Defaults and Losses on the Underlying
Mortgage Loans; and Those Payments, Defaults and Losses May Be Highly
Unpredictable--Delinquencies, Defaults and Losses on the Underlying Mortgage
Loans May Affect the Amount and Timing of Payments on Your Offered Certificates;
and the Rate and Timing of Those Delinquencies and Defaults, and the Severity of
Those Losses, are Highly Unpredictable,""--Some Provisions in the MortgageLoans Underlying Your Offered Certificates May Be Challenged as BeingUnenforceable--Due-on-Sale and Debt Acceleration Clauses" and "Legal Aspects ofMortgage Loans--Due on Sale and Due-on-Encumbrance Provisions" in the
accompanying base prospectus.
S-88
Many of the mortgage loans permit one or more of the following types of
transfers:
o transfers of the corresponding mortgaged real property if specified
conditions are satisfied, which conditions normally include one or
both of the following--
1. confirmation by each applicable rating agency that the
transfer will not result in a qualification, downgrade or
withdrawal of any of its then-current ratings of the
certificates; or
2. the reasonable acceptability of the transferee to the lender;
o a transfer of the corresponding mortgaged real property to a person
that is affiliated with or otherwise related to the borrower or the
sponsor;
o transfers by the borrower of the corresponding mortgaged real
property to specified entities or types of entities or entities
satisfying the minimum criteria relating to creditworthiness and/or
standards specified in the related loan documents;
o transfers of ownership interests in the related borrower to
specified entities or types of entities or entities satisfying the
minimum criteria relating to creditworthiness and/or other standards
specified in the related loan documents;
o a transfer of non-controlling ownership interests in the related
borrower;
o a transfer of a controlling ownership interest in the related
borrower, subject to (i) receipt of written confirmation from the
rating agencies that the proposed transfer would not result in a
qualification, downgrade or withdrawal of any of the then current
ratings of the offered certificates, (ii) lender consent or (iii)
there being no change in the management of the mortgaged real
property;
o involuntary transfers caused by the death of any owner, general
partner or manager of the borrower;
o issuance by the related borrower of new partnership or membership
interests, so long as there is no change in control of the related
borrower;
o a transfer of ownership interests for estate planning purposes;
o changes in ownership between existing partners and members of the
related borrower;
o a required or permitted restructuring of a tenant-in-common group of
borrowers into a single purpose successor borrower;
o transfers of shares in a publicly held corporation or in connection
with the initial public offering of a private company;
o with respect to tenant-in-common borrowers, transfers among and/or
to additional tenant-in-common borrowers; or
o other transfers similar in nature to the foregoing.
Defeasance Loans. One hundred fifty-two (152) of the mortgage loans,
representing approximately 82.1% of the initial mortgage pool balance (one
hundred nineteen (119) mortgage loans in loan group 1, representing
approximately 74.2% of the initial loan group 1 balance, and thirty-three (33)
mortgage loans in loan group 2, representing approximately 92.7% of the initial
loan group 2 balance), permit the borrower to defease the related mortgage loan,
in whole or in part, by delivering U.S. government securities or other
non-callable government securities within the meaning of Section 2(a)(16) of the
Investment Company Act of 1940 and that satisfy applicable
S-89
U.S. Treasury regulations regarding defeasance, as substitute collateral during
a period in which voluntary prepayments are prohibited. See "--PrepaymentProvisions" in this prospectus supplement. Two (2) of these mortgage loans,
representing 10.7% of the initial mortgage pool balance, 0.8% of the initial
loan group 1 balance and 24.2% of the initial loan group 2 balance permit
voluntary prepayments with the payment of prepayment consideration prior to the
beginning of the defeasance period.
Each of these mortgage loans permits the related borrower, during the
applicable specified periods and subject to the applicable specified conditions,
to pledge to the holder of the mortgage loan the requisite amount of government
securities and obtain a full or partial release of the mortgaged real property.
In general, the government securities that are to be delivered in connection
with the defeasance of any mortgage loan, must provide for a series of payments
that--
o will be made prior, but as closely as possible, to all successive
due dates through and including the first day of the "open period"
(the date on which that prepayment is permitted without the payment
of any prepayment premium or yield maintenance charge), the maturity
date or, if applicable, the related anticipated repayment date; and
o will, in the case of each due date, be in a total amount equal to or
greater than the monthly debt service payment scheduled to be due on
that date, together with, in the case of the last due date, any
remaining defeased principal balance, with any excess to be returned
to the related borrower.
For purposes of determining the defeasance collateral for each of these
mortgage loans that has an anticipated repayment date, that mortgage loan will
be treated as if a balloon payment is due on its anticipated repayment date.
If fewer than all of the real properties securing any particular mortgage
loan or group of cross-collateralized mortgage loans are to be released in
connection with any defeasance, the requisite defeasance collateral will be
calculated based on any one or more of: (i) the allocated loan amount for the
property to be released, (ii) the portion of the monthly debt service payments
attributable to the property to be released, (iii) an estimated or otherwise
determined sales price of the property to be released or (iv) the achievement or
maintenance of a specified debt service coverage ratio with respect to the real
properties that are not being released. Twelve (12) mortgage loans, representing
approximately 32.6% of the initial mortgage pool balance (eight (8) mortgage
loans in loan group 1, representing approximately 12.6% of the initial loan
group 1 balance, and four (4) mortgage loan in loan group 2, representing
approximately 59.6% of the initial loan group 2 balance), permit the partial
release of collateral in connection with partial defeasance.
In connection with any delivery of defeasance collateral, the related
borrower will be required to deliver a security agreement granting the trust a
first priority security interest in the defeasance collateral, together with an
opinion of counsel confirming the first priority status of the security
interest.
None of the mortgage loans may be defeased prior to the second anniversary
of the date of initial issuance of the certificates.
See "Risk Factors--Risks Related to the Offered Certificates--Yield
Maintenance Charges or Defeasance Provisions May Not Fully Protect Against
Prepayment Risk" in this prospectus supplement.
Collateral Substitution and Partial Releases (Other Than In Connection With
Defeasance)
In addition to the release of a mortgaged real property in connection with
full or partial defeasance, certain of the loan documents provide for (i) the
substitution of an individual mortgaged real property for another property, (ii)
the partial release of a portion of the mortgaged real property upon a partial
prepayment in certain cases, with yield maintenance or other prepayment
consideration or (iii) the free release of a portion of the mortgaged real
property, which portion is undeveloped, non-income producing or an out-parcel,
and/or which portion was not material in the underwriting of the mortgage loan
(even if it was included in the appraised value of the mortgaged real property).
In addition, certain loan documents permit the addition of property.
S-90
In the case of one (1) mortgage loan (loan number 2), secured by the
mortgaged real properties identified on Annex A-1 to this prospectus supplement
as Farallon Portfolio, representing approximately 10.3% of the initial mortgage
pool balance and approximately 24.2% of the initial loan group 2 balance, the
related borrowers may from time to time substitute individual mortgaged real
properties with other real properties subject to the satisfaction of certain
conditions, including:
o the market value of the substitute property is equal to or exceeds
the greater of (i) the initial appraised value of the release
property and (ii) the then-current market value of the release
property (which may be based on the initial appraisal during the
first two years and thereafter an appraisal dated no more than 90
days prior to the substitution);
o after giving effect to the substitution, the aggregate debt service
coverage ratio equals or exceeds the greater of (i) 1.23x and (ii)
the lesser of (A) the debt service coverage ratio immediately prior
to the substitution and (B) 1.43x; and
o the borrower may only substitute replacement properties for any
related mortgaged property (or properties) the aggregate initial
loan amount(s) allocated to each individual mortgaged property of
which individually, or in the aggregate, do not exceed twenty
percent (20%) of the principal amount of the loan on the closing
date.
In the case of one (1) mortgage loan (loan number 5), secured by the
mortgaged real properties identified on Annex A-1 to this prospectus supplement
as U-Haul Portfolio, representing approximately 3.1% of the initial mortgage
pool balance and approximately 5.3% of the initial loan group 1 balance, the
related borrower may substitute individual mortgaged real properties with other
real properties subject to the satisfaction of certain conditions, including:
o the related borrower may obtain a release of the lien of certain
individual U-Haul Portfolio properties up to one (1) time during the
term of the loan by substituting therefor another property of like
use, kind and quality acquired by the related borrower or its
affiliate;
o any such released properties in the aggregate during the term of the
loan, comprise no greater than thirty percent (30%) of the original
principal balance of the loan;
o the pro-forma aggregate debt service coverage ratio for the U-Haul
Portfolio loan immediately after such property substitution shall be
greater than the greater of (a) the aggregate debt service coverage
ratio immediately prior to such property substitution and (b) 1.35x;
o the debt service coverage ratio for the 12 months immediately prior
to the substitution with respect to the substitute property shall be
equal or greater than the debt service coverage ratio for the 12
calendar months immediately preceding the closing date with respect
to the release property; and
o lender shall have received a current appraisal of the substitute
property prepared within one hundred eighty (180) days prior to the
release and substitution (a) showing an appraised value equal to or
greater than the appraised value of the substitution release
property as of the closing date, and (b) which supports an aggregate
loan-to-value ratio with respect to the cross-collateralized
properties remaining subject to the lien of the cross-collateralized
mortgages after the substitution not greater than the lesser of (A)
71% and (B) the aggregate loan-to-value ratio with respect to the
cross-collateralized properties remaining subject to the lien of the
cross-collateralized mortgages immediately prior to the date of the
proposed substitution.
S-91
In the case of one (1) mortgage loan, (loan number 7), secured by the
mortgaged real properties identified on Annex A-1 to this prospectus supplement
as Georgia-Alabama Retail Portfolio, representing approximately 1.6% of the
initial mortgage pool balance and approximately 2.8% of the initial loan group 1
balance, commencing twelve months from the loan origination date the related
borrower may from time to time substitute individual mortgaged real properties
with other real properties subject to the satisfaction of certain conditions,
including:
o the market value of the substitute property is equal to or exceeds
the greater of (i) the initial appraised value of the release
property and (ii) the then-current market value of the release
property;
o after giving effect to the substitution, the debt service coverage
ratio of the mortgage loan is at least equal to the greater of (i)
the debt service coverage ratio as of loan origination and (ii) the
debt service coverage ratio immediately preceding the substitution;
o no individual property may be replaced with more than one qualified
substitute property; and
o no more than an aggregate of seven property substitutions may occur
during the loan term.
In the case of one (1) mortgage loan (loan number 38), secured by the
mortgaged real property identified on Annex A-1 to this prospectus supplement as
HCP Tranche II, representing approximately 0.6% of the initial mortgage pool
balance and approximately 1.1% of the initial loan group 1 balance, the related
borrower may from time to time substitute a portion of the related mortgaged
real property with another parcel of real property subject to the satisfaction
of certain conditions, specifically:
o after giving effect to the substitution, the loan-to-value ratio is
no greater than 100%;
o after giving effect to the substitution, the aggregate debt service
coverage ratio is no less than the greater of (i) 1.52x and (ii) the
debt service coverage ratio immediately prior to the substitution;
and
o the aggregate amount of rent payable under leases at all properties
for traditional medical office use is not less than 50% of all rents
payable under all leases at individual properties.
In the case of one (1) mortgage loan (loan number 53), secured by the
mortgaged real property identified on Annex A-1 to this prospectus supplement as
Mody Portfolio-Arlington, representing approximately 0.5% of the initial
mortgage pool balance and approximately 0.8% of the initial loan group 1
balance, if the prior owner of such property exercises a purchase option during
the defeasance lockout period, the borrower is permitted to obtain a partial
release of such property upon payment of a release price equal to 120% of the
allocated loan amount and a yield maintenance fee.
In addition to the foregoing discussion, some of the mortgage loans that
we intend to include in the trust fund may permit, in some cases, upon the
satisfaction of certain loan-to-value, debt service coverage ratio, leasing and
other conditions, the release of one or more undeveloped or non-income producing
parcels or outparcels that, in each such case do not represent a significant
portion of the appraised value of the related mortgaged real property or were
not taken into account in underwriting the subject mortgage loan.
MORTGAGE POOL CHARACTERISTICSGeneral. A detailed presentation of various characteristics of the
mortgage loans, and of the corresponding mortgaged real properties, on an
individual basis and in tabular format, is shown on Annexes A-1, A-2, B and C to
this prospectus supplement. Some of the terms that appear in those exhibits, as
well as elsewhere in this prospectus supplement, are defined or otherwise
discussed in the glossary to this prospectus supplement. The statistics in the
tables and schedules on Annexes A-1, A-2, B and C to this prospectus supplement
were derived, in many cases, from information and operating statements furnished
by or on behalf of the respective borrowers. The information and the operating
statements were generally unaudited and have not been independently verified by
us or the underwriters.
S-92
SIGNIFICANT MORTGAGE LOANS
The following table shows certain characteristics of the ten largest
mortgage loans or groups of cross-collateralized mortgage loans in the trust, by
cut-off date principal balance.
% OF
NUMBER % OF INITIAL
OF INITIAL LOAN
MORTGAGE % OF LOAN GROUP
LOANS/ INITIAL GROUP 1 2
MORTGAGE MORTGAGED CUT-OFF DATE MORTGAGE MORTGAGE MORTGAGE
LOAN REAL PRINCIPAL POOL POOL POOL PROPERTY
LOAN NAME SELLER PROPERTIES BALANCE BALANCE BALANCE BALANCE TYPE
--------------- -------- ---------- -------------- -------- -------- -------- ------------
Empirian
Portfolio Pool
Two MLML 1/73 $ 335,000,000 13.8% 0.0% 32.4% Multifamily
Farallon Manufactured
Portfolio(3) MLML 1/274 $ 250,000,000 10.3% 0.0% 24.2% Housing
Executive Hills
Portfolio KeyBank 1/9 $ 99,900,000 4.1% 7.1% 0.0% Office
Peninsula
Beverly Hills CRF 1/1 $ 79,300,000 3.3% 5.7% 0.0% Hospitality
U-Haul SAC 12 &
13 MLML 1/17 $ 74,934,080 3.1% 5.3% 0.0% Self Storage
Towers at
University Town
Center KeyBank 1/1 $ 56,835,903 2.3% 0.0% 5.5% Multifamily
Georgia-Alabama
Retail
Portfolio(4) CRF 1/62 $ 39,926,997 1.6% 2.8% 0.0% Retail
Douglas
Corporate
Center I & II KeyBank 1/1 $ 36,000,000 1.5% 2.6% 0.0% Office
Gray Apartment
Portfolio CRF 2/2 $ 31,500,000 1.3% 0.0% 3.0% Multifamily
Haverly Park
Apartments CRF 1/1 $ 30,000,000 1.2% 0.0% 2.9% Multifamily
---------- -------------- -------- -------- --------
TOTAL/WEIGHTED
AVERAGE 11/441 $1,033,396,980 42.4% 23.5% 68.0%
CUT-OFFDATE
PRINCIPAL CUT-OFF
PROPERTY BALANCE DATE
SIZE PER LTV
LOAN NAME SF/UNIT(1) SF/UNIT DSCR(2) RATIO(2)
--------------- ---------- ---------- ------- ---------
Empirian
Portfolio Pool
Two 6,892 $48,607 1.18x 78.9%
Farallon
Portfolio(3) 57,165 $27,561 1.50x 79.7%
Executive Hills
Portfolio 951,754 $105 1.43x 71.4%
Peninsula
Beverly Hills 194 $408,763 2.54x 35.8%
U-Haul SAC 12 &
13 711,292 $105 1.48x 66.9%
Towers at
University Town
Center 910 $62,457 1.17x 71.9%
Georgia-Alabama
Retail
Portfolio(4) 239,753 $333 1.24x 79.3%
Douglas
Corporate
Center I & II 213,379 $169 1.38x 53.1%
Gray Apartment
Portfolio 789 $39,924 1.26x 75.0%
Haverly Park
Apartments 636 $47,170 1.14x 70.6%
------- ---------
TOTAL/WEIGHTED
AVERAGE 1.42X 72.6%
_____________________
(1) Property size is indicated in rooms (for hospitality properties), in units
(for multifamily properties), pads (for manufactured housing properties),
beds (for student housing properties) and square feet for all other
property types.
(2) Except with respect to the Farallon Portfolio and the Georgia-Alabama
Retail Portfolio, DSCR and LTV for any mortgage loan that is part of a
loan combination is calculated without regard to a related B-note, if
applicable. For calculations that include a related B-note, see "The LoanCombinations" below.
(3) The Farallon Portfolio trust mortgage loan consists of ten (10) promissory
notes, five (5) of which are A-notes in the aggregate original principal
amount of $116,225,000 and five (5) of which are B-notes in the aggregate
original principal amount of $133,775,000. The debt service coverage ratio
and the cut-off date loan-to-value ratio were determined taking into
consideration, in the case of the debt service coverage ratio, the
aggregate annualized amount of debt service that will be payable under the
related trust mortgage loans and the related non-trust mortgage loans
(including the related subordinate B-note non-trust loans) and, in the
case of the cut-off date loan-to-value ratio, the cut-off date principal
balance of the related trust mortgage loans and the related non-trust
mortgage loans (including the related subordinate B-note non-trust loans).
The DSCR calculations include cash flow from the Farallon Rental Housing
Portfolio (as defined in Annex C, "Preliminary Structural and CollateralTerm Sheet--The Farallon Portfolio"). The DSCR excluding cash flow from
the Farallon Rental Housing Portfolio is 1.27x.
(4) The Georgia-Alabama Retail Portfolio trust mortgage loan consists of two
promissory notes, one of which is an A-note with an original principal
balance of $33,000,000 and one of which is a B-note with an original
principal balance of $7,000,000. The debt service coverage ratio and the
cut-off date loan-to-value ratio were determined taking into
consideration, in the case of the debt service coverage ratio, the
aggregate annualized amount of debt service that will be payable under the
related loan combination and, in the case of the cut-off date
loan-to-value ratio, the cut-off date principal balance of the related
loan combination.
See Annex C to this prospectus supplement for descriptions of the ten
largest mortgage loans or groups of cross-collateralized mortgage loans.
S-93
THE LOAN COMBINATIONSGeneral. The mortgage pool will include five (5) mortgage loans that are
each part of a separate Loan Combination. Each of those Loan Combinations
consists of the particular mortgage loan (or, in the case of the Farallon
Portfolio Loan Combination and the Georgia-Alabama Retail Portfolio Loan
Combination, mortgage loans) that we intend to include in the trust and one or
more other mortgage loans that we will not include in the trust. Each mortgage
loan comprising a particular Loan Combination is evidenced by a separate
promissory note or promissory notes. The aggregate debt represented by the
entire Loan Combination, however, is secured by the same mortgage(s) or deed(s)
of trust on the related mortgaged real property or properties. The mortgage
loans that are part of a particular Loan Combination are obligations of the same
borrower and are cross-defaulted. The allocation of payments to the respective
mortgage loans comprising a Loan Combination, whether on a senior/subordinated
or a pari passu basis (or some combination thereof), is effected either through
one or more co-lender agreements or other intercreditor arrangements to which
the respective holders of the subject promissory notes are parties or may be
reflected by virtue of relevant provisions contained in the subject promissory
notes and a common loan agreement. Such co-lender agreements or other
intercreditor arrangements will, in general, govern the respective rights of the
noteholders, including in connection with the servicing of the respective
mortgage loans comprising a Loan Combination.
S-94
The table below identifies each mortgage loan that is part of a Loan
Combination.
U/W DSCR (NCF) AND CUT-OFF DATE
MORTGAGE LOANS THAT ARE RELATED LOAN-TO-VALUE RATIO OF ENTIRE
PART OF A LOAN COMBINATION NON-TRUST LOANS LOAN COMBINATION
--------------------------------------------------------------- ---------------- ---------------------------------
TRUST MORTGAGE LOAN (AS CUT-OFF DATE % OF INITIAL CUT-OFF DATE
IDENTIFIED ON ANNEX A-1 TO THIS PRINCIPAL MORTGAGE ORIGINAL LOAN-TO-VALUE
PROSPECTUS SUPPLEMENT) BALANCE POOL BALANCE PRINCIPAL BALANCE U/W NCF DSCR RATIO
------------------------------- ------------- ------------ ----------------- ------------ -------------
Farallon Portfolio(1) $250,000,000 10.3% $1,325,500,000(1) 1.50x 79.7%
Executive Hills Portfolio $ 99,900,000 4.1% $ 11,100,000 1.24x 79.3%
Peninsula Beverly Hills $ 79,300,000 3.3% $ 60,700,000 1.40x 63.2%
Georgia-Alabama Retail $ 39,926,997 1.6% $ 40,000,000(2) 1.24x 79.3%
Portfolio
Timbercreek Apartments $ 5,317,000 0.2% $ 331,300 1.08x 84.9%
_________________
(1) The original principal balance of the related non-trust loans for the
Farallon Portfolio consists of $883,775,000 in the aggregate of A-notes
and $441,725,000 in the aggregate of B-notes. The Farallon Portfolio trust
mortgage loan consists of ten (10) promissory notes, five (5) of which are
A-notes in the aggregate original principal amount of $116,225,000 and
five (5) of which are B-notes in the aggregate original principal amount
of $133,775,000. The debt service coverage ratio and the cut-off date
loan-to-value ratio were determined taking into consideration, in the case
of the debt service coverage ratio, the aggregate annualized amount of
debt service that will be payable under the related trust mortgage loans
and the related non-trust mortgage loans (including the related
subordinate B-note non-trust loans) and, in the case of the cut-off date
loan-to-value ratio, the cut-off date principal balance of the related
trust mortgage loans and the related non-trust mortgage loans (including
the related subordinate B-note non-trust loans). The U/W NCF DSCR
calculations include cash flow from the Farallon Rental Housing Portfolio
(as defined in Annex C, "Preliminary Structural and Collateral TermSheet--The Farallon Portfolio"). The U/W NCF DSCR excluding cash flow from
the Farallon Rental Housing Portfolio is 1.27x.
(2) The original principal balance of the related non-trust loans for the
Georgia-Alabama Retail Portfolio consists of a $33,000,000 A-note and a
$7,000,000 B-note.
The Farallon Portfolio Loan CombinationGeneral. The Farallon Portfolio Trust Mortgage Loan, which has a cut-off
date principal balance of $250,000,000, representing approximately 10.3% of the
initial mortgage pool balance and approximately 24.2% of the initial loan group
2 balance, is part of the Loan Combination that we refer to as the Farallon
Portfolio Loan Combination, which consists of (i) the Farallon Portfolio Trust
Mortgage Loan (which is comprised of the Farallon Portfolio A-Note Trust
Mortgage Loans and the Farallon Portfolio B-Note Trust Mortgage Loans) and (ii)
the Farallon Portfolio Non-Trust Mortgage Loan which has an aggregate original
principal balance of $1,325,500,000 and is evidenced by 35 other notes, all as
detailed on Table A below. The 35 other notes will not be included in the
issuing entity. The Farallon Portfolio Non-Trust Mortgage Loans are secured by
the same mortgage instrument encumbering the subject mortgaged real property and
will be serviced under the series 2007-8 pooling and servicing agreement. The
Farallon Portfolio A-Note Trust Mortgage Loans and the Farallon Portfolio A-Note
Non-Trust Mortgage Loans are collectively referred to herein as the "Farallon
Portfolio Senior Loans." The Farallon Portfolio B-Note Trust Mortgage Loans and
the Farallon Portfolio B-Note Non-Trust Mortgage Loans are collectively referred
to herein as the "Farallon Portfolio Junior Loans." The relative rights of the
holders of the notes comprising the Farallon Portfolio Loan Combination are
governed by the Farallon Portfolio Intercreditor Agreement.
S-95
Priority of Payments. Pursuant to the Farallon Portfolio Intercreditor
Agreement, if no monetary event of default or non-monetary event of default
which caused a Servicing Transfer Event to occur with respect to the Farallon
Portfolio Trust Mortgage Loan has occurred and is continuing, all amounts that
any Farallon Portfolio Borrower tenders or that are otherwise available to pay
the Farallon Portfolio Loan Combination, whether received in the form of a
monthly payment, a balloon payment, liquidation proceeds, proceeds under any
insurance policy or awards or settlements in respect of condemnation proceedings
or similar exercise of the power of eminent domain (other than (x) proceeds,
awards or settlements to be applied to the restoration or repair of the Farallon
Portfolio Mortgaged Property or released to any Farallon Portfolio Borrower in
accordance with the Servicing Standard or the Farallon Portfolio loan documents,
and (y) all amounts for required reserves or escrows required by the Farallon
Portfolio loan documents to be held as reserves or escrows) shall be distributed
generally in the following manner, to the extent of available funds:
o first, to the servicers and trustee under the series 2007-8 pooling
and servicing agreement, as applicable, all amounts then due and
payable to such parties pursuant to and in accordance with the
2007-8 pooling and servicing agreement with respect to the Farallon
Portfolio Loan Combination;
o second, to each holder of a Farallon Portfolio Senior Loan on a pari
passu and pro rata basis (in proportion to the respective amounts of
interest (excluding default interest) then due and payable on each
related note during the related interest accrual period for such
note) in an amount equal to the accrued and unpaid interest
(excluding default interest) during the related interest accrual
period for the related note on the applicable Farallon Portfolio
Senior Loan outstanding principal balances at (x) with respect to
the Farallon Portfolio Trust Mortgage Loan, the applicable interest
rate for such loan minus the master servicing fee rate and trustee
fee rate, and (y) with respect to each Farallon Portfolio A-Note
Non-Trust Mortgage Loan, the applicable interest rate for the
related note minus the master servicing fee rate;
o third, to each holder of a Farallon Portfolio Senior Loan, an amount
equal to the applicable amount of note-specific principal payments
paid by the Farallon Portfolio Borrower or other obligated entity
with respect to each related note (such amount with respect to each
such note, a "Note A Principal Entitlement", and such amounts with
respect to such notes, collectively, the "Aggregate Note A Principal
Entitlement"), to be applied in reduction of the principal balance
of each such note, provided that if the amount distributable
pursuant to this clause is less than the Aggregate Note A Principal
Entitlement, then any such shortfall shall be borne by each such
note holder on a pari passu and pro rata basis (calculated based on
each such note's respective Note A Principal Entitlement relative to
the Aggregate Note A Principal Entitlement);
o fourth, to each holder of a Farallon Portfolio Senior Loan, on a
pari passu and pro rata basis, an amount equal to its pro rata
portion of all non-note-specific principal payments received on the
Farallon Portfolio Loan Combination (calculated based on the
respective principal balances of such notes relative to the
outstanding principal balance of the Farallon Portfolio Loan
Combination), to be applied in reduction of the principal balance of
each such note;
o fifth, to each holder of a Farallon Portfolio Junior Loan, on a pari
passu and pro rata basis (in proportion to the respective amounts of
interest (excluding default interest) then due and payable on each
related note during the related interest accrual period for such
note) in an amount equal to the accrued and unpaid interest
(excluding default interest) during the related interest accrual
period for the related note on the applicable Farallon Portfolio
Junior Loan outstanding principal balance at (x) with respect to the
Farallon Portfolio B-Note Trust Mortgage Loan, the applicable
interest rate for such loan minus the master servicing fee rate and
the trustee fee rate; and (y) with respect to each Farallon
Portfolio B-Note Non-Trust Mortgage Loan, the applicable interest
rate for the related note minus the master servicing fee rate;
o sixth, to each holder of a Farallon Portfolio Junior Loan, an amount
equal to the applicable amount of note-specific principal payments
paid by the Farallon Portfolio Borrower or other obligated entity
with respect to each related note (such amount with respect to each
such note, a "Note B
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Principal Entitlement", and such amounts with respect to such notes,
collectively, the "Aggregate Note B Principal Entitlement"), to be
applied in reduction of the principal balance of each such note,
provided that if the amount distributable pursuant to this clause is
less than the Aggregate Note B Principal Entitlement, then any such
shortfall shall be borne by each such note holder on a pari passu
and pro rata basis (calculated based on each such note's respective
Note B Principal Entitlement relative to the Aggregate Note B
Principal Entitlement);
o seventh, to each holder of a Farallon Portfolio Junior Loan, on a
pari passu and pro rata basis, an amount equal to its pro rata
portion of all non-note-specific principal payments received on the
Farallon Portfolio Loan Combination (calculated based on the
respective principal balances of such notes relative to the
outstanding principal balance of the Farallon Portfolio Loan
Combination), to be applied in reduction the principal balance of
each such note;
o eighth, to each holder of the Farallon Portfolio Senior Loan, an
amount equal to the applicable amount of Prepayment Premium actually
paid by the Farallon Portfolio Borrower or other obligated entity
with respect to each such note (such amount with respect to each
related note, a "Note A Prepayment Premium Entitlement", and such
amounts with respect to such notes, collectively, the "Aggregate
Note A Prepayment Premium Entitlement"), provided that if the amount
distributable pursuant to this clause is less than the Aggregate
Note A Prepayment Premium Entitlement, then any such shortfall shall
be borne by each such note holder on a pari passu and pro rata basis
(calculated based on each such note's respective Note A Prepayment
Premium Entitlement relative to the Aggregate Note A Prepayment
Premium Entitlement), and provided further that such applicable
amount of Prepayment Premium shall be determined (i) if such
Prepayment Premium is in the nature of a fixed percentage of the
amount prepaid, by multiplying such percentage by the portion of the
principal balance of the applicable note being prepaid and (ii) if
the Prepayment Premium is a "yield maintenance" or "spread
maintenance" premium, by separately computing the Prepayment Premium
for such note based on the formula provided in the Farallon
Portfolio loan documents but calculated based on the applicable
interest rate for each such Farallon Portfolio Senior Loan and the
portion of the principal balance of the applicable note being
prepaid;
o ninth, to each holder of a Farallon Portfolio Junior Loan, an amount
equal to the applicable amount of Prepayment Premium actually paid
by the Farallon Portfolio Borrower or other obligated entity with
respect to each related note (such amount with respect to each such
note, a "Note B Prepayment Premium Entitlement", and such amounts
with respect to such notes, collectively, the "Aggregate Note B
Prepayment Premium Entitlement"), provided that if the amount
distributable pursuant to this clause is less than the Aggregate
Note B Prepayment Premium Entitlement, then any such shortfall shall
be borne by each such note holder on a pari passu and pro rata basis
(calculated based on each such note's respective Note B Prepayment
Premium Entitlement relative to the Aggregate Note B Prepayment
Premium Entitlement), and provided further that such applicable
amount of Prepayment Premium shall be determined (i) if such
Prepayment Premium is in the nature of a fixed percentage of the
amount prepaid, by multiplying such percentage by the portion of the
principal balance of the applicable note being prepaid and (ii) if
the Prepayment Premium is a "yield maintenance" or "spread
maintenance" premium, by separately computing the Prepayment Premium
for such note based on the formula provided in the Farallon
Portfolio loan documents but calculated based on the applicable
interest rate for each Farallon Portfolio Junior Loan and the
portion of the principal balance of the applicable note being
prepaid;
o tenth, to each holder of a Farallon Portfolio Senior Loan and each
holder of a Farallon Portfolio Junior Loan, in an amount equal to
any and all other fees (including, without limitation, any late
charges) payable by any Farallon Portfolio Borrower pursuant to the
terms of the Farallon Portfolio loan documents, in accordance with
their respective outstanding principal balances relative to the
outstanding principal balance of the Farallon Portfolio Loan
Combination, to the extent actually paid and not payable pursuant to
the series 2007-8 pooling and servicing agreement (x) to cover
interest on Advances, (y) to offset Additional Trust Fund Expenses
relating in any
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way to the Farallon Portfolio Loan Combination or (z) to any
servicer or trustee under the pooling and servicing agreement;
o eleventh, to each holder of a Farallon Portfolio Senior Loan and
each holder of a Farallon Portfolio Junior Loan, in an amount equal
to any default interest in excess of the interest paid in accordance
with clauses second or fifth above, in accordance with their
respective outstanding principal balances relative to the
outstanding principal balance of the Farallon Portfolio Loan
Combination, to the extent actually paid and not payable pursuant to
the series 2007-8 pooling and servicing agreement (x) to cover
interest on Advances, (y) to offset Additional Trust Fund Expenses
relating in any way to the Farallon Portfolio Loan Combination or
(z) to any servicer or trustee under the pooling and servicing
agreement; and
o twelfth, if any excess amount is paid by any Farallon Portfolio
Borrower or otherwise and is not required to be returned to any
Farallon Portfolio Borrower or to a party other than a note holder
under the Farallon Portfolio loan documents, and not otherwise
applied in accordance with the foregoing clauses, such amount shall
be paid to each holder of a Farallon Portfolio Senior Loan and each
holder of a Farallon Portfolio Junior Loan pro rata in accordance
with their original principal balances (but calculated as if each
note that was paid in full in connection with a prior application on
a prior distribution date, had an original principal balance equal
to zero).
Pursuant to the Farallon Portfolio Intercreditor Agreement, if a monetary
event of default or non-monetary event of default which caused a Servicing
Transfer Event to occur with respect to the Farallon Portfolio Trust Mortgage
Loan has occurred and is continuing, all amounts that any Farallon Portfolio
Borrower tenders or that are otherwise available to pay the Farallon Portfolio
Loan Combination, whether received in the form of a monthly payment, a balloon
payment, liquidation proceeds, proceeds under any insurance policy or awards or
settlements in respect of condemnation proceedings or similar exercise of the
power of eminent domain (other than (x) proceeds, awards or settlements to be
applied to the restoration or repair of the Farallon Portfolio Mortgaged
Property or released to any Farallon Portfolio Borrower in accordance with the
Servicing Standard or the Farallon Portfolio loan documents and (y) all amounts
for required reserves or escrows required by the Farallon Portfolio loan
documents to be held as reserves or escrows) shall be distributed generally in
the following manner, to the extent of available funds:
o first, to the servicers and the trustee under the series 2007-8
pooling and servicing agreement, as applicable, all amounts then due
and payable to such parties pursuant to and in accordance with the
series 2007-8 pooling and servicing agreement with respect to the
Farallon Portfolio Loan Combination;
o second, to each holder of a Farallon Portfolio Senior Loan on a pari
passu and pro rata basis (in proportion to the respective amounts of
interest (excluding default interest) then due and payable on each
related note during the related interest accrual period for such
note) in an amount equal to the accrued and unpaid interest
(excluding default interest) during the related interest accrual
period for the related note on the applicable Farallon Portfolio
Senior Loan outstanding principal balances at (x) with respect to
the Farallon Portfolio Trust Mortgage Loan, the applicable interest
rate for such loan minus the master servicing fee rate and trustee
fee rate, and (y) with respect to each Farallon Portfolio A-Note
Non-Trust Mortgage Loan, the applicable interest rate for the
related note minus the master servicing fee rate;
o third, to each holder of the Farallon Portfolio Senior Loan, on a
pari passu and pro rata basis, an amount equal to all principal
payments received on the Farallon Portfolio Loan Combination
(calculated based on their outstanding principal balances relative
to the outstanding aggregate principal balance of the Farallon
Portfolio Senior Loan), until the principal balance of each such
Farallon Portfolio Senior Loan has been reduced to zero;
o fourth, to each holder of a Farallon Portfolio Junior Loan, on a
pari passu and pro rata basis (in proportion to the respective
amounts of interest (excluding default interest) then due and
payable on each related note during the related interest accrual
period for such note) in an amount equal to
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the accrued and unpaid interest (excluding default interest) during
the related interest accrual period for the related note on the
applicable Farallon Portfolio Junior Loan outstanding principal
balance at (y) with respect to the Farallon Portfolio B-Note Trust
Mortgage Loan, the applicable interest rate for such loan minus the
master servicing fee rate and the trustee fee rate; and (z) with
respect to each Farallon Portfolio B-Note Non-Trust Mortgage Loan,
the applicable interest rate for the related note minus the master
servicing fee rate;
o fifth, to each holder of a Farallon Portfolio Junior Loan, in an
aggregate amount equal to the aggregate outstanding principal
balance of the Farallon Portfolio Junior Loan, on a pari passu and
pro rata basis (calculated based on their respective outstanding
principal balances relative to the aggregate outstanding principal
balance of the Farallon Portfolio Junior Loan), to be applied in
reduction of the outstanding principal balance of the Farallon
Portfolio Junior Loan, until such amount has been reduced to zero;
o sixth, to each holder of the Farallon Portfolio Senior Loan, an
amount equal to its applicable Note A Prepayment Premium
Entitlement, provided that if the amount distributable pursuant to
this clause is less than the Aggregate Note A Prepayment Premium
Entitlement, then any such shortfall shall be borne by each such
note holder on a pari passu and pro rata basis (calculated based on
each such note's respective Note A Prepayment Premium Entitlement
relative to the Aggregate Note A Prepayment Premium Entitlement),
and provided further that such applicable amount of Prepayment
Premium shall be determined (i) if such Prepayment Premium is in the
nature of a fixed percentage of the amount prepaid, by multiplying
such percentage by the portion of the principal balance of the
applicable note being prepaid and (ii) if the Prepayment Premium is
a "yield maintenance" or "spread maintenance" premium, by separately
computing the Prepayment Premium for such note based on the formula
provided in the Farallon Portfolio loan documents but calculated
based on the applicable interest rate for each Farallon Portfolio
Senior Loan and the portion of the principal balance of the
applicable note being prepaid;
o seventh, to each holder of a Farallon Portfolio Junior Loan, an
amount equal to its applicable Note B Prepayment Premium
Entitlement, provided that if the amount distributable pursuant to
this clause is less than the Aggregate Note B Prepayment Premium
Entitlement, then any such shortfall shall be borne by each such
note holder on a pari passu and pro rata basis (calculated based on
each such note's respective Note B Prepayment Premium Entitlement
relative to the Aggregate Note B Prepayment Premium Entitlement),
and provided further that such applicable amount of Prepayment
Premium shall be determined (i) if such Prepayment Premium is in the
nature of a fixed percentage of the amount prepaid, by multiplying
such percentage by the portion of the principal balance of the
applicable note being prepaid and (ii) if the Prepayment Premium is
a "yield maintenance" or "spread maintenance" premium, by separately
computing the Prepayment Premium for such note based on the formula
provided in the Farallon Portfolio loan documents but calculated
based on the applicable interest rate for each Farallon Portfolio
Junior Loan and the portion of the principal balance of the
applicable note being prepaid;
o eighth, to each holder of the Farallon Portfolio Senior Loan on a
pari passu and pro rata basis, in an amount equal to any and all
other fees (including, without limitation, any late charges) payable
by any Farallon Portfolio Borrower pursuant to the terms of the
Farallon Portfolio loan documents, in accordance with their
respective percentage interests (based on their outstanding
principal balances relative to the outstanding principal balance of
the Farallon Portfolio Loan Combination), to the extent actually
paid and not payable pursuant to the series 2007-8 pooling and
servicing agreement (x) to cover interest on Advances, (y) to offset
Additional Trust Fund Expenses relating in any way to the Farallon
Portfolio Loan Combination or (z) to any servicer or trustee under
the series 2007-8 pooling and servicing agreement;
o ninth, to each holder of the Farallon Portfolio Senior Loan on a
pari passu and pro rata basis, in an amount equal to any default
interest in excess of the interest paid in accordance with clauses
second and fourth above, in accordance with their respective
percentage interests (based on their outstanding principal balances
relative to the outstanding principal balance of the Farallon
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Portfolio Loan Combination), to the extent actually paid and not
payable pursuant to the series 2007-8 pooling and servicing
agreement (x) to cover interest on Advances, (y) to offset
Additional Trust Fund Expenses relating in any way to the Farallon
Portfolio Loan Combination or (z) to any servicer or trustee under
the series 2007-8 pooling and servicing agreement;
o tenth, to each holder of a Farallon Portfolio Junior Loan, in an
amount equal to all other fees (including, without limitation, any
late charges) payable by any Farallon Portfolio Borrower pursuant to
the terms of the Farallon Portfolio loan documents, in accordance
with their respective percentage interests (based on their
outstanding principal balances relative to the outstanding principal
balance of the Farallon Portfolio Loan Combination), to the extent
actually paid and not payable pursuant to the series 2007-8 pooling
and servicing agreement (x) to cover interest on Advances, (y) to
offset Additional Trust Fund Expenses relating in any way to the
Farallon Portfolio Loan Combination or (z) to any servicer or
trustee under the series 2007-8 pooling and servicing agreement;
o eleventh, to each holder of a Farallon Portfolio Junior Loan, in an
amount equal to any default interest in excess of the interest paid
in accordance with clauses second, fourth, and ninth above, in
accordance with their respective percentage interests (based on
their outstanding principal balances relative to the outstanding
principal balance of the Farallon Portfolio Loan Combination), to
the extent actually paid and not payable pursuant to the series
2007-8 pooling and servicing agreement (x) to cover interest on
Advances, (y) to offset Additional Trust Fund Expenses relating in
any way to the Farallon Portfolio Loan Combination or (z) to any
servicer or trustee under the series 2007-8 pooling and servicing
agreement;
o twelfth, if the proceeds of any foreclosure sale or any liquidation
of the Farallon Portfolio Loan Combination or Farallon Portfolio
Mortgaged Property exceed the amounts required to be applied in
accordance with the foregoing clauses and, as a result of a workout
the principal balance of any Farallon Portfolio Junior Loan has been
reduced, such excess amount shall be paid to each holder of a
Farallon Portfolio Junior Loan, on a pari passu and pro rata basis,
in an aggregate amount up to the reduction, if any, of the principal
balance of the Farallon Portfolio Junior Loan as a result of such
workout; and
o thirteenth, if any excess amount is paid by any Farallon Portfolio
Borrower or otherwise and is not required to be returned to any
Farallon Portfolio Borrower or to a party other than a note holder
under the Farallon Portfolio loan documents, and not otherwise
applied in accordance with the foregoing clauses, such amount shall
be paid to each holder of a Farallon Portfolio Senior Loan and each
holder of a Farallon Portfolio Junior Loan pro rata in accordance
with their original principal balances (but calculated as if each
note that was paid in full in connection with a prior application on
a prior distribution date, had an original principal balance equal
to zero).
Control Rights. Each servicer shall be required, prior to taking or not
taking any action that is a Major Decision (as defined below), to notify in
writing the Farallon Portfolio Controlling Party (or its Operating Advisor (as
defined below)) of any proposal to take (or not take) any such actions and to
receive the written approval of the Farallon Portfolio Controlling Party (or its
Operating Advisor); provided that (1) if the Farallon Portfolio Controlling
Party (or its Operating Advisor) fails to notify the applicable servicer of its
approval or disapproval of any such proposed action within ten (10) business
days (or, if the Farallon Portfolio Loan Agreement provides for a shorter period
for lender to give consent, no later than one (1) business day prior to such
shorter period) of delivery to the Farallon Portfolio Controlling Party (or its
Operating Advisor) by the applicable servicer of written notice of such a
proposed action, together with all information reasonably necessary to make an
informed decision with respect thereto, such action by the applicable servicer
shall be deemed to have been approved by the Farallon Portfolio Controlling
Party (or its Operating Advisor) and (2) with respect to any of the foregoing
actions which necessitate the delivery of an asset status report, such action
will be taken in accordance with the procedures set forth in paragraph (b) below
and provided, further that any notice sent by the applicable servicer shall
contain a statement in bold type to the effect that failure to respond within
ten (10) business days shall constitute consent. Notwithstanding the foregoing,
the applicable servicer may take any Major Decision or any action set forth in
the asset status report before the expiration of the aforementioned ten (10)
business day period if (A) the applicable
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servicer has reasonably determined that failure to take such action would
violate applicable law, the terms of the Farallon Portfolio loan documents, the
Servicing Standard and/or the series 2007-8 pooling and servicing agreement, and
(B) it has delivered written notice to the Farallon Portfolio Controlling Party
at least two (2) business days prior to taking such Major Decision or action
(except in cases of emergency, when no prior notice need be sent, in which event
the acting party shall so advise the Farallon Portfolio Controlling Party (or
its Operating Advisor) with reasonable diligence of the action taken).
The special servicer shall promptly provide the Farallon Portfolio
Controlling Party (or its Operating Advisor) with copies of asset status reports
in accordance with the time frames set forth in, and in accordance with, the
series 2007-8 pooling and servicing agreement. With respect to the Farallon
Portfolio Loan Combination, if the asset status report recommends any Major
Decision, then the special servicer shall provide to the Farallon Portfolio
Controlling Party (or its Operating Advisor) all information in the possession
of the special servicer or reasonably obtainable by the special servicer which
the special servicer considers to be material in connection with evaluating any
of the foregoing proposed actions or which is reasonably requested by the
Farallon Portfolio Controlling Party (or its Operating Advisor) and the Farallon
Portfolio Controlling Party (or its Operating Advisor) shall then have the
period of time specified in paragraph (a) above (to the extent such period does
not delay the special servicer from taking any action that is required by the
Servicing Standard prior to the expiration of such period) within which to
consult with, advise and direct the special servicer regarding the proposed
action and the special servicer shall follow such advice and direction; provided
that any notice sent by the special servicer shall contain a statement in bold
type to the effect that failure to respond within the period of time specified
in paragraph (a) above shall constitute consent; and provided, further, that (A)
if the Farallon Portfolio Controlling Party (or its Operating Advisor) fails to
notify the special servicer of its approval or disapproval of any such proposed
action within the period of time specified in paragraph (a) above, such action
by the special servicer shall be deemed to have been approved by the Farallon
Portfolio Controlling Party (or its Operating Advisor), (B) with respect to any
of the foregoing actions which necessitate the delivery of an asset status
report, such action will be taken in accordance with the procedures set forth in
the series 2007-8 pooling and servicing agreement with respect to the delivery
and approval of such asset status report and (C) such rights are subject to the
limitations set forth below, including but not limited to the obligation of the
special servicer to act in accordance with the Servicing Standard.
Notwithstanding the foregoing, any amounts funded, whether by any servicer or
Trustee on behalf of any note holder or by any note holder pursuant to the
Farallon Portfolio Intercreditor Agreement, under the Farallon Portfolio loan
documents as a result of (1) the making of any protective advances or (2)
interest accruals or accretions and any compounding thereof (including default
interest) with respect to any note shall not at any time be deemed to contravene
this subsection.
Notwithstanding anything contained in the series 2007-8 pooling and
servicing agreement or Farallon Portfolio Intercreditor Agreement, no servicer
shall comply with any advice, consultation or disapproval provided by the
Farallon Portfolio Controlling Party (or its Operating Advisor) if such advice,
consultation or disapproval would (i) require or cause the applicable servicer
to violate any applicable law, (ii) be inconsistent with the Servicing Standard,
(iii) require or cause the applicable servicer to violate the provisions of the
Farallon Portfolio Intercreditor Agreement or the series 2007-8 pooling and
servicing agreement relating to the REMIC provisions (if applicable) or the
grantor trust provisions of the Code (if applicable), (iv) require or cause the
applicable servicer to violate any other provisions of the Farallon Portfolio
Intercreditor Agreement or the series 2007-8 pooling and servicing agreement, or
(v) require or cause the applicable servicer to violate the terms of the
Farallon Portfolio Loan Combination.
Appointment of Operating Advisor. The Farallon Portfolio Controlling Party
shall have the right at any time to appoint an operating advisor for the
Farallon Portfolio Loan Combination (the "Operating Advisor"). The Farallon
Portfolio Controlling Party shall have the right in its sole discretion at any
time and from time to time to remove and replace the Operating Advisor. When
exercising its various rights, the Farallon Portfolio Controlling Party may, at
its option, in each case, act through the Operating Advisor. The Operating
Advisor may be any person or entity (other than any Farallon Portfolio Borrower,
its principal or any affiliate of any Farallon Portfolio Borrower), including,
without limitation, the Farallon Portfolio Controlling Party, any officer or
employee of the Farallon Portfolio Controlling Party, any affiliate of the
Farallon Portfolio Controlling Party or any other unrelated third party. No such
Operating Advisor shall owe any fiduciary duty or other duty to any other person
or entity (other than the Farallon Portfolio Controlling Party). All actions
that are permitted to be taken by the Farallon
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Portfolio Controlling Party may be taken by the Operating Advisor acting on
behalf of the Farallon Portfolio Controlling Party.
Appointment of Special Servicer. The Farallon Portfolio Controlling Party
(or its Operating Advisor) may remove the special servicer with respect to the
Farallon Portfolio Loan Combination and appoint a successor special servicer, in
each case, at any time, and from time to time, and for any reason whatsoever or
no reason at all, and, in each case, in accordance with the provisions relating
thereto in the series 2007-8 pooling and servicing agreement.
Other Rights. With limiting any other right of the Farallon Portfolio
Controlling Party, the Farallon Portfolio Controlling Party will have, with
respect to the Farallon Portfolio Loan Combination, (1) all rights given to the
Farallon Portfolio Controlling Party in the series 2007-8 pooling and servicing
agreement and (2) all rights given to the controlling class representative
(under the series 2007-8 pooling and servicing agreement) in the series 2007-8
pooling and servicing agreement as if the Farallon Portfolio Loan Combination
were a loan that was not part of a Loan Combination.
"Major Decision" means:
o any acceleration of the Farallon Portfolio Loan Combination (unless
such acceleration is by its terms automatic under the Farallon
Portfolio Loan Agreement);
o any foreclosure upon or comparable conversion (which may include
acquisition of REO Property) of the ownership of all or any portion
of the Farallon Portfolio Mortgaged Property and/or the other
collateral securing the Farallon Portfolio Loan Combination or any
subsequent sale of all or any portion of the Farallon Portfolio
Mortgaged Property (including REO Property) or other collateral
securing the Farallon Portfolio Loan Combination;
o any modification of, or waiver (a) with respect to the Farallon
Portfolio Loan Combination that would result in the extension of the
maturity date or extended maturity date thereof (other than an
extension in accordance with the terms of the Farallon Portfolio
Loan Agreement), a reduction in the interest rate or the monthly
debt service payment or a deferral or a forgiveness of interest on
or principal of the Farallon Portfolio Loan Combination or a
modification or waiver of any other monetary term of the Farallon
Portfolio Loan Combination relating to the timing or amount of any
payment of principal or interest (other than default interest) or
any other material sums due and payable under the Farallon Portfolio
loan documents (including any Prepayment Premium), including any
acceptance of a discounted payoff of the Farallon Portfolio Loan
Combination, or a modification or waiver of any provision of the
Farallon Portfolio Loan Combination which restricts any Farallon
Portfolio Borrower or its equity owners from incurring additional
indebtedness or (b) of any material non-monetary term of the
Farallon Portfolio Loan Combination;
o any modification of any monetary term of the Farallon Portfolio loan
documents;
o any proposed sale of all or any portion of the Farallon Portfolio
Mortgaged Property (other than as specifically permitted by the
terms of the Farallon Portfolio loan documents or in connection with
a termination of the trust fund created in connection with a
securitization);
o any acceptance of a discounted payoff of the Farallon Portfolio Loan
Combination;
o any determination to bring all or any portion of the Farallon
Portfolio Mortgaged Property or REO Property into compliance with
applicable environmental laws or to otherwise address hazardous
materials located all or any portion of the Farallon Portfolio
Mortgaged Property or REO Property;
o any release of any collateral for the Farallon Portfolio Loan
Combination (other than in accordance with the Farallon Portfolio
loan documents);
o any acceptance of additional or substitute collateral for the
Farallon Portfolio Loan Combination (other than in accordance with
the Farallon Portfolio loan documents);
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o any waiver of a "due-on-sale" or "due-on-encumbrance" clause;
o any acceptance of an assumption agreement releasing any Farallon
Portfolio Borrower, or any guarantor, from liability under the
Farallon Portfolio Loan Combination;
o the approval by any person or entity of any replacement special
servicer for the Farallon Portfolio Loan Combination (other than in
connection with the Trustee becoming the successor thereto pursuant
to the terms of the series 2007-8 pooling and servicing agreement);
o the voting, adoption or approval of any plan or reorganization,
restructuring or similar plan in the bankruptcy of any Farallon
Portfolio Borrower;
o any renewal or replacement of the then-existing insurance policies
(if lender approval is provided for in the applicable Farallon
Portfolio loan documents);
o any sale of all or any portion of the Farallon Portfolio Loan
Combination (which would in any event be subject to the Farallon
Portfolio Intercreditor Agreement) other than in connection with the
exercise of a purchase option set forth in the series 2007-8 pooling
and servicing agreement (provided that the foregoing shall not limit
any note holder's rights to transfer or pledge all or any portion of
any interest in the Farallon Portfolio Loan Combination in
accordance with the Farallon Portfolio Intercreditor Agreement);
o any incurrence of additional debt by any Farallon Portfolio Borrower
or any mezzanine financing by any direct or indirect beneficial
owner of any Farallon Portfolio Borrower except in accordance with
the terms of the Farallon Portfolio loan documents and the approval
of any intercreditor agreement in connection therewith;
o any release of any Farallon Portfolio Borrower or any guarantor from
any obligation of or liability with respect to the Farallon
Portfolio Loan Combination;
o any transfer or pledge of all or any portion of the Farallon
Portfolio Mortgaged Property or any portion thereof or any transfer
or pledge of any direct or indirect ownership interest in any
Farallon Portfolio Borrower, except as may be expressly permitted by
the Farallon Portfolio loan documents or any consent to an
assignment and assumption of the Farallon Portfolio Loan Combination
pursuant to the Farallon Portfolio loan documents except as may be
expressly permitted by the Farallon Portfolio loan documents;
o any proposed modification or waiver of any provision of the Farallon
Portfolio loan documents governing the types, nature or amount of
insurance coverage required to be obtained and maintained by any
Farallon Portfolio Borrower or guarantor;
o exercise of any right under the Farallon Portfolio loan documents to
terminate a property management agreement for all or any portion of
the Farallon Portfolio Mortgaged Property upon the occurrence of an
event of default or default by the property manager or any approval
rights with respect to any change of the property manager for all or
any portion of the Farallon Portfolio Mortgaged Property;
o any material reduction or material waiver of any Farallon Portfolio
Borrower's obligations to pay any reserve amounts under the Farallon
Portfolio loan documents;
o any approval or material waiver or modification of any material
insurance requirements set forth in the Farallon Portfolio Loan
Agreement.
o any adoption, implementation or determination with respect to a
business plan or budget submitted by any Farallon Portfolio Borrower
with respect to the Farallon Portfolio Mortgaged Property (if a
lender approval is provided for in the applicable Farallon Portfolio
loan documents);
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o the execution or renewal of any lease (if a lender approval is
provided for in the applicable Farallon Portfolio loan documents);
o any determination with respect to any material alterations on all or
any portion of the Farallon Portfolio Mortgaged Property (if lender
approval is provided for in the applicable Farallon Portfolio loan
documents);
o the release to any Farallon Portfolio Borrower of any escrow for
which such Farallon Portfolio Borrower is not entitled under the
Farallon Portfolio loan documents or under applicable law;
o entry into or approval of any documents relating to ARC Housing LLC
or ARC Housing 2 LLC, including any intercreditor agreement (if a
lender approval is provided for in the applicable Farallon Portfolio
loan documents);
o the determination of any debt service coverage test (if lender is
entitled to determine same under the applicable Farallon Portfolio
loan documents and to the extent lender has such discretion);
o any amendment to any single purpose entity provision of the related
Farallon Portfolio loan documents;
o any determination regarding the use or application of condemnation
awards or insurance proceeds to the extent lender has such
discretion; or
o other material waiver, amendment, or modification of any Farallon
Portfolio Loan Document not included in the prior bullet points
above.
Consultation Rights. Pursuant to the Farallon Portfolio Intercreditor
Agreement, if, during the Farallon Portfolio Directing Securitization Period,
MLML or any entity wholly owned by MLML owns any note, then MLML and each such
other entity, as applicable, shall have non-binding consultation rights with
respect to the Farallon Portfolio Control Rights but subject to all timing and
other limitations with respect thereto to which the Farallon Portfolio
Controlling Party is subject.
TABLE A
Promissory Notes
FIXED RATE FIVE YEAR NOTE:
------------------------------------------------------------------------------------------------------------------
FIXED RATE FIVE FIXED INTEREST FIXED RATE FIXED INTEREST
YEAR NOTE A AMOUNT ($) RATE (%) FIVE YEAR NOTE B AMOUNT ($) RATE (%) TOTAL ($)
------------------------------------------------------------------------------------------------------------------
Fixed Rate Five Fixed Rate
Year Note A-1 23,245,000 6.4194 Five Year Note B-1 26,755,000 6.4194 50,000,000
------------------------------------------------------------------------------------------------------------------
Fixed Rate Five Fixed Rate
Year Note A-2 23,245,000 6.4194 Five Year Note B-2 26,755,000 6.4194 50,000,000
------------------------------------------------------------------------------------------------------------------
Fixed Rate Five Fixed Rate
Year Note A-3 23,245,000 6.4194 Five Year Note B-3 26,755,000 6.4194 50,000,000
------------------------------------------------------------------------------------------------------------------
Fixed Rate Five Fixed Rate
Year Note A-4 23,245,000 6.4194 Five Year Note B-4 26,755,000 6.4194 50,000,000
------------------------------------------------------------------------------------------------------------------
Fixed Rate Five Fixed Rate
Year Note A-5 23,245,000 6.4194 Five Year Note B-5 26,755,000 6.4194 50,000,000
------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------
FIXED RATE FIVE FIXED INTEREST FIXED RATE FIXED INTEREST
YEAR NOTE A AMOUNT ($) RATE (%) FIVE YEAR NOTE B AMOUNT ($) RATE (%) TOTAL ($)
------------------------------------------------------------------------------------------------------------------
Fixed Rate Five Fixed Rate
Year Note A-6 23,245,000 6.4194 Five Year Note B-6 26,755,000 6.4194 50,000,000
------------------------------------------------------------------------------------------------------------------
TOTAL 139,470,000 160,530,000 300,000,000
------------------------------------------------------------------------------------------------------------------
FIXED RATE SEVEN YEAR NOTE:
------------------------------------------------------------------------------------------------------------------
FIXED RATE SEVEN FIXED INTEREST FIXED RATE FIXED INTEREST
YEAR NOTE A AMOUNT ($) RATE (%) SEVEN YEAR NOTE B AMOUNT ($) RATE (%) TOTAL ($)
------------------------------------------------------------------------------------------------------------------
* Fixed Rate 23,245,000 6.5226 * Fixed Rate 26,755,000 6.5226 50,000,000
Seven Year Seven Year
Note A-1 Note B-1
------------------------------------------------------------------------------------------------------------------
* Fixed Rate * Fixed Rate
Seven Year 23,245,000 6.5226 Seven Year 26,755,000 6.5226 50,000,000
Note A-2 Note B-2
------------------------------------------------------------------------------------------------------------------
* Fixed Rate * Fixed Rate
Seven Year 23,245,000 6.5226 Seven Year 26,755,000 6.5226 50,000,000
Note A-3 Note B-3
------------------------------------------------------------------------------------------------------------------
* Fixed Rate * Fixed Rate
Seven Year 23,245,000 6.5226 Seven Year 26,755,000 6.5226 50,000,000
Note A-4 Note B-4
------------------------------------------------------------------------------------------------------------------
TOTAL 92,980,000 107,020,000 200,000,000
------------------------------------------------------------------------------------------------------------------
FIXED RATE TEN YEAR NOTE:
------------------------------------------------------------------------------------------------------------------
FIXED RATE TEN FIXED INTEREST FIXED RATE FIXED INTEREST
YEAR NOTE A AMOUNT ($) RATE (%) TEN YEAR NOTE B AMOUNT ($) RATE (%) TOTAL ($)
------------------------------------------------------------------------------------------------------------------
* Fixed Rate Ten 23,245,000 6.4650 *Fixed Rate Ten 26,755,000 6.4650 50,000,000
Year Note A-1 Year Note B-1
------------------------------------------------------------------------------------------------------------------
Fixed Rate Ten 23,245,000 6.4650 Fixed Rate Ten 26,755,000 6.4650 50,000,000
Year Note A-2 Year Note B-2
------------------------------------------------------------------------------------------------------------------
Fixed Rate Ten 23,245,000 6.4650 Fixed Rate Ten 26,755,000 6.4650 50,000,000
Year Note A-3 Year Note B-3
------------------------------------------------------------------------------------------------------------------
Fixed Rate Ten 23,245,000 6.4650 Fixed Rate Ten 26,755,000 6.4650 50,000,000
Year Note A-4 Year Note B-4
------------------------------------------------------------------------------------------------------------------
Fixed Rate Ten 23,245,000 6.4650 Fixed Rate Ten 26,755,000 6.4650 50,000,000
Year Note A-5 Year Note B-5
------------------------------------------------------------------------------------------------------------------
Fixed Rate Ten 23,245,000 6.4650 Fixed Rate Ten 26,755,000 6.4650 50,000,000
Year Note A-6 Year Note B-6
------------------------------------------------------------------------------------------------------------------
Fixed Rate Ten 23,245,000 6.4650 Fixed Rate Ten 26,755,000 6.4650 50,000,000
Year Note A-7 Year Note B-7
------------------------------------------------------------------------------------------------------------------
Fixed Rate Ten 23,245,000 6.4650 Fixed Rate Ten 26,755,000 6.4650 50,000,000
Year Note A-8 Year Note B-8
------------------------------------------------------------------------------------------------------------------
Fixed Rate Ten 23,245,000 6.4650 Fixed Rate Ten 26,755,000 6.4650 50,000,000
Year Note A-9 Year Note B-9
------------------------------------------------------------------------------------------------------------------
Fixed Rate Ten 23,245,000 6.4650 Fixed Rate Ten 26,755,000 6.4650 50,000,000
Year Note A-10 Year Note B-10
------------------------------------------------------------------------------------------------------------------
Fixed Rate Ten 23,245,000 6.4650 Fixed Rate Ten 26,755,000 6.4650 50,000,000
Year Note A-11 Year Note B-11
------------------------------------------------------------------------------------------------------------------
Fixed Rate Ten 11,855,000 6.4650 Fixed Rate Ten 13,645,000 6.4650 25,500,000
Year Note A-12 Year Note B-12
------------------------------------------------------------------------------------------------------------------
TOTAL 267,550,000 307,950,000 575,500,000
------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------
GRAND FIXED RATE 500,000,000 575,500,000 1,075,500,000
TOTAL
------------------------------------------------------------------------------------------------------------------
FLOATING RATE A NOTE:
-------------------------------------------------
INTEREST
FLOATING RATE A NOTE AMOUNT ($) RATE (%)
-------------------------------------------------
Floating Rate A 500,000,000 One-month
Note LIBOR +
0.75%
-------------------------------------------------
GRAND TOTAL ALL NOTES
-------------------------------------------------------------------------------------------------------
GRAND TOTAL
FIXED AND A NOTE AMOUNT B NOTE AMOUNT TOTAL AMOUNT
FLOATING ($) ($) ($)
-------------------------------------------------------------------------------------------------------
1,000,000,000 575,000,000 1,575,500,000
-------------------------------------------------------------------------------------------------------
* Included in the Farallon Portfolio Trust Mortgage Loan
The Executive Hills Portfolio Loan CombinationGeneral. The Executive Hills Portfolio Trust Mortgage Loan, which has a
cut-off date principal balance of $99,900,000, representing approximately 4.1%
of the initial mortgage pool balance and approximately 7.1% of the initial loan
group 1 balance, is part of the Loan Combination that we refer to as the
Executive Hills Portfolio Loan Combination, which consists that mortgage loan
and a $11,100,000 B-note non-trust loan (the "Executive Hills Portfolio B-Note
Non-Trust Mortgage Loan"). The Executive Hills Portfolio B-Note Non-Trust
Mortgage Loan will not be included in the fund. The Executive Hills Portfolio
B-Note Non-Trust Mortgage Loan is secured by the same mortgage instruments
encumbering the subject mortgaged real property and will be serviced under the
pooling and servicing agreement. The relative rights of the holders of the
Executive Hills Portfolio Loan Combination are governed by a co-lender agreement
(the "Executive Hills Portfolio Intercreditor Agreement").
Priority of Payments. The rights of the holder of the Executive Hills
Portfolio B-Note Non-Trust Mortgage Loan to receive payments of interest,
principal, and other amounts are subordinate to the rights of the holder of the
Executive Hills Portfolio Trust Mortgage Loan to receive such amounts. Pursuant
to the Executive Hills Portfolio Intercreditor Agreement, prior to an event of
default, collections on the Executive Hills Portfolio Loan Combination
(excluding any amounts as to which other provision for their application had
been made in the related loan documents) will be allocated (after the
application to unpaid servicing fees, reimbursed costs and expenses and/or
reimbursement of advances and interest thereon, incurred under the pooling and
servicing agreement) generally in the following manner, to the extent of
available funds:
o first, to the applicable servicer or trustee, all amounts due and
payable;
o second, to the Executive Hills Portfolio Trust Mortgage Loan an
amount equal to all accrued and unpaid interest (excluding default
interest) on its principal balance (net of related servicing fees);
o third, to the Executive Hills Portfolio Trust Mortgage Loan an
amount equal to its pro rata portion (based on its principal
balance) of all principal payments on Executive Hills Portfolio Loan
Combination in accordance with the related loan documents;
o fourth, to the Executive Hills Portfolio B-Note Non-Trust Mortgage
Loan an amount equal to (a) the aggregate amount of all payments
made by the holder thereof in connection with the exercise of its
cure rights, (b) all accrued and unpaid interest (excluding default
interest) on its respective principal balance (net of related
servicing fees), and (c) its pro rata portion (based on its
principal
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balance) all principal payments on the Executive Hills Portfolio
Loan Combination in accordance with the related loan documents;
o fifth, to the Executive Hills Portfolio Trust Mortgage Loan and the
Executive Hills Portfolio B-Note Non-Trust Mortgage Loan, in each
case on a pro rata basis (based on their respective principal
balances), any default interest, to the extent not payable to any
party pursuant to the pooling and servicing agreement;
o sixth, to the Executive Hills Portfolio Trust Mortgage Loan, any
yield maintenance premium due with respect to that mortgage loan
under the related loan documents;
o seventh, to the Executive Hills Portfolio B-Note Non-Trust Mortgage
Loan, any yield maintenance premium due with respect to that
mortgage loan under the related loan documents;
o eighth, to the Executive Hills Portfolio Trust Mortgage Loan and the
Executive Hills Portfolio B-Note Non-Trust Mortgage Loan, on a pro
rata basis (based on their respective principal balances), any late
payment charges actually paid by borrower, to the extent not payable
to any party pursuant to the pooling and servicing agreement; and
o ninth, to the Executive Hills Portfolio Trust Mortgage Loan and the
Executive Hills Portfolio B-Note Non-Trust Mortgage Loan, on a pro
rata basis (based on their respective principal balances), any
excess amounts paid by, but not required to be returned to, the
borrower.
Pursuant to the Executive Hills Portfolio Intercreditor Agreement,
subsequent to the occurrence of and during the continuation of a monetary or
non-monetary event of default that would place the loan into special servicing,
collections on the Executive Hills Portfolio Loan Combination (excluding any
amounts to be applied according to other provisions in the related loan
documents and excluding (x) proceeds, awards or settlements to be applied to the
restoration or repair of the related mortgaged property or released to the
borrower in accordance with the Servicing Standard or the related loan documents
and (y) all amounts for required reserves or escrows required by the related
loan documents to be held as reserves or escrows) will be allocated (after
application to unpaid servicing fees, unreimbursed costs and expenses and/or
reimbursement of advances and/or interest thereon, incurred under the pooling
and servicing agreement) generally in the following manner, to the extent of
available funds:
o first, to the applicable servicer or trustee, all amounts due and
payable;
o second, to the Executive Hills Portfolio Trust Mortgage Loan an
amount equal to all accrued and unpaid interest (excluding default
interest) on its principal balance (net of related servicing fees);
o third, to the Executive Hills Portfolio Trust Mortgage Loan, an
amount equal to its outstanding principal balance until its
principal balance has been reduced to zero;
o fourth, to the Executive Hills Portfolio B-Note Non-Trust Mortgage
Loan, an amount equal to (a) the aggregate amount of all payments
made by the holder thereof in connection with the exercise of its
cure rights, (b) all accrued and unpaid interest (excluding default
interest) on its respective principal balance (net of related master
servicing fees) and (c) an amount equal to its principal balance
until its principal balance has been reduced to zero;
o fifth, to the Executive Hills Portfolio Trust Mortgage Loan and the
Executive Hills Portfolio B-Note Non-Trust Mortgage Loan, in each
case on a pro rata basis (based on their respective principal
balances), any default interest, to the extent not payable to any
party pursuant to the pooling and servicing agreement;
o sixth, to the Executive Hills Portfolio Trust Mortgage Loan, any
yield maintenance premium due in respect of that mortgage loan under
the related loan documents;
o seventh, to the Executive Hills Portfolio B-Note Non-Trust Mortgage
Loan, any yield maintenance premium due in respect of that mortgage
loan under the related loan documents;
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o eighth, to the Executive Hills Portfolio Trust Mortgage Loan and the
Executive Hills Portfolio B-Note Non-Trust Mortgage Loan, on a pro
rata basis (based on their respective principal balances), any late
payment charges actually paid by the borrower, to the extent not
payable to any party pursuant to the pooling and servicing
agreement;
o ninth, to the Executive Hills Portfolio Trust Mortgage Loan and the
Executive Hills Portfolio B-Note Non-Trust Mortgage Loan, on a pro
rata basis (based on their respective principal balances), any
excess amounts paid by, but not required to be returned to, the
borrower.
Consent Rights. Under the Executive Hills Portfolio Intercreditor
Agreement, the Executive Hills Portfolio Controlling Party (as defined in the
"Glossary" below) will be entitled to direct the master servicer or the special
servicer, and the master servicer or the special servicer, as applicable, may
not take any of the following actions without the consent or deemed consent of
the Executive Hills Portfolio Controlling Party:
o any acceleration of the mortgage loans in the Executive Hills
Portfolio Loan Combination;
o any proposed or actual foreclosure upon or comparable conversion
(which may include acquisition of REO Property) of the ownership of
the mortgaged property or any subsequent sale of the mortgaged
property (including REO Property);
o any modification, extension, amendment of, or waiver with respect to
a monetary term (including timing of payments) or any material
non-monetary term of the Executive Hills Portfolio Loan Combination;
o any proposed or actual sale of the mortgaged property for less than
an amount equal to the par purchase price specified in the Executive
Hills Portfolio Intercreditor Agreement;
o any acceptance of a discounted payoff of the Executive Hills
Portfolio Loan Combination;
o any determination to bring the mortgaged property or REO Property
into compliance with applicable environmental laws or to otherwise
address hazardous materials located at the mortgaged property or REO
Property;
o any release of any portion of the mortgaged property (other than in
accordance with the terms of the related loan documents);
o any acceptance of additional or substitute collateral for the
Executive Hills Portfolio Loan Combination (other than in accordance
with the terms of the related loan documents) or any subordination
of the liens granted under the terms of the related loan documents;
o any waiver or determination to enforce or not enforce a
"due-on-sale" or "due-on-encumbrance" clause;
o any acceptance of an assumption agreement releasing the borrower, or
any guarantor, from liability under the Executive Hills Portfolio
Loan Combination;
o any voting on any plan or reorganization, restructuring or similar
plan in the bankruptcy (or similar proceeding) of the borrower;
o any renewal or replacement of the then-existing insurance policies
(to the lender's approval is required under the related loan
documents) or any proposed modification or waiver of any insurance
requirements under the related loan documents and any modification
of any insurance provisions in the related loan documents;
o any incurrence of additional debt by the borrower or any mezzanine
financing by any direct or indirect beneficial owner of the borrower
(other than in accordance with the terms of the related loan
documents);
S-108
o any release of the borrower or any guarantor from liability under
the Executive Hills Portfolio Loan Combination;
o any transfer or pledge of the mortgaged property or any portion
thereof or any transfer or pledge of any direct or indirect
ownership interest in the borrower, except as may be expressly
permitted by the related loan documents, or any consent to an
assignment and assumption of the Executive Hills Portfolio Loan
Combination pursuant to the related loan documents;
o any replacement of the property manager or any material modification
or termination of the property management agreement;
o any material reduction or material waiver of any obligations to pay
any reserve amounts under the related loan documents;
o any waiver of any guarantor's obligations under any guaranty or
indemnity;
o any amendment to any single purpose entity provision of the related
loan documents;
o any determination with respect to any proposed material alterations
to the mortgaged property (to the extent consent is required under
the related loan documents);
o any determination regarding the use or application of condemnation
awards or insurance proceeds to the extent the lender has such
discretion;
o any waiver of a material event of default under the related loan
documents;
o any extension or shortening of the maturity date of the loans in the
Executive Hills Portfolio Loan Combination;
o any workout;
o any subordination of any recorded document recorded in connection
with the loans in the Executive Hills Portfolio Loan Combination;
and
o any forgiveness of any interest payments or principal payments of
the loans in the Executive Hills Portfolio Loan Combination.
Notwithstanding the foregoing, the applicable master servicer and the
special servicer may not follow any advice of the Executive Hills Portfolio
Controlling Party that would cause it to violate the Servicing Standard,
applicable law, the related loan documents or the REMIC provisions.
Consultation Rights. Under the Executive Hills Portfolio Intercreditor
Agreement, the Executive Hills Portfolio Controlling Party shall be entitled to
consult, in a non-binding manner, with the holder of the Executive Hills
Portfolio Trust Mortgage Loan and the applicable servicer with respect to
actions relating to the Executive Hills Portfolio Loan Combination and the
mortgaged property.
Purchase Option. The Executive Hills Portfolio Intercreditor Agreement
provides that if (a) any payment of principal or interest on the Executive Hills
Portfolio Loan Combination becomes 90 or more days delinquent, (b) the Executive
Hills Portfolio Loan Combination has been accelerated, (c) the principal balance
of the Executive Hills Portfolio Loan Combination is not paid at maturity, (d)
the borrower files a petition for bankruptcy, (e) the Executive Hills Portfolio
Loan Combination becomes a specially serviced loan (and the Executive Hills
Portfolio Loan Combination is either in default or a default with respect
thereto is reasonably foreseeable) or (f) foreclosure proceedings have been
commenced, then the holder of the Executive Hills Portfolio B-Note Non-Trust
Mortgage Loan has the option to purchase the Executive Hills Portfolio Trust
Mortgage Loan from the trust fund, at a price generally equal to the aggregate
unpaid principal balance of the Executive Hills Portfolio Trust Mortgage Loan,
together with all accrued and unpaid interest on that mortgage loans, to but not
including the date of such purchase, plus any related servicing compensation,
advances and interest on advances payable or reimbursable to any party to
S-109
the pooling and servicing agreement. The foregoing option shall terminate once
the mortgaged property becomes REO Property.
Cure Rights. In the event that the related borrower fails to make any
scheduled payments due under the related loan documents, the holder of the
Executive Hills Portfolio B-Note Non-Trust Mortgage Loan will have ten (10) days
from the date of receipt of notice of the subject default to cure the default.
In the event of a non-monetary default by the related borrower, the holder of
the Executive Hills Portfolio B-Note Non-Trust Mortgage Loan will have thirty
(30) days from the date of receipt of notice of the subject default to cure the
default, provided the holder of the Executive Hills Portfolio B-Note Non-Trust
Mortgage Loan is diligently prosecuting the cure of the subject default. Without
the prior consent of the holder of the Executive Hills Portfolio Trust Mortgage
Loan, the holder of the Executive Hills Portfolio B-Note Non-Trust Mortgage Loan
will not have the right to more than six (6) cure events during the term of the
Executive Hills Portfolio Loan Combination, and no single cure event may exceed
three (3) months.
The Peninsula Beverly Hills Loan CombinationGeneral. The Peninsula Beverly Hills Trust Mortgage Loan, which has a
cut-off date principal balance of $79,300,000, representing approximately 3.3%
of the initial mortgage pool balance and approximately 5.7% of the initial loan
group 1 balance, is part of the Loan Combination that we refer to as the
Peninsula Beverly Hills Loan Combination, which consists of that mortgage loan
and a single B-note non-trust loan (the "Beverly Hills Peninsula B-Note
Non-Trust Mortgage Loan"). The Beverly Hills Peninsula B-Note Non-Trust Mortgage
Loan was transferred to Pacific Life Insurance Company and will not be included
in the trust fund. The Beverly Hills Peninsula B-Note Non-Trust Mortgage Loan is
secured by the same mortgage instrument encumbering the subject mortgaged real
property and will be serviced under the pooling and servicing agreement. The
relative rights of the holders of the loans comprising the Peninsula Beverly
Hills Loan Combination are governed by an intercreditor agreement (the
"Peninsula Beverly Hills Intercreditor Agreement").
Priority of Payments. The rights of the holder of the Peninsula Beverly
Hills B-Note Non-Trust Mortgage Loan to receive payments of interest, principal
and other amounts are subordinate to the rights of the holder of the Peninsula
Beverly Hills Trust Mortgage Loan to receive such amounts. Pursuant to the
Peninsula Beverly Hills Intercreditor Agreement, prior to an event of default,
collections on the Peninsula Beverly Hills Loan Combination (excluding any
amounts as to which other provision for their application has been made in the
related loan documents) will be allocated (after the application to unpaid
servicing fees, unreimbursed costs and expenses and/or reimbursement of advances
and interest thereon, incurred under the pooling and servicing agreement)
generally in the following manner, to the extent of available funds:
o first, to the applicable servicer or trustee all amounts due and
payable;
o second, to the Peninsula Beverly Hills Trust Mortgage Loan an amount
equal to all accrued and unpaid interest (excluding default
interest) on its principal balance (net of related servicing fees);
o third, to the Peninsula Beverly Hills Trust Mortgage Loan in an
amount equal to its pro rata portion of principal payments (based on
their respective initial principal balances) on the Peninsula
Beverly Hills Loan Combination;
o fourth, to the Peninsula Beverly Hills B-Note Non-Trust Mortgage
Loan, in an amount equal to (i) the aggregate amount of all payments
made by the holder thereof in connection with the exercise of its
cure rights and (ii) unreimbursed costs and expenses;
o fifth, to the Peninsula Beverly Hills B-Note Non-Trust Mortgage
Loan, an amount equal to all accrued and unpaid interest (excluding
default interest) on its respective principal balance at the
interest rate for the Peninsula Beverly Hills B-Note Non-Trust
Mortgage Loan less related master servicing fees;
o sixth, to the Peninsula Beverly Hills B-Note Non-Trust Mortgage
Loan, an amount equal to its pro rata portion of all principal
payments on the Peninsula Beverly Hills Loan Combination;
S-110
o seventh, to the Peninsula Beverly Hills Trust Mortgage Loan, any
yield maintenance premium actually received in respect of that
mortgage loan under the related loan documents;
o eighth, to the Peninsula Beverly Hills B-Note Non-Trust Mortgage
Loan, any yield maintenance premium actually received in respect of
that mortgage loan under the related loan documents;
o ninth, to the Peninsula Beverly Hills Trust Mortgage Loan and the
Peninsula Beverly Hills B-Note Non-Trust Mortgage Loan, in each case
on a pro rata basis (based on their respective initial principal
balances), any default interest, to the extent not payable to any
party pursuant to the pooling and servicing agreement;
o tenth, to the Peninsula Beverly Hills Trust Mortgage Loan, on a pro
rata basis (based on its respective initial principal balance), an
amount equal to any extension fees, to the extent actually paid by
the borrower, to the extent not payable to any party pursuant to the
pooling and servicing agreement;
o eleventh, to the Peninsula Beverly Hills B-Note Non-Trust Mortgage
Loan, on a pro rata basis (based on its respective initial principal
balance), an amount equal to any extension fees, to the extent
actually paid by the borrower, to the extent not payable to any
party pursuant to the pooling and servicing agreement;
o twelfth, to the Peninsula Beverly Hills Trust Mortgage Loan and the
Peninsula Beverly Hills B-Note Non-Trust Mortgage Loan on a pro rata
basis (based on their respective initial principal balances), any
late payment charges actually paid by the borrower, to the extent
not payable to any party pursuant to the pooling and servicing
agreement; and
o thirteenth, to the Peninsula Beverly Hills Trust Mortgage Loan and
the Peninsula Beverly Hills B-Note Non-Trust Mortgage Loan, on a pro
rata basis (based on their respective initial principal balances),
any excess amounts paid by, but not required to be returned to, the
borrower or any guarantor.
Pursuant to the Peninsula Beverly Hills Intercreditor Agreement,
subsequent to the occurrence and during the continuation of a monetary or
non-monetary event of default that would place the loan into special servicing
(other than imminent default), collections on the Peninsula Beverly Hills Loan
Combination (excluding any amounts as to which other provision for their
application has been made in the related loan documents and excluding (x)
proceeds, awards or settlements to be applied to the restoration or repair of
the related mortgaged property or released to the borrower in accordance with
the Servicing Standard or the related loan documents and (y) all amounts for
required reserves or escrows required by the related loan documents to be held
as reserves or escrows) will be allocated (after application to unpaid servicing
fees, unreimbursed costs and expenses and/or reimbursement of advances and/or
interest thereon, incurred under the pooling and servicing agreement) generally
in the following manner, to the extent of available funds:
o first, to the applicable servicer or trustee, all amounts due and
payable;
o second, to the Peninsula Beverly Hills Trust Mortgage Loan an amount
equal to all accrued and unpaid interest (excluding default
interest) on its principal balance (net of related servicing fees);
o third, to the Peninsula Beverly Hills Trust Mortgage Loan, an amount
equal to its outstanding principal balance until its principal
balance has been reduced to zero;
o fourth, to the Peninsula Beverly Hills B-Note Non-Trust Mortgage
Loan, in an amount equal to (i) the aggregate amount of all payments
made by the holder thereof in connection with the exercise of its
cure rights and (ii) unreimbursed costs and expenses;
S-111
o fifth, to the Peninsula Beverly Hills B-Note Non-Trust Mortgage
Loan, an amount equal to all accrued and unpaid interest (excluding
default interest) on its respective principal balance at the
interest rate for the Peninsula Beverly Hills B-Note Non-Trust
Mortgage Loan less related master servicing fees;
o sixth, to the Peninsula Beverly Hills B-Note Non-Trust Mortgage
Loan, an amount equal to its principal balance until its principal
balance has been reduced to zero;
o seventh, to the Peninsula Beverly Hills Trust Mortgage Loan, any
yield maintenance premium actually received in respect of that
mortgage loan under the related loan documents;
o eighth, to the Peninsula Beverly Hills B-Note Non-Trust Mortgage
Loan, any yield maintenance premium actually received in respect of
that mortgage loan under the related loan documents;
o ninth, to the Peninsula Beverly Hills Trust Mortgage Loan and the
Peninsula Beverly Hills B-Note Non-Trust Mortgage Loan, in each case
on a pro rata basis (based on their respective initial principal
balances), any default interest, to the extent not payable to any
party pursuant to the pooling and servicing agreement;
o tenth, to the Peninsula Beverly Hills Trust Mortgage Loan, on a pro
rata basis (based on its respective initial principal balance), an
amount equal to any extension fees, to the extent actually paid by
the borrower, to the extent not payable to any party pursuant to the
pooling and servicing agreement;
o eleventh, to the Peninsula Beverly Hills B-Note Non-Trust Mortgage
Loan, on a pro rata basis (based on its respective initial principal
balance), an amount equal to any extension fees, to the extent
actually paid by the borrower, to the extent not payable to any
party pursuant to the pooling and servicing agreement;
o twelfth, to the Peninsula Beverly Hills Trust Mortgage Loan and the
Peninsula Beverly Hills B-Note Non-Trust Mortgage Loan on a pro rata
basis (based on their respective initial principal balances), any
late payment charges actually paid by the borrower, to the extent
not payable to any party pursuant to the pooling and servicing
agreement;
o thirteenth, to the Peninsula Beverly Hills Trust Mortgage Loan and
the Peninsula Beverly Hills B-Note Non-Trust Mortgage Loan, on a pro
rata basis (based on their respective initial principal balances),
any excess amounts paid by, but not required to be returned to, the
borrower or any guarantor.
Consent Rights. Under the Peninsula Beverly Hills Intercreditor Agreement,
the Peninsula Beverly Hills Controlling Party (as defined in the "Glossary"
below) will be entitled to direct the master servicer or the special servicer,
and the master servicer or the special servicer, as applicable, may not take any
of the following actions without the consent of the Peninsula Beverly Hills
Controlling Party:
o any acceleration of the mortgage loans in the Peninsula Beverly
Hills Loan Combination (unless such acceleration is by its terms
automatic under the related loan documents);
o any foreclosure upon or comparable conversion (which may include
acquisition of REO Property) of the ownership of the mortgaged
property or any subsequent sale of the mortgaged property (including
REO Property);
o any modification of, or waiver with respect to, (a) the material
payment terms of the Peninsula Beverly Hills Loan Combination, (b)
any provision of the related loan documents that restricts the
borrower or its equity owners from incurring additional indebtedness
or (c) any other material non-monetary term of the Peninsula Beverly
Hills Loan Combination;
S-112
o any proposed sale of the mortgaged property other than as
specifically permitted by the related loan documents;
o any acceptance of a discounted payoff of the Peninsula Beverly Hills
Loan Combination;
o any determination to bring the mortgaged property or REO Property
into compliance with applicable environmental laws or to otherwise
address hazardous materials located at the mortgaged property or REO
Property;
o any release of any portion of the mortgaged property (other than in
accordance with the terms of the related loan documents);
o any acceptance of additional or substitute collateral for the
Peninsula Beverly Hills Loan Combination (other than in accordance
with the terms of the related loan documents);
o any waiver of a "due-on-sale" or "due-on-encumbrance" clause or
insurance provision;
o any acceptance of an assumption agreement releasing the borrower, or
any guarantor, from liability under the Peninsula Beverly Hills Loan
Combination;
o the approval by holder of the Peninsula Beverly Hills Trust Mortgage
Loan of any replacement Special Servicer for the Peninsula Beverly
Hills Loan Combination (other than in connection with the Trustee
becoming the successor pursuant to the terms of the pooling and
servicing agreement);
o any adoption or approval of any plan or reorganization,
restructuring or similar plan in the bankruptcy of the borrower;
o any renewal or replacement of the then-existing insurance policies
to the extent that such renewal or replacement does not comply with
the terms of the related loan documents or any proposed modification
or waiver of any insurance requirements under the related loan
documents;
o any approval of the incurrence of additional debt by the borrower or
any mezzanine financing by any direct or indirect beneficial owner
of the borrower (other than in accordance with the terms of the
related loan documents) and the approval of any related
intercreditor agreement;
o any release of the borrower or any guarantor from liability under
the Peninsula Beverly Hills Loan Combination;
o any transfer or pledge of the mortgaged property or any portion
thereof or any transfer or pledge of any direct or indirect
ownership interest in the borrower, except as may be expressly
permitted by the related loan documents or any consent to an
assignment and assumption of the Peninsula Beverly Hills Loan
Combination pursuant to the related loan documents;
o any replacement of the property manager, if approval is required by
the related loan documents;
o any material reduction or material waiver of any obligations to pay
any reserve amounts under the related loan documents;
o any waiver of any guarantor's or indemnitor's obligations under any
guaranty or indemnity;
o any amendment to any single purpose entity provision of the related
loan documents;
o any determination with respect to any proposed material alterations
to the mortgaged property (to the extent consent is required under
the related loan documents);
o any determination with respect to annual budgets and business plans
for the mortgaged property (to the extent any such approval rights
are provided in the related loan documents); and
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o any determination regarding the use or application of condemnation
awards or insurance proceeds to the extent the lender has such
discretion.
Notwithstanding the foregoing, the applicable master servicer and the
special servicer may not follow any advice of the Peninsula Beverly Hills
Controlling Party that would cause it to violate the Servicing Standard,
applicable law, the related loan documents or the REMIC provisions.
Consultation Rights. Under the Peninsula Beverly Hills Intercreditor
Agreement, the Peninsula Beverly Hills Controlling Party will be entitled to
consult, in a non-binding manner, with the holder of the Peninsula Beverly Hills
Trust Mortgage Loan and the applicable servicer with respect to proposals to
take certain actions relating to the Peninsula Beverly Hills Loan Combination
and the mortgaged property and consider alternative actions recommended by the
Peninsula Beverly Hills Controlling Party including, among other things,
execution or renewal of any lease (if approval is required by the related loan
documents) and waiver of any notice provision related to prepayment of all or
any portion of the Peninsula Beverly Hills Loan Combination.
Purchase Option. The Peninsula Beverly Hills Intercreditor Agreement
provides that if (a) any principal or interest payment with respect to the
Peninsula Beverly Hills Loan Combination becomes delinquent, (b) the Peninsula
Beverly Hills Loan Combination has been accelerated, (c) the principal balance
of the Peninsula Beverly Hills Loan Combination is not paid at maturity, (d) the
borrower files a petition for bankruptcy or (e) the Peninsula Beverly Hills
Trust Mortgage Loan becomes a specially serviced loan (and an event of default
has occurred and is continuing or a default is reasonably foreseeable), then (if
the holder of the Peninsula Beverly Hills B-Note Non-Trust Mortgage Loan is not
then currently curing the subject default and at the time of such purchase the
subject event of default is continuing), the holder of the Peninsula Beverly
Hills B-Note Non-Trust Mortgage Loan has the option to purchase the Peninsula
Beverly Hills Trust Mortgage Loan from the trust fund, at a price generally
equal to the aggregate unpaid principal balance of the Peninsula Beverly Hills
Trust Mortgage Loan, together with all accrued and unpaid interest on that
mortgage loan, to but not including the date of such purchase, plus any related
servicing compensation, advances and interest on advances payable or
reimbursable to any party to the pooling and servicing agreement. No liquidation
fee will be payable to the special servicer in connection with this purchase
option as long as the holder of the Peninsula Beverly Hills B-Note Non-Trust
Mortgage Loan has exercised its right to purchase the related Trust Mortgage
Loan in the 90-day period following delivery of the repurchase option notice
required under the Peninsula Beverly Hills Intercreditor Agreement. In addition,
the pooling and servicing agreement grants to the special servicer and the
controlling class holder a fair value purchase option as described below under
"Servicing of the Mortgage Loans--Realization Upon Defaulted Mortgage Loans."
Cure Rights. In the event that the related borrower fails to make any
scheduled payments due under the related loan documents, the holder of the
Peninsula Beverly Hills B-Note Non-Trust Mortgage Loan will have five (5)
business days from the date of receipt of notice of the subject default (or five
business days from the expiration of any applicable grace period, whichever is
longer) to cure the default. In the event of a non-monetary default by the
related borrower, the holder of the Peninsula Beverly Hills B-Note Non-Trust
Mortgage Loan will have 30 days from the date of receipt of notice of the
subject default (or 30 days from the expiration of any applicable grace period,
whichever is longer) to cure the default; provided that if the subject
non-monetary default cannot be cured within 30 days, but the holder of the
Peninsula Beverly Hills B-Note Non-Trust Mortgage Loan has commenced and is
diligently prosecuting the cure of the subject default, the cure period will be
extended for an additional period not to exceed 30 additional days.
Without the prior consent of the holder of the Peninsula Beverly Hills
Trust Mortgage Loan, the holder of the Peninsula Beverly Hills B-Note Non-Trust
Mortgage Loan will not have the right to cure more than six cure events during
the term of the Peninsula Beverly Hills Loan Combination, and no single cure
event may exceed three months.
The Georgia-Alabama Retail Portfolio Loan CombinationGeneral. The Georgia-Alabama Retail Portfolio Trust Mortgage Loan, which
has a cut-off date principal balance of $39,926,997, representing approximately
1.6% of the initial mortgage pool balance and approximately 2.8% of the initial
loan group 1 balance, is part of the Loan Combination that we refer to as the
Georgia-Alabama Retail Portfolio Loan Combination. The Georgia-Alabama Retail
Portfolio Trust Mortgage Loan consists of a $33,000,000 A-note (the
"Georgia-Alabama Retail Portfolio A-Note Trust Mortgage Loan") and a $7,000,000
B-
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note (the "Georgia-Alabama Retail Portfolio B-Note Trust Mortgage Loan"). The
Georgia-Alabama Retail Portfolio Loan Combination consists of the related trust
mortgage loan (the "Georgia-Alabama Retail Portfolio Trust Mortgage Loan"), a
mortgage loan that is pari passu in right of payment with the Georgia-Alabama
Retail Portfolio A-Note Trust Mortgage Loan (the "Georgia-Alabama Retail
Portfolio A-Note Non-Trust Mortgage Loan," and together with the Georgia-Alabama
Retail Portfolio A-Note Trust Mortgage Loan, the "Georgia-Alabama Retail
Portfolio Senior Mortgage Loans") and a subordinate mortgage loan (the
"Georgia-Alabama Retail Portfolio B-Note Non-Trust Mortgage Loan" and together
with the Georgia-Alabama Retail Portfolio B-Note Trust Mortgage Loan, the
"Georgia-Alabama Retail Portfolio Junior Mortgage Loans"). The Georgia-Alabama
Retail Portfolio Loan Combination is secured by mortgages or deeds of trust on
the subject mortgaged real properties. The Georgia-Alabama Retail Portfolio
A-Note Non-Trust Mortgage Loan was deposited into the ML-CFC 2007-7 Commercial
Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-7
securitization (the "Other Securitization"). The Georgia-Alabama Retail
Portfolio B-Note Non-Trust Mortgage Loan is currently held by Countrywide
Commercial Real Estate Finance, Inc., or an affiliate of Countrywide Commercial
Real Estate Finance, Inc., and will not be included in the trust fund. The
Georgia-Alabama Retail Portfolio Loan Combination is serviced and administered
under the pooling and servicing agreement related to the ML-CFC 2007-7
Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series
2007-7 securitization (the "Other Pooling and Servicing Agreement"). The
relative rights of the holders of the loans comprising the Georgia-Alabama
Retail Portfolio Loan Combination are governed by intercreditor agreements (the
"Georgia-Alabama Retail Portfolio Intercreditor Agreements").
Priority of Payments. The rights of the holder of the Georgia-Alabama
Retail Portfolio A-Note Non-Trust Mortgage Loan to receive payments of interest,
principal and other amounts are pari passu with the rights of the holder of the
Georgia-Alabama Retail Portfolio A-Note Trust Mortgage Loan to receive such
amounts. The rights of the holder of the Georgia-Alabama Retail Portfolio B-Note
Non-Trust Mortgage Loan to receive payments of interest, principal and other
amounts are subordinate to the rights of the holders of the Georgia-Alabama
Retail Portfolio Senior Mortgage Loans to receive such amounts and are pari
passu to the rights of the holder of the Georgia-Alabama Retail Portfolio B-Note
Trust Mortgage Loan.
Pursuant to the Georgia-Alabama Retail Portfolio Intercreditor Agreements,
prior to an event of default, collections on the Georgia-Alabama Retail
Portfolio Loan Combination (excluding any amounts as to which other provision
for their application has been made in the related loan documents) will be
allocated (after the application to unpaid servicing fees, unreimbursed costs
and expenses and/or reimbursement of advances and interest thereon, incurred
under the series 2007-8 pooling and servicing agreement and/or the Other Pooling
and Servicing Agreement) generally in the following manner, to the extent of
available funds:
o first, to the applicable servicer or trustee, all amounts due and
payable;
o second, to the Georgia-Alabama Retail Portfolio Senior Mortgage
Loans, on a pari passu basis, an amount equal to all accrued and
unpaid interest (excluding default interest) on their principal
balances, less the related servicing fees;
o third, to the Georgia-Alabama Retail Portfolio Senior Mortgage
Loans, in an amount equal to their pro rata portion of principal
payments on the Georgia-Alabama Retail Portfolio Loan Combination;
o fourth, to the Georgia-Alabama Retail Portfolio Junior Mortgage
Loans, in an amount equal to (a) the aggregate amount of all
payments made by the holder thereof in connection with the exercise
of its cure rights, (b) accrued and unpaid interest (excluding
default interest) on its respective principal balance at the
interest rate for the Georgia-Alabama Retail Portfolio Junior
Mortgage Loans, less related master servicing fees and (c) their pro
rata portion of principal payments on the Georgia-Alabama Retail
Portfolio Loan Combination in accordance with the related loan
documents;
o fifth, to the Georgia-Alabama Retail Portfolio Senior Mortgage
Loans, any yield maintenance premiums actually received in respect
of the Georgia-Alabama Retail Portfolio Senior Mortgage Loans;
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o sixth, to the Georgia-Alabama Retail Portfolio Junior Mortgage
Loans, any yield maintenance premium actually received in respect of
the Georgia-Alabama Retail Portfolio Junior Mortgage Loans;
o seventh, to the Georgia-Alabama Retail Portfolio Senior Mortgage
Loans and to the Georgia-Alabama Retail Portfolio Junior Mortgage
Loans, in each case on a pro rata basis, any default interest, to
the extent not payable to any party pursuant to the Other Pooling
and Servicing Agreement or the 2007-8 pooling and servicing
agreement;
o eighth, to the Georgia-Alabama Retail Portfolio Senior Mortgage
Loans, on a pro rata basis (based on their respective initial
principal balances), an amount equal to any extension fees, to the
extent actually paid by the borrower and to the extent not payable
to any party pursuant to the Other Pooling and Servicing Agreement
or the 2007-8 pooling and servicing agreement;
o ninth, to the Georgia-Alabama Retail Portfolio Junior Mortgage
Loans, on a pro rata basis (based on their respective initial
principal balances), an amount equal to any extension fees, to the
extent actually paid by the borrower, to the extent not payable to
any party pursuant to the Other Pooling and Servicing Agreement or
the 2007-8 pooling and servicing agreement;
o tenth, to the Georgia-Alabama Retail Portfolio Senior Mortgage Loans
and to the Georgia-Alabama Retail Portfolio Junior Mortgage Loans,
pro rata, any late payment charges actually paid by the borrower, to
the extent not payable to any party pursuant to the Other Pooling
and Servicing Agreement or the 2007-8 pooling and servicing
agreement;
o eleventh, to the Georgia-Alabama Retail Portfolio Senior Mortgage
Loans and to the Georgia-Alabama Retail Portfolio Junior Mortgage
Loans on a pari passu basis, pro rata (based on their respective
initial principal balances), any excess amounts paid by, but not
required to be returned to, the borrower or loan sponsor.
Pursuant to the Georgia-Alabama Retail Portfolio Intercreditor Agreement,
subsequent to the occurrence and during the continuation of a monetary or other
material event of default, collections on the Georgia-Alabama Retail Portfolio
Loan Combination (excluding any amounts as to which other provision for their
application has been made in the related loan documents and excluding (x)
proceeds, awards or settlements to be applied to the restoration or repair of
the related mortgaged property or released to the borrower in accordance with
the Servicing Standard or the related loan documents and (y) all amounts for
required reserves or escrows required by the related loan documents to be held
as reserves or escrows) will be allocated (after application to unpaid servicing
fees, unreimbursed costs and expenses and/or reimbursement of advances and/or
interest thereon, incurred under the series 2007-8 pooling and servicing
agreement and/or the Other Pooling and Servicing Agreement) generally in the
following manner, to the extent of available funds:
o first, to the applicable servicer or trustee, all amounts due and
payable;
o second, to the Georgia-Alabama Retail Portfolio Senior Mortgage
Loans, an amount equal to all accrued and unpaid interest (excluding
default interest) on their principal balances, less related
servicing fees;
o third, to the Georgia-Alabama Retail Portfolio Senior Mortgage
Loans, principal payments, until their principal balances have been
reduced to zero;
o fourth, to the Georgia-Alabama Retail Portfolio Junior Mortgage
Loans, in an amount equal to (a) the aggregate amount of all
payments made by the holder thereof in connection with the exercise
of its cure rights, (b) all accrued and unpaid interest (excluding
default interest) on its respective principal balance (net of
related master servicing fees) and (c) principal payments until its
principal balance has been reduced to zero;
o fifth, to the Georgia-Alabama Retail Portfolio Senior Mortgage
Loans, any yield maintenance premium actually received in respect of
the Georgia-Alabama Retail Portfolio Senior Loans;
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o sixth, to the Georgia-Alabama Retail Portfolio Junior Mortgage
Loans, any yield maintenance premium actually received in respect of
Georgia-Alabama Retail Portfolio Junior Mortgage Loans;
o seventh, to the Georgia-Alabama Retail Portfolio Senior Mortgage
Loans, and to the Georgia-Alabama Retail Portfolio Junior Mortgage
Loans, in each case on a pro rata basis, any default interest, to
the extent not payable to any party pursuant to the Other Pooling
and Servicing Agreement or the 2007-8 pooling and servicing
agreement;
o eighth, to the Georgia-Alabama Retail Portfolio Senior Mortgage
Loans, an amount equal to any extension fees, to the extent actually
paid by the borrower, to the extent not payable to any party
pursuant to the Other Pooling and Servicing Agreement or the 2007-8
pooling and servicing agreement;
o ninth, to the Georgia-Alabama Retail Portfolio Junior Mortgage
Loans, on a pro rata basis an amount equal to any extension fees, to
the extent actually paid by the borrower, to the extent not payable
to any party pursuant to the Other Pooling and Servicing Agreement
or the 2007-8 pooling and servicing agreement;
o tenth, to the Georgia-Alabama Retail Portfolio Senior Mortgage
Loans, and to the Georgia-Alabama Retail Portfolio Junior Mortgage
Loans, in each case on a pro rata basis, any late payment charges
actually paid by the borrower, to the extent not payable to any
party pursuant to the Other Pooling and Servicing Agreement or the
2007-8 pooling and servicing agreement;
o eleventh, to the Georgia-Alabama Retail Portfolio Senior Mortgage
Loans, and to the Georgia-Alabama Retail Portfolio Junior Mortgage
Loans, on a pro rata basis (based on their respective initial
principal balances), any excess amounts paid by, but not required to
be returned to, the borrower or loan sponsor.
Consent Rights. Under the Georgia-Alabama Retail Portfolio Intercreditor
Agreements, the Georgia-Alabama Retail Portfolio Controlling Party (as defined
in the "Glossary" below) will be entitled to direct the Other Servicer and the
Other Special Servicer, and the Other Servicer or the Other Special Servicer, as
applicable, may not take any of the following actions without the consent of the
Georgia-Alabama Retail Portfolio Controlling Party:
o any acceleration of the mortgage loans in the Georgia-Alabama Retail
Portfolio Loan Combination (unless such acceleration is by its terms
automatic under the related loan documents);
o any foreclosure upon or comparable conversion (which may include
acquisition of REO Property) of the ownership of the related
mortgaged property or any subsequent sale of the mortgaged property
(including REO Property);
o any modification of, or waiver with respect to, (a) the material
payment terms of the Georgia-Alabama Retail Portfolio Loan
Combination, (b) any provision of the related loan documents that
restricts the related borrower or its equity owners from incurring
additional indebtedness or (c) any other material non-monetary term
of the Georgia-Alabama Retail Portfolio Loan Combination;
o any modification of any monetary term of the Georgia-Alabama Retail
Portfolio Loan Combination;
o any proposed sale of the mortgaged property other than as
specifically permitted by the related loan documents;
o any acceptance of a discounted payoff of the Georgia-Alabama Retail
Portfolio Loan Combination;
o any determination to bring the mortgaged property or REO Property
into compliance with applicable environmental laws or to otherwise
address hazardous materials located at the mortgaged property or REO
Property;
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o any release of any collateral for the mortgage loan (other than in
accordance with the terms of the related loan documents);
o any acceptance of additional or substitute collateral for the
Georgia-Alabama Retail Portfolio Loan Combination (other than in
accordance with the terms of the related loan documents);
o any waiver of a "due-on-sale" or "due-on-encumbrance" clause or any
material waiver or modification of any material insurance
requirement set forth in the related loan documents;
o any acceptance of an assumption agreement releasing the borrower, or
any guarantor, from liability under the Georgia-Alabama Retail
Portfolio Loan Combination;
o the approval by holder of the Georgia-Alabama Retail Portfolio Trust
Mortgage Loan of any replacement Special Servicer for the
Georgia-Alabama Retail Portfolio Loan Combination (other than in
connection with the Other Trustee becoming the successor pursuant to
the terms of the Other Pooling and Servicing Agreement);
o any adoption or approval of any plan or reorganization,
restructuring or similar plan in the bankruptcy of the borrower;
o any renewal or replacement of the then-existing insurance policies
to the extent lender's approval is required under the loan
documents;
o any sale of any mortgage loan comprising the Georgia-Alabama Retail
Portfolio Loan Combination (other than in connection with the
exercise of a purchase option under the Other Pooling and Servicing
Agreement);
o any approval of the incurrence of additional debt by the borrower or
any mezzanine financing by any direct or indirect beneficial owner
of the borrower (other than in accordance with the terms of the
related loan documents) and the approval of any related
intercreditor agreement;
o any release of the borrower or any guarantor from liability under
the Georgia-Alabama Retail Portfolio Loan Combination;
o any transfer or pledge of the mortgaged property or any portion
thereof or any transfer or pledge of any direct or indirect
ownership interest in the borrower, except as may be expressly
permitted by the related loan documents or any consent to an
assignment and assumption of the Georgia-Alabama Retail Portfolio
Loan Combination pursuant to the related loan documents;
o the exercise of any right under the loan documents to terminate the
property manager or any approval rights with respect to a change in
property manager; and
o any material reduction or material waiver of any obligations to pay
any reserve amounts under the related loan documents.
The Georgia-Alabama Retail Portfolio Controlling Party (as defined in the
"Glossary" below) is currently the controlling class representative (as designee
of the holder of the Georgia-Alabama Retail Portfolio B-Note Trust Mortgage
Loan) and the holder of the Georgia-Alabama Retail Portfolio B-Note Non-Trust
Mortgage Loan, collectively. In the event the holders of the Georgia-Alabama
Retail Portfolio Junior Mortgage Loans fail to agree on a course of action
within three (3) business days (or such reasonable time period as agreed to by
such holders, subject to the restrictions on timing set forth in the
Georgia-Alabama Retail Portfolio Intercreditor Agreement) after receipt of
notice of a request for Major Action (as such term is defined in the
Georgia-Alabama Retail Portfolio Intercreditor Agreement), each Georgia-Alabama
Retail Portfolio Junior Mortgage Loan holder shall provide the Other Servicer
with a proposal specifying whether to approve or disapprove the Major Action and
the Other Servicer shall determine, based on the proposals, whether to approve
or disapprove the Major Action, subject to the provisions in the Georgia-Alabama
Retail Portfolio Intercreditor Agreement, including that the Other Servicer
shall
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not make any decision that it reasonably and in good faith considers to be
inconsistent with the Servicing Standard or the REMIC provisions of the code.
Consultation Rights. Under the Georgia-Alabama Retail Portfolio
Intercreditor Agreement, the holder of the Georgia-Alabama Retail Portfolio
Trust Mortgage Loan and the Other Servicer and/or Other Special Servicer are
permitted to consult, on a non-binding basis, with the Georgia-Alabama Retail
Portfolio Controlling Party with respect to certain actions relating to the
Georgia-Alabama Retail Portfolio Loan Combination and the related mortgaged
properties including, among other things, execution or renewal of any lease (if
approval is required by the related loan documents) and waiver of any notice
provisions related to prepayment of all or any portion of the Georgia-Alabama
Retail Portfolio Loan Combination.
Purchase Option. The Georgia-Alabama Retail Portfolio Intercreditor
Agreement provides that if (a) any principal or interest payment with respect to
the Georgia-Alabama Retail Portfolio Loan Combination becomes delinquent, (b)
the Georgia-Alabama Retail Portfolio Loan Combination has been accelerated, (c)
the principal balance of the Georgia-Alabama Retail Portfolio Loan Combination
is not paid at maturity, (d) the related borrower files a petition for
bankruptcy or (e) the Georgia-Alabama Retail Portfolio Trust Mortgage Loan
becomes a specially serviced loan (and an event of default has occurred and is
continuing), then the holder of either of the Georgia-Alabama Retail Portfolio
Junior Loans has the option to purchase the Georgia-Alabama Retail Portfolio
Trust Mortgage Loan from the trust fund and the Georgia-Alabama Retail Portfolio
A-Note Non-Trust Mortgage Loan from the Other Securitization, at a price
generally equal to the aggregate unpaid principal balance of the loans being
purchased, together with all accrued and unpaid interest on that mortgage loan,
to but not including the date of such purchase, plus any related servicing
compensation, advances and interest on advances payable or reimbursable to any
party to the Other Pooling and Servicing Agreement or the 2007-8 pooling and
servicing agreement. In addition, the pooling and servicing agreement grants to
the special servicer and the controlling class holder a fair value purchase
option as described below under "Servicing of the Mortgage Loans--RealizationUpon Defaulted Mortgage Loans."
Cure Rights. In the event that the related borrower fails to make any
scheduled payments due under the related loan documents, the holders of the
Georgia-Alabama Retail Portfolio Junior Mortgage Loans each will have five
business days from the date of receipt of notice of the subject default (or five
business days from the expiration of any applicable grace period, whichever is
longer) to cure the default. In the event of a non-monetary default by the
related borrower, the holders of the Georgia-Alabama Retail Portfolio Junior
Mortgage Loans each will have 30 days from the date of receipt of notice of the
subject default (or 30 days from the expiration of any applicable grace period,
whichever is longer) to cure the default; provided that if the subject
non-monetary default cannot be cured within 30 days, but a holder of the
Georgia-Alabama Retail Portfolio Junior Mortgage Loan has commenced and is
diligently prosecuting the cure of the subject default, the cure period will be
extended for an additional period not to exceed 30 additional days.
Without the prior consent of the holder of the Georgia-Alabama Retail
Portfolio Trust Mortgage Loan, the holders of the Georgia-Alabama Retail
Portfolio Junior Mortgage Loan will not have the right to cure more than six
cure events during the term of the Georgia-Alabama Retail Portfolio Loan
Combination and no single cure event may exceed three months.
The MezzCap Loan Combinations
The Timbercreek Apartments Mortgage Loan, which has a cut-off date
principal balance of $5,317,000, representing approximately 0.2% of the initial
mortgage pool balance and approximately 0.5% of the initial loan group 2
balance, is part of the Loan Combination that we refer to as the Timbercreek
Apartments Loan Combination. The related borrower has encumbered the subject
mortgaged real property with subordinate debt, which constitutes the related
B-Note Non-Trust Loan. The aggregate debt consisting of the underlying trust
mortgage loan and the related B-Note Non-Trust Loan, which two mortgage loans
constitute a Loan Combination, is secured by a single mortgage or deed of trust
on the subject mortgaged real property. We intend to include the underlying
mortgage loan in the trust fund. That B-Note Non-Trust Loan was sold immediately
after origination to Mezz Cap Finance, LLC, and will not be included in the
trust fund. We refer to the Timbercreek Apartments Loan Combination as a
"MezzCap Loan Combination."
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In the case of the MezzCap Loan Combination, the underlying mortgage loan
and related B-Note Non-Trust Loan are cross-defaulted. The B-Note Non-Trust Loan
has the same maturity date and prepayment structure as the related underlying
trust mortgage loan. For purposes of the information presented in this
prospectus supplement with respect to the underlying mortgage loan that is part
of the MezzCap Loan Combination, unless the context clearly indicates otherwise,
the loan-to-value ratio and debt service coverage ratio information reflects
only the underlying mortgage loan and does not take into account the related
B-Note Non-Trust Loan.
In the case of the MezzCap Loan Combination, the trust, as the holder of
the related underlying mortgage loan, and the holder of the related B-Note
Non-Trust Loan are parties to an intercreditor agreement, which we refer to as
the MezzCap Intercreditor Agreement. The servicing and administration of the
underlying mortgage loan (and, to the extent described below, the related B-Note
Non-Trust Loan) that is part of the MezzCap Loan Combination will be performed
by the applicable master servicer and the special servicer on behalf of the
trust (and, in the case of the related B-Note Non-Trust Loan, on behalf of the
holder of that loan). The applicable master servicer will be required to collect
payments with respect to any B-Note Non-Trust Loan only following the occurrence
of certain events of default with respect to the MezzCap Loan Combination set
forth in the related MezzCap Intercreditor Agreement, each of which events of
default is referred to as a MezzCap Material Default. The following describes
certain provisions of the MezzCap Intercreditor Agreement.
Priority of Payments. The rights of the holder of each B-Note Non-Trust
Loan that is part of the MezzCap Loan Combination to receive payments of
interest, principal and other amounts are subordinate to the rights of the
holder of the related underlying mortgage loan to receive such amounts. So long
as a MezzCap Material Default has not occurred or, if a MezzCap Material Default
has occurred but is no longer continuing with respect to a MezzCap Loan
Combination, the borrower under the MezzCap Loan Combination will be required to
make separate payments of principal and interest to the holder of the related
underlying trust mortgage loan and B-Note Non-Trust Loan. Escrow and reserve
payments will be made to the applicable master servicer on behalf of the trust
as the holder of the underlying mortgage loans. Any voluntary principal
prepayments will be applied as provided in the related loan documents; provided
that any prepayment resulting from the payment of insurance proceeds or
condemnation awards or accepted during the continuance of an event of default
will be applied as though there were an existing MezzCap Material Default. If a
MezzCap Material Default occurs and is continuing with respect to the MezzCap
Loan Combination, then all amounts tendered by the borrower on the related
B-Note Non-Trust Loan will be subordinate to all payments due with respect to
the subject underlying trust mortgage loan and the amounts with respect to the
MezzCap Loan Combination will be paid in the following manner:
o first, to the master servicer, the special servicer and the trustee,
up to the amount of any unreimbursed costs and expenses paid by such
entity, including unreimbursed advances and interest thereon;
o second, to the master servicer and the special servicer, in an
amount equal to the accrued and unpaid servicing fees and/or other
compensation earned by them;
o third, to the subject underlying mortgage loan, in an amount equal
to interest (other than default interest) due with respect to the
subject underlying mortgage loan;
o fourth, to the subject underlying mortgage loan, in an amount equal
to the principal balance of the subject underlying mortgage loan
until paid in full;
o fifth, to the subject underlying mortgage loan, in an amount equal
to any prepayment premium, to the extent actually paid, allocable to
the subject underlying mortgage loan;
o sixth, to the related B-Note Non-Trust Loan up to the amount of any
unreimbursed costs and expenses paid by the holder of the related
B-Note Non-Trust Loan;
o seventh, to the related B-Note Non-Trust Loan, in an amount equal to
interest (other than default interest) due with respect to the
related B-Note Non-Trust Loan;
o eighth, to the related B-Note Non-Trust Loan, in an amount equal to
the principal balance of the related B-Note Non-Trust Loan until
paid in full;
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o ninth, to the related B-Note Non-Trust Loan, in an amount equal to
any prepayment premium, to the extent actually paid, allocable to
the related B-Note Non-Trust Loan;
o tenth, to the subject underlying mortgage loan and the related
B-Note Non-Trust Loan, in that order, in an amount equal to any
unpaid default interest accrued on the subject underlying mortgage
loan and the related B-Note Non-Trust Loan, respectively; and
o eleventh, to the subject underlying mortgage loan and the related
B-Note Non-Trust Loan, pro rata, based upon the initial principal
balances, any amounts actually collected that represent late payment
charges, other than a prepayment premium or default interest, that
are not payable to the applicable master servicer, the special
servicer or the trustee; and
o twelfth, any excess, to the subject underlying mortgage loan and the
related B-Note Non-Trust Loan, pro rata, based upon the initial
principal balances.
Notwithstanding the foregoing, amounts payable with respect to a B-Note
Non-Trust Loan that is part of the MezzCap Loan Combination will not be
available to cover all costs and expenses associated with the related underlying
mortgage loan. Unless a MezzCap Material Default exists with respect to the
MezzCap Loan Combination, payments of principal and interest with respect to the
related B-Note Non-Trust Loan will be distributed to the holder of the related
B-Note Non-Trust Loan and, accordingly, will not be available to cover certain
expenses that, upon payment out of the trust fund, will constitute Additional
Trust Fund Expenses. For example, a Servicing Transfer Event could occur with
respect to the MezzCap Loan Combination, giving rise to special servicing fees,
at a time when no MezzCap Material Default exists. In addition, following the
resolution of all Servicing Transfer Events (and presumably all MezzCap Material
Defaults) with respect to the MezzCap Loan Combination, workout fees would be
payable. The special servicer has agreed that special servicing fees, workout
fees and principal recovery fees earned with respect to any B-Note Non-Trust
Loan that is part of the MezzCap Loan Combination will be payable solely out of
funds allocable thereto. However, special servicing compensation earned with
respect to an underlying mortgage loan that is part of the MezzCap Loan
Combination, as well as interest on related advances and various other servicing
expenses, will be payable out of collections allocable to that underlying
mortgage loan and/or general collections on the mortgage pool if collections
allocable to the related B-Note Non-Trust Loan are unavailable or insufficient
to cover such items.
If, after the expiration of the right of the holder of the B-Note
Non-Trust Loan that is part of the MezzCap Loan Combination to purchase the
related underlying mortgage loan (as described under "--Purchase Option" below),
the related underlying mortgage loan or the subject B-Note Non-Trust Loan is
modified in connection with a workout so that, with respect to either the
related underlying mortgage loan or the subject B-Note Non-Trust Loan, (a) the
outstanding principal balance is decreased, (b) payments of interest or
principal are waived, reduced or deferred or (c) any other adjustment is made to
any of the terms of the MezzCap Loan Combination, then all payments to the
trust, as the holder of the related underlying mortgage loan, will be made as if
the workout did not occur and the payment terms of the related underlying
mortgage loan will remain the same. In that case, the holder of the subject
B-Note Non-Trust Loan will be required to bear the full economic effect of all
waivers, reductions or deferrals of amounts due on either the related underlying
mortgage loan or the subject B-Note Non-Trust Loan attributable to the workout
(up to the outstanding principal balance, together with accrued interest, of the
subject B-Note Non-Trust Loan).
So long as a MezzCap Material Default has not occurred with respect to the
MezzCap Loan Combination, the master servicer will have no obligation to collect
payments with respect to the related B-Note Non-Trust Loan. A separate servicer
of that B-Note Non-Trust Loan will be responsible for collecting amounts payable
in respect of that B-Note Non-Trust Loan. That servicer will have no servicing
duties or obligations with respect to the related underlying mortgage loan or
the related mortgaged real property. If a MezzCap Material Default occurs with
respect to the MezzCap Loan Combination, the master servicer or the special
servicer, as applicable, will (during the continuance of that MezzCap Material
Default) collect and distribute payments for both the related underlying
mortgage loan and the related B-Note Non-Trust Loan according to the sequential
order of priority provided for in the MezzCap Intercreditor Agreement.
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Consent Rights. Subject to certain limitations with respect to
modifications and certain rights of the holder of a B-Note Non-Trust Loan that
is part of the MezzCap Loan Combination to purchase the related underlying
mortgage loan (as discussed in the next paragraph and under "--Purchase Option"
below), the holder of that B-Note Non-Trust Loan has no voting, consent or other
rights with respect to the master servicer's or special servicer's
administration of, or the exercise of rights and remedies with respect to, the
MezzCap Loan Combination.
In the case of the MezzCap Loan Combination, the ability of the master
servicer or the special servicer, as applicable, to enter into any assumption,
amendment, deferral, extension, increase or waiver of any term or provision of
the related B-Note Non-Trust Loan, the related underlying mortgage loan or the
related loan documents, is limited by the rights of the holder of the related
B-Note Non-Trust Loan to approve modifications and other actions as contained in
the MezzCap Intercreditor Agreement; provided that the consent of the holder of
a B-Note Non-Trust Loan will not be required in connection with any modification
or other action with respect to the MezzCap Loan Combination after the
expiration of the right of the holder of the related B-Note Non-Trust Loan to
purchase the related underlying mortgage loan; and provided, further, that no
consent or failure to provide consent by the holder of the related B-Note
Non-Trust Loan may cause the master servicer or special servicer to violate
applicable law or any term of the series 2007-8 pooling and servicing agreement,
including the Servicing Standard. The holder of a B-Note Non-Trust Loan that is
part of the MezzCap Combination may not enter into any assumption, amendment,
deferral, extension, increase or waiver of the subject B-Note Non-Trust Loan or
the related loan documents without the prior written consent of the trustee, as
holder of the related underlying mortgage loan, acting through the master
servicer and/or the special servicer as specified in the series 2007-8 pooling
and servicing agreement.
Purchase Option. In the case of the MezzCap Loan Combination, upon the
occurrence of any one of certain defaults that are set forth in the MezzCap
Intercreditor Agreement, the holder of the related B-Note Non-Trust Loan will
have the right to purchase the related underlying mortgage loan at a purchase
price determined under the MezzCap Intercreditor Agreement and generally equal
to the sum of (a) the outstanding principal balance of the related underlying
mortgage loan, (b) accrued and unpaid interest on the outstanding principal
balance of the related underlying mortgage loan (excluding any default interest
or other late payment charges), (c) any unreimbursed servicing advances made by
the master servicer, the special servicer or the trustee with respect to the
related mortgaged real property, together with any advance interest thereon, (d)
reasonable out-of-pocket legal fees and costs incurred in connection with
enforcement of the MezzCap Loan Combination by the master servicer or the
special servicer in accordance with its duties and related to an event of
default, (e) any interest on any unreimbursed P&I advances made by the master
servicer the trustee with respect to the related underlying mortgage loan, (f)
any related master servicing fees, primary servicing fees, special servicing
fees and trustee's fees payable under the series 2007-8 pooling and servicing
agreement, and (g) out-of-pocket expenses incurred by the trustee, the special
servicer or the master servicer with respect to the MezzCap Loan Combination
together with advance interest thereon.
ADDITIONAL LOAN AND PROPERTY INFORMATION
Delinquencies. Each mortgage loan seller will represent in its mortgage
loan purchase agreement that, with respect to the mortgage loans that we will
purchase from that mortgage loan seller, no scheduled payment of principal and
interest under any mortgage loan was 30 days or more past due as of the cut-off
date for such mortgage loan, without giving effect to any applicable grace
period, nor was any scheduled payment 30 days or more delinquent with respect to
any monthly debt service payment at any time since the date of its origination,
without giving effect to any applicable grace period. None of the mortgage loans
has experienced any losses of principal or interest (through forgiveness of debt
or restructuring) since origination.
Tenant Matters. Described and listed below are certain aspects of the some
of the tenants at the mortgaged real properties for the mortgage loans--
o One hundred eighty-one (181) of the mortgaged real properties,
securing approximately 33.0% of the initial mortgage pool balance
and approximately 57.4% of the initial loan group 1 balance, are, in
each case, a retail property, an office property or an
industrial/warehouse property that is leased to one or more major
tenants that each occupies at least 25% of the net rentable area of
the
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particular property. A number of companies are major tenants at more
than one of the mortgaged real properties.
o Sixty-eight (68) of the mortgaged real properties, securing
approximately 8.3% of the initial mortgage pool balance and
approximately 14.5% of the initial loan group 1 balance, are
entirely or substantially leased to a single tenant.
o There are several cases in which a particular entity is a tenant at
more than one of the mortgaged real properties, and although it may
not be a major tenant at any of those properties, it is significant
to the success of the properties.
o Certain tenant leases at the mortgaged real properties (including
mortgaged real properties leased to a single tenant) have terms that
are shorter than the terms of the related mortgage loans and, in
some cases, significantly shorter. See Annex A-1 to this prospectus
supplement for information regarding lease term expirations with
respect to the three largest tenants at the mortgaged real
properties.
o Certain of the mortgaged real properties (for example, loan number 6
representing security for approximately 2.3% of the initial mortgage
pool balance and approximately 5.5% of the initial loan group 2
balance), are multifamily rental properties that have a material
tenant concentration of students. Those kinds of mortgaged real
properties may experience more fluctuations in occupancy rate than
other types of properties.
o One (1) loan, representing approximately 10.3% of the initial
mortgage pool balance and approximately 24.2% of the initial loan
group 2 balance is secured by manufactured housing properties of
which certain affiliates of the related borrower have master leased
or may master lease portions of the mortgaged properties, and in
turn sublease individual manufactured homes and lots to residential
subtenants.
o With respect to certain of the mortgage loans, one or more of the
tenants may be local, state or federal governmental entities
(including mortgaged real properties leased to a single tenant).
These entities may have the right to terminate their leases at any
time, subject to various conditions, including notice to the
landlord or a loss of available funding.
o With respect to certain of the mortgage loans, one or more tenants
(which may include significant tenants) have lease expiration dates
or early termination options, that occur prior to the maturity date
of the related mortgage loan. Additionally, mortgage loans may have
concentrations of leases expiring at varying rates in varying
percentages prior to the related maturity date and in some
situations, all of the leases, at a mortgaged real property may
expire prior to the related maturity date. Even if vacated space is
successfully relet, the costs associated with reletting, including
tenant improvements and leasing commissions, could be substantial
and could reduce cash flow from the mortgaged real properties.
o With respect to certain of the mortgage loans, one or more of the
tenants at the related mortgaged real property may be "dark", have
yet to take possession of their leased premises or may have taken
possession of their leased premises but have yet to open their
respective businesses to the general public and, in some cases, may
not have commenced paying rent under their leases.
Ground Leases. In the case of each of seven (7) mortgaged real properties,
representing approximately 3.0% of the initial mortgage pool balance and
approximately 5.2% of the initial loan group 1 balance, and approximately 0.1%
of the initial loan group 2 balance, the related mortgage constitutes a lien on
the related borrower's leasehold or sub-leasehold interest in the subject
mortgaged real property, but not on the corresponding fee interest. In each case
(except as specified below), the related ground lease or sub-ground lease, after
giving effect to all extension options exercisable at the option of the relevant
lender, expires more than ten (10) years after the stated maturity of the
related mortgage loan and the ground lessor has agreed to give the holder of the
related mortgage loan notice of, and the right to cure, any default or breach by
the related ground lessee.
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In the case of one (1) mortgage loan (loan number 3), secured by the
mortgaged real property identified on Annex A-1 to this prospectus supplement as
Executive Hills Portfolio, representing approximately 4.1% of the initial
mortgage pool balance and approximately 7.1% of the initial loan group 1
balance, with respect to one of the nine mortgaged real properties included in
the portfolio, the related borrower holds a fee simple interest for a majority
of the subject mortgaged real property and a leasehold interest for a small
portion of the subject mortgaged real property. Neither the building nor the
parking structure are situated on the leasehold portion of the subject mortgaged
property. Such leasehold portion only includes paved surface parking. The
related ground lease for the leasehold portion of the subject mortgaged real
property expires approximately five (5) years prior to the stated maturity of
the related mortgage loan. The mortgage loan was closed with the borrower having
30 days to obtain, among other things, a twenty-five (25) year extension of the
ground lease term from the ground lessor. The terms of the post-closing
agreement have not yet been satisfied and the time frame has been extended an
additional 60 days.
In addition, in the case of one (1) mortgage loan, (loan number 28),
secured by the mortgaged real property identified on Annex A-1 to this
prospectus supplement as Residence Inn Carlsbad, representing approximately 0.8%
of the initial mortgage pool balance and approximately 1.4% of the initial loan
group 1 balance, the mortgage loan is secured by both the related borrower's
leasehold interest and the ground lessor's fee interest in the mortgaged
property. Although this mortgaged real property is being characterized as a fee
interest above, the mortgage loan documents permit the release of the fee
interest subject to the satisfaction of certain conditions including:
o the ground lessor or any subsequent owner executes estoppel
agreements required by the lender;
o the debt service coverage ratio is at least 1.35x (or if a mezzanine
loan is in place, then the debt service coverage ratio must be at
least 1.20x);
o the lender has received all required documentation to effectuate
such release; and
o the sale is an arms-length transaction.
See "Risk Factors--Lending on Ground Leases Creates Risks for Lenders ThatAre Not Present When Lending on an Actual Ownership Interest in a Real Property"
and "Legal Aspects Of Mortgage Loans--Foreclosure--Leasehold Considerations" in
the accompanying base prospectus.
Additional and Other Financing.
Additional Secured Debt. In the case of each of the Trust Mortgage Loans,
the related mortgage also secures the related Non-Trust Loan, which will not be
included in the trust fund. See "--The Loan Combinations" above for a
description of certain aspects of the related Loan Combinations.
In the case of one (1) mortgage loan, (loan number 61), secured by the
mortgaged real property identified on Annex A-1 to this prospectus supplement as
Casino Self Storage, representing approximately 0.4% of the initial mortgage
pool balance and approximately 0.7% of the initial loan group 1 balance, there
is a junior lien on the related mortgaged property held by the City of Moorpark,
California. Pursuant to a certain 2003 settlement agreement resulting from a
zoning dispute between the related borrower and the city, the city agreed to a
certain zoning classification and the related borrower agreed to pay the city
$1,200,000 in installments over a period of 14 years. The related borrower's
obligation to pay the city is secured by a deed of trust which is junior to any
permanent financing , including the mortgage loan, pursuant to a subordination
agreement in favor of any permanent lender. The outstanding balance on the deed
of trust is $960,000.
In the case of eight (8) mortgage loans, representing approximately 7.0%
of the initial mortgage pool balance (five (5) mortgage loans in loan group 1,
representing approximately 9.7% of the initial loan group 1 balance, and three
(3) mortgage loans in loan group 2, representing approximately 3.3% of the
initial loan group 2 balance), the owners of the related borrowers are permitted
to incur subordinate debt secured by a lien on the related mortgaged real
property, as identified in the table below. The incurrence of this subordinate
indebtedness is generally subject to certain conditions, that may include any
one or more of the following conditions--
o consent of the mortgage lender;
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o satisfaction of loan-to-value tests, which provide that the
aggregate principal balance of the related mortgage loan and the
subject subordinate debt may not exceed a specified percentage of
the value of the related mortgaged real property and debt service
coverage tests, which provide that the combined debt service
coverage ratio of the related mortgage loan and the subject
subordinate loan may not be less than a specified number;
o subordination of the subordinate debt pursuant to a subordination
and intercreditor agreement; and/or
o confirmation from each rating agency that the subordinate financing
will not result in a downgrade, qualification or withdrawal of the
then current ratings of the offered certificates.
MORTGAGE LOAN CUT-OFF MAXIMUM COMBINED LTV
LOAN GROUP MORTGAGED REAL PROPERTY DATE BALANCE RATIO MINIMUM COMBINED DSCR
---------- ---------------------------- --------------------- -------------------- ---------------------
1 Executive Hills Portfolio $99,900,000 80% 1.20x
Pride Drive Business
1 Center(1) 23,500,000 80% 1.20x
2 The Haven Apartments 23,000,000 80% 1.20x
2 Edge Lake Apartments(2) 9,000,000 80% 1.10x
1 Douglasville Day Center(3) 6,900,000 75% 1.25x(3)
1 Paramount Self Storage 2,840,565 70% 1.40x
2 Swansonian Apartments 2,300,000 80% 1.20x
1 1515 Walsh Ave Industrial(4) 2,126,207 75% 1.25x
_____________
(1) Not permitted to be incurred in the first 12 months of the related loan
closing or in the 24 months prior to the loan maturity date.
(2) Not permitted to be incurred until 12 months after the related loan
closing date.
(3) Not permitted to be incurred in the first 24 months of the related loan
closing. DSCR shown is the actual DSCR. The DSCR assuming an interest rate
of 9.25% is 1.15x.
(4) Not permitted to be incurred until 6 months after the related loan closing
date.
Except as described above, the mortgage loans do not permit the related
borrowers to enter into additional subordinate or other financing that is
secured by the related mortgaged real properties without the lender's consent.
See "Risk Factors--Risks Relating to the Mortgage Loans--A Borrower's Other
Loans May Reduce the Cash Flow Available to the Mortgaged Real Property Which
May Adversely Affect Payment on Your Certificates; Mezzanine Financing Reduces a
Principal's Equity in, and Therefore Its Incentive to Support, a Mortgaged Real
Property" in this prospectus supplement. See also, See "Risk Factors--AdditionalSecured Debt Increases the Likelihood That a Borrower Will Default on a MortgageLoan Underlying Your Offered Certificates" and "Legal Aspects Of MortgageLoans--Subordinate Financing" in the accompanying base prospectus.
Mezzanine Debt. In the case of three (3) mortgage loans, representing
approximately 1.1% of the initial mortgage pool balance (one (1) mortgage loan
in loan group 1, representing approximately 0.4% of the initial loan group 1
balance, and two (2) mortgage loans in loan group 2, representing approximately
1.9% of the initial loan group 2 balance), the owner(s) of the related borrower
have pledged their interests in the borrower to secure secondary financing in
the form of mezzanine debt, as indicated in the table below.
INTEREST
MORTGAGE ORIGINAL RATE ON
LOAN LOAN MORTGAGED PROPERTY LOAN CUT-OFF MEZZANINE DEBT AGGREGATE MATURITY DATE OF MEZZANINE
NUMBER GROUP NAME DATE BALANCE BALANCE DEBT BALANCE MEZZANINE LOAN LOAN
------ ----- -------------------- ------------ -------------- ------------ ---------------- ---------
55 2 Plaza Apartments $ 11,120,000 $1,380,000 $ 12,500,000 5/8/12 12.50%
70 2 Brooklyn Apartments $ 8,800,000 $ 340,000 $ 9,140,000 5/8/17 12.50%
Mooresville Town
89 1 Square $ 6,067,231 $ 580,000 $ 6,647,231 7/18/17 12.50%
In the case of each of the above described mortgage loans with existing
mezzanine debt, the mezzanine loan was made by the related mortgage loan seller
as mezzanine lender simultaneously with the origination of the mortgage loan and
is subject to an intercreditor agreement entered into between the holder of the
mortgage loan and
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the mezzanine lender, under which, generally, among other covenants and
agreements between the mezzanine lender and the mortgage lender, the mezzanine
lender--
o has agreed, among other things, not to acquire the equity ownership
interests in the related mortgage borrower constituting collateral
securing its related mezzanine loan without either the consent of
the holder of the mortgage loan or written confirmation from the
rating agencies that an enforcement action would not cause the
downgrade, withdrawal or qualification of the then current ratings
of the offered certificates, unless certain conditions are met
relating to the identity and status of the transferee of the
collateral and the replacement property manager and, in certain
cases, the delivery of an acceptable non-consolidation opinion
letter by counsel, and
o has subordinated and made junior its related mezzanine loan to the
related mortgage loan (other than as to its interest in the pledged
collateral) and has the option to purchase the related mortgage loan
if that mortgage loan becomes a defaulted mortgage loan, and the
option to cure the default.
In the case of thirty-two (32) mortgage loans, representing approximately
20.0% of the initial mortgage pool balance (twenty-six (26) mortgage loans in
loan group 1, representing approximately 26.4% of the initial loan group 1
balance, and six (6) mortgage loans in loan group 2, representing approximately
11.3% of the initial loan group 2 balance), the owners of the related borrowers
are permitted to pledge their ownership interests in the borrowers as collateral
for mezzanine debt in the future, as identified in the table below. The
incurrence of this mezzanine indebtedness is generally subject to certain
conditions, that may include any one or more of the following conditions--
o consent of the mortgage lender;
o satisfaction of loan-to-value tests, which provide that the
aggregate principal balance of the related mortgage loan and the
subject mezzanine debt may not exceed a specified percentage of the
value of the related mortgaged real property and debt service
coverage tests, which provide that the combined debt service
coverage ratio of the related mortgage loan and the subject
mezzanine loan may not be less than a specified number;
o subordination of the mezzanine debt pursuant to a subordination and
intercreditor agreement; and/or
o confirmation from each rating agency that the mezzanine financing
will not result in a downgrade, qualification or withdrawal of the
then current ratings of the offered certificates.
FUTURE MEZZ
--------------------
MORTGAGE MAX
LOAN CUT-OFF COMBINED
LOAN NUMBER GROUP PROPERTY NAME BALANCE LTV MIN COMBINED DSCR
----------- ------- ----------------------------------- ----------- --------- ------------------
4 1 Peninsula Beverly Hills(1) $79,300,000 80% 1.15x(7)
6 2 Towers at University Town Center $56,835,903 90% 1.05x
8 1 Douglas Corporate Center I & II $36,000,000 75% N/A
13 1 Hilltop Plaza(8) $24,600,000 80% 1.20x(7)
15 1 Pride Drive Business Center(2) $23,500,000 80% 1.20x
17 1 Hollister Business Park $23,000,000 85% 1.10x
16 2 The Haven Apartments $23,000,000 90% 1.05x
28 1 Residence Inn Carlsbad(1) $19,000,000 80% 1.20x(7)
29 1 CVS Distribution Facility $18,700,000 76% 1.50x
32 1 Edgewater in Denver(4) $17,600,000 80% 1.20x(7)
34 2 Oakleigh Apartments $15,471,261 85% 1.10x
37 1 Legacy Oaks at Spring Hill $15,000,000 85% 1.07x
36 1 Solita Soho Hotel $15,000,000 75% 1.40x
44 1 Celebration at Six Forks(4) $13,370,000 90% 1.10x
46 1 Alexander Village at Brier Creek(4) $13,150,000 90% 1.10x
56 2 PKL Multifamily Portfolio $11,080,000 90% N/A
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FUTURE MEZZ
--------------------
MORTGAGE MAX
LOAN CUT-OFF COMBINED
LOAN NUMBER GROUP PROPERTY NAME BALANCE LTV MIN COMBINED DSCR
----------- ------- ----------------------------------- ----------- --------- ------------------
60 1 Federal Way Crossings II $10,500,000 80% 1.20x
62 1 El Pueblito Shopping Center $10,000,000 90% 1.05x
68 2 Edge Lake Apartments(3) $ 9,000,000 80% 1.10x
79 1 Walgreens - Tarzana $ 6,870,000 85% 1.10x
91 1 Raleigh Eastgate Shopping Center(4) $ 6,000,000 90% 1.10x
95 1 Grandview Plaza(5) $ 5,700,000 80% 1.16x(6)
100 1 HK Systems(9) $ 5,300,000 80% 1.15x
113 1 925 Broadbeck Drive $ 4,305,000 85% 1.07x
117 1 PKL Commercial Portfolio $ 4,200,000 90% N/A
121 1 Carson Street Retail $ 3,877,931 80% 1.15x
122 1 Kerr Drug - Durham $ 3,820,000 90% 1.05x
124 1 Kerr Drug - Hillsborough $ 3,720,000 90% 1.05x
138 1 2247 North Milwaukee $ 2,997,340 80% 1.20x
149 1 FedEx Moline $ 2,725,000 85% 1.05x
179 1 PetCo - Modesto $ 2,000,000 80% 1.15x
193 2 Saticoy Street Apartments $ 1,650,000 75% 1.20x(7)
_____________________________________
(1) Not permitted to be incurred until 24 months after the securitization
closing date.
(2) Not permitted to be incurred in the first 12 months of the related loan
closing or in the 24 months prior to the loan maturity date.
(3) Not permitted to be incurred in the first 12 months of the related loan
closing.
(4) Not permitted to be incurred in the first 24 months of the related loan
closing.
(5) Not permitted to be incurred in the first 36 months of the related loan
closing.
(6) The DSCR must be equal to or greater than the DSCR of the related mortgage
loan at closing.
(7) DSCR shown for each loan is the actual DSCR. The DSCR for each loan
assuming an interest rate of 9.25% is 1.00x, 0.90x, 0.90x, 0.90x and
1.00x, respectively.
(8) Not permitted to be incurred until 24 months after the related loan
closing and only in connection with the transfer of property and
assumption of the loan pursuant to the related loan agreement.
(9) LTV and DSCR shown are after a transfer of the related mortgaged property.
The LTV and DSCR prior to such transfer are 90% and 1.07x, respectively.
While a mezzanine lender has no security interest in or rights to the
mortgaged real property securing the related mortgage borrower's mortgage loan,
a default under a mezzanine loan could cause a change in control in the related
mortgage borrower as a result of the realization on the pledged ownership
interests by the mezzanine lender. See "Risk Factors--Risks Relating to the
Mortgage Loans--A Borrower's Other Loans May Reduce the Cash Flow Available to
the Mortgaged Real Property Which May Adversely Affect Payment on Your
Certificates; Mezzanine Financing Reduces a Principal's Equity in, and Therefore
Its Incentive to Support, a Mortgaged Real Property" in this prospectus
supplement.
Unsecured and Other Debt. The mortgage loans generally do not prohibit the
related borrower from incurring other obligations in the ordinary course of
business relating to the mortgaged real property, including, but not limited to,
trade payables and capital expenditures, or from incurring indebtedness and/or
entering into financing leases secured by or covering equipment or other
personal property located at or used in connection with the mortgaged real
property. Therefore, under certain of the mortgage loans, the borrower has
incurred or is permitted to incur additional financing that is not secured by
the mortgaged real property. In addition, borrowers that have not agreed to
certain special purpose covenants in the related loan documents are not
prohibited from incurring additional debt.
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In addition to the foregoing types of additional debt a borrower may have
incurred or is permitted to incur, we are aware, that in the case of two (2)
mortgage loans (loan numbers 42 and 93), representing approximately 0.8% of the
initial mortgage pool balance, the related borrowers have incurred, or are
permitted to incur, subordinate unsecured indebtedness.
In the case of one mortgage loan (loan number 2) secured by the mortgaged
real property identified on Annex A-1 to this prospectus supplement as Farallon
Portfolio, representing approximately 10.3% of the initial mortgage pool balance
and approximately 24.2% of the initial loan group 2 balance, certain affiliates
of the related borrower are permitted to enter into a revolving credit facility
secured by a non-controlling interest in the related borrower, in the maximum
amount of up to (x) $15,000,000 during the first year of the related mortgage
loan and (y) $25,000,000 thereafter.
Except as disclosed under this "--Additional and Other Financing"
subsection, we have not been able to confirm whether the respective borrowers
under the mortgage loans have any other debt outstanding. We make no
representation with respect to the mortgage loans as to whether any other
subordinate financing currently encumbers any mortgaged real property, whether
any borrower has incurred material unsecured debt or whether a third-party holds
debt secured by a pledge of an equity interest in a related borrower.
Zoning and Building Code Compliance. In connection with the origination of
each mortgage loan, the related originator examined whether the use and
operation of the mortgaged real property were in material compliance with
zoning, land-use, building, fire and health ordinances, rules, regulations and
orders then-applicable to that property. Evidence of this compliance may have
been in the form of legal opinions, surveys, recorded documents, letters from
government officials or agencies, title insurance endorsements, engineering or
consulting reports and/or representations by the related borrower. In some
cases, a certificate of occupancy was not available. Where the property as
currently operated is a permitted nonconforming use and/or structure, an
analysis was generally conducted as to--
o the likelihood that a material casualty would occur that would
prevent the property from being rebuilt in its current form; and
o whether existing replacement cost hazard insurance or, if necessary,
supplemental law or ordinance coverage would, in the event of a
material casualty, be sufficient--
1. to satisfy the entire mortgage loan; or
2. taking into account the cost of repair, to pay down the
mortgage loan to a level that the remaining collateral would
be adequate security for the remaining loan amount.
Notwithstanding the foregoing, we cannot assure you, however, that any
such analysis, or that the above determinations, were made in each and every
case.
Lockboxes. Fifty-nine (59) mortgage loans, representing approximately
56.9% of the initial mortgage pool balance (fifty-one (51) mortgage loans in
loan group 1, representing approximately 50.6% of the initial loan group 1
balance and eight (8) mortgage loans in loan group 2, representing approximately
65.5% of the initial loan group 2 balance), generally provide that all rents,
credit card receipts, accounts receivables payments and other income derived
from the related mortgaged real properties will be paid into one of the
following types of lockboxes, each of which is described below.
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o LOCKBOXES IN EFFECT ON THE DATE OF CLOSING. Income (or a portion
thereof sufficient to pay monthly debt service) is paid directly to
a lockbox account controlled by the lender, or both the borrower and
the lender, except that with respect to multifamily and manufactured
housing properties, income is collected and deposited in the lockbox
account by the manager of the mortgaged real property and, with
respect to hospitality properties, cash or "over-the-counter"
receipts are deposited into the lockbox account by the manager,
while credit card receivables are deposited directly into a lockbox
account. In the case of such lockboxes, funds deposited into the
lockbox account are disbursed either--
1. in accordance with the related loan documents to satisfy the
borrower's obligation to pay, among other things, debt service
payments, taxes and insurance and reserve account deposits; or
2. to the borrower on a daily or other periodic basis, until the
occurrence of a triggering event, following which the funds
will be disbursed to satisfy the borrower's obligation to pay,
among other things, debt service payments, taxes and insurance
and reserve account deposits.
In some cases, the lockbox account is currently under the control of
both the borrower and the lender, to which the borrower will have
access until the occurrence of the triggering event, after which no
such access will be permitted. In other cases, the related loan
documents require the borrower to establish the lockbox but each
account has not yet been established.
For purposes of this prospectus supplement, a lockbox is considered
to be a "hard" lockbox when income from the subject property is paid
directly by tenants (or, with respect to manufactured housing
properties, by borrowers or a property manager) into a lockbox
account controlled by the lender. A lockbox is considered to be a
"soft" lockbox (for all property types other than manufactured
housing) when income from the subject property is paid into a
lockbox account controlled by the lender, by the borrower or a
property manager.
o SPRINGING LOCKBOX. Income is collected by or otherwise accessible to
the borrower until the occurrence of a triggering event, following
which a lockbox of the type described above is put in place, from
which funds are disbursed to a lender controlled account and used to
pay, among other things, debt service payments, taxes and insurance
and reserve account deposits. Examples of triggering events may
include:
1. a failure to pay the related mortgage loan in full on or
before any related anticipated repayment date; or
2. a decline by more than a specified amount, in the net
operating income of the related mortgaged real property; or
3. a failure to meet a specified debt service coverage ratio; or
4. an event of default under the mortgage.
For purposes of this prospectus supplement, a springing lockbox is an
account, which may be a hard or soft lockbox, that is required to be established
by the borrower upon the occurrence of a trigger event.
The fifty-nine (59) mortgage loans referred to above provide for lockbox
accounts as follows:
% OF INITIAL % OF INITIAL LOAN % OF INITIAL LOAN
NUMBER OF MORTGAGE POOL GROUP 1 PRINCIPAL GROUP 2 PRINCIPAL
LOCKBOX TYPE MORTGAGE LOANS BALANCE BALANCE BALANCE
------------------------------- -------------- ------------- ----------------- ------------------
Hard 33 40.7% 28.9% 56.6%
Soft 7 6.9% 5.3% 8.9%
None at Closing, Springing Hard 11 6.4% 11.2% 0.0%
None at Closing, Springing Soft 6 2.3% 3.9% 0.0%
Soft at Closing, Springing Hard 2 0.7% 1.2% 0.0%
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Hazard, Liability and Other Insurance. Although exceptions exist, the loan
documents for each of the mortgage loans generally require the related borrower
to maintain with respect to the corresponding mortgaged real property the
following insurance coverage--
o hazard insurance in an amount that generally is, subject to an
approved deductible, at least equal to the lesser of--
1. the outstanding principal balance of the mortgage loan; and
2. the full insurable replacement cost or insurable value of the
improvements located on the insured property;
o if any portion of the improvements on the property was in an area
identified in the federal register by the Federal Emergency
Management Agency as having special flood hazards, flood insurance
meeting the requirements of the Federal Insurance Administration
guidelines, in an amount that is equal to the least of--
1. the outstanding principal balance of the related mortgage
loan;
2. the full insurable replacement cost or insurable value of the
improvements on the insured property; and
3. the maximum amount of insurance available under the National
Flood Insurance Act of 1968;
o commercial general liability insurance against claims for personal
and bodily injury, death or property damage; and
o business interruption or rent loss insurance.
Certain mortgage loans permit a borrower to satisfy its insurance coverage
requirement by permitting its tenant to self-insure (including with respect to
terrorism insurance coverage).
In general, the mortgaged real properties securing the mortgage loans,
including those properties located in California, are not insured against
earthquake risks. In the case of those properties located in California, other
than those that are manufactured housing communities or self storage facilities,
a third-party consultant conducted seismic studies to assess the probable
maximum loss for the property. However, with respect to the following mortgaged
properties located in California, identified on Annex A-1 as loan numbers 197,
209, 214, 215, 216, 217 and 218, no seismic studies were conducted. With respect
to any seismic study conducted in California or other locations, except as
indicated in the following sentence, none of the resulting reports concluded
that a mortgaged real property was likely to experience a probable maximum loss
in excess of 20% of the estimated replacement cost of the improvements. In the
case of the mortgage loan identified on Annex A-1 to this prospectus supplement
as Bank of Everett Tower, representing approximately 0.3% of the initial
mortgage pool balance and approximately 0.6% of the initial loan group 1
balance, the probable maximum loss exceeds 20% and the related borrower has
earthquake insurance in place. In the case of the mortgage loans identified on
Annex A-1 to this prospectus supplement as 1544 Placentia Ave Apartments and
1607 Greenfield Apartments, collectively representing approximately 0.2% of the
initial mortgage pool balance and approximately 0.4% of the initial loan group 2
balance, although the probable maximum loss was determined to exceed 20%, the
lender waived its requirement that the borrower carry earthquake insurance In
the case of the mortgage loan identified on Annex A-1 to this prospectus
supplement as U-Haul Vacaville, representing approximately 0.2% of the initial
mortgage pool balance and approximately 0.4% of the initial loan group 1
balance, although the probable maximum loss was determined to exceed 25%, the
lender waived its requirement that the borrower carry earthquake insurance.
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Each master servicer (with respect to each of the mortgage loans serviced
by it, including those of such mortgage loans that have become specially
serviced mortgage loans), and the special servicer, with respect to REO
Properties, will be required to use reasonable efforts, consistent with the
Servicing Standard, to cause each borrower to maintain, or if the borrower does
not maintain, the applicable master servicer will itself maintain, to the extent
available at commercially reasonable rates and that the trustee has an insurable
interest therein, for the related mortgaged real property, all insurance
required by the terms of the loan documents and the related mortgage.
Where insurance coverage at the mortgaged real property for any mortgage
loan is left to the lender's discretion, the master servicers will be required
to exercise such discretion in accordance with the Servicing Standard, and to
the extent that any mortgage loan so permits, the related borrower will be
required to exercise its efforts to obtain insurance from insurers which have a
minimum claims-paying ability rating of at least "A" by each of S&P and Fitch
(or the obligations of which are guaranteed or backed by a company having such
claims-paying ability), and where insurance is obtained by a master servicer,
such insurance must be from insurers that meet such requirements. In addition to
the foregoing, neither master servicer will be required to cause to be
maintained or to itself obtain and maintain any earthquake or environmental
insurance policy unless a policy providing such coverage was in effect either at
the time of the origination of the related mortgage loan or at the time of
initial issuance of the certificates.
In some cases, however, insurance may not be available from insurers that
are rated by any of S&P and Fitch. In that case, the applicable master servicer
or the special servicer, as the case may be, will be required to use reasonable
efforts, consistent with the servicing standard, to cause the borrower to
maintain, or will itself maintain, as the case may be, insurance with insurers
having the next highest ratings that are offering the required insurance at
commercially reasonable rates.
Various forms of insurance maintained with respect to any of the mortgaged
real properties for the mortgage loans, including casualty insurance,
environmental insurance and earthquake insurance, may be provided under a
blanket insurance policy. That blanket insurance policy will also cover other
real properties, some of which may not secure loans in the trust. As a result of
total limits under any of those blanket policies, losses at other properties
covered by the blanket insurance policy may reduce the amount of insurance
coverage with respect to a property securing one of the mortgage loans in the
trust. See "Risk Factors--Risks Related to the Mortgage Loans--The Absence or
Inadequacy of Insurance Coverage on the Property May Adversely Affect Payments
on Your Certificates" in this prospectus supplement and "Risk Factors--Lack ofInsurance Coverage Exposes a Trust to Risk for Particular Special Hazard Losses"
in the accompanying base prospectus.
With limited exception, the mortgage loans generally provide that
insurance and condemnation proceeds are to be applied either--
o to restore the mortgaged real property; or
o towards payment of the mortgage loan.
If any mortgaged real property is acquired by the trust through
foreclosure, deed in lieu of foreclosure or otherwise following a default on the
related mortgage loan, the special servicer will be required to maintain for
that property generally the same types of insurance policies providing coverage
in the same amounts as were previously required under the related mortgage loan.
The special servicer will not be required to obtain any insurance for an REO
Property that was previously required under the related mortgage if (a) such
insurance is not available at any rate; or (b) as determined by the special
servicer following due inquiry conducted in a manner consistent with the
Servicing Standard and subject to the rights of and consultation with the
controlling class representative, such insurance is not available at
commercially reasonable rates and the subject hazards are not commonly insured
against by prudent owners of similar real properties in similar locales.
The master servicers and the special servicer may each satisfy their
obligations regarding maintenance of the hazard insurance policies referred to
in this prospectus supplement by maintaining a blanket insurance policy or a
master force-placed insurance policy insuring (or entitling the applicable party
to obtain insurance) against hazard losses on all of the mortgage loans for
which they are responsible. If any blanket insurance policy maintained by a
master servicer or the special servicer contains a deductible clause, however,
the applicable master servicer or the
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special servicer, as the case may be, will be required, in the event of a
casualty covered by that policy, to pay out of its own funds all sums that--
o are not paid because of the deductible clause; and
o would have been paid if an individual hazard insurance policy
referred to above had been in place.
The applicable originator and its successors and assigns are the
beneficiaries under separate title insurance policies with respect to each
mortgage loan. It is expected that each title insurer will enter into
co-insurance and reinsurance arrangements with respect to the title insurance
policy as are customary in the title insurance industry. Subject to standard
exceptions, including those regarding claims made in the context of insolvency
proceedings, each title insurance policy will provide coverage to the trustee
for the benefit of the certificateholders for claims made against the trustee
regarding the priority and validity of the borrower's title to the subject
mortgaged real property.
ASSESSMENTS OF PROPERTY CONDITIONProperty Inspections. All of the mortgaged real properties for the
mortgage loans were inspected in connection with the origination or acquisition
of the related mortgage loan to assess their general condition. No inspection
revealed any patent structural deficiency or any deferred maintenance considered
material and adverse to the interests of the holders of the offered
certificates, except in such cases where adequate reserves have been
established.
Appraisals. All of the mortgaged real properties for the mortgage loans
were appraised by a state certified appraiser or an appraiser belonging to the
Appraisal Institute in accordance with the Federal Institutions Reform, Recovery
and Enforcement Act of 1989. The primary purpose of each of those appraisals was
to provide an opinion of the fair market value of the related mortgaged real
property. There can be no assurance that another appraiser would have arrived at
the same opinion of value. The resulting appraised values are shown on Annex A-1
to this prospectus supplement.
Environmental Assessments. A third-party environmental consultant
conducted a Phase I environmental site assessment, or updated a previously
conducted assessment (which update may have been pursuant to a database update),
with respect to the mortgaged real properties, other than the mortgaged real
properties securing the mortgage loans identified on Annex A-1 to this
prospectus supplement as loan numbers 115, 152, 159, 160, 165, 171, 191, 197,
198, 199, 201, 203, 209, 210, 213, 214, 215, 216, 217 and 218. All of the Phase
I environmental site assessments or updates occurred during the 12-month period
ending on the cut-off date, except with respect to loan numbers 7.15.
In the case of three (3) mortgaged real properties, representing
approximately 0.6% of the initial mortgage pool balance, and approximately 1.1%
of the initial loan group 1 balance, a third-party consultant also conducted a
Phase II environmental site assessment of each such mortgaged real property.
The environmental testing at any particular mortgaged real property did
not necessarily cover all potential environmental issues. For example, tests for
radon, lead-based paint and lead in water were generally performed only at
multifamily rental properties and only when the originator of the related
mortgage loan believed this testing was warranted under the circumstances.
If the environmental investigations described above identified material
adverse or potentially material adverse environmental conditions at or with
respect to any of the respective mortgaged real properties securing a mortgage
loan or at a nearby property with potential to affect a mortgaged real property,
then one of the following occurred:
o an environmental consultant investigated those conditions and
recommended no further investigations or remediation; or
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o an operation and maintenance plan or other remediation was required
and/or an escrow reserve was established to cover the estimated
costs of obtaining that plan and/or effecting that remediation; or
o those conditions were remediated or abated prior to the closing
date; or
o a letter was obtained from the applicable regulatory authority
stating that no further action was required; or
o an environmental liability insurance policy was obtained, a letter
of credit was provided, an escrow reserve account was established,
another party has acknowledged responsibility, or an indemnity from
the responsible party was obtained to cover the estimated costs of
any required investigation, testing, monitoring or remediation; or
o in those cases where an offsite property is the location of a
leaking underground storage tank or groundwater or soil
contamination, a responsible party has been identified under
applicable law, and generally either--
1. that condition is not known to have affected the mortgaged
real property; or
2. the responsible party has either received a letter from the
applicable regulatory agency stating no further action is
required, established a remediation fund, engaged in
responsive remediation, or provided an indemnity or guaranty
to the borrower; or
3. an environmental insurance policy was obtained (which was not
for the primary benefit of a secured lender).
In some cases, the identified condition related to the presence of
asbestos-containing materials, lead-based paint, mold, and/or radon. Where these
substances were present, the environmental consultant often recommended, and the
related loan documents required--
o the establishment of an operation and maintenance plan to address
the issue, or
o in some cases involving asbestos-containing materials, lead-based
paint, mold and/or radon, an abatement or removal program or a
long-term testing program.
In a few cases, the particular asbestos-containing materials, lead-based
paint, mold and/or radon was in need of repair or other remediation. This could
result in a claim for damages by any party injured by that condition. In certain
cases, the related lender did not require the establishment of an operation and
maintenance plan despite the identification of issues involving
asbestos-containing materials and/or lead-based paint.
In some cases, the environmental consultant did not recommend that any
action be taken with respect to a potentially material adverse environmental
condition at a mortgaged real property securing a mortgage loan, because a
responsible party with respect to that condition had already been identified.
There can be no assurance, however, that such a responsible party will be
financially able to address the subject condition.
In some cases where the environmental consultant recommended specific
remediation of an adverse environmental condition, the related originator of a
mortgage loan required the related borrower generally:
o to carry out the specific remedial measures prior to closing;
o carry out the specific remedial measures post-closing and, if deemed
necessary by the related originator of the subject mortgage loan,
deposit with the lender a cash reserve in an amount generally equal
to 100% to 125% of the estimated cost to complete the remedial
measures; or
o to monitor the environmental condition and/or to carry out
additional testing, in the manner and within the time frame
specified in the related loan documents.
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Some borrowers under the mortgage loans have not satisfied all
post-closing obligations required by the related loan documents with respect to
environmental matters. There can be no assurance that recommended operations and
maintenance plans have been or will continue to be implemented.
In some cases, the environmental assessment for a mortgaged real property
identified potential and, in some cases, significant environmental issues at
nearby properties. The resulting environmental report indicated, however, that--
o the mortgaged real property had not been affected or had been
minimally affected,
o the potential for the problem to affect the mortgaged real property
was limited, or
o a person responsible for remediation had been identified.
The information provided by us in this prospectus supplement regarding
environmental conditions at the respective mortgaged real properties is based on
the environmental site assessments referred to in this "--EnvironmentalAssessments" subsection and has not been independently verified by--
o us,
o any of the other parties to the pooling and servicing agreement,
o any of the mortgage loan sellers,
o any of the underwriters, or
o the affiliates of any of these parties.
There can be no assurance that the environmental assessments or studies,
as applicable, identified all environmental conditions and risks at, or that any
environmental conditions will not have a material adverse effect on the value of
or cash flow from, one or more of the mortgaged real properties.
See "Risk Factors--Risks Related to the Mortgage Loans--Lending onIncome-Producing Real Properties Entails Environmental Risks" in this prospectus
supplement.
Secured Creditor Environmental Insurance Policy. Certain mortgaged real
properties are covered by individual secured creditor impaired property
environmental insurance policies. In general, each policy insures the trust fund
against losses resulting from certain known and unknown environmental conditions
in violation of applicable environmental standards at the subject mortgage real
properties during the applicable policy periods, which periods continue at least
five years beyond the maturity date of the mortgage loans to which they relate,
provided no foreclosure has occurred. Subject to certain conditions and
exclusions, each insurance policy, by its terms, generally provides coverage, up
to a maximum of 125% of the original loan balance against (i) losses resulting
from default under the mortgage loans to which they relate if on site
environmental conditions in violation of the applicable environmental standards
are discovered at the mortgage real properties during the policy periods and no
foreclosures of the mortgaged real properties have taken place, (ii) clean-up
costs discovered by the insured resulting from environmental conditions in
violation of the applicable environmental standards at or emanating from the
mortgaged real properties, and (iii) losses from third-party claims against the
trust during the policy period for any losses for bodily injury, property damage
or related claim expenses caused by conditions in violation of applicable
environmental standards.
The premiums for each of the secured creditor impaired property policies
described above, have been or, as of the date of initial issuance of the offered
certificates, will have been paid in full. We cannot assure you, however, that
should environmental insurance be needed, coverage would be available or
uncontested, that the terms and conditions of such coverage would be met, that
coverage would be sufficient for the claims at issue or that coverage would not
be subject to certain deductibles.
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Engineering Assessments. Except as indicated in the following paragraph,
in connection with the origination of the mortgage loans, a licensed engineer
inspected the related mortgaged real properties except the properties securing
the mortgage loans identified on Annex A-1 to this prospectus supplement as loan
numbers 115, 151, 152, 159, 160, 165, 171, 176, 191, 197, 198, 199, 201, 203,
209, 210, 213, 214, 215, 216, 217 and 218, to assess the structure, exterior
walls, roofing, interior structure and mechanical and electrical systems. The
resulting engineering reports were prepared:
o in the case of six hundred forty-two (642) mortgaged real
properties, representing security for approximately 98.5% of the
initial mortgage pool balance, during the 12-month period preceding
the cut-off date,
The resulting reports indicated deferred maintenance items and/or
recommended capital improvements on the mortgaged real properties. Generally,
with respect to a majority of the mortgaged real properties, where the
engineer's recommended repairs, corrections or replacements were deemed material
by the related originator, the related borrowers were required to carry out the
necessary repairs, corrections or replacements, and in some instances, to
establish reserves, generally in an amount ranging from 100% to 125% of the
licensed engineer's estimated cost of the recommended repairs, corrections or
replacements to fund deferred maintenance or replacement items that the reports
characterized as in need of prompt attention.
ASSIGNMENT OF THE MORTGAGE LOANS
On or before the date of initial issuance of the offered certificates,
each mortgage loan seller will transfer its mortgage loans to us, and we will
then transfer all the mortgage loans to the trust. In each case, the transferor
will assign the subject mortgage loans, without recourse, to the transferee.
In connection with the foregoing transfers, the related mortgage loan
seller will be required to deliver the following documents, among others, to the
custodian with respect to each of the mortgage loans--
o either:
1. the original promissory note, endorsed without recourse to the
order of the trustee or in blank; or
2. if the original promissory note has been lost, a copy of that
note, together with a lost note affidavit and indemnity;
o the original or a copy of the related mortgage instrument, together
with originals or copies of any intervening assignments of that
instrument, in each case, unless the particular document has not
been returned from the applicable recording office, with evidence of
recording or certified by the applicable recording office;
o the original or a copy of any separate assignment of leases and
rents, together with originals or copies of any intervening
assignments of that instrument, in each case, unless the particular
document has not been returned from the applicable recording office,
with evidence of recording or certified by the applicable recording
office;
o either:
1. a completed assignment of the related mortgage instrument in
favor of the trustee or in blank, in recordable form except
for completion of the assignee's name if delivered in blank
and except for missing recording information; or
2. a certified copy of that assignment as sent for recording;
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o either:
1. a completed assignment of any separate related assignment of
leases and rents in favor of the trustee or in blank, in
recordable form except for completion of the assignee's name
if delivered in blank and except for missing recording
information; or
2. a certified copy of that assignment as sent for recording;
o an original or copy of the lender's policy or certificate of title
insurance or, if a title insurance policy has not yet been issued or
located, a commitment for title insurance, which may be a pro forma
policy or a marked version of the policy that has been executed by
an authorized representative of the title company or an agreement to
provide the same pursuant to binding escrow instructions executed by
an authorized representative of the title company;
o in those cases where applicable, the original or a copy of the
related ground lease;
o originals or copies of any consolidation, assumption, substitution
and modification agreements in those instances where the terms or
provisions of the related mortgage instrument or promissory note
have been consolidated or modified or the subject mortgage loan has
been assumed; and
o a copy of any related letter of credit (the original of which will
be required to be delivered to the applicable master servicer).
provided that mortgage loan seller may deliver certain documents, including
those identified in the third, fourth and fifth bullets, within the 30-day
period following the date of issuance of the offered certificates.
The custodian is required to hold all of the documents delivered to it
with respect to the mortgage loans, in trust for the benefit of the
certificateholders. Within a specified period of time following that delivery,
the custodian will be further required to conduct a review of those documents.
The scope of the custodian's review of those documents will, in general, be
limited solely to confirming that those documents have been received. None of
the trustee, either master servicer, the special servicer or custodian is under
any duty or obligation to inspect, review or examine any of the documents
relating to the mortgage loans to determine whether the document is valid,
effective, enforceable, in recordable form or otherwise appropriate for the
represented purpose.
If--
o any of the above-described documents required to be delivered by the
respective mortgage loan sellers to the custodian is not delivered
or is otherwise defective in the manner contemplated by the pooling
and servicing agreement; and
o that omission or defect materially and adversely affects the value
of, or the interests of the certificateholders in, the subject loan,
then the omission or defect will constitute a material document defect as to
which the certificateholders will have the rights against us described below
under "--Repurchases and Substitutions," provided that no document defect (other
than with respect to a mortgage note, mortgage, title insurance policy, ground
lease or any letter of credit) will be considered to materially and adversely
affect the interests of the certificateholders or the value of the related
mortgage loan unless the document with respect to which the document defect
exists is required in connection with an imminent enforcement of the lender's
rights or remedies under the related mortgage loan, defending any claim asserted
by any borrower or third party with respect to the mortgage loan, establishing
the validity or priority of any lien on any collateral securing the mortgage
loan or for any immediate servicing obligations.
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Within a specified period following the later of--
o the date on which the offered certificates are initially issued; and
o the date on which all recording information necessary to complete
the subject document is received by the custodian,
the custodian or one or more independent third-party contractors retained at the
expense of the mortgage loan sellers must submit for recording in the real
property records of the applicable jurisdiction each of the assignments of
recorded loan documents in the trustee's favor described above. Because most of
the mortgage loans are newly originated, many of those assignments cannot be
completed and recorded until the related mortgage and/or assignment of leases
and rents, reflecting the necessary recording information, is returned from the
applicable recording office.
REPRESENTATIONS AND WARRANTIES
In each mortgage loan purchase agreement, the applicable mortgage loan
seller has represented and warranted with respect to each mortgage loan (subject
to certain exceptions specified in each mortgage loan purchase agreement), as of
the issuance date, or as of such other date specifically provided in the
representation and warranty, among other things, generally that:
(a) The information relating to the mortgage loan set forth in the loan
schedule attached to the related mortgage loan purchase agreement
will be true and correct in all material respects as of the cut-off
date.
(b) Immediately prior to its transfer and assignment of the mortgage
loan, it had good title to, and was the sole owner of, the mortgage
loan.
(c) The related mortgage instrument is a valid and, subject to the
exceptions and limitations on enforceability set forth in clause (d)
below, enforceable first priority lien upon the related mortgaged
real property, prior to all other liens and there are no other liens
and/or encumbrances that are pari passu with the lien of the
mortgage, in any event subject, however, to the Permitted
Encumbrances, which Permitted Encumbrances do not, individually or
in the aggregate, materially interfere with the security intended to
be provided by the related mortgage, the current principal use of
the related mortgaged real property, the value of the mortgaged real
property or the current ability of the related mortgaged real
property to generate income sufficient to service the mortgage loan.
(d) The promissory note, the mortgage instrument and each other
agreement executed by or on behalf of the related borrower in
connection with the mortgage loan is the legal, valid and binding
obligation of the related borrower, subject to any non-recourse
provisions contained in any of the foregoing agreements and any
applicable state anti-deficiency or market value limit deficiency
legislation. In addition, each of the foregoing documents is
enforceable against the related borrower in accordance with its
terms, except as enforcement may be limited by (1) bankruptcy,
insolvency, reorganization, receivership, fraudulent transfer and
conveyance or other similar laws affecting the enforcement of
creditors' rights generally, (2) general principles of equity,
regardless of whether such enforcement is considered in a proceeding
in equity or at law, and (3) public policy considerations regarding
provisions purporting to provide indemnification for securities law
violations, except that certain provisions in those documents may be
further limited or rendered unenforceable by applicable law, but,
subject to the limitations set forth in the foregoing clauses (1),
(2) and (3), such limitations or unenforceability will not render
those loan documents invalid as a whole or substantially interfere
with the lender's realization of the principal benefits and/or
security provided thereby.
(e) It has not received notice and has no actual knowledge, of any
proceeding pending for the condemnation of all or any material
portion of the mortgaged real property for the mortgage loan.
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(f) There exists an American Land Title Association or equivalent form
of the lender's title insurance policy (or, if the title policy has
yet to be issued, a pro forma policy or a marked up title insurance
commitment binding on the title insurer) on which the required
premium has been paid, insuring the first priority lien of the
related mortgage instrument or, if more than one, mortgage
instruments, in the original principal amount of the mortgage loan
after all advances of principal, subject only to Permitted
Encumbrances, which Permitted Encumbrances do not, individually or
in the aggregate, materially interfere with the security intended to
be provided by the related mortgage, the current principal use of
the related mortgaged real property, the value of the mortgaged real
property or the current ability of the related mortgaged real
property to generate income sufficient to service the mortgage loan.
(g) The proceeds of the mortgage loan have been fully disbursed, except
in those cases where the full amount of the mortgage loan has been
disbursed, but a portion of the proceeds is being held in escrow or
reserve accounts pending satisfaction of specific leasing criteria,
repairs or other matters with respect to the related mortgaged real
property, and there is no requirement for future advances under the
mortgage loan.
(h) If the related mortgage instrument is a deed of trust, a trustee,
duly qualified under applicable law, has either been properly
designated and currently so serves or may be substituted in
accordance with the deed of trust and applicable law.
(i) Except as identified in the engineering report prepared by an
independent engineering consultant obtained in connection with the
origination of the mortgage loan (if such a report was prepared), to
its knowledge, the related mortgaged real property is in good repair
and free and clear of any damage that would materially and adversely
affect its value as security for the mortgage loan, except in any
such case where an escrow of funds, letter of credit or insurance
coverage exists sufficient to effect the necessary repairs and
maintenance.
In addition to the above-described representations and warranties, each
mortgage loan seller will also make additional representations and warranties
regarding the mortgage loans being sold by them to depositor, which (subject to
certain exceptions specified in each mortgage loan purchase agreement), will
include representations and warranties generally to the following effect:
o the borrower is obligated to be in material compliance with
environmental laws and regulations;
o the mortgage loan is eligible to be included in a REMIC;
o there are no liens for delinquent real property taxes on the related
mortgaged real property;
o the related borrower is not the subject of bankruptcy proceedings;
o if applicable, a mortgage loan secured by a borrower's leasehold
interest contains certain provisions for the benefit of the lender;
and
o the borrower is obligated to provide financial information regarding
the related mortgaged real property on at least an annual basis.
REPURCHASES AND SUBSTITUTIONS
In the case of (i) a breach of any of the loan-specific representations
and warranties in any mortgage loan purchase agreement that materially and
adversely affects the value of a mortgage loan or the interests of the
certificateholders in that mortgage loan or (ii) a material document defect as
described above under "--Assignment of the Mortgage Loans" above, the applicable
mortgage loan seller, if it does not cure such breach or defect in all material
respects within a period of 90 days following its receipt of notice thereof, is
obligated pursuant to the applicable mortgage loan purchase agreement (the
relevant rights under which have been assigned by us to the trustee) to either
substitute a qualified substitute mortgage loan (so long as that substitution is
effected prior to the second anniversary of the Closing Date) and pay any
substitution shortfall amount or to repurchase the affected
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mortgage loan within such 90-day period at the purchase price described below;
provided that, unless the breach or defect would cause the mortgage loan not to
be a qualified mortgage within the meaning of section 860G(a)(3) of the Code,
the applicable mortgage loan seller generally has an additional 90-day period to
cure such breach or defect if it is diligently proceeding with such cure. Each
mortgage loan seller is solely responsible for its repurchase or substitution
obligation, and such obligations will not be our responsibility. The purchase
price at which a mortgage loan seller will be required to repurchase a mortgage
loan as to which there remains an uncured material breach or material document
defect, as described above, will be generally equal to the sum (without
duplication) of--
o the unpaid principal balance of that mortgage loan at the time of
purchase, plus
o all unpaid interest due and accrued with respect to that mortgage
loan at its mortgage interest rate to, but not including, the due
date in the collection period of purchase (exclusive of any portion
of that interest that constitutes Additional Interest), plus
o all unpaid interest accrued on Advances made under the pooling and
servicing agreement with respect to that mortgage loan, plus
o all unreimbursed servicing advances made under the pooling and
servicing agreement with respect to that mortgage loan, plus
o any reasonable costs and expenses, including, but not limited to,
the cost of any enforcement action, incurred by the applicable
master servicer, the special servicer, the trustee or the trust fund
in connection with any such purchase by a mortgage loan seller (to
the extent not included in the preceding bullet), plus
o other Additional Trust Fund Expenses related to that mortgage loan,
including special servicing fees, plus
o if the circumstances (which are discussed under "Servicing of theMortgage Loans--Servicing and Other Compensation and Payment ofExpenses--The Principal Recovery Fee") under which a principal
recovery fee would be payable to the special servicer are present, a
principal recovery fee.
If (i) any mortgage loan is required to be repurchased or substituted for
in the manner described above, (ii) such mortgage loan is then a Crossed Loan,
and (iii) the applicable document defect (including any omission) or breach of a
representation and warranty does not constitute a defect or breach, as the case
may be, as to any other Crossed Loan in such Crossed Group (without regard to
this paragraph), then the applicable defect or breach, as the case may be, will
be deemed to constitute a defect or breach, as the case may be, as to any other
Crossed Loan in the Crossed Group for purposes of this paragraph, and the
related mortgage loan seller will be required to repurchase or substitute for
such other Crossed Loan(s) in the related Crossed Group unless (A) the weighted
average debt service coverage ratio for all the remaining related Crossed Loans
for the four calendar quarters immediately preceding the repurchase or
substitution is not less than the weighted average debt service coverage ratio
for all such related Crossed Loans, including the affected Crossed Loan, for the
four calendar quarters immediately preceding the repurchase or substitution; and
(B) the weighted average loan-to-value ratio of the remaining related Crossed
Loans determined at the time of repurchase or substitution, based upon an
appraisal obtained by the special servicer, is not greater than the weighted
average loan-to-value ratio for all such Crossed Loans, including the affected
Crossed Loan, at the time of repurchase or substitution. In the event that one
or more of such other Crossed Loans satisfy the aforementioned criteria, the
mortgage loan seller may elect either to repurchase or substitute for only the
affected Crossed Loan as to which the related breach or defect exists or to
repurchase or substitute for all of the Crossed Loans in the related Crossed
Group.
To the extent that the related mortgage loan seller repurchases or
substitutes only for an affected Crossed Loan as described in the immediately
preceding paragraph while the trustee continues to hold any related Crossed
Loans, we and the related mortgage loan seller will agree in the related
mortgage loan purchase agreement to forbear from enforcing any remedies against
the other's Primary Collateral, but each is permitted to exercise remedies
against the Primary Collateral securing its respective affected Crossed Loans,
so long as such exercise does not materially impair the ability of the other
party to exercise its remedies against its Primary Collateral. If the exercise
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of remedies by one party would materially impair the ability of the other party
to exercise its remedies with respect to the Primary Collateral securing the
Crossed Loans held by such party, then both parties have agreed in the related
mortgage loan purchase agreement to forbear from exercising such remedies until
the loan documents evidencing and securing the relevant mortgage loans can be
modified to remove the threat of material impairment as a result of the exercise
of remedies.
Notwithstanding the foregoing discussion, if any mortgage loan is
otherwise required to be repurchased or substituted for in the manner described
above, as a result of a document defect or breach with respect to one or more
mortgaged real properties that secure a mortgage loan that is secured by
multiple properties, the related mortgage loan seller will not be required to
effect a repurchase or substitution of the subject mortgage loan if--
o the affected mortgaged real property(ies) may be released pursuant
to the terms of any partial release provisions in the related loan
documents and such mortgaged real property(ies) are, in fact,
released,
o the remaining mortgaged real property(ies) satisfy the requirements,
if any, set forth in the loan documents and the applicable mortgage
loan seller provides an opinion of counsel to the effect that such
release would not cause either of REMIC I or REMIC II to fail to
qualify as a REMIC under the Code or result in the imposition of any
tax on prohibited transactions or contributions after the startup
day of either REMIC I or REMIC II under the Code, and
o the related mortgage loan seller obtains written confirmation from
each applicable rating agency that the release will not result in a
qualification, downgrade or withdrawal of any of the then-current
ratings of the offered certificates.
Except with respect to breaches of certain representations regarding the
borrower's obligation to pay certain costs (in respect of which the remedy is
the payment of costs), the foregoing substitution or repurchase obligation
constitutes the sole remedy available to the certificateholders and the trustee
for any uncured material breach of any mortgage loan seller's representations
and warranties or material document defects regarding its mortgage loans. There
can be no assurance that the applicable mortgage loan seller will have the
financial resources to repurchase any mortgage loan at any particular time. Each
mortgage loan seller is the sole warranting party in respect of the mortgage
loans sold to us by such mortgage loan seller, and neither we nor any of our
affiliates will be obligated to substitute or repurchase any such affected
mortgage loan in connection with a material breach of a mortgage loan seller's
representations and warranties or material document defects if such mortgage
loan seller defaults on its obligation to do so.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this prospectus supplement of the mortgage pool is
based upon the mortgage pool as it is expected to be constituted at the time the
offered certificates are issued, with adjustments for the monthly debt service
payments due on the mortgage loans on or before the cut-off date. Prior to the
issuance of the offered certificates, one or more mortgage loans may be removed
from the mortgage pool if we consider the removal necessary or appropriate. A
limited number of other mortgage loans may be included in the mortgage pool
prior to the issuance of the offered certificates, unless including those
mortgage loans would materially alter the characteristics of the mortgage pool
as described in this prospectus supplement. We believe that the information in
this prospectus supplement will be generally representative of the
characteristics of the mortgage pool as it will be constituted at the time the
offered certificates are issued; however, the range of mortgage interest rates
and maturities, as well as the other characteristics of the mortgage loans
described in this prospectus supplement, may vary, and the actual initial
mortgage pool balance may be as much as 5% larger or smaller than the initial
mortgage pool balance specified in this prospectus supplement.
A current report on Form 8-K, together with the pooling and servicing
agreement, will be filed with the Securities and Exchange Commission and be
available to purchasers of the offered certificates on or shortly after the date
of initial issuance of the offered certificates. If mortgage loans are removed
from or added to the mortgage pool, that removal or addition will be noted in
that current report on Form 8-K.
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TRANSACTION PARTICIPANTSTHE ISSUING ENTITY
In connection with the issuance of the certificates, the issuing entity
will be ML-CFC Commercial Mortgage Trust 2007-8, a common law trust created
under the laws of the State of New York pursuant to the pooling and servicing
agreement. ML-CFC Commercial Mortgage Trust 2007-8 is sometimes referred to in
this prospectus supplement and the accompanying base prospectus as the "issuingentity," the "trust" or the "trust fund." We will transfer the mortgage loans to
the trust in exchange for the issuance of the certificates to us or at our
direction. The trust assets will initially consist of the mortgage loans, any
collections of interest or principal thereon that are allocable to the period
after the cut-off date but were received on or prior to the date of initial
issuance of the certificates, and any related reserve or escrow funds being held
pending application as of the date of initial issuance of the certificates.
The trust's activities will be limited to the transactions and activities
entered into in connection with the securitization described in this prospectus
supplement and, except for those activities, the trust will not be authorized
and will have no power to borrow money or issue debt, merge with another entity,
reorganize, liquidate or sell assets or engage in any business or activities.
Consequently, the trust will not be permitted to hold any assets, or incur any
liabilities, other than those described in this prospectus supplement. Because
the trust will be created pursuant to the pooling and servicing agreement, the
trust and its permissible activities can only be amended or modified by amending
the pooling and servicing agreement. See "Description of the GoverningDocuments--Amendment" in the accompanying base prospectus. The fiscal year end
of the trust will be December 31.
The trust will not have any directors, officers or employees. The trustee,
the master servicers and the special servicer will be responsible for
administration of the trust assets, in each case to the extent of its duties
expressly set forth in the pooling and servicing agreement. Those parties may
perform their respective duties directly or through sub-servicers and/or agents.
Because the trust fund will be a common law trust, it may not be eligible
for relief under the federal bankruptcy laws, unless it can be characterized as
a "business trust" for purposes of the federal bankruptcy laws. Bankruptcy
courts look at various considerations in making this determination, so it is not
possible to predict with any certainty whether or not the trust would be
characterized as a "business trust."THE DEPOSITOR
We are Merrill Lynch Mortgage Investors, Inc., the depositor for the
series 2007-8 securitization transaction. We will acquire the mortgage loans
from the sponsors and the other mortgage loan seller and will transfer the
mortgage loans to the trust. At this time, we are only engaged in the
securitization of mortgage loans of the type described in the accompanying base
prospectus. The accompanying base prospectus contains a more detailed
description of us under the heading "The Depositor."THE SPONSORS AND MORTGAGE LOAN SELLERS
MERRILL LYNCH MORTGAGE LENDING, INC. Merrill Lynch Mortgage Lending, Inc.
("MLML"), our affiliate, an affiliate of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, one of the underwriters and an affiliate of Merrill Lynch Capital
Services, Inc., the swap counterparty, is one of the sponsors and mortgage loan
sellers. MLML has been originating and/or acquiring multifamily and commercial
mortgage loans for securitization since 1994.
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The table below indicates the size and growth of MLML's commercial
mortgage loan securitization program:
MERRILL LYNCH MORTGAGE LENDING US LOAN SECURITIZATION/SALE (IN MILLIONS)
2004 2005 2006 YTD 2007
-------- -------- -------- --------
Fixed Rate Loans $1,965.7 $5,252.1 $6,525.0 $3,122.8
Floating Rate Loans 532.0 1,515.5 2,235.0 318.5
-------- -------- -------- --------
TOTAL $2,497.7 $6,767.6 $8,760.0 $3,441.3
For additional information regarding MLML, see "The Sponsor" in the
accompanying base prospectus.
COUNTRYWIDE COMMERCIAL REAL ESTATE FINANCE, INC. Countrywide Commercial
Real Estate Finance, Inc. ("CRF") is a California corporation with its principal
offices located in Calabasas, California. CRF is a wholly owned direct
subsidiary of Countrywide Capital Markets, Inc., which is a wholly owned direct
subsidiary of Countrywide Financial Corporation. Countrywide Financial
Corporation, through its subsidiaries, provides mortgage banking and diversified
financial services in domestic and international markets. Founded in 1969,
Countrywide Financial Corporation is headquartered in Calabasas, California. CRF
is an affiliate of Countrywide Securities Corporation, one of the underwriters
and a registered broker dealer specializing in underwriting, buying, and selling
mortgage backed debt securities. CRF is also an affiliate of Countrywide Home
Loans, Inc. ("CHL"), a New York corporation headquartered in Calabasas, CA. CHL
is engaged primarily in the mortgage banking business, and as part of that
business, originates, purchases, sells and services mortgage loans. CHL
originates mortgage loans through a retail branch system and through mortgage
loan brokers and correspondents nationwide. Mortgage loans originated or
serviced by CHL are principally first lien, fixed or adjustable rate mortgage
loans secured by single family residences. CHL and its consolidated
subsidiaries, including Countrywide Servicing, service substantially all of the
mortgage loans CHL originates or acquires. In addition, Countrywide Servicing
has purchased in bulk the rights to service mortgage loans originated by other
lenders.
CRF was founded in 2004 and originates and purchases from other lenders,
commercial and multifamily mortgage loans for the purpose of securitizing them
in commercial mortgage backed securitization ("CMBS") transactions. CRF also
engages in the origination, and/or buying and selling, of mortgages and other
interests related to commercial real estate for investment and other purposes.
Neither CRF, CHL, Countrywide Servicing nor any of their affiliates
services the commercial and multifamily loans that CRF originates or acquires
for securitization in CMBS transactions.
The table below indicates the size and growth of CRF's commercial mortgage
loan origination program:
COUNTRYWIDE COMMERCIAL REAL ESTATE LOAN ORIGINATION (IN MILLIONS)
THROUGH
2004 2005 2006 6/30/07(1) TOTAL
------ -------- -------- ---------- ---------
Fixed Rate Loans $358.4 $3,564.2 $4,488.3 $3,843.7 $12,254.6
Floating Rate Loans $ 0 $ 360.6 $1,182.6 $839.4 $2,382.6
------ -------- -------- ---------- ---------
TOTAL $358.4 $3,924.8 $5,670.9 $4,683.1 $14,637.2
_______________
(1) Does not include the series 2007-8 securitization.
CRF's Securitization Program. CRF originates multifamily and commercial
mortgage loans throughout the United States since 2004 and may potentially
originate abroad. CRF originates both fixed and floating rate multifamily and
commercial mortgage loans. To date, substantially all of the multifamily and
commercial mortgage loans contributed to commercial mortgage securitizations by
CRF have been originated, directly or through correspondents, by CRF.
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In the normal course of its securitization program, CRF, may also acquire
multifamily and commercial mortgage loans from various third party originators.
These mortgage loans may have been originated using underwriting guidelines not
established by CRF. The trust fund relating to a series of offered certificates
may include mortgage loans originated by one or more of these third parties.
CRF may also originate multifamily and commercial mortgage loans in
conjunction with third party correspondents and, in those cases, the third party
correspondents may perform the underwriting based on various criteria
established or reviewed by CRF, and CRF would originate the subject mortgage
loan on a specified closing date prior to inclusion in the subject
securitization.
In connection with its commercial mortgage securitization transactions,
CRF generally transfers the subject mortgage assets to a depositor, who then
transfers those mortgage assets to the issuing entity for the related
securitization. The issuing entity issues commercial mortgage pass through
certificates backed by, and supported by the cash flows generated by, those
mortgage assets.
CRF and its affiliates also work with rating agencies, unaffiliated
mortgage loan sellers and servicers in structuring the securitization
transaction. Neither CRF nor any of its affiliates acts as servicer of any
multifamily or commercial mortgage loan in the commercial mortgage
securitizations for which it contributes these loans. Instead, CRF and/or the
applicable depositor contract with other entities to service the multifamily and
commercial mortgage loans following their transfer into a trust fund established
with respect to a series of certificates.
In connection with CRF contributing mortgage loans to a commercial
mortgage securitization transaction, CRF may be obligated, specifically with
respect to the mortgage loans that it is contributing, generally pursuant to a
mortgage loan purchase agreement or other comparable agreement, to:
o deliver various specified loan documents;
o file and/or record or cause a third party to file and/or record on
its behalf various specified loan documents and assignments of those
documents; and
o make various loan specific representations and warranties.
If it is later determined that any mortgage asset contributed by CRF fails
to conform to the specified representations and warranties or there is a defect
in or an omission with respect to certain specified mortgage loan documents
related to that mortgage asset, which breach, defect or omission, as the case
may be, is determined to have a material adverse effect on the value of the
subject mortgage asset or such other standard as is described in the related
prospectus supplement, then after being notified, CRF will generally have an
obligation to cure the subject defect, omission or breach or to repurchase or,
under certain circumstances, substitute the subject mortgage asset.
The table below indicates the size and growth of CRF's commercial mortgage
loan securitization program:
COUNTRYWIDE COMMERCIAL REAL ESTATE LOAN SECURITIZATION/SALE (IN MILLIONS)
2005 2006 THROUGH 6/30/2007(1) TOTAL
-------- -------- ------------------- ---------
Fixed Rate Loans $2,911.5 $4,240.3 $3,327.6 $10,479.4
Floating Rate Loans 102.1 335.7 324.4 762.2
-------- -------- ------------------- ---------
TOTAL $3,013.6 $4,576.0 $3,652.0 $11,241.6
________________
(1) Does not include the series 2007-8 securitization.
CRF's Underwriting Standards. Set forth below is a discussion of certain
general underwriting guidelines of CRF with respect to multifamily and
commercial mortgage loans originated by CRF. The underwriting guidelines
described below may not apply to multifamily and commercial mortgage loans
acquired by CRF from third party originators.
Notwithstanding the discussion below, given the unique nature of income
producing real properties, the underwriting and origination procedures and the
credit analysis with respect to any particular multifamily or
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commercial mortgage loan may differ significantly from one asset to another, and
will be driven by circumstances particular to that property, including, among
others, its type, current use, physical quality, size, environmental condition,
location, market conditions, capital reserve requirements and additional
collateral, tenants and leases, borrower identity, borrower sponsorship and/or
performance history. Consequently, there can be no assurance that the
underwriting of any particular multifamily or commercial mortgage loan will
conform to the general guidelines described in this "--CRF's UnderwritingStandards" section.
1. LOAN ANALYSIS. CRF performs both a credit analysis and a collateral
analysis with respect to each multifamily and commercial mortgage loan it
originates. The credit analysis of the borrower may include a review of third
party credit reports, reports resulting from judgment, lien, bankruptcy and
pending litigation searches and, if applicable, the loan payment history of the
borrower and its principals. Generally, borrowers are required to be single
purpose entities, although exceptions may be made from time to time on a case by
case basis. The collateral analysis includes an analysis, in each case to the
extent available, of historical property operating statements, a current rent
roll, a budget and a projection of future performance and a review of tenant
leases. Depending on the type of real property collateral involved and other
relevant circumstances, CRF's underwriting staff and/or legal counsel will
review leases of significant tenants. CRF may also perform a limited qualitative
review with respect to certain tenants located at the real property collateral,
particularly significant tenants, credit tenants and sole tenants. CRF generally
requires third party appraisals, as well as environmental reports, building
condition reports and, if applicable, seismic reports. Each report is reviewed
for acceptability by a CRF staff member or a third party reviewer. The results
of these reviews are incorporated into the underwriting report.
2. LOAN APPROVAL. Prior to commitment, all multifamily and commercial
mortgage loans to be originated by CRF must be approved by the CRF credit
committee, which is comprised of representatives of CRF and its affiliates. The
requirements of the committee vary by loan size. The committee may approve a
mortgage loan as presented, request additional due diligence, modify the loan
terms or decline a loan transaction.
3. DEBT SERVICE COVERAGE RATIO. The repayment of a multifamily or
commercial mortgage loan is typically dependent upon the successful operation of
the related real property collateral and the ability of that property to
generate income sufficient to make debt service payments on the loan.
Accordingly, in connection with the origination of any multifamily or commercial
mortgage loan, CRF will analyze whether cash flow expected to be derived from
the subject real property collateral will be sufficient to make the required
payments under that mortgage loan, taking into account, among other things,
revenues and expenses for, and other debt currently secured by, or that in the
future may be secured by, the subject real property collateral as well as debt
secured by pledges of the ownership interests in the related borrower.
The debt service coverage ratio of a multifamily or commercial mortgage
loan is an important measure of the likelihood of default on the loan. In
general, the debt service coverage ratio of a multifamily or commercial mortgage
loan at any given time is the ratio of--
o the amount of income, net of operating expenses and capital
expenditures, derived or expected to be derived from the related
real property collateral for a given period that is available to pay
debt service on the subject mortgage loan, to
o the sum of the scheduled payments of principal and/or interest
during that given period required to be paid (i) on the subject
mortgage loan under the related loan documents and (ii) on any other
loan that is secured by a lien of senior or equal priority on the
related real property collateral.
However, the amount described in the first bullet of the preceding
sentence is often a highly subjective number based on variety of assumptions
regarding, and adjustments to, revenues and expenses with respect to the related
real property collateral.
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For example, when calculating the debt service coverage ratio for a
multifamily or commercial mortgage loan, CRF may utilize annual net cash flow
that was calculated based on assumptions regarding projected rental income,
expenses and/or occupancy, including, without limitation, one or more of the
following:
o the assumption that a particular tenant at the subject real property
collateral that has executed a lease, but has not yet taken
occupancy and/or has not yet commenced paying rent, will take
occupancy and commence paying rent on a future date;
o the assumption that an unexecuted lease that is currently being
negotiated with respect to a particular tenant at the subject real
property collateral or is out for signature will be executed and in
place on a future date;
o the assumption that a portion of currently vacant and unleased space
at the subject real property collateral will be leased at current
market rates and consistent with occupancy rates of comparable
properties in the subject market;
o the assumption that certain rental income that is to be payable
commencing on a future date under a signed lease, but where the
subject tenant is in an initial rent abatement or free rent period
or has not yet taken occupancy, will be paid commencing on such
future date;
o assumptions regarding the probability of renewal of particular
leases and/or the re leasing of certain space at the subject real
property collateral and the anticipated effect on capital and re
leasing expenditures; and
o various additional lease up assumptions and other assumptions
regarding the payment of rent not currently being paid.
There is no assurance that the foregoing assumptions made with respect to
any prospective multifamily or commercial mortgage loan will, in fact, be
consistent with actual property performance.
Generally, the debt service coverage ratio for multifamily and commercial
mortgage loans originated by CRF, calculated as described above, will be equal
to or greater than 1.20:1 (subject to the discussion under "--Additional Debt"
below); however, exceptions may be made when consideration is given to
circumstances particular to the mortgage loan or related real property
collateral. For example, CRF may originate a multifamily or commercial mortgage
loan with a debt service coverage ratio below 1.20:1 based on, among other
things, the amortization features of the mortgage loan (for example, if the
mortgage loan provides for relatively rapid amortization) the type of tenants
and leases at the subject real property collateral, the taking of additional
collateral such as reserves, letters of credit and/or guarantees, CRF's judgment
of improved property performance in the future and/or other relevant factors. In
addition, CRF may originate a multifamily loan on a property in what is
considered by CRF to be a strong market at a debt service coverage ratio that is
lower than 1.20:1.
4. LOAN TO VALUE RATIO. CRF also looks at the loan to value ratio of a
prospective multifamily or commercial mortgage loan as one of the factors it
takes into consideration in evaluating the likelihood of recovery if a property
is liquidated following a default. In general, the loan to value ratio of a
multifamily or commercial mortgage loan at any given time is the ratio,
expressed as a percentage, of--
o the sum of the then outstanding principal balance of the subject
mortgage loan and any other loans that are secured by liens of
senior or equal priority on the related real property collateral, to
o the estimated as is or as stabilized value of the related real
property collateral based on an appraisal, a cash flow analysis, a
recent sales price or another method or benchmark of valuation.
Generally, the loan to value ratio for multifamily and commercial mortgage
loans originated by CRF, calculated as described above, will be equal to or less
than 81% (subject to the discussion under "--Additional Debt" below); however,
exceptions may be made when consideration is given to circumstances particular
to the mortgage loan or related real property collateral. For example, CRF may
originate a multifamily or commercial mortgage loan with a loan to value ratio
above 81% based on, among other things, the amortization features of the
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mortgage loan (for example, if the mortgage loan provides for relatively rapid
amortization), the type of tenants and leases at the subject real property
collateral, the taking of additional collateral such as reserves, letters of
credit and/or guarantees, CRF or the appraiser's judgment of improved property
performance in the future and/or other relevant factors.
5. ADDITIONAL DEBT. When underwriting a multifamily or commercial
mortgage loan, CRF will take into account whether the subject real property
collateral and/or direct or indirect interest in a related borrower are
encumbered by additional debt and will analyze the likely effect of that
additional debt on repayment of the subject mortgage loan. It is possible that
CRF or an affiliate will be the lender on that additional debt.
The debt service coverage ratio described above under "--Debt ServiceCoverage Ratio" and the loan to value ratio described above under "--Loan toValue Ratio" may be below 1.20:1 and above 81%, respectively, based on the
existence of additional debt secured by the related real property collateral or
directly or indirectly by equity interests in the related borrower.
6. ASSESSMENTS OF PROPERTY CONDITION. As part of the underwriting
process, CRF will analyze the condition of the real property collateral for a
prospective multifamily or commercial mortgage loan. To aid in that analysis,
CRF may, subject to certain exceptions, inspect or retain a third party to
inspect the property and will obtain the property assessments and reports
described below.
(a) Appraisals. CRF will, in most cases, require that the real property
collateral for a prospective multifamily or commercial mortgage loan
be appraised by a state certified appraiser or an appraiser
belonging to the Appraisal Institute, a membership association of
professional real estate appraisers. In addition, CRF will generally
require that those appraisals be conducted in accordance with the
Uniform Standards of Professional Appraisal Practices developed by
The Appraisal Foundation, a not for profit organization established
by the appraisal profession. Furthermore, the appraisal report will
usually include or be accompanied by a separate letter that includes
a statement by the appraiser that the guidelines in Title XI of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989
were followed in preparing the appraisal. In some cases, however,
CRF may establish the value of the subject real property collateral
based on a cash flow analysis, a recent sales price or another
method or benchmark of valuation.
(b) Environmental Assessment. CRF may require a Phase I environmental
assessment with respect to the real property collateral for a
prospective multifamily or commercial mortgage loan. However, when
circumstances warrant, CRF may utilize an update of a prior
environmental assessment or a desktop review. Alternatively, CRF
might forego an environmental assessment in limited circumstances,
such as when it requires the borrowers or its principal to obtain an
environmental insurance policy or an environmental guarantee.
Furthermore, an environmental assessment conducted at any particular
real property collateral will not necessarily cover all potential
environmental issues. For example, an analysis for radon, lead based
paint and lead in drinking water will usually be conducted only at
multifamily rental properties and only when CRF or the environmental
consultant believes that such an analysis is warranted under the
circumstances.
Depending on the findings of the initial environmental assessment, CRF may
require additional record searches or environmental testing, such as a Phase II
environmental assessment with respect to the subject real property collateral.
(c) Engineering Assessment. In connection with the origination process,
CRF may require that an engineering firm inspect the real property
collateral for any prospective multifamily or commercial mortgage
loan to assess the structure, exterior walls, roofing, interior
structure and/or mechanical and electrical systems. Based on the
resulting report, CRF will determine the appropriate response to any
recommended repairs, corrections or replacements and any identified
deferred maintenance.
(d) Seismic Report. If the subject real property collateral includes any
material improvements and is located in California or in seismic
zones 3 or 4, CRF may require a report to establish the probable
maximum or bounded loss for the improvements at the property as a
result of an earthquake. If that loss is equal to or greater than
20% of the estimated replacement cost for the improvements at
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the property, CRF may require retrofitting of the improvements or
that the borrower obtain earthquake insurance if available at a
commercially reasonable price. It should be noted, however, that in
assessing probable maximum loss different assumptions may be used
with respect to each seismic assessment, it is possible that some of
the real properties that were considered unlikely to experience a
probable maximum loss in excess of 20% of estimated replacement cost
might have been the subject of a higher estimate had different
assumptions been used.
7. ZONING AND BUILDING CODE COMPLIANCE. In connection with the
origination of a multifamily or commercial mortgage loan, CRF will generally
examine whether the use and occupancy of the related real property collateral is
in material compliance with zoning, land use, building rules, regulations and
orders then applicable to that property. Evidence of this compliance may be in
the form of one or more of the following: legal opinions; surveys; recorded
documents; temporary or permanent certificates of occupancy; letters from
government officials or agencies; title insurance endorsements; engineering or
consulting reports; zoning reports; and/or representations by the related
borrower.
Where a property as currently operated is a permitted non conforming use
and/or structure and the improvements may not be rebuilt to the same dimensions
or used in the same manner in the event of a major casualty, CRF will analyze
whether--
o any major casualty that would prevent rebuilding has a sufficiently
remote likelihood of occurring;
o casualty insurance proceeds together with the value of any
additional collateral would be available in an amount estimated by
CRF to be sufficient to pay off the related mortgage loan in full;
o the real property collateral, if permitted to be repaired or
restored in conformity with current law, would in CRF's judgment
constitute adequate security for the related mortgage loan; and/or
o to require the related borrower to obtain law and ordinance
insurance (which may or may not be adequate to cover any potential
related loss).
8. ESCROW REQUIREMENTS. Based on its analysis of the real property
collateral, the borrower and the principals of the borrower, CRF may require a
borrower under a multifamily or commercial mortgage loan to fund various escrows
for taxes and/or insurance, capital expenses, replacement reserves and/or
environmental remediation. CRF conducts a case by case analysis to determine the
need for a particular escrow or reserve. Consequently, the aforementioned
escrows and reserves are not established for every multifamily and commercial
mortgage loan originated by CRF. Furthermore, CRF may accept an alternative to a
cash escrow or reserve from a borrower, such as a letter of credit or a
guarantee from the borrower or an affiliate of the borrower or periodic evidence
that the items for which the escrow or reserve would have been established are
being paid or addressed. In certain situations, CRF may not require any reserves
or escrows.
Notwithstanding the foregoing discussion under this "--CRF's UnderwritingStandards" section, CRF may sell mortgage loans to the depositor for inclusion
in the trust fund that vary from, or do not comply with, CRF's underwriting
guidelines. In addition, in some cases, CRF's and/or its affiliates may not have
strictly applied these underwriting guidelines as the result of a case by case
permitted exception based upon other compensating factors.
KEYBANK NATIONAL ASSOCIATION. KeyBank Nation Association ("KeyBank") is a
national banking association that is a wholly-owned subsidiary of KeyCorp (NYSE:
KEY). KeyBank is the parent of KeyCorp Real Estate Capital Markets, Inc., one of
the master servicers and is an affiliate of KeyBanc Capital Markets Inc., one of
the underwriters. KeyBank maintains its primary offices at Key Tower, 127 Public
Square, Cleveland, Ohio44114, and its telephone number is (216) 689-6300.
KeyBank has approximately 950 banking centers located in 13 states. As of March31, 2007, KeyBank had total assets of approximately $89.408 billion, total
liabilities (including minority interest in consolidated subsidiaries) of
approximately $82.512 billion and approximately $6.896 billion in stockholder's
equity.
KeyBank provides financial services, including commercial real estate
financing, throughout the United States. In 2006, KeyBank's Real Estate Capital
Group originated a total of $16.0 billion in construction, development,
permanent and private equity loans from 32 offices nationwide. Of this total,
$3.3 billion was
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originated for sale through commercial mortgage-backed securities (CMBS)
transactions, acquisition by Fannie Mae or Freddie Mac, or sale to life
insurance companies and pension funds.
KeyBank began selling commercial mortgage loans into CMBS transactions in
2000. KeyBank's commercial mortgage loans that are originated for sale into a
CMBS transaction (or through a sale of whole loan interests to third party
investors) are generally fixed rate and are secured primarily by retail, office,
multifamily, industrial, self-storage, and hospitality properties. As of
December 31, 2006, KeyBank had originated approximately $8.2 billion of
commercial mortgage loans that have been securitized in 33 securitization
transactions. The following table sets forth information for the past three
years regarding the amount of commercial mortgage loans that KeyBank (i)
originated for the purposes of securitization in CMBS transactions and (ii)
actually securitized in CMBS transactions (which amounts include mortgage loans
that were originated or purchased by KeyBank).
YEAR LOANS ORIGINATED LOANS SECURITIZED
------------------- ---------------- -----------------
2006 (in billions) $2.221 $1.905
2005 (in billions) $1.385 $1.323
2004 (in billions) $1.213 $1.099
Generally, KeyBank originates the commercial mortgage loans that it
contributes to CMBS transactions. However, if KeyBank purchases mortgage loans
from third-party originators (which mortgage loans may have been originated
using underwriting guidelines not established by KeyBank), KeyBank
re-underwrites those mortgage loans and performs other procedures to ascertain
the quality of those mortgage loans, which procedures are subject to approval by
a credit officer of KeyBank.
KeyBank originates commercial mortgage loans and, together with other
sponsors or loan sellers, participates in a securitization by transferring the
mortgage loans to an unaffiliated securitization depositor, which then transfers
the mortgage loans to the issuing entity for the related securitization. KeyBank
initially selects the mortgage loans that it will contribute to the
securitization, but it has no input on the mortgage loans contributed by other
sponsors or loan sellers. KeyBank generally participates in securitizations with
multiple mortgage loan sellers and an unaffiliated depositor.
KeyBank's wholly-owned subsidiary, KeyCorp Real Estate Capital Markets,
Inc., acts as the primary servicer of KeyBank's commercial mortgage loans that
are securitized and in most cases, including this transaction, acts as a master
servicer for securitizations in which KeyBank participates. Other than the
securitization of commercial mortgage loans, KeyBank securitizes federal and
private student loans that it originates or purchases from third parties.
KeyBank's Underwriting StandardsGeneral. Set forth below is a general discussion of certain of KeyBank's
underwriting guidelines for originating commercial mortgage loans. KeyBank also
generally applies these underwriting guidelines when it re-underwrites
commercial mortgage loans acquired from third-party originators. KeyBank
generally does not outsource to third parties any credit underwriting decisions
or originating duties other than those services performed by providers of
environmental, engineering and appraisal reports and other related consulting
services.
The underwriting and origination procedures and credit analysis described
below may vary from one commercial mortgage loan to another based on the unique
circumstances of the related commercial property (including its type, current
use, size, location, market conditions, tenants and leases, performance history
and/or other factors), and KeyBank may, on a case-by-case basis, permit
exceptions to its underwriting guidelines based upon other compensating factors.
Consequently, there can be no assurance that the underwriting of any particular
underlying mortgage loan sold into this transaction by KeyBank strictly
conformed to the general guidelines described in this "--KeyBank's UnderwritingStandards" section.
Loan Analysis. KeyBank generally performs both a credit analysis and a
collateral analysis for each commercial mortgage loan as well as a site
inspection of the related real property collateral. The credit analysis of the
borrower generally includes a review of third-party credit reports and/or
judgment, lien, bankruptcy and pending litigation searches as well as searches
to determine OFAC and PATRIOT Act compliance. Generally, borrowers of
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loans greater than $4.0 million are required to be special-purpose entities,
although exceptions are made on a case-by-case basis. The collateral analysis
generally includes an analysis, in each case to the extent available and
applicable, of the historical property operating statements, rent rolls and a
review of certain significant tenant leases. KeyBank's credit underwriting also
generally includes a review of third-party appraisals, as well as environmental
reports, property condition reports and seismic reports, if applicable.
Loan Approval. Prior to commitment, all commercial mortgage loans to be
originated or purchased by KeyBank must be approved by a dedicated credit
officer of KeyBank. The credit officer may approve a mortgage loan as
recommended, request additional due diligence, modify the loan terms or decline
a loan transaction.
Debt Service Coverage Ratio and Loan-to-Value Ratio. KeyBank's
underwriting includes a calculation of the debt service coverage ratio (DSCR) in
connection with the origination of a commercial mortgage loan. The DSCR will
generally be calculated based on the underwritten net cash flow from the subject
property as determined by KeyBank and payments on the mortgage loan based on
actual principal and/or interest due on the mortgage loan. However, underwritten
net cash flow is a subjective number based on a variety of assumptions
regarding, and adjustments to, revenues and expenses with respect to the related
real property collateral, and there is no assurance that those assumptions or
adjustments will, in fact, be consistent with actual property performance.
KeyBank's underwriting also generally includes a calculation of the
loan-to-value ratio of a prospective commercial mortgage loan in connection with
its origination. In general, the loan-to-value ratio of a commercial mortgage
loan at any given time is the ratio, expressed as a percentage, of (i) the then
outstanding principal balance of the mortgage loan, to (ii) the estimated value
of the related real property collateral based on an appraisal. See also the
discussion of "UW Net Cash Flow" in the "Glossary" to this prospectus supplement
and "Annex A-1 Characteristics of the Mortgage Loans" and "Annex A-2 CertainStatistical Information Regarding the Mortgage Loans" in this prospectus
supplement.
Property Assessments. As part of its underwriting process, KeyBank will
obtain the following property assessments.
Appraisals. KeyBank will require independent appraisals in connection with
the origination of each commercial mortgage loan that meet the requirements of
the "Uniform Standards of Professional Appraisal Practice" as adopted by the
Appraisal Standards Board of the Appraisal Foundation and the guidelines in
Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of
1989.
Environmental Assessment. KeyBank will require a Phase I environmental
assessment with respect to the real property collateral for a prospective
commercial mortgage loan. However, when circumstances warrant, KeyBank may
utilize an update of a prior environmental assessment, a transaction screen or a
desktop review. Depending on the findings of the initial environmental
assessment, KeyBank may require additional environmental testing, such as a
Phase II environmental assessment with respect to the subject real property
collateral, an environmental insurance policy, an escrow of funds or a guaranty
or indemnity with respect to environmental matters.
Property Condition Assessment. KeyBank will require that an engineering
firm inspect the real property collateral for any prospective commercial
mortgage loan to assess the structure, exterior walls, roofing, interior
structure and/or mechanical and electrical systems. Based on the resulting
report, KeyBank will determine the appropriate response to any recommended
repairs, corrections or replacements and any identified deferred maintenance.
Seismic Report. If the subject real property collateral includes any
material improvements and is located in California or in seismic zones 3 or 4,
KeyBank may require a report to establish the probable maximum or bounded loss
for the improvements at the property as a result of an earthquake. If that loss
is in excess of 20% of the estimated replacement cost for the improvements at
the property, KeyBank may require retrofitting of the improvements or that the
borrower obtain earthquake insurance if available at a commercially reasonable
price.
Zoning and Building Code Compliance. KeyBank will generally examine
whether the use and occupancy of the subject real property collateral securing a
commercial mortgage loan is in material compliance with zoning, land-use,
building rules, regulations and orders then applicable to that property.
Evidence of this compliance may be in the form of one or more of the following:
legal opinions; surveys; recorded documents; temporary or
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permanent certificates of occupancy; letters from government officials or
agencies; title insurance endorsements; engineering, appraisal or consulting
reports; and/or representations by the related borrower.
Escrow Requirements. Based on its analysis of the real property
collateral, the borrower and the principals of the borrower, KeyBank may require
a borrower under a commercial mortgage loan to fund various escrows for taxes
and/or insurance, capital expenses, replacement reserves, potential re-tenanting
expenses and/or environmental remediation. KeyBank conducts a case-by-case
analysis to determine the need for a particular escrow or reserve. Consequently,
the aforementioned escrows and reserves are not established for every
multifamily and commercial mortgage loan originated by KeyBank. Furthermore,
KeyBank may accept an alternative to a cash escrow or reserve from a borrower,
such as a letter of credit or a guarantee or periodic evidence that the items
for which the escrow or reserve would have been established are being paid or
addressed.
Notwithstanding the foregoing discussion under this "--KeyBank'sUnderwriting Standards" section, the depositor may purchase underlying mortgage
loans for inclusion in the issuing entity that vary from, or do not comply with,
KeyBank's underwriting guidelines.
THE MASTER SERVICERS AND THE SPECIAL SERVICER
KEYCORP REAL ESTATE CAPITAL MARKETS, INC. KeyCorp Real Estate Capital
Markets, Inc. ("KRECM") will be a master servicer under the series 2007-8
pooling and servicing agreement. KRECM will act as the master servicer with
respect to the mortgage loans acquired by us from Merrill Lynch Mortgage
Lending, Inc. and KeyBank National Association. KRECM is an Ohio corporation
that is a wholly-owned subsidiary of KeyBank National Association, one of the
mortgage loan sellers and a sponsor, and an affiliate of KeyBanc Capital Markets
Inc., one of the underwriters. KeyBank National Association and KeyBanc Capital
Markets Inc. are both wholly-owned subsidiaries of KeyCorp. KRECM maintains
servicing offices at 911 Main Street, Suite 1500, Kansas City, Missouri64105
and 1717 Main Street, Suite 1000, Dallas, Texas75201.
KRECM has been engaged in the servicing of commercial mortgage loans since
1995 and commercial mortgage loans originated for securitization since 1998. The
following table sets forth information about KRECM's portfolio of master or
primary serviced commercial mortgage loans as of the dates indicated.
LOANS 12/31/2004 12/31/2005 12/31/2006
----------------------------------------------------------- ------------ -------------- ---------------
By Approximate Number: 5,345 11,218 11,322
By Approximate Aggregate Principal Balance (in billions): $34.094 $73.692 $94.726
Within this servicing portfolio are, as of December 31, 2006,
approximately 9,384 loans with a total principal balance of approximately $70
billion that are included in approximately 116 commercial mortgage-backed
securitization transactions. KRECM's servicing portfolio includes mortgage loans
secured by multifamily, office, retail, hospitality and other types of
income-producing properties that are located throughout the United States. KRECM
also services newly-originated commercial mortgage loans and mortgage loans
acquired in the secondary market for issuers of commercial and multifamily
mortgage-backed securities, financial institutions and a variety of investors
and other third-parties. Based on the aggregate outstanding principal balance of
loans being serviced as of December 31, 2006, the Mortgage Bankers Association
of America ranked KRECM the fifth largest commercial mortgage loan servicer in
terms of total master and primary servicing volume.
KRECM is approved as a master servicer, primary servicer and special
servicer for commercial mortgage-backed securities rated by Moody's, S&P and
Fitch. Moody's does not assign specific ratings to servicers. KRECM is on S&P's
Select Servicer list as a U.S. Commercial Mortgage Master Servicer, and S&P has
assigned to KRECM the rating of STRONG as a master servicer, primary servicer
and special servicer. Fitch has assigned to KRECM the ratings of CMS1- as a
master servicer, CPS1- as a primary servicer and CSS2+ as a special servicer.
S&P's and Fitch's ratings of a servicer are based on an examination of many
factors, including the servicer's financial condition, management team,
organizational structure and operating history.
No securitization transaction involving commercial mortgage loans in which
KRECM is or has been acting as master servicer has experienced a master servicer
event of default as a result of any action or inaction of KRECM as master
servicer, including as a result of KRECM's failure to comply with the applicable
servicing criteria in connection with any securitization transaction.
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KRECM's servicing system utilizes a mortgage-servicing technology platform
with multiple capabilities and reporting functions. This platform allows KRECM
to process mortgage servicing activities including: (i) performing account
maintenance; (ii) tracking borrower communications; (iii) tracking real estate
tax escrows and payments, insurance escrows and payments, replacement reserve
escrows and operating statement data and rent rolls; (iv) entering and updating
transaction data; and (v) generating various reports. KRECM generally uses the
CMSA format to report to trustees of commercial mortgage-backed securities
(CMBS) transactions and maintains a website (www.Key.com/Key2CRE) that provides
access to reports and other information to investors in CMBS transactions for
which KRECM is a master servicer.
Certain duties and obligations of the master servicer and the provisions
of the series 2007-8 pooling and servicing agreement are described in this
prospectus supplement under "Servicing of the Mortgage Loans." KRECM's ability
to waive or modify any terms, fees, penalties or payments on the underlying
mortgage loans and the effect of that ability on the potential cash flows from
the underlying mortgage loans are described in the prospectus supplement under
"Servicing of the Mortgage Loans--The Controlling Class Representative and theLoan Combination Controlling Parties"; "--Enforcement of Due-on-Sale andDue-on-Encumbrance Provisions"; and "--Modifications, Waivers, Amendments andConsents."
The master servicer's obligations to make debt service advances and/or
servicing advances, and the interest or other fees charged for those advances
and the terms of the master servicer's recovery of those advances, are described
in this prospectus supplement under "Description of the OfferedCertificates--Advances of Delinquent Monthly Debt Service Payments andReimbursement of Advances" and "Servicing of the Mortgage Loans --RequiredAppraisals" and "--Servicing and Other Compensation and Payment of Expenses."
KRECM will not have primary responsibility for the custody of original documents
evidencing the underlying mortgage loans. Rather, the trustee acts as custodian
of the original documents evidencing the underlying mortgage loans. But on
occasion, KRECM may have custody of certain original documents as necessary for
enforcement actions involving particular mortgage loans or otherwise. To the
extent KRECM performs custodial functions as the master servicer, original
documents will be maintained in a manner consistent with the Servicing Standard.
Certain terms of the series 2007-8 pooling and servicing agreement
regarding the master servicer's removal, replacement, resignation or transfer
are described in this prospectus supplement under "Servicing of the MortgageLoans--Events of Default" and "--Rights Upon Event of Default."
The manner in which collections on the underlying mortgage loans are to be
maintained is described under "Servicing of the Mortgage Loans--CollectionAccounts" in this prospectus supplement. Generally, all amounts received by
KRECM on the underlying mortgage loans are initially deposited into a common
clearing account with collections on other commercial mortgage loans serviced by
KRECM and are then allocated and transferred to the appropriate account
described under "Servicing of the Mortgage Loans--Collection Accounts" in this
prospectus supplement within the time required by the series 2007-8 pooling and
servicing agreement. Similarly, KRECM generally transfers any amount that is to
be disbursed to a common disbursement account on the day of the disbursement.
KRECM maintains the accounts it uses in connection with servicing
commercial mortgage loans with its parent company, KeyBank National Association.
The following table sets forth the ratings assigned to KeyBank National
Association's long-term deposits and short-term deposits.
S&P FITCH MOODY'S
---------- ---------- ---------
Long-Term Deposits: A A A1
Short-Term Deposits: A-1 F1 P-1
KRECM believes that its financial condition will not have any material
adverse effect on the performance of its duties under the series 2007-8 pooling
and servicing agreement and, accordingly, will not have any material adverse
impact on the mortgage pool performance or the performance of the series 2007-8
certificates. There are currently no legal proceedings pending, and no legal
proceedings known to be contemplated by governmental authorities, against KRECM
or of which any of its property is the subject, that is material to the series
2007-8 certificateholders.
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KRECM has developed policies, procedures and controls for the performance
of its master servicing obligations in compliance with applicable servicing
agreements, servicing standards and the servicing criteria set forth in Item
1122 of Regulation AB. These policies, procedures and controls include, among
other things, procedures to (i) notify borrowers of payment delinquencies and
other loan defaults, (ii) work with borrowers to facilitate collections and
performance prior to the occurrence of a servicing transfer event, and (iii) if
a servicing transfer event occurs as a result of a delinquency, loss, bankruptcy
or other loan default, transfer the subject loan to the special servicer.
KRECM's servicing policies and procedures for the servicing functions it will
perform under the series 2007-8 pooling and servicing agreement for assets of
the same type included in the series 2007-8 securitization transaction are
updated periodically to keep pace with the changes in the CMBS industry. For
example, KRECM has, in response to changes in federal or state law or investor
requirements, (i) made changes in its insurance monitoring and risk-management
functions as a result of the Terrorism Risk Insurance Act of 2002 and (ii)
established a website where investors and mortgage loan borrowers can access
information regarding their investments and mortgage loans. Otherwise, KRECM's
servicing policies and procedures have been generally consistent for the last
three years in all material respects.
KRECM is, as the master servicer, generally responsible for both master
servicing functions and primary servicing functions with respect to the
underlying mortgage loans it is obligated to service under the series 2007-8
pooling and servicing agreement. However, KRECM will be permitted to appoint one
or more subservicers to perform all or any portion of its primary servicing
functions under the series 2007-8 pooling and servicing agreement, as further
described in this prospectus supplement under "Servicing of the MortgageLoans--Sub-Servicers." At the request of certain of the mortgage loan sellers,
KRECM intends to appoint two (2) subservicers to perform primary servicing
functions for certain underlying mortgage loans or groups of underlying mortgage
loans (in each case aggregating less than 10% of the initial mortgage pool
balance) pursuant to subservicing agreements that will require and entitle the
respective subservicers to handle collections, hold escrow and reserve accounts
and respond to and make recommendations regarding assignments and assumptions
and other borrower requests.
In addition, KRECM may from time to time perform some of its servicing
obligations under the series 2007-8 pooling and servicing agreement through one
or more third-party vendors that provide servicing functions such as tracking
and reporting of flood zone changes, performing UCC searches or filing UCC
financing statements and amendments.
KRECM will, in accordance with its internal procedures and applicable law,
monitor and review the performance of the subservicers that it appoints and any
third-party vendors retained by it to perform servicing functions.
KRECM is not an affiliate of the depositor, the sponsors (other than
KeyBank National Association), the issuing entity, the special servicer, the
trustee, or any originator of any of the underlying mortgage loans identified in
this prospectus supplement (other than KeyBank National Association).
The information set forth in this prospectus supplement concerning KRECM
has been provided by it. KRECM will make no representations as to the validity
or sufficiency of the series 2007-8 pooling and servicing agreement, the series
2007-8 certificates, the underlying mortgage loans or this prospectus
supplement.
See also "Servicing of the Mortgage Loans--General,""--Servicing andOther Compensation and Payment of Expenses,""--Enforcement of Due-on-Sale andDue-on-Encumbrance Provisions,""--Modifications, Waivers, Amendments andConsents,""--Required Appraisals,""--Collection Accounts" and "--Inspections;Collection of Operating Information" below in this prospectus supplement.
WELLS FARGO BANK, NATIONAL ASSOCIATION. Wells Fargo Bank, National
Association ("Wells Fargo Bank") will act as master servicer with respect to
those mortgage loans acquired by us from Countrywide Commercial Real Estate
Finance, Inc. and transferred by us to the trust. Certain servicing and
administration functions will also be provided by one or more primary servicers
that previously serviced the mortgage loans for the applicable mortgage loan
seller.
Wells Fargo Bank has originated and serviced commercial mortgage loans
since before 1975 and has serviced securitized commercial mortgage loans since
1993. Wells Fargo Bank is approved as a master servicer, primary servicer and
special servicer for commercial mortgage-backed securities rated by Moody's, S&P
and Fitch.
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Moody's does not assign specific ratings to servicers. S&P has assigned to Wells
Fargo Bank the ratings of STRONG as a primary servicer and as a master servicer
and ABOVE AVERAGE as a special servicer. Fitch has assigned to Wells Fargo Bank
the ratings of CMS2 as a master servicer, CPS1 as a primary servicer and CSS1 as
a special servicer. S&P's and Fitch's ratings of a servicer are based on an
examination of many factors, including the servicer's financial condition,
management team, organizational structure and operating history.
As of March 31, 2007, the commercial mortgage servicing group of Wells
Fargo Bank was responsible for servicing approximately 12,165 commercial and
multifamily mortgage loans with an aggregate outstanding principal balance of
approximately $107.8 billion, including approximately 10,812 loans securitized
in approximately 97 commercial mortgage-backed securitization transactions with
an aggregate outstanding principal balance of approximately $103.0 billion, and
also including loans owned by institutional investors and government sponsored
entities such as Freddie Mac. The properties securing these loans are located in
all 50 states and include retail, office, multifamily, industrial, hospitality
and other types of income-producing properties. According to the Mortgage
Bankers Association of America, as of December 31, 2006, Wells Fargo Bank was
the fourth largest commercial mortgage servicer in terms of the aggregate
outstanding principal balance of loans being master and/or primary serviced in
commercial mortgage-backed securitization transactions.
Wells Fargo Bank has developed policies, procedures and controls for the
performance of its master servicing obligations in compliance with applicable
servicing agreements, servicing standards and the servicing criteria set forth
in Item 1122 of Regulation AB. These policies, procedures and controls include,
among other things, measures for notifying borrowers of payment delinquencies
and other loan defaults and for working with borrowers to facilitate collections
and performance prior to the occurrence of a Servicing Transfer Event.
A Wells Fargo Bank proprietary website (www.wellsfargo.com/com/comintro)
provides investors with access to investor reports for commercial
mortgage-backed securitization transactions for which Wells Fargo Bank is master
servicer.
Wells Fargo Bank may appoint one or more sub-servicers to perform all or
any portion of its duties under the pooling and servicing agreement. Wells Fargo
Bank monitors and reviews the performance of sub-servicers appointed by it.
Wells Fargo Bank has received an issuer rating of "Aaa" from Moody's.
Wells Fargo Bank's long term deposits are rated "Aaa" by Moody's, "AA" by S&P
and "AA+" by Fitch.
Wells Fargo & Company is the holding company for Wells Fargo Bank. Wells
Fargo & Company files reports with the Securities and Exchange Commission as
required under the Securities Exchange Act of 1934, as amended. Such reports
include information regarding Wells Fargo Bank and may be obtained at the
website maintained by the Securities and Exchange Commission at www.sec.gov.
There are no legal proceedings pending against Wells Fargo Bank, or to
which any property of Wells Fargo Bank is subject, that are material to the
certificateholders, nor does Wells Fargo Bank have actual knowledge of any
proceedings of this type contemplated by governmental authorities.
THE SPECIAL SERVICER
MIDLAND LOAN SERVICES, INC. Midland Loan Services, Inc. ("Midland") will
be the special servicer and in this capacity will initially be responsible for
the servicing and administration of the specially serviced mortgage loans and
REO properties pursuant to the pooling and servicing agreement.
Midland is a Delaware corporation and a wholly-owned subsidiary of PNC
Bank, National Association. Midland is an affiliate of a company that is the
external manager of an entity that may be the initial controlling class
representative/directing certificateholder under the pooling and servicing
agreement. Midland's principal servicing office is located at 10851 Mastin
Street, Building 82, Suite 300, Overland Park, Kansas66210.
Midland is a real estate financial services company that provides loan
servicing, asset management and technology solutions for large pools of
commercial and multifamily real estate assets. Midland is approved as a master
servicer, special servicer and primary servicer for investment-grade commercial
and multifamily mortgage-
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backed securities ("CMBS") by S&P, Moody's and Fitch. Midland has received the
highest rankings as a master, primary and special servicer of real estate assets
under U.S. CMBS transactions from both S&P and Fitch. S&P ranks Midland as
"Strong" and Fitch ranks Midland as "1" for each category. Midland is also a
HUD/FHA-approved mortgagee and a Fannie Mae-approved multifamily loan servicer.
Midland has detailed operating procedures across the various servicing
functions to maintain compliance with its servicing obligations and the
servicing standards under Midland's servicing agreements, including procedures
for managing delinquent and special serviced loans. The policies and procedures
are reviewed annually and centrally managed and available electronically within
Midland's Enterprise!(R) Loan Management System. Furthermore Midland's disaster
recovery plan is reviewed annually.
Midland will not have primary responsibility for custody services of
original documents evidencing the underlying mortgage loans. Midland may from
time to time have custody of certain of such documents as necessary for
enforcement actions involving particular mortgage loans or otherwise. To the
extent that Midland has custody of any such documents for any such servicing
purposes, such documents will be maintained in a manner consistent with the
servicing standard.
No securitization transaction involving commercial or multifamily mortgage
loans in which Midland was acting as master servicer, primary servicer or
special servicer has experienced a servicer event of default as a result of any
action or inaction of Midland as master servicer, primary servicer or special
servicer, as applicable, including as a result of Midland's failure to comply
with the applicable servicing criteria in connection with any securitization
transaction. Midland has made all advances required to be made by it under the
servicing agreements on the commercial and multifamily mortgage loans serviced
by Midland in securitization transactions.
From time-to-time Midland is a party to lawsuits and other legal
proceedings as part of its duties as a loan servicer (e.g., enforcement of loan
obligations) and/or arising in the ordinary course of business. Midland does not
believe that any such lawsuits or legal proceedings would, individually or in
the aggregate, have a material adverse effect on its business or its ability to
service loans pursuant to the pooling and servicing agreement.
Midland currently maintains an Internet-based investor reporting system,
CMBS Investor Insight(R), that contains performance information at the
portfolio, loan and property levels on the various commercial mortgage-backed
securities transactions that it services. Certificateholders, prospective
transferees of the certificates and other appropriate parties may obtain access
to CMBS Investor Insight through Midland's website at www.midlandls.com. Midland
may require registration and execution of an access agreement in connection with
providing access to CMBS Investor Insight.
As of June 30, 2007, Midland was servicing approximately 24,550 commercial
and multifamily mortgage loans with a principal balance of approximately $222
billion. The collateral for such loans is located in all 50 states, the District
of Columbia, Puerto Rico, Guam and Canada. Approximately 17,250 of such loans,
with a total principal balance of approximately $149 billion, pertain to
commercial and multifamily mortgage-backed securities. The related loan pools
include multifamily, office, retail, hospitality and other income-producing
properties. As of June 30, 2007, Midland was named the special servicer in
approximately 141 commercial mortgage-backed securities transactions with an
aggregate outstanding principal balance of approximately $107 billion. With
respect to such transactions as of such date, Midland was administering
approximately 98 assets with an outstanding principal balance of approximately
$351 million.
Midland has been servicing mortgage loans in commercial mortgage-backed
securities transactions since 1992. The table below contains information on the
size and growth of the portfolio of commercial and multifamily mortgage loans in
commercial mortgaged-backed securities and other servicing transactions for
which Midland has acted as master and/or primary servicer from 2004 to 2006.
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CALENDAR YEAR END
(APPROXIMATE AMOUNTS IN BILLIONS)
----------------------------------------------
PORTFOLIO GROWTH -
MASTER/PRIMARY 2004 2005 2006
------------------------- --------- ---------- ----------
CMBS $70 $104 $139
Other $28 $ 32 $ 61
Total $98 $136 $200
Midland has acted as a special servicer for commercial and multifamily
mortgage loans in commercial mortgage-backed securities transactions since 1992.
The table below contains information on the size and growth of the portfolio of
specially serviced commercial and multifamily mortgage loans and REO properties
that have been referred to Midland as special servicer in commercial
mortgage-backed securities transaction from 2004 to 2006.
CALENDAR YEAR END
(APPROXIMATE AMOUNTS IN BILLIONS)
--------------------------------------------
PORTFOLIO GROWTH - CMBS
SPECIAL SERVICING 2004 2005 2006
------------------------- --------- ---------- ----------
Total $49 $65 $89
THE TRUSTEE
LaSalle Bank National Association ("LaSalle") will act as trustee under
the pooling and servicing agreement, on behalf of the certificateholders. In
addition, LaSalle will act as custodian on behalf of the trustee. The trustee's
corporate trust office is located at 135 South LaSalle Street, Suite 1625,
Chicago, Illinois, 60603. Attention: Global Securities and Trust
Services--ML-CFC Commercial Mortgage Trust 2007-8 or at such other address as
the trustee may designate from time to time. LaSalle is a national banking
association formed under the federal laws of the United States of America. Its
parent company, LaSalle Bank Corporation, is an indirect subsidiary of ABN AMRO
Bank N.V., a Netherlands banking corporation.
On April 22, 2007, ABN AMRO Holding N.V. agreed to sell ABN AMRO North
America Holding Company, the indirect parent of LaSalle Bank National
Association, to Bank of America Corporation. The proposed sale currently
includes all parts of the Global Securities and Trust Services Group within
LaSalle Bank engaged in the business of acting as trustee, securities
administrator, master servicer, custodian, collateral administrator, securities
intermediary, fiscal agent and issuing and paying agent in connection with
securitization transactions.
The contract between ABN AMRO Bank N.V. and Bank of America Corporation
was filed on Form 6-K with the Securities and Exchange Commission on April 25,2007. The contract provides that the sale of LaSalle Bank is subject to
regulatory approvals and other customary closing conditions.
LaSalle has extensive experience serving as trustee on securitizations of
commercial mortgage loans. Since 1994, LaSalle has served as trustee or paying
agent on over 700 commercial mortgage-backed security transactions involving
assets similar to the mortgage loans to be included in the trust. As of June 30,2007, LaSalle served as trustee or paying agent in over 470 commercial
mortgage-backed security transactions. The long-term unsecured debt of LaSalle
is rated "A+" by S&P, "Aa3" by Moody's and "AA-" by Fitch. The depositor, the
master servicers, the special servicer and the trustee may maintain other
banking relationships in the ordinary course of business with the trustee.
In its capacity as custodian, LaSalle will hold the mortgage loan files
exclusively for the use and benefit of the trust. The custodian will not have
any duty or obligation to inspect, review or examine any of the documents,
instruments, certificates or other papers relating to the mortgage loans
delivered to it to determine that the same are valid. The disposition of the
mortgage loan files will be governed by the pooling and servicing agreement.
LaSalle provides custodial services on over 1100 residential, commercial and
asset-backed securitization transactions and maintains almost 3.0 million
custodial files in its two vault locations in Elk Grove, Illinois and Irvine,
California. LaSalle's two vault locations can maintain a total of approximately
6 million custody files. All custody files are segregated and maintained in
secure and fire resistant facilities in compliance with customary industry
standards. The vault construction complies with Fannie Mae/Ginnie Mae guidelines
applicable to document custodians. LaSalle maintains disaster recovery protocols
to ensure the preservation of custody files in the event of force
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majeure and maintains, in full force and effect, such fidelity bonds and/or
insurance policies as are customarily maintained by banks which act as
custodians. LaSalle uses unique tracking numbers for each custody file to ensure
segregation of collateral files and proper filing of the contents therein and
accurate file labeling is maintained through a monthly reconciliation process.
LaSalle uses a proprietary collateral review system to track and monitor the
receipt and movement internally or externally of custody files and any release
or reinstatement of collateral.
Using information set forth in this prospectus supplement, the trustee
will develop the cashflow model for the trust. Based on the monthly loan
information provided by the master servicers, the trustee will calculate the
amount of principal and interest to be paid to each class of certificates on
each Distribution Date. In accordance with the cashflow model and based on the
monthly loan information provided by the master servicers, the master servicers
will perform distribution calculations, remit distributions on the Distribution
Date to certificateholders and prepare a monthly statement to certificateholders
detailing the payments received and the activity on the Mortgage Loans during
the collection period. In performing these obligations, the trustee will be able
to conclusively rely on the information provided to it by the master servicers,
and the trustee will not be required to recompute, recalculate or verify the
information provided to it by the master servicers.
There are no legal proceedings pending against LaSalle, or to which any
property of LaSalle is subject, that is material to the certificateholders, nor
does LaSalle have actual knowledge of any proceedings of this type contemplated
by governmental authorities.
In addition to having express duties under the pooling and servicing
agreement, the trustee, as a fiduciary, also has certain duties unique to
fiduciaries under applicable law. In general, the trustee will be subject to
certain federal laws and, because the pooling and servicing agreement is
governed by New York law, certain New York state laws. As a national bank acting
in a fiduciary capacity, the trustee will, in the administration of its duties
under the pooling and servicing agreement, be subject to certain regulations
promulgated by the Office of the Comptroller of the Currency, specifically those
set forth in Chapter 12, Part 9 of the Code of Federal Regulations. New York
common law has required fiduciaries of common law trusts formed in New York to
perform their duties in accordance with the "prudent person" standard, which, in
this transaction, would require the trustee to exercise such diligence and care
in the administration of the trust as a person of ordinary prudence would employ
in managing his own property. However, under New York common law, the
application of this standard of care can be restricted contractually to apply
only after the occurrence of a default. The pooling and servicing agreement
provides that the trustee is subject to the prudent person standard only for so
long as an event of default has occurred and remains uncured.
See also "Description of the Governing Documents--The Trustee,""--Dutiesof the Trustee,""--Matters Regarding the Trustee" and "--Resignation andRemoval of the Trustee" in the accompanying base prospectus.
AFFILIATIONS AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We, the depositor, are affiliated with the following parties: (i) Merrill
Lynch Mortgage Lending, Inc, a sponsor and mortgage loan seller, (ii) Merrill
Lynch, Pierce, Fenner & Smith Incorporated, one of the underwriters and (iii)
Merrill Lynch Capital Services, Inc., the swap counterparty
Merrill Lynch Mortgage Lending, Inc., a sponsor and mortgage loan seller,
is affiliated with the following parties: (i) Merrill Lynch Mortgage Investors,
Inc, the depositor, (ii) Merrill Lynch, Pierce, Fenner & Smith Incorporated, one
of the underwriters and (iii) Merrill Lynch Capital Services, Inc., the swap
counterparty.
Countrywide Commercial Real Estate Finance, Inc., a sponsor and mortgage
loan seller, is affiliated with Countrywide Securities Corporation, one of the
underwriters.
KeyBank National Association, a sponsor and mortgage loan seller, is
affiliated with KeyCorp Real Estate Capital Markets, Inc., one of the master
servicers and KeyBanc Capital Markets Inc., one of the underwriters.
Midland Loan Services, Inc., the special servicer, is an affiliate of a
company that is the external manager of an entity that may be the initial
controlling class representative.
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LaSalle Bank National Association and Merrill Lynch Mortgage Lending, Inc.
("MLML") are parties to a custodial agreement whereby LaSalle, for
consideration, provides custodial services to MLML for certain commercial
mortgage loans originated or purchased by it. Pursuant to this custodial
agreement, LaSalle is currently providing custodial services for most of the
mortgage loans to be sold by MLML to the depositor in connection with this
securitization. The terms of the custodial agreement are customary for the
commercial mortgage-backed securitization industry providing for the delivery,
receipt, review and safekeeping of mortgage loan files.
SERVICING OF THE MORTGAGE LOANSGENERAL
Except as described below, the servicing of the mortgage loans in the
trust will be governed by the pooling and servicing agreement. This section
contains summary descriptions of some of the provisions of the pooling and
servicing agreement relating to the servicing and administration of the mortgage
loans and any real estate owned by the trust. You should also refer to the
accompanying base prospectus, in particular the section captioned "Descriptionof the Governing Documents" for additional important information regarding
provisions of the pooling and servicing agreement that relate to the rights and
obligations of the master servicers and the special servicer.
The servicing of the Georgia-Alabama Retail Portfolio Loan Combination
will be governed exclusively by the Other Pooling and Servicing Agreement and
the Georgia-Alabama Retail Portfolio Intercreditor Agreement. All decisions,
consents, waivers, approvals and other actions in respect of the Georgia-Alabama
Retail Portfolio Loan Combination will be effected in accordance with the Other
Pooling and Servicing Agreement. Consequently, the servicing provisions set
forth herein will not be applicable to the Georgia-Alabama Retail Portfolio Loan
Combination, the servicing of which will instead be governed by the Other
Pooling and Servicing Agreement. The servicing standards under the Other Pooling
and Servicing Agreement are substantially similar to the Servicing Standard
under the pooling and servicing agreement.
The pooling and servicing agreement provides that the master servicers and
the special servicer must each service and administer the mortgage loans and any
real estate owned by the trust for which it is responsible, directly or through
sub-servicers, in accordance with--
o any and all applicable laws; and
o the express terms of the pooling and servicing agreement and the
respective mortgage loans.
Furthermore, to the extent consistent with the preceding paragraph, the
master servicers and the special servicer must each service and administer the
mortgage loans and any real estate owned by the trust for which it is
responsible in accordance with the Servicing Standard.
In general, the master servicers will be responsible for the servicing and
administration of--
o all mortgage loans as to which no Servicing Transfer Event has
occurred; and
o all worked out mortgage loans as to which no new Servicing Transfer
Event has occurred.
The special servicer, on the other hand, will be responsible for the
servicing and administration of each mortgage loan as to which a Servicing
Transfer Event has occurred and which has not yet been worked out with respect
to that Servicing Transfer Event. The special servicer will also be responsible
for the administration of each mortgaged real property that has been acquired by
the trust with respect to a defaulted mortgage loan through foreclosure,
deed-in-lieu of foreclosure or otherwise.
Despite the foregoing, the pooling and servicing agreement will require
each master servicer to continue to receive payments and prepare certain reports
to the trustee required to be prepared with respect to any specially serviced
mortgage loans that were previously non-specially serviced mortgage loans it was
responsible for servicing and, otherwise, to render other incidental services
with respect to any specially serviced mortgage loans and REO
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Properties. None of the masters servicers or the special servicer will have
responsibility for the performance by either of the other servicers of its
respective obligations and duties under the pooling and servicing agreement.
The applicable master servicer will transfer servicing of a mortgage loan
to the special servicer upon the occurrence of a Servicing Transfer Event with
respect to that mortgage loan. The special servicer will return the servicing of
the subject mortgage loan to the applicable master servicer, and that mortgage
loan will be considered to have been worked out, if and when all Servicing
Transfer Events with respect to that mortgage loan cease to exist as described
in the definition of "Servicing Transfer Event" in the glossary to this
prospectus supplement, in which event that mortgage loan would be considered to
be a worked out mortgage loan.
The Farallon Portfolio Loan Combination, Executive Hills Portfolio Loan
Combination, Peninsula Beverly Hills Loan Combination and the MezzCap B-Note
Non-Trust Loans will be serviced by the applicable master servicer and the
special servicer in accordance with the pooling and servicing agreement and the
related Loan Combination Intercreditor Agreement.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSESThe Master Servicing Fee. The principal compensation to be paid to each
master servicer with respect to its master servicing activities will be the
related master servicing fee.
With respect to each master servicer, the master servicing fee:
o will be earned with respect to each and every mortgage loan in the
trust that it is responsible for servicing as of the date of the
initial issuance of the certificates, including--
1. each such mortgage loan, if any, that becomes a specially
serviced mortgage loan; and
2. each such mortgage loan, if any, as to which the corresponding
mortgaged real property has become REO Property; and
o in the case of each applicable mortgage loan, will--
1. be calculated on the same interest accrual basis as that
mortgage loan, which will be any of a 30/360 Basis or an
Actual/360 Basis (except in the case of partial periods of
less than a month, when it will be calculated on the basis of
the actual number of days elapsed in that partial period and a
360-day year);
2. accrue at the related master servicing fee rate;
3. accrue on the same principal amount as interest accrues or is
deemed to accrue from time to time with respect to that
mortgage loan; and
4. be payable (a) monthly from amounts received with respect to
interest on that mortgage loan and/or (b) if the subject
mortgage loan and any related REO Property has been
liquidated, out of general collections on the mortgage pool.
Subject to certain conditions, the master servicers are each entitled,
under the pooling and servicing agreement, to receive, or to assign or pledge to
any qualified institutional buyer or institutional accredited investor (other
than a Plan), an excess servicing strip, which is a portion of the master
servicing fee. If a master servicer resigns or is terminated as a master
servicer, it (or its assignee) will continue to be entitled to receive the
excess servicing strip and will be paid that excess servicing strip (except to
the extent that any portion of that excess servicing strip is needed to
compensate any successor master servicer for assuming its duties as a master
servicer under the pooling and servicing agreement). We make no representation
or warranty regarding whether, following any resignation or termination of a
master servicer, (a) any holder of the excess servicing strip would dispute the
trustee's determination that any portion of the excess servicing strip was
necessary to compensate a successor master servicer or (b) the ability of the
trustee to successfully recapture the excess servicing strip or any portion of
that strip
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from any holder of the excess servicing strip, in particular if that holder were
the subject of a bankruptcy or insolvency proceeding.
The master servicing fee rate with respect to the mortgage loans varies on
a loan-by-loan basis and ranges from 0.02% per annum to 0.10% per annum. The
weighted average master servicing fee rate for the mortgage pool was 0.02829%
per annum as of the cut-off date. That master servicing fee rate includes any
sub-servicing fee rate payable to any third-party servicers that sub-service or
primary service the loans on behalf of a master servicer.
Investment Income. Each master servicer will be authorized, but not
required, to invest or direct the investment of funds held in its collection
account, or in any and all accounts maintained by it that are escrow and/or
reserve accounts, only in Permitted Investments. See "--Collection Account"
below. Each master servicer will be entitled to retain any interest or other
income earned on those funds, in general, and will be required (subject to
certain exceptions set forth in the pooling and servicing agreement) to cover
any losses of principal from its own funds.
The special servicer will be authorized, but not required, to invest or
direct the investment of funds held in its REO account in Permitted Investments.
See "--REO Properties" below. The special servicer will be entitled to retain
any interest or other income earned on those funds, in general, and will be
required (subject to certain exceptions set forth in the pooling and servicing
agreement) to cover any losses of principal from its own funds without any right
to reimbursement.
Prepayment Interest Shortfalls. The pooling and servicing agreement
provides that, if any Prepayment Interest Shortfalls are incurred by reason of
voluntary principal prepayments being made by borrowers with respect to any
mortgage loans (other than specially serviced mortgage loans) during any
collection period (other than principal prepayments made out of insurance
proceeds, condemnation proceeds or liquidation proceeds and other than following
a material default), the applicable master servicer must make a nonreimbursable
payment with respect to the related distribution date in an amount equal to the
lesser of:
o the total amount of those Prepayment Interest Shortfalls incurred
with respect to mortgage loans master serviced by that master
servicer; and
o the sum of the following components of that master servicer's total
servicing compensation for that same collection period--
1. that portion of the master servicing fees that represents an
accrual at a rate of 0.01% per annum; and
2. the total amount of Prepayment Interest Excesses that were
collected by that master servicer during the subject
collection period;
provided, however, that if a Prepayment Interest Shortfall occurs as a result of
the applicable series 2007-8 master servicer's allowing the related borrower to
deviate from the terms of the related loan documents regarding principal
prepayments (other than (a) subsequent to a material default under the related
loan documents, (b) pursuant to applicable law or a court order, or (c) at the
request or with the consent of the special servicer or the controlling class
representative), then, for purposes of determining the payment that the
applicable master servicer will be required to make to cover that Prepayment
Interest Shortfall, the reference to "master servicing fee" in clause 1 of the
second bullet of this paragraph will be construed to include the entire master
servicing fee payable to that master servicer for that same collection period,
inclusive of any portion payable to a third-party primary servicer, and the
amount of any investment income earned by that master servicer on the related
principal prepayment while on deposit in its collection account.
No other master servicing compensation will be available to cover
Prepayment Interest Shortfalls, and the applicable master servicer's obligation
to make payments to cover Prepayment Interest Shortfalls in respect of a
particular collection period will not carry over to any following collection
period. In addition, the applicable master servicer will be required to apply
any Prepayment Interest Excesses with respect to a particular collection period,
that are not otherwise used to cover Prepayment Interest Shortfalls as described
above, to cover any shortfalls in interest caused as a result of the prepayment
of a mortgage loan by the application of a condemnation award or
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casualty insurance proceeds, in each case that are actually received, in
reduction of the subject mortgage loan's principal balance.
Any payments made by the master servicers with respect to any distribution
date to cover Prepayment Interest Shortfalls will be included among the amounts
payable as principal and interest on the certificates on that distribution date
as described under "Description of the Offered Certificates--Payments" in this
prospectus supplement. If the aggregate amount of the payments made by the
master servicers with respect to any distribution date to cover Prepayment
Interest Shortfalls is less than the total of all the Prepayment Interest
Shortfalls incurred with respect to the mortgage pool during the related
collection period, then the resulting Net Aggregate Prepayment Interest
Shortfall will be allocated among the respective interest-bearing classes of the
certificates (other than the class X certificates), in reduction of the interest
payable on those certificates, as and to the extent described under "Descriptionof the Offered Certificates--Payments--Payments of Interest" in this prospectus
supplement.
Principal Special Servicing Compensation. The principal compensation to be
paid to the special servicer with respect to its special servicing activities
will be--
o the special servicing fee;
o the workout fee; and
o the principal recovery fee.
The Special Servicing Fee. The special servicing fee:
o will be earned with respect to--
1. each specially serviced mortgage loan (other than the
Georgia-Alabama Retail Portfolio Trust Mortgage Loan, for
which such fee will be earned by the special servicer under
the Other Pooling and Servicing Agreement), if any; and
2. each mortgage loan, if any, as to which the corresponding
mortgaged real property has become REO Property; and
o with respect to each such mortgage loan, will--
1. be calculated on the same interest accrual basis as that
mortgage loan, which will be any of a 30/360 Basis or an
Actual/360 Basis (except in the case of partial periods of
less than a month, when it will be calculated on the basis of
the actual number of days elapsed in that partial period and a
360-day year);
2. accrue at a special servicing fee rate of 0.25% per annum;
3. accrue on the same principal amount as interest accrues or is
deemed to accrue from time to time on that mortgage loan; and
4. will be payable monthly from related liquidation proceeds,
insurance proceeds and condemnation proceeds and then from
general collections on all the mortgage loans and any REO
Properties, that are on deposit in the master servicers'
collection accounts from time to time.
The Workout Fee. The special servicer will, in general, be entitled to
receive a workout fee with respect to each specially serviced mortgage loan that
has been worked out by it. The workout fee will be payable out of, and will be
calculated by application of a workout fee rate of 1.0% to, each collection of
interest and principal received on the subject mortgage loan for so long as it
remains a worked out mortgage loan. The workout fee with respect to any worked
out mortgage loan will cease to be payable if a new Servicing Transfer Event
occurs with respect to the mortgage loan. However, a new workout fee would
become payable if the mortgage loan again became a worked out mortgage loan with
respect to that new Servicing Transfer Event. If the special servicer is
terminated or resigns,
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it will retain the right to receive any and all workout fees payable with
respect to those mortgage loans that became worked out mortgage loans during the
period that it acted as special servicer and remained (and with respect to those
mortgage loans that, subject to the conditions set forth in the pooling and
servicing agreement, were about to become) worked out mortgage loans at the time
of its termination or resignation. The successor special servicer will not be
entitled to any portion of those workout fees. Although workout fees are
intended to provide the special servicer with an incentive to better perform its
duties, the payment of any workout fee will reduce amounts payable to the
certificateholders.
The Principal Recovery Fee. Except as described in the following
paragraph, the special servicer will be entitled to receive a principal recovery
fee with respect to: (a) each specially serviced mortgage loan (other than the
Georgia-Alabama Retail Portfolio Trust Mortgage Loan)(or any replacement
mortgage loan substituted for it) for which the special servicer obtains a full
or discounted payoff from the related borrower; and (b) any specially serviced
mortgage loan or REO Property (other than the Georgia-Alabama Retail Portfolio
Trust Mortgage Loan and any related REO Property) as to which the special
servicer receives any liquidation proceeds, insurance proceeds or condemnation
proceeds. The principal recovery fee will be payable from any full or discounted
payoff, liquidation proceeds, insurance proceeds or condemnation proceeds. As to
each such specially serviced mortgage loan and REO Property, the principal
recovery fee will be payable from, and will be calculated by application of a
principal recovery fee rate of 1.0% to, the related payment or proceeds.
Notwithstanding anything to the contrary described in the prior paragraph,
no principal recovery fee will be payable based on, or out of, payments or
proceeds received in connection with:
o the repurchase or replacement of any mortgage loan by a loan seller
for a breach of representation or warranty or for defective or
deficient loan documentation, as described under "Description of theMortgage Pool--Repurchases and Substitutions" in this prospectus
supplement within the time period (or extension thereof) provided
for such repurchase or replacement or, if such repurchase or
replacement occurs after such time period, if the mortgage loan
seller was acting in good faith to resolve such breach or defect,
within such further period that will not end beyond the date that is
one hundred twenty (120) days following the end of the initial time
period, which is ninety (90) days, provided for such repurchase or
replacement;
o except as described under "--Realization Upon Defaulted MortgageLoans" below with respect to certain assignees, the purchase of any
defaulted mortgage loan or REO Property by the special servicer or
any single holder - or, if applicable, beneficial owner - of
certificates evidencing the largest interest in the controlling
class of the certificates, as described under "--Realization UponDefaulted Mortgage Loans" below;
o the purchase of an A-Note Trust Mortgage Loan (or in the case of the
Georgia-Alabama Retail Portfolio Trust Mortgage Loan, the related
B-Note Trust Loan) by the holder of the related B-Note Non-Trust
Loan, as described under "Description of the Mortgage Pool--The LoanCombinations" in this prospectus supplement, unless provided for
under the related Loan Combination Intercreditor Agreement;
provided, however, that if the related Loan Combination
Intercreditor Agreement provides that a principal recovery fee is
payable if and to the extent such fee is payable under the series
2007-8 pooling and servicing agreement (or in the case of the
Georgia-Alabama Retail Portfolio Trust Mortgage Loan, the Other
Pooling and Servicing Agreement) (or words of similar impact), then
such principal recovery fee shall be payable if such purchase occurs
more than 90 days after the date such purchase option is first
exercisable under such Loan Combination Intercreditor Agreement;
o the purchase of all the mortgage loans and REO Properties by a
master servicer, the special servicer or any single holder - or, if
applicable, beneficial owner - of certificates evidencing the
largest interest in the controlling class of the certificates in
connection with the termination of the trust, as described under
"Description of the Offered Certificates--Termination" in this
prospectus supplement; and
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o the exchange, following the date on which the total principal
balances of the offered certificates are reduced to zero, of all the
remaining certificates (other than the class Y, Z, R-I and R-II
certificates) for all the mortgage loans and REO Properties in the
trust at the time of exchange, subject to the conditions set forth
in the pooling and servicing agreement.
Although principal recovery fees are intended to provide the special
servicer with an incentive to better perform its duties, the payment of any
principal recovery fee will reduce amounts payable to the certificateholders.
Loan Combinations. Any special servicing fees, workout fees and principal
recovery fees with respect to a Loan Combination may be paid out of collections
on the entire Loan Combination, except that to the extent those fees relate to a
B-Note Non-Trust Loan, the special servicer will be entitled to receive those
fees solely from collections in respect of the subject B-Note Non-Trust Loan. In
addition, any special servicing fees, workout fees and principal recovery fees
with respect to Farallon Portfolio Loan Combination may be paid out of
collections on the entire Loan Combination, with such amounts being deducted
first, in respect of collections on the Farallon Portfolio B-Note Trust Mortgage
Loan and the Farallon Portfolio B-Note Non-Trust Mortgage Loans, pro rata, and
then, in respect of collections on the Farallon Portfolio A-Note Trust Mortgage
Loan and the Farallon Portfolio A-Note Non-Trust Mortgage Loans, pro rata.
If the Georgia-Alabama Retail Portfolio Loan Combination becomes a
specially serviced mortgage loan under the Other Pooling and Servicing
Agreement, the Other Special Servicer will be entitled to similar compensation
pursuant to such Other Pooling and Servicing Agreement. The workout fee rate
under the Other Pooling and Servicing Agreement is 1.00%. The special servicer
under the pooling and servicing agreement is not entitled to such fees with
respect to the Georgia-Alabama Retail Portfolio Trust Mortgage Loan. If funds
received in respect of the Georgia-Alabama Retail Portfolio A-Note Trust
Mortgage Loan are insufficient to pay such compensation (after the holders of
the Georgia-Alabama Retail Portfolio Junior Loans pay such compensation out of
amounts owed on their respective loans) to the Other Special Servicer, a pro
rata portion of such amounts will be withdrawn from general collections in the
Collection Account. However, with respect to the Georgia-Alabama Retail
Portfolio Loan, to the extent those fees relate to the Georgia-Alabama Retail
Portfolio Junior Mortgage Loans, the Other Special Servicer will be entitled to
such fees from the collections in respect of the subject B-Note Non-Trust Loan
and the B-Note Trust Loan. The special servicer is not entitled to the foregoing
fees with respect to the Georgia-Alabama Retail Portfolio Trust Mortgage Loan.
Additional Servicing Compensation. As additional master servicing
compensation, each master servicer will be entitled to receive any Prepayment
Interest Excesses collected with respect to the mortgage loans it is responsible
for servicing (except to the extent required to offset any Prepayment Interest
Shortfalls).
In addition, the following items collected on any mortgage loan in the
mortgage pool will be allocated between the applicable master servicer and the
special servicer as additional compensation in accordance with the pooling and
servicing agreement:
o any late payment charges and Penalty Interest actually collected on
any particular mortgage loan in the mortgage pool, which late
payment charges and Penalty Interest are not otherwise applied--
1. to pay the applicable master servicer, the special servicer or
the trustee, as applicable, any unpaid interest on Advances
made by that party with respect to that mortgage loan or the
related mortgaged real property,
2. to reimburse the issuing entity for any interest on Advances
that were made with respect to that mortgage loan or the
related mortgaged real property, which interest was paid to
the applicable master servicer, the special servicer or the
trustee, as applicable, from a source of funds other than late
payment charges and Penalty Interest collected on that
mortgage loan,
3. to pay, or to reimburse the issuing entity, any expenses
incurred by the special servicer in connection with inspecting
the related mortgaged real property following a Servicing
Transfer Event with respect to that mortgage loan or after
that property has become an REO Property, or
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4. to pay, or to reimburse the issuing entity, any other expenses
incurred with respect to that mortgage loan or the related
mortgaged real property that are or, if paid from a source
other than Penalty Interest and/or late payment charges
collected on that mortgage loan, would result in an Additional
Trust Fund Expense; and
o any modification fees, assumption fees, assumption application fees,
earnout fees, release fees, consent/waiver fees, extension fees,
defeasance fees and other comparable transaction fees and charges.
Payment of Expenses; Servicing Advances. The master servicers and the
special servicer will each be required to pay their respective overhead costs
and any general and administrative expenses they incur in connection with their
servicing activities under the pooling and servicing agreement. None of the
master servicers or the special servicer will be entitled to reimbursement for
expenses except as expressly provided in the pooling and servicing agreement.
Any and all customary, reasonable and necessary out of pocket costs and
expenses incurred by a master servicer, the trustee or, in some cases, the
special servicer, in connection with the servicing of a mortgage loan, if a
default is imminent thereunder or after a default, delinquency or other
unanticipated event, or in connection with the administration of any REO
Property, will be servicing advances. Servicing advances will be reimbursable
from future payments and other collections, including insurance proceeds,
condemnation proceeds and liquidation proceeds, received in connection with the
related mortgage loan or REO Property.
The special servicer will be required to notify the applicable master
servicer as to when it must make servicing advances with respect to a specially
serviced mortgage loan or REO Property. Generally, the special servicer must
make the request 10 business days, if reasonably practicable, and in any event
at least five business days, prior to the date the Advance must be made. The
applicable master servicer must make the requested servicing advance within a
specified number of days following its receipt of the request. The special
servicer will have the option, but not the obligation, to make such Advances.
If a master servicer is required under the pooling and servicing agreement
to make a servicing advance, but does not do so within 15 days after the
servicing advance is required to be made, then the trustee will be required:
o if it has actual knowledge of the failure, to give that master
servicer notice of its failure; and
o if the failure continues for five more business days, to make the
servicing advance.
Despite the foregoing discussion or anything else to the contrary in this
prospectus supplement, none of the master servicers, the special servicer or the
trustee will be obligated to make servicing advances that, it determines in
accordance with the Servicing Standard (in the case of a master servicer or
special servicer) or its good faith business judgment (in the case of the
trustee), would not be ultimately recoverable, together with interest accrued on
that advance, from expected collections on the related mortgage loan or REO
Property. The trustee will be entitled to rely on any determination of
non-recoverability made by a master servicer. In addition, the special servicer
may also determine that any servicing advance made or proposed to be made by a
master servicer or the trustee is not recoverable, together with interest
accrued on that servicing advance, from proceeds of the mortgage loan to which
that Advance relates, and the applicable master servicer and the trustee will be
required to act in accordance with that determination (on which determination
they will, as provided in the pooling and servicing agreement, be entitled to
conclusively rely).
If a master servicer, the special servicer or the trustee makes any
servicing advance that it (or, in the case of a master servicer or the trustee,
the special servicer) subsequently determines, in its judgment, is not
recoverable, together with interest accrued on that Advance, from expected
collections on the related mortgage loan or REO Property, it may obtain
reimbursement for that Advance, together with interest on that Advance, out of
general collections on the mortgage loans it is responsible for servicing and
any REO Properties on deposit in its collection account (or, if those funds in
its collection account are insufficient, from the similar funds in the other
master servicer's collection account) from time to time subject to substantially
the same limitations and requirements as are applicable to P&I advances
described under "Description of the Offered Certificates--Advances of DelinquentMonthly Debt Service Payments and Reimbursement of Advances" in this prospectus
supplement. Each master
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servicer, the special servicer or the trustee may also obtain reimbursement for
any servicing advance that constitutes a Workout-Delayed Reimbursement Amount
out of general principal collections on the mortgage loans and any REO
Properties on deposit in the applicable master servicer's collection account
(or, if those funds in its collection account are insufficient, from the similar
funds in the other master servicer's collection account) from time to time
subject to substantially the same limitations and requirements as are applicable
to P&I advances described under "Description of the OfferedCertificates--Advances of Delinquent Monthly Debt Service Payments andReimbursement of Advances" in this prospectus supplement.
The master servicers will be permitted to pay, and the special servicer
may direct the payment of, some servicing expenses directly out of the
applicable master servicer's collection account (or, if those funds in its
collection account are insufficient, from the similar funds in the other master
servicer's collection account) and at times without regard to the relationship
between the expense and the funds from which it is being paid (subject to the
limitations for reimbursement of Advances from general collections), which may
include servicing expenses relating to the remediation of any adverse
environmental circumstance or condition at any of the mortgaged real properties.
Each master servicer, the special servicer and the trustee will be
entitled to receive interest on servicing advances made by them. The interest
will accrue on the amount of each servicing advance, for so long as the
servicing advance is outstanding, at a rate per annum equal to the prime rate as
published in the "Money Rates" section of The Wall Street Journal, as that prime
rate may change from time to time. Interest accrued with respect to any
servicing advance will be payable in the collection period in which that Advance
is reimbursed--
o first, out of Penalty Interest and late payment charges collected on
the related mortgage loan during that collection period; and
o second, if and to the extent that the Penalty Interest and late
charges referred to in clause first above are insufficient to cover
the advance interest, out of any amounts then on deposit in the
applicable master servicer's collection account (or, if those funds
in its collection account are insufficient, from the similar funds
in the other master servicer's collection account) subject to
substantially the same limitations and requirements as are
applicable to P&I advances described under "Description of theOffered Certificates--Advances of Delinquent Monthly Debt ServicePayments and Reimbursement of Advances" in this prospectus
supplement.
The special servicer may, but is not obligated to, make any servicing
advance on a specially serviced mortgage loan or REO Property (as required on an
emergency or urgent basis) and then request from the applicable master servicer
reimbursement of the servicing advance, together with interest thereon as set
forth in the pooling and servicing agreement. Upon the applicable master
servicer's reimbursing the special servicer for any such servicing advance, that
master servicer will be considered to have made that servicing advance as of the
date that the special servicer actually made it. The applicable master servicer
will have no obligation to reimburse from its own funds any advance made by the
special servicer that such master servicer determines to be nonrecoverable.
However, any such advance made by the special servicer will be reimbursable to
the special servicer from the trust fund as a Nonrecoverable Advance.
Subject to certain conditions, the applicable master servicer may (and
must, if directed by the special servicer in connection with a specially
serviced mortgage loan or an REO Property) pay directly out of the collection
account any servicing advance that it considers to be nonrecoverable in
accordance with the Servicing Standard, provided that the applicable master
servicer or the special servicer has determined, in accordance with the
Servicing Standard, that this payment is in the best interests of the
certificateholders (or, if a Loan Combination is involved, the
certificateholders and holder(s) of the related Non-Trust Loan(s)), as a
collective whole.
For additional information regarding reimbursement of servicing advances,
see "Description of the Offered Certificates--Advances of Delinquent MonthlyDebt Service Payments and Reimbursement of Advances" in this prospectus
supplement.
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The master servicers, special servicer and trustee under the pooling and
servicing agreement will not have any obligation or authority to supervise the
Other Servicer, Other Special Servicer or Other Trustee under the Other Pooling
and Servicing Agreement or to make servicing advances with respect to the
Georgia-Alabama Retail Portfolio Loan Combination.
TRUST ADMINISTRATION COMPENSATION
The trustee will be entitled to a monthly fee for its services, which fees
(in the aggregate) will--
o accrue at a rate of 0.00085% per annum,
o accrue on the Stated Principal Balance of each mortgage loan
outstanding from time to time, and
o be calculated on the same interest accrual basis as is applicable to
each mortgage loan.
The trust administration fee is payable out of general collections on the
mortgage loans and any REO Properties in the trust.
In addition, the trustee will be authorized to invest or direct the
investment of funds held in its distribution account and interest reserve
account in Permitted Investments. See "Description of the OfferedCertificates--Distribution Account" and "--Interest Reserve Account" in this
prospectus supplement. It will be--
o entitled to retain any interest or other income earned on those
funds, and
o required to cover any losses of principal of those investments from
its own funds.
The trustee will not be obligated, however, to cover any losses resulting
from the bankruptcy or insolvency of any depository institution or trust company
(other than itself or an affiliate) holding the distribution account or the
interest reserve account.
SUB-SERVICERS
Subject to such limitations as may be provided for in the pooling and
servicing agreement, each master servicer and the special servicer may each
delegate any of its servicing obligations under the pooling and servicing
agreement to any one or more third-party primary servicers. Any delegation of
servicing obligations by the special servicer will be subject to the consent of
the controlling class representative. Either master servicer or the special
servicer, as the case may be, will remain obligated under the pooling and
servicing agreement for any duties delegated to a sub-servicer.
The pooling and servicing agreement will permit each master servicer and,
with the consent of the controlling class representative, the special servicer
to enter into sub-servicing agreements to provide for the performance by third
parties of any or all of their respective obligations under the pooling and
servicing agreement, provided that in each case, the sub-servicing agreement:
(a) is consistent with the pooling and servicing agreement in all material
respects, requires the sub-servicer to comply with all of the applicable
conditions of the pooling and servicing agreement and, with limited exceptions,
includes events of default with respect to the sub-servicer substantially
similar to the events of default applicable to the applicable master servicer or
the special servicer, as the case may be; (b) provides that if the applicable
master servicer or the special servicer, as the case may be, for any reason no
longer acts in that capacity thereunder, including by reason of an event of
default, the trustee or its designee may (i) assume all of the rights and,
except to the extent such obligations arose prior to the date of assumption,
obligations of the applicable master servicer or the special servicer, as the
case may be, under such agreement or (ii) except with respect only to the
sub-servicing agreements in effect as of the date of initial issuance of the
certificates, terminate the sub-servicing agreement without cause and without
payment of any penalty or termination fee; (c) provides that the trustee, for
the benefit of the certificateholders and, in the case of a sub-servicing
agreement relating to a Loan Combination, for benefit of the related Non-Trust
Loan Noteholder(s), will be a third party beneficiary under such agreement; (d)
permits any purchaser of a mortgage loan pursuant to the pooling and servicing
agreement to terminate the sub-servicing agreement with respect to the purchased
mortgage loan at its option and without penalty; (e) does not permit the
sub-servicer to enter into or consent to any material
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modification, extension, waiver or amendment or otherwise take any enforcement
action on behalf of the applicable master servicer or the special servicer,
without the consent of the applicable master servicer or the special servicer,
as the case may be, or conduct any sale of a mortgage loan or REO Property; and
(f) does not permit the sub-servicer any direct rights of indemnification that
may be satisfied out of assets of the trust fund. In addition, pursuant to the
pooling and servicing agreement, each sub-servicing agreement entered into by a
master servicer must provide that such agreement will, with respect to any
mortgage loan, terminate at the time such mortgage loan becomes a specially
serviced mortgage loan or, alternatively, be subject to the special servicer's
rights to service such mortgage loan for so long as such mortgage loan continues
to be a specially serviced mortgage loan; and each sub-servicing agreement
entered into by the special servicer may relate only to specially serviced
mortgage loans and must terminate with respect to any such mortgage loan which
ceases to be a specially serviced mortgage loan.
The pooling and servicing agreement will require the master servicers and
the special servicer, for the benefit of the trustee, the certificateholders
and, in the case of a Loan Combination, the related B-Note Loan Noteholder(s),
to monitor the performance and enforce the obligations of their respective
sub-servicers under the related sub-servicing agreements. Further, the pooling
and servicing agreement will provide that, notwithstanding any sub-servicing
agreement, the master servicers and the special servicer will remain obligated
and liable to the trustee, the certificateholders and the Non-Trust Loan
Noteholder(s) for the performance of their respective obligations and duties
under the pooling and servicing agreement as if each alone were servicing and
administering the subject mortgage loans, and each master servicer and the
special servicer will be responsible, without right of reimbursement, for all
compensation of each sub-servicer retained by it.
THE CONTROLLING CLASS REPRESENTATIVE AND THE LOAN COMBINATION CONTROLLING
PARTIES
Controlling Class. As of any date of determination, the controlling class
of certificateholders will be the holders of the most subordinate class of
certificates then outstanding, other than the class X, Y, Z, R-I and R-II
certificates, that has a total principal balance that is greater than 25% of
that class's original total principal balance. However, if no class of
certificates, other than the class X, Y, Z, R-I and R-II certificates, has a
total principal balance that satisfies this requirement, then the controlling
class of certificateholders will be the holders of the most subordinate class of
certificates then outstanding, other than the class X, Y, Z, R-I and R-II
certificates. The class A-1, A-2, A-2FL, A-SB, A-3, A-3FL and A-1A certificates
will be treated as a single class for purposes of determining, and exercising
the rights of, the controlling class. Appraisal Reduction Amounts will not be
considered in determining the principal balance outstanding on the applicable
class of certificates for the purpose of determining the controlling class.
Selection of the Controlling Class Representative. The holders of
certificates representing more than 50% of the total principal balance of the
controlling class of certificates will be entitled to--
o select a representative having the rights and powers described under
"--Rights and Powers of The Controlling Class Representative and theLoan Combination Controlling Parties" below; or
o replace an existing controlling class representative.
The trustee will be required to promptly notify all the certificateholders
of the controlling class that they may select a controlling class representative
upon:
o the receipt by the trustee of written requests for the selection of
a controlling class representative from the holders of certificates
representing more than 50% of the total principal balance of the
controlling class of certificates;
o the resignation or removal of the person acting as controlling class
representative; or
o a determination by the trustee that the controlling class of
certificateholders has changed.
The notice will explain the process for selecting a controlling class
representative. The appointment of any person as the controlling class
representative will generally not be effective until that person provides the
trustee, each master servicer and the special servicer with--
o written confirmation of its acceptance of its appointment;
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o an address and facsimile number for the delivery of notices and
other correspondence; and
o a list of officers or employees of the person with whom the parties
to the pooling and servicing agreement may deal, including their
names, titles, work addresses and facsimile numbers.
Resignation and Removal of the Controlling Class Representative. The
controlling class representative may at any time resign by giving written notice
to the trustee and each certificateholder of the controlling class. The holders
of certificates representing more than 50% of the total principal balance of the
controlling class of certificates, will be entitled to remove any existing
controlling class representative by giving written notice to the trustee and to
the existing controlling class representative.
Rights and Powers of the Controlling Class Representative and the Loan
Combination Controlling Parties. The special servicer (or with respect to the
Georgia-Alabama Retail Portfolio Trust Mortgage Loan, the Other Special
Servicer) will be required to prepare an asset status report for each mortgage
loan that becomes a specially serviced mortgage loan, not later than 60 days
(or, in the case of any Loan Combination such other number of days provided for
in the related Loan Combination Intercreditor Agreement) after the servicing of
the mortgage loan is transferred to the special servicer (or with respect to the
Georgia-Alabama Retail Portfolio Trust Mortgage Loan, the Other Special
Servicer). Each asset status report is to include, among other things, a summary
of the status of the subject specially serviced mortgage loan and negotiations
with the related borrower and a summary of the special servicer's recommended
action with respect to the subject specially serviced mortgage loan. Each asset
status report is required to be delivered to the controlling class
representative (and, in the case of the a Loan Combination, the related Loan
Combination Controlling Party or the B-Note Loan Noteholder, if applicable, (if
any)), among others, by the special servicer.
If, within 10 business days of receiving an asset status report that
relates to a mortgage loan and relates to a recommended action to which the
controlling class representative is entitled to object, as described below, the
controlling class representative does not disapprove the asset status report in
writing, then the special servicer (or with respect to the Georgia-Alabama
Retail Portfolio Trust Mortgage Loan, the Other Special Servicer) will be
required to take the recommended action as outlined in the asset status report;
provided, however, that the special servicer (or with respect to the
Georgia-Alabama Retail Portfolio Trust Mortgage Loan, the Other Special
Servicer) may not take any action that is contrary to applicable law, the
Servicing Standard or the terms of the applicable loan documents. If the
controlling class representative disapproves an initial asset status report, the
special servicer (or with respect to the Georgia-Alabama Retail Portfolio Trust
Mortgage Loan, the Other Special Servicer) will be required to revise that asset
status report and deliver to the controlling class representative, among others,
a new asset status report as soon as practicable, but in no event later than 30
days after such disapproval.
The special servicer (or with respect to the Georgia-Alabama Retail
Portfolio Trust Mortgage Loan, the Other Special Servicer) will be required to
continue to revise an asset status report as described above until the
controlling class representative does not disapprove a revised asset status
report in writing within 10 business days of receiving the revised asset status
report or until the special servicer makes one of the determinations described
below. The special servicer (or with respect to the Georgia-Alabama Retail
Portfolio Trust Mortgage Loan, the Other Special Servicer) may, from time to
time, modify any asset status report it has previously so delivered and
implement such modified report; provided that the modified report shall have
been prepared, reviewed and not rejected as described above. Notwithstanding the
foregoing, the special servicer (or with respect to the Georgia-Alabama Retail
Portfolio Trust Mortgage Loan, the Other Special Servicer) may, following the
occurrence of an extraordinary event with respect to the related mortgaged real
property, take any action set forth in an asset status report (that is
consistent with the terms of the pooling and servicing agreement) before the
expiration of a 10 business day period if the special servicer (or with respect
to the Georgia-Alabama Retail Portfolio Trust Mortgage Loan, the Other Special
Servicer) has reasonably determined that failure to take the action would
materially and adversely affect the interests of the certificateholders, and the
special servicer has made a reasonable effort to contact the controlling class
representative. The foregoing discussion notwithstanding, the special servicer
(or with respect to the Georgia-Alabama Retail Portfolio Trust Mortgage Loan,
the Other Special Servicer) will be required to determine whether any
affirmative disapproval is not in the best interest of all the
certificateholders pursuant to the Servicing Standard.
In the event the controlling class representative and the special servicer
(or with respect to the Georgia-Alabama Retail Portfolio Trust Mortgage Loan,
the Other Special Servicer) have been unable to agree upon an asset
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status report with respect to a specially serviced mortgage loan within 90 days
of the controlling class representative's receipt of the initial asset status
report, the special servicer must implement the actions directed by the
controlling class representative unless doing so would result in any of the
consequences contemplated in clauses (a) through (d) in the second following
paragraph, in which event the special servicer (or with respect to the
Georgia-Alabama Retail Portfolio Trust Mortgage Loan, the Other Special
Servicer) must implement the actions described in the most recent asset status
report submitted to the controlling class representative by the special servicer
that is consistent with the Servicing Standard. Notwithstanding the fact that an
asset status report has been prepared and/or approved, the controlling class
representative will remain entitled to advise and object regarding the actions
described below and any related asset status report will not be a substitute for
the exercise of those rights.
Notwithstanding the foregoing discussion, with respect to each mortgage
loan in the trust fund that is part of a Loan Combination, the related Loan
Combination Intercreditor Agreement may contain provisions regarding the review,
approval and implementation of asset status reports with respect to the related
Loan Combination that are different from those described above.
No direction of the controlling class representative or a Loan Combination
Controlling Party in connection with any asset status report may (a) require or
cause the special servicer (or with respect to the Georgia-Alabama Retail
Portfolio Trust Mortgage Loan, the Other Special Servicer) to violate the terms
of the subject mortgage loan, applicable law or any provision of the related
Loan Combination Intercreditor Agreement, if applicable, or the pooling and
servicing agreement, including the special servicer's (or with respect to the
Georgia-Alabama Retail Portfolio Trust Mortgage Loan, the Other Special
Servicer's) obligation to act in the best interests of all the
certificateholders (and, in the case of a Loan Combination, the holders of the
related Non-Trust Loan(s)) in accordance with the Servicing Standard and to
maintain the REMIC status of REMIC I and REMIC II, (b) result in the imposition
of any tax on "prohibited transactions" or contributions after the startup date
of either REMIC I or REMIC II under the Code, (c) expose any party to the
pooling and servicing agreement, any mortgage loan seller or the trust fund to
any claim, suit or liability or (d) expand the scope of the applicable master
servicer's, the trustee's or special servicer's responsibilities under the
pooling and servicing agreement.
In addition, the controlling class representative will be entitled to
advise the special servicer with respect to the following actions (except as
described below with respect to the Farallon Portfolio Loan Combination, the
Peninsula Beverly Hills Loan Combination and the Georgia-Alabama Retail
Portfolio Loan Combination or as described above, under "Description of theMortgage Pool--The Loan Combinations"), and the special servicer will not be
permitted to take (or consent to the applicable master servicer taking) any of
the following actions with respect to the mortgage loans in the trust fund
(exclusive of the Farallon Portfolio Loan Combination, Peninsula Beverly Hills
Loan Combination and the Georgia-Alabama Retail Portfolio Loan Combination) as
to which the controlling class representative has objected in writing within 10
business days of having been notified in writing of the particular proposed
action (provided that, with respect to non-specially serviced mortgage loans,
this 10-business day notice period may not exceed by more than five (5) business
days the 10 business days during which the special servicer can object to the
applicable master servicer waiving Additional Interest or taking actions
described under "--Enforcement of Due-on-Sale and Due-on-Encumbrance Provisions"
and "--Modifications, Waivers, Amendments and Consents" below):
o any foreclosure upon or comparable conversion (which may include
acquisition of an REO Property) of the ownership of properties
securing a specially serviced mortgage loan as comes into and
continues in default;
o any modification or consent to a modification of a material term of
a mortgage loan, including the timing of payments or an extension of
the maturity date of a mortgage loan;
o any proposed sale of any defaulted mortgage loan or any REO
Property, other than in connection with the termination of the trust
as described under "Description of the OfferedCertificates--Termination" in this prospectus supplement or, in the
case of a defaulted mortgage loan, other than in connection with the
purchase option described under "--Realization Upon DefaultedMortgage Loans--Fair Value Call" in this prospectus supplement, for
less than the outstanding principal balance of the related mortgage
loan, plus accrued interest (exclusive of Penalty Interest and
Additional Interest), expenses and fees;
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o any determination to bring an REO Property into compliance with
applicable environmental laws or to otherwise address hazardous
material located at the REO Property;
o any release of material real property collateral for any mortgage
loan, other than (a) where the release is not conditioned upon
obtaining the consent of the lender or certain specified conditions
being fulfilled, (b) upon satisfaction of that mortgage loan, (c) in
connection with a pending or threatened condemnation action or (d)
in connection with a full or partial defeasance of that mortgage
loan;
o any acceptance of substitute or additional real property collateral
for any mortgage loan (except where the acceptance of the substitute
or additional collateral is not conditioned upon obtaining the
consent of the lender, in which case only notice to the controlling
class representative will be required);
o any waiver of a due-on-sale or due-on-encumbrance clause in any
mortgage loan;
o any releases of earn-out reserves or related letters of credit with
respect to a mortgaged real property securing a mortgage loan (other
than where the release is not conditioned upon obtaining the consent
of the lender, in which case only notice to the controlling class
representative will be required);
o any termination or replacement, or consent to the termination or
replacement, of a property manager with respect to any mortgaged
real property or any termination or change, or consent to the
termination or change, of the franchise for any mortgaged real
property operated as a hospitality property (other than where the
action is not conditioned upon obtaining the consent of the lender,
in which case only prior notice will be required to be delivered to
the controlling class representative);
o any determination that an insurance-related default is an Acceptable
Insurance Default or that earthquake or terrorism insurance is not
available at commercially reasonable rates; and
o any waiver of insurance required under the related loan documents
(except as contemplated in the preceding bullet).
Furthermore, the controlling class representative may direct the special
servicer to take, or to refrain from taking, any such actions with respect to
the mortgage loans and REO Properties in the trust fund as the controlling class
representative may consider advisable or as to which provision is otherwise made
in the pooling and servicing agreement.
In the case of the Georgia-Alabama Retail Portfolio Trust Mortgage Loan,
the Georgia-Alabama Retail Portfolio Controlling Party will be entitled to
direct the Other Servicer and the Other Special Servicer under the Other Pooling
and Servicing Agreement with respect to the actions described under "Descriptionof the Mortgage Pool--The Loan Combinations--The Georgia-Alabama RetailPortfolio Loan Combination--Consent Rights" and the special servicer under the
Other Pooling and Servicing Agreement will not be permitted to take (or consent
to the applicable master servicer taking) any of those specified actions with
respect to the Georgia-Alabama Retail Portfolio Loan Combination as to which the
Georgia-Alabama Retail Portfolio Controlling Party has objected.
Notwithstanding the foregoing, no advice, direction or objection given or
made by the controlling class representative (or, if applicable, the Loan
Combination Controlling Party), as contemplated by any of the preceding
paragraphs of this "--Rights and Powers of The Controlling Class Representativeand the Loan Combination Controlling Parties" subsection, may--
o require or cause the applicable master servicer or the special
servicer to violate applicable law, the terms of any mortgage loan
or any other provision of the pooling and servicing agreement,
including the applicable master servicer or the special servicer's
obligation to act in accordance with the Servicing Standard and the
loan documents;
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o result in an adverse tax consequence for the trust;
o expose the trust, us, the applicable master servicer, the special
servicer, the trustee or any of our or their respective affiliates,
directors, officers, employees or agents, to any material claim,
suit or liability;
o materially expand the scope of the applicable master servicer or the
special servicer's responsibilities under the pooling and servicing
agreement; or
o cause the applicable master servicer or the special servicer to act,
or fail to act, in a manner which violates the Servicing Standard.
In addition, if the special servicer determines that immediate
action is necessary to protect the interests of the
certificateholders and any related Non-Trust Loan Noteholder, as a
collective whole, it may take such action without waiting for a
response from the controlling class representative.
The master servicer and the special servicer are each required to
disregard any advice, direction or objection on the part of the controlling
class representative (or, if applicable, any Loan Combination Controlling Party)
that would have any of the effects described in the immediately preceding five
bullets.
Furthermore, the special servicer will not be obligated to seek approval
from the controlling class representative for any actions to be taken by the
special servicer with respect to any particular specially serviced mortgage loan
if (i) the special servicer has notified the controlling class representative in
writing of various actions that the special servicer proposes to take with
respect to the workout or liquidation of that mortgage loan and (ii) for up to
60 days following the first such notice, the controlling class representative
has objected to all of the proposed actions and has failed to suggest any
alternative actions that the special servicer considers to be consistent with
the Servicing Standard.
NOTWITHSTANDING THE FOREGOING DISCUSSION, WITH RESPECT TO THE
GEORGIA-ALABAMA RETAIL PORTFOLIO LOAN COMBINATION, THE CONTROLLING CLASS
REPRESENTATIVE (UNLESS THE GEORGIA-ALABAMA RETAIL PORTFOLIO CONTROLLING PARTY IS
THE CONTROLLING CLASS REPRESENTATIVE) WILL HAVE NO APPROVAL RIGHTS FOR ACTIONS
THE OTHER SERVICER AND OTHER SPECIAL SERVICER TAKE IN REGARD TO THE
GEORGIA-ALABAMA RETAIL PORTFOLIO LOAN COMBINATION PURSUANT TO THE OTHER POOLING
AND SERVICING AGREEMENT. AS DESIGNEE OF THE HOLDER OF THE GEORGIA-ALABAMA RETAIL
PORTFOLIO TRUST MORTGAGE LOAN, THE CONTROLLING CLASS REPRESENTATIVE WILL HAVE
THE RIGHT TO CONSULT WITH THE OTHER SERVICER AND OTHER SPECIAL SERVICER PURSUANT
TO THE OTHER POOLING AND SERVICING AGREEMENT REGARDING SUCH SERVICING ACTIONS AS
DESCRIBED ABOVE UNDER "LOAN COMBINATIONS-- GEORGIA-ALABAMA RETAIL PORTFOLIO LOANCOMBINATION." ADDITIONALLY, NOTWITHSTANDING THE FOREGOING DISCUSSION, WITH
RESPECT TO ANY MORTGAGE LOAN THAT IS PART OF A LOAN COMBINATION WHERE THE
RELATED LOAN COMBINATION CONTROLLING PARTY IS NOT THE CONTROLLING CLASS
REPRESENTATIVE, THE CONTROLLING CLASS REPRESENTATIVE WILL HAVE NO APPROVAL
RIGHTS FOR ACTIONS THE APPLICABLE MASTER SERVICER AND THE SPECIAL SERVICER TAKE
IN REGARD TO THE RELATED LOAN COMBINATION PURSUANT TO THE 2007-8 POOLING AND
SERVICING AGREEMENT.
NOTWITHSTANDING THE FOREGOING DISCUSSION, WITH RESPECT TO THE FARALLON
PORTFOLIO LOAN COMBINATION, THE HOLDER OR HOLDERS (AND THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS) OF ALL OR ANY PORTION OF THE NON-TRUST FIXED-RATE A
NOTES WHICH ARE NOT HELD BY THE TRUST, AS DESIGNATED BY MLML AND WHICH MAY BE
MLML, WILL HAVE THE RIGHT TO REPLACE THE SPECIAL SERVICER FOR THE FARALLON
PORTFOLIO LOAN COMBINATION AND TO DIRECT AND ADVISE THE MASTER SERVICER AND
SPECIAL SERVICER, AND HAVE CERTAIN APPROVAL RIGHTS, WITH RESPECT TO VARIOUS
SERVICING MATTERS AND MAJOR DECISIONS RELATING TO THE FARALLON PORTFOLIO LOAN
COMBINATION (COLLECTIVELY, "FARALLON PORTFOLIO CONTROL RIGHTS"). THE CONTROLLING
CLASS OF THE ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8, COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES, SERIES 2007-8 SECURITIZATION TRANSACTION WILL NOT
HAVE THE FARALLON PORTFOLIO CONTROL RIGHTS. IN CONNECTION WITH FUTURE
SECURITIZATIONS INVOLVING ALL OR ANY PORTION OF THE FIXED RATE NOTES THAT
COMPRISE THE FARALLON PORTFOLIO LOAN COMBINATION, MLML MAY DESIGNATE THE
CONTROLLING CLASS OF ANY SUCH SECURITIZATION AS THE CONTROLLING HOLDER FOR THE
FARALLON PORTFOLIO LOAN COMBINATION IN WHICH CASE SUCH CONTROLLING HOLDER SHALL
HAVE THE FARALLON PORTFOLIO CONTROL RIGHTS AND MLML (OR ITS SUCCESSORS OR
ASSIGNS, AS APPLICABLE), AS HOLDER OF ANY REMAINING PORTION OF THE FARALLON
PORTFOLIO LOAN COMBINATION, WILL HAVE CERTAIN NON-BINDING CONSULTATION RIGHTS
WITH RESPECT TO MATTERS RELATING TO THE FARALLON CONTROL RIGHTS. SEE "THE LOANCOMBINATIONS--THE FARALLON PORTFOLIO LOAN COMBINATION" IN THIS PROSPECTUS
SUPPLEMENT.
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WHEN REVIEWING THE REST OF THIS "SERVICING OF THE MORTGAGE LOANS" SECTION,
IT IS IMPORTANT THAT YOU CONSIDER THE EFFECTS THAT THE RIGHTS AND POWERS OF THE
CONTROLLING CLASS REPRESENTATIVE (AND, IN THE CASE OF THE MORTGAGE LOANS THAT
ARE PART OF LOAN COMBINATIONS, THE RELATED NON-TRUST LOAN NOTEHOLDERS AND LOAN
COMBINATION CONTROLLING PARTIES) COULD HAVE ON THE ACTIONS OF THE SPECIAL
SERVICER AND, IN SOME CASES, THE APPLICABLE MASTER SERVICER.
Certain Liability and Expense Matters. In general, any and all expenses of
the controlling class representative are to be borne by the holders of the
controlling class in proportion to their respective percentage interests in that
class, and not by the trust; and all expenses borne by any Non-Trust Loan
Noteholder acting as a Loan Combination Controlling Party are to be borne by
that holder. However, if a claim is made against the controlling class
representative by a borrower under a mortgage loan, the controlling class
representative is required to immediately notify the trustee, the applicable
master servicer and the special servicer. The special servicer on behalf and at
the cost and expense of the trust will, subject to the discussion under
"Description of the Governing Documents--Matters Regarding the Master Servicer,the Special Servicer, the Manager and Us" in the accompanying base prospectus,
assume the defense of the claim against the controlling class representative,
but only if--
o the special servicer or the trust are also named parties to the same
action; and
o in the sole reasonable judgment of the special servicer:
1. the controlling class representative acted in good faith,
without gross negligence or willful misfeasance, with regard
to the particular matter at issue; and
2. there is no potential for the special servicer or the trust to
be an adverse party in the action as regards the controlling
class representative.
The controlling class representative and the Non-Trust Loan Noteholders
may have special relationships and interests that conflict with those of the
holders of one or more classes of the offered certificates. In addition, the
controlling class representative does not have any duties or liabilities to the
holders of any class of certificates other than the controlling class, and the
Non-Trust Loan Noteholders do not have any duties or liabilities to the holders
of any class of certificates. The controlling class representative may act
solely in the interests of the certificateholders of the controlling class and,
with respect to the Loan Combinations, the related Non-Trust Loan Noteholders
may act solely in their own interests, and none of such parties will have any
liability to any certificateholders for having done so. No certificateholder may
take any action against the controlling class representative for its having
acted solely in the interests of the certificateholders of the controlling
class. Similarly, no certificateholder may take any action against a Non-Trust
Loan Noteholder for having acted solely in its own interest.
REPLACEMENT OF THE SPECIAL SERVICER
Certificateholders entitled to a majority of the voting rights allocated
to the controlling class of certificates may terminate an existing special
servicer and appoint a successor thereto. In addition, if the special servicer
is terminated in connection with an event of default, certificateholders
entitled to a majority of the voting rights allocated to the controlling class
of certificates may appoint a successor. See "--Events of Default" and "--RightsUpon Event of Default" below. In either case, any appointment of a successor
special servicer will be subject to, among other things, receipt by the trustee
of--
o written confirmation from each rating agency rating the certificates
that the appointment will not result in a qualification, downgrade
or withdrawal of any of the ratings then assigned thereby to the
certificates; and
o the written agreement of the proposed special servicer to be bound
by the terms and conditions of the pooling and servicing agreement,
together with an opinion of counsel regarding, among other things,
the enforceability of the pooling and servicing agreement against
the proposed special servicer.
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Subject to the foregoing, any certificateholder or any affiliate of a
certificateholder may be appointed as special servicer.
If the controlling class of certificateholders terminates an existing
special servicer without cause, then the reasonable out-of-pocket costs and
expenses of any related transfer of servicing duties are to be paid by the
certificateholders that voted to remove the terminated special servicer. Any
terminated special servicer will be entitled to reclaim all amounts accrued or
owing to it under the pooling and servicing agreement.
With respect to the Farallon Portfolio Loan Combination, the Executive
Hills Portfolio Loan Combination, the Peninsula Beverly Hills Loan Combination
and the Georgia-Alabama Retail Portfolio Loan Combination, the Farallon
Portfolio Controlling Party, the Peninsula Beverly Hills Controlling Party and
the Georgia-Alabama Retail Portfolio Controlling Party, respectively, each has
the right, subject to the conditions and restrictions set forth in the Farallon
Portfolio Intercreditor Agreement, the Executive Hills Portfolio Intercreditor
Agreement, the Peninsula Beverly Hills Intercreditor Agreement and the
Georgia-Alabama Retail Portfolio Intercreditor Agreement, respectively, to
terminate and replace the special servicer at any time. Under the Peninsula
Beverly Hills Intercreditor Agreement, the holder of the Peninsula Beverly Hills
B-Note Non-Trust Mortgage Loan (provided it is the Peninsula Beverly Hills
Controlling Party) has the right to appoint Pacific Life Insurance Company as
special servicer for this Mortgage Loan within 90 days following the Closing
Date (so long as Pacific Life Insurance Company is on the S&P Select Servicer
List as a U.S. Commercial Mortgage Servicer).
BENEFICIAL OWNERS OF THE CONTROLLING CLASS
If the controlling class of certificates is held in book-entry form, then
any beneficial owner of those certificates whose identity and beneficial
ownership interest has been proven to the satisfaction of the trustee, will be
entitled--
o to receive all notices described under "--The Controlling ClassRepresentative and the Loan Combination Controlling Parties" and
"--Replacement of the Special Servicer" above; and
o to exercise directly all rights described under "--The ControllingClass Representative and the Loan Combination Controlling Parties"
and "--Replacement of the Special Servicer" above,
that it otherwise would if it were the registered holder of certificates of the
controlling class.
Beneficial owners of controlling class certificates held in book-entry
form will likewise be subject to the same limitations on rights and the same
obligations as they otherwise would if they were registered holders of
certificates of the controlling class.
ENFORCEMENT OF DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Subject to the foregoing discussion and the discussions under "--TheControlling Class Representative and the Loan Combination Controlling Parties"
above and "--Modifications, Waivers, Amendments and Consents" below, the
applicable master servicer, with respect to non-specially serviced mortgage
loans, and the special servicer, with respect to all other mortgage loans (in
each case, other than the Georgia-Alabama Retail Portfolio Trust Mortgage Loan),
will be required to enforce, on behalf of the trust fund, any right the lender
under any mortgage loan may have under either a due-on-sale or
due-on-encumbrance clause, unless the applicable master servicer or the special
servicer, as applicable, has determined that waiver of the lender's rights under
such clauses would be in accordance with the Servicing Standard. However,
subject to the related loan documents and applicable law, neither the applicable
master servicer nor the special servicer may waive its rights or grant its
consent under any related due-on-sale or due-on-encumbrance clause--
o in respect of any mortgage loan that--
1. has a principal balance of $20,000,000 or more at the time of
determination or has, whether (a) individually, (b) as part of
a group of cross-collateralized mortgage loans or (c) as part
of a group of mortgage loans made to affiliated borrowers, a
principal balance
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that is equal to or greater than 5% or more of the aggregate
outstanding principal balance of the mortgage pool at the time
of determination; or
2. is one of the ten largest mortgage loans (which for this
purpose includes groups of cross-collateralized mortgage loans
and groups of mortgage loans made to affiliated borrowers) by
outstanding principal balance at the time of determination; or
o where, in the case of a due-on-encumbrance clause only, the subject
mortgage loan, taking into account existing debt on the related
mortgaged real property and the proposed additional debt as if such
total debt were a single mortgage loan, would have a loan-to-value
ratio equal to or greater than 85% or a debt service coverage ratio
equal to or less than 1.20:1;
unless, with some exceptions, it receives prior written confirmation from each
applicable rating agency that this action would not result in the qualification,
downgrade or withdrawal of any of the ratings then assigned by the rating agency
to the certificates (or placement of the certificates on negative credit watch
status in contemplation of such rating action). Also, a master servicer may not
waive its rights or grant its consent under any due-on-sale or
due-on-encumbrance clause described in this paragraph until it has received
consent of the special servicer. Further, none of the master servicers or the
special servicer may consent to the transfer of any mortgaged real property that
secures a group of cross-collateralized mortgage loans, unless all of the
mortgaged real properties securing such group of mortgage loans are transferred
at the same time, or the controlling class representative consents to the
transfer.
With respect to the Georgia-Alabama Retail Portfolio Loan Combination, the
Other Servicer and Other Special Servicer pursuant to the Other Pooling and
Servicing Agreement will be required to enforce, on behalf of the issuing
entity, any right the lenders under the Georgia-Alabama Retail Portfolio Loan
Combination may have under either a due-on-sale or due-on-encumbrance clause in
accordance with the Other Pooling and Servicing Agreement.
MODIFICATIONS, WAIVERS, AMENDMENTS AND CONSENTS
The special servicer, with respect to any specially serviced mortgage
loan, may, consistent with the Servicing Standard, agree to:
o modify, waive or amend any term of the subject mortgage loan;
o extend the maturity of the subject mortgage loan;
o defer or forgive the payment of interest on and principal of the
subject mortgage loan;
o defer or forgive the payment of prepayment premiums, yield
maintenance charges and late payment charges on the subject mortgage
loan;
o permit the release, addition or substitution of collateral securing
the subject mortgage loan;
o permit the release, addition or substitution of the borrower or any
guarantor with respect to the subject mortgage loan; or
o provide consents with respect to any leasing activity at the
mortgaged real property securing the subject mortgage loan;
provided that the ability of the special servicer to agree to any of the
foregoing, however, is subject to the discussion under "--The Controlling ClassRepresentative and the Loan Combination Controlling Parties" and "--Enforcementof Due-on-Sale and Due-on-Encumbrance Provisions" above in this prospectus
supplement and further, to the limitations, conditions and restrictions
discussed below.
The special servicer may agree to or consent to (or permit the applicable
master servicer to agree to or consent to) the modification, waiver or amendment
of any term of any mortgage loan that would--
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o affect the amount or timing of any related payment of principal,
interest or other amount (including prepayment premiums or yield
maintenance charges, but excluding Penalty Interest and amounts
payable as additional servicing compensation) payable under the
mortgage loan (including, subject to the discussion in the third
following paragraph, extend the date on which any related balloon
payment is due); or
o affect the obligation of the related borrower to pay a prepayment
premium or yield maintenance charge or permit a principal prepayment
during any period in which the related mortgage note prohibits
principal prepayments; or
o in the special servicer's judgment, materially impair the security
for the mortgage loan or reduce the likelihood of timely payment of
amounts due on the mortgage loan;
provided that a material default on the mortgage loan has occurred or, in the
special servicer's judgment, a material default on the mortgage loan is
reasonably foreseeable, and the modification, waiver, amendment or other action
is reasonably likely to produce a greater recovery to the certificateholders, as
a collective whole, on a present value basis, than would liquidation.
Neither a master servicer nor the special servicer may release any
mortgaged real property securing a mortgage loan, except as otherwise allowed by
the pooling and servicing agreement.
Neither a master servicer nor the special servicer may extend the maturity
date of any mortgage loan to a date beyond the earliest of--
1. two years prior to the rated final distribution date; and
2. if the mortgage loan is secured by a mortgage on the related
borrower's leasehold interest (and not the corresponding fee
interest) in the related mortgaged real property, 20 years
(or, to the extent consistent with the Servicing Standard,
giving due consideration to the remaining term of the related
ground lease and with the consent of the controlling class
representative, 10 years) prior to the end of the then-current
term of the related ground lease, plus any unilateral options
to extend such term.
Neither a master servicer nor the special servicer may make or permit any
modification, waiver or amendment of any term of any mortgage loan that would--
o cause either of REMIC I or REMIC II to fail to qualify as a REMIC
under the Code;
o result in the imposition of any tax on prohibited transactions or
contributions after the startup date of either of REMIC I or REMIC
II under the Code; or
o adversely affect the status of any portion of the trust that is
intended to be a grantor trust under the Code.
Generally, the master servicers may not agree to modify, waive or amend
the term of any mortgage loan or consent to certain borrower actions without the
consent of the special servicer. Subject to the foregoing discussion, however,
either master servicer, without the approval of the special servicer, the
controlling class representative or any of the rating agencies, may modify,
waive or amend certain terms of, or consent to certain borrower actions with
respect to, non-specially serviced mortgage loans for which it is acting as
master servicer as specified in the pooling and servicing agreement, including,
without limitation--
o approving certain waivers of non-material covenant defaults;
o approving certain leasing activity;
o waiving certain late payment charges and Penalty Interest subject to
the limitations in the pooling and servicing agreement;
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o permitting the release, addition or substitution of collateral
securing the subject mortgage loan;
o permitting the release, addition or substitution of the borrower or
any guarantor with respect to the subject mortgage loan;
o approving certain consents with respect to rights-of-way, easements
or similar agreements and consents to subordination of the related
mortgage loan to such easements, rights-of-way or similar
agreements, that do not materially affect the use or value of the
mortgaged real property or materially interfere with the borrower's
ability to make related payments;
o approving releases of unimproved parcels of a mortgaged real
property;
o approving annual budgets to operate mortgaged real properties;
o approving certain temporary waivers of requirements in loan
documents with respect to insurance deductible amounts or
claims-paying ability ratings of insurance providers; and
o consenting to changing the property manager with respect to a
mortgage loan with an unpaid principal balance of less than
$2,000,000.
The foregoing limitations, conditions and restrictions will not apply to
any of the acts or circumstances referenced in this "--Modifications, Waivers,Amendments and Consents" section that is provided for under the terms of the
subject mortgage loan in effect on the date of initial issuance of the offered
certificates or that is solely within the control of the related borrower. Also,
neither master servicer nor the special servicer will be required to oppose the
confirmation of a plan in any bankruptcy or similar proceeding involving a
borrower if, in its judgment, opposition would not ultimately prevent the
confirmation of the plan or one substantially similar.
Notwithstanding the foregoing, in the case of the ARD Loans, the
applicable master servicer will be permitted, in its discretion, after the
related anticipated repayment date, to waive any or all of the Additional
Interest accrued on those mortgage loans, if the related borrower is ready and
willing to pay all other amounts due under the mortgage loan in full, including
the entire principal balance. However, the applicable master servicer's
determination to waive the trust's right to receive that Additional Interest--
o must be in accordance with the Servicing Standard; and
o will be subject to approval by the special servicer and the
controlling class representative.
The pooling and servicing agreement will also limit the master servicers'
and the special servicer's ability to institute an enforcement action solely for
the collection of Additional Interest.
Neither a master servicer nor the special servicer will have any liability
to the trust, the certificateholders or any other person for any determination
made by it in connection with a modification, waiver or amendment of a mortgage
loan that is made on a reasonable basis and in accordance with the Servicing
Standard.
All modifications, waivers and amendments entered into by a master
servicer and/or the special servicer with respect to the mortgage loans are to
be in writing. Each master servicer and the special servicer must deliver to the
custodian for deposit in the related mortgage file, an original counterpart of
the agreement relating to each modification, waiver or amendment agreed to by
it, promptly following its execution.
Modifications, waivers, amendments and consents in respect of the
Georgia-Alabama Retail Portfolio Loan Combination will be administered by the
Other Servicer or Other Special Servicer, as applicable, under and in accordance
with the Other Pooling and Servicing Agreement.
REQUIRED APPRAISALS
The special servicer must make commercially reasonable efforts to obtain,
within 60 days of the occurrence of any Appraisal Trigger Event with respect to
any of the mortgage loans (other than the Georgia-Alabama Retail
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Portfolio Trust Mortgage Loan), and deliver to the trustee, the custodian, the
applicable master servicer and the controlling class representative, a copy of
an appraisal of the related mortgaged real property from an independent
appraiser meeting the qualifications imposed in the pooling and servicing
agreement, unless an appraisal had previously been obtained within the prior 12
months and the special servicer has no actual knowledge of a material adverse
change in the condition of the related mortgaged real property in which case
such appraisal may be a letter update of the prior appraisal.
Notwithstanding the foregoing, if the unpaid principal balance of the
subject mortgage loan, net of related unreimbursed advances of principal, is
less than $2,000,000, the special servicer may perform an internal valuation of
the mortgaged real property instead of an appraisal.
As a result of any appraisal or other valuation, it may be determined that
an Appraisal Reduction Amount exists with respect to the subject mortgage loan.
An Appraisal Reduction Amount is relevant to the determination of the amount of
any advances of delinquent interest required to be made with respect to the
affected mortgage loan. See "Description of the Offered Certificates--Advancesof Delinquent Monthly Debt Service Payments and Reimbursement of Advances" in
this prospectus supplement.
If an Appraisal Trigger Event occurs with respect to any mortgage loan
(other than the Georgia-Alabama Retail Portfolio Trust Mortgage Loan), then the
special servicer will have an ongoing obligation to obtain or perform, as the
case may be, once every 12 months after the occurrence of that Appraisal Trigger
Event (or sooner if the special servicer has actual knowledge of a material
adverse change in the condition of the related mortgaged real property), an
update of the prior required appraisal or other valuation. The special servicer
is to deliver to the trustee, the custodian, the applicable master servicer and
the controlling class representative the new appraisal or valuation within ten
business days of obtaining or performing such appraisal or valuation (or update
thereof). This ongoing obligation will cease if and when--
o if the Appraisal Trigger Event was the failure by the borrower to
make any monthly debt service payment for 60 days or more, or
involved the special servicer modifying the amount or timing of any
monthly debt service payment (other than a balloon payment), the
related borrower has made three consecutive full and timely monthly
debt service payments under the terms of the mortgage loan (as such
terms may have been modified); or
o with respect to the other Appraisal Trigger Events (other than the
related mortgaged real property becoming REO Property), such
circumstances cease to exist in the reasonable judgment of the
special servicer, but, with respect to any bankruptcy or insolvency
proceedings, no later than the entry of an order or decree
dismissing such proceeding, and with respect to the extension of any
date on which a balloon payment is due, no later than the date that
the special servicer agrees to an extension;
provided that no other Appraisal Trigger Event then exists with respect to the
subject mortgage loan.
The cost of each required appraisal, and any update of that appraisal,
will be advanced by the applicable master servicer, if it does not consider it
to be nonrecoverable, and will be reimbursable to the applicable master servicer
as a servicing advance.
With respect to the Georgia-Alabama Retail Portfolio Trust Mortgage Loan,
any required appraisals will be obtained in accordance with the Other Pooling
and Servicing Agreement.
COLLECTION ACCOUNTSGeneral. Each master servicer will be required to establish and maintain
one or more segregated accounts or sub-accounts as a collection account for
purposes of holding payments and other collections that it receives with respect
to the mortgage loans. That collection account must be maintained in a manner
and with a depository institution that satisfies rating agency standards for
securitizations similar to the one involving the offered certificates.
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The funds held in each master servicer's collection account may be held as
cash or invested in Permitted Investments. Any interest or other income earned
on funds in the applicable master servicer's collection account will be paid to
the applicable master servicer as additional compensation subject to the
limitations set forth in the pooling and servicing agreement.
Deposits. Under the pooling and servicing agreement, each master servicer
must deposit or cause to be deposited in its collection account within one
business day following receipt of available funds, in the case of payments and
other collections on the mortgage loans, or as otherwise required under the
pooling and servicing agreement, the following payments and collections received
or made by or on behalf of that master servicer with respect to the mortgage
pool subsequent to the date of initial issuance of the offered certificates,
other than monthly debt service payments due on or before the cut-off date,
which monthly debt service payments belong to the related mortgage loan seller:
o all payments on account of principal on the mortgage loans,
including principal prepayments;
o all payments on account of interest on the mortgage loans, including
Additional Interest and Penalty Interest;
o all prepayment premiums, yield maintenance charges and late payment
charges collected with respect to the mortgage loans;
o all proceeds received under any hazard, flood, title or other
insurance policy that provides coverage with respect to a mortgaged
real property or the related mortgage loan, and all proceeds
received in connection with the condemnation or the taking by right
of eminent domain of a mortgaged real property, in each case to the
extent not otherwise required to be applied to the restoration of
the real property or released to the related borrower;
o all amounts received and retained in connection with the liquidation
of defaulted mortgage loans by foreclosure or as otherwise
contemplated under "--Realization Upon Defaulted Mortgage Loans"
below;
o any amounts paid by the mortgage loan sellers in connection with the
repurchase or replacement of a mortgage loan as described under
"Description of the Mortgage Pool--Repurchases and Substitutions" in
this prospectus supplement;
o any amounts required to be deposited by that master servicer in
connection with losses incurred with respect to Permitted
Investments of funds held in the collection account;
o all payments required to be paid by that master servicer or the
special servicer with respect to any deductible clause in any
blanket insurance policy as described under "Description of theMortgage Pool--Additional Loan and Property Information--Hazard,Liability and Other Insurance" in this prospectus supplement;
o any amounts required to be transferred from the special servicer's
REO account;
o any amounts representing compensating interest payments in respect
of prepayment interest shortfalls as described under "--Servicingand Other Compensation and Payment of Expenses--Prepayment InterestShortfalls" above;
o any amounts received with respect to the Georgia-Alabama Retail
Portfolio Trust Mortgage Loan from the Other Servicer or Other
Special Servicer; and
o any amount paid by a borrower to cover items for which a servicing
advance has been previously made and for which the that master
servicer or the trustee, as applicable, has been previously
reimbursed out of the collection account.
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Upon receipt of any of the amounts described in the first five bullets and
the last bullet of the preceding paragraph with respect to any specially
serviced mortgage loan, the special servicer is required to promptly remit these
amounts to the applicable master servicer for deposit in that master servicer's
collection account.
Notwithstanding the foregoing, amounts received on any A-Note Trust
Mortgage Loan will be deposited into a separate account or sub-account of the
collection account maintained by the applicable master servicer before being
transferred to that master servicer's collection account.
Withdrawals. The master servicers may make withdrawals from their
respective collection accounts for any of the following purposes, which are not
listed in any order of priority:
o to remit to the trustee for deposit in the trustee's distribution
account described under "Description of the OfferedCertificates--Distribution Account" in this prospectus supplement,
on the business day preceding each distribution date, an aggregate
amount of immediately available funds equal to that portion of the
Available Distribution Amount (calculated without regard to clauses
(a)(ii), (a)(v), (b)(ii)(B), (b)(iv) and (b)(v) of the definition of
that term in this prospectus supplement, and exclusive of other
amounts received after the end of the related collection period) for
the related distribution date then on deposit in the collection
account, together with any prepayment premiums, yield maintenance
charges and/or Additional Interest received on the mortgage loans
during the related collection period and, in the case of the final
distribution date, any additional amounts which the relevant party
is required to pay in connection with the purchase of all the
mortgage loans and REO Properties, plus any amounts required to be
remitted in respect of P&I advances;
o to reimburse the trustee and itself, in that order, for any
unreimbursed P&I advances made by that party (or made by the Other
Servicer under the Other Pooling and Servicing Agreement with
respect to the Georgia-Alabama Retail Portfolio Trust Mortgage Loan)
under the pooling and servicing agreement, which reimbursement is to
be made out of late collections of interest (net of related master
servicing fees) and principal (net of any related workout fee or
principal recovery fee) received in respect of the particular
mortgage loan or REO Property as to which the Advance was made;
provided that, if such P&I advance remains outstanding after a
workout and the borrower continues to be obligated to pay such
amounts, such P&I advance will be reimbursed out of general
collections of principal as described under "Description of theOffered Certificates--Advances of Delinquent Monthly Debt ServicePayments and Reimbursement of Advances" in this prospectus
supplement;
o to pay itself earned and unpaid master servicing fees with respect
to each mortgage loan, which payment is to be made out of
collections on that mortgage loan that are allocable as interest or,
if that mortgage loan and any related REO Property have been
previously liquidated, out of general collections on the other
mortgage loans and REO Properties;
o to pay the special servicer, out of general collections on the
mortgage loans and any REO Properties, earned and unpaid special
servicing fees with respect to each mortgage loan that is either--
1. a specially serviced mortgage loan; or
2. a mortgage loan as to which the related mortgaged real
property has become an REO Property;
o to pay the special servicer earned and unpaid workout fees and
principal recovery fees to which it is entitled, which payment is to
be made from the sources described under "--Servicing and OtherCompensation and Payment of Expenses" above;
o to reimburse the trustee or the special servicer/itself, in that
order (with reimbursements to the special servicer and the subject
master servicer to be made concurrently on a pro rata basis), for
any unreimbursed servicing advances, first, out of payments made by
the borrower that are
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allocable to such servicing advance, and then, out of liquidation
proceeds, insurance proceeds, condemnation proceeds and, if
applicable, revenues from REO Properties relating to the mortgage
loan in respect of which the servicing advance was made, and then
out of general collections; provided that, if such Advance remains
outstanding after a workout and the borrower continues to be
obligated to pay such amounts, such Advance will be reimbursed out
of general collections of principal as described under "--Servicingand Other Compensation and Payment of Expenses" above and
"Description of the Offered Certificates--Advances of DelinquentMonthly Debt Service Payments and Reimbursement of Advances" in this
prospectus supplement;
o to reimburse the trustee or the special servicer/itself, in that
order (with reimbursements to the special servicer and the subject
master servicer to be made concurrently on a pro rata basis), first
out of REO Property revenues, liquidation proceeds and insurance and
condemnation proceeds received in respect of the mortgage loan
relating to the Advance, and then out of general collections on the
mortgage loans and any REO Properties, for any unreimbursed Advance
made by that party under the pooling and servicing agreement that
has been determined not to be ultimately recoverable, together with
interest thereon, subject to the limitations set forth in the
pooling and servicing agreement and the limitations described under,
as applicable, "--Servicing and Other Compensation and Payment ofExpenses" above and/or "Description of the OfferedCertificates--Advances of Delinquent Monthly Debt Service Paymentsand Reimbursement of Advances" in this prospectus supplement;
o in connection with the Georgia-Alabama Retail Portfolio Trust
Mortgage Loan, to make any payments required to be made by the trust
to the applicable Other Servicer, the Other Special Servicer and the
Other Trustee pursuant to the George-Alabama Retail Portfolio
Intercreditor Agreement and the Other Pooling and Servicing
Agreement (including the series 2007-8 trust fund's allocable share
of any reimbursement for nonrecoverable advances, interest thereon
and indemnification payments relating to the Georgia-Alabama Retail
Portfolio Loan Combination);
o to pay the trustee or the special servicer/itself, in that order
(with payments to the special servicer and the subject master
servicer to be made concurrently on a pro rata basis), unpaid
interest on any Advance made by that party under the pooling and
servicing agreement, which payment is to be made out of Penalty
Interest and late payment charges collected on the related mortgage
loan during the collection period during which that Advance is
reimbursed;
o in connection with the reimbursement of Advances as described in the
second bullet, the sixth bullet or the seventh bullet under this
"--Withdrawals" subsection and subject to the limitations described
in each of those three bullets, to pay itself, the special servicer
or the trustee, as the case may be, out of general collections on
the mortgage loans and any REO Properties, any interest accrued and
payable on that Advance and not otherwise payable under the
preceding bullet;
o to pay for costs and expenses incurred by the trust fund in
connection with property inspections;
o to pay the special servicer or itself any items of additional
servicing compensation on deposit in the collection account as
discussed under "--Servicing and Other Compensation and Payment ofExpenses--Additional Servicing Compensation" above;
o to pay for the cost of an independent appraiser or other expert in
real estate matters, to the extent such cost is not required to be
advanced under the pooling and servicing agreement;
o to pay itself, the special servicer, any of the mortgage loan
sellers, any holder (or, if applicable, beneficial owner) of
certificates of the controlling class or any other person, as the
case may be, with respect to each mortgage loan, if any, previously
purchased by such person pursuant to the pooling and servicing
agreement, all amounts received in respect of any such purchased
mortgage loan subsequent to the date of purchase;
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o to pay, out of general collections on the mortgage loans and any REO
Properties, for costs and expenses incurred by the trust in
connection with the remediation of adverse environmental conditions
at any mortgaged real property that secures a defaulted mortgage
loan;
o to pay itself, the special servicer, us, or any of their or our
respective members, managers, shareholders, directors, officers,
employees and agents, as the case may be, out of general collections
on the mortgage loans and any REO Properties, any of the
reimbursements or indemnities to which we or any of those other
persons or entities are entitled as described under "Description ofthe Governing Documents--Matters Regarding the Master Servicer, theSpecial Servicer, the Manager and Us" in the accompanying base
prospectus;
o to pay, out of general collections on the mortgage loans and any REO
Properties, for the costs of various opinions of counsel, the cost
of recording the pooling and servicing agreement and expenses
properly incurred by the trustee in connection with consulting with
the special servicer as to tax matters;
o to pay any other items described in this prospectus supplement as
being payable from the collection account;
o to withdraw amounts deposited in the collection account in error;
and
o to clear and terminate the collection account upon the termination
of the pooling and servicing agreement.
The pooling and servicing agreement will prohibit the application of
amounts received on the Non-Trust Loans to cover expenses payable or
reimbursable out of general collections with respect to mortgage loans and REO
Properties in the trust that are not related to the related Loan Combination.
In addition, in general, if at any time a master servicer is entitled to
make a payment, reimbursement or remittance from its collection account,
o the payment, reimbursement or remittance is permitted or required to
be made from any funds (or in the case of any Workout-Delayed
Reimbursement Amount, any principal collection) on deposit in that
master servicer's collection account,
o the amounts on deposit in that master servicer's collection account
are insufficient to satisfy the payment, reimbursement or
remittance, and
o the amount on deposit in the other master servicer's collection
account (after taking into account the other master servicer's
obligations to make payments, reimbursements or remittances from its
own collection account) is sufficient to make such payment,
reimbursement or remittance in full or in part,
then the other master servicer must make the payment, reimbursement or
remittance from that other master servicer's collection account within a
specified number of days following a written request from the first master
servicer. The written request must indicate the nature and amount of the
payment, reimbursement or remittance and include a certification from the first
master servicer that the first master servicer's collection account does not
then have funds on deposit that are sufficient for the payment, reimbursement or
remittance.
REALIZATION UPON DEFAULTED MORTGAGE LOANSFair Value Call. The pooling and servicing agreement grants to the special
servicer and the holder (or, if applicable, the beneficial owner) of the
certificates with the largest percentage of voting rights allocated to the
controlling class of certificates (such holder (or, if applicable, beneficial
owner) referred to as the plurality controlling class certificateholder) a right
to purchase from the trust defaulted mortgage loans under the circumstances
described below in this "--Fair Value Call" subsection; provided, however, that
with respect to the Farallon Portfolio Trust Mortgage Loan, one or more holders
of the related non-trust loans will have the right to
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purchase the Farallon Portfolio Trust Mortgage Loan prior to the special
servicer or the controlling class representative. With respect to the
Georgia-Alabama Retail Portfolio Trust Mortgage Loan, the holders of the
Georgia-Alabama Retail Portfolio Junior Mortgage Loans will have the right to
purchase the Georgia-Alabama Retail Portfolio Trust Mortgage Loan prior to the
special servicer or the controlling class representative. See "Description ofthe Mortgage Pool--The Loan Combinations--The Georgia-Alabama Retail PortfolioLoan Combination." The defaulted mortgage loans in respect of which this right
may be exercised are mortgage loans that have experienced payment defaults
similar to the payment defaults that would constitute a Servicing Transfer Event
as described in the glossary to this prospectus supplement or mortgage loans as
to which the related indebtedness has been accelerated by the applicable master
servicer or the special servicer following default. The fair value call option
will not apply to the Georgia-Alabama Retail Portfolio A-Note Non-Trust Mortgage
Loan. Instead, the Other Pooling and Servicing Agreement provides for a
comparable fair value call option for the Georgia-Alabama Retail Portfolio
A-Note Non-Trust Mortgage Loan.
At the time a mortgage loan becomes a defaulted mortgage loan satisfying
the criteria described in the preceding paragraph, each of the special servicer
and the plurality controlling class certificateholder will have a purchase
option (which option will be assignable when the opportunity to exercise it
arises) to purchase the defaulted mortgage loan, from the trust fund at an
option price generally equal to (i) if the special servicer has not yet
determined the fair value of the defaulted mortgage loan, the sum of the unpaid
principal balance of that mortgage loan at the time of purchase, together with
unpaid and accrued interest on that mortgage loan at its mortgage interest rate,
unpaid interest accrued on related Advances, related unreimbursed servicing
advances and other related Additional Trust Fund Expenses, including special
servicing fees, or (ii) the fair value of the defaulted mortgage loan as
determined by the special servicer, if the special servicer has made such fair
value determination; provided that if (i) the option is being exercised by an
assignee of the special servicer or the plurality controlling class
certificateholder that is not affiliated with the special servicer or the
plurality controlling class certificateholder, (ii) the assignment of the
purchase right or option was made for no material consideration, and (iii) the
purchase option is exercised more than 90 days following the making of a fair
value determination, the special servicer will be entitled to receive a
principal recovery fee. The special servicer will be permitted to change from
time to time, its determination of the fair value of a defaulted mortgage loan
based upon changed circumstances, new information or otherwise, in accordance
with the Servicing Standard; provided, however, that the special servicer will
update its determination of the fair value of a defaulted mortgage loan at least
once every 90 days; and, provided, further, that absent the special servicer
having actual knowledge of a material change in circumstances affecting the
value of the related mortgaged real property, the special servicer will not be
obligated to update such determination. The purchase option in respect of a
defaulted mortgage loan will first belong to the plurality controlling class
certificateholder. If the purchase option is not exercised by the plurality
controlling class certificateholder or any assignee thereof within 60 days of a
fair value determination being made, then the purchase option will belong to the
special servicer for 15 days. If the purchase option is not exercised by the
special servicer or its assignee within such 15-day period, then the purchase
option will revert to the plurality controlling class certificateholder.
Notwithstanding the foregoing, the holder of a Non-Trust Loan may have the
right to purchase the related Trust Mortgage Loan from the trust in certain
default situations, as described above under "Description of the MortgagePool--The Loan Combinations" in this prospectus supplement. In addition,
notwithstanding the discussion in the preceding paragraph, the holders of a
mezzanine loan may have the right to purchase the related mortgage loan from the
trust if certain defaults on the related mortgage loan occur.
Unless and until the purchase option with respect to a defaulted mortgage
loan is exercised, the special servicer will be required to pursue such other
resolution strategies available under the pooling and servicing agreement,
including workout and foreclosure consistent with the Servicing Standard, but
the special servicer will not be permitted to sell the defaulted mortgage loan
other than pursuant to the exercise of the purchase option.
If not exercised sooner, the purchase option with respect to any defaulted
mortgage loan will automatically terminate upon (i) the related borrower's cure
of all related defaults on the defaulted mortgage loan, (ii) the acquisition on
behalf of the trust fund of title to the related mortgaged real property by
foreclosure or deed in lieu of foreclosure or (iii) the modification or pay-off
(full or discounted) of the defaulted mortgage loan in connection with a
workout. In addition, the purchase option with respect to a defaulted mortgage
loan held by any person will
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terminate upon the exercise of the purchase option and consummation of the
purchase by any other holder of a purchase option.
If (a) a purchase option is exercised with respect to a defaulted mortgage
loan and the person expected to acquire the defaulted mortgage loan pursuant to
such exercise is the plurality controlling class certificateholder, the special
servicer, or any affiliate of any of them, which means that the purchase option
has not been assigned to another unaffiliated person, and (b) the option price
is based on the special servicer's determination of the fair value of the
defaulted mortgage loan, then the applicable master servicer or, if that master
servicer and the special servicer are the same person, the trustee (or a
third-party appraiser designated by the applicable master servicer or the
trustee, as applicable, at its option, upon whose determination the applicable
master servicer or the trustee, as the case may be, may, absent manifest error,
conclusively rely) will be required to confirm that the option price (as
determined by the special servicer) represents a fair value for the defaulted
mortgage loan. The applicable master servicer or the trustee, as applicable,
will be entitled to receive, out of the collection account, a fee of $2,500 for
the initial confirmation, but not for any subsequent confirmations, of fair
value with respect to that mortgage loan. The costs of all appraisals,
inspection reports and opinions of value incurred by the applicable master
servicer, the special servicer, the trustee or any third-party appraiser in
connection with any determination of fair value will be reimbursable to the
applicable master servicer, the special servicer or the trustee, as applicable,
as servicing advances.
Foreclosure and Similar Proceedings. Neither master servicer may institute
foreclosure proceedings, exercise any power of sale contained in a mortgage or
acquire title to a mortgaged real property. If a default on a mortgage loan has
occurred and is continuing and no satisfactory arrangements can be made for
collection of delinquent payments, then, subject to the discussion under "--TheControlling Class Representative and the Loan Combination Controlling Parties"
above, the special servicer may, on behalf of the trust, take any of the
following actions:
o institute foreclosure proceedings;
o exercise any power of sale contained in the related mortgage;
o obtain a deed in lieu of foreclosure; or
o otherwise acquire title to the corresponding mortgaged real
property, by operation of law or otherwise.
The special servicer may not acquire title to any mortgaged real property
or take any other action with respect to any mortgaged real property that would
cause the trustee, for the benefit of the certificateholders (or, if a Loan
Combination is involved, the certificateholders and the holder(s) of the related
B-Note Non-Trust Loan(s)), to be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or an "operator" of the
particular mortgaged real property within the meaning of federal environmental
laws, unless--
o the special servicer has previously received a report prepared by a
person who regularly conducts environmental audits, which report
will be an expense of the trust; and
o either:
1. the report indicates that--
o the particular mortgaged real property is in compliance with
applicable environmental laws and regulations; and
o there are no circumstances or conditions present at the mortgaged
real property that have resulted in any contamination for which
investigation, testing, monitoring, containment, clean-up or
remediation could be required under any applicable environmental
laws and regulations; or
2. the special servicer (who may rely conclusively on the report)
determines that taking the actions necessary to bring the
particular mortgaged real property into compliance with
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applicable environmental laws and regulations and/or taking
any of the other actions contemplated by clause 1, above, is
reasonably likely to maximize the recovery to
certificateholders (or, if a Loan Combination is involved, the
certificateholders and the holder(s) of the related B-Note
Non-Trust Loan(s)), taking into account the time value of
money.
If the environmental testing contemplated above establishes that any of
the conditions described in clauses 1. and 2. have not been satisfied with
respect to any mortgaged real property and there is no breach of a
representation or warranty requiring repurchase under the applicable mortgage
loan purchase agreement, the special servicer will be required to take such
action as is in accordance with the Servicing Standard (other than proceeding
against the related mortgaged real property). At such time as it deems
appropriate, the special servicer may, on behalf of the trust, release all or a
portion of the subject mortgaged real property from the lien of the related
mortgage instrument; provided that, if the related mortgage loan has a then
outstanding principal balance of greater than $1 million, then prior to the
release of all or a portion of the related mortgaged real property, (i) the
special servicer shall have notified the rating agencies, the trustee, the
controlling class representative and the applicable master servicer in writing
of its intention to so release all or a portion of such mortgaged real property
and the bases for such intention, and (ii) the trustee shall have notified the
certificateholders in writing of the special servicer's intention to so release
all or a portion of such mortgaged real property.
If the trust acquires title to any mortgaged real property, the special
servicer, on behalf of the trust, has to sell the particular real property prior
to the close of the third calendar year following the calendar year in which
that acquisition occurred, subject to limited exceptions as described under
"--REO Properties" below.
If liquidation proceeds collected with respect to a defaulted mortgage
loan are less than the outstanding principal balance of the defaulted mortgage
loan, together with accrued interest on and reimbursable expenses incurred by
the special servicer and/or the applicable master servicer in connection with
the defaulted mortgage loan, then the trust will realize a loss in the amount of
the shortfall. The special servicer, the applicable master servicer and/or the
trustee will be entitled to payment or reimbursement out of the liquidation
proceeds recovered on any defaulted mortgage loan, prior to the payment of the
liquidation proceeds to the certificateholders, for--
o any and all amounts that represent unpaid servicing fees and
additional servicing compensation with respect to the mortgage loan;
o unreimbursed (from the related mortgage loan) servicing expenses and
Advances incurred with respect to the mortgage loan;
o any P&I advances made with respect to the mortgage loan that are
unreimbursed from that mortgage loan; and
o any interest payable (or paid from general collections) to the
applicable master servicer and/or special servicer on any expenses
and Advances and not reimbursed from that mortgage loan.
In the event a default has occurred and is continuing and no satisfactory
arrangements can be made for collection of delinquent payments with respect to
the Georgia-Alabama Retail Portfolio Loan Combination, the Other Special
Servicer pursuant to the Other Pooling and Servicing Agreement, will be required
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 corresponding mortgaged real property, by operation of law or
otherwise in accordance with the procedures set forth in the Other Pooling and
Servicing Agreement.
REO PROPERTIES
If title to any mortgaged real property is acquired by the special
servicer on behalf of the trust, the special servicer will be required to sell
that property not later than the end of the third calendar year following the
year of acquisition, unless--
o the IRS grants an extension of time to sell the property; or
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o the special servicer obtains an opinion of independent counsel
generally to the effect that the holding of the property subsequent
to the end of the third calendar year following the year in which
the acquisition occurred will not result in the imposition of a tax
on the trust assets or cause either of REMIC I or REMIC II to fail
to qualify as a REMIC under the Code.
Regardless of whether the special servicer applies for or is granted an
extension of time to sell the property, the special servicer must act in
accordance with the Servicing Standard to liquidate the property on a timely
basis. If an extension is granted or opinion given, the special servicer must
sell the REO Property within the period specified in the extension or opinion.
The special servicer may be required to retain an independent contractor
to operate and manage the REO Property. The retention of an independent
contractor will not relieve the special servicer of its obligations with respect
to the REO Property.
In general, the special servicer, or an independent contractor employed by
the special servicer at the expense of the trust, will be obligated to operate
and manage any REO Property in a manner that:
o maintains its status as foreclosure property under the REMIC
provisions of the Code; and
o is in accordance with the Servicing Standard.
The special servicer must review the operation of each REO Property and
consult with the trustee or any person appointed by the trustee to act as tax
administrator to determine the trust's federal income tax reporting position
with respect to the income it is anticipated that the trust would derive from
the property. The special servicer could determine that it would not be
consistent with the Servicing Standard to manage and operate the property in a
manner that would avoid the imposition of a tax on net income from foreclosure
property, within the meaning of section 857(b)(4)(B) of the Code.
Generally, net income from foreclosure property means income that does not
qualify as "rents from real property" within the meaning of Section 856(c)(3)(A)
of the Code and Treasury regulations thereunder or as income from the sale of
such REO Property. "Rents from real property" do not include the portion of any
rental based on the net income or gain of any tenant or sub-tenant. No
determination has been made whether rent on any of the mortgaged real properties
meets this requirement. "Rents from real property" include charges for services
customarily furnished or rendered in connection with the rental of real
property, whether or not the charges are separately stated. Services furnished
to the tenants of a particular building will be considered as customary if, in
the geographic market in which the building is located, tenants in buildings
which are of similar class are customarily provided with the service. No
determination has been made whether the services furnished to the tenants of the
mortgaged real properties are "customary" within the meaning of applicable
regulations. It is therefore possible that a portion of the rental income with
respect to an REO Property would not constitute "rents from real property," or
that all of such income would fail to so qualify if a separate charge is not
stated for such non-customary services or such services are not performed by an
independent contractor. In addition to the foregoing, any net income from a
trade or business operated or managed by an independent contractor on an REO
Property owned by REMIC I, such as a hotel, will not constitute "rents from real
property." Any of the foregoing types of income instead constitute "net income
from foreclosure property," which would be taxable to such REMIC at the highest
marginal federal corporate rate (currently 35%) and may also be subject to state
or local taxes. Any such taxes would be chargeable against the related income
for purposes of determining the net proceeds from the REO Property available for
distribution to holders of Certificates. See "Federal Income Tax
Consequences-REMICs" in the accompanying prospectus.
The special servicer will be required to segregate and hold all funds
collected and received in connection with any REO Property separate and apart
from its own funds and general assets. If an REO Property is acquired by the
trust, the special servicer will be required to establish and maintain an
account for the retention of revenues and other proceeds derived from the REO
Property. That REO account must be maintained in a manner and with a depository
institution that satisfies rating agency standards for securitizations similar
to the one involving the offered certificates. The special servicer will be
required to deposit, or cause to be deposited, in its REO account, following
receipt, all net income, insurance proceeds, condemnation proceeds and
liquidation proceeds received with respect to each REO Property. The funds held
in this REO account may be held as cash or invested in Permitted
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Investments. Any interest or other income earned on funds in the special
servicer's REO account will be payable to the special servicer, subject to the
limitations described in the pooling and servicing agreement.
The special servicer will be required to withdraw from its REO account
funds necessary for the proper operation, management, leasing, maintenance and
disposition of any REO Property, but only to the extent of amounts on deposit in
the account relating to that particular REO Property. Shortly after the end of
each collection period, the special servicer will be required to withdraw from
the REO account and deposit, or deliver to the applicable master servicer for
deposit, into that master servicer's collection account the total of all amounts
received with respect to each REO Property during that collection period, net
of--
o any withdrawals made out of those amounts as described in the
preceding sentence; and
o any portion of those amounts that may be retained as reserves as
described in the next paragraph.
The special servicer may, subject to the limitations described in the
pooling and servicing agreement, retain in its REO account the portion of the
proceeds and collections as may be necessary to maintain a reserve of sufficient
funds for the proper operation, management, leasing, maintenance and disposition
of the related REO Property, including the creation of a reasonable reserve for
repairs, replacements, necessary capital improvements and other related
expenses.
The special servicer will be required to keep and maintain separate
records, on a property-by-property basis, for the purpose of accounting for all
deposits to, and withdrawals from, its REO account.
The Other Special Servicer with respect to the Other Securitization will
be required to administer any REO Property related to the Georgia-Alabama Retail
Portfolio Loan Combination in a substantially similar manner pursuant to the
Other Pooling and Servicing Agreement.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The special servicer will be required, at the expense of the trust, to
inspect or cause an inspection of the corresponding mortgaged real property as
soon as practicable after any mortgage loan becomes a specially serviced
mortgage loan and annually so long as such mortgage loan is a specially serviced
mortgage loan. Beginning in 2008, the applicable master servicer, for each
mortgage loan that it is responsible for servicing that is not a specially
serviced mortgage loan and does not relate to an REO Property, will be required,
at its own expense, to inspect or cause an inspection of the mortgaged real
property at least once every calendar year, unless such mortgaged real property
has been inspected in such calendar year by the special servicer. The applicable
master servicer and the special servicer will each be required to prepare or
cause the preparation of a written report of each inspection performed by it
that generally describes the condition of the particular real property and that
specifies--
o any sale, transfer or abandonment of the property of which the
subject master servicer or the special servicer, as applicable, is
aware; or
o any change in the property's condition or value of which the subject
master servicer or the special servicer, as applicable, is aware and
considers to be material; or
o any visible waste committed on the property of which the subject
master servicer or special servicer, as applicable, is aware and
considers to be material.
The special servicer, in the case of each specially serviced mortgage
loan, and the applicable master servicer, in the case of each other mortgage
loan, will each be required to use reasonable efforts to collect from the
related borrower, the quarterly (if any) and annual operating statements,
budgets and rent rolls of the corresponding mortgaged real property. However,
there can be no assurance that any operating statements required to be delivered
by a borrower will in fact be delivered, nor is the applicable master servicer
or the special servicer likely to have any practical means of compelling
delivery.
The special servicer will also be required to cause quarterly and annual
operating statements, budgets and rent rolls to be prepared for each REO
Property.
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Each master servicer, with respect to each mortgage loan that it is
responsible for servicing, will be required to prepare and maintain an operating
statement analysis for each mortgaged real property and each REO Property, as
applicable, and copies of such operating statement analyses are to be made
available by the applicable master servicer to the trustee, the special servicer
and/or the controlling class representative upon request or as otherwise
provided in the pooling and servicing agreement (but not more frequently than
quarterly).
EVIDENCE AS TO COMPLIANCE
On or before May 1 of each year, beginning in 2008 (provided that, if any
of the following items are required in connection with any filing with the
Securities and Exchange Commission, each master servicer and the special
servicer will be required to deliver such items on or before March 15 of each
year, beginning in 2008), each master servicer and the special servicer must
deliver or cause to be delivered to the trustee and us, among others, the
following items:
o a report on an assessment of compliance by it with the applicable
servicing criteria set forth in Item 1122(d) of Regulation AB,
signed by an authorized officer of the subject master servicer or
the special servicer, as the case may be, which report will contain
(a) a statement by the subject master servicer or the special
servicer, as the case may be, of its responsibility for assessing
compliance with the servicing criteria applicable to it, (b) a
statement that the subject master servicer or the special servicer,
as the case may be, used the servicing criteria set forth in Item
1122(d) of Regulation AB to assess compliance with the applicable
servicing criteria, (c) the subject master servicer's or the special
servicer's, as the case may be, assessment of compliance with the
applicable servicing criteria as of and for the period ending
December 31st of the preceding calendar year, which discussion must
include any material instance of noncompliance with the applicable
servicing criteria identified by the subject master servicer or the
special servicer, as the case may be, and (d) a statement that a
registered public accounting firm has issued an attestation report
on the subject master servicer's or the special servicer's, as the
case may be, assessment of compliance with the applicable servicing
criteria as of and for such period ending December 31st of the
preceding calendar year;
o as to each report delivered by the subject master servicer or the
special servicer as described in the immediately preceding bullet, a
report from a registered public accounting firm (made in accordance
with the standards for attestation engagements issued or adopted by
the Public Company Accounting Oversight Board) that attests to, and
reports on, the assessment made by the asserting party in the report
delivered as described in the immediately preceding bullet; and
o a statement signed by an authorized officer of the subject master
servicer or the special servicer, as the case may be, to the effect
that: (a) a review of the activities of the subject master servicer
or the special servicer, as the case may be, during the preceding
calendar year (or, if applicable, the portion of such year during
which the offered certificates were outstanding) and of its
performance under the pooling and servicing agreement has been made
under such officer's supervision, and (b) to the best of such
officer's knowledge, based on such review, the subject master
servicer or special servicer, as the case may be, has fulfilled its
material obligations under the pooling and servicing agreement in
all material respects throughout the preceding calendar year or
portion of that year during which the certificates were outstanding
or, if there has been a material default, specifying each material
default known to such officer and the nature and status of that
default.
The pooling and servicing agreement will require that: (1) any party to
the pooling and servicing agreement (in addition to the master servicers and
special servicer) that is "participating in the servicing function" (within the
meaning of Item 1122 of Regulation AB) with respect to the mortgage pool, must
deliver a separate assessment report and attestation report similar to those
described in the first two bullets of the prior paragraph; (2) any party to the
pooling and servicing agreement that has retained a sub-servicer, subcontractor
or agent that is "participating in the servicing function" (within the meaning
of Item 1122 of Regulation AB) with respect to the mortgage pool, must cause
(or, in the case of a sub-servicer that is engaged by the applicable master
servicer at the request of a mortgage loan seller that is not the same person as
or an affiliate of that sub-servicer or was servicing a mortgage loan for the
related mortgage loan seller prior to the sale of such mortgage loan by such
mortgage loan
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seller to the depositor, must use commercially reasonable efforts to cause) that
sub-servicer, subcontractor or agent to deliver a separate assessment report and
attestation report similar to those described in the first two bullets of the
prior paragraph; and (3) any party to the pooling and servicing agreement that
has retained a sub-servicer that meets the criteria in Item 1108(a)(2)(i), (ii)
or (iii) of Regulation AB, must cause (or, in the case of a sub-servicer that is
engaged by the applicable master servicer at the request of a mortgage loan
seller that is not the same person as or an affiliate of that sub-servicer or
was servicing a mortgage loan for the related mortgage loan seller prior to the
sale of such mortgage loan by such mortgage loan seller to the depositor, must
use commercially reasonable efforts to cause) that sub-servicer to deliver, a
separate servicer compliance statement similar to that described in the third
bullet of the prior paragraph.
EVENTS OF DEFAULT
Each of the following events, circumstances and conditions will be
considered events of default under the pooling and servicing agreement:
o any failure by either master servicer to deposit into the collection
account any amount required to be so deposited by it under the
pooling and servicing agreement, which failure continues unremedied
for two business days following the date on which the deposit was
required to be made; or
o any failure by either master servicer to remit to the trustee for
deposit into the distribution account any amount required to be so
remitted by it under the pooling and servicing agreement, which
failure continues unremedied until 11:00 a.m., New York City time,
on the business day following the date on which the remittance was
required to be made; or
o any failure by the special servicer to deposit into the REO account
or to deposit into, or to remit to the applicable master servicer
for deposit into, the collection account, any amount required to be
so deposited or remitted under the pooling and servicing agreement,
provided, however, that the failure to deposit or remit such amount
will not be an event of default if such failure is remedied within
one business day and in any event on or prior to the related P&I
advance date; or
o a master servicer fails to timely make any servicing advance
required to be made by it under the pooling and servicing agreement,
and that failure continues unremedied for five business days
following the date on which notice has been given to that master
servicer by the trustee; or
o a master servicer or the special servicer fails to observe or
perform in any material respect any of its other covenants or
agreements under the pooling and servicing agreement, and that
failure continues unremedied for 30 days after written notice of it,
requiring it to be remedied, has been given to the subject master
servicer or the special servicer, as the case may be, by any other
party to the pooling and servicing agreement or by
certificateholders entitled to not less than 25% of the voting
rights for the certificates; provided, however, that (A) with
respect to any such failure (other than a failure described in
clause (B) below) that is not curable within such 30-day period, the
subject master servicer or the special servicer, as the case may be,
will have an additional cure period of 30 days to effect such cure
so long as the subject master servicer or the special servicer, as
the case may be, has commenced to cure such failure within the
initial 30-day period and has provided the trustee and any affected
B-Note Loan Noteholders with an officer's certificate certifying
that it has diligently pursued, and is continuing to pursue, a full
cure, or (B) in the case of the failure to deliver to the trustee
the annual statement of compliance, the annual assessment report
and/or the annual attestation report with respect to the subject
master servicer or the special servicer, as applicable, pursuant to
the pooling and servicing agreement, which is required to be part of
or incorporated in a report to be filed with the Securities and
Exchange Commission, continues unremedied beyond the time specified
in the pooling and servicing agreement; or
o it is determined that there is a breach by either master servicer or
the special servicer of any of its representations or warranties
contained in the pooling and servicing agreement that materially and
adversely affects the interests of any class of certificateholders,
and that breach continues
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unremedied for 30 days after written notice of it, requiring it to
be remedied, has been given to the applicable master servicer or the
special servicer, as the case may be, by any other party to the
pooling and servicing agreement or by certificateholders entitled to
not less than 25% of the voting rights for the certificates;
provided, however, that with respect to any such breach which is not
curable within such 30-day period, the applicable master servicer or
the special servicer, as the case may be, will have an additional
cure period of 30 days to effect such cure so long as the applicable
master servicer or the special servicer, as the case may be, has
commenced to cure such breach within the initial 30-day period and
has provided the trustee with an officer's certificate certifying
that it has diligently pursued, and is continuing to pursue, a full
cure; or
o a decree or order of a court having jurisdiction in an involuntary
case under federal or state bankruptcy, insolvency or similar law
for the appointment of a conservator, receiver, liquidator, trustee
or similar official in any bankruptcy, insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings,
or for the winding-up or liquidation of its affairs, is entered
against a master servicer or the special servicer and the decree or
order remains in force for a period of 60 days, provided, however,
that the subject master servicer or the special servicer, as
appropriate, will have an additional period of 30 days to effect a
discharge, dismissal or stay of the decree or order if it commenced
the appropriate proceedings to effect such discharge, dismissal or
stay within the initial 60-day period; or
o a master servicer or the special servicer consents to the
appointment of a conservator, receiver, liquidator, trustee or
similar official in any bankruptcy, insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings
relating to it or of or relating to all or substantially all of its
property; or
o a master servicer or the special servicer admits in writing its
inability to pay its debts or takes other actions specified in the
pooling and servicing agreement indicating its insolvency or
inability to pay its obligations; or
o any of S&P or Fitch has (a) qualified, downgraded or withdrawn any
rating then assigned by it to any class of certificates, or (b)
placed any class of certificates on "watch status" in contemplation
of possible rating downgrade or withdrawal (and that "watch status"
placement has not have been withdrawn by it within 60 days of such
placement), and, in either case, cited servicing concerns with a
master servicer or the special servicer as the sole or a material
factor in such rating action;
o a master servicer or the special servicer is removed from S&P's
Select Servicer List as a U.S. Commercial Mortgage Master Servicer
or a U.S. Commercial Mortgage Special Servicer, as applicable, and
is not reinstated within 60 days after its removal therefrom; or
o a master servicer ceases to be rated at least "CMS3" by Fitch or the
special servicer ceases to be rated at least "CSS3" by Fitch and
such rating is not restored within 30 days after the subject
downgrade or withdrawal.
With respect to the Georgia-Alabama Retail Portfolio Trust Mortgage Loan,
the Other Pooling and Servicing Agreement contains similar, but not identical,
events of default with the Other Master Servicer or the Other Special Servicer.
RIGHTS UPON EVENT OF DEFAULT
If an event of default described under "--Events of Default" above occurs
with respect to the either master servicer or the special servicer and remains
unremedied, the trustee will be authorized, and at the direction of either the
controlling class representative or the certificateholders entitled to not less
than 25% of the voting rights for all the classes of certificates, the trustee
will be required, to terminate all of the rights and obligations of the
defaulting party under the pooling and servicing agreement and in and to the
trust assets other than any rights the defaulting party may have as a
certificateholder; provided that the terminated defaulting party will continue
to be entitled to receive all amounts due and owing to it in accordance with the
terms of the pooling and servicing agreement and
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will continue to be entitled to the benefit of any provisions for reimbursement
or indemnity as and to the extent provided in the pooling and servicing
agreement. Upon any termination, the trustee must either:
o succeed to all of the responsibilities, duties and liabilities of
the applicable master servicer or the special servicer, as the case
may be, under the pooling and servicing agreement; or
o appoint an established mortgage loan servicing institution to act as
successor a successor master servicer or the successor special
servicer, as the case may be, provided such successor is reasonably
acceptable to the controlling class representative.
Notwithstanding the foregoing discussion in this "--Rights Upon Event ofDefault" section, if a master servicer is terminated under the circumstances
described above because of the occurrence of any of the events of default
described in the last three bullets under "--Events of Default" above, that
master servicer will have the right for a period of approximately 45
days--during which time that master servicer will continue to master service the
mortgage loans it is responsible for servicing--to sell its master servicing
rights with respect to the mortgage loans it is responsible for servicing to a
master servicer whose appointment S&P and Fitch have each confirmed will not
result in a qualification, downgrade or withdrawal of any of the then-current
ratings of the certificates. The terminated master servicer will be responsible
for all out-of-pocket expenses incurred in connection with the attempt to sell
its rights to master service the mortgage loans, to the extent such expenses are
not reimbursed by the replacement servicer.
Either the controlling class representative or the holders of certificates
entitled to a majority of the voting rights for the certificates may require the
trustee to appoint an established mortgage loan servicing institution to act as
a successor master servicer or as the successor special servicer, as the case
may be, rather than have the trustee act as that successor, provided such
successor is reasonably acceptable to the controlling class representative. The
appointment of a successor special servicer by the trustee is subject to the
rights of the controlling class of certificateholders to designate a successor
special servicer as described under "--Replacement of the Special Servicer"
above.
Notwithstanding the foregoing in this "--Rights Upon Event of Default"
section, (a) if an event of default on the part of the master servicer affects a
Non-Trust Loan Noteholder in respect of the Peninsula Beverly Hills Loan
Combination, and if the master servicer is not otherwise terminated as provided
above, then the master servicer may not be terminated by or at the direction of
the related Non-Trust Loan Noteholder, and (b) furthermore, if an event of
default affects solely a Non-Trust Loan Noteholder in respect of the Peninsula
Beverly Hills Loan Combination, then the master servicer may not be terminated
by the trustee. However, in the case of each of clause (a) and (b) of the prior
sentence, at the request of the affected Non-Trust Loan Noteholder, the master
servicer must appoint a sub-servicer that will be responsible for servicing the
subject Loan Combination.
In general, the certificateholders entitled to at least 66?% of the voting
rights allocated to each class of certificates affected by any event of default
may waive the event of default. However, the events of default described in the
first, second, third, tenth or eleventh bullets under "--Events of Default"
above may only be waived by all of the holders of the affected classes of the
certificates. Upon any waiver of an event of default, the event of default will
cease to exist and will be deemed to have been remedied for every purpose under
the pooling and servicing agreement.
ADDITIONAL MATTERS RELATING TO THE TRUSTEE
The trustee is at all times required to be a corporation, bank, trust
company or association organized and doing business under the laws of the U.S.
or any State of the U.S. or the District of Columbia. In addition, the trustee
must at all times--
o be authorized under those laws to exercise trust powers;
o with limited exception, have a combined capital and surplus of at
least $100,000,000; and
o be subject to supervision or examination by a federal or state
banking authority.
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If the corporation, bank, trust company or association publishes reports
of condition at least annually, in accordance with law or the requirements of
the supervising or examining authority, then the combined capital and surplus of
the corporation, bank, trust company or association will be deemed to be its
combined capital and surplus as described in its most recent published report of
condition.
We, the master servicers, the special servicer and our and their
respective affiliates, may from time to time enter into normal banking and
trustee relationships with the trustee and its affiliates. The trustee and any
of its respective affiliates may hold certificates in their own names. In
addition, for purposes of meeting the legal requirements of some local
jurisdictions, the master servicer and the trustee acting jointly will have the
power to appoint a co-trustee or separate trustee of all or any part of the
trust assets. All rights, powers, duties and obligations conferred or imposed
upon the trustee will be conferred or imposed upon the trustee and the separate
trustee or co-trustee jointly, or in any jurisdiction in which the trustee shall
be incompetent or unqualified to perform some acts, singly upon the separate
trustee or co-trustee who shall exercise and perform its rights, powers, duties
and obligations solely at the direction of the trustee.
SERVICING OF THE GEORGIA-ALABAMA RETAIL PORTFOLIO LOAN COMBINATION
Pursuant to the Georgia-Alabama Retail Portfolio Intercreditor Agreement,
the Georgia-Alabama Retail Portfolio Loan Combination will initially be serviced
under the Other Pooling and Servicing Agreement. The Other Pooling and Servicing
Agreement provides for servicing in a manner acceptable for rated transactions
similar in nature to this securitization. The servicing arrangements under the
Other Pooling and Servicing Agreement is generally similar to the servicing
arrangements under the series 2007-8 pooling and servicing agreement.
In that regard:
o LaSalle Bank National Association is the trustee under the Other
Pooling and Servicing Agreement and will be the mortgagee of record
for the Georgia-Alabama Retail Portfolio Loan Combination.
o The master servicer, the special servicer or the trustee under the
series 2007-8 pooling and servicing agreement will have no
obligation or authority to supervise the master servicer, special
servicer or trustee under the Other Pooling and Servicing Agreement
or to make advances with respect to the Georgia-Alabama Retail
Portfolio Loan Combination (except to the limited extent described
below). The obligation of the master servicer to provide information
and collections to the trustee and the series 2007-8
certificateholders with respect to the Georgia-Alabama Retail
Portfolio Loan Combination will be dependent on its receipt of the
corresponding information and collections from the master servicer
or special servicer for that transaction.
o The Other Servicer under the Other Pooling and Servicing Agreement
will make servicing advances for the benefit of this trust and the
trust formed under the Other Pooling and Servicing Agreement and the
master servicer will remit collections on the Georgia-Alabama Retail
Portfolio Trust Mortgage Loan to or on behalf of the trustee for
this trust.
o The Other Servicer will not be required to make P&I advances with
respect to the Georgia-Alabama Retail Portfolio Trust Mortgage Loan.
Consequently, the master servicer under the series 2007-8 pooling
and servicing agreement will be required to make P&I advances with
respect to the Georgia-Alabama Retail Portfolio Trust Mortgage Loan,
unless the Other Servicer under the Other Pooling and Servicing
Agreement or the master servicer under the series 2007-8 pooling and
servicing agreement has determined that such advance would not be
recoverable from collections on the Georgia-Alabama Retail Portfolio
Loan Combination.
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DESCRIPTION OF THE OFFERED CERTIFICATESGENERAL
The certificates will be issued, on or about August 24, 2007, under the
pooling and servicing agreement. They will represent the entire beneficial
ownership interest of the trust. The assets of the trust will include:
o a segregated pool of mortgage loans;
o any and all payments under and proceeds of those mortgage loans
received after the cut-off date, exclusive of payments of principal,
interest and other amounts due on or before that date;
o the loan documents for those mortgage loans;
o our rights under the mortgage loan purchase agreements between us
and the respective mortgage loan sellers;
o any REO Properties acquired by the trust with respect to any of
those mortgage loans that come into and continue in default;
o those funds or assets as from time to time are deposited in the
master servicers' collection accounts, the special servicer's REO
account, the trustee's distribution account described under
"--Distribution Account" below or the trustee's interest reserve
account described under "--Interest Reserve Account" below; and
o the swap agreements relating to the class A-2FL certificates, the
class A-3FL certificates, the class AM-FL certificates and the class
AJ-FL certificates, respectively; provided, that none of the holders
of any offered certificates will have any beneficial interest in any
swap agreement.
Whenever we refer to mortgage loans in this prospectus supplement, we are
referring to the mortgage loans that we intend to include in the trust fund,
unless the context clearly indicates otherwise.
The certificates will include the following classes:
o the A-1, A-2, A-SB, A-3, A-1A, AM, AJ, B, C, D, E and F classes,
which are the classes of certificates that are offered by this
prospectus supplement; and
o the A-2FL, A-3FL, AM-FL, AJ-FL, G, H, J, K, L, M, N, P, Q, S, T, X,
Y, Z, R-I and R-II classes, which are the classes of certificates
that--
1. will be retained or privately placed by us; and
2. are not offered by this prospectus supplement.
The trust will also include the class A-2FL, class A-3FL, class AM-FL and
class AJ-FL REMIC II regular interests, which will be represented by the class
A-2FL, class A-3FL, class AM-FL and class AJ-FL certificates, respectively,
which are not offered by this prospectus supplement.
The class A-1, A-2, A-2FL, A-SB, A-3, A-3FL, A-1A, AM, AM-FL, AJ, AJ-FL,
B, C, D, E, F, G, H, J, K, L, M, N, P, Q, S and T certificates are the only
certificates that will have principal balances and are sometimes referred to as
the principal balance certificates. The principal balance of any of these
certificates will represent the total payments of principal to which the holder
of the certificate is entitled over time out of payments, or advances in lieu of
payments, and other collections on the assets of the trust. Accordingly, on each
distribution date, the principal balance of each certificate having a principal
balance will be permanently reduced by any payments of principal actually made
with respect to that certificate on that distribution date. See "--Payments"
below.
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On any particular distribution date, the principal balance of each class
of principal balance certificates may also be reduced, without any corresponding
payment, in connection with losses on the mortgage loans and default-related and
otherwise unanticipated expenses of the trust. However, in limited
circumstances, the total principal balance of a class of principal balance
certificates that was previously so reduced without a corresponding payment of
principal, may be reinstated (up to the amount of that prior reduction), with
past due interest. In general, such a reinstatement of principal balance on any
particular distribution date would result from any recoveries of Nonrecoverable
Advances or interest thereon that were reimbursed and/or paid in a prior
collection period from the principal portion of general collections on the
mortgage pool, which recoveries are included in the Principal Distribution
Amount for that distribution date. See "--Reductions to Certificate PrincipalBalances in Connection with Realized Losses and Additional Trust Fund Expenses"
below.
The class X certificates will not have principal balances, and the holders
of the class X certificates will not be entitled to receive payments of
principal. However, each class X certificate will have a notional amount for
purposes of calculating the accrual of interest with respect to that
certificate.
The total notional amount of the class X certificates will equal the total
principal balance of all the class A-1, A-2, A-SB, A-3, A-1A, AM, AJ, B, C, D,
E, F, G, H, J, K, L, M, N, P, Q, S and T certificates and the class A-2FL, class
A-3FL, class AM-FL and class AJ-FL REMIC II regular interests outstanding from
time to time. The total initial notional amount of the class X certificates will
be approximately $2,435,364,703, although it may be as much as 5% larger or
smaller, depending on the actual size of the initial mortgage pool balance.
In general, principal balances and notional amounts will be reported on a
class-by-class basis. In order to determine the principal balance or notional
amount of any of your offered certificates from time to time, you may multiply
the original principal balance or notional amount of that certificate as of the
date of initial issuance of the offered certificates, as specified on the face
of that certificate, by the then-applicable certificate factor for the relevant
class. The certificate factor for any class of offered certificates, as of any
date of determination, will equal a fraction, expressed as a percentage, the
numerator of which will be the then outstanding total principal balance or
notional amount, as applicable, of that class, and the denominator of which will
be the original total principal balance or notional amount, as applicable, of
that class. Certificate factors will be reported monthly in the monthly trustee
report.
REGISTRATION AND DENOMINATIONSGeneral. The offered certificates will be issued in book-entry form in
original denominations of $25,000 initial principal balance and in any whole
dollar denomination in excess of $25,000.
Each class of offered certificates will initially be represented by one or
more certificates registered in the name of Cede & Co., as nominee of The
Depository Trust Company. You will not be entitled to receive an offered
certificate issued in fully registered, certificated form, except under the
limited circumstances described in the accompanying base prospectus under
"Description of the Certificates--Book-Entry Registration." For so long as any
class of offered certificates is held in book-entry form--
o all references in this prospectus supplement to actions by holders
of those certificates will refer to actions taken by DTC upon
instructions received from beneficial owners of those certificates
through its participating organizations; and
o all references in this prospectus supplement to payments, notices,
reports, statements and other information to holders of those
certificates will refer to payments, notices, reports and statements
to DTC or Cede & Co., as the registered holder of those
certificates, for payment to beneficial owners of offered
certificates through its participating organizations in accordance
with DTC's procedures.
The trustee will initially serve as certificate registrar for purposes of
providing for the registration of the offered certificates and, if and to the
extent physical certificates are issued to the actual beneficial owners of any
of the offered certificates, the registration of transfers and exchanges of
those certificates.
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DTC, Euroclear and Clearstream. You will hold your certificates through
DTC, in the United States, or Clearstream Banking Luxembourg or Euroclear Bank
S.A./N.V., as operator of the Euroclear System, in Europe, if you are a
participating organization of the applicable system, or indirectly through
organizations that are participants in the applicable system. Clearstream and
Euroclear will hold omnibus positions on behalf of organizations that are
participants in either of these systems, through customers' securities accounts
in Clearstream's or Euroclear's names on the books of their respective
depositaries. Those depositaries will, in turn, hold those positions in
customers' securities accounts in the depositaries' names on the books of DTC.
For a discussion of DTC, Euroclear and Clearstream, see "Description of theCertificates--Book-Entry Registration--DTC, Euroclear and Clearstream" in the
accompanying base prospectus.
Transfers between participants in DTC will occur in accordance with DTC's
rules. Transfers between participants in Clearstream and Euroclear will occur in
accordance with their applicable rules and operating procedures. Cross-market
transfers between persons holding directly or indirectly through DTC, on the one
hand, and directly or indirectly through participants in Clearstream or
Euroclear, on the other, will be accomplished through DTC in accordance with DTC
rules on behalf of the relevant European international clearing system by its
depositary. See "Description of the Certificates--Book-EntryRegistration--Holding and Transferring Book-Entry Certificates" in the
accompanying base prospectus. For additional information regarding clearance and
settlement procedures for the offered certificates and for information with
respect to tax documentation procedures relating to the offered certificates,
see Annex F hereto.
DISTRIBUTION ACCOUNTGeneral. The trustee must establish and maintain an account in which it
will hold funds pending their payment on the certificates (exclusive of the
class A-2FL, A-3FL, AM-FL and AJ-FL certificates), the class A-2FL, class A-3FL,
class AM-FL and class AJ-FL REMIC II regular interests and from which it will
make those payments. That distribution account must be maintained in a manner
and with a depository institution that satisfies rating agency standards for
securitizations similar to the one involving the offered certificates. Funds
held in the trustee's distribution account may be held as cash or invested in
Permitted Investments. Any interest or other income earned on funds in the
trustee's distribution account will be paid to the trustee subject to the
limitations set forth in the pooling and servicing agreement.
Although the trustee may establish and maintain collections of Additional
Interest in an account separate from, but comparable to, its distribution
account, it is anticipated that, and the discussion in this prospectus
supplement assumes that, any collections of Additional Interest will be held as
part of a sub-account of the trustee's distribution account.
Deposits. On the business day prior to each distribution date, each master
servicer will be required to remit to the trustee for deposit in the
distribution account the following funds:
o all payments and other collections on the mortgage loans and any REO
Properties that are then on deposit in the subject master servicer's
collection account, exclusive of any portion of those payments and
other collections that represents one or more of the following:
1. monthly debt service payments due on a due date subsequent to
the end of the related collection period;
2. payments and other collections received after the end of the
related collection period;
3. amounts that are payable or reimbursable from the subject
master servicer's collection account to any person other than
the certificateholders, including--
(a) amounts payable to the subject master servicer or the
special servicer as compensation, including master
servicing fees, special servicing fees, workout fees,
principal recovery fees, assumption fees, modification
fees and, to the extent not otherwise applied to cover
interest on Advances and/or certain other actual or
potential Additional Trust Fund Expenses, Penalty
Interest and late payment charges,
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(b) amounts payable in reimbursement of outstanding
Advances, together with interest on those Advances,
(c) amounts payable with respect to other expenses of the
trust, and
(d) amounts payable at the request of the other master
servicer as described in the last paragraph under
"--Collection Account--Withdrawals" above.
4. amounts deposited in the subject master servicer's collection
account in error;
o any compensating interest payment deposited in the subject master
servicer's collection account to cover Prepayment Interest
Shortfalls incurred with respect to the mortgage loans during the
related collection period;
o any P&I advances made with respect to that distribution date; and
o any amounts paid by the subject master servicer, the special
servicer or the plurality controlling class certificateholder to
purchase all the mortgage loans and any REO Properties (minus
certain required deductions) in connection with the termination of
the trust as contemplated under "Description of the OfferedCertificates--Termination" in this prospectus supplement.
See "--Advances of Delinquent Monthly Debt Service Payments andReimbursement of Advances" below and "Servicing of the MortgageLoans--Collection Account" and "--Servicing and Other Compensation and Paymentof Expenses" in this prospectus supplement.
With respect to each distribution date that occurs during March,
commencing in March 2008, the trustee will be required to transfer from its
interest reserve account, which we describe under "--Interest Reserve Account"
below, to the distribution account the interest reserve amounts that are then
being held in that interest reserve account with respect to those mortgage loans
that accrue interest on an Actual/360 Basis.
Withdrawals. The trustee may from time to time make withdrawals from its
distribution account for any of the following purposes:
o to pay itself a monthly fee which is described under "--TrustAdministration Compensation" above and any interest or other income
earned on funds in the distribution account;
o to indemnify itself and various related persons, as described under
"Description of the Governing Documents--Matters Regarding theTrustee" in the accompanying base prospectus;
o to indemnify itself and any corresponding related persons similar to
those described in preceding bullet;
o to pay for any opinions of counsel required to be obtained in
connection with any amendments to the pooling and servicing
agreement and certain other opinions of counsel provided for in the
pooling and servicing agreement;
o to pay any federal, state and local taxes imposed on the trust, its
assets and/or transactions, together with all incidental costs and
expenses, that are required to be borne by the trust as described
under "Federal Income Tax Consequences--Taxation of Owners of REMICResidual Certificates--Prohibited Transactions Tax and Other Taxes"
in the accompanying base prospectus and "Servicing of the MortgageLoans--REO Properties" in this prospectus supplement;
o to pay any separate tax administrator any amounts reimbursable to
it;
o to transfer from its distribution account to its interest reserve
account interest reserve amounts with respect to those mortgage
loans that accrue interest on an Actual/360 Basis, as and when
described under "--Interest Reserve Account" below;
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o to pay to either master servicer any amounts deposited by such
master servicer in the distribution account not required to be
deposited therein; and
o to clear and terminate the distribution account at the termination
of the pooling and servicing agreement.
On each distribution date, all amounts on deposit in the trustee's
distribution account, exclusive of any portion of those amounts that are to be
withdrawn for the purposes contemplated in the foregoing paragraph, will be
withdrawn and applied to make payments on the certificates (exclusive of the
class A-2FL, A-3FL, AM-FL, and AJ-FL certificates), the class A-2FL, class
A-3FL, class AM-FL and class AJ-FL REMIC II regular interests. For any
distribution date, those funds will consist of five separate components--
o the portion of those funds that represent prepayment consideration
collected on the mortgage loans as a result of voluntary or
involuntary prepayments that occurred during the related collection
period, which will be paid to the holders of certain classes of
certificates as described under "--Payments--Payments of PrepaymentPremiums and Yield Maintenance Charges" below;
o the portion of those funds that represent Additional Interest
collected on the Converting Loans during the related collection
period, which will be paid to the holders of the class Y
certificates as described under "--Payments--Payments of AdditionalInterest" below;
o the portion of those funds that represent Additional Interest
collected on the ARD Loans during the related collection period,
which will be paid to the holders of the class Z certificates as
described under "--Payments--Payments of Additional Interest" below;
and
o the remaining portion of those funds, which--
1. we refer to as the Available Distribution Amount; and
2. will be paid to the holders of all the certificates, other
than the class A-2FL, A-3FL, AM-FL and AJ-FL certificates, and
with respect to the class A-2FL, class A-3FL, class AM-FL and
class AJ-FL REMIC II regular interests, as described under
"--Payments--Priority of Payments" below.
INTEREST RESERVE ACCOUNT
The trustee must maintain an account in which it will hold the interest
reserve amounts described in the next paragraph with respect to those mortgage
loans that accrue interest on an Actual/360 Basis. That interest reserve account
must be maintained in a manner and with a depository that satisfies rating
agency standards for similar securitizations as the one involving the offered
certificates. The interest reserve account may be a sub-account of the
distribution account, but for purposes of the discussion in this prospectus
supplement it is presented as if it were a separate account. Funds held in the
trustee's interest reserve account may be held as cash or invested in Permitted
Investments. Any interest or other income earned on funds in the trustee's
interest reserve account will be paid to the trustee subject to the limitations
set forth in the pooling and servicing agreement.
During January, except in a leap year, and February of each calendar year,
beginning in 2008, the trustee will, on or before the distribution date in that
month (unless such distribution date is the final distribution date), withdraw
from the distribution account and deposit in its interest reserve account the
interest reserve amounts with respect to those mortgage loans that accrue
interest on an Actual/360 Basis and for which the monthly debt service payment
due in that month was either received or advanced. That interest reserve amount
for each of those mortgage loans will generally equal one day's interest
(exclusive of Penalty Interest and Additional Interest and net of any master
servicing fees and trust administration fees payable therefrom) accrued on the
Stated Principal Balance of the subject mortgage loan as of the end of the
related collection period.
During March of each calendar year, beginning in 2008 (or February, if the
related distribution date is the final distribution date), the trustee will, on
or before the distribution date in that month, withdraw from its interest
reserve account and deposit in the distribution account any and all interest
reserve amounts then on deposit in the
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interest reserve account with respect to those mortgage loans that accrue
interest on an Actual/360 Basis. All interest reserve amounts that are so
transferred from the interest reserve account to the distribution account will
be included in the Available Distribution Amount for the distribution date
during the month of transfer.
FLOATING RATE ACCOUNT
The trustee, on behalf of the holders of the class A-2FL, A-3FL, AM-FL and
AJ-FL certificates, will be required to establish and maintain an account in
which it will hold funds pending their distribution on the class A-2FL, A-3FL,
AM-FL and/or AJ-FL certificates or to the swap counterparty and from which it
will make those distributions. No holder of any class of offered certificates
will have any beneficial interest in any such floating rate account.
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FEES AND EXPENSES
The following summarizes the related fees and expenses to be paid from the
assets of the trust fund and the recipient, general purpose, source and
frequency of payments for those fees and expenses:
TYPE / RECIPIENT AMOUNT GENERAL PURPOSE SOURCE FREQUENCY
------------------------- ------------------------------ --------------- ----------------------------- ---------------
Fees
Master Servicing Fee / The master servicers will earn Compensation First, out of collections of Monthly
Master Servicers a master servicing fee with interest with respect to the
respect to each and every subject mortgage loan and
mortgage loan in the trust, then, if the subject mortgage
including each specially loan and any related REO
serviced mortgage loan, if Property has been liquidated,
any, and each mortgage loan, out of general collections on
if any, as to which the deposit in the collection
corresponding mortgaged real account.
property has become an REO
Property. With respect to
each mortgage loan, the master
servicing fee will: (1)
generally be calculated for
the same number of days and on
the same principal amount as
interest accrues or is deemed
to accrue on that mortgage
loan; and (2) accrue at an
annual rate that ranges from
0.02000% to 0.10000% per
annum. Master servicing fees
with respect to any mortgage
loan will include the primary
servicing fees payable by the
applicable master servicer to
any sub-servicer with respect
to that mortgage loan.
Additional Master Prepayment Interest Excesses Compensation Interest payments made by the Time to time
Servicing collected on mortgage loans related borrower intended to
Compensation / Master that are the subject of a cover interest accrued on the
Servicers principal prepayment in full subject principal prepayment
or in part after their with respect to the subject
respective due dates in any mortgage loan during the
collection period; period from and after the
related due date.
All interest and investment Compensation Interest and investment Monthly
income earned on amounts on income related to the subject
deposit in accounts maintained accounts (net of investment
by the master servicers, to losses).
the extent not otherwise
payable to the borrowers;
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TYPE / RECIPIENT AMOUNT GENERAL PURPOSE SOURCE FREQUENCY
------------------------- ------------------------------ --------------- ----------------------------- ---------------
On performing mortgage loans, Compensation Payments of late payment Time to time
late payment charges and charges and default interest
default interest actually made by borrowers with
collected with respect to the respect to the mortgage loans.
subject mortgage loan during
any collection period, but
only to the extent not
otherwise allocable to pay the
following items with respect
to the subject mortgage loan:
(i) interest on advances; or
(ii) Additional Trust Fund
Expenses currently payable or
previously paid with respect
to the subject mortgage loan
or mortgaged real property
from collections on the
mortgage pool and not
previously reimbursed; and
With respect to any Compensation Payments of the applicable Time to time
non-specially serviced fee(s) made by the borrower
mortgage loan, 100%--or, if the under the subject mortgage
consent of the special loan.
servicer is required with
respect to the subject action,
50%-- of each assumption
application fee, assumption
fee, modification fee,
extension fee other similar
fee or fees paid in connection
with a defeasance of a
mortgage loan that is actually
paid by a borrower in
connection with the related
action.
Special Servicing Fee / The special servicer will earn Compensation Out of general collections on Monthly
Special Servicer a special servicing fee with all the mortgage loans and
respect to each mortgage loan any REO Properties in the
that is being specially trust on deposit in the
serviced by it or as to which master servicers' collection
the corresponding mortgaged accounts.
real property has become an
REO Property. With respect to
each such mortgage loan
described in the preceding
sentence, the special
servicing fee will: (a) accrue
for the same number of days
and on the same principal
amount as interest accrues or
is deemed to accrue from time
to time on that mortgage loan;
(b) accrue at a special
servicing fee rate of 0.25%
per annum; and (c) be payable
monthly from general
collections on the mortgage
pool.
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TYPE / RECIPIENT AMOUNT GENERAL PURPOSE SOURCE FREQUENCY
------------------------- ------------------------------ --------------- ----------------------------- ---------------
Workout Fee / Special The special servicer will, in Compensation Out of each collection of Time to time
Servicer general, be entitled to interest (other than default
receive a workout fee with interest) and principal
respect to each specially received on the subject
serviced mortgage loan that it mortgage loan.
successfully works out. The
workout fee will be payable
out of, and will be calculated
by application of a workout
fee rate of 1.0% to, each
collection of interest and
principal received on the
subject mortgage loan for so
long as it is not returned to
special servicing by reason of
an actual or reasonably
foreseeable default.
Principal Recovery Fee / Subject to the exceptions Compensation Out of the full, partial or Time to time
Special Servicer described under "The Pooling discounted payoff obtained
and Servicing from the related borrower
Agreement--Servicing and Other and/or liquidation proceeds
Compensation and Payment of (exclusive of any portion of
Expenses--Principal Special that payment or proceeds that
Servicing Compensation--The represents a recovery of
Principal Recovery Fee" in default interest) in respect
this prospectus supplement, of the related specially
the special servicer will, in serviced mortgage loan or
general, be entitled to related REO Property, as the
receive a principal recovery case may be.
fee with respect to: (a) each
specially serviced mortgage
loan--or any replacement
mortgage loan substituted for
it--as to which the special
servicer obtains a full or
discounted payoff from the
related borrower; and (b) any
specially serviced mortgage
loan or REO Property as to
which the special servicer
receives any liquidation
proceeds, sale proceeds,
insurance proceeds or
condemnation proceeds. As to
each such specially serviced
mortgage loan or foreclosure
property, the principal
recovery fee will be payable
from, and will be calculated
by application of a principal
recovery fee rate of 1.0% to,
the related payment or
proceeds.
Additional Special All interest and investment Compensation Interest and investment Monthly
Servicing Compensation income earned on amounts on income related to the subject
/ Special Servicer deposit in accounts maintained accounts (net of investment
by the special servicer; losses).
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TYPE / RECIPIENT AMOUNT GENERAL PURPOSE SOURCE FREQUENCY
------------------------- ------------------------------ --------------- ----------------------------- ---------------
On specially serviced mortgage Compensation Payments of late payment Time to time
loans, late payment charges charges and default interest
and default interest actually made by borrowers in respect
collected with respect to the of the mortgage loans.
subject mortgage loan during
any collection period, but
only to the extent not
otherwise allocable to pay the
following items with respect
to the subject mortgage loan:
(i) interest on advances; or
(ii) additional trust fund
expenses currently payable or
previously paid with respect
to the subject mortgage loan
or mortgaged real property
from collections on the
mortgage pool and not
previously reimbursed;
With respect to any specially Compensation Payments of the applicable Time to time
serviced mortgage loan, 100% fee(s) made by the borrower
of each assumption application under the subject mortgage
fee, assumption fee, loan.
modification fee or other
similar fee actually paid by a
borrower with respect to any
assumption or modification; and
With respect to any performing Compensation Payments of the applicable Time to time
mortgage loan, if the consent fee(s) made by the borrower
of the special servicer is under the subject mortgage
required with respect to the loan.
subject action, 50% of
assumption fees, assumption
application fees, modification
fees and other fees actually
paid by a borrower with
respect to any assumption,
modification or other
agreement entered into by the
applicable master servicer.
Trust Administration Fee The trust administration fee, Compensation General collections on the Monthly
/ Trustee for any distribution date, mortgage loans and any REO
will equal one month's Properties on deposit in the
interest at 0.00085% per annum master servicers' collection
with respect to each and every accounts and/or the trustee's
mortgage loan in the trust, distribution account.
including each specially
serviced mortgage loan, if
any, and each mortgage loan,
if any, as to which the
corresponding mortgaged real
property has become an REO
Property.
Additional Trust All interest and investment Compensation Interest and investment Monthly
Administration income earned on amounts on income related to the subject
Compensation/Trustee deposit in accounts maintained account (net of investment
by the trustee. losses).
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TYPE / RECIPIENT AMOUNT GENERAL PURPOSE SOURCE FREQUENCY
------------------------- ------------------------------ --------------- ----------------------------- ---------------
EXPENSES
Servicing Advances / To the extent of funds Reimbursement Amounts on deposit in the Time to time
Trustee, Master available, the amount of any of expenses applicable master servicer's
Servicers or Special servicing advances.(1) collection account that
Servicer represent (a) payments made
by the related borrower to
cover the item for which such
servicing advance was made or
(b) liquidation proceeds,
condemnation proceeds,
insurance proceeds and, if
applicable, REO revenues (in
each case, if applicable, net
of any principal recovery fee
or workout fee payable
therefrom) received in
respect of the particular
mortgage loan or related REO
Property, provided that if
the applicable master
servicer, special servicer or
trustee determines that a
servicing advance is not
recoverable out of
collections on the related
underlying mortgage loan,
then out of general
collections on the mortgage
loans and any REO Properties
in the trust on deposit in
the applicable master
servicer's collection account
or, if funds in that master
servicer's collection account
are insufficient, the other
master servicer's collection
account.
Interest on servicing At a rate per annum equal to a Payment of First, out of default Time to time
advances / Master published prime rate, accrued interest on interest and late payment
Servicers, Special on the amount of each Servicing charges on the related
Servicer or Trustee outstanding servicing Advances mortgage loan and then, after
advance.(2) or at the same time that
advance is reimbursed, out of
any other amounts then on
deposit in the applicable
master servicer's collection
account or, if funds in that
master servicer's collection
account are insufficient, the
other master servicer's
collection account.
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TYPE / RECIPIENT AMOUNT GENERAL PURPOSE SOURCE FREQUENCY
------------------------- ------------------------------ --------------- ----------------------------- ---------------
P&I Advances / To the extent of funds Reimbursement Amounts on deposit in the Time to time
Master Servicer and available, the amount of any of P&I Advances applicable master servicer's
Trustee P&I advances.(1) made with collection account that
respect to the represent late collections of
mortgage pool interest and principal (net
of related master servicing,
workout and principal
recovery fees) received in
respect of the related
mortgage loans or REO
Property as to which such P&I
advance was made, provided
that if the applicable master
servicer or trustee
determines that a P&I advance
is not recoverable out of
collections on the related
underlying mortgage loan,
then out of general
collections on the mortgage
loans and any REO Properties
in the trust on deposit in
the applicable master
servicer's collection account
or, if funds in that master
servicer's collection account
are insufficient, the other
master servicer's collection
account.
Interest on P&I Advances / At a rate per annum equal to a Payment of First, out of default Time to time
Master Servicers and published prime rate, accrued interest on P&I interest and late payment
Trustee on the amount of each advances charges on the related
outstanding P&I advance.(2) mortgage loan and then, after
or at the same time that
advance is reimbursed, out of
any other amounts then on
deposit in the applicable
master servicer's collection
account or, if funds in that
master servicer's collection
account are insufficient, the
other master servicer's
collection account.
Indemnification Expenses/ Amount to which such party is Indemnification General collections on the Time to time
Trustee and any entitled to indemnification mortgage loans and any REO
director, officer, under the pooling and Properties on deposit in the
employee or agent of servicing agreement.(3) applicable master servicer's
the Trustee, collection account or, if
Depositor, Master funds in that master
Servicers or Special servicer's collection account
Servicer and any are insufficient, the other
director, officer, master servicer's collection
employee or agent of account and/or the trustee's
Depositor, either distribution account.
Master Servicer or the
Special Servicer
_____________________________
(1) Reimbursable out of collections on the related mortgage loan, except that:
(a) advances that are determined not to be recoverable out of related
collections will be reimbursable first out of general collections of
principal on the mortgage pool and then out of other general collections
on the mortgage pool; and (b) advances that remain outstanding after a
specially serviced mortgage loan has been worked out and the servicing of
that mortgage loan has been returned to the applicable master servicer may
be reimbursable out of general collections of principal on the mortgage
pool.
(2) Payable out of late payment charges and/or default interest on the related
mortgage loan or, in connection with or after reimbursement of the related
advance, out of general collections on the mortgage pool, although in some
cases interest on advances may be payable first or solely out of general
collections of principal on the mortgage pool.
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(3) Payable out of general collections on the mortgage pool. In general, none
of the above specified persons are entitled to indemnification for (1) any
liability specifically required to be borne thereby pursuant to the terms
of the pooling and servicing agreement, or (2) any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence
in the performance of, or the negligent disregard of, such party's
obligations and duties under the pooling and servicing agreement, or as
may arise from a breach of any representation or warranty of such party
made in the pooling and servicing agreement.
S-203
CALCULATION OF PASS-THROUGH RATES
Each class of offered certificates will have a pass-through rate equal to
(a) a "Fixed" pass-through rate that will remain constant at the initial
pass-through rate shown for that class in the table, (b) a "WAC Cap" variable
pass-through rate equal to the lesser of (x) the initial pass-through rate
identified in the table with respect to that class, and (y) a weighted average
of the adjusted net mortgage interest rates on the mortgage loans (without
regard to the additional interest distributable to the class Y and class Z
certificates) from time to time, or (c) a "WAC-x%" variable pass-through rate
equal to either: (x) a weighted average of the adjusted net mortgage interest
rates on the mortgage loans (excluding amounts payable to the class Y and class
Z certificates) from time to time; or (y) a weighted average of the adjusted net
mortgage interest rates on the mortgage loans (without regard to the additional
interest distributable to the class Y and class Z certificates) from time to
time, minus a specific percentage.
Under certain circumstances described in this prospectus supplement, the
pass-through rate applicable to the class A-2FL, class A-3FL, class AM-FL and
class AJ-FL certificates may convert to either (a) a fixed rate; (b) a variable
rate equal to the weighted average of the adjusted net mortgage interest rates
on the mortgage loans (excluding the additional interest distributable to the
class Y and class Z certificates) from time to time; (c) a variable rate equal
to the lesser of (i) % per annum and (ii) a weighted average of the adjusted net
mortgage interest rates on the mortgage loans (excluding the additional interest
distributable to the class Y and class Z certificates) from time to time; or (d)
a variable rate equal to the weighted average of the adjusted net mortgage
interest rates on the mortgage loans (excluding the additional interest
distributable to the class Y and class Z certificates) from time to time less a
specified percentage.
For so long as the related swap agreement is in effect and there is no
continuing payment default thereunder on the part of the swap counterparty, the
pass-through rates applicable to the class A-2FL, class A-3FL, class AM-FL and
class AJ-FL certificates will be floating rates based on LIBOR plus a specified
percentage. However, the pass-through rate with respect to the class A-2FL,
A-3FL, AM-FL or AJ-FL certificates may be effectively reduced as a result of
shortfalls allocated to the corresponding REMIC II regular interest or, if the
pass-through rate of the related REMIC II regular interest for any interest
accrual period is limited by the Weighted Average Net Mortgage Rate, then the
amount by which the interest distributable with respect to that REMIC II regular
interest is reduced as a result of that limitation will result in a
corresponding reduction to the amount of interest payable by the swap
counterparty with respect to the related distribution date and therefore a
corresponding reduction to the amount of interest distributable with respect to
the class A-2FL, class A-3FL, class AM-FL and/or class AJ-FL certificates, as
applicable, on that distribution date. In addition, if there is a continuing
payment default under the related swap agreement, or if the related swap
agreement is terminated and a replacement swap agreement is not obtained, then
the pass-through rate with respect to the class A-2FL certificates, the class
A-3FL certificates, the class AM-FL certificates or the class AJ-FL
certificates, as applicable, will convert to a per annum rate equal to the
pass-through rate on the corresponding REMIC II regular interest, and
accordingly the interest accrual period and interest accrual basis for that
class of certificates will convert to those of the corresponding REMIC II
regular interest.
The term "LIBOR" means, with respect to the class A-2FL, A-3FL, AM-FL and
AJ-FL certificates and each interest accrual period for those certificates, the
rate for deposits in U.S. Dollars, for a period equal to one month, which
appears on Reuters Screen LIBOR01 Page as of 11:00 a.m., London time, on the
related LIBOR Determination Date. If that rate does not appear on Reuters Screen
LIBOR01 Page, LIBOR for that interest accrual period will be determined on the
basis of the rates at which deposits in U.S. Dollars are offered by any five
major reference banks in the London interbank market selected by the calculation
agent under each swap agreement to provide that bank's offered quotation of such
rates at approximately 11:00 a.m., London time, on the related LIBOR
Determination Date to prime banks in the London interbank market for a period of
one month, commencing on the first day of the subject interest accrual period
and in an amount that is representative for a single such transaction in the
relevant market at the relevant time. The calculation agent under each swap
agreement will request the principal London office of any five major reference
banks in the London interbank market selected by the calculation agent to
provide a quotation of those rates, as offered by each such bank. If at least
two such quotations are provided, LIBOR for that interest accrual period will be
the arithmetic mean of the quotations. If fewer than two quotations are provided
as requested, LIBOR for that interest accrual period will be the arithmetic mean
of the rates quoted by major banks in New York City selected by the calculation
agent under each swap agreement, at approximately 11:00 a.m., New York City
time, on the related LIBOR Determination Date with respect to the subject
interest accrual
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period for loans in U.S. Dollars to leading European banks for a period equal to
one month, commencing on the LIBOR Determination Date with respect to such
interest accrual period and in an amount that is representative for a single
such transaction in the relevant market at the relevant time. The calculation
agent under each swap agreement will determine LIBOR for each interest accrual
period and the determination of LIBOR by the calculation agent will be binding
absent manifest error.
The "LIBOR Determination Date" for the class A-2FL, A-3FL, AM-FL and AJ-FL
certificates is (i) with respect to the initial interest accrual period, the
date that is two LIBOR business days prior to the date of initial issuance of
the certificates, and (ii) with respect to each applicable interest accrual
period thereafter, the date that is two LIBOR Business Days prior to the
commencement of the subject interest accrual period. A "LIBOR Business Day" is
any day on which commercial banks are open for general business (including
dealings in foreign exchange and foreign currency deposits) in London, England
and/or New York, New York.
The pass-through rate for the class X certificates for any interest
accrual period will equal the weighted average of the respective strip rates,
which we refer to as class X strip rates, at which interest accrues during that
interest accrual period on the respective components of the total notional
amount of the class X certificates outstanding immediately prior to the related
distribution date, with the relevant weighting to be done based upon the
relative sizes of those components. Each of those components will be comprised
of the total principal balance of one of the respective classes of the principal
balance certificates. The total principal balance of each class of principal
balance certificates (other than the class A-2FL, class A-3FL, class AM-FL and
class AJ-FL certificates) or REMIC II regular interests will constitute a
separate component of the total notional amount of the class X certificates.
For purposes of accruing interest on the class X certificates during any
interest accrual period, the applicable class X strip rate with respect to any
component of the total notional amount of the class X certificates for that
interest accrual period will equal the excess, if any, of (a) the Weighted
Average Net Mortgage Rate for the related distribution date, over (b) the
pass-through rate in effect during such interest accrual period for the class of
principal balance certificates whose principal balance makes up such component.
The class Y, Z, R-I and R-II certificates will not be interest-bearing
and, therefore, will not have pass-through rates.
PAYMENTSGeneral. On each distribution date, the trustee will, to the extent of
available funds, make all payments required to be made on the certificates on
that date to the holders of record as of the close of business on the last
business day of the calendar month preceding the month in which those payments
are to occur. The final payment of principal and/or interest on any offered
certificate, however, will be made only upon presentation and surrender of that
certificate at the offices of the certificate registrar or such other location
to be specified in a notice of the pendency of that final payment.
In order for a certificateholder to receive payments by wire transfer on
and after any particular distribution date, that certificateholder must provide
the trustee with written wiring instructions no later than five business days
prior to the last business day of the calendar month preceding the month in
which that distribution date occurs. Otherwise, that certificateholder will
receive its payments by check mailed to it.
Cede & Co. will be the registered holder of your offered certificates, and
you will receive payments on your offered certificates through DTC and its
participating organizations, until physical certificates are issued to the
actual beneficial owners. See "--Registration and Denominations" above.
Payments of Interest. All of the classes of the certificates except for
the class Y, Z, R-I and R-II certificates, the class A-2FL REMIC II regular
interest, the class A-3FL REMIC II regular interest, the class AM-FL REMIC II
regular interest, and the class AJ-FL REMIC II regular interest, will bear
interest based upon:
o the pass-through rate with respect to that particular class of
certificates, the class A-2FL REMIC II regular interest, the class
A-3FL REMIC II regular interest, the class AM-FL REMIC II regular
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interest, and the class AJ-FL REMIC II regular interest, as the case
may be, for that interest accrual period;
o the total principal balance or notional amount, as the case may be,
of that particular class of certificates, the class A-2FL REMIC II
regular interest, the class A-3FL REMIC II regular interest, the
class AM-FL REMIC II regular interest, and the class AJ-FL REMIC II
regular interest, as the case may be, outstanding immediately prior
to the related distribution date; and
o the assumption that each year consists of twelve 30-day months (or,
in the case of each of the class A-2FL, A-3FL, AM-FL and AJ-FL
certificates, for so long as the related swap agreement is in effect
and there is no continuing payment default thereunder on the part of
the swap counterparty, based on the actual number of days in that
interest accrual period and the assumption that each year consists
of 360 days). In addition, if the pass-through rate of the any of
the REMIC II regular interests for any interest accrual period is
limited by the Weighted Average Net Mortgage Rate, then the amount
by which the interest distributable with respect to that REMIC II
regular interest is reduced as a result of that limitation will
result in a corresponding reduction to the amount of interest
payable by the swap counterparty with respect to the related
distribution date and therefore a corresponding reduction to the
amount of interest distributable with respect to the class A-2FL,
class A-3FL, class AM-FL and/or class AJ-FL certificates, as
applicable, on that distribution date.
On each distribution date, subject to available funds and the priorities
of payment described under "--Payments--Priority of Payments" below, the total
amount of interest payable to the holders of each interest-bearing class of the
certificates (exclusive of the class A-2FL, A-3FL, AM-FL and AJ-FL certificates)
and with respect to each of the class A-2FL REMIC II regular interest, A-3FL
REMIC II regular interest, AM-FL REMIC II regular interest and the class AJ-FL
REMIC II regular interest will include the total amount of interest accrued
during the related interest accrual period with respect to that class of
certificates or that REMIC II regular interest, as the case may be, reduced
(except in the case of the class X certificates) by the portion of any Net
Aggregate Prepayment Interest Shortfall or any interest shortfall for that
distribution date allocable to the subject class of certificates.
The portion of the Net Aggregate Prepayment Interest Shortfall for any
distribution date that is allocable to any class of principal balance
certificates will equal the product of:
o the amount of that Net Aggregate Prepayment Interest Shortfall for
that distribution date (less the amount allocated to the applicable
class of certificates as specified in the following paragraph)
multiplied by
o a fraction, the numerator of which is the total amount of interest
accrued during the related interest accrual period with respect to
the subject class of principal balance certificates or the subject
REMIC II regular interest, as the case may be, and the denominator
of which is the total amount of interest accrued during the related
interest accrual period with respect to all of the interest bearing
classes of certificates (exclusive of the class A-2FL, A-3FL, AM-FL
and AJ-FL certificates), the class A-2FL REMIC II regular interest,
the class A3-FL REMIC II regular interest, the class AM-FL REMIC II
regular interest and the class AJ-FL REMIC II regular interest.
If the holders of any interest-bearing class of the certificates do not
receive all of the interest to which they or it, as applicable, are/is entitled
on any distribution date, then they or it, as applicable, will continue to be
entitled to receive the unpaid portion of that interest on future distribution
dates, subject to the available funds for those future distribution dates and
the priorities of payment described under "--Payments--Priority of Payments"
below.
Although Net Aggregate Prepayment Interest Shortfalls or other interest
shortfalls will not be allocated directly to the class A-2FL, A-3FL, AM-FL or
AJ-FL certificates, any such shortfalls allocated to the corresponding REMIC II
regular interest will result in a dollar-for-dollar reduction in the interest
distributable on the class A-2FL, A-3FL, AM-FL or AJ-FL certificates, as the
case may be. Any distributions of interest allocated to the class A-2FL, class
A-3FL, class AM-FL and class AJ-FL REMIC II regular interests, will be deposited
in the trustee's floating rate account and will thereafter be distributed to the
holders of the class A-2FL, A-3FL, AM-FL and AJ-FL certificates, as applicable,
and/or the swap counterparty, as applicable.
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If the holders of any interest-bearing class of the certificates (other
than the class A-2FL, A-3FL, AM-FL and AJ-FL certificates) or the grantor trust
with respect to the class A-2FL REMIC II regular interest, the class A-3FL REMIC
II regular interest, the class AM-FL REMIC II regular interest or the class
AJ-FL REMIC II regular interest do not receive all of the interest to which they
are entitled on any distribution date, then they will continue to be entitled to
receive the unpaid portion of that interest on future distribution dates,
subject to the available funds for those future distribution dates and the
priorities of payment described under "--Payments--Priority of Payments" below.
However, no interest will accrue on any of that unpaid interest, and a portion
of any past due interest payable with respect to each of the class A-2FL, class
A-3FL, class AM-FL and class AJ-FL REMIC II regular interests may be payable to
the swap counterparty.
Payments of Principal. In general, subject to available funds and the
priority of payments described under "--Payments--Priority of Payments" below,
the total distributions of principal to be made with respect to the principal
balance certificates (other than the class A-2FL, A-3FL, AM-FL and AJ-FL
certificates), the class A-2FL, class A-3FL, class AM-FL and class AJ-FL REMIC
II regular interests, on any given distribution date will equal the Principal
Distribution Amount for that distribution date, and the total distributions of
principal to be made with respect to any particular class of principal balance
certificates on any given distribution date will equal the portion of the
Principal Distribution Amount for that distribution date that is allocable to
that particular class of principal balance certificates. So long as the class
A-3 and A-3FL certificates, on the one hand, and class A-1A certificates, on the
other hand, remain outstanding, however, except as otherwise set forth below,
the Principal Distribution Amount for each distribution date will be calculated
on a loan group-by-loan group basis. On each distribution date after the total
principal balance of either the class A-3 and A-3FL certificates on the one
hand, or the class A-1A certificates, on the other hand, has been reduced to
zero, a single Principal Distribution Amount will be calculated in the aggregate
for both loan groups.
As indicated in the definition of "Principal Distribution Amount" in the
glossary to this prospectus supplement, the Principal Distribution Amount for
any distribution date will generally be:
o reduced by any Nonrecoverable Advance, with interest thereon, or any
Workout-Delayed Reimbursement Amount with respect to any mortgage
loan (or, in the case of a servicing advance, the related Loan
Combination) that is reimbursed out of general collections of
principal on the mortgage pool received during the related
collection period; and
o increased by any items recovered during the related collection
period that previously constituted a Nonrecoverable Advance or
interest thereon or a Workout-Delayed Reimbursement Amount that was
reimbursed out of general collections of principal on the mortgage
pool during a prior collection period.
If any Nonrecoverable Advance, with interest thereon, or Workout-Delayed
Reimbursement Amount with respect to a mortgage loan is reimbursed out of
general collections of principal on the mortgage pool, then any corresponding
reduction in the Principal Distribution Amount for the relevant distribution
date, as contemplated by the first bullet of the prior paragraph, will generally
result first in a reduction in the portion of such Principal Distribution Amount
attributable to the loan group that includes the subject mortgage loan, until
such portion is reduced to zero, and then in the portion of such Principal
Distribution Amount that is attributable to the other loan group. Increases in
the Principal Distribution Amount for any distribution date, as contemplated by
the second bullet of the prior paragraph, will generally be made to offset prior
reductions in reverse order to that described in the prior sentence. See
"Servicing of the Mortgage Loans--Servicing and Other Compensation and Paymentof Expenses" in this prospectus supplement and "--Advances of Delinquent MonthlyDebt Service Payments and Reimbursement of Advances" below.
The payment of Additional Trust Fund Expenses with respect to any mortgage
loan may result in a reduction of amounts allocable as principal of that
mortgage loan and, accordingly, a smaller Principal Distribution Amount.
S-207
In general, the portion of the Principal Distribution Amount consisting of
the Loan Group 1 Principal Distribution Amount will be allocated to the class
A-1, A-2, A-SB and A-3 certificates and the class A-2FL REMIC II regular
interest and the class A-3FL REMIC II regular interest on each distribution date
as follows:
o first, to the class A-SB certificates, up to the lesser of--
1. the entire Loan Group 1 Principal Distribution Amount for that
distribution date, and
2. the excess, if any, of (a) the total principal balance of the
class A-SB certificates outstanding immediately prior to that
distribution date, over (b) the Class A-SB Planned Principal
Balance for that distribution date;
o second, to the class A-1 certificates, up to the lesser of--
1. the entire Loan Group 1 Principal Distribution Amount for that
distribution date, reduced by any portion of that amount
allocable to the class A-SB certificates as described in the
preceding bullet, and
2. the total principal balance of the class A-1 certificates
outstanding immediately prior to that distribution date;
o third, to the class A-2 certificates and the class A-2FL REMIC II
regular interest, on a pro rata basis by principal balance, up to
the lesser of--
1. the entire Loan Group 1 Principal Distribution Amount for that
distribution date, reduced by any portion of that amount
allocable to the class A-SB and/or A-1 certificates as
described in the preceding two bullets, and
2. the total principal balance of the class A-2 certificates and
the class A-2FL REMIC II regular interest outstanding
immediately prior to that distribution date;
o fourth, to the class A-SB certificates, up to the lesser of--
1. the entire Loan Group 1 Principal Distribution Amount for that
distribution date, reduced by any portion of that amount
allocable to the class A-SB, A-1, A-2 certificates and/or the
class A-2FL REMIC II regular interest as described in the
preceding three bullets, and
2. the total principal balance of the class A-SB certificates
outstanding immediately prior to that distribution date (as
reduced by any portion of the Loan Group 1 Principal
Distribution Amount for that distribution date allocable to
the class A-SB certificates as described in the first bullet
of this paragraph); and
o fifth, to the class A-3 certificates and the class A-3FL REMIC II
regular interest, on a pro rata basis by principal balance, up to
the lesser of--
1. the entire Loan Group 1 Principal Distribution Amount for that
distribution date, reduced by any portion of that amount
allocable to the class A-1, A-2 and/or A-SB certificates
and/or the class A-2FL REMIC II regular interest regular
interest as described in the preceding four bullets, and
2. the total principal balance of the class A-3 certificates and
the class A-3FL REMIC II regular interest outstanding
immediately prior to that distribution date;
In general, the portion of the Principal Distribution Amount consisting of
the Loan Group 2 Principal Distribution Amount will be allocated to the class
A-1A certificates on each distribution date up to the lesser of--
o the entire Loan Group 2 Principal Distribution Amount for that
distribution date; and
S-208
o the total principal balance of the class A-1A certificates
outstanding immediately prior to that distribution date.
If the Loan Group 1 Principal Distribution Amount for any distribution
date exceeds the total principal balance of the class A-1, A-2, A-SB and A-3
certificates, the class A-2FL REMIC II regular interest and the class A-3FL
REMIC II regular interest outstanding immediately prior to that distribution
date, then (following retirement of the class A-1, A-2, A-SB and A-3
certificates, the class A-2FL REMIC II regular interest and the class A-3FL
REMIC II regular interest) the remaining portion thereof would be allocated to
the class A-1A certificates, up to the extent necessary to retire such class of
certificates. Similarly, if the Loan Group 2 Principal Distribution Amount for
any distribution date exceeds the total principal balance of the class A-1A
certificates outstanding immediately prior to that distribution date, then
(following retirement of the class A-1A certificates) the remaining portion
thereof would be allocated (after taking account of the allocations of the Loan
Group 1 Principal Distribution Amount for that distribution date described in
the second preceding paragraph): first, to the class A-SB certificates, up to
the extent necessary to pay down the then total principal balance thereof to the
Class A-SB Planned Principal Balance for that distribution date; second, to the
class A-1 certificates, up to the extent necessary to retire that class of
certificates; third, to the class A-2 certificates and the class A-2FL REMIC II
regular interest, on a pro rata basis by principal balance, up to the extent
necessary to retire that class of certificates and that REMIC II regular
interest; fourth, to the class A-SB certificates, up to the extent necessary to
retire that class of certificates; and fifth, to the class A-3 certificates and
the class A-3FL REMIC II regular interest, on a pro rata basis by principal
balance, up to the extent necessary to retire that class of certificates and
that REMIC II regular interest.
Notwithstanding the foregoing, if any of two or more of the A-1, A-2,
A-2FL, A-SB, A-3, A-3FL and A-1A classes are outstanding at a time when the
total principal balance of the class AM, AM-FL, AJ, AJ-FL, B, C, D, E, F, G, H,
J, K, L, M, N, P, Q, S and T certificates has been reduced to zero as described
under "--Reductions to Certificate Principal Balances in Connection withRealized Losses and Additional Trust Fund Expenses" below, then the Principal
Distribution Amount for each distribution date thereafter will be allocable
among the A-1, A-2, A-SB, A-3 and A-1A classes and, if applicable, the class
A-2FL REMIC II regular interest and the class A-3FL REMIC II regular interest
that remain outstanding on a pro rata basis in accordance with their respective
total principal balances immediately prior to that distribution date, in each
case up to that total principal balance.
Following the retirement of the class A-1, A-2, A-SB, A-3, A-1A
certificates and the class A-2FL REMIC II regular interest and class A-3FL REMIC
II regular interest, the Principal Distribution Amount for each distribution
date will be allocated to the respective classes of certificates identified in
the table below and in the order of priority set forth in that table, in each
case up to the lesser of--
o the portion of that Principal Distribution Amount that remains
unallocated; and
o the total principal balance of the particular class immediately
prior to that distribution date.
S-209
ORDER OF ALLOCATION CLASS
------------------- ---------------------
1 AM and AM-FL*
2 AJ and AJ-FL*
3 B
4 C
5 D
6 E
7 F
8 G
9 H
10 J
11 K
12 L
13 M
14 N
15 P
16 Q
17 S
18 T
____________________
* Pro rata and pari passu based on the respective principal balances
thereof. References to "AM-FL" and "AJ-FL" in the table refer to the class
AM-FL and class AJ-FL REMIC II regular interests.
In no event will the holders of any class of certificates or REMIC II
regular interests listed in the foregoing table be entitled to receive any
payments of principal until the total principal balance of the class A-1, A-2,
A-SB, A-3, A-1A certificates and the class A-2FL REMIC II regular interest and
the class A-3FL REMIC II regular interest is reduced to zero. Furthermore, in no
event will the holders of any class of certificates listed in the foregoing
table be entitled to receive any payments of principal until the total principal
balance of all other classes of certificates, if any, listed above it in the
foregoing table is reduced to zero.
Reimbursement Amounts. As discussed under "--Reductions of Certificate
Principal Balances in Connection with Realized Losses and Additional Trust Fund
Expenses" below, the total principal balance of any class of principal balance
certificates (exclusive of the class A-2FL, A-3FL, AM-FL and AJ-FL
certificates), the class A-2FL, class A-3FL, class AM-FL and class AJ-FL REMIC
II regular interests may be reduced without a corresponding payment of
principal. If that occurs with respect to any such class of principal balance
certificates or with respect to the class A-2FL REMIC II regular interest, the
class A-3FL REMIC II regular interest, the class AM-FL REMIC II regular interest
or the class AJ-FL REMIC II regular interest, then, subject to available funds
from time to time and the priority of payments described under
"--Payments--Priority of Payments" below, there may be distributed with respect
to that class of principal balance certificates or that REMIC II regular
interest, as applicable, a reimbursement of the amount of any such reduction,
without interest. References to the "loss reimbursement amount" under
"--Payments--Priority of Payments" below mean, in the case of any class of
principal balance certificates (exclusive of the class A-2FL, A-3FL, AM-FL and
AJ-FL certificates) or in the case of the class A-2FL REMIC II regular interest,
the class A-3FL REMIC II regular interest, the class AM-FL REMIC II regular
interest or the class AJ-FL REMIC II regular interest, for any distribution
date, the total amount of all previously unreimbursed reductions, if any, made
in the total principal balance of that class of principal balance certificates
or the total principal balance of that REMIC II regular interest, as applicable,
on all prior distribution dates as discussed under "--Reductions of Certificate
Principal Balances in Connection with Realized Losses and Additional Trust Fund
Expenses" below. Any such reimbursements with respect to the class A-2FL REMIC
II regular interest, the class A-3FL REMIC II regular interest, the class AM-FL
REMIC II regular interest or the class AJ-FL REMIC II regular interest, will be
deposited in the trustee's floating rate account and thereafter will be
distributed to the holders of the class A-2FL certificates, the class A-3FL
certificates, the class AM-FL certificates or the class AJ-FL certificates, as
applicable.
In limited circumstances, the total principal balance of a class of
principal balance certificates or REMIC II regular interest that was previously
reduced as described in the preceding paragraph without a corresponding payment
of principal, may be reinstated (up to the amount of the prior reduction), with
interest. Any such reinstatement of principal balance would result in a
corresponding reduction in the loss reimbursement amount with
S-210
respect to the subject class of principal balance certificates or REMIC II
regular interest. In general, such a reinstatement of principal balance on any
particular distribution date would result from any recoveries of Nonrecoverable
Advances (or interest thereon) that was reimbursed in a prior collection period
from the principal portion of general collections on the mortgage pool, which
recoveries are included in the Principal Distribution Amount for such
Distribution Date.
Priority of Payments. On each distribution date, the trustee will apply
the Available Distribution Amount for that date applicable to the related loan
group or both loan groups, to make the following payments in the following order
of priority, in each case to the extent of the remaining applicable portion of
the Available Distribution Amount:
ORDER OF RECIPIENT CLASS
PAYMENT OR CLASSES TYPE AND AMOUNT OF PAYMENT
------------ ----------------------- --------------------------------------------------------------------------
1 X* From the entire Available Distribution Amount, interest up to the total
interest payable on that class, without regard to loan groups
A-1, A-2, A-2FL(1), From the portion of the Available Distribution Amount attributable to
A-SB, A-3 and A-3FL*(2) the mortgage loans in loan group 1, interest up to the total interest
payable on those classes, pro rata, based on entitlement
A-1A* From the portion of the Available Distribution Amount attributable to
the mortgage loans in loan group 2, interest up to the total interest
payable on such class
2 A-1, A-2, A-2FL(1), Principal up to the Loan Group 1 Principal Distribution Amount (and, if
A-SB, A-3 the class A-1A certificates are retired, any remaining portion of the
and A-3FL**(2) Loan Group 2 Principal Distribution Amount), first to the class A-SB
certificates, until the total principal balance thereof is reduced to
the applicable Class A-SB Planned Principal Balance, and then to (a) the
class A-1 certificates, (b) the class A-2 certificates and the class
A-2FL REMIC II regular interest, on a pro rata basis by principal
balance, (c) the class A-SB certificates and (d) the class A-3
certificates and the class A-3FL REMIC II regular interest, on a pro
rata basis by principal balance.
A-1A** Principal up to the Loan Group 2 Principal Distribution Amount (and, if
the class A-3 and class A-3FL certificates are retired, any remaining
portion of the Loan Group 1 Principal Distribution Amount), until the
class A-1A certificates are retired
3 A-1, A-2, A-2FL(1), Reimbursement up to the loss reimbursement amounts for those classes and
A-SB, A-3, A-3FL(2) and those REMIC II regular interests, pro rata, based on entitlement,
A-1A without regard to loan groups
-------------------------------------------------------------------------------------------------------------------
4 AM and AM-FL(3) Interest up to the total interest payable on that class and that REMIC
II regular interest, on a pro rata basis, by principal balance
5 AM and AM-FL(3) Principal up to the portion of the Principal Distribution Amount
allocable to that class and that REMIC II regular interest, on a pro
rata basis, by principal balance
6 AM and AM-FL(3) Reimbursement up to the loss reimbursement amount for that class and
that REMIC II regular interest, pro rata, based on entitlement
-------------------------------------------------------------------------------------------------------------------
7 AJ and AJ-FL(4) Interest up to the total interest payable on that class and that REMIC
II regular interest, on a pro rata basis, by principal balance
8 AJ and AJ-FL(4) Principal up to the portion of the Principal Distribution Amount
allocable to that class and that REMIC II regular interest, on a pro
rata basis, by principal balance
9 AJ and AJ-FL(4) Reimbursement up to the loss reimbursement amount for that class and
that REMIC II regular interest, pro rata, based on entitlement
-------------------------------------------------------------------------------------------------------------------
10 B Interest up to the total interest payable on that class
11 B Principal up to the portion of the Principal Distribution Amount
allocable to that class
12 B Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
13 C Interest up to the total interest payable on that class
14 C Principal up to the portion of the Principal Distribution Amount
allocable to that class
15 C Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
S-211
ORDER OF RECIPIENT CLASS
PAYMENT OR CLASSES TYPE AND AMOUNT OF PAYMENT
-------------------------------------------------------------------------------------------------------------------
16 D Interest up to the total interest payable on that class
17 D Principal up to the portion of the Principal Distribution Amount
allocable to that class
18 D Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
19 E Interest up to the total interest payable on that class
20 E Principal up to the portion of the Principal Distribution Amount
allocable to that class
21 E Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
22 F Interest up to the total interest payable on that class
23 F Principal up to the portion of the Principal Distribution Amount
allocable to that class
24 F Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
25 G Interest up to the total interest payable on that class
26 G Principal up to the portion of the Principal Distribution Amount
allocable to that class
27 G Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
28 H Interest up to the total interest payable on that class
29 H Principal up to the portion of the Principal Distribution Amount
allocable to that class
30 H Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
31 J Interest up to the total interest payable on that class
32 J Principal up to the portion of the Principal Distribution Amount
allocable to that class
33 J Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
34 K Interest up to the total interest payable on that class
35 K Principal up to the portion of the Principal Distribution Amount
allocable to that class
36 K Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
37 L Interest up to the total interest payable on that class
38 L Principal up to the portion of the Principal Distribution Amount
allocable to that class
39 L Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
40 M Interest up to the total interest payable on that class
41 M Principal up to the portion of the Principal Distribution Amount
allocable to that class
42 M Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
43 N Interest up to the total interest payable on that class
44 N Principal up to the portion of the Principal Distribution Amount
allocable to that class
45 N Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
46 P Interest up to the total interest payable on that class
47 P Principal up to the portion of the Principal Distribution Amount
allocable to that class
48 P Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
49 Q Interest up to the total interest payable on that class
50 Q Principal up to the portion of the Principal Distribution Amount
allocable to that class
51 Q Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
52 S Interest up to the total interest payable on that class
53 S Principal up to the portion of the Principal Distribution Amount
allocable to that class
54 S Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
S-212
ORDER OF RECIPIENT CLASS
PAYMENT OR CLASSES TYPE AND AMOUNT OF PAYMENT
-------------------------------------------------------------------------------------------------------------------
55 T Interest up to the total interest payable on that class
56 T Principal up to the portion of the Principal Distribution Amount
allocable to that class
57 T Reimbursement up to the loss reimbursement amount for that class
-------------------------------------------------------------------------------------------------------------------
58 R-I and R-II Any remaining portion of the Available Distribution Amount
_______________________
* If the portion of the Available Distribution Amount allocable to pay
interest on any one or more of the A-1, A-2, A-SB, A-3, A-1A and X
classes, the class A-2FL REMIC II regular interest and the class A-3FL
REMIC II regular interest, as set forth in the table above, is
insufficient for that purpose, then the Available Distribution Amount will
be applied to pay interest on all those classes and those REMIC II regular
interest, pro rata based on entitlement.
** In general, no payments of principal will be made in respect of the class
A-1, A-2 or A-3 certificates or the class A-2FL REMIC II regular interest
or the class A-3FL REMIC II regular interest on any given distribution
date until the total principal balance of the class A-SB certificates is
paid down to the then applicable Class A-SB Planned Principal Balance. In
addition, no payments of principal will be made in respect of the class
A-2 certificates or the class A-2FL REMIC II regular interest until the
total principal balance of the class A-1 certificates is reduced to zero,
no payments of principal will be made in respect of the class A-SB
certificates (other than as described in the prior sentence) until the
total principal balance of the class A-2 and class A-2FL REMIC II regular
interest is reduced to zero and no payments of principal will be made in
respect of the class A-3 certificates and the class A-3FL REMIC II regular
interest until the total principal balance of the class A-SB certificates
is reduced to zero. Furthermore, for purposes of receiving distributions
of principal from the Loan Group 1 Principal Distribution Amount, the
class A-1, A-2, A-SB and A-3 certificates and the class A-2FL REMIC II
regular interest and the class A-3FL REMIC II regular interest will
evidence a prior right, relative to the class A-1A certificates, to any
available funds attributable to loan group 1; and, for purposes of
receiving distributions of principal from the Loan Group 2 Principal
Distribution Amount, the class A-1A certificates will evidence a prior
right, relative to the class A-1, A-2, A-SB and A-3 certificates and the
class A-2FL REMIC II regular interest and the class A-3FL REMIC II regular
interest, to any available funds attributable to loan group 2. However, if
any two or more of the class A-1, A-2, A-SB, A-3 and A-1A certificates and
the class A-2FL REMIC II regular interest and the class A-3FL REMIC II
regular interest are outstanding at a time when the total principal
balance of the class AM, AJ, B, C, D, E, F, G, H, J, K, L, M, N, P, Q, S
and T certificates, the class AJ-FL REMIC II regular interest and the
class AM-FL REMIC II regular interest have been reduced to zero as
described under "--Reductions to Certificate Principal Balances inConnection with Realized Losses and Additional Trust Fund Expenses" below,
payments of principal on the outstanding class A-1, A-2, A-SB, A-3 and
A-1A certificates and the class A-2FL REMIC II regular interest and the
class A-3FL REMIC II regular interest will be made on a pro rata basis in
accordance with the respective total principal balances of those classes
then outstanding, without regard to loan groups.
(1) Refers to class A-2FL REMIC II regular interest. Interest, principal and
loss reimbursement amounts in respect of the class A-2FL REMIC II regular
interest will be paid to the applicable sub-account of the trustee's
floating rate account for distribution to the holders of the class A-2FL
certificates and/or the swap counterparty on the subject distribution
date.
(2) Refers to class A-3FL REMIC II regular interest. Interest, principal and
loss reimbursement amounts in respect of the class A-3FL REMIC II regular
interest will be paid to the applicable sub-account of the trustee's
floating rate account for distribution to the holders of the class A-3FL
certificates and/or the swap counterparty on the subject distribution
date.
(3) Refers to class AM-FL REMIC II regular interest. Interest, principal and
loss reimbursement amounts in respect of the class AM-FL REMIC II regular
interest will be paid to the applicable sub-account of the trustee's
floating rate account for distribution to the holders of the class AM-FL
certificates and/or the swap counterparty on the subject distribution
date.
(4) Refers to class AJ-FL REMIC II regular interest. Interest, principal and
loss reimbursement amounts in respect of the class AJ-FL REMIC II regular
interest will be paid to the applicable sub-account of the trustee's
floating rate account for distribution to the holders of the class AJ-FL
certificates and/or the swap counterparty on the subject distribution
date.
Payments of Prepayment Premiums and Yield Maintenance Charges. If any
prepayment consideration is collected during any particular collection period
with respect to any mortgage loan, regardless of whether that prepayment
consideration is calculated as a percentage of the amount prepaid or in
accordance with a yield maintenance formula, then on the distribution date
corresponding to that collection period, the trustee will pay a portion of that
prepayment consideration to the holders of the class A-1, A-2, A-SB, A-3, A-1A,
AM, AJ, B, C, D, E, F, G, H, J and/or K certificates and/or to the holders of
the class A-2FL REMIC II regular interest, the class A-3FL REMIC II regular
interest, the class AM-FL REMIC II regular interest and/or the class AJ-FL REMIC
II regular interest (or, for so long as the class A-3 and A-1A certificates and
the class A-3FL REMIC II regular interest are outstanding, payments of principal
on that distribution date from collections on the loan group that includes the
S-213
prepaid mortgage loan), up to an amount equal to, in the case of any particular
class of those principal balance certificates or REMIC II regular interests, the
product of--
o the full amount of that prepayment consideration, net of workout
fees and principal recovery fees payable from it, multiplied by
o a fraction, which in no event may be greater than 1.0, the numerator
of which is equal to the excess, if any, of the pass-through rate
for the subject class of certificates, over the relevant discount
rate, and the denominator of which is equal to the excess, if any,
of the mortgage interest rate of the prepaid mortgage loan over the
relevant discount rate, and further multiplied by
o a fraction, the numerator of which is equal to the amount of
principal payable with respect to the subject class of certificates
or the REMIC II regular interest, as the case may be, on that
distribution date (or, for so long as the class A-3 and A-1A
certificates and the class A-3FL REMIC II regular interest are
outstanding, the amount of principal payable with respect to the
subject class of certificates, or that REMIC II regular interest, as
the case may be, on that distribution date from collections on the
loan group that includes the prepaid mortgage loan), and the
denominator of which is the Principal Distribution Amount (or, so
long as the A-3 and A-1A certificates and the class A-3FL REMIC II
regular interest are outstanding, the Loan Group 1 Principal
Distribution Amount or the Loan Group 2 Principal Distribution
Amount, as applicable, based on which loan group includes the
prepaid mortgage loan) for that distribution date.
Notwithstanding the foregoing, for so long as the related swap agreement
is in effect and there is no continuing payment default thereunder, any
prepayment premium or yield maintenance charge allocable to the class A-2FL,
class A-3FL, class AM-FL and class AJ-FL REMIC II regular interests will be
payable to the respective swap counterparty.
The discount rate applicable to any such class of principal balance
certificates, the class A-2FL REMIC II regular interest, the class A-3FL REMIC
II regular interest, the class AM-FL REMIC II regular interest or the class
AJ-FL REMIC II regular interest, as the case may be, with respect to any prepaid
mortgage loan will be equal to the discount rate stated in the relevant loan
documents, or if none is stated, will equal the yield, when compounded monthly,
on the U.S. Treasury issue, primary issue, with a maturity date closest to the
maturity date or anticipated repayment date, as applicable, for the prepaid
mortgage loan. In the event that there are two or more U.S. Treasury issues--
o with the same coupon, the issue with the lowest yield will be
selected; or
o with maturity dates equally close to the maturity date or
anticipated repayment date, as applicable, for the prepaid mortgage
loan, the issue with the earliest maturity date will be selected.
The calculation of the discount rate with respect to certain mortgage
loans may vary from the above description.
Following any payment of prepayment consideration as described above, the
trustee will pay any remaining portion of the prepayment consideration, net of
workout fees and principal recovery fees payable from it, to the holders of the
class X certificates.
NOTWITHSTANDING THE FOREGOING, ALL PREPAYMENT PREMIUMS AND YIELD
MAINTENANCE CHARGES PAYABLE AS DESCRIBED ABOVE, WILL BE REDUCED, WITH RESPECT TO
SPECIALLY SERVICED MORTGAGE LOANS, BY AN AMOUNT EQUAL TO ADDITIONAL TRUST FUND
EXPENSES AND REALIZED LOSSES PREVIOUSLY ALLOCATED TO ANY CLASS OF CERTIFICATES.
Neither we nor the underwriters make any representation as to--
o the enforceability of the provision of any promissory note
evidencing one of the mortgage loans or any other loan document
requiring the payment of a prepayment premium or yield maintenance
charge; or
S-214
o the collectability of any prepayment premium or yield maintenance
charge.
See "Description of the Mortgage Pool--Terms and Conditions of theMortgage Loans--Prepayment Provisions" and "--Other Prepayment Provisions;Mortgage Loans Which May Require Principal Paydowns" in this prospectus
supplement.
Payments of Additional Interest. On each distribution date, any Additional
Interest collected on the Converting Loans during the related collection period
will be distributed to the holders of the class Y certificates, and any
Additional Interest collected on the ARD Loans during the related collection
period will be distributed to the holders of the class Z certificates.
Treatment of REO Properties. Notwithstanding that any mortgaged real
property may be acquired as part of the trust assets through foreclosure, deed
in lieu of foreclosure or otherwise, the related mortgage loan will be treated
as having remained outstanding, until the REO Property is liquidated, for
purposes of determining--
o payments on the certificates (exclusive of the class A-2FL, A-3FL,
AM-FL and AJ-FL certificates), the class A-2FL, class A-3FL, class
AM-FL and class AJ-FL REMIC II regular interests;
o allocations of Realized Losses and Additional Trust Fund Expenses to
the certificates (exclusive of the class A-2FL, A-3FL, AM-FL and
AJ-FL certificates), the class A-2FL, class A-3FL, class AM-FL and
class AJ-FL REMIC II regular interests; and
o the amount of all fees payable to the applicable master servicer,
the special servicer and the trustee under the pooling and servicing
agreement.
In connection with the foregoing, that mortgage loan deemed to remain
outstanding will be taken into account when determining the Weighted Average Net
Mortgage Rate and the Principal Distribution Amount for each distribution date.
Operating revenues and other proceeds derived from an REO Property
administered under the pooling and servicing agreement will be applied--
o first, to pay or reimburse the applicable master servicer, the
special servicer and/or the trustee for the payment of some of the
costs and expenses incurred in connection with the operation and
disposition of the REO Property; and
o second, as collections of principal, interest and other amounts due
on the related mortgage loan (or, if the REO Property relates
thereto, on a Loan Combination).
To the extent described under "--Advances of Delinquent Monthly DebtService Payments and Reimbursement of Advances" below, the applicable master
servicer and the trustee will be required to advance delinquent monthly debt
service payments with respect to each mortgage loan as to which the
corresponding mortgaged real property has become an REO Property, in all cases
as if the mortgage loan had remained outstanding.
REDUCTIONS TO CERTIFICATE PRINCIPAL BALANCES IN CONNECTION WITH REALIZED LOSSES
AND ADDITIONAL TRUST FUND EXPENSES
As a result of Realized Losses and Additional Trust Fund Expenses, the
total Stated Principal Balance of, together with any Unliquidated Advances with
respect to, the mortgage pool may decline below the total principal balance of
the principal balance certificates (exclusive of the class A-2FL, A-3FL, AM-FL
and AJ-FL certificates), the class A-2FL, class A-3FL, class AM-FL and class
AJ-FL REMIC II regular interests.
On each distribution date, following the payments to be made to the
certificateholders (exclusive of the class A-2FL, A-3FL, AM-FL and AJ-FL
certificates) and with respect to the class A-2FL, class A-3FL, class AM-FL and
class AJ-FL REMIC II regular interests on that distribution date, the trustee
will be required to allocate to
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the respective classes of the principal balance certificates (exclusive of the
class A-2FL, A-3FL, AM-FL and AJ-FL certificates), the class A-2FL, class A-3FL,
class AM-FL and class AJ-FL REMIC II regular interests, sequentially in the
order described in the following table and, in each case, up to the total
principal balance of the subject class, the aggregate of all Realized Losses and
Additional Trust Fund Expenses that were incurred at any time following the
cut-off date through the end of the related collection period and were not
previously allocated on any prior distribution date, but only to the extent that
the total principal balance of the principal balance certificates following all
payments made to certificateholders (exclusive of the class A-2FL, A-3FL, AM-FL
and AJ-FL certificates) and with respect to the class A-2FL, class A-3FL, class
AM-FL and class AJ-FL REMIC II regular interests on that distribution date
exceeds the total Stated Principal Balance of, together with any Unliquidated
Advances with respect to, the mortgage pool that will be outstanding immediately
following that distribution date.
ORDER OF ALLOCATION CLASS
------------------- --------------------------
1 T
2 S
3 Q
4 P
5 N
6 M
7 L
8 K
9 J
10 H
11 G
12 F
13 E
14 D
15 C
16 B
17 AJ and AJ-FL*
18 AM and AM-FL*
19 A-1, A-2, A-2FL
A-SB, A-3, A-3FL and A-1A*
_________________
* Pro rata and pari passu based on the respective total principal balances
thereof.
The reference in the foregoing table to "A-2FL" means the class A-2FL
REMIC II regular interest. However, any reduction in the total principal balance
of the class A-2FL REMIC II regular interest, as described above, will result in
a dollar-for-dollar reduction in the total principal balance of the class A-2FL
certificates. The reference in the foregoing table to "A-3FL" means the class
A-3FL REMIC II regular interest. However, any reduction in the total principal
balance of the class A-3FL REMIC II regular interest, as described above, will
result in a dollar-for-dollar reduction in the total principal balance of the
class A-3FL certificates. The reference in the foregoing table to "AM-FL" means
the class AM-FL REMIC II regular interest. However, any reduction in the total
principal balance of the class AM-FL REMIC II regular interest, as described
above, will result in a dollar-for-dollar reduction in the total principal
balance of the class AM-FL certificates. The reference in the foregoing table to
"AJ-FL" means the class AJ-FL REMIC II regular interest. However, any reduction
in the total principal balance of the class AJ-FL REMIC II regular interest, as
described above, will result in a dollar-for-dollar reduction in the total
principal balance of the class AJ-FL certificates.
All Realized Losses and Additional Trust Fund Expenses, if any, allocated
to a class of principal balance certificates or REMIC II regular interest will
be made by reducing the total principal balance of such class by the amount so
allocated.
In no event will the total principal balance of any class of principal
balance certificates or REMIC II regular interest identified in the foregoing
table be reduced until the total principal balance of all other classes of
principal balance certificates or REMIC II regular interest listed above it in
the table have been reduced to zero.
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A Realized Loss can result from the liquidation of a defaulted mortgage
loan or any related REO Property for less than the full amount due thereunder.
In addition, if any portion of the debt due under any of the mortgage loans is
forgiven, whether in connection with a modification, waiver or amendment granted
or agreed to by the applicable master servicer or the special servicer or in
connection with the bankruptcy, insolvency or similar proceeding involving the
related borrower, the amount forgiven, other than Penalty Interest and
Additional Interest, also will be treated as a Realized Loss. Furthermore, any
Nonrecoverable Advance reimbursed from principal collections will constitute a
Realized Loss.
Some examples of Additional Trust Fund Expenses are:
o any special servicing fees, workout fees and principal recovery fees
paid to the special servicer; which fees are not covered out of late
payment charges and Penalty Interest actually collected on the
related mortgage loan;
o any interest paid to the applicable master servicer, the special
servicer and/or the trustee with respect to unreimbursed Advances,
which interest payment is not covered out of late payment charges
and Penalty Interest actually collected on the related mortgage
loan;
o any amounts payable to the special servicer in connection with
inspections of mortgaged real properties, which amounts are not
covered out of late payment charges and Penalty Interest actually
collected on the related mortgage loan;
o the cost of various opinions of counsel required or permitted to be
obtained in connection with the servicing of the mortgage loans and
the administration of the other trust assets;
o any unanticipated, non-mortgage loan specific expenses of the trust,
including--
1. any reimbursements and indemnifications to the trustee and/or
various related persons described under "Description of theGoverning Documents--Matters Regarding the Trustee" in the
accompanying base prospectus;
2. any reimbursements and indemnification to either master
servicer, the special servicer, us and/or various related
persons described under "Description of the GoverningDocuments--Matters Regarding the Master Servicer, the SpecialServicer, the Manager and Us" in the accompanying base
prospectus; and
3. any federal, state and local taxes, and tax-related expenses,
payable out of the trust assets, as described under "FederalIncome Tax Consequences--Taxation of Owners of REMIC ResidualCertificates--Prohibited Transactions Tax and Other Taxes" in
the accompanying base prospectus; and
o any amount (other than normal monthly payments) specifically payable
or reimbursable to the holder of a Non-Trust Loan by the trust, in
its capacity as holder of the related mortgage loan in the trust
that is part of the related Loan Combination, pursuant to the
related Loan Combination Intercreditor Agreement; and
o any amounts expended on behalf of the trust to remediate an adverse
environmental condition at any mortgaged real property securing a
defaulted mortgage loan as described under "Servicing of theMortgage Loans--Realization Upon Defaulted Mortgage Loans" in this
prospectus supplement.
From time to time, the Principal Distribution Amount may include items
that represent a recovery of Nonrecoverable Advances (or interest thereon) that
were previously reimbursed out of the principal portion of general collections
on the mortgage pool. In such circumstances, it is possible that the total
Stated Principal Balance of, together with any Unliquidated Advances with
respect to, the mortgage pool may exceed the total principal balance of the
principal balance certificates. If and to the extent that any such excess exists
as a result of the inclusion of such items in the Principal Distribution Amount
(and, accordingly, the distribution of such items as
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principal with respect to the principal balance certificates), the total
principal balances of one or more classes that had previously been reduced as
described above in this "--Reductions to Certificate Principal Balances inConnection with Realized Losses and Additional Trust Fund Expenses" section may
be increased (in each case, up to the amount of any such prior reduction). Any
such increase would be made among the respective classes of principal balance
certificates in reverse order that such reductions had been made (i.e., such
increases would be made in descending order of seniority); provided that such
increases may not result in the total principal balance of the principal balance
certificates being in excess of the total Stated Principal Balance of, together
with any Unliquidated Advances with respect to, the mortgage pool. Any such
increases will also be accompanied by a reinstatement of the past due interest
that would otherwise have accrued if the reinstated principal amounts had never
been written off.
ADVANCES OF DELINQUENT MONTHLY DEBT SERVICE PAYMENTS AND REIMBURSEMENT OF
ADVANCES
Each master servicer will be required to make, for each distribution date,
a total amount of P&I advances generally equal to all monthly debt service
payments (other than balloon payments), and assumed monthly debt service
payments (including with respect to balloon mortgage loans and mortgage loans as
to which the related mortgaged real properties have become REO Properties), in
each case net of related master servicing fees (and, in the case of the
Georgia-Alabama Retail Portfolio Trust Mortgage Loan, the servicing fee of the
applicable master servicer under the Other Securitization), that:
o were due or deemed due, as the case may be, with respect to the
mortgage loans serviced by that master servicer during the related
collection period; and
o were not paid by or on behalf of the respective borrowers or
otherwise collected as of the close of business on the related
determination date.
The master servicers will not make P&I advances prior to the related P&I
advance date, which is the business day immediately preceding each distribution
date. Notwithstanding the foregoing, if it is determined that an Appraisal
Reduction Amount exists with respect to any mortgage loan, then the applicable
master servicer will reduce the interest portion, but not the principal portion,
of each P&I advance that it must make with respect to that mortgage loan during
the period that the Appraisal Reduction Amount exists. The interest portion of
any P&I advance required to be made with respect to any mortgage loan as to
which there exists an Appraisal Reduction Amount, will equal the product of--
o the amount of the interest portion of the P&I advance for that
mortgage loan for the related distribution date without regard to
this or the prior sentence; and
o a fraction, expressed as a percentage, the numerator of which is
equal to the Stated Principal Balance of that mortgage loan
immediately prior to the related distribution date, net of the
related Appraisal Reduction Amount, if any, and the denominator of
which is equal to the Stated Principal Balance of that mortgage loan
immediately prior to the related distribution date.
In the case of any A-Note Trust Mortgage Loan, any reduction in the
interest portion of P&I advances to be made with respect to that mortgage loan,
as contemplated by the prior paragraph, will be based on that portion of any
Appraisal Reduction Amount with respect to the related Loan Combination that is
allocable to the subject A-Note Trust Mortgage Loan. Each Loan Combination will
be treated as single mortgage loan for purposes of calculating an Appraisal
Reduction Amount. Any Appraisal Reduction Amount with respect to a Loan
Combination will be allocated first to the related B-Note Trust Loan and B-Note
Non-Trust Loan, pro rata (if applicable), in each case, up to the outstanding
principal balances thereof, and then to the applicable A-Note Trust Mortgage
Loan and A-note non-trust mortgage loan, pro rata (if applicable). In the case
of the George-Alabama Retail Portfolio Trust Mortgage Loan, any Appraisal
Reduction Amount will be calculated in accordance with, and based on an
appraisal performed or obtained by the Other Master Servicer or the Other
Special Servicer pursuant to, the Other Pooling and Servicing Agreement.
With respect to any distribution date, the applicable master servicer will
be required to make P&I advances either out of its own funds or, subject to the
replacement as and to the extent provided in the pooling and servicing
agreement, funds held in its collection account that are not required to be paid
on the certificates (exclusive of the
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class A-2FL, A-3FL, AM-FL and AJ-FL certificates) or with respect to the class
A-2FL REMIC II regular interest, the class A-3FL REMIC II regular interest, the
class AM-FL REMIC II regular interest or the class AJ-FL REMIC II regular
interest on that distribution date (or a combination of both methods).
The trustee will be required to make any P&I advance that the applicable
master servicer fails to make with respect to a mortgage loan. See "--TheTrustee" below.
The master servicers and the trustee will each be entitled to recover any
P&I advance made by it, out of its own funds, from collections on the mortgage
loan as to which the Advance was made out of late collections, liquidation
proceeds or insurance and condemnation proceeds. None of the master servicers or
the trustee will be obligated to make any P&I advance that, in its judgment or
in the judgment of the special servicer, would not ultimately be recoverable,
together with interest accrued on that Advance, out of collections on the
related mortgage loan. In addition, the special servicer may also determine that
any P&I advance made or proposed to be made by the applicable master servicer or
the trustee is not recoverable, together with interest accrued on that Advance,
from proceeds of the related mortgage loan, and the applicable master servicer
and the trustee will be required to act in accordance with such determination.
If the applicable master servicer or the trustee makes any P&I advance that it
or the special servicer subsequently determines, in its judgment, will not be
recoverable, together with interest accrued on that Advance, out of collections
on the related mortgage loan, it may obtain reimbursement for that Advance
together with interest accrued on the Advance as described in the next
paragraph, out of general collections on the mortgage loans and any REO
Properties on deposit in the applicable master servicer's collection account (or
if funds are insufficient in such account, from the other master servicer's
collection account) from time to time subject to the limitations and
requirements described below. See also "Description of the GoverningDocuments--Advances" in the accompanying base prospectus and "Servicing of theMortgage Loans--Collection Account" in this prospectus supplement.
The master servicers and the trustee will each be entitled to receive
interest on P&I advances made thereby out of its own funds; provided, however,
that no interest will accrue on any P&I advance made with respect to a mortgage
loan if the related monthly debt service payment is received on its due date or
prior to the expiration of any applicable grace period. That interest will
accrue on the amount of each P&I advance, for so long as that Advance is
outstanding, at an annual rate equal to the prime rate as published in the
"Money Rates" section of The Wall Street Journal, as that prime rate may change
from time to time. Interest accrued with respect to any P&I advance will be
payable in the collection period in which that Advance is reimbursed--
o first, out of Penalty Interest and late payment charges collected on
the related mortgage loan during that collection period; and
o second, if and to the extent that the Penalty Interest and late
charges referred to in clause first are insufficient to cover the
advance interest, out of any amounts then on deposit in the
applicable master servicer's collection account (or if funds are
insufficient in such account, from the other master servicer's
collection account) subject to the limitations for reimbursement of
the P&I advances described below.
A monthly debt service payment will be assumed to be due with respect to:
o each balloon mortgage loan that is delinquent in respect of its
balloon payment on its stated maturity date, provided that such
mortgage loan has not been paid in full and no other liquidation
event has occurred in respect thereof before such maturity date; and
o each mortgage loan as to which the corresponding mortgaged real
property has become an REO Property.
The assumed monthly debt service payment deemed due on any mortgage loan
described in the first bullet of the prior paragraph that is delinquent as to
its balloon payment will equal, for its stated maturity date and for each
successive due date that it remains outstanding and part of the trust, the
monthly debt service payment that would have been due on the mortgage loan on
the relevant date if the related balloon payment had not come due and the
mortgage loan had, instead, continued to amortize and accrue interest according
to its terms in effect prior to that stated maturity date. The assumed monthly
debt service payment deemed due on any mortgage loan described in the
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second bullet of the prior paragraph as to which the related mortgaged real
property has become an REO Property, will equal, for each due date that the REO
Property remains part of the trust, the monthly debt service payment or, in the
case of a mortgage loan delinquent with respect to its balloon payment, the
assumed monthly debt service payment that would have been due or deemed due on
that mortgage loan had it remained outstanding. Assumed monthly debt service
payments for the ARD Loans do not include Additional Interest.
None of the master servicers or the trustee will be required to make any
P&I advance with respect to a Non-Trust Loan.
Upon a determination that a previously made Advance, whether it be a
servicing advance or P&I advance, is not recoverable, together with interest
accrued on that Advance, out of collections on the related mortgage loan, the
applicable master servicer, the special servicer or the trustee, as applicable,
will have the right to be reimbursed for such Advance and interest accrued on
such Advance from amounts on deposit in the applicable master servicer's
collection account (or if funds are insufficient in such account, from the other
master servicer's collection account) that constitute principal collections
received on all of the mortgage loans serviced by it during the related
collection period; provided, however, that if amounts of principal on deposit in
the collection accounts are not sufficient to fully reimburse such party, the
party entitled to the reimbursement may elect at its sole option to be
reimbursed at that time from general collections in its collection account or to
defer the portion of the reimbursement of that Advance equal to the amount in
excess of the principal on deposit in the collection account, in which case
interest will continue to accrue on the portion of the Advance that remains
outstanding. Further, any party to the pooling and servicing agreement that has
deferred the reimbursement of an Advance or a portion of an Advance may elect at
any time to reimburse itself for the deferred amounts from general collections
(including amounts otherwise distributable as interest to certificateholders) on
the mortgage loans together with interest thereon. In either case, the
reimbursement will be made first from principal received on the mortgage loans
serviced by the applicable master servicer during the collection period in which
the reimbursement is made, prior to reimbursement from other collections
received during that collection period. In that regard, in the case of
reimbursements from principal, such reimbursement will be made from principal
received on the mortgage loans included in the loan group to which the mortgage
loan in respect of which the Advance was made belongs and, if those collections
are insufficient, then from principal received on the mortgage loans in the
other loan group. Any Workout-Delayed Reimbursement Amount (which includes
interest on the subject Advance) will be reimbursable (together with advance
interest thereon) to the applicable master servicer, the special servicer or the
trustee, as applicable, in full, only from amounts on deposit in the applicable
master servicer's collection account that constitute principal received on all
of the mortgage loans being serviced by it during the related collection period
(net of amounts necessary to reimburse for Nonrecoverable Advances and pay
interest thereon) (or if funds are insufficient in such account, from the other
master servicer's collection account) and, to the extent that the principal
collections during that collection period are not sufficient to reimburse such
Workout-Delayed Reimbursement Amount, will be reimbursable (with interest
continuing to accrue thereon) from collections of principal on the mortgage
loans serviced by the applicable master servicer during subsequent collection
periods. In that regard, such reimbursement will be made from principal received
on the mortgage loans included in the loan group to which the mortgage loan in
respect of which the Advance was made belongs and, if those collections are
insufficient, then from principal received on the mortgage loans in the other
loan group. Any reimbursement for Nonrecoverable Advances and interest on
Nonrecoverable Advances should result in a Realized Loss which will be allocated
in accordance with the loss allocation rules described under "--Reductions toCertificate Principal Balances in Connection with Realized Losses and AdditionalTrust Fund Expenses" above. The fact that a decision to recover such
Nonrecoverable Advances over time, or not to do so, benefits some classes of
certificateholders to the detriment of other classes will not, with respect to
the applicable master servicer or special servicer, constitute a violation of
the Servicing Standard or any contractual duty under the pooling and servicing
agreement and/or, with respect to the trustee, constitute a violation of any
fiduciary duty to certificateholders or contractual duty under the pooling and
servicing agreement.
None of the parties to the pooling and servicing agreement will be
required to advance any amount required to be paid by the swap counterparty
under any of the swap contracts in the event that the swap counterparty fails to
make such required payment.
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REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Reports by the Trustee. Based solely on information provided in monthly
reports prepared by the master servicers and the special servicer and delivered
to the trustee, the trustee will be required to prepare and make available
electronically via its website at www.etrustee.net or, upon written request,
provide by first class mail, on each distribution date to each registered holder
of a certificate, a trustee report substantially in the form of, and containing
the information set forth in, Annex D to this prospectus supplement. The trustee
report for each distribution date will detail the distributions on the
certificates on that distribution date and the performance, both in total and
individually to the extent available, of the mortgage loans and the related
mortgaged real properties, including the following items of information:
o the applicable record date, interest accrual period, determination
date and distribution date;
o the amount of the distribution on such distribution date to the
holders of each class of principal balance certificates, the class
A-2FL, class A-3FL, class AM-FL and class AJ-FL REMIC II regular
interests, in reduction of the total principal balance thereof;
o the amount of the distribution on such distribution date to the
holders of each class of interest-bearing certificates, the class
A-2FL, class A-3FL, class AM-FL and class AJ-FL REMIC II regular
interests, allocable to interest;
o the amount of the distribution on such distribution date to the
holders of each class of interest-bearing certificates allocable to
prepayment premiums and/or yield maintenance charges;
o the amount of the distribution on such distribution date to the
holders of each class of principal balance certificates in
reimbursement of previously allocated Realized Losses and Additional
Trust Fund Expenses;
o the Available Distribution Amount for such distribution date, and
related information regarding cash flows received for distributions,
fees and expenses;
o payments made to and by the swap counterparty with respect to the
class A-2FL, class A-3FL, class AM-FL and class AJ-FL certificates;
o (a) the aggregate amount of P&I advances made with respect to the
entire mortgage pool for such distribution date pursuant to the
pooling and servicing agreement and the aggregate amount of
unreimbursed P&I advances with respect to the entire mortgage pool
that had been outstanding at the close of business on the related
determination date and the aggregate amount of interest accrued and
payable to the master servicers or the trustee in respect of such
unreimbursed P&I advances as of the close of business on the related
Determination Date, (b) the aggregate amount of servicing advances
with respect to the entire mortgage pool as of the close of business
on the related determination date and (c) the aggregate amount of
all advances with respect to the entire mortgage pool as of the
close of business on the related determination date that are
nonrecoverable on a loan specific basis;
o the aggregate unpaid principal balance of the mortgage pool
outstanding as of the close of business on the related determination
date;
o the aggregate Stated Principal Balance of the mortgage pool
outstanding immediately before and immediately after such
distribution date;
o the number, aggregate principal balance, weighted average remaining
term to maturity and weighted average mortgage interest rate of the
mortgage loans as of the close of business on the related
determination date;
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o the number, aggregate unpaid principal balance (as of the close of
business on the related Determination Date) and aggregate Stated
Principal Balance (immediately after such distribution date) of the
mortgage loans (a) delinquent 30-59 days, (b) delinquent 60-89 days,
(c) delinquent more than 89 days, (d) as to which foreclosure
proceedings have been commenced, and (e) to the actual knowledge of
either master servicer or special servicer, in bankruptcy
proceedings;
o as to each mortgage loan referred to in the preceding bullet above,
(a) the loan number thereof, (b) the Stated Principal Balance
thereof immediately following such distribution date, and (c) a
brief description of any executed loan modification;
o with respect to any mortgage loan that was liquidated during the
related collection period (other than by reason of a payment in
full), (a) the loan number thereof, (b) the aggregate of all
liquidation proceeds and other amounts received in connection with
such liquidation (separately identifying the portion thereof
allocable to distributions on the certificates), and (c) the amount
of any Realized Loss in connection with such liquidation;
o with respect to any REO Property included in the trust fund that was
liquidated during the related collection period, (a) the loan number
of the related mortgage loan, (b) the aggregate of all liquidation
proceeds and other amounts received in connection with such
liquidation (separately identifying the portion thereof allocable to
distributions on the certificates), and (c) the amount of any
Realized Loss in respect of the related mortgage loan in connection
with such liquidation;
o the amount of interest accrued and the amount of interest payable in
respect of each class of interest-bearing certificates for such
distribution date;
o any unpaid interest in respect of each class of interest-bearing
certificates after giving effect to the distributions made on such
distribution date;
o the pass-through rate for each class of interest-bearing
certificates for such distribution date;
o the Principal Distribution Amount, separately identifying the
respective components thereof (and, in the case of any voluntary
principal prepayment or other unscheduled collection of principal
received during the related collection period, the loan number for
the related mortgage loan and the amount of such prepayment or other
collection of principal);
o the aggregate of all Realized Losses incurred during the related
collection period and all Additional Trust Fund Expenses incurred
during the related collection period;
o the aggregate of all Realized Losses and Additional Trust Fund
Expenses that were allocated on such distribution date;
o the total principal balance or notional amount, as applicable, of
each class of interest-bearing certificates outstanding immediately
before and immediately after such distribution date, separately
identifying any reduction therein due to the allocation of Realized
Losses and Additional Trust Fund Expenses on such distribution date;
o the certificate factor for each class of interest-bearing
certificates immediately following such distribution date;
o the aggregate amount of interest on P&I advances in respect of the
mortgage pool paid to the master servicers and the trustee during
the related collection period in accordance with the pooling and
servicing agreement;
o the aggregate amount of interest on servicing advances in respect of
the mortgage pool paid to the master servicers, the special servicer
and the trustee during the related collection period in accordance
with the pooling and servicing agreement;
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o the aggregate amount of servicing compensation paid to the master
servicers and the special servicer during the related collection
period;
o information regarding any Appraisal Reduction Amount existing with
respect to any mortgage loan as of the related determination date;
o the original and then current credit support levels for each class
of interest-bearing certificates;
o the original and then current ratings known to the trustee for each
class of interest-bearing certificates;
o the aggregate amount of prepayment premiums and yield maintenance
charges collected during the related collection period;
o the value of any REO Property included in the trust fund as of the
end of the related determination date for such distribution date,
based on the most recent appraisal or valuation;
o the amounts, if any, actually distributed with respect to the class
Y certificates, the class Z certificates, the class R-I certificates
and the class R-II certificates, respectively, on such distribution
date; and
o any material information known to the trustee regarding any material
breaches of representations and warranties of the respective
mortgage loan sellers with respect to the mortgage loans and any
events of default under the pooling and servicing agreement.
Recipients will be deemed to have agreed to keep the information contained
in any trustee report confidential to the extent such information is not
publicly available.
The special servicer is required to deliver to the master servicers
monthly, beginning in September, 2007, a CMSA special servicer loan file that
contains the information called for in, or that will enable the master servicers
to produce, the CMSA reports required to be delivered by the master servicers to
the trustee as described below, in each case with respect to all specially
serviced mortgage loans and the REO Properties.
Each master servicer is required to deliver to the trustee monthly,
beginning in September, 2007, the CMSA loan periodic update file with respect to
the subject distribution date.
Monthly, beginning in October, 2007, each master servicer must deliver to
the trustee a copy of each of the following reports relating to the mortgage
loans and, if applicable, any REO Properties:
o a CMSA comparative financial status report;
o a CMSA delinquent loan status report;
o a CMSA historical loan modification and corrected mortgage loan
report;
o a CMSA REO status report;
o a CMSA loan level reserve/LOC report;
o a CMSA advance recovery report;
o a CMSA servicer watchlist;
o a CMSA property file;
o a CMSA loan set-up file; and
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o a CMSA financial file.
These reports will provide required information as of the related
determination date and will be in an electronic format reasonably acceptable to
both the trustee and each of the master servicers.
In addition, each master servicer will be required to deliver to the
controlling class representative any Note B Loan Noteholder and upon request,
the trustee, the following reports required to be prepared and maintained by it
and/or the special servicer:
o with respect to any mortgaged real property or REO Property, a CMSA
operating statement analysis report; and
o with respect to any mortgaged real property or REO Property, a CMSA
NOI adjustment worksheet.
Absent manifest error of which it has actual knowledge, none of the master
servicers or the special servicer will be responsible for the accuracy or
completeness of any information supplied to it by a borrower or a third party
that is included in reports or other information provided by or on behalf of a
master servicer or the special servicer, as the case may be. None of the
trustee, the master servicers and the special servicer will make any
representations or warranties as to the accuracy or completeness of, and the
trustee, the master servicers and the special servicer will disclaim
responsibility for, any information made available by the trustee, the master
servicers or the special servicer, as the case may be, for which it is not the
original source.
The reports identified in the preceding paragraphs as CMSA reports will be
in the forms prescribed in the standard Commercial Mortgage Securities
Association investor reporting package or otherwise approved by the Commercial
Mortgage Securities Association. Current forms of these reports are available at
the Commercial Mortgage Securities Association's internet website, located at
www.cmbs.org.
Information Available From Trustee. The trustee will, and the master
servicers may, but are not required to, make available each month via their
respective internet websites to any interested party (i) the trustee report,
(ii) the pooling and servicing agreement and (iii) the final prospectus
supplement for the offered certificates and the accompanying base prospectus. In
addition, the trustee will make available each month, on each distribution date,
the Unrestricted Servicer Reports, the CMSA loan periodic update file, the CMSA
loan setup file, the CMSA bond level file, and the CMSA collateral summary file
to any interested party on its internet website. The trustee will also make
available each month, to the extent received, on each distribution date, (i) the
Restricted Servicer Reports and (ii) the CMSA property file, to any holder of a
certificate, any certificate owner or any prospective transferee of a
certificate or interest therein that provides the trustee with certain required
certifications, via the trustee's internet website initially located at
www.etrustee.net with the use of a password (or other comparable restricted
access mechanism) provided by the trustee. Assistance with the trustee's website
can be obtained by calling: (714) 259-6253.
The trustee will make no representations or warranties as to the accuracy
or completeness of, and may disclaim responsibility for, any information made
available by the trustee for which it is not the original source.
The trustee and the master servicers may require registration and the
acceptance of a disclaimer in connection with providing access to their
respective internet websites. The trustee and the master servicers will not be
liable for the dissemination of information made in accordance with the pooling
and servicing agreement.
Availability of Exchange Act Reports. The annual reports on Form 10-K, the
distribution reports on Form 10-D, the current reports on Form 8-K and
amendments to those reports filed or furnished with respect to the trust
pursuant to section 13(a) or 15(d) of the Exchange Act will be made available on
the website of the trustee as soon as reasonably practicable after such material
is electronically filed with, or furnished to, the SEC.
Book-Entry Certificates. If you hold your offered certificates in
book-entry form through DTC, you may obtain direct access to the monthly reports
of the trustee as if you were a certificateholder, provided that you deliver a
written certification to the trustee confirming your beneficial ownership in the
offered certificates. Otherwise, until definitive certificates are issued with
respect to your offered certificates, the information contained in those
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monthly reports will be available to you only to the extent that it is made
available through DTC and the DTC participants or is available on the trustee's
internet website. Conveyance of notices and other communications by DTC to the
DTC participants, and by the DTC participants to beneficial owners of the
offered certificates, will be governed by arrangements among them, subject to
any statutory or regulatory requirements as may be in effect from time to time.
We, the master servicers, the special servicer, the trustee, the trustee and the
certificate registrar are required to recognize as certificateholders only those
persons in whose names the certificates are registered on the books and records
of the certificate registrar.
Other Information. The pooling and servicing agreement will obligate the
master servicers (with respect to the items listed in clauses 1, 2, 3, 4, 5, 6,
8 and 9 below, to the extent those items are in its possession), the special
servicer (with respect to the items in clauses 4, 5, 6, 7, 8 and 9 below, to the
extent those items are in its possession), the trustee or the trustee, as
applicable (with respect to the items in clauses 1 through 10 below, in the case
of the trustee, and clause 3 below, in the case of the trustee, to the extent
those items are in their respective possessions), to make available at their
respective offices, during normal business hours, upon 10 days' advance written
notice, for review by any holder or beneficial owner of an offered certificate
or any person identified to the trustee as a prospective transferee of an
offered certificate or any interest in that offered certificate, originals or
copies of, among other things, the following items:
1. the pooling and servicing agreement, including exhibits, and
any amendments to the pooling and servicing agreement;
2. all trustee reports and monthly reports of the master
servicers delivered, or otherwise electronically made
available, to certificateholders since the date of initial
issuance of the offered certificates;
3. all officer's certificates delivered to the trustee and the
trustee by the master servicers and/or the special servicer
since the date of initial issuance of the certificates, as
described under "Servicing of the Mortgage Loans--Evidence asto Compliance" in this prospectus supplement;
4. all accountants' reports delivered to the trustee with respect
to the master servicers and/or the special servicer since the
date of initial issuance of the offered certificates, as
described under "Servicing of the Mortgage Loans--Evidence asto Compliance" in this prospectus supplement;
5. the most recent inspection report with respect to each
mortgaged real property for a mortgage loan prepared by or on
behalf of the applicable master servicer and delivered to the
trustee as described under "Servicing of the MortgageLoans--Inspections; Collection of Operating Information" in
this prospectus supplement and any environmental assessment
prepared as described under "Realization Upon DefaultedMortgage Loans--Foreclosure and Similar Proceedings" in this
prospectus supplement;
6. the most recent annual operating statement and rent roll for
each mortgaged real property for a mortgage loan and financial
statements of the related borrower collected by or on behalf
of the master servicers as described under "Servicing of theMortgage Loans--Inspections; Collection of OperatingInformation" in this prospectus supplement;
7. all modifications, waivers and amendments of the mortgage
loans that are to be added to the mortgage files from time to
time and any asset status report prepared by the special
servicer;
8. the servicing file relating to each mortgage loan;
9. any and all officer's certificates and other evidence
delivered by the master servicers or the special servicer, as
the case may be, to support its determination that any advance
was, or if made, would be, a nonrecoverable advance; and
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10. all reports filed with the SEC with respect to the trust
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended.
Copies of the foregoing items will be available from the trustee, the
master servicers or the special servicer, as applicable, upon request. However,
except in the case of the items described in item 10 above, the trustee, the
master servicers and the special servicer, as applicable, will be permitted to
require payment of a sum sufficient to cover the reasonable costs and expenses
of providing the copies.
In connection with providing access to or copies of the items described
above, the trustee, the master servicers or the special servicer, as applicable,
may require:
o in the case of a registered holder of an offered certificate or a
beneficial owner of an offered certificate held in book-entry form,
a written confirmation executed by the requesting person or entity,
in a form reasonably acceptable to the trustee, the master servicers
or the special servicer, as applicable, generally to the effect that
the person or entity is a beneficial owner of offered certificates
and will keep the information confidential; and
o in the case of a prospective purchaser of an offered certificate or
any interest in that offered certificate, confirmation executed by
the requesting person or entity, in a form reasonably acceptable to
the trustee, the master servicers or the special servicer, as
applicable, generally to the effect that the person or entity is a
prospective purchaser of offered certificates or an interest in
offered certificates, is requesting the information for use in
evaluating a possible investment in the offered certificates and
will otherwise keep the information confidential.
The certifications referred to in the prior paragraph may include an
indemnity from the certifying party for a breach. Registered holders of the
offered certificates will be deemed to have agreed to keep the information
described above confidential by the acceptance of their certificates.
VOTING RIGHTS
At all times during the term of the pooling and servicing agreement, 100%
of the voting rights for the certificates will be allocated among the respective
classes of certificates as follows:
o 2% in the aggregate in the case of the class X certificates, and
o in the case of any class of principal balance certificates, a
percentage equal to the product of 98% and a fraction, the numerator
of which is equal to the then total principal balance of such class
of principal balance certificates and the denominator of which is
equal to the then total principal balance of all the principal
balance certificates.
The holders of the class R-I, R-II, Y or Z certificates will not be
entitled to any voting rights. Voting rights allocated to a class of
certificates will be allocated among the related certificateholders in
proportion to the percentage interests in such class evidenced by their
respective certificates. See "Description of the Certificates--Voting Rights" in
the accompanying base prospectus.
TERMINATION
The obligations created by the pooling and servicing agreement will
terminate following the earliest of--
o the final payment or advance on, or other liquidation of, the last
mortgage loan or related REO Property remaining in the trust; and
o the purchase of all of the mortgage loans and REO Properties
remaining in the trust by the holder (or, if applicable, the
beneficial owner) of certificates with the largest percentage of
voting rights allocated to the controlling class (such holder (or,
if applicable, beneficial owner) referred to as the plurality
controlling class certificateholder), a master servicer or the
special servicer, in that order of preference, after the Stated
Principal Balance of the mortgage pool prior to the application of
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principal payments and losses in the related collection period has
been reduced to less than 1.0% of the initial mortgage pool balance.
Written notice of termination of the pooling and servicing agreement will
be given to each certificateholder. The final payment with respect to each
certificate will be made only upon surrender and cancellation of that
certificate at the office of the certificate registrar or at any other location
specified in the notice of termination.
Any purchase by either master servicer, the special servicer or the
plurality controlling class certificateholder of all the mortgage loans and REO
Properties remaining in the trust is required to be made at a price equal to:
o the sum of--
1. the then total principal balance of all the mortgage loans
then included in the trust (excluding any mortgage loans as to
which the related mortgaged real properties have become REO
Properties), together with interest thereon plus any accrued
and unpaid interest on P&I advances made with respect to such
mortgage loans, unreimbursed servicing advances for those
mortgage loans plus any accrued and unpaid interest on such
servicing advances, any reasonable costs and expenses incurred
in connection with any such purchase and any other Additional
Trust Fund Expenses (including any Additional Trust Fund
Expenses previously reimbursed or paid by the trust fund but
not so reimbursed by the related borrower or from insurance
proceeds or condemnation proceeds); and
2. the appraised value of all REO Properties then included in the
trust, as determined by an appraiser mutually agreed upon by
the applicable master servicer, the special servicer and the
trustee, minus
o solely in the case of a purchase by a master servicer, the total of
all amounts payable or reimbursable to the such master servicer
under the pooling and servicing agreement.
The purchase will result in early retirement of the outstanding
certificates. The termination price, exclusive of any portion of the termination
price payable or reimbursable to any person other than the certificateholders,
will constitute part of the Available Distribution Amount for the final
distribution date.
In addition, if, following the date on which the total principal balances
of the offered certificates are reduced to zero, all of the remaining
certificates (but excluding the class Y, Z, R-I and R-II certificates), are held
by the same certificateholder, the trust fund may also be terminated, subject to
such additional conditions as may be set forth in the pooling and servicing
agreement, in connection with an exchange of all the remaining certificates
(other than the class Y, Z, R-I and R-II certificates) for all the mortgage
loans and REO Properties remaining in the trust fund at the time of exchange.
YIELD AND MATURITY CONSIDERATIONSYIELD CONSIDERATIONSGeneral. The yield on any offered certificate will depend on:
o the price at which the certificate is purchased by an investor; and
o the rate, timing and amount of payments on the certificate.
o The rate, timing and amount of payments on any offered certificate
will in turn depend on, among other things:
o the pass-through rate for the certificate;
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o the rate and timing of principal payments, including principal
prepayments, and other principal collections on the mortgage loans
and the extent to which those amounts are to be applied or otherwise
result in reduction of the principal balance of the certificate;
o the rate, timing and severity of Realized Losses and Additional
Trust Fund Expenses and the extent to which those losses and
expenses result in the reduction of the principal balance of the
certificate;
o the timing and severity of any Net Aggregate Prepayment Interest
Shortfalls and the extent to which those shortfalls result in the
reduction of the interest payments on the certificate.
Pass-Through Rates. The pass-through rates for some classes of the offered
certificates will be, in the case of each of these classes, equal to, based on
or limited by the Weighted Average Net Mortgage Rate. See "Description of theOffered Certificates - Calculation of Pass-Through Rates" in this prospectus
supplement. As a result, the respective pass-through rates (and, accordingly,
the respective yields to maturity) on these classes of offered certificates
could be adversely affected if mortgage loans with relatively high Net Mortgage
Rates experienced a faster rate of principal payments than mortgage loans with
relatively low Net Mortgage Rates. This means that the respective yields to
maturity on these classes of offered certificates could be sensitive to changes
in the relative composition of the mortgage pool as a result of scheduled
amortization, voluntary prepayments and liquidations of mortgage loans following
default.
See "Description of the Offered Certificates--Payments--Calculation ofPass-Through Rates" and "Description of the Mortgage Pool" in this prospectus
supplement and "--Rate and Timing of Principal Payments" below.
Rate and Timing of Principal Payments. The yield to maturity of the class
X certificates will be extremely sensitive to, and the yield to maturity on any
offered certificates purchased at a discount or a premium will be affected by,
the frequency and timing of principal payments made in reduction of the total
principal balances of the offered certificates. In turn, the frequency and
timing of principal payments that are paid or otherwise result in reduction of
the total principal balance of any offered certificate will be directly related
to the frequency and timing of principal payments on or with respect to the
mortgage loans (or, in some cases, a particular group of mortgage loans).
Finally, the rate and timing of principal payments on or with respect to the
mortgage loans will be affected by their amortization schedules, the dates on
which balloon payments are due and the rate and timing of principal prepayments
and other unscheduled collections on them, including for this purpose,
collections made in connection with liquidations of mortgage loans due to
defaults, casualties or condemnations affecting the mortgaged real properties,
or purchases or other removals of mortgage loans from the trust.
Prepayments and other early liquidations of the mortgage loans will result
in payments on the certificates of amounts that would otherwise be paid over the
remaining terms of the mortgage loans. This will tend to shorten the weighted
average lives of some or all of the offered certificates. Defaults on the
mortgage loans, particularly at or near their maturity dates, may result in
significant delays in payments of principal on the mortgage loans and,
accordingly, on the certificates, while workouts are negotiated or foreclosures
are completed. These delays will tend to lengthen the weighted average lives of
some or all of the offered certificates. See "Servicing of the MortgageLoans--Modifications, Waivers, Amendments and Consents" in this prospectus
supplement. In addition, the ability of the related borrower under the ARD
Loans, to repay that loan on the related anticipated repayment date will
generally depend on its ability to either refinance the mortgage loan or sell
the corresponding mortgaged real property. Also, a borrower may have little
incentive to repay its mortgage loan on the related anticipated repayment date
if then prevailing interest rates are relatively high. Accordingly, there can be
no assurance that the ARD Loans will be paid in full on their respective
anticipated repayment dates. Failure of the related borrower under any ARD Loan
to repay that mortgage loan by or shortly after the related anticipated
repayment date, for whatever reason, will tend to lengthen the weighted average
lives of the offered certificates.
Similarly, the ability of a borrower under a Converting Loan to repay that
mortgage loan on the first open prepayment date will generally depend on its
ability to either refinance the mortgage loan or sell the corresponding
mortgaged real property. Also, a borrower may have little incentive to repay its
mortgage loan on the related date if then-current market interest rates are
particularly high. Accordingly, there can be no assurance that any Converting
Loan will be paid in full on its first open prepayment date. Failure of a
borrower under a Converting Loan to repay
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that mortgage loan by or shortly after the related open prepayment date, for any
reason, will tend to lengthen the weighted average lives of the offered
certificates.
The extent to which the yield to maturity on any offered certificate may
vary from the anticipated yield will depend upon the degree to which the
certificate is purchased at a discount or premium and when, and to what degree,
payments of principal on the mortgage loans (and, in particular, with respect to
the class A-1, A-2, A-2FL, A-SB, A-3 and A-3FL certificates, the mortgage loans
in loan group 1, and with respect to the class A-1A certificates, the mortgage
loans in loan group 2) are in turn paid or otherwise result in a reduction of
the principal balance of the certificate. If you purchase your offered
certificates at a discount from their total principal balance, your actual yield
could be lower than your anticipated yield if the principal payments on the
mortgage loans (and, in particular, with respect to the class A-1, A-2, A-2FL,
A-SB, A-3 and A-3FL certificates, the mortgage loans in loan group 1, and with
respect to the class A-1A certificates, the mortgage loans in loan group 2) are
slower than you anticipated. If you purchase any offered certificates at a
premium relative to their total principal or notional balance, you should
consider the risk that a faster than anticipated rate of principal payments on
the mortgage loans (and, in particular, with respect to the class A-1, A-2,
A-2FL, A-SB, A-3 and A-3FL certificates, the mortgage loans in loan group 1, and
with respect to the class A-1A certificates, the mortgage loans in loan group 2)
could result in an actual yield to you that is lower than your anticipated
yield.
Because the rate of principal payments on or with respect to the mortgage
loans will depend on future events and a variety of factors, no assurance can be
given as to that rate or the rate of principal prepayments in particular.
Even if they are available and payable on your offered certificates,
prepayment premiums and yield maintenance charges may not be sufficient to
offset fully any loss in yield on your offered certificates attributable to the
related prepayments of the mortgage loans. Prepayment consideration payable on
specially serviced mortgage loans will be applied to reimburse Realized Losses
and Additional Trust Fund Expenses previously allocated to any class of
certificates.
The yield on the class A-1, A-2, A-2FL, A-SB, A-3 and A-3FL certificates
will be particularly sensitive to prepayments on mortgage loans in loan group 1,
and the yield on the class A-1A certificates will be particularly sensitive to
prepayments on mortgage loans in loan group 2.
Delinquencies and Defaults on the Mortgage Loans. The rate and timing of
delinquencies and defaults on the mortgage loans (and, in particular, with
respect to the class A-1, A-2, A-2FL, A-SB, A-3 and A-3FL certificates, on the
mortgage loans in loan group 1, and with respect to the class A-1A certificates,
the mortgage loans in loan group 2) may affect the amount of payments on your
offered certificates, the yield to maturity of your offered certificates, the
rate of principal payments on your offered certificates and the weighted average
life of your offered certificates.
Delinquencies on the mortgage loans, unless covered by P&I advances, may
result in shortfalls in payments of interest and/or principal on your offered
certificates for the current month. Although any shortfalls in payments of
interest may be made up on future distribution dates, no interest would accrue
on those shortfalls. Thus, any shortfalls in payments of interest would
adversely affect the yield to maturity of your offered certificates.
If--
o you calculate the anticipated yield to maturity for your offered
certificates based on an assumed rate of default and amount of
losses on the mortgage loans that is lower than the default rate and
amount of losses actually experienced; and
o the additional losses result in a reduction of the total payments on
or the total principal balance of your offered certificates,
then your actual yield to maturity will be lower than you calculated and could,
under some scenarios, be negative.
Reimbursement of Advances from general collections of principal on the
mortgage pool may reduce distributions of the principal in respect of the
offered certificates.
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The timing of any loss on a liquidated mortgage loan that results in a
reduction of the total payments on, or the total principal balance of, your
offered certificates will also affect your actual yield to maturity, even if the
rate of defaults and severity of losses are consistent with your expectations.
In general, the earlier your loss occurs, the greater the effect on your yield
to maturity.
Even if losses on the mortgage loans do not result in a reduction of the
total payments on or the total principal balance of your offered certificates,
the losses may still affect the timing of payments on, and the weighted average
life and yield to maturity of, your offered certificates.
Relevant Factors. The following factors, among others, will affect the
rate and timing of principal payments and defaults and the severity of losses on
or with respect to the mortgage loans:
o prevailing interest rates;
o the terms of the mortgage loans, including provisions that require
the payment of prepayment premiums and yield maintenance charges,
provisions that impose prepayment lock-out periods and amortization
terms that require balloon payments;
o the demographics and relative economic vitality of the areas in
which the mortgaged real properties are located;
o the general supply and demand for commercial and multifamily rental
space of the type available at the mortgaged real properties in the
areas in which the mortgaged real properties are located;
o the quality of management of the mortgaged real properties;
o the servicing of the mortgage loans;
o possible changes in tax laws; and
o other opportunities for investment.
See "Risk Factors--Risks Related to the Mortgage Loans,""Description ofthe Mortgage Pool" and "Servicing of the Mortgage Loans" in this prospectus
supplement and "Description of the Governing Documents" and "Yield and MaturityConsiderations--Yield and Prepayment Considerations" in the accompanying base
prospectus.
The rate of prepayment on the mortgage loans is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below the annual
rate at which a mortgage loan accrues interest, the related borrower may have an
increased incentive to refinance the mortgage loan. Conversely, to the extent
prevailing market interest rates exceed the annual rate at which a mortgage loan
accrues interest, the related borrower may be less likely to voluntarily prepay
the mortgage loan. Assuming prevailing market interest rates exceed the revised
mortgage interest rate at which an ARD Loan accrues interest following its
anticipated repayment date, the primary incentive for the related borrower to
prepay the mortgage loan on or before its anticipated repayment date is to give
the borrower access to excess cash flow, all of which, net of the minimum
required debt service, approved property expenses and any required reserves,
must be applied to pay down principal of the mortgage loan. Accordingly, there
can be no assurance that any ARD Loan will be prepaid on or before its
respective anticipated repayment date or on any other date prior to maturity.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell their
mortgaged real properties in order to realize their equity in those properties,
to meet cash flow needs or to make other investments. In addition, some
borrowers may be motivated by federal and state tax laws, which are subject to
change, to sell their mortgaged real properties prior to the exhaustion of tax
depreciation benefits.
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A number of the borrowers are limited or general partnerships. The
bankruptcy of the general partner in a partnership may result in the dissolution
of the partnership. The dissolution of a borrower partnership, the winding-up of
its affairs and the distribution of its assets could result in an acceleration
of its payment obligations under the related mortgage loan.
We make no representation or warranty regarding:
o the particular factors that will affect the rate and timing of
prepayments and defaults on the mortgage loans (or any particular
group of mortgage loans);
o the relative importance of those factors;
o the percentage of the total principal balance of the mortgage loans
(or any particular group of mortgage loans) that will be prepaid or
as to which a default will have occurred as of any particular date;
or
o the overall rate of prepayment or default on the mortgage loans (or
any particular group of mortgage loans).
Unpaid Interest. If the portion of the Available Distribution Amount
payable with respect to interest on any class of offered certificates on any
distribution date is less than the total amount of interest then payable for the
class, the shortfall will be payable to the holders of those certificates on
subsequent distribution dates, subject to available funds on those subsequent
distribution dates and the priority of payments described under "Description ofthe Offered Certificates--Payments--Priority of Payments" in this prospectus
supplement. That shortfall will not bear interest, however, and will therefore
negatively affect the yield to maturity of that class of offered certificates
for so long as it is outstanding.
Delay in Payments. Because monthly payments will not be made on the
certificates until several days after the due dates for the mortgage loans
during the related collection period, your effective yield will be lower than
the yield that would otherwise be produced by your pass-through rate and
purchase price, assuming that purchase price did not account for a delay.
CPR MODEL
Prepayments on loans are commonly measured relative to a prepayment
standard or model. The prepayment model used in this prospectus supplement is
the constant prepayment rate, or "CPR," model, which represents an assumed
constant rate of prepayment each month, which is expressed on a per annum basis,
relative to the then-outstanding principal balance of a pool of loans for the
life of those loans. The CPR model does not purport to be either a historical
description of the prepayment experience of any pool of loans or a prediction of
the anticipated rate of prepayment of any pool of loans, including the mortgage
pool. We do not make any representations about the appropriateness of the CPR
model.
WEIGHTED AVERAGE LIVES
The tables set forth below indicate the respective weighted average lives
of the respective classes of the offered certificates and set forth the
percentages of the respective initial total principal balances of those classes
that would be outstanding after the distribution dates in each of the calendar
months shown, subject, however, to the following discussion and the assumptions
specified below.
For purposes of this prospectus supplement, "weighted average life" of any
offered certificate refers to the average amount of time that will elapse from
the assumed date of settlement of that certificate, which is June 13, 2007,
until each dollar of principal of the certificate will be repaid to the
investor, based on the Modeling Assumptions. For purposes of this "Yield andMaturity Considerations" section, the weighted average life of any offered
certificate is determined by:
o multiplying the amount of each principal payment on the certificate
by the number of years from the assumed settlement date to the
related distribution date;
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o summing the results; and
o dividing the sum by the total amount of the reductions in the
principal balance of the certificate.
The weighted average life of any offered certificate will be influenced
by, among other things, the rate at which principal of the mortgage loans is
paid, which may be in the form of scheduled amortization, balloon payments,
prepayments, liquidation proceeds, condemnation proceeds or insurance proceeds.
The weighted average life of any offered certificate may also be affected to the
extent that additional payments in reduction of the principal balance of that
certificate occur as a result of the purchase or other removal of a mortgage
loan from the trust or the optional termination of the trust. The purchase of a
mortgage loan from the trust will have the same effect on payments to the
holders of the privately offered certificates as if the mortgage loan had
prepaid in full, except that no prepayment consideration is collectable with
respect thereto.
The tables set forth below have been prepared on the basis of the Modeling
Assumptions. The actual characteristics and performance of the mortgage loans
will differ from the assumptions used in calculating the tables set forth below.
The tables set forth below are hypothetical in nature and are provided only to
give a general sense of how the principal cash flows might behave under each
assumed prepayment scenario. In particular, the tables were prepared on the
basis of the assumption that there are no losses or defaults on the mortgage
loans. Any difference between those assumptions and the actual characteristics
and performance of the mortgage loans, or actual prepayment or loss experience,
will affect the percentages of the respective initial total principal balances
of the various classes of subject offered certificates (other than the class X
certificates) outstanding over time and their respective weighted average lives.
PERCENTAGES OF THE CLOSING DATE PRINCIPAL BALANCE OF THE
CLASS A-1 CERTIFICATES
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
------------------------------------ ------ ------- ------- ------- --------
Initial Percentage.................. 100% 100% 100% 100% 100%
August 12, 2008..................... 87 87 87 87 87
August 12, 2009..................... 73 73 73 73 73
August 12, 2010..................... 54 54 54 54 54
August 12, 2011..................... 31 31 31 31 31
August 12, 2012 and thereafter...... 0 0 0 0 0
Weighted Average Life (in Years).... 2.98 2.97 2.97 2.97 2.95
PERCENTAGES OF THE CLOSING DATE PRINCIPAL BALANCE OF THE
CLASS A-2 CERTIFICATES
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
------------------------------------ ------ ------- ------- ------- --------
Initial Percentage.................. 100% 100% 100% 100% 100%
August 12, 2008..................... 100 100 100 100 100
August 12, 2009..................... 100 100 100 100 100
August 12, 2010..................... 100 100 100 100 100
August 12, 2011..................... 100 100 100 100 100
August 12, 2012..................... 100 100 100 100 100
August 12, 2013..................... 100 95 91 86 80
August 12, 2014..................... 6 0 0 0 0
August 12, 2015..................... 6 0 0 0 0
August 12, 2016 and thereafter...... 0 0 0 0 0
Weighted Average Life (in Years).... 7.02 6.82 6.71 6.60 6.28
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PERCENTAGES OF THE CLOSING DATE PRINCIPAL BALANCE OF THE
CLASS E CERTIFICATES
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
------------------------------------ ------ ------- ------- ------- --------
Initial Percentage.................. 100% 100% 100% 100% 100%
August 12, 2008..................... 100 100 100 100 100
August 12, 2009..................... 100 100 100 100 100
August 12, 2010..................... 100 100 100 100 100
August 12, 2011..................... 100 100 100 100 100
August 12, 2012..................... 100 100 100 100 100
August 12, 2013..................... 100 100 100 100 100
August 12, 2014..................... 100 100 100 100 100
August 12, 2015..................... 100 100 100 100 100
August 12, 2016..................... 100 100 100 100 100
August 12, 2017 and thereafter...... 0 0 0 0 0
Weighted Average Life (in Years).... 9.97 9.97 9.97 9.97 9.72
PERCENTAGES OF THE CLOSING DATE PRINCIPAL BALANCE OF THE
CLASS F CERTIFICATES
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
------------------------------------ ------ ------- ------- ------- --------
Initial Percentage.................. 100% 100% 100% 100% 100%
August 12, 2008..................... 100 100 100 100 100
August 12, 2009..................... 100 100 100 100 100
August 12, 2010..................... 100 100 100 100 100
August 12, 2011..................... 100 100 100 100 100
August 12, 2012..................... 100 100 100 100 100
August 12, 2013..................... 100 100 100 100 100
August 12, 2014..................... 100 100 100 100 100
August 12, 2015..................... 100 100 100 100 100
August 12, 2016..................... 100 100 100 100 100
August 12, 2017 and thereafter...... 0 0 0 0 0
Weighted Average Life (in Years).... 9.97 9.97 9.97 9.97 9.72
The foregoing tables were prepared assuming a 0% CPR during lockout,
defeasance and yield maintenance periods and otherwise assuming that prepayments
occur at indicated CPR. The indicated CPRs are applied to the mortgage loans in
the trust fund (including the Farallon Portfolio B-Note Trust Mortgage Loans and
the Georgia-Alabama Retail Portfolio B-Note Trust Mortgage Loan) and do not take
into account the B-Note Non-Trust Loans.
THE SWAP AGREEMENTS
On the closing date, the trustee, on behalf of the trust, will enter into
four interest rate swap agreements with Merrill Lynch Capital Services, Inc., as
swap counterparty, relating to the class A-2FL, class A-3FL, class AM-FL and
class AJ-FL certificates, respectively. None of the holders of any class of
offered certificates will have any beneficial interest in any of the swap
agreements.
FEDERAL INCOME TAX CONSEQUENCESGENERAL
This is a general summary of the material federal income tax consequences
of owning the offered certificates. This summary is directed to initial
investors that hold the offered certificates as "capital assets" within the
meaning of section 1221 of the Code. It does not discuss all United States
federal income tax consequences that may be relevant to owners of the offered
certificates, particularly as to investors subject to special treatment under
the Code, including banks and insurance companies. Prospective investors should
consult their tax advisors regarding the federal, state, local, and, if
relevant, foreign tax consequences to them of owning offered certificates.
Further, this summary and any legal opinions referred to in this summary
are based on laws, regulations, including the REMIC regulations promulgated by
the Treasury Department, rulings and decisions now in effect or (with respect to
the regulations) proposed, all of which are subject to change either
prospectively or retroactively.
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Upon the issuance of the offered certificates, Cadwalader, Wickersham &
Taft LLP, New York, New York, our counsel, will deliver its opinion generally to
the effect that, assuming compliance with the pooling and servicing agreement
(and with respect to the Georgia-Alabama Retail Portfolio Trust Mortgage Loan,
compliance with the Other Pooling and Servicing Agreement), and subject to any
other assumptions set forth in the opinion, REMIC I and REMIC II, respectively,
will each qualify as a REMIC under the Code and the arrangements under which the
class A-2FL, class A-3FL, class AM-FL and class AJ-FL REMIC II regular
interests, the related swap agreements, the trustee's floating rate account and
the right to Additional Interest are held will be classified as one or more
grantor trusts for U.S. federal income tax purposes.
The assets of REMIC I will generally include--
o the mortgage loans;
o any REO Properties acquired on behalf of the certificateholders (or
a beneficial interest in the mortgaged properties securing the
Georgia-Alabama Retail Portfolio Trust Mortgage Loan if acquired
under the Other Pooling and Servicing Agreement);
o the master servicers' collection accounts;
o the special servicer's REO account; and
o the trustee's distribution account and interest reserve account, but
will exclude any collections of Additional Interest on the ARD Loans
or Converting Loans.
For federal income tax purposes,
o the separate non-certificated regular interests in REMIC I will be
the regular interests in REMIC I and will be the assets of REMIC II;
o the class R-I certificates will evidence the sole class of residual
interests in REMIC I;
o the class A-1, A-2, A-SB, A-3, A-1A, X, AM, AJ, B, C, D, E, F, G, H,
J, K, L, M, N, P, Q, S and T certificates and the class A-2FL, class
A-3FL, class AM-FL and class AJ-FL REMIC II regular interests will
evidence or constitute the regular interests in, and will generally
be treated as debt obligations of, REMIC II;
o the class R-II certificates will evidence the sole class of residual
interests in REMIC II;
o the class A-2FL, class A-3FL, class AM-FL and class AJ-FL
certificates will each evidence interests in a grantor trust
consisting of the respective REMIC II regular interest, the related
swap agreement and the applicable sub-account of the trustee's
floating rate account. No holder of any offered certificates will
have any beneficial interest in any such grantor trust;
o the portion of the trust consisting of Additional Interest on the
Converting Loans will be treated as a grantor trust for federal
income tax purposes, and the class Y certificates will represent
undivided interests in these assets; and
o the portion of the trust consisting of Additional Interest on the
ARD Loans will be treated as a grantor trust for federal income tax
purposes, and the class Z certificates will represent undivided
interests in these assets.
See "Federal Income Tax Consequences--REMICs" and "--Grantor Trusts" in
the accompanying base prospectus.
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DISCOUNT AND PREMIUM; PREPAYMENT CONSIDERATION
Holders of the offered certificates will be required to report income on
such regular interests in accordance with the accrual method of accounting.
It is anticipated that the class , class , class , class , class , class
and class certificates will be issued at a premium and that the other classes of
offered certificates will be issued with a [de minimis] amount of original issue
discount. If you own an offered certificate issued with original issue discount,
you may have to report original issue discount income and be subject to a tax on
this income before you receive a corresponding cash payment.
When determining the rate of accrual of original issue discount, market
discount and premium, if any, for federal income tax purposes the prepayment
assumption used will be that subsequent to the date of any determination:
o the ARD Loans will be paid in full on their respective anticipated
repayment dates;
o no mortgage loan will otherwise be prepaid prior to maturity; and
o there will be no extension of maturity for any mortgage loan.
However, no representation is made as to the actual rate at which the
mortgage loans will prepay, if at all. See "Federal Income TaxConsequences--REMICs--Taxation of Owners of REMIC Regular Certificates" in the
accompanying base prospectus.
The IRS has issued regulations under sections 1271 to 1275 of the Code
generally addressing the treatment of debt instruments issued with original
issue discount. You should be aware, however, that those regulations and section
1272(a)(6) of the Code do not adequately address all issues relevant to, or are
not applicable to, prepayable securities such as the offered certificates. We
recommend that you consult with your own tax advisor concerning the tax
treatment of your offered certificates.
Whether a holder of any of the offered certificates will be treated as
holding a certificate with amortizable bond premium will depend on the
certificateholder's purchase price and the payments remaining to be made on the
certificate at the time of its acquisition by the certificateholder. If you
acquire an interest in any offered certificates issued at a premium, you should
consider consulting your own tax advisor regarding the possibility of making an
election to amortize the premium. See "Federal Income TaxConsequences--REMICs--Taxation of Owners of REMIC Regular Certificates--Premium"
in the accompanying base prospectus.
Prepayment premiums and yield maintenance charges actually collected on
the mortgage loans will be paid on the offered certificates as and to the extent
described in this prospectus supplement. It is not entirely clear under the Code
when the amount of a prepayment premium or yield maintenance charge should be
taxed to the holder of a class of offered certificates entitled to that amount.
For federal income tax reporting purposes, the tax administrator will report
prepayment premiums or yield maintenance charges as income to the holders of a
class of offered certificates entitled thereto only after the applicable master
servicer's actual receipt of those amounts. The IRS may nevertheless seek to
require that an assumed amount of prepayment premiums and yield maintenance
charges be included in payments projected to be made on the offered certificates
and that taxable income be reported based on the projected constant yield to
maturity of the offered certificates. Therefore, the projected prepayment
premiums and yield maintenance charges would be included prior to their actual
receipt by holders of the offered certificates. If the projected prepayment
premiums and yield maintenance charges were not actually received, presumably
the holder of an offered certificate would be allowed to claim a deduction or
reduction in gross income at the time the unpaid prepayment premiums and yield
maintenance charges had been projected to be received. Moreover, it appears that
prepayment premiums and yield maintenance charges are to be treated as ordinary
income rather than capital gain. The correct characterization of the income is
not entirely clear. We recommend you consult your own tax advisors concerning
the treatment of prepayment premiums and yield maintenance charges.
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CHARACTERIZATION OF INVESTMENTS IN OFFERED CERTIFICATES
The offered certificates will be treated as "real estate assets" within
the meaning of section 856(c)(5)(B) of the Code in the hands of a real estate
investment trust or "REIT." Most of the mortgage loans are not secured by real
estate used for residential or certain other purposes prescribed in section
7701(a)(19)(C) of the Code. Consequently, the offered certificates generally
will not be treated as assets qualifying under that section. Accordingly,
investment in the offered certificates may not be suitable for a thrift
institution seeking to be treated as a "domestic building and loan association"
under section 7701(a)(19)(C) of the Code. In addition, the offered certificates
will be "qualified mortgages" within the meaning of section 860G(a)(3) of the
Code in the hands of another REMIC if transferred to such REMIC on its startup
date in exchange for regular or residual interests in such REMIC.
Finally, interest, including original issue discount, if any, on the
offered certificates will be interest described in section 856(c)(3)(B) of the
Code if received by a REIT if 95% or more of the assets of REMIC II are treated
as "real estate assets" within the meaning of section 856(c)(5)(B) of the Code.
To the extent that less than 95% of the assets of REMIC II are treated as "real
estate assets" within the meaning of section 856(c)(5)(B) of the Code, a REIT
holding offered certificates will be treated as receiving directly its
proportionate share of the income of the REMIC.
To the extent an offered certificate represents ownership of an interest
in a mortgage loan that is secured in part by cash reserves, that mortgage loan
is not secured solely by real estate. Therefore:
o a portion of that certificate may not represent ownership of "loans
secured by an interest in real property" or other assets described
in section 7701(a)(19)(C) of the Code;
o a portion of that certificate may not represent ownership of "real
estate assets" under section 856(c)(5)(B) of the Code; and
o the interest on that certificate may not constitute "interest on
obligations secured by mortgages on real property" within the
meaning of section 856(c)(3)(B) of the Code.
In addition, most of the mortgage loans contain defeasance provisions
under which the lender may release its lien on the collateral securing the
subject mortgage loan in return for the borrower's pledge of substitute
collateral in the form of government securities. Generally, under the Treasury
regulations, if a REMIC releases its lien on real property that secures a
qualified mortgage, the subject mortgage loan ceases to be a qualified mortgage
on the date the lien is released unless certain conditions are satisfied. In
order for the defeased mortgage loan to remain a qualified mortgage, the
Treasury regulations require that--
1. the borrower pledges substitute collateral that consist solely of
certain government securities,
2. the related loan documents allow that substitution,
3. the lien is released to facilitate the disposition of the property
or any other customary commercial transaction, and not as part of an
arrangement to collateralize a REMIC offering with obligations that
are not real estate mortgages, and
4. the release is not within two years of the startup day of the REMIC.
Following the defeasance of a mortgage loan, regardless of whether the
foregoing conditions were satisfied, that mortgage loan would not be treated as
a "loan secured by an interest in real property" or a "real estate asset" and
interest on that loan would not constitute "interest on obligations secured by
real property" for purposes of sections 7701(a)(19)(C), 856(c)(5)(B) and
856(e)(3)(B) of the Code, respectively.
See "Description of the Mortgage Pool" in this prospectus supplement and
"Federal Income Tax Consequences--REMICs--Characterization of Investments inREMIC Certificates" in the accompanying base prospectus.
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ERISA CONSIDERATIONS
The following description is general in nature, is not intended to be
all-inclusive, is based on the law and practice existing at the date of this
document and is subject to any subsequent changes therein. In view of the
individual nature of ERISA and Code consequences, each potential investor that
is a Plan or is investing on behalf of, or with plan assets of a Plan, is
advised to consult its own legal advisor with respect to the specific ERISA and
Code consequences of investing in the certificates and to make its own
independent decision. The following is merely a summary and should not be
construed as legal advice.
ERISA and section 4975 of the Code impose various requirements on--
o Plans, and
o persons that are fiduciaries with respect to Plans,
in connection with the investment of the assets of a Plan. For purposes of this
discussion, Plans may include qualified pension, profit sharing and Code section
401(k) plans, individual retirement accounts and annuities, Keogh plans and
collective investment funds and separate accounts, including, as applicable,
insurance company general accounts, in which other Plans are invested.
A fiduciary of any Plan should carefully review with its legal advisors
whether the purchase or holding of offered certificates could be or give rise to
a transaction that is prohibited or is not otherwise permitted under ERISA or
section 4975 of the Code or whether there exists any statutory, regulatory or
administrative exemption applicable thereto. Some fiduciary and prohibited
transaction issues arise only if the assets of the trust are "plan assets" for
purposes of Part 4 of Title I of ERISA and section 4975 of the Code. Whether the
assets of the trust will be plan assets at any time will depend on a number of
factors, including the portion of any class of certificates that is held by
benefit plan investors within the meaning of U.S. Department of Labor Regulation
Section 2510.3-101.
The U.S. Department of Labor has issued an individual prohibited
transaction exemption to each of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation and Bear, Stearns & Co. Inc.,
each as amended by Prohibited Transaction Exemption 2007-5. Subject to the
satisfaction of conditions set forth in the Exemption, the Exemption generally
exempts from the application of the prohibited transaction provisions of
Sections 406(a) and (b) and 407(a) of ERISA, and the excise taxes imposed on
these prohibited transactions under sections 4975(a) and (b) of the Code,
specified transactions relating to, among other things, the servicing and
operation of pools of real estate loans, such as the mortgage pool, and the
purchase, sale and holding of mortgage pass-through certificates, such as the
offered certificates, that are underwritten by an Exemption-Favored Party.
The Exemption sets forth five general conditions which must be satisfied
for a transaction involving the purchase, sale and holding of an offered
certificate to be eligible for exemptive relief under the Exemption. The
conditions are as follows:
o first, the acquisition of the certificate by a Plan must be on terms
that are at least as favorable to the Plan as they would be in an
arm's-length transaction with an unrelated party;
o second, at the time of its acquisition by the Plan, that certificate
must be rated in one of the four highest generic rating categories
by S&P, Moody's, Fitch, DBRS Limited or DBRS, Inc.;
o third, the trustee cannot be an affiliate of any other member of the
Restricted Group, other than an underwriter;
o fourth, the following must be true--
1. the sum of all payments made to and retained by
Exemption-Favored Parties must represent not more than
reasonable compensation for underwriting the relevant class of
certificates;
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2. the sum of all payments made to and retained by us in
connection with the assignment of mortgage loans to the trust
must represent not more than the fair market value of the
obligations; and
3. the sum of all payments made to and retained by the trustee,
the master servicers, the special servicer and any
sub-servicer must represent not more than reasonable
compensation for that person's services under the pooling and
servicing agreement and reimbursement of that person's
reasonable expenses in connection therewith; and
o fifth, the investing Plan must be an accredited investor as defined
in Rule 501(a)(1) of Regulation D under the Securities Act of 1933,
as amended.
It is a condition of their issuance that each class of offered
certificates receive an investment grade rating from each of S&P and Fitch. In
addition, the initial trustee is not an affiliate of any other member of the
Restricted Group. Accordingly, as of the date of initial issuance of the
certificates, the second and third general conditions set forth above will be
satisfied with respect to the offered certificates. A fiduciary of a Plan
contemplating the purchase of any such offered certificate in the secondary
market must make its own determination that, at the time of the purchase, the
certificate continues to satisfy the second and third general conditions set
forth above. A fiduciary of a Plan contemplating the purchase of any such
offered certificate, whether in the initial issuance of the certificate or in
the secondary market, must make its own determination that the first and fourth
general conditions set forth above will be satisfied with respect to the
certificate as of the date of the purchase. A Plan's authorizing fiduciary will
be deemed to make a representation regarding satisfaction of the fifth general
condition set forth above in connection with the purchase of any such offered
certificate.
The Exemption also requires that the trust meet the following
requirements:
o the trust assets must consist solely of assets of the type that have
been included in other investment pools;
o certificates evidencing interests in those other investment pools
must have been rated in one of the four highest generic rating
categories of S&P, Moody's, Fitch, DBRS Limited or DBRS, Inc. for at
least one year prior to the Plan's acquisition of an offered
certificate; and
o certificates evidencing interests in those other investment pools
must have been purchased by investors other than Plans for at least
one year prior to any Plan's acquisition of an offered certificate.
We believe that these requirements have been satisfied as of the date of
this prospectus supplement.
If the general conditions of the Exemption are satisfied, the Exemption
may provide an exemption from the restrictions imposed by Sections 406(a) and
407(a) of ERISA, as well as the excise taxes imposed by sections 4975(a) and (b)
of the Code by reason of sections 4975(c)(1)(A) through (D) of the Code, in
connection with--
o the direct or indirect sale, exchange or transfer of an offered
certificate to a Plan upon initial issuance from us or an
Exemption-Favored Party when we are, or a mortgage loan seller, the
trustee, a master servicer, the special servicer or any
sub-servicer, any provider of credit support, Exemption-Favored
Party or borrower is, a Party in Interest with respect to the
investing Plan;
o the direct or indirect acquisition or disposition in the secondary
market of an offered certificate by a Plan; and
o the continued holding of class A-1, A-2, A-SB, A-3, A-1A, AM, AJ, B,
C, D, E or F certificates by a Plan.
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However, no exemption is provided from the restrictions of Sections
406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of an
offered certificate on behalf of a Plan sponsored by any member of the
Restricted Group, by any person who has discretionary authority or renders
investment advice with respect to the assets of that Plan.
Moreover, if the general conditions of the Exemption, as well as other
conditions set forth in the Exemption, are satisfied, the Exemption may also
provide an exemption from the restrictions imposed by Sections 406(b)(1) and
(b)(2) of ERISA and the 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:
o the direct or indirect sale, exchange or transfer of offered
certificates in the initial issuance of those certificates between
us or an Exemption-Favored Party and a Plan when the person who has
discretionary authority or renders investment advice with respect to
the investment of the assets of the Plan in those certificates is a
borrower, or an affiliate of a borrower, with respect to 5.0% or
less of the fair market value of the mortgage loans;
o the direct or indirect acquisition or disposition in the secondary
market of such offered certificates by a Plan; and
o the continued holding of such offered certificates by a Plan.
Further, if the general conditions of the Exemption, as well as other
conditions set forth in the Exemption, are satisfied, the Exemption may provide
an exemption from the restrictions imposed by Sections 406(a), 406(b) and 407(a)
of ERISA, and the 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 assets.
Lastly, if the general conditions of the Exemption are satisfied, the
Exemption also may provide an exemption from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA, and the 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 or taxes 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--
o providing services to the Plan, or
o having a specified relationship to this person,
solely as a result of the Plan's ownership of class offered certificates.
Before purchasing an offered certificate, a fiduciary of a Plan should
itself confirm that the general and other conditions set forth in the Exemption
and the other requirements set forth in the Exemption would be satisfied at the
time of the purchase.
Certain employee benefit plans, such as 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 to Title I of ERISA or section 4975 of the Code. However, governmental
and church plans may be subject to a federal, state or local law which is, to a
material extent, similar to the above-mentioned provisions of ERISA and the
Code. A fiduciary of a governmental plan should make its own determination as to
the need for and the availability of any exemptive relief under any similar law.
Any fiduciary of a Plan considering whether to purchase an offered
certificate on behalf of that Plan should consult with its counsel regarding the
applicability of the fiduciary responsibility and prohibited transaction
provisions of ERISA and the Code to the investment. Such fiduciary must also
determine on its own whether an offered certificate is an appropriate investment
for a Plan under ERISA and the Code with regard to ERISA's general fiduciary
requirements, including investment prudence and diversification and the
exclusive benefit rule.
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The sale of offered certificates to a Plan is in no way a representation
or warranty by us or the underwriters that the investment meets all relevant
legal requirements with respect to investments by Plans generally or by any
particular Plan, or that the investment is appropriate for Plans generally or
for any particular Plan.
LEGAL INVESTMENT
The offered certificates will not constitute mortgage related securities
for purposes of the Secondary Mortgage Market Enhancement Act of 1984. As a
result, the appropriate characterization of the offered certificates under
various legal investment restrictions, and therefore the ability of investors
subject to these restrictions to purchase those certificates, is subject to
significant interpretive uncertainties.
Neither we nor the underwriters make any representation as to the proper
characterization of the offered certificates for legal investment, financial
institution regulatory, or other purposes, or as to the ability of particular
investors to purchase the offered certificates under applicable legal investment
or other restrictions. All institutions whose investment activities are subject
to legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the offered certificates--
o are legal investments for them; or
o are subject to investment, capital or other restrictions.
See "Legal Investment" in the accompanying base prospectus.
LEGAL MATTERS
Particular legal matters relating to the certificates will be passed upon
for us by Cadwalader, Wickersham & Taft LLP, New York, New York and for the
underwriters by Latham & Watkins LLP, New York, New York.
RATINGS
It is a condition to their issuance that the respective classes of offered
certificates be rated as follows:
CLASS FITCH S&P
---------- ------- ------
Class A-1 AAA AAA
Class A-2 AAA AAA
Class A-SB AAA AAA
Class A-3 AAA AAA
Class A-1A AAA AAA
Class AM AAA AAA
Class AJ AAA AAA
Class B AA+ AA+
Class C AA AA
Class D AA- AA-
Class E A+ A+
Class F A A
The ratings on the offered certificates address the likelihood of the
timely receipt by their holders of all payments of interest to which they are
entitled on each distribution date and the ultimate receipt by their holders of
all payments of principal to which they are entitled on or before the rated
final distribution date. The ratings take into consideration the credit quality
of the mortgage pool, structural and legal aspects associated with the offered
certificates, and the extent to which the payment stream from the mortgage pool
is adequate to make payments of interest and/or principal required under the
offered certificates.
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The ratings on the respective classes of offered certificates do not
represent any assessment of--
o the tax attributes of the offered certificates or of the trust;
o whether or to what extent prepayments of principal may be received
on the mortgage loans;
o the likelihood or frequency of prepayments of principal on the
mortgage loans;
o the degree to which the amount or frequency of prepayments of
principal on the mortgage loans might differ from those originally
anticipated;
o whether or to what extent the interest payable on any class of
offered certificates may be reduced in connection with Net Aggregate
Prepayment Interest Shortfalls; and
o whether and to what extent prepayment premiums, yield maintenance
charges, Penalty Interest or Additional Interest will be received.
Also, a security rating does not represent any assessment of the yield to
maturity that investors may experience.
There can be no assurance as to whether any rating agency not requested to
rate the offered certificates will nonetheless issue a rating to any class of
offered certificates and, if so, what the rating would be. A rating assigned to
any class of offered certificates by a rating agency that has not been requested
by us to do so may be lower than the rating assigned thereto by S&P or Fitch.
The ratings on the offered certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating organization. Each security
rating should be evaluated independently of any other security rating. See
"Rating" in the accompanying base prospectus.
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GLOSSARY
The following capitalized terms will have the respective meanings assigned
to them in this glossary whenever they are used in this prospectus supplement,
including in any of the annexes to this prospectus supplement.
"30/360 BASIS" means the accrual of interest calculated on the basis of a
360-day year consisting of twelve 30-day months.
"ACCEPTABLE INSURANCE DEFAULT" means, with respect to any mortgage loan
serviced under the pooling and servicing agreement, any default under the
related loan documents resulting from (i) the exclusion of acts of terrorism
from coverage under the related "all risk" casualty insurance policy maintained
on the related mortgaged real property and (ii) the related borrower's failure
to obtain insurance that specifically covers acts of terrorism, but only if the
special servicer has determined, in its reasonable judgment, exercised in
accordance with the Servicing Standard, that (a) such insurance is not available
at commercially reasonable rates and the relevant hazards are not commonly
insured against by prudent owners of similar real properties in similar locales
(but only by reference to such insurance that has been obtained by such owners
at current market rates) or (b) such insurance is not available at any rate. In
making such determination, the special servicer will be entitled to rely on the
opinion of an insurance consultant at the expense of the trust.
"ACTUAL/360 BASIS" means the accrual of interest calculated on the basis
of the actual number of days elapsed during any calendar month (or other
applicable accrual period) in a year assumed to consist of 360 days.
"ADDITIONAL INTEREST" means (i) with respect to the ARD Loans in the trust
fund, the additional interest accrued with respect to those mortgage loans as a
result of the marginal increase in the related mortgage interest rate upon
passage of the related anticipated repayment date, as that additional interest
may compound in accordance with the terms of that mortgage loan and (ii) with
respect to any Converting Loan in the trust fund, the additional interest, in
excess of the original fixed rate, that may accrue with respect to that mortgage
loan as a result of the conversion of the mortgage loan from bearing interest at
a fixed rate to bearing interest on a floating rate.
"ADDITIONAL TRUST FUND EXPENSE" means any of certain specified expenses of
the trust that, in each case, generally:
o arises out of a default on a mortgage loan or in respect of a
mortgage loan as to which a default is imminent or arises out of an
otherwise unanticipated event; and
o is not covered by a servicing advance or a corresponding collection
from the related borrower.
Examples of some Additional Trust Fund Expenses are set forth under
"Description of the Offered Certificates--Reductions to Certificate PrincipalBalances in Connection with Realized Losses and Additional Trust Fund Expenses"
in this prospectus supplement.
"ADVANCE" means a P&I advance or a servicing advance made, or that may be
made, under the pooling and servicing agreement.
"A-NOTE TRUST MORTGAGE LOAN" means any of the mortgage loans included in
the trust that are secured by the mortgaged real properties identified on Annex
A-1 to this prospectus supplement as Farallon Portfolio and Georgia-Alabama
Retail Portfolio.
"A-NOTE NON-TRUST MORTGAGE LOAN" means the Farallon Portfolio A-Note
Non-Trust Mortgage Loans and Georgia-Alabama Retail Portfolio A-Note Non-Trust
Mortgage Loan.
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"APPRAISAL REDUCTION AMOUNT" means, for any mortgage loan as to which an
Appraisal Trigger Event has occurred, an amount that will equal the excess, if
any, of "x" over "y" where--
1. "x" is an amount, as of the determination date immediately
succeeding the date on which the knowledge of the occurrence of the
relevant Appraisal Trigger Event is obtained, if no new appraisal
(or letter update or internal valuation) is required, or otherwise
the date on which the appraisal (or letter update or internal
valuation, if applicable) is obtained, and each anniversary of such
determination date thereafter so long as appraisals are required to
be obtained in connection with the subject mortgage loan, equal to
the sum (without duplication) of:
(a) the Stated Principal Balance of the subject mortgage loan;
(b) to the extent not previously advanced by or on behalf of the
applicable master servicer, the special servicer or the
trustee, all unpaid interest accrued on the subject mortgage
loan through the most recent due date prior to the date of
determination at the related Net Mortgage Rate (exclusive of
any portion thereof that constitutes Additional Interest);
(c) all accrued but unpaid (from related collections) master
servicing fees and special servicing fees with respect to the
subject mortgage loan and, without duplication, all accrued or
otherwise incurred but unpaid (from related collections)
Additional Trust Fund Expenses with respect to the subject
mortgage loan;
(d) all related unreimbursed Advances made by or on behalf of the
applicable master servicer or the trustee with respect to the
subject mortgage loan, together with (i) interest on those
Advances and (ii) any related Unliquidated Advances; and
(e) all currently due and unpaid real estate taxes and unfunded
improvement reserves and assessments, insurance premiums and,
if applicable, ground rents with respect to the related
mortgaged real property; and
2. "y" is equal to the sum of (x) 90% of an amount equal to (i) the
resulting appraised or estimated value of the related mortgaged real
property or REO Property, which value may be subject to reduction by
the special servicer based on its review of the related appraisal
and other relevant information (without implying any duty to do so),
reduced, to not less than zero, by (ii) the amount of any
obligations secured by liens on the property that are prior to the
lien of the subject mortgage loan and estimated liquidation
expenses, and (y) all escrows, reserves and letters of credit held
as additional collateral with respect to the subject mortgage loan.
If, however, any required appraisal, letter update or internal valuation
is not obtained or performed within 60 days of the relevant Appraisal Trigger
Event, then until the required appraisal or other valuation is obtained or
performed, the Appraisal Reduction Amount for the subject mortgage loan will
equal 25% of the Stated Principal Balance of that mortgage loan.
The foregoing notwithstanding, in the case of any Loan Combination, any
Appraisal Reduction Amount will be calculated as if it were a single loan, and
then will be allocated first to the related B-Note Trust Loan and the B-Note
Non-Trust Loan, pro rata (if applicable), in each case up to the outstanding
principal balance thereof, and then to the applicable A-Note Trust Mortgage Loan
and with respect to the Farallon Portfolio Loan Combination and the
Georgia-Alabama Retail Portfolio Loan Combination, to the related A-Note Trust
Mortgage Loan and the related A-Note Non-Trust Mortgage Loan, pro rata.
"APPRAISAL TRIGGER EVENT" means, with respect to any mortgage loan in the
trust, any of the following events:
o the mortgage loan has been modified by the special servicer in a
manner that affects the amount or timing of any monthly debt service
payment due on it, other than a balloon payment (except, or in
addition to, bringing monthly debt service payments current and
extending the maturity date for less than six months);
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o the related borrower fails to make any monthly debt service payment
with respect to the mortgage loan and the failure continues for 60
days;
o 60 days following the receipt by the special servicer of notice that
a receiver has been appointed and continues in that capacity with
respect to the mortgaged real property securing the mortgage loan;
o 60 days following the receipt by the special servicer of notice that
the related borrower has become the subject of a bankruptcy
proceeding;
o the mortgaged real property securing the mortgage loan becomes an
REO Property; or
o any balloon payment on such mortgage loan has not been paid by the
60th day following its scheduled maturity date, so long as the
applicable master servicer has, on or prior to the 60th day after
the due date of that balloon payment, received written evidence from
an institutional lender of such lender's binding commitment to
refinance the mortgage loan within 120 days after the due date of
such balloon payment, provided the borrower continues, during that
period, to make in respect of each due date without omission,
monthly payments equivalent to the monthly payments previously due
under the mortgage loan prior to its maturity date.
For purposes of the foregoing, each Loan Combination will be treated as a
single mortgage loan.
"ARD LOANS" means the mortgage loans in, or to be included in, the trust
fund, that have the characteristics described in the first paragraph under
"Description of the Mortgage Pool--Terms and Conditions of the MortgageLoans--ARD Loans" in this prospectus supplement and identified on Annex A-1 to
this prospectus supplement as an "ARD Loans.""AVAILABLE DISTRIBUTION AMOUNT" means, with respect to any distribution
date:
(a) an amount equal to the sum, without duplication, of the following
amounts:
(i) the aggregate of all amounts on deposit in the master
servicers' collection accounts and the trustee's distribution
account as of the close of business on the related
determination date and the amounts collected by or on behalf
of the master servicers as of the close of business on such
determination date and required to be deposited in the
collection account;
(ii) the aggregate amount of all P&I advances made by either master
servicer or the trustee for distribution on the certificates
on that distribution date;
(iii) the aggregate amount transferred from the special servicer's
REO account and/or any separate custodial account maintained
with respect to a Loan Combination to the applicable master
servicer's collection account during the month of that
distribution date, on or prior to the date on which P&I
advances are required to be made in that month;
(iv) the aggregate amount deposited by the master servicers in
their collection accounts for that distribution date in
connection with Prepayment Interest Shortfalls and any
shortfalls in interest caused by the application of a
condemnation award or casualty insurance proceeds to prepay a
mortgage loan; and
(v) for each distribution date occurring in March, the aggregate
of all interest reserve amounts in respect of each mortgage
loan that accrues interest on an Actual/360 Basis or an
Actual/365 Basis deposited in the trustee's distribution
account;
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exclusive of
(b) any portion of the amounts described in clause (a) above that
represents one or more of the following:
(i) any monthly debt service payments collected but due on a due
date after the end of the related collection period;
(ii) all amounts in the master servicers' collection accounts or
the trustee's distribution account that are payable or
reimbursable to any person other than the certificateholders
from:
(A) the master servicers' collection accounts, including,
but not limited to, servicing compensation, as described
under "Servicing of the Mortgage Loans--CollectionAccount--Withdrawals" in this prospectus supplement; and
(B) the trustee's distribution account, including, but not
limited to, trust administration fees, as described
under "Description of the OfferedCertificates--Distribution Account--Withdrawals" in this
prospectus supplement;
(iii) any prepayment premiums and yield maintenance charges;
(iv) any Additional Interest on the Converting Loans (which is
separately distributed to the holders of the class Y
certificates);
(v) any Additional Interest on the ARD Loans (which is separately
distributed to the holders of the class Z certificates);
(vi) if such distribution date occurs during February of any year
or during January of any year that is not a leap year, the
interest reserve amounts in respect of each mortgage loan that
accrues interest on an Actual/360 Basis or an Actual/365 Basis
to be deposited in the trustee's interest reserve account and
held for future distribution; and
(viii) any amounts deposited in the master servicers' collection
account or the trustee's distribution account in error.
In no event will the Available Distribution Amount include amounts payable
to the holders of the B-Note Non-Trust Loans.
"B-NOTE LOAN NOTEHOLDER" means the holder of a B-Note Non-Trust Loan.
"B-NOTE NON-TRUST LOAN" means any of the B-Note non-trust mortgage loans
that are secured by the same related mortgaged real property identified on Annex
A-1 to this prospectus supplement as Farallon Portfolio, Executive Hills
Portfolio, Peninsula Beverly Hills, Georgia-Alabama Retail Portfolio and
Timbercreek Apartments.
"B-NOTE TRUST LOAN" means any of the B-Note trust mortgage loans that are
secured by the same related mortgaged real property identified on Annex A-1 to
this prospectus supplement as Farallon Portfolio and Georgia-Alabama Retail
Portfolio.
"CLASS A-SB PLANNED PRINCIPAL BALANCE" means, with respect to the class
A-SB certificates for any distribution date, the principal balance specified for
that distribution date on Annex E to this prospectus supplement. The principal
balances set forth on Annex E to this prospectus supplement were calculated
using, among other things, the Modeling Assumptions and a 0% CPR. Based on the
Modeling Assumptions and a 0% CPR, the total principal balance of the class A-SB
certificates on each distribution date would be reduced to approximately the
scheduled principal balance indicated for that distribution date on Annex E to
this prospectus supplement. There is no assurance, however, that the mortgage
loans will perform in conformity with the Modeling Assumptions. Therefore, there
can be no assurance that the total principal balance of the class A-SB
certificates on any distribution
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date will be equal to (and, furthermore, following retirement of the class A-1
and A-2 certificates and the class A-2FL REMIC II regular interests, that total
principal balance may be less than) the principal balance that is specified for
that distribution date on Annex E to this prospectus supplement.
"CLEARSTREAM" means Clearstream Banking Luxembourg.
"CLOSING DATE" means the date of the initial issuance of the offered
certificates, which will be on or about August 24, 2007.
"CMSA" means the Commercial Mortgage Securities Association, an
international trade organization for the commercial real estate capital markets.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONVERTING LOAN" means any mortgage loan in, or to be included in, the
trust fund, that has the characteristics described in the first paragraph under
"Description of the Mortgage Pool--Terms and Conditions of the MortgageLoans--Converting Loans" in this prospectus supplement and identified on Annex
A-1 to this prospectus supplement as a "Converting Loan.""CPR" means an assumed constant rate of prepayment each month, which is
expressed on a per annum basis, relative to the then outstanding principal
balance of a pool of mortgage loans for the life of those loans.
"CROSSED LOAN" means a mortgage loan in the trust fund that is
cross-collateralized and cross-defaulted with one or more other mortgage loans
in the trust fund.
"CROSSED GROUP" means a group of related Crossed Loans.
"DTC" means The Depository Trust Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EUROCLEAR" means Euroclear Bank S.A./N.V., as operator of the Euroclear
System.
"EXECUTIVE HILLS PORTFOLIO B-NOTE NON-TRUST MORTGAGE LOAN" has the meaning
given such term under "Description of the Mortgage Pool--The LoanCombinations--The Executive Hills Portfolio Loan Combination" in this prospectus
supplement.
"EXECUTIVE HILLS PORTFOLIO CONTROLLING PARTY" means with respect to the
Executive Hills Portfolio Loan Combination;
o the holder of the Executive Hills Portfolio B-Note Non-Trust
Mortgage Loan, but only if and for so long as (i) it has an unpaid
principal balance, net of the portion of any Appraisal Reduction
Amount with respect to the Executive Hills Portfolio Loan
Combination allocable to the Executive Hills Portfolio B-Note
Non-Trust Mortgage Loan, equal to or greater than 25% of its unpaid
principal balance (without taking into account any Appraisal
Reduction Amount) or (ii) not more than 50% of the principal balance
of the Executive Hills Portfolio B-Note Non-Trust Mortgage Loan is
held by the related borrower of its affiliates; or
o the controlling class representative if (i) the unpaid principal
balance of the Executive Hills Portfolio B-Note Non-Trust Mortgage
Loan, net of the portion of any Appraisal Reduction Amount with
respect to the Executive Hills Portfolio Loan Combination allocable
to the Executive Hills Portfolio B-Note Non-Trust Mortgage Loan, is
less than 25% of its unpaid principal balance (without taking into
account any Appraisal Reduction Amount), or (ii) more than 50% of
the principal balance of the Executive Hills Portfolio B-Note
Non-Trust Mortgage Loan is held by the related borrower or its
affiliates.
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"EXECUTIVE HILLS PORTFOLIO INTERCREDITOR AGREEMENT" has the meaning given
such term under "Description of the Mortgage Pool--The Loan Combinations--TheExecutive Hills Portfolio Loan Combination" in this prospectus supplement.
"EXECUTIVE HILLS PORTFOLIO LOAN COMBINATION" means, collectively, the
Executive Hills Portfolio Trust Mortgage Loan and the Executive Hills Portfolio
B-Note Non-Trust Mortgage Loan.
"EXECUTIVE HILLS PORTFOLIO TRUST MORTGAGE LOAN" has the meaning given such
term under "Description of the Mortgage Pool--The Loan Combinations--TheExecutive Hills Portfolio Loan Combination" in this prospectus supplement.
"EXEMPTION" means, collectively, Prohibited Transaction Exemption 90-29
(granted to Merrill Lynch, Pierce, Fenner & Smith Incorporated), Prohibited
Transaction Exemption 2000-55 (granted to Countrywide Securities Corporation)
and Prohibited Transaction Exemption 90-30 (granted to Bear, Stearns & Co.
Inc.), each as amended by Prohibited Transaction Exemption 2007-5, or any
successor thereto, all as issued by the U.S. Department of Labor.
"EXEMPTION-FAVORED PARTY" means any of--
o Merrill Lynch, Pierce, Fenner & Smith Incorporated;
o Countrywide Securities Corporation;
o any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control
with any entity referred to in the prior two bullets; and
o any member of the underwriting syndicate or selling group of which a
person described in the prior three bullets is a manager or
co-manager with respect to those mortgage pass-through certificates.
"FARALLON PORTFOLIO A-NOTE NON-TRUST MORTGAGE LOAN" means, individually,
each loan that is evidenced by an individual note comprising the Farallon
Portfolio A-Note Non-Trust Mortgage Loans.
"FARALLON PORTFOLIO A-NOTE NON-TRUST MORTGAGE LOANS" means the loans
that--
o are not part of the issuing entity,
o consist of the notes specified under the columns "Fixed Rate Five
Year Note A,""Fixed Rate Ten Year Note A," and "Floating Rate ANote" in Table A under the heading "The Loan Combinations--TheFarallon Portfolio Loan Combination" in this prospectus supplement
which are not highlighted therein with an asterisk as being part of
the Farallon Portfolio Trust Mortgage Loan, which notes have an
unpaid principal balance of $883,775,000 as of the cut-off date, and
o are secured by the same mortgage encumbering the Farallon Portfolio
Mortgaged Property as are the Farallon Portfolio B-Note Trust
Mortgage Loans and the Farallon Portfolio A-Note Trust Mortgage
Loans.
"FARALLON PORTFOLIO A-NOTE TRUST MORTGAGE LOAN" means, individually, each
loan that is evidenced by an individual note comprising the Farallon
Portfolio A-Note Trust Mortgage Loans.
"FARALLON PORTFOLIO A-NOTE TRUST MORTGAGE LOANS" means the loans that--
o are part of the issuing entity,
o consist of the notes specified under the columns "Fixed Rate Seven
Year Note A" and "Fixed Rate Ten Year Note A" in Table A under the
heading "The Loan Combinations--The Farallon Portfolio LoanCombination" in this prospectus supplement which are highlighted
therein with an
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asterisk as being part of the Farallon Portfolio Trust Mortgage
Loan, which notes have an unpaid principal balance of $116,225,000
as of the cut-off date, and
o are secured by the same mortgage encumbering the Farallon Portfolio
Mortgaged Property as are the Farallon Portfolio B-Note Trust
Mortgage Loans and the Farallon Portfolio B-Note Non-Trust Mortgage
Loans.
"FARALLON PORTFOLIO B-NOTE NON-TRUST MORTGAGE LOAN" means, individually,
each loan that is evidenced by an individual note comprising the Farallon
Portfolio B-Note Non-Trust Mortgage Loans.
"FARALLON PORTFOLIO B-NOTE NON-TRUST MORTGAGE LOANS" means the loans
that--
o are part of the issuing entity,
o consist of the notes specified under the columns "Fixed Rate Five
Year Note B" and "Fixed Rate Ten Year Note B" in Table A under the
heading "The Loan Combinations--The Farallon Portfolio LoanCombination" in this prospectus supplement which are not highlighted
therein with an asterisk as being part of the Farallon Portfolio
Trust Mortgage Loan, which notes have an unpaid principal balance of
$441,725,000 as of the cut-off date, and
o are secured by the same mortgage encumbering the Farallon Portfolio
Mortgaged Property as are the Farallon Portfolio A-Note Trust
Mortgage Loans and the Farallon Portfolio B-Note Trust Mortgage
Loans.
"FARALLON PORTFOLIO B-NOTE TRUST MORTGAGE LOAN" means, individually, each
loan that is evidenced by an individual note comprising the Farallon Portfolio
B-Note Trust Mortgage Loans.
"FARALLON PORTFOLIO B-NOTE TRUST MORTGAGE LOANS" means the loans that--
o are part of the issuing entity,
o consist of the notes specified under the columns "Fixed Rate Seven
Year Note B" and "Fixed Rate Ten Year Note B" in Table A under the
heading "The Loan Combinations--The Farallon Portfolio LoanCombination" in this prospectus supplement which are highlighted
therein with an asterisk as being part of the Farallon Portfolio
Trust Mortgage Loan, which notes have an unpaid principal balance of
$133,775,000 as of the cut-off date, and
o are secured by the same mortgage encumbering the Farallon Portfolio
Mortgaged Property as are the Farallon Portfolio A-Note Trust
Mortgage Loans and the Farallon Portfolio B-Note Non-Trust Mortgage
Loans.
"FARALLON PORTFOLIO BORROWER" means the borrower under the Farallon
Portfolio Loan Combination.
"FARALLON PORTFOLIO CONTROL RIGHTS" means the rights, and limitations on
liability, of the Farallon Portfolio Controlling Party set forth under the
heading "The Loan Combinations--The Farallon Portfolio Loan Combination--ControlRights" in this prospectus supplement.
"FARALLON PORTFOLIO CONTROLLING PARTY" means, (i) during the Farallon
Portfolio Interim Period, the Farallon Portfolio Interim Controlling Party and
(ii) during the Farallon Portfolio Directing Securitization Period, the Farallon
Portfolio Directing Controlling Party.
"FARALLON PORTFOLIO DIRECTING CONTROLLING PARTY" means the entity
designated as such with respect to the Farallon Portfolio Loan Combination in
the Farallon Portfolio Directing Pooling Agreement.
"FARALLON PORTFOLIO DIRECTING POOLING AGREEMENT" means the pooling and
servicing agreement, trust and servicing agreement or similar agreement for the
Farallon Portfolio Directing Securitization.
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"FARALLON PORTFOLIO DIRECTING SECURITIZATION" means the securitization
designated as such by MLML, provided that such securitization holds all or any
portion of the Farallon Portfolio A-Note Non-Trust Mortgage Loans other than the
portion thereof that is represented by the floating rate A note.
"FARALLON PORTFOLIO DIRECTING SECURITIZATION PERIOD" means the period of
time commencing on the date of the Farallon Portfolio Directing Securitization
and thereafter.
"FARALLON PORTFOLIO INTERIM CONTROLLING PARTY" means the holder or holders
(and their respective successors and assigns) of all or any portion of the
Farallon Portfolio A-Note Non-Trust Mortgage Loans other than the portion
thereof that is represented by the floating rate A note, designated by MLML; the
initial Farallon Portfolio Interim Controlling Party shall be MLML.
"FARALLON PORTFOLIO INTERIM PERIOD" means the period of time commencing on
the date of the securitization of the Farallon Portfolio Trust Mortgage Loan and
ending on the date of the Farallon Portfolio Directing Securitization.
"FARALLON PORTFOLIO INTERCREDITOR AGREEMENT" means, the intercreditor and
servicing agreement by and between the holders of the Farallon Portfolio Trust
Mortgage Loan and the Farallon Portfolio Non-Trust Mortgage Loan. Following the
inclusion of the Farallon Portfolio Trust Mortgage Loan in the issuing entity,
the trust, acting through the trustee, will be the holder of that mortgage loan
and a party to the Farallon Portfolio Intercreditor Agreement.
"FARALLON PORTFOLIO LOAN COMBINATION" means, collectively, the Farallon
Portfolio Trust Mortgage Loan and the Farallon Portfolio Non-Trust Mortgage
Loan.
"FARALLON PORTFOLIO MORTGAGED PROPERTY" means the mortgaged real property
identified on Annex A-1 to this prospectus supplement as Farallon Portfolio.
"FARALLON PORTFOLIO NON-TRUST MORTGAGE LOAN" means, collectively, the
Farallon Portfolio A-Note Non-Trust Mortgage Loans and the Farallon Portfolio
B-Note Non-Trust Mortgage Loans, and each such loan, individually, a "Farallon
Portfolio Non-Trust Mortgage Loan.""FARALLON PORTFOLIO TRUST MORTGAGE LOAN" means, collectively, the Farallon
Portfolio A-Note Trust Mortgage Loan and the Farallon Portfolio B-Note Trust
Mortgage Loan.
"GEORGIA-ALABAMA RETAIL PORTFOLIO A-NOTE NON-TRUST MORTGAGE LOAN" has the
meaning given such term under "Description of the Mortgage Pool--The LoanCombinations--The Georgia-Alabama Retail Portfolio Loan Combination" in this
prospectus supplement.
"GEORGIA-ALABAMA RETAIL PORTFOLIO B-NOTE NON-TRUST MORTGAGE LOAN" has the
meaning given such term under "Description of the Mortgage Pool--The LoanCombinations--The Georgia-Alabama Retail Portfolio Loan Combination" in this
prospectus supplement.
"GEORGIA-ALABAMA RETAIL PORTFOLIO B-NOTE TRUST MORTGAGE LOAN" has the
meaning given such term under "Description of the Mortgage Pool--The LoanCombinations--The Georgia-Alabama Retail Portfolio Loan Combination" in this
prospectus supplement.
"GEORGIA-ALABAMA RETAIL PORTFOLIO CONTROLLING PARTY" means, with respect
to the Georgia-Alabama Retail Portfolio Loan Combination,
o the holder of more than 50% of the principal balance of the
Georgia-Alabama Retail Portfolio B-Note Trust Mortgage Loan and the
holder of more than 50% of the principal balance of the
Georgia-Alabama Retail Portfolio B-Note Non-Trust Mortgage Loan,
collectively (and excluding any principal balance held by the
related borrower or certain borrower related parties), but only if
and for so long as the Georgia-Alabama Junior Mortgage Loans
together have an unpaid principal balance, net of the portion of any
Appraisal Reduction Amount with respect to the Georgia-Alabama
Retail Portfolio Loan Combination allocable to the Georgia-Alabama
Retail Portfolio
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Junior Mortgage Loans, equal to or greater than 25% of their total
unpaid principal balance (without taking into account any Appraisal
Reduction Amount); or
o if the unpaid principal balance of the Georgia-Alabama Retail
Portfolio Junior Mortgage Loans, net of the portion of any Appraisal
Reduction Amount with respect to the Georgia-Alabama Retail
Portfolio Loan Combination allocable to the Georgia-Alabama Retail
Portfolio Junior Mortgage Loans, is less than 25% of their total
unpaid principal balance (without taking into account any Appraisal
Reduction Amount), the controlling class representative.
In general, to the extent that the series 2007-8 trust fund, as the holder
of the Georgia-Alabama Retail Portfolio B-Note Trust Mortgage Loan, is entitled
to make determinations in connection with the potential exercise of the rights
of the Georgia-Alabama Retail Portfolio Controlling Party, then the pooling and
servicing agreement will provide that the series 2007-8 controlling class
representative will be entitled to make those determinations on behalf of the
trust fund.
"GEORGIA-ALABAMA RETAIL PORTFOLIO INTERCREDITOR AGREEMENT" means, the
Intercreditor Agreements related to the Georgia-Alabama Retail Portfolio Loan
Combination.
"GEORGIA-ALABAMA RETAIL PORTFOLIO JUNIOR MORTGAGE LOANS" means the
Georgia-Alabama Retail Portfolio B-Note Trust Mortgage Loan and the
Georgia-Alabama Retail Portfolio B-Note Non-Trust Mortgage Loan.
"GEORGIA-ALABAMA RETAIL PORTFOLIO LOAN COMBINATION" has the meaning given
such term under "Description of the Mortgage Pool--The Loan Combinations--TheGeorgia-Alabama Retail Portfolio Loan Combination" in this prospectus
supplement.
"GEORGIA-ALABAMA RETAIL PORTFOLIO NON-TRUST LOANS" means the
Georgia-Alabama Retail Portfolio A-Note Non-Trust Mortgage Loan and the
Georgia-Alabama Retail Portfolio B-Note Non-Trust Mortgage Loan.
"GEORGIA-ALABAMA RETAIL PORTFOLIO SENIOR MORTGAGE LOANS" means the
Georgia-Alabama Retail Portfolio Trust Mortgage Loan and the Georgia-Alabama
Retail Portfolio A-Note Non-Trust Mortgage Loan.
"GEORGIA-ALABAMA RETAIL PORTFOLIO TRUST MORTGAGE LOAN" has the meaning
given such term under "Description of the Mortgage Pool--The LoanCombinations--The Georgia-Alabama Retail Portfolio Loan Combination" in this
prospectus supplement.
"FITCH" means Fitch, Inc.
"IRS" means the Internal Revenue Service.
"LOAN COMBINATION" means any of the Farallon Portfolio Loan Combination,
the Executive Hills Portfolio Loan Combination, the Peninsula Beverly Hills Loan
Combination, the Georgia-Alabama Retail Portfolio Loan Combination and the Mezz
Cap Loan Combination.
"LOAN COMBINATION INTERCREDITOR AGREEMENT" means any Intercreditor
Agreement related to any Loan Combination.
"LOAN GROUP 1 PRINCIPAL DISTRIBUTION AMOUNT" means, in general, the
portion of the Principal Distribution Amount attributable to the mortgage loans
in loan group 1.
"LOAN GROUP 2 PRINCIPAL DISTRIBUTION AMOUNT" means, in general, the
portion of the Principal Distribution Amount attributable to the mortgage loans
in loan group 2.
"MEZZCAP B-NOTE NON-TRUST MORTGAGE LOAN" means the Timbercreek Apartments
B-Note Non-Trust Mortgage Loan.
"MEZZCAP INTERCREDITOR AGREEMENT" means the Intercreditor Agreement
related to the Mezz Cap Loan Combination.
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"MEZZCAP LOAN COMBINATION" means the Timbercreek Apartments Loan
Combination.
"MEZZCAP MATERIAL DEFAULT" means, with respect to a MezzCap Loan
Combination, one of the following events: (a) either of the related underlying
mortgage loan or B-Note Non-Trust Loan has been accelerated; (b) a continuing
monetary default; or (c) a bankruptcy action has been filed by or against the
related borrower.
"MEZZCAP TRUST MORTGAGE LOAN" means the Timbercreek Apartments Trust
Mortgage Loan.
"MLML" means Merrill Lynch Mortgage Lending, Inc.
"MODELING ASSUMPTIONS" means, collectively, the following assumptions
regarding the certificates and the mortgage loans in, or to be included in, the
trust fund:
o the mortgage loans have the characteristics set forth on Annex A-1,
and the initial mortgage pool balance is approximately
$2,435,364,704; and the mortgage loans are allocated to loan group 1
and loan group 2 as described in this prospectus supplement;
o the initial total principal balance or notional amount, as the case
may be, of each class of certificates is as described in this
prospectus supplement;
o the pass-through rate for each class of certificates is as described
in this prospectus supplement;
o there are no delinquencies or losses with respect to the mortgage
loans;
o there are no modifications, extensions, waivers or amendments
affecting the monthly debt service payments by borrowers on the
mortgage loans;
o there are no Appraisal Reduction Amounts with respect to the
mortgage loans;
o there are no casualties or condemnations affecting the corresponding
mortgaged real properties;
o each of the mortgage loans provides monthly debt service payments to
be due on the first day of each month, and accrues interest on the
basis described in this prospectus supplement, which is any of an
Actual/360 Basis or a 30/360 Basis;
o all prepayments on the mortgage loans are assumed to be accompanied
by a full month's interest;
o there are no breaches of our representations and warranties
regarding the mortgage loans;
o no voluntary or involuntary prepayments are received as to any
mortgage loan during that mortgage loan's lockout period, yield
maintenance period or defeasance period, in each case if any;
o the ARD Loans are paid in full on its anticipated repayment date;
o except as otherwise assumed in the immediately preceding two
bullets, prepayments are made on each of the mortgage loans at the
indicated CPRs set forth in the subject tables, without regard to
any limitations in those mortgage loans on partial voluntary
principal prepayments;
o each Converting Loan is paid in full on the first payment date when
no prepayment charge is due;
o no person or entity entitled thereto exercises its right of optional
termination described in this prospectus supplement under
"Description of the Offered Certificates--Termination";
o no mortgage loan is required to be repurchased by any mortgage loan
seller;
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o any mortgage loans that allow a choice between yield maintenance or
fixed penalties and defeasance have been assumed to be mortgage
loans providing for voluntary prepayment with prepayment
consideration in the form of yield maintenance or fixed penalties,
as applicable;
o no prepayment premiums or yield maintenance charges are collected;
o there are no Additional Trust Fund Expenses;
o payments on the offered certificates are made on the 12th day of
each month, whether or not a business day, commencing in September
2007; and
o the offered certificates are settled on August 24, 2007.
"MOODY'S" means Moody's Investors Service, Inc.
"NET AGGREGATE PREPAYMENT INTEREST SHORTFALL" means, with respect to any
distribution date, the excess, if any, of--
o the Prepayment Interest Shortfalls incurred with respect to the
mortgage pool during the related collection period, over
o the total payments made by the master servicers to cover those
Prepayment Interest Shortfalls.
"NET MORTGAGE RATE" means with respect to any mortgage loan, in general, a
per annum rate equal to the related mortgage interest rate in effect from time
to time (excluding the Additional Interest distributable to the class Y and
class Z certificates), minus the sum of the applicable master servicing fee rate
under the pooling and servicing agreement (which includes the rate at which any
primary servicing fees accrue) and the per annum rate at which the monthly trust
administration fee is calculated; provided, however, that for purposes of
calculating the Weighted Average Net Mortgage Rate and the respective
pass-through rates for the class A-2FL REMIC II regular interest, the class
A-3FL REMIC II regular interest, the class AM-FL REMIC II regular interest, the
class AJ-FL REMIC II regular interest and the various classes of the non-fixed
rate interest-bearing certificates, from time to time--
o the Net Mortgage Rate for the subject mortgage loan will be
calculated without regard to any modification, waiver or amendment
of the terms of such mortgage loan, or any other change in the
related mortgage interest rate, subsequent to the date of issuance
of the certificates, and
o if any mortgage loan does not accrue interest on the basis of a
360-day year consisting of twelve 30-day months, then the Net
Mortgage Rate of such mortgage loan for any one-month period
preceding a related due date will be the annualized rate at which
interest would have to accrue in respect of such loan on the basis
of a 360-day year consisting of twelve 30-day months in order to
produce, in general, the aggregate amount of interest actually
accrued in respect of such loan during such one-month period at the
related mortgage interest rate (net of the aggregate per annum rate
at which the related master servicing fee and the trust
administration fee are calculated under the pooling and servicing
agreement), except that, with respect to any such mortgage loan, the
Net Mortgage Rate for the one-month period (a) prior to the
respective due dates in January and February in any year which is
not a leap year or in February in any year which is a leap year will
be determined so as to produce an aggregate amount of interest that
excludes any related interest reserve amount transferred to the
trustee's interest reserve account in respect of that one-month
period and (b) prior to the due date in March will be determined so
as to produce an aggregate amount of interest that includes the
related interest reserve amount(s) retained in the trustee's
interest reserve account for the respective one-month periods prior
to the due dates in January and February in any year which is not a
leap year or the one-month period prior to the due date in February
in any year which is a leap year.
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As of the cut-off date (without regard to the adjustment described in the
proviso to the prior sentence), the Net Mortgage Rates for the mortgage loans
ranged from 5.04915% per annum to 6.78915%, with a weighted average of those Net
Mortgage Rates of 5.95741% per annum. See "Servicing of the MortgageLoans--Servicing and Other Compensation and Payment of Expenses" in this
prospectus supplement.
"NONRECOVERABLE ADVANCE" means any Advance previously made or proposed to
be made, or any Workout-Delayed Reimbursement Amount previously made, with
respect to any mortgage loan or REO Property that is determined, in accordance
with the pooling and servicing agreement, not to be ultimately recoverable,
together with interest accrued on that Advance, from payments or other
collections on or with respect to that mortgage loan or REO Property (or, in the
case of an A-Note Trust Mortgage Loan, on or with respect to the related Loan
Combination).
"NON-TRUST LOAN NOTEHOLDER" means the holder of a Non-Trust Loan.
"NON-TRUST LOAN" means any of the Farallon Portfolio Non-Trust Loan,
Executive Hills Portfolio B-Note Non-Trust Loan, Peninsula Beverly Hills B-Note
Non-Trust Loan, Georgia-Alabama Retail Portfolio A-Note Non-Trust Loan,
Georgia-Alabama Retail Portfolio B-Note Non-Trust Loan and the MezzCap B-Note
Non-Trust Loan.
"OTHER SECURITIZATION" means the ML-CFC 2007-7 Commercial Mortgage Trust
Commercial Mortgage Pass-Through Certificates, Series 2007-7, which holds the
Georgia-Alabama Retail Portfolio A Note Non-Trust designated as "Note A-1" in
the Georgia-Alabama Retail Portfolio Intercreditor Agreement.
"OTHER SERVICER" means Wachovia Bank, National Association, which acts as
a master servicer of the Other Securitization, which will be responsible for the
primary servicing and administration of the Georgia-Alabama Retail Portfolio
Loan Combination under the Other Pooling and Servicing Agreement.
"OTHER SPECIAL SERVICER" means Midland Loan Services, Inc., as special
servicer of the Other Securitization, which will be responsible for the
servicing and administration of the Georgia-Alabama Retail Loan Combination to
the extent it becomes a specially serviced mortgage loan under the Other Pooling
and Servicing Agreement.
"OTHER TRUSTEE" means LaSalle Bank National Association, as trustee of the
Other Securitization.
"OTHER POOLING AND SERVICING AGREEMENT" means that certain pooling and
servicing agreement relating to the Other Securitization among Merrill Lynch
Mortgage Investors, Inc., the Other Servicer, Midland Loan Services, Inc., as a
master servicer, the Other Special Servicer and the Other Trustee.
"P&I" means principal and/or interest payments, excluding balloon
payments, required to be paid in respect of a mortgage loan in accordance with
the schedule for repayment provided for by that mortgage loan.
"PARTY IN INTEREST" means any person that is a "party in interest" within
the meaning of Section 3(14) of ERISA or a "disqualified person" within the
meaning of section 4975(e)(2) of the Code.
"PENALTY INTEREST" means any interest, other than late payment charges,
Additional Interest, prepayment premiums or yield maintenance charges, that--
o accrues on a defaulted mortgage loan solely by reason of the subject
default; and
o is in excess of all interest at the related mortgage interest rate.
"PENINSULA BEVERLY HILLS B-NOTE NON-TRUST MORTGAGE LOAN" has the meaning
given such term under "Description of the Mortgage Pool--The LoanCombinations--The Peninsula Beverly Hills Loan Combination" in this prospectus
supplement.
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"PENINSULA BEVERLY HILLS CONTROLLING PARTY" means, with respect to the
Peninsula Beverly Hills Loan Combination,
o the holder of more than 50% of the principal balance of the
Peninsula Beverly Hills B-Note Non-Trust Mortgage Loan (excluding
any principal balance held by the related borrower or certain
borrower related parties), but only if and for so long as it has an
unpaid principal balance, net of the portion of any Appraisal
Reduction Amount with respect to the Peninsula Beverly Hills Loan
Combination allocable to the Peninsula Beverly Hills B-Note
Non-Trust Mortgage Loan, equal to or greater than 25% of its unpaid
principal balance (without taking into account any Appraisal
Reduction Amount); or
o if the unpaid principal balance of the Peninsula Beverly Hills
B-Note Non-Trust Mortgage Loan, net of the portion of any Appraisal
Reduction Amount with respect to the Peninsula Beverly Hills Loan
Combination allocable to the Peninsula Beverly Hills B-Note
Non-Trust Mortgage Loan, is less than 25% of its unpaid principal
balance (without taking into account any Appraisal Reduction
Amount), the controlling class representative.
"PENINSULA BEVERLY HILLS INTERCREDITOR AGREEMENT" means, the Intercreditor
Agreement related to the Peninsula Beverly Hills Loan Combination.
"PENINSULA BEVERLY HILLS LOAN COMBINATION" has the meaning given such term
under "Description of the Mortgage Pool--The Loan Combinations--The PeninsulaBeverly Hills Loan Combination" in this prospectus supplement.
"PENINSULA BEVERLY HILLS TRUST MORTGAGE LOAN" has the meaning given such
term under "Description of the Mortgage Pool--The Loan Combinations--ThePeninsula Beverly Hills Loan Combination" in this prospectus supplement.
"PERMITTED ENCUMBRANCES" means, with respect to any mortgaged real
property securing a mortgage loan, any and all of the following in, or to be
included in, the trust fund:
o the lien of current real property taxes, ground rents, water
charges, sewer rents and assessments not yet delinquent or accruing
interest or penalties;
o covenants, conditions and restrictions, rights of way, easements and
other matters that are of public record and/or are referred to in
the related lender's title insurance policy or, if that policy has
not yet been issued, referred to in a pro forma title policy or a
marked-up commitment binding upon the title insurer;
o exceptions and exclusions specifically referred to in the related
lender's title insurance policy or, if that policy has not yet been
issued, referred to in a pro forma title policy or marked-up
commitment binding upon the title insurer;
o other matters to which like properties are commonly subject;
o the rights of tenants, as tenants only, under leases and subleases,
pertaining to the related mortgaged real property;
o if the related mortgage loan is cross-collateralized with any other
mortgage loan within the mortgage pool, the lien of the mortgage for
the other mortgage loan(s) contained in the same group of
cross-collateralized loans; and
o if the related mortgaged real property consists of one or more units
in a condominium, the related condominium declaration,
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none of which, as represented by the related mortgage loan seller in the related
mortgage loan purchase agreement (subject to any exceptions set forth in that
agreement), materially interferes with the security intended to be provided by
the related mortgage, the current principal use of the property or the current
ability of the property to generate income sufficient to service the related
mortgage loan.
"PERMITTED INVESTMENTS" means U.S. government securities and AAA rated
obligations, including:
o 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 (having original maturities of not
more than 365 days), provided that those obligations are backed by
the full faith and credit of the United States;
o repurchase agreements or obligations with respect to any security
described in the preceding bullet (having original maturities of not
more than 365 days), provided that (a) the short-term deposit or
debt obligations of the party agreeing to repurchase the subject
security are rated F1+ by Fitch and A-1+ by S&P, and (b) if it is a
long term deposit or debt obligation (which in the case of S&P means
in excess of three months), the long-term debt obligations of which
are rated AA+ by Fitch and AAA by S&P;
o federal funds, unsecured uncertified certificates of deposit, time
deposits, demand deposits and bankers' acceptances of any bank or
trust company organized under the laws of the United States or any
state thereof (having original maturities of not more than 365
days), (a) the short-term obligations of which are rated F1+ by
Fitch and A-1+ by S&P, and (b) if it is a long term obligation
(which in the case of S&P means in excess of three months), the
long-term debt obligations of which are rated AA+ by Fitch and AAA
by S&P;
o commercial paper (including both non-interest bearing discount
obligations and interest-bearing obligations and having original
maturities of not more than 365 days) of any corporation or other
entity organized under the laws of the United States or any state
thereof which commercial paper (a) is rated F1+ by Fitch and A-1+ by
S&P, and (b) if it is a long term obligation (which in the case of
S&P means in excess of three months), the long-term debt obligations
of which are rated AA+ by Fitch and AAA by S&P;
o money market funds which are rated in one of the four highest
applicable rating categories of a nationally recognized statistical
rating organization (AA+ by Fitch and AAAm or AAAm-G by S&P); and
o any other obligation or security acceptable to each applicable
rating agency for the related offered certificates, evidence of
which acceptability will be provided in writing by each of those
rating agencies to, among others, the trustee;
provided that (1) no investment described above may evidence either the right to
receive (x) only interest with respect to such investment or (y) a yield to
maturity greater than 120% of the yield to maturity at par of the underlying
obligations; and (2) no investment described above may be purchased at a price
greater than par if such investment may be prepaid or called at a price less
than its purchase price prior to stated maturity. In addition, "Permitted
Investments" (i) must exclude any security with the S&P's "r" symbol attached to
the rating; and (ii) must be limited to those instruments that have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change. All investments must mature or be redeemable upon the option of the
holder thereof on or prior to the business day preceding the day before the date
such amounts are required to be remitted out of the applicable account under the
pooling and servicing agreement.
"PLAN" means any employee benefit plan, or other retirement plan,
arrangement or account, that is subject to the fiduciary responsibility
provisions of ERISA or section 4975 of the Code.
"PREPAYMENT INTEREST EXCESS" means, with respect to any full or partial
prepayment of a mortgage loan made by the related borrower during any collection
period after the due date for that loan, the amount of any interest collected on
that prepayment for the period following that due date, less the amount of
related master servicing fees
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payable from that interest collection, and exclusive of any Penalty Interest
and/or Additional Interest included in that interest collection.
"PREPAYMENT INTEREST SHORTFALL" means, with respect to any full or partial
prepayment of a mortgage loan voluntarily made by the related borrower during
any collection period prior to the due date for that loan, the amount of any
uncollected interest, without regard to any prepayment premium or yield
maintenance charge actually collected, that would have accrued on that
prepayment to, but not including, that due date at a rate per annum equal to the
sum of the related Net Mortgage Rate for such mortgage loan and the trust
administration fee rate (net of any Penalty Interest and Additional Interest, if
applicable).
"PRIMARY COLLATERAL" means the mortgaged real property directly securing a
Crossed Loan and excluding any property as to which the related lien may only be
foreclosed upon by exercise of cross-collateralization of that Crossed Loan with
other related Crossed Loans.
"PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to each distribution
date, the aggregate of the following (without duplication):
(a) the aggregate of the principal portions of all monthly debt service
payments (other than balloon payments) due or deemed due on or in
respect of the mortgage loans (including mortgage loans as to which
the related mortgaged real properties have become REO Properties)
for their respective due dates occurring during the related
collection period, to the extent paid by the related borrower during
or prior to, or otherwise received during, the related collection
period or advanced by either master servicer or the trustee, as
applicable, for such distribution date;
(b) the aggregate of all principal prepayments received on the mortgage
loans during the related collection period;
(c) with respect to any mortgage loan as to which the related stated
maturity date occurred during or prior to the related collection
period, any payment of principal (other than a principal prepayment)
made by or on behalf of the related borrower during the related
collection period (including any balloon payment), net of any
portion of such payment that represents a recovery of the principal
portion of any monthly debt service payment (other than a balloon
payment) due or deemed due in respect of the related mortgage loan
on a due date during or prior to the related collection period and
included as part of the Principal Distribution Amount for such
distribution date or any prior distribution date pursuant to clause
(a) above;
(d) the aggregate of the principal portion of all liquidation proceeds,
sale proceeds, insurance proceeds, condemnation proceeds and, to the
extent not otherwise included in clause (a), (b) or (c) above,
payments and revenues that were received on or in respect of the
mortgage loans and REO Properties during the related collection
period and that were identified and applied by the applicable master
servicer and/or the special servicer as recoveries of principal of
the mortgage loans, in each case net of any portion of such amounts
that represents a recovery of the principal portion of any monthly
debt service payment (other than a balloon payment) due or deemed
due in respect of the related mortgage loan on a due date during or
prior to the related collection period and included as part of the
Principal Distribution Amount for such distribution date or any
prior distribution date pursuant to clause (a) above; and
(e) if such distribution date is subsequent to the initial distribution
date, the excess, if any, of the Principal Distribution Amount for
the immediately preceding distribution date, over the aggregate
distributions of principal made on the principal balance
certificates on such immediately preceding distribution date;
provided that the Principal Distribution Amount for any distribution date will
generally be reduced (to not less than zero) by any Workout-Delayed
Reimbursement Amounts in respect of any particular mortgage loan that are
reimbursed from principal collections on the mortgage pool during the related
collection period (although any of those amounts that were reimbursed from
principal collections and are subsequently collected on the related
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mortgage loan will be added to the Principal Distribution Amount for the
distribution date following the collection period in which the subsequent
collection occurs); and
provided, further, that the Principal Distribution Amount for any distribution
date will generally be reduced (to not less than zero) by any Nonrecoverable
Advances in respect of any particular mortgage loan (and advance interest
thereon) that are reimbursed from principal collections on the mortgage pool
during related collection period (although any of those amounts that were
reimbursed from principal collections and are subsequently collected
(notwithstanding the nonrecoverability determination) on the related mortgage
loan will be added to the Principal Distribution Amount for the distribution
date following the collection period in which the subsequent collection occurs).
If the reimbursement of any Workout-Delayed Reimbursement Amount or
Nonrecoverable Advance (and accompanying interest) results in a reduction in the
Principal Distribution Amount for any distribution date, as contemplated by the
provisos to the prior sentence, then that reduction shall, to the fullest extent
permitted, be applied to the portion of the Principal Distribution Amount
attributable to the loan group that includes the related mortgage loan before
affecting the portion of the Principal Distribution Amount attributable to the
other loan group. Any additions to the Principal Distribution Amount for any
distribution date, as contemplated by the provisos to the first sentence of this
definition, will be allocated between the respective portions of the Principal
Distribution Amount allocable to the two loan groups to offset the earlier
corresponding reductions, generally in the reverse order in which the reductions
were made.
The payment of Additional Trust Fund Expenses with respect to any mortgage
loan may result in a reduction of amounts allocable as principal of that
mortgage loan and, accordingly, a smaller Principal Distribution Amount.
The Principal Distribution Amount will not include any payments or other
collections of principal on the Non-Trust Loans.
"REALIZED LOSSES" mean losses arising from the inability to collect all
amounts due and owing under any defaulted mortgage loan, including by reason of
the fraud or bankruptcy of the borrower, modifications, bankruptcy or a casualty
of any nature at the related mortgaged real property, to the extent not covered
by insurance. The Realized Loss in respect of a liquidated mortgage loan (or
related REO Property) is an amount generally equal to the excess, if any, of (a)
the outstanding principal balance of such mortgage loan as of the date of
liquidation, together with (i) all accrued and unpaid interest thereon to but
not including the due date in the collection period in which the liquidation
occurred (exclusive of any Penalty Interest, Additional Interest, prepayment
premiums or yield maintenance charges in respect of such mortgage loan) and (ii)
related servicing expenses and servicing advances (together with interest
accrued thereon), and related Unliquidated Advances in respect of servicing
advances, in any event not reimbursed from collections on the subject mortgage
loan (or related REO Property), and any related due and unpaid servicing
compensation (including principal recovery fees) and any other related unpaid
Additional Trust Fund Expenses, over (b) the aggregate amount of liquidation
proceeds, if any, recovered in connection with such liquidation (net of any
portion of such liquidation proceeds that is payable or reimbursable in respect
of the related liquidation and other servicing expenses and, in the case of an
A-Note Trust Mortgage Loan, net of any portion of such liquidation proceeds
payable to the holder of the related Non-Trust Loan. If any portion of the debt
due under a mortgage loan (other than Additional Interest and Penalty Interest)
is forgiven, whether in connection with a modification, waiver or amendment
granted or agreed to by the special servicer or in connection with a bankruptcy
or similar proceeding involving the related borrower, the amount so forgiven
also will be treated as a Realized Loss. Any reimbursement of Advances
determined to be nonrecoverable from collections on the related mortgage loan
(and interest on such Advances) that are made from collections of principal that
would otherwise be included in the Principal Distribution Amount, will be
Realized Losses.
"REMIC" means a real estate mortgage investment conduit, within the
meaning of, and formed in accordance with, the Tax Reform Act of 1986 and
sections 860A through 860G of the Code.
"REO PROPERTY" means any mortgaged real property that is acquired by the
trust through foreclosure, deed-in-lieu of foreclosure or otherwise following a
default on the corresponding mortgage loan.
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"RESTRICTED GROUP" means, collectively--
1. the trustee;
2. the Exemption-Favored Parties;
3. us;
4. the master servicers;
5. the special servicer;
6. any sub-servicers;
7. the mortgage loan sellers;
8. the swap counterparty;
9. each borrower, if any, with respect to mortgage loans constituting
more than 5.0% of the total unamortized principal balance of the
mortgage pool as of the date of initial issuance of the offered
certificates; and
10. any and all affiliates of any of the aforementioned persons.
"RESTRICTED SERVICER REPORTS" means collectively, to the extent not filed
with the Securities and Exchange Commission, the CMSA servicer watchlist, the
CMSA operating statement analysis report, the CMSA NOI adjustment worksheet, the
CMSA financial file, the CMSA comparative financial status report and the CMSA
loan level reserve/LOC report.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc.
"SERVICING STANDARD" means, with respect to each master servicer or the
special servicer, the obligation to service and administer the mortgage loans
for which that party is responsible under the pooling and servicing agreement:
o in the same manner in which, and with the same care, skill, prudence
and diligence with which, each master servicer or the special
servicer, as the case may be, generally services and administers
similar mortgage loans that either are part of other third-party
portfolios, giving due consideration to customary and usual
standards of practice of prudent institutional commercial mortgage
loan servicers servicing mortgage loans for third parties, or are
held as part of its own portfolio, whichever standard is higher;
o with a view to (i) the timely recovery of all scheduled payments of
principal and interest under the mortgage loans, (ii) in the case of
the special servicer, if a mortgage loan comes into and continues in
default, the maximization of the recovery on that mortgage loan to
the certificateholders and, in the case of a Loan Combination, the
holder of the related Non-Trust Loan, all taken as a collective
whole, on a net present value basis (the relevant discounting of the
anticipated collections to be performed at the related mortgage
interest rate) and (iii) the best interests (as determined by each
master servicer or special servicer, as applicable, in its
reasonable judgment) of the holders of the certificates and the
trust fund and, in the case of a Loan Combination, the holder of the
related Non-Trust Loan, taking into account, to the extent
consistent with the related Loan Combination Intercreditor
Agreement, the subordinate nature of the related B-Note Non-Trust
Loan; and
o without regard to--
1. any relationship that each master servicer or the special
servicer, as the case may be, or any of its affiliates may
have with any of the borrowers (or any affiliate thereof), us,
any mortgage loan seller or any other party to the
transaction;
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2. the ownership of any certificate by each master servicer or
the special servicer, as the case may be, or by any of its
affiliates;
3. the obligation of each master servicer or the special
servicer, as the case may be, to make Advances;
4. the right of each master servicer or the special servicer, as
the case may be, to receive compensation or other fees for its
services rendered pursuant to the pooling and servicing
agreement;
5. the ownership, servicing or management by each master servicer
or the special servicer, as the case may be, or any of its
affiliates of any other loans or real properties not included
in or securing, as the case may be, the mortgage pool;
6. any obligation of each master servicer or any of its
affiliates to repurchase or substitute a mortgage loan as a
mortgage loan seller;
7. any obligation of each master servicer or any of its
affiliates to cure a breach of representation and warranty
with respect to any mortgage loan; and
8. any debt each master servicer or the special servicer, as the
case may be, or any of its affiliates, has extended to any of
the borrowers or any affiliate thereof.
"SERVICING TRANSFER EVENT" means, with respect to any mortgage loan
serviced under the pooling and servicing agreement, any of the following events:
1. the related borrower fails to make when due any monthly debt service
payment, including a balloon payment, and the failure continues
unremedied--
(a) except in the case of a balloon payment, for 60 days; or
(b) solely in the case of a delinquent balloon payment, for 60
days, so long as the related borrower (A) continues to make in
respect of each due date without omission, monthly payments
equivalent to the monthly payments previously due under the
mortgage loan prior to its maturity date, and (B) delivers a
refinancing commitment within 60 days after the related
maturity date, then for such period (not to exceed 120 days)
beyond the related maturity date ending on the date on which
it is determined that the refinancing could not reasonably be
expected to occur;
2. the applicable master servicer or, with the consent of the
controlling class representative, the special servicer determines in
its reasonable judgment (exercised in accordance with the Servicing
Standard) that a default in the making of a monthly debt service
payment, including a balloon payment, is likely to occur and is
likely to remain unremedied for at least 60 days;
3. the applicable master servicer or, with the consent of the
controlling class representative, the special servicer determines in
its reasonable judgment (exercised in accordance with the Servicing
Standard) that a non-payment default (other than an Acceptable
Insurance Default) has occurred under the mortgage loan that may
materially impair the value of the corresponding mortgaged real
property as security for the mortgage loan and the default continues
unremedied beyond the applicable cure period under the terms of the
mortgage loan or, if no cure period is specified, for 60 days,
provided that a default that gives rise to an acceleration right
without any cure period shall be deemed to have a cure period equal
to zero;
4. various events of bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar proceedings occur
with respect to the related borrower or the corresponding mortgaged
real property, or the related borrower takes various actions
indicating its bankruptcy, insolvency or inability to pay its
obligations; or
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5. the applicable master servicer receives notice of the commencement
of foreclosure or similar proceedings with respect to the
corresponding mortgaged real property.
A Servicing Transfer Event will cease to exist, if and when:
o with respect to the circumstances described in clause 1. of this
definition, the related borrower makes three consecutive full and
timely monthly debt service payments under the terms of the mortgage
loan, as those terms may be changed or modified in connection with a
bankruptcy or similar proceeding involving the related borrower or
by reason of a modification, waiver or amendment granted or agreed
to by the applicable master servicer or the special servicer;
o with respect to the circumstances described in clauses 2. and 4. of
this definition, those circumstances cease to exist in the
reasonable judgment of the special servicer (exercised in accordance
with the Servicing Standard), but, with respect to any bankruptcy or
insolvency proceedings contemplated by clause 4., no later than the
entry of an order or decree dismissing the proceeding;
o with respect to the circumstances described in clause 3. of this
definition, the default is cured in the judgment of the special
servicer; and
o with respect to the circumstances described in clause 5. of this
definition, the proceedings are terminated;
so long as at that time no other circumstance identified in clauses 1. through
5. of this definition continues to exist.
If a Servicing Transfer Event exists with respect to the mortgage loan in
a Loan Combination that will be included in the trust or any other loan in the
related Loan Combination, it will also be considered to exist for each other
mortgage loan in the subject Loan Combination; provided that, if the holder of a
B-Note Non-Trust Loan prevents the occurrence of a Servicing Transfer Event with
respect to the related Trust Mortgage Loan through the exercise of cure rights
as set forth in the related Loan Combination Intercreditor Agreement, then the
existence of such Servicing Transfer Event with respect to that B-Note Non-Trust
Loan will not, in and of itself, result in the existence of a Servicing Transfer
Event with respect to the related Trust Mortgage Loan or cause the servicing of
the related Loan Combination to be transferred to the special servicer, unless a
separate Servicing Transfer Event has occurred with respect thereto.
"STATED PRINCIPAL BALANCE" means, for each mortgage loan, an amount that:
o will initially equal its cut-off date principal balance (or, in the
case of a replacement mortgage loan, its principal balance as of the
date of substitution); and
o will be permanently reduced on each distribution date, to not less
than zero, by--
1. all payments and other collections of principal, if any, with
respect to that mortgage loan that are included as part of the
Principal Distribution Amount for such distribution date
pursuant to clause (a), clause (b), clause (c) and/or clause
(d) of, and without regard to the provisos to, the definition
of "Principal Distribution Amount" in this glossary;
2. any amount of reduction in the outstanding principal balance
of any mortgage loan resulting from a deficient valuation that
occurred during the related collection period; and
3. any other related Realized Losses incurred during the related
collection period that represents a loss of principal with
respect to that mortgage loan.
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With respect to each mortgage loan relating to, and deemed to remain
outstanding with respect to, an REO Property, the "Stated Principal Balance"
will be an amount equal to the Stated Principal Balance of that mortgage loan as
of the date of the acquisition of the related REO Property, permanently reduced
on each subsequent distribution date, to not less than zero, by:
o all amounts, if any, collected with respect to the related REO
Property that are allocable as principal of the subject mortgage
loan and that are included as part of the Principal Distribution
Amount for such distribution date pursuant to clause (a), clause
(b), clause (c) and/or clause (d) of, and without regard to the
provisos to, the definition of "Principal Distribution Amount" in
this glossary; and
o any related Realized Loss incurred during the related collection
period that represents a loss of principal with respect to the
subject mortgage loan.
o "Unliquidated Advance" means, with respect to any mortgage loan, any
Advance made by a party to the pooling and servicing agreement that:
o is not a Nonrecoverable Advance;
o has been reimbursed to the party that made the Advance as a
Workout-Delayed Reimbursement Amount out of principal collections on
other mortgage loans; and
o was originally made with respect to an item that has not been
subsequently recovered out of collections on or proceeds of the
subject mortgage loan or any related REO Property.
"TRUST MORTGAGE LOAN" means any of the mortgage loans included in the
trust that are secured by the mortgaged real properties identified on Annex A-1
to this prospectus supplement as Farallon Portfolio, Executive Hills Portfolio,
Peninsula Beverly Hills, Georgia-Alabama Retail Portfolio and Timbercreek
Apartments.
"UNRESTRICTED SERVICER REPORTS" means collectively, the CMSA delinquent
loan status report, CMSA historical loan modification and corrected mortgage
loan report, CMSA REO status report, CMSA advance recovery report and, if and to
the extent filed with the Securities and Exchange Commission, such reports and
files as would, but for such filing, constitute Restricted Servicer Reports.
"WEIGHTED AVERAGE NET MORTGAGE RATE" means, for any distribution date, the
weighted average of the applicable Net Mortgage Rates for all the mortgage
loans, weighted on the basis of their respective Stated Principal Balances
immediately following the preceding distribution date.
"WORKOUT-DELAYED REIMBURSEMENT AMOUNT" means, with respect to any mortgage
loan that had been subject to special servicing and has subsequently been
returned to performing status (including as a result of a modification of its
terms), any Advance made with respect to that mortgage loan as of a date
coinciding with or, depending on the circumstances, shortly before the date on
which that mortgage loan stopped being specially serviced, together with
interest on that Advance, to the extent that (a) such Advance is not reimbursed
to the party that made it as of the date that the subject mortgage loan stopped
being specially serviced and (b) the amount of such Advance becomes an
obligation of the related borrower to pay such amount under the terms of the
modified loan documents.
The following defined terms and descriptions of underwriting standards are
used in Annexes A-1 and A-2:
(i) References to "UW DSCR (x)" and "DSCR" are references to debt
service coverage ratios. Debt service coverage ratios are used by income
property lenders to measure the ratio of (a) cash currently generated by a
property that is available for debt service (that is, cash that remains after
average cost of non-capital expenses of operation, tenant improvements, leasing
commissions and replacement reserves during the term of the mortgage loan) to
(b) required debt service payments. However, debt service coverage ratios only
measure the current, or recent, ability of a property to service mortgage debt.
The UW DSCR (x) for any mortgage loan is the ratio of "UW Net Cash Flow"
produced by the related mortgaged real property to the annualized amount of debt
service that will be payable under that mortgage loan commencing after the
origination date; provided, however, for purposes of
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calculating the UW DSCR (x) provided in this prospectus supplement with respect
to ninety (90) mortgage loans, representing approximately 48.3% of the initial
mortgage pool balance, where periodic payments are interest-only for a certain
amount of time after origination, after which period each mortgage loan
amortizes principal for its remaining term, the debt service used is the
annualized amount of debt service that will be payable under the mortgage loan
commencing after the amortization period begins; and provided, further, that for
purposes of calculating the UW DSCR(x) provided in this prospectus supplement
with respect to thirty-nine (39) mortgage loans, representing approximately
31.2% of the initial mortgage pool balance, where periodic payments are
interest-only up to the related maturity date or, if applicable, the related
anticipated repayment date, the debt service used is the product of (a) the
principal balance of the subject mortgage loan as of the cut-off date and (b)
the annual mortgage rate as adjusted for the interest accrual method.
As indicated in the footnotes to the table in the section captioned
"Summary of Prospectus Supplement--The Mortgage Loans and the Mortgaged RealProperties--Additional Statistical Information," the debt service coverage ratio
for certain mortgage loans may have been calculated by taking into account a
holdback amount and/or a letter of credit taken subject to the financial
performance of the related mortgaged real property. Additionally, with respect
to certain other mortgage loans, the related debt service coverage ratio was
calculated by taking into account various assumptions regarding the financial
performance of the related mortgaged real property on a "stabilized" basis. See
Annex A-1 to this prospectus supplement for more information regarding the debt
service coverage ratios on the mortgage loans referred to in the foregoing
sentence.
(ii) The "UW Net Cash Flow" or "UW NCF ($)" for a mortgaged real property
is the "net cash flow" of such mortgaged real property as set forth in, or
determined by the applicable mortgage loan seller on the basis of, mortgaged
real property operating statements, generally unaudited, and certified rent
rolls (as applicable) supplied by the related borrower in the case of
multifamily, mixed use, retail, manufactured housing community, industrial, self
storage and office properties (each, a "Rental Property"). In general, the
mortgage loan sellers relied on either full-year operating statements, rolling
12-month operating statements and/or applicable year to-date financial
statements, if available, and on rent rolls for all Rental Properties that were
current as of a date not earlier than six months prior to the respective date of
origination in determining UW Net Cash Flow for the mortgaged real properties.
In general, "net cash flow" is the revenue derived from the use and
operation of a mortgaged real property less operating expenses (such as
utilities, administrative expenses, repairs and maintenance, tenant improvement
costs, leasing commissions, management fees and advertising), fixed expenses
(such as insurance, real estate taxes and, if applicable, ground lease payments)
and replacement reserves and an allowance for vacancies and credit losses. Net
cash flow does not reflect interest expenses and non-cash items such as
depreciation and amortization, and generally does not reflect capital
expenditures.
In determining the "revenue" component of UW Net Cash Flow for each Rental
Property, the applicable mortgage loan seller generally relied on the most
recent rent roll supplied and, where the actual vacancy shown thereon and the
market vacancy was less than 5.0%, assumed a 5.0% vacancy in determining revenue
from rents, except that in the case of certain non-multifamily properties, space
occupied by such anchor or single tenants or other large creditworthy tenants
may have been disregarded in performing the vacancy adjustment due to the length
of the related leases or creditworthiness of such tenants, in accordance with
the respective mortgage loan seller's underwriting standards. Where the actual
or market vacancy was not less than 5.0%, the applicable mortgage loan seller
determined revenue from rents by generally relying on the most recent rent roll
supplied and the greater of (a) actual historical vacancy at the related
mortgaged real property, (b) historical vacancy at comparable properties in the
same market as the related mortgaged real property, and (c) 5.0%. In determining
rental revenue for multifamily, self storage and manufactured housing community
properties, the mortgage loan sellers generally either reviewed rental revenue
shown on the certified rolling 12-month operating statements, the rolling
three-month operating statements for multifamily properties or annualized the
rental revenue and reimbursement of expenses shown on rent rolls or operating
statements with respect to the prior one to twelve month periods. For the other
Rental Properties, the mortgage loan sellers generally annualized rental revenue
shown on the most recent certified rent roll (as applicable), after applying the
vacancy factor, without further regard to the terms (including expiration dates)
of the leases shown thereon.
In determining the "expense" component of UW Net Cash Flow for each
mortgaged real property, the mortgage loan sellers generally relied on rolling
12-month operating statements and/or full-year or year-to-date
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financial statements supplied by the related borrower, except that (a) if tax or
insurance expense information more current than that reflected in the financial
statements was available, the newer information was used, (b) property
management fees were generally assumed to be 3.0% to 7.0% of effective gross
revenue (except with respect to single tenant properties, where fees as low as
2.0% of effective gross receipts were assumed), (c) assumptions were made with
respect to reserves for leasing commissions, tenant improvement expenses and
capital expenditures and (d) expenses were assumed to include annual replacement
reserves. In addition, in some instances, the mortgage loan sellers
recharacterized as capital expenditures those items reported by borrowers as
operating expenses (thus increasing "net cash flow") where the mortgage loan
sellers determined appropriate.
The borrowers' financial information used to determine UW Net Cash Flow
was in most cases borrower certified, but unaudited, and neither we nor the
mortgage loan sellers verified their accuracy.
The UW Net Cash Flow for each mortgaged real property is calculated on the
basis of numerous assumptions and subjective judgments, which, if ultimately
proven erroneous, could cause the actual operating income for such mortgaged
real property to differ materially from the UW Net Cash Flow set forth herein.
Some assumptions and subjective judgments related to future events, conditions
and circumstances, including future expense levels, the re-leasing of occupied
space, which will be affected by a variety of complex factors over which none of
the issuing entity, the depositor, the mortgage loan sellers, the master
servicers, the special servicer, the trustee or the trustee have control. In
some cases, the UW Net Cash Flow for any mortgaged real property is higher, and
may be materially higher, than the actual annual net cash flow for that
mortgaged real property, based on historical operating statements. No guaranty
can be given with respect to the accuracy of the information provided by any
borrowers, or the adequacy of the procedures used by a mortgage loan seller in
determining and presenting operating information. See "Risk Factors--Risks
Relating to Underwritten Net Cash Flow" in this prospectus supplement.
(iii) References to "Cut-off Date LTV %" or "LTV Ratio" are references to
the ratio, expressed as a percentage, of the cut-off date principal balance of a
mortgage loan to the appraised value of the related mortgaged real property as
shown on the most recent third-party appraisal thereof available to the mortgage
loan sellers.
As indicated in the footnotes to the table in the section captioned
"Summary of Prospectus Supplement--The Mortgage Loans and the Mortgaged RealProperties--Additional Statistical Information," the loan-to-value ratio for
certain mortgage loans may have been calculated by taking into account a
holdback amount and/or a letter of credit that was taken subject to the
financial performance of the related mortgaged real property. Additionally, with
respect to certain other mortgage loans, the related loan-to-value ratio was
calculated by taking into account various assumptions regarding the financial
performance of the related mortgaged real property on a "stabilized" basis. See
Annex A-1 to this prospectus supplement for more information regarding the loan
to value ratios of the mortgage loans referred to in the preceding sentence.
(iv) References to "Maturity LTV %,""Maturity Date LTV Ratio" or "ARD
LTV Ratio" are references to the ratio, expressed as a percentage, of the
expected balance of a balloon loan on its scheduled maturity date (or the ARD
Loans on their respective anticipated repayment dates) (prior to the payment of
any balloon payment or principal prepayments) to the appraised value of the
related mortgaged real property as shown on the most recent third-party
appraisal thereof available to the mortgage loan sellers prior to the cut-off
date.
(v) References to "Original Balance per Unit ($)" and "Cut-off Date
Balance per Unit ($)" are, for each mortgage loan secured by a lien on a
multifamily property (including a manufactured housing community) or hospitality
property, are references to the original principal balance and the cut-off date
principal balance of such mortgage loan, respectively, divided by the number of
dwelling units, pads, guest rooms or beds, respectively, that the related
mortgaged real property comprises, and, for each mortgage loan secured by a lien
on a retail, industrial/warehouse, self storage or office property, references
to the cut-off date principal balance of such mortgage loan, respectively,
divided by the net rentable square foot area of the related mortgaged real
property.
(vi) References to "Year Built" are references to the year that a
mortgaged real property was originally constructed or substantially renovated.
With respect to any mortgaged real property which was constructed in phases, the
"Year Built" refers to the year that the first phase was originally constructed.
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(vii) References to "Admin. Fee %" for each mortgage loan represent the
sum of (a) the master servicing fee rate (excluding the primary servicing fee
rate) for such mortgage loan and (b) a specified percentage that may vary on a
loan-by-loan basis, which percentage represents the trust administration fee
rate, the primary servicer fee rate and, in some cases, a correspondent fee
rate. The administrative fee rate for each mortgage loan is set forth on Annex
A-1 to this prospectus supplement.
(viii) References to "Rem. Term" represent, with respect to each mortgage
loan, the number of months and/or payments remaining from the cut-off date to
the stated maturity date of such mortgage loan (or the remaining number of
months and/or payments to the anticipated repayment date of any mortgage loan if
it is an ARD Loans).
(ix) References to "Rem. Amort." represent, with respect to each mortgage
loan, the number of months and/or payments remaining from the later of the
cut-off date and the end of any interest-only period, if any, to the month in
which such mortgage loan would fully or substantially amortize in accordance
with such loan's amortization schedule without regard to any balloon payment, if
any, due on such mortgage loan.
(x) References to "LO ()" represent, with respect to each mortgage loan,
the period during which prepayments of principal are prohibited and no
substitution of defeasance collateral is permitted. The number indicated in the
parentheses indicates the number of monthly payment periods within such period
(calculated for each mortgage loan from the date of its origination). References
to "O ()" represent the period for which (a) no prepayment premium or yield
maintenance charge is assessed and (b) defeasance is no longer required.
References to "YM ()" represent the period for which a yield maintenance charge
is assessed. The periods, if any, between consecutive due dates occurring prior
to the maturity date or anticipated repayment date, as applicable, of a mortgage
loan during which the related borrower will have the right to prepay such
mortgage loan without being required to pay a prepayment premium or a yield
maintenance charge (each such period, an "Open Period") with respect to all of
the mortgage loans have been calculated as those Open Periods occurring
immediately prior to the maturity date or anticipated repayment date, as
applicable, of such mortgage loan as set forth in the related loan documents.
(xi) References to "Def ()" represent, with respect to each mortgage
loan, the period during which the related borrower, in lieu of a principal
prepayment, is permitted to pledge defeasance collateral to the holder of the
mortgage.
(xii) References to "Occupancy %" are, with respect to any mortgaged real
property, references as of the most recently available rent rolls to (a) in the
case of multifamily properties and manufactured housing communities, the
percentage of units rented, (b) in the case of office and retail properties, the
percentage of the net rentable square footage rented, and (c) in the case of
self storage facilities, either the percentage of the net rentable square
footage rented or the percentage of units rented (depending on borrower
reporting).
(xiii) References to "Upfront Capex Reserve ($)" are references to funded
reserves escrowed for repairs, replacements and corrections of issues other than
those outlined in the engineering reports. In certain cases, the funded reserves
may also include reserves for ongoing repairs, replacements and corrections.
(xiv) References to "Upfront Engineering Reserve ($)" are references to
funded reserves escrowed for repairs, replacements and corrections of issues
outlined in the engineering reports.
(xv) References to "Monthly Capex Reserve ($)"are references to funded
reserves escrowed for ongoing items such as repairs and replacements. In certain
cases, however, the subject reserve will be subject to a maximum amount, and
once such maximum amount is reached, such reserve will not thereafter be funded,
except, in some such cases, to the extent it is drawn upon.
(xvi) References to "Upfront TI/LC Reserve ($)"are references to funded
reserves escrowed for tenant improvement allowances and leasing commissions. In
certain cases, however, the subject reserve will be subject to a maximum amount,
and once such maximum amount is reached, such reserve will not thereafter be
funded, except, in some such cases, to the extent it is drawn upon.
(xvii) References to "Monthly TI/LC Reserve ($)"are references to funded
reserves, in addition to any escrows funded at loan closing for potential
TI/LCs, that require funds to be escrowed during some or all of the loan
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term for TI/LC expenses, which may be incurred during the loan term. In certain
instances, escrowed funds may be released to the borrower upon satisfaction of
certain leasing conditions.
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MLML – Merrill Lynch Mortgage Lending, Inc., CRF – Countrywide Commercial Real Estate Finance, Inc., KEY – Keybank National Association.
2
With respect to mortgage loan numbers 12, 13, 16, 19, 26, 42, 46, 52, 83, 89, 101 and 202, the UW NCF ($) and UW DSCR (x) for the mortgage loans were calculated using ‘‘as stabilized’’ Cash Flows. ‘‘In Place’’ NCF is $1,691,018, $1,897,451, $1,110,045, $1,312,999, $1,364,516, $940,706, $941,077, $706,792, $454,866, $534,784, $442,683, and $110,576. The ‘‘In Place’’ UW DSCR (x) is 1.17x, 1.10x, 0.84x, 0.87x, 1.00x, 1.08x, 0.95x, 0.92x, 0.97x, 1.22x, 1.14x, and 1.16x.
3
With respect to mortgage loans that are presented as cross-collateralized and cross-defaulted, Cut-Off Date LTV (%), Maturity LTV (%), UW DSCR (x) Original Balance per Unit ($) and Cut-Off Date Balance per Unit ($) were calculated in the aggregate.
4
With respect to mortgage loans with partial interest only periods, Annual P&I Debt Service ($), Monthly P&I Debt Service ($) and UW DSCR (x) are shown after the expiration of the Initial Interest Only Period.
5
With respect to mortgage loans 12, 37, 46, 79, 87 and 172, the Cut-Off Date LTV (%) was calculated using the full loan amount and the ‘‘as stabilized’’ Appraised Value ($). Using the full loan amount and the ‘‘as is’’ value, the Cut-Off Date LTV (%) is 87.7%, 72.1%, 83.3%, 113.6%, 106.1% and 78.4%.
6
With respect to mortgage loans which are Interest-Only for the entire term, the UW DSCR (x) is calculated using the interest-only annual payment.
7
With respect to mortgage loan number 127 only the UW DSCR (x) is calculated after taking into account certain holdbacks, letters of credit or reserve amounts. The ‘‘as-is’’ UW DSCR (x) is 1.01x.
8
With respect to mortgage loans secured by multiple properties, each mortgage loan’s Original Balance ($), Cut-Off Date Balance ($) and Maturity/ARD Balance ($) are allocated to the respective properties based on an allocation determined by Appraised Value ($) or as shown in the related loan documents.
9
The Admin. Fee (%) includes the primary servicing fee, master servicing fee, sub-servicing fee and trustee fees applicable to each mortgage loan.
10
The Net Mortgage Rate (%) is equal to the related Interest Rate (%) less the related Admin. Fee (%).
11
With respect to mortgage loan number 2, the loan was originated in the amount of $1,575,500,000 of which $250,000,000 is included in the trust. The multiple other notes evidencing the loan are expected to be securitized in one or more future securitizations during 2007 or thereafter. Calculations of LTV, DSCR, Original Loan Balance Per Pad and Cut-off Date Loan Balance Per Pad are based on the whole loan amount.
12
With respect to the Farallon Portfolio Loan Floating Rate A Note, not included in the subject trust, the DSCR calculations assume a LIBOR of 6.50% (LIBOR strike price plus 75 basis point spread).
13
With respect to mortgage loan numbers 12, 80, 73, 11, 91, and 208 occupancy includes certain space that is master leased (to an affiliate of the borrower).
14
With respect to the mortgage loan number 4, the Cut-Off Date Principal Balance represents a portion of a loan combination comprised of the mortgage loan and a $60,700,000 subordinate non-trust loan (the ‘‘Peninsula Beverly Hills B-Note’’). Including the Peninsula Beverly Hills B-Note, the Cut-Off Date LTV Ratio is 63.2%, the LTV Ratio at Maturity is 63.2%, the Underwritten DSCR on NOI is 1.62x and the Underwritten DSCR on NCF is 1.40x.
15
With respect to mortgage loan number 11, the loan has an ascending Interest Rate schedule with Interest Rates of 5.11% for the first three loan years, respectively, and a fixed interest rate for the last seven loan years of 5.77%. The DSCR and annual payment account for the 5.77% rate and a 360 month amortization. For purposes of aggregating interest rates in the tables throughout, the 5.11% interest rate was used.
With respect to mortgage loan numbers 9, 10, and 57, these loans have multiple funding dates. Gray Apartment Portfolio is comprised of two crossed loans, numbers 9 and 10. For Gray Apartment Portfolio a blended rate based off the full loan amount was used to calculate the DSCR of 1.26(x) and the P&I Debt Service of $2,234,805.00 respectfully. For mortgage loan number 57 the DSCR (x) and P&I Debt Service is as follows, DSCR 1.33(x) and P&I Debt Service $786,829.80.
17
With respect to mortgage loan numbers 6, 87 and 88, these properties are occupied by a majority of students.
18
With respect to mortgage loan numbers 191, 198, 210, and 213, the interest rate presented in the annex and tables throughout represent the interest rate for the first 10 years of the loan term. On the 120th payment, this loan converts from a fixed rate loan to a floating rate loan. During the floating rate period, the loan documents require that the interest rate be at least as high as the related fixed rate specified in this prospectus supplement.
19
With respect to mortgage loan number 48, there is a leasehold estate in the air rights parcel in which the Hotel sits and subleasehold estate in the parking garage.
20
With respect to mortgage loan number 53, during the first 24 months the borrower can only partially prepay an amount which would release the Arlington Property prior to the Lockout Expiration date.
21
With respect to mortgage loan number 213, this loan is an Interest Only Fully Amortizing loan, where the interest only payments are for the first 36 payments and the amortizing term begins after the 36th IO period. The P and I payments and DSCR are based on the 324 amortization term.
22
With respect to mortgage loan number 7, the mortgage loan is part of a loan combination. The loan combination is comprised of $80,000,000 of total debt which consists of the trust mortgage asset ($33,000,000 Pari-Passu A-2 note and $7,000,000 Pari-Passu B-2 note), a $33,000,000 Pari-Passu A-1 note (which has previously been securitized as part of ML-CFC Commercial Mortgage Trust 2007-7) and $7,000,000 Pari-Passu B-1 note. The following calculations are based on the $79,926,997 total debt: UW DSCR is 1.24x, Cut-Off LTV is 79.3%, Maturity LTV is 66.9% Original Balance per square foot is $333.68 and Cutoff Balance per square foot is $333.07. When based on collateral included in the mortgage trust asset ($40,000,000 total), calculations are: UW DSCR is 2.47x, Cut-Off is LTV 39.7%, Maturity LTV is 33.5%, Original Balance per square foot is $166.84 and Cut-Off Balance per square foot $166.35.
23
With respect to mortgage loan number 130 the Cut-Off Date LTV (89.2%) was calculated using the full loan amount and the ‘‘as is’’ Appraised Value ($3,700,000). Using the full loan amount and the ‘‘as stabilized’’ value ($4,150,000), the Cut-Off Date LTV is 79.5% and the maturity LTV is 71.4%.
24
With respect to mortgage loan number 6, per the Replacement Reserve and Security Agreement, commencing on the monthly payment date in May of 2009, borrower shall pay lender the sum of $7,583.00 per month until the cap escrow amount of $273,000.00 is met or exceeded.
25
With respect to mortgage loan number 140, per the TI/LC Escrow and Security Agreement, commencing on the Monthly Payment Date occurring on August 1, 2008 borrower shall deposit $2,000.00 into the escrow account per month until the aggregate amount equals or exceeds $48,000.00.
26
The Farallon Portfolio Loan Combination was originated in the amount of $1,575,500,000 of which $250,000,000 is included in the trust. The Farallon Portfolio Loan is evidenced by eight (8) interest only promissory notes totaling $200,000,000 with original terms to maturity of 84 months and two (2) interest only promissory notes totaling $50,000,000 with original terms to maturity of 120 months.
27
See ‘‘Annex C Preliminary Structural and Collateral Term Sheet - The Farallon Portfolio.’’
Mortgage loans 2 and 62 provides for a prepayment premium that is equal to the sum of (i) all amounts incurred by lender in connection with the enforcement of its rights under the note, the security instrument, this agreement or any of the other loan documents, (ii) any amounts incurred by lender to protect the property or the lien or security created by the loan documents, or for taxes, assessments or insurance premiums as provided in the loan documents, and (iii) the greater of (a) 1% of the outstanding principal amount of the loan and (b) the positive difference, if any, between (x) the present value on the date of such prepayment of all future installments which borrower would otherwise be required to pay under the note and this agreement during the original term hereof absent such prepayment, including the outstanding principal amount which would otherwise be due upon the scheduled maturity date absent such prepayment, with
such present value being determined by the use of a discount rate equal to the yield to maturity (adjusted to a ‘‘mortgage equivalent basis’’ pursuant to the standards and practices of the securities industry association), on the date of such prepayment, of the United States treasury security having the term to maturity closest to what otherwise would have been the remaining term hereof absent such prepayment and (y) the outstanding principal amount on the date of such prepayment.
B.
Mortgage loans 4, 31, 39, 45, 53, 56, 70, 77, 84, 90, 102, 109, 117, 119, 122, 124, 131, 132, 137, 147, 150, 151, 152, 158, 160, 163, 165, 166, 167, 171, 173, 183, 184, 191, 193, 195, 199, 200, 201, 207, 208, 209, 212, 213, 214, 215, 217, and 218 allow for prepayment with yield maintenance that is equal to the greater of (i) a minimum fee as described in Annex A-1 for the related loan and (ii) amount equal to the product obtained by multiplying: (A) amount of Principal Indebtedness (‘‘PI’’) being repaid, by (B) difference obtained by subtracting Adjusted Yield Rate (‘‘AYR’’) from Adjusted Interest Rate (‘‘AIR’’), by (C) present value factor calculated using formula: (1 - (1 + r/12)†-n)/r where r=AYR and n=remaining term of the mortgage loan in months calculated as follows: number of days (and any fraction thereof) between date of prepayment or acceleration and maturity date, multiplied by 12/365.25. ‘‘AIR’’ means Interest Rate
multiplied by 365.25/360. ‘‘AYR’’ means product of formula: (((1+Reference Treasury Yield/2)†(1/6)) - 1) multiplied by 12. ‘‘Reference Treasury Yield’’ generally means the yield rate on the U.S. Treasury with a maturity date closest to, but shorter than, the remaining average life of the mortgage loan.
C.
Mortgage loans 3, 14, 22, 27, 41, 59, 64, 82, 85, 92, 98, 114, 118, 140, 144, 146, and 157 provide for a prepay premium that is equal to the greater of (A) a minimum fee as described in the Annex A-1 for the related loan or (B) the Yield Maintenance Amount. ‘‘Yield Maintenance Amount’’ shall mean an amount equal to the present value, as of the date such prepayment or proceeds are received, of the remaining scheduled payments of principal and interest from the date such payment or proceeds are received through the originally scheduled maturity date (including any balloon payment), determined by discounting such payments at the Discount Rate (as hereinafter defined), less the amount of principal being repaid. ‘‘Discount Rate’’ shall mean the rate that, when compounded monthly, is equivalent to the Treasury Rate (as hereinafter defined), when compounded semi-annually. ‘‘Treasury Rate’’ shall mean the yield calculated by the linear
interpolation of the yields, as reported in Federal Reserve Statistical Release H.15 – Selected Interest Rates under the heading U.S. Government Securities/Treasury Constant Maturities for the week ending prior to the date such payment or proceeds are received, of U.S. Treasury constant maturities with maturity dates (one longer and one shorter) most nearly approximating the maturity date. (If Release H.15 is no longer published, lender shall select a comparable publication to determine the Treasury Rate.)
D.
Mortgage Loan 8 provides for a prepayment premium calculated as follows:
The product (‘‘Yield Maintenance’’) is obtained by multiplying:
(A)
the portion of the Loan being prepaid, times;
(B)
the difference obtained by subtracting (I) the Yield Rate from (II) the Note Rate, times;
(C)
the present value factor calculated using the following formula:
1-(1+r)-n
r
r = Yield Rate
n = the number of years and any fraction thereof, remaining between the date the prepayment is made and the date that is six months prior to the Maturity Date.
As used herein, ‘‘Yield Rate’’ means the yield rate on the U.S. Treasury Security with a maturity date closest to, but earlier than, the date that is six months prior the Maturity Date, as reported by the yield reported in The Wall Street Journal on the fifth Business Day preceding the Prepayment Calculation. If the yield to maturity is not so published for such U.S. Treasury Security in The Wall Street Journal, or if the yield shall not be ascertainable from that publication, then the Yield Rate shall be 50 basis points over the Treasury Constant Maturity Series yields reported, as of the fifth Business Day preceding the Prepayment Calculation Date, in Federal Reserve Statistical Release H. 15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the date that is six (6) months prior to
the Maturity Date. If no such publication (or comparable successor publication) can be found, then the Lender will use its reasonable discretion in interpolating between current issue non-callable ‘‘on-the-run’’ U.S. Treasury securities with maturities nearest to the date that is six (6) months prior to the Maturity Date, in accordance with generally accepted practices of linear interpolation.
ANNEX B
CERTAIN CHARACTERISTICS REGARDING MULTIFAMILY PROPERTIES IN LOAN GROUP 2
LOAN # ORIGINATOR(1) PROPERTY NAME STREET ADDRESS
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1 MLML Empirian Portfolio Pool 2 Various
1.01 MLML Centre Lake III 15754 Northwest 7th Avenue
1.02 MLML Sunset Way 15385 Southwest 73rd Terrace Circle
1.03 MLML Jupiter Cove I 17825-18985 Thelma Avenue
1.04 MLML Thymewood I 17940 NW 67th Avenue
1.05 MLML Bel Aire 10509 SW 216th Street
1.06 MLML Redan Village 3829 Redan Road
1.07 MLML Dogwood Glen 2390 Woodglen Drive
1.08 MLML Rivers End 5520 Collins Road
1.09 MLML Astorwood 1228 Southeast Astorwood Place
1.10 MLML Palm Place 7693 Alicia Lane
1.11 MLML Pine Barrens 11750 Alden Road
1.12 MLML Ridgewood - Indiana 2729 Ridgewood Drive
1.13 MLML Summit Center 5161 Jaczko Lane
1.14 MLML Parkwood Village 6804 Parkway Drive
1.15 MLML Valleyfield - Georgia 5421 Covington Highway
1.16 MLML Clearview 715-A Clearview Drive
1.17 MLML Apple Ridge 480 Lancaster Pike
1.18 MLML Northrup Court 135 Fern Hollow Road
1.19 MLML Cedarwood 180 Codell Drive
1.20 MLML Amberwood 1116 N Tennessee Street
1.21 MLML Shadetree 1769 Shadetree Way
1.22 MLML Heathmoore - Indianapolis 5984 Heathmore Drive
1.23 MLML Harvest Grove 5239 Harvestwood Lane
1.24 MLML Ridgewood - Ohio 3616 Hogans Run Road
1.25 MLML The Meadows - Ohio 112 Mocking Bird Court
1.26 MLML Amhurst 4151 Amston Drive
1.27 MLML Waterbury - Michigan 108 Waterbury Court
1.28 MLML Pine Meadows I 15025 Pine Meadows Drive
1.29 MLML Elmtree Park 11023 Elmtree Park Drive
1.30 MLML Sherbrook 100 Sherbrook Court
1.31 MLML Heronwood 13809 Heronwood Lane SW
1.32 MLML Windrush (FL) 13971 Windrush Court
1.33 MLML Willowood 1056 Mindy Lane
1.34 MLML Valleyfield - Pennsylvania 3520 Washington Pike
1.35 MLML Bridgepoint I 1500 Monument Road
1.36 MLML Willow Lakes 2900 Reidville Road
1.37 MLML Shadow Trace 105 Trace Terrace
1.38 MLML Berry Pines 6290 Berryhill Road
1.39 MLML Hillcrest Villas 200 Hospital Drive
1.40 MLML Greentree 121 Covington Avenue
1.41 MLML Waterbury - Ohio 4140 Mt.Carmel Tobasco Road
1.42 MLML Forsythia Court 6001 Barley Avenue
1.43 MLML Greenglen 101 Tree Glen Way
1.44 MLML Meadowood - Ohio 1248 Warble Drive
1.45 MLML Oakwood Village 101 Fister Court
1.46 MLML Deerwood 611 Mt. Homer Road
1.47 MLML Spring Gate 1500 Spring Gate Drive
1.48 MLML Woodcrest I 101 Woodcrest Circle
1.49 MLML Iris Glen 101 Iris Glen Drive SE
1.50 MLML Lakeshore I 1100 Lakeshore Drive
1.51 MLML Ashgrove 1 Ashgrove Court
1.52 MLML Stillwater 6815 Waters Avenue
1.53 MLML Springbrook 104 Springbrook Court
1.54 MLML Heathmoore - Evansville 2413 South Green River Road
1.55 MLML Lindendale 3580 Lindendale Drive
1.56 MLML Concord Square 500 North Lexington-Springmill Road
1.57 MLML Silver Forest 1200 Northeast 30th Avenue
1.58 MLML Charing Cross 1017 South Main Street
1.59 MLML Hatcherway 127 Havanna Avenue
1.60 MLML Stonehenge 4151 Amston Drive
1.61 MLML Waterbury - Georgia 1375 College Station Road
1.62 MLML Longwood 710 Eureka Springs Drive
1.63 MLML Woodbine 2567 Hudson Drive
1.64 MLML Mulberry 4070 Leap Road
1.65 MLML Cedargate - Kentucky 310 Midland Boulevard
1.66 MLML Willow Run 901 Princeton Road
1.67 MLML Cedargate - Indiana 110 Cedargate Court
1.68 MLML Hillside Manor 120 Lonnie Lane
1.69 MLML Princeton Court 103 Princeton Court
1.70 MLML Northwood 10431 SE 49th Court
1.71 MLML Slate Run 2306 Granite Drive
1.72 MLML Parkville 1100 Taywood Drive
1.73 MLML Hartwick 20 Hartwick Drive
2 MLML Farallon Portfolio Various
2.001 MLML Portside 14001 Beach Boulevard
2.002 MLML Shadow Hills 8403 Millinockett Lane
2.003 MLML CV-Jacksonville 10960 Beach Boulevard
2.004 MLML Western Hills 13000 SW 5th Court
2.005 MLML Siesta Lago 4750 Siesta Lago Drive
2.006 MLML Hunter Ridge 696 Tara Road
2.007 MLML Camelot 655 North Highway 89
2.008 MLML Wikiup 6500 East 88th Avenue
2.009 MLML Harmony Road 2500 East Harmony Road
2.010 MLML Lamplighter Village 1661 Powder Springs Road
2.011 MLML Chalet North 1800 Alpine Drive
2.012 MLML Country Club Mobile Estates 5100 South 1300 East
2.013 MLML Shadowood 6359 Bells Ferry Road
2.014 MLML Southwind Village 302 Fillmore Street
2.015 MLML The Meadows 14470 East 13th Avenue
2.016 MLML Landmark Village 225 Club Drive
2.017 MLML Crescentwood Village 11352 South Crescentwood Drive
2.018 MLML Stone Mountain 100 Castle Club Drive
2.019 MLML Casual Estates 7330 Lands End Lane
2.020 MLML Village North 1240 North Cowan Avenue
2.021 MLML Windsor Mobile Estates 2800 Hampton Park Drive
2.022 MLML Riverdale (Colonial Coach) 8000 Highway 85
2.023 MLML Foxhall Village 5709 Buffaloe Road
2.024 MLML New Twin Lakes 31 Regina Drive
2.025 MLML Carnes Crossing 420 Pittsburg Landing
2.026 MLML Saddlebrook 8401 East Saddlebrook Drive
2.027 MLML Thornton Estates 3600 East 88th Avenue
2.028 MLML Mountainside Estates 17190 Mount Vernon Road
2.029 MLML Castlewood Estates 100 Plantation Hill Road
2.030 MLML Green Spring Valley 1100 Greenvale Road
2.031 MLML Villa West (UT) 8400 South 4000 West
2.032 MLML Villa West (CO) 2700 C Street
2.033 MLML Torrey Hills 5406 Torrey Road
2.034 MLML Springdale Lake 5 Springdale Drive
2.035 MLML Brookside Village - TX 14900 Lasater Road
2.036 MLML Columbia Heights 2515 Cumberland Road
2.037 MLML Encantada 1000 Coyote Trail
2.038 MLML Woodlands of Kennesaw 2880 Cobb Parkway North
2.039 MLML Lakeview Estates 2600 North Hill Field
2.040 MLML Oakwood Forest 4100 N US Highway 29
2.041 MLML Broadmore 148 Broadmore
2.042 MLML Oak Park Village (FL) 4000 Southwest 47th Street
2.043 MLML Misty Winds 5902 Ayers Street
2.044 MLML Evergreen Village - IA 5309 Highway 75 North
2.045 MLML Ortega Village 5515 118th Street
2.046 MLML Riverside (UT) 1232 West Rock River Road
2.047 MLML Easy Living 3323 Iowa Street
2.048 MLML Southfork 4937 Stuart Road
2.049 MLML Cloverleaf 4515 34th Street
2.050 MLML Golden Valley 7631 Dallas Highway
2.051 MLML Riverdale 5100 South 1050 West
2.052 MLML Friendly Village - GA 9 Pinetree Road
2.053 MLML Smoke Creek 4255 Smokecreek Parkway
2.054 MLML Marion Village 700 35th Street
2.055 MLML Valley View - Danboro 1081 Easton Road
2.056 MLML Colonial Gardens 3000 Tuttle Creek Boulevard
2.057 MLML Evergreen Village - UT 2491 North Highway 89
2.058 MLML Summit Oaks 6812 Randol Mill Road
2.059 MLML Stoneybrook 435 North 35th Avenue
2.060 MLML Pedaler's Pond 1960 Pedalers Pond Boulevard
2.061 MLML Burntwood 3308 South East 89th Street
2.062 MLML Country Club Crossing 1101 Hickory Boulevard
2.063 MLML Sunset Vista 8460 West Sunset Hills Drive
2.064 MLML Spring Valley Village 36 Hopf Drive
2.065 MLML South Arlington Estates 7400 Twin Parks Drive
2.066 MLML Mallard Lake 4441 Highway 162
2.067 MLML Sundown 1219 West 450 North
2.068 MLML Stony Brook North 3000 Stony Brook Drive
2.069 MLML Twin Pines 2011 West Wilden Avenue
2.070 MLML Inspiration Valley 5250 West 53rd Avenue
2.071 MLML Highland Acres 1708 Bunker Hill Lane
2.072 MLML Oak Ridge 1201 County Road 15
2.073 MLML Washington Mobile Estates 1450 North Washington Boulevard
2.074 MLML River Oaks 7301 Buttonwood
2.075 MLML Siouxland Estates 1520 Atokad Drive
2.076 MLML Brookside 8155 Redwood Road
2.077 MLML Eagle Ridge 617 Holfords Prairie
2.078 MLML Cedar Knoll 5535 Dysart Road
2.079 MLML Marnelle 1512 Highway 54 West
2.080 MLML Maple Manor 18 Williams Street
2.081 MLML Arlington Lakeside 3211 West Division Street
2.082 MLML Royal Crest 2025 East Jemez Road
2.083 MLML Forest Creek 855 East Mishawaka Road
2.084 MLML Four Seasons 100 Apollo Drive
2.085 MLML Cottonwood Grove 4500 14th Street
2.086 MLML Highland 1875 Osolo Road
2.087 MLML Valley Verde 1751 West Hadley
2.088 MLML Chalet City 301 Alpine Lane
2.089 MLML Southridge Estates 802 E. County Line Road Lot 259
2.090 MLML Ridgewood Estates 4100 Southeast Adams
2.091 MLML Creekside 2510 Highway 175N
2.092 MLML Eastview 601 El Camino Road
2.093 MLML Viking Villa 433 East 980 North
2.094 MLML Lakewood Estates 7171 West 60th Street
2.095 MLML Terrace Heights 4001 Peru Road
2.096 MLML Falcon Farms 2507 214th Street North
2.097 MLML Forest Park 183 Pitcher Road
2.098 MLML Quail Run 903 South Main Street
2.099 MLML Sheridan 5305 North Sheridan
2.100 MLML Huguenot Estates 18-5 Cherry Street
2.101 MLML Countryside (CO) 2036 1st Avenue
2.102 MLML Silver Creek 4930 North Dittmer Street
2.103 MLML Havenwood 106 Havenwood Drive
2.104 MLML Northland 11819 North College Avenue
2.105 MLML Ewing Trace 4201 Windsor Place
2.106 MLML Overpass Point MHC 99 East Green Pines Drive
2.107 MLML Enchanted Village 246 Wonderland Drive
2.108 MLML Seascape 6301 Old Brownsville Road
2.109 MLML Golden Triangle 301 South Coppell Road
2.110 MLML Meadowood 1900 Northwest Lyman Road
2.111 MLML Meadowbrook 33550 East Highway 96
2.112 MLML Tallview Terrace 3290 North Martha Street
2.113 MLML Western Mobile Estates 7148 West Arabian Way
2.114 MLML Whitney 8401 NW 13th Street
2.115 MLML Five Seasons Davenport 5112 North Fairmount Avenue
2.116 MLML Valley View - Honey Brook 1 Mark Lane
2.117 MLML Village Park 724 Creek Ridge Road
2.118 MLML Countryside Village (TN) 200 Early Road
2.119 MLML Mobile Gardens 6250 North Federal Boulevard
2.120 MLML Carriage Court East 3475 Goldenrod Road
2.121 MLML Mission Estates 12400 Rojas Drive
2.122 MLML Loveland 4105 Garfield Avenue
2.123 MLML Meadow Glen 600 Glen Vista Drive
2.124 MLML Shiloh Pines 2525 Shiloh Road
2.125 MLML Rolling Hills 1322 South Belt Line Road
2.126 MLML Deerpointe 9380 103rd Street
2.127 MLML Cypress Shores 200 Bass Circle
2.128 MLML Oasis 2221 South Prairie Avenue
2.129 MLML Tanglewood 100 Sara Lane
2.130 MLML Villa 3096 Camelot Drive
2.131 MLML Castle Acres 1713 West US Highway 50
2.132 MLML Dynamic 1335 Dynamic Drive
2.133 MLML Big Country 3400 South Greeley Hwy
2.134 MLML Carriage Court Central 4820 West Oakridge Road
2.135 MLML Northern Hills 1901 W. Shady Grove Road
2.136 MLML Sunny Acres 272 Nicole Lane
2.137 MLML Lakewood - TX 1023 Lakes Drive
2.138 MLML Westlake 9717 NW 10th Street
2.139 MLML Mesquite Meadows 14647 Lasater Road
2.140 MLML Cedar Terrace 1834 Gretchen Drive SW
2.141 MLML Frieden Manor 102 Frieden Manor
2.142 MLML Country Club Manor 4003 Birch Drive
2.143 MLML Suburban Estates 16 East Maruca Drive
2.144 MLML Deerhurst 6500 Privette Road
2.145 MLML Aledo 124 East Yates Circle
2.146 MLML President's Park 158 Fillmore Street
2.147 MLML Woodlake 5418 Country Club Road
2.148 MLML Silver Leaf 1550 North Main Street
2.149 MLML Dynamic II 1129 East Parkerville Road
2.150 MLML Magnolia Circle 7915 103rd Street
2.151 MLML Twin Oaks 1915 West MacArthur Road
2.152 MLML Washingtonville Manor 1 East Avenue
2.153 MLML Brookside Village -PA 202 Skyline Drive
2.154 MLML Westview 3201 West Echeta Road
2.155 MLML Sunset Country 5000 Red Creek Springs Road
2.156 MLML Westmoor 7901 South Council Road
2.157 MLML The Towneship at Clifton 3232 South Clifton
2.158 MLML Eagle Creek 11300 US Highway 271
2.159 MLML Mesquite Ridge 14222 Lasater Road
2.160 MLML Oak Park Village (TX) 550 Ruby Road
2.161 MLML Plantation Estates 3461 Bankhead Hwy
2.162 MLML Breazeale 2458 North 9th Street
2.163 MLML Shady Hills 1508 Dickerson Road
2.164 MLML Cimmaron Village 300 East Prosser Road
2.165 MLML Birchwood Farms 8057 Birchwood Drive
2.166 MLML Terrell Crossing 2390 West Moore Avenue
2.167 MLML Pleasant Grove (CO) 517 East Trilby Road
2.168 MLML Willow Creek Estates 900 Century Drive
2.169 MLML Bluebonnet Estates 901 East Young Avenue
2.170 MLML Connelly Terrace 20 Florida Street
2.171 MLML Hampton Acres 1501 South Hampton Road
2.172 MLML Meridian Sooner 5900 SE 48th Street
2.173 MLML Mesquite Green 100 South Belt Line Road
2.174 MLML El Lago 5712 Martin Street
2.175 MLML Moosic Heights 118 1st Street
2.176 MLML Golden Rule 2001 South MacArthur Boulevard
2.177 MLML Amber Village 13965 Skyfrost Lane
2.178 MLML Riverchase 4440 Tuttle Creek Boulevard
2.179 MLML Hidden Hills One Sequoia Drive
2.180 MLML The Woodlands 4480 S. Meridian
2.181 MLML Blue Valley 730 Allen Road
2.182 MLML Autumn Forest 3700 East Sourwood Drive
2.183 MLML Valley View - Ephrata 50 Mollie Drive
2.184 MLML Cowboy 845 Barton Road
2.185 MLML Lakeside - GA 3291 Bankhead Hwy
2.186 MLML Sunnyside 2901 West Ridge Pike
2.187 MLML Trailmont 1341 Dickerson Pike
2.188 MLML Timberland 13501 SE 29th Street
2.189 MLML Denton Falls 6601 Grissom Road
2.190 MLML Terrace 351 North Forest
2.191 MLML Lakeside - IA 11325 140th Street
2.192 MLML Siesta Manor 35 San Aymores Court
2.193 MLML Sunrise Terrace 2305 E. 19th Street North
2.194 MLML Riverside (KS) 420 North Street
2.195 MLML Chisholm Creek 501 East 63rd Street N
2.196 MLML Prairie Village 1661 West Republic
2.197 MLML Willow Terrace 5429 Parker Henderson Road
2.198 MLML Countryside (KS) 1000 Reservation Road
2.199 MLML Highview 4901 South Douglas Highway
2.200 MLML Green Valley Village 2760 Robertson Road
2.201 MLML Crestview - OK 2323 East 6th Avenue
2.202 MLML Shady Lane 6791 Highway 2
2.203 MLML Western Park 2575 West 6th Street
2.204 MLML Brookshire Village 4800 West Four Ridge Road
2.205 MLML Overholser Village 9355 Sundown Road
2.206 MLML The Pines 9919 Hwy 78
2.207 MLML Jonesboro (Atlanta Meadows) 275 Upper Riverdale Road
2.208 MLML Park Plaza 4317 Clemence Street
2.209 MLML Belaire 1550 Yellowstone Avenue
2.210 MLML Pine Hills 101 North Michigan
2.211 MLML Commerce Heights 7701 Brighton Boulevard
2.212 MLML Oak Glen 5909 South Wilkerson Road
2.213 MLML Creekside Estates 301 Modene Street
2.214 MLML Kimberly @ Creekside 2402 Highway 175N
2.215 MLML Harper Woods 2200 Harper Street
2.216 MLML Brittany Place 1735 Northwest Lyman Road
2.217 MLML Shady Creek 15250 Kleberg Road
2.218 MLML Connie Jean 5570 Connie Jean Road
2.219 MLML Willow Springs 4600 Old Blue Circle
2.220 MLML Seamist 702 S Clarkwood Road
2.221 MLML Pleasant View Estates 6020 Fort Jenkins Lane
2.222 MLML Navajo Lake Estates 501 East 63rd Street North
2.223 MLML Kopper View MHC 7122 West Bendixon Drive
2.224 MLML Carsons 649 North Franklin Street
2.225 MLML Rose Country Estates 3400 NNE Loop 323
2.226 MLML Redwood Village 1735 West 3150 South
2.227 MLML Birch Meadows 214 Jones Road
2.228 MLML Terrace II 350 North Forest Drive
2.229 MLML Englewood Village 2334 McCann Avenue
2.230 MLML Eastern Villa 402 Villa Drive
2.231 MLML El Caudillo 4960 South Seneca
2.232 MLML Chambersburg I & II 5368 Philadelphia Avenue
2.233 MLML Wheel Estates 5225 South Orange Blossom Trail
2.234 MLML Oakwood Lake Village 29 Oakwood Lane
2.235 MLML Valley View - Ephrata II 75 Synder Lane
2.236 MLML Oak Grove 2716 West Delmar Avenue
2.237 MLML Cedar Creek, KS 745 Cedar Drive
2.238 MLML Oakridge / Stonegate 800 Eastgate
2.239 MLML Vogel Manor MHC 71 Vogel Circle
2.240 MLML Hidden Oaks 5306 Rita Kay Lane
2.241 MLML Plainview 3650 Harvey Place
2.242 MLML Rockview Heights 201 Rockview Lane
2.243 MLML West Cloud Commons 1319 West Cloud Street
2.244 MLML Gallant Estates 4449 Burlington Road
2.245 MLML Sunset Village 1400 Old Sivells Bend Road
2.246 MLML Countryside (OK) 1824 South Chester
2.247 MLML Chelsea 924 North Elmira Street
2.248 MLML Gregory Courts 2 Erica Circle
2.249 MLML El Lago II 5701 Martin Street
2.250 MLML Glen Acres 500 East 50th Street South
2.251 MLML Shadow Mountain 1601 EFM 1417
2.252 MLML Pine Haven MHP 191 Pine Haven Circle
2.253 MLML Collingwood MHP 358 Chambers Road
2.254 MLML Mountaintop 37 Mountaintop Lane
2.255 MLML Whispering Hills 905 East 3rd Avenue
2.256 MLML Mulberry Heights 5429 Wilbarger Street
2.257 MLML Zoppe's 2607 Highway 175N
2.258 MLML Shawnee Hills 4420 SW 61st Street
2.259 MLML Pleasant Grove (NC) 5000 Hilltop-Needmore Road
2.260 MLML Park Avenue Estates 1400 East Kay Street
2.261 MLML Monroe Valley 15 Old State Road
2.262 MLML El Dorado 5600 Texoma Parkway
2.263 MLML Crestview - PA Wolcott Hollow Road & Route 220
2.264 MLML Sherwood Acres 1928 East 47th Street South
2.265 MLML Bush Ranch 3847 Quarterhorse Road
2.266 MLML Glenview 1619 North Douglas Boulevard
2.267 MLML Misty Hollow 910 North Oakview Drive
2.268 MLML Audora 4625 South Seneca
2.269 MLML Green Acres 4437 Sycamore Grove Road
2.270 MLML Sunset 77 530 North US Highway 77
2.271 MLML Hidden Acres 2111 Richardson Road
2.272 MLML Park D'Antoine 779 Route 9
2.273 MLML Sleepy Hollow 1909 South Anna
2.274 MLML Sycamore Square 1010 West 44th Street South
6 Key Towers at University Town Center 6515 Belcrest Road
CRF Gray Apartment Portfolio Various
9 CRF Park at Lakeside Apartments 10950 Briar Forest Drive
10 CRF Evergreen Pointe Apartments 1307 Wilcrest Drive
11 CRF Haverly Park Apartments 4701 & 4804 Haverwood Lane
12 CRF Skyline Village MHP 7510 Concord Boulevard
16 MLML The Haven Apartments 9914 Military Drive West
19 CRF Chandler Park Apartments Homes 2600 Chandler Drive
21 CRF Summer Crest Apartments 75 Crestmont Way
23 CRF Crittenden Way Apartments 249 Crittenden Way
34 CRF Oakleigh Apartments 11580 Perkins Road
42 CRF Stonebridge Apartments 6512 Bridge Crossing Drive
45 CRF Chadron Avenue Apartments 14030 & 14100 Chadron Avenue
52 CRF 201 Westmoreland Lofts 201 North Westmoreland Avenue
55 CRF Plaza Apartments 3780 University Club Boulevard
56 CRF PKL Multifamily Portfolio Various
56.01 CRF Heritage Park Apartments 1065-1078 Heritage Park Drive
56.02 CRF North Road Townhomes 675-709 North Road
56.03 CRF Countryshire Townhomes 44-83 Windway Circle
56.04 CRF Crystal Commons 10-72 Crystal Commons Drive
56.05 CRF Heritage Park Townhomes 1030-1057 Heritage Park Drive
57 CRF Eagles Landing Apartments 11700 Fuqua Street
66 CRF Sterling MHP 7 Bridge Boulevard
68 CRF Edge Lake Apartments 3010 NASA Road 1
70 CRF Brooklyn Apartments 1001 East Jeffrey Street
75 CRF Airway MHP 9001 South Cicero Avenue
81 CRF Bennington Woods Apartments 200 Spartacus Court
85 Key Cumberland Green Apartments 26 North Ladow Avenue
87 CRF Sevilla Apartments 1501 Holleman Drive
88 CRF Pine Court Apartments III 717-725 West Cary Street
92 Key Kingswood Apartments 3400 Joyce Lane
99 Key Timbercreek Apartments 501 Camelot Drive
102 CRF 1570 Oak Avenue 1570 Oak Avenue
103 CRF Regency Apartments - Carson City 3401 Airport Road
105 CRF Turtle Cove Apartments 1600 North 9th Street
110 CRF Emerick Manor Apartments 4671-4681 Country Lane
115 CRF Hunter's Ridge Apts 301 Panorama Boulevard
148 Key Woodview Apartments 940 North Providence Road
151 CRF Orizaba Avenue Apartments 6635 Orizaba Avenue
152 CRF 1544 Placentia Ave. Apts. 1544 Placentia Avenue
159 CRF South Land Park Apts 7198 South Land Park Drive
160 CRF 586 Hart St. 586 Hart Street and 614 West 138th Street
165 CRF Blackstone 222 222 Summit Avenue
171 CRF Swansonian Apartments 1017 East Harrison Street
180 CRF Skyridge MHP 13216 Northeast 59th Street
185 CRF Clifton Mobile Manor 375 Oak Avenue
190 CRF El Camba MCH 1841 George Jenkins Boulevard
193 CRF Saticoy Street Apartments 14615 Saticoy Street
197 CRF Marengo Apartments 460 North Marengo Avenue
198 CRF 360 Franklin Ave. 360 Franklin Avenue
201 CRF Twin Oaks 5263 15th Avenue NE
203 CRF Bear Creek Villas 7930-7976 170th Place Northeast
209 CRF Red Curb - 1558 & 1643 206th 1558 West 206th Street
210 CRF 1607 Greenfield Apts 1607 Greenfield Avenue
213 CRF 174 Russell Street 174 Russell Street
214 CRF Red Curb - 1527 204th 1527 204th Street
215 CRF Red Curb - 219th 1639 West 219th Street
216 CRF Batavia Apartments 302 North Batavia Street
217 CRF Red Curb - 1531 204th 1531 204th Street
218 CRF 1605 West Torrance Boulevard 1605 West Torrance Boulevard
NUMBER OF PROPERTY PROPERTY
LOAN # CITY STATE ZIP CODE COUNTY PROPERTIES TYPE SUBTYPE
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1 Various Various Various Various 73 Multifamily Garden
1.01 Miami FL 33169 Miami-Dade 1 Multifamily Garden
1.02 Miami FL 33193 Miami-Dade 1 Multifamily Garden
1.03 Jupiter FL 33458 Palm Beach 1 Multifamily Garden
1.04 Hialeah FL 33015 Miami-Dade 1 Multifamily Garden
1.05 Cutler Bay FL 33190 Miami-Dade 1 Multifamily Garden
1.06 Decatur GA 30032 DeKalb 1 Multifamily Garden
1.07 Indianapolis IN 46260 Marion 1 Multifamily Garden
1.08 Jacksonville FL 32244 Duval 1 Multifamily Garden
1.09 Stuart FL 34994 Martin 1 Multifamily Garden
1.10 Sarasota FL 34243 Manatee 1 Multifamily Garden
1.11 Jacksonville FL 32246 Duval 1 Multifamily Garden
1.12 Elkhart IN 46517 Elkhart 1 Multifamily Garden
1.13 West Palm Beach FL 33415 Palm Beach 1 Multifamily Garden
1.14 Douglasville GA 30135 Douglas 1 Multifamily Garden
1.15 Decatur GA 30035 DeKalb 1 Multifamily Garden
1.16 Greenwood IN 46143 Johnson 1 Multifamily Garden
1.17 Circleville OH 43113 Pickaway 1 Multifamily Garden
1.18 Coraopolis PA 15108 Allegheny 1 Multifamily Garden
1.19 Lexington KY 40509 Fayette 1 Multifamily Garden
1.20 Cartersville GA 30120 Bartow 1 Multifamily Garden
1.21 Palm Springs FL 33406 Palm Beach 1 Multifamily Garden
1.22 Indianapolis IN 46237 Marion 1 Multifamily Garden
1.23 Gahanna OH 43230 Franklin 1 Multifamily Garden
1.24 Columbus OH 43221 Franklin 1 Multifamily Garden
1.25 Pickerington OH 43147 Fairfield 1 Multifamily Garden
1.26 Dayton OH 45424 Montgomery 1 Multifamily Garden
1.27 Westland MI 48186 Wayne 1 Multifamily Garden
1.28 Fort Myers FL 33908 Lee 1 Multifamily Garden
1.29 Indianapolis IN 46229 Marion 1 Multifamily Garden
1.30 Wexford PA 15090 Allegheny 1 Multifamily Garden
1.31 Fort Myers FL 33919 Lee 1 Multifamily Garden
1.32 Fort Myers FL 33903 Lee 1 Multifamily Garden
1.33 Wooster OH 44691 Wayne 1 Multifamily Garden
1.34 Bridgeville PA 15017 Allegheny 1 Multifamily Garden
1.35 Jacksonville FL 32225 Duval 1 Multifamily Garden
1.36 Spartanburg SC 29301 Spartanburg 1 Multifamily Garden
1.37 Stone Mountain GA 30083 DeKalb 1 Multifamily Garden
1.38 Milton FL 32570 Santa Rosa 1 Multifamily Garden
1.39 Crestview FL 32539 Okaloosa 1 Multifamily Garden
1.40 Thomasville GA 31792 Thomas 1 Multifamily Garden
1.41 Cincinnati OH 45255 Clermont 1 Multifamily Garden
1.42 Louisville KY 40218 Jefferson 1 Multifamily Garden
1.43 Dayton OH 45415 Montgomery 1 Multifamily Garden
1.44 Columbus OH 43204 Franklin 1 Multifamily Garden
1.45 Augusta GA 30909 Richmond 1 Multifamily Garden
1.46 Eustis FL 32726 Lake 1 Multifamily Garden
1.47 Panama City FL 32404 Bay 1 Multifamily Garden
1.48 Warner Robins GA 31093 Houston 1 Multifamily Garden
1.49 Conyers GA 30013 Rockdale 1 Multifamily Garden
1.50 Ft. Oglethorpe GA 30742 Catoosa 1 Multifamily Garden
1.51 Franklin OH 45005 Warren 1 Multifamily Garden
1.52 Savannah GA 31406 Chatham 1 Multifamily Garden
1.53 Anderson SC 29621 Anderson 1 Multifamily Garden
1.54 Evansville IN 47715 Vanderburgh 1 Multifamily Garden
1.55 Columbus OH 43204 Franklin 1 Multifamily Garden
1.56 Mansfield OH 44906 Richland 1 Multifamily Garden
1.57 Ocala FL 34470 Marion 1 Multifamily Garden
1.58 Bowling Green OH 43402 Wood 1 Multifamily Garden
1.59 Waycross GA 31501 Ware 1 Multifamily Garden
1.60 Dayton OH 45424 Montgomery 1 Multifamily Garden
1.61 Athens GA 30605 Clarke 1 Multifamily Garden
1.62 Lexington KY 40517 Fayette 1 Multifamily Garden
1.63 Cuyahoga Falls OH 44221 Summit 1 Multifamily Garden
1.64 Hilliard OH 43026 Franklin 1 Multifamily Garden
1.65 Shelbyville KY 40065 Shelby 1 Multifamily Garden
1.66 Madisonville KY 42431 Hopkins 1 Multifamily Garden
1.67 Michigan City IN 46360 La Porte 1 Multifamily Garden
1.68 Americus GA 31709 Sumter 1 Multifamily Garden
1.69 Evansville IN 47715 Vanderburgh 1 Multifamily Garden
1.70 Belleview FL 34420 Marion 1 Multifamily Garden
1.71 Lebanon IN 46052 Boone 1 Multifamily Garden
1.72 Englewood OH 45322 Montgomery 1 Multifamily Garden
1.73 Tipton IN 46072 Tipton 1 Multifamily Garden
2 Various Various Various Various 274 Manufactured Housing Mobile Home Park
2.001 Jacksonville FL 32250 Duval 1 Manufactured Housing Mobile Home Park
2.002 Orlando FL 32825 Orange 1 Manufactured Housing Mobile Home Park
2.003 Jacksonville FL 32246 Duval 1 Manufactured Housing Mobile Home Park
2.004 Davie FL 33325 Broward 1 Manufactured Housing Mobile Home Park
2.005 Kissimmee FL 34746 Osceola 1 Manufactured Housing Mobile Home Park
2.006 Jonesboro GA 30238 Clayton 1 Manufactured Housing Mobile Home Park
2.007 North Salt Lake UT 84054 Davis 1 Manufactured Housing Mobile Home Park
2.008 Henderson CO 80640 Adams 1 Manufactured Housing Mobile Home Park
2.009 Fort Collins CO 80528 Larimer 1 Manufactured Housing Mobile Home Park
2.010 Marietta GA 30064 Cobb 1 Manufactured Housing Mobile Home Park
2.011 Apopka FL 32703 Orange 1 Manufactured Housing Mobile Home Park
2.012 Salt Lake City UT 84117 Salt Lake 1 Manufactured Housing Mobile Home Park
2.013 Acworth GA 30102 Cherokee 1 Manufactured Housing Mobile Home Park
2.014 Naples FL 34104 Collier 1 Manufactured Housing Mobile Home Park
2.015 Aurora CO 80011 Arapahoe 1 Manufactured Housing Mobile Home Park
2.016 Fairburn GA 30213 Fayette 1 Manufactured Housing Mobile Home Park
2.017 Sandy UT 84070 Salt Lake 1 Manufactured Housing Mobile Home Park
2.018 Stone Mountain GA 30087 Gwinnett 1 Manufactured Housing Mobile Home Park
2.019 Liverpool NY 13090 Onondaga 1 Manufactured Housing Mobile Home Park
2.020 Lewisville TX 75057 Denton 1 Manufactured Housing Mobile Home Park
2.021 West Valley City UT 84119 Salt Lake 1 Manufactured Housing Mobile Home Park
2.022 Riverdale GA 30296 Clayton 1 Manufactured Housing Mobile Home Park
2.023 Raleigh NC 27616 Wake 1 Manufactured Housing Mobile Home Park
2.024 Bloomingburg NY 12721 Sullivan 1 Manufactured Housing Mobile Home Park
2.025 Summerville SC 29483 Berkeley 1 Manufactured Housing Mobile Home Park
2.026 North Charleston SC 29420 Dorchester 1 Manufactured Housing Mobile Home Park
2.027 Thornton CO 80229 Adams 1 Manufactured Housing Mobile Home Park
2.028 Golden CO 80401 Jefferson 1 Manufactured Housing Mobile Home Park
2.029 Mableton GA 30126 Cobb 1 Manufactured Housing Mobile Home Park
2.030 Raleigh NC 27603 Wake 1 Manufactured Housing Mobile Home Park
2.031 West Jordan UT 84088 Salt Lake 1 Manufactured Housing Mobile Home Park
2.032 Greeley CO 80631 Weld 1 Manufactured Housing Mobile Home Park
2.033 Flint MI 48507 Genesee 1 Manufactured Housing Mobile Home Park
2.034 Belton MO 64012 Cass 1 Manufactured Housing Mobile Home Park
2.035 Dallas TX 75253 Dallas 1 Manufactured Housing Mobile Home Park
2.036 Grand Forks ND 58201 Grand Forks 1 Manufactured Housing Mobile Home Park
2.037 Las Cruces NM 88001 Dona Ana 1 Manufactured Housing Mobile Home Park
2.038 Kennesaw GA 30152 Cobb 1 Manufactured Housing Mobile Home Park
2.039 Layton UT 84041 Davis 1 Manufactured Housing Mobile Home Park
2.040 Greensboro NC 27405 Guilford 1 Manufactured Housing Mobile Home Park
2.041 Goshen IN 46528 Elkhart 1 Manufactured Housing Mobile Home Park
2.042 Gainesville FL 32608 Alachua 1 Manufactured Housing Mobile Home Park
2.043 Corpus Christi TX 78415 Nueces 1 Manufactured Housing Mobile Home Park
2.044 Sioux City IA 51108 Woodbury 1 Manufactured Housing Mobile Home Park
2.045 Jacksonville FL 32244 Duval 1 Manufactured Housing Mobile Home Park
2.046 West Valley City UT 84119 Salt Lake 1 Manufactured Housing Mobile Home Park
2.047 Lawrence KS 66046 Douglas 1 Manufactured Housing Mobile Home Park
2.048 Denton TX 76207 Denton 1 Manufactured Housing Mobile Home Park
2.049 Moline IL 61265 Rock Island 1 Manufactured Housing Mobile Home Park
2.050 Douglasville GA 30134 Douglas 1 Manufactured Housing Mobile Home Park
2.051 Riverdale UT 84405 Weber 1 Manufactured Housing Mobile Home Park
2.052 Lawrenceville GA 30043 Gwinnett 1 Manufactured Housing Mobile Home Park
2.053 Snellville GA 30039 Gwinnett 1 Manufactured Housing Mobile Home Park
2.054 Marion IA 52302 Linn 1 Manufactured Housing Mobile Home Park
2.055 Danboro PA 18810 Bucks 1 Manufactured Housing Mobile Home Park
2.056 Manhattan KS 66502 Riley 1 Manufactured Housing Mobile Home Park
2.057 Pleasant View UT 84404 Weber 1 Manufactured Housing Mobile Home Park
2.058 Fort Worth TX 76120 Tarrant 1 Manufactured Housing Mobile Home Park
2.059 Greeley CO 80631 Weld 1 Manufactured Housing Mobile Home Park
2.060 Lake Wales FL 33859 Polk 1 Manufactured Housing Mobile Home Park
2.061 Oklahoma City OK 73135 Cleveland 1 Manufactured Housing Mobile Home Park
2.062 Altoona IA 50009 Polk 1 Manufactured Housing Mobile Home Park
2.063 Magna UT 84044 Salt Lake 1 Manufactured Housing Mobile Home Park
2.064 Nanuet NY 10954 Rockland 1 Manufactured Housing Mobile Home Park
2.065 Arlington TX 76001 Tarrant 1 Manufactured Housing Mobile Home Park
2.066 Pontoon Beach IL 62040 Madison 1 Manufactured Housing Mobile Home Park
2.067 Clearfield UT 84015 Davis 1 Manufactured Housing Mobile Home Park
2.068 Raleigh NC 27604 Wake 1 Manufactured Housing Mobile Home Park
2.069 Goshen IN 46528 Elkhart 1 Manufactured Housing Mobile Home Park
2.070 Arvada CO 80002 Jefferson 1 Manufactured Housing Mobile Home Park
2.071 Lewisville TX 75056 Denton 1 Manufactured Housing Mobile Home Park
2.072 Elkhart IN 46516 Elkhart 1 Manufactured Housing Mobile Home Park
2.073 Ogden UT 84404 Webber 1 Manufactured Housing Mobile Home Park
2.074 Kansas City KS 66111 Wyandotte 1 Manufactured Housing Mobile Home Park
2.075 South Sioux City NE 68776 Dakota 1 Manufactured Housing Mobile Home Park
2.076 West Jordan UT 84088 Salt Lake 1 Manufactured Housing Mobile Home Park
2.077 Lewisville TX 75056 Denton 1 Manufactured Housing Mobile Home Park
2.078 Waterloo IA 50701 Black Hawk 1 Manufactured Housing Mobile Home Park
2.079 Fayetteville GA 30214 Fayette 1 Manufactured Housing Mobile Home Park
2.080 Taylor PA 18517 Lackawanna 1 Manufactured Housing Mobile Home Park
2.081 Arlington TX 76012 Tarrant 1 Manufactured Housing Mobile Home Park
2.082 Los Alamos NM 87544 Los Alamos 1 Manufactured Housing Mobile Home Park
2.083 Elkhart IN 46517 Elkhart 1 Manufactured Housing Mobile Home Park
2.084 Fayetteville GA 30214 Fayette 1 Manufactured Housing Mobile Home Park
2.085 Plano TX 75074 Collin 1 Manufactured Housing Mobile Home Park
2.086 Elkhart IN 46514 Elkhart 1 Manufactured Housing Mobile Home Park
2.087 Las Cruces NM 88005 Dona Ana 1 Manufactured Housing Mobile Home Park
2.088 Crowley TX 76036 Tarrant 1 Manufactured Housing Mobile Home Park
2.089 Des Moines IA 50320 Polk 1 Manufactured Housing Mobile Home Park
2.090 Topeka KS 66609 Shawnee 1 Manufactured Housing Mobile Home Park
2.091 Seagoville TX 75159 Dallas 1 Manufactured Housing Mobile Home Park
2.092 Gillette WY 82716 Campbell 1 Manufactured Housing Mobile Home Park
2.093 Ogden UT 84404 Weber 1 Manufactured Housing Mobile Home Park
2.094 Davenport IA 52804 Scott 1 Manufactured Housing Mobile Home Park
2.095 Dubuque IA 52001 Dubuque 1 Manufactured Housing Mobile Home Park
2.096 Port Byron IL 61275 Rock Island 1 Manufactured Housing Mobile Home Park
2.097 Queensbury NY 12804 Warren 1 Manufactured Housing Mobile Home Park
2.098 Hutchins TX 75141 Dallas 1 Manufactured Housing Mobile Home Park
2.099 Arvada CO 80002 Jefferson 1 Manufactured Housing Mobile Home Park
2.100 Port Jervis NY 12771 Orange 1 Manufactured Housing Mobile Home Park
2.101 Greeley CO 80631 Weld 1 Manufactured Housing Mobile Home Park
2.102 Davenport IA 52806 Scott 1 Manufactured Housing Mobile Home Park
2.103 Pompano Beach FL 33064 Broward 1 Manufactured Housing Mobile Home Park
2.104 Kansas City MO 64156 Clay 1 Manufactured Housing Mobile Home Park
2.105 Des Moines IA 50320 Polk 1 Manufactured Housing Mobile Home Park
2.106 Tooele UT 84074 Tooele 1 Manufactured Housing Mobile Home Park
2.107 Alton IL 62002 Madison 1 Manufactured Housing Mobile Home Park
2.108 Corpus Christi TX 78417 Nueces 1 Manufactured Housing Mobile Home Park
2.109 Coppell TX 75019 Dallas 1 Manufactured Housing Mobile Home Park
2.110 Topeka KS 66608 Shawnee 1 Manufactured Housing Mobile Home Park
2.111 Pueblo CO 81001 Pueblo 1 Manufactured Housing Mobile Home Park
2.112 Sioux City IA 51105 Woodbury 1 Manufactured Housing Mobile Home Park
2.113 West Valley City UT 84128 Salt Lake 1 Manufactured Housing Mobile Home Park
2.114 Gainesville FL 32653 Alachua 1 Manufactured Housing Mobile Home Park
2.115 Davenport IA 52806 Scott 1 Manufactured Housing Mobile Home Park
2.116 Honey Brook PA 19344 Chester 1 Manufactured Housing Mobile Home Park
2.117 Greensboro NC 27406 Guilford 1 Manufactured Housing Mobile Home Park
2.118 Columbia TN 38401 Maury 1 Manufactured Housing Mobile Home Park
2.119 Denver CO 80221 Adams 1 Manufactured Housing Mobile Home Park
2.120 Orlando FL 32822 Orange 1 Manufactured Housing Mobile Home Park
2.121 El Paso TX 79928 El Paso 1 Manufactured Housing Mobile Home Park
2.122 Loveland CO 80538 Larimer 1 Manufactured Housing Mobile Home Park
2.123 Keller TX 76248 Tarrant 1 Manufactured Housing Mobile Home Park
2.124 Tyler TX 75703 Smith 1 Manufactured Housing Mobile Home Park
2.125 Dallas TX 75253 Dallas 1 Manufactured Housing Mobile Home Park
2.126 Jacksonville FL 32210 Duval 1 Manufactured Housing Mobile Home Park
2.127 Winter Haven FL 33881 Polk 1 Manufactured Housing Mobile Home Park
2.128 Pueblo CO 81005 Pueblo 1 Manufactured Housing Mobile Home Park
2.129 Huntsville TX 77340 Walker 1 Manufactured Housing Mobile Home Park
2.130 Flint MI 48507 Genesee 1 Manufactured Housing Mobile Home Park
2.131 O'Fallon IL 62269 Saint Clair 1 Manufactured Housing Mobile Home Park
2.132 DeSoto TX 75115 Dallas 1 Manufactured Housing Mobile Home Park
2.133 Cheyenne WY 82007 Laramie 1 Manufactured Housing Mobile Home Park
2.134 Orlando FL 32809 Orange 1 Manufactured Housing Mobile Home Park
2.135 Springdale AR 72764 Washington 1 Manufactured Housing Mobile Home Park
2.136 Somerset PA 15501 Somerset 1 Manufactured Housing Mobile Home Park
2.137 Royse City TX 75189 Rockwall 1 Manufactured Housing Mobile Home Park
2.138 Oklahoma City OK 73127 Canadian 1 Manufactured Housing Mobile Home Park
2.139 Dallas TX 75253 Dallas 1 Manufactured Housing Mobile Home Park
2.140 Cedar Rapids IA 52404 Linn 1 Manufactured Housing Mobile Home Park
2.141 Schuylkill Haven PA 17972 Schuylkill 1 Manufactured Housing Mobile Home Park
2.142 Imperial MO 63052 Jefferson 1 Manufactured Housing Mobile Home Park
2.143 Greensburg PA 15601 Westmoreland 1 Manufactured Housing Mobile Home Park
2.144 Wendell NC 27591 Wake 1 Manufactured Housing Mobile Home Park
2.145 Aledo TX 76008 Parker 1 Manufactured Housing Mobile Home Park
2.146 Grand Forks ND 58201 Grand Forks 1 Manufactured Housing Mobile Home Park
2.147 Greensboro NC 27405 Guilford 1 Manufactured Housing Mobile Home Park
2.148 Mansfield TX 76063 Tarrant 1 Manufactured Housing Mobile Home Park
2.149 DeSoto TX 75115 Dallas 1 Manufactured Housing Mobile Home Park
2.150 Jacksonville FL 32210 Duval 1 Manufactured Housing Mobile Home Park
2.151 Wichita KS 67217 Sedgwick 1 Manufactured Housing Mobile Home Park
2.152 Washingtonville NY 10992 Orange 1 Manufactured Housing Mobile Home Park
2.153 Berwick PA 17815 Columbia 1 Manufactured Housing Mobile Home Park
2.154 Gillette WY 82716 Campbell 1 Manufactured Housing Mobile Home Park
2.155 Pueblo CO 81005 Peublo 1 Manufactured Housing Mobile Home Park
2.156 Oklahoma City OK 73169 Oklahoma 1 Manufactured Housing Mobile Home Park
2.157 Wichita KS 67216 Sedgwick 1 Manufactured Housing Mobile Home Park
2.158 Tyler TX 75708 Smith 1 Manufactured Housing Mobile Home Park
2.159 Dallas TX 75253 Dallas 1 Manufactured Housing Mobile Home Park
2.160 Coppell TX 75019 Dallas 1 Manufactured Housing Mobile Home Park
2.161 Douglasville GA 30134 Douglas 1 Manufactured Housing Mobile Home Park
2.162 Laramie WY 82072 Albany 1 Manufactured Housing Mobile Home Park
2.163 Nashville TN 37207 Davidson 1 Manufactured Housing Mobile Home Park
2.164 Cheyenne WY 82007 Laramie 1 Manufactured Housing Mobile Home Park
2.165 Birch Run MI 48415 Saginaw 1 Manufactured Housing Mobile Home Park
2.166 Terrell TX 75160 Kaufman 1 Manufactured Housing Mobile Home Park
2.167 Fort Collins CO 80525 Larimer 1 Manufactured Housing Mobile Home Park
2.168 Ogden UT 84404 Weber 1 Manufactured Housing Mobile Home Park
2.169 Temple TX 76501 Bell 1 Manufactured Housing Mobile Home Park
2.170 Connelly NY 12417 Ulster 1 Manufactured Housing Mobile Home Park
2.171 DeSoto TX 75115 Dallas 1 Manufactured Housing Mobile Home Park
2.172 Oklahoma City OK 73135 Oklahoma 1 Manufactured Housing Mobile Home Park
2.173 Dallas TX 75253 Dallas 1 Manufactured Housing Mobile Home Park
2.174 Fort Worth TX 76119 Tarrant 1 Manufactured Housing Mobile Home Park
2.175 Avoca PA 18641 Luzerne 1 Manufactured Housing Mobile Home Park
2.176 Oklahoma City OK 73128 Oklahoma 1 Manufactured Housing Mobile Home Park
2.177 Dallas TX 75253 Dallas 1 Manufactured Housing Mobile Home Park
2.178 Manhattan KS 66502 Riley 1 Manufactured Housing Mobile Home Park
2.179 Casper WY 82604 Natrona 1 Manufactured Housing Mobile Home Park
2.180 Wichita KS 67217 Sedgwick 1 Manufactured Housing Mobile Home Park
2.181 Manhattan KS 66502 Riley 1 Manufactured Housing Mobile Home Park
2.182 Browns Summit NC 27214 Guilford 1 Manufactured Housing Mobile Home Park
2.183 Ephrata PA 17522 Lancaster 1 Manufactured Housing Mobile Home Park
2.184 Pocatello ID 83204 Bannock 1 Manufactured Housing Mobile Home Park
2.185 Lithia Springs GA 30122 Douglas 1 Manufactured Housing Mobile Home Park
2.186 Norristown PA 19403 Montgomery 1 Manufactured Housing Mobile Home Park
2.187 Goodlettsville TN 37072 Davidson 1 Manufactured Housing Mobile Home Park
2.188 Choctaw OK 73020 Oklahoma 1 Manufactured Housing Mobile Home Park
2.189 Denton TX 76208 Denton 1 Manufactured Housing Mobile Home Park
2.190 Casper WY 82609 Natrona 1 Manufactured Housing Mobile Home Park
2.191 Davenport IA 52804 Scott 1 Manufactured Housing Mobile Home Park
2.192 Fenton MO 63026 Jefferson 1 Manufactured Housing Mobile Home Park
2.193 Newton IA 50208 Jasper 1 Manufactured Housing Mobile Home Park
2.194 Lawrence KS 66044 Douglas 1 Manufactured Housing Mobile Home Park
2.195 Park City KS 67219 Sedgwick 1 Manufactured Housing Mobile Home Park
2.196 Salina KS 67401 Saline 1 Manufactured Housing Mobile Home Park
2.197 Fort Worth TX 76119 Tarrant 1 Manufactured Housing Mobile Home Park
2.198 Hays KS 67601 Ellis 1 Manufactured Housing Mobile Home Park
2.199 Gillette WY 83718 Campbell 1 Manufactured Housing Mobile Home Park
2.200 Casper WY 82604 Natrona 1 Manufactured Housing Mobile Home Park
2.201 Stillwater OK 74074 Payne 1 Manufactured Housing Mobile Home Park
2.202 Commerce City CO 80022 Adams 1 Manufactured Housing Mobile Home Park
2.203 Fayetteville AR 72704 Washington 1 Manufactured Housing Mobile Home Park
2.204 House Springs MO 63051 Jefferson 1 Manufactured Housing Mobile Home Park
2.205 Oklahoma City OK 73127 Canadian 1 Manufactured Housing Mobile Home Park
2.206 Ladson SC 29456 Charleston 1 Manufactured Housing Mobile Home Park
2.207 Riverdale GA 30274 Clayton 1 Manufactured Housing Mobile Home Park
2.208 Gillette WY 82718 Campbell 1 Manufactured Housing Mobile Home Park
2.209 Pocatello ID 83201 Bannock 1 Manufactured Housing Mobile Home Park
2.210 Lawrence KS 66044 Douglas 1 Manufactured Housing Mobile Home Park
2.211 Commerce City CO 80022 Adams 1 Manufactured Housing Mobile Home Park
2.212 Fayetteville AR 72704 Washington 1 Manufactured Housing Mobile Home Park
2.213 Seagoville TX 75159 Dallas 1 Manufactured Housing Mobile Home Park
2.214 Seagoville TX 75159 Dallas 1 Manufactured Housing Mobile Home Park
2.215 Lawrence KS 66046 Douglas 1 Manufactured Housing Mobile Home Park
2.216 Topeka KS 66608 Shawnee 1 Manufactured Housing Mobile Home Park
2.217 Dallas TX 75253 Dallas 1 Manufactured Housing Mobile Home Park
2.218 Jacksonville FL 32222 Duval 1 Manufactured Housing Mobile Home Park
2.219 Fort Worth TX 76119 Tarrant 1 Manufactured Housing Mobile Home Park
2.220 Corpus Christi TX 78406 Nueces 1 Manufactured Housing Mobile Home Park
2.221 Bloomsburg PA 18603 Columbia 1 Manufactured Housing Mobile Home Park
2.222 Wichita KS 67219 Sedgwick 1 Manufactured Housing Mobile Home Park
2.223 West Valley City UT 84128 Salt Lake 1 Manufactured Housing Mobile Home Park
2.224 Chambersburg PA 17201 Franklin 1 Manufactured Housing Mobile Home Park
2.225 Tyler TX 75708 Smith 1 Manufactured Housing Mobile Home Park
2.226 West Valley City UT 84119 Salt Lake 1 Manufactured Housing Mobile Home Park
2.227 Saratoga Springs NY 12866 Saratoga 1 Manufactured Housing Mobile Home Park
2.228 Casper WY 82609 Natrona 1 Manufactured Housing Mobile Home Park
2.229 Cheyenne WY 82001 Laramie 1 Manufactured Housing Mobile Home Park
2.230 Stillwater OK 74074 Payne 1 Manufactured Housing Mobile Home Park
2.231 Wichita KS 67217 Sedgwick 1 Manufactured Housing Mobile Home Park
2.232 Chambersburg PA 17202 Franklin 1 Manufactured Housing Mobile Home Park
2.233 Orlando FL 32839 Orange 1 Manufactured Housing Mobile Home Park
2.234 Tunkhannock PA 18657 Wyoming 1 Manufactured Housing Mobile Home Park
2.235 Ephrata PA 17522 Lancaster 1 Manufactured Housing Mobile Home Park
2.236 Godfrey IL 62035 Madison 1 Manufactured Housing Mobile Home Park
2.237 Salina KS 67401 Saline 1 Manufactured Housing Mobile Home Park
2.238 Stillwater OK 74074 Payne 1 Manufactured Housing Mobile Home Park
2.239 Arnold MO 63010 Jefferson 1 Manufactured Housing Mobile Home Park
2.240 Fort Worth TX 76119 Tarrant 1 Manufactured Housing Mobile Home Park
2.241 Casper WY 82601 Natrona 1 Manufactured Housing Mobile Home Park
2.242 Arnold MO 63010 Jefferson 1 Manufactured Housing Mobile Home Park
2.243 Salina KS 67401 Saline 1 Manufactured Housing Mobile Home Park
2.244 Greensboro NC 27405 Guilford 1 Manufactured Housing Mobile Home Park
2.245 Gainesville TX 76240 Cooke 1 Manufactured Housing Mobile Home Park
2.246 Stillwater OK 74074 Payne 1 Manufactured Housing Mobile Home Park
2.247 Sayre PA 18840 Bradford 1 Manufactured Housing Mobile Home Park
2.248 Honey Brook PA 17202 Chester 1 Manufactured Housing Mobile Home Park
2.249 Fort Worth TX 76119 Tarrant 1 Manufactured Housing Mobile Home Park
2.250 Wichita KS 67216 Sedgwick 1 Manufactured Housing Mobile Home Park
2.251 Sherman TX 75090 Grayson 1 Manufactured Housing Mobile Home Park
2.252 Blossvale NY 13308 Oneida 1 Manufactured Housing Mobile Home Park
2.253 Horseheads NY 14845 Chemung 1 Manufactured Housing Mobile Home Park
2.254 Narvon PA 17555 Lancaster 1 Manufactured Housing Mobile Home Park
2.255 Coal Valley IL 61240 Rock Island 1 Manufactured Housing Mobile Home Park
2.256 Fort Worth TX 76119 Tarrant 1 Manufactured Housing Mobile Home Park
2.257 Seagoville TX 75159 Dallas 1 Manufactured Housing Mobile Home Park
2.258 Topeka KS 66619 Shawnee 1 Manufactured Housing Mobile Home Park
2.259 Fuquay-Varina NC 27526 Wake 1 Manufactured Housing Mobile Home Park
2.260 Haysville KS 67060 Sedgwick 1 Manufactured Housing Mobile Home Park
2.261 Jonestown PA 17038 Lebanon 1 Manufactured Housing Mobile Home Park
2.262 Sherman TX 75090 Grayson 1 Manufactured Housing Mobile Home Park
2.263 Athens PA 18840 Bradford 1 Manufactured Housing Mobile Home Park
2.264 Wichita KS 67216 Sedgwick 1 Manufactured Housing Mobile Home Park
2.265 House Springs MO 63051 Jefferson 1 Manufactured Housing Mobile Home Park
2.266 Midwest City OK 73130 Oklahoma 1 Manufactured Housing Mobile Home Park
2.267 Midwest City OK 73110 Oklahoma 1 Manufactured Housing Mobile Home Park
2.268 Wichita KS 67217 Sedgwick 1 Manufactured Housing Mobile Home Park
2.269 Chambersburg PA 17201 Franklin 1 Manufactured Housing Mobile Home Park
2.270 Douglass KS 67039 Butler 1 Manufactured Housing Mobile Home Park
2.271 Arnold MO 63010 Jefferson 1 Manufactured Housing Mobile Home Park
2.272 Gansevoort NY 12831 Saratoga 1 Manufactured Housing Mobile Home Park
2.273 Wichita KS 67209 Sedgwick 1 Manufactured Housing Mobile Home Park
2.274 Wichita KS 67217 Sedgwick 1 Manufactured Housing Mobile Home Park
6 Hyattsville MD 20782 Prince George's 1 Multifamily Student Housing
Houston TX 77042 Harris 2 Multifamily Garden
9 Houston TX 77042 Harris 1 Multifamily Garden
10 Houston TX 77042 Harris 1 Multifamily Garden
11 Dallas TX 75287 Collin 1 Multifamily Garden
12 Inver Grove Heights MN 55076 Dakota 1 Manufactured Housing Mobile Home Park
16 San Antonio TX 78251 Bexar 1 Multifamily Garden
19 Bowling Green KY 42104 Warren 1 Multifamily Garden
21 Greenville SC 29615 Greenville 1 Multifamily Garden
23 Brighton NY 14623 Monroe 1 Multifamily Garden
34 Baton Rouge LA 70810 East Baton Rouge 1 Multifamily Garden
42 Indianapolis IN 46226 Marion 1 Multifamily Garden
45 Hawthorne CA 90250 Los Angeles 1 Multifamily Garden
52 Los Angeles CA 90004 Los Angeles 1 Multifamily Garden
55 Jacksonville FL 32277 Duval 1 Multifamily Garden
56 Various NY Various Monroe 5 Multifamily Garden
56.01 Webster NY 14580 Monroe 1 Multifamily Garden
56.02 Scottsville NY 14546 Monroe 1 Multifamily Garden
56.03 Ogden NY 14624 Monroe 1 Multifamily Garden
56.04 Gates NY 14624 Monroe 1 Multifamily Garden
56.05 Webster NY 14580 Monroe 1 Multifamily Garden
57 Houston TX 77034 Harris 1 Multifamily Garden
66 Lakeland FL 33815 Polk 1 Manufactured Housing Mobile Home Park
68 Seabrook TX 77586 Harris 1 Multifamily Garden
70 Baltimore MD 21225 Baltimore City 1 Multifamily Garden
75 Oak Lawn IL 60453 Cook 1 Manufactured Housing Mobile Home Park
81 Cary NC 27511 Wake 1 Multifamily Garden
85 Millville NJ 08332 Cumberland 1 Multifamily Garden
87 College Station TX 77840 Brazos 1 Multifamily Garden
88 Richmond VA 23220 Henrico 1 Multifamily Garden
92 Denton TX 76207 Denton 1 Multifamily Garden
99 Spartanburg SC 29301 Spartanburg 1 Multifamily Garden
102 Evanston IL 60201 Cook 1 Multifamily Mid/High Rise
103 Carson City NV 89706 Carson City 1 Multifamily Garden
105 Midlothian TX 76065 Ellis 1 Multifamily Garden
110 Warrensville Heights OH 44128 Cuyahoga 1 Multifamily Garden
115 Alamogordo NM 88310 Otero 1 Multifamily Garden
148 Media PA 19063 Delaware 1 Multifamily Garden
151 Long Beach CA 90805 Los Angeles 1 Multifamily Garden
152 Newport Beach CA 92663 Orange 1 Multifamily Garden
159 Sacramento CA 95831 Sacramento 1 Multifamily Garden
160 Brooklyn NY 11201 Kings 1 Multifamily Garden
165 Seattle WA 98102 King 1 Multifamily Garden
171 Seattle WA 98102 King 1 Multifamily Garden
180 Vancouver WA 98660 Clark 1 Manufactured Housing Mobile Home Park
185 Greenfield CA 93927 Monterey 1 Manufactured Housing Mobile Home Park
190 Lakeland FL 33815 Polk 1 Manufactured Housing Mobile Home Park
193 Van Nuys CA 91405 Los Angeles 1 Multifamily Garden
197 Pasadena CA 91101 Los Angeles 1 Multifamily Garden
198 Brooklyn NY 11238 Kings 1 Multifamily Garden
201 Seattle WA 98105 King 1 Multifamily Garden
203 Redmond WA 98052 King 1 Multifamily Garden
209 Los Angeles CA 90501 Los Angeles 1 Multifamily Garden
210 Westwood CA 90025 Los Angeles 1 Multifamily Garden
213 Brooklyn NY 11222 Kings 1 Multifamily Garden
214 Torrance CA 90501 Los Angeles 1 Multifamily Garden
215 Torrance CA 90501 Los Angeles 1 Multifamily Garden
216 Orange CA 92868 Orange 1 Multifamily Garden
217 Torrance CA 90501 Los Angeles 1 Multifamily Garden
218 Torrance CA 90501 Los Angeles 1 Multifamily Garden
PADS
CUT-OFF DATE LOAN --------------
CUT-OFF DATE BALANCE GROUP OCCUPANCY AVG RENT PER
LOAN # BALANCE ($) PER UNIT ($) 1 OR 2 OCCUPANCY % DATE TOTAL UNITS/PADS MO. ($)
------------------------------------------------------------------------------------------------------------------
1 335,000,000 48,607.08 2 94.29 4/1/2007 6,892
1.01 17,200,000 2 96.15 4/1/2007 234
1.02 17,170,000 2 91.64 4/1/2007 287
1.03 12,800,000 2 96.26 4/1/2007 187
1.04 11,400,000 2 95.00 4/1/2007 160
1.05 8,680,000 2 96.69 4/1/2007 121
1.06 7,200,000 2 94.16 4/1/2007 154
1.07 6,676,000 2 95.63 4/1/2007 167
1.08 6,410,000 2 92.59 4/1/2007 135
1.09 6,390,000 2 93.33 4/1/2007 75
1.10 6,240,000 2 96.25 4/1/2007 80
1.11 6,160,000 2 96.15 4/1/2007 104
1.12 5,840,000 2 89.35 4/1/2007 168
1.13 5,760,000 2 94.25 4/1/2007 87
1.14 5,760,000 2 94.07 4/1/2007 135
1.15 5,700,000 2 93.94 4/1/2007 132
1.16 5,700,000 2 92.00 4/1/2007 156
1.17 5,600,000 2 97.18 4/1/2007 141
1.18 5,480,000 2 97.20 4/1/2007 109
1.19 5,400,000 2 97.95 4/1/2007 146
1.20 5,360,000 2 93.16 4/1/2007 117
1.21 5,200,000 2 97.37 4/1/2007 76
1.22 5,200,000 2 92.59 4/1/2007 138
1.23 5,190,000 2 97.71 4/1/2007 130
1.24 5,100,000 2 93.22 4/1/2007 118
1.25 4,660,000 2 96.67 4/1/2007 120
1.26 4,520,000 2 90.48 4/1/2007 147
1.27 4,400,000 2 94.06 4/1/2007 101
1.28 4,380,000 2 93.33 4/1/2007 60
1.29 4,240,000 2 91.20 4/1/2007 125
1.30 4,240,000 2 94.59 4/1/2007 74
1.31 4,190,000 2 96.61 4/1/2007 59
1.32 4,150,000 2 85.07 4/1/2007 67
1.33 4,050,000 2 93.27 4/1/2007 104
1.34 4,000,000 2 97.40 4/1/2007 76
1.35 3,980,000 2 92.96 4/1/2007 71
1.36 3,970,000 2 88.42 4/1/2007 95
1.37 3,840,000 2 100.00 4/1/2007 81
1.38 3,770,000 2 90.63 4/1/2007 64
1.39 3,730,000 2 93.85 4/1/2007 65
1.40 3,600,000 2 93.33 4/1/2007 75
1.41 3,560,000 2 95.71 4/1/2007 70
1.42 3,470,000 2 89.80 4/1/2007 98
1.43 3,410,000 2 96.05 4/1/2007 76
1.44 3,320,000 2 92.77 4/1/2007 83
1.45 3,280,000 2 94.29 4/1/2007 70
1.46 3,270,000 2 96.00 4/1/2007 50
1.47 3,269,000 2 81.82 4/1/2007 66
1.48 3,230,000 2 90.91 4/1/2007 66
1.49 3,200,000 2 91.14 4/1/2007 79
1.50 3,160,000 2 92.41 4/1/2007 79
1.51 3,100,000 2 100.00 4/1/2007 63
1.52 3,010,000 2 100.00 4/1/2007 53
1.53 3,000,000 2 93.48 4/1/2007 92
1.54 2,960,000 2 98.63 4/1/2007 73
1.55 2,920,000 2 94.81 4/1/2007 77
1.56 2,800,000 2 95.83 4/1/2007 72
1.57 2,745,000 2 96.08 4/1/2007 51
1.58 2,730,000 2 94.03 4/1/2007 67
1.59 2,700,000 2 100.00 4/1/2007 64
1.60 2,680,000 2 92.75 4/1/2007 69
1.61 2,640,000 2 98.11 4/1/2007 53
1.62 2,620,000 2 95.00 4/1/2007 60
1.63 2,600,000 2 94.55 4/1/2007 55
1.64 2,550,000 2 93.33 4/1/2007 60
1.65 2,440,000 2 93.10 4/1/2007 58
1.66 2,380,000 2 93.06 4/1/2007 72
1.67 2,260,000 2 96.23 4/1/2007 58
1.68 2,240,000 2 91.67 4/1/2007 60
1.69 2,230,000 2 98.39 4/1/2007 62
1.70 2,160,000 2 100.00 4/1/2007 42
1.71 2,160,000 2 86.89 4/1/2007 61
1.72 1,940,000 2 89.58 4/1/2007 48
1.73 1,630,000 2 93.18 4/1/2007 44
2 250,000,000 27,560.57 2 82.57 4/30/2007 57,165 325
2.001 6,448,746 2 97.53 4/30/2007 931 337
2.002 4,623,294 2 85.71 4/30/2007 665 398
2.003 4,316,090 2 92.52 4/30/2007 642 358
2.004 3,810,854 2 90.39 4/30/2007 406 528
2.005 3,650,904 2 98.36 4/30/2007 489 389
2.006 3,541,733 2 79.76 4/30/2007 850 345
2.007 3,399,556 2 99.47 4/30/2007 379 421
2.008 3,121,549 2 91.15 4/30/2007 339 496
2.009 3,068,232 2 83.51 4/30/2007 485 408
2.010 2,895,589 2 95.58 4/30/2007 430 403
2.011 2,768,645 2 97.77 4/30/2007 404 370
2.012 2,654,395 2 99.07 4/30/2007 323 408
2.013 2,611,235 2 85.40 4/30/2007 507 413
2.014 2,552,840 2 90.06 4/30/2007 362 400
2.015 2,458,902 2 91.75 4/30/2007 303 479
2.016 2,342,114 2 78.24 4/30/2007 510 369
2.017 2,160,584 2 99.63 4/30/2007 273 402
2.018 2,031,101 2 81.97 4/30/2007 355 409
2.019 1,981,593 2 57.44 4/30/2007 806 393
2.020 1,967,629 2 98.61 4/30/2007 287 414
2.021 1,956,204 2 97.59 4/30/2007 249 404
2.022 1,938,432 2 88.99 4/30/2007 436 354
2.023 1,853,380 2 97.77 4/30/2007 314 393
2.024 1,847,033 2 99.22 4/30/2007 257 526
2.025 1,838,147 2 70.60 4/30/2007 602 302
2.026 1,796,255 2 89.41 4/30/2007 425 324
2.027 1,774,992 2 97.12 4/30/2007 208 463
2.028 1,675,659 2 82.46 4/30/2007 228 499
2.029 1,662,964 2 98.33 4/30/2007 300 367
2.030 1,635,036 2 96.58 4/30/2007 322 335
2.031 1,600,762 2 99.53 4/30/2007 211 393
2.032 1,579,181 2 74.62 4/30/2007 331 355
2.033 1,575,373 2 72.68 4/30/2007 377 397
2.034 1,552,523 2 85.55 4/30/2007 443 321
2.035 1,509,362 2 78.96 4/30/2007 385 313
2.036 1,495,398 2 94.04 4/30/2007 302 358
2.037 1,487,782 2 81.64 4/30/2007 354 365
2.038 1,487,782 2 91.39 4/30/2007 267 410
2.039 1,483,973 2 96.17 4/30/2007 209 349
2.040 1,454,776 2 71.79 4/30/2007 468 307
2.041 1,453,507 2 71.94 4/30/2007 360 345
2.042 1,447,160 2 95.92 4/30/2007 343 248
2.043 1,444,621 2 87.35 4/30/2007 340 314
2.044 1,437,004 2 74.13 4/30/2007 518 297
2.045 1,410,346 2 69.44 4/30/2007 288 281
2.046 1,409,076 2 98.50 4/30/2007 200 374
2.047 1,376,071 2 93.85 4/30/2007 260 298
2.048 1,367,185 2 73.03 4/30/2007 356 335
2.049 1,348,143 2 92.81 4/30/2007 292 308
2.050 1,345,605 2 72.22 4/30/2007 126 356
2.051 1,320,216 2 95.19 4/30/2007 208 339
2.052 1,307,521 2 98.52 4/30/2007 203 423
2.053 1,307,521 2 84.09 4/30/2007 264 382
2.054 1,301,174 2 73.80 4/30/2007 439 276
2.055 1,301,174 2 100.00 4/30/2007 230 382
2.056 1,288,480 2 99.12 4/30/2007 342 248
2.057 1,268,169 2 77.22 4/30/2007 237 337
2.058 1,263,091 2 78.18 4/30/2007 275 352
2.059 1,247,223 2 51.64 4/30/2007 426 396
2.060 1,221,200 2 97.66 4/30/2007 214 277
2.061 1,218,661 2 81.86 4/30/2007 408 248
2.062 1,218,661 2 92.04 4/30/2007 226 390
2.063 1,217,391 2 88.24 4/30/2007 204 351
2.064 1,216,122 2 100.00 4/30/2007 136 702
2.065 1,211,044 2 91.50 4/30/2007 247 342
2.066 1,211,044 2 90.97 4/30/2007 277 304
2.067 1,205,966 2 94.36 4/30/2007 195 320
2.068 1,195,811 2 96.17 4/30/2007 183 422
2.069 1,194,541 2 93.53 4/30/2007 232 336
2.070 1,192,003 2 92.14 4/30/2007 140 482
2.071 1,190,733 2 96.92 4/30/2007 195 377
2.072 1,188,194 2 97.56 4/30/2007 205 340
2.073 1,180,578 2 92.47 4/30/2007 186 336
2.074 1,178,039 2 73.23 4/30/2007 396 293
2.075 1,175,500 2 82.78 4/30/2007 273 290
2.076 1,158,997 2 92.94 4/30/2007 170 368
2.077 1,136,147 2 95.19 4/30/2007 187 381
2.078 1,129,800 2 93.10 4/30/2007 290 253
2.079 1,129,800 2 90.55 4/30/2007 201 363
2.080 1,127,261 2 90.00 4/30/2007 310 272
2.081 1,108,220 2 83.62 4/30/2007 232 366
2.082 1,100,603 2 77.65 4/30/2007 179 510
2.083 1,100,603 2 83.23 4/30/2007 167 358
2.084 1,094,256 2 80.75 4/30/2007 213 336
2.085 1,079,023 2 96.64 4/30/2007 149 426
2.086 1,066,328 2 93.47 4/30/2007 245 280
2.087 1,054,903 2 87.27 4/30/2007 220 283
2.088 1,053,634 2 80.08 4/30/2007 256 326
2.089 1,046,017 2 91.63 4/30/2007 251 366
2.090 1,026,976 2 87.00 4/30/2007 277 269
2.091 1,025,706 2 82.06 4/30/2007 301 278
2.092 1,025,706 2 100.00 4/30/2007 209 295
2.093 1,005,395 2 92.67 4/30/2007 191 294
2.094 993,335 2 94.41 4/30/2007 179 334
2.095 992,066 2 73.50 4/30/2007 317 297
2.096 985,084 2 84.11 4/30/2007 214 304
2.097 977,467 2 98.91 4/30/2007 183 370
2.098 963,504 2 82.87 4/30/2007 216 291
2.099 960,965 2 89.29 4/30/2007 112 485
2.100 959,695 2 99.40 4/30/2007 166 410
2.101 944,462 2 93.10 4/30/2007 174 334
2.102 928,594 2 82.59 4/30/2007 270 282
2.103 911,457 2 96.67 4/30/2007 120 449
2.104 903,840 2 95.73 4/30/2007 281 333
2.105 896,223 2 97.25 4/30/2007 182 380
2.106 896,223 2 79.46 4/30/2007 185 276
2.107 889,559 2 53.46 4/30/2007 520 280
2.108 882,260 2 54.33 4/30/2007 254 275
2.109 877,182 2 86.03 4/30/2007 136 456
2.110 875,912 2 85.20 4/30/2007 250 253
2.111 868,296 2 55.56 4/30/2007 387 285
2.112 867,026 2 81.77 4/30/2007 203 294
2.113 865,757 2 86.11 4/30/2007 144 362
2.114 860,679 2 98.54 4/30/2007 206 265
2.115 856,871 2 77.61 4/30/2007 259 275
2.116 853,063 2 94.44 4/30/2007 144 358
2.117 842,907 2 82.57 4/30/2007 241 301
2.118 833,069 2 65.14 4/30/2007 350 277
2.119 830,213 2 85.00 4/30/2007 100 469
2.120 817,518 2 100.00 4/30/2007 128 330
2.121 816,249 2 70.63 4/30/2007 286 282
2.122 812,440 2 92.04 4/30/2007 113 415
2.123 807,363 2 52.32 4/30/2007 409 305
2.124 801,016 2 71.91 4/30/2007 299 263
2.125 794,668 2 90.06 4/30/2007 181 301
2.126 792,129 2 85.71 4/30/2007 210 287
2.127 784,513 2 87.19 4/30/2007 203 294
2.128 783,243 2 90.06 4/30/2007 161 329
2.129 764,202 2 80.18 4/30/2007 227 261
2.130 762,932 2 54.23 4/30/2007 319 383
2.131 755,316 2 97.60 4/30/2007 167 282
2.132 754,046 2 90.38 4/30/2007 156 338
2.133 751,507 2 73.58 4/30/2007 246 251
2.134 746,430 2 99.15 4/30/2007 118 326
2.135 741,352 2 94.44 4/30/2007 180 281
2.136 732,466 2 98.55 4/30/2007 207 246
2.137 724,849 2 76.21 4/30/2007 227 273
2.138 721,041 2 70.75 4/30/2007 335 238
2.139 721,041 2 85.00 4/30/2007 200 286
2.140 715,963 2 76.07 4/30/2007 234 289
2.141 710,885 2 90.67 4/30/2007 193 276
2.142 700,730 2 84.92 4/30/2007 252 295
2.143 694,383 2 94.50 4/30/2007 200 261
2.144 684,227 2 84.65 4/30/2007 202 308
2.145 682,958 2 92.14 4/30/2007 140 305
2.146 660,108 2 91.03 4/30/2007 156 319
2.147 658,838 2 62.42 4/30/2007 306 322
2.148 658,838 2 96.55 4/30/2007 145 301
2.149 656,300 2 93.13 4/30/2007 131 346
2.150 648,683 2 92.86 4/30/2007 126 287
2.151 644,875 2 71.63 4/30/2007 363 237
2.152 641,066 2 100.00 4/30/2007 82 620
2.153 634,719 2 87.72 4/30/2007 171 278
2.154 629,641 2 99.23 4/30/2007 130 300
2.155 623,294 2 62.25 4/30/2007 204 333
2.156 619,486 2 68.31 4/30/2007 284 243
2.157 615,678 2 45.35 4/30/2007 538 239
2.158 600,444 2 83.98 4/30/2007 181 238
2.159 599,175 2 95.77 4/30/2007 142 283
2.160 597,905 2 87.10 4/30/2007 93 435
2.161 596,636 2 93.13 4/30/2007 131 322
2.162 591,558 2 97.46 4/30/2007 118 302
2.163 583,942 2 86.53 4/30/2007 193 308
2.164 582,672 2 93.51 4/30/2007 154 263
2.165 578,864 2 86.62 4/30/2007 142 349
2.166 575,056 2 68.06 4/30/2007 191 297
2.167 568,708 2 77.68 4/30/2007 112 390
2.168 568,708 2 97.81 4/30/2007 137 227
2.169 564,900 2 66.09 4/30/2007 174 253
2.170 563,631 2 100.00 4/30/2007 100 434
2.171 558,553 2 88.14 4/30/2007 118 332
2.172 550,936 2 90.14 4/30/2007 213 236
2.173 545,858 2 95.00 4/30/2007 120 296
2.174 544,589 2 87.60 4/30/2007 121 340
2.175 516,661 2 91.50 4/30/2007 153 268
2.176 515,392 2 84.10 4/30/2007 195 232
2.177 510,949 2 63.87 4/30/2007 191 284
2.178 506,506 2 98.74 4/30/2007 159 230
2.179 498,889 2 94.53 4/30/2007 128 268
2.180 497,620 2 69.58 4/30/2007 240 255
2.181 493,811 2 96.60 4/30/2007 147 226
2.182 486,195 2 41.75 4/30/2007 297 271
2.183 484,925 2 95.19 4/30/2007 104 318
2.184 483,656 2 72.41 4/30/2007 174 246
2.185 469,692 2 96.08 4/30/2007 102 317
2.186 456,998 2 88.73 4/30/2007 71 438
2.187 451,920 2 77.86 4/30/2007 131 361
2.188 449,381 2 80.35 4/30/2007 173 230
2.189 448,112 2 54.84 4/30/2007 186 334
2.190 444,303 2 95.54 4/30/2007 112 265
2.191 444,303 2 75.61 4/30/2007 123 314
2.192 441,130 2 81.77 4/30/2007 192 276
2.193 439,226 2 66.50 4/30/2007 200 240
2.194 435,417 2 92.47 4/30/2007 93 297
2.195 429,070 2 55.51 4/30/2007 254 258
2.196 427,801 2 83.08 4/30/2007 130 263
2.197 426,055 2 65.52 4/30/2007 203 278
2.198 425,262 2 74.06 4/30/2007 212 222
2.199 423,992 2 100.00 4/30/2007 94 295
2.200 423,992 2 96.19 4/30/2007 105 262
2.201 408,759 2 54.43 4/30/2007 237 256
2.202 397,334 2 90.63 4/30/2007 64 378
2.203 392,256 2 84.55 4/30/2007 110 266
2.204 389,718 2 72.25 4/30/2007 191 282
2.205 387,179 2 80.86 4/30/2007 162 237
2.206 387,179 2 75.16 4/30/2007 157 219
2.207 380,831 2 98.67 4/30/2007 75 330
2.208 378,293 2 100.00 4/30/2007 79 302
2.209 377,023 2 80.36 4/30/2007 168 230
2.210 370,676 2 83.33 4/30/2007 90 277
2.211 366,868 2 94.12 4/30/2007 51 411
2.212 364,329 2 95.45 4/30/2007 88 271
2.213 355,443 2 81.32 4/30/2007 91 296
2.214 351,634 2 80.58 4/30/2007 103 271
2.215 346,557 2 83.57 4/30/2007 140 280
2.216 326,246 2 87.36 4/30/2007 87 252
2.217 321,168 2 78.95 4/30/2007 95 279
2.218 318,629 2 98.39 4/30/2007 62 250
2.219 311,330 2 68.12 4/30/2007 138 282
2.220 311,012 2 64.33 4/30/2007 157 274
2.221 300,857 2 75.45 4/30/2007 110 277
2.222 298,318 2 65.00 4/30/2007 160 246
2.223 297,049 2 88.52 4/30/2007 61 330
2.224 291,971 2 86.26 4/30/2007 131 229
2.225 289,432 2 83.50 4/30/2007 103 232
2.226 275,468 2 97.50 4/30/2007 40 394
2.227 274,199 2 98.39 4/30/2007 62 365
2.228 267,851 2 97.14 4/30/2007 70 264
2.229 264,043 2 98.36 4/30/2007 61 305
2.230 261,504 2 71.20 4/30/2007 125 232
2.231 255,157 2 91.04 4/30/2007 67 255
2.232 242,463 2 95.92 4/30/2007 98 218
2.233 239,924 2 96.30 4/30/2007 54 257
2.234 233,577 2 87.34 4/30/2007 79 264
2.235 233,577 2 100.00 4/30/2007 43 325
2.236 231,038 2 75.34 4/30/2007 73 264
2.237 228,499 2 55.48 4/30/2007 155 247
2.238 220,882 2 67.59 4/30/2007 108 228
2.239 220,882 2 97.26 4/30/2007 73 279
2.240 218,819 2 68.97 4/30/2007 87 292
2.241 218,343 2 94.37 4/30/2007 71 222
2.242 217,074 2 82.00 4/30/2007 100 292
2.243 213,266 2 66.99 4/30/2007 103 236
2.244 211,996 2 76.19 4/30/2007 84 248
2.245 210,727 2 65.74 4/30/2007 108 239
2.246 210,727 2 56.00 4/30/2007 125 238
2.247 210,727 2 90.59 4/30/2007 85 261
2.248 210,727 2 90.00 4/30/2007 40 364
2.249 204,221 2 78.95 4/30/2007 57 340
2.250 203,110 2 60.15 4/30/2007 133 237
2.251 201,841 2 60.47 4/30/2007 129 251
2.252 201,206 2 63.91 4/30/2007 133 245
2.253 194,065 2 72.82 4/30/2007 103 276
2.254 190,416 2 92.31 4/30/2007 39 348
2.255 185,338 2 95.56 4/30/2007 45 266
2.256 184,386 2 66.18 4/30/2007 68 298
2.257 170,105 2 89.09 4/30/2007 55 234
2.258 166,296 2 65.14 4/30/2007 109 219
2.259 159,949 2 70.83 4/30/2007 72 269
2.260 138,369 2 77.65 4/30/2007 85 234
2.261 135,830 2 93.18 4/30/2007 44 280
2.262 124,405 2 58.23 4/30/2007 79 260
2.263 121,866 2 65.66 4/30/2007 99 243
2.264 115,519 2 60.91 4/30/2007 110 235
2.265 112,980 2 80.43 4/30/2007 46 279
2.266 106,633 2 68.33 4/30/2007 60 236
2.267 85,052 2 54.10 4/30/2007 61 221
2.268 67,280 2 78.38 4/30/2007 37 235
2.269 62,202 2 100.00 4/30/2007 24 215
2.270 60,933 2 48.08 4/30/2007 52 197
2.271 59,029 2 88.46 4/30/2007 26 292
2.272 58,394 2 94.12 4/30/2007 17 331
2.273 52,047 2 29.21 4/30/2007 89 229
2.274 24,119 2 31.43 4/30/2007 35 205
6 56,835,903 62,457.04 2 98.35 5/31/2007 910
31,500,000 39,923.95 2 91.07 Various 789
9 23,500,000 39,923.95 2 89.30 5/30/2007 592
10 8,000,000 39,923.95 2 96.40 5/23/2007 197
11 30,000,000 47,169.81 2 97.60 4/13/2007 636
12 25,000,000 63,775.51 2 96.70 3/30/2007 392 490
16 23,000,000 70,552.15 2 72.40 7/23/2007 326
19 22,000,000 68,750.00 2 75.34 4/3/2007 320
21 19,805,000 74,454.89 2 92.86 12/5/2006 266
23 19,650,000 45,486.11 2 93.06 6/1/2007 432
34 15,471,261 52,267.77 2 98.31 4/24/2007 296
42 13,800,000 70,050.76 2 98.00 4/18/2007 197
45 13,250,000 77,034.88 2 98.25 4/24/2007 172
52 11,700,000 377,419.35 2 80.60 5/31/2007 31
55 11,120,000 39,572.95 2 98.90 3/31/2007 281
56 11,080,000 69,250.00 2 100.00 Various 160
56.01 3,150,000 2 100.00 5/1/2007 40
56.02 2,260,000 2 100.00 5/1/2007 36
56.03 1,920,000 2 100.00 5/1/2007 28
56.04 1,900,000 2 100.00 4/24/2007 28
56.05 1,850,000 2 100.00 5/1/2007 28
57 11,000,000 42,968.75 2 90.60 4/20/2007 256
66 9,430,000 27,735.29 2 99.71 5/1/2007 340 229
68 9,000,000 41,666.67 2 93.06 3/2/2007 216
70 8,800,000 28,571.43 2 98.38 3/26/2007 308
75 8,235,832 30,730.71 2 86.94 5/14/2007 268 483
81 6,800,000 50,746.27 2 90.00 5/31/2007 134
85 6,494,781 23,195.65 2 93.57 6/6/2007 280
87 6,145,160 31,036.16 2 94.90 5/1/2007 198
88 6,095,449 90,976.86 2 100.00 5/16/2007 67
92 5,875,000 29,375.00 2 93.50 3/8/2007 200
99 5,317,000 45,836.21 2 99.14 6/5/2007 116
102 5,296,166 60,875.47 2 96.88 3/12/2007 87
103 5,186,150 66,489.10 2 89.70 3/20/2007 78
105 5,000,000 52,083.33 2 92.71 5/16/2007 96
110 4,700,000 35,338.35 2 86.50 2/15/2007 133
115 4,290,000 48,750.00 2 92.00 7/11/2007 88
148 2,797,460 40,542.90 2 98.55 6/8/2007 69
151 2,700,000 77,142.86 2 94.30 2/15/2007 35
152 2,695,310 107,812.40 2 100.00 4/1/2007 25
159 2,545,581 70,710.57 2 94.40 5/11/2007 36
160 2,542,875 195,605.77 2 100.00 2/28/2007 13
165 2,392,980 95,719.18 2 100.00 4/20/2007 25
171 2,300,000 74,193.55 2 96.97 2/28/2007 31
180 1,994,308 15,108.39 2 90.80 4/1/2007 132 400
185 1,850,000 42,045.45 2 100.00 5/2/2007 44 395
190 1,700,000 16,831.68 2 94.06 4/1/2007 101 236
193 1,650,000 51,562.50 2 100.00 4/27/2007 32
197 1,400,000 233,333.33 2 100.00 4/3/2007 6
198 1,397,645 155,293.86 2 100.00 3/23/2007 9
201 1,300,000 92,857.14 2 100.00 3/23/2007 14
203 1,247,794 103,982.83 2 100.00 2/1/2007 12
209 1,047,902 104,790.22 2 100.00 2/21/2007 10
210 997,408 124,675.99 2 100.00 3/6/2007 8
213 848,000 141,333.33 2 100.00 4/4/2007 6
214 818,362 136,393.63 2 83.30 2/12/2007 6
215 786,426 98,303.21 2 100.00 2/12/2007 8
216 698,790 87,348.70 2 100.00 4/1/2007 8
217 688,621 137,724.29 2 100.00 2/12/2007 5
218 494,011 98,802.21 2 40.00 2/21/2006 5
STUDIOS 1 BEDROOM 2 BEDROOM
----------------------- ------------------------ -------------------------
# AVG RENT PER # AVG RENT PER # AVG RENT PER
LOAN # UNITS MO. ($) UNITS MO. ($) UNITS MO. ($)
-----------------------------------------------------------------------------------------
1 960 473 4,896 574 1,026 725
1.01 71 681 146 819 17 1,061
1.02 51 674 208 803 26 1,031
1.03 173 728 11 873
1.04 18 767 112 896 29 1,103
1.05 14 685 96 817 11 1,041
1.06 15 436 119 526 20 699
1.07 48 469 102 566 17 670
1.08 36 450 86 558 13 743
1.09 75 832
1.10 8 627 56 749 16 884
1.11 31 513 66 618 7 794
1.12 23 346 131 491 14 636
1.13 77 714 10 884
1.14 15 421 101 517 19 677
1.15 104 464 28 634
1.16 37 420 104 502 15 620
1.17 2 385 129 462 10 593
1.18 10 496 77 596 22 751
1.19 17 340 102 465 26 679
1.20 22 417 81 495 14 660
1.21 48 723 28 866
1.22 32 392 89 514 17 645
1.23 24 442 92 543 14 702
1.24 12 424 82 533 24 675
1.25 18 435 78 510 24 635
1.26 29 425 104 489 14 668
1.27 8 524 77 648 16 830
1.28 48 703 12 814
1.29 34 410 81 538 10 689
1.30 22 570 44 688 7 869
1.31 57 704 2 820
1.32 61 673 6 787
1.33 17 394 72 457 15 602
1.34 8 564 52 634 16 822
1.35 21 554 45 648 5 782
1.36 15 409 71 478 9 612
1.37 65 516 16 752
1.38 6 446 44 563 14 660
1.39 19 487 41 636 5 755
1.40 6 431 55 487 14 591
1.41 56 527 14 697
1.42 10 385 68 428 20 583
1.43 17 412 48 501 11 648
1.44 9 415 57 518 17 652
1.45 6 428 50 479 14 615
1.46 44 610 6 781
1.47 8 503 46 599 12 751
1.48 6 470 48 501 12 640
1.49 8 450 55 631 16 694
1.50 15 370 59 438 5 611
1.51 6 441 44 521 13 644
1.52 6 498 41 610 6 766
1.53 28 393 56 453 8 628
1.54 57 486 16 589
1.55 23 346 49 514 5 630
1.56 5 354 57 476 10 573
1.57 6 422 33 506 12 638
1.58 23 361 43 473 1 640
1.59 6 403 46 449 12 559
1.60 7 433 49 521 12 681
1.61 5 524 37 550 11 679
1.62 14 366 40 470 6 692
1.63 49 529 6 734
1.64 6 451 42 555 12 680
1.65 6 389 40 443 12 557
1.66 7 349 50 417 14 557
1.67 6 388 40 509 12 656
1.68 6 365 42 400 12 555
1.69 50 458 12 576
1.70 10 423 21 518 11 636
1.71 6 419 42 526 13 694
1.72 9 423 32 509 7 612
1.73 7 368 29 462 8 602
2
2.001
2.002
2.003
2.004
2.005
2.006
2.007
2.008
2.009
2.010
2.011
2.012
2.013
2.014
2.015
2.016
2.017
2.018
2.019
2.020
2.021
2.022
2.023
2.024
2.025
2.026
2.027
2.028
2.029
2.030
2.031
2.032
2.033
2.034
2.035
2.036
2.037
2.038
2.039
2.040
2.041
2.042
2.043
2.044
2.045
2.046
2.047
2.048
2.049
2.050
2.051
2.052
2.053
2.054
2.055
2.056
2.057
2.058
2.059
2.060
2.061
2.062
2.063
2.064
2.065
2.066
2.067
2.068
2.069
2.070
2.071
2.072
2.073
2.074
2.075
2.076
2.077
2.078
2.079
2.080
2.081
2.082
2.083
2.084
2.085
2.086
2.087
2.088
2.089
2.090
2.091
2.092
2.093
2.094
2.095
2.096
2.097
2.098
2.099
2.100
2.101
2.102
2.103
2.104
2.105
2.106
2.107
2.108
2.109
2.110
2.111
2.112
2.113
2.114
2.115
2.116
2.117
2.118
2.119
2.120
2.121
2.122
2.123
2.124
2.125
2.126
2.127
2.128
2.129
2.130
2.131
2.132
2.133
2.134
2.135
2.136
2.137
2.138
2.139
2.140
2.141
2.142
2.143
2.144
2.145
2.146
2.147
2.148
2.149
2.150
2.151
2.152
2.153
2.154
2.155
2.156
2.157
2.158
2.159
2.160
2.161
2.162
2.163
2.164
2.165
2.166
2.167
2.168
2.169
2.170
2.171
2.172
2.173
2.174
2.175
2.176
2.177
2.178
2.179
2.180
2.181
2.182
2.183
2.184
2.185
2.186
2.187
2.188
2.189
2.190
2.191
2.192
2.193
2.194
2.195
2.196
2.197
2.198
2.199
2.200
2.201
2.202
2.203
2.204
2.205
2.206
2.207
2.208
2.209
2.210
2.211
2.212
2.213
2.214
2.215
2.216
2.217
2.218
2.219
2.220
2.221
2.222
2.223
2.224
2.225
2.226
2.227
2.228
2.229
2.230
2.231
2.232
2.233
2.234
2.235
2.236
2.237
2.238
2.239
2.240
2.241
2.242
2.243
2.244
2.245
2.246
2.247
2.248
2.249
2.250
2.251
2.252
2.253
2.254
2.255
2.256
2.257
2.258
2.259
2.260
2.261
2.262
2.263
2.264
2.265
2.266
2.267
2.268
2.269
2.270
2.271
2.272
2.273
2.274
6 910 738
2 395 169 548 298 712
9 112 549 216 707
10 2 395 57 547 82 725
11 232 634 404 815
12
16 132 841 158 1,185
19 116 614 168 679
21 96 687 142 850
23 224 635 208 725
34 112 618 184 728
42 62 692 135 882
45 124 825 48 1,025
52 31 3,517
55 168 540 112 650
56 160 833
56.01 40 882
56.02 36 773
56.03 28 862
56.04 28 863
56.05 28 782
57 96 628 160 755
66
68 128 605 88 727
70 308 605
75
81 22 670 94 774
85 140 806 140 945
87 99 476 99 599
88 42 800 22 1,291
92 100 496 100 562
99 32 519 64 603
102 55 717 24 946 8 1,240
103 78 833
105 32 670 56 851
110 19 550 85 625
115 16 571 64 706
148 69 630
151 1 695 8 895 21 1,250
152 23 1,198
159 12 788 24 969
160 4 1,700 2 1,926 6 1,350
165 17 805 7 1,146
171 21 753 10 891
180
185
190
193 24 683 8 816
197 4 1,750 2 2,450
198 1 1,058
201 6 708 6 950
203 12 1,129
209 8 989
210 3 1,048 4 1,631
213 6 1,506
214 4 1,034
215 5 900 3 1,100
216 8 1,131
217 4 1,225
218 4 742
3 BEDROOM 4 BEDROOM
-------------------------- ---------------------------
# AVG RENT PER # AVG RENT PER UTILITIES ELEVATOR
LOAN # UNITS MO. ($) UNITS MO. ($) TENANT PAYS PRESENT
--------------------------------------------------------------------------------------------------
1 10 898 Various No
1.01 E No
1.02 2 1,110 E No
1.03 3 955 E No
1.04 1 1,050 E, S, W No
1.05 E No
1.06 E No
1.07 E, S, W No
1.08 E, S, W No
1.09 E, S, W No
1.10 E, S, W No
1.11 E, S, W No
1.12 E, S, W No
1.13 E, S, W No
1.14 E, S, W No
1.15 E No
1.16 E, S, W No
1.17 E, S, W No
1.18 E, S, W No
1.19 1 709 E, S, W No
1.20 E, S, W No
1.21 E, S, W No
1.22 E No
1.23 E, S, W No
1.24 E, S, W No
1.25 E No
1.26 E, S, W No
1.27 E No
1.28 E, S, W No
1.29 E No
1.30 1 887 E, S, W No
1.31 E, S, W No
1.32 E, S, W No
1.33 E No
1.34 E, S, W No
1.35 E, S, W No
1.36 E, S, W No
1.37 E No
1.38 E, S, W No
1.39 E, S, W No
1.40 E, S, W No
1.41 E, S, W No
1.42 E, S, W No
1.43 E, S, W No
1.44 E No
1.45 E, S, W No
1.46 E, S, W No
1.47 E, S, W No
1.48 E, S, W No
1.49 E No
1.50 E, S, W No
1.51 E, S, W No
1.52 E, S, W No
1.53 E, S, W No
1.54 E, S, W No
1.55 E No
1.56 E No
1.57 E, S, W No
1.58 E No
1.59 E, S, W No
1.60 1 719 E, S, W No
1.61 E, S, W No
1.62 E, S, W No
1.63 E No
1.64 E, S, W No
1.65 E, S, W No
1.66 1 529 E, S, W No
1.67 E, S, W No
1.68 E, S, W No
1.69 E, S, W No
1.70 E, S, W No
1.71 E, S, W No
1.72 E, S, W No
1.73 E, S, W No
2 Various
2.001 E, G, S, W
2.002 E, S, W
2.003 E, G, S, W
2.004 E, S, W
2.005 E, G, S, W
2.006 E, S, W
2.007 E, G, S, W
2.008 E, G, S, W
2.009 E, G, S, W
2.010 E, G, S, W
2.011 E, G, S, W
2.012 E, G, S, W
2.013 E, G, S, W
2.014 E, S, W
2.015 E, G, S, W
2.016 E, S, W
2.017 E, G, S, W
2.018 E, G, S, W
2.019 E, G, S, W
2.020 E, G, S, W
2.021 E, G, S, W
2.022 E, G, S, W
2.023 E, S, W
2.024 E, G
2.025 E, S, W
2.026 E, S, W
2.027 E, G, S, W
2.028 E, G, S, W
2.029 E, G, S, W
2.030 E, G, S, W
2.031 E, G, S, W
2.032 E, G, S, W
2.033 E, G, S, W
2.034 E, G, S, W
2.035 E, G, S, W
2.036 E, G, S, W
2.037 E, G
2.038 E, G, S, W
2.039 E, G, S, W
2.040 E, S, W
2.041 E, G
2.042 E, G, S, W
2.043 E, G, S, W
2.044 E, G, S, W
2.045 E, G, S, W
2.046 E, G, S, W
2.047 E, G, S, W
2.048 E, G, S, W
2.049 E, G, S, W
2.050 E, S, W
2.051 E, G, S, W
2.052 E, G, S, W
2.053 E, G, S, W
2.054 E, G, S, W
2.055 E, G, S
2.056 E, G, S, W
2.057 E, G, S, W
2.058 E, G, S, W
2.059 E, G, S, W
2.060 E, S, W
2.061 E, G, S, W
2.062 E, G, S, W
2.063 E, G, S, W
2.064 E, G, W
2.065 E, G, S, W
2.066 E, G, S, W
2.067 E, G, S, W
2.068 E, S, W
2.069 E, G, S, W
2.070 E, G, S
2.071 E, G, S, W
2.072 E, G, S, W
2.073 E, G, S, W
2.074 E, G, S, W
2.075 E, G, S, W
2.076 E, G, S, W
2.077 E, G, S, W
2.078 E, G, S, W
2.079 E, S, W
2.080 E, G
2.081 E, G, S, W
2.082 E, G, S, W
2.083 E, G, S, W
2.084 E, S
2.085 E, G, S, W
2.086 E, G, S, W
2.087 E, G, S, W
2.088 E, G, S, W
2.089 E, G, S, W
2.090 E, G, S, W
2.091 E, G, S, W
2.092 E, G, S, W
2.093 E, G, S, W
2.094 E, G, S, W
2.095 E, G, S, W
2.096 E, G
2.097 E, G, S, W
2.098 E, G, S, W
2.099 E, G, S, W
2.100 E, G, S
2.101 E, G, S, W
2.102 E, G, S, W
2.103 E, S, W
2.104 E, G, S, W
2.105 E, G, S, W
2.106 E, G, S, W
2.107 E, G, S, W
2.108 E, G, S, W
2.109 E, G, S, W
2.110 E, G, S, W
2.111 E, G, S, W
2.112 E, G, S, W
2.113 E, G, S, W
2.114 E, G, S, W
2.115 E, G, S, W
2.116 E, G, S
2.117 E, G, S, W
2.118 E, G, S, W
2.119 E, G, S, W
2.120 E, S, W
2.121 E, G, S, W
2.122 E, G, S, W
2.123 E, G, S, W
2.124 E, G, S, W
2.125 E, G, S, W
2.126 E, G, S, W
2.127 E, W
2.128 E, G, S, W
2.129 E, G, S, W
2.130 E, G, S, W
2.131 E, G, S, W
2.132 E, G, S, W
2.133 E, G, S, W
2.134 E, S, W
2.135 E, G, S, W
2.136 E, G
2.137 E, G, S, W
2.138 E, G, S, W
2.139 E, G, S, W
2.140 E, G, S, W
2.141 E, S
2.142 E, G, S, W
2.143 E, G, S
2.144 E
2.145 E, G, S, W
2.146 E, G, S, W
2.147 E
2.148 E, G, S, W
2.149 E, G, S, W
2.150 E, G, S, W
2.151 E, G, S, W
2.152 E, G, S, W
2.153 E, G
2.154 E, G, S, W
2.155 E, G, S, W
2.156 E, G, S, W
2.157 E, G, S, W
2.158 E, S, W
2.159 E, G, S, W
2.160 E, G, S, W
2.161 E, G, S, W
2.162 E, G, S, W
2.163 E, G, S, W
2.164 E, G, S, W
2.165 E, G, S, W
2.166 E, G, S, W
2.167 E, G, S, W
2.168 E, G, S, W
2.169 E, G, S, W
2.170 E, G, S, W
2.171 E, G, S, W
2.172 E, G, S, W
2.173 E, G, S, W
2.174 E, G, S, W
2.175 E, G
2.176 E, G, S, W
2.177 E, G, S, W
2.178 E, G, S, W
2.179 E, G, S, W
2.180 E, G, S, W
2.181 E, G, S, W
2.182 E
2.183 E, S, W
2.184 E, S, W
2.185 E, G, S, W
2.186 E, G, S
2.187 E, G, S, W
2.188 E, G, S, W
2.189 E, G, S, W
2.190 E, G, S, W
2.191 E, G, S, W
2.192 E, G, S, W
2.193 E, G, S, W
2.194 E, G, S, W
2.195 E, G, S, W
2.196 E, G, S, W
2.197 E, G, S, W
2.198 E, G, S, W
2.199 E, G, S, W
2.200 E, G, S, W
2.201 E, G, S, W
2.202 E, G, S, W
2.203 E, G, S, W
2.204 E, G, S, W
2.205 E, G, S, W
2.206 E, G, S, W
2.207 E, G, S, W
2.208 E, G, S, W
2.209 E, G, S, W
2.210 E, G, S, W
2.211 E, G, S, W
2.212 E, G, S, W
2.213 E, G, S, W
2.214 E, G, S, W
2.215 E, G, S, W
2.216 E, G, S, W
2.217 E, G, S, W
2.218 E, G, S, W
2.219 E, G, S, W
2.220 E, G, S, W
2.221 E, G
2.222 E, G, S, W
2.223 E, G, S, W
2.224 E, S
2.225 E, G, S, W
2.226 E, G, S, W
2.227 E, G, S, W
2.228 E, G, S, W
2.229 E, G, S, W
2.230 E, G, S, W
2.231 E, G, S, W
2.232 E, G, S, W
2.233 E, G, S, W
2.234 E, G
2.235 E, G, S, W
2.236 E, G, S, W
2.237 E, G, S, W
2.238 E, G, S, W
2.239 E, G, S, W
2.240 E, G, S, W
2.241 E, G, S, W
2.242 E, G, S, W
2.243 E, G, S, W
2.244 E, G, S, W
2.245 E, G, S, W
2.246 E, G, S, W
2.247 E, G
2.248 E, S
2.249 E, G, S, W
2.250 E, G, S, W
2.251 E, G, S, W
2.252 E, G
2.253 E, G
2.254 E, G, S
2.255 E, G, S, W
2.256 E, G, S, W
2.257 E, G, S, W
2.258 E, G, S, W
2.259 E
2.260 E, G, S, W
2.261 E
2.262 E, S, W
2.263 E, G
2.264 E, G, S, W
2.265 E, G, S, W
2.266 E, G, S, W
2.267 E, G, S, W
2.268 E, G, S, W
2.269 E, S
2.270 E, G, S, W
2.271 E, G, S, W
2.272 E, G, S, W
2.273 E, G, S, W
2.274 E, G, S, W
6 None Yes
248 895 72 979 W No
9 208 895 56 975 W No
10 40 895 16 995 W No
11 E No
12 E, G, S, W No
16 36 1,332 W No
19 36 886 E, W No
21 28 1,045 E, S, W No
23 E No
34 E No
42 E, S, W No
45 E, G No
52 E, G, S, W No
55 1 1,000 E No
56 Various No
56.01 E, G, S, W No
56.02 E, G, W No
56.03 E, G, S, W No
56.04 E No
56.05 E, G, S, W No
57 E, G, S, W No
66 E, S No
68 W No
70 None No
75 E, G No
81 18 960 E, S, W No
85 E, G No
87 E, G No
88 3 1,850 None Yes
92 E No
99 20 702 E, G No
102 E, W Yes
103 E, G No
105 8 1,015 E, W No
110 29 750 E Yes
115 8 859 E No
148 E No
151 5 1,325 S, W Yes
152 2 1,588 E, G No
159 E, G, S, W No
160 1 4,000 E, G No
165 1 2,000 E No
171 E, G, S, W No
180 E, G, S, W No
185 E, G No
190 E, S No
193 E, G No
197 E, G No
198 2 1,866 6 1,934 E, G No
201 1 1,150 1 1,790 E, S, W No
203 E No
209 2 1,513 E, G, W No
210 1 2,800 E, G No
213 E, G No
214 2 1,375 E, G No
215 E, G, W No
216 E, G, W No
217 1 1,300 E, G, S No
218 1 2,500 E, G No
The depositor has filed a registration statement (including a prospectus) with
the SEC (SEC File No. 333-142235) for the offering to which this communication
relates. Before you invest, you should read the prospectus in that registration
statement and other documents the depositor has filed with the SEC for more
complete information about the depositor, the issuing entity and this offering.
You may get these documents for free by visiting EDGAR on the SEC Web site at
www.sec.gov. Alternatively, the depositor, any underwriter or any dealer
participating in the offering will arrange to send you the prospectus if you
request it by calling toll free 866-500-5408.
[LOGO] Merrill Lynch [LOGO] Countrywide Commercial
-----------------------------
REAL ESTATE FINANCE
KeyBank
[LOGO](R)
PRELIMINARY STRUCTURAL AND COLLATERAL TERM SHEET
$2,264,889,000 (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
CLASS A-1, CLASS A-2, CLASS A-SB, CLASS A-3, CLASS A-1A,
CLASS AM, CLASS AJ, CLASS B, CLASS C, CLASS D, CLASS E AND CLASS F
--------------------------------------------------------------------------------
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
Issuing Entity
MERRILL LYNCH MORTGAGE INVESTORS, INC.
Depositor
COUNTRYWIDE COMMERCIAL REAL ESTATE FINANCE, INC.
MERRILL LYNCH MORTGAGE LENDING, INC.
KEYBANK NATIONAL ASSOCIATION
Mortgage Loan Sellers & Sponsors
KEYCORP REAL ESTATE CAPITAL MARKETS, INC.
WELLS FARGO BANK, NATIONAL ASSOCIATION
Master Servicers
LASALLE BANK NATIONAL ASSOCIATION
Trustee
AUGUST 9, 2007
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
NOTICE RELATING TO AUTOMATICALLY GENERATED E-MAIL DISCLAIMERS
Any legends, disclaimers or other notices or language that may appear in the
text of, at the bottom of, or attached to, an email communication to which this
material may have been attached are not applicable to these materials and
should be disregarded. Such legends, disclaimers or other notices have been
automatically generated as a result of these materials having been sent via
Bloomberg or another e-mail system.
MERRILL LYNCH & CO. COUNTRYWIDE SECURITIES CORPORATION
KEYBANC CAPITAL MARKETS BEAR, STEARNS & CO. INC. BANC OF AMERICA
SECURITIES LLC
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
STRUCTURAL OVERVIEW
--------------------------------------------------------------------------------
OFFERED CERTIFICATES
INITIAL
CERTIFICATE APPROX.
EXPECTED RATINGS PRINCIPAL BALANCE TOTAL INITIAL
---------------- OR NOTIONAL CREDIT
CLASS FITCH S&P AMOUNT(1) SUPPORT
---------------------------------------------------------------------
A-1 AAA AAA $ 37,262,000 30.000%
A-2 AAA AAA $ [122,485,000](2) 30.000%
A-SB AAA AAA $ 72,678,000 30.000%
A-3 AAA AAA $ [438,559,000](2) 30.000%
A1A AAA AAA $ 1,033,771,000 30.000%
AM AAA AAA $ [243,536,000](2) 20.000%
AJ AAA AAA $ [210,050,000](2) 11.375%
B AA+ AA+ $ 12,177,000 10.875%
C AA AA $ 39,575,000 9.250%
D AA- AA- $ 27,398,000 8.125%
E A+ A+ $ 9,132,000 7.750%
F A A $ 18,266,000 7.000%
APPROX.
PERCENTAGE
OF INITIAL WEIGHTED PRINCIPAL ASSUMED FINAL
MORTGAGE AVERAGE WINDOW DISTRIBUTION
CLASS POOL BALANCE LIFE (YEARS)(3) (MONTHS)(3) DATE(3) RATE TYPE
-----------------------------------------------------------------------------------------
A-1 1.530% 2.98 1-58 June 2012 (4)
A-2 [5.029]%(2) 7.02 82-105 May 2016 (4)
A-SB 2.984% 7.29 58-115 March 2017 (4)
A-3 [18.008]%(2) 9.75 115-119 July 2017 (4)
A1A 42.448% 8.70 1-119 July 2017 (4)
AM [10.000]%(2) 9.88 119-119 July 2017 (4)
AJ [8.625]%(2) 9.96 119-120 August 2017 (4)
B 0.500% 9.97 120-120 August 2017 (4)
C 1.625% 9.97 120-120 August 2017 (4)
D 1.125% 9.97 120-120 August 2017 (4)
E 0.375% 9.97 120-120 August 2017 (4)
F 0.750% 9.97 120-120 August 2017 (4)
NON-OFFERED CERTIFICATES(6)
INITIAL
CERTIFICATE APPROX.
EXPECTED RATINGS PRINCIPAL BALANCE TOTAL INITIAL
---------------- OR NOTIONAL CREDIT
CLASS FITCH S&P AMOUNT(1) SUPPORT
---------------------------------------------------------------------
A-2FL AAA AAA [ ](2) 30.000%
A-3FL AAA AAA [ ](2) 30.000%
AM-FL AAA AAA [ ](2) 20.000%
AJ-FL AAA AAA [ ](2) 11.375%
G A- A- $ 21,309,000 6.125%
H BBB+ BBB+ $ 33,486,000 4.750%
J BBB BBB $ 24,354,000 3.750%
K BBB- BBB- $ 15,221,000 3.125%
L BB+ BB+ $ 15,221,000 2.500%
M BB BB $ 9,133,000 2.125%
N BB- BB- $ 3,044,000 2.000%
P B+ B+ $ 3,044,000 1.875%
Q B B $ 6,089,000 1.625%
S B- B- $ 3,044,000 1.500%
T NR NR $ 36,530,703 0.000%
X AAA AAA $ 2,435,364,703(5) N/A
APPROX.
PERCENTAGE
OF INITIAL WEIGHTED PRINCIPAL ASSUMED FINAL
MORTGAGE AVERAGE WINDOW DISTRIBUTION
CLASS POOL BALANCE LIFE (YEARS)(3) (MONTHS)(3) DATE(3) RATE TYPE
------------------------------------------------------------------------------------------------
A-2FL [ ](2) 7.02 82-105 May 2016 LIBOR + [ ]%(4)
A-3FL [ ](2) 9.75 115-119 July 2017 LIBOR + [ ]%(4)
AM-FL [ ](2) 9.88 119-119 July 2017 LIBOR + [ ]%(4)
AJ-FL [ ](2) 9.96 119-120 August 2017 LIBOR + [ ]%(4)
G 0.875% 9.97 120-120 August 2017 (4)
H 1.375% 9.97 120-120 August 2017 (4)
J 1.000% 9.97 120-120 August 2017 (4)
K 0.625% 9.97 120-120 August 2017 (4)
L 0.625% 9.97 120-120 August 2017 (4)
M 0.375% 9.97 120-120 August 2017 (4)
N 0.125% 9.97 120-120 August 2017 (4)
P 0.125% 9.97 120-120 August 2017 (4)
Q 0.250% 9.97 120-120 August 2017 (4)
S 0.125% 9.97 120-120 August 2017 (4)
T 1.500% 10.38 120-180 August 2022 (4)
X N/A N/A N/A N/A Variable
(1) In the case of each such class, subject to a permitted variance of plus or
minus 5.0%.
(2) The principal allocations between each of the class A-2 and class A-2FL
certificates, the class A-3 and class A-3FL certificates, the class AM and
class AM-FL certificates, and the class AJ and class AJ-FL certificates,
respectively, will be determined by market demand up to the initial
principal balance indicated on the respective fixed rate class.
(3) As of the cut-off date. The weighted average life, principal window and
assumed final distribution date were calculated assuming no prepayments
will be made on the mortgage loans prior to their related maturity dates
(except in the case of loans with anticipated repayment dates ("ARDloans"), which are assumed to prepay on their anticipated repayment dates)
and the other Modeling Assumptions that will be described in the
prospectus supplement.
(4) The pass-through rates on the class A-1, A-2, A-SB, A-3, A-1A, AM, AJ, B,
C, D, E, F, G, H, J, K, L, M, N, P, Q, S and T certificates will equal any
one of (i) a fixed rate, (ii) the weighted average of certain net mortgage
rates on the mortgage loans (in each case adjusted, if necessary, to
accrue on the basis of a 360-day year consisting of twelve 30-day months),
(iii) a rate equal to the lesser of a specified pass-through rate and the
weighted average of certain net mortgage rates on the mortgage loans (in
each case adjusted, if necessary , to accrue on the basis of a 360-day
year consisting of twelve 30-day months) and (iv) the weighted average of
certain net mortgage rates on the mortgage loans (in each case adjusted,
if necessary, to accrue on the basis of a 360-day year consisting of
twelve 30-day months) less a specified percentage. By virtue of the
related interest rate swap agreements, the pass-through rate for the class
A-2FL, A-3FL, AM-FL and AJ-FL certificates will be based on one month
LIBOR plus a specified margin; provided that interest payments made under
the related swap agreement may be subject to reduction (thereby resulting
in an effective pass-through rate below LIBOR plus a specified margin).
The initial LIBOR rate will be determined prior to closing and subsequent
LIBOR rates will be determined two LIBOR business days before the start of
each class A-2FL, A-3FL, AM-FL and AJ-FL interest accrual period. Under
certain circumstances, the pass-through rate for class A-2FL, A-3FL, AM-FL
and AJ-FL certificates may convert to a rate described herein in clause
(i), (ii), (iii) or (iv) of the first sentence of this footnote (4). None
of the holders of offered certificates will have any beneficial interest
in any swap agreement.
(5) The class X certificates will not have a certificate principal balance and
their holders will not receive distributions of principal, but such
holders will be entitled to receive payments of the aggregate interest
accrued on the notional amount of each of the components of the class X
certificates.
(6) Not offered pursuant to the prospectus supplement. Any information
provided herein regarding the characteristics of these classes of
certificates is provided only to enhance your understanding of the offered
certificates.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
1
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--------------------------------------------------------------------------------
TRANSACTION TERMS
--------------------------------------------------------------------------------
ISSUE TYPE Sequential pay REMIC. Class A-1, Class A-2, Class A-SB,
Class A-3, Class A-1A, Class AM, Class AJ, Class B, Class C,
Class D, Class E and Class F certificates are offered
publicly. All other certificates will be privately placed
with qualified institutional buyers, institutional
accredited investors or non-U.S. persons in accordance with
Regulation S.
CUT-OFF DATE References in this term sheet to the "cut-off date" mean,
with respect to each mortgage loan, the related due date of
that mortgage loan in August 2007 or, with respect to those
mortgage loans, if any, that have their respective first
payment dates in September 2007, August 1, 2007.
OFFERING TERMS The commercial mortgage backed securities referred to in
this term sheet, and the mortgage pool backing them, are
subject to modification or revision (including the
possibility that one or more classes of securities may be
split, combined or eliminated at any time prior to issuance
or availability of a final prospectus) and are offered on a
"when, as and if issued" basis. You understand that, when
you are considering the purchase of these securities, a
contract of sale will come into being no sooner than the
date on which the relevant class has been priced and we have
confirmed the allocation of securities to be made to you.
Any "indications of interest" expressed by you, and any
"soft circles" generated by us, will not create binding
contractual obligations for you or us.
MORTGAGE POOL The mortgage pool consists of 218 mortgage loans with an
aggregate initial mortgage pool balance of $2,435,364,704,
subject to a variance of plus or minus 5.0%. The mortgage
loans are secured by 664 mortgaged real properties located
throughout 42 states.
LOAN GROUPS For purposes of making distributions to the class A-1, A-2,
A-2FL, A-SB, A-3, A-3FL and A-1A certificates, the pool of
mortgage loans will be deemed to consist of two distinct
groups, loan group 1 and loan group 2. Loan group 1 will
consist of 162 mortgage loans, representing approximately
57.6% of the initial mortgage pool balance, that are secured
by the various property types that make up the collateral
for those mortgage loans, and loan group 2 will consist of
56 mortgage loans, representing approximately 42.4% of the
initial mortgage pool balance, that are secured by
multifamily and manufactured housing community properties
(approximately 97.8% of all the mortgaged properties secured
by multifamily and manufactured housing community
properties).
ISSUING ENTITY ML-CFC Commercial Mortgage Trust 2007-8
DEPOSITOR Merrill Lynch Mortgage Investors, Inc.
MORTGAGE LOAN Countrywide Commercial Real Estate Finance, Inc. ("CRF") ...
SELLERS/SPONSORS 46.7% of the initial mortgage pool balance
Merrill Lynch Mortgage Lending, Inc. ("MLML") ..............
35.9% of the initial mortgage pool balance
KeyBank National Association ("KeyBank") ...................
17.4% of the initial mortgage pool balance
UNDERWRITERS Merrill Lynch, Pierce, Fenner & Smith Incorporated
Countrywide Securities Corporation
KeyBanc Capital Markets Inc.
Banc of America Securities LLC
Bear, Stearns & Co. Inc.
TRUSTEE LaSalle Bank National Association
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
2
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
MASTER SERVICERS KeyCorp Real Estate Capital Markets, Inc., with respect to
the mortgage loans sold to the depositor by MLML and KeyBank
and Wells Fargo Bank, National Association with respect to
mortgage loans sold to the depositor by CRF. With respect to
the mortgage loan known as Georgia-Alabama Retail Portfolio,
Wachovia Bank, National Association will primary service
such mortgage loan pursuant to the pooling and servicing
agreement governing the ML-CFC 2007-7 Commercial Mortgage
Trust, Commercial Mortgage Pass-Through Certificates, Series
2007-7 securitization (the "ML-CFC 2007-7 Securitization").
SPECIAL SERVICER Midland Loan Services, Inc. However, with respect to the
mortgage loan known as Georgia-Alabama Retail Portfolio, the
special servicer will be Midland Loan Services, Inc.
pursuant to the pooling and servicing agreement governing
the ML-CFC 2007-7 Securitization.
RATING AGENCIES Fitch, Inc.
Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
DENOMINATIONS $25,000 minimum for the offered certificates.
CLOSING DATE On or about August 24, 2007.
SETTLEMENT TERMS Book-entry through DTC for all offered certificates.
DETERMINATION DATE For any distribution date, the eighth day of each month, or
if such day is not a business day, the business day
immediately succeeding, beginning in September 2007, except
that in the case of certain mortgage loans, the applicable
master servicer may make its determination as to the
collections received as of a later date during each month.
DISTRIBUTION DATE The fourth business day following the related Determination
Date, beginning in September 2007.
DAY COUNT All classes will accrue on a 30/360 basis except the
non-offered classes A-2FL, A-3FL, AM-FL and AJ-FL, which
will accrue on the basis of the actual number of days
elapsed and a 360-day year.
INTEREST Each class of certificates will be entitled on each
DISTRIBUTIONS distribution date to interest accrued during the prior
calendar month at its pass-through rate for such
distribution date on the outstanding certificate balance of
such class immediately prior to such distribution date;
provided that, for so long as the related swap agreement is
in effect and no payment default is continuing thereunder,
the interest accrual period for the class A-2FL, A-3FL,
AM-FL and AJ-FL certificates will, for each distribution
date, begin on the prior distribution date (or, in the case
of the initial such interest accrual period, on the closing
date) and end on the business day preceding the subject
distribution date. Interest on the offered certificates will
be calculated on the basis of twelve 30-day months and a
360-day year (or, in the case of the class A-2FL, A-3FL,
AM-FL and AJ-FL certificates, for so long as the related
swap agreement is in effect and no payment default is
continuing thereunder, the actual number of days during each
related interest accrual period in a year assumed to consist
of 360 days). Subject to available funds, distributions of
interest will be made with respect to the following classes
of certificates in the following order on each distribution
date: first, the class A-1, A-2, A-2FL (through the class
A-2FL regular interest), A-SB, A-3, A-3FL (through the class
A-3FL regular interest), A-1A and X certificates, pro rata
and pari passu; second, the class AM and AM-FL (through the
class AM-FL regular interest) certificates, pro rata and
pari passu; third, the class AJ and AJ-FL (through the class
AJ-FL regular interest) certificates, pro rata and pari
passu; and then the respective remaining classes of
certificates with principal balances, sequentially in
alphabetical order of class designation. In general,
payments of interest in respect of the class A-1, A-2, A-SB,
A-3 and
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
3
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
certificates and the class A-2FL and class A-3FL regular
interests will be made to the extent of available funds
attributable to the mortgage loans in loan group 1, payments
of interest in respect of the class A-1A certificates will
be made to the extent of available funds attributable to the
mortgage loans in loan group 2, and payments of interest in
respect of the class X certificates will be made to the
extent of available funds attributable to mortgage loans in
both loan groups. However, if the application of available
funds as described in the preceding sentence would result in
an interest shortfall to any of those classes of
certificates, then payments of interest will be made with
respect to all of those classes on a pro rata (based on
amount of interest accrued) and pari passu basis without
regard to loan groups. Furthermore, payments of interest
with respect to the class A-2FL, A-3FL, AM-FL and AJ-FL
certificates out of collections on the mortgage loans will
be calculated on the related regular interests on a 30/360
basis at a fixed coupon or a coupon calculated at the lesser
of a specified percentage and a weighted average coupon
derived from net interest rates on the mortgage loans, with
such interest to be exchanged under the related swap
agreement for interest calculated on an actual/360 basis at
a LIBOR-based rate. No class of certificates will provide
credit support for any failure on the part of the swap
counterparty to make any required payment under the swap
agreement. Interest payments with respect to the class
A-2FL, A-3FL, AM-FL and AJ-FL certificates may be subject to
reduction if the related regular interest is subject to a
cap equal to the weighted average of the net interest rates
on the mortgage loans and such weighted average of the net
interest rates on the mortgage loans declines below the
fixed rate per annum at which interest is payable by the
trust to the swap counterparty.
No class of offered certificates will have any beneficial
interest in any swap agreement.
PRINCIPAL Except as described below, principal will be distributed on
DISTRIBUTIONS each distribution date, to the extent of available funds, to
the most senior class of sequential pay certificates
outstanding until its certificate balance is reduced to
zero. Payments of principal will generally be made, to the
extent of available funds (i) a) to the class A-1
certificates, b) the class A-2 certificates and the class
A-2FL regular interest (on a pro rata and pari passu basis),
c) the class A-SB certificates and d) the class A-3
certificates and the class A-3FL regular interest (on a pro
rata and pari passu basis), in that order, in an amount
equal to the funds received or advanced with respect to
principal on mortgage loans in loan group 1 and, after the
principal balance of the class A-1A certificates has been
reduced to zero, the funds received or advanced with respect
to principal on mortgage loans in loan group 2, in each case
until the principal balance of the subject class of
certificates is reduced to zero, and (ii) to the class A-1A
certificates, in an amount equal to the funds received or
advanced with respect to principal on mortgage loans in loan
group 2 and, after the principal balance of the A-3
certificates and the class A-3FL regular interest have been
reduced to zero, the funds received or advanced with respect
to principal on mortgage loans in loan group 1, until the
principal balance of the class A-1A certificates is reduced
to zero.
Notwithstanding the foregoing, on any distribution date as
of which the principal balance of the class A-SB
certificates is required to be paid down to its scheduled
principal balance for that distribution date in accordance
with a specified schedule that will be annexed to the
prospectus supplement, distributions of principal will be
made, to the extent of available funds, to reduce the
principal balance of the class A-SB certificates to its
scheduled principal balance for the subject distribution
date, out of the funds received or advanced with respect to
principal on the mortgage loans in loan group 1 (prior to
any distributions of principal from those loan group 1 funds
to any other class of certificates on that distribution
date) and, after the principal balance of the class A-1A
certificates has been reduced to zero, out of the funds
received or advanced with respect to principal
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
4
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
on mortgage loans in loan group 2 (prior to any
distributions of principal with respect to the class A-1,
A-2, and A-3 certificates and the class A-2FL and A-3FL
regular interests on that distribution date).
If, due to losses, the certificate balances of the class AM,
AM-FL regular interest, AJ and AJ-FL regular interest
through class T certificates are reduced to zero, payments
of principal to the class A-1, A-2, A-SB, A-3 and A-1A
certificates and the class A-2FL and A-3FL regular interests
(to the extent that any two or more of these classes are
outstanding) will be made on a pro rata and pari passu
basis.
Following retirement of the class A-1, A-2, A-2FL, A-SB,
A-3, A-3FL and A-1A certificates, amounts distributable as
principal will be distributed on each distribution date, to
the extent of available funds, first to the class AM
certificates and the class AM-FL regular interest (on a pro
rata and pari passu basis), second to the class AJ
certificates and the class AJ-FL regular interest (on a pro
rata and pari passu basis), and third to the class B, C, D,
E, F, G, H, J, K, L, M, N, P, Q, S and T certificates, in
that order, in each case until the related certificate
balance of the subject class of certificates is reduced to
zero.
LOSSES Losses realized on the mortgage loans and certain
default-related and other unanticipated expenses, if any,
will be allocated to the class T, S, Q, P, N, M, L, K, J, H,
G, F, E, D, C and B certificates, in that order, and then,
on a pro rata and pari passu basis, to the class AJ
certificates and the class AJ-FL regular interest, and then,
on a pro rata and pari passu basis, to the class AM
certificates and the class AM-FL regular interest, and then,
on a pro rata and pari passu basis, to the class A-1, A-2,
A-SB, A-3, and A-1A certificates and the class A-2FL and
A-3FL regular interests.
PREPAYMENT Any prepayment premiums or yield maintenance charges
PREMIUMS AND collected will be distributed to certificate holders and/or
YIELD MAINTENANCE the swap counterparty on the distribution date following the
CHARGES collection period in which the prepayment premium was
received. On each distribution date, the holders of each
class of offered certificates and of the class A-2FL, A-3FL,
AM-FL, AJ-FL (in the case of floating rate classes, in the
limited circumstances described below), G, H, J and K
certificates then entitled to principal distributions (to
the extent such prepayment premium or yield maintenance
charge is collected from mortgage loans in the loan group,
if applicable, from which such class of certificates is
receiving payments of principal) will be entitled to a
portion of prepayment premiums or yield maintenance charges
equal to the product of (a) the amount of such prepayment
premiums or yield maintenance charges, net of workout fees
and principal recovery fees payable therefrom, multiplied by
(b) a fraction, which in no event may be greater than 1.0,
the numerator of which is equal to the excess, if any, of
the pass-through rate of such class of certificates (or, in
the case of the class A-2FL, A-3FL, AM-FL and AJ-FL
certificates, the pass-through rate that would be payable on
the related regular interests without regard to the related
interest rate swap agreement as described under "Interest
Distributions" above) over the relevant discount rate, and
the denominator of which is equal to the excess, if any, of
the mortgage interest rate of the prepaid mortgage loan over
the relevant discount rate, multiplied by (c) a fraction,
the numerator of which is equal to the amount of principal
distributable on such class of certificates on that
distribution date, and the denominator of which is equal to
the total principal distribution amount for that
distribution date; provided that, if any of the class A-3 or
class A-3FL certificates on the one hand and the class A-1A
certificates on the other hand were outstanding (prior to
any distributions) on such distribution date, then the
number in clause (c) will be a fraction, the numerator of
which is equal to the amount of principal distributable on
the subject class of certificates on such distribution date
with respect to the loan group that includes the prepaid
mortgage loan, and the denominator of which is equal to the
portion of the total principal distribution amount for such
distribution date that is attributable to the
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
5
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
loan group that includes the prepaid mortgage loan. However,
as long as the related swap agreement is in effect and there
is no continuing payment default thereunder, any prepayment
premium or yield maintenance charge allocable to the class
A-2FL, A-3FL, AM-FL and AJ-FL certificates will be payable
to the swap counterparty under the respective swap
transaction.
The portion, if any, of the prepayment premiums or yield
maintenance charges remaining after any payments described
above will be distributed to the holders of the class X.
All prepayment premiums and yield maintenance charges
payable as described above will be reduced, with respect to
specially serviced mortgage loans, by an amount equal to
certain expenses of the trust fund and losses realized in
respect of the mortgage loans previously allocated to any
class of certificates.
ADVANCES The applicable master servicer (solely with respect to those
mortgage loans as to which it is acting as master servicer)
and, if it fails to do so, the trustee will be obligated to
make P&I advances and servicing advances, including advances
of delinquent property taxes and insurance, but only to the
extent that such advances are considered recoverable, and,
in the case of P&I advances, subject to appraisal reductions
(which are described below) that may occur. However, with
respect to the Georgia-Alabama Retail Portfolio Loan
Combination, Wachovia Bank National Association, as master
servicer under the pooling and servicing agreement governing
the ML-CFC 2007-7 Securitization, will be obligated to make
servicing advances.
APPRAISAL If any of certain adverse events or circumstances described
REDUCTIONS in the offering prospectus occur or exist with respect to
any mortgage loan or the mortgaged real property for any
mortgage loan, that mortgage loan will be considered a
required appraisal loan. An appraisal reduction will
generally be made in the amount, if any, by which the
principal balance of the required appraisal loan (plus other
amounts overdue or advanced in connection with such loan)
exceeds 90% of the appraised value of the related mortgaged
real property plus all escrows and reserves (including
letters of credit) held as additional collateral with
respect to the mortgage loan. As a result of calculating an
appraisal reduction amount for a given mortgage loan, the
interest portion of any P&I advance for such loan will be
reduced, which will have the effect of reducing the amount
of interest available for distribution to the certificates.
A required appraisal loan will generally cease to be a
required appraisal loan when the related mortgage loan has
been brought current for at least three consecutive months
and no other circumstances exist which would cause such
mortgage loan to be a required appraisal loan.
OPTIONAL Each master servicer, the special servicer and certain
TERMINATION certificate holders will have the option to terminate the
trust and retire the then outstanding certificates, in whole
but not in part, and purchase the remaining assets of the
trust on or after the distribution date on which the stated
principal balance of the mortgage loans is less than
approximately 1.0% of the initial mortgage pool balance.
Such purchase price will generally be at a price equal to
the unpaid aggregate principal balance of the mortgage
loans, plus accrued and unpaid interest and certain other
additional trust fund expenses, and the fair market value of
any REO properties acquired by the trust following
foreclosure.
In addition, if, following the date on which the total
principal balances of the class A-1, A-2, A-2FL, A-SB, A-3,
A-3FL, A-1A, AM, AM-FL, AJ, AJ-FL, B, C, D, E and F
certificates are reduced to zero, all of the remaining
certificates, except the class Y, Z, R-I and R-II
certificates, are held by the same certificate holder, the
trust fund may also be terminated, subject to such
additional conditions as may be set forth in the pooling and
servicing agreement, in connection with an exchange of all
the remaining certificates, except the class Y, Z, R-I and
R-II certificates, for all the mortgage loans and REO
properties remaining in the trust fund at the time of
exchange.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
6
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
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CONTROLLING CLASS The most subordinate class of principal balance certificates
that has a class certificate balance greater than 25% of its
original certificate balance will be the controlling class
of certificates; provided, however, that if no such class of
principal balance certificates satisfies such requirement,
the controlling class of certificates will be the most
subordinate class of principal balance certificates with a
class certificate balance greater than zero. Other than with
respect to trust mortgage loans that are part of a loan
combination and are described below, the holder(s) of
certificates representing a majority interest in the
controlling class will have the right, subject to the
limitations and conditions described in the offering
prospectus, to replace the special servicer and select a
representative that may direct and advise the special
servicer on various servicing matters. With respect to the
mortgage loan known as Peninsula Beverly Hills, which
mortgage loan is part of a loan combination comprised of
that mortgage loan and a subordinate B-note non-trust loan,
for so long as such B-note has an outstanding principal
balance equal to or greater than 25% of its outstanding
principal balance (subject to the conditions described in
the offering prospectus), the holder of the B-note (or after
such period, the controlling class representative) will have
the right, in lieu of the controlling class representative,
to replace the special servicer for this mortgage loan and
to direct and advise the applicable master servicer and the
special servicer on various servicing matters with respect
to the loans in the Peninsula Beverly Hills loan combination
and the related mortgaged real property. With respect to the
mortgage loan known as Georgia-Alabama Retail Portfolio,
which mortgage loan in the trust is comprised of a senior
note and a subordinate B-note, such mortgage loan in the
trust is part of a loan combination consisting of the trust
mortgage loan, a non-trust loan that is pari passu with the
senior trust mortgage loan and a non-trust subordinate
B-note that is pari passu with the subordinate B-note trust
mortgage loan. For so long as the subordinate B-note in the
trust and the non-trust B-note (in the aggregate) have an
outstanding principal balance equal to or greater than 25%
of its aggregate outstanding principal balance (subject to
the conditions described in the offering prospectus), the
holders of greater than 50% of the B-notes (or after such
period, the controlling class representative) will have the
right, in lieu of the controlling class representative
(under certain circumstances described in the accompanying
offering prospectus), to replace the special servicer for
this mortgage loan and to direct and advise the applicable
master servicer and the special servicer on various
servicing matters with respect to the Georgia-Alabama Retail
Portfolio loan combination and the related mortgaged real
properties. The holder of the B-note in the trust will be
represented by the holder(s) of certificates representing a
majority interest in the controlling class. With respect to
the mortgage loan known as the Farallon Portfolio Loan,
which mortgage loan is comprised of four (4) seven-year
senior trust mortgage loans and four (4) seven-year
subordinate trust mortgage loans and one (1) ten-year senior
trust mortgage loan and one (1) ten-year subordinate trust
mortgage loan, and is part of a loan combination comprised
of such mortgage loans and other non-trust mortgage loans,
the holder or holders (and their respective successors and
assigns) of all or any portion of the non-trust fixed-rate A
notes which are not held by the trust, as designated by MLML
and which may be MLML, will have the right, in lieu of the
controlling class representative, to replace the special
servicer for this mortgage loan and to direct and advise the
applicable master servicer and special servicer, and have
certain approval rights, with respect to various servicing
matters and major decisions relating to the Farallon
Portfolio loan combination (collectively, "Farallon
Portfolio Control Rights"). Certain other holders of the
Farallon Portfolio non-trust loans will have certain
non-binding consultation rights with respect to matters
relating to the Farallon Portfolio Control Rights. With
respect to the mortgage loan known as Executive Hills
Portfolio, which mortgage loan is part of a loan combination
comprised of that mortgage loan and a subordinate B-note
non-trust loan. The holder of the Executive Hills Portfolio
B-note non-trust loan will have the right to replace the
special servicer for the related loan combination and the
right to direct and advise the applicable master servicer on
various servicing matters until an appraisal reduction with
respect to the loan
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
7
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
combination reduces the principal balance of such B-note
non-trust loan below 25% of its original principal balance,
or the holder of more than 50% of the principal balance of
the B-note non-trust loan is the related borrower or an
affilate thereof.
ERISA The offered certificates are expected to be eligible for
purchase by employee benefit plans and other plans or
arrangements, subject to certain conditions.
SMMEA The offered certificates will not be "mortgage related
securities" for the purposes of the Secondary Mortgage
Market Enhancement Act of 1984.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
8
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
CONTACTS
MERRILL LYNCH & CO. COUNTRYWIDE SECURITIES CORPORATION
John Mulligan Tom O'Hallaron
(212) 449-3860 (Phone) (818) 225-6353 (Phone)
(212) 738-1491 (Fax) (818) 225-4032 (Fax)
Max Baker Marlyn Marincas
(212) 449-3860 (Phone) (818) 225-6342 (Phone)
(212) 738-1491 (Fax) (818) 225-4032 (Fax)
Rich Sigg Jerry Hirschkorn
(212) 449-3860 (Phone) (212) 649-8352 (Phone)
(212) 738-1491 (Fax) (212) 649-8391 (Fax)
David Rodgers Mark Rudnitzky
(212) 449-3611 (Phone) (818) 225-6353 (Phone)
(212) 449-7684 (Fax) (818) 225-4032 (Fax)
Joe Cuomo BANC OF AMERICA SECURITIES LLC
(212) 449-3766 (Phone)
(212) 449-7684 (Fax) Geordie Walker
(704) 388-1597 (Phone)
KEYBANC CAPITAL MARKETS (704) 388-9677 (Fax)
Audrey Saccardi Chris Springer
(216) 689-3567 (Phone) (704) 388-1597 (Phone)
(216) 689-0976 (Fax) (704) 388-9677 (Fax)
Gary Andrews BEAR, STEARNS & CO. INC.
(216) 689-3567 (Phone)
(216) 689-0976 (Fax) Craig Sedmak
(212) 272-4953 (Phone)
(212) 849-0223 (Fax)
Stephen Gargiulo
(212) 272-4953 (Phone)
(212) 849-0223 (Fax)
Jignesh Patel
(212) 272-6184 (Phone)
(212) 849-0223 (Fax)
Mathew Weinstein
(212) 272-4953 (Phone)
(212) 849-0223 (Fax)
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
9
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
MORTGAGE POOL CHARACTERISTICS AS OF THE CUT-OFF DATE
(THE SUM OF THE PERCENTAGE CALCULATIONS MAY NOT EQUAL 100% DUE TO ROUNDING.)
All numerical information provided with respect to the mortgage loans is
provided on an approximate basis. All weighted average information provided
with respect to the mortgage loans reflects a weighting of the subject mortgage
loans based on their respective cut-off date principal balances. When
information with respect to the mortgaged real properties is expressed as a
percentage of the initial mortgage pool balance, the percentages are based upon
the cut-off date principal balances of the related mortgage loans comprising
the mortgage pool. If any of the mortgage loans is secured by multiple
mortgaged real properties, the cut-off date principal balance has been
allocated based on any of (i) an individual property's appraised value as a
percentage of the total appraised value of all of the mortgaged real
properties, including the subject individual property, securing the same
mortgage loan, (ii) an individual property's underwritten net operating income
as a percentage of the total underwritten net operating income of all the
mortgaged real properties, including the subject individual property, securing
the same mortgage loan and (iii) an allocated loan balance specified in the
related loan documents. Unless specifically indicated otherwise, statistical
information presented with respect to any mortgage loan in the trust that is
part of a loan combination includes the related pari passu non-trust loan and
excludes the related B-note non-trust loan (except with respect to the
Georgia-Alabama Retail Portfolio Loan, in which case the subordinate B-note in
the trust and the subordinate non-trust B-note are included in statistical
information, unless otherwise specified, and except with respect to the
Farallon Portfolio Loan, in which case the subordinate B-notes in the trust and
the subordinate non-trust B notes are included in the statistical information,
unless otherwise specified). With respect to certain mortgage loans, the debt
service coverage ratios and/or cut-off date loan to value ratios were
calculated assuming the application of a holdback amount and/or a letter of
credit in reduction of their respective cut-off date principal balances or
taking into account various assumptions, including assumptions regarding the
financial performance or value of the related mortgaged real property on a
"stabilized" basis. For such mortgage loans, the information herein is not
based on the actual "as-is" information. See "Annex A-1--CertainCharacteristics of the Mortgage Loans" in the offering prospectus. Unless
otherwise specified, the information contained in this paragraph, where
applicable, applies to the information contained in the charts in this
Preliminary Structural and Collateral Term Sheet.
GENERAL CHARACTERISTICS
--------------------------------------------------------------------------------
ALL MORTGAGE LOAN LOAN
LOANS GROUP 1 GROUP 2
Initial mortgage pool balance ........................................... $2,435,364,704 $1,401,593,530 $1,033,771,173
Number of pooled mortgage loans ......................................... 218 162 56
Number of mortgaged properties .......................................... 664 259 405
Percentage of investment grade loans(1) ................................. 3.3% 5.7% 0.0%
Average cut-off date principal balance .................................. 11,171,398 8,651,812 18,460,200
Largest cut-off date principal balance .................................. 335,000,000 99,900,000 335,000,000
Smallest cut-off date principal balance ................................. 494,011 898,482 494,011
Weighted average mortgage interest rate ................................. 5.9865% 5.9747% 6.0026%
Highest mortgage interest rate .......................................... 6.8100% 6.8100% 6.5226%
Lowest mortgage interest rate ........................................... 5.1100% 5.2900% 5.1100%
Number of cross collateralized mortgage loans ........................... 2 0 2
Cross collateralized mortgage loans as % of IPB ......................... 1.3% 0.0% 3.0%
Number of multi property mortgage loans ................................. 11 8 3
Multi property mortgage loans as a % of IPB ............................. 35.3% 18.9% 57.7%
Weighted average underwritten debt service coverage ratio ............... 1.36x 1.40x 1.31x
Maximum underwritten debt service coverage ratio ........................ 3.06x 2.99x 3.06x
Minimum underwritten debt service coverage ratio ........................ 1.11x 1.13x 1.11x
Weighted average cut-off date loan-to-value ratio ....................... 71.6% 68.3% 76.2%
Maximum cut-off date loan-to-value ratio ................................ 89.2% 89.2% 80.1%
Minimum cut-off date loan-to-value ratio ................................ 24.2% 24.2% 27.0%
Weighted average remaining term to maturity or anticipated repayment
date (months) .......................................................... 113 116 108
Maximum remaining term to maturity or anticipated repayment date (months) 358 298 358
Minimum remaining term to maturity or anticipated repayment date (months) 54 58 54
Weighted average remaining amortization term (months)(2) ................ 363 362 365
Maximum remaining amortization term (months) ............................ 420 420 420
Minimum remaining amortization term (months)(2) ......................... 177 177 324
(1) It has been confirmed by Fitch and S&P, in accordance with their
respective methodologies, that the Peninsula Beverly Hills mortgage loan
has credit characteristics consistent with investment-grade rated
obligations.
(2) Excludes mortgage loans that are interest-only for the entire term.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
10
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
PROPERTY TYPE BY STATE MATRIX FOR MORTGAGE POOL
--------------------------------------------------------------------------------
% OF INITIAL
MORTGAGE POOL MANUFACTURED
STATE BALANCE MULTIFAMILY RETAIL HOUSING
California ............. 17.7 2.0 6.2 0.1
Southern .............. 14.0 1.9 4.4 --
Northern .............. 3.8 0.1 1.8 0.1
Texas .................. 10.2 5.0 2.0 1.5
Florida ................ 9.5 6.2 0.5 2.0
Georgia ................ 8.7 2.3 4.6 1.1
Ohio ................... 4.4 2.7 1.1 --
New York ............... 3.9 1.5 0.7 0.4
Nevada ................. 3.3 0.2 2.9 --
Virginia ............... 3.2 0.3 0.6 --
North Carolina ......... 3.1 0.3 2.0 0.4
Missouri ............... 3.0 -- -- 0.2
Maryland ............... 2.7 2.7 -- --
Kansas ................. 2.7 -- 0.1 0.5
Colorado ............... 2.6 -- 0.7 1.0
Indiana ................ 2.5 2.2 0.1 0.2
Louisiana .............. 2.1 0.6 0.1 --
Utah ................... 1.7 -- 0.4 1.1
South Carolina ......... 1.7 1.3 0.1 0.2
Illinois ............... 1.7 0.2 0.2 0.6
Pennsylvania ........... 1.7 0.7 -- 0.4
Minnesota .............. 1.6 -- 0.5 1.0
Maine .................. 1.6 -- 0.8 --
Kentucky ............... 1.6 1.6 -- --
Washington ............. 1.3 0.3 0.5 0.1
Alabama ................ 1.2 0.6 0.2 --
Arizona ................ 1.2 -- 0.6 --
Oklahoma ............... 1.0 -- -- 0.2
Iowa ................... 0.5 -- -- 0.5
New Mexico ............. 0.4 0.2 0.1 0.1
New Hampshire .......... 0.4 -- -- --
Idaho .................. 0.4 -- 0.3 0.0
Massachusetts .......... 0.3 -- -- --
Michigan ............... 0.3 0.2 -- 0.1
Wisconsin .............. 0.3 -- -- --
Wyoming ................ 0.3 -- -- 0.3
New Jersey ............. 0.3 0.3 -- --
Mississippi ............ 0.2 -- 0.2 --
Oregon ................. 0.2 -- -- --
South Dakota ........... 0.2 -- 0.2 --
Tennessee .............. 0.1 -- -- 0.1
Arkansas ............... 0.1 -- -- 0.1
North Dakota ........... 0.1 -- -- 0.1
Nebraska ............... 0.0 -- -- 0.0
-----------------------------------------------
100.0% 31.2% 25.8% 12.2%
===============================================
SELF MIXED
STATE OFFICE HOSPITALITY STORAGE INDUSTRIAL USE LAND
California ............. 2.6 4.0 2.0 0.1 0.5 0.1
Southern .............. 1.2 4.0 1.8 0.0 0.5 0.1
Northern .............. 1.5 -- 0.2 0.1 -- --
Texas .................. 1.1 0.2 0.4 0.1 -- --
Florida ................ 0.2 -- 0.4 0.2 -- --
Georgia ................ -- -- 0.8 -- -- --
Ohio ................... -- 0.5 -- 0.1 -- --
New York ............... 0.2 1.0 -- -- 0.2 --
Nevada ................. 0.1 -- -- -- 0.1 --
Virginia ............... 1.0 -- 0.6 0.8 -- --
North Carolina ......... -- 0.2 -- 0.2 -- 0.1
Missouri ............... 2.7 -- -- 0.1 -- --
Maryland ............... -- -- -- -- -- --
Kansas ................. 2.0 -- -- -- -- --
Colorado ............... -- 0.9 -- -- -- --
Indiana ................ -- -- -- -- -- --
Louisiana .............. -- -- 0.3 1.0 -- --
Utah ................... -- -- -- 0.2 -- --
South Carolina ......... -- -- 0.1 -- -- --
Illinois ............... 0.1 -- -- 0.1 0.6 --
Pennsylvania ........... -- 0.5 0.1 -- -- --
Minnesota .............. -- -- -- 0.1 -- --
Maine .................. 0.3 0.5 -- -- -- --
Kentucky ............... -- -- -- -- -- --
Washington ............. 0.3 -- -- -- 0.1 --
Alabama ................ 0.2 -- -- -- 0.2 --
Arizona ................ 0.2 -- 0.3 -- -- --
Oklahoma ............... -- -- 0.7 -- -- --
Iowa ................... -- -- -- -- -- --
New Mexico ............. -- -- -- -- -- --
New Hampshire .......... -- -- -- 0.4 -- --
Idaho .................. -- -- -- -- -- --
Massachusetts .......... -- -- 0.3 -- -- --
Michigan ............... -- -- -- -- -- --
Wisconsin .............. -- -- -- 0.3 -- --
Wyoming ................ -- -- -- -- -- --
New Jersey ............. -- -- -- -- -- --
Mississippi ............ -- -- -- -- -- --
Oregon ................. -- -- 0.2 -- -- --
South Dakota ........... -- -- -- -- -- --
Tennessee .............. 0.1 -- -- -- -- --
Arkansas ............... -- -- 0.0 -- -- --
North Dakota ........... -- -- -- -- -- --
Nebraska ............... -- -- -- -- -- --
------------------------------------------------------------
11.1% 7.9% 6.3% 3.6% 1.7% 0.2%
============================================================
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
11
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
SELECT CHARACTERISTICS OF MORTGAGE POOL
CUT-OFF DATE % OF INITIAL
NUMBER OF PRINCIPAL MORTGAGE POOL
MORTGAGE LOANS BALANCE BALANCE
Interest Only .................................... 39 $ 759,100,000 31.2%
Single Tenant .................................... 22 $ 154,964,109 6.4%
Loans > 50% Single Tenant ........................ 38 $ 249,238,430 10.2%
Current Secondary Debt ........................... 9 $ 510,931,227 21.0%
Future Secondary Debt Permitted .................. 39 $ 620,989,207 25.5%
Lockbox .......................................... 59 $1,386,471,186 56.9%
Escrow Type(1)
TI/LC Reserves(2) ............................... 74 $ 547,527,501 53.3%
Real Estate Tax ................................. 170 $2,009,919,390 82.5%
Insurance ....................................... 159 $1,809,608,605 74.3%
Replacement Reserves ............................ 140 $1,812,474,660 74.4%
____________________
(1) Includes only upfront and ongoing reserves
(2) TI/LC Escrows are expressed as a percentage of only the mortgage loans
secured by office, retail, industrial and mixed use properties.
SELECT CHARACTERISTICS OF LOAN GROUP 1
--------------------------------------------------------------------------------
CUT-OFF DATE % OF INITIAL
NUMBER OF PRINCIPAL MORTGAGE POOL
MORTGAGE LOANS BALANCE BALANCE
Interest Only .................................... 24 $ 373,095,000 26.6%
Single Tenant .................................... 22 $ 154,964,109 11.1%
Loans > 50% Single Tenant ........................ 38 $ 249,238,430 17.8%
Current Secondary Debt ........................... 5 $ 235,694,227 16.8%
Future Secondary Debt Permitted .................. 31 $ 487,852,043 34.8%
Lockbox .......................................... 51 $ 709,051,186 50.6%
Escrow Type(1)
TI/LC Reserves(2) ............................... 74 $ 547,527,501 53.3%
Real Estate Tax ................................. 127 $1,072,305,796 76.5%
Insurance ....................................... 118 $ 892,289,793 63.7%
Replacement Reserves ............................ 108 $ 932,268,848 66.5%
____________________
(1) Includes only upfront and ongoing reserves
(2) TI/LC Escrows are expressed as a percentage of only the mortgage loans
secured by office, retail, industrial and mixed use properties.
SELECT CHARACTERISTICS OF LOAN GROUP 2
--------------------------------------------------------------------------------
CUT-OFF DATE % OF INITIAL
NUMBER OF PRINCIPAL MORTGAGE POOL
MORTGAGE LOANS BALANCE BALANCE
Interest Only .................................... 15 $ 386,005,000 37.3%
Single Tenant .................................... NAP NAP NAP
Loans > 50% Single Tenant ........................ NAP NAP NAP
Current Secondary Debt ........................... 4 $ 275,237,000 26.6%
Future Secondary Debt Permitted .................. 8 $ 133,137,165 12.9%
Lockbox .......................................... 8 $ 677,420,000 65.5%
Escrow Type(1)
Real Estate Tax ................................. 43 $ 937,613,594 90.7%
Insurance ....................................... 41 $ 917,318,812 88.7%
Replacement Reserves ............................ 32 $ 880,205,811 85.1%
____________________
(1) Includes only upfront and ongoing reserves
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
12
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
SELECT CHARACTERISTICS OF MORTGAGE POOL
--------------------------------------------------------------------------------
CUT-OFF DATE BALANCE ($)
--------------------------------------------------------------------------------
AGGREGATE % OF
RANGE OF CUT-OFF INITIAL % OF % OF
CUT-OFF NUMBER OF DATE MORTGAGE LOAN LOAN
DATE PRINCIPAL MORTGAGE PRINCIPAL POOL GROUP 1 GROUP 2
BALANCES ($) LOANS BALANCE ($) BALANCE BALANCE BALANCE
-------------------------------------------------------------------------------------------------------
494,011 - 2,999,999 .............. 82 $ 162,518,603 6.7% 9.0% 3.6%
3,000,000 - 3,999,999 .............. 18 61,666,343 2.5% 4.4% 0.0%
4,000,000 - 4,999,999 .............. 13 58,559,834 2.4% 3.5% 0.9%
5,000,000 - 5,999,999 .............. 14 76,066,315 3.1% 3.5% 2.6%
6,000,000 - 6,999,999 .............. 14 90,491,919 3.7% 4.6% 2.5%
7,000,000 - 7,999,999 .............. 2 14,250,000 0.6% 1.0% 0.0%
8,000,000 - 9,999,999 .............. 13 115,033,172 4.7% 5.1% 4.2%
10,000,000 - 12,999,999 .............. 16 179,110,276 7.4% 9.6% 4.3%
13,000,000 - 19,999,999 .............. 27 443,571,261 18.2% 25.8% 7.9%
20,000,000 - 49,999,999 .............. 13 338,126,997 13.9% 15.3% 11.9%
50,000,000 - 335,000,000 .............. 6 895,969,984 36.8% 18.1% 62.1%
-------------------------------------------------------------------------------------------------------
Total ................................. 218 $2,435,364,704 100.0% 100.0% 100.0%
MIN: $494,011 MAX: $335,000,000 AVG. $11,171,398
-------------------------------------------------------------------------------------------------------
DEBT SERVICE COVERAGE RATIO (X)
--------------------------------------------------------------------------------
AGGREGATE % OF
CUT-OFF INITIAL % OF % OF
NUMBER OF DATE MORTGAGE LOAN LOAN
RANGE OF MORTGAGE PRINCIPAL POOL GROUP 1 GROUP 2
DSCRS (X) LOANS BALANCE ($) BALANCE BALANCE BALANCE
-------------------------------------------------------------------------------------------------------
1.11 - 1.14 ........................... 4 $ 38,790,875 1.6% 0.4% 3.2%
1.15 - 1.19 ........................... 37 629,596,097 25.9% 14.1% 41.8%
1.20 - 1.29 ........................... 99 659,573,519 27.1% 34.7% 16.8%
1.30 - 1.34 ........................... 14 116,606,697 4.8% 4.3% 5.4%
1.35 - 1.39 ........................... 23 176,570,840 7.3% 10.8% 2.4%
1.40 - 1.44 ........................... 13 170,653,983 7.0% 11.0% 1.6%
1.45 - 1.49 ........................... 8 176,371,601 7.2% 12.6% 0.0%
1.50 - 1.59 ........................... 5 293,912,340 12.1% 2.0% 25.7%
1.60 - 1.99 ........................... 9 80,193,455 3.3% 4.1% 2.2%
2.00 - 3.06 ........................... 6 93,095,296 3.8% 6.0% 0.8%
-------------------------------------------------------------------------------------------------------
Total ................................. 218 $2,435,364,704 100.0% 100.0% 100.0%
MIN: 1.11X MAX: 3.06X WTD. AVG. 1.36X
-------------------------------------------------------------------------------------------------------
MORTGAGE RATE (%)(1)
--------------------------------------------------------------------------------
AGGREGATE % OF
CUT-OFF INITIAL % OF % OF
NUMBER OF DATE MORTGAGE LOAN LOAN
RANGE OF MORTGAGE PRINCIPAL POOL GROUP 1 GROUP 2
MORTGAGE RATES (%) LOANS BALANCE ($) BALANCE BALANCE BALANCE
-------------------------------------------------------------------------------------------------------
5.1100 - 5.4999 ....................... 3 72,900,000 3.0% 3.1% 2.9%
5.5000 - 5.7499 ....................... 49 552,473,758 22.7% 27.2% 16.6%
5.7500 - 5.9999 ....................... 60 843,103,971 34.6% 27.6% 44.2%
6.0000 - 6.0999 ....................... 20 76,433,122 3.1% 3.7% 2.4%
6.1000 - 6.1999 ....................... 26 143,077,611 5.9% 7.3% 4.0%
6.2000 - 6.2999 ....................... 18 173,383,984 7.1% 9.7% 3.7%
6.3000 - 6.3999 ....................... 22 158,574,197 6.5% 10.5% 1.1%
6.4000 - 6.4999 ....................... 9 134,058,380 5.5% 5.6% 5.3%
6.5000 - 6.8100 ....................... 12 281,359,681 11.6% 5.4% 19.9%
-------------------------------------------------------------------------------------------------------
Total ................................. 219 $2,435,364,704 100.0% 100.0% 100.0%
MIN: 5.1100 MAX: 6.8100 WTD. AVG. 5.9865
-------------------------------------------------------------------------------------------------------
CUT-OFF DATE LOAN-TO-VALUE RATIO (%)
--------------------------------------------------------------------------------
AGGREGATE % OF
CUT-OFF INITIAL % OF % OF
RANGE OF NUMBER OF DATE MORTGAGE LOAN LOAN
CUT-OFF DATE LTV MORTGAGE PRINCIPAL POOL GROUP 1 GROUP 2
RATIOS (%) LOANS BALANCE ($) BALANCE BALANCE BALANCE
-------------------------------------------------------------------------------------------------------
24.2 - 50.0 ........................... 13 $ 111,320,175 4.6% 7.3% 0.9%
50.1 - 60.0 ........................... 32 126,793,151 5.2% 8.0% 1.4%
60.1 - 65.0 ........................... 26 270,967,046 11.1% 16.9% 3.4%
65.1 - 70.0 ........................... 25 205,337,523 8.4% 11.7% 4.1%
70.1 - 75.0 ........................... 52 503,468,354 20.7% 23.4% 17.0%
75.1 - 77.5 ........................... 26 197,663,373 8.1% 12.3% 2.5%
77.6 - 80.0 ........................... 39 974,345,081 40.0% 17.4% 70.6%
80.1 - 89.2 ........................... 5 45,470,000 1.9% 3.1% 0.2%
-------------------------------------------------------------------------------------------------------
Total ................................. 218 $2,435,364,704 100.0% 100.0% 100.0%
MIN: 24.2% MAX: 89.2% WTD. AVG. 71.6%
-------------------------------------------------------------------------------------------------------
MATURITY DATE OR ARD LOAN-TO-VALUE RATIO (%)
--------------------------------------------------------------------------------
AGGREGATE % OF
RANGE OF CUT-OFF INITIAL % OF % OF
MATURITY DATE NUMBER OF DATE MORTGAGE LOAN LOAN
OR ARD MORTGAGE PRINCIPAL POOL GROUP 1 GROUP 2
LTV RATIOS (%) LOANS BALANCE ($) BALANCE BALANCE BALANCE
-------------------------------------------------------------------------------------------------------
Fully Amortizing ...................... 7 $ 17,278,958 0.7% 1.0% 0.3%
18.9 - 40.0 ........................... 7 95,106,862 3.9% 6.2% 0.8%
40.1 - 50.0 ........................... 27 77,253,151 3.2% 4.9% 0.8%
50.1 - 60.0 ........................... 40 334,330,620 13.7% 21.7% 3.0%
60.1 - 62.4 ........................... 19 215,858,382 8.9% 8.4% 9.4%
62.5 - 65.0 ........................... 21 141,811,433 5.8% 8.3% 2.4%
65.1 - 67.4 ........................... 24 304,052,171 12.5% 15.1% 9.0%
67.5 - 70.0 ........................... 16 95,747,000 3.9% 5.8% 1.4%
70.1 - 75.0 ........................... 39 696,741,127 28.6% 19.5% 40.9%
75.1 - 80.1 ........................... 18 457,185,000 18.8% 9.0% 32.0%
-------------------------------------------------------------------------------------------------------
Total ................................. 218 $2,435,364,704 100.0% 100.0% 100.0%
MIN: 18.9% MAX:80.1% WTD. AVG. 66.9%
-------------------------------------------------------------------------------------------------------
ORIGINAL TERM TO MATURITY OR ARD (MOS)(1)
--------------------------------------------------------------------------------
AGGREGATE % OF
CUT-OFF INITIAL % OF % OF
RANGE OF NUMBER OF DATE MORTGAGE LOAN LOAN
ORIGINAL TERMS MORTGAGE PRINCIPAL POOL GROUP 1 GROUP 2
TO MATURITY (MOS.) LOANS BALANCE ($) BALANCE BALANCE BALANCE
-------------------------------------------------------------------------------------------------------
1 - 60 .............................. 7 $ 54,299,781 2.2% 0.3% 4.9%
73 - 84 .............................. 5 349,300,000 14.3% 8.2% 22.6%
108 - 120 ............................. 200 2,014,485,964 82.7% 90.5% 72.2%
121 - 360 ............................. 7 17,278,958 0.7% 1.0% 0.3%
-------------------------------------------------------------------------------------------------------
Total ................................. 219 $2,435,364,704 100.0% 100.0% 100.0%
MIN: 60 MAX: 360 WTD. AVG. 114
-------------------------------------------------------------------------------------------------------
____________________
(1) For the purpose of the Mortgage Rate (%) and Original Term to Maturity or
ARD (mos) tables, the Farallon Portfolio Loan was treated as two separate
mortgage loans with original principal balances of $200,000,000 and
$50,000,000, respectively, and with loan maturities of 7-years and
10-years, respectively.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
13
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
REMAINING TERM TO MATURITY OR ARD (MOS)(1)
--------------------------------------------------------------------------------
AGGREGATE % OF
CUT-OFF INITIAL % OF % OF
RANGE OF NUMBER OF DATE MORTGAGE LOAN LOAN
REMAINING TERMS MORTGAGE PRINCIPAL POOL GROUP 1 GROUP 2
TO MATURITY (MOS.) LOANS BALANCE ($) BALANCE BALANCE BALANCE
-------------------------------------------------------------------------------------------------------
54 - 60 .............................. 7 $ 54,299,781 2.2% 0.3% 4.9%
61 - 84 .............................. 5 349,300,000 14.3% 8.2% 22.6%
85 - 121 ............................. 200 2,014,485,964 82.7% 90.5% 72.2%
122 - 358 ............................. 7 17,278,958 0.7% 1.0% 0.3%
-------------------------------------------------------------------------------------------------------
Total ................................. 219 $2,435,364,704 100.0% 100.0% 100.0%
MIN: 54 MAX: 358 WTD. AVG. 113
-------------------------------------------------------------------------------------------------------
REMAINING PARTIAL IO TERM (MOS)
--------------------------------------------------------------------------------
AGGREGATE % OF
CUT-OFF INITIAL % OF % OF
NUMBER OF DATE MORTGAGE LOAN LOAN
RANGE OF REMAINING MORTGAGE PRINCIPAL POOL GROUP 1 GROUP 2
PARTIAL IO TERMS LOANS BALANCE ($) BALANCE BALANCE BALANCE
-------------------------------------------------------------------------------------------------------
9 - 14 ............................... 2 $ 17,720,000 0.7% 1.3% 0.0%
15 - 24 ............................... 24 201,810,000 8.3% 9.7% 6.4%
25 - 34 ............................... 13 101,988,000 4.2% 2.8% 6.1%
35 - 39 ............................... 12 78,539,000 3.2% 4.9% 0.9%
40 - 54 ............................... 1 5,875,000 0.2% 0.0% 0.6%
55 - 60 ............................... 39 771,030,896 31.7% 28.6% 35.9%
-------------------------------------------------------------------------------------------------------
Total ................................. 91 $1,176,962,896 48.3% 47.2% 49.8%
MIN: 9 MAX: 60 WTD. AVG. 48
-------------------------------------------------------------------------------------------------------
PROPERTY STATE/LOCATION
--------------------------------------------------------------------------------
AGGREGATE % OF
CUT-OFF INITIAL % OF % OF
NUMBER OF DATE MORTGAGE LOAN LOAN
MORTGAGED PRINCIPAL POOL GROUP 1 GROUP 2
LOCATION PROPERTIES BALANCE ($) BALANCE BALANCE BALANCE
-------------------------------------------------------------------------------------------------------
California ............................ 61 $ 431,846,443 17.7% 27.7% 4.2%
Southern ............................. 51 339,808,043 14.0% 21.5% 3.8%
Northern ............................. 10 92,038,401 3.8% 6.3% 0.4%
Texas ................................. 84 249,172,695 10.2% 6.6% 15.2%
Florida ............................... 49 231,413,829 9.5% 2.3% 19.3%
Georgia ............................... 102 212,450,232 8.7% 9.4% 7.8%
Ohio .................................. 22 107,608,147 4.4% 3.0% 6.3%
Other(a) .............................. 346 1,202,873,357 49.4% 51.1% 47.1%
-------------------------------------------------------------------------------------------------------
Total ................................. 664 $2,435,364,704 100.0% 100.0% 100.0%
-------------------------------------------------------------------------------------------------------
(a) Includes 37 States
PROPERTY TYPE
--------------------------------------------------------------------------------
AGGREGATE % OF
CUT-OFF INITIAL % OF % OF
NUMBER OF DATE MORTGAGE LOAN LOAN
MORTGAGED PRINCIPAL POOL GROUP 1 GROUP 2
PROPERTY TYPE PROPERTIES BALANCE ($) BALANCE BALANCE BALANCE
-------------------------------------------------------------------------------------------------------
Multifamily ........................... 408 $1,057,175,674 43.4% 1.7% 100.0%
Multifamily .......................... 128 758,965,534 31.2% 1.7% 71.2%
Manufactured Housing ................. 280 298,210,139 12.2% 0.0% 28.8%
Retail ................................ 151 628,459,626 25.8% 44.8% 0.0%
Office ................................ 35 269,573,155 11.1% 19.2% 0.0%
Hospitality ........................... 10 192,020,082 7.9% 13.7% 0.0%
Self Storage .......................... 34 154,017,053 6.3% 11.0% 0.0%
Industrial ............................ 14 87,067,565 3.6% 6.2% 0.0%
Mixed Use ............................. 10 42,081,549 1.7% 3.0% 0.0%
Land .................................. 2 4,970,000 0.2% 0.4% 0.0%
-------------------------------------------------------------------------------------------------------
Total ................................. 664 $2,435,364,704 100.0% 100.0% 100.0%
-------------------------------------------------------------------------------------------------------
AMORTIZATION TYPES
--------------------------------------------------------------------------------
AGGREGATE % OF
CUT-OFF INITIAL % OF % OF
NUMBER OF DATE MORTGAGE LOAN LOAN
MORTGAGE PRINCIPAL POOL GROUP 1 GROUP 2
AMORTIZATION TYPES LOANS BALANCE ($) BALANCE BALANCE BALANCE
-------------------------------------------------------------------------------------------------------
IO-Balloon ............................ 89 $1,166,214,896 47.9% 46.5% 49.7%
Interest Only ......................... 39 759,100,000 31.2% 26.6% 37.3%
Balloon ............................... 77 381,577,660 15.7% 17.9% 12.6%
ARD ................................... 5 101,293,190 4.2% 7.2% 0.0%
Fully Amortizing ...................... 7 17,278,958 0.7% 1.0% 0.3%
Partial IO-ARD ........................ 1 9,900,000 0.4% 0.7% 0.0%
-------------------------------------------------------------------------------------------------------
Total ................................. 218 $2,435,364,704 100.0% 100.0% 100.0%
-------------------------------------------------------------------------------------------------------
REMAINING STATED AMORTIZATION TERM (MOS)
--------------------------------------------------------------------------------
AGGREGATE % OF
CUT-OFF INITIAL % OF % OF
NUMBER OF DATE MORTGAGE LOAN LOAN
RANGE OF REMAINING STATED MORTGAGE PRINCIPAL POOL GROUP 1 GROUP 2
AMORTIZATION TERMS (MOS.) LOANS BALANCE ($) BALANCE BALANCE BALANCE
-------------------------------------------------------------------------------------------------------
Interest Only ......................... 39 $ 759,100,000 31.2% 26.6% 37.3%
177 - 240 ............................. 5 24,929,630 1.0% 1.8% 0.0%
241 - 300 ............................. 6 26,469,138 1.1% 1.9% 0.0%
301 - 360 ............................. 147 1,415,816,878 58.1% 59.3% 56.5%
361 - 420 ............................. 21 209,049,057 8.6% 10.4% 6.2%
-------------------------------------------------------------------------------------------------------
Total ................................. 218 $2,435,364,704 100.0% 100.0% 100.0%
MIN: 177 MAX: 420 WTD. AVG. 363
-------------------------------------------------------------------------------------------------------
____________________
(1) For the purpose of the Remaining Term to Maturity or ARD (mos) table, the
Farallon Portfolio Loan was treated as two separate mortgage loans with
original principal balances of $200,000,000 and $50,000,000, respectively,
and with loan maturities of 7-years and 10-years, respectively.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
14
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
CLASS A-2 AND A-2 FL (7-9 YEARS)
--------------------------------------------------------------------------------
AGGREGATE LOAN BALANCE
CUT-OFF DATE AT MATURITY /
LOAN PRINCIPAL BALANCE ARD TO
LOAN/PROPERTY NAME SELLER ALLOCATED TO CLASS CLASS STATE
--------------------------------------------------------------------------------------------
Peninsula Beverly Hills CRF $79,300,000 $ 79,300,000 CA
Douglas Corporate Center I & II Key 36,000,000 36,000,000 CA
Holiday Inn Buffalo Niagara
International Airport CRF 8,962,340 7,184,938 NY
CLASS A-2 AND A-2 FL TOTAL BALLOON
PAYMENT $122,484,938
REMAINING CLASS A-2 AND A-2 FL
AMORTIZATION $ 62
TOTAL CLASS A-2 AND A-2 FL
CERTIFICATE BALANCE $122,485,000
REMANING CUT-OFF
TERM TO DATE
PROPERTY MATURITY / REMAINING LTV U/W NCF
LOAN/PROPERTY NAME TYPE ARD (MONTHS) IO PERIOD RATIO DSCR
----------------------------------------------------------------------------------------------------
Peninsula Beverly Hills Hospitality 84 84 35.8% 2.54x
Douglas Corporate Center I & II Office 82 82 53.1 1.38
Holiday Inn Buffalo Niagara
International Airport Hospitality 105 0 59.7 1.55
CLASS A-2 AND A-2 FL TOTAL BALLOON
PAYMENT
REMAINING CLASS A-2 AND A-2 FL
AMORTIZATION
TOTAL CLASS A-2 AND A-2 FL
CERTIFICATE BALANCE
MORTGAGE POOL PREPAYMENT PROFILE
--------------------------------------------------------------------------------
PERCENT OF REMAINING BALANCE ANALYSIS(1)
% OF REM
MONTHS AGGREGATE MORTGAGE
SINCE REMAINING POOL BALANCE
CUT-OFF NUMBER OF PRINCIPAL LOCK OUT/
PERIOD DATE MORTGAGE LOANS BALANCE DEFEASANCE(2)
-----------------------------------------------------------------------------------
August 2007 0 218 $ 2,435,364,703.61 81.28%
August 2008 12 218 $ 2,429,087,501.65 81.27%
August 2009 24 218 $ 2,421,661,525.87 75.40%
August 2010 36 218 $ 2,411,877,759.20 80.94%
August 2011 48 218 $ 2,399,903,265.36 80.86%
August 2012 60 211 $ 2,332,417,534.83 76.74%
August 2013 72 211 $ 2,310,050,088.16 76.48%
August 2014 84 207 $ 1,936,989,876.00 78.19%
August 2015 96 207 $ 1,911,749,964.19 78.20%
August 2016 108 206 $ 1,878,077,985.46 76.12%
August 2017 120 3 $ 5,498,863.20 0.00%
August 2018 132 3 $ 4,555,868.85 0.00%
August 2019 144 3 $ 3,553,540.50 0.00%
August 2020 156 3 $ 2,488,665.12 0.00%
August 2021 168 3 $ 1,356,264.17 0.00%
August 2022 180 0 $ -- 0.00%
% OF REM % OF REM % OF REM
MORTGAGE MORTGAGE MORTGAGE
POOL BALANCE POOL BALANCE X% POOL BALANCE
PERIOD YIELD MAINTENANCE(3) PENALTY(4) OPEN TOTAL
-----------------------------------------------------------------------------------
August 2007 18.58% 0.14% 0.00% 100.00%
August 2008 18.60% 0.14% 0.00% 100.00%
August 2009 24.20% 0.14% 0.26% 100.00%
August 2010 18.67% 0.13% 0.26% 100.00%
August 2011 18.76% 0.13% 0.26% 100.00%
August 2012 22.29% 0.98% 0.00% 100.00%
August 2013 22.30% 1.22% 0.00% 100.00%
August 2014 20.37% 1.44% 0.00% 100.00%
August 2015 20.36% 1.44% 0.00% 100.00%
August 2016 20.20% 1.45% 2.23% 100.00%
August 2017 77.32% 0.00% 22.68% 100.00%
August 2018 77.41% 0.00% 22.59% 100.00%
August 2019 77.55% 0.00% 22.46% 100.00%
August 2020 77.79% 0.00% 22.21% 100.00%
August 2021 78.46% 0.00% 21.54% 100.00%
August 2022 0.00% 0.00% 0.00% 100.00%
____________________
(1) Calculated assuming that no mortgage loan prepays, defaults or is
repurchased prior to stated maturity (except that mortgage loans with
anticipated repayment dates (ARD loans) are assumed to prepay on their
anticipated repayment dates and except that mortgage loans with conversion
dates (converting loans) are assumed to prepay on their conversion dates).
Otherwise, Mortgage Pool Prepayment Profile is calculated based on
Modeling Assumptions as described in the offering prospectus.
(2) Mortgage loans included in this category are locked out from prepayment,
but may include periods during which defeasance is permitted.
(3) Including mortgage loans that permit defeasance or prepayment with yield
maintenance and mortgage loans that permit greater of yield maintenance
cost and x% penalties.
(4) Including mortgage loans that permit defeasance or x% penalties.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
15
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS OR GROUPS OF CROSS-COLLATERALIZED MORTGAGE LOANS
--------------------------------------------------------------------------------
NUMBER OF
MORTGAGE % OF
LOANS/ INITIAL
MORTGAGED CUT-OFF DATE SHADOW MORTGAGE
MORTGAGE REAL PRINCIPAL RATING POOL
NO. LOAN NAME LOAN SELLER PROPERTIES BALANCE FITCH/S&P(1) BALANCE
----------------------------------------------------------------------------------------------------------
1. Empirian Portfolio Pool 2 MLML 1 73 $ 335,000,000 13.8%
2. Farallon Portfolio MLML 1 274 $ 250,000,000 10.3%
3. Executive Hills Portfolio Key 1 9 $ 99,900,000 4.1%
4. Peninsula Beverly Hills CRF 1 1 $ 79,300,000 BBB-/BBB- 3.3%
5. U-Haul SAC 12 & 13 MLML 1 17 $ 74,934,080 3.1%
6. Towers at University Town
Center Key 1 1 $ 56,835,903 2.3%
7. The Georgia-Alabama Retail
Portfolio CRF 1 62 $ 39,926,997 1.6%
8. Douglas Corporate Center I &
II Key 1 1 $ 36,000,000 1.5%
9. Gray Apartment Portfolio CRF 2 2 $ 31,500,000 1.3%
10. Haverly Park Apartments(4) CRF 1 1 $ 30,000,000 1.2%
----------------------------------------------------------------------------------------------------------
TOTAL/WTD. AVG. 11 441 $1,033,396,980 42.4%
----------------------------------------------------------------------------------------------------------
LOAN
BALANCE CUT-OFF
PROPERTY PROPERTY PER DSCR DATE LTV
NO. TYPE SIZE(2) SF/UNIT(3) (X)(3),(4) RATIO (%)(3)
-------------------------------------------------------------------------------------
1. Multifamily 6,892 $ 48,607 1.18x 78.9%
2. Manufactured Housing 57,165 $ 27,561 1.50 79.7
3. Office 951,754 $ 105 1.43 71.4
4. Hospitality 194 $408,763 2.54 35.8
5. Self Storage 711,292 $ 105 1.48 66.9
6.
Multifamily-Student 910 $ 62,457 1.17 71.9
7.
Retail 239,753 $ 333 1.24 79.3
8.
Office 213,379 $ 169 1.38 53.1
9. Multifamily 789 $ 39,924 1.26 75.0
10. Multifamily 636 $ 47,170 1.14 70.6
-------------------------------------------------------------------------------------
1.42X 72.6%
-------------------------------------------------------------------------------------
(1) It has been confirmed by Fitch and S&P, in accordance with their
respective methodologies, that the Peninsula Beverly Hills mortgage loan
has credit characteristics consistent with investment-grade rated
obligations.
(2) Property size is indicated in rooms (for hospitality properties), in units
(for multifamily properties), pads (for manufactured housing properties),
beds (for student housing properties) and square feet for all other
property types.
(3) Calculations with respect to the Farallon Portfolio Loan are based on the
aggregate principal balance of the Farallon Portfolio Loan Combination (as
defined herein). The DSCR(x) assumes a LIBOR of 6.50% (LIBOR strike price
plus 75 basis points) with respect to the portion of the Farallon
Portfolio Loan Combination consisting of the non-trust floating rate A
note.
(4) The interest rate increases from 5.1100% to 5.7700% during the loan term.
The DSCR(x) shown is based on the 5.7700% interest rate.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
16
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
[THIS PAGE INTENTIONALLY LEFT BLANK.]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
17
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
EMPIRIAN PORTFOLIO POOL 2
[2 PHOTOS OF EMPIRIAN PORTFOLIO POOL 2]
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
Number of Mortgaged Real Properties 73
Location (City/State) Various
Property Type Multifamily
Size (Units) 6,892
Percentage Physical Occupancy as of April 1, 2007 94.3%
Year Built Various
Year Renovated Various
Appraisal Value $424,650,000
Average Monthly Rent Per Unit $583
Underwritten Economic Occupancy 94.1%
Underwritten Revenues $48,374,647
Underwritten Total Expenses $18,721,185
Underwritten Net Operating Income (NOI) $29,653,462
Underwritten Net Cash Flow (NCF) $27,865,962
4/30/2007 (TTM) $27,357,487
2006 NOI $26,142,422
2005 NOI $24,473,524
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
--------------------------------------------------------------------------------
Mortgage Loan Seller MLML
Loan Group 2
Origination Date May 9, 2007
Cut-off Date Principal Balance $335,000,000
Cut-off Date Loan Balance Per Unit $48,607
Percentage of Initial Mortgage Pool Balance 13.8%
Number of Mortgage Loans 1
Type of Security (Fee/Leasehold) Fee
Mortgage Rate 5.8315%
Amortization Type IO-Balloon
IO Period (Months) 60
Original Term to Maturity/ARD (Months) 120
Original Amortization Term (Months) 360
Call Protection LO(26),Def(91),O(3)
Lockbox Hard
Cut-off Date LTV Ratio 78.9%
LTV Ratio at Maturity or ARD 73.6%
Underwritten DSCR on NOI 1.25x(1)
Underwritten DSCR on NCF 1.18x(2)
--------------------------------------------------------------------------------
(1) The Underwritten DSCR on NOI during the interest only period is 1.49x.
(2) The Underwritten DSCR on NCF during the interest only period is 1.40x.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
18
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
[MAP]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
19
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
THE LOANS. The mortgage loan (the "Empirian Loan") is evidenced by a single
promissory note and is secured by a first mortgage encumbering the borrower's
fee interest in a portfolio of multifamily complexes (the "Empirian
Properties"). The Empirian Loan has a principal balance of $335,000,000 as of
the cut-off date and represents approximately 13.8% of the initial mortgage
pool balance and approximately 32.4% of the initial loan group 2 balance.
The Empirian Loan was originated on May 9, 2007 and has a remaining term of 118
months to its scheduled maturity date of June 8, 2017. The Empirian Loan may be
voluntarily prepaid after the monthly payment date occurring on March 8, 2017
without payment of a prepayment premium and permits defeasance with United
States government obligations beginning two years after the creation of the
series 2007-8 securitization trust.
THE PROPERTIES. The Empirian Properties consist of 73 multifamily rental
communities totaling 6,892 units located across eight states. The properties
range in size from 42 to 287 units, with an average of 94 per location.
The Empirian Properties are single-story garden apartment communities. The
units are factory-built, modular constructed properties that were manufactured
in the 1970's to the 1980's by Cardinal Industries, an Ohio-based company
established in 1954. Each apartment features direct exterior access, a private
patio, and immediate access to parking. Appliances generally include electric
ranges and refrigerators with most units offering full-size washer and dryer
hookups as well as attic space.
According to Equity Residential, the previous owner, recent capital
improvements to the properties reportedly included exterior upgrades to roofs,
siding replacement, paint, concrete walks, asphalt paving, sealcoat,
landscaping and signage. Interior upgrades reportedly included carpets,
cabinets, flooring, countertops, hot water heaters and the replacement of HVAC
units. Other select renovations included upgrades to on-site management offices
and laundry rooms. Per engineering reports created by LandAmerica Commercial
Services, the Empirian Properties are in generally good condition and there is
currently no proposed program for the renovation, improvement or development of
the Empirian Properties.
--------------------------------------------------------------------------------
EMPIRIAN PROPERTIES(1)
% OF AVERAGE MONTHLY
UNIT MIX NO. OF UNITS TOTAL UNITS MARKET RENT/UNIT
--------------------------------------------------------------------------------
Studio 960 13.9% $473
1BR 4,896 71.0 574
2BR 1,026 14.9 725
3BR 10 0.1 898
--------------------------------------------------------------------------------
TOTAL/WTD. AVG. 6,892 100.0% $583
--------------------------------------------------------------------------------
THE MARKET. The Empirian Properties are located in both metropolitan and rural
areas across eight states with geographic concentrations in Florida, Ohio,
Georgia and Indiana. The table below highlights geographic concentration.
----------------------------------------------------------------------------------------------
EMPIRIAN PROPERTIES - STATE ALLOCATION(1)
ALLOCATED CUT-OFF
STATE TOTAL SF/UNITS OCCUPANCY APPRAISED VALUE DATE BALANCE UW NCF
----------------------------------------------------------------------------------------------
Florida 2,141 94.0% $178,390,000 $139,054,000 $10,832,605
Ohio 1,500 94.7 75,920,000 60,730,000 5,372,598
Georgia 1,218 94.5 69,080,000 54,920,000 4,727,570
Indiana 1,052 92.9 48,920,000 38,896,000 3,323,340
Kentucky 434 94.2 20,790,000 16,310,000 1,339,230
Pennsylvania 259 96.5 17,150,000 13,720,000 1,247,516
South Carolina 187 90.9 8,900,000 6,970,000 554,530
Michigan 101 94.1 5,500,000 4,400,000 468,573
----------------------------------------------------------------------------------------------
TOTAL/WTD. AVG. 6,892 94.3% $424,650,000 $335,000,000 $27,865,962
----------------------------------------------------------------------------------------------
COMPETITIVE CONDITIONS.(1) Certain of the mortgaged real properties comprising
the Empirian Portfolio and representing 6,892 units is subject to competitive
conditions.
The mortgaged real property identified as Sunset Way represents 4.17% of total
units in the Empirian Portfolio. According to a third-party appraisal, there
are approximately 557 properties in the Miami market of which approximately 43
properties are located in Sunset Way's submarket of Kendall Lakes. The average
one-year annualized vacancy rate for Kendall Lakes was reported at 2.9%.
According to the appraisal dated April 15, 2007, current indications show an
outflow of units because of the "condo conversion" activity of the last few
years.
The mortgaged real property identified as Centre Lake III represents 3.40% of
total units in the Empirian Portfolio. According to a third-party appraisal,
there are approximately 557 properties in the Miami market of which
approximately 52 properties are located Centre Lake III's submarket of North
Miami/Bayshore. The average 1 year annualized vacancy rate for North
Miami/Bayshore was reported at 2.5%. According to the appraisal dated April 15,2007, current indications show an outflow of units because of the "condo
conversion" activity of the last few years.
(1) Certain information was obtained from a third party appraisal. The
appraisal relies on many assumptions, and no representation is made as to
the accuracy of the assumptions underlying the appraisal.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
20
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
THE BORROWERS. 99 single purpose, bankruptcy remote entities (the "Empirian
Borrowers") owned and controlled, directly or indirectly, by Ezra Beyman
("Sponsor").
Mr. Beyman has over 20 years of real estate experience. He founded Empire
Equities, the predecessor to Empire Equity Group Inc., in November 1983 and has
since been involved in all aspects of the real estate industry including
acquisition, renovation, sale, management and financing of various property
types including single-family dwellings, multi-story luxury complexes and
commercial real estate. Mr. Beyman also owns and operates a residential
mortgage brokerage operation, which, following his recent acquisition of
Olympia Funding, Inc., is one of the largest in the United States. These
operations are organized as the Empire-Empirian Group of Holdings and its
affiliates, which direct the management, acquisition, renovation, financing and
sale of residential and commercial properties. The company is based in
Montvale, NJ.
As of January 2007, Mr. Beyman owned or controlled 309 multifamily properties
totaling approximately $2.4 billion in reported market value.
PROPERTY MANAGEMENT. Empirian Property Management, Inc. ("Empirian"), an
affiliate of the sponsor. Empirian was founded by a team of real estate
professionals, including Mr. Beyman, with over 15 years of real estate
experience. Empirian exclusively manages Empire's portfolio of approximately
300 properties totaling 35,000 units. Empirian's management approach is to hire
experienced local real estate professionals possessing local knowledge of their
respective markets. In 2006, Empire acquired Equity Residential's Lexford
operating and management platform and maintained existing management personnel
resulting in on-site continuity post-acquisition.
LOCKBOX. Hard lockbox with springing cash management.
ESCROWS.
--------------------------------------------------------------------------------
EMPIRIAN LOAN ESCROWS / RESERVES
TYPE: INITIAL MONTHLY
--------------------------------------------------------------------------------
Taxes $ 2,661,941 $ 380,277
Insurance $ 1,472,067 $ 163,563
Capital Expenditures $ 0 $ 148,958
Deferred Maintenance $ 413,533 $ 0
Environmental Remediation Reserve $ 56,563 $ 0
--------------------------------------------------------------------------------
ADDITIONAL DEBT. None permitted.
PARTIAL RELEASES. Prior to the Defeasance Lockout Date (defined as two years
from the start-up day of the series 2007-8 securitization) up to 25% (based on
allocated loan amount) of the individual Empirian Properties may be released
from the lien of the related mortgage provided that (i) the debt service
coverage ratio ("DSCR") on the Empirian Loan immediately following the release
is equal to or greater than the greater of (a) the DSCR immediately prior to
such release and (b) the DSCR as of the loan closing date, (ii) the Empirian
Borrowers prepay the loan in an amount equal to the "Adjusted Release Amount"
(equal to (x) with respect to properties located in Michigan or Ohio, 110% of
the allocated loan amount for each such property, and (y) with respect to
properties located in any other state, 115% of the allocated loan amount for
each such property) and (iii) the Empirian Borrowers pay a prepayment premium
in an amount equal to the greater of yield maintenance and 1%.
After the Defeasance Lockout Date, the loan may be defeased in whole or in part
and the underlying properties may be released and replaced with U.S. treasury
securities in an amount equal to the adjusted release amount associated with
the properties being released, provided that the Empirian Borrowers comply with
standard defeasance provisions, including the requirement that after such
partial defeasance (i) the DSCR on the Empirian Loan is equal to or greater
than (a) the DSCR immediately prior to such release and (b) the DSCR as of the
loan closing date and (ii) the Empirian Borrowers prepay the loan in an amount
equal to the "Adjusted Release Amount" (equal to (x) with respect to properties
located in Michigan or Ohio, 110% of the allocated loan amount for each such
property, and (y) with respect to properties located in any other state, 115%
of the allocated loan amount for each such property).
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
21
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
FARALLON PORTFOLIO
[2 PHOTOS OF FARALLON PORTFOLIO]
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
Number of Mortgaged Real Properties 274
Location (City/State) Various
Property Type Manufactured Housing
Size (Pads) 57,165
Percentage Physical Occupancy as of
April 30, 2007 82.6%
Year Built Various
Year Renovated Various
Appraisal Value $1,975,955,000
Average Monthly Rent Per Pad $325
Underwritten Economic Occupancy 82.0%
Underwritten Revenues $213,097,027
Underwritten Total Expenses $54,201,845
Underwritten Net Operating Income (NOI) $158,895,181
Underwritten Net Cash Flow (NCF) $156,037,181
4/30/2007 (TTM) NOI $149,331,279
2006 NOI $145,844,254
2005 NOI $120,287,472
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
--------------------------------------------------------------------------------
Mortgage Loan Seller MLML
Loan Group 2
Origination Date July 31, 2007
Cut-off Date Principal Balance $250,000,000(1)
Cut-off Date Loan Balance Per Pad $27,561
Percentage of Initial Mortgage Pool Balance 10.3%
Number of Mortgage Loans 1
Type of Security (Fee/Leasehold) Fee/Leasehold(2)
Mortgage Rate 6.5226%/6.4650%(1)
Amortization Type Interest Only
IO Period (Months) 84/120(1)
Original Term to Maturity/ARD (Months) 84/120(1)
Original Amortization Term (Months) NAP
Call Protection YM(3), Def(4), O(4)
Lockbox Hard
Cut-off Date LTV Ratio 79.7%(1)
LTV Ratio at Maturity or ARD 79.7%(1)
Underwritten DSCR on NOI 1.53x(1),(5),(6)
Underwritten DSCR on NCF 1.50x(1),(5),(6)
--------------------------------------------------------------------------------
(1) The Farallon Portfolio Loan Combination was originated in the amount of
$1,575,500,000 of which $250,000,000 is included in the trust. The
Farallon Portfolio Loan is evidenced by eight (8) interest only promissory
notes totalling $200,000,000 with original terms to maturity of 84 months
and two (2) interest only promissory notes totalling $50,000,000 with
original terms to maturity of 120 months. The mortgage rate of the
promissory notes totaling $200,000,000 is 6.5226% and the mortgage rate of
the promissory notes totaling $50,000,000 is 6.4650%. The multiple other
notes evidencing the loan are expected to be securitized in one or more
future securitizations. Calculations of LTV, DSCR and Cut-off Date Loan
Balance Per Pad are based on the whole loan amount of $1,575,500,000.
(2) One of the 274 manufactured housing communities is owned in leasehold. See
the section entitled "Ground Lease" below.
(3) See the section entitled "Prepayment" below.
(4) See the section entitled "Defeasance" below.
(5) The DSCR calculations assume a LIBOR of 6.50% (LIBOR strike price plus 75
basis points) with respect to the portion of the Farallon Portfolio Loan
Combination consisting of the floating rate A note non-trust loan.
(6) The DSCR calculations include cash flow from the Farallon Rental Housing
Portfolio (as defined below under "--The Loan"). The Underwritten DSCR on
NOI and Underwritten DSCR on NCF excluding the cash flow from the Farallon
Rental Housing Portfolio is 1.30x and 1.27x, respectively.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
22
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
[MAP]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
23
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
THE LOAN. The mortgage loan (the "Farallon Portfolio Loan") is evidenced by ten
(10) fixed rate notes and is secured by first mortgages encumbering Borrower's
fee interests in two hundred seventy three (273) manufactured housing
communities and a leasehold interest in one (1) manufactured housing community,
which communities are located in twenty three (23) states (collectively the
"Farallon Portfolio") and, until such time as the Debt Service Coverage Ratio
equals 1.43x, a pledge of equity in entities that own approximately 9,098
rental homes dispersed throughout the 274 communities (the "Farallon Rental
Housing Portfolio"). The Farallon Portfolio Loan represents approximately 10.3%
of the initial mortgage pool balance and approximately 24.2% of the initial
loan group 2 balance. The Farallon Portfolio Loan was originated on July 31,2007 and has a principal balance as of the cut-off date of $250,000,000. A $200
million portion of the Farallon Portfolio Loan has a scheduled maturity date of
August 1, 2014. A $50 million portion of the Farallon Portfolio Loan has a
scheduled maturity date of August 1, 2017. The Farallon Portfolio Loan permits
prepayment and defeasance as described in the sections entitled "Prepayment"
and "Defeasance" below.
The Farallon Portfolio Loan is a portion of a whole mortgage loan with an
original principal balance of $1,575,500,000 (the "Farallon Portfolio LoanCombination"). The Farallon Portfolio Loan Combination is evidenced by
forty-five (45) notes as follows: (i) six (6) five-year fixed rate A notes with
an aggregate initial principal balance of $139,470,000 and an interest rate of
6.4194% per annum, none of which are held by the trust; (ii) four (4)
seven-year fixed rate A notes with an aggregate initial principal balance of
$92,980,000 and an interest rate of 6.5226% per annum, all of which are held by
the trust; (iii) twelve (12) ten-year fixed rate A notes with an aggregate
initial principal balance of $267,550,000 (together with the notes in clauses
(i) and (ii) above, the "Farallon Portfolio Loan Fixed Rate A Notes") and an
interest rate of 6.4650%, one of which is held by the trust with a principal
balance of $23,245,000; (iv) one (1) floating rate A note with an initial
principal balance of $500,000,000 (the "Farallon Portfolio Loan Floating Rate A
Note"), and an interest rate of one-month LIBOR plus 0.75% per annum, and a
two-year term subject to three one-year extensions if certain conditions are
satisfied, which note is not held by the trust; (v) six (6) five-year fixed
rate B notes (which are generally subordinate to all A notes) with an aggregate
initial principal balance of $160,530,000 and an interest rate of 6.4194% per
annum, none of which are held by the trust; (vi) four (4) seven-year fixed rate
B notes (which are generally subordinate to all A notes) with an aggregate
initial principal balance of $107,020,000 and an interest rate of 6.5226% per
annum, all of which are held by the trust; and (vii) twelve (12) ten-year fixed
rate B notes (which are generally subordinate to all A notes) with an aggregate
initial principal balance of $307,950,000 (together with the notes in clauses
(v) and (vi) above, the "Farallon Portfolio Loan Fixed Rate B Notes" and
together with the Farallon Portfolio Loan Fixed Rate A Notes, the "Farallon
Portfolio Loan Fixed Rate Notes") and an interest rate of 6.4650%, one of which
is held by the trust in a principal balance of $26,755,000. All of the
forty-five (45) notes that comprise the Farallon Portfolio Loan Combination,
including the Farallon Portfolio Loan, are secured by the mortgages encumbering
the Farallon Portfolio and are interest only for their respective terms.
The thirty-five (35) notes that comprise the Farallon Portfolio Loan
Combination that are not held by the trust are expected to be securitized in
one or more future securitizations. The pooling and servicing agreement for the
ML-CFC Commercial Mortgage Trust 2007-8, Commercial Mortgage Pass-Through
Certificates, Series 2007-8 securitization transaction and the intercreditor
agreement for the Farallon Portfolio Loan Combination will govern the servicing
of the Farallon Portfolio Loan Combination. Initially, the holder or holders
(and their respective successors and assigns) of all or any portion of a
Farallon Portfolio Loan Fixed Rate A Note which is not held by the trust, as
designated by MLML and which may be MLML, will have the right to direct and
advise the applicable master servicer and the special servicer, and have
certain approval rights, with respect to various servicing matters and major
decisions relating to the Farallon Portfolio Loan Combination (collectively,
"Farallon Portfolio Control Rights"). The controlling class of the ML-CFC
Commercial Mortgage Trust 2007-8, Commercial Mortgage Pass-Through
Certificates, Series 2007-8 securitization transaction will not have the
Farallon Portfolio Control Rights. In connection with future securitizations
involving all or any portion of the Farallon Portfolio Loan Fixed Rate Notes,
MLML may designate the controlling class of any such securitization as the
controlling holder for the Farallon Portfolio Loan Combination in which case
such controlling holder shall have the Farallon Portfolio Control Rights and
MLML (or its successors or assigns, as applicable), as holder of any remaining
portion of the Farallon Portfolio Loan Combination, will have certain
non-binding consultation rights with respect to matters relating to the
Farallon Control Rights. See "Description of the Mortgage Pool -- The LoanCombinations" in the prospectus supplement.
| $500 million* | $500 million
| Farallon Portfolio Loan Fixed Rate A-Notes | Farallon Portfolio Loan Floating Rate A-Note
| (5, 7, and 10 year maturities) | (2 year maturity)
Farallon Portfolio Loan Combination | |
$1,575,500,000 | --------------------------------------------------------------------------------------------
| $575.5 million*
| Farallon Portfolio Loan Fixed Rate B-Notes
| (5, 7, and 10 year maturities)
* The five-year, seven-year and ten-year fixed rate portions are further
divided into pari passu A and pari passu B Notes with 5, 7, and 10 year
terms as set forth above. Each fixed rate A Note has a corresponding B
Note. Each A Note will generally be senior to all the B Notes.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
24
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
THE BORROWERS. The borrower under the Farallon Portfolio Loan is made up of
forty (40) single member Delaware limited liability companies, each a single
purpose, bankruptcy remote entity 100% indirectly owned and controlled by
American Residential Communities JV LLC, a Delaware limited liability company
(the "Joint Venture"). The majority interest in the Joint Venture is indirectly
owned (i) by funds managed by Farallon Capital Management, LLC ("Farallon") and
(ii) by funds managed by Helix Funds LLC ("Helix Funds"). A non-consolidation
opinion was delivered in connection with the origination of the Farallon
Portfolio Loan.
Farallon is a global investment management company that manages discretionary
equity capital of more than $26 billion, largely from institutional investors
such as university endowments, foundations, and pension plans. Farallon was
founded in March 1986 by Thomas F. Steyer. Farallon invests in public and
private debt and equity securities, direct investments in private companies and
real estate. Farallon invests in real estate across all asset classes around
the world, including the United States, Europe, Latin America and India.
Farallon employs approximately 120 people in its headquarters in San Francisco,
California.
Farallon's joint venture partner is Helix Funds, a Chicago-based private real
estate investment management company, the management team of which collectively
has more than 40 years of experience in the manufactured home communities
business, including the acquisition of more than 75 communities across the
United States.
THE PROPERTIES. The Farallon Portfolio consists of 274 manufactured housing
communities located across 23 states. The Farallon Portfolio in the aggregate
contains approximately 57,165 homesites in communities ranging in size from 17
to 931 homesites. The Farallon Rental Housing Portfolio consists of
approximately 9,098 rental homes disbursed throughout the 274 manufactured
housing communities which make up the Farallon Portfolio. The Farallon Rental
Housing Portfolio is operated by one or more subsidiaries of the Joint Venture.
No appraisals were completed for assets in the Farallon Rental Housing
Portfolio, and such portfolio will be released from the collateral when the
Farallon Portfolio (excluding the Farallon Portfolio Rental Housing Portfolio)
achieves a Debt Service Coverage Ratio of 1.43x.
The owners of the Farallon Rental Housing Portfolio lease homesites from the
Borrowers pursuant to one or more leases, which leases provide for rent to be
payable for each leased homesite in the event the homesite (and the
manufactured home located on such homesite) is occupied by a lessee or other
user paying rent. Any such rents are to be no less than the greater of the
subrental rate for the homesite or market rates. After the closing date, the
owners of the Farallon Rental Housing Portfolio may add additional homes to the
Farallon Rental Housing Portfolio. After January 1, 2008, certain new homes
added to the Farallon Rental Housing Portfolio may be financed and encumbered
by liens related to such financing. After the release of the Farallon Rental
Housing Portfolio collateral (see below), the entire Farallon Rental Housing
Portfolio may be financed and encumbered by liens related to such financing.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
25
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER % OF AVERAGE AVERAGE
STATE PROPERTIES OF PADS TOTAL PADS UNDERWRITTEN NOI % OF NOI OCCUPANCY RENT/PAD
-----------------------------------------------------------------------------------------------------------------------
Texas 50 9,207 16.1% $ 24,368,410 15.3% 78.5 $311
Florida 19 5,971 10.4% $ 19,656,396 12.4% 92.6 $353
Kansas 29 5,113 8.9% $ 9,954,308 6.3% 73.4 $252
Georgia 16 4,970 8.7% $ 16,337,149 10.3% 86.5 $374
Colorado 18 3,938 6.9% $ 13,958,481 8.8% 78.9 $407
Utah 19 3,802 6.7% $ 14,407,611 9.1% 93.9 $360
Iowa 14 3,691 6.5% $ 8,256,871 5.2% 81.0 $301
Pennsylvania 21 2,575 4.5% $ 6,236,629 3.9% 91.1 $288
North Carolina 10 2,489 4.4% $ 6,222,048 3.9% 77.6 $324
Oklahoma 13 2,486 4.3% $ 5,284,087 3.3% 73.4 $239
New York 11 2,045 3.6% $ 5,413,492 3.4% 79.1 $424
Missouri 9 1,604 2.8% $ 4,344,480 2.7% 85.4 $304
Illinois 7 1,588 2.8% $ 3,344,240 2.1% 78.2 $292
Wyoming 13 1,577 2.8% $ 5,246,579 3.3% 93.5 $276
Indiana 5 1,209 2.1% $ 3,770,274 2.4% 86.4 $331
South Carolina 3 1,184 2.1% $ 2,962,976 1.9% 78.0 $299
Michigan 3 838 1.5% $ 1,997,361 1.3% 68.0 $384
New Mexico 3 753 1.3% $ 2,122,310 1.3% 82.3 $376
Tennessee 3 674 1.2% $ 1,231,710 0.8% 73.7 $302
North Dakota 2 458 0.8% $ 1,421,915 0.9% 93.0 $345
Arkansas 3 378 0.7% $ 1,027,258 0.6% 91.8 $274
Idaho 2 342 0.6% $ 629,889 0.4% 76.3 $238
Nebraska 1 273 0.5% $ 700,706 0.4% 82.8 $290
-----------------------------------------------------------------------------------------------------------------------
TOTAL/WTD. AVG. 274 57,165 100.0% $158,895,181 100.0% 82.6 $325
-----------------------------------------------------------------------------------------------------------------------
[MAP]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
26
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
COMPETITIVE CONDITIONS.(1) The Farallon Portfolio is subject to competitive
conditions. According to third-party appraisals, there are multiple competitive
properties in each of the assets' respective submarkets. The reported weighted
average market rents for the identified competitive set is $299.69 per month
with a range of $246.89 to $352.48 as compared to the subject portfolio of
$309.21 per month over the trailing twelve months. The reported weighted
average vacancy for the competitive set is 15.6% as compared to the subject
portfolio of 17.1% over the trailing twelve months.
LOCKBOX. The Farallon Portfolio Loan Combination is structured so that all
monies with respect to the Farallon Portfolio are deposited by the Borrowers or
property manager into a local collection account (other than security deposits
which are deposited into a separate security deposits account). Funds in the
local collection accounts are periodically swept into the lender controlled
central collection account from which payments of debt service and reserve
deposits are made.
ESCROWS.
--------------------------------------------------------------------------------
LOAN ESCROWS / RESERVES
TYPE: INITIAL MONTHLY
--------------------------------------------------------------------------------
Taxes $6,933,000 $1,218,340
Insurance $ 684,275 $ 0(1)
Capital Expenditures $2,238,600 $ 238,167
Deferred Maintenance $ 536,646 $ 0
Environmental $1,370,644 $ 0
--------------------------------------------------------------------------------
(1) Each month Borrower is required to deposit an amount into the insurance
escrow such that the amount therein equals or exceeds one half of the
insurance premiums over the current policy period (pro rated to 12
months).
DEFEASANCE. After the later of (i) the date that the principal balance of the
Farallon Portfolio Loan Floating Rate A Note has been paid in full and (ii) the
earlier of (a) the date that is 2 years after the final securitization of the
entire Farallon Portfolio Loan Combination (including all notes) and (b) August1, 2010 (the "First Open Defeasance Date"), the Farallon Portfolio Loan
Combination may be defeased with United States government obligations. After
the First Open Defeasance Date, the Borrowers may also obtain a release of one
or more individual properties from the lien of the mortgage in connection with
a partial defeasance subject to fulfillment of certain conditions, including
providing defeasance collateral in an amount equal to 125% of the then-current
allocated loan amount for the property(ies) being defeased and satisfaction of
the Debt Service Coverage Test. Each such partial defeasance shall be allocated
pro-rata across the Farallon Portfolio Loan Fixed Rate Notes.
PREPAYMENT. So long as the principal balance of the Farallon Portfolio Loan
Floating Rate A Note has been paid in full, but prior to the First Open
Defeasance Date, Borrower may prepay the Farallon Portfolio Loan in full
together with payment in full of the remaining Farallon Portfolio Loan Fixed
Rate Notes upon the payment of the greater of 1% of the prepaid amount or yield
maintenance determined in accordance with the loan agreement. On or after May1, 2012, the Borrower may prepay the five-year portion of the Farallon
Portfolio Loan Combination without any prepayment premium or yield maintenance.
On or after May 1, 2014, the Borrower may prepay the seven-year portion of the
Farallon Portfolio Loan Combination without any prepayment premium or yield
maintenance. On or after May 1, 2017, the Borrower may prepay the ten-year
portion of the Farallon Portfolio Loan Combination without any prepayment
premium or yield maintenance.
SUBSTITUTION PROVISIONS. The Borrower has the right on one or more occasions,
to obtain the release of one or more of the properties from the lien of the
mortgage up to an aggregate amount of 20% of the Farallon Portfolio Loan
Combination principal balance on the closing date by substituting one or more
manufactured housing community properties of like kind and quality acquired by
the applicable Borrower, subject, in each case, to the fulfillment of certain
conditions described in the loan documents including, without limitation,
satisfaction of the Debt Service Coverage Test and delivery of appraisals,
environmental reports, title policies, opinions, loan documents and rating
agency confirmation that any rating issued in connection with a securitization
of the Farallon Portfolio Loan Combination will not, as a result of the
proposed substitution, be downgraded from the then-current ratings thereof,
qualified or withdrawn.
PROPERTY RELEASES.
Release Upon Maturity. In connection with the repayment (or prepayment on or
after May 1, 2012 or May 1, 2014, as applicable) of the five-year and
seven-year notes that comprise the Farallon Portfolio Loan Combination, the
Borrower may obtain a release of certain manufactured home communities,
provided certain requirements are satisfied (including, without limitation,
satisfaction of the Debt Service Coverage Test) and the remaining manufactured
housing communities in the Farallon Portfolio have a geographical composition
and diversity characteristics no less favorable to lender, as determined by
Borrower in its reasonable good faith judgment, than prior to such release.
(1) Certain information was obtained from a third party appraisal. The
appraisal relies on many assumptions, and no representation is made as to
the accuracy of the assumptions underlying the appraisal.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
27
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
In connection with the prepayment in whole or in part of the Farallon Portfolio
Loan Floating Rate A Note, the Borrower may effectuate the following property
releases:
Capital Events. In connection with any (i) sale of a manufactured housing
community to a third party or an affiliate or (ii) any refinancing, provided
that Borrower transfers such manufactured home community to an affiliate
simultaneously with such refinance, Borrower may, provided certain requirements
are satisfied (including, without limitation, satisfaction of the Debt Service
Coverage Test and, if such event occurs on or prior to the 24th payment date, a
prepayment fee and/or spread maintenance, as applicable), apply the proceeds of
such sale or refinancing (in an amount equal to the greater of (x) the
then-current allocated loan amount of such manufactured home community and (y)
90% of the net proceeds received in connection with such sale or refinance
(which amount shall not exceed 125% of the then-current allocated loan amount
)) to prepay the Farallon Portfolio Loan Floating Rate A Note.
Held For Sale Events. In connection with any sale of certain "held-for-sale"
manufactured housing communities, Borrower may, provided certain requirements
are satisfied (including, without limitation, satisfaction of the Debt Service
Coverage Test and, if such event occurs on or prior to the 24th payment date, a
reduced prepayment fee equal to 0.15% of the amount prepaid), apply the
proceeds of such sale or refinancing (in an amount equal to the greater of (x)
the then-current allocated loan amount of such manufactured home community and
(y) 90% of the net proceeds received in connection with such sale or refinance
(which amount shall not exceed 125% of the then-current allocated loan amount
)) to prepay up to $160,000,000 of the Farallon Portfolio Loan Floating Rate A
Note.
OTHER RELEASES. In the event Borrower cannot comply with certain covenants
contained in the loan documents with respect to any one manufactured housing
community, Borrower may obtain a release of such individual manufactured
housing community in accordance with the release, substitution and/or partial
defeasance provisions described above.
FARALLON RENTAL HOUSING PORTFOLIO RELEASE PROVISIONS. The Farallon Rental
Housing Portfolio will be released from the collateral when the Farallon
Portfolio alone achieves a Debt Service Coverage Ratio of 1.43x.
ADDITIONAL DEBT. Not permitted. Certain affiliates of Borrower are permitted to
enter into a revolving credit facility secured by a non-controlling interest in
Borrower, not to exceed $15,000,000 during the first year of the loan and
$25,000,000 thereafter.
PROPERTY MANAGEMENT. ARC Management Services, LLC is the property manager for
all the Farallon Portfolio properties and the Farallon Rental Housing
Portfolio. The property manager is affiliated with the Borrowers.
GROUND LEASE. One manufactured housing community (Birchwood Farms, located in
Birch Run, Michigan) is owned in leasehold. The initial term of the ground
lease expires on April 12, 2099. Annual rent due under the ground lease is
$90,576 and increases on April 20, 2010 and every five years thereafter, by the
lesser of (a) 20% of the rent then in effect or (b) the cumulative CPI increase
over the prior five year period. Pursuant to an option agreement, Borrower may
purchase the related fee interest and such purchase is permitted under the loan
documents provided that Borrower delivers customary title endorsements,
opinions and amendments to the applicable mortgage in order to subject the
related fee interest to the lien of the mortgage.
As used herein "Debt Service Coverage Ratio" means, as of any date of
calculation with respect to the Farallon Portfolio, the quotient expressed to
two decimal places of the underwritten net cash flow of the Farallon Portfolio,
and not the Farallon Rental Housing Portfolio, divided by the aggregate Assumed
Loan Debt Service (rounded to the nearest hundredth).
As used herein "Assumed Loan Debt Service" means the annual debt service on the
Farallon Portfolio Loan Combination calculated (i) with respect to the Farallon
Portfolio Loan Fixed Rate Notes, using the computed debt service during the
prior 12-month period and assuming that the Farallon Portfolio Loan Fixed Rate
Notes had been outstanding during such period with an outstanding principal
balance equal to same at the time of calculation and (ii) with respect to the
Farallon Portfolio Loan Floating Rate A Note, using an assumed interest rate
equal to the then applicable interest rate cap strike rate (as of the closing
date, the strike rate is 5.75%, and during any Farallon Portfolio Loan Floating
Rate A Note extension term, shall be 6.0%, provided such strike rate may be
adjusted by lender such that the Debt Service Coverage Ratio during the
applicable extension term taking into account interest rate cap payments at the
adjusted strike rate is not less than 1.43x) plus 0.75% over the prior 12-month
period and assuming that the Farallon Portfolio Loan Floating Rate A Note had
been outstanding during such period with an outstanding principal balance equal
to same at the time of calculation.
As used herein, "Debt Service Coverage Test" means as of any date of
calculation with respect to a property release, substitution, partial
defeasance or other event, a test which shall be satisfied if the Debt Service
Coverage Ratio for the manufactured housing communities that remain in the
Farallon Portfolio (or with respect to a substitution, are collateral for the
Farallon Portfolio Loan Combination following such substitution) after such
property release, substitution, partial defeasance or other event, equals or
exceeds the greater of (i) 1.23x and (ii) the lesser of (A) the Debt Service
Coverage Ratio immediately prior to the applicable property release,
substitution, partial defeasance or other event and (B) 1.43x.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
28
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--------------------------------------------------------------------------------
[THIS PAGE INTENTIONALLY LEFT BLANK.]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
29
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
EXECUTIVE HILLS PORTFOLIO
[2 PHOTOS OF EXECUTIVE HILLS PORTFOLIO]
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
Number of Mortgaged Real Properties 9
Location (City/State) Kansas City, MO and Overland Park, KS
Property Type Office
Size (Square Feet) 951,754
Percentage Physical Occupancy as of April 30, 2007 and May 7,
2007 93.2%
Year Built Various
Year Renovated Various
Appraisal Value $140,000,000
# of Tenant Leases 37
Average Rent Per Square Foot $19.90
Underwritten Economic Occupancy 92.7%
Underwritten Revenues $18,348,910
Underwritten Total Expenses $6,944,622
Underwritten Net Operating Income (NOI) $11,404,288
Underwritten Net Cash Flow (NCF) $10,016,978
4/30/2007 (T-4 Annualized) $8,800,272
2006 NOI $6,975,513
2005 NOI $6,040,689
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
--------------------------------------------------------------------------------
Mortgage Loan Seller KeyBank
Loan Group 1
Origination Date June 13, 2007
Cut-off Date Principal Balance $99,900,000
Cut-off Date Loan Balance Per SF/Unit $105
Percentage of Initial Mortgage Pool Balance 4.1%
Number of Mortgage Loans 1
Type of Security (Fee/Leasehold) 8 Properties: Fee
1 Property: Fee/Leasehold
Mortgage Rate 5.7300%
Amortization Type Actual/360
IO Period (Months) 60
Original Term to Maturity/ARD (Months) 120
Original Amortization Term (Months) 360
Original Call Protection GRTRofYMor 1%(25),Defor
GRTRofYMor 1%(91),O(4)
Lockbox None
Cut-off Date LTV Ratio 71.4%
LTV Ratio at Maturity or ARD 66.5%
Underwritten DSCR on NOI 1.63x(1)
Underwritten DSCR on NCF 1.43x(2)
--------------------------------------------------------------------------------
(1) The Underwritten DSCR on NOI during the initial interest only period is
1.99x.
(2) The Underwritten DSCR on NCF during the initial interest only period is
1.75x.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
30
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
[MAP OF EXECUTIVE HILLS PORTFOLIO]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
31
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
THE LOAN. The mortgage loan (the "Executive Hills Portfolio Loan") is evidenced
by a single promissory note and is secured by first priority security
instruments encumbering nine office buildings located in the Greater Kansas
City Metropolitan area, on both sides of the Kansas and Missouri state-line
(the "Executive Hills Portfolio Property"). The subject loan has a 5-year
interest only period with a 30-year amortization schedule beginning in year 6
of the 10 year term. The Executive Hills Portfolio Loan represents
approximately 4.1% of the initial mortgage pool balance and approximately 7.1%
of the initial loan group 1 balance.
The Executive Hills Portfolio Loan was originated on June 13, 2007 and has a
principal balance as of the cut off date of $99,900,000. The Executive Hills
Portfolio Loan has a scheduled maturity date of July 1, 2017. The Executive
Hills Portfolio Loan may be prepaid in whole, but not in part, at any time
during its term with payment of prepayment consideration in the amount equal to
the greater of one percent (1%) of the then outstanding principal balance or
the yield maintenance amount. Commencing two years and fifteen days after the
creation of the series 2007-8 securitization trust, the Executive Hills
Portfolio Borrower has the option of prepaying the Executive Hills Portfolio
Loan in whole as described in the preceding sentence, or defeasing the entire
Executive Hills Portfolio Loan, subject to standard defeasance requirements.
Voluntary prepayment of the Executive Hills Portfolio loan is permitted on or
after April 1, 2017 without penalty.
The Executive Hills Portfolio Loan is the first priority "A Note" of an A/B
structured loan transaction. The Executive Hills Portfolio Property also
secures a subordinate B Note ("Executive Hills Portfolio B Note") with an
original principal balance of $11,100,000 that is not included in the Series
2007-8 securitization trust. The security instruments that secure the Executive
Hills Portfolio Loan also secure the Executive Hills Portfolio B Note. See
"Description of the Mortgage Pool -- The Loan Combinations" in the offering
prospectus.
THE PROPERTIES.
------------------------------------------------------------------------------------------------
EXECUTIVE HILLS PORTFOLIO
% OF
YEAR BUILT/ PORTFOLIO
PROPERTY LOCATION RENOVATED SQ. FT. SQ. FT.
------------------------------------------------------------------------------------------------
8140 Ward Parkway Kansas City, MO 1987 209,328 22.0%
903 E 104th -- Building C Kansas City, MO 1989 175,481 18.4%
10450 Holmes -- Building D Kansas City, MO 1988 117,017 12.3%
6363 College Boulevard Overland Park, KS 1985/1988 131,857 13.9%
7301 College Boulevard -- Building
37 Overland Park, KS 1985/1988 81,635 8.6%
4900-4950 College Boulevard --
Building 49-49a Overland Park, KS 1976/1978 77,095 8.1%
10410 Holmes Road -- Building A Kansas City, MO 1984 50,423 5.3%
5000 College Boulevard -- Building
54 Overland Park, KS 1988 61,504 6.5%
10950 El Monte Overland Park, KS 1974 47,414 5.0%
------------------------------------------------------------------------------------------------
TOTAL/WTD. AVG. 951,754 100.0%
------------------------------------------------------------------------------------------------
CUT-OFF DATE ALLOCATED
UNDERWRITTEN ALLOCATED APPRAISAL
PROPERTY OCCUPANCY NCF BALANCE VALUE
-----------------------------------------------------------------------------------------------
8140 Ward Parkway 95.1% $ 2,584,172 $25,689,000 $ 35,994,000
903 E 104th -- Building C 97.6% $ 2,138,949 $20,551,000 $ 28,798,000
10450 Holmes -- Building D 100.0% $ 1,360,651 $13,558,000 $ 18,998,000
6363 College Boulevard 96.9% $ 1,058,361 $12,488,000 $ 17,500,000
7301 College Boulevard -- Building
37 89.2% $ 848,289 $ 7,635,000 $ 10,696,000
4900-4950 College Boulevard --
Building 49-49a 98.8% $ 706,932 $ 6,351,000 $ 8,904,000
10410 Holmes Road -- Building A 73.4% $ 427,150 $ 5,352,000 $ 7,504,000
5000 College Boulevard -- Building
54 100.0% $ 594,277 $ 4,781,000 $ 6,706,000
10950 El Monte 51.7% $ 298,198 $ 3,495,000 $ 4,900,000
-----------------------------------------------------------------------------------------------
TOTAL/WTD. AVG. 93.2% $10,016,978 $99,900,000 $140,000,000
-----------------------------------------------------------------------------------------------
The Executive Hills Portfolio Loan is secured by nine office properties with a
total of 951,754 rentable square feet. Eight of the buildings were developed by
the sponsorship throughout the 1980's and have been owned and operated by the
sponsorship since completion. 6363 College Boulevard was developed by the
sponsorship, subsequently sold, and recently repurchased. The Executive Hills
Portfolio Property has a total of 37 tenants with the largest tenant occupying
20.9% of the net rentable area. The Executive Hills Portfolio Property houses
several nationally known tenants and locally based firms, and is situated in
close proximity to Interstate-435, the outer loop which provides access to all
parts of the Kansas City MSA.
8140 Ward Parkway is a five-story, Class A office building, located in Kansas
City, MO. The subject is currently 95.1% occupied by NovaStar Financial, Inc.,
a specialty finance company with business in the origination, purchase,
securitization, sale, investment in, and service of residential nonconforming
loans and mortgage-backed securities. The subject property is their national
headquarters. The subject is well located within the Ward Parkway Office
Submarket.
903 E 104th -- Building C is a nine-story, Class A office building, located in
Kansas City, MO. The building is 97.6% occupied by twelve tenants, including
IndyMac Bank and the University of Phoenix. IndyMac Bank is the 7th largest
savings and loan and the 2nd largest independent mortgage lender in the United
States. The University of Phoenix was founded in 1976 and specializes in making
higher education highly accessible for working students. It is the largest
private university in North America, with over 190 locations.
10450 Holmes Road -- Building D is a six-story, Class A office building,
located in Kansas City, MO. The subject is 100% occupied by a single tenant,
Burns & McDonnell, as their corporate headquarters. Burns & McDonnell is an
engineering firm founded in 1898 in Kansas City. Originally specializing
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
32
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
in designing utility plants, it has since expanded to other large scale
projects such as airports, roadways, steel mills and other civil work projects.
Burns & McDonnell was recently ranked 35th of the top U.S. engineering
companies by Engineering News-Record.
6363 College Boulevard is a Class B office building, located in Overland Park,
KS. The building has a main six-story building and an attached three-story
annex building. The property is 96.9% occupied by seven tenants. The largest
tenant of the property is South & Associates who have provided professional and
comprehensive foreclosure, litigation, loss mitigation and collection services
to loan servicers throughout the United States since 1973.
7301 College Boulevard -- Building 37 is a two-story, Class B office building,
located in Overland Park, KS. The property is currently leased to three
tenants. Two new leases totaling 52,110 sq. ft. have been executed by Baker
University and The Mutual Fund Store at rental rates of $20.00/sf and
$22.42/sf, respectively. Both are scheduled to take occupancy October 1, 2007.
4900-4950 College Boulevard -- Building 49-49a is a Class B office building
with a one-story section and three-story section, located in Overland Park, KS.
The property is 98.7% occupied by two tenants, Computer Technology Corp. and
YRC Enterprise Services. YRC Enterprise Services is a subsidiary of YRC
Worldwide, Inc., a Fortune 500 company and one of the largest transportation
service providers in the world.
10410 Holmes Road -- Building A is a four-story, Class B office building,
located in Kansas City, MO. The building is currently 73.4% occupied by seven
tenants including U.S. Bank and Universal Underwriters Group. U.S. Bancorp, the
parent company of U.S. Bank, has $223 billion in assets and is the 6th largest
commercial bank in the United States. Universal Underwriters employs
approximately 1,800 people in 28 regional offices. The 83 year old company is
the nation's largest underwriter of automobile, truck and motorcycle dealers,
as well as the automotive aftermarket industry. In 2007, Universal Underwriters
Group will go through the process of changing brand names to Zurich
Underwriters.
5000 College Boulevard -- Building 54 is a four-story, Class B office building,
located in Overland Park, KS. The building is 100% occupied by three tenants.
R.H. Donnelley is the largest tenant, with 84% of the space. R.H. Donnelley is
the nation's third largest Yellow Pages publisher using print and online
capabilities. The company has more than 4,000 employees operating in 28 states.
10950 El Monte Building is a single-story, Class B office building, located in
Overland Park, KS. The property is currently 51.7% occupied by a single tenant,
North American Savings Bank F.S.B.("NASB"). NASB, was founded in 1927, has over
$1 billion in assets and more than 400 employees. NASB offers a diverse
portfolio of financial services ranging from banking and investments to
consumer and commercial loans from 12 locations throughout the Kansas City
Metropolitan area.
The following table presents certain information relating to the major tenants
of the Executive Hills Portfolio Property:
-----------------------------------------------------------------------------------------
TENANT INFORMATION
CREDIT RATINGS SQUARE % OF BASE RENT LEASE
TENANT NAME (FITCH/S&P) FEET GLA PSF EXPIRATION
-----------------------------------------------------------------------------------------
NovaStar Financial, Inc. N/A 199,048 20.9% $ 21.49 1/31/2011
Burns & McDonnell N/A 117,017 12.3% $ 19.93 2/29/2012
R.H. Donnelley CCC+/BB- 51,531 5.4% $ 19.04 10/31/2009
-----------------------------------------------------------------------------------------
TOTAL/WTD. AVG. 367,596 38.6% $ 20.65
-----------------------------------------------------------------------------------------
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
33
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LEASE ROLLOVER SCHEDULE
NUMBER SQUARE % OF % OF BASE
OF LEASES FEET GLA BASE RENT RENT
YEAR EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING
--------------------------------------------------------------------------------
MTM 1 5,982 0.6% $ 104,685 0.6%
2007 2 3,091 0.3 61,835 0.4
2008 2 11,654 1.2 310,380 1.8
2009 8 116,714 12.3 2,373,174 13.4
2010 4 71,323 7.5 1,440,960 8.2
2011 8 280,358 29.5 5,875,681 33.3
2012 4 171,666 18.0 3,212,205 18.2
2013 5 70,916 7.5 1,409,792 8.0
2014 3 49,222 5.2 933,407 5.3
2015 1 40,184 4.2 753,450 4.3
2016 2 66,017 6.9 1,179,392 6.7
2017 -- -- 0.0 0 0.0
Thereafter -- -- 0.0 0 0.0
Vacancy NAP 64,627 6.8 0 0.0
--------------------------------------------------------------------------------
TOTAL 40 951,754 100.0% $17,654,960 100.0%
--------------------------------------------------------------------------------
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE CUMULATIVE CUMULATIVE %
SQUARE FEET % OF GLA BASE RENT OF BASE RENT
YEAR EXPIRING EXPIRING EXPIRING EXPIRING
----------------------------------------------------------------------------
MTM 5,982 0.6% $ 104,685 0.6%
2007 9,073 1.0 166,520 0.9
2008 20,727 2.2 476,900 2.7
2009 137,441 14.4 2,850,074 16.1
2010 208,764 21.9 4,291,034 24.3
2011 489,122 51.4 10,166,715 57.6
2012 660,788 69.4 13,378,919 75.8
2013 731,704 76.9 14,788,711 83.8
2014 780,926 82.1 15,722,118 89.1
2015 821,110 86.3 16,475,568 93.3
2016 887,127 93.2 17,654,960 100.0
2017 887,127 93.2 17,654,960 100.0
Thereafter 887,127 93.2 17,654,960 100.0
Vacancy 951,754 100.0 17,634,960 100.0
----------------------------------------------------------------------------
TOTAL 951,754 100.0% $17,654,960 100.0%
----------------------------------------------------------------------------
THE MARKET.(1)
COLLEGE BOULEVARD SUBMARKET -- BUILDING 37, BUILDING 49/49A, BUILDING 54, 6363
COLLEGE BOULEVARD, & EL MONTE
The College Boulevard Submarket has a total of approximately 8.4 million square
feet of office space. CoStar(2) market statistics for the current period
identify 80 properties (approximately 7.0 million square feet) as comparable to
the subject, defined as existing Class B office properties from 40,000-210,000
square feet with typical floor plates of 15,000 square feet. The current
occupancy for the comparables is 88% with gross rents ranging from $14.91-$30.00
per square foot with an average rental rate of $18.40.
The College Boulevard office corridor is a relatively mature, in-fill area that
has been fully developed, with most properties constructed in the 1980's. This
neighborhood can be defined as the area surrounding the I-435/Metcalf Ave
intersection in South Johnson County, KS, approximately 12 miles southwest of
the CBD. The College Boulevard / Metcalf Avenue intersection has a 4-way
traffic count of approximately 150,000 vehicles/day. Four of the subject
buildings (Building 49/49a, Building 54, 6363 College Boulevard, & El Monte)
are located southeast of the I-435/Metcalf Ave intersection, with Building 37
being located just west of the I-435/Metcalf Ave intersection. The subject
buildings are situated with easy access to I-435, which has a full interchange
at the intersections along I-435 at Metcalf Ave. From I-435, the entire Kansas
City MSA can be accessed.
SOUTH KANSAS CITY, MO SUBMARKET -- BUILDING A, C, & D
The South Kansas City, MO Submarket has a total of 2.56 million square feet of
office space. CoStar(2) market statistics for the current period identify 9
properties(3) totaling 831,679 square feet as comparable to the subject, defined
as existing Class B properties from 50,000-210,000 square feet with typical
floor plates of 10,000 square feet. The current occupancy for the comparables
is 92% with gross rents ranging from $18.00-$21.33 per square foot with an
average rental rate of $18.33
The general neighborhood represents a fully developed area of Kansas City,
which is improved with a mixture of office, retail and residential properties
with good local and regional access. This neighborhood can be defined as the
area surrounding the I-435/Holmes Road intersection in South Kansas City, Mo,
approximately 10 miles south of the CBD. The traffic count at the intersection
is 113,259 cars/day. The subject buildings are situated immediately south of
I-435. Buildings A, and C, are east of Holmes Road and Building D is
immediately west of Holmes Road. I-435 is the outer loop circling the Kansas
City MSA, and provides access from most parts of the MSA. Holmes Road is a
major north-south thoroughfare running through the area. The subject buildings
are situated with easy access to I-435, which has a full interchange at the
intersections along I-435 at Holmes Road. The improvements are part of the well
established Executive Hills East Business Park. The office park contains
approximately 890,000 SF and is 87.5% occupied. The buildings were built in the
1980's and 1990's.
(1) Certain information in this section was obtained from a third party
appraisal. The appraisal relies on many assumptions, and no representation
is made as to the accuracy of those assumptions.
(2) Submarket occupancies and rental rates were obtained form CoStar.
(3) The comparables were amended to exclude the former Marion Labs Facility,
as the property is a three-building office/campus property.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
34
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--------------------------------------------------------------------------------
WARD PARKWAY SUBMARKET -- 8140 WARD PARKWAY
The Ward Parkway Submarket has a total of 3.07 million square feet of office
space. CoStar2 market statistics for the current period identify 4 properties
totaling 477,189 square feet as comparable to the subject, defined as existing
Class B properties from 50,000-250,000 square feet with typical floor plates of
25,000 square feet. The current occupancy for the comparables is 93% with gross
rents ranging from $16.75-$19.50 with an average rental rate of $17.69.
Approximately 8 miles south of the CBD, the subject is located at the
intersection of W 81st Street and Ward Parkway, as part of a small cluster of
well-established multi-tenant and mid and high-rise Class A and Class B office
buildings. The buildings were built in the 1980's and 1990's and all exhibit
over 90% occupancy. Traffic count in the neighborhood is approximately 8,000
cars/day. Ward Parkway runs parallel to State Line Road which runs north/south
along the Kansas/Missouri state line. The subject is 3.5 miles north of the
State Line Road / I-435 intersection, and is 3.7 miles northwest of the subject
buildings located in the Executive Hills East Business Park.
The improvements in the surrounding area include 3 other multi-tenant and mid
and high-rise Class A and Class B office buildings which are owned by the
sponsorship of and managed by Executive Hills Management, but are not part of
the collateral for this transaction. The cluster of buildings exhibits average
occupancy of 92%. The immediate neighborhood is substantially surrounded by
single-family residential development, with Ward Parkway Center located to the
south. Ward Parkway Center is a 735,000 enclosed shopping mall anchored by AMC,
Dillard's and Target. Built in 1959, the mall underwent a major renovation
project in 1999/2000. In excess of $50 million was spent renovating the
shopping center. It is owned and managed by Developers Diversified Realty (DDR)
and is currently 86% occupied.
-----------------------------------------------------------------------------------------------------------------------------------
5 MILE RADIUS
IN-PLACE NUMBER 5 MILE RADIUS MEDIAN HOUSEHOLD
PROPERTY NAME SECONDARY SUBMARKET RENT PSF OF TENANTS POPULATION INCOME
-----------------------------------------------------------------------------------------------------------------------------------
8140 Ward Parkway Ward Parkway $ 21.49 1 185,607 $57,446
903 E 104th -- Building C South Kansas City, MO $ 20.05 12 185,607 $57,446
10450 Holmes -- Building D South Kansas City, MO $ 19.93 1 185,607 $57,446
6363 College Boulevard College Blvd. $ 17.09 7 227,001 $71,733
7301 College Boulevard -- Building 37 College Blvd. $ 20.98 3 227,001 $71,733
4900-4950 College Boulevard -- Building 49-49a College Blvd. $ 18.74 2 227,001 $71,733
10410 Holmes Road -- Building A South Kansas City, MO $ 23.31 7 185,607 $57,446
5000 College Boulevard -- Building 54 College Blvd. $ 19.17 3 227,001 $71,733
10950 El Monte College Blvd. $ 17.56 1 227,001 $71,733
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTD. AVG. $ 19.81 37 208,604 $65,383
-----------------------------------------------------------------------------------------------------------------------------------
THE BORROWER. The Executive Hills Portfolio Borrower is EHD Holdings, LLC, a
bankruptcy remote single purpose entity that is a Delaware single member
limited liability company. The Executive Hills Portfolio Borrower is controlled
by the sole member, EHMD Properties, L.L.C. Seventy-nine percent of the
ownership interest in EHMD Properties, L.L.C. is held by the two sponsors and
indemnitors, Larry J. Bridges (55%) and Sherman W. Dreiseszun (24%). The
remaining ownership is made up of individuals each owning less than a 10%
interest. The sponsors and indeminitors are experienced real estate developers
and owners. Collectively they, in some cases with their affiliates and
partners, own and control over 4 million square feet of Class A & B office
property in the Kansas City area. Mr. Bridges owns Executive Hills Management,
Inc company and Mr. Dreiseszun is an investor in real estate assets, area
financial institutions, and other business interests in the local community.
Since its formation in 1979 Executive Hills has developed over 6 million square
feet of office space in the Kansas City Market. The buildings range in size
from 20,000 - 800,000 SF.
PROPERTY MANAGEMENT. The property manager for the Executive Hills Portfolio
Loan is Executive Hills Management, Inc. ("Executive Hills"), which is owned by
the sponsor, Larry J. Bridges. Executive Hills is the largest office building
developer in the Kansas City area. It confines its activities to the Kansas
City area in order for Mr. Bridges to maintain "hands on" management of all of
its projects, being responsible for leasing and all related activities. The
management portfolio contains 4 million SF of office space with 2.8 million SF
located in suburban submarkets and 1.2 million SF located in the Kansas City
CBD. The average occupancy of the total management portfolio is 76.5%, however
occupancy in the suburban markets is 95%.
LOCKBOX. The Executive Hills Portfolio Loan documents do not require a lockbox.
ADDITIONAL DEBT. As noted above, The Executive Hills Portfolio Properties also
secure the Executive Hills Portfolio B Note.
Additionally, with the prior written consent of the holder of the Executive
Hills Portfolio Loan, the Executive Hills Portfolio Borrower may obtain
additional subordinate debt secured by the Executive Hills Portfolio Property,
or any of the individual Executive Hills Portfolio Properties, provided certain
requirements are satisfied, including (i) if the additional subordinate debt
will be secured by the Executive Hills Portfolio Properties in its entirety,
the aggregate amount of the Executive Hills Portfolio Loan, the Executive Hills
Portfolio B Note debt and the additional subordinate debt shall
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
35
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
not cause the loan to value to exceed 80%, (ii) if the subordinate debt will be
secured by one of the individual Executive Hills Portfolio Properties (but not
the Executive Hills Portfolio in its entirety), the additional subordinate debt
shall not exceed the amount that would cause the loan to value for such
individual Executive Hills Portfolio Property (taking into account the
allocated loan amount for such individual property) to exceed 80% of the
appraised value of such individual Executive Hills Portfolio Property, (iii)
the available cash flow from the Executive Hills Portfolio Property shall be
sufficient to produce a debt service coverage ratio of not less than 1.20x
taking into account the combined annual debt service for the Executive Hills
Portfolio Loan, the Executive Hills Portfolio B Note debt and the additional
subordinate debt, (iv) delivery of rating agency confirmation and (v) execution
of an acceptable intercreditor agreement.
RELEASE PROVISIONS. Individual Executive Hills Portfolio Properties may be
released from the lien of the related security instrument provided certain
requirements are satisfied, including (i) a partial prepayment of the principal
amount equal to 110% of the allocated loan amount of the individual Executive
Hills Portfolio Property to be released, (ii) payment of the applicable yield
maintenance amount with respect to such partial prepayment amount, (iii) after
giving effect to such partial release, the loan to value for the remaining
Executive Hills Portfolio Property shall be no more than 80%, (iv) after giving
effect to such partial release, the debt service coverage ratio for the
remaining Executive Hills Portfolio Property shall be not less than 1.20x and
(v) delivery of rating agency confirmation.
LEASEHOLD INTEREST. With respect to a portion of the individual Executive Hills
Portfolio Property that is known as Building D, the Executive Hills Portfolio
Borrower holds a leasehold interest with the City of Kansas City, Missouri as
the ground lessor. This leasehold portion of this individual Executive Hills
Portfolio Property is used for excess surface parking and access to a loading
dock. The building and parking structure situated on this individual Executive
Hills Portfolio Property is on the portion owned by the Executive Hills
Portfolio Borrower as a fee simple interest. A non-recourse carve out was added
to the Executive Hills Portfolio Loan documents for Executive Hills Portfolio
Borrower's failure, if the ground lease is terminated prior to the full
repayment of the Executive Hills Portfolio Loan, to reconfigure the fee
premises of this individual Executive Hills Portfolio Property so (i) there is
full access to the existing loading dock and (ii) such fee premises complies
with all applicable laws and leases as they pertain to available parking on
such fee premises.
LETTER OF CREDIT. The Executive Hills Portfolio Borrower delivered a $4,200,000
irrevocable letter of credit to be held as additional security for the
Executive Hills Portfolio Loan for a period of not less than twenty-four months
and to be returned to Executive Hills Portfolio Borrower if specified
requirements relating to one of the tenants of the Executive Hills Portfolio
Property, NovaStar Financial, Inc., are timely satisfied.
ESCROWS. The following escrow/reserve accounts have been established with
respect to the Executive Hills Portfolio Loan:
--------------------------------------------------------------------------------
ESCROWS / RESERVES
TYPE: INITIAL MONTHLY
--------------------------------------------------------------------------------
Taxes $710,424 $ 169,951
Insurance(1) $ 0 Springing
Environmental Reserve(2) $ 2,400 $ 0
Rollover Reserve(3) $ 64,166 $ 64,166
--------------------------------------------------------------------------------
(1) The requirement of an escrow for an insurance premium is waived provided
blanket insurance is maintained.
(2) Funds in the Environmental Reserve may be released to the Executive Hills
Portfolio Borrower upon lender's receipt of a satisfactory O&M Plan for
two of the individual properties.
(3) Monthly deposits to the Rollover Reserve continue until a $2,600,000 cap
is achieved. If the balance falls below the cap, monthly deposits shall
recommence.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
36
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
[THIS PAGE INTENTIONALLY LEFT BLANK.]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
37
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
PENINSULA BEVERLY HILLS
[2 PHOTOS PENINSULA BEVERLY HILLS]
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
Number of Mortgaged Real Properties 1
Location (City/State) Beverly Hills, CA
Property Type Hospitality
Size (Rooms) 194
Percentage Physical Occupancy as of May 31, 2007 83.5%
Year Built 1991
Loan Purpose Refinance
Appraisal Value $221,500,000
Underwritten Economic Occupancy 84.0%
Underwritten Revenues $56,241,314
Underwritten Total Expenses $41,574,978
Underwritten Net Operating Income (NOI) $14,666,336
Underwritten Net Cash Flow (NCF) $12,697,890
5/31/2007 (TTM) NOI $13,869,094
2006 NOI $13,408,262
2005 NOI $12,291,400
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION(1)
--------------------------------------------------------------------------------
Mortgage Loan Seller CRF
Loan Group 1
Origination Date July 31, 2007
Cut-off Date Principal Balance $79,300,000(2)
Cut-off Date Loan Balance Per Room $408,763
Percentage of Initial Mortgage Pool Balance 3.3%
Number of Mortgage Loans 1
Type of Security (Fee/Leasehold) Fee
Mortgage Rate 6.2093%
Amortization Type Interest Only
IO Period (Months) 84
Original Term to Maturity/ARD (Months) 84
Original Amortization Term (Months) NAP
Original Call Protection LO(24),Def(11),LESSofDeforGRT
RofYMor1%(45),O(4)
Lockbox Hard
Cut-off Date LTV Ratio 35.8%(3)
LTV Ratio at Maturity or ARD 35.8%(3)
Underwritten DSCR on NOI 2.93x(3)
Underwritten DSCR on NCF 2.54x(3)
Shadow Rating (F/S) BBB-/BBB-(4)
--------------------------------------------------------------------------------
(1) Cut-off Date Principal Balance and other information presented herein,
unless otherwise specified, do not include the principal balance of the
related subordinate non-trust B-note loan.
(2) Represents a portion of a loan combination that is comprised of the
mortgage loan and a $60,700,000 subordinate non-trust B-note loan (the
"Peninsula Beverly Hills B-Note").
(3) Including the Peninsula Beverly Hills B-Note, the Cut-Off Date LTV Ratio
is 63.2%, the LTV Ratio at Maturity is 63.2%, the Underwritten DSCR on NOI
is 1.62x and the Underwritten DSCR on NCF is 1.40x.
(4) It has been confirmed by both Fitch and S&P, in accordance with their
respective methodologies, that the Peninsula Beverly Hills Loan has credit
characteristics consistent with investment-grade rated obligations.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
38
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
[MAP OF PENINSULA BEVERLY HILLS]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
39
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
THE LOAN. The mortgage loan (the "Peninsula Beverly Hills Loan") is evidenced
by a single promissory note secured by a first priority deed of trust
encumbering a full service hotel located in Beverly Hills, California (the
"Peninsula Beverly Hills Property"). The Peninsula Beverly Hills Loan
represents approximately 3.3% of the initial mortgage pool balance and
approximately 5.7% of the initial loan group 1 balance.
The Peninsula Beverly Hills Loan was originated on July 31, 2007, and has a
principal balance as of the cut-off date of $79,300,000. The Peninsula Beverly
Hills Loan has a remaining term of 84 months and a scheduled maturity date of
August 8, 2014. The Peninsula Beverly Hills Loan permits defeasance of the
entire loan with United States Treasury obligations or other non-callable
government securities beginning two years after the creation of the
securitization trust. In addition, the Peninsula Beverly Hills Loan may be
prepaid in whole on any payment date occurring from and after after the thirty
sixth payment date upon payment of yield maintenance premium; provided that if
the total cost to defease the Peninsula Beverly Hills Loan would be less than
the cost of prepayment with yield maintenance, the Peninsula Beverly Hills
Borrower will be required to defease instead of prepay. Voluntary prepayment of
the Peninsula Beverly Hills Loan is permitted on or after May 8, 2014 without
penalty.
The Peninsula Beverly Hills Property also secures a subordinate B-note (the
"Peninsula Beverly Hills B-Note", and together with the Peninsula Beverly Hills
Loan, the "Peninsula Beverly Hills Loan Combination") with an original
principal balance of $60,700,000. The Peninsula Beverly Hills B-Note is
co-terminous with the Peninsula Beverly Hills Loan. The respective rights of
the holder of the Peninsula Beverly Hills Loan and the Peninsula Beverly Hills
B-Note will be governed by a co-lender agreement, as described in the
accompanying free writing prospectus under "Description of the MortgagePool--The Loan Combinations." The holder of the Peninsula Beverly Hills B-Note
will have the right, under certain circumstances, to replace the special
servicer for this mortgage loan and the right to direct and advise the
applicable master and special servicer on various servicing matters, in each
case, at certain times, as described in the accompanying free writing
prospectus under "Description of the Mortgage Pool--The Loan Combinations."THE PROPERTY. The Peninsula Beverly Hills Loan is secured by the fee interest
in a four- and five-story, luxury hotel located on 2.182 acres at the southeast
corner of Little Santa Monica Boulevard and Lasky Drive in the heart of Beverly
Hills, California, within walking distance of world renowned shopping on Rodeo
Drive and the business community of Century City. The Peninsula Beverly Hills
Property was built in 1991 and currently includes 194 guest rooms. The
Peninsula Beverly Hills Property consists of three buildings; the main building
is "Z" shaped and houses 178-guestrooms while two, detached garden-style villa
buildings house a total of 16 guestrooms.
The Peninsula Beverly Hills Property's overall design is best characterized as
a first-class, upscale hotel with an Italianesque villa design motif. Amenities
include the Belvedere Restaurant (the only Five-Diamond restaurant in Southern
California), a 105-seat fine-dining restaurant that offers patio seating as
well as a 20-seat private dining area; the area known as the "Living Room" with
seating for 35 people, where the Peninsula's "afternoon tea," evening cocktails
and appetizers are served, accompanied by daily live music; the Roof Garden,
which seats 50 people and is situated by the 60-foot rooftop swimming pool and
ten private pool-side cabanas; The Club Bar, an intimate bar lounge serving a
full menu; a fitness center; a gift and sundry shop; a small shop featuring
designer men's clothing; and approximately 2,600 square feet of function space.
Additionally, the Peninsula Beverly Hills Property has three smaller meeting
rooms, which may be converted to guest rooms (one is scheduled to be converted
by the end of 2008). In addition, a two-level subterranean parking facility
provides 320 parking spaces.
The Peninsula Beverly Hills Property, a AAA Five-Diamond and Mobil Five-Star
hotel for the 13th consecutive year, has recently been awarded: Conde Nast
Traveler: Gold List 2007 (highest ranking hotel in Los Angeles); Travel +
Leisure January 2007: 500 World's Best Hotels (No. 2 in Los Angeles); Travel +
Leisure: Best Business Hotels November 2006; Institutional Investor -- 2006
List of Top 100 Hotels in the World; and Andrew Harper's Hideaway Report (USA):
Ranked No. 1 (and gold medalist for 3 of the last 5 years) in the list of Top
20 U.S. City Hotels -- World's Best Hotels, Resorts & Hideaways.
THE MARKET(1). The Peninsula Beverly Hills Property is located at 9882 Santa
Monica Boulevard on the edge of the area known as the "Golden Triangle" in
Beverly Hills, California. The Golden Triangle is defined by Santa Monica
Boulevard to the north, Wilshire Boulevard to the south and Rexford Drive to
the east and encompasses Rodeo Drive. The city attracts nearly 12,205 visitors
a day and is the number one non-paid attraction in Southern California.
According to the Beverly Hills Chamber of Commerce, the average Beverly Hills
guest spends approximately $407 per day in the city.
______________________
(1) Certain information in this section was obtained from a third party
appraisal. The appraisal relies on many assumptions, and no representation
is made as to the accuracy of the assumptions underlying the appraisal.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
40
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
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Market demand, as measured by occupied rooms, has experienced positive growth
over the last five years, and the weighted average occupancy rate in the market
has climbed from 61.8% in 2002 to 75.1% in 2006 (slightly off the 2005 high of
75.7%). ADR for the competitive market has increased significantly since 2002,
growing at a compound annual average growth rate of 8.3% and above inflationary
growth levels of 6.8%, 13.2%, and 12.2% in 2004, 2005, and 2006, respectively.
RevPAR for the competitive market has increased at a remarkable compound annual
average growth of 13.7% over the past five years.
The Peninsula Beverly Hills Property has maintained an average occupancy of
81.5% over the past ten years, with the lowest occupancy of 77.6% occurring in
2001. The weighted average occupancy rate from 2002 through 2006 is 83.5%. ADR
has experienced significant growth with a compound average annual growth of
10.6%. The Peninsula Beverly Hills Property experienced double digit ADR growth
of 14.7%, 12.6%, and 10.7% in 2004, 2005, and 2006, respectively. As a result
of the ADR growth, the Peninsula Beverly Hills Property has demonstrated strong
RevPAR growth at 11.6% per year.
For the year-to-date period through May 31, 2007, occupied rooms is 0.2%
greater and ADR is up 8.3% over statistics for the same period last year,
resulting in RevPAR increasing 8.5% (or $43) over that achieved through May
2006.
-------------------------------------------------------------------------------------------------------
THE PENINSULA BEVERLY HILLS HOTEL -- KEY METRICS
2002 2003 2004 2005 2006 TTM 5/07 U/W
-------------------------------------------------------------------------------------------------------
Occupancy 80.5% 83.6% 85.5% 84.5% 83.4% 83.5% 84.0%
ADR $ 388.24 $ 406.17 $ 465.91 $ 524.53 $ 580.64 $ 600.54 $ 620.00
RevPAR $ 312.53 $ 339.56 $ 398.35 $ 443.23 $ 484.25 $ 501.35 $ 520.80
-------------------------------------------------------------------------------------------------------
Against its competitive set, the Peninsula Beverly Hills hotel has enjoyed
significant occupancy, ADR and RevPAR levels, continually outperforming the
market. The Peninsula's penetration rates are outstanding with trailing 12
months ended May 31, 2005, trailing 12 months ended May 31, 2006 and trailing
12 months period ended May 31, 2007 RevPAR penetration at 137%, 136%, and 132%,
respectively.
--------------------------------------------------------------------------------
THE PENINSULA BEVERLY HILLS HOTEL -- MARKET PENETRATIONS
TTM 5/31/05 TTM 5/31/06 TTM 5/31/07 YTD 5/31/07
--------------------------------------------------------------------------------
Occupancy 112% 112% 111% 110%
ADR 122% 122% 118% 121%
RevPAR 137% 136% 132% 133%
--------------------------------------------------------------------------------
THE BORROWER. The borrower is Belvedere Hotel Partnership (the "Peninsula
Beverly Hills Borrower"), a bankruptcy remote, single purpose entity that is a
California partnership. The Peninsula Beverly Hills Borrower is owned by
Peninsula Beverly Hills Holdings, LLC (20%), 707, LLC (30%) and Belvedere
America LLC (50%). The managing joint venturer of the Peninsula Beverly Hills
Borrower is 707, LLC, a bankruptcy remote, single purpose entity that is a
Delaware limited liability company.
The sponsor of the Peninsula Beverly Hills Loan, Probity International
Corporation ("Probity"), is 100% owned by Financial RSZ Corporation, Inc.
According to Probity, they have extensive experience in acquiring, developing,
financing, managing and leasing office, retail, industrial, hotel and
residential properties throughout the United States, with an emphasis in
Southern California. Probity is based in Beverly Hills California. Since 1980,
Probity has developed over one million square feet of prime location properties
in the United States, including 660 Madison Avenue, a Class-A mixed use
building including 250,000 square feet of office space on top of Barney's New
York, located in Manhattan; The Wilshire, a 27-story luxury condominium project
serving as a landmark on Wilshire Boulevard's famed "Golden Mile" in Los
Angeles; Four Thirty North Rodeo Drive, an architecturally acclaimed collection
of retail shops in Beverly Hills leased to internationally recognized tenants;
The Graciela Burbank, an upscale boutique hotel in Burbank's Media District;
and Brentwood Financial Plaza, a Class-A office building located in the highly
desirable Brentwood, California neighborhood.
The non-recourse carve-out guarantors for the Peninsula Beverly Hills Loan are
Robert Zarnegin, President & CEO of Probity, 707, LLC and Belvedere America,
LLC. Mr. Zarnegin has more than 25 years of extensive real estate investment
and development experience, and is responsible for all of the long-term
strategic planning and decision-making of Probity, as well as its overall
operating and business activities.
PROPERTY MANAGEMENT. The Peninsula Beverly Hills Property is managed by
Peninsula Beverly Hills Hotel Management Inc., an affiliate of the Peninsula
Beverly Hills Borrower, an entity ultimately owned by The Hong Kong and
Shanghai Hotels, Limited, a publicly traded Hong Kong company,
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
41
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
since its inception in 1991. The Hong Kong and Shanghai Hotels group owns
and/or operates a total of seven Peninsula hotels worldwide (three of the
hotels are located in the U.S.) that are top or amongst the leaders in room
rate and RevPAR in their respective cities.
LOCKBOX. The mortgage loan requires a hard lockbox and springing cash
management. The loan documents require the Peninsula Beverly Hills Borrower to
direct its credit card clearing banks and all space tenants to deposit all
rents, receivables and other revenues directly to the lockbox account. Prior to
a Cash Management Period, all rents are swept to an account designated by the
Peninsula Beverly Hills Borrower. During the occurrence of a Cash Management
Period, all rents are swept into an account designated by the lender. A "Cash
Management Period" means any period commencing upon the occurrence of an event
of default under the loan documents and ending when such event of default no
longer exists.
ESCROWS/RESERVES. The following escrow/reserve accounts have been established
with respect to the Peninsula Beverly Hills Loan.
--------------------------------------------------------------------------------
ESCROWS / RESERVES
TYPE: INITIAL MONTHLY
--------------------------------------------------------------------------------
Taxes $456,455 $ 65,208
Insurance $265,608 $ 20,808
Capital Expenditure / FF&E $ 0 $176,628
--------------------------------------------------------------------------------
PERMITTED MEZZANINE DEBT. The loan documents permit the direct or indirect
parents of the Peninsula Beverly Hills Borrower to incur mezzanine debt
commencing on the 24th month following the securitization of the Peninsula
Beverly Hills Loan, provided, among other things: (a) the combined outstanding
loan amount and mezzanine loan amount does not, in the aggregate, exceed 80% of
the fair market value of the Peninsula Beverly Hills Property, (b) the actual
aggregate debt service coverage ratio is at least 1.15x (based on debt service
payable under the Peninsula Beverly Hills Loan and such mezzanine loan,
underwritten net cash flow and the actual constant in effect), (c) the assumed
aggregate debt service coverage ratio is at least of 1.00x (based upon a
calculation of underwritten net cash flow of the Peninsula Beverly Hills
Property and an assumed debt service constant equal to 9.25%), (d) the
mezzanine lender has executed an intercreditor agreement acceptable to the
lender, and (e) the Peninsula Beverly Hills Borrower has obtained a letter from
the rating agency confirming that the incurrence of the mezzanine debt will not
result in any qualification, withdrawal or downgrading of the certificates.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
42
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
[THIS PAGE INTENTIONALLY LEFT BLANK.]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
43
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
U-HAUL SAC 12 & 13
[2 PHOTOS OF U-HAUL SAC 12 & 13]
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
Number of Mortgaged Real Properties 17
Location (City/State) Various
Property Type Self Storage
Size (Square Feet) 711,292
Percentage Physical Occupancy as of June 20, 2007 90.9%
Year Built Various
Year Renovated Various
Appraisal Value $111,930,000
Average Rent Per Square Foot $12.33
Underwritten Economic Occupancy 89.2%
Underwritten Revenues $10,928,372
Underwritten Total Expenses $3,082,419
Underwritten Net Operating Income (NOI) $7,845,953
Underwritten Net Cash Flow (NCF) $7,775,041
March 2007 NOI $9,223,762
March 2006 NOI $8,750,638
March 2005 NOI $8,094,254
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
--------------------------------------------------------------------------------
Mortgage Loan Seller MLML
Loan Group 1
Origination Date June 22, 2007
Cut-off Date Principal Balance $74,934,080
Cut-off Date Loan Balance Per SF/Unit $105
Percentage of Initial Mortgage Pool Balance 3.1%
Number of Mortgage Loans 1
Type of Security (Fee/Leasehold) Fee
Mortgage Rate 5.7740%
Amortization Type ARD
IO Period (Months) 0
Original Term to Maturity/ARD (Months) 120
Original Amortization Term (Months) 360
Original Call Protection LO(25),Def(88),O(7)
Lockbox Soft
Cut-off Date LTV Ratio 66.9%
LTV Ratio at Maturity or ARD 56.5%
Underwritten DSCR on NOI 1.49x
Underwritten DSCR on NCF 1.48x
--------------------------------------------------------------------------------
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
44
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
[5 MAPS U-HAUL SAC 12 & 13]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
45
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
THE LOAN. The mortgage loan (the "U-Haul Portfolio Loan") is evidenced by two
promissory notes ("12 & 13 SAC") secured by first mortgages, deeds of trust
and/or similar security instruments encumbering the fee interest in 17 U-Haul
self-storage properties (the "U-Haul Portfolio Properties"). The table below
provides specific information about the U-Haul Portfolio Properties. The U-Haul
Portfolio Loan represents approximately 3.1% of the initial mortgage pool
balance and approximately 5.3% of the initial loan group 1 balance.
The U-Haul Portfolio Loan was originated on June 22, 2007, and has a principal
balance as of the cut-off date of $74,934,080. The 12 SAC and 13 SAC notes have
remaining terms of 119 months to their anticipated repayment dates of July 8,2017. The U-Haul Portfolio Loan has a final maturity date of July 8, 2037. Both
notes may be prepaid on or after January 8, 2017 without penalty, and permit
defeasance with United States government obligations beginning two years after
the creation of the series 2007-8 securitization trust.
THE PROPERTIES. The U-Haul Portfolio Properties consist of 17 U-Haul self
storage facilities totaling 8,459 self storage units and 711,292 net rentable
square feet located in nine states across the U.S. The largest state
concentrations are Texas with three properties totaling 1,596 units (19% of
total units), and California with 3 properties totaling 1,540 units (18% of
total units). The properties average 498 storage units per location (ranging
from 323 to 742 units) with an average unit size of 84 rentable square feet.
Typical construction consists of either metal or concrete block framing block
on concrete slab foundations, with pitched, corrugated metal roofs.
Exterior-access storage units generally have roll-up aluminum or metal doors.
Interior-access storage units, some of which are climate-controlled, are either
located within the main retail/office building, or in separate buildings built
or converted specifically for interior-access storage. Approximately 33.5% of
the U-Haul Portfolio Properties units are climate-controlled. Some U-Haul
Portfolio Properties also have an apartment for an on-site manager. As of June20, 2007, the U-Haul Portfolio Properties were 90.9% occupied.
The U-Haul Portfolio Properties produce income from business lines other than
self storage rental. These business lines include U-Haul truck / trailer
rentals, trailer hitch installation, propane sales, and sales of moving and
storage products including boxes, tape, and padlocks. For purposes of
determining the net cash flow and debt service coverage ratio ("DSCR") for the
U-Haul Portfolio Loan, income and expenses associated with the U-Haul truck /
trailer rentals was excluded. Other ancillary non-storage income was
underwritten to approximately 20% of effective gross income.
------------------------------------------------------------------------------------------------------------------------------------
YEAR BUILT/ APPRAISED UNDERWRITTEN
PROPERTY NAME CITY/STATE TOTAL SF YEAR RENOVATED OCCUPANCY (%) VALUE ($) NCF ($)
------------------------------------------------------------------------------------------------------------------------------------
U-Haul Center Hayden Road Scottsdale / AZ 47,720 1997 99.5 $ 13,580,000 $ 812,844
U-Haul Ctr Broward Fort Lauderdale / FL 38,475 1976/1995 97.1 9,900,000 719,086
U-Haul Ctr Covina Covina / CA 43,550 1996 95.4 8,700,000 691,582
U-Haul Center Old Natl Hwy College Park / GA 64,547 1980 93.8 7,400,000 575,658
U-Haul Center Of Vacaville Vacaville / CA 38,300 1996 89.6 6,600,000 542,434
U-Haul Of Hyannis Hyannis / MA 41,271 1964 85.1 7,600,000 488,426
U-Haul Ct Of Tigard Tigard / OR 37,143 1980 97.0 7,000,000 468,832
U-Haul Ctr Of N Richland Hills North Richland Hills / TX 54,537 1997 89.9 6,000,000 435,520
U-Haul Ctr Tulane New Orleans / LA 32,374 1908/2006 85.4 5,600,000 527,071
U-Haul Gause Blvd Slidell / LA 45,878 1979 90.0 6,400,000 399,521
U-Haul Center Goldenrod Orlando / FL 35,755 1988 88.8 5,300,000 345,100
U-Haul Storage Worcester Worcester / MA 31,891 1964 94.2 5,100,000 338,141
U-Haul Mechanicsburg Mechanicsburg / PA 44,950 1980 94.0 4,600,000 340,213
U-Haul Center Grissom Road San Antonio / TX 41,300 1986/1994 84.1 5,200,000 305,655
U-Haul Lambert Road La Habra / CA 28,112 1980 85.9 4,600,000 322,181
U-Haul Ctr Savannah Savannah / GA 31,189 1981 99.5 4,200,000 293,056
U-Haul Center I-10 West Houston / TX 54,300 1990 77.8 4,150,000 169,720
------------------------------------------------------------------------------------------------------------------------------------
TOTAL/WTD. AVG. 711,292 90.9% $111,930,000 $7,775,041
------------------------------------------------------------------------------------------------------------------------------------
THE MARKETS(1). Within their respective markets, the U-Haul Portfolio Properties
are typically located along major roadways with excellent visibility and
access. Immediate surrounding uses are generally retail or retail/light
industrial mix. The majority of the tenant base consists of residential users
who need additional storage space for personal items. Other common users of
self-storage space are contractors, attorneys who store documents,
pharmaceutical sales representatives who need climate controlled storage for
their inventories, and local retailers with excess inventory. The typical
storage tenant stays for approximately 4-6 months, with some tenants staying
for a number of years.
THE BORROWERS. The borrowers, Twelve SAC Self-Storage Corporation and Thirteen
SAC Self-Storage Corporation (collectively the "U-Haul Portfolio Borrower") are
single-purpose bankruptcy remote Nevada corporations wholly owned by SAC
Holding Corporation. SAC Holding Corporation is owned by Blackwater
Investments, Inc ("Blackwater"), which is 100% owned by Mark V. Shoen. Through
its wholly-owned subsidiaries, Blackwater currently owns over 300 self-storage
properties encompassing approximately 13.0 million net rentable square feet in
the United States and Canada. SAC Holding Corporation and Blackwater are
indemnitors on the U-Haul Portfolio Loan.
____________________
(1) Certain information was obtained from third party appraisals. The
appraisals rely on many assumptions and no representation is made as to
the accuracy of those assumptions.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
46
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
Mark Shoen is the son of Leonard S. Shoen, the founder of U-Haul. Mark Shoen is
the second largest shareholder of AMERCO, Inc. (NasdaqNM: UHAL / NYSE: AOPRA),
with approximately 3.53 million shares of common stock or 16.80% of the total
outstanding. Mark Shoen's sibling, Edward J. Shoen, is the acting
CEO/Chairman/President of AMERCO, which serves as the holding company for three
other wholly-owned subsidiaries (Republic Western Insurance, Oxford Life
Insurance and Amerco Real Estate Company) in addition to U-Haul International,
Inc. AMERCO operates the most recognized moving and storage brand -- U-Haul --
in North America. The company operates approximately 1,450
retail/self-storage/moving centers, and an additional 13,950 locations are
independently operated by dealers. In 2004, AMERCO emerged from Chapter 11 with
100% of the pre-petition equity fully-restored. S&P has assigned an issuer
rating of BB/Stable Outlook to the company (Fitch does not presently rate the
company).
PROPERTY MANAGEMENT. The U-Haul Portfolio Properties are managed by nine
separate entities, each a wholly-owned subsidiary of U-Haul International, Inc.
LOCKBOX. Two cash management accounts were established at closing in the
respective names of the U-Haul Portfolio Borrower and the lender wherein all
income from the properties is deposited. Prior to a trigger event, the U-Haul
Portfolio Borrower will have access to funds in the cash management accounts.
After a trigger event, funds in the cash management accounts will be swept to a
central account maintained and controlled by the lender. A trigger event will
occur upon (i) an event of default, (ii) if the U-Haul Portfolio Loan has not
been paid in full on or before the anticipated repayment date, or (iii) if the
debt service coverage ratio falls below 1.15x on an actual trailing 12-month
basis.
RELEASE PROVISIONS. Individual U-Haul Portfolio Properties may be released from
the lien of the related mortgage upon defeasance of a principal amount equal to
125% of the allocated loan amount provided that, among other things (i) no
default exists, (ii) the pro-forma aggregate DSCR for the U-Haul Portfolio Loan
immediately after such release shall be greater than the greater of (a) the
aggregate DSCR immediately prior to such release and (b) 1.35x, and (iii) the
LTV with respect to the remaining properties shall be no greater than the
lesser of (a) 71% or (b) the LTV with respect to the properties immediately
prior to the proposed date of such release.
PROPERTY SUBSTITUTION. Beginning two years after the creation of the ML-CFC
series 2007-8 securitization trust, the related borrower may obtain a release
of the lien of certain individual U-Haul Portfolio Properties up to one (1)
time during the term of the loan by substituting therefore another property of
like use, kind and quality acquired by the related borrower or its affiliate,
provided that, any such released properties in the aggregate during the term of
the loan, comprise no greater than thirty percent (30%) of the original
principal balance of the loan, and provided that, among other things, (i) no
default exists, (ii) the pro-forma aggregate DSCR for the U-Haul Portfolio Loan
immediately after such property substitution shall be greater than the greater
of (a) the aggregate DSCR immediately prior to such property substitution and
(b) 1.35x, (iii) the DSCR for the 12 months immediately prior to the
substitution with respect to the substitute property shall be equal or greater
than the DSCR for the 12 calendar months immediately preceding the closing date
with respect to the release property, (iv) receipt of rating agency
confirmation, and (v) lender shall have received a current appraisal of the
substitute property prepared within one hundred eighty (180) days prior to the
release and substitution (a) showing an appraised value equal to or greater
than the appraised value of the substitution release property as of the closing
date, and (b) which supports an aggregate loan-to-value ratio with respect to
the cross-collateralized properties remaining subject to the lien of the
cross-collateralized mortgages after the substitution not greater than the
lesser of (A) 71% and (B) the aggregate loan-to-value ratio with respect to the
cross-collateralized properties remaining subject to the lien of the
cross-collateralized mortgages immediately prior to the date of the proposed
substitution.
ESCROWS. The following escrow/reserve accounts have been established with
respect to the U-Haul Portfolio Loan:
--------------------------------------------------------------------------------
ESCROWS / RESERVES
TYPE: INITIAL MONTHLY
--------------------------------------------------------------------------------
Taxes $ 511,000 $ 0
Insurance $ 38,804 $ 0
Environmental Reserve $1,005,300 $ 0
Capital Expenditures $ 72,110 $ 0
Replacement Reserve $ 438,400 $ 0
--------------------------------------------------------------------------------
PERMITTED MEZZANINE DEBT: None permitted.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
47
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
TOWERS AT UNIVERSITY TOWN CENTER
[2 PHOTOS OF TOWERS AT UNIVERSITY TOWN CENTER]
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
Number of Mortgaged Real Properties 1
Location (City/State) Hyattsville, MD
Property Type Student Multifamily
Size (Beds) 910
Percentage Physical Occupancy as of May 31, 2007 98.4%
Year Built 2006
Year Renovated NAP
Appraisal Value $79,000,000
Average Rent Per Bed $737
Underwritten Economic Occupancy 93.5%
Underwritten Revenues $8,310,388
Underwritten Total Expenses $3,607,576
Underwritten Net Operating Income (NOI) $4,702,812
Underwritten Net Cash Flow (NCF) $4,617,412
5/31/2007 (T-5 Annualized) NOI $4,530,193
2006 NOI $2,157,925
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
--------------------------------------------------------------------------------
Mortgage Loan Seller KeyBank
Loan Group 2
Origination Date April 30, 2007
Cut-off Date Principal Balance $56,835,903
Cut-off Date Loan Balance Per Bed $62,457
Percentage of Initial Mortgage Pool Balance 2.3%
Number of Mortgage Loans 1
Type of Security (Fee/Leasehold) Fee
Mortgage Rate 5.6700%
Amortization Type Balloon
IO Period (Months) 0
Original Term to Maturity/ARD (Months) 120
Original Amortization Term (Months) 360
Call Protection LO(27),Def(87),O(6)
Lockbox None
Cut-off Date LTV Ratio 71.9%
LTV Ratio at Maturity or ARD 60.6%
Underwritten DSCR on NOI 1.19x
Underwritten DSCR on NCF 1.17x
--------------------------------------------------------------------------------
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
48
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
[MAP OF TOWERS AT UNIVERSITY TOWN CENTER]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
49
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
THE LOAN. The $57,000,000 loan (the "Towers at University Town Center Loan") is
evidenced by a single promissory note, and due to an indemnity deed of trust
structure, a guaranty, which is secured by an Indemnity Deed of Trust
encumbering a 244-unit student housing complex with 910 beds (the "Towers at
University Town Center Property"). The Towers at University Town Center Loan
represents approximately 2.3% of the initial mortgage pool balance and
approximately 5.5% of the initial loan group 2 balance.
The Towers at University Town Center Loan was originated on April 30, 2007, and
has a principal balance as of the cut-off date of $56,835,903. The Towers at
University Town Center Loan has a scheduled maturity date of May 1, 2017. The
Towers at University Town Center Loan permits defeasance of the entire loan
with United States Treasury obligations or other non-callable government
securities beginning on the earlier to occur of (i) May 1, 2010 or (ii) two
years and fifteen days after the creation of the series 2007-8 securitization
trust. Voluntary prepayment of the Towers at University Town Center Loan is
permitted during the last 180 days of the term without penalty.
THE PROPERTY(1). The Towers at University Town Center Loan is secured by a fee
interest in a 16-story 244-unit student housing building that has four levels
of underground parking and occupies 1.43 acres. The subject units are fully
furnished, and each bed has a private bath. The Towers at University Town
Center Property features an on-site administrative office as well as a
furnished clubhouse featuring plasma TVs, pool tables, tanning beds, a fitness
center and a rooftop pool. High speed internet is provided within each unit and
wi-fi access is available in the common areas.
The following table presents certain information with respect to the unit mix:
----------------------------------------------------------------------------------------------------------------------------
AVERAGE BED AVERAGE MONTHLY AVERAGE MONTHLY
UNIT TYPE NO. OF BEDS SQUARE FEET NET RENTABLE SF % OF TOTAL BEDS IN-PLACE RENT/BED MARKET RENT/BED
----------------------------------------------------------------------------------------------------------------------------
2BR/2BA 60 383 22,950 6.6% $ 809 $ 837
2BR/2.5BA 4 658 2,630 0.4% $ 930 $ 977
3BR/2.5BA 6 644 3,864 0.7% $ 895 $ 940
4BR/4BA 840 320 268,800 92.3% $ 730 $ 754
----------------------------------------------------------------------------------------------------------------------------
Total/Wtd. Avg. 910 328 298,244 100% $ 738 $ 762
----------------------------------------------------------------------------------------------------------------------------
THE MARKET(1). The property is located in Hyattsville, Prince George's County,
Maryland in the Washington-Arlington-Alexandria MSA. Hyattsville is located
approximately 5 miles northeast of Washington D.C. Adjacent communities near
the subject include University Park and College Park to the east and northeast,
Adelphi to the north, and Langley Park to the west. More than 20 colleges,
universities, and secondary education institutions are located within a 10-mile
radius of the property.
The property is home to students from the following schools: University of
Maryland located 1.5 miles north, Columbia Union College located 2.5 miles
northwest, Catholic University of America located 3.5 miles southwest, Trinity
College located 4 miles southwest, Howard University located 4.5 miles
southwest, George Washington University located 7 miles southwest, Georgetown
University located 7.5 miles southwest, Prince George's Community College
located 8.5 miles southeast, and American University located 9 miles southwest.
The property is located in the Hyattsville multifamily market as determined by
REIS, Inc, and in the College Park Student Housing submarket as determined by
JPI Student Housing. The Hyattsville multifamily market contains 31 properties
and 11,104 units. 92% of the properties in the market were completed before
1970, and none have been completed since 1989. The average occupancy as of
year-end 2006 was 97.3%. The JPI College Park Student Housing submarket
contains 28 properties and 14,464 units. 71% of the properties in the market
were completed before 1980, and 7 properties with 2,607 units have been
completed since 1998. The average occupancy as of year-end 2006 was 96.0%. The
properties that were completed after 1998 reported 96.7% occupancy. The
appraisal utilized a 97% market occupancy for the subject.
The University of Maryland has approximately 24,500 undergraduate students and
9,500 graduate students with a stable enrollment that is projected to grow
approximately 0.8% annually. Approximately 4,000 new freshmen are admitted
annually and 90% want to live in dorms on campus. The University has an
insufficient housing supply, and 1,006 students are currently on the on-campus
waiting list for the 2007-2008 academic year. The Board of Regents turned down
a request for funding by the University to build additional on-campus housing,
driving up demand for off-campus housing. The property was essentially 100%
leased for the first year following construction. Pre-leasing activity has been
strong for the 2007-2008 school year, and rents are being quoted at levels
slightly higher than the in-place rents.
The subject building is part of the 56-acre mixed use office, retail,
residential, and parking project known as University Town Center that was
developed by the sponsor over the last forty five years. The project contains
four office buildings totaling more than 900,000 square feet. All office
buildings have been renovated or completed within the last 10 years. Remaining
phases of development over the next two years will include a 14-screen movie
theater, a 56,180-square foot Safeway, 1,000,000 square feet of new office
space with an underground parking garage, 135 residential condominium units,
and 250,000 square feet of retail shops. Construction on the 112-unit and
22-unit condominium developments immediately east of the subject has begun and
completion is scheduled for late 2007. The Safeway is expected to be completed
on a vacant parcel located southeast of the subject in 2009.
_________________
(1) Certain information is from the third party appraisal. The appraisal
relies upon many assumptions, and no representation is made as to the
accuracy of those assumptions.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
50
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
THE BORROWER. UTC Student Housing Holding, LLC, a Delaware limited liability
company and bankruptcy remote special purpose entity (the "Towers at University
Town Center Borrower") is the sole member of UTC Housing I, LLC, a Delaware
limited liability company and bankruptcy remote special purpose entity (the
"IDOT Grantor"), which holds the fee interest in the Towers at University Town
Center Property and was formed exclusively for the purpose of acquiring,
constructing improvements on, and operating the Towers at University Town
Center Property. The IDOT Grantor mortgaged its fee interest in the Towers at
University Town Center Property as security for its guaranty of the Towers at
University Town Center Loan. The Towers at University Town Center Borrower is
owned by UTC Holdings, LLC, a Delaware limited liability company. The sponsor
is Hershel W. Blumberg, founder and majority owner of Prince George's Metro
Center, Inc., which acts as indemnitor for the subject loan. Since 1948, Mr.
Blumberg has been involved in a large number of varied real estate ventures,
including the design, construction and management of a 2.5 million square foot
multi-use project, University Town Center. Mr. Blumberg has also participated
in the acquisition, engineering, zoning, development and sale to home builders
of over 10,000 single family detached lots, single family attached lots,
apartments, a commercial office building, as well as the conversion of
apartment buildings to condominiums.
PROPERTY MANAGEMENT. The Towers at University Town Center Property is managed
by JPI Management Services, Inc., a division of JPI Residential REIT ("JPI").
JPI was founded in 1976 as Jefferson Properties and specializes in development,
acquisition, management, leasing, and research for multifamily properties. JPI,
being one of the largest private multifamily real estate companies in the U.S.,
has acquired, developed, managed or leased more than 260 conventional
properties totaling 60,000 units, and 52 student living properties totaling
30,000 beds. JPI currently owns or manages 16 student housing properties with
over 8,000 beds.
LOCKBOX. The Towers at University Town Center Loan is not subject to a lockbox
or cash management arrangement.
ESCROWS. The following escrow/reserve accounts have been established with
respect to the Towers at University Town Center Loan:
--------------------------------------------------------------------------------
ESCROWS / RESERVES
TYPE: INITIAL MONTHLY
--------------------------------------------------------------------------------
Insurance $ 0 Springing
Capital Expenditures $ 0 $ 7,583(2)
Certificate of Occupancy Holdback $ 25,000(3) $ 0
--------------------------------------------------------------------------------
____________________
(1) Insurance escrow is suspended so long as blanket insurance is maintained
that satisfies the insurance provisions and other standard conditions are
satisfied.
(2) The monthly deposits commence May 1, 2009 and continue until a cap of
$273,000 is deposited. At any time that the balance is less than such cap
amount, monthly deposits shall re-commence.
(3) The Certificate of Occupancy Holdback funds will be held until the Towers
at University Town Center borrower delivers to lender a certificate of
occupancy for the Towers at University Town Center Property not later than
September 1, 2007. If the certificate has not been obtained by this date,
the funds shall be held by lender as additional collateral for the term of
the loan.
PERMITTED MEZZANINE DEBT. Future mezzanine debt is permitted so long as (i) the
maximum loan to value ratio at the time of incurrence of such debt, when such
debt is added to the balance of the Towers at University Town Center Loan, does
not exceed 90%, (ii) the debt service coverage ratio does not fall below 1.05x,
based upon the debt service required to pay the Towers at University Town
Center Loan and the debt service required under the mezzanine loan, and (iii)
certain other standard requirements are satisfied, including without limitation
receipt of acceptable mezzanine loan documents, satisfaction of rating agency
criteria, execution of an acceptable intercreditor agreement, and upon request,
execution of a lockbox agreement.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
51
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
GEORGIA-ALABAMA RETAIL PORTFOLIO
[2 PHOTOS OF GEORGIA-ALABAMA RETAIL PORTFOLIO]
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
Number of Mortgaged Real Properties 62
Location (State) AL(2)/GA(60)
Property Type Convenience Store
Size (Square Feet) 239,753
Percentage Physical Occupancy as of November
13, 2006 95.2%
Year Built Various(1)
Year Renovated NAP
Appraisal Value $100,650,000(1)
# of Tenants 103
Underwritten Economic Occupancy 95.0%
Underwritten Revenues $9,688,084
Underwritten Total Expenses $1,636,637
Underwritten Net Operating Income (NOI) $8,051,447
Underwritten Net Cash Flow (NCF) $7,890,418
2006 NOI $8,574,373
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION(2)
--------------------------------------------------------------------------------
Mortgage Loan Seller CRF
Loan Group 1
Origination Date May 9, 2007
Cut-off Date Principal Balance $39,926,997(2)
Percentage of Initial Mortgage Pool Balance 1.6%
Number of Mortgage Loans 1
Type of Security (Fee/Leasehold) Fee
Mortgage Rate 6.7700%
Amortization Type Balloon
IO Period (Months) 0
Original Term to Maturity/ARD (Months) 120
Original Amortization Term (Months) 336
Original Call Protection LO(26),Def(90),O(4)
Lockbox None at Closing, Springing Hard
Cut-off Date LTV Ratio 79.3%(3)
LTV Ratio at Maturity or ARD 66.9%(3)
Underwritten DSCR on NOI 1.26x(3)
Underwritten DSCR on NCF 1.24x(3)
--------------------------------------------------------------------------------
(1) For a list of each property including year built and appraised value for
each, see "The Properties," below. Appraised value shown here is based on
an aggregate appraised value.
(2) The mortgage loan is a part of a loan combination (with a combined
original principal balance of $80,000,000). The loan combination consists
of the trust mortgage asset (which consists of an A-note with an original
principal balance of $33,000,000 and a B-note with an original principal
balance of $7,000,000), an A-note non-trust loan with an original
principal balance of $33,000,000 that is an asset in ML-CFC Commercial
Mortgage Trust 2007-7 and a B-note non-trust loan with an original
principal balance of $7,000,000. Only the trust mortgage asset is included
in the trust fund.
(3) The calculations of LTV ratio and DSCR include the trust mortgage asset,
the principal balance of the A-note non-trust loan and the principal
balance of the B-note non-trust loan.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
52
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
[MAP OF GEORGIA-ALABAMA RETAIL PORTFOLIO]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
53
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
THE LOAN. The mortgage loan (the "Georgia-Alabama Retail Portfolio Loan") is
evidenced by a single promissory note secured by a first mortgage encumbering a
62-property, cross-collateralized convenience store portfolio situated in the
southeastern United States with 60 properties located in Georgia and 2
properties located in Dothan, Alabama (the "Georgia-Alabama Retail Portfolio
Properties"). The Georgia-Alabama Portfolio Loan represents approximately 1.6%
of the initial mortgage pool balance and approximately 2.8% of the initial loan
group 1 balance.
The Georgia-Alabama Retail Portfolio Loan was originated on May 9, 2007, and
has a principal balance as of the cut-off date of $39,926,997. The
Georgia-Alabama Retail Portfolio Loan has a remaining term of 118 months and a
scheduled maturity date of June 8, 2017. The Georgia-Alabama Retail Portfolio
Loan permits defeasance of the entire loan (or partial defeasance as described
below under "Release Provisions") with United States Treasury obligations or
other non-callable government securities beginning two years after the creation
of the securitization trust. Voluntary prepayment of the Georgia-Alabama Retail
Portfolio Loan is permitted on or after March 8, 2017, without penalty.
The Georgia-Alabama Retail Portfolio Loan is part of a loan combination (with a
combined principal balance of $80,000,000). The loan combination consists of
(i) the Georgia-Alabama Retail Portfolio Loan (which consists of a $33,000,000
A-note (the "Georgia-Alabama Trust A-Note") and a $7,000,000 B-note (the
"Georgia-Alabama Trust B-Note")), (ii) a $33,000,000 A-note non-trust loan (the
"A-Note Non-Trust Loan") that is an asset in ML-CFC Commercial Mortgage Trust
2007-7 and is pari passu with the Georgia-Alabama Retail Portfolio Trust A-Note
and (iii) a $7,000,000 B-note non-trust loan (the "B-Note Non-Trust Loan,"
together with the Georgia-Alabama B-Note Loan, the "B-Note Loans") that is
subordinate to the Georgia-Alabama Trust A-Note and the A-Note Non-Trust Loan
(together, the "A-Note Loans") and is pari passu with the Georgia-Alabama Trust
B-Note. The B-Note Loans are co-terminus with the A-Note Loans. The respective
rights of the holders of the Georgia-Alabama Retail Portfolio Loan, the A-Note
Non-Trust Loan and the B-Note Non-Trust Loan will be governed by co-lender
agreements, as described in the accompanying free writing prospectus under
"Description of the Mortgage Pool--The Loan Combinations." The holders of the
B-Note Loans will have the right, under certain circumstances, to replace the
special servicer for this mortgage loan and the right to direct and advise the
applicable master and special servicer on various servicing matters, in each
case, at certain times, as described in the accompanying free writing
prospectus under "Description of the Mortgage Pool--The Loan Combinations." The
Georgia-Alabama Retail Portfolio Loan will be serviced pursuant to the pooling
and servicing agreement governing the ML-CFC 2007-7 Commercial Mortgage Trust,
Commercial Mortgage Pass-Through Certificates, Series 2007-7 securitization.
THE PROPERTIES. The Georgia-Alabama Retail Portfolio Loan is secured by a fee
interest in a 62-property, cross-collateralized convenience store portfolio
situated in the southeastern United States with 60 properties located in
Georgia and 2 properties located in Dothan, Alabama. The Georgia-Alabama Retail
Portfolio Borrower leases each Georgia-Alabama Retail Portfolio Property
(generally comprised of a convenience store and a gas station) to an
independent third party operator. A significant portion of the gas station and
convenience stores have lease terms of at least 10 years. Each Georgia-Alabama
Retail Portfolio Property has a retail gas station operating under one of the
following brand-name franchise agreements: Exxon (22 stores), Shell (10
stores), Mobil (8 stores), Texaco (7 stores), Chevron (6 stores), Hop In (4
stores), Citgo (3 stores) and BP (2 stores). In addition, at 24 of the
Georgia-Alabama Retail Portfolio Properties, the Georgia-Alabama Retail
Portfolio Borrower leases space to additional retail tenants, including
Domino's Pizza, Pizza Hut, Subway, dry cleaners and nail salons. For a
discussion of risks related to the Georgia-Alabama Retail Portfolio Loan, see
"Risk Factors--Risks Related to the Mortgage Loans--Risks Related to Gas
Stations and Related Convenience Stores" and "--Lending on Income-ProducingReal Properties Entails Environmental Risk" in the accompanying prospectus
supplement.
The portfolio is currently 95.2% occupied by 103 tenants. Each property is
independently operated by a third party operator. No tenant makes up more than
2.46% of the total gross income.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
54
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
GEORGIA-ALABAMA RETAIL PORTFOLIO PROPERTIES
YEAR
PROPERTY CITY STATE BUILT RENT
-------------------------------------------------------------------------------------------
Annistown Center Snellville GA 2004 $ 176,400
Arnold Mill Center Woodstock GA 2003 159,000
Atlanta Road Center Marietta GA 2003 212,400
Big A Center Douglasville GA 2002 141,960
Bouldercrest & 285 Atlanta GA 2003 171,000
Burnt Hickory Center Douglasville GA 2003 171,426
Crystal Creek Center Douglasville GA 2003 132,000
Elbert Center Elberton GA 2004 168,000
Excell In 03 Kennesaw GA 1989 123,600
Excell In 04 Decatur GA 1989 120,000
Excell In 05 College Park GA 1996 150,000
Excell In 07 Atlanta GA 1986 136,988
Excell In 08 Atlanta GA 1986 81,000
Excell In 09 Atlanta GA 1982 112,000
Excell In 10 Marietta GA 1986 77,250
Excell In 11 Atlanta GA 1988 238,200
Excell In 12 Atlanta GA 1985 120,000
Excell In 13 Atlanta GA 1968 85,488
Excell In 14 Atlanta GA 1985 170,149
Excell In 15 Marietta GA 1971 135,159
Excell In 16 Atlanta GA 1986 144,000
Excell Out Town Properties - Dublin Dublin GA 1999 111,240
Excell Out Town Properties-Main Street Dothan AL 2000 150,000
Excell Out Town Properties-Clark Circle Dothan AL 2001 150,000
Excell Out Town Properties-Milledgeville Milledgeville GA 2000 150,000
Flat Shoals Convenience Center Union City GA 2003 182,220
Hall Creek Center Flowery Branch GA 2003 165,000
Highway 120 Center Dallas GA 2003 162,720
Highway 369 Center Cumming GA 2003 144,000
Hill Street Center Atlanta GA 2003 152,400
Irwin Bridge Center Conyers GA 2003 168,240
Jefferson Street Center Austell GA 1969 75,600
Killian Hill Center Snellville GA 2003 165,000
Lakeridge Village Center Riverdale GA 2002 145,908
Lenora Center Snellville GA 2002 176,233
Locust Grove Center Locust Grove GA 2001 123,600
Metro Atlanta Comm Prop 0518 Atlanta GA 1969 90,000
Metro Atlanta Comm Prop 8102 Chamblee GA 1967 96,000
Metro Atlanta Comm Prop 8115 Atlanta GA 1967 216,000
Metro Atlanta Comm Prop 8159 East Point GA 1972 180,000
Metro Atlanta Comm Prop 8165 Marietta GA 1988 102,000
Mount Vernon Gainesville GA 2003 123,600
Mount Zion & Highway 138 Stockbridge GA 2003 190,500
Noah's Ark Jonesboro GA 2003 132,000
North Georgia Comm Prop 0022 Ball Ground GA 1984 127,308
North Georgia Comm Prop 0029 Woodstock GA 1988 111,458
North Georgia Comm Prop 0039 Canton GA 1988 127,308
North Georgia Comm Prop 0040 Cumming GA 1988 127,308
North Georgia Comm Prop 0042 Dawsonville GA 1990 127,308
Northwest Georgia Comm Prop 0051 Adairsville GA 1994 57,000
Northwest Georgia Comm Prop 0058 White GA 1994 66,000
Northwest Georgia Comm Prop 8754 Rome GA 1996 90,000
Northwest Georgia Comm Prop 8769 Ringgold GA 1993 102,000
Northwest Georgia Comm Prop 8785 Lafayette GA 1988 48,000
Six Flags Center Austell GA 2003 186,176
Skyview Center Lithia Springs GA 2003 192,900
Snapfinger Center Decatur GA 2005 162,000
South Atlanta Center College Park GA 2003 186,120
South Peachtree Center Norcross GA 2003 171,600
Stone Mill Center Cartersville GA 2003 166,500
Sylvan Property East Point GA 2005 189,300
Wesley Chapel Center Decatur GA 1998 156,000
-------------------------------------------------------------------------------------------
TOTAL $8,772,567
-------------------------------------------------------------------------------------------
% OF
TOTAL # OF APPRAISED
PROPERTY RENT TENANTS OCCUPANCY FLAG VALUE
----------------------------------------------------------------------------------------------------
Annistown Center 2.0% 3 100.0% Shell $ 2,000,000
Arnold Mill Center 1.8 2 68.0 Mobil 2,180,000
Atlanta Road Center 2.4 4 100.0 Chevron 2,430,000
Big A Center 1.6 2 100.0 Exxon 1,610,000
Bouldercrest & 285 1.9 2 100.0 Exxon 2,210,000
Burnt Hickory Center 2.0 3 100.0 Exxon 1,990,000
Crystal Creek Center 1.5 1 100.0 Shell 1,500,000
Elbert Center 1.9 2 100.0 Shell 1,910,000
Excell In 03 1.4 1 100.0 Exxon 1,410,000
Excell In 04 1.4 1 100.0 Exxon 1,390,000
Excell In 05 1.7 1 100.0 Exxon 1,710,000
Excell In 07 1.6 1 100.0 Exxon 1,550,000
Excell In 08 0.9 1 100.0 Exxon 910,000
Excell In 09 1.3 1 100.0 Exxon 1,140,000
Excell In 10 0.9 1 100.0 Exxon 880,000
Excell In 11 2.7 2 100.0 Exxon 2,030,000
Excell In 12 1.4 1 100.0 Exxon 1,530,000
Excell In 13 1.0 1 100.0 Exxon 970,000
Excell In 14 1.9 1 100.0 Exxon 1,890,000
Excell In 15 1.5 1 100.0 Exxon 1,530,000
Excell In 16 1.6 1 100.0 Exxon 1,770,000
Excell Out Town Properties - Dublin 1.3 1 100.0 Hop In 1,260,000
Excell Out Town Properties-Main Street 1.7 1 100.0 Hop In 1,700,000
Excell Out Town Properties-Clark Circle 1.7 1 100.0 Hop In 1,700,000
Excell Out Town Properties-Milledgeville 1.7 1 100.0 Hop In 1,690,000
Flat Shoals Convenience Center 2.1 3 100.0 Mobil 2,110,000
Hall Creek Center 1.9 4 83.3 Exxon 2,030,000
Highway 120 Center 1.9 2 100.0 Exxon 1,850,000
Highway 369 Center 1.6 1 100.0 Mobil 1,610,000
Hill Street Center 1.7 2 100.0 Shell 1,760,000
Irwin Bridge Center 1.9 4 100.0 Mobil 1,880,000
Jefferson Street Center 0.9 1 100.0 Texaco 860,000
Killian Hill Center 1.9 2 100.0 Exxon 1,710,000
Lakeridge Village Center 1.7 2 100.0 Shell 1,650,000
Lenora Center 2.0 3 100.0 Exxon 2,000,000
Locust Grove Center 1.4 1 50.0 Texaco 1,630,000
Metro Atlanta Comm Prop 0518 1.0 1 100.0 CITGO 1,040,000
Metro Atlanta Comm Prop 8102 1.1 1 100.0 Mobil 1,090,000
Metro Atlanta Comm Prop 8115 2.5 1 100.0 Texaco 2,440,000
Metro Atlanta Comm Prop 8159 2.1 1 100.0 Texaco 2,090,000
Metro Atlanta Comm Prop 8165 1.2 1 100.0 Texaco 1,150,000
Mount Vernon 1.4 1 100.0 Texaco 1,390,000
Mount Zion & Highway 138 2.2 4 100.0 Mobil 2,100,000
Noah's Ark 1.5 1 100.0 Shell 1,510,000
North Georgia Comm Prop 0022 1.5 1 100.0 Chevron 1,440,000
North Georgia Comm Prop 0029 1.3 1 100.0 CITGO 1,290,000
North Georgia Comm Prop 0039 1.5 1 100.0 CITGO 1,450,000
North Georgia Comm Prop 0040 1.5 1 100.0 Chevron 1,470,000
North Georgia Comm Prop 0042 1.5 1 100.0 Chevron 1,470,000
Northwest Georgia Comm Prop 0051 0.6 1 100.0 Chevron 630,000
Northwest Georgia Comm Prop 0058 0.8 1 100.0 BP 730,000
Northwest Georgia Comm Prop 8754 1.0 1 100.0 Texaco 1,000,000
Northwest Georgia Comm Prop 8769 1.2 1 100.0 BP 1,180,000
Northwest Georgia Comm Prop 8785 0.5 1 100.0 Chevron 530,000
Six Flags Center 2.1 3 100.0 Shell 2,140,000
Skyview Center 2.2 5 100.0 Mobil 2,150,000
Snapfinger Center 1.8 2 100.0 Shell 1,760,000
South Atlanta Center 2.1 2 100.0 Exxon 2,110,000
South Peachtree Center 2.0 3 75.0 Shell 2,190,000
Stone Mill Center 1.9 2 56.7 Exxon 2,370,000
Sylvan Property 2.2 2 100.0 Shell 2,140,000
Wesley Chapel Center 1.8 1 100.0 Mobil 1,810,000
----------------------------------------------------------------------------------------------------
TOTAL 100.0% 103 95.2% $100,650,000
----------------------------------------------------------------------------------------------------
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
55
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--------------------------------------------------------------------------------
The following tables present certain information regarding the Georgia-Alabama
Retail Portfolio Properties.
--------------------------------------------------------------------------------
PROPERTY AGE
NUMBER OF % OF PERCENTAGE
YEAR BUILT PROPERTIES PROPERTIES BASE RENT OF BASE RENT
--------------------------------------------------------------------------------
Before 1985 9 14.5% $1,117,555 12.7%
1985-1989 14 22.6 1,727,261 19.7
1990-1994 4 6.5 352,308 4.0
1995-1999 4 6.5 507,240 5.8
2000-2005 31 50.0 5,068,203 57.8
--------------------------------------------------------------------------------
TOTAL 62 100.0% $8,772,567 100.0%
--------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
RENT INFORMATION BY FRANCHISE(1)
NUMBER OF BASE RENT FROM % OF BASE RENT
PROPERTIES BY % OF TOTAL CONVENIENCE FROM CONVENIENCE BASE RENT FROM % OF BASE RENT
FRANCHISE FRANCHISE PROPERTIES STORES(2) STORES OTHER TENANTS FROM OTHER TENANTS
-----------------------------------------------------------------------------------------------------------------------
Exxon 22 35.5% $2,867,782 35.9% $332,011 42.9%
Shell 10 16.1 1,417,308 17.7 198,476 25.7
Mobil 8 12.9 1,096,320 13.7 192,540 24.9
Texaco 7 11.3 910,800 11.4 0 0.0
Chevron 6 9.7 648,924 8.1 50,400 6.5
Hop In 4 6.5 561,240 7.0 0 0.0
Citgo 3 4.8 328,766 4.1 0 0.0
BP 2 3.2 168,000 2.1 0 0.0
-----------------------------------------------------------------------------------------------------------------------
TOTAL 62 100.0% $7,999,140 100.0% $773,427 100.0%
-----------------------------------------------------------------------------------------------------------------------
(1) Based on information obtained from the Georgia-Alabama Retail Portfolio
Borrower's rent roll dated November 13, 2006. The franchise companies
listed here are not tenants at the Georgia-Alabama Retail Portfolio
Properties. These companies, through contracts with the Sponsors of the
Georgia-Alabama Retail Portfolio Loan, supply the third party operators at
each property with petroleum and other products related to the gas station
business. The tenant at each Georgia-Alabama Retail Portfolio Property is
a third party operator or retail tenant, unaffiliated with the
Georgia-Alabama Retail Portfolio Borrower or any of the petroleum
companies listed here.
(2) "Base Rent from Convenience Stores" means the amount of rent due by the
operator of the convenience store and gas station. The franchisor listed
under the heading "Franchise" is not responsible for this rent. The
aggregate convenience store rent for the Georgia-Alabama Retail Portfolio
Properties represents 91.2% of the total rent for the Georgia-Alabama
Retail Portfolio Properties based on the November 13, 2006 rent roll.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
56
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--------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
LEASE ROLLOVER SCHEDULE(1),(2)
CUMULATIVE
% OF CUMULATIVE % OF
NUMBER OF BASE RENT BASE RENT BASE RENT BASE RENT
YEAR LEASES EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING
--------------------------------------------------------------------------------------------------
Vacant 7 $ 0 0.0% $ 0 0.0%
MTM 16 701,996 8.0 701,996 8.0
2007 2 37,800 0.4 739,796 8.4
2008 10 436,020 5.0 1,175,816 13.4
2009 9 399,213 4.6 1,575,029 18.0
2010 8 799,500 9.1 2,374,529 27.1
2011 2 26,400 0.3 2,400,929 27.4
2012 1 20,226 0.2 2,421,155 27.6
2013 9 720,776 8.2 3,141,931 35.8
2014 2 33,600 0.4 3,175,531 36.2
2015 1 24,000 0.3 3,199,531 36.5
2016 3 271,200 3.1 3,470,731 39.6
2017 13 1,688,946 19.3 5,159,677 58.8
2018 11 1,466,690 16.7 6,626,367 75.5
2019 6 888,000 10.1 7,514,367 85.7
Thereafter 10 1,258,200 14.3 8,772,567 100.0
--------------------------------------------------------------------------------------------------
TOTAL 103 $8,772,567 100.0%
--------------------------------------------------------------------------------------------------
(1) The leases referred to in this chart reflect the leases with the third
party operator/tenants at each Georgia-Alabama Retail Portfolio Property
as well as leases for 41 other retail tenants at certain of the
Georgia-Alabama Retail Portfolio Properties.
(2) The numbers in this chart are based on the assumption that no tenant
exercises an early termination option.
THE MARKET.(1) The Georgia-Alabama Retail Portfolio Properties are concentrated
in the southeastern United States with 60 properties located in Georgia and 2
properties located in Dothan, Alabama. The majority of the properties are
located in Atlanta, Georgia or in the Atlanta metro area, including the
Eastern, Western, Northwestern and Northeastern areas. Other properties within
the portfolio are located in counties closer to the central portion of Georgia,
including Baldwin County located 75 miles southeast of Atlanta, Elbert County,
which is 96 miles northeast of Atlanta, and Laurens County, which is 140 miles
southeast of Atlanta. In addition, there are two properties located in Dothan,
Alabama. Dothan, the largest city in Houston County, is located in the
southeast corner of Alabama, approximately 105 miles southeast of Montgomery,
96 miles northwest of Tallahassee, and 205 miles east of Mobile.
THE BORROWER. The borrower, Georgia-Alabama Commercial Investments, LLC (the
"Georgia-Alabama Retail Portfolio Borrower") is a single purpose Delaware
limited liability company. The Georgia-Alabama Retail Portfolio Borrower is
100% directly owned by Georgia-Alabama Commercial Management, LLC, an entity
managed by Marvin Hewatt ("Hewatt") and indirectly owned by Hewatt and Barron
Jefferson Russell ("Russell," and together with Hewatt, the "Sponsors"). The
Georgia-Alabama Retail Portfolio Loan is full recourse to the Sponsors.
According to Mr. Russell, he joined Mr. Hewatt as a partner in 1998 and formed
Majors Management, LLC (an entity wholly owned by the Sponsors) to oversee the
development, leasing and management of their real estate portfolio and other
investments. According to Mr. Russell, he has over 40 years in petroleum
sales/distribution experience with industry leaders such as Exxon, Mobil and
Texaco.
According to the Sponsors, they have invested over $120 million in various real
estate opportunities since 1998. In 2002, the Sponsors purchased 19 properties
from Exxon in the metropolitan Atlanta area and in 2003, they purchased 75
properties in southeastern states. Through their ownership of Majors Management
LLC and other wholly owned entities, the Sponsors own, and supply petroleum
products to, over 200 convenience store/gas stations in Georgia, Florida,
Alabama, Mississippi and Louisiana. The Sponsors acquire, develop, lease and
manage convenience store/gas station centers, and in-line retail centers, for
long term appreciation and yield.
PROPERTY MANAGEMENT. Each of the Georgia-Alabama Retail Portfolio Properties is
self managed by the Georgia-Alabama Retail Portfolio Borrower.
LOCKBOX. The Georgia-Alabama Retail Portfolio Loan documents require a
springing hard lockbox and springing cash management. In the event the debt
service coverage ratio is less than 1.15x as of the last day of any calendar
quarter or any other Cash Sweep Event (as defined below) occurs, the
Georgia-Alabama Retail Portfolio Borrower is required, within 15 business days,
to establish a lender controlled lockbox account and to direct all tenants to
send rents and other payments due to the Georgia-Alabama Retail Portfolio
Borrower to the lender controlled lockbox account.
____________________
(1) Certain information in this section was obtained from third party
appraisals. The appraisals rely on many assumptions and no representation
is made as to the accuracy of those assumptions.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
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COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
ESCROWS/RESERVES. The following escrow/reserve accounts have been established
with respect to The Georgia-Alabama Retail Portfolio Loan.
--------------------------------------------------------------------------------
ESCROWS / RESERVES
TYPE INITIAL MONTHLY
--------------------------------------------------------------------------------
Reconstruction Reserve(1) $1,350,444 $ 0
Remediation Reserve(2) $ 56,250 $ 0
PLL Insurance Reserve(3) $ 224,090 $ 0
Insurance Reserve(4) $ 0 $ 0
--------------------------------------------------------------------------------
___________________
(1) For the completion of improvements at the Georgia-Alabama Retail Portfolio
Property located at 5084 Old National Highway, College Park, GA.
(2) For the required remediation at the Georgia-Alabama Retail Portfolio
Property located at 6741 Bellsferry Road, Woodstock, GA.
(3) Countrywide Commercial Real Estate Finance, Inc. ("CRF") deposited
$224,090 in this reserve to be used for the payment of renewal premiums
due under the pollution legal liability insurance policy (the "PLL
Insurance Policy"). The reserve funds may only be used to pay the renewal
premium and are not collateral for the Georgia-Alabama Retail Portfolio
Loan in the event of a default. The reserve funds are to be returned to
CRF (i) at the time the lender is given notice that the PLL Insurance
Policy will not be renewed or has been cancelled or (ii) on the maturity
date.
(4) In the event the PLL Insurance Policy is cancelled or not renewed, the
Georgia-Alabama Retail Portfolio Borrower will be required to deposit 150%
of the estimated annual remediation cost amount for all of the
Georgia-Alabama Retail Portfolio Properties for the remaining term of the
Georgia-Alabama Retail Portfolio Loan, as determined by reference to the
5-year historic cost of remediation for all such properties. In addition,
in the event the PLL Insurance Policy carrier (a) drops or otherwise
excludes an individual property from its coverage or (b) a release has
occurred at a Georgia-Alabama Retail Portfolio Property and 90 days has
elapsed since the Georgia-Alabama Retail Portfolio Borrower first learned
of it (or should have learned of it) and the related insurance provider
(i) has not accepted a claim for coverage or has denied coverage with
respect to such claim or (ii) has determined that the required remediation
is not covered by the policy, then , (x) if the cause relates to (a)
above, the Georgia-Alabama Retail Portfolio Borrower will be required to
deliver to lender an amount equal to 150% of the estimated annual
remediation cost for all such properties that caused the event described
in (a) above for the remaining term of the Georgia-Alabama Retail
Portfolio Loan (as determined by reference to the 5-year historical cost
of remediation for all such individual properties) or (y) if the cause
relates to (b) above, the Georgia-Alabama Retail Portfolio Borrower will
be required to deliver to lender an amount equal to 150% of the amount
required for remediation of any individual property that caused the event
described in (b) to be triggered (as determined by a report prepared by an
environmental consultant or engineer acceptable to lender).
CASH FLOW SWEEP. During a Cash Sweep Event, any excess amounts in the lender
controlled account will be retained by the lender and held as additional
collateral until the termination of such Cash Sweep Event. A "Cash Sweep Event"
occurs if (i) more than six properties cease to operate for more than 30
consecutive days (other than due to casualty or condemnation), (ii) the debt
service coverage ratio for any trailing 12 month period declines below 1.10x or
(iii) an event of default under the Georgia-Alabama Retail Portfolio Loan
documents occurs. A Cash Sweep Event will terminate if (a) with respect to the
matter described in clause (i) of the definition of the term Cash Sweep Event
above, the lender has determined that fewer than six properties ceased to
operate for more than 30 consecutive days (other than due to casualty or
condemnation), (b) with respect to the matter described in clause (ii) of the
definition of the term Cash Sweep Event above, the debt service coverage ratio
for any two consecutive calendar quarters is at least 1.20x, (c) with respect
to the matter described in clause (iii) of the definition of the term Cash
Sweep Event above, an event of default under the Georgia-Alabama Retail
Portfolio Loan documents no longer exists, or (d) the lender otherwise elects,
in its sole discretion, to terminate the Cash Sweep Event.
MEZZANINE DEBT. The Georgia-Alabama Retail Portfolio Loan documents do not
permit mezzanine debt.
RELEASE PROVISIONS. Up to seven individual Georgia-Alabama Retail Portfolio
Properties may be released during the term of the Georgia-Alabama Retail
Portfolio Loan from the lien of the related mortgage upon defeasance of a
principal amount equal to 125% of the allocated loan amount of the
Georgia-Alabama Retail Portfolio Property to be defeased.
PROPERTY SUBSTITUTION. Commencing twelve months following the Georgia-Alabama
Retail Portfolio Loan origination date, the Georgia-Alabama Retail Portfolio
Borrower may substitute up to seven individual Georgia-Alabama Retail Portfolio
Properties during the term of the Georgia-Alabama Retail Portfolio Loan with a
qualified substitute property provided that several conditions are satisfied,
including among other conditions that: (i) the market value of any proposed
qualified substitute property is equal to or exceeds the greater of (a) the
initial appraised value of the individual property proposed to be replaced and
(b) the then current market value of such individual property immediately prior
to the substitution, (ii) after giving effect to the substitution, the
aggregate debt service coverage ratio, as determined by lender, for the
aggregate of all individual properties securing the Georgia-Alabama Retail
Portfolio Loan will be no less than the greater of (a) the debt service
coverage ratio as of the closing date and (b) the debt service coverage ratio
immediately prior to such substitution and (iii) no individual property may be
replaced with more than one qualified substitute property.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
58
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--------------------------------------------------------------------------------
[THIS PAGE INTENTIONALLY LEFT BLANK.]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
59
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DOUGLAS CORPORATE CENTER I & II
[2 PHOTOS OF DOUGLAS CORPORATE CENTER I & II]
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
Number of Mortgaged Real Properties 1
Location (City/State) Roseville, CA
Property Type Office
Size (Square Feet) 213,379
Percentage Physical Occupancy as of April 27, 2007 83.8%
Year Built 1990/2003(1)
Year Renovated NAP
Appraisal Value $67,750,000
# of Tenant Leases 43(2)
Average Rent Per Square Foot $27.70(2)
Underwritten Economic Occupancy 83.8%
Underwritten Revenues $5,248,686
Underwritten Total Expenses $2,119,756
Underwritten Net Operating Income (NOI) $3,128,930
Underwritten Net Cash Flow (NCF) $2,749,044
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
--------------------------------------------------------------------------------
Mortgage Loan Seller KeyBank
Loan Group 1
Origination Date May 31, 2007
Cut-off Date Principal Balance $36,000,000
Cut-off Date Loan Balance Per SF/Unit $169
Percentage of Initial Mortgage Pool Balance 1.5%
Number of Mortgage Loans 1
Type of Security (Fee/Leasehold) Fee
Mortgage Rate 5.4270%
Amortization Type Interest Only
IO Period (Months) 84
Original Term to Maturity/ARD (Months) 84
Original Amortization Term (Months) 0
Original Call Protection LO(26),DeforYM(51),O(7)
Lockbox None
Cut-off Date LTV Ratio 53.1%
LTV Ratio at Maturity or ARD 53.1%
Underwritten DSCR on NOI 1.58x
Underwritten DSCR on NCF 1.38x
--------------------------------------------------------------------------------
(1) Douglas Corporate Center building I was built in 1990 and Douglas
Corporate Center building II was built in 2003.
(2) Information based on the Douglas Corporate Center I & II Borrower's April27, 2007 rent roll.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
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--------------------------------------------------------------------------------
[MAP OF DOUGLAS CORPORATE CENTER I & II]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
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--------------------------------------------------------------------------------
THE LOAN. The mortgage loan (the "Douglas Corporate Center I & II Loan") is
evidenced by a single promissory note and is secured by a fee simple first
mortgage encumbering two Class A office buildings (the "Douglas Corporate
Center I & II Property") located in Roseville, California. The Douglas
Corporate Center I & II Loan represents approximately 1.5% of the initial
mortgage pool balance and approximately 2.6% of the initial loan group 1
balance.
The Douglas Corporate Center I & II Loan was originated on May 31, 2007, and
has a principal balance as of the cut-off date of $36,000,000. The Douglas
Corporate Center I & II Loan has a remaining term of 82 months and a scheduled
maturity date of June 1, 2014. The Douglas Corporate Center I & II Loan may not
be prepaid in whole or part except as follows: (i) at any time after the
earlier to occur of (a) December 1, 2009, or (b) the date that is two years
following the "startup date". The Douglas Corporate Center I and II Borrower
may prepay the loan on any date (provided that if such date is not a scheduled
payment date, the Douglas Corporate Center I and II borrower will be required
to also pay any interest shortfall) provided that the Douglas Corporate Center
I and II borrower either pays a yield maintenance premium or purchases
defeasance collateral in accordance with the loan documents; (ii) the Douglas
Corporate Center I and II borrower may openly prepay the Douglas Corporate
Center I and II loan, with no prepayment penalty or obligation to purchase
defeasance collateral at any time after the date that is six months prior to
the Maturity Date (provided that if such date is not a scheduled payment date,
the Douglas Corporate Center I and II borrower shall also pay any interest
shortfall); and (iii) any prepayment in connection with a casualty or
condemnation will not incur a prepayment penalty.
THE PROPERTY. The Douglas Corporate Center I & II Property is comprised of two
3-story, Class A office buildings totaling 213,379 net rentable square feet, as
well as surface parking consisting of 865 spaces, located in Roseville, Placer
County, California. Douglas Corporate Center I was built in 1990 and Douglas
Corporate Center II was built in 2003.
The property is 83.8% occupied by 31 tenants. New York Life Insurance ("NYL"),
the largest tenant, utilizes its space at the property for sales and
administrative staff. NYL sells life insurance, annuities, mutual funds,
long-term care insurance and group policies, as well as provides investment
management services for institutional clients. Other major tenants include
Countrywide Home Loans, Pacific Health Advantage, and EMC Corporation.
Countrywide engages in mortgage lending and other finance-related operations,
within five segments comprised of mortgage banking, banking, capital markets,
insurance, and global operations. Pacific Health Advantage, which is a
non-profit organization founded in 1989 by Pacific Business Group on Health,
provides affordable combinations of health insurance plans to small businesses
based in California with 2 to 50 employees. EMC Corporation engages in the
development, delivery, and support of information infrastructure technologies
and solutions worldwide, which includes storage systems, platform-based
software, consulting, implementation, operations management, training,
maintenance, and support.
The following table presents certain information relating to the major tenants
at the Douglas Corporate Center I & II Property:
---------------------------------------------------------------------------------------------------------------------------------
TENANT INFORMATION
CREDIT RATINGS SQUARE % OF BASE RENT LEASE
TENANT NAME PARENT COMPANY (FITCH/S&P) FEET GLA PSF EXPIRATION
---------------------------------------------------------------------------------------------------------------------------------
New York Life Insurance NAP AA+/AA+ 22,771 10.7% $ 24.60 August 2011
Countrywide Home Loans Countrywide Financial Corporation A/A 18,629 8.7% $ 28.88(1) Various(2)
Pacific Health Advantage NAP NR 18,093 8.5% $ 27.74(3) Various(4)
EMC Corporation NAP NR/BBB+ 14,100 6.6% $ 27.84 March 2011
---------------------------------------------------------------------------------------------------------------------------------
Total/Wtd. Avg. 73,593 34.5% $ 27.08
---------------------------------------------------------------------------------------------------------------------------------
(1) Countrywide Home Loans pays $28.80/sf for 13,117 sf of space, $28.20/sf
for 1,521 sf of space, and $29.40/sf for 3,991 sf of space.
(2) Lease expirations are: 1,521 sf expiring October 2007, 3,991 sf expiring
June 2010, 8,539 sf expiring November 2010, 4,578 sf expiring September
2008.
(3) Pacific Health Advantage pays $27.60/sf for 16,026 sf of space and
$28.80/sf for 2,067 sf of space.
(4) The lease for 16,026 sf expires July 2011 and the lease for 2,067 sf
expires September 2011.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
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The following table presents certain information relating to the lease rollover
schedule at the Douglas Corporate Center I & II Property:
----------------------------------------------------------------------------------------------------------------------------------
LEASE ROLLOVER SCHEDULE(1)
NUMBER SQUARE % OF % OF BASE CUMULATIVE CUMULATIVE CUMULATIVE CUMULATIVE %
OF LEASES FEET GLA BASE RENT RENT SQUARE FEET % OF GLA BASE RENT OF BASE RENT
YEAR EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING
----------------------------------------------------------------------------------------------------------------------------------
MTM 2 5,138 2.4% $ 138,323 2.8% 5,138 2.4% $ 138,323 2.4%
2007 2 2,401 1.1 60,316 1.2 7,539 3.5 198,639 4.0
2008 9 30,354 14.2 856,061 17.3 37,893 17.8 1,054,700 21.3
2009 9 29,930 14.0 853,380 17.2 67,823 31.8 1,908,081 38.6
2010 5 19,153 9.0 548,046 11.2 86,976 40.8 2,456,126 49.6
2011 13 86,919 40.7 2,346,429 47.4 173,895 81.5 4,802,555 97.0
2012 2 4,431 2.1 124,802 2.5 178,326 83.6 4,927,358 99.5
2013 -- -- 0.0 0 0.0 178,326 83.6 4,927,358 99.5
2014 -- -- 0.0 0 0.0 178,326 83.6 4,927,358 99.5
2015 -- -- 0.0 0 0.0 178,326 83.6 4,927,358 99.5
2016 1 400 0.2 23,892 0.5 178,726 83.8 4,951,250 100.0
2017 -- -- 0.0 0 0.0 178,726 83.8 4,951,250 100.0
Thereafter -- -- 0.0 0 0.0 178,726 83.8 4,951,250 100.0
Vacant NAP 34,653 16.2 0 0.0 213,379 100.0 4,951,250 100.0
----------------------------------------------------------------------------------------------------------------------------------
TOTAL 43 213,379 100% $4,951,250 100% 213,379 100% $4,951,250 100%
----------------------------------------------------------------------------------------------------------------------------------
THE MARKET(2). The Douglas Corporate Center I & II Property is located on the
northeast corner of Douglas Boulevard and East Roseville Parkway, in Roseville
approximately 1.75 miles from Interstate 80 and 19 miles northeast of downtown
Sacramento. The neighborhood consists of commercial developments, residential
developments, and community services. Commercial developments consist of office
buildings in the immediate area, and retailers, such as Wal-Mart, Safeway,
Target, Raley's, Home Depot, and Staples, which are located within a few miles
of the subject. Residential development includes single-family homes, apartment
complexes, and condominiums. Community services, such as fire stations,
hospitals, police stations, and schools are readily available in the
surrounding area, as well as public transportation, parks, golf courses, and
other recreational facilities. The area is anticipated to experience
significant growth in the foreseeable future.
Douglas Corporate Center I & II is within the Sacramento Office Market and the
Roseville/Rocklin Office Submarket. The Sacramento Office Market Class A sector
consisted of 190 buildings containing 23,409,365 square feet for the second
quarter 2007. Class A office property occupancy for the second quarter 2007 was
88%. Average quoted rates in the Sacramento Office Market Class A sector for
available space were $27.26/sf, trending up from $26.87/sf in the first quarter
2007, and average quoted rates in the Roseville/Rocklin Submarket Class A
sector were $28.52/sf. Average in-place rents at the subject are $27.70/sf.
Sacramento, California's state capital since 1869, is strategically located at
the nucleus of several major freeways, including US Highway 50, State Highway
99, and Interstates 5 and 80. These freeways provide access to the San
Francisco Bay Area to the west, Southern California to the south, Oregon and
Washington to the north, and Nevada to the east. The rate of population growth
in the Sacramento Primary Metropolitan Statistical Area ("PMSA") has been
robust over the past 16 years, growing 2.2% per year from 1990 to 2000. From
2000 to 2005, the population increased by an average of 2.7% per year.
According to the demographic Research Unit of the California Department of
Finance, the Sacramento PMSA population is projected to increase 2.0% per year,
and reach approximately 2.04 million people by 2010. According to CoStar 2Q07
Sacramento Office Report, the cumulative growth in office jobs over the past 5
years in Sacramento has been 10.60%, which equates to 2.12% per year. Major
employers include Intel Corporation, Kaiser Permanente, Raley's Inc., SBC, Bank
of America, Wells Fargo, and Target Corporation.
THE BORROWER. Hines Douglas Corporate Center LP, a Delaware limited partnership
(the "Douglas Corporate Center I & II Borrower") is a special purpose,
bankruptcy remote entity. The Douglas Corporate Center I & II Borrower is made
up of a 0.1% general partnership interest held by Hines Douglas Corporate
Center GP, LLC (the "SPE Component Entity") and a 99.9% limited partnership
interest held by Hines CF Sacramento Partners LP (the "Sacramento LP") which
entity also owns 100% of the membership interest in the SPE Component Entity.
The SPE Component Entity is a single member Delaware limited liability company
which is a special purpose entity and bankruptcy remote, and which has an
independent manager. The Sacramento LP has 91% of its general partnership
interest held by Hines-Sumisei U.S. Core Office Trust (the "Hines U.S. Trust")
in which Hines-Sumisei U.S. Core Office Fund L.P. owns a 40% interest and a
group of General Motors parties owns a 57% interest. The non-recourse carveouts
contained in the Douglas Corporate Center I & II loan agreement, along with the
environmental indemnity, were given by the Douglas Corporate Center I & II
Borrower.
__________________
(1) Information obtained from the Douglas Corporate Center I & II Borrower's
rent roll dated April 27, 2007.
(2) Certain information in this section was obtained from a third party
appraisal. The appraisal relies on many assumptions, and no representation
is made as to the accuracy of the assumptions underlying the appraisal.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
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Hines, founded over 50 years ago, is a privately owned real estate firm
involved in real estate investment, development, and property management
worldwide. The Hines portfolio of projects underway, completed, acquired and
managed for third parties includes more than 950 properties representing
approximately 380 million square feet of office, residential, mixed-use,
industrial, hotel, medical, retail and sports facilities, as well as large,
master-planned communities and land developments. Hines has offices in 16
countries, with regional offices in Houston (U.S. headquarters), London
(European headquarters), New York, Chicago, Atlanta and San Francisco, as well
as 62 other cities. Currently, the firm controls assets valued at approximately
$16 billion. In addition, since 1991, Hines has created 26 investment funds
with over $12 billion of equity capital entrusted to Hines by partners
including major public and private pension funds, foreign governments and
investment authorities, foundations, endowments, high net-worth individuals and
individual investors.
PROPERTY MANAGEMENT. The Douglas Corporate Center I & II Property is managed by
Hines Interests Limited Partnership ("Hines"), a Delaware limited partnership
(the "Douglas Property Manager"), and affiliate of the Douglas Corporate Center
I & II Borrower. Currently, Hines manages 161 properties, which total
approximately 104 million square feet.
LOCKBOX. None.
PERMITTED MEZZANINE DEBT. Future mezzanine financing secured by a pledge of the
mezzanine borrower's direct or indirect equity interest in the Douglas
Corporate Center I & II Borrower and/or the SPE component entity is permitted,
subject to certain standard criteria, including without limitation: (i) an
aggregate LTV equal or less than 75%, (ii) such mezzanine financing is from a
qualified mezzanine lender, (iii) delivery of an intercreditor agreement
acceptable to the rating agencies, and (iv) a confirmation by the rating
agencies that the incurrence of such mezzanine financing will not cause a
qualification downgrade or withdrawal of the then-current ratings on the
certificates.
ESCROWS. The following escrow/reserve accounts have been established with
respect to the Douglas Corporate Center I & II Loan:
--------------------------------------------------------------------------------
ESCROWS / RESERVES
TYPE: INITIAL MONTHLY
--------------------------------------------------------------------------------
Taxes $ 0 Springing(1)
Insurance $ 0 Springing(1)
Replacement Reserve $ 0 Springing(2)
Leasing Reserve $ 0 Springing(3)
--------------------------------------------------------------------------------
(1) Upon the occurrence of an event of default, lender may require borrower to
establish a tax and insurance reserve to be funded monthly, provided that
if insurance is obtained through a blanket insurance policy which is
acceptable to lender, then no insurance escrow will be required.
(2) The Replacement Reserve monthly reserve deposits of $3,556.33 are not
required to be made by the Douglas Corporate Center I & II Borrower except
during the occurrence of an event of default under the Douglas Corporate
Center I & II Loan.
(3) The Leasing Reserve monthly reserve deposits of $38,882.08 are not
required to be made by the Douglas Corporate Center I & II Borrower except
during the occurrence of an event of default under the Douglas Corporate
Center I & II Loan.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
64
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[THIS PAGE INTENTIONALLY LEFT BLANK.]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
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GRAY APARTMENT PORTFOLIO
[2 PHOTOS Of GRAY APARTMENT PORTFOLIO]
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
Number of Mortgaged Real Properties 2
Location (City/State) Houston, TX
Property Type Multifamily
Size (Units) 789
Percentage Occupancy as of May 2007 91.1%
Year Built 1972/1974(1)
Year Renovated 2003
Appraisal Value $41,980,000
Average Monthly Rent Per Unit $752
Underwritten Occupancy 82.1%
Underwritten Revenues $6,101,820
Underwritten Total Expenses $3,081,928
Underwritten Net Operating Income (NOI) $3,019,892
Underwritten Net Cash Flow (NCF) $2,822,642
5/31/2007 TTM NOI $3,200,327
2006 NOI $3,591,975
2005 NOI $1,604,614
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
--------------------------------------------------------------------------------
Mortgage Loan Seller CRF
Loan Group 2
Origination Date November 1, 2006
Cut-off Date Principal Balance $31,500,000
Cut-off Date Loan Balance Per SF/Unit $39,924
Percentage of Initial Mortgage Pool Balance 1.3%
Number of Mortgage Loans 2
Type of Security (Fee/Leasehold) Fee
Mortgage Rate 5.8700%
Amortization Type IO-Balloon
IO Period (Months) 24
Original Term to Maturity/ARD (Months) 120
Original Amortization Term (Months) 360
Call Protection LO(33),Def(83),O(4)
Lockbox Soft
Cut-off Date LTV Ratio 75.0%
LTV Ratio at Maturity or ARD 66.3%
Underwritten DSCR on NOI 1.35x(2)
Underwritten DSCR on NCF 1.26x(3)
--------------------------------------------------------------------------------
(1) The Evergreen Pointe apartment complex was constructed in 1972 and the
Park at Lakeside apartment complex was constructed in 1974.
(2) The Underwritten DSCR on NOI during the interest only period is 1.61x.
(3) The Underwritten DSCR on NCF during the interest only period is 1.50x.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
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[MAP OF GRAY APARTMENT PORTFOLIO]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
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THE LOAN. The mortgage loan is comprised of two cross-collateralized and
cross-defaulted loans (collectively, the "Gray Apartment Portfolio Loan") each
evidenced by a promissory note and secured by a mortgage encumbering two
adjacent apartment complexes consisting in the aggregate of 789 units located
in Houston, Texas (collectively, the "Gray Apartment Portfolio Properties").
The Gray Apartment Portfolio Loan represents approximately 1.3% of the initial
mortgage pool balance and approximately 3.0% of the initial loan group 2
balance.
The Gray Apartment Portfolio Loan was originated on November 1, 2006, and has a
principal balance as of the cut-off date of $31,500,000. The Gray Apartment
Portfolio Loan has a remaining term of 111 months and a scheduled maturity date
of November 8, 2016. The Gray Apartment Portfolio Loan permits defeasance of
the entire loan (or partial defeasance as described below under "ReleaseProvisions") with United States Treasury obligations or other non-callable
government securities beginning two years after the creation of the
securitization trust. Voluntary prepayment of the Gray Apartment Portfolio Loan
is permitted on or after August 8, 2016, without penalty.
THE PROPERTIES. The Gray Apartment Portfolio Loan is secured by the fee
interest in two adjacent apartment complexes, Park at Lakeside and Evergreen
Pointe, consisting in the aggregate of 789 units located in Houston, Texas.
Park at Lakeside. The 592-unit Park at Lakeside apartment complex was
constructed in 1974. It comprises (based on number of apartment units) 75% of
the Gray Apartment Portfolio Loan. The property has been well maintained, with
a significant renovation in 2003 that totaled $4,175,000 ($7,052/unit).
Community amenities include: indoor racquetball court, three pools, heated spa,
fitness center, picnic areas, covered parking, and child care center. Unit
amenities include: large floor plans, all electric kitchens, large walk-in
closets, and patios/balconies. The property is located along Lakeside Estates
Drive at Lynbrook Drive and just north of Briar Forest Drive, which is a
primary neighborhood artery in the city of Houston. The Sam Houston Parkway,
which is one-half mile east of the property, provides freeway access through
the neighborhood. The promissory note evidencing the Park at Lakeside loan has
a cut-off date principal balance of $23,500,000.
---------------------------------------------------------------------------------------------
UNIT BREAKDOWN AND OCCUPANCY AS OF MAY 30, 2007
1-BEDROOM UNITS/ 2-BEDROOM UNITS/ 3-BEDROOM UNITS/ 4-BEDROOM UNITS/
OCCUPANCY OCCUPANCY OCCUPANCY OCCUPANCY
---------------------------------------------------------------------------------------------
112 units/98.2% 216 units/91.7% 208 units/88.5% 56 units/76.8%
---------------------------------------------------------------------------------------------
Evergreen Pointe. The 197-unit Evergreen Pointe apartment complex was
constructed in 1972. It comprises (based on number of apartment units) 25% of
the Gray Apartment Portfolio Loan. The property has been well maintained, with
an exterior renovation in 2003 that totaled $820,000 ($4,160/unit). Community
amenities include: swimming pool and heated spa. Unit amenities include: large
floor plans, kitchen pantries, large walk-in closets, and patios/balconies. The
property is located between Lakeside Estates Drive and Wilcrest Drive and just
north of Briar Forest Drive, which is a primary neighborhood artery in the city
of Houston. The Sam Houston Parkway, which is one-half mile east of the
property, provides freeway access through the neighborhood. The promissory note
evidencing the Evergreen Pointe loan has a cut-off date principal balance of
$8,000,000.
------------------------------------------------------------------------------------------------------------
UNIT BREAKDOWN AND OCCUPANCY AS OF MAY 23, 2007
STUDIO UNITS/ 1-BEDROOM UNITS/ 2-BEDROOM UNITS/ 3-BEDROOM UNITS/ 4-BEDROOM UNITS/
OCCUPANCY OCCUPANCY OCCUPANCY OCCUPANCY OCCUPANCY
------------------------------------------------------------------------------------------------------------
2 units/50% 57 units/98.2% 82 units/96.3% 40 units/97.5% 16 units/98.8%
------------------------------------------------------------------------------------------------------------
The following tables present certain information regarding the Gray Apartment
Portfolio Properties on a combined basis.
--------------------------------------------------------------------------------
MULTIFAMILY INFORMATION(1)
WEIGHTED
AVERAGE UNIT NET
UNIT MIX NO. OF UNITS SQUARE FEET RENTABLE SF
--------------------------------------------------------------------------------
Studio 2 297 297
1 BR 169 660 109,545
2 BR 298 982 272,414
3 BR 248 1,260 279,846
4 BR 72 1,453 86,528
--------------------------------------------------------------------------------
Total/Weighted Average 789 1,042 748,630
--------------------------------------------------------------------------------
% OF WEIGHTED AVERAGE WEIGHTED AVERAGE MONTHLY
UNIT MIX TOTAL UNITS MONTHLY ASKING RENT/UNIT(1) MARKET RENT/UNIT(2)
-------------------------------------------------------------------------------------------------
Studio 0.3% $395 $ 395
1 BR 21.4% $548 $ 561
2 BR 37.8% $712 $ 734
3 BR 31.4% $895 $ 937
4 BR 9.1% $979 $1018
-------------------------------------------------------------------------------------------------
Total/Weighted Average 100.0% $758 $ 786
-------------------------------------------------------------------------------------------------
(1) Information obtained from the Gray Apartment Portfolio Borrower's rent
roll dated May 2007.
(2) Information obtained from appraisal dated May 25, 2007.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
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--------------------------------------------------------------------------------
THE MARKET(1). Both Park at Lakeside and Evergreen Pointe are located in the
Briar Forest submarket. According to REIS, the submarket at the end of the
first quarter of 2007 consisted of 41,661 units at 144 properties with a
reported vacancy of 6.6%. Net absorption for the quarter was a positive 166
units. Vacancy rates in the submarket have stabilized in recent years,
fluctuating slightly between 5% and 7% since the third quarter of 2005.
Concessions in the submarket vary from 15 days to one month of free rent.
Concessions at the Park at Lakeside and Evergreen Pointe Properties have
averaged 6% and 5%, respectively, over the past 12 months.
The population within a one- and three-mile radius of the Gray Portfolio
Properties is 16,936 and 143,846, respectively; the median household income is
$29,707 and $34,034, respectively.
THE BORROWER. The borrower, Wentwood Lakeside I, LP (the "Gray Apartment
Portfolio Borrower") is a single purpose Texas Limited Partnership. The Gray
Apartment Portfolio Borrower is owned by: (i) limited partner GRAOCH Associates
#110, LP (with a 19.49% interest), (ii) limited partner GRAOCH Associates #36,
LP (with a 39.65% interest), (iii) limited partner GRAOCH Associates #92, LP
(with a 39.86% interest), and (iv) by the general partner Everpark GP, LP.
(with a 1% interst). Everpark GP, LP is owned 100% by Gary Gray and all of the
limited partnerships are controlled by Gary Gray, who is the non-recourse
carve-out guarantor.
GRAOCH Associates ("GRAOCH"), originally formed in 1991, is a Vancouver,
British Columbia based real estate investment firm, whose sole business is the
acquisition, financing, ownership, operation, asset management and disposition
of rental apartment communities located throughout the United States. Gary M.
Gray is the 100% general partner and a substantial limited partner in GRAOCH.
According to GRAOCH, since its inception in 1991, entities controlled and
co-owned by GRAOCH have acquired 107 separate apartment communities, located in
20 separate sates containing a total of 23,299 individual apartment units. In
addition, according to GRAOCH, as of February 2006, a total of 52 apartment
communities containing a total of 11,940 individual apartment units have been
sold.
PROPERTY MANAGEMENT. The property manager for the Gray Apartment Portfolio
Properties is Pinnacle Realty Management ("Pinnacle"), an entity that is not
affiliated with the Gray Apartment Portfolio Borrower. Pinnacle is a
full-service real estate management and brokerage firm headquartered in
Seattle, Washington. Pinnacle oversees a portfolio of apartment, office,
industrial and retail assets valued at more than $12.3 billion. Pinnacle
currently has 140,000 multifamily housing units under management.
LOCKBOX. The Gray Apartment Portfolio Loan documents require a soft lockbox and
springing cash management. During a Cash Management Period, all rents are
required to be swept into an account designated by the lender. Funds in the
lender controlled account are required to be allocated towards the payment of
taxes and insurance, debt service, capital expenditures, borrower operating
expenses, extra-ordinary expenses and to the net cash flow reserve account (as
described under "Cash Flow Sweep" below). A "Cash Management Period" means any
period commencing upon (a) the occurrence of any event of default; or (b) the
debt service coverage ratio as of the last day of any calendar quarter
(beginning with the four quarters ending December 31, 2006) being less than
1.10x. A Cash Management Period will terminate if (i) with respect to the
matter described in clause (a) of the definition of the term Cash Management
Period above, such event of default no longer exists or (ii) with respect to
the matter described in clause (b) of the definition of the term Cash
Management Period above, the debt service coverage ratio is at least 1.10x.
ESCROWS/RESERVES. The following escrow/reserve accounts have been established
with respect to the Gray Apartment Portfolio Loan.
--------------------------------------------------------------------------------
ESCROWS / RESERVES
TYPE: INITIAL MONTHLY
--------------------------------------------------------------------------------
Taxes $565,000 $56,037
Insurance $ 0 $29,265
Capital Expenditure Reserve $ 0 $16,438
Deferred Maintenance $256,194 $ 0
--------------------------------------------------------------------------------
CASH FLOW SWEEP. During a Cash Management Period (as defined above) any funds
remaining in the cash collateral account after the funding of debt service,
reserves, operating expenses and extra-ordinary expenses will be swept into the
excess cash collateral account and held as additional collateral until the Cash
Management Period is terminated.
ADDITIONAL DEBT. Other than permitted trade payables paid in the ordinary
course of business, the Gray Apartment Portfolio Borrower is not permitted to
incur additional debt.
RELEASE PROVISIONS. The mortgage loan documents permit the Gray Apartment
Portfolio Borrower to obtain a release of an individual property from the lien
of the mortgage loan documents provided that: (a) no event of default exists;
(b) the Gray Apartment Portfolio Borrower shall have fully
____________________
(1) Certain information in this section was obtained from third party
appraisals. The appraisals rely on many assumptions and no representation
is made as to the accuracy of those assumptions.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
69
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--------------------------------------------------------------------------------
defeased the loan relating to the release property in an amount equal to 100%
of the outstanding principal balance of the related note; (c) the release
property is conveyed to an entity unaffiliated with the Gray Apartment
Portfolio Borrower; (d) the debt service coverage ratio for the remaining
property is no less than 1.20x if the remaining loan property is Evergreen
Pointe and 1.25x if the remaining loan property is Park at Lakeside. If the
underwritten net cash flow of the property that will remain, subject to the
liens of the Gray Apartment Portfolio Loan documents, would not be sufficient
to satisfy such debt service coverage ratio requirement given the then-current
principal balance of the remaining loan, then the Gray Apartment Portfolio
Borrower may post as additional collateral treasuries in an aggregate amount
such that after such partial defeasance the debt service coverage ratio
requirement is satisfied.
The Gray Apartment Portfolio Loan documents permit a release of the
cross-collateralization arrangement upon the defeasance of either property. In
addition, the Gray Apartment Portfolio Loan documents permit a release of the
cross if either Gray Apartment Portfolio Property is sold to an entity
unaffiliated with the Gray Apartment Portfolio Borrower and the loan is assumed
in accordance with the terms of the Gray Apartment Portfolio Loan documents.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
70
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--------------------------------------------------------------------------------
[THIS PAGE INTENTIONALLY LEFT BLANK.]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
71
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--------------------------------------------------------------------------------
HAVERLY PARK APARTMENTS
[2 PHOTOS OF HAVERLY PARK APARTMENTS]
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
Number of Mortgaged Real Properties 1
Location (City/State) Dallas, TX
Property Type Multifamily
Size (Units) 636
Percentage Occupancy as of April 13 2007 97.6%
Year Built 1984
Appraisal Value $42,520,000
Average Monthly Rent Per Unit $747
Underwritten Occupancy 92.5%
Underwritten Revenues $4,998,821
Underwritten Total Expenses $2,585,934
Underwritten Net Operating Income (NOI) $2,412,887
Underwritten Net Cash Flow (NCF) $2,285,687
2/28/2007 TTM NOI $2,295,519
2006 NOI $2,265,287
2005 NOI $2,163,104
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MORTGAGE LOAN INFORMATION
--------------------------------------------------------------------------------
Mortgage Loan Seller CRF
Loan Group 2
Origination Date April 30, 2007
Cut-off Date Principal Balance $30,000,000
Cut-off Date Loan Balance Per SF/Unit $47,170
Percentage of Initial Mortgage Pool Balance 1.2%
Number of Mortgage Loans 1
Type of Security (Fee/Leasehold) Fee
Mortgage Rate 5.1100%(1)
Amortization Type IO-Balloon
IO Period (Months) 36
Original Term to Maturity/ARD (Months) 120
Original Amortization Term (Months) 420
Call Protection LO(27), Def(89), O(4)
Lockbox Soft
Cut-off Date LTV Ratio 70.6%
LTV Ratio at Maturity or ARD 65.7%
Underwritten DSCR on NOI 1.21x(2)
Underwritten DSCR on NCF 1.14x(3)
--------------------------------------------------------------------------------
(1) The interest rate is 5.11% through and including the payment date in May
2010 and will increase to 5.77% commencing on the payment date in June
2010. The DSCR shown here and used throughout the accompanying offering
prospectus is calculated based on the 5.77% interest rate.
(2) The Underwritten DSCR on NOI during the initial interest only period is
1.55x.
(3) The Underwritten DSCR on NCF during the initial interest only period is
1.47x.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
72
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--------------------------------------------------------------------------------
[MAP OF HAVERLY PARK APARTMENTS]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
73
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--------------------------------------------------------------------------------
THE LOAN. The mortgage loan (the "Haverly Park Apartments Loan") is evidenced
by a promissory note and is secured by a first mortgage encumbering two
directly adjacent class B apartment complexes consisting in the aggregate of
636 units located in Dallas, Texas (collectively, the "Haverly Park Apartments
Property"). The Haverly Park Apartments Loan represents approximately 1.2% of
the initial mortgage pool balance and approximately 2.9% of the initial loan
group 2 balance.
The Haverly Park Apartments Loan was originated on April 30, 2007, and has a
principal balance as of the cut-off date of $30,000,000. The Haverly Park
Apartments Loan has a remaining term of 117 months and a scheduled maturity
date of May 8, 2017. The Haverly Park Apartments Loan permits defeasance of the
entire loan with United States Treasury obligations or other non-callable
government securities beginning two years after the creation of the
securitization trust. Voluntary prepayment of the Haverly Park Apartments Loan
is permitted on or after February 8, 2017, without penalty.
THE PROPERTY. The Haverly Park Apartments Loan is secured by the fee interest
in two directly adjacent class B apartment complexes consisting in the
aggregate of 636 units, located in Dallas, Texas. The Haverly Park Apartments
Property was constructed between 1983 and 1984. Community amenities include
four swimming pools, two hot tubs, a 24-hour fitness club and five on-site
laundry facilities. All units feature 9-foot ceilings, patios/balconies with
extra storage, and are pre-wired for cable. Upgraded units also have vaulted
ceilings, fireplaces, built-in bookshelves, dry bars, kitchen pantries and
washer/dryer connections. There are 248 covered parking spaces.
The Haverly Park Apartments Borrower plans to implement a $2,249,759
($3,537/unit) capital plan over the next 28 months to upgrade all units. The
renovation will include kitchen appliance replacement, new cabinet doors and
countertops, upgrades for kitchen flooring and carpet, and bath vinyl
replacement. There are also plans to upgrade the fitness center, leasing
office, and party room. See "Escrows/Reserves" below.
The Haverly Park Apartments Property is built on 26.5 acres, and is located 17
miles north of the Dallas central business district, in the Plano area.
Located off of the North Dallas Tollway, just north of the intersection with
the LBJ Freeway and just south of the George Bush Turnpike, the Haverly Park
Apartments Property is located in an infill area with a limited amount of
multifamily-zoned land.
--------------------------------------------------------------------------------
UNIT BREAKDOWN AND OCCUPANCY AS OF APRIL 13, 2007
1-BEDROOM UNITS/OCCUPANCY 2-BEDROOM UNITS/OCCUPANCY
--------------------------------------------------------------------------------
232 units/97.4% 404 units/97.7%
--------------------------------------------------------------------------------
The following tables present certain information regarding the Haverly Park
Apartments Property.
---------------------------------------------------------------------------------------------------------------------------------
MULTIFAMILY INFORMATION(1)
WEIGHTED
AVERAGE UNIT NET % OF WEIGHTED AVERAGE WEIGHTED AVERAGE MONTHLY
UNIT MIX NO. OF UNITS SQUARE FEET RENTABLE SF TOTAL UNITS MONTHLY ASKING RENT(1) MARKET RENT/UNIT(2)
---------------------------------------------------------------------------------------------------------------------------------
1 BR 232 621 140,323 36.5% $632 $653
2 BR 404 921 363,999 63.5% $813 $846
---------------------------------------------------------------------------------------------------------------------------------
Total/Wtd. Avg. 636 812 504,322 100.0% $747 $776
---------------------------------------------------------------------------------------------------------------------------------
(1) Information obtained from the Haverly Park Apartments Borrower's rent roll
dated April 13, 2007.
(2) Information obtained from appraisal dated April 2, 2007.
THE MARKET(1). The Haverly Park Apartments Property is located at the
intersection of Haverwood Lane and Pear Ridge Drive. The Dallas apartment
market has a total of 394,465 units, of which 93.1% were occupied as of January
2007. Occupancy has increased 3.2% since the first quarter of 2005.
Historically, the property has had average occupancies of 94% in 2006, 96% in
2005, and 93% in 2004.
Rental rates in the market have remained steady over the past two years
increasing from $0.84/square foot at the beginning of 2005 to $0.85/ square
foot at the end of 2006. The Far North Dallas submarket has a total of 28,629
units, of which 94.1% were occupied as of January 2007. Occupancy has increased
1.5% since the first quarter of 2005. Rental rates in the submarket have
increased slightly over the past two years from $0.86/ square foot at the
beginning of 2005 to $0.88/SF at the end of 2006.
The population within a one and three mile radius of the subject property is
23,020 and 126,074, respectively; while the average household income is $83,390
and $97,391, respectively. There has been rapid population growth since 2000
in both the one-mile (17.56%) and three-mile (10.69%) radius.
THE BORROWER. The borrower consists of 29 tenant-in-common borrowers (the
"Haverly Park Apartments Borrower"), each of which is a single purpose Delaware
limited liability company. The Haverly Park Apartments Borrower is indirectly
wholly-owned by Eliason, Inc., which, together with its affiliates, operate
real estate projects in the Midwestern and Southeastern U.S. David J. Eliason
and Brian E. Eliason are the non-recourse carve-out guarantors. In addition,
with respect to the non-recourse carve-outs that relate to an individual
borrower, each tenant-in-common borrower has an individual guarantor.
____________________
(1) Certain information in this section was obtained from third party
appraisals. The appraisals rely on many assumptions and no representation
is made as to the accuracy of those assumptions.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
74
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
David J. Eliason is the President and Co-Founder of Eliason, Inc. His
responsibilities include overseeing the acquisition of new properties and
securing financing from multiple sources. In the past three years, David
Eliason has structured in excess of $150 million in real estate transactions
and the corresponding debt financing for such transactions.
Brian E. Eliason is Chief Executive Officer and Co-Founder of Eliason, Inc. Mr.
Eliason is responsible for analyzing and structuring transactions. During Mr.
Eliason's tenure as CEO, Eliason, Inc. and its affiliates have acquired more
than 750 multi-family units and 280,000 square feet of retail space.
PROPERTY MANAGEMENT. The property manager for the Haverly Park Apartments
Property is Lincoln Property Company. According to the Lincoln Property
Company, it is one of the largest diversified real estate companies in the
United States. According to Lincoln Property Company, it began by developing
apartment buildings in the Dallas area and then expanded into commercial and
retail projects. It owns, leases and manages approximately 250 residential
communities throughout the United States. Its commercial division provides
management, development and brokerage services for industrial, office, retail
and mixed-use real estate.
LOCKBOX. The Haverly Park Apartments Loan documents require a soft lockbox and
springing cash management. During the occurrence of a Cash Management Period,
all rents are required to be swept into an account designated by the lender.
Funds in the lender controlled account are required to be allocated towards the
payment of taxes and insurance, debt service, capital expenditures, borrower
operating expenses, extra-ordinary expenses and, if a Cash Sweep Event then
exists, funds will be distributed to the excess cash flow reserve account (as
described under "Cash Flow Sweep" below). A "Cash Management Period" means any
period commencing upon (a) the occurrence of any event of default; or (b) a
Cash Sweep Event. A "Cash Sweep Event" means, the aggregate debt service
coverage ratio is less than 1.05x for any trailing 12 month period. A Cash
Sweep Event will terminate when the aggregate debt service coverage ratio has
been at least 1.15x for at least two consecutive calendar quarters. A Cash
Management Period will terminate if (i) with respect to the matter described in
clause (a) of the definition of the term Cash Management Period above, such
event of default no longer exists, (ii) with respect to the matter described in
clause (b) of the definition of the term Cash Management Period above, the Cash
Sweep Event has terminated, or (iii) the lender otherwise elects, in its sole
discretion, to terminate the Cash Management Period.
ESCROWS/RESERVES. The following escrow/reserve accounts have been established
with respect to the Haverly Park Apartments Loan.
--------------------------------------------------------------------------------
ESCROWS / RESERVES
TYPE: INITIAL MONTHLY
--------------------------------------------------------------------------------
Taxes $234,667 $58,667
Insurance $ 0 $ 8,073
Capital Expenditure Reserve $ 0(1) $ 0(1)
--------------------------------------------------------------------------------
(1) Beginning on the payment date in July 2010 and on each payment date
thereafter, the Haverly Park Apartments Borrower will be required to
deposit on a monthly basis into the Capital Expenditure Reserve $10,600
which amount will increase by 2% on each anniversary of the Haverly Park
Apartments Loan closing date occurring after July 2010. In addition, on
the payment date in July 2010 the Haverly Park Apartments Borrower is
required to deposit $1,687,500 less any capital expenditure outlays
actually made by the Haverly Park Apartments Borrower.
The Haverly Park Apartments Borrower also deposited $1,687,500 with a deposit
bank (not a lender controlled account) to be used for the capital plan
described under "The Property" above.
CASH FLOW SWEEP. During a Cash Sweep Event (as defined above) any funds
remaining in the cash collateral account after the funding of debt service,
reserves, operating expenses, extra-ordinary expenses will be swept into the
excess cash collateral account and held as additional collateral until the Cash
Sweep Period is terminated.
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
75
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
--------------------------------------------------------------------------------
[THIS PAGE INTENTIONALLY LEFT BLANK.]
This material is being provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Countrywide Securities Corporation, KeyBanc Capital Markets Inc.,
Banc of America Securities LLC and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters") for your information. This material is not to be construed as
an offer to sell or the solicitation of any offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. The
information contained in this material may pertain to securities that
ultimately are not sold. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
herein. The Underwriters make no representation regarding the likelihood that
any of such assumptions will coincide with actual market conditions or events.
The Underwriters and their affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned herein or derivatives thereof (including
options). Information contained in this material is current as of the date
appearing in this material only. INFORMATION IN THIS MATERIAL REGARDING ANY
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION
REGARDING SUCH ASSETS. ANY INFORMATION IN THIS MATERIAL, WHETHER REGARDING THE
ASSETS BACKING ANY SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED
BY THE INFORMATION CONTAINED IN ANY PROSPECTUS DELIVERED TO YOU PRIOR TO THE
TIME OF SALE. The Underwriters are acting as underwriters and not acting as
agents for the issuer in connection with the proposed transaction.
76
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
135 S. LaSalle Street, Suite 1625 Record Date: 31-Aug-07
Chicago, IL60603
USA
ABN AMRO ACCT:
Administrator: Analyst:
Richard La Vigne 312.992.3773 REPORTING PACKAGE TABLE OF CONTENTS Patrick Gong 714.259.6253
richard.lavigne@abnamro.compatrick.gong@abnamro.com
------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------- ------------------------------------------------------------ ----------------------------
Page(s)
-------
Issue Id: MLCFC078 Statements to Certificateholders Page 2 Closing Date: 24-Aug-2007
Cash Reconciliation Summary Page 3
Monthly Data File Bond Interest Reconciliation Page 4
Name: MLCFC078_200709_3.ZIP Bond Interest Reconciliation Page 5 First Payment Date:
Bond Principal Reconciliation Page 6
--------------------------------------- Shortfall Summary Report Page 7
Asset-Backed Facts ~ 15 Month Loan Rated Final Payment Date:
Status Summary Page 8
Asset-Backed Facts ~ 15 Month Loan
Payoff/Loss Summary Page 9 Determination Date:
Mortgage Loan Characteristics Page 10
Delinquent Loan Detail Page 11 ----------------------------
Loan Level Detail Page 12 Trust Collection Period
Realized Loss Detail Page 13 ----------------------------
Collateral Realized Loss Page 14
Appraisal Reduction Detail Page 15 ----------------------------
Material Breaches Detail Page 16
Historical Collateral Prepayment Page 17
Specially Serviced (Part I) - Loan Detail Page 18
Specially Serviced (Part II) - Servicer Comments Page 19
Summary of Loan Maturity Extensions Page 20
Rating Information Page 21
Other Realated Information Page 22
SWAP Summary Page 23
------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
PARTIES TO THE TRANSACTION
-------------------------------------------------------------------------------------------------------------------------
Depositor: Merrill Lynch Mortagae Investors, Inc.
Master Servicer: KeyCorp Real Estate Capital Markets, Inc./Wells Fargo Bank, National Association
Rating Agency: Fitch, Inc./Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
Special Servicer: Midland Loan Services, Inc.
Underwriter: Banc of America Securities LLC/Bear Stearns & Co. Inc./Countrywide Securities
Corporation/KeyBanc Capital Markets, Inc./Merrill Lynch, Pierce, Fenner &
Smith Incorporated
-------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------
INFORMATION IS AVAILABLE FOR THIS ISSUE FROM THE FOLLOWING SOURCES
---------------------------------------------------------------------------------
LaSalle Web Site www.etrustee.net
Servicer Web Site www.ctslink.com
LaSalle Factor Line 800.246.5761
---------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
PAGE 1 OF 23
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
Record Date: 31-Aug-07
ABN AMRO ACCT:
------------------------------------------------------------------------------------------------------------------------------------
ORIGINAL OPENING PRINCIPAL PRINCIPAL NEGATIVE CLOSING INTEREST INTEREST PASS-THROUGH
CLASS FACE VALUE (1) BALANCE PAYMENT ADJ. OR LOSS AMORTIZATION BALANCE PAYMENT (2) ADJUSTMENT RATE
CUSIP Next Rate(3)
------------------------------------------------------------------------------------------------------------------------------------
Total
------------------------------------------------------------------------------------------------------------------------------------
--------------------------------
Total P&I Payment
--------------------------------
Notes: (1) N denotes notional balance not included in total (2) Accrued Interest Plus/Minus Interest Adjustment Minus Deferred
Interest equals Interest Payment (3) Estimated. * Denotes Controlling Class
PAGE 2 OF 23
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
Record Date: 31-Aug-07
ABN AMRO ACCT:
BOND INTEREST RECONCILIATION DETAIL
--------------------------------------------------------------------------------------------------------------------------
Current Remaining
Accrual Pass- Accrued Total Total Distributable Interest Period Outstanding
------------ Opening Through Certificate Interest Interest Certificate Payment Shortfall Interest
Class Method Days Balance Rate Interest Additions Deductions Interest Amount Recovery Shorfalls
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
---------------------------
Credit
Support
--------------------
Class Original Current(1)
---------------------------
---------------------------
(1) Determined as follows: (A) the ending balance of all the classes less (B) the sum of (i) the ending balance of the class and
(ii) the ending balance of all classes which are not subordinate to the class divided by (A).
PAGE 4 OF 23
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
Record Date: 31-Aug-07
ABN AMRO ACCT:
BOND INTEREST RECONCILIATION DETAIL
--------------------------------------------------------------------------------------
Additions
-----------------------------------------------------------
Prior Interest
Prior Current Interest Accrual Other
Interest Interest Shortfall on Prior Prepayment Yield Interest
Class Due Date Due Date Due Shortfall Premiums Maintenance Proceeds (1)
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
-----------------------------------------------------------
-------------------------------------------------------------------
Deductions
-----------------------------------
Deferred & Distributable Interest
Allocable Accretion Interest Certificate Payment
Class PPIS Interest Loss Expense Interest Amount
-------------------------------------------------------------------
-------------------------------------------------------------------
------------------------------------------------------------
(1) Other Interest Proceeds are additional interest amounts specifically allocated to the bond(s) and used in determining the
Bondholder's Distributable Interest.
PAGE 5 OF 23
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
Record Date: 31-Aug-07
ABN AMRO ACCT:
BOND PRINCIPAL RECONCILIATION
--------------------------------------------------------------------------------------------------
Accreted Principal
-------------------------
Beginning Basic Extra Int Shortfall Pool Extra Pledged
class Principle Principle Res Fund Loss Principle Certificate
Class Balance Payment Amt Payment Amt Release Allocations Payment Amt Def Interest
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
0.00
-----------------------------------------------------------------------
-------------------------------------------------------------------------------------
Interest
Prior Cumulative Ending Accured on Rated Credit Support
Losses Pool Class Pool Losses Final --------------------
Class Reimbursed Loss Balance Cls A - M Maturity Original Current(4)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
------------------------------------------------------------------------------
(1) Extra Principal Amounts: the lessor of (i) the excess, if any, of the overcollateralization Target Amount over the
Overcollateralization Amount.
PAGE 6 OF 23
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
Record Date: 31-Aug-07
ABN AMRO ACCT:
INTEREST ADJUSTMENTS SUMMARY
------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------- ---------------------------------------------------------------
SHORTFALL ALLOCATED TO THE BONDS: EXCESS ALLOCATED TO THE BONDS:
------------------------------------------------------ ------------------------------------------------------
Net Prepayment Int. Shortfalls Allocated to the Bonds 0.00 Other Interest Proceeds Due the Bonds 0.00
Special Servicing Fees 0.00 Prepayment Interest Excess Due the Bonds 0.00
Workout Fees 0.00 Interest Income 0.00
Liquidation Fees 0.00 Yield Maintenance Penalties Due the Bonds 0.00
Legal Fees 0.00 Prepayment Penalties Due the Bonds 0.00
Misc. Fees & Expenses Paid by/to Servicer 0.00 Recovered ASER Interest Due the Bonds 0.00
Interest Paid to Servicer on Outstanding Advances 0.00 Recovered Interest Due the Bonds 0.00
ASER Interest Advance Reduction 0.00 ARD Excess Interest 0.00
--------
Interest Not Advanced (Current Period) 0.00 Total Excess Allocated to the Bonds 0.00
========
Recoup of Prior Advances by Servicer 0.00
Servicing Fees Paid Servicer on Loans Not Advanced 0.00
Misc. Fees & Expenses Paid by Trust 0.00
Shortfall Due to Rate Modification 0.00
Other Interest Loss 0.00
--------
Total Shortfall Allocated to the Bonds 0.00
========
--------------------------------------------------------------- ---------------------------------------------------------------
AGGREGATE INTEREST ADJUSTMENT ALLOCATED TO THE BONDS
--------------------------------------------------------------------
Total Excess Allocated to the Bonds 0.00
Less Total Shortfall Allocated to the Bonds 0.00
---------
Total Interest Adjustment to the Bonds 0.00
=========
------------------------------------------------------------------------------------------------------------------------------------
PAGE 7 OF 23
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
Record Date: 31-Aug-07
ABN AMRO ACCT:
MORTGAGE LOAN CHARACTERISTICS
DISTRIBUTION OF PRINCIPAL BALANCES DISTRIBUTION OF MORTGAGE INTEREST RATES
---------------------------------------------------------------- ----------------------------------------------------------------
Current
Current Weighted Average Mortgage Weighted Average
Scheduled # of Scheduled % of ---------------------- Interest # of Scheduled % of -----------------------
Balance Loans Balance Balance Term Coupon PFY DSCR Rate Loans Balance Balance Term Coupon PFY DSCR
---------------------------------------------------------------- ----------------------------------------------------------------
----------------------------------------------------------------
0 0 0.00%
----------------------------------------------------------------
Minimum Mortgage Interest Rate
Maximum Mortgage Interest Rate
DISTRIBUTION OF REMAINING TERM (BALLOON)
----------------------------------------------------------------
Balloon Weighted Average
---------------------------------------------------------------- Mortgage # of Scheduled % of -----------------------
0 0 0.00% Loans Loans Balance Balance Term Coupon PFY DSCR
---------------------------------------------------------------- ----------------------------------------------------------------
Average Schedule Balance 0
Maximum Schedule Balance
Minimum Schedule Balance
DISTRIBUTION OF REMAINING TERM (FULLY AMORTIZING)
----------------------------------------------------------------
Fully
Amortizing Weighted Average
Mortgage # of Scheduled % of ----------------------
Loans Loans Balance Balance Term Coupon PFY DSCR
----------------------------------------------------------------
---------------------------------------------------------------- ----------------------------------------------------------------
0 0 0.00% 0 0 0.00%
---------------------------------------------------------------- ----------------------------------------------------------------
PAGE 10 OF 23
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
Record Date: 31-Aug-07
ABN AMRO ACCT:
DELINQUENT LOAN DETAIL
------------------------------------------------------------------------------------------------------------------------------------
Paid Outstanding Out. Property Special
Disclosure Thru Current P&I P&I Protection Loan Status Servicer Foreclosure Bankruptcy REO
Control # Date Advance Advances** Advances Code (1) Transfer Date Date Date Date
------------------------------------------------------------------------------------------------------------------------------------
TOTAL
------------------------------------------------------------------------------------------------------------------------------------
(1): LEGEND: A. IN GRACE PERIOD 1. DELINQ. 1 MONTH 3. DELINQUENT 3 + MONTHS 5. NON PERFORMING MATURED BALLOON 9. REO
B. LATE PAYMENT BUT 2. DELINQ. 2 MONTHS 4. PERFORMING MATURED BALLOON 7. FORECLOSURE
< 1 MONTH DELINQ.
------------------------------------------------------------------------------------------------------------------------------------
** Outstanding P&I Advances include the current period P&I Advances and may include Servicer Advances.
PAGE 11 OF 23
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
Record Date: 31-Aug-07
ABN AMRO ACCT:
LOAN LEVEL DETAIL
------------------------------------------------------------------------------------------------------------------------------------
Operating Ending Loan
Disclosure Property Maturity PFY Statement Geo. Principal Note Scheduled Prepayment Prepayment Status
Control # Group Type Date DSCR Date Location Balance Rate P&I Amount Date Code (1)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
* NOI and DSCR, if available and reportable under the terms of the trust agreement, are based on information obtained from the
related borrower, and no other party to the agreement shall be held liable for the accuracy or methodology used to determine such
figures.
------------------------------------------------------------------------------------------------------------------------------------
(1) Legend: A. In Grace Period 1. Delinquent 1 month 3. Delinquent 3+ months 5. Non Performing 9. REO
Matured Ballon
B. Late Payment but 2. Delinquent 2 months 4. Performing Matured 7. Foreclosure
< 1 month delinq Balloon
------------------------------------------------------------------------------------------------------------------------------------
PAGE 12 OF 23
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
Record Date: 31-Aug-07
ABN AMRO ACCT:
REALIZED LOSS DETAIL
------------------------------------------------------------------------------------------------------------------------------------
Beginning Gross Proceeds Aggregate Net Net Proceeds
Disclosure Appraisal Appraisal Scheduled Gross as a % of Liquidation Liquidation as a % of Realized
Period Control # Date Value Balance Proceeds Sched. Balance Expenses * Proceeds Sched. Balance Loss
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
CURRENT TOTAL
CUMULATIVE
------------------------------------------------------------------------------------------------------------------------------------
* Aggregate liquidation expenses also include outstanding P&I advances and unpaid servicing fees, unpaid trustee fees, etc..
PAGE 13 OF 23
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
Record Date: 31-Aug-07
ABN AMRO ACCT:
BOND/COLLATERAL REALIZED LOSS RECONCILIATION
Interest
Beginning (Shortages)/
Balance of the Aggregate Prior Realized Amounts Covered by Excesses applied
Prospectus Loan at Realized Loss Loss Applied to Overcollateralization to Realized
ID Period Liquidation on Loans Certificates and other Credit Losses
A B C
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
Additional (Recoveries)/
Modification (Recoveries)/ Current Realized Loss Recoveries of Realized Loss
Prospectus Adjustments/Appraisal Expenses applied to Applied to Realized Losses Applied to
ID Reduction Adjustment Realized Losses Certificates* paid as Cash Certificate Interest
D E
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
*In the Initial Period the Current Realized Loss Applied to Certificates will equal Aggregate Realized Loss on Loans - B - C - D + E
instead of A - C - D + E
Description of Fields
---------------------
A Prior Realized Loss Applied to Certificates
B Reduction to Realized Loss applied to bonds (could represent OC, insurance policies, reserve
accounts, etc)
C Amounts classified by the Master as interest adjustments from general collections on a loan with a
Realized Loss
D Adjustments that are based on principal haircut or future interest foregone due to modification
E Realized Loss Adjustments, Supplemental Recoveries or Expenses on a previously liquidated loan
PAGE 14 of 23
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
Record Date: 31-Aug-07
ABN AMRO ACCT:
MATERIAL BREACHES AND MATERIAL DOCUMENT DEFECT DETAIL
--------------------------------- ------------------------------------------------------------------------------------------------
Ending Material
Disclosure Principal Breach Material Breach and Material Document Defect
Control # Balance Date Description
--------------------------------- ------------------------------------------------------------------------------------------------
--------------------------------- ------------------------------------------------------------------------------------------------
Material breaches of pool asset representation or warranties or transaction covenants. PAGE 16 OF 23
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
Record Date: 31-Aug-07
ABN AMRO ACCT:
MATURITY EXTENSION SUMMARY
------------------------------------------------------------------------------------------------------------------------------------
LOANS WHICH HAVE HAD THEIR MATURITY DATES EXTENDED
Number of Loans: 0
Stated Principal Balance outstanding: 0.00
Weighted Average Extension Period: 0
LOANS IN THE PROCESS OF HAVING THEIR MATURITY DATES EXTENDED
Number of Loans: 0
Stated Principal Balance outstanding: 0.00
Weighted Average Extension Period: 0
LOANS IN THE PROCESS OF HAVING THEIR MATURITY DATES FURTHER EXTENDED
Number of Loans: 0
Cutoff Principal Balance: 0.00
Weighted Average Extension Period: 0
LOANS PAID-OFF THAT DID EXPERIENCE MATURITY DATE EXTENSIONS
Number of Loans: 0
Cutoff Principal Balance: 0.00
Weighted Average Extension Period: 0
LOANS PAID-OFF THAT DID NOT EXPERIENCE MATURITY DATE EXTENSIONS
Number of Loans: 0
Cutoff Principal Balance: 0.00
------------------------------------------------------------------------------------------------------------------------------------
PAGE 20 OF 23
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
Record Date: 31-Aug-07
ABN AMRO ACCT:
RATING INFORMATION
------------------------------------------------------------------------------------------------------------------------------------
-------------------- ------------------------------------------ ------------------------------------------------
ORIGINAL RATINGS RATING CHANGE/CHANGE DATE(1)
CLASS CUSIP FITCH MOODY'S S&P FITCH MOODY'S S&P
-------------------- ------------------------------------------ ------------------------------------------------
-------------------- ------------------------------------------ ------------------------------------------------
NR - Designates that the class was not rated by the rating agency.
(1) Changed ratings provided on this report are based on information provided by the applicable rating agency via electronic
transmission. It shall be understood that this transmission will generally have been provided to LaSalle within 30 days of the
payment date listed on this statement. Because ratings may have changed during the 30 day window, or may not be being provided by
the rating agency in an electronic format and therefore not being updated on this report, LaSalle recommends that investors obtain
current rating information directly from the rating agency.
------------------------------------------------------------------------------------------------------------------------------------
PAGE 21 OF 23
[LOGO] LASALLE BANK ML-CFC COMMERICAL MORTGAGE TRUST 2007-8 Statement Date: 14-Sep-07
ABN AMRO COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 14-Sep-07
SERIES 2007-8 Prior Payment: N/A
Next Payment: 12-Oct-07
Record Date: 31-Aug-07
ABN AMRO ACCT:
LEGEND
------------------------------------------------------------------------------------------------------------------------------------
Until this statement/report is filed with the Commission with respect to the Trust pursuant to Section 15(d) of the Securities
Exchange Act of 1934, as amended, the recipient hereof shall be deemed to keep the information contained herein confidential and
such information will not, without the prior consent of the Master Servicer or the Trustee, be disclosed by such recipient or by its
officers, directors, partners, employees, agents or representatives in any manner whatsoever, in whole or in part.
------------------------------------------------------------------------------------------------------------------------------------
PAGE 22 OF 23
ANNEX F
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in limited circumstances, the globally offered ML-CFC Commercial
Mortgage Trust 2007-8, Commercial Mortgage Pass-Through Certificates, Series
2007-8, class A-1, class A-2, class A-SB, class A-3, class A-1A, class AM, class
AJ, class B, class C, class D, class E and class F, will be available only in
book-entry form.
The book-entry certificates 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.
Secondary market trading between investors holding book-entry certificates
through Clearstream and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional Eurobond practice, which is seven calendar days' settlement.
Secondary market trading between investors holding book-entry certificates
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between member organizations of Clearstream
or Euroclear and DTC participants holding book-entry certificates will be
accomplished on a delivery against payment basis through the respective
depositaries of Clearstream and Euroclear, in that capacity, as DTC
participants.
As described under "U.S. Federal Income Tax Documentation Requirements"
below, non-U.S. holders of book-entry certificates will be subject to U.S.
withholding taxes unless those holders meet specific requirements and deliver
appropriate U.S. tax documents to the securities clearing organizations of their
participants.
INITIAL SETTLEMENT
All certificates of each class of offered certificates will be held in
registered form by DTC in the name of Cede & Co. as nominee of DTC. Investors'
interests in the book-entry certificates will be represented through financial
institutions acting on their behalf as direct and indirect DTC participants. As
a result, Clearstream and Euroclear will hold positions on behalf of their
member organizations through their respective depositaries, which in turn will
hold positions in accounts as DTC participants.
Investors' securities custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their book-entry certificates 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.
Trading between DTC Participants. Secondary market trading between DTC
participants will be settled in same-day funds.
Trading between Clearstream and/or Euroclear Participants. Secondary
market trading between member organizations of Clearstream or Euroclear will be
settled using the procedures applicable to conventional Eurobonds in same-day
funds.
F-1
Trading between DTC Seller and Clearstream or Euroclear Purchaser. When
book-entry certificates are to be transferred from the account of a DTC
participant to the account of a member organization of Clearstream or Euroclear,
the purchaser will send instructions to Clearstream or Euroclear through that
member organization at least one business day prior to settlement. Clearstream
or Euroclear, as the case may be, will instruct the respective depositary to
receive the book-entry certificates against payment. Payment will include
interest accrued on the book-entry certificates from and including the 1st day
of the interest accrual period coinciding with or commencing in, as applicable,
the calendar month in which the last coupon payment date occurs (or, if no
coupon payment date has occurred, from and including the first day of the
initial interest accrual period) to and excluding the settlement date. Payment
will then be made by the respective depositary to the DTC participant's account
against delivery of the book-entry certificates. After settlement has been
completed, the book-entry certificates will be credited to the respective
clearing system and by the clearing system, in accordance with its usual
procedures, to the account of the member organization of Clearstream or
Euroclear, as the case may be. The securities credit will appear the next day,
European time, and the cash debit will be back-valued to, and the interest on
the book-entry certificates 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, which means the trade fails, the
Clearstream or Euroclear cash debit will be valued instead as of the actual
settlement date.
Member organizations of Clearstream and Euroclear 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 pre-position
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 book-entry certificates are credited to their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, member organizations of Clearstream or Euroclear can elect not
to pre-position funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, the member organizations purchasing book-entry
certificates would incur overdraft charges for one day, assuming they cleared
the overdraft when the book-entry certificates were credited to their accounts.
However, interest on the book-entry certificates would accrue from the value
date. Therefore, in many cases the investment income on the book-entry
certificates earned during that one-day period may substantially reduce or
offset the amount of those overdraft charges, although this result will depend
on the cost of funds of the respective member organization of Clearstream or
Euroclear.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending book-entry
certificates to the respective depositary for the benefit of member
organizations of Clearstream or Euroclear. 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.
Trading between Clearstream or Euroclear Seller and DTC Purchaser. Due to
time zone differences in their favor, member organizations of Clearstream or
Euroclear may employ their customary procedures for transactions in which
book-entry certificates 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 member organization of
Clearstream or Euroclear at least one business day prior to settlement. In these
cases, Clearstream or Euroclear, as appropriate, will instruct the respective
depositary to deliver the book-entry certificates to the DTC participant's
account against payment. Payment will include interest accrued on the book-entry
certificates from and including the 1st day of the interest accrual period
coinciding with or commencing in, as applicable, the calendar month in which the
last coupon payment date occurs (or, if no coupon payment date has occurred,
from and including the first day of the initial interest accrual period) to and
excluding the settlement date. The payment will then be reflected in the account
of the member organization of Clearstream or Euroclear the following day, and
receipt of the cash proceeds in the account of that member organization of
Clearstream or Euroclear would be back-valued to the value date, which would be
the preceding day, when settlement occurred in New York. Should the member
organization of Clearstream or Euroclear have a line of credit with its
respective clearing system and elect to be in debit in anticipation of receipt
of the sale proceeds in its account, the back-valuation will extinguish any
overdraft charges incurred over the one-day period. If settlement is not
completed on the intended value date, which means the trade fails, receipt of
the cash proceeds in the account of the member organization of Clearstream or
Euroclear would be valued instead as of the actual settlement date.
F-2
Finally, day traders that use Clearstream or Euroclear and that purchase
book-entry certificates from DTC participants for delivery to member
organizations of Clearstream or Euroclear should note that these trades would
automatically fail on the sale side unless affirmative action were 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 day trade is reflected in their Clearstream or
Euroclear accounts, in accordance with the clearing system's
customary procedures;
o borrowing the book-entry certificates in the United States from a
DTC participant no later than one day prior to settlement, which
would allow sufficient time for the book-entry certificates to be
reflected in their Clearstream or Euroclear accounts 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 member
organization of Clearstream or Euroclear.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A holder that is not a "United States person" (a "U.S. person") within the
meaning of Section 7701(a)(30) of the Internal Revenue Code (a "non-U.S.
holder") holding a book-entry certificate through Clearstream, Euroclear or DTC
may be subject to U.S. withholding tax unless such holder provides certain
documentation to the issuer of such holder's book-entry certificate, the paying
agent or any other entity required to withhold tax (any of the foregoing, a
"U.S. withholding agent") establishing an exemption from withholding. A non-U.S.
holder may be subject to withholding unless each U.S. withholding agent
receives:
1. from a non-U.S. holder that is classified as a corporation for U.S.
federal income tax purposes or is an individual, and is eligible for
the benefits of the portfolio interest exemption or an exemption (or
reduced rate) based on a treaty, a duly completed and executed IRS
Form W-8BEN (or any successor form);
2. from a non-U.S. holder that is eligible for an exemption on the
basis that the holder's income from the certificate is effectively
connected to its U.S. trade or business, a duly completed and
executed IRS Form W-8ECI (or any successor form);
3. from a non-U.S. holder that is classified as a partnership for U.S.
federal income tax purposes, a duly completed and executed IRS Form
W-8IMY (or any successor form) with all supporting documentation (as
specified in the U.S. Treasury Regulations) required to substantiate
exemptions from withholding on behalf of its partners; certain
partnerships may enter into agreements with the IRS providing for
different documentation requirements and it is recommended that such
partnerships consult their tax advisors with respect to these
certification rules;
4. from a non-U.S. holder that is an intermediary (i.e., a person
acting as a custodian, a broker, nominee or otherwise as an agent
for the beneficial owner of a certificate):
(a) if the intermediary is a "qualified intermediary" within the
meaning of section 1.1441-1(e)(5)(ii) of the U.S. Treasury
Regulations (a "qualified intermediary"), a duly completed and
executed IRS Form W-8IMY (or any successor or substitute
form):
(i) stating the name, permanent residence address and
qualified intermediary employer identification number of
the qualified intermediary and the country under the
laws of which the qualified intermediary is created,
incorporated or governed;
(ii) certifying that the qualified intermediary has provided,
or will provide, a withholding statement as required
under section 1.1441-1(e)(5)(v) of the U.S. Treasury
Regulations;
F-3
(iii) certifying that, with respect to accounts it identifies
on its withholding statement, the qualified intermediary
is not acting for its own account but is acting as a
qualified intermediary; and
(iv) providing any other information, certifications, or
statements that may be required by the IRS Form W-8IMY
or accompanying instructions in addition to, or in lieu
of, the information and certifications described in
section 1.1441-1(e)(3)(ii) or 1.1441-1(e)(5)(v) of the
U.S. Treasury Regulations; or
(b) if the intermediary is not a qualified intermediary (a
"nonqualified intermediary"), a duly completed and executed
IRS Form W-8IMY (or any successor or substitute form):
(i) stating the name and permanent residence address of the
nonqualified intermediary and the country under the laws
of which the nonqualified intermediary is created,
incorporated or governed;
(ii) certifying that the nonqualified intermediary is not
acting for its own account;
(iii) certifying that the nonqualified intermediary has
provided, or will provide, a withholding statement that
is associated with the appropriate IRS Forms W-8 and W-9
required to substantiate exemptions from withholding on
behalf of such nonqualified intermediary's beneficial
owners; and
(iv) providing any other information, certifications or
statements that may be required by the IRS Form W-8IMY
or accompanying instructions in addition to, or in lieu
of, the information, certifications, and statements
described in section 1.1441-1(e)(3)(iii) or (iv) of the
U.S. Treasury Regulations; or
5. from a non-U.S. holder that is a trust, depending on whether the
trust is classified for U.S. federal income tax purposes as the
beneficial owner of the certificate, either an IRS Form W-8BEN or
W-8IMY; any non-U.S. holder that is a trust should consult its tax
advisors to determine which of these forms it should provide.
All non-U.S. holders will be required to update the above-listed forms and
any supporting documentation in accordance with the requirements under the U.S.
Treasury Regulations. These forms generally remain in effect for a period
starting on the date the form is signed and ending on the last day of the third
succeeding calendar year, unless a change in circumstances makes any information
on the form incorrect. Under certain circumstances, an IRS Form W-8BEN, if
furnished with a taxpayer identification number, remains in effect until the
status of the beneficial owner changes, or a change in circumstances makes any
information on the form incorrect.
In addition, all holders, including holders that are U.S. persons, holding
book-entry certificates through Clearstream, Euroclear or DTC may be subject to
backup withholding unless the holder:
o provides the appropriate IRS Form W-8 (or any successor or
substitute form), duly completed and executed, if the holder is a
non-U.S. holder;
o provides a duly completed and executed IRS Form W-9, if the holder
is a U.S. person; or
o can be treated as an "exempt recipient" within the meaning of
section 1.6049-4(c)(1)(ii) of the U.S. Treasury Regulations (e.g., a
corporation or a financial institution such as a bank).
This summary does not deal with all of the aspects of U.S. federal income
tax withholding or backup withholding that may be relevant to investors that are
non-U.S. holders. Such holders are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of book-entry
certificates.
F-4
PROSPECTUS
MERRILL LYNCH MORTGAGE INVESTORS, INC., THE DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES, ISSUABLE IN SERIES
We are Merrill Lynch Mortgage Investors, Inc., the depositor with respect
to each series of certificates offered by this prospectus. We intend to offer
from time to time mortgage pass-through certificates, issuable in series. These
offers may be made through one or more different methods, including offerings
through underwriters. We do not currently intend to list the offered
certificates of any series on any national securities exchange or the NASDAQ
stock market. See "METHOD OF DISTRIBUTION."
--------------------------------------------------------------------------------
THE OFFERED CERTIFICATES:
The offered certificates will be issuable in series. The issuing entity for each
series of offered certificates will be a statutory or common law trust created
at our direction. Each series of offered certificates will--
o have its own series designation, and
o consist of one or more classes with various payment characteristics.
The offered certificates will represent interests only in the issuing entity.
The offered certificates will not represent interests in or obligations of the
depositor, any of the sponsors or any of our or their respective affiliates.
ASSETS OF THE ISSUING ENTITY:
The assets of each issuing entity will include--
o mortgage loans secured by first and/or junior liens on, or security
interests in, various interests in commercial and multifamily real
properties,
o mortgage-backed securities that directly or indirectly evidence interests
in, or are directly or indirectly secured by, those types of mortgage
loans, or
o some combination of those types of mortgage loans and mortgage-backed
securities.
The assets of the issuing entity may also include cash, permitted investments,
letters of credit, surety bonds, insurance policies, guarantees, reserve funds,
guaranteed investment contracts, interest rate exchange agreements, interest
rate cap or floor agreements or currency exchange agreements.
--------------------------------------------------------------------------------
In connection with each offering, we will prepare a supplement to this
prospectus in order to describe in more detail the particular certificates being
offered and the assets of the related issuing entity, which may consist of any
of the assets described under "THE TRUST FUND.". In that document, we will also
state the price to the public for the subject offered certificates or explain
the method for determining that price, identify the applicable lead or managing
underwriter(s), if any, and provide information regarding the relevant
underwriting arrangements and the underwriters' compensation. We will identify
in each prospectus supplement the sponsor or sponsors for the subject
securitization transaction.
Structural credit enhancement will be provided for the respective classes
of offered certificates through overcollateralization, the subordination of more
junior classes of offered and/or non-offered certificates, the use of a letter
of credit, a surety bond, an insurance policy or a guarantee, the establishment
of one or more reserve funds or any combination of the foregoing. Payments on a
class of offered certificates may occur monthly, bi-monthly, quarterly,
semi-annually or at any other specified interval, commencing on the distribution
date specified in the related prospectus supplement.
--------------------------------------------------------------------------------
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 20 IN
THIS PROSPECTUS PRIOR TO INVESTING.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE OFFERED CERTIFICATES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------------------------------------------------------------------------
The date of this prospectus is May 10, 2007.
General .......................................................................................................137
REMICs ........................................................................................................139
Grantor Trusts.................................................................................................163
STATE AND OTHER TAX CONSEQUENCES........................................................................................174
ERISA CONSIDERATIONS....................................................................................................174
General .......................................................................................................174
Plan Asset Regulations.........................................................................................175
Prohibited Transaction Exemptions..............................................................................176
Underwriter's Exemption........................................................................................177
Insurance Company General Accounts.............................................................................177
Consultation with Counsel......................................................................................177
Tax Exempt Investors...........................................................................................178
LEGAL INVESTMENT........................................................................................................178
USE OF PROCEEDS.........................................................................................................180
METHOD OF DISTRIBUTION..................................................................................................180
LEGAL MATTERS...........................................................................................................182
FINANCIAL INFORMATION...................................................................................................182
RATING..................................................................................................................182
GLOSSARY................................................................................................................184
5
IMPORTANT NOTICE ABOUT THE INFORMATION PRESENTED IN THIS PROSPECTUS
When deciding whether to invest in any of the offered certificates, you
should only rely on the information contained in this prospectus and the related
prospectus supplement. We have not authorized any dealer, salesman or other
person to give any information or to make any representation that is different.
In addition, information in this prospectus or any related prospectus supplement
is current only as of the date on its cover. By delivery of this prospectus and
any related prospectus supplement, we are not offering to sell any securities,
and are not soliciting an offer to buy any securities, in any state where the
offer and sale is not permitted.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933, as amended, with respect to the
certificates offered by this prospectus. The Securities Act registration
statement number for that registration statement is 333-[_____]. This prospectus
is part of that registration statement, but the registration statement contains
additional information. Any materials, including our registration statement and
the exhibits to it, that we file with the Securities and Exchange Commission may
be read and copied at prescribed rates at the SEC's Public Reference Room at 100
F Street, N.E., Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains an internet website that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC, in addition to copies of these materials, and that internet
website is located at http://www.sec.gov.
6
SUMMARY OF PROSPECTUS
This summary contains selected information from this prospectus. It does
not contain all of the information you need to consider in making your
investment decision. TO UNDERSTAND ALL OF THE TERMS OF A PARTICULAR OFFERING OF
CERTIFICATES, YOU SHOULD READ CAREFULLY THIS PROSPECTUS AND THE RELATED
PROSPECTUS SUPPLEMENT IN FULL.
THE DEPOSITOR...................................... We are Merrill Lynch Mortgage Investors, Inc., the depositor with
respect to each series of offered certificates. We are a special
purpose Delaware corporation. Our principal offices are located at 4
World Financial Center, 10th Floor, 250 Vesey Street, New York, NewYork10080. Our main telephone number is 212-449-1000. We will acquire
the mortgage assets that are to back each series of offered
certificates and transfer them to the issuing entity. See "THEDEPOSITOR."THE SPONSOR........................................ Unless we state otherwise in the related prospectus supplement,
Merrill Lynch Mortgage Lending, Inc., which is our affiliate, will be
a sponsor with respect to each securitization transaction involving
the issuance of a series of offered certificates. If and to the extent
that there are other sponsors with respect to any securitization
transaction involving the issuance of a series of offered
certificates, we will identify each of those sponsors and include
relevant information with respect thereto in the related prospectus
supplement. With respect to any securitization transaction involving
the issuance of a series of offered certificates, a sponsor will be a
person or entity that organizes and initiates that securitization
transaction by selling or transferring assets, either directly or
indirectly, including through an affiliate, to the issuing entity. See
"THE SPONSOR."THE ISSUING ENTITIES............................... The issuing entity with respect to each series of offered certificates
will be a statutory or common law trust created at our direction. Each
issuing entity will own and hold assets of the type described under
"THE TRUST FUND" and be the entity in whose name the subject offered
certificates are issued.
THE ORIGINATORS.................................... Some or all of the mortgage loans backing a series of offered
certificates may be originated by Merrill Lynch Mortgage Lending, Inc.
or by one of our other affiliates. In addition, there may be other
third-party originators of the mortgage loans backing a series of
offered certificates. See "THE TRUST FUND--MortgageLoans--Originators." We will identify in the related prospectus
supplement for each series of offered certificates any originator or
group of affiliated originators --apart from a sponsor and/or its
affiliates-- that originated or is expected to originate mortgage
loans representing 10% or more of the related mortgage asset pool, by
balance.
THE SECURITIES BEING OFFERED....................... The securities that will be offered by this prospectus and the related
prospectus supplements consist of mortgage pass-through certificates.
These certificates will be issued in series, and each series will, in
turn, consist of one or more classes. Each series of offered
certificates will evidence interests only in the issuing
-7-
entity. Each class of offered certificates must, at the time of
issuance, be assigned an investment grade rating by at least one
nationally recognized statistical rating organization. We will
identify in the related prospectus supplement, with respect to each
class of offered certificates, each applicable rating agency and the
minimum rating to be assigned. Typically, the four highest rating
categories, within which there may be sub-categories or gradations to
indicate relative standing, signify investment grade. See "RATING."
THE OFFERED CERTIFICATES We may not publicly offer all the mortgage pass-through certificates
MAY BE ISSUED WITH OTHER CERTIFICATES........... evidencing interests in an issuing entity established by us. We may
elect to retain some of those certificates, to place some privately
with institutional investors, to place some with investors outside the
United States or to deliver some to the applicable seller as partial
consideration for the mortgage assets that such seller is contributing
to the subject securitization transaction. In addition, some of those
certificates may not satisfy the rating requirement for offered
certificates described under "--The Securities Being Offered" above.
THE GOVERNING DOCUMENTS............................ In general, a pooling and servicing agreement or other similar
agreement or collection of agreements will govern, among other
things--
o the issuance of each series of offered certificates,
o the creation of and transfer of assets to the issuing entity,
and
o the servicing and administration of those assets.
The parties to the governing document(s) for a series of offered
certificates will always include us and a trustee. We will be
responsible for establishing the issuing entity for each series of
offered certificates. In addition, we will transfer or arrange for the
transfer of the initial trust assets to each issuing entity. In
general, the trustee for a series of offered certificates will be
responsible for, among other things, making payments and preparing and
disseminating various reports to the holders of those offered
certificates.
If the assets of any issuing entity include mortgage loans, the
parties to the applicable governing document(s) will also include--
o one or more master servicers that will generally be responsible
for performing customary servicing duties with respect to those
mortgage loans that are not defaulted, nonperforming or
otherwise problematic in any material respect, and
-8-
o one or more special servicers that will generally be responsible
for servicing and administering (a) those mortgage loans that
are defaulted, nonperforming or otherwise problematic in any
material respect, including performing work-outs and
foreclosures with respect to those mortgage loans, and (b) real
estate assets acquired as part of the related trust with respect
to defaulted mortgage loans.
The same person or entity, or affiliated entities, may act as both
master servicer and special servicer for one of our trusts.
Notwithstanding the reference to the duties of a special servicer
above, we will not transfer to an issuing entity any mortgage loan
that is more than 90 days delinquent or in foreclosure or any
foreclosure property. However, any mortgage loan that we transfer to
an issuing entity may subsequently become non-performing or the
related mortgaged real property may subsequently become foreclosure
property.
If the assets of any issuing entity include mortgage-backed
securities, the parties to the applicable governing document(s) may
also include a manager that will be responsible for performing various
administrative duties with respect to those mortgage-backed
securities. If the related trustee assumes those duties, however,
there will be no manager.
Compensation arrangements for a trustee, master servicer, special
servicer or manager for any issuing entity may vary from
securitization transaction to securitization transaction.
In the related prospectus supplement, we will identify the trustee and
any master servicer, special servicer or manager for each series of
offered certificates and will describe their respective duties and
compensation in further detail. See "DESCRIPTION OF THE GOVERNINGDOCUMENTS."
Any servicer, master servicer or special servicer for any issuing
entity may perform any or all of its servicing duties under the
applicable governing document(s) through one or more primary servicers
or sub-servicers. In the related prospectus supplement, we will
identify any such primary servicer or sub-servicer that, at the time
of initial issuance of the subject offered certificates, is (a)
affiliated with us or with the issuing entity or any sponsor for the
subject securitization transaction or (b) services 10% or more of the
related mortgage asset pool, by balance.
CHARACTERISTICS OF THE MORTGAGE ASSETS............. The assets of any issuing entity will, in general, include mortgage
loans. Each of those mortgage loans will constitute the obligation of
one or more persons to repay a debt. The performance of that
obligation will be secured by a first or junior lien on, or security
interest in, the fee, leasehold or other interest(s) of the related
borrower or another person in or with respect to one or more
commercial or multifamily real properties. In particular, those
properties may include:
-9-
o rental or cooperatively-owned buildings with multiple dwelling
units;
o retail properties related to the sale of consumer goods and
other products, or related to providing entertainment,
recreational or personal services, to the general public;
o office buildings;
o hospitality properties;
o casino properties;
o health care-related facilities;
o industrial facilities;
o warehouse facilities, mini-warehouse facilities and self-storage
facilities;
o restaurants, taverns and other establishments involved in the
food and beverage industry;
o manufactured housing communities, mobile home parks and
recreational vehicle parks;
o recreational and resort properties;
o arenas and stadiums;
o churches and other religious facilities;
o parking lots and garages;
o mixed use properties;
o other income-producing properties; and/or
o unimproved land.
The mortgage loans underlying a series of offered certificates may
have a variety of payment terms. For example, any of those mortgage
loans--
o may provide for the accrual of interest at a mortgage interest
rate that is fixed over its term, that resets on one or more
specified dates or that otherwise adjusts from time to time;
o may provide for the accrual of interest at a mortgage interest
rate that may be converted at the borrower's
-10-
election from an adjustable to a fixed interest rate or from a
fixed to an adjustable interest rate;
o may provide for no accrual of interest;
o may provide for level payments to stated maturity, for payments
that reset in amount on one or more specified dates or for
payments that otherwise adjust from time to time to accommodate
changes in the mortgage interest rate or to reflect the
occurrence of specified events;
o may be fully amortizing or, alternatively, may be partially
amortizing or nonamortizing, with a substantial payment of
principal due on its stated maturity date;
o may permit the negative amortization or deferral of accrued
interest;
o may prohibit some or all voluntary prepayments or require
payment of a premium, fee or charge in connection with those
prepayments;
o may permit defeasance and the release of real property
collateral in connection with that defeasance;
o may provide for payments of principal, interest or both, on due
dates that occur monthly, bi-monthly, quarterly, semi-annually,
annually or at some other interval; and/or
o may have two or more component parts, each having
characteristics that are otherwise described in this prospectus
as being attributable to separate and distinct mortgage loans.
Most, if not all, of the mortgage loans underlying a series of offered
certificates will be secured by liens on real properties located in
the United States, its territories and possessions. However, some of
those mortgage loans may be secured by liens on real properties
located outside the United States, its territories and possessions,
provided that foreign mortgage loans do not represent more than 10% of
the related mortgage asset pool, by balance.
We, the depositor, do not originate mortgage loans. However, some or
all of the mortgage loans held by an issuing entity may be originated
by our affiliates.
Neither we nor any of our affiliates will guarantee or insure
repayment of any of the mortgage loans underlying a series of offered
certificates. Unless we expressly state otherwise in the related
prospectus supplement, no governmental agency or instrumentality will
guarantee or insure repayment of any of the mortgage loans underlying
a series of offered certificates.
-11-
The assets of any issuing entity may also include mortgage
participations, mortgage pass-through certificates, collateralized
mortgage obligations and other mortgage-backed securities, that
evidence an interest in, or are secured by a pledge of, one or more
mortgage loans of the type described above. We will not transfer a
mortgage-backed security to any issuing entity unless--
o the security has been registered under the Securities Act of
1933, as amended, or
o we would be free to publicly resell the security without
registration.
In addition to the asset classes described above in this
"--Characteristics of the Mortgage Assets" subsection, we may transfer
to an issuing entity loans secured by equipment or inventory related
to the real property collateral securing a mortgage loan held by that
issuing entity, provided that such other asset classes in the
aggregate will not exceed 10% by principal balance of the related
asset pool.
We will describe the specific characteristics of the mortgage assets
underlying a series of offered certificates in the related prospectus
supplement.
Assets held by an issuing entity will also include: (a) cash,
including in the form of initial deposits and collections on the
related mortgage loans, mortgage-backed securities and instruments of
credit enhancement, guaranteed investment contracts, interest rate
exchange agreements, interest rate floor or cap agreements and
currency exchange agreements; (b) bank accounts; (c) permitted
investments; and (d) following foreclosure, acceptance of a deed in
lieu of foreclosure or any other enforcement action, real property and
other collateral for defaulted mortgage loans.
See "THE TRUST FUND--Mortgage Loans"and"--Mortgage-Backed Securities."
SUBSTITUTION, ACQUISITION AND We will generally acquire the mortgage assets to be securitized from
REMOVAL OF MORTGAGE ASSETS......................... Merrill Lynch Mortgage Lending, Inc. or another of our affiliates or
from another seller of commercial and multifamily mortgage loans. We
will then transfer those mortgage assets to the issuing entity for the
related securitization transaction.
If and to the extent described in the related prospectus supplement,
we, a mortgage asset seller or another specified person or entity may
make or assign to or for the benefit of an issuing entity various
representations and warranties, or may be obligated to deliver to an
issuing entity various documents, in either case relating to some or
all of the mortgage assets transferred to that issuing entity. A
material breach of one of
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those representations and warranties or a failure to deliver a
material document may, under the circumstances described in the
related prospectus supplement, give rise to an obligation to
repurchase the affected mortgage asset(s) from the subject issuing
entity or to replace the affected mortgage asset(s) with other
mortgage asset(s) that satisfy the criteria specified in the related
prospectus supplement.
In general, the total outstanding principal balance of the mortgage
assets transferred by us to any particular issuing entity will equal
or exceed the initial total outstanding principal balance of the
related series of certificates. In the event that the total
outstanding principal balance of the related underlying mortgage loans
initially delivered by us to the related trustee is less than the
initial total outstanding principal balance of any series of
certificates, the subject securitization transaction may include a
prefunding feature, in which case we may deposit or arrange for the
deposit of cash or liquid investments on an interim basis with the
related trustee to cover the shortfall. For a specified period, as set
forth in the related prospectus supplement, following the date of
initial issuance of that series of certificates, which will constitute
the prefunding period, we or our designee will be entitled to obtain a
release of the deposited cash or investments if we deliver or arrange
for delivery of a corresponding amount of mortgage assets. If we fail,
however, to deliver or arrange for the delivery of mortgage assets
sufficient to make up the entire shortfall within the prefunding
period, any of the cash or, following liquidation, investments
remaining on deposit with the related trustee will be used by the
related trustee to pay down the total principal balance of the related
series of certificates, as described in the related prospectus
supplement.
If the subject securitization transaction involves a prefunding
feature, then we will indicate in the related prospectus supplement,
among other things:
o the term or duration of the prefunding period, which may not
extend beyond one year from the date of initial issuance of the
related offered certificates;
o the amount of proceeds to be deposited in the applicable
prefunding account and the percentage of the mortgage asset pool
and any class or series of offered certificates represented by
those proceeds, which proceeds may not exceed 50% of the related
offering proceeds; and
o any limitation on the ability to add pool assets.
If so specified in the related prospectus supplement, we or another
specified person or entity may be permitted, at our or its option, but
subject to the conditions specified in that prospectus supplement, to
acquire from the related issuing entity particular
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mortgage assets underlying a series of certificates in exchange for:
o cash that would be applied to pay down the principal balances of
certificates of that series; and/or
o other mortgage loans or mortgage-backed securities that--
1. conform to the description of mortgage assets in this
prospectus, and
2. satisfy the criteria set forth in the related prospectus
supplement.
For example, if a mortgage loan backing a series of offered
certificates defaults, then it may be subject to (a) a purchase option
on the part of another lender whose loan is secured by a lien on the
same real estate collateral or by a lien on an equity interest in the
related borrower and/or (b) a fair value purchase option under the
applicable governing document(s) for the subject securitization
transaction or another servicing agreement.
In addition, if so specified in the related prospectus supplement, but
subject to the conditions specified in that prospectus supplement, one
or more holders of certificates may exchange those certificates for
one or more of the mortgage loans or mortgage-backed securities
constituting part of the mortgage pool underlying those certificates.
Further, if so specified in the related prospectus supplement, a
special servicer or other specified party for one of our
securitizations may be obligated, under the circumstances described in
that prospectus supplement, to sell on behalf of the related issuing
entity a delinquent or defaulted mortgage asset.
See also "--Optional or Mandatory Redemption or Termination" below.
CHARACTERISTICS OF THE OFFERED
CERTIFICATES....................................... An offered certificate may entitle the holder to receive:
o a stated principal amount, which will be represented by its
principal balance, if any;
o interest on a principal balance or notional amount, at a fixed,
floating, adjustable or variable pass-through rate, which
pass-through rate may change as of a specified date or upon the
occurrence of specified events or for any other reason from one
accrual or payment period to another, as described in the
related prospectus supplement;
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o specified, fixed or variable portions of the interest, principal
or other amounts received on the related underlying mortgage
loans or mortgage-backed securities;
o payments of principal, with disproportionate, nominal or no
payments of interest;
o payments of interest, with disproportionate, nominal or no
payments of principal;
o payments of interest on a deferred or partially deferred basis,
which deferred interest may be added to the principal balance,
if any, of the subject class of offered certificates or which
deferred interest may or may not itself accrue interest, all as
set forth in the related prospectus supplement;
o payments of interest or principal that commence only as of a
specified date or only after the occurrence of specified events,
such as the payment in full of the interest and principal
outstanding on one or more other classes of certificates of the
same series;
o payments of interest or principal that are, in whole or in part,
calculated based on or payable specifically from payments or
other collections on particular related underlying mortgage
loans or mortgage-backed securities;
o payments of principal to be made, from time to time or for
designated periods, at a rate that is--
1. faster and, in some cases, substantially faster, or
2. slower and, in some cases, substantially slower,
than the rate at which payments or other collections of
principal are received on the related underlying mortgage loans
or mortgage-backed securities;
o payments of principal to be made, subject to available funds,
based on a specified principal payment schedule or other
methodology;
o payments of principal that may be accelerated or slowed in
response to a change in the rate of principal payments on the
related underlying mortgage loans or mortgage-backed securities
in order to protect the subject class of offered certificates
or, alternatively, to protect one or more other classes of
certificates of the same series from prepayment and/or extension
risk;
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o payments of principal out of amounts other than payments or
other collections of principal on the related underlying
mortgage loans or mortgage-backed securities, such as excess
spread on the related underlying mortgage loans or
mortgage-backed securities or amounts otherwise payable as
interest with respect to another class of certificates of the
same series, which other class of certificates provides for the
deferral of interest payments thereon;
o payments of residual amounts remaining after required payments
have been made with respect to other classes of certificates of
the same series; or
o payments of all or part of the prepayment or repayment premiums,
fees and charges, equity participations payments or other
similar items received on the related underlying mortgage loans
or mortgage-backed securities.
Any class of offered certificates may be senior or subordinate to or
pari passu with one or more other classes of certificates of the same
series, including a non-offered class of certificates of that series,
for purposes of some or all payments and/or allocations of losses.
A class of offered certificates may have two or more component parts,
each having characteristics that are otherwise described in this
prospectus as being attributable to separate and distinct classes.
Payments on a class of offered certificates may occur monthly,
bi-monthly, quarterly, semi-annually or at any other specified
interval, commencing on the distribution date specified in the related
prospectus supplement.
We will describe the specific characteristics of each class of offered
certificates in the related prospectus supplement, including payment
characteristics and authorized denominations. Among other things, in
the related prospectus supplement, we will summarize the flow of
funds, payment priorities and allocations among the respective classes
of offered certificates of any particular series, the respective
classes of non-offered certificates of that series, and fees and
expenses, to the extent necessary to understand the payment
characteristics of those classes of offered certificates, and we will
identify any events in the applicable governing document(s) that would
alter the transaction structure or flow of funds. See "DESCRIPTION OFTHE CERTIFICATES."
CREDIT SUPPORT AND REINVESTMENT,
INTEREST RATE AND CURRENCY-RELATED Some classes of offered certificates may be protected in full or in
PROTECTION FOR THE OFFERED CERTIFICATES............ part against defaults and losses, or select types of defaults and
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losses, on the related underlying mortgage loans or mortgage-backed
securities through the subordination of one or more other classes of
certificates of the same series or by other types of credit support.
The other types of credit support may include overcollateralization or
a letter of credit, a surety bond, an insurance policy, a guarantee or
a reserve fund. We will describe the credit support, if any, for each
class of offered certificates and, if applicable, we will identify the
provider of that credit support, in the related prospectus supplement.
In addition, we will summarize in the related prospectus supplement
how losses not covered by credit enhancement or support will be
allocated to the subject series of offered certificates.
The assets of an issuing entity with respect to any series of offered
certificates may also include any of the following agreements:
o guaranteed investment contracts in accordance with which moneys
held in the funds and accounts established with respect to those
offered certificates will be invested at a specified rate;
o interest rate exchange agreements or interest rate cap or floor
agreements; or
o currency exchange agreements.
We will describe the types of reinvestment, interest rate and currency
related protection, if any, for each class of offered certificates
and, if applicable, we will identify the provider of that protection,
in the related prospectus supplement.
See "RISK FACTORS,""THE TRUST FUND" and "DESCRIPTION OF CREDITSUPPORT."
ADVANCES WITH RESPECT TO THE If the assets of an issuing entity for a series of offered
MORTGAGE ASSETS.................................... certificates include mortgage loans, then, as and to the extent
described in the related prospectus supplement, the related master
servicer, the related special servicer, the related trustee, any
related provider of credit support and/or any other specified person
may be obligated to make, or may have the option of making, advances
with respect to those mortgage loans to cover--
o delinquent scheduled payments of principal and/or interest,
other than balloon payments,
o property protection expenses,
o other servicing expenses, or
o any other items specified in the related prospectus supplement.
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Any party making advances will be entitled to reimbursement from
subsequent recoveries on the related mortgage loan and as otherwise
described in this prospectus or the related prospectus supplement.
That party may also be entitled to receive interest on its advances
for a specified period. See "DESCRIPTION OF THE GOVERNINGDOCUMENTS--Advances."
If the assets of an issuing entity for a series of offered
certificates include mortgage-backed securities, we will describe in
the related prospectus supplement any comparable advancing obligations
with respect to those mortgage-backed securities or the underlying
mortgage loans.
OPTIONAL OR MANDATORY We will describe in the related prospectus supplement any
REDEMPTION OR TERMINATION.......................... circumstances involving an optional or mandatory redemption of offered
certificates or an optional or mandatory termination of the related
issuing entity. In particular, a master servicer, special servicer or
other designated party may be permitted or obligated to purchase or
sell--
o all the mortgage assets held by any particular issuing entity,
thereby resulting in a termination of that issuing entity, or
o that portion of the mortgage assets held by any particular
issuing entity as is necessary or sufficient to retire one or
more classes of offered certificates of the related series.
See "DESCRIPTION OF THE CERTIFICATES--Termination and Redemption."
FEDERAL INCOME TAX CONSEQUENCES.................... Any class of offered certificates will constitute or evidence
ownership of:
o regular interests or residual interests in a real estate
mortgage investment conduit under Sections 860A through 860G of
the Internal Revenue Code of 1986; or
o interests in a grantor trust under Subpart E of Part I of
Subchapter J of the Internal Revenue Code of 1986.
See "FEDERAL INCOME TAX CONSEQUENCES."
ERISA CONSIDERATIONS............................... If you are a fiduciary of an employee benefit plan or other retirement
plan or arrangement, you are encouraged to review with your legal
advisor whether the purchase or holding of offered certificates could
give rise to a transaction that is prohibited or is not otherwise
permissible under applicable law. See "ERISA CONSIDERATIONS."
LEGAL INVESTMENT................................... If your investment authority is subject to legal investment laws and
regulations, regulatory capital requirements or review by regulatory
authorities, then you may be subject to restrictions on
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investment in the offered certificates. You are encouraged to consult
your legal advisor to determine whether and to what extent the offered
certificates constitute a legal investment for you. We will specify in
the related prospectus supplement which classes of the offered
certificates, if any, will constitute mortgage related securities for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, as
amended. See "LEGAL INVESTMENT."
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RISK FACTORS
YOU SHOULD CONSIDER THE FOLLOWING FACTORS, AS WELL AS THE FACTORS SET
FORTH UNDER "RISK FACTORS" IN THE RELATED PROSPECTUS SUPPLEMENT, IN DECIDING
WHETHER TO PURCHASE OFFERED CERTIFICATES.
LACK OF LIQUIDITY WILL IMPAIR YOUR ABILITY TO SELL YOUR OFFERED CERTIFICATES AND
MAY HAVE AN ADVERSE EFFECT ON THE MARKET VALUE OF YOUR OFFERED CERTIFICATES
The offered certificates may have limited or no liquidity. We cannot
assure you that a secondary market for your offered certificates will develop.
There will be no obligation on the part of anyone to establish a secondary
market. Furthermore, a particular investor or a few investors may acquire a
substantial portion of a given class of offered certificates, thereby limiting
trading in that class. Even if a secondary market does develop for your offered
certificates, it may provide you with less liquidity than you anticipated and it
may not continue for the life of your offered certificates.
We will describe in the related prospectus supplement the information that
will be available to you with respect to your offered certificates. The limited
nature of the information may adversely affect the liquidity of your offered
certificates.
We do not currently intend to list the offered certificates on any
national securities exchange or the NASDAQ stock market.
Lack of liquidity will impair your ability to sell your offered
certificates and may prevent you from doing so at a time when you may want or
need to. Lack of liquidity could adversely affect the market value of your
offered certificates. We do not expect that you will have any redemption rights
with respect to your offered certificates.
If you decide to sell your offered certificates, you may have to sell them
at a discount from the price you paid for reasons unrelated to the performance
of your offered certificates or the related underlying mortgage loans or
mortgage-backed securities. Pricing information regarding your offered
certificates may not be generally available on an ongoing basis.
THE MARKET VALUE OF YOUR OFFERED CERTIFICATES MAY BE ADVERSELY AFFECTED BY
FACTORS UNRELATED TO THE PERFORMANCE OF YOUR OFFERED CERTIFICATES AND THE
UNDERLYING MORTGAGE ASSETS, SUCH AS FLUCTUATIONS IN INTEREST RATES AND THE
SUPPLY AND DEMAND OF CMBS GENERALLY
The market value of your offered certificates can decline even if those
certificates and the underlying mortgage assets are performing at or above your
expectations.
The market value of your offered certificates will be sensitive to
fluctuations in current interest rates. However, a change in the market value of
your offered certificates as a result of an upward or downward movement in
current interest rates may not equal the change in the market value of your
offered certificates as a result of an equal but opposite movement in interest
rates.
The market value of your offered certificates will also be influenced by
the supply of and demand for commercial mortgage-backed securities generally.
The supply of commercial mortgage-backed securities will depend on, among other
things, the amount of commercial and multifamily mortgage loans, whether newly
originated or held in portfolio, that are available for securitization. A number
of factors will affect investors' demand for commercial mortgage-backed
securities, including--
o the availability of alternative investments that offer higher yields
or are perceived as being a better credit risk, having a less
volatile market value or being more liquid,
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o legal and other restrictions that prohibit a particular entity from
investing in commercial mortgage-backed securities or limit the
amount or types of commercial mortgage-backed securities that it may
acquire,
o investors' perceptions regarding the commercial and multifamily real
estate markets, which may be adversely affected by, among other
things, a decline in real estate values or an increase in defaults
and foreclosures on mortgage loans secured by income-producing
properties, and
o investors' perceptions regarding the capital markets in general,
which may be adversely affected by political, social and economic
events completely unrelated to the commercial and multifamily real
estate markets.
If you decide to sell your offered certificates, you may have to sell at
discount from the price you paid for reasons unrelated to the performance of
your offered certificates or the related underlying mortgage loans or
mortgage-backed securities. Pricing information regarding your offered
certificates may not be generally available on an ongoing basis.
PAYMENTS ON THE OFFERED CERTIFICATES WILL BE MADE SOLELY FROM THE LIMITED ASSETS
OF THE RELATED TRUST, AND THOSE ASSETS MAY BE INSUFFICIENT TO MAKE ALL REQUIRED
PAYMENTS ON THOSE CERTIFICATES
The offered certificates will represent interests solely in, and will be
payable solely from the limited assets of, the related issuing entity. The
offered certificates will not represent interests in or obligations of us, any
sponsor or any of our or their respective affiliates, and no such person or
entity will be responsible for making payments on the offered certificates if
collections on the assets of the related issuing entity are insufficient. No
governmental agency or instrumentality will guarantee or insure payment on the
offered certificates. Furthermore, some classes of offered certificates will
represent a subordinate right to receive payments out of collections and/or
advances on some or all of the assets of the related issuing entity. If the
assets of the related issuing entity are insufficient to make payments on your
offered certificates, no other assets will be available to you for payment of
the deficiency, and you will bear the resulting loss. Any advances made by a
master servicer or other party with respect to the mortgage assets underlying
your offered certificates are intended solely to provide liquidity and not
credit support. The party making those advances will have a right to
reimbursement, probably with interest, which is senior to your right to receive
payment on your offered certificates.
ANY CREDIT SUPPORT FOR YOUR OFFERED CERTIFICATES MAY BE INSUFFICIENT TO PROTECT
YOU AGAINST ALL POTENTIAL LOSSES
The Amount of Credit Support Will Be Limited. The rating agencies that
assign ratings to your offered certificates will establish the amount of credit
support, if any, for your offered certificates based on, among other things, an
assumed level of defaults, delinquencies and losses with respect to the related
underlying mortgage loans or mortgage-backed securities. Actual losses may,
however, exceed the assumed levels. See "DESCRIPTION OF THECERTIFICATES--Allocation of Losses and Shortfalls" and "DESCRIPTION OF CREDITSUPPORT." If actual losses on the related underlying mortgage loans or
mortgage-backed securities exceed the assumed levels, you may be required to
bear the additional losses.
Credit Support May Not Cover All Types of Losses. The credit support, if
any, for your offered certificates may not cover all of your potential losses.
For example, some forms of credit support may not cover or may provide limited
protection against losses that you may suffer by reason of fraud or negligence
or as a result of uninsured casualties at the real properties securing the
underlying mortgage loans. You may be required to bear any losses which are not
covered by the credit support.
Disproportionate Benefits May Be Given to Some Classes and Series to the
Detriment of Others. If a form of credit support covers multiple classes or
series and losses exceed the amount of that credit support, it is
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possible that the holders of offered certificates of another series or class
will be disproportionately benefited by that credit support to your detriment.
THE INVESTMENT PERFORMANCE OF YOUR OFFERED CERTIFICATES WILL DEPEND UPON
PAYMENTS, DEFAULTS AND LOSSES ON THE UNDERLYING MORTGAGE LOANS; AND THOSE
PAYMENTS, DEFAULTS AND LOSSES MAY BE HIGHLY UNPREDICTABLE
The Terms of the Underlying Mortgage Loans Will Affect Payments on Your
Offered Certificates. Each of the mortgage loans underlying the offered
certificates will specify the terms on which the related borrower must repay the
outstanding principal amount of the loan. The rate, timing and amount of
scheduled payments of principal may vary, and may vary significantly, from
mortgage loan to mortgage loan. The rate at which the underlying mortgage loans
amortize will directly affect the rate at which the principal balance or
notional amount of your offered certificates is paid down or otherwise reduced.
In addition, any mortgage loan underlying the offered certificates may
permit the related borrower during some or all of the loan term to prepay the
loan. In general, a borrower will be more likely to prepay its mortgage loan
when it has an economic incentive to do so, such as obtaining a larger loan on
the same underlying real property or a lower or otherwise more advantageous
interest rate through refinancing. If a mortgage loan includes some form of
prepayment restriction, the likelihood of prepayment should decline. These
restrictions may include--
o an absolute or partial prohibition against voluntary prepayments
during some or all of the loan term, or
o a requirement that voluntary prepayments be accompanied by some form
of prepayment premium, fee or charge during some or all of the loan
term.
In many cases, however, there will be no restriction associated with the
application of insurance proceeds or condemnation proceeds as a prepayment of
principal.
The Terms of the Underlying Mortgage Loans Do Not Provide Absolute
Certainty as to the Rate, Timing and Amount of Payments on Your Offered
Certificates. Notwithstanding the terms of the mortgage loans backing your
offered certificates, the amount, rate and timing of payments and other
collections on those mortgage loans will, to some degree, be unpredictable
because of borrower defaults and because of casualties and condemnations with
respect to the underlying real properties.
The investment performance of your offered certificates may vary
materially and adversely from your expectations due to--
o the rate of prepayments and other unscheduled collections of
principal on the underlying mortgage loans being faster or slower
than you anticipated, or
o the rate of defaults on the underlying mortgage loans being faster,
or the severity of losses on the underlying mortgage loans being
greater, than you anticipated.
The actual yield to you, as a holder of an offered certificate, may not
equal the yield you anticipated at the time of your purchase, and the total
return on investment that you expected may not be realized. In deciding whether
to purchase any offered certificates, you should make an independent decision as
to the appropriate prepayment, default and loss assumptions to be used. If the
trust assets underlying your offered certificates include mortgage-backed
securities, the terms of those securities may soften or enhance the effects to
you that may result from prepayments, defaults and losses on the mortgage loans
that ultimately back those securities.
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Prepayments on the Underlying Mortgage Loans Will Affect the Average Life
of Your Offered Certificates; and the Rate and Timing of Those Prepayments May
Be Highly Unpredictable. Payments of principal and/or interest on your offered
certificates will depend upon, among other things, the rate and timing of
payments on the related underlying mortgage loans or mortgage-backed securities.
Prepayments on the underlying mortgage loans may result in a faster rate of
principal payments on your offered certificates, thereby resulting in a shorter
average life for your offered certificates than if those prepayments had not
occurred. The rate and timing of principal prepayments on pools of mortgage
loans varies among pools and is influenced by a variety of economic,
demographic, geographic, social, tax and legal factors. Accordingly, neither you
nor we can predict the rate and timing of principal prepayments on the mortgage
loans underlying your offered certificates. As a result, repayment of your
offered certificates could occur significantly earlier or later, and the average
life of your offered certificates could be significantly shorter or longer, than
you expected.
The extent to which prepayments on the underlying mortgage loans
ultimately affect the average life of your offered certificates depends on the
terms and provisions of your offered certificates. A class of offered
certificates may entitle the holders to a pro rata share of any prepayments on
the underlying mortgage loans, to all or a disproportionately large share of
those prepayments, or to none or a disproportionately small share of those
prepayments. If you are entitled to a disproportionately large share of any
prepayments on the underlying mortgage loans, your offered certificates may be
retired at an earlier date. If, however, you are only entitled to a small share
of the prepayments on the underlying mortgage loans, the average life of your
offered certificates may be extended. Your entitlement to receive payments,
including prepayments, of principal of the underlying mortgage loans may--
o vary based on the occurrence of specified events, such as the
retirement of one or more other classes of certificates of the same
series, or
o be subject to various contingencies, such as prepayment and default
rates with respect to the underlying mortgage loans.
We will describe the terms and provisions of your offered certificates
more fully in the related prospectus supplement.
Prepayments on the Underlying Mortgage Loans Will Affect the Yield on Your
Offered Certificates; and the Rate and Timing of Those Prepayments May Be Highly
Unpredictable. If you purchase your offered certificates at a discount or
premium, the yield on your offered certificates will be sensitive to prepayments
on the underlying mortgage loans. If you purchase your offered certificates at a
discount, you should consider the risk that a slower than anticipated rate of
principal payments on the underlying mortgage loans could result in your actual
yield being lower than your anticipated yield. Alternatively, if you purchase
your offered certificates at a premium, you should consider the risk that a
faster than anticipated rate of principal payments on the underlying mortgage
loans could result in your actual yield being lower than your anticipated yield.
The potential effect that prepayments may have on the yield of your offered
certificates will increase as the discount deepens or the premium increases. If
the amount of interest payable on your offered certificates is
disproportionately large as compared to the amount of principal payable on your
offered certificates, or if your offered certificates entitle you to receive
payments of interest but no payments of principal, then you may fail to recover
your original investment under some prepayment scenarios. The rate and timing of
principal prepayments on pools of mortgage loans varies among pools and is
influenced by a variety of economic, demographic, geographic, social, tax and
legal factors. Accordingly, neither you nor we can predict the rate and timing
of principal prepayments on the mortgage loans underlying your offered
certificates.
Delinquencies, Defaults and Losses on the Underlying Mortgage Loans May
Affect the Amount and Timing of Payments on Your Offered Certificates; and the
Rate and Timing of Those Delinquencies and Defaults, and the Severity of Those
Losses, are Highly Unpredictable. The rate and timing of delinquencies and
defaults, and the severity of losses, on the underlying mortgage loans will
impact the amount and timing of payments on a
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series of offered certificates to the extent that their effects are not offset
by delinquency advances or some form of credit support.
Unless otherwise covered by delinquency advances or some form of credit
support, defaults on the underlying mortgage loans may delay payments on a
series of offered certificates while the defaulted mortgage loans are worked-out
or liquidated. However, liquidations of defaulted mortgage loans prior to
maturity could affect the yield and average life of an offered certificate in a
manner similar to a voluntary prepayment.
If you calculate your anticipated yield to maturity based on an assumed
rate of default and amount of losses on the underlying mortgage loans that is
lower than the default rate and amount of losses actually experienced, then, to
the extent that you are required to bear the additional losses, your actual
yield to maturity will be lower than you calculated and could, under some
scenarios, be negative. Furthermore, the timing of losses on the underlying
mortgage loans can affect your yield. In general, the earlier you bear any loss
on an underlying mortgage loan, the greater the negative effect on your yield.
See "--Repayment of a Commercial or Multifamily Mortgage Loan Depends on
the Performance and Value of the Underlying Real Property, Which May Decline
Over Time, and the Related Borrower's Ability to Refinance the Property, of
Which There Is No Assurance" below.
There Is an Increased Risk of Default Associated with Balloon Payments.
Any of the mortgage loans underlying your offered certificates may be
nonamortizing or only partially amortizing. The borrower under a mortgage loan
of that type is required to make substantial payments of principal and interest,
which are commonly called balloon payments, on the maturity date of the loan.
The ability of the borrower to make a balloon payment depends upon the
borrower's ability to refinance or sell the real property securing the loan. The
ability of the borrower to refinance or sell the property will be affected by a
number of factors, including:
o the fair market value and condition of the underlying real property;
o the level of interest rates;
o the borrower's equity in the underlying real property;
o the borrower's financial condition;
o occupancy levels at or near the time of refinancing;
o the operating history of the underlying real property;
o changes in zoning and tax laws;
o changes in competition in the relevant geographic area;
o changes in rental rates in the relevant geographic area;
o changes in governmental regulation and fiscal policy;
o prevailing general and regional economic conditions;
o the state of the fixed income and mortgage markets; and
o the availability of credit for multifamily rental or commercial
properties.
-24-
See "--Repayment of a Commercial or Multifamily Mortgage Loan Depends on
the Performance and Value of the Underlying Real Property, Which May Decline
Over Time, and the Related Borrower's Ability to Refinance the Property, of
Which There is No Assurance" below.
Neither we nor any of our affiliates will be obligated to refinance any
mortgage loan underlying your offered certificates.
The related master servicer or special servicer may, within prescribed
limits, extend and modify mortgage loans underlying your offered certificates
that are in default or as to which a payment default is imminent in order to
maximize recoveries on the defaulted loans. The related master servicer or
special servicer is only required to determine that any extension or
modification is reasonably likely to produce a greater recovery than a
liquidation of the real property securing the defaulted loan. There is a risk
that the decision of the master servicer or special servicer to extend or modify
a mortgage loan may not in fact produce a greater recovery.
REPAYMENT OF A COMMERCIAL OR MULTIFAMILY MORTGAGE LOAN DEPENDS ON THE
PERFORMANCE AND VALUE OF THE UNDERLYING REAL PROPERTY, WHICH MAY DECLINE OVER
TIME, AND THE RELATED BORROWER'S ABILITY TO REFINANCE THE PROPERTY, OF WHICH
THERE IS NO ASSURANCE
Most of the Mortgage Loans Underlying Your Offered Certificates Will Be
Nonrecourse. You should consider all of the mortgage loans underlying your
offered certificates to be nonrecourse loans. This means that, in the event of a
default, recourse will be limited to the related real property or properties
securing the defaulted mortgage loan. In the event that the income generated by
a real property were to decline as a result of the poor economic performance of
that real property with the result that the real property is not able to support
debt service payments on the related mortgage loan, neither the related borrower
nor any other person would be obligated to remedy the situation by making
payments out of their own funds. In such a situation, the borrower could choose
instead to surrender the related mortgaged property to the lender or let it be
foreclosed upon.
In those cases where recourse to a borrower or guarantor is permitted by
the loan documents, we generally will not undertake any evaluation of the
financial condition of that borrower or guarantor. Consequently, full and timely
payment on each mortgage loan underlying your offered certificates will depend
on one or more of the following:
o the sufficiency of the net operating income of the applicable real
property;
o the market value of the applicable real property at or prior to
maturity; and
o the ability of the related borrower to refinance or sell the
applicable real property.
In general, the value of a multifamily or commercial property will depend
on its ability to generate net operating income. The ability of an owner to
finance a multifamily or commercial property will depend, in large part, on the
property's value and ability to generate net operating income.
Unless we state otherwise in the related prospectus supplement, none of
the mortgage loans underlying your offered certificates will be insured or
guaranteed by any governmental entity or private mortgage insurer.
The risks associated with lending on multifamily and commercial properties
are inherently different from those associated with lending on the security of
single-family residential properties. This is because, among other reasons,
multifamily rental and commercial real estate lending generally involves larger
loans and, as described above, repayment is dependent upon the successful
operation and value of the related mortgaged property and the related borrower's
ability to refinance the mortgage loan or sell the related mortgaged property.
-25-
Many Risk Factors Are Common to Most or All Multifamily and Commercial
Properties. The following factors, among others, will affect the ability of a
multifamily or commercial property to generate net operating income and,
accordingly, its value:
o the location, age, functionality, design and construction quality of
the subject property;
o perceptions regarding the safety, convenience and attractiveness of
the property;
o the characteristics of the neighborhood where the property is
located;
o the degree to which the subject property competes with other
properties in the area;
o the proximity and attractiveness of competing properties;
o the existence and construction of competing properties;
o the adequacy of the property's management and maintenance;
o tenant mix and concentration;
o national, regional or local economic conditions, including plant
closings, industry slowdowns and unemployment rates;
o local real estate conditions, including an increase in or oversupply
of comparable commercial or residential space;
o demographic factors;
o customer confidence, tastes and preferences;
o retroactive changes in building codes and other applicable laws;
o changes in governmental rules, regulations and fiscal policies,
including environmental legislation; and
o vulnerability to litigation by tenants and patrons.
Particular factors that may adversely affect the ability of a multifamily
or commercial property to generate net operating income include:
o an increase in interest rates, real estate taxes and other operating
expenses;
o an increase in the capital expenditures needed to maintain the
property or make improvements;
o a decline in the financial condition of a major tenant and, in
particular, a sole tenant or anchor tenant;
o an increase in vacancy rates;
o a decline in rental rates as leases are renewed or replaced;
o natural disasters and civil disturbances such as earthquakes,
hurricanes, floods, eruptions, terrorist attacks or riots; and
-26-
o environmental contamination.
The volatility of net operating income generated by a multifamily or
commercial property over time will be influenced by many of the foregoing
factors, as well as by:
o the length of tenant leases;
o the creditworthiness of tenants;
o the rental rates at which leases are renewed or replaced;
o the percentage of total property expenses in relation to revenue;
o the ratio of fixed operating expenses to those that vary with
revenues; and
o the level of capital expenditures required to maintain the property
and to maintain or replace tenants.
Therefore, commercial and multifamily properties with short-term or less
creditworthy sources of revenue and/or relatively high operating costs, such as
those operated as hospitality and self-storage properties, can be expected to
have more volatile cash flows than commercial and multifamily properties with
medium- to long-term leases from creditworthy tenants and/or relatively low
operating costs. A decline in the real estate market will tend to have a more
immediate effect on the net operating income of commercial and multifamily
properties with short-term revenue sources and may lead to higher rates of
delinquency or defaults on the mortgage loans secured by those properties.
The Successful Operation of a Multifamily or Commercial Property Depends
on Tenants. Generally, multifamily and commercial properties are subject to
leases. The owner of a multifamily or commercial property typically uses lease
or rental payments for the following purposes:
o to pay for maintenance and other operating expenses associated with
the property;
o to fund repairs, replacements and capital improvements at the
property; and
o to service mortgage loans secured by, and any other debt obligations
associated with operating, the property.
Accordingly, mortgage loans secured by income-producing properties will be
affected by the expiration of leases and the ability of the respective borrowers
to renew the leases or relet the space on comparable terms and on a timely
basis.
Factors that may adversely affect the ability of an income-producing
property to generate net operating income from lease and rental payments
include:
o a general inability to lease space;
o an increase in vacancy rates, which may result from tenants deciding
not to renew an existing lease or discontinuing operations;
o an increase in tenant payment defaults or any other inability to
collect rental payments;
o a decline in rental rates as leases are entered into, renewed or
extended at lower rates;
-27-
o an increase in leasing costs and/or the costs of performing landlord
obligations under existing leases;
o an increase in the capital expenditures needed to maintain the
property or to make improvements; and
o a decline in the financial condition and/or bankruptcy or insolvency
of a significant or sole tenant.
With respect to any mortgage loan backing a series of offered
certificates, you should anticipate that, unless the related mortgaged real
property is owner occupied, one or more--and possibly all--of the leases at the
related mortgaged real property will expire at varying rates during the term of
that mortgage loan and some tenants will have, and may exercise, termination
options. In addition, some government-sponsored tenants will have the right as a
matter of law to cancel their leases for lack of appropriations.
Additionally, in some jurisdictions, if tenant leases are subordinated to
the lien created by the related mortgage instrument but do not contain
attornment provisions, which are provisions requiring the tenant to recognize as
landlord under the lease a successor owner following foreclosure, the leases may
terminate upon the transfer of the property to a foreclosing lender or purchaser
at foreclosure. Accordingly, if a mortgaged real property is located in such a
jurisdiction and is leased to one or more desirable tenants under leases that
are subordinate to the mortgage and do not contain attornment provisions, that
mortgaged real property could experience a further decline in value if such
tenants' leases were terminated.
Some mortgage loans that back offered certificates may be secured by
mortgaged real properties with tenants that are related to or affiliated with a
borrower. In those cases a default by the borrower may coincide with a default
by the affiliated tenants. Additionally, even if the property becomes a
foreclosure property, it is possible that an affiliate of the borrower may
remain as a tenant.
Dependence on a Single Tenant or a Small Number of Tenants Makes a
Property Riskier Collateral. In those cases where an income-producing property
is leased to a single tenant or is primarily leased to one or a small number of
major tenants, a deterioration in the financial condition or a change in the
plan of operations of any of those tenants can have particularly significant
effects on the net operating income generated by the property. If any of those
tenants defaults under or fails to renew its lease, the resulting adverse
financial effect on the operation of the property will be substantially more
severe than would be the case with respect to a property occupied by a large
number of less significant tenants.
An income-producing property operated for retail, office or industrial
purposes also may be adversely affected by a decline in a particular business or
industry if a concentration of tenants at the property is engaged in that
business or industry.
Accordingly, factors that will affect the operation and value of a
commercial property include:
o the business operated by the tenants;
o the creditworthiness of the tenants; and
o the number of tenants.
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Tenant Bankruptcy Adversely Affects Property Performance. The bankruptcy
or insolvency of a major tenant, or a number of smaller tenants, at a commercial
property may adversely affect the income produced by the property. Under the
U.S. Bankruptcy Code, a tenant has the option of assuming or rejecting any
unexpired lease. If the tenant rejects the lease, the landlord's claim for
breach of the lease would be a general unsecured claim against the tenant unless
there is collateral securing the claim. The claim would be limited to:
o the unpaid rent reserved under the lease for the periods prior to
the bankruptcy petition or any earlier surrender of the leased
premises, plus
o an amount, not to exceed three years' rent, equal to the greater of
one year's rent and 15% of the remaining reserved rent.
The Success of an Income-Producing Property Depends on Reletting Vacant
Spaces. The operations at an income-producing property will be adversely
affected if the owner or property manager is unable to renew leases or relet
space on comparable terms when existing leases expire and/or become defaulted.
Even if vacated space is successfully relet, the costs associated with
reletting, including tenant improvements and leasing commissions in the case of
income-producing properties operated for retail, office or industrial purposes,
can be substantial, could exceed any reserves maintained for that purpose and
could reduce cash flow from the income-producing properties. Moreover, if a
tenant at a income-producing property defaults in its lease obligations, the
landlord may incur substantial costs and experience significant delays
associated with enforcing its rights and protecting its investment, including
costs incurred in renovating and reletting the property.
If an income-producing property has multiple tenants, re-leasing
expenditures may be more frequent than in the case of a property with fewer
tenants, thereby reducing the cash flow generated by the multi-tenanted
property. Multi-tenanted properties may also experience higher continuing
vacancy rates and greater volatility in rental income and expenses.
Property Value May Be Adversely Affected Even When Current Operating
Income is Not. Various factors may affect the value of multifamily and
commercial properties without affecting their current net operating income,
including:
o changes in interest rates;
o the availability of refinancing sources;
o changes in governmental regulations, licensing or fiscal policy;
o changes in zoning or tax laws; and
o potential environmental or other legal liabilities.
Property Management May Affect Property Operations and Value. The
operation of an income-producing property will depend upon the property
manager's performance and viability. The property manager generally is
responsible for:
o responding to changes in the local market;
o planning and implementing the rental structure, including staggering
durations of leases and establishing levels of rent payments;
o operating the property and providing building services;
o managing operating expenses; and
-29-
o ensuring that maintenance and capital improvements are carried out
in a timely fashion.
Income-producing properties that derive revenues primarily from short-term
rental commitments, such as hospitality or self-storage properties, generally
require more intensive management than properties leased to tenants under
long-term leases.
By controlling costs, providing appropriate and efficient services to
tenants and maintaining improvements in good condition, a property manager can--
o maintain or improve occupancy rates, business and cash flow,
o reduce operating and repair costs, and
o preserve building value.
On the other hand, management errors can, in some cases, impair the long term
viability of an income-producing property.
Maintaining a Property in Good Condition is Expensive. The owner may be
required to expend a substantial amount to maintain, renovate or refurbish a
commercial or multifamily property. Failure to do so may materially impair the
property's ability to generate cash flow. The effects of poor construction
quality will increase over time in the form of increased maintenance and capital
improvements. Even superior construction will deteriorate over time if
management does not schedule and perform adequate maintenance in a timely
fashion. There can be no assurance that an income-producing property will
generate sufficient cash flow to cover the increased costs of maintenance and
capital improvements in addition to paying debt service on the mortgage loan(s)
that may encumber that property.
Competition Will Adversely Affect the Profitability and Value of an
Income-Producing Property. Some income-producing properties are located in
highly competitive areas. Comparable income-producing properties located in the
same area compete on the basis of a number of factors including:
o rental rates;
o location;
o type of business or services and amenities offered; and
o nature and condition of the particular property.
The profitability and value of an income-producing property may be
adversely affected by a comparable property that:
o offers lower rents;
o has lower operating costs;
o offers a more favorable location; or
o offers better facilities.
Costs of renovating, refurbishing or expanding an income-producing property in
order to remain competitive can be substantial.
-30-
The Prospective Performance of the Multifamily and Commercial Mortgage
Loans to be Included in Any of Our Trusts Should be Evaluated Separately from
the Performance of the Multifamily and Commercial Mortgage Loans in Any of Our
Other Trusts. Notwithstanding that there are many common factors affecting the
profitability and value of income-producing properties in general, those factors
do not apply equally to all income-producing properties and, in many cases,
there are special factors that will affect the profitability and/or value of a
particular income-producing property. See, for example, "--Various Types of
Income-Producing Properties May Secure Mortgage Loans Underlying a Series of
Offered Certificates and Each Type of Income-Producing Property May Present
Special Risks as Collateral for a Loan" below. Each income-producing property
represents a separate and distinct business venture; and, as a result, each of
the multifamily and commercial mortgage loans included in one of our trusts
requires a unique underwriting analysis. Furthermore, economic conditions,
whether worldwide, national, regional or local, vary over time. The performance
of a mortgage pool originated and outstanding under one set of economic
conditions may vary dramatically from the performance of an otherwise comparable
mortgage pool originated and outstanding under a different set of economic
conditions. Accordingly, investors should evaluate the mortgage loans underlying
a series of offered certificates independently from the performance of the
mortgage loans underlying any other series of offered certificates.
VARIOUS TYPES OF INCOME-PRODUCING PROPERTIES MAY SECURE MORTGAGE LOANS
UNDERLYING A SERIES OF OFFERED CERTIFICATES AND EACH TYPE OF INCOME-PRODUCING
PROPERTY MAY PRESENT SPECIAL RISKS AS COLLATERAL FOR A LOAN
General. The mortgage loans underlying a series of offered certificates
may be secured by numerous types of multifamily and commercial properties. As
discussed under "--Repayment of a Commercial or Multifamily Mortgage Loan
Depends on the Performance and Value of the Underlying Real Property, Which May
Decline Over Time, and the Related Borrower's Ability to Refinance the Property,
of Which There is No Assurance" above, the adequacy of an income-producing
property as security for a mortgage loan depends in large part on its value and
ability to generate net operating income. The relative importance of any factor
affecting the value or operation of an income-producing property will depend on
the type and use of the property, and the type and use of a particular
income-producing property may present special risks. Additionally, many types of
commercial properties are not readily convertible to alternative uses if the
original use is not successful or may require significant capital expenditures
to effect any conversion to an alternative use. As a result, the liquidation
value of any of those types of property would be substantially less than would
otherwise be the case. Set forth below is a discussion of some of the various
factors that may affect the value and operations of the indicated types of
multifamily and commercial properties.
Multifamily Rental Properties. Factors affecting the value and operation
of a multifamily rental property include:
o the physical attributes of the property, such as its age,
appearance, amenities and construction quality in relation to
competing buildings;
o the types of services or amenities offered at the property;
o the location of the property;
o distance from employment centers and shopping areas;
o local factory or other large employer closings;
o the characteristics of the surrounding neighborhood, which may
change over time;
o the rents charged for dwelling units at the property relative to the
rents charged for comparable units at competing properties;
-31-
o the ability of management to provide adequate maintenance and
insurance;
o the property's reputation;
o the level of mortgage interest rates, which may encourage tenants to
purchase rather than lease housing;
o the existence or construction of competing or alternative
residential properties in the local market, including other
apartment buildings and complexes, manufactured housing communities,
mobile home parks and single-family housing;
o compliance with and continuance of any government housing rental
subsidy programs and/or low income housing tax credit or incentive
programs from which the property receives benefits;
o the ability of management to respond to competition;
o the tenant mix and whether the property is primarily occupied by
workers from a particular company or type of business, or personnel
from a local military base or students;
o in the case of student housing facilities, the reliance on the
financial well-being of the college or university to which it
relates, competition from on-campus housing units, and the
relatively higher turnover rate compared to other types of
multifamily tenants;
o adverse local, regional or national economic conditions, which may
limit the amount that may be charged for rents and may result in a
reduction in timely rent payments or a reduction in occupancy
levels;
o state and local regulations, which may affect the property owner's
ability to increase rent to the market rent for an equivalent
apartment;
o the extent to which the property is subject to land use restrictive
covenants or contractual covenants that require that units be rented
to low income tenants;
o the extent to which the cost of operating the property, including
the cost of utilities and the cost of required capital expenditures,
may increase;
o the extent to which increases in operating costs may be passed
through to tenants; and
o the financial condition of the owner of the property.
Because units in a multifamily rental property are leased to individuals,
usually for no more than a year, the property is likely to respond relatively
quickly to a downturn in the local economy or to the closing of a major employer
in the area.
In addition, multifamily rental properties are typically in markets that,
in general, are characterized by low barriers to entry. Thus, a particular
multifamily rental property market with historically low vacancies could
experience substantial new construction and a resultant oversupply of rental
units within a relatively short period of time. Since apartments within a
multifamily rental property are typically leased on a short-term basis, the
tenants residing at a particular property may easily move to alternative
multifamily rental properties with more desirable amenities or locations or to
single family housing.
-32-
Some states regulate the relationship of an owner and its tenants at a
multifamily rental property. Among other things, these states may--
o require written leases;
o require good cause for eviction;
o require disclosure of fees;
o prohibit unreasonable rules;
o prohibit retaliatory evictions;
o prohibit restrictions on a resident's choice of unit vendors;
o limit the bases on which a landlord may increase rent; or
o prohibit a landlord from terminating a tenancy solely by reason of
the sale of the owner's building.
Apartment building owners have been the subject of suits under state
Unfair and Deceptive Practices Acts and other general consumer protection
statutes for coercive, abusive or unconscionable leasing and sales practices.
Some counties and municipalities also impose rent control or rent
stabilization regulations on apartment buildings. These regulations may limit
rent increases to--
o fixed percentages,
o percentages of increases in the consumer price index,
o increases set or approved by a governmental agency, or
o increases determined through mediation or binding arbitration.
In many cases, the rent control or rent stabilization laws do not provide
for decontrol of rental rates upon vacancy of individual units. Any limitations
on a landlord's ability to raise rents at a multifamily rental property may
impair the landlord's ability to repay a mortgage loan secured by the property
or to meet operating costs.
Some multifamily rental properties are subject to land use restrictive
covenants or contractual covenants in favor of federal or state housing
agencies. These covenants generally require that a minimum number or percentage
of units be rented to tenants who have incomes that are substantially lower than
median incomes in the area or region. These covenants may limit the potential
rental rates that may be charged at a multifamily rental property, the potential
tenant base for the property or both. An owner may subject a multifamily rental
property to these covenants in exchange for tax credits or rent subsidies. When
the credits or subsidies cease, net operating income will decline. The
differences in rents between subsidized or supported properties and other
multifamily rental properties in the same area may not be a sufficient economic
incentive for some eligible tenants to reside at a subsidized or supported
property that may have fewer amenities or be less attractive as a residence. As
a result, occupancy levels at a subsidized or supported property may decline,
which may adversely affect the value and successful operation of the property.
Cooperatively-Owned Apartment Buildings. Some multifamily properties are
owned or leased by cooperative corporations. In general, each shareholder in the
corporation is entitled to occupy a particular apartment unit under a long-term
proprietary lease or occupancy agreement.
-33-
A tenant/shareholder of a cooperative corporation must make a monthly
maintenance payment to the corporation. The monthly maintenance payment
represents a tenant/shareholder's pro rata share of the corporation's--
o mortgage loan payments,
o real property taxes,
o maintenance expenses, and
o other capital and ordinary expenses of the property.
These monthly maintenance payments are in addition to any payments of principal
and interest the tenant/shareholder must make on any loans of the
tenant/shareholder secured by its shares in the corporation.
A cooperative corporation is directly responsible for building maintenance
and payment of real estate taxes and hazard and liability insurance premiums. A
cooperative corporation's ability to meet debt service obligations on a mortgage
loan secured by, and to pay all other operating expenses of, the cooperatively
owned property depends primarily upon the receipt of--
o maintenance payments from the tenant/shareholders, and
o any rental income from units or commercial space that the
cooperative corporation might control.
A cooperative corporation may have to impose special assessments on the
tenant/shareholders in order to pay unanticipated expenditures. Accordingly, a
cooperative corporation is highly dependent on the financial well being of its
tenant/shareholders. A cooperative corporation's ability to pay the amount of
any balloon payment due at the maturity of a mortgage loan secured by the
cooperatively owned property depends primarily on its ability to refinance the
property. Additional factors likely to affect the economic performance of a
cooperative corporation include--
o the failure of the corporation to qualify for favorable tax
treatment as a "cooperative housing corporation" each year, which
may reduce the cash flow available to make debt service payments on
a mortgage loan secured by cooperatively owned property; and
o the possibility that, upon foreclosure, if the cooperatively-owned
property becomes a rental property, certain units could be subject
to rent control, stabilization and tenants' rights laws, at below
market rents, which may affect rental income levels and the
marketability and sale proceeds of the ensuing rental property as a
whole.
In a typical cooperative conversion plan, the owner of a rental apartment
building contracts to sell the building to a newly formed cooperative
corporation. Shares are allocated to each apartment unit by the owner or
sponsor. The current tenants have a specified period to subscribe at prices
discounted from the prices to be offered to the public after that period. As
part of the consideration for the sale, the owner or sponsor receives all the
unsold shares of the cooperative corporation. In general the sponsor controls
the corporation's board of directors and management for a limited period of
time. If the sponsor of the cooperative corporation holds the shares allocated
to a large number of apartment units, the lender on a mortgage loan secured by a
cooperatively owned property may be adversely affected by a decline in the
creditworthiness of that sponsor.
Many cooperative conversion plans are non-eviction plans. Under a
non-eviction plan, a tenant at the time of conversion who chooses not to
purchase shares is entitled to reside in its apartment unit as a subtenant from
the owner of the shares allocated to that unit. Any applicable rent control or
rent stabilization laws would continue to be applicable to the subtenancy. In
addition, the subtenant may be entitled to renew its lease for an
-34-
indefinite number of years with continued protection from rent increases above
those permitted by any applicable rent control and rent stabilization laws. The
owner/shareholder is responsible for the maintenance payments to the cooperative
corporation without regard to whether it receives rent from the subtenant or
whether the rent payments are lower than maintenance payments on the unit.
Newly-formed cooperative corporations typically have the greatest concentration
of non-tenant/shareholders.
Retail Properties. The term "retail property" encompasses a broad range of
properties at which businesses sell consumer goods and other products and
provide various entertainment, recreational or personal services to the general
public. Some examples of retail properties include--
o shopping centers,
o factory outlet centers,
o malls,
o automotive sales and service centers,
o consumer oriented businesses,
o department stores,
o grocery stores,
o convenience stores,
o specialty shops,
o gas stations,
o movie theaters,
o fitness centers,
o bowling alleys,
o salons, and
o dry cleaners.
A number of factors may affect the value and operation of a retail
property. Some of these factors include:
o the strength, stability, number and quality of the tenants;
o tenants' sales;
o tenant mix;
o whether the property is in a desirable location;
o the physical condition and amenities of the building in relation to
competing buildings;
-35-
o whether a retail property is anchored, shadow anchored or unanchored
and, if anchored or shadow anchored, the strength, stability,
quality and continuous occupancy of the anchor tenant or the shadow
anchor, as the case may be, are particularly important factors; and
o the financial condition of the owner of the property.
Unless owner occupied, retail properties generally derive all or a
substantial percentage of their income from lease payments from commercial
tenants. Therefore, it is important for the owner of a retail property to
attract and keep tenants, particularly significant tenants, that are able to
meet their lease obligations. In order to attract tenants, the owner of a retail
property may be required to--
o lower rents,
o grant a potential tenant a free rent or reduced rent period,
o improve the condition of the property generally, or
o make at its own expense, or grant a rent abatement to cover, tenant
improvements for a potential tenant.
A prospective tenant will also be interested in the number and type of
customers that it will be able to attract at a particular retail property. The
ability of a tenant at a particular retail property to attract customers will be
affected by a number of factors related to the property and the surrounding
area, including:
o competition from other retail properties;
o perceptions regarding the safety, convenience and attractiveness of
the property;
o perceptions regarding the safety of the surrounding area;
o demographics of the surrounding area;
o the strength and stability of the local, regional and national
economies;
o traffic patterns and access to major thoroughfares;
o the visibility of the property;
o availability of parking;
o the particular mixture of the goods and services offered at the
property;
o customer tastes, preferences and spending patterns; and
o the drawing power of other tenants.
The success of a retail property is often dependent on the success of its
tenants' businesses. A significant component of the total rent paid by tenants
of retail properties is often tied to a percentage of gross sales or revenues.
Declines in sales or revenues of the tenants will likely cause a corresponding
decline in percentage rents and/or impair the tenants' ability to pay their rent
or other occupancy costs. A default by a tenant under its lease could result in
delays and costs in enforcing the landlord's rights. Retail properties would be
directly and adversely affected by a decline in the local economy and reduced
consumer spending.
-36-
Repayment of a mortgage loan secured by a retail property will be affected
by the expiration of space leases at the property and the ability of the
borrower to renew or relet the space on comparable terms. Even if vacant space
is successfully relet, the costs associated with reletting, including tenant
improvements, leasing commissions and free rent, may be substantial and could
reduce cash flow from a retail property.
With respect to some retail properties, one or more tenants may have the
option, at any time or after the expiration of a specified period, to terminate
their leases at the property. In many cases, the tenant is required to provide
notice and/or pay penalties in connection with the exercise of its termination
option. Notwithstanding any disincentives with respect to a termination option,
there can be no assurance a tenant will not exercise such an option, especially
if the rent paid by that tenant is in excess of market rent.
The presence or absence of an anchor tenant in a multi-tenanted retail
property can be important. Anchor tenants play a key role in generating customer
traffic and making the center desirable for other tenants. Retail properties
that are anchored have traditionally been perceived as less risky than
unanchored properties. As to any given retail property, an anchor tenant is
generally understood to be a nationally or regionally recognized tenant whose
space is, in general, materially larger in size than the space occupied by other
tenants at the same retail property and is important in attracting customers to
the retail property.
A retail property may also benefit from a shadow anchor. A shadow anchor
is a store or business that satisfies the criteria for an anchor store or
business, but which may be located at an adjoining property or on a portion of
the subject retail property that is not collateral for the related mortgage
loan. A shadow anchor may own the space it occupies. In those cases where the
property owner does not control the space occupied by the anchor store or
business, the property owner may not be able to take actions with respect to the
space that it otherwise typically would, such as granting concessions to retain
an anchor tenant or removing an ineffective anchor tenant.
In some cases, an anchor tenant or a shadow anchor may cease to operate at
the property, thereby leaving its space unoccupied even though it continues to
pay rent on or even own the vacant space. If an anchor tenant or a shadow anchor
ceases operations at a retail property or if its sales do not reach a specified
threshold, other tenants at the property may be entitled to terminate their
leases prior to the scheduled expiration date or to pay rent at a reduced rate
for the remaining term of the lease.
Accordingly, the following factors, among others, will adversely affect
the economic performance of an anchored retail property, including:
o an anchor tenant's failure to renew its lease;
o termination of an anchor tenant's lease;
o the bankruptcy or economic decline of an anchor tenant or a shadow
anchor;
o the cessation of the business of a self-owned anchor or of an anchor
tenant, notwithstanding its continued ownership of the previously
occupied space or its continued payment of rent, as the case may be;
or
o a loss of an anchor tenant's ability to attract shoppers.
Retail properties may also face competition from sources outside a given
real estate market or with lower operating costs. For example, all of the
following compete with more traditional department stores and specialty shops
for consumer dollars:
o factory outlet centers;
-37-
o discount shopping centers and clubs;
o catalogue retailers;
o home shopping networks and programs;
o internet web sites and electronic media shopping; and
o telemarketing.
Similarly, home movie rentals and pay-per-view movies provide alternate
sources of entertainment to movie theaters. Continued growth of these
alternative retail outlets and entertainment sources, which are often
characterized by lower operating costs, could adversely affect the rents
collectible at retail properties.
Gas stations, automotive sales and service centers and dry cleaners also
pose unique environmental risks because of the nature of their businesses and
the types of products used or sold in those businesses.
Office Properties. Factors affecting the value and operation of an office
property include:
o the strength, stability, number and quality of the tenants,
particularly significant tenants, at the property;
o the physical attributes and amenities of the building in relation to
competing buildings, including the condition of the HVAC system.
parking and the building's compatibility with current business
wiring requirements;
o whether the area is a desirable business location, including local
labor cost and quality, tax environment, including tax benefits, and
quality of life issues, such as schools and cultural amenities;
o the location of the property with respect to the central business
district or population centers;
o demographic trends within the metropolitan area to move away from or
towards the central business district;
o social trends combined with space management trends, which may
change towards options such as telecommuting or hoteling to satisfy
space needs;
o tax incentives offered to businesses or property owners by cities or
suburbs adjacent to or near where the building is located;
o local competitive conditions, such as the supply of office space or
the existence or construction of new competitive office buildings;
o the quality and philosophy of building management;
o access to mass transportation;
o accessibility from surrounding highways/streets;
o changes in zoning laws; and
o the financial condition of the owner.
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With respect to some office properties, one or more tenants may have the
option, at any time or after the expiration of a specified period, to terminate
their leases at the property. In many cases, the tenant is required to provide
notice and/or pay penalties in connection with the exercise of its termination
option. Notwithstanding any disincentives with respect to a termination option,
there can be no assurance a tenant will not exercise such an option, especially
if the rent paid by that tenant is in excess of market rent.
Office properties may be adversely affected by an economic decline in the
business operated by their tenants. The risk associated with that economic
decline is increased if revenue is dependent on a single tenant or if there is a
significant concentration of tenants in a particular business or industry.
Office properties are also subject to competition with other office
properties in the same market. Competitive factors affecting an office property
include:
o rental rates;
o the building's age, condition and design, including floor sizes and
layout;
o access to public transportation and availability of parking; and
o amenities offered to its tenants, including sophisticated building
systems, such as fiber optic cables, satellite communications or
other base building technological features.
The cost of refitting office space for a new tenant is often higher than
for other property types.
The success of an office property also depends on the local economy.
Factors influencing a company's decision to locate in a given area include:
o the cost and quality of labor;
o tax incentives; and
o quality of life considerations, such as schools and cultural
amenities.
The strength and stability of the local or regional economy will affect an
office property's ability to attract stable tenants on a consistent basis. A
central business district may have a substantially different economy from that
of a suburb.
Hospitality Properties. Hospitality properties may involve different types
of hotels and motels, including:
o full service hotels;
o resort hotels with many amenities;
o limited service hotels;
o hotels and motels associated with national or regional franchise
chains;
o hotels that are not affiliated with any franchise chain but may have
their own brand identity; and
o other lodging facilities.
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Factors affecting the value, operation and economic performance of a
hospitality property include:
o the location of the property and its proximity to major population
centers or attractions;
o the seasonal nature of business at the property;
o the level of room rates relative to those charged by competitors;
o quality and perception of the franchise affiliation, if any;
o economic conditions, either local, regional or national, which may
limit the amount that can be charged for a room and may result in a
reduction in occupancy levels;
o the existence or construction of competing hospitality properties;
o nature and quality of the services and facilities;
o financial strength and capabilities of the owner and operator;
o the need for continuing expenditures for modernizing, refurbishing
and maintaining existing facilities;
o increases in operating costs, which may not be offset by increased
room rates;
o the property's dependence on business and commercial travelers and
tourism;
o changes in travel patterns caused by changes in access, energy
prices, labor strikes, relocation of highways, the reconstruction of
additional highways or other factors; and
o changes in travel patterns caused by perceptions of travel safety,
which perceptions can be significantly and adversely influenced by
terrorist acts and foreign conflict as well as apprehension
regarding the possibility of such acts or conflicts.
Because limited service hotels and motels are relatively quick and
inexpensive to construct and may quickly reflect a positive value, an
over-building of these hotels and motels could occur in any given region, which
would likely adversely affect occupancy and daily room rates. Further, because
rooms at hospitality properties are generally rented for short periods of time,
hospitality properties tend to be more sensitive to adverse economic conditions
and competition than many other types of commercial properties. Additionally,
the revenues of some hospitality properties, particularly those located in
regions whose economies depend upon tourism, may be highly seasonal in nature
and/or may be adversely affected by prolonged unfavorable weather conditions.
Hospitality properties may be operated under franchise agreements. The
continuation of a franchise is typically subject to specified operating
standards and other terms and conditions. The franchisor periodically inspects
its licensed properties to confirm adherence to its operating standards. The
failure of the hospitality property to maintain those standards or adhere to
those other terms and conditions could result in the loss or cancellation of the
franchise license. It is possible that the franchisor could condition the
continuation of a franchise license on the completion of capital improvements or
the making of capital expenditures that the owner of the hospitality property
determines are too expensive or are otherwise unwarranted in light of the
operating results or prospects of the property. In that event, the owner of the
hospitality property may elect to allow the franchise license to lapse. In any
case, if the franchise is terminated, the owner of the hospitality property may
seek to obtain a suitable replacement franchise, which may be at significantly
higher fees than the previous franchise, or to operate property independently of
a franchise license. The loss of a franchise license could have a
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material adverse effect upon the operations or value of the hospitality property
because of the loss of associated name recognition, marketing support and
centralized reservation systems provided by the franchisor.
The viability of any hospitality property that is a franchise of a
national or a regional hotel or motel chain is dependent upon:
o the continued existence and financial strength of the franchisor;
o the public perception of the franchise service mark; and
o the duration of the franchise licensing agreement.
The transferability of franchise license agreements may be restricted. The
consent of the franchisor would be required for the continued use of the
franchise license by the hospitality property following a foreclosure.
Conversely, a lender may be unable to remove a franchisor that it desires to
replace following a foreclosure. Additionally, any provision in a franchise
agreement or management agreement providing for termination because of a
bankruptcy of a franchisor or manager will generally not be enforceable. In the
event of a foreclosure on a hospitality property, the lender or other purchaser
of the hospitality property may not be entitled to the rights under any
associated operating, liquor and other licenses. That party would be required to
apply in its own right for new operating, liquor and other licenses. There can
be no assurance that a new license could be obtained or that it could be
obtained promptly. The lack of a liquor license in a hospitality property could
have an adverse impact on the revenue from that property or on its occupancy
rate.
Casino Properties. Factors affecting the economic performance of a casino
property include:
o location, including proximity to or easy access from major
population centers;
o appearance;
o economic conditions, either local, regional or national, which may
limit the amount of disposable income that potential patrons may
have for gambling;
o the existence or construction of competing casinos;
o dependence on tourism; and
o local or state governmental regulation.
Competition among major casinos may involve attracting patrons by--
o providing alternate forms of entertainment, such as performers and
sporting events, and
o offering low-priced or free food and lodging.
Casino owners may expend substantial sums to modernize, refurbish and
maintain existing facilities.
Because of their dependence on disposable income of patrons, casino
properties are likely to respond quickly to a downturn in the economy.
The ownership, operation, maintenance and/or financing of casino
properties is often subject to local or state governmental regulation. A
government agency or authority may have jurisdiction over or influence with
respect to the foreclosure of a casino property or the bankruptcy of its owner
or operator. In some jurisdictions, it may be necessary to receive governmental
approval before foreclosing, thereby resulting in substantial delays to a
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lender. Gaming licenses are not transferable, including in connection with a
foreclosure. There can be no assurance that a lender or another purchaser in
foreclosure or otherwise will be able to obtain the requisite approvals to
continue operating the foreclosed property as a casino.
Any given state or municipality that currently allows legalized gambling
could pass legislation banning it.
The loss of a gaming license for any reason would have a material adverse
effect on the value of a casino property.
Health Care-Related Properties. Health care-related properties include:
o hospitals;
o medical offices;
o skilled nursing facilities;
o nursing homes;
o congregate care facilities; and
o in some cases, assisted living centers and housing for seniors.
Health care-related facilities, particularly nursing homes, may receive a
substantial portion of their revenues from government reimbursement programs,
primarily Medicaid and Medicare. Medicaid and Medicare are subject to:
o statutory and regulatory changes;
o retroactive rate adjustments;
o administrative rulings;
o policy interpretations;
o delays by fiscal intermediaries; and
o government funding restrictions.
In addition, nursing facilities and assisted living facilities that are
dependent on revenues from other third party payors (other than Medicare and
Medicaid), such as private insurers, are also affected by the reimbursement
policies of those payors.
All of the foregoing can adversely affect revenues from the operation of a
health care-related facility. Moreover, governmental payors have employed
cost-containment measures that limit payments to health care providers. In
addition, there are currently under consideration various proposals for national
health care relief that could further limit these payments.
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Health care-related facilities are subject to significant governmental
regulation of the ownership, operation, maintenance and/or financing of those
properties. Providers of long-term nursing care and other medical services are
highly regulated by federal, state and local law. They are also subject to
numerous factors which can increase the cost of operation, limit growth and, in
extreme cases, require or result in suspension or cessation of operations,
including:
o federal and state licensing requirements;
o facility inspections;
o rate setting;
o disruptions in payments;
o reimbursement policies;
o audits, which may result in recoupment of payments made or
withholding of payments due;
o laws relating to the adequacy of medical care, distribution of
pharmaceuticals, use of equipment, personnel operating policies and
maintenance of and additions to facilities and services;
o patient care liability claims, including those generated by the
recent advent of the use of video surveillance, or "granny cams", by
family members or government prosecutors to monitor care and limited
availability and increased costs of insurance; and
o shortages in staffing, increases in labor costs and labor disputes.
Under applicable federal and state laws and regulations, Medicare and
Medicaid reimbursements generally may not be made to any person other than the
provider who actually furnished the related material goods and services.
Accordingly, in the event of foreclosure on a health care-related facility,
neither a lender nor other subsequent lessee or operator of the property would
generally be entitled to obtain from federal or state governments any
outstanding reimbursement payments relating to services furnished at the
property prior to foreclosure. Furthermore, in the event of foreclosure, there
can be no assurance that a lender or other purchaser in a foreclosure sale would
be entitled to the rights under any required licenses and regulatory approvals.
The lender or other purchaser may have to apply in its own right for those
licenses and approvals. There can be no assurance that a new license could be
obtained or that a new approval would be granted. In addition, there can be no
assurance that the facilities will remain licensed and loss of
licensure/provider agreements by a significant number of facilities could have a
material adverse effect on a borrower's ability to meet its obligations under
the related mortgage loan and, therefore, on distributions on your certificates.
With respect to health care-related properties, the regulatory environment
has intensified, particularly the long-term care service environment for large,
for profit, multi-facility providers. For example, in the past few years,
federal prosecutors have utilized the federal false claims act to prosecute
nursing facilities that have quality of care deficiencies or reported instances
of possible patient abuse and neglect, falsification of records, failure to
report adverse events, improper use of restraints, and certain other care
issues. Since facilities convicted under the false claims act may be liable for
triple damages plus mandatory civil penalties, nursing facilities often settled
with the government for a substantial amount of money rather than defending the
allegations.
The extensive federal, state and local regulations affecting health
care-related facilities include regulations on the financial and other
arrangements that facilities enter into during the normal course of business.
For example, anti-kickback laws prohibit certain business practices and
relationships that might affect the provision and cost of health care services
reimbursable under Medicare and Medicaid programs, including the payment or
receipt of money or anything else of value in return for the referral of
patients whose care will be paid
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by those programs. Sanctions for violations include criminal penalties and civil
sanctions, fines and possible exclusion from payor programs. Federal and state
governments have used monetary recoveries derived from prosecutions to
strengthen their fraud detection and enforcement programs. There can be no
assurance that government officials charged with responsibility for enforcing
the anti-kickback and/or self-referral laws will not assert that certain
arrangements or practices are in violation of such provisions. The operations of
a nursing facility or assisted living facility could be adversely affected by
the failure of its arrangements to comply with such laws or similar state laws
enacted in the future.
The Deficit Reduction Act of 2006 ("DRA") is expected to increase
government anti-fraud efforts. Among other things, the DRA required
organizations, such as nursing facilities and assisted living facilities, that
receive $5 million or more in Medicaid payments to train their work forces on
the federal false claims act and its whistle blower provisions by January 1,2007. The statute also encourages states to pass their own false claims laws by
giving states a larger share of the money recovered from false claims cases. The
effect of the DRA may be to create more whistle blowers and give rise to more
false claims act prosecutions. There can be no assurance that government
officials responsible for false claims act enforcement will not assert that one
or more of a borrower's arrangements, practices, nursing facilities, or assisted
living facilities are in violation of such laws.
Each state also has a Medicaid Fraud Control Unit ("MFCU"), which
typically operates as a division of the state Attorney General's Office or
equivalent, which conducts criminal and civil investigations into alleged abuse,
neglect, mistreatment and/or misappropriation of resident property. In some
cases, the allegations may be investigated by the state Attorney General, local
authorities and federal and/or state survey agencies. There are MFCU and state
Attorney General investigations pending and, from time to time, threatened
against providers, relating to or arising out of allegations of potential
resident abuse, neglect or mistreatment.
Further, the nursing facilities and assisted living facilities are likely
to compete on a local and regional basis with each other and with other
providers who operate similar facilities. They may also compete with providers
of long term care services in other settings, such as hospital rehabilitation
units or home health agencies or other community-based providers. The formation
of managed care networks and integrated delivery systems, as well as increasing
government efforts to encourage the use of home and community-based services
instead of nursing facility services, could also adversely affect nursing
facilities or assisted living facilities if there are incentives that lead to
the utilization of other facilities or community-based home care providers,
instead of nursing facility or assisted living providers, or if competition
drives down prices paid by residents. Some of the competitors of the subject
facilities may be better capitalized, may offer services not offered by the
facilities, or may be owned by agencies supported by other sources of income or
revenue not available to for-profit facilities, such as tax revenues and
charitable contributions. The success of a facility also depends upon the number
of competing facilities in the local market, as well as upon other factors, such
as the facility's age, appearance, reputation and management, resident and
family preferences, referrals by and affiliations with managed care
organizations, relationship with other health care providers and other health
care networks, the types of services provided and, where applicable, the quality
of care and the cost of that care. If the facilities fail to attract patients
and residents and compete effectively with other health care providers, their
revenues and profitability may decline.
Health care-related facilities are generally special purpose properties
that could not be readily converted to general residential, retail or office
use. This will adversely affect their liquidation value. Furthermore, transfers
of health care-related facilities are subject to regulatory approvals under
state, and in some cases federal, law not required for transfers of most other
types of commercial properties. Moreover, in certain circumstances, such as when
federal or state authorities believe that liquidation may adversely affect the
health, safety or welfare of the nursing facility and/or assisted living
facility residents, a facility operator may not be allowed to liquidate for an
indeterminate period of time. Finally, the receipt of any liquidation proceeds
could be delayed by the approval process of any state agency necessary for the
transfer of a mortgaged real property and even reduced to satisfy governmental
obligations of the facility, such as audit recoupments from nursing facilities.
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Industrial Properties. Industrial properties may be adversely affected by
reduced demand for industrial space occasioned by a decline in a particular
industry segment and/or by a general slowdown in the economy. In addition, an
industrial property that suited the particular needs of its original tenant may
be difficult to relet to another tenant or may become functionally obsolete
relative to newer properties. Also, lease terms with respect to industrial
properties are generally for shorter periods of time and may result in a
substantial percentage of leases expiring in the same year at any particular
industrial property.
The value and operation of an industrial property depends on:
o location of the property, the desirability of which in a particular
instance may depend on--
1. availability of labor services,
2. proximity to supply sources and customers, and
3. accessibility to various modes of transportation and shipping,
including railways, roadways, airline terminals and ports;
o building design of the property, the desirability of which in a
particular instance may depend on--
1. ceiling heights,
2. column spacing,
3. number and depth of loading bays,
4. divisibility,
5. floor loading capacities,
6. truck turning radius,
7. overall functionality, and
8. adaptability of the property, because industrial tenants often
need space that is acceptable for highly specialized
activities; and
o the quality and creditworthiness of individual tenants, because
industrial properties frequently have higher tenant concentrations.
Industrial properties are generally special purpose properties that could
not be readily converted to general residential, retail or office use. This will
adversely affect their liquidation value. In addition, properties used for many
industrial purposes are more prone to environmental concerns than other property
types.
Warehouse, Mini-Warehouse and Self-Storage Facilities. Warehouse,
mini-warehouse and self-storage properties are considered vulnerable to
competition because both acquisition costs and break-even occupancy are
relatively low. Depending on their location, mini-warehouses and self-storage
facilities tend to be adversely affected more quickly by a general economic
downturn than other types of commercial properties. In addition, it would
require substantial capital expenditures to convert a warehouse, mini-warehouse
or self-storage property to an alternative use. This will materially impair the
liquidation value of the property if its operation for storage purposes becomes
unprofitable due to decreased demand, competition, age of improvements or other
factors.
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Successful operation of a warehouse, mini-warehouse or self-storage
property depends on--
o building design,
o location and visibility,
o tenant privacy,
o efficient access to the property,
o proximity to potential users, including apartment complexes or
commercial users,
o services provided at the property, such as security,
o age and appearance of the improvements, and
o quality of management.
In addition, it is difficult to assess the environmental risks posed by
warehouse, mini-warehouse and self-storage properties due to tenant privacy
restrictions, tenant anonymity and unsupervised access to these facilities.
Therefore, these facilities may pose additional environmental risks to
investors. Environmental site assessments performed with respect to warehouse,
mini-warehouse and self-storage properties would not include an inspection of
the contents of the facilities. Therefore, it would not be possible to provide
assurance that any of the units included in these kinds of facilities are free
from hazardous substances or other pollutants or contaminants.
Restaurants and Taverns. Factors affecting the economic viability of
individual restaurants, taverns and other establishments that are part of the
food and beverage service industry include:
o competition from facilities having businesses similar to a
particular restaurant or tavern;
o perceptions by prospective customers of safety, convenience,
services and attractiveness;
o the cost, quality and availability of food and beverage products;
o negative publicity, resulting from instances of food contamination,
food-borne illness and similar events;
o changes in demographics, consumer habits and traffic patterns;
o the ability to provide or contract for capable management; and
o retroactive changes to building codes, similar ordinances and other
legal requirements.
Adverse economic conditions, whether local, regional or national, may
limit the amount that may be charged for food and beverages and the extent to
which potential customers dine out. Because of the nature of the business,
restaurants and taverns tend to respond to adverse economic conditions more
quickly than do many other types of commercial properties. Furthermore, the
transferability of any operating, liquor and other licenses to an entity
acquiring a bar or restaurant, either through purchase or foreclosure, is
subject to local law requirements.
The food and beverage service industry is highly competitive. The
principal means of competition are--
o market segment,
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o product,
o price,
o value,
o quality,
o service,
o convenience,
o location, and
o the nature and condition of the restaurant facility.
A restaurant or tavern operator competes with the operators of comparable
establishments in the area in which its restaurant or tavern is located. Other
restaurants could have--
o lower operating costs,
o more favorable locations,
o more effective marketing,
o more efficient operations, or
o better facilities.
The location and condition of a particular restaurant or tavern will
affect the number of customers and, to an extent, the prices that may be
charged. The characteristics of an area or neighborhood in which a restaurant or
tavern is located may change over time or in relation to competing facilities.
Also, the cleanliness and maintenance at a restaurant or tavern will affect its
appeal to customers. In the case of a regionally- or nationally-known chain
restaurant, there may be costly expenditures for renovation, refurbishment or
expansion, regardless of its condition.
Factors affecting the success of a regionally- or nationally-known chain
restaurant include:
o actions and omissions of any franchisor, including management
practices that--
1. adversely affect the nature of the business, or
2. require renovation, refurbishment, expansion or other
expenditures;
o the degree of support provided or arranged by the franchisor,
including its franchisee organizations and third-party providers of
products or services; and
o the bankruptcy or business discontinuation of the franchisor or any
of its franchisee organizations or third-party providers.
Chain restaurants may be operated under franchise agreements. Those
agreements typically do not contain provisions protective of lenders. A
borrower's rights as franchisee typically may be terminated without informing
the lender, and the borrower may be precluded from competing with the franchisor
upon termination.
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In addition, a lender that acquires title to a restaurant site through
foreclosure or similar proceedings may be restricted in the use of the site or
may be unable to succeed to the rights of the franchisee under the related
franchise agreement. The transferability of a franchise may be subject to other
restrictions. Also, federal and state franchise regulations may impose
additional risk, including the risk that the transfer of a franchise acquired
through foreclosure or similar proceedings may require registration with
governmental authorities or disclosure to prospective transferees.
Manufactured Housing Communities, Mobile Home Parks and Recreational
Vehicle Parks. Manufactured housing communities and mobile home parks consist of
land that is divided into "spaces" or "home sites" that are primarily leased to
owners of the individual mobile homes or other housing units. The home owner
often invests in site-specific improvements such as carports, steps, fencing,
skirts around the base of the home, and landscaping. The land owner typically
provides private roads within the park, common facilities and, in many cases,
utilities. Due to relocation costs and, in some cases, demand for homesites, the
value of a mobile home or other housing unit in place in a manufactured housing
community or mobile home park is generally higher, and can be significantly
higher, than the value of the same unit not placed in a manufactured housing
community or mobile home park. As a result, a well-operated manufactured housing
community or mobile home park that has achieved stabilized occupancy is
typically able to maintain occupancy at or near that level. For the same reason,
a lender that provided financing for the home of a tenant who defaulted in his
or her space rent generally has an incentive to keep rental payments current
until the home can be resold in place, rather than to allow the unit to be
removed from the park. In general, the individual mobile homes and other housing
units will not constitute collateral for a mortgage loan underlying a series of
offered certificates.
Recreational vehicle parks lease spaces primarily or exclusively for motor
homes, travel trailers and portable truck campers, primarily designed for
recreational, camping or travel use. In general, parks that lease recreational
vehicle spaces can be viewed as having a less stable tenant population than
parks occupied predominantly by mobile homes. However, it is not unusual for the
owner of a recreational vehicle to leave the vehicle at the park on a year-round
basis or to use the vehicle as low cost housing and reside in the park
indefinitely.
Factors affecting the successful operation of a manufactured housing
community, mobile home park or recreational vehicle park include:
o location of the manufactured housing property;
o the ability of management to provide adequate maintenance and
insurance;
o the number of comparable competing properties in the local market;
o the age, appearance, condition and reputation of the property;
o the quality of management; and
o the types of facilities and services it provides.
Manufactured housing communities and mobile home parks also compete
against alternative forms of residential housing, including--
o multifamily rental properties,
o cooperatively-owned apartment buildings,
o condominium complexes, and
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o single-family residential developments.
Recreational vehicle parks also compete against alternative forms of
recreation and short-term lodging, such as staying at a hotel at the beach.
Manufactured housing communities, mobile home parks and recreational
vehicle parks are special purpose properties that could not be readily converted
to general residential, retail or office use. This will adversely affect the
liquidation value of the property if its operation as a manufactured housing
community, mobile home park or recreational vehicle park, as the case may be,
becomes unprofitable due to competition, age of the improvements or other
factors.
Some states regulate the relationship of an owner of a manufactured
housing community or mobile home park and its tenants in a manner similar to the
way they regulate the relationship between a landlord and tenant at a
multifamily rental property. In addition, some states also regulate changes in
the use of a manufactured housing community or mobile home park and require that
the owner give written notice to its tenants a substantial period of time prior
to the projected change.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control or rent stabilization
on manufactured housing communities and mobile home parks. These ordinances may
limit rent increases to--
o fixed percentages,
o percentages of increases in the consumer price index,
o increases set or approved by a governmental agency, or
o increases determined through mediation or binding arbitration.
In many cases, the rent control or rent stabilization laws either do not
permit vacancy decontrol or permit vacancy decontrol only in the relatively rare
event that the mobile home or manufactured housing unit is removed from the
homesite. Local authority to impose rent control or rent stabilization on
manufactured housing communities and mobile home parks is pre-empted by state
law in some states and rent control or rent stabilization is not imposed at the
state level in those states. In some states, however, local rent control and/or
rent stabilization ordinances are not pre-empted for tenants having short-term
or month-to-month leases, and properties there may be subject to various forms
of rent control or rent stabilization with respect to those tenants.
Recreational and Resort Properties. Any mortgage loan underlying a series
of offered certificates may be secured by a golf course, marina, ski resort,
amusement park or other property used for recreational purposes or as a resort.
Factors affecting the economic performance of a property of this type include:
o the location and appearance of the property;
o the appeal of the recreational activities offered;
o the existence or construction of competing properties, whether are
not they offer the same activities;
o the need to make capital expenditures to maintain, refurbish,
improve and/or expand facilities in order to attract potential
patrons;
o geographic location and dependence on tourism;
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o changes in travel patterns caused by changes in energy prices,
strikes, location of highways, construction of additional highways
and similar factors;
o seasonality of the business, which may cause periodic fluctuations
in operating revenues and expenses;
o sensitivity to weather and climate changes; and
o local, regional and national economic conditions.
A marina or other recreational or resort property located next to water
will also be affected by various statutes and government regulations that govern
the use of, and construction on, rivers, lakes and other waterways.
Because of the nature of the business, recreational and resort properties
tend to respond to adverse economic conditions more quickly than do many other
types of commercial properties. In addition, some recreational and resort
properties may be adversely affected by prolonged unfavorable weather
conditions.
Recreational and resort properties are generally special purpose
properties that are not readily convertible to alternative uses. This will
adversely affect their liquidation value.
Arenas and Stadiums. The success of an arena or stadium generally depends
on its ability to attract patrons to a variety of events, including:
o sporting events;
o musical events;
o theatrical events;
o animal shows; and/or
o circuses.
The ability to attract patrons is dependent on, among others, the
following factors:
o the appeal of the particular event;
o the cost of admission;
o perceptions by prospective patrons of the safety, convenience,
services and attractiveness of the arena or stadium;
o perceptions by prospective patrons of the safety of the surrounding
area; and
o the alternative forms of entertainment available in the particular
locale.
In some cases, an arena's or stadium's success will depend on its ability
to attract and keep a sporting team as a tenant. An arena or stadium may become
unprofitable, or unacceptable to a tenant of that type, due to decreased
attendance, competition and age of improvements. Often, substantial expenditures
must be made to modernize, refurbish and/or maintain existing facilities.
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Arenas and stadiums are special purpose properties which cannot be readily
convertible to alternative uses. This will adversely affect their liquidation
value.
Churches and Other Religious Facilities. Churches and other religious
facilities generally depend on charitable donations to meet expenses and pay for
maintenance and capital expenditures. The extent of those donations is dependent
on the attendance at any particular religious facility and the extent to which
attendees are prepared to make donations, which is influenced by a variety of
social, political and economic factors. Donations may be adversely affected by
economic conditions, whether local, regional or national. Religious facilities
are special purpose properties that are not readily convertible to alternative
uses. This will adversely affect their liquidation value.
Parking Lots and Garages. The primary source of income for parking lots
and garages is the rental fees charged for parking spaces. Factors affecting the
success of a parking lot or garage include:
o the number of rentable parking spaces and rates charged;
o the location of the lot or garage and, in particular, its proximity
to places where large numbers of people work, shop or live;
o the amount of alternative parking spaces in the area;
o the availability of mass transit; and
o the perceptions of the safety, convenience and services of the lot
or garage.
Unimproved Land. The value of unimproved land is largely a function of its
potential use. This may depend on--
o its location,
o its size,
o the surrounding neighborhood, and
o local zoning laws.
ANY ANALYSIS OF THE VALUE OR INCOME PRODUCING ABILITY OF A COMMERCIAL OR
MULTIFAMILY PROPERTY IS HIGHLY SUBJECTIVE AND SUBJECT TO ERROR
Mortgage loans secured by liens on income-producing properties are
substantially different from mortgage loans made on the security of
owner-occupied single-family homes. The repayment of a loan secured by a lien on
an income-producing property is typically dependent upon--
o the successful operation of the property, and
o its ability to generate income sufficient to make payments on the
loan.
This is particularly true because most or all of the mortgage loans underlying
the offered certificates will be nonrecourse loans.
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The debt service coverage ratio of a multifamily or commercial mortgage
loan is an important measure of the likelihood of default on the loan. In
general, the debt service coverage ratio of a multifamily or commercial mortgage
loan at any given time is the ratio of--
o the amount of income derived or expected to be derived from the
related real property collateral for a given period that is
available to pay debt service on the subject mortgage loan, to
o the scheduled payments of principal and/or interest during that
given period on the subject mortgage loan and any other senior
and/or pari passu loans that are secured by the related real
property collateral.
The amount described in the first bullet point of the preceding sentence is
often a highly subjective number based on a variety of assumptions regarding,
and adjustments to, revenues and expenses with respect to the related real
property.
The cash flow generated by a multifamily or commercial property will
generally fluctuate over time and may or may not be sufficient to--
o make the loan payments on the related mortgage loan,
o cover operating expenses, and
o fund capital improvements at any given time.
Operating revenues of a nonowner occupied, income-producing property may
be affected by the condition of the applicable real estate market and/or area
economy. Properties leased, occupied or used on a short-term basis, such as--
o some health care-related facilities,
o hotels and motels,
o recreational vehicle parks, and
o mini-warehouse and self-storage facilities,
tend to be affected more rapidly by changes in market or business conditions
than do properties typically leased for longer periods, such as--
o warehouses,
o retail stores,
o office buildings, and
o industrial facilities.
Some commercial properties may be owner-occupied or leased to a small
number of tenants. Accordingly, the operating revenues may depend substantially
on the financial condition of the borrower or one or a few tenants. Mortgage
loans secured by liens on owner-occupied and single tenant properties may pose a
greater likelihood of default and loss than loans secured by liens on
multifamily properties or on multi-tenant commercial properties.
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Increases in property operating expenses can increase the likelihood of a
borrower default on a multifamily or commercial mortgage loan secured by the
property. Increases in property operating expenses may result from:
o increases in energy costs and labor costs;
o increases in interest rates and real estate tax rates; and
o changes in governmental rules, regulations and fiscal policies.
Some net leases of commercial properties may provide that the lessee,
rather than the borrower/landlord, is responsible for payment of operating
expenses. However, a net lease will result in stable net operating income to the
borrower/landlord only if the lessee is able to pay the increased operating
expense while also continuing to make rent payments.
Lenders also look to the loan-to-value ratio of a mortgage loan as a
factor in evaluating the likelihood of loss if a property is liquidated
following a default. In general, the loan-to-value ratio of a multifamily or
commercial mortgage loan at any given time is the ratio, expressed as a
percentage, of--
o the then outstanding principal balance of the mortgage loan and any
other senior and/or pari passu loans that are secured by the related
real property collateral, to
o the estimated value of the related real property based on an
appraisal, a cash flow analysis, a recent sales price or another
method or benchmark of valuation.
A low loan-to-value ratio means the borrower has a large amount of its own
equity in the multifamily or commercial property that secures its loan. In these
circumstances--
o the borrower has a greater incentive to perform under the terms of
the related mortgage loan in order to protect that equity, and
o the lender has greater protection against loss on liquidation
following a borrower default.
However, loan-to-value ratios are not necessarily an accurate measure of
the likelihood of liquidation loss in a pool of multifamily and commercial
mortgage loans. For example, the value of a multifamily or commercial property
as of the date of initial issuance of a series of offered certificates may be
less than the estimated value determined at loan origination. The value of any
real property, in particular a multifamily or commercial property, will likely
fluctuate from time to time. Moreover, even a current appraisal is not
necessarily a reliable estimate of value. Appraised values of income-producing
properties are generally based on--
o the market comparison method, which takes into account the recent
resale value of comparable properties at the date of the appraisal;
o the cost replacement method, which takes into account the cost of
replacing the property at the date of the appraisal;
o the income capitalization method, which takes into account the
property's projected net cash flow; or
o a selection from the values derived from the foregoing methods.
Each of these appraisal methods presents analytical difficulties. For
example--
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o it is often difficult to find truly comparable properties that have
recently been sold;
o the replacement cost of a property may have little to do with its
current market value; and
o income capitalization is inherently based on inexact projections of
income and expense and the selection of an appropriate
capitalization rate and discount rate.
If more than one appraisal method is used and significantly different
results are produced, an accurate determination of value and, correspondingly, a
reliable analysis of the likelihood of default and loss, is even more difficult.
The value of a multifamily or commercial property will be affected by
property performance. As a result, if a multifamily or commercial mortgage loan
defaults because the income generated by the related property is insufficient to
pay operating costs and expenses as well as debt service, then the value of the
property will decline and a liquidation loss may occur.
BORROWER CONCENTRATION WITHIN A TRUST EXPOSES INVESTORS TO GREATER RISK OF
DEFAULT AND LOSS
A particular borrower or group of related borrowers may be associated with
multiple real properties securing the mortgage loans underlying a series of
offered certificates. The bankruptcy or insolvency of, or other financial
problems with respect to, that borrower or group of borrowers could have an
adverse effect on--
o the operation of all of the related real properties, and
o the ability of those properties to produce sufficient cash flow to
make required payments on the related mortgage loans.
For example, if a borrower or group of related borrowers that owns or controls
several real properties experiences financial difficulty at one of those
properties, it could defer maintenance at another of those properties in order
to satisfy current expenses with respect to the first property. That borrower or
group of related borrowers could also attempt to avert foreclosure by filing a
bankruptcy petition that might have the effect of interrupting debt service
payments on all the related mortgage loans for an indefinite period. In
addition, multiple real properties owned by the same borrower or related
borrowers are likely to have common management. This would increase the risk
that financial or other difficulties experienced by the property manager could
have a greater impact on the owner of the related loans.
LOAN CONCENTRATION WITHIN A TRUST EXPOSES INVESTORS TO GREATER RISK OF DEFAULT
AND LOSS
Any of the mortgage assets in one of our trusts may be substantially
larger than the other assets in that trust. In general, the inclusion in a trust
of one or more mortgage assets that have outstanding principal balances that are
substantially larger than the other mortgage assets in the trust can result in
losses that are more severe, relative to the size of the related mortgage asset
pool, than would be the case if the total principal balance of that pool were
distributed more evenly.
GEOGRAPHIC CONCENTRATION WITHIN A TRUST EXPOSES INVESTORS TO GREATER RISK OF
DEFAULT AND LOSS
If a material concentration of mortgage loans underlying a series of
offered certificates is secured by real properties in a particular locale, state
or region, then the holders of those certificates will have a greater exposure
to:
o any adverse economic developments that occur in the locale, state or
region where the properties are located;
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o changes in the real estate market where the properties are located;
o changes in governmental rules and fiscal policies in the
governmental jurisdiction where the properties are located; and
o acts of nature, including floods, tornadoes and earthquakes, in the
areas where properties are located.
CHANGES IN POOL COMPOSITION WILL CHANGE THE NATURE OF YOUR INVESTMENT
The mortgage loans underlying any series of offered certificates will
amortize at different rates and mature on different dates. In addition, some of
those mortgage loans may be prepaid or liquidated. As a result, the relative
composition of the related mortgage asset pool will change over time.
If you purchase offered certificates with a pass-through rate that is
equal to or calculated based upon a weighted average of interest rates on the
underlying mortgage loans, your pass-through rate will be affected, and may
decline, as the relative composition of the mortgage pool changes.
In addition, as payments and other collections of principal are received
with respect to the underlying mortgage loans, the remaining mortgage pool
backing your offered certificates may exhibit an increased concentration with
respect to property type, number and affiliation of borrowers and geographic
location.
ADJUSTABLE RATE MORTGAGE LOANS MAY ENTAIL GREATER RISKS OF DEFAULT TO LENDERS
THAN FIXED RATE MORTGAGE LOANS
Some or all of the mortgage loans underlying a series of offered
certificates may provide for adjustments to their respective mortgage interest
rates and corresponding adjustments to their respective periodic debt service
payments. As the periodic debt service payment for any of those mortgage loans
increases, the likelihood that cash flow from the underlying real property will
be insufficient to make that periodic debt service payment and pay operating
expenses also increases.
ADDITIONAL SECURED DEBT INCREASES THE LIKELIHOOD THAT A BORROWER WILL DEFAULT ON
A MORTGAGE LOAN UNDERLYING YOUR OFFERED CERTIFICATES
Some or all of the mortgage loans included in one of our trusts may permit
the related borrower to encumber the related real property with additional
secured debt.
Even if a mortgage loan prohibits further encumbrance of the related real
property, a violation of this prohibition may not become evident until the
affected mortgage loan otherwise defaults. Accordingly, a lender, such as one of
our trusts, may not realistically be able to prevent a borrower from incurring
subordinate debt.
The existence of any additional secured indebtedness increases the
difficulty of refinancing a mortgage loan at the loan's maturity. In addition,
the related borrower may have difficulty repaying multiple loans. Moreover, the
filing of a petition in bankruptcy by, or on behalf of, a junior lienholder may
stay the senior lienholder from taking action to foreclose out the junior lien.
See "LEGAL ASPECTS OF MORTGAGE LOANS--Subordinate Financing."
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WITH RESPECT TO CERTAIN MORTGAGE LOANS INCLUDED IN OUR TRUSTS, THE MORTGAGED
PROPERTY OR PROPERTIES THAT SECURE THE SUBJECT MORTGAGE LOAN IN THE TRUST ALSO
SECURE ONE (1) OR MORE RELATED MORTGAGE LOANS THAT ARE NOT IN THE TRUST; THE
INTERESTS OF THE HOLDERS OF THOSE NON-TRUST MORTGAGE LOANS MAY CONFLICT WITH
YOUR INTERESTS
Certain mortgage loans included in our trusts are each part of a loan
combination or split loan structure that includes one or more additional
mortgage loans (not included in the trust) that are secured by the same mortgage
instrument(s) encumbering the same mortgaged property or properties, as
applicable, as is the subject mortgage loan. See "THE TRUST FUND--MortgageLoans--Loan Combinations." Pursuant to one or more co-lender or similar
agreements, a holder of a particular non-trust mortgage loan in a subject loan
combination, or a group of holders of non-trust mortgage loans in a subject loan
combination (acting together), may be granted various rights and powers that
affect the mortgage loan in that loan combination that is in one of our trusts,
including (a) cure rights with respect to the mortgage loan in our trust, (b) a
purchase option with respect to the mortgage loan in our trust, (c) the right to
advise, direct and/or consult with the applicable servicer regarding various
servicing matters, including certain modifications, affecting that loan
combination, and/or (d) the right to replace the applicable special servicer
(without cause) with respect to the mortgage loan in our trust. In some cases,
those rights and powers may be assignable or may be exercised through a
representative or designee. In connection with exercising any of the foregoing
rights afforded to it, the holder of any non-trust mortgage loan in a loan
combination that includes a mortgage loan in one of our trusts --or, if
applicable, any representative, designee or assignee of that holder with respect
to the particular right -- will likely not be an interested party with respect
to the related series of certificates, will have no obligation to consider the
interests of, or the impact of exercising such rights on, the related series of
certificates and may have interests that conflict with your interests. If any
such non-trust mortgage loan is included in a securitization, then the
representative, designee or assignee exercising any of the rights of the holder
of that non-trust mortgage loan may be a securityholder, an operating advisor, a
controlling class representative or other comparable party or a servicer from
that other unrelated securitization. You should expect that the holder or
beneficial owner of a non-trust mortgage loan will exercise its rights and
powers to protect its own economic interests, and will not be liable to the
related series of certificateholders for so doing.
In addition, certain of mortgage loans included in our trusts that are
part of a loan combination will be serviced and administered pursuant to the
servicing agreement for the securitization of a non-trust mortgage loan that is
part of the same loan combination. Consequently, the certificateholders of the
related series of certificates will have limited ability to control the
servicing of those mortgage loans and the parties with control over the
servicing of those mortgage loans may have interests that conflict with your
interests. See "DESCRIPTION OF THE GOVERNING DOCUMENTS--Servicing Mortgage LoansThat Are Part of a Loan Combination."THE BORROWER'S FORM OF ENTITY MAY CAUSE SPECIAL RISKS AND/OR HINDER RECOVERY
Some of the mortgage loans underlying a series of offered certificates may
have borrowers that are individuals or, alternatively, are entities that either
have not been structured to diminish the likelihood of their becoming bankrupt
or do not satisfy all the characteristics of special purpose entities. In
general, as a result of a borrower not being a special purpose entity or not
being limited to owning the related mortgaged real property, the borrower may be
engaged in activities unrelated to the subject mortgaged real property and may
incur indebtedness or suffer liabilities with respect to those activities.
Further, some of the borrowing entities may have been in existence and
conducting business prior to the origination of the related underlying mortgage
loans, may own or have previously owned other property that is not part of the
collateral for the related underlying mortgage loans and, further, may not have
always satisfied all the characteristics of special purpose entities even if
they currently do so. This could negatively impact the borrower's financial
condition, and thus its ability to pay amounts due and owing under the subject
underlying mortgage loan. The related mortgage documents and/or organizational
documents of those borrowers may not contain the representations, warranties and
covenants customarily made by a borrower that is a special purpose entity, such
as limitations on indebtedness and affiliate transactions and restrictions on
the borrower's ability to dissolve, liquidate, consolidate, merge, sell all or
any material portion of its assets or amend its organizational documents. These
provisions are designed to mitigate
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the possibility that the borrower's financial condition would be adversely
impacted by factors unrelated to the related mortgaged real property and the
related mortgage loan.
Borrowers not structured as bankruptcy-remote entities may be more likely
to become insolvent or the subject of a voluntary or involuntary bankruptcy
proceeding because those borrowers may be:
o operating entities with businesses distinct from the operation of
the property with the associated liabilities and risks of operating
an ongoing business; and
o individuals that have personal liabilities unrelated to the
property.
In addition, if an underlying mortgage loan is secured by a mortgage on
both the related borrower's leasehold interest in the related mortgaged real
property and the underlying fee interest in such property, the related borrower
may be a special purpose entity, but the owner and pledgor of the related fee
interest may not be a special purpose entity.
However, any borrower, even an entity structured to be bankruptcy-remote,
as an owner of real estate will be subject to certain potential liabilities and
risks. We cannot assure you that any borrower will not file for bankruptcy
protection or that creditors of a borrower or a corporate or individual general
partner or managing member of a borrower will not initiate a bankruptcy or
similar proceeding against such borrower or corporate or individual general
partner or managing member.
With respect to those borrowers that are structured as special purposes
entities, although the terms of the borrower's organizational documents and/or
related loan documents require that the related borrower covenants to be a
special purpose entity, in some cases those borrowers are not required to
observe all covenants and conditions that typically are required in order for
such an entity to be viewed under the standard rating agency criteria as a
special purpose entity.
Furthermore, with respect to any related borrowers, creditors of a common
parent in bankruptcy may seek to consolidate the assets of such borrowers with
those of the parent. Consolidation of the assets of such borrowers would likely
have an adverse effect on the funds available to make distributions on your
offered certificates, and may lead to a downgrade, withdrawal or qualification
of the ratings of your offered certificates. See "--Borrower BankruptcyProceedings Can Delay and Impair Recovery on a Mortgage Loan Underlying YourOffered Certificates" below and "LEGAL ASPECTS OF MORTGAGE LOANS--BankruptcyLaws."
The mortgage loans underlying a series of offered certificates may have
borrowers that own the related mortgaged real properties as tenants-in-common or
may permit the related borrowers to convert into a tenant-in-common structure in
the future. Generally, in tenant-in-common ownership structures, each
tenant-in-common owns an undivided share in the subject real property. If a
tenant-in-common desires to sell its interest in the subject real property and
is unable to find a buyer or otherwise desires to force a partition, the
tenant-in-common has the ability to request that a court order a sale of the
subject real property and distribute the proceeds to each tenant-in-common owner
proportionally. To reduce the likelihood of a partition action, a
tenant-in-common borrower may be required to waive its partition right. However,
there can be no assurance that, if challenged, this waiver would be enforceable
or that it would be enforced in a bankruptcy proceeding.
The enforcement of remedies against tenant-in-common borrowers may be
prolonged because each time a tenant-in-common borrower files for bankruptcy,
the bankruptcy court stay is reinstated. While a lender may seek to mitigate
this risk after the commencement of the first bankruptcy of a tenant-in-common
by commencing an involuntary proceeding against the other tenant-in-common
borrowers and moving to consolidate all those cases, there can be no assurance
that a bankruptcy court would consolidate those separate cases. Additionally,
tenant-in-common borrowers may be permitted to transfer portions of their
interests in the subject mortgaged real property to numerous additional
tenant-in-common borrowers.
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The bankruptcy, dissolution or action for partition by one or more of the
tenants-in-common could result in an early repayment of the related mortgage
loan, a significant delay in recovery against the tenant-in-common borrowers, a
material impairment in property management and a substantial decrease in the
amount recoverable upon the related mortgage loan. Not all tenants-in-common for
these mortgage loans may be special purpose entities and some of those
tenants-in-common may be individuals.
BORROWER BANKRUPTCY PROCEEDINGS CAN DELAY AND IMPAIR RECOVERY ON A MORTGAGE LOAN
UNDERLYING YOUR OFFERED CERTIFICATES
Under the U.S. Bankruptcy Code, the filing of a petition in bankruptcy by
or against a borrower will stay the sale of a real property owned by that
borrower, as well as the commencement or continuation of a foreclosure action.
In addition, if a court determines that the value of a real property is
less than the principal balance of the mortgage loan it secures, the court may
reduce the amount of secured indebtedness to the then-value of the property.
This would make the lender a general unsecured creditor for the difference
between the then-value of the property and the amount of its outstanding
mortgage indebtedness.
A bankruptcy court also may:
o grant a debtor a reasonable time to cure a payment default on a
mortgage loan;
o reduce monthly payments due under a mortgage loan;
o change the rate of interest due on a mortgage loan; or
o otherwise alter a mortgage loan's repayment schedule.
Furthermore, the borrower, as debtor-in-possession, or its bankruptcy
trustee has special powers to avoid, subordinate or disallow debts. In some
circumstances, the claims of a secured lender, such as one of our trusts, may be
subordinated to financing obtained by a debtor-in-possession subsequent to its
bankruptcy.
Under the U.S. Bankruptcy Code, a lender will be stayed from enforcing a
borrower's assignment of rents and leases. The U.S. Bankruptcy Code also may
interfere with a lender's ability to enforce lockbox requirements. The legal
proceedings necessary to resolve these issues can be time consuming and may
significantly delay the receipt of rents. Rents also may escape an assignment to
the extent they are used by borrower to maintain its property or for other court
authorized expenses.
As a result of the foregoing, the related trust's recovery with respect to
borrowers in bankruptcy proceedings may be significantly delayed, and the total
amount ultimately collected may be substantially less than the amount owed.
REDEVELOPMENT AND RENOVATION AT THE MORTGAGED PROPERTIES MAY HAVE UNCERTAIN AND
ADVERSE RESULTS
Some mortgage loans underlying a series of offered certificates may be
secured by mortgaged real properties that are undergoing or are expected to
undergo redevelopment or renovation in the future. There can be no assurance
that current or planned redevelopment or renovation will be completed, that such
redevelopment or renovation will be completed in the time frame contemplated, or
that, when and if redevelopment or renovation is completed, such redevelopment
or renovation will improve the operations at, or increase the value of, the
subject property. Failure of any of the foregoing to occur could have a material
negative impact on the ability of the related borrower to repay the related
mortgage loan.
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In the event the related borrower fails to pay the costs of work completed
or material delivered in connection with such ongoing redevelopment or
renovation, the portion of the mortgaged real property on which there are
renovations may be subject to mechanic's or materialmen's liens that may be
senior to the lien of the related mortgage loan.
ENVIRONMENTAL LIABILITIES WILL ADVERSELY AFFECT THE VALUE AND OPERATION OF THE
CONTAMINATED PROPERTY AND MAY DETER A LENDER FROM FORECLOSING
There can be no assurance--
o as to the degree of environmental testing conducted at any of the
real properties securing the mortgage loans that back your offered
certificates;
o that the environmental testing conducted by or on behalf of the
applicable originators or any other parties in connection with the
origination of those mortgage loans or otherwise identified all
adverse environmental conditions and risks at the related real
properties;
o that the results of the environmental testing were accurately
evaluated in all cases;
o that the related borrowers have implemented or will implement all
operations and maintenance plans and other remedial actions
recommended by any environmental consultant that may have conducted
testing at the related real properties; or
o that the recommended action will fully remediate or otherwise
address all the identified adverse environmental conditions and
risks.
Environmental site assessments vary considerably in their content, quality
and cost. Even when adhering to good professional practices, environmental
consultants will sometimes not detect significant environmental problems because
to do an exhaustive environmental assessment would be far too costly and
time-consuming to be practical.
In addition, the current environmental condition of a real property
securing a mortgage loan underlying your offered certificates could be adversely
affected by--
o tenants at the property, such as gasoline stations or dry cleaners,
or
o conditions or operations in the vicinity of the property, such as
leaking underground storage tanks at another property nearby.
Various environmental laws may make a current or previous owner or
operator of real property liable for the costs of removal or remediation of
hazardous or toxic substances on, under or adjacent to the property. Those laws
often impose liability whether or not the owner or operator knew of, or was
responsible for, the presence of the hazardous or toxic substances. For example,
there are laws that impose liability for release of asbestos containing
materials into the air or require the removal or containment of the materials.
The owner's liability for any required remediation generally is unlimited and
could exceed the value of the property and/or the total assets of the owner. In
addition, the presence of hazardous or toxic substances, or the failure to
remediate the adverse environmental condition, may adversely affect the owner's
or operator's ability to use the affected property. In some states,
contamination of a property may give rise to a lien on the property to ensure
the costs of cleanup. Depending on the state, this lien may have priority over
the lien of an existing mortgage, deed of trust or other security instrument. In
addition, third parties may seek recovery from owners or operators of real
property for personal injury associated with exposure to hazardous substances,
including asbestos and lead-based paint. Persons who arrange for the disposal or
treatment of hazardous or toxic substances may be liable for the costs of
removal or remediation of the substances at the disposal or treatment facility.
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The federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, as well as other federal and state laws,
provide that a secured lender, such as one of our trusts, may be liable as an
"owner" or "operator" of the real property, regardless of whether the borrower
or a previous owner caused the environmental damage, if--
o agents or employees of the lender are deemed to have participated in
the management of the borrower, or
o the lender actually takes possession of a borrower's property or
control of its day-to-day operations, including through the
appointment of a receiver or foreclosure.
Although recently enacted legislation clarifies the activities in which a
lender may engage without becoming subject to liability under the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, and similar federal laws, that legislation has no applicability to
state environmental laws. Moreover, future laws, ordinances or regulations could
impose material environmental liability.
Federal law requires owners of residential housing constructed prior to
1978--
o to disclose to potential residents or purchasers information in
their possession regarding the presence of known lead-based paint or
lead-based paint-related hazards in such housing, and
o to deliver to potential residents or purchasers a United States
Environmental Protection Agency approved information pamphlet
describing the potential hazards to pregnant women and young
children, including that the ingestion of lead-based paint chips
and/or the inhalation of dust particles from lead-based paint by
children can cause permanent injury, even at low levels of exposure.
Property owners may be liable for injuries to their tenants resulting from
exposure under various laws that impose affirmative obligations on property
owners of residential housing containing lead-based paint.
SOME PROVISIONS IN THE MORTGAGE LOANS UNDERLYING YOUR OFFERED CERTIFICATES MAY
BE CHALLENGED AS BEING UNENFORCEABLE
Cross-Collateralization Arrangements. It may be possible to challenge
cross-collateralization arrangements involving more than one borrower as a
fraudulent conveyance, even if the borrowers are related. If one of those
borrowers were to become a debtor in a bankruptcy case, creditors of the
bankrupt party or the representative of the bankruptcy estate of the bankrupt
party could seek to have the bankruptcy court avoid any lien granted by the
bankrupt party to secure repayment of another borrower's loan. In order to do
so, the court would have to determine that--
o the bankrupt party--
1. was insolvent at the time of granting the lien,
2. was rendered insolvent by the granting of the lien,
3. was left with inadequate capital, or
4. was not able to pay its debts as they matured; and
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o the bankrupt party did not, when it allowed its property to be
encumbered by a lien securing the other borrower's loan, receive
fair consideration or reasonably equivalent value for pledging its
property for the equal benefit of the other borrower.
If the court were to conclude that the granting of the lien was an avoidable
fraudulent conveyance, it could nullify the lien or security instrument
effecting the cross-collateralization. The court could also allow the bankrupt
party to recover payments it made under the avoided cross-collateralization.
Prepayment Premiums, Fees and Charges. Under the laws of a number of
states, the enforceability of any mortgage loan provisions that require payment
of a prepayment premium, fee or charge upon an involuntary prepayment, is
unclear. If those provisions were unenforceable, borrowers would have an
incentive to default in order to prepay their loans.
Due-on-Sale and Debt Acceleration Clauses. Some or all of the mortgage
loans included in one of our trusts may contain a due-on-sale clause, which
permits the lender, with some exceptions, to accelerate the maturity of the
mortgage loan upon the sale, transfer or conveyance of--
o the related real property, or
o a majority ownership interest in the related borrower.
We anticipate that all of the mortgage loans included in one of our trusts
will contain some form of debt-acceleration clause, which permits the lender to
accelerate the debt upon specified monetary or non-monetary defaults by the
related borrower.
The courts of all states will enforce acceleration clauses in the event of
a material payment default. The equity courts of any state, however, may refuse
to allow the foreclosure of a mortgage, deed of trust or other security
instrument or to permit the acceleration of the indebtedness if:
o the default is deemed to be immaterial,
o the exercise of those remedies would be inequitable or unjust, or
o the circumstances would render the acceleration unconscionable.
Assignments of Leases. Some or all of the mortgage loans included in one
of our trusts may be secured by, among other things, an assignment of leases and
rents. Under that document, the related borrower will assign its right, title
and interest as landlord under the leases on the related real property and the
income derived from those leases to the lender as further security for the
related mortgage loan, while retaining a license to collect rents for so long as
there is no default. In the event the borrower defaults, the license terminates
and the lender is entitled to collect rents. In some cases, those assignments
may not be perfected as security interests prior to actual possession of the
cash flow. Accordingly, state law may require that the lender take possession of
the property and obtain a judicial appointment of a receiver before becoming
entitled to collect the rents. In addition, the commencement of bankruptcy or
similar proceedings by or with respect to the borrower will adversely affect the
lender's ability to collect the rents. See "LEGAL ASPECTS OF MORTGAGELOANS--Bankruptcy Laws."Defeasance. A mortgage loan underlying a series of offered certificates
may permit the related borrower, during the periods specified and subject to the
conditions set forth in the loan, to pledge to the holder of the mortgage loan a
specified amount of U.S. Treasury obligations or other government securities and
thereby obtain a release of the related mortgaged property. The cash amount
which a borrower must expend to purchase, or must deliver to a master servicer
in order for the master servicer to purchase, the required United States
government securities may be in excess of the principal balance of the mortgage
loan. A court could interpret that excess amount as a form of prepayment premium
or could take it into account for usury purposes. In some states, some
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forms of prepayment premiums are unenforceable. If the payment of that excess
amount were held to be unenforceable, the remaining portion of the cash amount
to be delivered may be insufficient to purchase the requisite amount of United
States government securities.
CERTAIN ASPECTS OF SUBORDINATION AGREEMENTS, INCLUDING CO-LENDER AGREEMENTS
EXECUTED IN CONNECTION WITH MORTGAGE LOANS UNDERLYING YOUR OFFERED CERTIFICATES
THAT ARE PART OF A SPLIT LOAN STRUCTURE, MAY BE UNENFORCEABLE
Pursuant to co-lender, intercreditor and similar agreements for certain of
the mortgage loans included in one of our trusts, which mortgage loans are, in
each case, intended to be senior to one or more other mortgage loans--not
included in the related trust--that encumber the related mortgaged property, the
subordinate lenders may have agreed that they will not take any direct actions
with respect to the related subordinated debt, including any actions relating to
the bankruptcy of the related borrower, and that the holder of the related
mortgage loan that is included in our trust--directly or through an applicable
servicer--will have all rights to direct all such actions. There can be no
assurance that in the event of the borrower's bankruptcy, a court will enforce
such restrictions against a subordinated lender. While subordination agreements
are generally enforceable in bankruptcy, in its decision in In re 203 North
LaSalle Street Partnership, 246 B.R. 325 (Bankr. N.D. Ill. March 10, 2000), the
United States Bankruptcy Court for the Northern District of Illinois refused to
enforce a provision of a subordination agreement that allowed a first mortgagee
to vote a second mortgagee's claim with respect to a Chapter 11 reorganization
plan on the grounds that pre-bankruptcy contracts cannot override rights
expressly provided by the Bankruptcy Code. This holding, which one court has
already followed, potentially limits the ability of a senior lender to accept or
reject a reorganization plan or to control the enforcement of remedies against a
common borrower over a subordinated lender's objections. In the event the
foregoing holding is followed with respect to a co-lender relationship related
to one of the mortgage loans underlying your offered certificates, the trustee's
recovery with respect to the related borrower in a bankruptcy proceeding may be
significantly delayed, and the aggregate amount ultimately collected may be
substantially less than the amount owed.
WORLD EVENTS AND NATURAL DISASTERS COULD HAVE AN ADVERSE IMPACT ON THE REAL
PROPERTIES SECURING THE MORTGAGE LOANS UNDERLYING YOUR OFFERED CERTIFICATES AND
CONSEQUENTLY COULD REDUCE THE CASH FLOW AVAILABLE TO MAKE PAYMENTS ON THE
OFFERED CERTIFICATES
The economic impact of the United States' military operations in Iraq and
other parts of the world, as well as the possibility of any terrorist attacks
domestically or abroad, is uncertain, but could have a material effect on
general economic conditions, consumer confidence, and market liquidity. We can
give no assurance as to the effect of these events on consumer confidence and
the performance of the loans held by trust fund. Any adverse impact resulting
from these events would be borne by the holders of one or more classes of the
securities. In addition, natural disasters, including earthquakes, floods and
hurricanes, also may adversely affect the real properties securing the mortgage
loans that back your offered certificates. For example, real properties located
in California may be more susceptible to certain hazards (such as earthquakes or
widespread fires) than properties in other parts of the country and mortgaged
real properties located in coastal states generally may be more susceptible to
hurricanes than properties in other parts of the country. Hurricanes and related
windstorms, floods and tornadoes have caused extensive and catastrophic physical
damage in and to coastal and inland areas located in the Gulf Coast region of
the United States and certain other parts of the southeastern United States. The
underlying mortgage loans do not all require the maintenance of flood insurance
for the related real properties. We cannot assure you that any damage caused by
hurricanes, windstorms, floods or tornadoes would be covered by insurance.
JURISDICTIONS WITH ONE ACTION OR SECURITY FIRST RULES AND/OR ANTI-DEFICIENCY
LEGISLATION MAY LIMIT THE ABILITY OF THE SPECIAL SERVICER TO FORECLOSE ON A REAL
PROPERTY OR TO REALIZE ON OBLIGATIONS SECURED BY A REAL PROPERTY
Several states, including California, have laws that prohibit more than
one "judicial action" to enforce a mortgage obligation, requiring the lender to
exhaust the real property security for such obligation first and/or
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limiting the ability of the lender to recover a deficiency judgment from the
obligor following the lender's realization upon the collateral. This could be
particularly problematic for cross-collateralized, cross-defaulted or
multi-property mortgage loans secured by real properties located in multiple
states where only some of those states have such rules. A lender who proceeds in
violation of these rules may run the risk of forfeiting collateral and/or
forfeiting the right to enforce the underlying obligation. In some
jurisdictions, the benefits of such laws may also be available to a guarantor of
the underlying obligation, thereby limiting the ability of the lender to recover
against a guarantor without first proceeding against the collateral and without
a judicial foreclosure. Accordingly, where real properties are located in
jurisdictions in which "one action,""security first" and/or "anti-deficiency"
rules may be applicable, the special servicer should seek to obtain advice of
counsel prior to enforcing any of the trust's rights under any of the related
mortgage loans and/or guarantees of those mortgage loans. As a result, the
special servicer may incur additional - and perhaps significant additional -
delay and expense in foreclosing on the underlying real properties located in
states affected by "one action,""security first" or "anti-deficiency" rules.
See "LEGAL ASPECTS OF MORTGAGE LOANS--Foreclosure--One Action and Security FirstRules" and "--Foreclosure--Anti-Deficiency Legislation."LACK OF INSURANCE COVERAGE EXPOSES A TRUST TO RISK FOR PARTICULAR SPECIAL HAZARD
LOSSES
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of a property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in the related
policy. Most insurance policies typically do not cover any physical damage
resulting from, among other things:
o war,
o riot, strike and civil commotion,
o terrorism,
o nuclear, biological or chemical materials,
o revolution,
o governmental actions,
o floods and other water-related causes,
o earth movement, including earthquakes, landslides and mudflows,
o wet or dry rot,
o mold,
o vermin, and
o domestic animals.
Unless the related mortgage loan documents specifically require the
borrower to insure against physical damage arising from these causes, then the
resulting losses may be borne by you as a holder of offered certificates.
Not all of the mortgaged real properties that secure mortgage loans
included in one of our trusts will be insured against acts of terrorism. Some of
those mortgage loans may not require terrorism insurance coverage. In
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other cases, because of heightened concern over future terrorist activities in
the United States, it may be difficult for borrowers to obtain or renew
terrorism insurance coverage at commercially reasonable rates.
There is also a possibility of casualty losses on a real property for
which insurance proceeds, together with land value, may not be adequate to pay
the mortgage loan in full or rebuild the improvements. Consequently, there can
be no assurance that each casualty loss incurred with respect to a real property
securing one of the mortgage loans included in one of our trusts will be fully
covered by insurance or that the mortgage loan will be fully repaid in the event
of a casualty.
Furthermore, various forms of insurance maintained with respect to any of
the real properties for the mortgage loans included in one of our trusts,
including casualty insurance, environmental insurance and earthquake insurance,
may be provided under a blanket insurance policy. That blanket insurance policy
will also cover other real properties, some of which may not secure loans in
that trust. As a result of total limits under any of those blanket policies,
losses at other properties covered by the blanket insurance policy may reduce
the amount of insurance coverage with respect to a property securing one of the
loans in our trust.
LENDING ON CONDOMINIUM UNITS CREATES RISKS FOR LENDERS THAT ARE NOT PRESENT WHEN
LENDING ON NON-CONDOMINIUMS
Some mortgage loans underlying the offered certificates will be secured
by--
o the related borrower's interest in a commercial condominium unit or
multiple units in a residential condominium project, and
o the related voting rights in the owners' association for the subject
building, development or project.
Condominiums may create risks for lenders that are not present when
lending on properties that are not condominiums. In the case of condominiums, a
condominium owner is generally responsible for the payment of common area
maintenance charges. In the event those charges are not paid when due, the
condominium association may have a lien for those unpaid charges against the
owner of the subject condominium unit, and, in some cases, pursuant to the
condominium declaration, the lien of the mortgage for a related mortgage loan is
subordinate to that lien for unpaid common area maintenance charges. In
addition, pursuant to many condominium declarations, the holders of the
remaining units would become responsible for the common area maintenance charges
that remain unpaid by any particular unit holder.
Further, in the case of condominiums, a board of managers generally has
discretion to make decisions affecting the condominium building and there is no
assurance that the borrower under a mortgage loan secured by one or more
interests in that condominium will have any control over decisions made by the
related board of managers. Thus, decisions made by that board of managers,
including regarding assessments to be paid by the unit owners, insurance to be
maintained on the condominium building, restoration following a casualty and
many other decisions affecting the maintenance of that building, may not be
consistent with the mortgage loan documents and may have an adverse impact on
the mortgage loans that are secured by real properties consisting of such
condominium interests.
There can be no assurance that the related board of managers will act in
the best interests of the borrower under those mortgage loans. Further, because
of the nature of condominiums, a default on the part of the borrower with
respect to such real properties will not allow the special servicer the same
flexibility in realizing on the collateral as is generally available with
respect to commercial properties that are not condominiums. The rights of other
unit owners, the documents governing the management of the condominium units and
the state and local laws applicable to condominium units must be considered. In
addition, in the event of a casualty with respect to the subject real property,
because of the possible existence of multiple loss payees on any insurance
policy covering the property, there could be a delay in the restoration of the
property and/or the allocation of related
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insurance proceeds, if any. Consequently, if any of the mortgage loans
underlying the offered certificates are secured by the related borrower's
interest in a condominium, servicing and realizing upon such mortgage loan could
subject the holders of such offered certificates to a greater delay, expense and
risk than with respect to a mortgage loan secured by a commercial property that
is not a condominium.
LENDING ON GROUND LEASES CREATES RISKS FOR LENDERS THAT ARE NOT PRESENT WHEN
LENDING ON AN ACTUAL OWNERSHIP INTEREST IN A REAL PROPERTY
In order to secure a mortgage loan, a borrower may grant a lien on its
leasehold interest in a real property as tenant under a ground lease. If the
ground lease does not provide for notice to a lender of a default under the
ground lease on the part of the borrower, together with a reasonable opportunity
for the lender to cure the default, the lender may be unable to prevent
termination of the lease and may lose its collateral.
In addition, upon the bankruptcy of a landlord or a tenant under a ground
lease, the debtor entity has the right to assume or reject the ground lease. If
a debtor landlord rejects the lease, the tenant has the right to remain in
possession of its leased premises at the rent reserved in the lease for the
term, including renewals. If a debtor tenant rejects any or all of its leases,
the tenant's lender may not be able to succeed to the tenant's position under
the lease unless the landlord has specifically granted the lender that right. If
both the landlord and the tenant are involved in bankruptcy proceedings, the
trustee for your offered certificates may be unable to enforce the bankrupt
tenant's obligation to refuse to treat as terminated a ground lease rejected by
a bankrupt landlord. In those circumstances, it is possible that the trustee
could be deprived of its security interest in the leasehold estate,
notwithstanding lender protection provisions contained in the lease or mortgage
loan documents.
Further, in a recent decision by the United States Court of Appeals for
the Seventh Circuit (Precision Indus. v. Qualitech Steel SBQ, LLC, 2003 U.S.
App. LEXIS 7612 (7th Cir. Apr. 23, 2003)), the court ruled that where a
statutory sale of the leased property occurs under Section 363(f) of the U.S.
Bankruptcy Code upon the bankruptcy of a landlord, the sale terminates a
lessee's possessory interest in the property, and the purchaser assumes title
free and clear of any interest, including any leasehold estates. Pursuant to
Section 363(e) of the U.S. Bankruptcy Code, a lessee may request the bankruptcy
court to prohibit or condition the statutory sale of the property so as to
provide adequate protection of the leasehold interest; however, the court ruled
that this provision does not ensure continued possession of the property, but
rather entitles the lessee to compensation for the value of its leasehold
interest, typically from the sale proceeds. As a result, there can be no
assurance that, in the event of a statutory sale of leased property pursuant to
Section 363(f) of the Bankruptcy Code, the lessee may be able to maintain
possession of the property under the ground lease. In addition, there can be no
assurance that the lessee and/or the lender (to the extent it can obtain
standing to intervene) will be able to recuperate the full value of the
leasehold interest in bankruptcy court.
CHANGES IN ZONING LAWS MAY ADVERSELY AFFECT THE USE OR VALUE OF A REAL PROPERTY
Due to changes in zoning requirements since construction, an
income-producing property may not comply with current zoning laws, including
density, use, parking and set back requirements. Accordingly, the property may
be a permitted non-conforming structure or the operation of the property may be
a permitted non-conforming use. This means that the owner is not required to
alter the property's structure or use to comply with the new law, but the owner
may be limited in its ability to rebuild the premises "as is" in the event of a
substantial casualty loss. This may adversely affect the cash flow available
following the casualty. If a substantial casualty were to occur, insurance
proceeds may not be sufficient to pay a mortgage loan secured by the property in
full. In addition, if the property were repaired or restored in conformity with
the current law, its value or revenue-producing potential may be less than that
which existed before the casualty.
COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT OF 1990 MAY BE EXPENSIVE
Under the Americans with Disabilities Act of 1990, all public
accommodations are required to meet federal requirements related to access and
use by disabled persons. If a property does not currently comply with
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that Act, the property owner may be required to incur significant costs in order
to effect that compliance. This will reduce the amount of cash flow available to
cover other required maintenance and capital improvements and to pay debt
service on the mortgage loan(s) that may encumber that property. There can be no
assurance that the owner will have sufficient funds to cover the costs necessary
to comply with that Act. In addition, noncompliance could result in the
imposition of fines by the federal government or an award or damages to private
litigants.
LITIGATION AND OTHER LEGAL PROCEEDINGS MAY ADVERSELY AFFECT A BORROWER'S ABILITY
TO REPAY ITS MORTGAGE LOAN
From time to time, there may be legal proceedings pending or threatened
against the borrowers and their affiliates relating to the business of, or
arising out of the ordinary course of business of, the borrowers and their
affiliates. It is possible that such legal proceedings may have a material
adverse effect on any borrower's ability to meet its obligations under the
related mortgage loan and, therefore, on distributions on your certificates.
The owner of a multifamily or commercial property may be a defendant in a
litigation arising out of, among other things, the following:
o breach of contract involving a tenant, a supplier or other party;
o negligence resulting in a personal injury, or
o responsibility for an environmental problem.
Litigation will divert the owner's attention from operating its property.
If the litigation were decided adversely to the owner, the award to the
plaintiff may adversely affect the owner's ability to repay a mortgage loan
secured by the property.
From time to time, there may be condemnations pending or threatened
against one or more of the mortgaged real properties securing the mortgage loans
in one of our trusts. The proceeds payable in connection with a total
condemnation may not be sufficient to restore the related mortgaged real
property or to satisfy the remaining indebtedness of the related mortgage loan.
The occurrence of a partial condemnation may have a material adverse effect on
the continued use of, or income generated by, the affected mortgaged real
property. Therefore, we cannot assure you that the occurrence of any
condemnation will not have a negative impact upon distributions on your offered
certificates.
TAXES ON FORECLOSURE PROPERTY WILL REDUCE AMOUNTS AVAILABLE TO MAKE PAYMENTS ON
THE OFFERED CERTIFICATES
One of our trusts may be designated, in whole or in part, as a real estate
mortgage investment conduit for federal income tax purposes. If that trust
acquires a real property through a foreclosure or deed in lieu of foreclosure,
then the related special servicer may be required to retain an independent
contractor to operate and manage the property. Receipt of the following types of
income on that property will subject the trust to federal, and possibly state or
local, tax on that income at the highest marginal corporate tax rate:
o any net income from that operation and management that does not
consist of qualifying rents from real property within the meaning of
Section 856(d) of the Internal Revenue Code of 1986, and
o any rental income based on the net profits of a tenant or sub-tenant
or allocable to a service that is non-customary in the area and for
the type of building involved.
The risk of taxation being imposed on income derived from the operation of
foreclosed real property is particularly present in the case of hospitality and
health care-related properties. These taxes, and the cost of
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retaining an independent contractor, would reduce the net proceeds available for
payment with respect to the related offered certificates.
In addition, in connection with the trust's acquisition of a real
property, through foreclosure or similar action, and/or its liquidation of such
property, the trust may in certain jurisdictions, particularly in New York and
California, be required to pay state or local transfer or excise taxes. Such
state or local taxes may reduce net proceeds available for distribution to the
offered certificates.
RESIDUAL INTERESTS IN A REAL ESTATE MORTGAGE INVESTMENT CONDUIT HAVE ADVERSE TAX
CONSEQUENCES
Inclusion of Taxable Income in Excess of Cash Received. If you own a
certificate that is a residual interest in a real estate mortgage investment
conduit, or REMIC, for federal income tax purposes, you will have to report on
your income tax return as ordinary income your pro rata share of the taxable
income of that REMIC, regardless of the amount or timing of your possible
receipt of any cash on the certificate. As a result, your offered certificate
may have phantom income early in the term of the REMIC because the taxable
income from the certificate may exceed the amount of economic income, if any,
attributable to the certificate. While you will have a corresponding amount of
tax losses later in the term of the REMIC, the present value of the phantom
income may significantly exceed the present value of the tax losses. Therefore,
the after-tax yield on any REMIC residual certificate may be significantly less
than that of a corporate bond or other instrument having similar cash flow
characteristics. In fact, some offered certificates that are residual interests,
may have a negative value.
You will have to report your share of the taxable income and net loss of
the REMIC until all the certificates in the related series have a principal
balance of zero. See "FEDERAL INCOME TAX CONSEQUENCES--REMICs."
Some Taxable Income of a Residual Interest Cannot Be Offset Under the
Internal Revenue Code of 1986. A portion of the taxable income from a REMIC
residual certificate may be treated as excess inclusions under the Internal
Revenue Code of 1986. You will have to pay tax on the excess inclusions
regardless of whether you have other credits, deductions or losses. In
particular, the tax on excess inclusion:
o generally will not be reduced by losses from other activities,
o for a tax-exempt holder, will be treated as unrelated business
taxable income, and
o for a foreign holder, will not qualify for any exemption from
withholding tax.
Individuals and Some Entities Should Not Invest in REMIC Residual
Certificates. The fees and non-interest expenses of a REMIC will be allocated
pro rata to certificates that are residual interests in the REMIC. However,
individuals will only be able to deduct these expenses as miscellaneous itemized
deductions, which are subject to numerous restrictions and limitations under the
Internal Revenue Code of 1986. Therefore, the certificates that are residual
interests generally are not appropriate investments for:
o individuals,
o estates,
o trusts beneficially owned by any individual or estate, and
o pass-through entities having any individual, estate or trust as a
shareholder, member or partner.
In addition, the REMIC residual certificates will be subject to numerous
transfer restrictions. These restrictions will reduce your ability to liquidate
a REMIC residual certificate. For example, unless we indicate otherwise in the
related prospectus supplement, you will not be able to transfer a REMIC residual
certificate to:
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o a foreign person under the Internal Revenue Code of 1986, or
o a U.S. person that is classified as a partnership under the Internal
Revenue Code of 1986, unless all of its beneficial owners are U.S.
persons, or
o a foreign permanent establishment or fixed base (within the meaning
of an applicable income tax treaty) of a U.S. person.
It is possible that a class of offered certificates would also evidence a
residual interest in a REMIC and therefore that class of offered certificates or
the portion thereof that represents the residual interest in the REMIC would
exhibit the characteristics, and be subject to the risks, described above in
this "--Residual Interests in a Real Estate Mortgage Investment Conduit HaveAdverse Tax Consequences" section.
See "FEDERAL INCOME TAX CONSEQUENCES--REMICs--Taxation of Owners of REMICResidual Certificates."ADDITIONAL COMPENSATION TO THE MASTER SERVICER AND THE SPECIAL SERVICER AND
INTEREST ON ADVANCES WILL AFFECT YOUR RIGHT TO RECEIVE DISTRIBUTIONS ON YOUR
OFFERED CERTIFICATES
To the extent described in the related prospectus supplement, the master
servicer, the special servicer, the trustee and any fiscal agent will each be
entitled to receive interest on unreimbursed advances made by that party with
respect to the mortgage assets. This interest will generally accrue from the
date on which the related advance was made or the related expense was incurred
through the date of reimbursement. In addition, under certain circumstances,
including a default by the borrower in the payment of principal and interest on
a mortgage asset, that mortgage asset will become specially serviced and the
related special servicer will be entitled to compensation for performing special
servicing functions pursuant to the related governing document(s). The right to
receive interest on advances or special servicing compensation is senior to the
rights of certificateholders to receive distributions on the offered
certificates. Thus, the payment of interest on advances and the payment of
special servicing compensation may lead to shortfalls in amounts otherwise
distributable on your offered certificates.
INABILITY TO REPLACE THE MASTER SERVICER COULD AFFECT COLLECTIONS AND RECOVERIES
ON THE MORTGAGE ASSETS
The structure of the servicing fee payable to the master servicer might
affect the ability to find a replacement master servicer. Although the trustee
is required to replace the master servicer if the master servicer is terminated
or resigns, if the trustee is unwilling (including for example because the
servicing fee is insufficient) or unable (including for example, because the
trustee does not have the systems to service mortgage loans), it may be
necessary to appoint a replacement master servicer. Because the master servicing
fee is structured as a percentage of the stated principal balance of each
mortgage asset, it may be difficult to replace the servicer at a time when the
balance of the mortgage loans has been significantly reduced because the fee may
be insufficient to cover the costs associated with servicing the mortgage assets
and/or related REO properties remaining in the mortgage pool. The performance of
the mortgage assets may be negatively impacted, beyond the expected transition
period during a servicing transfer, if a replacement master servicer is not
retained within a reasonable amount of time.
PROBLEMS WITH BOOK-ENTRY REGISTRATION
Your offered certificates may be issued in book-entry form through the
facilities of the Depository Trust Company. As a result--
o you will be able to exercise your rights as a certificateholder only
indirectly through the Depository Trust Company and its
participating organizations;
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o you may have only limited access to information regarding your
offered certificates;
o you may suffer delays in the receipt of payments on your offered
certificates; and
o your ability to pledge or otherwise take action with respect to your
offered certificates may be limited due to the lack of a physical
certificate evidencing your ownership of those certificates.
See "DESCRIPTION OF THE CERTIFICATES--Book-Entry Registration and
Definitive Certificates."POTENTIAL CONFLICTS OF INTEREST CAN AFFECT A SERVICER'S PERFORMANCE
A master servicer, special servicer or sub-servicer for one of our trusts,
or any of their respective affiliates, may purchase certificates evidencing
interests in that trust.
In addition, a master servicer, special servicer or sub-servicer for one
of our trusts, or any of their respective affiliates, may have interests in, or
other financial relationships with, borrowers under the related mortgage loans.
These relationships may create conflicts of interest.
In servicing mortgage loans in any of our trusts, a master servicer,
special servicer or sub-servicer will each be required to observe the terms of
the governing document(s) for the related series of offered certificates--or, in
the case of a sub-servicer, a consistent sub-servicing agreement--and, in
particular, to act in accordance with the servicing standard described in the
related prospectus supplement. You should consider, however, that if any of
these parties or an affiliate owns certificates or has financial interests in or
other financial dealings with any of the related borrowers, then it may have
interests when dealing with the mortgage loans underlying your offered
certificates that are in conflict with your interests. For example, if the
related special servicer or an affiliate thereof or any other related entity
owns any certificates, and in particular a class of non-offered certificates, it
could seek to mitigate the potential loss on its certificates from a troubled
mortgage loan by delaying acceleration or other enforcement in the hope of
realizing greater proceeds in the future. However, this action or failure to
take immediate action by a special servicer could pose a greater risk to the
trust and ultimately result in a lower recovery to the related trust than would
have been the case if the special servicer had not delayed in taking enforcement
action.
Furthermore, a master servicer, special servicer or sub-servicer for any
of our trusts may service existing and new loans for third parties, including
portfolios of loans similar to the mortgage loans included in that trust. The
properties securing these other loans may be in the same markets as and compete
with the properties securing mortgage loans in our trust. Accordingly, that
master servicer, special servicer or sub-servicer may be acting on behalf of
parties with conflicting interests.
PROPERTY MANAGERS AND BORROWERS MAY EACH EXPERIENCE CONFLICTS OF INTEREST IN
MANAGING MULTIPLE PROPERTIES
In the case of many of the mortgage loans underlying the offered
certificates, the related property managers and borrowers may experience
conflicts of interest in the management and/or ownership of the related real
properties because:
o the real properties may be managed by property managers that are
affiliated with the related borrowers;
o the property managers also may manage additional properties,
including properties that may compete with those real properties; or
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o affiliates of the property managers and/or the borrowers, or the
property managers and/or the borrowers themselves, also may own
other properties, including properties that may compete with those
real properties.
LIMITED INFORMATION CAUSES UNCERTAINTY
Some of the mortgage loans that will be included in our trusts are loans
that were made to enable the related borrower to acquire the related real
property. Accordingly, for some of these loans limited or no historical
operating information is available with respect to the related real property. As
a result, you may find it difficult to analyze the historical performance of
those properties.
THE RISK OF TERRORISM IN THE UNITED STATES AND MILITARY ACTION MAY ADVERSELY
AFFECT THE VALUE OF THE OFFERED CERTIFICATES AND PAYMENTS ON THE MORTGAGE ASSETS
It is impossible to predict the extent to which terrorist activities may
occur in the United States. Furthermore, it is uncertain what effects any past
or future terrorist activities and/or consequent actions on the part of the
United States Government and others, including military action, will have on
U.S. and world financial markets; local, regional and national economies; real
estate markets across the U.S.; and/or particular business segments, including
those that are important to the performance of the real properties that secure
the mortgage loans underlying any series of offered certificates. Among other
things, reduced investor confidence could result in substantial volatility in
securities markets and a decline in real estate-related investments. In
addition, reduced consumer confidence, as well as a heightened concern for
personal safety, could result in a material decline in personal spending and
travel.
As a result of the foregoing, defaults on commercial real estate loans
could increase; and, regardless of the performance of the mortgage loans
underlying any series of offered certificates, the liquidity and market value of
those offered certificates may be impaired.
CAPITALIZED TERMS USED IN THIS PROSPECTUS
From time to time we use capitalized terms in this prospectus. Frequently
used capitalized terms will have the respective meanings assigned to them in the
glossary attached to this prospectus.
THE TRUST FUNDISSUING ENTITIES
The issuing entity with respect to each series of offered certificates is
the entity that will own and hold the related underlying mortgage loans or
mortgage-backed securities and in whose name those certificates will be issued.
Each issuing entity will be a statutory trust or a common law trust organized at
our direction under the laws of the State or other jurisdiction specified in the
related prospectus supplement. As described in the related prospectus
supplement, the Governing Document for each series of offered certificates will
set forth the permissible activities and restrictions on the activities of the
related issuing entity and will govern the servicing and administration of the
related trust assets. Each series of offered certificates will represent
interests only in, and be payable solely from assets of, the related trust.
However, a series of offered certificates may be issued together with other
certificates of the same series, which other certificates will not be offered
pursuant to this prospectus.
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DESCRIPTION OF THE TRUST ASSETS
The trust assets backing a series of offered certificates will
collectively constitute the related trust fund. Each such trust fund will
primarily consist of:
o various types of multifamily and/or commercial mortgage loans;
o mortgage participations, pass-through certificates, collateralized
mortgage obligations or other mortgage-backed securities that
directly or indirectly evidence interests in, or are secured by
pledges of, one or more of various types of multifamily and/or
commercial mortgage loans; or
o a combination of mortgage loans and mortgage-backed securities of
the types described above.
In addition to the asset classes described above in this "--Description ofthe Trust Assets"--section, we may include in the trust fund with respect to any
series of offered certificates loans secured by equipment or inventory related
to the real property collateral securing a mortgage loan in that trust fund,
provided that such other asset classes in the aggregate will not exceed 10% by
principal balance of the related asset pool.
We will describe the specific characteristics of the mortgage assets
underlying a series of offered certificates in the related prospectus
supplement.
Unless we indicate otherwise in the related prospectus supplement, we will
acquire, directly or through one of our affiliates, in the secondary market, any
mortgage-backed security to be included in one of our trusts.
Neither we nor any of our affiliates will guarantee payment of any of the
mortgage assets included in one of our trusts. Furthermore, unless we indicate
otherwise in the related prospectus supplement, no governmental agency or
instrumentality will guarantee or insure payment of any of those mortgage
assets.
MORTGAGE LOANSGeneral. Each mortgage loan underlying the offered certificates will
constitute the obligation of one or more persons to repay a debt. That
obligation will be evidenced by a promissory note or bond. In addition, that
obligation will be secured by a mortgage, deed of trust or other security
instrument that creates a first or junior lien on, or security interest in, an
interest in one or more of the following types of real property:
o rental or cooperatively-owned buildings with multiple dwelling
units;
o retail properties related to the sale of consumer goods and other
products to the general public, such as shopping centers, malls,
factory outlet centers, automotive sales centers, department stores
and other retail stores, grocery stores, specialty shops,
convenience stores and gas stations;
o retail properties related to providing entertainment, recreational
and personal services to the general public, such as movie theaters,
fitness centers, bowling alleys, salons, dry cleaners and automotive
service centers;
o office properties;
o hospitality properties, such as hotels, motels and other lodging
facilities;
o casino properties;
o health care-related properties, such as hospitals, skilled nursing
facilities, nursing homes, congregate care facilities and, in some
cases, assisted living centers and senior housing;
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o industrial properties;
o warehouse facilities, mini-warehouse facilities and self-storage
facilities;
o restaurants, taverns and other establishments involved in the food
and beverage industry;
o manufactured housing communities, mobile home parks and recreational
vehicle parks;
o recreational and resort properties, such as golf courses, marinas,
ski resorts and amusement parks;
o arenas and stadiums;
o churches and other religious facilities;
o parking lots and garages;
o mixed use properties;
o other income-producing properties; and
o unimproved land.
The adequacy of an income-producing property as security for a mortgage
loan depends in large part on its value and ability to generate net operating
income. Set forth under "RISK FACTORS--Various Types of Income-Producing
Properties May Secure Mortgage Loans Underlying a Series of Offered Certificates
and Each Type of Income-Producing Property May Present Special Risks as
Collateral for a Loan" is a discussion of some of the various factors that may
affect the value and operations of each of the indicated types of multifamily
and commercial properties.
The real property interests that may be encumbered in order to secure a
mortgage loan underlying your offered certificates, include--
o a fee interest or estate, which consists of ownership of the
property for an indefinite period,
o an estate for years, which consists of ownership of the property for
a specified period of years,
o a leasehold interest or estate, which consists of a right to occupy
and use the property for a specified period of years, subject to the
terms and conditions of a lease,
o shares in a cooperative corporation which owns the property, or
o any other real estate interest under applicable local law.
Any of these real property interests may be subject to deed restrictions,
easements, rights of way and other matters of public record with respect to the
related property. In addition, the use of, and improvements that may be
constructed on, any particular real property will, in most cases, be subject to
zoning laws and other legal restrictions.
Most, if not all, of the mortgage loans underlying a series of offered
certificates will be secured by liens on real properties located in the United
States, its territories and possessions. However, some of those mortgage loans
may be secured by liens on real properties located outside the United States,
its territories and possessions, provided that foreign mortgage loans do not
represent more than 10% of the related mortgage asset pool, by balance.
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Junior Mortgage Loans. If we so indicate in the related prospectus
supplement, one or more of the mortgage loans underlying a series of offered
certificates may be secured by a junior lien on the related real property.
However, the loan or loans secured by the more senior liens on that property may
not be included in the related trust fund. The primary risk to the holder of a
mortgage loan secured by a junior lien on a real property is the possibility
that the foreclosure proceeds remaining after payment of the loans secured by
more senior liens on that property will be insufficient to pay the junior loan
in full. In a foreclosure proceeding, the sale proceeds are generally applied--
o first, to the payment of court costs and fees in connection with the
foreclosure,
o second, to the payment of real estate taxes, and
o third, to the payment of any and all principal, interest, prepayment
or acceleration penalties, and other amounts owing to the holder of
the senior loans.
The claims of the holders of the senior loans must be satisfied in full before
the holder of the junior loan receives any payments with respect to the junior
loan. If a lender forecloses on a junior loan, it does so subject to any related
senior loans.
Delinquent Mortgage Loans. If we so indicate in the related prospectus
supplement, the mortgage loans underlying a series of offered certificates may
be delinquent as of the date the certificates are initially issued. In those
cases, we will describe in the related prospectus supplement--
o the period of the delinquency,
o any forbearance arrangement then in effect,
o the condition of the related real property, and
o the ability of the related real property to generate income to
service the mortgage debt.
We will not, however, transfer any mortgage loan to a trust if we know
that the mortgage loan is, at the time of transfer, more than 90 days delinquent
with respect to any scheduled payment of principal or interest or in
foreclosure. Furthermore, delinquent mortgage loans will not constitute 20% or
more, as measured by dollar volume, of the mortgage asset pool for a series of
offered certificates as of the relevant measurement date.
Payment Provisions of the Mortgage Loans. Each of the mortgage loans
included in one of our trusts will have the following features:
o an original term to maturity of not more than approximately 40
years; and
o scheduled payments of principal, interest or both, to be made on
specified dates, that occur monthly, bi-monthly, quarterly,
semi-annually, annually or at some other interval.
A mortgage loan included in one of our trusts may also include terms that:
o provide for the accrual of interest at a mortgage interest rate that
is fixed over its term, that resets on one or more specified dates
or that otherwise adjusts from time to time;
o provide for the accrual of interest at a mortgage interest rate that
may be converted at the borrower's election from an adjustable to a
fixed interest rate or from a fixed to an adjustable interest rate;
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o provide for no accrual of interest;
o provide for level payments to stated maturity, for payments that
reset in amount on one or more specified dates or for payments that
otherwise adjust from time to time to accommodate changes in the
coupon rate or to reflect the occurrence of specified events;
o be fully amortizing or, alternatively, may be partially amortizing
or nonamortizing, with a substantial payment of principal due on its
stated maturity date;
o permit the negative amortization or deferral of accrued interest;
o permit defeasance and the release of the real property collateral in
connection with that defeasance; and/or
o prohibit some or all voluntary prepayments or require payment of a
premium, fee or charge in connection with those prepayments.
Loan Combinations. Certain of the mortgage loans included in one of our
trust funds may be part of a loan combination. A loan combination will generally
consist of the particular mortgage loan or loans that we will include in the
subject trust fund and one or more other mortgage loans that we will not include
in the trust fund. Each mortgage loan comprising a particular loan combination
is evidenced by a separate promissory note. The aggregate debt represented by
the entire loan combination, however, is secured by the same mortgage(s) or
deed(s) of trust on the related mortgaged property or properties. The mortgage
loans constituting a particular loan combination are obligations of the same
borrower and, in general, are cross-defaulted. The allocation of payments to the
respective mortgage loans comprising a loan combination, whether on a
senior/subordinated or a pari passu basis (or some combination thereof), is
either effected through a co-lender, intercreditor or similar agreement to which
the respective holders of the subject promissory notes are parties and/or may be
reflected in the subject promissory notes, a common loan agreement or other
common loan document. Such co-lender, intercreditor or similar agreement will,
in general, govern the respective rights of the noteholders, including in
connection with the servicing of the respective mortgage loans comprising a loan
combination. Further, each such co-lender agreement or other intercreditor
arrangement may impose restrictions of the transferability of the ownership of
any mortgage loan that is part of a loan combination. See "RISK FACTORS--With
Respect to Certain Mortgage Loans Included in Our Trusts, the Mortgaged Property
or Properties that Secure the Subject Mortgage Loan in the Trust Also Secure One
(1) or More Related Mortgage Loans That Are Not in the Trust; The Interests of
the Holders of Those Non-Trust Mortgage Loans May Conflict with Your Interests."
Real Property and Other Collateral. Following a foreclosure, acceptance of
a deed in lieu of foreclosure or any enforcement action, trust assets may
include real property or other collateral for a defaulted mortgage loan pending
the liquidation of that collateral.
Mortgage Loan Information in Prospectus Supplements. We will describe in
the related prospectus supplement the characteristics of the mortgage loans that
we will include in any of our trusts. In general, we will provide in the related
prospectus supplement, among other items, the following information on the
particular mortgage loans in one of our trusts:
o the total outstanding principal balance and the largest, smallest
and average outstanding principal balance of the mortgage loans;
o the type or types of property that provide security for repayment of
the mortgage loans;
o the earliest and latest maturity date for the mortgage loans;
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o the original and remaining terms to maturity of the mortgage loans,
or the range of each of those terms to maturity, and the weighted
average original and remaining terms to maturity of the mortgage
loans;
o loan-to-value ratios of the mortgage loans either at origination or
as of a more recent date, or the range of those loan-to-value
ratios, and the weighted average of those loan-to-value ratios;
o the mortgage interest rates of the mortgage loans, or the range of
those mortgage interest rates, and the weighted average mortgage
interest rate of the mortgage loans;
o if any mortgage loans have adjustable mortgage interest rates, the
index or indices upon which the adjustments are based, the
adjustment dates, the range of gross margins and the weighted
average gross margin, and any limits on mortgage interest rate
adjustments at the time of any adjustment and over the life of the
loan;
o information on the payment characteristics of the mortgage loans,
including applicable prepayment restrictions;
o debt service coverage ratios of the mortgage loans either at
origination or as of a more recent date, or the range of those debt
service coverage ratios, and the weighted average of those debt
service coverage ratios; and
o the geographic distribution of the properties securing the mortgage
loans on a state-by-state basis.
If we are unable to provide the specific information described above at
the time a series of offered certificates is initially offered, we will
provide--
o more general information in the related prospectus supplement, and
o specific information in a report which will be filed with the SEC as
part of a Current Report on Form 8-K following the issuance of those
certificates.
In addition, with respect to any obligor or group of affiliated obligors
with respect to any pool asset or group of pool assets, or property or group of
related properties securing any pool asset or group of pool assets, if such pool
asset or group of pool assets represents a material concentration within the
mortgage asset pool, we will include in the related prospectus supplement
financial statements or other financial information on the related real property
or properties as required under the Securities Act and the Exchange Act.
Originators. Some or all of the mortgage loans included in one of our
trusts may be originated by Merrill Lynch Mortgage Lending, Inc. or by one of
our other affiliates. In addition, there may be other third-party originators of
the mortgage loans to be included in one of our trusts. Accordingly, we will
acquire each of the mortgage loans to be included in one of our trusts from the
originator or a subsequent assignee, in privately negotiated transactions. See
"THE SPONSOR." We will identify in the related prospectus supplement any
originator or group of affiliated originators--apart from any sponsor and/or its
affiliates--that will or is expected to originate mortgage loans representing
10% or more of the related mortgage asset pool, by balance.
Method and Criteria by Which Mortgage Loans are Selected for Inclusion in
a Securitization. There is no formal method or established criteria by which
mortgage loans are selected for inclusion in any particular asset
securitization. Merrill Lynch Mortgage Lending, Inc. ("MLML"), which is expected
to be one of the sponsors, and its affiliates generally originate mortgage loans
in accordance with the underwriting criteria described under the heading "THESPONSOR." When any such mortgage loan is originated, MLML or one of its
affiliates will generally determine whether the subject mortgage loan is to be
targeted for securitization. Mortgage loans targeted for securitization are
usually securitized as soon as possible after origination. Accordingly, all such
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mortgage loans held by MLML pending securitization would be expected to be
securitized as soon thereafter as possible.
Notwithstanding the foregoing, we or MLML could decide not to include one
or more mortgage loans in a particular securitization transaction for business
reasons. For example, MLML or one of its affiliates could hold a mortgage loan
out of securitization transactions until the related mortgaged property
"stabilizes" (such as following significant renovations, a lease-up period or a
free rent period for a significant portion of the tenants). A mortgage loan may
not be included in a securitization transaction because it would have adverse
effects on the diversity of the subject asset pool (including by reason of its
size, the related property type or the related geographic property location),
which in turn could make the related certificates less appealing to investors or
adversely affect rating levels. Also, MLML or an affiliate could remove a
mortgage loan from the potential asset pool in response to investor feedback.
Likewise, we could request another sponsor or mortgage loan seller that is
contributing mortgage loans to one of our securitizations not to include one or
more of those mortgage loans for reasons similar to those above or because of
material inconsistencies with MLML's underwriting standards.
MORTGAGE-BACKED SECURITIES
The mortgage-backed securities underlying a series of offered certificates
may include:
o mortgage participations, mortgage pass-through certificates,
collateralized mortgage obligations or other mortgage-backed
securities that are not insured or guaranteed by any governmental
agency or instrumentality, or
o certificates issued and/or insured or guaranteed by Freddie Mac,
Fannie Mae, Ginnie Mae, Farmer Mac, or another federal or state
governmental agency or instrumentality.
In addition, each of those mortgage-backed securities will directly or
indirectly evidence an interest in, or be secured by a pledge of, multifamily
and/or commercial mortgage loans.
Each mortgage-backed security included in one of our trusts--
o will have been registered under the Securities Act, or
o will be exempt from the registration requirements of the Securities
Act, or will have been held for at least the holding period
specified in Rule 144(k) under that Act, or
o may otherwise be resold by us publicly without registration under
the Securities Act.
We will register the offering of any mortgage-backed security to be
included in one of our trusts with the SEC if --
o the issuer of the subject mortgage-backed securities has a direct or
indirect agreement, arrangement, relationship or understanding with
the issuing entity, the depositor, any sponsor or an underwriter,
relating to inclusion of those mortgage-backed securities in our
trust,
o the issuer of the subject mortgage-backed securities or any of its
affiliates is an affiliate of the issuing entity, the depositor, any
sponsor or an underwriter of a series of offered certificates, or
o the depositor would not be free to publicly resell the subject
mortgage-backed securities without registration under the Securities
Act.
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Any registration of underlying securities will be made in compliance with
the provisions of Rule 190 under the Securities Act. In connection with any such
registration--
o the prospectus supplement for the related series of offered
certificates will describe the plan of distribution for both that
series of offered certificates and the underlying mortgage-backed
securities; and
o the separate prospectus relating to the offering of the underlying
mortgage-backed securities will be delivered simultaneously with the
delivery of the prospectus relating to the series of offered
certificates described in the prospectus supplement that relates to
that series of offered certificates, which prospectus supplement
will either state that the prospectus for the offering of the
underlying mortgage-backed securities is being delivered along with
the prospectus for the underlying mortgage-backed securities, or
will be combined with the prospectus for the offering of the
underlying mortgage-backed securities.
If the offering of the subject series of offered certificates and the
underlying mortgage-backed securities is not made on a firm commitment basis,
the issuing entity or the underwriters for the offering of the subject series of
offered certificates will be required to distribute a preliminary prospectus for
both the subject series of offered certificates and the underlying
mortgage-backed securities to any person who is expected to receive a
confirmation of sale of the subject series of offered certificates at least 48
hours prior to sending such confirmation.
We will describe in the related prospectus supplement the characteristics
of the mortgage-backed securities that we will include in any of our trusts. In
general, we will provide in the related prospectus supplement, among other
items, the following information on the particular mortgage-backed securities
included in one of our trusts:
o the initial and outstanding principal amount(s) and type of the
securities;
o the original and remaining term(s) to stated maturity of the
securities;
o the pass-through or bond rate(s) of the securities or the formula
for determining those rate(s);
o the payment characteristics of the securities;
o the identity of the issuer(s), servicer(s) and trustee(s) for the
securities;
o a description of the related credit support, if any;
o the type of mortgage loans underlying the securities;
o the circumstances under which the related underlying mortgage loans,
or the securities themselves, may be purchased prior to maturity;
o the terms and conditions for substituting mortgage loans backing the
securities; and
o the characteristics of any agreements or instruments providing
interest rate protection to the securities.
With respect to any mortgage-backed security included in one of our
trusts, we will provide in our reports filed under the Exchange Act, the same
information regarding the security as is provided by the issuer of the security
in its own reports filed under that Act, if the security was publicly offered,
or in the reports the issuer of the security provides to the related trustee, if
the security was privately issued.
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SUBSTITUTION, ACQUISITION AND REMOVAL OF MORTGAGE ASSETS
We will generally acquire the mortgage assets to be included in one of our
trusts from Merrill Lynch Mortgage Lending, Inc. or another of our affiliates or
from another seller of commercial and multifamily mortgage loans. We will then
transfer those mortgage assets to the issuing entity for the related
securitization transaction.
If and to the extent described in the related prospectus supplement, we, a
mortgage asset seller or another specified person or entity may make or assign
to or for the benefit of one of our trusts various representations and
warranties, or may be obligated to deliver to one of our trusts various
documents, in either case relating to some or all of the mortgage assets
transferred to that trust. A material breach of one of those representations and
warranties or a failure to deliver a material document may, under the
circumstances described in the related prospectus supplement, give rise to an
obligation to repurchase the affected mortgage asset(s) out of the subject trust
or to replace the affected mortgage asset(s) with other mortgage asset(s) that
satisfy the criteria specified in the related prospectus supplement.
In general, the total outstanding principal balance of the mortgage assets
transferred by us to any particular trust will equal or exceed the initial total
outstanding principal balance of the related series of certificates. In the
event that the total outstanding principal balance of the related underlying
mortgage loans or mortgage-backed securities initially delivered by us to the
related trustee is less than the initial total outstanding principal balance of
any series of certificates, the subject securitization transaction may include a
prefunding feature, in which case we may deposit or arrange for the deposit of
cash or liquid investments on an interim basis with the related trustee to cover
the shortfall. For a specified period, as set forth in the related prospectus
supplement, following the date of initial issuance of that series of
certificates, which will constitute the prefunding period, we or our designee
will be entitled to obtain a release of the deposited cash or investments if we
deliver or arrange for delivery of a corresponding amount of mortgage assets. If
we fail, however, to deliver or arrange for the delivery of mortgage assets
sufficient to make up the entire shortfall within the prefunding period, any of
the cash or, following liquidation, investments remaining on deposit with the
related trustee will be used by the related trustee to pay down the total
principal balance of the related series of certificates, as described in the
related prospectus supplement.
If the subject securitization transaction involves a prefunding period,
then we will indicate in the related prospectus supplement, among other things:
o the term or duration of the prefunding period, which period may not
extend more than one year beyond the date of initial issuance of the
related offered certificates;
o the amount of proceeds to be deposited in the prefunding account and
the percentage of the mortgage asset pool and any class or series of
offered certificates represented by those proceeds, which proceeds
may not exceed 50% of the related offering proceeds;
o triggers or events that would trigger limits on or terminate the
prefunding period and the effects of such triggers;
o when and how new pool assets may be acquired during the prefunding
period, and any limits on the amount, type or speed with which pool
assets may be acquired;
o the acquisition or underwriting criteria for additional pool assets
to be acquired during the prefunding period, including any
differences from the criteria used to select the current asset pool;
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o which party has the authority to add assets to the asset pool or
determine if such pool assets meet the acquisition or underwriting
criteria for additional pool assets, and whether or not there will
be any independent verification of such person's exercise of
authority or determinations;
o any requirements to add minimum amounts of pool assets and any
effects of not meeting those requirements;
o if applicable, the procedures and standards for the temporary
investment of funds in a prefunding account pending use (including
the disposition of gains and losses on pending funds) and a
description of the financial products or instruments eligible for
such accounts;
o the circumstances under which funds in a prefunding account will be
returned to investors or otherwise disposed of; and
o a statement of whether, and if so, how investors will be notified of
changes to the asset pool.
If so specified in the related prospectus supplement, we or another
specified person or entity may be permitted, at our or its option, but subject
to the conditions specified in that prospectus supplement, to acquire from the
related trust particular mortgage assets underlying a series of certificates in
exchange for:
o cash that would be applied to pay down the principal balances of
certificates of that series; and/or
o other mortgage loans or mortgage-backed securities that--
1. conform to the description of mortgage assets in this
prospectus, and
2. satisfy the criteria set forth in the related prospectus
supplement.
For example, if a mortgage loan backing a series of offered certificates
defaults, then it may be subject to (a) a purchase option on the part of another
lender whose loan is secured by a lien on the same real estate collateral or by
a lien on an equity interest in the related borrower and/or (b) a fair value
purchase option under the applicable governing document(s) for the subject
securitization transaction or another servicing agreement.
In addition, if so specified in the related prospectus supplement, but
subject to the conditions specified in that prospectus supplement, one or more
holders of certificates may exchange those certificates for one or more of the
mortgage loans or mortgage-backed securities constituting part of the mortgage
pool underlying those certificates.
Further, if so specified in the related prospectus supplement, a special
servicer or other specified party for one of our trusts may be obligated, under
the circumstances described in that prospectus supplement, to sell on behalf of
the trust a delinquent or defaulted mortgage asset.
See also "DESCRIPTION OF THE CERTIFICATES--Termination and Redemption."CASH, ACCOUNTS AND PERMITTED INVESTMENTS
The trust assets underlying a series of offered certificates will include
cash from various sources, including initial deposits and payments and
collections received or advanced on the related mortgage loans, mortgage-backed
securities, instruments of credit enhancement, guaranteed investment contracts,
interest rate exchange agreements, interest rate floor or cap agreements and/or
currency exchange agreements, as applicable.
The trust assets underlying a series of offered certificates will also
include one or more accounts established and maintained on behalf of the
holders. All initial deposits, payments and collections received or
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advanced on the related mortgage loans, mortgage-backed securities, instruments
of credit enhancement, guaranteed investment contracts, interest rate exchange
agreements, interest rate floor or cap agreements and/or currency exchange
agreements, as the case may be, and any other cash held by one of our trusts
will be deposited and held in those accounts. We will identify and describe
those accounts, and will further describe the deposits to and withdrawals from
those accounts, in the related prospectus supplement.
Funds on deposit in any account established and maintained on behalf of
certificateholders may be invested in Permitted Investments. In the related
prospectus supplement, we will provide a summary description of those Permitted
Investments and identify the beneficiary of any interest and other income earned
on funds in an account established and maintained on behalf of
certificateholders.
CREDIT SUPPORT
The holders of any class of offered certificates may be the beneficiaries
of credit support designed to protect them partially or fully against all or
particular defaults and losses on the related underlying mortgage loans or
mortgage-backed securities. The types of credit support that may benefit the
holders of a class of offered certificates include:
o the subordination of one or more other classes of certificates of
the same series;
o overcollateralization;
o a letter of credit;
o a surety bond;
o an insurance policy;
o a guarantee; and/or
o a reserve fund.
See "DESCRIPTION OF CREDIT SUPPORT".
In the related prospectus supplement, we will describe the amount and
types of any credit support benefiting the holders of a class of offered
certificates and, if applicable, we will identify the provider of that credit
support.
ARRANGEMENTS PROVIDING REINVESTMENT, INTEREST RATE AND CURRENCY RELATED
PROTECTION
The trust assets for a series of offered certificates may include
guaranteed investment contracts in accordance with which moneys held in the
funds and accounts established for that series will be invested at a specified
rate. Those trust assets may also include:
o interest rate exchange agreements;
o interest rate cap agreements;
o interest rate floor agreements; or
o currency exchange agreements.
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An interest rate exchange agreement, which is a type of swap agreement, is
an arrangement whereby two parties (called counterparties) enter into an
agreement to exchange periodic interest payments. The dollar amount the
counterparties pay each other is an agreed-upon periodic interest rate
multiplied by a predetermined dollar principal amount (which may decline over
time according to an agreed-upon schedule), called the notional principal
amount. No principal (notional amount) is exchanged between the parties to the
transaction; only interest is exchanged. In its most common form, one party
agrees to the pay the other a fixed rate of interest in exchange for a floating
rate.
An interest rate cap agreement is an arrangement whereby two parties (also
called counterparties) enter into an agreement that places a ceiling (a "cap
strike") on a floating rate of interest on a specified notional principal amount
for a specific term. The buyer of the interest rate cap agreement uses the
interest rate cap agreement to limit its maximum payable interest rate in
respect of an obligation it has to make payments at a floating rate. If the
buyer's floating rate rises above the cap strike, the interest rate cap
agreement provides for payments from the seller to the buyer for the difference
between the floating rate and the cap strike. If the floating rate remains below
the cap strike, no payments are required. The cap buyer is required to pay an
up-front fee for the cap agreement.
An interest rate floor agreement is an arrangement whereby two parties
(also called counterparties) enter into an agreement that places a minimum value
(a "floor strike") on a floating rate of interest on a specified notional
principal amount for a specific term. The buyer of the interest rate floor
agreement uses the interest rate floor agreement to limit its minimum receivable
interest rate in respect of an entitlement it has to receive payments at a
floating rate. The seller of the interest rate floor agreement accepts a minimum
on the interest rate it will pay in return for the receipt of a premium payment.
If the floating rate drops below the floor strike, the floor agreement provides
for payments from the seller to the buyer for the difference between the floor
strike and the floating rate.
A currency exchange agreement, which is a type of swap agreement, is an
arrangement whereby two parties (also called counterparties) enter into an
agreement to exchange interest and/or principal payments in different currencies
on a periodic or one-time basis.
In the related prospectus supplement, we will describe any agreements or
other arrangements designed to protect the holders of a class of offered
certificates against shortfalls resulting from movements or fluctuations in
interest rates or currency exchange rates. If applicable, we will also identify
any obligor under the agreement or other arrangement.
THE SPONSORGENERAL CHARACTER OF THE SPONSOR AND ITS BUSINESS
Unless otherwise specified in the related prospectus supplement, Merrill
Lynch Mortgage Lending, Inc. ("MLML") will act as the sole sponsor or a
co-sponsor for each securitization transaction involving the issuance of a
series of offered certificates. Any other entity which acts as a sponsor or as a
co-sponsor with MLML will be described in the related prospectus supplement.
MLML is a Delaware corporation formerly known as ML Health Care Servicing,
Inc., and is a wholly-owned subsidiary of Merrill Lynch Mortgage Capital Inc.,
which is an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc. MLML
makes, and purchases from lenders, commercial and multifamily mortgage loans for
the purpose of securitizing them in commercial mortgage-backed securitization
("CMBS") transactions. MLML and its affiliates also purchase prime, subprime,
nonperforming and subperforming residential mortgage loans from originators of
these loans and aggregates these loans for sale in asset-backed securitization
transactions.
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MLML is licensed as a Title II Nonsupervised Mortgagee approved by the
United States Department of Housing and Urban Development to originate and
service mortgage loans. MLML acts as servicer of record for a small number of
FHA-insured loans that are serviced by a sub-servicer. MLML does not service the
commercial and multifamily loans that it originates or acquires for
securitization in CMBS transactions.
MLML also engages in the origination, and/or buying and selling, of
mortgages and other interests in mortgage loans for investment purposes.
Further, MLML enters into resale and repurchase agreements to finance trading
inventory positions.
THE SPONSOR'S SECURITIZATION PROGRAM
MLML and its affiliates, directly or through correspondents, originate
multifamily and commercial mortgage loans throughout the United States and
abroad. MLML and its affiliates have been engaged in the origination of
multifamily and commercial mortgage loans for securitization since 1994. The
multifamily and commercial mortgage loans originated and securitized by MLML and
its affiliates include both fixed-rate loans and floating-rate loans and both
conduit balance loans--which are average-sized by industry standards-- and large
balance loans. Most of the multifamily and commercial mortgage loans included in
commercial mortgage securitizations sponsored by MLML and its affiliates have
been originated, directly or through correspondents, by MLML or an affiliate.
In addition, in the normal course of its securitization program, MLML and
its affiliates, may also acquire multifamily and commercial mortgage loans from
various third party originators. These mortgage loans may have been originated
using underwriting guidelines not established by MLML or any of its affiliates.
The trust fund relating to a series of offered certificates may include mortgage
loans originated by one or more of these third parties.
MLML and its affiliates may also originate multifamily and commercial
mortgage loans in conjunction with third-party correspondents and, in those
cases, the third-party correspondents would perform the underwriting based on
various criteria established or reviewed by MLML, and MLML or an affiliate would
originate the subject mortgage loan on a specified closing date prior to
inclusion in the subject securitization.
In connection with its commercial mortgage securitization transactions,
MLML or an affiliate generally transfers the subject mortgage assets to a
depositor, who then transfers those mortgage assets to the issuing entity for
the related securitization. In return for the transfer of the subject mortgage
assets by the depositor to the issuing entity, the issuing entity issues
commercial mortgage pass-through certificates backed by, and supported by the
cash flows generated by, those mortgage assets.
MLML and its affiliates also work with rating agencies, unaffiliated
mortgage loan sellers and servicers in structuring the securitization
transaction. MLML will generally act as sponsor, originator and mortgage loan
seller in its commercial mortgage securitization transactions. With respect to
certain of its commercial mortgage securitization transactions, there may be a
co-sponsor and/or other mortgage loan sellers and originators. We will identify
any co-sponsor in the related prospectus supplement. Neither MLML nor any of its
affiliates acts as servicer of the multifamily and commercial mortgage loans in
its commercial mortgage securitizations. Instead, MLML and/or the related
depositor contract with other entities to service the multifamily and commercial
mortgage loans following their transfer into a trust fund for a series of
offered certificates.
In connection with MLML or an affiliate contributing mortgage loans to a
commercial mortgage securitization transaction, MLML or that affiliate may be
obligated, specifically with respect to the mortgage loans that it is
contributing, generally pursuant to a mortgage loan purchase agreement or other
comparable agreement, to:
o deliver various specified loan documents;
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o file and/or record various specified loan documents and assignments
of those documents; and
o make various loan-specific representations and warranties.
If it is later determined that any mortgage asset contributed by MLML or
an affiliate fails to conform to the specified representations and warranties or
there is a defect in or an omission with respect to certain specified mortgage
loan documents related to that mortgage asset, which breach, defect or omission,
as the case may be, is determined to have a material adverse effect on the value
of the subject mortgage asset or such other standard as is described in the
related prospectus supplement, then MLML or such affiliate will generally have
an obligation to cure the subject defect, omission or breach or to repurchase or
replace the subject mortgage asset.
UNDERWRITING STANDARDSGeneral. Set forth below is a discussion of certain general underwriting
guidelines of MLML with respect to multifamily and commercial mortgage loans
originated by MLML. The underwriting guidelines described below may not--and
generally will not--apply to multifamily and commercial mortgage loans acquired
by MLML from third party originators.
Notwithstanding the discussion below, given the unique nature of
income-producing real properties, the underwriting and origination procedures
and the credit analysis with respect to any particular multifamily or commercial
mortgage loan may differ significantly from one asset to another, and will be
driven by circumstances particular to that property, including, among others,
its type, current use, physical quality, size, environmental condition,
location, market conditions, capital reserve requirements and additional
collateral, tenants and leases, borrower identity, borrower sponsorship and/or
performance history. Consequently, there can be no assurance that the
underwriting of any particular multifamily or commercial mortgage loan will
conform to the general guidelines described in this "--Underwriting Standards"
section.
Loan Analysis. MLML performs both a credit analysis and a collateral
analysis with respect to each multifamily and commercial mortgage loan it
originates. The credit analysis of the borrower may include a review of
third-party credit reports, reports resulting from judgment, lien, bankruptcy
and pending litigation searches and, if applicable, the loan payment history of
the borrower and its principals. Generally, borrowers are required to be
single-purpose entities, although exceptions may be made from time to time on a
case-by-case basis. The collateral analysis includes an analysis, in each case
to the extent available, of historical property operating statements, rent rolls
and a projection of future performance and a review of tenant leases. Depending
on the type of real property collateral involved and other relevant
circumstances, MLML's underwriting staff and/or legal counsel will review leases
of significant tenants. MLML may also perform a limited qualitative review with
respect to certain tenants located at the real property collateral, particularly
significant tenants, credit tenants and sole tenants. MLML generally requires
third-party appraisals, as well as environmental reports, building condition
reports and, if applicable, seismic reports. Each report is reviewed for
acceptability by a MLML staff member or a third-party reviewer. The results of
these reviews are incorporated into the underwriting report.
Loan Approval. Prior to commitment, all multifamily and commercial
mortgage loans to be originated by MLML must be approved by one or more
--depending on loan size--specified officers of MLML. The officer or officers
responsible for loan approval may approve a mortgage loan as recommended,
request additional due diligence, modify the loan terms or decline a loan
transaction.
Debt Service Coverage Ratio. The repayment of a multifamily or commercial
mortgage loan is typically dependent upon the successful operation of the
related real property collateral and the ability of that property to generate
income sufficient to make payments on the loan. Accordingly, in connection with
the origination of any multifamily or commercial mortgage loan, MLML will
analyze whether cash flow expected to be derived from the subject real property
collateral will be sufficient to make the required payments under that mortgage
loan, taking into account, among other things, revenues and expenses for, and
other debt currently secured by, or that in
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the future may be secured by, the subject real property collateral as well as
debt secured by pledges of the ownership interests in the related borrower.
The debt service coverage ratio of a multifamily or commercial mortgage
loan is an important measure of the likelihood of default on the loan. In
general, the debt service coverage ratio of a multifamily or commercial mortgage
loan at any given time is the ratio of--
o the amount of income, net of operating expenses, capital
expenditures and other amounts required to be reserved for various
purposes, derived or expected to be derived from the related real
property collateral for a given period that is available to pay debt
service on the subject mortgage loan, to
o the scheduled payments of principal and/or interest during that
given period on the subject mortgage loan and any other loans that
are secured by liens of senior or equal priority on the related real
property collateral.
However, the amount described in the first bullet of the preceding sentence is
often a highly subjective number based on variety of assumptions regarding, and
adjustments to, revenues and expenses with respect to the related real property
collateral.
For example, when calculating the debt service coverage ratio for a
multifamily or commercial mortgage loan, MLML may utilize annual net cash flow
that was calculated based on assumptions regarding projected rental income,
expenses and/or occupancy, including, without limitation, one or more of the
following:
o the assumption that a particular tenant at the subject real property
collateral that has executed a lease, but has not yet taken
occupancy and/or has not yet commenced paying rent, will take
occupancy and commence paying rent on a future date;
o the assumption that an unexecuted lease that is currently being
negotiated with respect to a particular tenant at the subject real
property collateral or is out for signature will be executed and in
place on a future date;
o the assumption that a portion of currently vacant and unleased space
at the subject real property collateral will be leased at current
market rates and consistent with occupancy rates of comparable
properties in the subject market;
o the assumption that certain rental income that is to be payable
commencing on a future date under a signed lease, but where the
subject tenant is in an initial rent abatement or free rent period
or has not yet taken occupancy, will be paid commencing on such
future date;
o assumptions regarding the probability of renewal of particular
leases and/or the re-leasing of certain space at the subject real
property collateral and the anticipated effect on capital and
re-leasing expenditures; and
o various additional lease-up assumptions and other assumptions
regarding the payment of rent not currently being paid.
There is no assurance that the foregoing assumptions made with respect to
any prospective multifamily or commercial mortgage loan will, in fact, be
consistent with actual property performance.
Generally, the debt service coverage ratio for multifamily and commercial
mortgage loans originated by MLML, calculated as described above, will be equal
to or greater than 1.20:1 (subject to the discussion under "--Additional Debt"
below); however, exceptions may be made when consideration is given to
circumstances
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particular to the mortgage loan or related real property collateral. For
example, MLML may originate a multifamily or commercial mortgage loan with a
debt service coverage ratio below 1.20:1 based on, among other things, the
amortization features of the mortgage loan (for example, if the mortgage loan
provides for relatively rapid amortization) the type of tenants and leases at
the subject real property collateral, the taking of additional collateral such
as reserves, letters of credit and/or guarantees, MLML's judgment of improved
property performance in the future and/or other relevant factors.
We expect to provide in the related prospectus supplement debt service
coverage ratios for each mortgage loan backing a series of offered certificates
and a more detailed discussion of the calculation of net cash flow used in
determining those debt service coverage ratios.
Loan-to-Value Ratio. MLML also looks at the loan-to-value ratio of a
prospective multifamily or commercial mortgage loan as one of the factors it
takes into consideration in evaluating the likelihood of recovery if a property
is liquidated following a default. In general, the loan-to-value ratio of a
multifamily or commercial mortgage loan at any given time is the ratio,
expressed as a percentage, of--
o the then outstanding principal balance of the subject mortgage loan
and any other loans that are secured by liens of senior or equal
priority on the related real property collateral, to
o the estimated value of the related real property collateral based on
an appraisal, a cash flow analysis, a recent sales price or another
method or benchmark of valuation.
Generally, the loan-to-value ratio for multifamily and commercial mortgage
loans originated by MLML, calculated as described above, will be equal to or
less than 80% (subject to the discussion under "--Additional Debt" below);
however, exceptions may be made when consideration is given to circumstances
particular to the mortgage loan or related real property collateral. For
example, MLML may originate a multifamily or commercial mortgage loan with a
loan-to-value ratio above 80% based on, among other things, the amortization
features of the mortgage loan (for example, if the mortgage loan provides for
relatively rapid amortization), the type of tenants and leases at the subject
real property collateral, the taking of additional collateral such as reserves,
letters of credit and/or guarantees, MLML's judgment of improved property
performance in the future and/or other relevant factors.
We expect to provide in the related prospectus supplement loan-to-value
ratios for each mortgage loan backing a series of offered certificates and the
property valuation used in determining those loan-to-value ratios.
Additional Debt. When underwriting a multifamily or commercial mortgage
loan, MLML will take into account whether the subject real property collateral
and/or direct or indirect interest in a related borrower are encumbered by
additional debt and will analyze the likely effect of that additional debt on
repayment of the subject mortgage loan. It is possible that MLML or an affiliate
will be the lender on that additional debt.
The debt service coverage ratios described above under "--Debt ServiceCoverage Ratio" and the loan-to-value ratios described above under
"--Loan-to-Value Ratio" may be below 1.20:1 and above 80%, respectively, based
on the existence of additional debt secured by the related real property
collateral or directly or indirectly by equity interests in the related
borrower.
Assessments of Property Condition. As part of the underwriting process,
MLML will analyze the condition of the real property collateral for a
prospective multifamily or commercial mortgage loan. To aid in that analysis,
MLML may, subject to certain exceptions, inspect or retain a third party to
inspect the property and will obtain the property assessments and reports
described below.
Appraisals. MLML will, in most cases, require that the real property
collateral for a prospective multifamily or commercial mortgage loan be
appraised by a state certified appraiser or an appraiser belonging to the
Appraisal Institute, a membership association of professional real estate
appraisers. In addition, MLML will
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generally require that those appraisals be conducted in accordance with the
Uniform Standards of Professional Appraisal Practices developed by The Appraisal
Foundation, a not-for-profit organization established by the appraisal
profession. Furthermore, the appraisal report will usually include or be
accompanied by a separate letter that includes a statement by the appraiser that
the guidelines in Title XI of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 were followed in preparing the appraisal. In some cases,
however, MLML may establish the value of the subject real property collateral
based on a cash flow analysis, a recent sales price or another method or
benchmark of valuation.
Environmental Assessment. MLML may require a Phase I environmental
assessment with respect to the real property collateral for a prospective
multifamily or commercial mortgage loan. However, when circumstances warrant,
MLML may utilize an update of a prior environmental assessment, a transaction
screen or a desktop review. Alternatively, MLML might forego an environmental
assessment in limited circumstances, such as when it has obtained the benefits
of an environmental insurance policy or an environmental guarantee. Furthermore,
an environmental assessment conducted at any particular real property collateral
will not necessarily cover all potential environmental issues. For example, an
analysis for radon, lead-based paint and lead in drinking water will usually be
conducted only at multifamily rental properties and only when MLML or the
environmental consultant believes that such an analysis is warranted under the
circumstances.
Depending on the findings of the initial environmental assessment, MLML
may require additional record searches or environmental testing, such as a Phase
II environmental assessment with respect to the subject real property
collateral.
Engineering Assessment. In connection with the origination process, MLML
may require that an engineering firm inspect the real property collateral for
any prospective multifamily or commercial mortgage loan to assess the structure,
exterior walls, roofing, interior structure and/or mechanical and electrical
systems. Based on the resulting report, MLML will determine the appropriate
response to any recommended repairs, corrections or replacements and any
identified deferred maintenance.
Seismic Report. If the subject real property collateral includes any
material improvements and is located in California or in seismic zones 3 or 4,
MLML may require a report to establish the probable maximum or bounded loss for
the improvements at the property as a result of an earthquake. If that loss is
in excess of 20% of the estimated replacement cost for the improvements at the
property, MLML may require retrofitting of the improvements or that the borrower
obtain earthquake insurance if available at a commercially reasonable price. It
should be noted, however, that because the seismic assessments may not
necessarily have used the same assumptions in assessing probable maximum loss,
it is possible that some of the real properties that were considered unlikely to
experience a probable maximum loss in excess of 20% of estimated replacement
cost might have been the subject of a higher estimate had different assumptions
been used.
Zoning and Building Code Compliance. In connection with the origination of
a multifamily or commercial mortgage loan, MLML will generally examine whether
the use and occupancy of the related real property collateral is in material
compliance with zoning, land-use, building rules, regulations and orders then
applicable to that property. Evidence of this compliance may be in the form of
one or more of the following: legal opinions; surveys; recorded documents;
temporary or permanent certificates of occupancy; letters from government
officials or agencies; title insurance endorsements; engineering or consulting
reports; and/or representations by the related borrower.
Where a property as currently operated is a permitted nonconforming use
and/or structure and the improvements may not be rebuilt to the same dimensions
or used in the same manner in the event of a major casualty, MLML will analyze
whether--
o any major casualty that would prevent rebuilding has a sufficiently
remote likelihood of occurring;
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o casualty insurance proceeds together with the value of any
additional collateral would be available in an amount estimated by
MLML to be sufficient to pay off the related mortgage loan in full;
o the real property collateral, if permitted to be repaired or
restored in conformity with current law, would in MLML's judgment
constitute adequate security for the related mortgage loan; and/or
o to require the related borrower to obtain law and ordinance
insurance.
Escrow Requirements. Based on its analysis of the real property
collateral, the borrower and the principals of the borrower, MLML may require a
borrower under a multifamily or commercial mortgage loan to fund various escrows
for taxes and/or insurance, capital expenses, replacement reserves and/or
environmental remediation. MLML conducts a case-by-case analysis to determine
the need for a particular escrow or reserve. Consequently, the aforementioned
escrows and reserves are not established for every multifamily and commercial
mortgage loan originated by MLML. Furthermore, MLML may accept an alternative to
a cash escrow or reserve from a borrower, such as a letter of credit or a
guarantee from the borrower or an affiliate of the borrower or periodic evidence
that the items for which the escrow or reserve would have been established are
being paid or addressed.
Notwithstanding the foregoing discussion under this "--Underwriting
Guidelines" section, we may purchase mortgage loans for inclusion in a trust
fund which vary from, or do not comply with, MLML's underwriting guidelines. In
addition, in some cases, MLML's and/or its affiliates may not have strictly
applied these underwriting guidelines as the result of a case-by-case permitted
exception based upon other compensating factors.
THE DEPOSITOR
We are Merrill Lynch Mortgage Investors, Inc., the depositor with respect
to each series of certificates offered by this prospectus. We are a corporation
organized under the laws of the State of Delaware. We were initially
incorporated on June 13, 1986. We are a wholly owned, direct subsidiary of
Merrill Lynch Mortgage Capital Inc., which is an indirect wholly owned
subsidiary of Merrill Lynch & Co., Inc. Our principal executive offices are
located at 4 World Financial Center, 10th Floor 250 Vesey Street, New York, NewYork10080. Our telephone number is 212-449-1000. There can be no assurance that
at any particular time we will have any significant assets. We do not file with
the SEC annual reports on Form 10-K or any other reports with respect to
ourselves or our financial condition pursuant to Section 13(a) or 15(d) of the
Exchange Act.
We were organized, among other things, for the purposes of:
o issuing and selling one or more series of bonds secured primarily by
mortgage collateral and manufactured housing conditional sales
contracts and loan agreements, investing in certain mortgage
collateral and manufactured housing conditional sales contracts and
loan agreements to be purchased with the proceeds of bonds secured
thereby and taking certain other actions with respect thereto;
o selling interests in mortgage loans, mortgage collateral and
manufactured housing conditional sales contracts and loan
agreements, evidencing those interests with pass-through
certificates, using the proceeds of the sale of the pass-through
certificates to acquire the mortgage loans, mortgage collateral and
manufactured housing conditional sales contracts and loan
agreements, retaining an interest, including a subordinated
interest, in the mortgage loans, mortgage collateral or manufactured
housing conditional sales contracts and loan agreements acquired and
sold and taking certain other actions with respect thereto;
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o acting as settlor or depositor of trusts formed to issue, sell and
deliver series of bonds secured by a pledge or assignment of
mortgage obligations, pass-through certificates in mortgage loans or
other mortgage collateral and manufactured housing conditional sales
contracts and loan agreements and investing in or selling beneficial
interests in the same, acquiring, owning, holding and pledging or
selling interests in residential mortgage loans, mortgage collateral
and manufactured housing conditional sales contracts and loan
agreements and investing cash balances on an interim basis in
certain short term investments; and
o doing all such things as are reasonable or necessary to enable us to
carry out any of the above, including entering into loan agreements,
servicing agreements and reimbursements agreements and selling
certificates of interest in any trust for which we serve as
depositor.
Since our incorporation in 1986, we have been engaged in the
securitization of commercial and multifamily mortgage loans and in acting as
depositor of one or more trusts formed to issue commercial mortgage pass-through
certificates that are secured by or represent interests in, pools of mortgage
loans.
We will generally acquire the mortgage assets that are to back each series
of offered certificates from the sponsor(s) for the subject securitization
transaction or, if specified in the prospectus supplement, from one or more
other mortgage asset sellers, in each case in privately negotiated transactions.
We will thereupon transfer those mortgage assets to the related trust.
After the issuance of a series of offered certificates, we may be
required, to the extent specified in the related Governing Document, to perform
certain actions on a continual basis, including but not limited to:
o to remove the trustee upon the occurrence of certain specified
events, including certain events of bankruptcy or insolvency,
failure to deliver certain required reports or imposition of a tax
upon the trust fund, and thereupon appoint a successor trustee;
o to appoint a successor trustee in the event that the trustee
resigns, is removed or becomes ineligible to continue serving in
such capacity under the related Governing Document;
o to provide the trustee, the master servicer and the special servicer
with any reports, certifications and information--other than with
respect to the mortgage loans--that they may reasonably require to
comply with the terms of the related Governing Document; and
o to provide to the related tax administrator in respect of the
related trust such information as it may reasonably require to
perform its reporting and other tax compliance obligations under the
related Governing Document.
Generally, it is expected that the functions and/or duties set out under
this "The Depositor" section will be performed by our agents or affiliates.
YIELD AND MATURITY CONSIDERATIONSGENERAL
The yield on your offered certificates will depend on--
o the price you paid for your offered certificates,
o the pass-through rate on your offered certificates, and
o the amount and timing of payments on your offered certificates.
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The following discussion contemplates a trust established by us that
consists only of mortgage loans. If one of our trusts also includes a
mortgage-backed security, the payment terms of that security will soften or
enhance the effects that the characteristics and behavior of mortgage loans
backing that security can have on the yield to maturity and/or weighted average
life of a class of offered certificates. If one of our trusts includes a
mortgage-backed security, we will discuss in the related prospectus supplement
the effect, if any, that the security may have on the yield to maturity and
weighted average lives of the related offered certificates.
PASS-THROUGH RATE
A class of interest-bearing offered certificates may have a fixed,
variable or adjustable pass-through rate. We will specify in the related
prospectus supplement the pass-through rate for each class of interest-bearing
offered certificates or, if the pass-through rate is variable or adjustable, the
method of determining the pass-through rate.
PAYMENT DELAYS
There will be a delay between the date on which payments on the underlying
mortgage loans are due and the date on which those payments are passed through
to you and other investors. That delay will reduce the yield that would
otherwise be produced if those payments were passed through on your offered
certificates on the same date that they were due.
YIELD AND PREPAYMENT CONSIDERATIONS
The yield to maturity on your offered certificates will be affected by the
rate of principal payments on the underlying mortgage loans and the allocation
of those principal payments to reduce the principal balance or notional amount
of your offered certificates. The rate of principal payments on those mortgage
loans will be affected by the following:
o the amortization schedules of the mortgage loans, which may change
from time to time to reflect, among other things, changes in
mortgage interest rates or partial prepayments of principal;
o the dates on which any balloon payments are due; and
o the rate of principal prepayments on the mortgage loans, including
voluntary prepayments by borrowers and involuntary prepayments
resulting from liquidations, casualties or purchases of mortgage
loans.
Because the rate of principal prepayments on the mortgage loans underlying
your offered certificates will depend on future events and a variety of factors,
we cannot give you any assurance as to that rate.
The extent to which the yield to maturity of your offered certificates may
vary from your anticipated yield will depend upon--
o whether you purchased your offered certificates at a discount or
premium and, if so, the extent of that discount or premium, and
o when, and to what degree, payments of principal on the underlying
mortgage loans are applied or otherwise result in the reduction of
the principal balance or notional amount of your offered
certificates.
If you purchase your offered certificates at a discount, then you should
consider the risk that a slower than anticipated rate of principal payments on
the underlying mortgage loans could result in an actual yield to you that is
lower than your anticipated yield. If you purchase your offered certificates at
a premium, then you should
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consider the risk that a faster than anticipated rate of principal payments on
the underlying mortgage loans could result in an actual yield to you that is
lower than your anticipated yield.
If your offered certificates entitle you to payments of interest, with
disproportionate, nominal or no payments of principal, then you should consider
that your yield will be extremely sensitive to prepayments on the underlying
mortgage loans and, under some prepayment scenarios, may be negative.
If a class of offered certificates accrues interest on a notional amount,
that notional amount will, in general, either--
o be based on the principal balances of some or all of the mortgage
assets in the related trust, or
o equal the total principal balance, or a designated portion of the
total principal balance, of one or more of the other classes of
certificates of the same series.
Accordingly, the yield on that class of certificates will be inversely related
to, as applicable, the rate at which--
o payments and other collections of principal are received on the
mortgage assets referred to in the first bullet point of the prior
sentence, and/or
o payments are made in reduction of the total principal balance of the
class or classes of certificates, or the designated portion of that
total principal balance, referred to in the second bullet point of
the prior sentence.
The extent of prepayments of principal of the mortgage loans underlying
your offered certificates may be affected by a number of factors, including:
o the availability of mortgage credit;
o the relative economic vitality of the area in which the related real
properties are located;
o the quality of management of the related real properties;
o the servicing of the mortgage loans;
o possible changes in tax laws; and
o other opportunities for investment.
In general, those factors that increase--
o the attractiveness of selling or refinancing a commercial or
multifamily property, or
o the likelihood of default under a commercial or multifamily mortgage
loan,
would be expected to cause the rate of prepayment to accelerate. In contrast,
those factors having an opposite effect would be expected to cause the rate of
prepayment to slow.
The rate of principal payments on the mortgage loans underlying your
offered certificates may also be affected by the existence and enforceability of
prepayment restrictions, such as--
o prepayment lock-out periods, and
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o requirements that voluntary principal prepayments be accompanied by
prepayment premiums, fees or charges.
If enforceable, those provisions could constitute either an absolute
prohibition, in the case of a prepayment lock-out period, or a disincentive, in
the case of a prepayment premium, fee or charge, to a borrower's voluntarily
prepaying its mortgage loan, thereby slowing the rate of prepayments.
The rate of prepayment on a pool of mortgage loans is likely to be
affected by prevailing market interest rates for mortgage loans of a comparable
type, term and risk level. As prevailing market interest rates decline, a
borrower may have an increased incentive to refinance its mortgage loan. Even in
the case of adjustable rate mortgage loans, as prevailing market interest rates
decline, the related borrowers may have an increased incentive to refinance for
the following purposes:
o to convert to a fixed rate loan and thereby lock in that rate, or
o to take advantage of a different index, margin or rate cap or floor
on another adjustable rate mortgage loan.
Subject to prevailing market interest rates and economic conditions
generally, a borrower may sell a real property in order to--
o realize its equity in the property,
o meet cash flow needs or
o make other investments.
Additionally, some borrowers may be motivated by federal and state tax
laws, which are subject to change, to sell their properties prior to the
exhaustion of tax depreciation benefits.
We make no representation as to--
o the particular factors that will affect the prepayment of the
mortgage loans underlying any series of offered certificates,
o the relative importance of those factors,
o the percentage of the principal balance of those mortgage loans that
will be paid as of any date, or
o the overall rate of prepayment on those mortgage loans.
WEIGHTED AVERAGE LIFE AND MATURITY
The rate at which principal payments are received on the mortgage loans
underlying any series of offered certificates will affect the ultimate maturity
and the weighted average life of one or more classes of those certificates. In
general, weighted average life refers to the average amount of time that will
elapse from the date of issuance of an instrument until each dollar allocable as
principal of that instrument is repaid to the investor.
The weighted average life and maturity of a class of offered certificates
will be influenced by the rate at which principal on the underlying mortgage
loans is paid to that class, whether in the form of--
o scheduled amortization, or
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o prepayments, including--
1. voluntary prepayments by borrowers, and
2. involuntary prepayments resulting from liquidations,
casualties or condemnations and purchases of mortgage loans
out of the related trust.
In the prospectus supplement for a series of offered certificates, we will
specify the projected weighted average life of each class of those offered
certificates with principal balances, based on the assumptions stated in that
prospectus supplement, including assumptions regarding prepayments on the
underlying mortgage loans. Those weighted average lives and assumptions are not
intended to predict, or to provide information that will enable you to predict,
the actual weighted average lives of your offered certificates.
PREPAYMENT MODELS
Prepayment rates on loans are commonly measured relative to a prepayment
standard or model, such as the CPR prepayment model or the SPA prepayment model.
CPR represents an assumed constant rate of prepayment each month, expressed as
an annual percentage, relative to the then outstanding principal balance of a
pool of mortgage loans for the life of those loans. SPA represents an assumed
variable rate of prepayment each month, expressed as an annual percentage,
relative to the then outstanding principal balance of a pool of mortgage loans,
with different prepayment assumptions often expressed as percentages of SPA. For
example, a prepayment assumption of 100% of SPA assumes prepayment rates of 0.2%
per annum of the then outstanding principal balance of those loans in the first
month of the life of the loans and an additional 0.2% per annum in each month
thereafter until the 30th month. Beginning in the 30th month, and in each month
thereafter during the life of the loans, 100% of SPA assumes a constant
prepayment rate of 6% per annum each month.
Neither CPR nor SPA nor any other prepayment model or assumption is a
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any particular pool of mortgage loans.
Moreover, the CPR and SPA models were developed based upon historical prepayment
experience for single-family mortgage loans. It is unlikely that the prepayment
experience of the mortgage loans underlying your offered certificates will
conform to any particular level of CPR or SPA.
OTHER FACTORS AFFECTING YIELD, WEIGHTED AVERAGE LIFE AND MATURITY
Balloon Payments; Extensions of Maturity. Some or all of the mortgage
loans underlying a series of offered certificates may require that balloon
payments be made at maturity. The ability of a borrower to make a balloon
payment typically will depend upon its ability either--
o to refinance the loan, or
o to sell the related real property.
If a borrower is unable to refinance or sell the related real property, there is
a possibility that the borrower may default on the mortgage loan or that the
maturity of the mortgage loan may be extended in connection with a workout. If a
borrower defaults, recovery of proceeds may be delayed by--
o the bankruptcy of the borrower, or
o adverse economic conditions in the market where the related real
property is located.
In order to minimize losses on defaulted mortgage loans, the related
master servicer or special servicer may be authorized within prescribed limits
to modify mortgage loans that are in default or as to which a payment default is
reasonably foreseeable. Any defaulted balloon payment or modification that
extends the maturity of a
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mortgage loan may delay payments of principal on your offered certificates and
extend the weighted average life of your offered certificates.
Negative Amortization. The weighted average life of a class of offered
certificates can be affected by mortgage loans that permit negative amortization
to occur. Those are the mortgage loans that provide for the current payment of
interest calculated at a rate lower than the rate at which interest accrues on
the mortgage loan, with the unpaid portion of that interest being added to the
related principal balance. Negative amortization most commonly occurs with
respect to an adjustable rate mortgage loan that:
o limits the amount by which its scheduled payment may adjust in
response to a change in its mortgage interest rate;
o provides that its scheduled payment will adjust less frequently than
its mortgage interest rate; or
o provides for constant scheduled payments regardless of adjustments
to its mortgage interest rate.
Negative amortization on one or more mortgage loans in any of our trusts
may result in negative amortization on a related class of offered certificates.
We will describe in the related prospectus supplement, if applicable, the manner
in which negative amortization with respect to the underlying mortgage loans is
allocated among the respective classes of a series of offered certificates.
The portion of any mortgage loan negative amortization allocated to a
class of offered certificates may result in a deferral of some or all of the
interest payable on those certificates. Deferred interest may be added to the
total principal balance of a class of offered certificates. In addition, an
adjustable rate mortgage loan that permits negative amortization would be
expected during a period of increasing interest rates to amortize, if at all, at
a slower rate than if interest rates were declining or were remaining constant.
This slower rate of mortgage loan amortization would be reflected in a slower
rate of amortization for one or more classes of certificates of the related
series. Accordingly, there may be an increase in the weighted average lives of
those classes of certificates to which any mortgage loan negative amortization
would be allocated or that would bear the effects of a slower rate of
amortization of the underlying mortgage loans.
The extent to which the yield on your offered certificates may be affected
by any negative amortization on the underlying mortgage loans will depend, in
part, upon whether you purchase your offered certificates at a premium or a
discount.
During a period of declining interest rates, the scheduled payment on an
adjustable rate mortgage loan may exceed the amount necessary to amortize the
loan fully over its remaining amortization schedule and pay interest at the then
applicable mortgage interest rate. The result is the accelerated amortization of
the mortgage loan. The acceleration in amortization of a mortgage loan will
shorten the weighted average lives of those classes of certificates that entitle
their holders to a portion of the principal payments on the mortgage loan.
Foreclosures and Payment Plans. The weighted average life of and yield on
your offered certificates will be affected by--
o the number of foreclosures with respect to the underlying mortgage
loans; and
o the principal amount of the foreclosed mortgage loans in relation to
the principal amount of those mortgage loans that are repaid in
accordance with their terms.
Servicing decisions made with respect to the underlying mortgage loans,
including the use of payment plans prior to a demand for acceleration and the
restructuring of mortgage loans in bankruptcy proceedings or otherwise, may also
affect the payment patterns of particular mortgage loans and, as a result, the
weighted average life of and yield on your offered certificates.
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Losses and Shortfalls on the Mortgage Assets. The yield on your offered
certificates will directly depend on the extent to which you are required to
bear the effects of any losses or shortfalls in collections on the underlying
mortgage loans and the timing of those losses and shortfalls. In general, the
earlier that you bear any loss or shortfall, the greater will be the negative
effect on the yield of your offered certificates.
The amount of any losses or shortfalls in collections on the mortgage
assets in any of our trusts will, to the extent not covered or offset by draws
on any reserve fund or under any instrument of credit support, be allocated
among the various classes of certificates of the related series in the priority
and manner, and subject to the limitations, that we specify in the related
prospectus supplement. As described in the related prospectus supplement, those
allocations may be effected by the following:
o a reduction in the entitlements to interest and/or the total
principal balances of one or more classes of certificates; and/or
o the establishment of a priority of payments among classes of
certificates.
If you purchase subordinated certificates, the yield to maturity on those
certificates may be extremely sensitive to losses and shortfalls in collections
on the underlying mortgage loans.
Additional Certificate Amortization. If your offered certificates have a
principal balance, then they entitle you to a specified portion of the principal
payments received on the underlying mortgage loans. They may also entitle you to
payments of principal from the following sources:
o amounts attributable to interest accrued but not currently payable
on one or more other classes of certificates of the applicable
series;
o interest received or advanced on the underlying mortgage assets that
is in excess of the interest currently accrued on the certificates
of the applicable series;
o prepayment premiums, fees and charges, payments from equity
participations or any other amounts received on the underlying
mortgage assets that do not constitute interest or principal; or
o any other amounts described in the related prospectus supplement.
The amortization of your offered certificates out of the sources described
in the prior paragraph would shorten their weighted average life and, if your
offered certificates were purchased at a premium, reduce their yield to
maturity.
DESCRIPTION OF THE GOVERNING DOCUMENTSGENERAL
The "Governing Document" for purposes of issuing the offered certificates
of each series will be a pooling and servicing agreement or other similar
agreement or collection of agreements. In general, the parties to the Governing
Document for a series of offered certificates will include us, a trustee, one or
more master servicers and one or more special servicers. However, if the related
trust assets include mortgage-backed securities, the Governing Document may
include a manager as a party, but may not include a master servicer, special
servicer or other servicer as a party. We will identify in the related
prospectus supplement the parties to the Governing Document for the subject
series of offered certificates.
If we so specify in the related prospectus supplement, the originator of
the mortgage assets or a party from whom we acquire mortgage assets or one of
their respective affiliates may perform the functions of master
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servicer, special servicer, primary servicer, sub-servicer or manager for the
trust to which we transfer those assets. The same person or entity may act as
both master servicer and special servicer for one of our trusts.
Any party to the Governing Document for a series of offered certificates,
or any of its affiliates, may own certificates issued thereunder. However,
except in limited circumstances, including with respect to required consents to
amendments to the Governing Document for a series of offered certificates,
certificates that are held by the related master servicer, special servicer or
manager will not be allocated voting rights.
A form of a pooling and servicing agreement has been filed as an exhibit
to the registration statement of which this prospectus is a part. However, the
provisions of the Governing Document for each series of offered certificates
will vary depending upon the nature of the certificates to be issued thereunder
and the nature of the related trust assets. The following summaries describe
select provisions that may appear in the Governing Document for each series of
offered certificates. The prospectus supplement for each series of offered
certificates will provide material additional information regarding the
Governing Document for that series. The summaries in this prospectus do not
purport to be complete, and you should refer to the provisions of the Governing
Document for your offered certificates and, further, to the description of those
provisions in the related prospectus supplement. We will provide a copy of the
Governing Document, exclusive of exhibits, that relates to your offered
certificates, without charge, upon written request addressed to our principal
executive offices specified under "The Depositor."ASSIGNMENT OF MORTGAGE ASSETS
At the time of initial issuance of any series of offered certificates, we
will acquire and assign, or cause to be directly assigned, to the designated
trustee those mortgage loans or mortgage-backed securities and any other assets
to be included in the related trust fund. We will specify in the related
prospectus supplement all material documents to be delivered, and all other
material actions to be taken, by us or any prior holder of the related
underlying mortgage loans or mortgage-backed securities in connection with that
assignment. We will also specify in the related prospectus supplement any
remedies available to the related certificateholders, or the related trustee on
their behalf, in the event that any of those material documents are not
delivered or any of those other material actions are not taken as required.
Concurrently with that assignment, the related trustee will deliver to us or our
designee the certificates of that series in exchange for the mortgage assets and
the other assets to be included in the related trust.
Each mortgage asset included in one of our trusts will be identified in a
schedule appearing as an exhibit to the related Governing Document. That
schedule generally will include detailed information about each mortgage asset
transferred to the related trust, including:
o in the case of a mortgage loan--
1. the address of the related real property,
2. the mortgage interest rate and, if applicable, the applicable
index, gross margin, adjustment date and any rate cap
information,
3. the remaining term to maturity,
4. if the mortgage loan is a balloon loan, the remaining
amortization term, and
5. the outstanding principal balance; and
o in the case of a mortgage-backed security--
1. the outstanding principal balance, and
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2. the pass-through rate or coupon rate.
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO MORTGAGE ASSETS
If and to the extent set forth in the prospectus supplement for any series
of offered certificates, we will, with respect to each mortgage asset in the
related trust, make or assign, or cause to be made or assigned, a limited set of
representations and warranties covering, by way of example:
o the accuracy of the information set forth for each mortgage asset on
the schedule of mortgage assets appearing as an exhibit to the
Governing Document for that series;
o the warranting party's title to each mortgage asset and the
authority of the warranting party to sell that mortgage asset; and
o in the case of a mortgage loan--
1. the enforceability of the related mortgage note and mortgage,
2. the existence of title insurance insuring the lien priority of
the related mortgage, and
3. the payment status of the mortgage loan.
We will identify the warranting party, and give a more detailed summary of
the representations and warranties made thereby, in the related prospectus
supplement. In most cases, the warranting party will be a prior holder of the
particular mortgage assets. We will also specify in the related prospectus
supplement any remedies against the warranting party available to the related
certificateholders, or the related trustee on their behalf, in the event of a
material breach of any of those representations and warranties.
COLLECTION AND OTHER SERVICING PROCEDURES WITH RESPECT TO MORTGAGE LOANS
The Governing Document for each series of offered certificates will govern
the servicing and administration of any mortgage loans included in the related
trust.
In general, the related master servicer and special servicer, directly or
through primary servicers or sub-servicers, will be obligated to service and
administer for the benefit of the related certificateholders the mortgage loans
in any of our trusts. The master servicer and the special servicer will be
required to service and administer those mortgage loans in accordance with
applicable law and, further, in accordance with the terms of the related
Governing Document, the mortgage loans themselves and any instrument of credit
support included in that trust. Subject to the foregoing, the master servicer
and the special servicer will each have full power and authority to do any and
all things in connection with that servicing and administration that it may deem
necessary and desirable.
As part of its servicing duties, each of the master servicer and the
special servicer for one of our trusts will be required to make reasonable
efforts to collect all payments called for under the terms and provisions of the
related mortgage loans that it services. In general, each of the master servicer
and the special servicer for one of our trusts will be obligated to follow those
collection procedures as are consistent with the servicing standard set forth in
the related Governing Document. Consistent with the foregoing, the master
servicer and the special servicer will each be permitted, in its discretion, to
waive any default interest or late payment charge in connection with collecting
a late payment on any defaulted mortgage loan.
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The master servicer and/or the special servicer for one or our trusts,
directly or through primary servicers or sub-servicers, will also be required to
perform various other customary functions of a servicer of comparable loans,
including:
o maintaining escrow or impound accounts for the payment of taxes,
insurance premiums, ground rents and similar items, or otherwise
monitoring the timely payment of those items;
o ensuring that the related properties are properly insured;
o attempting to collect delinquent payments;
o supervising foreclosures;
o negotiating modifications;
o responding to borrower requests for partial releases of the
encumbered property, easements, consents to alteration or demolition
and similar matters;
o protecting the interests of certificateholders with respect to
senior lienholders;
o conducting inspections of the related real properties on a periodic
or other basis;
o collecting and evaluating financial statements for the related real
properties;
o managing or overseeing the management of real properties acquired on
behalf of the trust through foreclosure, deed-in-lieu of foreclosure
or otherwise; and
o maintaining servicing records relating to mortgage loans in the
trust.
We will specify in the related prospectus supplement when, and the extent
to which, servicing of a mortgage loan is to be transferred from a master
servicer to a special servicer. In general, a special servicer for any of our
trusts will be responsible for the servicing and administration of:
o mortgage loans that are delinquent with respect to a specified
number of scheduled payments;
o mortgage loans as to which there is a material non-monetary default;
o mortgage loans as to which the related borrower has--
1. entered into or consented to bankruptcy, appointment of a
receiver or conservator or similar insolvency proceeding, or
2. become the subject of a decree or order for such a proceeding
which has remained in force undischarged or unstayed for a
specified number of days; and
o real properties acquired as part of the trust with respect to
defaulted mortgage loans.
The related Governing Document may also provide that if, in the judgment
of the related master servicer or other specified party, a payment default or a
material non-monetary default is reasonably foreseeable, the related master
servicer may elect or be required to transfer the servicing of that mortgage
loan, in whole or in part, to the related special servicer. When the
circumstances no longer warrant a special servicer's continuing to service a
particular mortgage loan, such as when the related borrower is paying in
accordance with the
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forbearance arrangement entered into between the special servicer and that
borrower, the master servicer will generally resume the servicing duties with
respect to the particular mortgage loan.
A borrower's failure to make required mortgage loan payments may mean that
operating income from the related real property 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 borrower 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 real property. In general, with respect to each
series of offered certificates, the related special servicer will be required to
monitor any mortgage loan in the related trust 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 real property,
initiate corrective action in cooperation with the mortgagor if cure is likely,
inspect the related real property and take any other actions as it deems
necessary and appropriate. A significant period of time may elapse before a
special servicer is able to assess the success of any corrective action or the
need for additional initiatives. The time period within which a special servicer
can--
o make the initial determination of appropriate action,
o evaluate the success of corrective action,
o develop additional initiatives,
o institute foreclosure proceedings and actually foreclose, or
o accept a deed to a real property in lieu of foreclosure, on behalf
of the certificateholders of the related series,
may vary considerably depending on the particular mortgage loan, the related
real property, the borrower, the presence of an acceptable party to assume the
mortgage loan and the laws of the jurisdiction in which the related real
property is located. If a borrower files a bankruptcy petition, the special
servicer may not be permitted to accelerate the maturity of the defaulted loan
or to foreclose on the related real property for a considerable period of time.
See "LEGAL ASPECTS OF MORTGAGE LOANS--Bankruptcy Laws."
A special servicer for one of our trusts may also perform limited duties
with respect to mortgage loans in that trust for which the related master
servicer is primarily responsible, such as--
o performing property inspections and collecting, and
o evaluating financial statements.
A master servicer for one of our trusts may perform limited duties with
respect to any mortgage loan in that trust for which the related special
servicer is primarily responsible, such as--
o continuing to receive payments on the mortgage loan,
o making calculations with respect to the mortgage loan, and
o making remittances and preparing reports to the related trustee
and/or certificateholders with respect to the mortgage loan.
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The duties of the master servicer and special servicer for your series
will be more fully described in the related prospectus supplement.
If and to the extent set forth in the related prospectus supplement, the
master servicer for your series will be responsible for filing and settling
claims with respect to particular mortgage loans for your series under any
applicable instrument of credit support. See "Description of Credit Support" in
this prospectus.
SERVICING MORTGAGE LOANS THAT ARE PART OF A LOAN COMBINATION
Certain of the mortgage loans that are included in our trusts will be part
of a loan combination as described under "The Trust Fund--Mortgage Loans--LoanCombinations." With respect to certain of those mortgage loans, the entire loan
combination may be serviced under the applicable Governing Document for our
trust, in which case the servicers under the Governing Document will have to
service the loan combination with regard to and considering the interests of the
holders of the non-trust mortgage loans included in the related loan
combination. With respect to other mortgage loans in our trusts that are part of
a loan combination, the entire loan combination may be serviced under a
servicing agreement for the securitization of a related non-trust loan in that
loan combination, in which case our servicers and the certificateholders of the
related series of certificates will have limited ability to control the
servicing of those mortgage loans. In any event, the related non-trust mortgage
loan noteholders may be permitted to exercise certain rights and direct certain
servicing actions with respect to the entire loan combination, including the
mortgage loan in our trust. See "RISK FACTORS--With Respect to Certain Mortgage
Loans Included in Our Trusts, the Mortgaged Property or Properties that Secure
the Subject Mortgage Loan in the Trust Also Secure One (1) or More Related
Mortgage Loans That Are Not in the Trust; The Interests of the Holders of Those
Non-Trust Mortgage Loans May Conflict with Your Interests."PRIMARY SERVICERS AND SUB-SERVICERS
A master servicer or special servicer may delegate its servicing
obligations to one or more third-party servicers, primary servicers and
sub-servicers. In addition, an originator or a seller of a mortgage loan may act
as primary servicer or sub-servicer with respect to that mortgage loan after it
is included in one of our trusts. A primary servicer or sub-servicer with
respect to a particular mortgage loan will often have direct contact with the
related borrower and may effectively perform all of the related primary
servicing functions (other than special servicing functions), with related
collections and reports being forwarded by that primary servicer or sub-servicer
to the master servicer for aggregation of such items with the remaining mortgage
pool. However, unless we specify otherwise in the related prospectus supplement,
the master servicer or special servicer will remain obligated for performance of
the delegated duties under the related Governing Document. Each sub-servicing
agreement between a master servicer or special servicer, as applicable, and a
sub-servicer must provide for servicing of the applicable mortgage loans
consistent with the related Governing Document.
Unless we specify otherwise in the related prospectus supplement, any
master servicer or special servicer for one of our trusts will be solely liable
for all fees owed by it to any sub-servicer, regardless of whether the master
servicer's or special servicer's compensation under the related Governing
Document is sufficient to pay those fees. Each sub-servicer will be entitled to
reimbursement from the related trust, through the master servicer or special
servicer, as the case may be, that retained it, for expenditures that it makes,
generally to the same extent that such master servicer or special servicer, as
the case may be, would be reimbursed under the related Governing Document.
We will identify in the related prospectus supplement any primary servicer
or sub-servicer that, at the time of initial issuance of the subject offered
certificates, is affiliated with us or with the issuing entity or any sponsor
for the subject securitization transaction or is expected to be a servicer of
mortgage loans representing 10% or more of the related mortgage asset pool, by
balance.
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COLLECTION OF PAYMENTS ON MORTGAGE-BACKED SECURITIES
Unless we specify otherwise in the related prospectus supplement, if a
mortgage-backed security is included among the trust assets underlying any
series of offered certificates, then--
o that mortgage-backed security will be registered in the name of the
related trustee or its designee;
o the related trustee will receive payments on that mortgage-backed
security; and
o subject to any conditions described in the related prospectus
supplement, the related trustee or a designated manager will, on
behalf and at the expense of the trust, exercise all rights and
remedies with respect to that mortgaged-backed security, including
the prosecution of any legal action necessary in connection with any
payment default.
ADVANCES
If any trust established by us includes mortgage loans, then as and to the
extent described in the related prospectus supplement, the related master
servicer, the related special servicer, the related trustee, any related
provider of credit support and/or any other specified person may be obligated to
make, or may have the option of making, advances with respect to those mortgage
loans to cover--
o delinquent payments of principal and/or interest, other than balloon
payments,
o property protection expenses,
o other servicing expenses, or
o any other items specified in the related prospectus supplement.
If there are any limitations with respect to a party's advancing
obligations, we will discuss those limitations in the related prospectus
supplement.
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to certificateholders. Advances are not a guarantee against
losses. The advancing party will be entitled to recover all of its advances out
of--
o subsequent recoveries on the related mortgage loans, including
amounts drawn under any fund or instrument constituting credit
support, and
o any other specific sources identified in the related prospectus
supplement.
If and to the extent that we so specify in the related prospectus
supplement, any entity making advances will be entitled to receive interest on
some or all of those advances for a specified period during which they are
outstanding at the rate specified in that prospectus supplement. That entity may
be entitled to payment of interest on its outstanding advances--
o periodically from general collections on the mortgage assets in the
related trust, prior to any payment to the related series of
certificateholders, or
o at any other times and from any sources as we may describe in the
related prospectus supplement.
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If any trust established by us includes mortgage-backed securities, we
will discuss in the related prospectus supplement any comparable advancing
obligations with respect to those securities or the mortgage loans that back
them.
MATTERS REGARDING THE MASTER SERVICER, THE SPECIAL SERVICER, THE MANAGER AND US
Unless we specify otherwise in the related prospectus supplement, the
master servicer, special servicer or manager for any of our trusts may each
resign from its obligations in that capacity, upon--
o the appointment of, and the acceptance of that appointment by, a
successor to the resigning party and receipt by the related trustee
of written confirmation from each applicable rating agency that the
resignation and appointment will not result in a withdrawal or
downgrade of any rating assigned by that rating agency to any class
of certificates of the related series, or
o a determination that those obligations are no longer permissible
under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by the resigning
party.
In general, no resignation will become effective until the related trustee
or other successor has assumed the obligations and duties of the resigning
master servicer, special servicer or manager, as the case may be. In some cases,
the appointment of a successor master servicer may require our consent, but if
we have not responded to a request for consent to a successor within the
requisite time period, that consent may be deemed to have been given. If the
duties of the master servicer or the special servicer are transferred to a
successor thereto, the master servicing fee and the special servicing fee and,
except as otherwise described in the related prospectus supplement, any workout
fee and/or any liquidation fee, as applicable, that accrues or otherwise becomes
payable under the Governing Document from and after the date of such transfer
will be payable to such successor. The Governing Document will require the
resigning master servicer or special servicer to pay all costs and expenses in
connection with its resignation and the resulting transfer of servicing.
With respect to each series of offered certificates, we and the related
master servicer, special servicer and/or manager, if any, will, in each case, be
obligated to perform only those duties specifically required under the related
Governing Document.
In no event will we, any master servicer, special servicer or manager for
one of our trusts, or any of our or their respective members, managers,
directors, officers, employees or agents, be under any liability to that trust
or the related certificateholders for any action taken, or not taken, in good
faith under the related Governing Document or for errors in judgment. Neither we
nor any of those other parties to the related Governing Document will be
protected, however, against any liability that would otherwise be imposed by
reason of--
o willful misfeasance, bad faith or gross negligence in the
performance of obligations or duties under the related Governing
Document for any series of offered certificates, or
o reckless disregard of those obligations and duties.
Furthermore, the Governing Document for each series of offered
certificates will entitle us, the master servicer, special servicer and/or
manager for the related trust, and our and their respective members, managers,
directors, officers, employees and agents, to indemnification out of the related
trust assets for any loss, liability or expense incurred in connection with any
legal action or claim that relates to that Governing Document or series of
offered certificates or to the related trust. The indemnification will not
extend, however, to any such loss, liability or expense:
o specifically required to be borne by the relevant party, without
right of reimbursement, under the terms of that Governing Document;
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o incurred in connection with any legal action or claim against the
relevant party resulting from any breach of a representation or
warranty made in that Governing Document; or
o incurred in connection with any legal action or claim against the
relevant party resulting from any willful misfeasance, bad faith or
gross negligence in the performance of obligations or duties under
that Governing Document or reckless disregard of those obligations
and duties.
Neither we nor any master servicer, special servicer or manager for the
related trust will be under any obligation to appear in, prosecute or defend any
legal action unless:
o the action is related to the respective responsibilities of that
party under the Governing Document for the affected series of
offered certificates; and
o either--
1. that party is specifically required to bear the expense of the
action, or
2. the action will not, in its opinion, involve that party in any
ultimate expense or liability for which it would not be
reimbursed under the Governing Document for the affected
series of offered certificates.
However, we and each of those other parties may undertake any legal action
that may be necessary or desirable with respect to the enforcement or protection
of the rights and duties of the parties to the Governing Document for any series
of offered certificates and the interests of the certificateholders of that
series under that Governing Document. In that event, the legal expenses and
costs of the action, and any liability resulting from the action, will be
expenses, costs and liabilities of the related trust and payable out of related
trust assets.
With limited exception, any person or entity--
o into which we or any related master servicer, special servicer or
manager may be merged or consolidated, or
o resulting from any merger or consolidation to which we or any
related master servicer, special servicer or manager is a party, or
o succeeding to all or substantially all of our business or the
business of any related master servicer, special servicer or
manager,
will be the successor of us or that master servicer, special servicer or
manager, as the case may be, under the Governing Document for a series of
offered certificates.
The compensation arrangements with respect to any master servicer, special
servicer or manager for any of our trusts will be set forth in the related
prospectus supplement. In general, that compensation will be payable out of the
related trust assets.
EVENTS OF DEFAULT
We will identify in the related prospectus supplement the various events
of default under the Governing Document for each series of offered certificates
for which any related master servicer, special servicer or manager may be
terminated in that capacity. In general, the Governing Document for each series
of offered certificates will provide that if the defaulting party is terminated
as a result of any such event of default, and if a non-defaulting party to that
Governing Document incurs any costs or expenses in connection with the
termination of the defaulting party and the transfer of the defaulting party's
duties under that Governing Document, then those
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costs and expenses of such non-defaulting party must be borne by the defaulting
party, and if not paid by the defaulting party within a specified period after
its termination, such non-defaulting party will be entitled to indemnification
for those costs and expenses from the related trust fund, although the
defaulting party will not thereby be relieved of its liability for those costs
and expenses.
AMENDMENT
The Governing Document for each series of offered certificates may be
amended by the parties thereto, without the consent of any of the holders of
those certificates, or of any non-offered certificates of the same series, for
the following reasons:
1. to cure any ambiguity;
2. to correct, modify or supplement any provision in the Governing
Document which may be inconsistent with any other provision in that
document or with the description of that document set forth in this
prospectus or the related prospectus supplement;
3. to add any other provisions with respect to matters or questions
arising under the Governing Document that are not inconsistent with
the existing provisions of that document;
4. to the extent applicable, to relax or eliminate any requirement
under the Governing Document imposed by the provisions of the
Internal Revenue Code relating to REMICs or grantor trusts if the
provisions of the Internal Revenue Code are amended or clarified so
as to allow for the relaxation or elimination of that requirement;
5. to relax or eliminate any requirement under the Governing Document
imposed by the Securities Act, or the rules under that Act if that
Act or those rules are amended or clarified so as to allow for the
relaxation or elimination of that requirement;
6. to comply with any requirements imposed by the Internal Revenue Code
or any final, temporary or, in some cases, proposed regulation,
revenue ruling, revenue procedure or other written official
announcement or interpretation relating to federal income tax laws,
or to avoid a prohibited transaction or reduce the incidence of any
tax that would arise from any actions taken with respect to the
operation of any REMIC or grantor trust created under the Governing
Document;
7. to the extent applicable, to modify, add to or eliminate the
transfer restrictions relating to the certificates which are
residual interests in a REMIC;
8. to further clarify or amend any provision of the Governing Document
to reflect the new agreement between the parties regarding SEC
reporting and filing obligations and related matters; or
9. to otherwise modify or delete existing provisions of the Governing
Document.
However, no amendment of the Governing Document for any series of offered
certificates that is covered solely by clauses 3. or 8. above, may adversely
affect in any material respect the interests of any holders of offered or
non-offered certificates of that series. In addition, if the related trust is
intended to be a "qualifying special purpose entity" under FASB 140, then no
such amendment may significantly change the activities of the related trust.
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In general, the Governing Document for a series of offered certificates
may also be amended by the parties to that document, with the consent of the
holders of offered and non-offered certificates representing, in total, not less
than 66 2/3%, or any other percentage specified in the related prospectus
supplement, of all the voting rights allocated to the certificateholders of that
series. However, the Governing Document for a series of offered certificates may
not be amended to--
o reduce in any manner the amount of, or delay the timing of, payments
received on the related underlying mortgage loans or mortgage-backed
securities that are required to be distributed on any offered or
non-offered certificate of that series without the consent of the
holder of that certificate; or
o adversely affect in any material respect the interests of the
holders of any class of offered or non-offered certificates of that
series in any other manner without the consent of the holders of all
certificates of that class; or
o modify the provisions of the Governing Document relating to
amendments of that document without the consent of the holders of
all offered and non-offered certificates of that series then
outstanding; or
o modify the specified percentage of voting rights which is required
to be held by certificateholders to consent, approve or object to
any particular action under the Governing Document without the
consent of the holders of all offered and non-offered certificates
of that series then outstanding; or
o if the related trust is intended to be a "qualifying special purpose
entity" under FASB 140, significantly change the activities of the
related trust without the consent of the holders of offered and
non-offered certificates of that series representing, in total, not
less than a majority of the voting rights for that series, without
regard to any of those certificates held by us or any of our
affiliates or agents.
Notwithstanding the foregoing, the Governing Document for any series of offered
certificates may provide that we need not be a party to any amendment to that
Governing Document, but rather may provide that any such amendment may not
adversely affect our rights and/or interests without our consent.
LIST OF CERTIFICATEHOLDERS
Upon written request of three or more certificateholders of record of any
series made for purposes of communicating with other holders of certificates of
the same series with respect to their rights under the related Governing
Document, the related trustee or other certificate registrar of that series will
afford the requesting certificateholders access during normal business hours to
the most recent list of certificateholders of that series. However, the trustee
may first require a copy of the communication that the requesting
certificateholders propose to send.
THE TRUSTEE
The trustee for each series of offered certificates will be named in the
related prospectus supplement. The commercial bank, banking association, banking
corporation or trust company that serves as trustee for any series of offered
certificates may have typical banking relationships with the us and our
affiliates and with any of the other parties to the related Governing Document
and its affiliates.
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DUTIES OF THE TRUSTEE
The trustee for each series of offered certificates will not--
o make any representation as to the validity or sufficiency of those
certificates, the related Governing Document or any underlying
mortgage asset or related document, or
o be accountable for the use or application by or on behalf of any
other party to the related Governing Document of any funds paid to
that party with respect to those certificates or the underlying
mortgage assets.
If no event of default has occurred and is continuing under the related
Governing Document, the trustee for each series of offered certificates will be
required to perform only those duties specifically required under the related
Governing Document. However, upon receipt of any of the various certificates,
reports or other instruments required to be furnished to it under the related
Governing Document, the trustee must examine those documents and determine
whether they conform to the requirements of that Governing Document.
MATTERS REGARDING THE TRUSTEE
As and to the extent described in the related prospectus supplement, the
fees and normal disbursements of the trustee for any series of offered
certificates may be the expense of the related master servicer or other
specified person or may be required to be paid by the related trust assets.
The trustee for each series of offered certificates and each of its
directors, officers, employees, affiliates, agents and "control persons" within
the meaning of the Securities Act will be entitled to indemnification, out of
related trust assets, for any loss, liability or expense incurred by that
trustee or any of those other persons in connection with that trustee's
acceptance or administration of its trusts under the related Governing Document.
However, the indemnification of a trustee or any of its directors, officers,
employees, affiliates, agents and "control persons" will not extend to any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
gross negligence on the part of the trustee in the performance of its
obligations and duties under the related Governing Document.
No trustee for any series of offered certificates will be liable for any
action reasonably taken, suffered or omitted by it in good faith and believed by
it to be authorized by the related Governing Document.
No trustee for any series of offered certificates will be under any
obligation to exercise any of the trusts or powers vested in it by the related
Governing Document or to institute, conduct or defend any litigation under or in
relation to that Governing Document at the request, order or direction of any of
the certificateholders of that series, unless those certificateholders have
offered the trustee reasonable security or indemnity against the costs, expenses
and liabilities that may be incurred as a result.
No trustee for any series of offered certificates will be required to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties under the related Governing Document, or in the
exercise of any of its rights or powers, if it has reasonable grounds for
believing that repayment of those funds or adequate indemnity against that risk
or liability is not reasonably assured to it.
The trustee for each series of offered certificates will be entitled to
execute any of its trusts or powers and perform any of its duties under the
related Governing Document, either directly or by or through agents or
attorneys. The trustee will not be responsible for any willful misconduct or
gross negligence on the part of any agent or attorney appointed by it with due
care.
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The protections, immunities and indemnities afforded to the trustee for
one of our trusts will also be available to it in its capacity as authenticating
agent, certificate registrar, tax administrator and custodian for that trust.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The trustee for any series of offered certificates may resign at any time
by giving written notice thereof to us, the master servicer, the special
servicer and all certificateholders. Upon receiving such notice, we will be
obligated to appoint a successor to a resigning trustee. If no successor trustee
has been appointed and has accepted appointment within 30 days after the giving
of such notice of resignation, the resigning trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
In general, if--
o at any time the trustee ceases to be eligible in accordance with the
provisions of the Governing Document and fails to resign after we
make a written request for the trustee to resign, or
o if at any time the trustee becomes incapable of acting, or is
adjudged bankrupt or insolvent, or a receiver of the trustee or of
its property is appointed, or any public officer takes charge or
control of the trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, or
o if the trustee fails (other than by reason of the failure of either
the master servicer or the special servicer to timely perform its
obligations or as a result of other circumstances beyond the
trustee's reasonable control) to timely deliver or otherwise make
available in accordance with the Governing Document certain reports
or statements required under the Governing Document and such failure
continues unremedied for a period set forth in the Governing
Document after receipt of written notice by the trustee of such
failure, or
o if a tax is imposed or threatened with respect to the trust fund by
any state in which the trustee is located or in which it holds any
portion of the trust fund,
then we may remove the trustee and appoint a successor trustee acceptable to us
and the master servicer by written instrument, in duplicate, which instrument
must be delivered to the trustee so removed and to the successor trustee.
In addition, unless we indicate otherwise in the related prospectus
supplement, the holders of the offered and non-offered certificates of a subject
series of certificates evidencing not less than 51%--or any other percentage
specified in the related prospectus supplement--of the voting rights for that
series may at any time remove the trustee and appoint a successor trustee by
written instrument(s), signed by such holders or their attorneys-in-fact,
delivered to the master servicer, the trustee so removed and the successor
trustee so appointed.
In the event that the trustee is terminated or removed, all of its rights
and obligations under the Governing Document and in and to the trust assets will
be terminated, other than any rights or obligations that accrued prior to the
date of such termination or removal, including the right to receive all fees,
expenses, advances, interest on advances and other amounts accrued or owing to
it under the Governing Document with respect to periods prior to the date of
such termination or removal, and no termination without cause will be effective
until the payment of those amounts to the trustee. Any resignation or removal of
the trustee and appointment of a successor trustee will not become effective
until acceptance of appointment by the successor trustee. The Governing Document
will generally provide that the predecessor trustee is required to deliver to
the successor trustee--at the expense of the certificateholders that effected
the removal if the trustee has been removed without cause, otherwise, if the
trustee has been removed with cause or not at the request of certificateholders,
or if such expenses are not paid by
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such certificateholders within a specified period, at the expense of the
trust--all documents related to the mortgage assets held by it or its agent and
statements held by it under the Governing Document.
DESCRIPTION OF THE CERTIFICATESGENERAL
Each series of offered certificates, together with any non-offered
certificates of the same series, will represent the entire beneficial ownership
interests in a trust established by us. Each series of offered certificates will
consist of one or more classes. Any non-offered certificates of that series will
likewise consist of one or more classes.
A series of certificates consists of all those certificates that--
o have the same series designation;
o were issued under the same Governing Document; and
o represent beneficial ownership interests in the same trust.
A class of certificates consists of all those certificates of a particular
series that--
o have the same class designation; and
o have the same payment terms.
The respective classes of offered and non-offered certificates of any
series may have a variety of payment terms. An offered certificate may entitle
the holder to receive:
o a stated principal amount, which will be represented by its
principal balance, if any;
o interest on a principal balance or notional amount, at a fixed,
floating, adjustable or variable pass-through rate, which
pass-through rate may change as of a specified date or upon the
occurrence of specified events or for any other reason from one
accrual or payment period to another, as described in the related
prospectus supplement;
o specified, fixed or variable portions of the interest, principal or
other amounts received on the related underlying mortgage loans or
mortgage-backed securities;
o payments of principal, with disproportionate, nominal or no payments
of interest;
o payments of interest, with disproportionate, nominal or no payments
of principal;
o payments of interest on a deferred or partially deferred basis,
which deferred interest may be added to the principal balance, if
any, of the subject class of offered certificates or which deferred
interest may or may not accrue interest, all as set forth in the
related prospectus supplement;
o payments of interest or principal that commence only as of a
specified date or only after the occurrence of specified events,
such as the payment in full of the interest and principal
outstanding on one or more other classes of certificates of the same
series;
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o payments of interest or principal that are, in whole or in part,
calculated based on or payable specifically or primarily from
payments or other collections on particular related underlying
mortgage loans or mortgage-backed securities;
o payments of principal to be made, from time to time or for
designated periods, at a rate that is--
1. faster and, in some cases, substantially faster, or
2. slower and, in some cases, substantially slower, than the rate
at which payments or other collections of principal are
received on the related underlying mortgage loans or
mortgage-backed securities;
o payments of principal to be made, subject to available funds, based
on a specified principal payment schedule or other methodology;
o payments of principal that may be accelerated or slowed in response
to a change in the rate of principal payments on the related
underlying mortgage loans or mortgage-backed securities in order to
protect the subject class of offered certificates or, alternatively,
to protect one or more other classes of certificates of the same
series from prepayment and/or extension risk;
o payments of principal out of amounts other than payments or other
collections of principal on the related underlying mortgage loans or
mortgage-backed securities such as excess spread on the related
underlying mortgage loans or mortgage-backed securities or amounts
otherwise payable as interest with respect to another class of
certificates of the same series, which other class of certificates
provides for the deferral of interest payments thereon;
o payments of residual amounts remaining after required payments have
been made with respect to other classes of certificates of the same
series; or
o payments of all or part of the prepayment or repayment premiums,
fees and charges, equity participations payments or other similar
items received on the related underlying mortgage loans or
mortgage-backed securities.
Any class of offered certificates may be senior or subordinate to or pari
passu with one or more other classes of certificates of the same series,
including a non-offered class of certificates of that series, for purposes of
some or all payments and/or allocations of losses or other shortfalls.
A class of offered certificates may have two or more component parts, each
having characteristics that are described in this prospectus as being
attributable to separate and distinct classes. For example, a class of offered
certificates may have a total principal balance on which it accrues interest at
a fixed, floating, adjustable or variable rate. That class of offered
certificates may also accrue interest on a total notional amount at a different
fixed, floating, adjustable or variable rate. In addition, a class of offered
certificates may accrue interest on one portion of its total principal balance
or notional amount at one fixed, floating, adjustable or variable rate and on
another portion of its total principal balance or notional amount at a different
fixed, floating, adjustable or variable rate. Furthermore, a class of offered
certificates may be senior to another class of certificates of the same series
in some respects, such as receiving payments out of payments and other
collections on particular related underlying mortgage loans or mortgage-backed
securities, but subordinate in other respects, such as receiving payments out of
the payments and other collections on different related underlying mortgage
loans or mortgage-backed securities.
Each class of offered certificates will be issued in minimum denominations
corresponding to specified principal balances, notional amounts or percentage
interests, as described in the related prospectus supplement. A class of offered
certificates may be issued in fully registered, definitive form and evidenced by
physical
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certificates or may be issued in book-entry form through the facilities of The
Depository Trust Company. Offered certificates held in fully registered,
definitive form may be transferred or exchanged, subject to any restrictions on
transfer described in the related prospectus supplement, at the location
specified in the related prospectus supplement, without the payment of any
service charges, except for any tax or other governmental charge payable in
connection with the transfer or exchange. Interests in offered certificates held
in book-entry form will be transferred on the book-entry records of DTC and its
participating organizations. If we so specify in the related prospectus
supplement, we will arrange for clearance and settlement through Clearstream
Banking, societe anonyme or the Euroclear System, for so long as they are
participants in DTC.
PAYMENTS ON THE CERTIFICATESGeneral. Payments on a series of offered certificates may occur monthly,
bi-monthly, quarterly, semi-annually, annually or at any other specified
interval. Payments and other collections on or with respect to the related
underlying mortgage loans or mortgage-backed securities will be the primary
source of funds payable on a series of offered certificates. In the prospectus
supplement for each series of offered certificates, we will identify:
o the frequency of distributions and the periodic distribution date
for that series,
o the relevant collection period for payments and other collections on
or with respect to the related underlying mortgage loans or
mortgage-backed securities that are payable on that series on any
particular distribution date; and
o the record date as of which certificateholders entitled to payments
on any particular distribution date will be established.
All payments with respect to a class of offered certificates on any
distribution date will be allocated pro rata among the outstanding certificates
of that class in proportion to the respective principal balances, notional
amounts or percentage interests, as the case may be, of those certificates.
Payments on an offered certificate will be made to the holder entitled thereto
either--
o by wire transfer of immediately available funds to the account of
that holder at a bank or similar entity, provided that the holder
has furnished the party making the payments with wiring instructions
no later than the applicable record date, or in most cases, a
specified number of days, generally no more than five, prior to that
date, and has satisfied any other conditions specified in the
related prospectus supplement, or
o by check mailed to the address of that holder as it appears in the
certificate register, in all other cases.
In general, the final payment on any offered certificate will be made only
upon presentation and surrender of that certificate at the location specified to
the holder in notice of final payment.
In connection with the offering and issuance of each series of offered
certificates, we will include the following information in the related
prospectus supplement:
o the flow of funds for the transaction, including the payment
allocations, rights and distribution priorities among all classes of
the subject offered certificates, and within each class of those
offered certificates, with respect to cash flows;
o any specified changes to the transaction structure that would be
triggered upon a default or event of default on the related trust
assets, such as a change in distribution priority among classes;
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o any credit enhancement, guaranteed investment contracts, interest
rate exchange agreements, interest rate floor or cap agreements
and/or currency exchange agreements, that are designed to enhance
credit, facilitate the timely payment of monies due on the mortgage
assets or owing to certificateholders, adjust the rate of return on
those offered certificates, or preserve monies that will or might be
distributed to certificateholders;
o how cash held pending distribution or other uses is held and
invested, the length of time cash will be held pending distributions
to certificateholders, the identity of the party or parties with
access to cash balances and the authority to invest cash balances,
the identity of the party or parties making decisions regarding the
deposit, transfer or disbursement of mortgage asset cash flows and
whether there will be any independent verification of the
transaction accounts or account activity; and
o an itemized list (in tabular format) of fees and expenses to be paid
or payable out of the cash flows from the related underlying
mortgage loans or mortgage-backed securities.
In the flow of funds discussion in any prospectus supplement, we will
provide information regarding any directing of cash flows from the trust assets
- such as to reserve accounts, cash collateral accounts or expenses - and the
purpose and operation of those requirements.
Payments of Interest. In the case of a class of interest-bearing offered
certificates, interest will accrue from time to time, at the applicable
pass-through rate and in accordance with the applicable interest accrual method,
on the total outstanding principal balance or notional amount of that class.
However, in some cases, the interest payable with respect to a class of
interest-bearing offered certificates will equal a specified percentage or other
specified portion, calculated as described in the related prospectus supplement,
of the interest accrued or payable, as applicable, on some or all of the related
underlying mortgage loans or mortgage-backed securities or on a particular
related underlying mortgage loan or mortgage-backed security.
The pass-through rate for a class of interest-bearing offered certificates
may be fixed, floating, adjustable or variable. For example, the pass-through
rate for a class of interest-bearing offered certificates may be:
o a specified fixed rate;
o a rate based on the interest rate for a particular related mortgage
asset;
o a rate based on a weighted average of the interest rates for some or
all of the related underlying mortgage loans or mortgage-backed
securities, except that for purposes of calculating that weighted
average rate any or all of the underlying rates may first be subject
to a cap or floor or be increased or decreased by a specified spread
or percentage or a spread or percentage calculated based on a
specified formula, with any such underlying rate adjustments
permitted to vary from mortgage asset to mortgage asset or, in the
case of any particular mortgage asset, from one accrual or payment
period to another;
o a rate that resets periodically based upon, and that varies either
directly or indirectly with, the value from time to time of a
designated objective index, such as the London interbank offered
rate, a particular prime lending rate, a particular Treasury rate,
the average cost of funds of one or more financial institutions or
another similar index rate, as determined from time to time as set
forth in the related prospectus supplement;
o a rate that is equal to the product of (a) a rate described in any
of the foregoing bullets in this sentence, multiplied by (b) a
specified percentage or a percentage calculated based on a specified
formula, which specified percentage or specified formula may vary
from one accrual or payment period to another;
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o a rate that is equal to (a) a rate described in any of the foregoing
bullets in this sentence, increased or decreased by (b) a specified
spread or a spread calculated based on a specified formula, which
specified spread or specified formula may vary from one accrual or
payment period to another;
o a floating, adjustable or otherwise variable rate that is described
in any of the foregoing bullets in this sentence, except that it is
limited by (a) a cap or ceiling that establishes either a maximum
rate or a maximum number of basis points by which the rate may
increase from one accrual or payment period to another or over the
life of the subject offered certificates or (b) a floor that
establishes either a minimum rate or a maximum number of basis
points by which the rate may decrease from one accrual or payment
period to another or over the life of the subject offered
certificates;
o a rate that is described in any of the foregoing bullets in this
sentence, except that it is subject to a limit on the amount of
interest to be paid on the subject offered certificates in any
accrual or payment period that is based on the total amount
available for distribution;
o the highest, lowest or average of any two or more of the rates
described in the foregoing bullets in this sentence, or the
differential between any two of the rates described in the foregoing
bullets in this sentence; or
o a rate that is based on (a) one fixed rate during one or more
accrual or payment periods and a different fixed rate or rates, or
any other rate or rates described in any of the foregoing bullets in
this sentence, during other accrual or payment periods or (b) a
floating, adjustable or otherwise variable rate described in any of
the foregoing bullets in this sentence, during one or more accrual
or payment periods and a fixed rate or rates, or a different
floating, adjustable or otherwise variable rate or rates described
in any of the foregoing bullets in this sentence during other
accrual or payment periods.
We will specify in the related prospectus supplement the pass-through rate
for each class of interest-bearing offered certificates or, in the case of a
floating, adjustable or variable pass-through rate, the method for determining
that pass-through rate and how frequently it will be determined. If the rate to
be paid with respect to any class of offered certificates can be a combination
of two or more rates, we will provide information in the related prospectus
supplement regarding each of those rates and when it applies.
Interest may accrue with respect to any offered certificate on the basis
of:
o a 360-day year consisting of 12 30-day months,
o the actual number of days elapsed during each relevant period in a
year assumed to consist of 360 days,
o the actual number of days elapsed during each relevant period in a
normal calendar year, or
o any other method identified in the related prospectus supplement.
We will identify the interest accrual method for each class of offered
certificates in the related prospectus supplement.
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Subject to available funds and any adjustments to interest entitlements
described in the related prospectus supplement, accrued interest with respect to
each class of interest-bearing offered certificates will normally be payable on
each distribution date. However, in the case of some classes of interest-bearing
offered certificates, payments of accrued interest will only begin on a
particular distribution date or under the circumstances described in the related
prospectus supplement. Prior to that time, the amount of accrued interest
otherwise payable on that class will be added to its total principal balance on
each date or otherwise deferred as described in the related prospectus
supplement.
If a class of offered certificates accrues interest on a total notional
amount, that total notional amount, in general, will be either:
o based on the principal balances of some or all of the related
underlying mortgage loans or mortgage-backed securities; or
o equal to the total principal balances of one or more other classes
of certificates of the same series.
Reference to the notional amount of any certificate is solely for
convenience in making calculations of interest and does not represent the right
to receive any payments of principal.
We will describe in the related prospectus supplement the extent to which
the amount of accrued interest that is payable on, or that may be added to the
total principal balance of, a class of interest-bearing offered certificates may
be reduced as a result of any contingencies, including shortfalls in interest
collections due to prepayments, delinquencies, losses and deferred interest on
the related underlying mortgage loans or mortgage-backed securities.
Payments of Principal. An offered certificate may or may not have a
principal balance. If it does, that principal balance outstanding from time to
time will represent the maximum amount that the holder of that certificate will
be entitled to receive as principal out of the future cash flow on the related
underlying mortgage loans or mortgage-backed securities and the other related
trust assets (which will be of the type described under "THE TRUST FUND").
The total outstanding principal balance of any class of offered
certificates will be reduced by--
o payments of principal actually made to the holders of that class,
and
o if and to the extent that we so specify in the related prospectus
supplement, losses of principal on the related underlying mortgage
loans or mortgage-backed securities that are allocated to or are
required to be borne by that class.
A class of interest-bearing offered certificates may provide that payments
of accrued interest will only begin on a particular distribution date or under
the circumstances described in the related prospectus supplement. If so, the
total outstanding principal balance of that class may be increased by the amount
of any interest accrued, but not currently payable, on that class.
We will describe in the related prospectus supplement any other
adjustments to the total outstanding principal balance of a class of offered
certificates.
We will specify the expected initial total principal balance of each class
of offered certificates in the related prospectus supplement. Unless we so state
in the related prospectus supplement, the initial total principal balance of a
series of certificates will not be greater than the total outstanding principal
balance of the related underlying mortgage loans or mortgage-backed securities
transferred by us to the related trust. We will specify in the related
prospectus supplement, if applicable the extent, expressed as a percentage,
initial total principal
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balance of a series of certificates is greater than or less than the total
outstanding principal balance of the related underlying mortgage loans or
mortgage-backed securities that we transfer to the trust
The payments of principal to be made on a series of offered certificates
from time to time will, in general, be a function of the payments, other
collections and advances of principal received or made with respect to the
mortgage assets. Payments of principal on a series of offered certificates may
also be made from the following sources:
o amounts attributable to interest accrued but not currently payable
on one or more other classes of certificates of the applicable
series;
o interest received or advanced on the underlying mortgage assets that
is in excess of the interest currently accrued on the certificates
of the applicable series;
o prepayment premiums, fees and charges, payments from equity
participations or any other amounts received on the underlying
mortgage assets that do not constitute interest or principal; or
o any other amounts described in the related prospectus supplement.
We will describe in the related prospectus supplement the principal
entitlement of each class of offered certificates on each distribution date
including any principal distribution schedules and formulas for calculating
principal distributions from cash flows on the trust assets. Payment priorities
among, principal distribution schedules for and formulas for calculating
principal, distributions from cash flows on the related trust assets with
respect to various classes of certificates of any particular series may be
affected by and/or subject to change based upon defaults and/or losses with
respect to the related trust assets or one or more particular trust assets
and/or liquidation, amortization, performance or similar riggers or events with
respect to the related trust assets or one or more particular trust assets. We
will identify in the related prospectus supplement the rights of
certificateholders and changes to the transaction structure or flow of funds if
the events or triggers described in the preceding sentence occur.
The offered certificates will not have maturity dates in a traditional
sense, and it will not be an event of default if a class of offered certificates
is not paid in full by a specified date. However, if the offered certificates of
any particular class or series are not paid in full by a specified date, then,
as and to the extent described in the related prospectus supplement, the
applicable Governing Document may provide for a liquidation of a sufficient
amount of related underlying mortgage loans or mortgage-backed securities to
retire that class or series.
ALLOCATION OF LOSSES AND SHORTFALLS
If and to the extent that any losses or shortfalls in collections on the
mortgage assets in any of our trusts are not covered or offset by delinquency
advances or draws on any reserve fund or under any instrument of credit support,
they will be allocated among the various classes of certificates of the related
series in the priority and manner, and subject to the limitations, specified in
the related prospectus supplement. As described in the related prospectus
supplement, the allocations may be effected as follows:
o by reducing the entitlements to interest and/or the total principal
balances of one or more of those classes; and/or
o by establishing a priority of payments among those classes.
See "DESCRIPTION OF CREDIT SUPPORT."
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; REPORTS FILED WITH THE SEC
All documents filed for the trust relating to a series of offered
certificates after the date of this prospectus and before the end of the related
offering with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act, are incorporated by reference in this prospectus and are a part of
this prospectus from the date of their filing. Any statement contained in a
document incorporated by reference in this prospectus is modified or superseded
for all purposes of this prospectus to the extent that a statement contained in
this prospectus--or in the related prospectus supplement--or in any other
subsequently filed document that also is incorporated by reference differs from
that statement. Any statement so modified or superseded shall not, except as so
modified or superseded, constitute a part of this prospectus.
We or another transaction party on behalf of the trust for a series of
offered certificates will file the reports required under the Securities Act and
under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act. These reports
include but are not limited to:
o Reports on Form 8-K (Current Report), following the issuance of the
series of certificates of the related trust fund, including as
Exhibits to the Form 8-K, various agreements or other documents
specified in the related prospectus supplement, if applicable;
o Reports on Form 8-K (Current Report), following the occurrence of
events specified in Form 8-K requiring disclosure, which are
required to be filed within the time-frame specified in Form 8-K
related to the type of event;
o Reports on Form 10-D (Asset-Backed Issuer Distribution Report),
containing the distribution and pool performance information
required on Form 10-D, which are required to be filed 15 days
following each related distribution date; and
o Report on Form 10-K (Annual Report), containing the items specified
in Form 10-K with respect to a fiscal year and filing or furnishing,
as appropriate, the required exhibits and the certification
delivered pursuant to Section 302(a) of the Sarbanes-Oxley Act of
2002.
We do not intend, and no other transaction party will be required, to file
with the SEC any reports required under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act with respect to any of our trusts following completion of the
reporting period required by Rule 15d-1 or Regulation 15D under the Securities
Exchange Act of 1934. Unless specifically stated in the report, the reports and
any information included in the report will neither be examined nor reported on
by an independent public accountant. Each of our trusts will have a separate
file number assigned by the SEC, which unless otherwise specified in the related
prospectus supplement is not available until filing of the final prospectus
supplement related to the series. Reports filed with the SEC with respect to one
of our trusts after the final prospectus supplement is filed will be available
under trust's specific number, which will be a series number assigned to the
file number for our registration statement as shown under "AVAILABLEINFORMATION."
We anticipate that, with respect to each of our trusts, the annual reports
on Form 10-K, the distribution reports on Form 10-D, the current reports on Form
8-K and amendments to those reports filed or furnished pursuant to section 13(a)
or 15(d) of the Exchange Act will be made available on the website of the
related trustee or the website of such other transaction party as may be
identified in the prospectus supplement for the related series of offered
certificates, as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the SEC. If this is the case, we
will identify in the applicable prospectus supplement the address of that
website. If the foregoing reports will not be made available in this manner,
then we will, in the related prospectus supplement, state whether an identified
transaction party voluntarily will provide electronic or paper copies of the
subject filings free of charge upon request.
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We will, or will cause another transaction party to, provide to each
person, including any beneficial owner, to whom a prospectus is delivered in
connection with any offered certificates, free of charge upon written or oral
request, a copy of any and all of the information that is incorporated by
reference in that prospectus but not delivered with that prospectus. We will, in
the related prospectus supplement, state the name, address and telephone number
to which the request for this information must be made.
REPORTS TO CERTIFICATEHOLDERS
On or about each distribution date, the related master servicer, manager
or trustee will forward to each offered certificateholder a statement
substantially in the form, or specifying the information, set forth in the
related prospectus supplement. In general, that statement will include
information regarding--
o the payments made on that distribution date with respect to the
applicable class of offered certificates, and
o the recent performance of the mortgage assets.
Within a reasonable period of time after the end of each calendar year,
the related master servicer, manager or trustee, as the case may be, will be
required to furnish to each person who at any time during the calendar year was
a holder of an offered certificate, upon request, a statement containing
information regarding the principal, interest and other amounts paid on the
applicable class of offered certificates, aggregated for--
o that calendar year, or
o the applicable portion of that calendar year during which the person
was a certificateholder.
The obligation to provide that annual statement will be deemed to have been
satisfied by the related master servicer, manager or trustee, as the case may
be, to the extent that substantially comparable information is provided in
accordance with any requirements of the Internal Revenue Code.
If one of our trusts includes mortgage-backed securities, the ability of
the related master servicer, manager or trustee, as the case may be, to include
in any distribution date statement information regarding the mortgage loans that
back those securities will depend on comparable reports being received with
respect to them.
Except as described in the related prospectus supplement, neither the
master servicer nor any other party to a Governing Document will be required to
provide certificateholders, or a trustee on their behalf, periodic evidence of
the absence of a default under, or of compliance with the terms of, that
Governing Document.
VOTING RIGHTS
Voting rights will be allocated among the respective classes of offered
and non-offered certificates of each series in the manner described in the
related prospectus supplement. Certificateholders will generally not have a
right to vote, except--
o with respect to those amendments to the governing documents
described under "DESCRIPTION OF THE GOVERNING DOCUMENTS--Amendment,"
or
o as otherwise specified in this prospectus or in the related
prospectus supplement.
As and to the extent described in the related prospectus supplement, the
certificateholders entitled to a specified amount of the voting rights for a
particular series will have the right to act as a group to remove or replace the
related trustee, master servicer, special servicer or manager. In general, that
removal or replacement must be for cause. We will identify exceptions in the
related prospectus supplement.
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TERMINATION AND REDEMPTION
The trust for each series of offered certificates will terminate and cease
to exist following:
o the final payment or other liquidation of the last mortgage asset in
that trust; and
o the payment, or provision for payment (i) to the certificateholders
of that series of all amounts required to be paid to them and (ii)
to the trustee, the fiscal agent, the master servicer, the special
servicer and the members, managers, officers, directors, employees
and/or agents of each of them of all amounts which may have become
due and owing to any of them under the Governing Document.
Written notice of termination of a trust will be given to each affected
certificateholder prior to the date of termination. The final payment will be
made only upon presentation and surrender of the certificates of the related
series at the location to be specified in the notice of termination.
If we so specify in the related prospectus supplement, one or more
designated parties will be entitled to purchase all of the mortgage assets
underlying a series of offered certificates, thereby effecting early retirement
of the certificates and early termination of the related trust. We will describe
in the related prospectus supplement which parties may exercise that purchase
option, the circumstances under which those parties may exercise that purchase
option and the price or the formula for determining the price.
If we so specify in the related prospectus supplement, following the date
on which the total principal balances of the offered certificates are reduced to
zero, if all of the remaining certificates (but excluding any class of
certificates evidencing a residual interest in a REMIC) are held by the same
certificateholder, that certificateholder will be entitled to exchange all of
the remaining certificates for all of the mortgage assets underlying that
series, thereby effecting the early termination of the related trust. We will
describe in the related prospectus supplement the specific circumstances under
which that exchange may occur.
In addition, if we so specify in the related prospectus supplement, on a
specified date or upon the reduction of the total principal balance of a
specified class or classes of certificates by a specified percentage or amount,
a party designated in the related prospectus supplement may be authorized or
required to solicit bids for the purchase of all the mortgage assets of the
related trust or of a sufficient portion of the mortgage assets to retire that
class or those classes of certificates. The solicitation of bids must be
conducted in a commercially reasonable manner, and assets will, in general, be
sold at their fair market value or at such other price as may be set forth in,
or as may be calculated in accordance with the formula set forth in, the related
prospectus supplement. If the price at which the mortgage assets are sold is
less than their unpaid balance, plus accrued interest, then the holders of one
or more classes of certificates of the applicable series may receive an amount
less than the total principal balance of, and accrued and unpaid interest on,
their certificates.
The title for any class of offered certificates with an optional
redemption or termination feature that may be exercised when 25% or more of the
original principal balance of the related mortgage asset pool is still
outstanding, will include the word "callable."BOOK-ENTRY REGISTRATIONGeneral. Any class of offered certificates may be issued in book-entry
form through the facilities of DTC. If so, that class will be represented by one
or more global certificates registered in the name of DTC or its nominee. If we
so specify in the related prospectus supplement, we will arrange for clearance
and settlement through the Euroclear System or Clearstream Banking Luxembourg
for so long as they are participants in DTC.
DTC, Euroclear and Clearstream. DTC is:
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o a limited-purpose trust company organized under the New York Banking
Law,
o a "banking corporation" within the meaning of the New York Banking
Law,
o a member of the Federal Reserve System,
o a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and
o a "clearing agency" registered under the provisions of Section 17A
of the Securities Exchange Act.
DTC was created to hold securities for participants in the DTC system and
to facilitate the clearance and settlement of securities transactions between
those participants through electronic computerized book-entry changes in their
accounts, thereby eliminating the need for physical movement of securities
certificates. Organizations that maintain accounts with DTC include securities
brokers and dealers, banks, trust companies and clearing corporations and may
include other organizations. DTC is owned by a number of its participating
organizations and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as banks, brokers, dealers
and trust companies that directly or indirectly clear through or maintain a
custodial relationship with one of the organizations that maintains an account
with DTC. The rules applicable to DTC and its participating organizations are on
file with the SEC.
It is our understanding that Clearstream Banking Luxembourg holds
securities for its member organizations and facilitates the clearance and
settlement of securities transactions between its member organizations through
electronic book-entry changes in accounts of those organizations, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in Clearstream in any of 31 currencies, including United States dollars.
Clearstream provides to its member organizations, among other things, services
for safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. Clearstream interfaces
with domestic securities markets in over 39 countries through established
depository and custodial relationships. As a professional depositary,
Clearstream is subject to regulation by the Luxembourg Monetary Institute.
Clearstream is registered as a bank in Luxembourg. It is subject to regulation
by the Commission de Surveillance du Secteur Financier, which supervises
Luxembourg banks. Clearstream's customers are world-wide financial institutions
including underwriters, securities brokers and dealers, banks, trust companies
and clearing corporations. Clearstream's U.S. customers are limited to
securities brokers and dealers, and banks. Currently, Clearstream has
approximately 2,500 customers located in over 94 countries, including all major
European countries, Canada and the United States. Indirect access to Clearstream
is available to other institutions that clear through or maintain a custodial
relationship with an account holder of Clearstream. Clearstream and Euroclear
have established an electronic bridge between their two systems across which
their respective participants may settle trades with each other.
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It is our understanding that Euroclear holds securities for its member
organizations and facilitates clearance and settlement of securities
transactions between its member organizations through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Over 150,000 different securities are accepted for
settlement through Euroclear, the majority of which are domestic securities from
over 32 markets. Transactions may be settled in Euroclear in any of over 30
currencies, including United States dollars. The Euroclear system includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described below in this
"--Book-Entry Registration" section. Euroclear is operated by Euroclear Bank
S.A./N.V., as Euroclear Operator, under a license agreement with Euroclear
Clearance System Public Limited Company. The Euroclear Operator is regulated and
examined by the Belgian Banking and Finance Commission and the National Bank of
Belgium. All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not Euroclear Clearance System. Indirect access to
the Euroclear system is also available to other firms that clear through or
maintain a custodial relationship with a member organization of Euroclear,
either directly or indirectly. Euroclear and Clearstream have established an
electronic bridge between their two systems across which their respective
participants may settle trades with each other.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Euroclear Terms and Conditions. The Euroclear Terms
and Conditions govern transfers of securities and cash within the Euroclear
system, withdrawal of securities and cash from the Euroclear system, and
receipts of payments with respect to securities in the Euroclear system. All
securities in the Euroclear system are held on a fungible basis without
attribution of specific securities to specific securities clearance accounts.
The Euroclear Operator acts under the Euroclear Terms and Conditions only on
behalf of member organizations of Euroclear and has no record of or relationship
with persons holding through those member organizations.
The information in this prospectus concerning DTC, Euroclear and
Clearstream, and their book-entry systems, has been obtained from sources
believed to be reliable, but we do not take any responsibility for the accuracy
or completeness of that information.
Holding and Transferring Book-Entry Certificates. Purchases of book-entry
certificates under the DTC system must be made by or through, and will be
recorded on the records of, the Financial Intermediary that maintains the
beneficial owner's account for that purpose. In turn, the Financial
Intermediary's ownership of those certificates will be recorded on the records
of DTC or, alternatively, if the Financial Intermediary does not maintain an
account with DTC, on the records of a participating firm that acts as agent for
the Financial Intermediary, whose interest will in turn be recorded on the
records of DTC. A beneficial owner of book-entry certificates must rely on the
foregoing procedures to evidence its beneficial ownership of those certificates.
DTC has no knowledge of the actual beneficial owners of the book-entry
certificates. DTC's records reflect only the identity of the direct participants
to whose accounts those certificates are credited, which may or may not be the
actual beneficial owners. The participants in the DTC system will remain
responsible for keeping account of their holdings on behalf of their customers.
Transfers between participants in the DTC system will be effected in the
ordinary manner in accordance with DTC's rules and will be settled in same-day
funds. Transfers between direct account holders at Euroclear and Clearstream, or
between persons or entities participating indirectly in Euroclear or
Clearstream, will be effected in the ordinary manner in accordance with their
respective procedures and in accordance with DTC's rules.
Cross-market transfers between direct participants in DTC, on the one
hand, and member organizations at Euroclear or Clearstream, on the other, will
be effected through DTC in accordance with DTC's rules and the rules of
Euroclear or Clearstream, as applicable. These cross-market transactions will
require, among other things, delivery of instructions by the applicable member
organization to Euroclear or Clearstream, as the case may be, in accordance with
the rules and procedures and within deadlines, Brussels time, established in
Euroclear
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or Clearstream, as the case may be. If the transaction complies with all
relevant requirements, Euroclear or Clearstream, as the case may be, will then
deliver instructions to its depositary to take action to effect final settlement
on its behalf.
Because of time-zone differences, the securities account of a member
organization of Euroclear or Clearstream purchasing an interest in a global
certificate from a DTC participant that is not a member organization, will be
credited during the securities settlement processing day, which must be a
business day for Euroclear or Clearstream, as the case may be, immediately
following the DTC settlement date. Transactions in interests in a book-entry
certificate settled during any securities settlement processing day will be
reported to the relevant member organization of Euroclear or Clearstream on the
same day. Cash received in Euroclear or Clearstream as a result of sales of
interests in a book-entry certificate by or through a member organization of
Euroclear or Clearstream, as the case may be, to a DTC participant that is not a
member organization will be received with value on the DTC settlement date, but
will not be available in the relevant Euroclear or Clearstream cash account
until the business day following settlement in DTC. The related prospectus
supplement will contain additional information regarding clearance and
settlement procedures for the book-entry certificates and with respect to tax
documentation procedures relating to the book-entry certificates.
Conveyance of notices and other communications by DTC to DTC participants,
and by DTC participants to Financial Intermediaries and beneficial owners, will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Payments on the book-entry certificates will be made to DTC. DTC's
practice is to credit DTC participants' accounts on the related distribution
date in accordance with their respective holdings shown on DTC's records, unless
DTC has reason to believe that it will not receive payment on that date.
Disbursement of those payments by DTC participants to Financial Intermediaries
and beneficial owners will be--
o governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer
form or registered in street name, and
o the sole responsibility of each of those DTC participants, subject
to any statutory or regulatory requirements in effect from time to
time.
Under a book-entry system, beneficial owners may receive payments after
the related distribution date.
The only "certificateholder" of book-entry certificates will be DTC or its
nominee. Parties to the governing documents for any series of offered
certificates need not recognize beneficial owners of book-entry certificates as
"certificateholders." The beneficial owners of book-entry certificates will be
permitted to exercise the rights of "certificateholders" only indirectly through
the DTC participants, who in turn will exercise their rights through DTC. We
have been informed that DTC will take action permitted to be taken by a
"certificateholder" only at the direction of one or more DTC participants. DTC
may take conflicting actions with respect to the book-entry certificates to the
extent that those actions are taken on behalf of Financial Intermediaries whose
holdings include those certificates.
Because DTC can act only on behalf of DTC participants, who in turn act on
behalf of Financial Intermediaries and beneficial owners of the applicable
book-entry securities, the ability of a beneficial owner to pledge its interest
in a class of book-entry certificates to persons or entities that do not
participate in the DTC system, or otherwise to take actions with respect to its
interest in a class of book-entry certificates, may be limited due to the lack
of a physical certificate evidencing that interest.
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Issuance of Definitive Certificates. Unless we specify otherwise in the
related prospectus supplement, beneficial owners of affected offered
certificates initially issued in book-entry form will not be able to obtain
physical certificates that represent those offered certificates, unless:
o we advise the related trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as
depository with respect to those offered certificates and we are
unable to locate a qualified successor; or
o we notify DTC of our intent to terminate the book-entry system
through DTC with respect to those offered certificates and, in the
event applicable law and/or DTC's procedures require that the DTC
participants holding beneficial interests in those offered
certificates submit a withdrawal request to DTC in order to so
terminate the book-entry system, we additionally notify those DTC
participants and they submit a withdrawal request with respect to
such termination.
Upon the occurrence of either of the two events described in the prior
paragraph, the trustee or other designated party will be required to notify all
DTC participants, through DTC, of the availability of physical certificates with
respect to the affected offered certificates. Upon surrender by DTC of the
certificate or certificates representing a class of book-entry offered
certificates, together with instructions for registration, the related trustee
or other designated party will be required to issue to the beneficial owners
identified in those instructions physical certificates representing those
offered certificates.
DESCRIPTION OF CREDIT SUPPORTGENERAL
Credit support may be provided with respect to one or more classes of the
offered certificates of any series or with respect to the related underlying
mortgage loans or mortgage-backed securities. That credit support may be in the
form of any of the following:
o the subordination of one or more other classes of certificates of
the same series;
o overcollateralization, whether in the form of mortgage assets or
otherwise;
o the use of a letter of credit, a surety bond, an insurance policy, a
guarantee;
o the establishment of one or more reserve funds; or
o any combination of the foregoing.
If and to the extent described in the related prospectus supplement, any
of the above forms of credit support may provide credit enhancement for
non-offered certificates, as well as offered certificates, or for more than one
series of certificates.
If you are the beneficiary of any particular form of credit support, that
credit support may not protect you against all risks of loss and will not
guarantee payment to you of all amounts to which you are entitled under your
offered certificates. If losses or shortfalls occur that exceed the amount
covered by that credit support or that are of a type not covered by that credit
support, you will bear your allocable share of deficiencies. Moreover, if that
credit support covers the offered certificates of more than one class or series
and total losses on the related underlying mortgage loans or mortgage-backed
securities exceed the amount of that credit support, it is possible that the
holders of offered certificates of other classes and/or series will be
disproportionately benefited by that credit support to your detriment.
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If you are the beneficiary of any particular form of credit support, we
will include in the related prospectus supplement a description of the
following:
o the nature and amount of coverage under that credit support;
o any conditions to payment not otherwise described in this
prospectus;
o any conditions under which the amount of coverage under that credit
support may be reduced and under which that credit support may be
terminated or replaced; and
o the material provisions relating to that credit support.
Additionally, we will set forth in the related prospectus supplement
information with respect to the obligor, if any, under any instrument of credit
support.
SUBORDINATE CERTIFICATES
If and to the extent described in the related prospectus supplement, one
or more classes of certificates of any series may be subordinate to one or more
other classes of certificates of that series. If you purchase subordinate
certificates, your right to receive payments out of collections and advances on
the related trust assets on any distribution date will be subordinated to the
corresponding rights of the holders of the more senior classes of certificates.
If and to the extent described in the related prospectus supplement, the
subordination of a class of certificates may not cover all types of losses or
shortfalls. In the related prospectus supplement, we will set forth information
concerning the method and amount of subordination provided by a class or classes
of subordinate certificates in a series and the circumstances under which that
subordination will be available.
If the mortgage assets in any trust established by us are divided into
separate groups, each supporting a separate class or classes of certificates of
the related series, credit support may be provided by cross-support provisions
requiring that payments be made on senior certificates evidencing interests in
one group of those mortgage assets prior to payments on subordinate certificates
evidencing interests in a different group of those mortgage assets. We will
describe in the related prospectus supplement the manner and conditions for
applying any cross-support provisions.
OVERCOLLATERALIZATION
If and to the extent described in the related prospectus supplement, the
mortgage assets underlying any series of offered certificates may generate
cashflows for the benefit of the related trust that, in the absence of default,
will be in excess of the amount needed to make all required payments with
respect to the offered and non-offered certificates of that series. This may be
as a result of excess spread or because the mortgage assets have a greater total
principal balance than the total principal balance of the certificates of the
subject series. As and to the extent described in the related prospectus
supplement, the additional cashflow may be available to cover losses or other
shortfalls on one or more classes of related offered certificates and/or to
amortize one or more classes of related certificates.
INSURANCE OR GUARANTEES WITH RESPECT TO MORTGAGE LOANS
The mortgage loans included in any trust established by us may be covered
for some default and/or loss risks by insurance policies or guarantees. If so,
we will describe in the related prospectus supplement the nature of those
default and/or loss risks and the extent of that coverage.
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LETTERS OF CREDIT
If and to the extent described in the related prospectus supplement,
deficiencies in amounts otherwise payable on a series of offered certificates or
select classes of those certificates will be covered by one or more letters of
credit, issued by a bank or other financial institution specified in the related
prospectus supplement. The issuer of a letter of credit will be obligated to
honor draws under that letter of credit in a total fixed dollar amount, net of
unreimbursed payments under the letter of credit, generally equal to a
percentage specified in the related prospectus supplement of the total principal
balance of some or all of the related underlying mortgage loans or
mortgage-backed securities as of the date the related trust was formed or of the
initial total principal balance of one or more classes of certificates of the
applicable series. The letter of credit may permit draws only in the event of
select types of losses and shortfalls. The amount available under the letter of
credit will, in all cases, be reduced to the extent of the unreimbursed payments
under it and may otherwise be reduced as described in the related prospectus
supplement. The obligations of the letter of credit issuer under the letter of
credit for any series of offered certificates will expire at the earlier of the
date specified in the related prospectus supplement or the termination of the
related trust.
CERTIFICATE INSURANCE AND SURETY BONDS
If and to the extent described in the related prospectus supplement,
deficiencies in amounts otherwise payable on a series of offered certificates or
select classes of those certificates will be covered by insurance policies or
surety bonds provided by one or more insurance companies or sureties. Those
instruments may cover, with respect to one or more classes of the offered
certificates of the related series, timely payments of interest and principal or
timely payments of interest and payments of principal on the basis of a schedule
of principal payments set forth in or determined in the manner specified in the
related prospectus supplement. We will describe in the related prospectus
supplement any limitations on the draws that may be made under any of those
instruments.
RESERVE FUNDS
If and to the extent described in the related prospectus supplement,
deficiencies in amounts otherwise payable on a series of offered certificates or
select classes of those certificates will be covered, to the extent of available
funds, by one or more reserve funds in which cash, a letter of credit, Permitted
Investments, a demand note or a combination of the foregoing, will be deposited,
in the amounts specified in the related prospectus supplement. If and to the
extent described in the related prospectus supplement, the reserve fund for the
related series of offered certificates may also be funded over time.
Amounts on deposit in any reserve fund for a series of offered
certificates will be applied for the purposes, in the manner, and to the extent
specified in the related prospectus supplement. If and to the extent described
in the related prospectus supplement, reserve funds may be established to
provide protection only against select types of losses and shortfalls. Following
each distribution date for the related series of offered certificates, amounts
in a reserve fund in excess of any required balance may be released from the
reserve fund under the conditions and to the extent specified in the related
prospectus supplement.
CREDIT SUPPORT WITH RESPECT TO MORTGAGE-BACKED SECURITIES
If and to the extent described in the related prospectus supplement, any
mortgage-backed security included in one of our trusts and/or the mortgage loans
that back that security may be covered by one or more of the types of credit
support described in this prospectus. We will specify in the related prospectus
supplement, as to each of those forms of credit support, the information
indicated above with respect to that mortgage-backed security, to the extent
that the information is material and available.
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LEGAL ASPECTS OF MORTGAGE LOANS
Most, if not all, of the mortgage loans underlying a series of offered
certificates will be secured by multifamily and commercial properties in the
United States, its territories and possessions. However, some of those mortgage
loans may be secured by multifamily and commercial properties outside the United
States, its territories and possessions.
The following discussion contains general summaries of select legal
aspects of mortgage loans secured by multifamily and commercial properties in
the United States. Because these legal aspects are governed by applicable state
law, which may differ substantially from state to state, the summaries do not
purport to be complete, to reflect the laws of any particular state, or to
encompass the laws of all jurisdictions in which the security for the mortgage
loans underlying the offered certificates is situated. Accordingly, you should
be aware that the summaries are qualified in their entirety by reference to the
applicable laws of those states. See "THE TRUST FUND--Mortgage Loans."
If a significant percentage of mortgage loans underlying a series of
offered certificates, are secured by properties in a particular state, we will
discuss the relevant state laws, to the extent they vary materially from this
discussion, in the related prospectus supplement.
GENERAL
Each mortgage loan underlying a series of offered certificates will be
evidenced by a note or bond and secured by an instrument granting a security
interest in real property. The instrument granting a security interest in real
property 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 that real property is
located. Mortgages, deeds of trust and deeds to secure debt are often
collectively referred to in this prospectus as "mortgages." A mortgage creates a
lien upon, or grants a title interest in, the real property covered by the
mortgage, and represents the security for the repayment of the indebtedness
customarily evidenced by a promissory note. The priority of the lien created or
interest granted will depend on--
o the terms of the mortgage,
o the terms of separate subordination agreements or intercreditor
agreements with others that hold interests in the real property,
o the knowledge of the parties to the mortgage, and
o in general, the order of recordation of the mortgage in the
appropriate public recording office.
However, the lien of a recorded mortgage will generally be subordinate to
later-arising liens for real estate taxes and assessments and other charges
imposed under governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS
There are two parties to a mortgage--
o a mortgagor, who is the owner of the encumbered interest in the real
property, and
o a mortgagee, who is the lender.
In general, the mortgagor is also the borrower.
In contrast, a deed of trust is a three-party instrument. The parties to a
deed of trust are--
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o the trustor, who is the equivalent of a mortgagor,
o the trustee to whom the real property is conveyed, and
o the beneficiary for whose benefit the conveyance is made, who is the
lender.
Under a deed of trust, the trustor grants the property, irrevocably until
the debt is paid, in trust and generally with a power of sale, to the trustee to
secure repayment of the indebtedness evidenced by the related note.
A deed to secure debt typically has two parties. Under a deed to secure
debt, the grantor, who is the equivalent of a mortgagor, conveys title to the
real property to the grantee, who is the lender, generally with a power of sale,
until the debt is repaid.
Where the borrower is a land trust, there would be an additional party
because legal title to the property is held by a land trustee under a land trust
agreement for the benefit of the borrower. At origination of a mortgage loan
involving a land trust, the borrower may execute a separate undertaking to make
payments on the mortgage note. In no event is the land trustee personally liable
for the mortgage note obligation.
The mortgagee's authority under a mortgage, the trustee's authority under
a deed of trust and the grantee's authority under a deed to secure debt are
governed by:
o the express provisions of the related instrument,
o the law of the state in which the real property is located,
o various federal laws, and
o in some deed of trust transactions, the directions of the
beneficiary.
INSTALLMENT CONTRACTS
The mortgage loans underlying your offered certificates may consist of
installment contracts. Under an installment contract the seller retains legal
title to the property and enters into an agreement with the purchaser for
payment of the purchase price, plus interest, over the term of the installment
contract. Only after full performance by the borrower of the contract is the
seller obligated to convey title to the real estate to the purchaser. During the
period that the installment contract is in effect, the purchaser is generally
responsible for maintaining the property in good condition and for paying real
estate taxes, assessments and hazard insurance premiums associated with the
property.
The seller's enforcement of an installment contract varies from state to
state. Generally, installment contracts provide that upon a default by the
purchaser, the purchaser loses his or her right to occupy the property, the
entire indebtedness is accelerated, and the purchaser's equitable interest in
the property is forfeited. The seller in this situation does not have to
foreclose in order to obtain title to the property, although in some cases a
quiet title action is in order if the purchaser has filed the installment
contract in local land records and an ejectment action may be necessary to
recover possession. In a few states, particularly in cases of purchaser default
during the early years of an installment contract, the courts will permit
ejectment of the purchaser 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 those statutes, a judicial or nonjudicial
foreclosure may be required, the seller may be required to give notice of
default and the borrower may be granted some grace period during which the
contract may be reinstated upon full payment of the default
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amount and the purchaser may have a post-foreclosure statutory redemption right.
In other states, courts in equity may permit a purchaser 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, generally speaking, the seller's procedures for obtaining
possession and clear title under an installment contract for the sale of real
estate in a given state are simpler and less time-consuming and costly than are
the procedures for foreclosing and obtaining clear title to a mortgaged
property.
LEASES AND RENTS
A mortgage that encumbers an income-producing property often contains an
assignment of rents and leases and/or may be accompanied by a separate
assignment of rents and leases. Under an assignment of rents and leases, the
borrower assigns to the lender the borrower's right, title and interest as
landlord under each lease and the income derived from each lease. However, the
borrower retains a revocable license to collect the rents, provided there is no
default and the rents are not directly paid to the lender. If the borrower
defaults, the license terminates and the lender is entitled to collect the
rents. Local law may require that the lender take possession of the property
and/or obtain a court-appointed receiver before becoming entitled to collect the
rents.
In most states, hotel and motel room rates are considered accounts
receivable under the UCC. Room rates are generally pledged by the borrower as
additional security for the loan when a mortgage loan is secured by a hotel or
motel. In general, the lender must file financing statements in order to perfect
its security interest in the room rates and must file continuation statements,
generally every five years, to maintain that perfection. Mortgage loans secured
by hotels or motels may be included in one of our trusts even if the security
interest in the room rates was not perfected or the requisite UCC filings were
allowed to lapse. A lender will generally be required to commence a foreclosure
action or otherwise take possession of the property in order to enforce its
rights to collect the room rates following a default, even if the lender's
security interest in room rates is perfected under applicable nonbankruptcy law.
In the bankruptcy setting, the lender will be stayed from enforcing its
rights to collect hotel and motel room rates. However, the room rates will
constitute cash collateral and cannot be used by the bankrupt borrower--
o without a hearing or the lender's consent, or
o unless the lender's interest in the room rates is given adequate
protection.
For purposes of the foregoing, the adequate protection may include a cash
payment for otherwise encumbered funds or a replacement lien on unencumbered
property, in either case equal in value to the amount of room rates that the
bankrupt borrower proposes to use. See "--Bankruptcy Laws" below.
PERSONALTY
Some types of income-producing real properties, such as hotels, motels and
nursing homes, may include personal property, which may, to the extent it is
owned by the borrower and not previously pledged, constitute a significant
portion of the property's value as security. The creation and enforcement of
liens on personal property are governed by the UCC. Accordingly, if a borrower
pledges personal property as security for a mortgage loan, the lender generally
must file UCC financing statements in order to perfect its security interest in
the personal property and must file continuation statements, generally every
five years, to maintain that perfection. Mortgage loans secured in part by
personal property may be included in one of our trusts even if the security
interest in the personal property was not perfected or the requisite UCC filings
were allowed to lapse.
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FORECLOSUREGeneral. Foreclosure is a legal procedure that allows the lender to
recover its mortgage debt by enforcing its rights and available legal remedies
under the mortgage. If the borrower defaults in payment or performance of its
obligations under the note or mortgage, the lender has the right to institute
foreclosure proceedings to sell the real property security at public auction to
satisfy the indebtedness.
Foreclosure Procedures Vary From State to State. The two primary methods
of foreclosing a mortgage are--
o judicial foreclosure, involving court proceedings, and
o nonjudicial foreclosure under a power of sale granted in the
mortgage instrument.
Other foreclosure procedures are available in some states, but they are
either infrequently used or available only in limited circumstances.
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses are raised or counterclaims are interposed. A
foreclosure action sometimes requires several years to complete.
Judicial Foreclosure. A judicial foreclosure proceeding is conducted in a
court having jurisdiction over the mortgaged property. Generally, a lender
initiates the action by the service of legal pleadings upon--
o all parties having a subordinate interest of record in the real
property, and
o all parties in possession of the property, under leases or
otherwise, whose interests are subordinate to the mortgage.
Delays in completion of the foreclosure may occasionally result from
difficulties in locating necessary parties, including defendants. When the
lender's right to foreclose is contested, the legal proceedings can be
time-consuming. The court generally issues a judgment of foreclosure and
appoints a referee or other officer to conduct a public sale of the mortgaged
property upon successful completion of a judicial foreclosure proceeding. The
proceeds of that public sale are used to satisfy the judgment. The procedures
that govern these public sales vary from state to state.
Equitable and Other Limitations on Enforceability of Particular
Provisions. United States courts have traditionally imposed general equitable
principles to limit the remedies available to lenders in foreclosure actions.
These principles are generally designed to relieve borrowers from the effects of
mortgage defaults perceived as harsh or unfair. Relying on these principles, a
court may:
o alter the specific terms of a loan to the extent it considers
necessary to prevent or remedy an injustice, undue oppression or
overreaching;
o require the lender to undertake affirmative actions to determine the
cause of the borrower's default and the likelihood that the borrower
will be able to reinstate the loan;
o require the lender to reinstate a loan or recast a payment schedule
in order to accommodate a borrower that is suffering from a
temporary financial disability; or
o limit the right of the lender to foreclose in the case of a
nonmonetary default, such as--
1. a failure to adequately maintain the mortgaged property, or
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2. an impermissible further encumbrance of the mortgaged
property.
Some courts have addressed the issue of whether federal or state
constitutional provisions reflecting due process concerns for adequate notice
require that a borrower receive notice in addition to statutorily-prescribed
minimum notice. For the most part, these cases have--
o upheld the reasonableness of the notice provisions, or
o found that a public sale under a mortgage providing for a power of
sale does not involve sufficient state action to trigger
constitutional protections.
In addition, some states may have statutory protection such as the right
of the borrower to reinstate its mortgage loan after commencement of foreclosure
proceedings but prior to a foreclosure sale.
Nonjudicial Foreclosure/Power of Sale. In states permitting nonjudicial
foreclosure proceedings, foreclosure of a deed of trust is generally
accomplished by a nonjudicial trustee's sale under a power of sale typically
granted in the deed of trust. A power of sale may also be contained in any other
type of mortgage instrument if applicable law so permits. A power of sale under
a deed of trust allows a nonjudicial public sale to be conducted generally
following--
o a request from the beneficiary/lender to the trustee to sell the
property upon default by the borrower, and
o notice of sale is given in accordance with the terms of the deed of
trust and applicable state law.
In some states, prior to a nonjudicial public sale, the trustee under the
deed of trust must--
o record a notice of default and notice of sale, and
o send a copy of those notices to the borrower and to any other party
who has recorded a request for a copy of them.
In addition, in some states, the trustee must provide notice to any other
party having an interest of record in the real property, including junior
lienholders. A notice of sale must be posted in a public place and, in most
states, published for a specified period of time in one or more newspapers. Some
states require a reinstatement period during which the borrower or junior
lienholder may have the right to cure the default by paying the entire actual
amount in arrears, without regard to the acceleration of the indebtedness, plus
the lender's expenses incurred in enforcing the obligation. In other states, the
borrower or the junior lienholder has only the right to pay off the entire debt
to prevent the foreclosure sale. Generally, state law governs the procedure for
public sale, the parties entitled to notice, the method of giving notice and the
applicable time periods.
Public Sale. A third party may be unwilling to purchase a mortgaged
property at a public sale because of--
o the difficulty in determining the exact status of title to the
property due to, among other things, redemption rights that may
exist, and
o the possibility that physical deterioration of the property may have
occurred during the foreclosure proceedings.
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As a result of the foregoing, it is common for the lender to purchase the
mortgaged property and become its owner, subject to the borrower's right in some
states to remain in possession during a redemption period. In that case, the
lender will have both the benefits and burdens of ownership, including the
obligation to pay debt service on any senior mortgages, to pay taxes, to obtain
casualty insurance and to make repairs necessary to render the property suitable
for sale. The costs of operating and maintaining a commercial or multifamily
residential property may be significant and may be greater than the income
derived from that property. The lender also will commonly obtain the services of
a real estate broker and pay the broker's commission in connection with the sale
or lease of the property. Whether, the ultimate proceeds of the sale of the
property equal the lender's investment in the property depends upon market
conditions. Moreover, because of the expenses associated with acquiring, owning
and selling a mortgaged property, a lender could realize an overall loss on the
related mortgage loan even if the mortgaged property is sold at foreclosure, or
resold after it is acquired through foreclosure, for an amount equal to the full
outstanding principal amount of the loan plus accrued interest.
The holder of a junior mortgage that forecloses on a mortgaged property
does so subject to senior mortgages and any other prior liens. In addition, it
may be obliged to keep senior mortgage loans current in order to avoid
foreclosure of its interest in the property. Furthermore, if the foreclosure of
a junior mortgage triggers the enforcement of a due-on-sale clause contained in
a senior mortgage, the junior mortgagee could be required to pay the full amount
of the senior mortgage indebtedness or face foreclosure.
Rights of Redemption. The purposes of a foreclosure action are--
o to enable the lender to realize upon its security, and
o to bar the borrower, and all persons who have interests in the
property that are subordinate to that of the foreclosing lender,
from exercising 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 to the foreclosure proceeding in order
for their equity of redemption to be terminated.
The equity of redemption is a common-law, nonstatutory right which should
be distinguished from post-sale statutory rights of redemption. In some states,
the borrower and foreclosed junior lienors are given a statutory period in which
to redeem the property after sale under a deed of trust or foreclosure of a
mortgage. 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. A statutory right of
redemption will diminish the ability of the lender to sell the foreclosed
property because the exercise of a right of redemption would defeat the title of
any purchaser through a foreclosure. Consequently, the practical effect of the
redemption right is to force the lender to maintain the property and pay the
expenses of ownership until the redemption period has expired. In some states, a
post-sale statutory right of redemption may exist following a judicial
foreclosure, but not following a trustee's sale under a deed of trust.
One Action and Security First Rules. Some states (including California)
have laws that prohibit more than one "judicial action" to enforce a mortgage
obligation secured by a mortgage on real property or an interest therein, and
some courts have construed the term "judicial action" broadly. In addition, some
states (including California) require that the lender proceed first against any
real property security for such mortgage obligation before proceeding directly
upon the secured obligation itself. In the case where either a
cross-collateralized, cross-defaulted or a multi-property mortgage loan is
secured by real properties located in multiple states, the special servicer may
be required to foreclose first on properties located in states where such "one
action" and/or "security first" rules apply (and where non-judicial foreclosure
is permitted) before foreclosing on properties located in the states where
judicial foreclosure is the only permitted method of foreclosure. Otherwise, a
second action in a state with "one action" rules might be precluded because of a
prior first action, even if such first action
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occurred in a state without "one action" rules. Moreover, while the consequences
of breaching these rules will vary from jurisdiction to jurisdiction, as a
general matter, a lender who proceeds in violation of these rules may run the
risk of forfeiting collateral and/or even the right to enforce the underlying
obligation. In addition, under certain circumstances, a lender with respect to a
real property located in a "one action" or "security first" jurisdiction may be
precluded from obtaining a deficiency judgment against the borrower following
foreclosure or sale under a deed of trust (unless there has been a judicial
foreclosure). Finally, in some jurisdictions, the benefits of such laws may be
available not just to the underlying obligor, but also to any guarantor of the
underlying obligation, thereby limiting the ability of the lender to recover
against a guarantor without first complying with the applicable anti-deficiency
statutes.
Anti-Deficiency Legislation. Some or all of the mortgage loans underlying
a series of offered certificates may be nonrecourse loans. Recourse in the case
of a default on a non-recourse mortgage loan will be limited to the mortgaged
property and any other assets that were pledged to secure the mortgage loan.
However, even if a mortgage loan by its terms provides for recourse to the
borrower's other assets, a lender's ability to realize upon those assets may be
limited by state law. For example, in some states, a lender cannot obtain a
deficiency judgment against the borrower following foreclosure or sale under a
deed of trust. A deficiency judgment is a personal judgment against the former
borrower equal to the difference between the net amount realized upon the public
sale of the real property and the amount due to the lender. Other state statutes
may require the lender to exhaust the security afforded under a mortgage 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, but in doing so, the lender may be deemed
to have elected a remedy and thus may be precluded from foreclosing upon the
security. Consequently, lenders will usually proceed first against the security
in states where an election of remedy provision exists. Other statutory
provisions limit any deficiency judgment to the excess of the outstanding debt
over the fair market value of the property at the time of the sale. These other
statutory provisions are intended to protect borrowers from exposure to large
deficiency judgments that might result from bidding at below-market values at
the foreclosure sale. In some states, exceptions to the anti-deficiency statutes
are provided for in certain instances where the value of the lender's security
has been impaired by acts or omissions of the borrower such as for waste upon
the property. Finally, some statutes may preclude deficiency judgments
altogether with respect to certain kinds of obligations such as purchase-money
indebtedness. In some jurisdictions the courts have extended the benefits of
this legislation to the guarantors of the underlying obligation as well.
Leasehold Considerations. Some or all of the mortgage loans underlying a
series of offered certificates may be secured by a mortgage on the borrower's
leasehold interest under a ground lease. Leasehold mortgage loans are subject to
some risks not associated with mortgage loans secured by a lien on the fee
estate of the borrower. The most significant of these risks is that if the
borrower's leasehold were to be terminated upon a lease default, the leasehold
mortgagee would lose its security. This risk may be lessened if the ground
lease:
o requires the lessor to give the leasehold mortgagee notices of
lessee defaults and an opportunity to cure them,
o permits the leasehold estate to be assigned to and by the leasehold
mortgagee or the purchaser at a foreclosure sale, and
o contains other protective provisions typically required by prudent
lenders to be included in a ground lease.
Some mortgage loans underlying a series of offered certificates, however,
may be secured by ground leases which do not contain these provisions.
Cooperative Shares. Some or all of the mortgage loans underlying a series
of offered certificates may be secured by a security interest on the borrower's
ownership interest in shares, and the proprietary leases belonging to those
shares, allocable to cooperative dwelling units that may be vacant or occupied
by nonowner tenants.
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Loans secured in this manner are subject to some risks not associated with
mortgage loans secured by a lien on the fee estate of a borrower in real
property. Loans secured in this manner typically are subordinate to the
mortgage, if any, on the cooperative's building. That mortgage, if foreclosed,
could extinguish the equity in the building and the proprietary leases of the
dwelling units derived from ownership of the shares of the cooperative. Further,
transfer of shares in a cooperative is subject to various regulations as well as
to restrictions under the governing documents of the cooperative. The shares may
be canceled in the event that associated maintenance charges due under the
related proprietary leases are not paid. Typically, a recognition agreement
between the lender and the cooperative provides, among other things, that the
lender may cure a default under a proprietary lease.
Under the laws applicable in many states, "foreclosure" on cooperative
shares is accomplished by a sale in accordance with the provisions of Article 9
of the UCC and the security agreement relating to the shares. Article 9 of the
UCC requires that a sale be conducted in a commercially reasonable manner, which
may be dependent upon, among other things, the notice given the debtor and the
method, manner, time, place and terms of the sale. Article 9 of the UCC provides
that the proceeds of the sale will be applied first to pay the costs and
expenses of the sale and then to satisfy the indebtedness secured by the
lender's security interest. A recognition agreement, however, generally provides
that the lender's right to reimbursement is subject to the right of the
cooperative corporation to receive sums due under the proprietary leases. 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.
In the case of foreclosure on a building converted from a rental building
to a building owned by a cooperative under a non-eviction plan, some states
require that a purchaser at a foreclosure sale take the property subject to rent
control and rent stabilization laws that apply to certain tenants who elected to
remain in the building but who did not purchase shares in the cooperative when
the building was so converted.
BANKRUPTCY LAWS
Operation of the U.S. Bankruptcy Code and related state laws may interfere
with or affect the ability of a lender to realize upon collateral or to enforce
a deficiency judgment. For example, under the U.S. 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. Often, no interest or principal payments are made during the course of
the bankruptcy case. The delay caused by an automatic stay and its consequences
can be significant. Also, under the U.S. Bankruptcy Code, the filing of a
petition in bankruptcy by or on behalf of a junior lienor may stay the senior
lender from taking action to foreclose out the junior lien.
Under the U.S. Bankruptcy Code, the amount and terms of a mortgage loan
secured by a lien on property of the debtor may be modified provided that
substantive and procedural safeguards protective of the lender are met. A
bankruptcy court may, among other things--
o reduce the secured portion of the outstanding amount of the loan to
the then-current value of the property, thereby leaving the lender a
general unsecured creditor for the difference between the
then-current value of the property and the outstanding balance of
the loan;
o reduce the amount of each scheduled payment, by means of a reduction
in the rate of interest and/or an alteration of the repayment
schedule, with or without affecting the unpaid principal balance of
the loan;
o extend or shorten the term to maturity of the loan;
o permit the bankrupt borrower to cure of the subject loan default by
paying the arrearage over a number of years; or
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o permit the bankrupt borrower, through its rehabilitative plan, to
reinstate the loan payment schedule even if the lender has obtained
a final judgment of foreclosure prior to the filing of the debtor's
petition.
Federal bankruptcy law may also interfere with or affect the ability of a
secured lender to enforce the borrower's assignment of rents and leases related
to the mortgaged property. A lender may be stayed from enforcing the assignment
under the U.S. Bankruptcy Code. In addition, the legal proceedings necessary to
resolve the issue could be time-consuming, and result in delays in the lender's
receipt of the rents. However, recent amendments to the U.S. Bankruptcy Code may
minimize the impairment of the lender's ability to enforce the borrower's
assignment of rents and leases. In addition to the inclusion of hotel revenues
within the definition of cash collateral as noted above, the amendments provide
that a pre-petition security interest in rents or hotel revenues is designed to
overcome those cases holding that a security interest in rents is unperfected
under the laws of some states until the lender has taken some further action,
such as commencing foreclosure or obtaining a receiver prior to activation of
the assignment of rents.
A borrower's ability to make payment on a mortgage loan may be impaired by
the commencement of a bankruptcy case relating to the tenant under a lease of
the related property. Under the U.S. Bankruptcy Code, the filing of a petition
in bankruptcy by or on behalf of a tenant results in a stay in bankruptcy
against the commencement or continuation of any state court proceeding for--
o past due rent,
o accelerated rent,
o damages, or
o a summary eviction order with respect to a default under the lease
that occurred prior to the filing of the tenant's bankruptcy
petition.
In addition, the U.S. Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court:
o assume the lease and either retain it or assign it to a third party,
or
o reject the lease.
If the lease is assumed, the trustee, debtor-in-possession or assignee, if
applicable, must cure any defaults under the lease, compensate the lessor for
its losses and provide the lessor with adequate assurance of future performance.
These remedies may be insufficient, and any assurances provided to the lessor
may be inadequate. If the lease is rejected, the lessor will be treated, except
potentially to the extent of any security deposit, as an unsecured creditor with
respect to its claim for damages for termination of the lease. The U.S.
Bankruptcy Code also limits a lessor's damages for lease rejection to:
o the rent reserved by the lease without regard to acceleration for
the greater of one year, or 15%, not to exceed three years, of the
remaining term of the lease, plus
o unpaid rent to the earlier of the surrender of the property or the
lessee's bankruptcy filing.
ENVIRONMENTAL CONSIDERATIONSGeneral. A lender may be subject to environmental risks when taking a
security interest in real property. Of particular concern may be properties that
are or have been used for industrial, manufacturing, military or disposal
activity. Those environmental risks include the possible diminution of the value
of a contaminated
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property or, as discussed below, potential liability for clean-up costs or other
remedial actions that could exceed the value of the property or the amount of
the lender's loan. In some circumstances, a lender may decide to abandon a
contaminated real property as collateral for its loan rather than foreclose and
risk liability for clean-up costs.
Superlien Laws. Under the laws of many states, contamination on a property
may give rise to a lien on the property for clean-up costs. In several states,
that lien has priority over all existing liens, including those of existing
mortgages. In these states, the lien of a mortgage may lose its priority to that
superlien.
CERCLA. The federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, imposes strict liability on present and past
"owners" and "operators" of contaminated real property for the costs of
clean-up. A secured lender may be liable as an "owner" or "operator" of a
contaminated mortgaged property if agents or employees of the lender have
participated in the management of the property or the operations of the
borrower. Liability may exist even if the lender did not cause or contribute to
the contamination and regardless of whether the lender has actually taken
possession of the contaminated mortgaged property through foreclosure, deed in
lieu of foreclosure or otherwise. Moreover, liability is not limited to the
original or unamortized principal balance of a loan or to the value of the
property securing a loan. Excluded from CERCLA's definition of "owner" or
"operator," however, is a person who, without participating in the management of
the facility, holds indicia of ownership primarily to protect his security
interest. This is the so called "secured creditor exemption."
The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996
(the "Lender Liability Act") amended, among other things, the provisions of
CERCLA with respect to lender liability and the secured creditor exemption. The
Lender Liability 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 a lender to be deemed to have
participated in the management of a mortgaged property, the lender must actually
participate in the operational affairs of the property of the borrower. The
Lender Liability 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--
o it exercises decision-making control over a borrower's environmental
compliance and hazardous substance handling and disposal practices,
or
o assumes day-to-day management of operational functions of a
mortgaged property.
The Lender Liability 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 that property at the
earliest practicable commercially reasonable time on commercially reasonable
terms.
CERCLA does not apply to petroleum products, and the secured creditor
exclusion does not govern liability for cleanup costs under federal laws other
than CERCLA, in particular Subtitle I of the federal Resource Conservation and
Recovery Act ("RCRA"), which regulates underground petroleum storage tanks,
except heating oil tanks. The Environmental Protection Agency has adopted a
lender liability rule for underground storage tanks (USTs) under Subtitle I of
RCRA. Under that rule a lender with a security interest in an UST or real
property containing an UST is not liable as an "owner" or "operator" so long as
the lender does not engage in decision making control of the use, storage,
filing or dispensing of petroleum contained in the UST, exercise control over
the daily operation of the UST, or engage in petroleum production, refining or
marketing. Moreover, under the Lender Liability Act, the protections accorded to
lenders under CERCLA are also accorded to holders of security interests in
underground petroleum storage tanks. It should be noted, however, that liability
for cleanup of petroleum contamination may be governed by state law, which may
not provide for any specific protection for secured creditors, or alternatively,
may not impose liability on secured creditors at all.
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Other Federal and State Laws. Many states have statutes similar to CERCLA,
and not all those statutes provide for a secured creditor exemption. In
addition, under federal law, there is potential liability relating to hazardous
wastes and underground storage tanks under the federal Resource Conservation and
Recovery Act.
Some federal, state and local laws, regulations and ordinances govern the
management, removal, encapsulation or disturbance of asbestos-containing
materials. These laws, as well as common law standards, may--
o impose liability for releases of or exposure to asbestos-containing
materials, and
o provide for third parties to seek recovery from owners or operators
of real properties for personal injuries associated with those
releases.
Federal legislation requires owners of residential housing constructed
prior to 1978 to disclose to potential residents or purchasers any known
lead-based paint hazards and will impose treble damages for any failure to
disclose. In addition, the ingestion of lead-based paint chips or dust particles
by children can result in lead poisoning. If lead-based paint hazards exist at a
property, then the owner of that property may be held liable for injuries and
for the costs of removal or encapsulation of the lead-based paint.
In a few states, transfers of some types of properties are conditioned
upon cleanup of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed in lieu of foreclosure
or otherwise, may be required to clean up the contamination before selling or
otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law
causes of action related to hazardous environmental conditions on a property,
such as actions based on nuisance or on toxic tort resulting in death, personal
injury or damage to property. While it may be more difficult to hold a lender
liable under common law causes of action, unanticipated or uninsured liabilities
of the borrower may jeopardize the borrower's ability to meet its loan
obligations.
Federal, state and local environmental regulatory requirements change
often. It is possible that compliance with a new regulatory requirement could
impose significant compliance costs on a borrower. These costs may jeopardize
the borrower's ability to meet its loan obligations.
Additional Considerations. The cost of remediating hazardous substance
contamination at a property can be substantial. If a lender becomes liable, it
can bring an action for contribution against the owner or operator who created
the environmental hazard. However, that individual or entity may be without
substantial assets. Accordingly, it is possible that the costs could become a
liability of the related trust and occasion a loss to the related
certificateholders.
If the operations on a foreclosed property are subject to environmental
laws and regulations, the lender will be required to operate the property in
accordance with those laws and regulations. This compliance may entail
substantial expense, especially in the case of industrial or manufacturing
properties.
In addition, a lender may be obligated to disclose environmental
conditions on a property to government entities and/or to prospective buyers,
including prospective buyers at a foreclosure sale or following foreclosure.
This disclosure may decrease the amount that prospective buyers are willing to
pay for the affected property, sometimes substantially.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Some or all of the mortgage loans underlying a series of offered
certificates may contain due-on-sale and due-on-encumbrance clauses that purport
to permit the lender to accelerate the maturity of the loan if the borrower
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transfers or encumbers the mortgaged property. In recent years, court decisions
and legislative actions placed substantial restrictions on the right of lenders
to enforce these clauses in many states. However, the Garn-St Germain Depository
Institutions Act of 1982 generally preempts state laws that prohibit the
enforcement of due-on-sale clauses and permits lenders to enforce these clauses
in accordance with their terms, subject to the limitations prescribed in that
act and the regulations promulgated under that act. The inability to enforce a
due-on-sale clause may result in transfer of the related mortgaged property to
an uncreditworthy person, which could increase the likelihood of default and
thereby may affect the average life of the mortgage loans and the number of
mortgage loans which may extend to maturity.
JUNIOR LIENS; RIGHTS OF HOLDERS OF SENIOR LIENS
Any of our trusts may include mortgage loans secured by junior liens,
while the loans secured by the related senior liens may not be included in that
trust. 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 loans
and the junior 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 as
follows:
o first, to the payment of court costs and fees in connection with the
foreclosure;
o second, to real estate taxes;
o 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; and
o last, in satisfaction of all principal, interest, prepayment and
acceleration penalties, if any, and any other sums due and owing to
the holder of the junior mortgage loan.
SUBORDINATE FINANCING
Some mortgage loans underlying a series of offered certificates may not
restrict the ability of the borrower to use the mortgaged property as security
for one or more additional loans, or the restrictions may be unenforceable.
Where a borrower encumbers a mortgaged property with one or more junior liens,
the senior lender is subjected to the following additional risks:
o the borrower may have difficulty servicing and repaying multiple
loans;
o if the subordinate financing permits recourse to the borrower, as is
frequently the case, and the senior loan does not, a borrower may
have more incentive to repay sums due on the subordinate loan;
o acts of the senior lender that prejudice the junior lender or impair
the junior lender's security, such as the senior lender's agreeing
to an increase in the principal amount of or the interest rate
payable on the senior loan, may create a superior equity in favor of
the junior lender;
o if the borrower defaults on the senior loan and/or any junior loan
or loans, the existence of junior loans and actions taken by junior
lenders can impair the security available to the senior lender and
can interfere with or delay the taking of action by the senior
lender; and
o the bankruptcy of a junior lender may operate to stay foreclosure or
similar proceedings by the senior lender.
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DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
Notes and mortgages may contain provisions that obligate the borrower to
pay a late charge or additional interest if payments are not timely made. They
may also contain provisions that prohibit prepayments for a specified period
and/or condition prepayments upon the borrower's payment of prepayment premium,
fee or charge. In some states, there are or may be specific limitations upon the
late charges that a lender may collect from a borrower for delinquent payments.
Some states also limit the amounts that a lender may collect from a borrower as
an additional charge if the loan is prepaid. In addition, the enforceability of
provisions that provide for prepayment premiums, fees and charges upon an
involuntary prepayment is unclear under the laws of many states.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980 provides that state usury limitations shall not apply to various
types of residential, including multifamily, first mortgage loans originated by
particular lenders after March 31, 1980. Title V authorized any state to
reimpose interest rate limits by adopting, before April 1, 1983, a law or
constitutional provision that expressly rejects application of the federal law.
In addition, even where Title V is not 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 and/or to limit discount points or other charges.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated under that act, in order to protect individuals with disabilities,
owners of public accommodations, such as hotels, restaurants, shopping centers,
hospitals, schools and social service center establishments, must remove
architectural and communication barriers which are structural in nature from
existing places of public accommodation to the extent "readily achievable." In
addition, under the ADA, alterations to a place of public accommodation or a
commercial facility are to be made so that, to the maximum extent feasible, the
altered portions are readily accessible to and usable by disabled individuals.
The "readily achievable" standard takes into account, among other factors, the
financial resources of the affected property owner, landlord or other applicable
person. In addition to imposing a possible financial burden on the borrower in
its capacity as owner or landlord, the ADA may also impose requirements on a
foreclosing lender who succeeds to the interest of the borrower as owner or
landlord. Furthermore, because the "readily achievable" standard may vary
depending on the financial condition of the owner or landlord, a foreclosing
lender that is financially more capable than the borrower of complying with the
requirements of the ADA may be subject to more stringent requirements than those
to which the borrower is subject.
SERVICEMEMBERS CIVIL RELIEF ACT
Under the terms of the Servicemembers Civil Relief Act, as amended, a
borrower who enters military service after the origination of the borrower's
mortgage loan, including a borrower who was in reserve status and is called to
active duty after origination of the mortgage loan, may not be charged interest,
including fees and charges, above an annual rate of 6% during the period of the
borrower's active duty status, unless a court orders otherwise upon application
of the lender. The Relief Act applies to individuals who are members of the
Army, Navy, Air Force, Marines, National Guard, Reserves, Coast Guard and
officers of the U.S. Public Health Service assigned to duty with the military.
Because the Relief Act applies to individuals who enter military service,
including reservists who are called to active duty, after origination of the
related mortgage loan, no information can be provided as to the number of loans
with individuals as borrowers that may be affected by the Relief Act.
Application of the Relief Act would adversely affect, for an indeterminate
period of time, the ability of a master servicer or special servicer to collect
full amounts of interest on an affected mortgage loan. Any shortfalls in
interest collections resulting from the application of the Relief Act would
result in a reduction of the amounts
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payable to the holders of certificates of the related series, and would not be
covered by advances or, unless otherwise specified in the related prospectus
supplement, any form of credit support provided in connection with the
certificates. In addition, the Relief Act imposes limitations that would impair
the ability of a master servicer or special servicer to foreclose on an affected
mortgage loan during the borrower's period of active duty status and, under some
circumstances, during an additional three month period after the active duty
status ceases.
In addition, pursuant to the laws of various states, under certain
circumstances, payments on mortgage loans by residents in such states who are
called into active duty with the National Guard or the reserves will be
deferred. These state laws may also limit the ability of the master servicer to
foreclose on the related mortgaged property. This could result in delays or
reductions in payment and increased losses on the mortgage loans that would be
borne by certificateholders.
FORFEITURES IN DRUG, RICO AND MONEY LAUNDERING PROCEEDINGS
Federal law provides that property purchased or improved with assets
derived from criminal activity or otherwise tainted, or used in the commission
of certain offenses can be seized by and ordered forfeited to the United States
of America. The offenses which can trigger such a seizure and forfeiture
include, among others, violations of the Racketeer Influenced and Corrupt
Organizations Act, the Bank Secrecy Act, the anti-money laundering laws and
regulations, including the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act (commonly
referred to as the Patriot Act) and the regulations issued pursuant to that Act,
as well as the narcotic drug laws. Under procedures contained in the
Comprehensive Crime Control Act of 1984, the government may seize the property
even before conviction. The government must publish notice of the forfeiture
proceeding and may give notice to all parties "known to have an alleged interest
in the property," including the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that--
o its mortgage was executed and recorded before commission of the
illegal conduct from which the assets used to purchase or improve
the property were derived or before any other crime upon which the
forfeiture is based, or
o the lender was, at the time of execution of the mortgage,
"reasonably without cause to believe" that the property was subject
to forfeiture.
However, there is no assurance that such defense will be successful.
FEDERAL INCOME TAX CONSEQUENCESGENERAL
This is a general discussion of the anticipated material federal income
tax consequences of purchasing, owning and transferring the offered
certificates. This discussion is directed to certificateholders that hold the
offered certificates as capital assets within the meaning of Section 1221 of the
Internal Revenue Code. This section does not discuss all federal income tax
consequences that may be relevant to owners of offered certificates,
particularly as to investors subject to special treatment under the Internal
Revenue Code, including:
o banks,
o insurance companies,
o foreign investors,
o tax exempt investors,
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o holders whose "functional currency" is not the United States dollar,
o United States expatriates, and
o holders holding the offered certificates as part of a hedge,
straddle or conversion transaction.
Further, this discussion does not address investors who treat items of
income, expense, gain or loss with respect to the offered certificates
differently for book and tax purposes.
This discussion and any legal opinions referred to in this discussion are
based on current provisions and interpretations of the Internal Revenue Code and
the accompanying Treasury regulations and on current judicial and administrative
rulings. All of these authorities are subject to change and any change can apply
retroactively. No rulings have been or will be sought from the IRS with respect
to any of the federal income tax consequences discussed below. Accordingly, the
IRS may take contrary positions.
Investors and preparers of tax returns 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 is--
o given with respect to events that have occurred at the time the
advice is rendered, and
o is directly relevant to the determination of an entry on a tax
return.
Accordingly, even if this discussion addresses an issue regarding the tax
treatment of the owner of the offered certificates, investors are encouraged to
consult their own tax advisors regarding that issue. Investors should do so not
only as to federal taxes, but also as to state and local taxes. See "STATE ANDOTHER TAX CONSEQUENCES."
The following discussion addresses securities of two general types:
o REMIC certificates, representing interests in a trust, or a portion
of the assets of that trust, as to which a specified person or
entity will make a real estate mortgage investment conduit, or
REMIC, election under Sections 860A through 860G of the Internal
Revenue Code; and
o grantor trust certificates, representing interests in a trust, or a
portion of the assets of that trust, as to which no REMIC election
will be made.
We will indicate in the prospectus supplement for each series of offered
certificates whether the related trustee, another party to the related Governing
Document or an agent appointed by that trustee or other party will make a REMIC
election and/or act as tax administrator for the related trust. If the related
tax administrator is required to make a REMIC election, we also will identify in
the related prospectus supplement all regular interests and residual interests
in the resulting REMIC.
The following discussion is limited to certificates offered under this
prospectus. In addition, this discussion applies only to the extent that the
related trust holds only mortgage loans. If a trust holds assets other than
mortgage loans, such as mortgage-backed securities, we will disclose in the
related prospectus supplement the tax consequences associated with those other
assets being included. In addition, if agreements other than guaranteed
investment contracts are included in a trust to provide interest rate protection
for the related offered certificates, the anticipated material tax consequences
associated with those agreements also will be discussed in the related
prospectus supplement. See "THE TRUST FUND--Arrangements Providing Reinvestment,Interest Rate and Currency Related Protection."
The following discussion is based in part on the rules governing original
issue discount in Sections 1271-1273 and 1275 of the Internal Revenue Code and
in the Treasury regulations issued under those sections. It is
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also based in part on the rules governing REMICs in Sections 860A-860G of the
Internal Revenue Code and in the Treasury regulations issued or proposed under
those sections. The regulations relating to original issue discount do not
adequately address all issues relevant to, and in some instances provide that
they are not applicable to, securities such as the offered certificates.
REMICSGeneral. With respect to each series of offered certificates as to which
the related tax administrator will make a REMIC election, our counsel will
deliver its opinion generally to the effect that, assuming compliance with all
provisions of the related Governing Document, and subject to any other
assumptions set forth in the opinion:
o the related trust, or the relevant designated portion of the trust,
will qualify as a REMIC, and
o those offered certificates will represent--
1. regular interests in the REMIC, or
2. residual interests in the REMIC.
Any and all offered certificates representing interests in a REMIC will be
either--
o REMIC regular certificates, representing regular interests in the
REMIC, or
o REMIC residual certificates, representing residual interests in the
REMIC.
If an entity electing to be treated as a REMIC fails to comply with the
ongoing requirements of the Internal Revenue Code for REMIC status, it may lose
its REMIC status. If so, the entity may become taxable as a corporation.
Therefore, the related certificates may not be given the tax treatment
summarized below. Although the Internal Revenue Code authorizes the Treasury
Department to issue regulations providing relief in the event of an inadvertent
termination of REMIC status, the Treasury Department has not done so. Any relief
mentioned above, moreover, may be accompanied by sanctions. These sanctions
could include the imposition of a corporate tax on all or a portion of a trust's
income for the period in which the requirements for REMIC status are not
satisfied. The Governing Document with respect to each REMIC will include
provisions designed to maintain its status as a REMIC under the Internal Revenue
Code.
Characterization of Investments in REMIC Certificates. Unless we state
otherwise in the related prospectus supplement, the offered certificates that
are REMIC certificates will be treated as--
o "real estate assets" within the meaning of Section 856(c)(5)(B) of
the Internal Revenue Code in the hands of a real estate investment
trust, and
o "loans secured by an interest in real property" or other assets
described in Section 7701(a)(19)(C) of the Internal Revenue Code in
the hands of a thrift institution,
in the same proportion that the assets of the related REMIC are so treated.
However, to the extent that the REMIC assets constitute mortgage loans on
property not used for residential or other prescribed purposes, the related
offered certificates will not be treated as assets qualifying under Section
7701(a)(19)(C). If 95% or more of the assets of the REMIC qualify for any of the
foregoing characterizations at all times during a calendar year, the related
offered certificates will qualify for the corresponding status in their entirety
for that calendar year.
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In addition, unless we state otherwise in the related prospectus
supplement, offered certificates that are REMIC regular certificates will be
"qualified mortgages" within the meaning of Section 860G(a)(3) of the Internal
Revenue Code in the hands of another REMIC.
Finally, interest, including original issue discount, on offered
certificates that are REMIC regular certificates, and income allocated to
offered certificates that are REMIC residual certificates, will be interest
described in Section 856(c)(3)(B) of the Internal Revenue Code if received by a
real estate investment trust, to the extent that these certificates are treated
as "real estate assets" within the meaning of Section 856(c)(5)(B) of the
Internal Revenue Code.
The related tax administrator will determine the percentage of the REMIC's
assets that constitute assets described in the above-referenced sections of the
Internal Revenue Code with respect to each calendar quarter based on the average
adjusted basis of each category of the assets held by the REMIC during that
calendar quarter. The related tax 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--
o collections on mortgage loans held pending payment on the related
offered certificates, and
o 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 these assets otherwise would receive the same treatment as the
mortgage loans for purposes of the above-referenced sections of the Internal
Revenue Code. In addition, in some instances, the mortgage loans may not be
treated entirely as assets described in those sections of the Internal Revenue
Code. If so, we will describe in the related prospectus supplement those
mortgage loans that are characterized differently. The Treasury regulations do
provide, however, that cash received from collections on mortgage loans held
pending payment is considered part of the mortgage loans for purposes of Section
856(c)(5)(B) of the Internal Revenue Code, relating to real estate investment
trusts.
To the extent a REMIC certificate represents ownership of an interest in a
mortgage loan that is secured in part by the related borrower's interest in a
bank account, that mortgage loan is not secured solely by real estate.
Accordingly:
o a portion of that certificate may not represent ownership of "loans
secured by an interest in real property" or other assets described
in Section 7701(a)(19)(C) of the Internal Revenue Code;
o a portion of that certificate may not represent ownership of "real
estate assets" under Section 856(c)(5)(B) of the Internal Revenue
Code; and
o the interest on that certificate may not constitute "interest on
obligations secured by mortgages on real property" within the
meaning of Section 856(c)(3)(B) of the Internal Revenue Code.
Tiered REMIC Structures. For certain series of REMIC certificates, the
related tax administrator may make two or more REMIC elections as to the related
trust for federal income tax purposes. As to each of these series of REMIC
certificates, our counsel will opine that each portion of the related trust as
to which a REMIC election is to be made will qualify as a REMIC. Each of these
series will be treated as interests in one REMIC solely for purposes of
determining:
o whether the related REMIC certificates will be "real estate assets"
within the meaning of Section 856(c)(5)(B) of the Internal Revenue
Code,
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o whether the related REMIC certificates will be "loans secured by an
interest in real property" under Section 7701(a)(19)(C) of the
Internal Revenue Code, and
o whether the interest/income on the related REMIC certificates is
interest described in Section 856(c)(3)(B) of the Internal Revenue
Code.
Taxation of Owners of REMIC Regular Certificates.General. Except as otherwise stated in this discussion, the Internal
Revenue Code treats REMIC regular certificates as debt instruments issued by the
REMIC and not as ownership interests in the REMIC or its assets. Holders of
REMIC regular certificates that otherwise report income under the cash method of
accounting must nevertheless report income with respect to REMIC regular
certificates under the accrual method.
Original Issue Discount. Some REMIC regular certificates may be issued
with original issue discount within the meaning of Section 1273(a) of the
Internal Revenue Code. Any holders of REMIC regular certificates issued with
original issue discount generally will have to include original issue discount
in income as it accrues, in accordance with a constant yield method described
below, prior to the receipt of the cash attributable to that income. The
Treasury Department has issued regulations under Sections 1271 to 1275 of the
Internal Revenue Code generally addressing the treatment of debt instruments
issued with original issue discount. Section 1272(a)(6) of the Internal Revenue
Code provides special rules applicable to the accrual of original issue discount
on, among other things, REMIC regular certificates. The Treasury Department has
not issued regulations under that section. You should be aware, however, that
Section 1272(a)(6) and the regulations under Sections 1271 to 1275 of the
Internal Revenue Code do not adequately address all issues relevant to, or are
not applicable to, prepayable securities such as the offered certificates. We
recommend that you consult with your own tax advisor concerning the tax
treatment of your offered certificates.
The Internal Revenue Code requires, in computing the accrual of original
issue discount on REMIC regular certificates, that a reasonable assumption be
used concerning the rate at which borrowers will prepay the mortgage loans held
by the related REMIC. Further, adjustments must be made in the accrual of that
original issue discount to reflect differences between the prepayment rate
actually experienced and the assumed prepayment rate. The prepayment assumption
is to be determined in a manner prescribed in Treasury regulations that the
Treasury Department has not yet issued. The Committee Report indicates that the
regulations should provide that the prepayment assumption used with respect to a
REMIC regular certificate is determined once, at initial issuance, and must be
the same as that used in pricing. The prepayment assumption used in reporting
original issue discount for each series of REMIC regular certificates will be
consistent with this standard and will be disclosed in the related prospectus
supplement. However, neither we nor any other person will make any
representation that the mortgage loans underlying any series of REMIC regular
certificates will in fact prepay at a rate conforming to the prepayment
assumption or at any other rate or that the IRS will not challenge on audit the
prepayment assumption used.
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 those certificates are
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 related date of initial issuance of those
certificates, the issue price for that class will be the fair market value of
that class on the date of initial issuance.
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Under the Treasury regulations, the stated redemption price of a REMIC
regular certificate is equal to the total of all payments to be made on that
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:
o a single fixed rate,
o a "qualified floating rate,"
o an "objective rate,"
o a combination of a single fixed rate and one or more "qualified
floating rates,"
o a combination of a single fixed rate and one "qualified inverse
floating rate," or
o 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 of that discount will vary according to the
characteristics of those certificates. If the original issue discount rules
apply to those certificates, we will describe in the related prospectus
supplement the manner in which those rules will be applied with respect to those
certificates in preparing information returns to the certificateholders and the
IRS.
Some classes of REMIC regular certificates may provide that the first
interest payment with respect to those certificates be made more than one month
after the date of initial issuance, a period that is longer than the subsequent
monthly intervals between interest payments. Assuming the accrual period for
original issue discount is the monthly period that ends on each distribution
date, then, as a result of this long first 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 date of
initial issuance, a portion of the purchase price paid for a REMIC regular
certificate will reflect that accrued interest. In those cases, information
returns provided to the certificateholders and the IRS will be based on the
position that the portion of the purchase price paid for the interest accrued
prior to the date of initial issuance is treated as part of the overall cost of
the REMIC regular certificate. Therefore, the portion of the interest paid on
the first distribution date in excess of interest accrued from the date of
initial issuance to the first distribution date is included in the stated
redemption price of the REMIC regular certificate. However, the Treasury
regulations state that all or some portion of this 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 these regulations and whether this 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
certificate multiplied by its weighted average maturity. For this purpose, the
weighted average maturity 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 certificate, by multiplying:
o the number of complete years, rounding down for partial years, from
the date of initial issuance, until that payment is expected to be
made, presumably taking into account the prepayment assumption, by
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o a fraction--
1. the numerator of which is the amount of the payment, and
2. the denominator of which is the stated redemption price at
maturity of the certificate.
Under the Treasury 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:
o the total amount of the de minimis original issue discount, and
o a fraction--
1. the numerator of which is the amount of the principal payment,
and
2. the denominator of which is the outstanding stated principal
amount of the subject REMIC regular certificate.
The Treasury regulations also would permit you to elect to accrue de
minimis original issue discount into income currently based on a constant yield
method. See "--REMICs--Taxation of Owners of REMIC Regular Certificates--MarketDiscount" below for a description of that election under the applicable Treasury
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 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 described below in this "--Original IssueDiscount" subsection.
As to each accrual period, the related tax administrator will calculate
the original issue discount that accrued during that accrual period. For these
purposes, an accrual period is, unless we otherwise state in the related
prospectus supplement, the period that begins on a date that corresponds to a
distribution date, or in the case of the first accrual period, begins on the
date of initial issuance, and ends on the day preceding the next following
distribution date. The portion of original issue discount that accrues in any
accrual period will equal the excess, if any, of:
o the sum of:
1. the present value, as of the end of the accrual period, of all
of the payments remaining to be made on the subject REMIC
regular certificate, if any, in future periods, presumably
taking into account the prepayment assumption, and
2. the payments made on that certificate during the accrual
period of amounts included in the stated redemption price,
over
o the adjusted issue price of the subject REMIC regular certificate at
the beginning of the accrual period.
The adjusted issue price of a REMIC regular certificate is:
o the issue price of the certificate, increased by
o the total amount of original issue discount previously accrued on
the certificate, reduced by
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o the amount of all prior payments of amounts included in its stated
redemption price.
The present value of the remaining payments referred to in item 1. of the second
preceding sentence will be calculated:
o assuming that payments on the REMIC regular certificate will be
received in future periods based on the related mortgage loans being
prepaid at a rate equal to the prepayment assumption;
o using a discount rate equal to the original yield to maturity of the
certificate, based on its issue price and the assumption that the
related mortgage loans will be prepaid at a rate equal to the
prepayment assumption; and
o taking into account events, including actual prepayments, that have
occurred before the close of the accrual period.
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 the
certificate at a cost, excluding any portion of that cost attributable to
accrued qualified stated interest, that is 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, the daily portion will be reduced, if the cost is in excess of its
adjusted issue price, in proportion to the ratio that the excess bears to the
total original issue discount remaining to be accrued on the certificate. The
adjusted issue price of a REMIC regular certificate, as of any date of
determination, equals the sum of:
o 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 date of determination, and
o the daily portions of original issue discount for all days during
that accrual period prior to that date of determination.
If the foregoing method for computing original issue discount results in a
negative amount of original issue discount as to any accrual period with respect
to a REMIC regular certificate held by you, the amount of original issue
discount accrued for that accrual period will be zero. You may not deduct the
negative amount currently. Instead, you will only be permitted to offset the
negative amount against future positive original issue discount, if any,
attributable to the certificate. Although not free from doubt, it is possible
that you may be permitted to recognize a loss to the extent your basis in the
certificate exceeds the maximum amount of payments that you could ever receive
with respect to the certificate. However, the loss may be a capital loss, which
is limited in its deductibility. The foregoing considerations are particularly
relevant to certificates that have no, or a disproportionately small, amount of
principal because they can have negative yields if the mortgage loans held by
the related REMIC prepay more quickly than anticipated. See "RISK FACTORS--The
Investment Performance of Your Offered Certificate Will Depend Upon Payments,
Defaults and Losses on the Underlying Mortgage Loans; and Those Payments,
Defaults and Losses May Be Highly Unpredictable."
The Treasury regulations in some circumstances permit the holder of a debt
instrument to recognize original issue discount under a method that differs from
that used by the issuer. Accordingly, it is possible that you may be able to
select a method for recognizing original issue discount that differs from that
used by the trust in preparing reports to you and the IRS. Prospective
purchasers of the REMIC regular certificates are encouraged to consult their tax
advisors concerning the tax treatment of these certificates in this regard.
The Treasury Department proposed regulations on August 24, 2004 concerning
the accrual of interest
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income by the holders of REMIC regular interests. The proposed regulations would
create a special rule for accruing original issue discount on REMIC regular
certificates that provide for a delay between record and distribution dates,
such that the period over which original issue discount accrues coincides with
the period over which the certificate holder's right to interest payment accrues
under the governing contract provisions rather than over the period between
distribution dates. If the proposed regulations are adopted in the same form as
proposed, certificate holders would be required to accrue interest from the
issue date to the first record date, but would not be required to accrue
interest after the last record date. The proposed regulations are limited to
REMIC regular certificates with delayed payment periods of fewer than 32 days.
The proposed regulations are proposed to apply to any REMIC regular certificate
issued after the date the final regulations are published in the Federal
Register. The proposed regulations provide automatic consent for the holder of a
REMIC regular certificate to change its method of accounting for original issue
discount under the final regulations. The change is proposed to be made on a
cut-off basis and, thus, does not affect REMIC regular interests certificates
before the date the final regulations are published in the Federal Register.
The Treasury Department issued a notice of proposed rulemaking on the
timing of income and deductions attributable to interest-only regular interests
in a REMIC on August 24, 2004. In this notice, the Treasury Department and the
IRS requested comments on whether to adopt special rules for taxing regular
interests in a REMIC that are entitled only to a specified portion of the
interest in respect of one or more mortgage loans held by the REMIC, high-yield
REMIC regular interests, and apparent negative-yield instruments. The Treasury
Department and the IRS also requested comments on different methods for taxing
the foregoing instruments, including the possible recognition of negative
amounts of original issue discount, the formulation of special guidelines for
the application of Internal Revenue Code Section 166 to REMIC IOs and similar
instruments, and the adoption of a new alternative method applicable to REMIC
IOs and similar instruments. It is uncertain whether IRS actually will propose
any regulations as a consequence of the solicitation of comments and when any
resulting new rules would be effective.
Market Discount. You will be considered to have purchased a REMIC regular
certificate at a market discount if--
o in the case of a certificate issued without original issue discount,
you purchased the certificate at a price less than its remaining
stated principal amount, or
o in the case of a certificate issued with original issue discount,
you purchased the certificate at a price less than its adjusted
issue price.
If you purchase a REMIC regular certificate with more than a de minimis
amount of market discount, you will recognize gain upon receipt of each payment
representing stated redemption price. Under Section 1276 of the Internal Revenue
Code, you generally will be required to allocate the portion of each payment
representing some or all of the stated redemption price first to accrued market
discount not previously included in income. You must recognize ordinary income
to that extent. You 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, this election will apply to all market discount bonds
acquired by you on or after the first day of the first taxable year to which
this election applies.
The Treasury regulations also permit you to elect to accrue all interest
and discount, including de minimis market or original issue discount, in income
as interest, and to amortize premium, based on a constant yield method. Your
making this election with respect to a REMIC regular certificate with market
discount would be deemed to be an election to include currently market discount
in income with respect to all other debt instruments with market discount that
you acquire during the taxable year of the election or thereafter, and possibly
previously acquired instruments. Similarly, your making this election as to a
certificate acquired at a premium would be deemed to be an election to amortize
bond premium, with respect to all debt instruments having amortizable bond
premium that you own or acquire. See "--REMICs --Taxation of Owners of REMICRegular Certificates--Premium" below.
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Each of the elections described above to accrue interest and discount, and
to amortize 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 Internal
Revenue Code if the market discount is less than 0.25% of the remaining stated
redemption price of the 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 Treasury regulations refer to the weighted average maturity of
obligations. 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 "--REMICs--Taxation of Owners of REMIC RegularCertificates--Original Issue Discount" above. This treatment would generally
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 Internal Revenue 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 relevant rules described in the Committee Report apply. The
Committee Report indicates that in each accrual period, you may accrue market
discount on a REMIC regular certificate held by you, at your option:
o on the basis of a constant yield method,
o in the case of a 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
certificate as of the beginning of the accrual period, or
o in the case of a 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 amount of original issue discount
remaining on the certificate at the beginning of the accrual period.
The prepayment assumption used in calculating the accrual of original
issue discount is also used in calculating the accrual of market discount.
To the extent that REMIC regular certificates provide for monthly or other
periodic payments 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, Section 1277 of the Internal Revenue Code may require you to
defer a portion of your 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 deferred interest expense would not exceed
the market discount that accrues during the related taxable year and is, in
general, allowed as a deduction not later than the year in which the related
market discount is includible in income. If you have elected, however, to
include market discount in income currently as it accrues, the interest deferral
rule described above would not apply.
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Premium. A REMIC regular certificate purchased at a cost, excluding any
portion of the cost attributable to accrued qualified stated interest, that is
greater than its remaining stated redemption price will be considered to be
purchased at a premium. You may elect under Section 171 of the Internal Revenue
Code to amortize the premium over the life of the certificate as an offset
against qualified stated interest. If made, this election will apply to all debt
instruments having amortizable bond premium that you own or subsequently
acquire. The IRS has issued regulations on the amortization of bond premium, but
they specifically do not apply to holders of REMIC regular certificates.
The Treasury regulations also permit you to elect to include all interest,
discount and premium in income based on a constant yield method, further
treating you 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 and require the use of a prepayment assumption in accruing market
discount with respect to REMIC regular certificates without regard to whether
those certificates have original issue discount, will also apply in amortizing
bond premium under Section 171 of the Internal Revenue Code.
Whether you will be treated as holding a REMIC regular certificate with
amortizable bond premium will depend on--
o the purchase price paid for your offered certificate, and
o the payments remaining to be made on your offered certificate at the
time of its acquisition by you.
If you acquire an interest in any class of REMIC regular certificates
issued at a premium, you should consider consulting your own tax advisor
regarding the possibility of making an election to amortize the premium.
Realized Losses. Under Section 166 of the Internal Revenue Code, if you
are either a corporate holder of a REMIC regular certificate or a noncorporate
holder of a REMIC regular certificate that acquires the certificate in
connection with a trade or business, you should be allowed to deduct, as
ordinary losses, any losses sustained during a taxable year in which your
offered certificate becomes wholly or partially worthless as the result of one
or more realized losses on the related mortgage loans. However, if you are a
noncorporate holder that does not acquire a REMIC regular certificate in
connection with a trade or business, it appears that--
o you will not be entitled to deduct a loss under Section 166 of the
Internal Revenue Code until your offered certificate becomes wholly
worthless, which is when its principal balance has been reduced to
zero, and
o the loss will be characterized as a short-term capital loss.
You will also have to accrue interest and original issue discount with
respect to your REMIC regular certificate, without giving effect to any
reductions in payments attributable to defaults or delinquencies on the related
mortgage loans, until it can be established that those payment reductions are
not recoverable. As a result, your taxable income in a period could exceed your
economic income in that period. If any of those amounts previously included in
taxable income are not ultimately received due to a loss on the related mortgage
loans, you should be able to recognize a loss or reduction in income. However,
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, the Internal Revenue Code does not subject a REMIC to entity-level
taxation, except with regard to prohibited transactions and the other
transactions described under "--REMICs--Prohibited Transactions Tax and OtherTaxes" below. Rather, a
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holder of REMIC residual certificates must generally include in income the
taxable income or net loss of the related REMIC. Accordingly, the Internal
Revenue Code treats the REMIC residual certificates much differently than it
would if they were direct ownership interests in the related mortgage loans or
as debt instruments issued by the related REMIC.
Holders of REMIC residual certificates generally will be required to
report their daily portion of the taxable income or, subject to the limitations
noted in this discussion, the net loss of the related REMIC for each day during
a calendar quarter that they own those certificates. For this purpose, the
taxable income or net loss of the REMIC will be allocated to each day in the
calendar quarter ratably using a "30 days per month/90 days per quarter/360 days
per year" convention unless we otherwise disclose in the related prospectus
supplement. These daily amounts then will be allocated among the holders of the
REMIC residual certificates in proportion to their respective ownership
interests on that day. Any amount included in the residual certificateholders'
gross income or allowed as a loss to them 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 "--REMICs--Taxation of Owners ofREMIC Residual Certificates--Taxable Income of the REMIC." Holders of REMIC
residual certificates must report the taxable income of the related REMIC
without regard to the timing or amount of cash payments by the REMIC until the
REMIC's termination. Income derived from the REMIC residual certificates will be
"portfolio income" for the purposes of the limitations under Section 469 of the
Internal Revenue Code on the deductibility of "passive losses."
A holder of a REMIC residual certificate that purchased the certificate
from a prior holder 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 related REMIC for each day that it holds the REMIC residual certificate.
These daily amounts generally will equal the amounts of taxable income or net
loss determined as described above. The Committee Report indicates that
modifications of the general rules may be made, by regulations, legislation or
otherwise to reduce, or increase, the income of a holder of a REMIC residual
certificate. These modifications would occur when a holder purchases the REMIC
residual certificate from a prior holder at a price other than the adjusted
basis that the REMIC residual certificate would have had in the hands of an
original holder of that certificate. The Treasury regulations, however, do not
provide for these modifications.
Any payments that you receive from the seller of a REMIC residual
certificate in connection with the acquisition of that certificate will be
income to you.
The Treasury Department has issued final regulations, effective May 11,2004, which address the federal income tax treatment of "inducement fees"
received by transferees of noneconomic REMIC residual interests. The final
regulations require inducement fees to be included in income over a period
reasonably related to the period in which the related REMIC residual interest is
expected to generate taxable income or net loss to its holder. The final
regulations provide two safe harbor methods which permit transferees to include
inducement fees in income, either (i) in the same amounts and over the same
period that the taxpayer uses for financial reporting purposes, provided that
such period is not shorter than the period the REMIC is expected to generate
taxable income or (ii) ratably over the remaining anticipated weighted average
life of all the regular and residual interests issued by the REMIC, determined
based on actual distributions projected as remaining to be made on such
interests under the prepayment assumption. If the holder of a REMIC residual
interest sells or otherwise disposes of the residual certificate, any
unrecognized portion of the inducement fee must be taken into account at the
time of the sale or disposition. The final regulations also provide that an
inducement fee shall be treated as income from sources within the United States.
In addition, the IRS has issued administrative guidance addressing the
procedures by which transferees of noneconomic REMIC residual interests may
obtain automatic consent from the IRS to change the method of accounting for
REMIC inducement fee income to one of the safe harbor methods provided in these
final regulations (including a change from one safe harbor method to the other
safe harbor method). Prospective purchasers of the REMIC residual certificates
are encouraged to consult with their tax advisors regarding the effect of these
final regulations and the related guidance regarding the procedures for
obtaining automatic consent to change the method of accounting.
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Tax liability with respect to the amount of income that holders of REMIC
residual certificates will be required to report, will often exceed the amount
of cash payments received from the related REMIC for the corresponding period.
Consequently, you should have--
o other sources of funds sufficient to pay any federal income taxes
due as a result of your ownership of REMIC residual certificates, or
o unrelated deductions against which income may be offset.
See, however, the rules discussed below relating to:
o excess inclusions,
o residual interests without significant value, and
o noneconomic residual interests.
The fact that the tax liability associated with this income allocated to
you may exceed the cash payments received by you for the corresponding period
may significantly and adversely affect their after-tax rate of return. This
disparity between income and payments may not be offset by corresponding losses
or reductions of income attributable to your REMIC residual certificates until
subsequent tax years. Even then, the extra income may not be completely offset
due to changes in the Internal Revenue Code, tax rates or character of the
income or loss. Therefore, REMIC residual certificates will ordinarily have a
negative value at the time of issuance. See "RISK FACTORS--Residual Interests ina Real Estate Mortgage Investment Conduit Have Adverse Tax Consequences."Taxable Income of the REMIC. The taxable income of a REMIC will equal:
o the income from the mortgage loans and other assets of the REMIC;
plus
o any cancellation of indebtedness income due to the allocation of
realized losses to those REMIC certificates constituting regular
interests in the REMIC; less the following items--
1. the deductions allowed to the REMIC for interest, including
original issue discount but reduced by any premium on
issuance, on any class of REMIC certificates constituting
regular interests in the REMIC, whether offered or not,
2. amortization of any premium on the mortgage loans held by the
REMIC,
3. bad debt losses with respect to the mortgage loans held by the
REMIC, and
4. except as described below in this "--Taxable Income of theREMIC" subsection, servicing, administrative and other
expenses.
For purposes of determining its taxable income, a REMIC will have an
initial aggregate basis in its assets equal to the sum of the issue prices of
all REMIC certificates, or in the case of REMIC certificates 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 REMIC certificates offered
hereby will be determined in the manner described above under
"--REMICs--Taxation of Owners of REMIC Regular Certificates--Original IssueDiscount." The issue price of a REMIC certificate received in exchange for an
interest in 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
related tax administrator may be required to estimate the fair market value of
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these 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 a 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 method is a constant yield method taking into account the
prepayment assumption. However, a REMIC that acquires loans at a market discount
must include that market discount in income currently, as it accrues, on a
constant yield basis. See "--REMICs--Taxation of Owners of REMIC RegularCertificates" above, which describes a method for accruing the 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 REMIC will acquire a mortgage loan with discount, or premium, to the
extent that the REMIC's basis, determined as described in the preceding
paragraph, is different from its stated redemption price. Discount will be
includible in the income of the REMIC as it accrues, in advance of receipt of
the cash attributable to that income, under a method similar to the method
described above for accruing original issue discount on the REMIC regular
certificates. A REMIC probably will elect under Section 171 of the Internal
Revenue Code to amortize any premium on the mortgage loans that it holds.
Premium on any mortgage loan to which this election applies may be amortized
under a constant yield method, presumably taking into account the prepayment
assumption.
A REMIC will be allowed deductions for interest, including original issue
discount, on all of the certificates that constitute regular interests in the
REMIC, whether or not offered hereby, as if those certificates were indebtedness
of the REMIC. Original issue discount will be considered to accrue for this
purpose as described above under "--REMICs--Taxation of Owners of REMIC RegularCertificates--Original Issue Discount." However, the de minimis rule described
in that section will not apply in determining deductions.
If a class of REMIC regular certificates is issued at a price in excess of
the stated redemption price of that class, the net amount of interest deductions
that are allowed to the REMIC in each taxable year with respect to those
certificates will be reduced by an amount equal to the portion of that excess
that is considered to be amortized in that year. It appears that this excess
should be amortized under a constant yield method in a manner analogous to the
method of accruing original issue discount described above under
"--REMICs--Taxation of Owners of REMIC Regular Certificates--Original IssueDiscount."
As a general rule, the taxable income of a REMIC will be determined as if
the REMIC were an individual having the calendar year as its taxable year and
using the accrual method of accounting. However, no item of income, gain, loss
or deduction allocable to a prohibited transaction will be taken into account.
See "--REMICs--Prohibited Transactions Tax and Other Taxes" below. Further, the
limitation on miscellaneous itemized deductions imposed on individuals by
Section 67 of the Internal Revenue Code will not be applied at the REMIC level
so that the REMIC will be allowed full deductions for servicing, administrative
and other non-interest expenses in determining its taxable income. All those
expenses will be allocated as a separate item to the holders of the related
REMIC certificates, subject to the limitation of Section 67 of the Internal
Revenue Code. See "--REMICs--Taxation of Owners of REMIC ResidualCertificates--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:
o the amount paid for that REMIC residual certificate,
o increased by amounts included in the income of the holder of that
REMIC residual certificate, and
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o decreased, but not below zero, by payments made, and by net losses
allocated, to the holder of that REMIC residual certificate.
A holder of a REMIC residual certificate is not allowed to take into
account any net loss for any calendar quarter to the extent that the net loss
exceeds the adjusted basis to that holder as of the close of that calendar
quarter, determined without regard to that net loss. Any loss that is not
currently deductible by reason of this limitation may be carried forward
indefinitely to future calendar quarters and, subject to the same limitation,
may be used only to offset income from the REMIC residual certificate.
Any distribution on a REMIC residual certificate will be treated as a
nontaxable return of capital to the extent it does not exceed the holder's
adjusted basis in the REMIC residual certificate. To the extent a distribution
on a REMIC residual certificate exceeds the holder's adjusted basis, it will be
treated as gain from the sale of that REMIC residual certificate.
A holder's basis in a REMIC residual certificate will initially equal the
amount paid for the certificate and will be increased by that holder's allocable
share of taxable income of the related REMIC. However, these increases in basis
may not occur until the end of the calendar quarter, or perhaps the end of the
calendar year, with respect to which the related REMIC's taxable income is
allocated to that holder. To the extent the initial basis of the holder of a
REMIC residual certificate is less than the distributions to that holder, and
increases in the initial basis either occur after these distributions or,
together with the initial basis, are less than the amount of these payments,
gain will be recognized to that holder on these distributions. This gain will be
treated as gain from the sale of its REMIC residual certificate.
The effect of these rules is that a holder of a REMIC residual certificate
may not amortize its basis in a REMIC residual certificate, but may only recover
its basis:
o through distributions,
o through the deduction of any net losses of the REMIC, or
o upon the sale of its REMIC residual certificate.
See "--REMICs--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 see "--REMICs--Taxation of Owners of REMIC ResidualCertificates--General" above. These adjustments could require a holder of a
REMIC residual certificate to account for any difference between the cost of the
certificate to the holder and the adjusted basis of the certificate would have
been in the hands of an original holder.
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:
o the daily portions of REMIC taxable income allocable to that
certificate, over
o the sum of the daily accruals for each day during the quarter that
the certificate was held by that holder.
The daily accruals of a holder of a REMIC residual certificate will be
determined by allocating to each day during a calendar quarter its ratable
portion of a numerical calculation. That calculation is the product of the
adjusted issue price of the REMIC residual certificate at the beginning of the
calendar quarter and 120% of the
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long-term Federal rate in effect on the date of initial issuance. For this
purpose, the adjusted issue price of a REMIC residual certificate as of the
beginning of any calendar quarter will be equal to:
o the issue price of the certificate, increased by
o the sum of the daily accruals for all prior quarters, and decreased,
but not below zero, by
o any payments made with respect to the certificate before the
beginning of that quarter.
The issue price of a REMIC residual certificate is the initial offering
price to the public at which a substantial amount of the REMIC residual
certificates were sold, but excluding sales to bond houses, brokers and
underwriters or, if no sales have been made, their initial value. 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 Department has authority to
issue regulations that would treat the entire amount of income accruing on a
REMIC residual certificate as excess inclusions if the REMIC residual interest
evidenced by that certificate is considered not to have significant value.
For holders of REMIC residual certificates, excess inclusions:
o will not be permitted to be offset by deductions, losses or loss
carryovers from other activities,
o will be treated as unrelated business taxable income to an otherwise
tax-exempt organization, and
o 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 payments to holders of REMIC residual
certificates that are foreign investors.
See, however, "--REMICs--Foreign Investors in REMIC Certificates" below.
Furthermore, for purposes of the alternative minimum tax:
o excess inclusions will not be permitted to be offset by the
alternative tax net operating loss deduction, and
o alternative minimum taxable income may not be less than the
taxpayer's excess inclusions.
This last rule has the effect of preventing non-refundable tax credits
from reducing the taxpayer's income tax to an amount lower than the alternative
minimum tax on excess inclusions.
In the case of any REMIC residual certificates held by a real estate
investment trust, or REIT, the total excess inclusions with respect to these
REMIC residual certificates will be allocated among the shareholders of the REIT
in proportion to the dividends received by the shareholders from the REIT. 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. The total
excess inclusions referred to in the previous sentence will be reduced, but not
below zero, by any REIT taxable income, within the meaning of Section 857(b)(2)
of the Internal Revenue Code, other than any net capital gain. Treasury
regulations yet to be issued could apply a similar rule to:
o regulated investment companies,
o common trusts, and
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o some cooperatives.
The Treasury regulations, however, currently do not address this subject.
Noneconomic REMIC Residual Certificates. Under the Treasury regulations,
transfers of noneconomic REMIC residual certificates will be disregarded for all
federal income tax purposes if "a significant purpose of the transfer was to
enable the transferor to impede the assessment or collection of tax." If a
transfer is disregarded, the purported transferor will continue to remain liable
for any taxes due with respect to the income on the noneconomic REMIC residual
certificate. The Treasury regulations provide that a REMIC residual certificate
is noneconomic unless, based on the prepayment assumption and on any required or
permitted clean up calls, or required liquidation provided for in the related
Governing Document:
o the present value of the expected future payments on the REMIC
residual certificate equals at least the present value of the
expected tax on the anticipated excess inclusions, and
o the transferor reasonably expects that the transferee will receive
payments with respect to the REMIC residual certificate at or after
the time the taxes accrue on the anticipated excess inclusions in an
amount sufficient to satisfy the accrued taxes.
The present value calculation referred to above is calculated 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. This rate is computed and published monthly by the
IRS.
Accordingly, all transfers of REMIC residual certificates that may
constitute noneconomic residual interests will be subject to restrictions under
the terms of the related Governing Document that are intended to reduce the
possibility of any transfer being disregarded. These restrictions will require
an affidavit:
o from each party to the transfer, stating that no purpose of the
transfer is to impede the assessment or collection of tax,
o from the prospective transferee, providing representations as to its
financial condition and that it understands that, as the holder of a
non-economic REMIC residual certificate, it may incur tax
liabilities in excess of any cash flows generated by the REMIC
residual certificate and that such transferee intends to pay its
taxes associated with holding such REMIC residual certificate as
they become due, and
o from the prospective transferor, stating that it has made 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.
Final Treasury regulations issued on July 18, 2002 (the "Safe Harbor
Regulations"), provide that transfers of noneconomic residual interests must
meet two additional requirements to qualify for the safe harbor: (i) the
transferee must represent that it will not cause income from the noneconomic
residual interest to be attributable to a foreign permanent establishment or
fixed base (within the meaning of an applicable income tax treaty, hereafter a
"foreign branch") of the transferee or another U.S. taxpayer, and (ii) the
transfer must satisfy either an "asset test" or a "formula test" provided under
the REMIC Regulations. A transfer to an "eligible corporation," generally a
domestic corporation, will satisfy the asset test if: at the time of the
transfer, and at the close of each of the transferee's two fiscal years
preceding the transferee's fiscal year of transfer, the transferee's gross and
net assets for financial reporting purposes exceed $100 million and $10 million,
respectively, in each case, exclusive of any obligations of certain related
persons, the transferee agrees in writing that any subsequent transfer of the
interest will be to another eligible corporation in a transaction that satisfies
the asset test, and the transferor does not know or have reason to know, that
the transferee will not honor these restrictions on subsequent transfers, and a
reasonable person would not conclude, based on the facts and circumstances known
to the transferor on or before
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the date of the transfer (specifically including the amount of consideration
paid in connection with the transfer of the noneconomic residual interest) that
the taxes associated with the residual interest will not be paid. In addition,
the direct or indirect transfer of the residual interest to a foreign branch of
a domestic corporation is not treated as a transfer to an eligible corporation
under the asset test. The "formula test" makes the safe harbor unavailable
unless the present value of the anticipated tax liabilities associated with
holding the residual interest did not exceed the sum of:
o the present value of any consideration given to the transferee to
acquire the interest,
o the present value of the expected future distributions on the
interest, and
o the present value (computed using a discount rate equal to the
applicable Federal short-term rate) of the anticipated tax savings
associated with the holding of the interest as the REMIC generates
losses.
If the transferee has been subject to the alternative minimum tax in the
preceding two years and will compute its taxable income in the current taxable
year using the alternative minimum tax rate, then it may use the alternative
minimum tax rate in lieu of the corporate tax rate. In addition, the direct or
indirect transfer of the residual interest to a foreign branch of a domestic
corporation is not treated as a transfer to an eligible corporation under the
formula test.
The Governing Document will require that all transferees of residual
certificates furnish an affidavit as to the applicability of one of the safe
harbors of the Safe Harbor Regulations, unless the transferor has waived the
requirement that the transferee do so.
Prospective investors are encouraged to consult their own tax advisors as
to the applicability and effect of these alternative safe harbor tests.
Prior to purchasing a REMIC residual certificate, prospective purchasers
should consider the possibility that a purported transfer of a REMIC residual
certificate to another party at some future date may be disregarded in
accordance with the above-described rules. This would result in the retention of
tax liability by the transferor with respect to that purported transfer.
We will disclose in the related prospectus supplement whether the offered
REMIC residual certificates may be considered noneconomic residual interests
under the Treasury regulations. However, we will base any disclosure that a
REMIC residual certificate will not be considered noneconomic upon various
assumptions. Further, we will make no representation that a REMIC residual
certificate will not be considered noneconomic for purposes of the
above-described rules.
See "--REMICs--Foreign Investors in REMIC Certificates" below for
additional restrictions applicable to transfers of REMIC residual certificates
to foreign persons.
Mark-to-Market Rules. Regulations under Section 475 of the Internal
Revenue Code require that a securities dealer mark to market securities held for
sale to customers. This mark-to-market requirement applies to all securities
owned by a dealer, except to the extent that the dealer has specifically
identified a security as held for investment. These regulations provide that for
purposes of this mark-to-market requirement, a REMIC residual certificate is not
treated as a security for purposes of Section 475 of the Internal Revenue Code.
Thus, a REMIC residual certificate is not subject to the mark-to-market rules.
We recommend that prospective purchasers of a REMIC residual certificate consult
their tax advisors regarding these regulations.
Transfers of REMIC Residual Certificates to Investors That Are Foreign
Persons. Unless we otherwise state in the related prospectus supplement,
transfers of REMIC residual certificates to investors that are foreign persons
under the Internal Revenue Code will be prohibited under the related Governing
Documents.
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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. Unless we state otherwise in the related
prospectus supplement, however, 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.
If the holder of a REMIC certificate receives an allocation of fees and
expenses in accordance with the preceding discussion, and if that holder is:
o an individual,
o an estate or trust, or
o a Pass-Through Entity beneficially owned by one or more individuals,
estates or trusts,
then--
o an amount equal to this individual's, estate's or trust's share of
these fees and expenses will be added to the gross income of this
holder, and
o the individual's, estate's or trust's share of these fees and
expenses will be treated as a miscellaneous itemized deduction
allowable subject to the limitation of Section 67 of the Internal
Revenue Code, which permits the deduction of these fees and expenses
only to the extent they exceed, in total, 2% of a taxpayer's
adjusted gross income.
In addition, Section 68 of the Internal Revenue Code currently 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:
o 3% of the excess, if any, of such taxpayer's adjusted gross income
over such specified amount, or
o 80% of the amount of itemized deductions otherwise allowable for
such tax year.
The Economic Growth and Tax Relief Reconciliation Act of 2001 repeals the
Section 68 overall limitation on itemized deductions. Subject to a sunset
provision, the repeal is phased-in over five years as follows. The otherwise
applicable Section 68 overall limitation on itemized deductions described above
is (i) reduced by one-third for taxable years beginning in 2006 and 2007, (ii)
reduced by two-thirds for taxable years beginning in 2008 and 2009, (iii) not
applicable for taxable years beginning in 2010 and (iv) applicable without
reduction pursuant to a sunset provision for taxable years beginning in 2011.
Furthermore, in determining the alternative minimum taxable income of a holder
of a REMIC certificate that is--
o an individual,
o an estate or trust, or
o 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 these fees and other deductions will be included
in the holder's gross income.
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The amount of additional taxable income reportable by holders of REMIC
certificates that are subject to the limitations of either Section 67 or Section
68 of the Internal Revenue Code, or the complete disallowance of the related
expenses for alternative minimum tax purposes, may be substantial.
Accordingly, REMIC certificates to which these expenses are allocated will
generally not be appropriate investments for:
o an individual,
o an estate or trust, or
o a Pass-Through Entity beneficially owned by one or more individuals,
estates or trusts.
We recommend that those prospective investors consult with their tax
advisors prior to making an investment in a REMIC certificate to which these
expenses are allocated.
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:
o the cost of the certificate to that certificateholder, increased by
o income reported by that certificateholder with respect to the
certificate, including original issue discount and market discount
income, and reduced, but not below zero, by
o payments on the certificate received by that certificateholder,
amortized premium and realized losses allocated to the certificate
and previously deducted by the certificateholder.
The adjusted basis of a REMIC residual certificate will be determined as
described above under "--REMICs--Taxation of Owners of REMIC ResidualCertificates--Basis Rules, Net Losses and Distributions." Except as described
below in this "--Sales of REMIC Certificates" subsection, any gain or loss from
your sale of a REMIC certificate will be capital gain or loss, provided that you
hold the certificate as a capital asset within the meaning of Section 1221 of
the Internal Revenue Code, which is generally property held for investment.
In addition to the recognition of gain or loss on actual sales, the
Internal Revenue Code requires the recognition of gain, but not loss, upon the
constructive sale of an appreciated financial position. A constructive sale of
an appreciated financial position occurs if a taxpayer enters into a transaction
or series of transactions that have the effect of substantially eliminating the
taxpayer's risk of loss and opportunity for gain with respect to the financial
instrument. Debt instruments that--
o entitle the holder to a specified principal amount,
o pay interest at a fixed or variable rate, and
o are not convertible into the stock of the issuer or a related party,
cannot be the subject of a constructive sale for this purpose. Because most
REMIC regular certificates meet this exception, Section 1259 will not apply to
most REMIC regular certificates. However, REMIC regular certificates that have
no, or a disproportionately small, amount of principal, can be the subject of a
constructive sale.
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. A taxpayer
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would do so because 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.
As of the date of this prospectus, the Internal Revenue Code provides for
lower rates as to long-term capital gains than those applicable to the
short-term capital gains and ordinary income recognized or received by
individuals. No similar rate differential exists for corporations. In addition,
the distinction between a capital gain or loss and ordinary income or loss is
relevant for other purposes to both individuals and corporations.
Gain from the sale of a REMIC regular certificate that might otherwise be
a capital gain will be treated as ordinary income to the extent that the gain
does not exceed the excess, if any, of:
o the amount that would have been includible in the seller's income
with respect to that REMIC regular certificate assuming that income
had accrued on the certificate at a rate equal to 110% of the
applicable Federal rate determined as of the date of purchase of the
certificate, which is 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, over
o the amount of ordinary income actually includible in the seller's
income prior to that sale.
In addition, gain recognized on the sale of a REMIC regular certificate by
a seller who purchased the certificate at a market discount will be taxable as
ordinary income in an amount not exceeding the portion of that discount that
accrued during the period the certificate was held by the seller, reduced by any
market discount included in income under the rules described above under
"--REMICs--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 Internal Revenue Code, so that gain or loss
recognized from the sale of a REMIC certificate by a bank or thrift institution
to which that section of the Internal Revenue Code 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 a holder holds the certificate as part of a "conversion transaction" within
the meaning of Section 1258 of the Internal Revenue 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 that transaction. The amount of gain so
realized in a conversion transaction that is recharacterized as ordinary income
generally will not exceed the amount of interest that would have accrued on the
taxpayer's net investment at 120% of the appropriate applicable Federal rate at
the time the taxpayer enters into the conversion transaction, subject to
appropriate reduction for prior inclusion of interest and other ordinary income
items from the transaction.
Except as may be provided in Treasury regulations yet to be issued, a loss
realized on the sale of a REMIC residual certificate will be subject to the
"wash sale" rules of Section 1091 of the Internal Revenue Code, if during the
period beginning six months before, and ending six months after, the date of
that sale the seller of that certificate:
o reacquires that same REMIC residual certificate,
o acquires any other residual interest in a REMIC, or
o acquires any similar interest in a taxable mortgage pool, as defined
in Section 7701(i) of the Internal Revenue Code.
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In that event, any loss realized by the holder of a REMIC residual certificate
on the sale will not be recognized or deductible currently, but instead will be
added to that holder's adjusted basis in the newly-acquired asset.
Prohibited Transactions Tax and Other Taxes. The Internal Revenue Code
imposes a tax on REMICs equal to 100% of the net income derived from prohibited
transactions. In general, subject to specified exceptions, a prohibited
transaction includes:
o the disposition of a non-defaulted mortgage loan,
o the receipt of income from a source other than a mortgage loan or
other Permitted Investments,
o the receipt of compensation for services, or
o the gain from the disposition of an asset purchased with collections
on the mortgage loans for temporary investment pending payment on
the REMIC certificates.
It is not anticipated that any REMIC will engage in any prohibited
transactions as to which it would be subject to this tax.
In addition, some contributions to a REMIC made after the day on which the
REMIC issues all of its interests could result in the imposition of a tax on the
REMIC equal to 100% of the value of the contributed property. The related
Governing Document 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 REITs. The related Governing Documents may permit the
special servicer to conduct activities with respect to a mortgaged property
acquired by one of our trusts in a manner that causes the trust to incur this
tax, if doing so would, in the reasonable discretion of the special servicer,
maximize the net after-tax proceeds to certificateholders. However, under no
circumstance may the special servicer allow the acquired mortgaged property to
cease to be a "Permitted Investment" under Section 860G(a)(5) of the Internal
Revenue Code.
Unless we state otherwise in the related prospectus supplement, and to the
extent permitted by then applicable laws, any tax on prohibited transactions,
particular contributions or Net Income From Foreclosure Property, and any state
or local income or franchise tax, that may be imposed on the REMIC will be borne
by the related trustee, tax administrator, master servicer, special servicer or
manager, in any case out of its own funds, provided that--
o the person has sufficient assets to do so, and
o the tax arises out of a breach of that person's obligations under
select provisions of the related Governing Document.
Any tax not borne by one of these persons would be charged against the
related trust resulting in a reduction in amounts payable to holders of the
related REMIC certificates.
Tax and Restrictions on Transfers of REMIC Residual Certificates to
Particular Organizations. If a REMIC residual certificate is transferred to a
Disqualified Organization, a tax will be imposed in an amount equal to the
product of:
o the present value of the total anticipated excess inclusions with
respect to the REMIC residual certificate for periods after the
transfer, and
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o the highest marginal federal income tax rate applicable to
corporations.
The value of the anticipated excess inclusions is 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.
The anticipated excess inclusions must be determined as of the date that
the REMIC residual certificate is transferred and must be based on:
o events that have occurred up to the time of the transfer,
o the prepayment assumption, and
o any required or permitted clean up calls or required liquidation
provided for in the related Governing Document.
The tax on transfers to Disqualified Organizations generally would be
imposed on the transferor of the REMIC residual certificate, except when the
transfer is through an agent for a Disqualified Organization. In that case, 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:
o the transferee furnishes to the transferor an affidavit that the
transferee is not a Disqualified Organization, and
o as of the time of the transfer, the transferor does not have actual
knowledge that the affidavit is false.
In addition, if a Pass-Through Entity includes in income excess inclusions
with respect to a REMIC residual certificate, and a Disqualified Organization is
the record holder of an interest in that entity, then a tax will be imposed on
that entity equal to the product of:
o the amount of excess inclusions on the certificate that are
allocable to the interest in the Pass-Through Entity held by the
Disqualified Organization, and
o 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 that Pass-Through Entity
furnishes to that Pass-Through Entity:
o the holder's social security number and a statement under penalties
of perjury that the social security number is that of the record
holder, or
o a statement under penalties of perjury that the record holder is not
a Disqualified Organization.
If an Electing Large Partnership holds a REMIC residual certificate, all
interests in the Electing Large Partnership are treated as held by Disqualified
Organizations for purposes of the tax imposed on pass-through entities described
in the second preceding paragraph. This tax on Electing Large Partnerships must
be paid even if each record holder of an interest in that partnership provides a
statement mentioned in the prior paragraph.
In addition, a person holding an interest in a Pass-Through Entity as a
nominee for another person will, with respect to that interest, be treated as a
Pass-Through Entity.
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Moreover, an entity will not qualify as a REMIC unless there are
reasonable arrangements designed to ensure that:
o the residual interests in the entity are not held by Disqualified
Organizations, and
o the information necessary for the application of the tax described
in this prospectus will be made available.
We will include in the related Governing Document restrictions on the
transfer of REMIC residual certificates and other provisions that are intended
to meet this requirement, and we will discuss those restrictions and provisions
in any prospectus supplement relating to the offering of any REMIC residual
certificate.
Termination. A REMIC will terminate immediately after the distribution
date following receipt by the REMIC of the final payment with respect to the
related 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 payment 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 payment on
that certificate is less than the REMIC residual certificateholder's adjusted
basis in the certificate, that holder should, but may not, be treated as
realizing a capital loss equal to the amount of that difference.
Reporting and Other Administrative Matters. Solely for purposes of the
administrative provisions of the Internal Revenue Code, a REMIC will be treated
as a partnership and holders of the related REMIC residual certificates will be
treated as partners. Unless we otherwise state in the related prospectus
supplement, the related tax administrator will file REMIC federal income tax
returns on behalf of the REMIC, and will be designated as and will act as or on
behalf of the tax matters person with respect to the REMIC in all respects.
As, or as agent for, the tax matters person, the related tax
administrator, subject to applicable notice requirements and various
restrictions and limitations, generally will have the authority to act on behalf
of the REMIC and the holders of the REMIC residual certificates in connection
with the administrative and judicial review of the REMIC's--
o income,
o deductions,
o gains,
o losses, and
o classification as a REMIC.
Holders of REMIC residual certificates generally will be required to
report these REMIC items consistently with their treatment on the related
REMIC's tax return. In addition, these holders may in some circumstances be
bound by a settlement agreement between the related tax administrator, as, or as
agent for, the tax matters person, and the IRS concerning any REMIC item.
Adjustments made to the REMIC's tax return may require these holders to make
corresponding adjustments on their returns. An audit of the REMIC's tax return,
or the adjustments resulting from that audit, could result in an audit of a
holder's return.
No REMIC will be registered as a tax shelter under section 6111 of the
Internal Revenue Code. Any person that holds a REMIC residual certificate as a
nominee for another person may be required to furnish to the related REMIC, in a
manner to be provided in Treasury regulations, the name and address of that
other person, as well as other information.
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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 or made readily available through electronic means to
individual holders of REMIC regular certificates and the IRS. Holders of REMIC
regular certificates that are--
o corporations,
o trusts,
o securities dealers, and
o various other non-individuals,
will be provided interest and original issue discount income information and the
information set forth in the following paragraphs. This information will be
provided upon request in accordance with the requirements of the applicable
regulations. The information must be provided by the later of:
o 30 days after the end of the quarter for which the information was
requested, or
o two weeks after the receipt of the request.
Reporting with respect to REMIC residual certificates, including--
o income,
o excess inclusions,
o investment expenses, and
o relevant information regarding qualification of the REMIC's assets,
will be made as required under the Treasury regulations, generally on a
quarterly basis.
As applicable, the REMIC regular certificate information reports will
include a statement of the adjusted issue price of the REMIC regular certificate
at the beginning of each accrual period. In addition, the reports will include
information required by regulations with respect to computing the accrual of any
market discount. Because exact computation of the accrual of market discount on
a constant yield method would require information relating to the holder's
purchase price that the REMIC may not have, the regulations only require that
information pertaining to the appropriate proportionate method of accruing
market discount be provided. See "--REMICs--Taxation of Owners of REMIC RegularCertificates--Market Discount."
Unless we otherwise specify in the related prospectus supplement, the
responsibility for complying with the foregoing reporting rules will be borne by
the related tax administrator for the subject REMIC.
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 Internal Revenue Code if recipients of these payments:
o fail to furnish to the payor information regarding, among other
things, their taxpayer identification numbers, or
o otherwise fail to establish an exemption from this tax.
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Any amounts deducted and withheld from a payment 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. Unless we otherwise disclose in
the related prospectus supplement, a holder of a REMIC regular certificate that
is--
o a foreign person, and
o 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 that certificate,
will normally not be subject to United States federal income or withholding tax
with respect to a payment on a REMIC regular certificate. To avoid withholding
or tax, that holder must comply with applicable identification requirements.
These requirements include delivery of a statement, signed by the
certificateholder under penalties of perjury, certifying that the
certificateholder is a foreign person and providing the name, address and any
other information with respect to the certificateholder as may be required by
regulations issued by the Treasury Department. 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.
For these purposes, a foreign person is anyone other than a U.S. Person.
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 person or
entity that owns directly or indirectly a 10% or greater interest in the related
REMIC residual certificates. If the holder does not qualify for exemption,
payments of interest, including payments in respect of accrued original issue
discount, to that holder may be subject to a tax rate of 30%, subject to
reduction under any applicable tax treaty.
It is possible, under regulations promulgated under Section 881 of the
Internal Revenue Code concerning conduit financing transactions, that the
exemption from withholding taxes described above may also not be available to a
holder who is a foreign person and either--
o owns 10% or more of one or more underlying mortgagors, or
o if the holder is a controlled foreign corporation, is related to one
or more mortgagors in the applicable trust.
Further, it appears that a REMIC regular certificate would not be included
in the estate of a nonresident alien individual and would not be subject to
United States estate taxes. However, it is recommended that certificateholders
who are nonresident alien individuals consult their tax advisors concerning this
question.
Unless we otherwise state in the related prospectus supplement, the
related Governing Document will prohibit transfers of REMIC residual
certificates to investors that are:
o foreign persons, or
o U.S. Persons, if classified as a partnership under the Internal
Revenue Code, unless all of their beneficial owners are U.S. Persons
and the partnership agreement prohibits transfers of partnership
interests to non-U.S. Persons.
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GRANTOR TRUSTS
Classification of Grantor Trusts. With respect to each series of grantor
trust certificates, our counsel will deliver its opinion to the effect that,
assuming compliance with all provisions of the related Governing Document, the
related trust, or relevant portion of that trust, will be classified as a
grantor trust under subpart E, part I of subchapter J of the Internal Revenue
Code and not as a partnership or an association taxable as a corporation.
A grantor trust certificate may be classified as either of the following
types of certificate:
o a grantor trust fractional interest certificate representing an
undivided equitable ownership interest in the principal of the
mortgage loans constituting the related grantor trust, together with
interest, if any, on those loans at a pass-through rate; or
o a grantor trust strip certificate representing ownership of all or a
portion of the difference between--
1. interest paid on the mortgage loans constituting the related
grantor trust, minus
2. the sum of:
o normal administration fees, and
o interest paid to the holders of grantor trust fractional interest
certificates issued with respect to that grantor trust
A grantor trust strip certificate may also evidence a nominal ownership
interest in the principal of the mortgage loans constituting the related grantor
trust.
Characterization of Investments in Grantor Trust Certificates.
Grantor Trust Fractional Interest Certificates. Unless we otherwise
disclose in the related prospectus supplement, any offered certificates that are
grantor trust fractional interest certificates will generally represent
interests in:
o "loans . . . secured by an interest in real property" within the
meaning of Section 7701(a)(19)(C)(v) of the Internal Revenue Code,
but only to the extent that the underlying mortgage loans have been
made with respect to property that is used for residential or other
prescribed purposes;
o "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 Internal Revenue Code; and
o "real estate assets" within the meaning of Section 856(c)(5)(B) of
the Internal Revenue Code.
In addition, interest on offered certificates that are 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 Internal
Revenue Code.
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Grantor Trust Strip Certificates. Even if grantor trust strip certificates
evidence an interest in a grantor trust--
o 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 Internal Revenue Code,
o consisting of mortgage loans that are "real estate assets" within
the meaning of Section 856(c)(5)(B) of the Internal Revenue Code,
and
o 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 Internal Revenue Code,
it is unclear whether the grantor trust strip certificates, and the income from
those certificates, will be so characterized. We recommend that prospective
purchasers to which the characterization of an investment in grantor trust strip
certificates is material consult their tax advisors regarding whether the
grantor trust strip certificates, and the income from those certificates, will
be so characterized.
o 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
Internal Revenue Code.
Taxation of Owners of Grantor Trust Fractional Interest Certificates.General. Holders of a particular series of grantor trust fractional
interest certificates generally:
o will be required to report on their federal income tax returns their
shares of the entire income from the underlying mortgage loans,
including amounts used to pay reasonable servicing fees and other
expenses, and
o will be entitled to deduct their shares of any 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 interest paid or
accrued on the underlying mortgage loans.
Section 67 of the Internal Revenue Code allows an individual, estate or
trust holding a grantor trust fractional interest certificate directly or
through some types of pass-through entities a deduction for any reasonable
servicing fees and expenses only to the extent that the total of the holder's
miscellaneous itemized deductions exceeds two percent of the holder's adjusted
gross income.
Section 68 of the Internal Revenue Code currently reduces the amount of
itemized deductions otherwise allowable for an individual whose adjusted gross
income exceeds a specified amount. The Economic Growth and Tax Relief
Reconciliation Act of 2001 repeals the Section 68 overall limitation on itemized
deductions. Subject to a sunset provision, the repeal is phased-in over five
years as follows. The otherwise applicable Section 68 overall limitation on
itemized deductions described above is (i) reduced by one-third for taxable
years beginning in 2006 and 2007, (ii) reduced by two-thirds for taxable years
beginning in 2008 and 2009, (iii) not applicable for taxable years beginning in
2010 and (iv) applicable without reduction pursuant to a sunset provision for
taxable years beginning in 2011.
The amount of additional taxable income reportable by holders of grantor
trust fractional interest certificates who are subject to the limitations of
either Section 67 or Section 68 of the Internal Revenue Code may be substantial.
Further, certificateholders, other than corporations, subject to the alternative
minimum tax may not deduct miscellaneous itemized deductions in determining
their alternative minimum taxable income.
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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, any fees and expenses should be allocated among
those classes of grantor trust certificates. The method of this allocation
should recognize that each class benefits from the related services. In the
absence of statutory or administrative clarification as to the method to be
used, we currently expect that information returns or reports to the IRS and
certificateholders will be based on a method that allocates these fees and
expenses among classes of grantor trust certificates with respect to each period
based on the payments made to each 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 Internal Revenue Code. Grantor trust
fractional interest certificates may be subject to those rules if:
o a class of grantor trust strip certificates is issued as part of the
same series, or
o we or any of our affiliates retain, for our or its own account or
for purposes of resale, a right to receive a specified portion of
the interest payable on an underlying mortgage loan.
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 mortgage loans that constitutes a stripped coupon. We will include
in the related prospectus supplement information regarding servicing fees paid
out of the assets of the related trust to:
o a master servicer,
o a special servicer,
o any sub-servicer, or
o their respective affiliates.
With respect to certain categories of debt instruments, Section 1272(a)(6)
of the Internal Revenue Code requires the use of a reasonable prepayment
assumption in accruing original issue discount, and adjustments in the accrual
of original issue discount when prepayments do not conform to the prepayment
assumption.
Legislation enacted in 1997 extended the scope of that section to cover
investments in any pool of debt instruments the yield on which may be affected
by reason of prepayments. The precise application of Section 1272(a)(6) of the
Internal Revenue Code to pools of debt instruments is unclear in certain
respects. For example, it is uncertain whether a prepayment assumption will be
applied collectively to all of a taxpayer's investments in these pools of debt
instruments, or on an investment-by-investment basis. Similarly, it is not clear
whether the assumed prepayment rate as to investments in grantor trust
fractional interest certificates is to be determined based on conditions at the
time of the first sale of the certificate or, with respect to any holder, at the
time of purchase of the certificate by that holder.
We recommend that certificateholders consult their tax advisors concerning
reporting original issue discount, market discount and premium with respect to
grantor trust fractional interest certificates.
In light of the application of Section 1286 of the Internal Revenue Code,
a beneficial owner of a stripped bond generally will be required to compute
accruals of original issue discount based on its yield, possibly taking into
account its own prepayment assumption. The information necessary to perform the
related calculations for information reporting purposes, however, generally will
not be available to the trustee. Accordingly, any information reporting provided
by the trustee with respect to these stripped bonds, which information will be
based on pricing information as of the closing date, will largely fail to
reflect the accurate accruals of original issue discount for these certificates.
Prospective investors therefore should be aware that the timing of accruals of
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original issue discount applicable to a stripped bond generally will be
different than that reported to holders and the IRS. Prospective investors
should consult their own tax advisors regarding their obligation to compute and
include in income the correct amount of original issue discount accruals and any
possible tax consequences to them if they should fail to do so.
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
Internal Revenue Code. This is subject, however, to the discussion below
regarding:
o the treatment of some stripped bonds as market discount bonds, and
o de minimis market discount.
See "--Grantor Trusts--Taxation of Owners of Grantor Trust FractionalInterest Certificates-- Market Discount" below.
The holder of a grantor trust fractional interest certificate will report
interest income from its grantor trust fractional interest certificate for each
month to the extent it constitutes "qualified stated interest" in accordance
with its normal method of accounting. See "REMICs--Taxation of Owners of REMICRegular Certificates--Original Issue Discount" in this prospectus for a
description of qualified stated interest.
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 that
purchaser of the grantor trust fractional interest certificate. The stated
redemption price of a grantor trust fractional interest certificate will be the
sum of all payments to be made on that certificate, other than qualified stated
interest, if any, and the certificate's share of reasonable servicing fees and
other expenses.
See "--Grantor Trusts--Taxation of Owners of Grantor Trust FractionalInterest Certificates--If Stripped Bond Rules Do Not Apply" for a definition of
"qualified stated interest." In general, the amount of that income that accrues
in any month would equal the product of:
o the holder's adjusted basis in the grantor trust fractional interest
certificate at the beginning of the related month, as defined in
"--Grantor Trusts--Sales of Grantor Trust Certificates," and
o the yield of that grantor trust fractional interest certificate to
the holder.
The yield would be computed at the rate, that, if used to discount the
holder's share of future payments on the related mortgage loans, would cause the
present value of those future payments to equal the price at which the holder
purchased the certificate. This rate is compounded based on the regular interval
between distribution dates. In computing yield under the stripped bond rules, a
certificateholder's share of future payments on the related mortgage loans will
not include any payments made with respect to any ownership interest in those
mortgage loans retained by us, a master servicer, a special servicer, a
sub-servicer or our or their respective affiliates, but will include the
certificateholder's share of any reasonable servicing fees and other expenses
and is based generally on the method described in Section 1272(a)(6) of the
Internal Revenue Code. The precise means of applying that method is uncertain in
various respects. See "--Grantor Trusts--Taxation of Owners of Grantor TrustFractional Interest Certificates--General."
In the case of a grantor trust fractional interest certificate acquired at
a price equal to the principal amount of the related mortgage loans allocable to
that 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 price less than or greater than the principal amount,
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respectively, the use of a reasonable prepayment assumption would increase or
decrease the yield. Therefore, the use of this prepayment assumption would
accelerate or decelerate, respectively, the reporting of income.
In the absence of statutory or administrative clarification, we currently
expect that information reports or returns to the IRS and certificateholders
will be based on:
o a prepayment assumption determined when certificates are offered and
sold under this prospectus, which we will disclose in the related
prospectus supplement, and
o a constant yield computed using a representative initial offering
price for each class of certificates.
However, neither we nor any other person will make any representation
that--
o the mortgage loans in any of our trusts will in fact prepay at a
rate conforming to the prepayment assumption used or any other rate,
or
o the prepayment assumption will not be challenged by the IRS on
audit.
Certificateholders also should bear in mind that the use of a
representative initial offering price will mean that the information returns or
reports that we send, 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. Accordingly, any purchaser of that 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:
o there is no original issue discount or only a de minimis amount of
original issue discount, or
o 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 related mortgage loans, 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
related mortgage loans, we will disclose that fact in the related prospectus
supplement. If the original issue discount or market discount on a grantor trust
fractional interest certificate determined under the stripped bond rules is less
than the product of:
o 0.25% of the stated redemption price, and
o the weighted average maturity of the related mortgage loans,
then the 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
discount and market discount described in "--Grantor Trusts--Taxation of Ownersof Grantor Trust Fractional Interest Certificates--If Stripped Bond Rules Do NotApply" 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 related mortgage loans in
accordance with the certificateholder's normal method of accounting. In that
case, the original issue discount rules will apply, even if
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the stripped bond rules do not apply, to a grantor trust fractional interest
certificate to the extent it evidences an interest in mortgage loans issued with
original issue discount.
The original issue discount, if any, on mortgage loans will equal the
difference between:
o the stated redemption price of the mortgage loans, and
o their issue price.
For a definition of "stated redemption price," see "--REMICs--Taxation ofOwners of REMIC Regular Certificates--Original Issue Discount" above. In
general, the issue price of a mortgage loan will be the amount received by the
borrower from the lender under the terms of the mortgage loan. If the borrower
separately pays points to the lender that are not paid for services provided by
the lender, such as commitment fees or loan processing costs, the amount of
those points paid reduces the issue price.
The stated redemption price of a mortgage loan will generally equal its
principal amount. The determination as to whether original issue discount will
be considered to be de minimis will be calculated using the same test as in the
REMIC discussion. See "--REMICs--Taxation of Owners of REMIC RegularCertificates--Original Issue Discount" above.
In the case of mortgage loans bearing adjustable or variable interest
rates, we will describe in the related prospectus supplement the manner in which
these rules will be applied with respect to the mortgage loans by the related
trustee or master servicer, as applicable, in preparing information returns to
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 generally on the method
described in Section 1272(a)(6) of the Internal Revenue Code. The precise means
of applying that method is uncertain in various respects, however. See
"--Grantor Trusts--Taxation of Owners of Grantor Trust Fractional InterestCertificates--General."
A purchaser of a grantor trust fractional interest certificate may
purchase the grantor trust fractional interest certificate at a cost less than
the certificate's allocable portion of the total remaining stated redemption
price of the underlying mortgage loans. In that case, the purchaser will also be
required to include in gross income the certificate's daily portions of any
original issue discount with respect to those mortgage loans. However, each
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 underlying
mortgage loans. The reduction will be approximately in proportion to the ratio
that the excess bears to the certificate's allocable portion of the total
original issue discount remaining to be accrued on those mortgage loans.
The adjusted issue price of a mortgage loan on any given day equals the
sum of:
o the adjusted issue price or the issue price, in the case of the
first accrual period, of the mortgage loan at the beginning of the
accrual period that includes that day, and
o the daily portions of original issue discount for all days during
the accrual period prior to that day.
The adjusted issue price of a mortgage loan at the beginning of any
accrual period will equal:
o the issue price of the mortgage loan, increased by
o the total amount of original issue discount with respect to the
mortgage loan that accrued in prior accrual periods, and reduced by
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o the amount of any payments made on the mortgage loan in prior
accrual periods of amounts included in its stated redemption price.
In the absence of statutory or administrative clarification, we currently
expect that information reports or returns to the IRS and certificateholders
will be based on:
o a prepayment assumption determined when the certificates are offered
and sold under this prospectus and disclosed in the related
prospectus supplement, and
o a constant yield computed using a representative initial offering
price for each class of certificates.
However, neither we nor any other person will make any representation
that--
o the mortgage loans will in fact prepay at a rate conforming to the
prepayment assumption or any other rate, or
o the prepayment assumption will not be challenged by the IRS on
audit.
Certificateholders also 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.
Market Discount. If the stripped bond rules do not apply to a grantor
trust fractional interest certificate, a certificateholder may be subject to the
market discount rules of Sections 1276 through 1278 of the Internal Revenue Code
to the extent an interest in a mortgage loan is considered to have been
purchased at a market discount. A mortgage loan is considered to have been
purchased at a market discount if--
o in the case of a mortgage loan issued without original issue
discount, it is purchased at a price less than its remaining stated
redemption price, or
o in the case of a mortgage loan issued with original issue discount,
it is purchased at a price less than its adjusted issue price.
If market discount is in excess of a de minimis amount, the holder
generally must include in income in each month the amount of the discount that
has accrued, under the rules described below, through that month that has not
previously been included in income. However, the inclusion will be 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, for accrual method certificateholders, due to the trust 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. Such market discount will be accrued based generally on the method
described in Section 1272(a)(6) of the Internal Revenue Code. The precise means
of applying that method is uncertain in various respects, however. See "GrantorTrusts--Taxation of Owners of Grantor Trust Fractional InterestCertificates--General."
We recommend that certificateholders consult their own tax advisors
concerning accrual of market discount with respect to grantor trust fractional
interest certificates. Certificateholders should also refer to the related
prospectus supplement to determine whether and in what manner the market
discount will apply to the underlying mortgage loans purchased at a market
discount.
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To the extent that the underlying mortgage loans provide for periodic
payments of stated redemption price, you may be required to include market
discount in income at a rate that is not significantly slower than the rate at
which that 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 under "--REMICs--Taxation of Owners of REMIC RegularCertificates--Original Issue Discount" above.
Further, under the rules described under "--REMICs--Taxation of Owners ofREMIC 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 underlying mortgage loans.
Premium. If a certificateholder is treated as acquiring the underlying
mortgage loans at a premium, which is a price in excess of their remaining
stated redemption price, the certificateholder may elect under Section 171 of
the Internal Revenue Code to amortize the portion of that premium allocable to
mortgage loans originated after September 27, 1985 using a constant yield
method. 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:
o be allocated among the payments of stated redemption price on the
mortgage loan, and
o be allowed as a deduction as those payments are made or, for an
accrual method certificateholder, due.
It appears that a prepayment assumption should be used in computing
amortization of premium allowable under Section 171 of the Internal Revenue Code
similar to that described for calculating the accrual of market discount of
grantor trust fractional interest certificates based generally on the method
described in Section 1272(a)(6) of the Internal Revenue Code. The precise means
of applying that method is uncertain in various respects, however. See "GrantorTrusts--Taxation of Owners of Grantor Trust Fractional InterestCertificates--General."
Taxation of Owners of Grantor Trust Strip Certificates. The stripped
coupon rules of section 1286 of the Internal Revenue Code will apply to the
grantor trust strip certificates. Except as described above under "--GrantorTrusts--Taxation of Owners of Grantor Trust Fractional Interest Certificates--IfStripped Bond Rules Apply," no regulations or published rulings under Section
1286 of the Internal Revenue 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, we recommend that you consult your tax advisors
concerning the method to be used in reporting income or loss with respect to
those certificates.
The Treasury regulations promulgated under the original discount rules do
not apply to stripped coupons, although they provide general guidance as to how
the original issue discount sections of the Internal Revenue Code will be
applied.
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, you would include as
interest income in each month an amount equal to the product of your adjusted
basis in the grantor trust strip certificate at the beginning of that month and
the yield of the grantor trust strip certificate to you. This yield would be
calculated based on:
o the price paid for that grantor trust strip certificate by you, and
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o the projected payments remaining to be made on that grantor trust
strip certificate at the time of the purchase, plus
o an allocable portion of the projected servicing fees and expenses to
be paid with respect to the underlying mortgage loans.
Such yield will accrue based generally on the method described in Section
1272(a)(6) of the Internal Revenue Code. The precise means of applying that
method is uncertain in various respects, however. See "Grantor Trusts--Taxationof Owners of Grantor Trust Fractional Interest Certificates--General."
If the method for computing original issue discount under Section
1272(a)(6) results in a negative amount of original issue discount as to any
accrual period with respect to a grantor trust strip certificate, the amount of
original issue discount allocable to that accrual period will be zero. That is,
no current deduction of the negative amount will be allowed to you. You will
instead only be permitted to offset that negative amount against future positive
original issue discount, if any, attributable to that certificate. Although not
free from doubt, it is possible that you may be permitted to deduct a loss to
the extent his or her basis in the certificate exceeds the maximum amount of
payments you could ever receive with respect to that certificate. However, the
loss may be a capital loss, which is limited in its deductibility. The foregoing
considerations are particularly relevant to grantor trust certificates with no,
or disproportionately small, amounts of principal, which can have negative
yields under circumstances that are not default related. See "RISK FACTORS--The
Investment Performance of Your Offered Certificates Will Depend Upon Payments,
Defaults and Losses on the Underlying Mortgage Loans; and Those Payments,
Defaults and Losses May Be Highly Unpredictable" above.
The accrual of income on the grantor trust strip certificates will be
significantly slower using a prepayment assumption than if yield is computed
assuming no prepayments. In the absence of statutory or administrative
clarification, we currently expect that information returns or reports to the
IRS and certificateholders will be based on:
o the prepayment assumption we will disclose in the related prospectus
supplement, and
o a constant yield computed using a representative initial offering
price for each class of certificates.
However, neither we nor any other person will make any representation
that--
o the mortgage loans in any of our trusts will in fact prepay at a
rate conforming to the prepayment assumption or at any other rate or
o the prepayment assumption will not be challenged by the IRS on
audit.
We recommend that prospective purchasers of the grantor trust strip
certificates consult their tax advisors regarding the use of the prepayment
assumption.
Certificateholders also 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.
Sales of Grantor Trust Certificates. Any gain or loss recognized on the
sale or exchange of a grantor trust certificate by an investor who holds that
certificate as a capital asset, will be capital gain or loss, except as
described below in this "--Sales of Grantor Trust Certificates" subsection. The
amount recognized equals the difference between:
o the amount realized on the sale or exchange of a grantor trust
certificate, and
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o its adjusted basis.
The adjusted basis of a grantor trust certificate generally will equal:
o its cost, increased by
o any income reported by the seller, including original issue discount
and market discount income, and reduced, but not below zero, by
o any and all previously reported losses, amortized premium, and
payments with respect to that grantor trust certificate.
As of the date of this prospectus, the Internal Revenue Code provides for
lower rates as to long-term capital gains than those applicable to the
short-term capital gains and ordinary income realized or received by
individuals. No similar rate differential exists for corporations. In addition,
the distinction between a capital gain or loss and ordinary income or loss
remains relevant for other purposes.
Gain or loss from the sale of a grantor trust certificate may be partially
or wholly ordinary and not capital in some circumstances. Gain attributable to
accrued and unrecognized market discount will be treated as ordinary income.
Gain or loss recognized by banks and other financial institutions subject to
Section 582(c) of the Internal Revenue Code will be treated as ordinary income.
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 Internal Revenue 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 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.
The Internal Revenue Code requires the recognition of gain upon the
constructive sale of an appreciated financial position. A constructive sale of
an appreciated financial position occurs if a taxpayer enters into a transaction
or series of transactions that have the effect of substantially eliminating the
taxpayer's risk of loss and opportunity for gain with respect to the financial
instrument. Debt instruments that--
o entitle the holder to a specified principal amount,
o pay interest at a fixed or variable rate, and
o are not convertible into the stock of the issuer or a related party,
cannot be the subject of a constructive sale for this purpose. Because most
grantor trust certificates meet this exception, this Section will not apply to
most grantor trust certificates. However, some grantor trust certificates have
no, or a disproportionately small amount of, principal and these certificates
can be the subject of a constructive sale.
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 relevant taxable year. This election
would be done 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.
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Grantor Trust Reporting. Unless otherwise provided in the related
prospectus supplement, the related tax administrator will furnish or make
readily available through electronic means to each holder of a grantor trust
certificate with each payment a statement setting forth the amount of the
payment allocable to principal on the underlying mortgage loans and to interest
on those loans at the related pass-through rate. In addition, the related tax
administrator will furnish, within a reasonable time after the end of each
calendar year, to each person or entity that was the holder of a grantor trust
certificate at any time during that year, information regarding:
o the amount of servicing compensation received by a master servicer
or special servicer, and
o all other customary factual information the reporting party deems
necessary or desirable to enable holders of the related grantor
trust certificates to prepare their tax returns.
The reporting party 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 grantor trust certificates are uncertain in various respects, there
is no assurance the IRS will agree with the information reports of those items
of income and expense. Moreover, those 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.
On January 24, 2006, the Treasury Department published final regulations,
which establish a reporting framework for interests in "widely held fixed
investment trusts" and place the responsibility of reporting on the person in
the ownership chain who holds an interest for a beneficial owner. A widely-held
fixed investment trust is defined as an arrangement classified as a "trust"
under Treasury regulation section 301.7701-4(c) in which any interest is held by
a middleman, which includes, but is not limited to:
o a custodian of a person's account,
o a nominee, and
o a broker holding an interest for a customer in street name.
The trustee, or its designated agent, will be required to calculate and
provide information to requesting persons with respect to the trust in
accordance with these new regulations beginning with respect to the 2007
calendar year. The trustee (or its designated agent), or the applicable
middleman (in the case of interests held through a middleman), will be required
to file information returns with the IRS and provide tax information statements
to holders in accordance with these new regulations after December 31, 2007.
Backup Withholding. In general, the rules described under
"--REMICs--Backup Withholding with Respect to REMIC Certificates" above will
also apply to grantor trust certificates.
Foreign Investors. In general, the discussion with respect to REMIC
regular certificates under "--REMICs--Foreign Investors in REMIC Certificates"
above applies to grantor trust certificates. However, unless we otherwise
specify in the related prospectus supplement, grantor trust certificates will be
eligible for exemption from U.S. withholding tax, subject to the conditions
described in the discussion above, 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 Internal Revenue Code from United
States withholding tax, and the certificate is not held in connection with a
certificateholder's trade or business in the United States, the certificate will
not be subject to United States estate taxes in the estate of a nonresident
alien individual.
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STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in "FEDERALINCOME TAX CONSEQUENCES," potential investors should consider the state and
local tax consequences concerning the offered certificates. State tax law may
differ substantially from the corresponding federal law, and the discussion
above does not purport to describe any aspect of the tax laws of any state or
other jurisdiction. Therefore, we recommend that prospective investors consult
their tax advisors with respect to the various tax consequences of investments
in the offered certificates.
ERISA CONSIDERATIONSGENERAL
The following description is general in nature, is not intended to be
all-inclusive, is based on the law and practice existing at the date of this
document and is subject to any subsequent changes therein. In view of the
individual nature of ERISA and Internal Revenue Code consequences, each
potential investor that is a Plan is advised to consult its own legal advisor
with respect to the specific ERISA and Internal Revenue Code consequences of
investing in the offered certificates and to make its own independent decision.
The following is merely a summary and should not be construed as legal advice.
ERISA imposes various requirements on--
o ERISA Plans, and
o persons that are fiduciaries with respect to ERISA Plans,
in connection with the investment of the assets of an ERISA Plan. For purposes
of this discussion, ERISA Plans include corporate pension and profit sharing
plans as well as separate accounts and collective investment funds, including as
applicable, insurance company general accounts, in which other ERISA Plans are
invested.
Governmental plans and, if they have not made an election under Section
410(d) of the Internal Revenue Code, church plans are not subject to ERISA
requirements. However, those plans may be subject to provisions of other
applicable federal or state law that are materially similar to the provisions of
ERISA or the Internal Revenue Code discussed in this section. Any of those plans
which is qualified and exempt from taxation under Sections 401(a) and 501(a) of
the Internal Revenue Code, moreover, is subject to the prohibited transaction
rules in Section 503 of the Internal Revenue Code.
ERISA imposes general fiduciary requirements on a fiduciary that is
investing the assets of an ERISA Plan, including--
o investment prudence and diversification, and
o compliance with the investing ERISA Plan's governing documents.
Section 406 of ERISA also prohibits a broad range of transactions
involving the assets of an ERISA Plan and a Party in Interest with respect to
that ERISA Plan, unless a statutory, regulatory or administrative exemption
exists. Section 4975 of the Internal Revenue Code contains similar prohibitions
applicable to the assets of an I.R.C. Plan.
The types of transactions between Plans and Parties in Interest that are
prohibited include:
o sales, exchanges or leases of property;
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o loans or other extensions of credit; and
o the furnishing of goods and services.
Parties in Interest that participate in a prohibited transaction may be
subject to an excise tax imposed under Section 4975 of the Internal Revenue Code
or a penalty imposed under Section 502(i) of ERISA, unless a statutory,
regulatory or administrative exemption is available. In addition, the persons
involved in the prohibited transaction may have to cancel the transaction and
pay an amount to the affected Plan for any losses realized by that Plan or
profits realized by those persons. In addition, individual retirement accounts
involved in the prohibited transaction may be disqualified, resulting in adverse
tax consequences to the owner of the account.
PLAN ASSET REGULATIONS
A Plan's investment in offered certificates may cause the underlying
mortgage assets and other assets of the related trust to be deemed assets of
that Plan. Section 2510.3-101 of the Plan Asset Regulations, as modified by
Section 3(42) of ERISA, provides that when a Plan acquires an equity interest in
an entity, the assets of that Plan include both that equity interest and an
undivided interest in each of the underlying assets of the entity, unless an
exception applies. One exception is that the equity participation in the entity
by benefit plan investors, which include both Plans and entities using assets of
Plans, is not significant. The equity participation by benefit plan investors
will be significant on any date if 25% or more of the value of any class of
equity interests in the entity is held by benefit plan investors. The percentage
owned by benefit plan investors is determined by excluding the investments of
the following persons:
1. those with discretionary authority or control over the assets of the
entity,
2. those who provide investment advice directly or indirectly for a fee
with respect to the assets of the entity, and
3. those who are affiliates of the persons described in the preceding
clauses 1. and 2.
In the case of one of our trusts, investments by us, by the related
trustee, the related master servicer, the related special servicer or any other
party with discretionary authority over the related trust assets, or by the
affiliates of these persons, will be excluded.
A fiduciary of an investing Plan is any person who--
o has discretionary authority or control over the management or
disposition of the assets of the Plan, or
o provides investment advice with respect to the assets of the Plan
for a fee.
If the mortgage and other assets included in one of our trusts are Plan
assets, then any party exercising management or discretionary control regarding
those assets, such as the related trustee, master servicer or special servicer,
or affiliates of any of these parties, may be--
o deemed to be a fiduciary with respect to the investing Plan, and
o subject to the fiduciary responsibility provisions of ERISA.
In addition, if the mortgage and other assets included in one of our trusts are
Plan assets, then the operation of that trust may involve prohibited
transactions under ERISA or Section 4975 of the Internal Revenue Code. For
example, if a borrower with respect to a mortgage loan in that trust is a Party
in Interest to an investing Plan, then
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the purchase by that Plan of offered certificates evidencing interests in that
trust could be a prohibited loan between that Plan and the Party in Interest.
The Plan Asset Regulation provides that when a Plan purchases a
"guaranteed governmental mortgage pool certificate," the assets of the Plan
include the certificate but do not include any of the mortgages underlying the
certificate. The Plan Asset Regulation includes in the definition of a
"guaranteed governmental mortgage pool certificate" some certificates issued
and/or guaranteed by Freddie Mac, Ginnie Mae or Fannie Mae. Accordingly, even if
these types of mortgaged-backed securities were deemed to be assets of a Plan,
the underlying mortgages would not be treated as assets of that Plan. Private
label mortgage participations, mortgage pass-through certificates or other
mortgage-backed securities are not "guaranteed governmental mortgage pool
certificates" within the meaning of the Plan Asset Regulation.
In addition, the acquisition or holding of offered certificates by or on
behalf of a Plan could give rise to a prohibited transaction if we or the
related trustee, master servicer or special servicer or any related underwriter,
sub-servicer, tax administrator, manager, borrower or obligor under any credit
enhancement mechanism, or one of their affiliates, is or becomes a Party in
Interest with respect to an investing Plan.
If you are the fiduciary of a Plan, you are encouraged to consult your
counsel and review the ERISA discussion in the related prospectus supplement
before purchasing any offered certificates on behalf of or with assets of the
Plan.
PROHIBITED TRANSACTION EXEMPTIONS
If you are a Plan fiduciary, then, in connection with your deciding
whether to purchase any of the offered certificates on behalf of, or with assets
of, a Plan, you should consider the availability of one of the following
prohibited transaction class exemptions issued by the U.S. Department of Labor:
o Prohibited Transaction Class Exemption 75-1, which exempts
particular transactions involving Plans and broker-dealers,
reporting dealers and banks;
o Prohibited Transaction Class Exemption 90-1, which exempts
particular transactions between insurance company separate accounts
and Parties in Interest;
o Prohibited Transaction Class Exemption 91-38, which exempts
particular transactions between bank collective investment funds and
Parties in Interest;
o Prohibited Transaction Class Exemption 84-14, which exempts
particular transactions effected on behalf of an ERISA Plan by a
"qualified professional asset manager;"
o Prohibited Transaction Class Exemption 95-60, which exempts
particular transactions between insurance company general accounts
and Parties in Interest; and
o Prohibited Transaction Class Exemption 96-23, which exempts
particular transactions effected on behalf of an ERISA Plan by an
"in-house asset manager."
In addition, the Pension Protection Act of 2006 provides a statutory
exemption under Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code
from certain prohibited transactions between a Plan or person using assets of a
Plan and a person or entity that is a party in interest or disqualified person
to such Plan solely by reason of providing services to such plan or entity
(other than a party in interest or a disqualified person that is a fiduciary, or
its affiliate, that has or exercises discretionary authority or control or
renders investment advice with respect to the assets of the plan or entity
involved in the transaction), provided that there is adequate consideration for
the transaction.
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We cannot provide any assurance that any of these exemptions will apply
with respect to any particular investment by or on behalf of a Plan in any class
of offered certificates. Furthermore, even if any of them were deemed to apply,
that particular class exemption may not apply to all transactions that could
occur in connection with the investment. The prospectus supplement with respect
to the offered certificates of any series may contain additional information
regarding the availability of other exemptions with respect to those
certificates.
UNDERWRITER'S EXEMPTION
It is expected that Merrill Lynch, Pierce, Fenner & Smith Incorporated
will be the sole underwriter or the lead or co-lead managing underwriter in each
underwritten offering of certificates made by this prospectus. The U.S.
Department of Labor issued PTE 90-29 to Merrill Lynch, Pierce, Fenner & Smith
Incorporated. Subject to the satisfaction of the conditions specified in that
exemption, PTE 90-29, as most recently amended by PTE 2007-5, generally exempts
from the application of the prohibited transaction provisions of ERISA and
Section 4975 of the Internal Revenue Code, various transactions relating to,
among other things--
o the servicing and operation of some mortgage asset pools, such as
the types of mortgage asset pools that will be included in our
trusts, and
o the purchase, sale and holding of some certificates such as
particular classes of the offered certificates that evidence
interests in those pools and are underwritten by Merrill Lynch,
Pierce, Fenner & Smith Incorporated or any person affiliated with
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
The related prospectus supplement will state whether PTE 90-29 is or may
be available with respect to any offered certificates underwritten by Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
INSURANCE COMPANY GENERAL ACCOUNTS
Section 401(c) of ERISA provides that the fiduciary and prohibited
transaction provisions of ERISA and the Internal Revenue Code do not apply to
transactions involving an insurance company general account where the assets of
the general account are not Plan assets. A Department of Labor regulation issued
under Section 401(c) of ERISA provides guidance for determining, in cases where
insurance policies supported by an insurer's general account are issued to or
for the benefit of a Plan on or before December 31, 1998, which general account
assets are Plan assets. That regulation generally provides that, if the
specified requirements are satisfied with respect to insurance policies issued
on or before December 31, 1998, the assets of an insurance company general
account will not be Plan assets.
Any assets of an insurance company general account which support insurance
policies issued to a Plan after December 31, 1998, or issued to a Plan on or
before December 31, 1998 for which the insurance company does not comply with
the requirements set forth in the Department of Labor regulation under Section
401(c) of ERISA, may be treated as Plan assets. In addition, because Section
401(c) of ERISA and the regulation issued under Section 401(c) of ERISA do not
relate to insurance company separate accounts, separate account assets are still
treated as Plan assets of Plans invested in the separate account. If you are an
insurance company and you are contemplating the investment of general account
assets in offered certificates, you should consult your legal counsel as to the
applicability of Section 401(c) of ERISA.
CONSULTATION WITH COUNSEL
If you are a fiduciary of a Plan and you intend to purchase offered
certificates on behalf of or with assets of that Plan, you should:
o consider your general fiduciary obligations under ERISA, and
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o consult with your legal counsel as to--
1. the potential applicability of ERISA and Section 4975 of the
Internal Revenue Code to that investment, and
2. the availability of any prohibited transaction exemption in
connection with that investment.
TAX EXEMPT INVESTORS
A Plan that is exempt from federal income taxation under Section 501 of
the Internal Revenue Code 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 Internal Revenue Code. All excess inclusions of a REMIC
allocated to a REMIC residual certificate held by a tax-exempt Plan will be
considered unrelated business taxable income and will be subject to federal
income tax.
See "FEDERAL INCOME TAX CONSEQUENCES--REMICs--Taxation of Owners of REMICResidual Certificates--Excess Inclusions" in this prospectus.
LEGAL INVESTMENT
If and to the extent specified in the related prospectus supplement,
certain classes of the offered certificates of any series will constitute
mortgage related securities for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended.
Generally, the only classes of offered certificates that will qualify as
"mortgage related securities" will be those that: (1) are rated in one of two
highest rating categories by at least one nationally recognized statistical
rating organization; and (2) are part of a series evidencing interests in a
trust fund consisting of loans originated by certain types of originators
specified in SMMEA and secured by first liens on real estate. The appropriate
characterization of offered certificates not qualifying as "mortgage related
securities" for purposes of SMMEA under various legal investment restrictions,
and thus the ability of investors subject to these restrictions to purchase such
certificates, may be subject to significant interpretive uncertainties. All
investors whose investment activities are subject to legal investment laws and
regulations, regulatory capital requirements, or review by regulatory
authorities are encouraged to consult with their own legal advisors in
determining whether and to what extent the offered certificates constitute legal
investments for them.
Mortgage related securities are legal investments for persons, trusts,
corporations, partnerships, associations, statutory trusts, and business
entities, including depository institutions, insurance companies, trustees and
pension funds--
o that are created or existing under the laws of the United States or
any state, including the District of Columbia and Puerto Rico, and
o whose authorized investments are subject to state regulations,
to the same extent that, under applicable law, obligations issued by or
guaranteed as to principal and interest by the United States or any of its
agencies or instrumentalities are legal investments for those entities.
Under SMMEA, a number of states enacted legislation, on or prior to the
October 3, 1991 cut-off for those enactments, limiting to various extents the
ability of some entities (in particular, insurance companies) to invest in
"mortgage related securities" secured by liens on residential, or mixed
residential and commercial properties, in most cases by requiring the affected
investors to rely solely upon existing state law, and not SMMEA. Pursuant to
Section 347 of the Riegle Community Development and Regulatory Improvement Act
of 1994, which amended the definition of "mortgage related security" to include,
in relevant part, certificates
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satisfying the rating and qualified originator requirements for "mortgage
related securities," but evidencing interests in a trust fund consisting, in
whole or in part, of first liens on one or more parcels of real estate upon
which are located one or more commercial structures, states were authorized to
enact legislation, on or before September 23, 2001, specifically referring to
Section 347 and prohibiting or restricting the purchase, holding or investment
by state-regulated entities in those types of certificates. Accordingly, the
investors affected by any state legislation overriding the preemptive effect of
SMMEA will be authorized to invest in offered certificates qualifying as
"mortgage related securities" only to the extent provided in that legislation.
SMMEA also amended the legal investment authority of federally chartered
depository institutions as follows:
o federal savings and loan associations and federal savings banks may
invest in, sell or otherwise deal in mortgage related securities
without limitation as to the percentage of their assets represented
by those securities; and
o federal credit unions may invest in mortgage related securities and
national banks may purchase mortgage related securities for their
own account without regard to the limitations generally applicable
to investment securities prescribed in 12 U.S.C. ss. 24 (Seventh),
subject in each case to the regulations that the applicable federal regulatory
authority may prescribe.
Effective December 31, 1996, the OCC amended 12 C.F.R. Part 1 to authorize
national banks to purchase and sell for their own account, without limitation as
to a percentage of the bank's capital and surplus, but subject to compliance
with certain general standards concerning "safety and soundness" and retention
of credit information in 12 C.F.R. ss. 1.5, some Type IV securities, which are
defined in 12 C.F.R. ss. 1.2(m) to include certain commercial mortgage-related
securities and residential mortgage-related securities. As defined, "commercial
mortgage-related security" and "residential mortgage-related security" mean, in
relevant part, a mortgage related security within the meaning of SMMEA, provided
that, in the case of a commercial mortgage-related security, it "represents
ownership of a promissory note or certificate of interest or participation that
is directly secured by a first lien on one or more parcels of real estate upon
which one or more commercial structures are located and that is fully secured by
interests in a pool of loans to numerous obligors." In the absence of any rule
or administrative interpretation by the OCC defining the term "numerous
obligors," we make no representation as to whether any class of offered
certificates will qualify as commercial mortgage-related securities, and thus as
Type IV securities, for investment by national banks.
The NCUA has adopted rules, codified at 12 C.F.R. Part 703, which permit
federal credit unions to invest in mortgage related securities (other than
stripped mortgage related securities, residual interests in mortgage related
securities and commercial mortgage related securities) under limited
circumstances, subject to compliance with general rules governing investment
policies and practices; however, credit unions approved for the NCUA's
"investment pilot program" under 12 C.F.R. ss. 703.19 may be able to invest in
those prohibited forms of securities, while "RegFlex credit unions" may invest
in commercial mortgage related securities under certain conditions pursuant to
12 C.F.R. ss. 742.4(b)(2).
The OTS has issued Thrift Bulletin 13a (December 1, 1998), "Management of
Interest Rate Risk, Investment Securities, and Derivatives Activities," and
Thrift Bulletin 73a (December 18, 2001), "Investing in Complex Securities,"
which thrift institutions subject to the jurisdiction of the OTS should consider
before investing in any of the offered certificates.
All depository institutions considering an investment in the offered
certificates should review the "Supervisory Policy Statement on Investment
Securities and End-User Derivatives Activities" of the Federal Financial
Institutions Examination Council, which has been adopted by the Board of
Governors of the Federal Reserve System, the FDIC, the OCC and the OTS effective
May 26, 1998, and by the NCUA effective October 1, 1998. That statement sets
forth general guidelines which depository institutions must follow in managing
risks,
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including market, credit, liquidity, operational (transaction), and legal risks,
applicable to all securities, including mortgage pass-through securities and
mortgage-derivative products used for investment purposes.
Investors whose investment activities are subject to regulation by federal
or state authorities should review rules, policies, and guidelines adopted from
time to time by those authorities before purchasing any offered certificates, as
certain classes may be deemed unsuitable investments, or may otherwise be
restricted, under those rules, policies, or guidelines (in certain instances
irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines, or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions that
may restrict or prohibit investment in securities that are not
"interest-bearing" or "income-paying," and, with regard to any offered
certificates issued in book-entry form, provisions that may restrict or prohibit
investments in securities that are issued in book-entry form.
Except as to the status of some classes as "mortgage related securities,"
we make no representations as to the proper characterization of any class of
offered certificates for legal investment, financial institution regulatory or
other purposes. Also, we make no representations as to the ability of particular
investors to purchase any class of offered certificates under applicable legal
investment restrictions. These uncertainties (and any unfavorable future
determinations concerning legal investment or financial institution regulatory
characteristics of the certificates) may adversely affect the liquidity of any
class of offered certificates. Accordingly, if your investment activities are
subject to legal investment laws and regulations, regulatory capital
requirements or review by regulatory authorities, you are encouraged to consult
with your legal advisor in determining whether and to what extent--
o the offered certificates of any class and series constitute legal
investments or are subject to investment, capital or other
restrictions; and
o if applicable, SMMEA has been overridden in your state.
USE OF PROCEEDS
Unless otherwise specified in the related prospectus supplement, the net
proceeds to be received from the sale of the offered certificates of any series
will be applied by us to the purchase of assets for the related trust or will be
used by us to (a) cover expenses related to that purchase and the issuance of
those certificates, including legal and accounting costs, rating agency fees,
registration fees, upfront fees of any master servicer, special servicer,
manager or trustee, and payments to any provider of credit support or a
derivative instrument, (b) fund any prefunding account, (c) fund any reserve
accounts or (d) make any initial deposits to the trust necessary to make
payments on the related certificates. We expect to sell the offered certificates
from time to time, but the timing and amount of offerings of those certificates
will depend on a number of factors, including the volume of mortgage assets
acquired by us, prevailing interest rates, availability of funds and general
market conditions.
METHOD OF DISTRIBUTION
The certificates offered by this prospectus and the related prospectus
supplements will be offered in series through one or more of the methods
described in the next paragraph. The prospectus supplement prepared for the
offered certificates of each series will describe the method of offering being
utilized for those certificates and will state the net proceeds to us from the
sale of those certificates.
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We intend that offered certificates will be offered through the following
methods from time to time. We further intend that offerings may be made
concurrently through more than one of these methods or that an offering of the
offered certificates of a particular series may be made through a combination of
two or more of these methods. The methods are as follows:
1. by negotiated firm commitment or best efforts underwriting and
public offering by one or more underwriters specified in the related
prospectus supplement;
2. by placements by us with institutional investors through dealers;
and
3. by direct placements by us with institutional investors.
In addition, if specified in the related prospectus supplement, the
offered certificates of a series may be offered in whole or in part to the
seller of the mortgage assets that would back those certificates. Furthermore,
the related trust assets for any series of offered certificates may include
other securities, the offering of which was registered under the registration
statement of which this prospectus is a part.
If underwriters are used in a sale of any offered certificates, other than
in connection with an underwriting on a best efforts basis, the offered
certificates will be acquired by the underwriters for their own account. These
certificates 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 managing underwriter or underwriters with respect to the offer and
sale of offered certificates of a particular series will be described 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 relevant prospectus
supplement.
Underwriters may receive compensation from us or from purchasers of the
offered certificates in the form of discounts, concessions or commissions.
Underwriters and dealers participating in the payment of the offered
certificates may be deemed to be underwriters in connection with those
certificates. In addition, any discounts or commissions received by them from us
and any profit on the resale of those offered certificates by them may be deemed
to be underwriting discounts and commissions under the Securities Act of 1933,
as amended.
It is anticipated that the underwriting agreement pertaining to the sale
of the offered certificates of any series will provide that--
o the obligations of the underwriters will be subject to various
conditions precedent,
o the underwriters will be obligated to purchase all the certificates
if any are purchased, other than in connection with an underwriting
on a best efforts basis, and
o in limited circumstances, we will indemnify the several underwriters
and the underwriters will indemnify us against civil liabilities
relating to disclosure in our registration statement, this
prospectus or any of the related prospectus supplements, including
liabilities under the Securities Act, or will contribute to payments
required to be made with respect to any liabilities.
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 us and purchasers of offered
certificates of that series.
We anticipate that the offered certificates will be sold primarily to
institutional investors. Purchasers of offered certificates, including dealers,
may, depending on the facts and circumstances of the purchases, be deemed to be
"underwriters" within the meaning of the Securities Act, in connection with
reoffers and sales by them of offered certificates. Holders of offered
certificates are encouraged to consult with their legal advisors in this regard
prior to any reoffer or sale.
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It is expected that Merrill Lynch, Pierce, Fenner & Smith Incorporated
will be the sole underwriter or the lead or co-lead managing underwriter in each
underwritten offering of certificates made by this prospectus. Merrill Lynch,
Pierce, Fenner & Smith Incorporated is an affiliate of Merrill Lynch Mortgage
Investors, Inc.
LEGAL MATTERS
Unless otherwise specified in the related prospectus supplement,
particular legal matters in connection with the certificates of each series,
including some federal income tax consequences, will be passed upon for us by--
o Thacher Proffitt & Wood LLP;
o Latham & Watkins LLP; or
o Cadwalader, Wickersham & Taft LLP.
FINANCIAL INFORMATION
A new trust will be formed with respect to each series of offered
certificates. None of those trusts will engage in any business activities or
have any assets or obligations prior to the issuance of the related series of
offered certificates. Accordingly, no financial statements with respect to any
trust will be included in this prospectus or in the related prospectus
supplement. We have determined that our financial statements will not be
material to the offering of any offered certificates.
RATING
It is a condition to the issuance of any class of offered certificates
that, at the time of issuance, at least one nationally recognized statistical
rating organization has rated those certificates in one of its generic rating
categories which signifies investment grade. Typically, the four highest rating
categories, within which there may be sub-categories or gradations indicating
relative standing, signify investment grade. We will, in the related prospectus
supplement, with respect to each class of offered certificates, identify the
applicable rating agency or agencies and specify the minimum rating(s) that must
be assigned thereto.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by the holders of all payments of interest and/or principal to which
they are entitled. These ratings address the structural, legal and
issuer-related aspects associated with the certificates, the nature of the
underlying mortgage assets and the credit quality of any third-party credit
enhancer. The rating(s) on a class of offered certificates will not represent
any assessment of--
o whether the price paid for those certificates is fair;
o whether those certificates are a suitable investment for any
particular investor;
o the tax attributes of those certificates or of the related trust;
o the yield to maturity or, if they have principal balances, the
average life of those certificates;
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o the likelihood or frequency of prepayments of principal on the
underlying mortgage loans;
o the degree to which the amount or frequency of prepayments on the
underlying mortgage loans might differ from those originally
anticipated;
o whether or to what extent the interest payable on those certificates
may be reduced in connection with interest shortfalls resulting from
the timing of voluntary prepayments;
o the likelihood that any amounts other than interest at the related
mortgage interest rates and principal will be received with respect
to the underlying mortgage loans; or
o if those certificates provide solely or primarily for payments of
interest, whether the holders, despite receiving all payments of
interest to which they are entitled, would ultimately recover their
initial investments in those certificates.
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.
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GLOSSARY
The following capitalized terms will have the respective meanings assigned
to them in this glossary whenever they are used in this prospectus.
"ADA" means the Americans with Disabilities Act of 1990, as amended.
"CERCLA" means the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Committee Report" means the Conference Committee Report accompanying the
Tax Reform Act of 1986.
"CPR" means an assumed constant rate of prepayment each month, which is
expressed on a per annum basis, relative to the then outstanding principal
balance of a pool of mortgage loans for the life of those loans.
"Disqualified Organization" means:
o the United States,
o any State or political subdivision of the United States,
o any foreign government,
o any international organization,
o any agency or instrumentality of the foregoing, except for
instrumentalities described in Section 168(h)(2)(D) of the Internal
Revenue Code or the Freddie Mac,
o any organization, other than a cooperative described in Section 521
of the Internal Revenue Code, that is exempt from federal income
tax, except if it is subject to the tax imposed by Section 511 of
the Internal Revenue Code, or
o any organization described in Section 1381(a)(2)(C) of the Internal
Revenue Code.
"DRA" means the Deficit Reduction Act of 2006.
"DTC" means The Depository Trust Company.
"Electing Large Partnership" means any partnership having more than 100
members during the preceding tax year which elects to apply simplified reporting
provisions under the Internal Revenue Code, except for some service partnerships
and commodity pools.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plan" means any employee benefit plan that is subject to the
fiduciary responsibility provisions of ERISA.
"Euroclear Operator" means Euroclear Bank, S.A./N.V., as operator of the
Euroclear System, or any successor entity.
"Euroclear Terms and Conditions" means the Terms and Conditions Governing
Use of Euroclear and the related Operating Procedures of the Euroclear System
and, to the extent that it applies to the operation of the Euroclear System,
Belgian law.
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"Exchange Act" means the Exchange Act of 1934, as amended.
"Fannie Mae" means the Federal National Mortgage Association.
"Farmer Mac" means the Federal Agricultural Mortgage Corporation.
"FASB 140" means the Financial Accounting Standards Board's Statement No.
140, entitled "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities," issued in September 2002.
"FDIC" means the Federal Deposit Insurance Corporation.
"Financial Intermediary" means a brokerage firm, bank, thrift institution
or other financial intermediary that maintains an account of a beneficial owner
of securities.
"Freddie Mac" means the Federal Home Loan Mortgage Corporation.
"Ginnie Mae" means the Government National Mortgage Association.
"Governing Document" means the pooling and servicing agreement or other
similar agreement or collection of agreements, which governs the issuance of a
series of offered certificates.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"I.R.C. Plan" means a plan, arrangement or account that is subject to
Section 4975 of the Internal Revenue Code, including individual retirement
accounts and certain Keogh plans.
"IRS" means the Internal Revenue Service.
"Lender Liability Act" means the Asset Conservation Lender Liability and
Deposit Insurance Act of 1996, as amended.
"Net Income From Foreclosure Property" means income from foreclosure
property other than qualifying rents and other qualifying income for a REIT.
"NCUA" means the National Credit Union Administration.
"OCC" means the Office of the Comptroller of the Currency.
"OTS" means the Office of Thrift Supervision.
"Party In Interest" means any person that is a "party in interest" within
the meaning of Section 3(14) of ERISA or a "disqualified person" within the
meaning of Section 4975(e)(2) of the Internal Revenue Code.
"Pass-Through Entity" means any:
o regulated investment company,
o real estate investment trust,
o trust,
o partnership, or
o other entities described in Section 860E(e)(6) of the Internal
Revenue Code.
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"Permitted Investments" means U.S. government securities and other
investment grade obligations, including:
o 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 (having original maturities of not
more than 365 days), provided that those obligations are backed by
the full faith and credit of the United States;
o repurchase agreements or obligations with respect to any security
described in the preceding bullet (having original maturities of not
more than 365 days), provided that the short-term deposit or debt
obligations of the party agreeing to repurchase the subject security
are investment grade rated;
o federal funds, unsecured uncertified certificates of deposit, time
deposits, demand deposits and bankers' acceptances of any bank or
trust company organized under the laws of the United States or any
state thereof (having original maturities of not more than 365
days), the short-term obligations of which are investment grade
rated;
o commercial paper (including both non-interest bearing discount
obligations and interest-bearing obligations and having original
maturities of not more than 365 days) of any corporation or other
entity organized under the laws of the United States or any state
thereof which commercial paper is investment grade rated;
o money market funds which are rated in one of the four highest
applicable rating categories of a nationally recognized statistical
rating organization; and
o any other obligation or security acceptable to each applicable
rating agency for the related offered certificates, evidence of
which acceptability will be provided in writing by each of those
rating agencies to, among others, the related trustee;
provided that (1) no investment described above may evidence either the right to
receive (x) only interest with respect to such investment or (y) a yield to
maturity greater than 120% of the yield to maturity at par of the underlying
obligations; and (2) no investment described above may be purchased at a price
greater than par if such investment may be prepaid or called at a price less
than its purchase price prior to stated maturity.
"Plan" means an ERISA Plan or an I.R.C. Plan.
"Plan Asset Regulation" means U.S. Department of Labor Regulation Section
2510.3-101 promulgated under ERISA.
"PTE" means a Prohibited Transaction Exemption issued by the U.S.
Department of Labor, as it may be amended from time to time, or any successor
thereto.
"RCRA" means the federal Resource Conservation and Recovery Act.
"REIT" means a real estate investment trust within the meaning of Section
856(a) of the Internal Revenue Code.
"Relief Act" means the Servicemembers Civil Relief Act, as amended.
"REMIC" means a real estate mortgage investment conduit, within the
meaning of, and formed in accordance with, the Tax Reform Act of 1986 and
Sections 860A through 860G of the Internal Revenue Code.
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"REMIC IO" means a REMIC that is entitled to only a specified portion of
the interest in respect of one or more mortgage loans held by the REMIC.
"REO Property" means any mortgaged property or interest therein that is
acquired by or on behalf of the trust through foreclosure, deed-in-lieu of
foreclosure or otherwise following a default on the corresponding underlying
mortgage loan.
"Safe Harbor Regulations" means the final Treasury regulations issued on
July 18, 2002.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"SMMEA" means the Secondary Mortgage Market Enhancement Act of 1984, as
amended.
"SPA" means standard prepayment assumption.
"Title V" means Title V of the Depository Institutions Deregulation and
Monetary Control Act of 1980.
"Treasury Department" means the United States Department of the Treasury.
"UCC" means, for any jurisdiction, the Uniform Commercial Code as in
effect in that jurisdiction.
"U.S. Person" means:
o a citizen or resident of the United States;
o a corporation, partnership or other entity created or organized in,
or under the laws of, the United States, any state or the District
of Columbia;
o an estate whose income from sources without the United States is
includible in gross income for United States federal income tax
purposes regardless of its connection with the conduct of a trade or
business in the United States; or
o a trust as to which--
1. a court in the United States is able to exercise primary
supervision over the administration of the trust, and
2. one or more United States persons have the authority to
control all substantial decisions of the trust.
In addition, to the extent provided in the Treasury regulations, a trust
will be a U.S. Person if it was in existence on August 20, 1996 and it elected
to be treated as a U.S. Person.
-186-
The attached CD-ROM contains one spreadsheet file that can be put on a user
specified hard drive or network drive. This spreadsheet file is "ML-CFC
2007-8.xls." The spreadsheet file "ML-CFC 2007-8.xls" is a Microsoft Excel(1),
Version 5.0 spreadsheet. The file provides, in electronic format, some of the
statistical information that appears under the caption "Description of theMortgage Pool" in this prospectus supplement and on Annexes A-1, A-2, A-3, A-3
and B to this prospectus supplement. Defined terms used, but not otherwise
defined, in the spreadsheet file will have the respective meanings assigned to
them in the glossary to this prospectus supplement. All the information
contained in the spreadsheet file is subject to the same limitations and
qualifications contained in this prospectus supplement. Prospective investors
are strongly urged to read this prospectus supplement and the accompanying base
prospectus in their respective entireties prior to accessing the spreadsheet
file.
___________________
(1) Microsoft Excel is a registered trademark of Microsoft Corporation.
(2) Adobe Acrobat is a registered trademark of Adobe Systems Incorporated.
================================================================================
Until ninety days following the date of the prospectus supplement, all
dealers that effect transactions in the offered certificates, whether or not
participating in this distribution, may be required to deliver a prospectus
supplement and the accompanying prospectus. This is in addition to the
obligation of dealers acting as underwriters to deliver a prospectus supplement
and the accompanying prospectus with respect to their unsold allotments and
subscriptions.
$2,264,889,000
(Approximate)
ML-CFC COMMERCIAL MORTGAGE TRUST 2007-8
as Issuing Entity
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-8
MERRILL LYNCH MORTGAGE INVESTORS, INC.
as Depositor
COUNTRYWIDE COMMERCIAL REAL ESTATE FINANCE, INC.
MERRILL LYNCH MORTGAGE LENDING, INC.
KEYBANK NATIONAL ASSOCIATION
as Sponsors and Loan Sellers
-----------------------
FREE WRITING PROSPECTUS
-----------------------
MERRILL LYNCH & CO.
COUNTRYWIDE SECURITIES
KEYBANC CAPITAL MARKETS
BANC OF AMERICA SECURITIES LLC
BEAR, STEARNS & CO. INC.
AUGUST 9, 2007
================================================================================
Dates Referenced Herein and Documents Incorporated by Reference
