S-3 1 ba24055897-s3.htm REGISTRATION STATEMENT ba24055897-s3.htm
 
As filed with the Securities and Exchange Commission on November 3, 2011
 
Registration No. 333-[_____]
 


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 

 
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933


 
BANC OF AMERICA MERRILL LYNCH COMMERCIAL MORTGAGE INC.
(Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of incorporation or organization)
 
56-1950039
(I.R.S. Employer Identification Number)
 
Bank of America Tower
One Bryant Park
New York, New York 10036
(646) 855-1767
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
David S. Fallick
Banc of America Merrill Lynch Commercial Mortgage Inc.
Bank of America Tower
One Bryant Park
New York, New York 10036
(646) 855-1767
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 

Copies to:
 
 
W. Todd Stillerman, Esq.
Assistant General Counsel
Bank of America, National Association
Bank of America Corporate Center, NC1-027-20-05
Charlotte, North Carolina 28255
(980) 388-7451
Henry A. LaBrun, Esq.
Cadwalader, Wickersham & Taft LLP
227 West Trade Street
Suite 2400
Charlotte, North Carolina 28202
(704) 348-5100
 
 



 
 
 
 
 

Approximate date of commencement of proposed sale to the public:  From time to time on or after the effective date of this Registration Statement.
 
If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.  o
 
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box.  x
 
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box.  o
 
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer                        o
Accelerated filer                                  o
Non-accelerated filer                          x   (Do not check if a smaller reporting company)
Smaller reporting company                o
 
CALCULATION OF REGISTRATION FEE
 
 
Title of each class of securities
to be registered(1)
 
Amount to
be registered
 
Proposed maximum
offering price per
unit
 
Proposed maximum
aggregate offering
price(2)
 
Amount of
registration fee
Mortgage Pass-Through Certificates
$1,000,000
100%
$1,000,000
$114.60


(1)
This Registration Statement and the registration fee pertain to the initial offering of the Mortgage Pass-Through Certificates registered hereunder by the registrant.  
 
(2)
Estimated solely for the purposes of calculating the registration fee.
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 
 
 

 
 
 
The information in this prospectus supplement is not complete and may be changed.  We may not sell these securities until a final prospectus supplement has been delivered to you.  This prospectus supplement and the accompanying prospectus are not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT DATED [________] [__], 201[_]
MAY BE AMENDED OR COMPLETED PRIOR TO SALE.
 
Prospectus Supplement (to accompany Prospectus dated [________] [__], 201[_])
 
$[____________________________] (Approximate)
 
Banc of America Merrill Lynch Commercial Mortgage Inc.
Depositor

Bank of America, National Association
Sponsor and Master Servicer
 
Banc of America Merrill Lynch Commercial Mortgage Trust 201[_]-[_]
Issuing Entity

______________________________________________________

 
Commercial Mortgage Pass-Through Certificates, Series 201[_]-[_]
 
Consider carefully the risk factors beginning on page S-[13] in this prospectus supplement and page [9] in the accompanying prospectus.
Neither the certificates nor the underlying mortgage loans are insured or guaranteed by any governmental agency.
The certificates will represent interests only in the issuing entity and will not represent interests in or obligations of the depositor, the sponsor or any of their affiliates, including Bank of America Corporation.
 
The Series 201[_]-[_] Commercial Mortgage Pass-Through Certificates will consist of the following classes:
 
●     the Class A Certificates;
 
●     [the Class A-FL Certificates;]
 
●     the Class B Certificates;
 
●     [the Class X Certificates;]
 
●     the Class C Certificates; and
 
●     the Class R Certificates.
 
Only the senior certificates and the Class B Certificates are offered by this prospectus supplement.
 
Distributions on the offered certificates will occur monthly, commencing [___________], as and to the extent of available funds as described in this prospectus supplement.  The mortgage loans constitute the sole source of repayment on the mortgage loans.
 
Credit enhancement for the offered certificates will be provided by subordination, in that each class of certificates will be subordinate to the class(es) of certificates that are higher in order of payment priority.  [Identification of any other form and provider of credit support to the extent required by Item 1102(h) of Regulation AB, including any enhancement or provider referenced in Items 1114(b) or 1115 of Regulation AB.]
 
Certain characteristics of the offered certificates include:
 
Class
 
Initial Certificate Balance or Notional
Amount as of Delivery Date
 
Approximate Initial Pass-Through
Rate as of Delivery Date
 
Assumed Final Distribution Date
A
     
[A-FL]
     
B
     
[X]
     

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these offered certificates or determined if this prospectus or the accompanying prospectus is truthful or complete.  Any representation to the contrary is a criminal offense.
 
Bank of America Merrill Lynch
 
[_______________] [__], 201[_]
 
 
 

 
 
 
The underwriter, [____________________], will purchase the offered certificates from Banc of America Merrill Lynch Commercial Mortgage Inc. and will offer them to the public at negotiated prices determined at the time of sale.  The underwriter expects to deliver the offered certificates to purchasers on or about [____ __], 201[_].  Banc of America Merrill Lynch Commercial Mortgage Inc. expects to receive from this offering approximately [___]% of the initial principal amount of the offered certificates, [plus accrued interest from [_________],] before deducting expenses payable by Banc of America Merrill Lynch Commercial Mortgage Inc.
 
 
 
 

 
 
 
 
For more information
 
Banc of America Merrill Lynch Commercial Mortgage Inc. has filed with the SEC additional registration materials relating to the certificates.  You may read and copy any of these materials at the SEC’s Public Reference Room at the following location:
 
·       SEC Public Reference Section
        100 F Street, N.E.
        Washington, D.C. 20549
 
You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information that has been filed electronically with the SEC.  The Internet address is http://www.sec.gov.
 
You may also contact Banc of America Merrill Lynch Commercial Mortgage Inc. in writing at Bank of America Tower, One Bryant Park, New York, New York 10036, or by telephone at (980) 388-7451.
 
See also the sections captioned “AVAILABLE INFORMATION” and “INCORPORATION OF CERTAIN INFORMATION BY REFERENCE” appearing at the end of the accompanying prospectus.
 
 
Table of Contents
Executive Summary
vi
Summary of Prospectus Supplement
1
The Certificates
6
General
6
Distributions
6
[Floating Rate Certificates]
8
Risk Factors
13
Description of the Mortgage Pool
36
General
36
Certain Terms and Conditions of the Mortgage Loans
36
Certain Terms and Conditions of the MBS
41
Certain Underwriting Matters
41
[The Index]
45
[Delinquent Mortgage Loans]
45
Split Loan Structures
45
Additional Mortgage Loan Information
46
[10% and Other] Top 10 Mortgage Loans
46
Changes in Mortgage Pool Characteristics
46
[Static Pool Information]
47
Representations and Warranties; Repurchases and Substitutions
47
The Sponsor
50
The Depositor
50
The Issuing Entity
51
The Trustee
51
[Significant Originators and Obligors]
52
[Significant Originators]
52
[Significant Obligors]
52
The Servicers
52
The Master Servicer
52
The Special Servicer
53
Other Servicers
53
Compensation and Expenses
53
[Description of the Swap Contract]
56
[General]
56
[The Swap Contract]
56
[Termination Fees]
57
[The Swap Counterparty]
57
Servicing of the Mortgage Loans
58
General
58
Modifications, Waivers and Amendments
59
Asset Status Reports
59
Inspections; Collection of Operating Information
60
Additional Obligations of the Master Servicer with Respect to ARM Loans
60
Description of the Certificates
61
General
61
Book-Entry Registration of the Offered Certificates
62
Distributions
63
Credit Support
68
[Floating Rate Certificates]
69
Cash Flow Agreements
70
Advances
70
Appraisal Reductions
71
Reports to Certificateholders; Certain Available Information
71
 
 
 
ii

 
 
 
Voting Rights
73
Termination; Retirement of Certificates
73
Yield and Maturity Considerations
73
Yield Considerations
73
Weighted Average Life
76
Yield Sensitivity of the Class X Certificates
79
[Certain Legal Aspects of the Mortgage Loans]
81
Material Federal Income Tax Consequences
82
[Taxation of the Swap Contract]
83
Method of Distribution
84
Legal Matters
84
[Ratings]
85
Legal Investment
85
Certain ERISA Considerations
85
Glossary of Principal Definitions
89

 
iii

 
 
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
 
Information about the offered certificates is contained in two separate documents that progressively provide more detail: (a) the accompanying prospectus, which provides general information, some of which may not apply to the offered certificates; and (b) this prospectus supplement, which incorporates and includes the appendices, and describes the specific terms of the offered certificates.  If the terms of the offered certificates vary between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement.
 
This prospectus supplement begins with several introductory sections describing the Series 201[_]-[_] Certificates and the trust in abbreviated form:
 
Executive Summary, which begins on page S-[__] of this prospectus supplement, which sets forth important statistical information relating to the Series 201[_]-[_] Certificates.
 
Summary of Prospectus Supplement, which begins on page S-[__] of this prospectus supplement and gives a brief introduction of the key features of Series 201[_]-[_] and the mortgage loans; and
 
Risk Factors, which begins on page S-[__] of this prospectus supplement and describes risks that apply to the offered certificates which are in addition to those described in the accompanying prospectus with respect to the securities issued by the trust generally.
 
This prospectus supplement and the accompanying prospectus include cross references to sections in these materials where you can find further related discussions.  The tables of contents in this prospectus supplement and in the accompanying prospectus identify the pages where these sections are located.
 
Certain capitalized terms are defined and used in this prospectus supplement and in the accompanying prospectus to assist you in understanding the terms of the offered certificates and this offering.  The capitalized terms used in this prospectus supplement are defined on the pages indicated under the caption “GLOSSARY OF PRINCIPAL DEFINITIONS” beginning on page S-[___] in this prospectus supplement.  The capitalized terms used in the accompanying prospectus are defined under the caption “GLOSSARY” beginning on page [___] in the accompanying prospectus.
 
In this prospectus supplement, “we” refers to the depositor, and “you” refers to a prospective investor in the offered certificates.
__________________________________________
 
If and to the extent required by applicable law or regulation, a prospectus supplement and the accompanying prospectus will be used by each underwriter in connection with offers and sales related to market-making transactions in the offered certificates with respect to which that underwriter is a principal. An underwriter may also act as agent in such transactions. Such sales will be made at negotiated prices at the time of sale.
 
Until [__________] [__], 201[_], all dealers that buy, sell or trade the offered certificates, whether or not participating in this offering, may be required to deliver a prospectus supplement and the accompanying prospectus. This is in addition to the dealers' obligation to deliver a prospectus supplement and the accompanying prospectus, when acting as underwriters and with respect to their unsold allotments or subscriptions.
__________________________________________

 
FORWARD-LOOKING STATEMENTS
 
This prospectus supplement and the accompanying prospectus contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended.  Specifically, forward-looking statements, together with related qualifying language and assumptions, are found in the material (including tables) under the headings “RISK FACTORS” and “PREPAYMENT AND YIELD CONSIDERATIONS” and in the appendices.  Forward-looking statements are also found in other places throughout this prospectus supplement and the accompanying prospectus, and may be identified by, among other things, accompanying language such as “expects”,
 
 
 
iv

 
 
“intends”, “anticipates”, “estimates” or analogous expressions, or by qualifying language or assumptions.  These statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results or performance to differ materially from the forward-looking statements.  These risks, uncertainties and other factors include, among others, general economic and business conditions, competition, changes in political, social and economic conditions, regulatory initiatives and compliance with governmental regulations, customer preferences and various other matters, many of which are beyond the depositor’s control.  These forward-looking statements speak only as of the date of this prospectus supplement.  The depositor expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements to reflect changes in the depositor’s expectations with regard to those statements or any change in events, conditions or circumstances on which any forward-looking statement is based.

 
 
 
v

 
 
 
EXECUTIVE SUMMARY
 
Certificate Characteristics
 
The following executive summary does not include all relevant information relating to the offered certificates and the mortgage loans.  In particular, the executive summary does not address the risks and special considerations involved with an investment in the offered certificates, and prospective investors should carefully review the detailed information appearing elsewhere in this prospectus supplement and in the accompanying prospectus before making any investment decision.  The executive summary also describes the private certificates that are not offered by this prospectus supplement which have not been registered under the Securities Act of 1933, as amended, and which will be sold to investors only in private transactions.  Any information we provide herein regarding the terms of the private certificates is provided only to enhance your understanding of the offered certificates.  Certain capitalized terms used in this executive summary may be defined elsewhere in this prospectus supplement, including in ANNEX A to this prospectus supplement, or in the accompanying prospectus.  A “GLOSSARY OF PRINCIPAL DEFINITIONS” is included at the end of this prospectus supplement.  A “GLOSSARY” is included at the end of the accompanying prospectus.  Terms that are used but not defined in this prospectus supplement will have the meanings specified in the accompanying prospectus.
 

Class
Certificate Balance or Notional Amount as of Delivery Date(1)
Approximate Percentage of Initial Pool Balance
Approximate Initial Credit Support
Rate Type
Approximate Initial Pass-Through Rate as of Delivery Date
Expected Weighted Average Life (years)(2)
Expected Principal Window (payments)(2)
 
Offered Certificates
A
$[__]
[__]%
[__]%
[Fixed]
[__]%
[__]
[__] -[__]
[A-FL]
   $[__](3)
[__]%
   [__]%(4)
[[One]-month
LIBOR plus
[__]%](5)
[__]%
[__]
[__] -[__]
B
$[__]
[__]%
[__]%
[Fixed]
[__]%
[__]
[__] - [__]
[X]
$[__]
N/A
N/A
Variable Rate(6)
  [__]%(6)
(6)
N/A
 
Private Certificates — Not Offered Hereby(7)
C
$[__]
[__]%
[__]%
[Fixed]
[__]%
[__]
[__] - [__]

 
(1)
As of the delivery date; subject to a variance of plus or minus 5%.
 
(2)
Based on the maturity assumptions (as defined under “YIELD AND MATURITY CONSIDERATIONS” in this prospectus supplement).  As of the delivery date, calculations for the certificates assume no prepayments will be made on the mortgage loans prior to their related maturity dates (or, in the case of the mortgage loans with anticipated repayment dates, the related anticipated repayment date).
 
(3)
[The certificate balance of the Class A-FL Certificates will be equal to the certificate balance of the Class A-FL Regular Interest.  See “DESCRIPTION OF SWAP CONTRACT” in this prospectus supplement.]
 
(4)
[The credit support percentages set forth for the Class A and Class A-FL Certificates are represented in the aggregate.]
 
(5)
[The Class A-FL Certificates are floating/variable rate securities with interest payable at [LIBOR] plus a spread.]
 
(6)
[For stripped interest certificates, when offered:  the Class X Certificates will not have a certificate balance and their holders will not receive distributions of principal, but such holders are entitled to receive payments of the aggregate interest accrued on the notional amount of the Class X Certificates, as described in this prospectus supplement.  The interest rate applicable to the Class X Certificates for each distribution date will be as described in this prospectus supplement.  See “DESCRIPTION OF THE CERTIFICATES” in this prospectus supplement.]
 
(7)
Not offered by this prospectus supplement.  Any information we provide herein regarding the terms of the private certificates is provided only to enhance your understanding of the offered certificates.

The Class R Certificates are not offered by this prospectus supplement and are not represented in this table.

 
 
 
vi

 
 
Below is a summary of information regarding the characteristics of mortgage loans and the mortgaged properties in the mortgage pool as of the cut-off date.  The balances and other numerical information used to calculate various ratios are explained in this prospectus supplement in the related definition under “GLOSSARY OF PRINCIPAL DEFINITIONS”.  Further information regarding the mortgage loans is contained in this prospectus supplement under “SUMMARY OF PROSPECTUS SUPPLEMENT—Mortgage Pool”, “DESCRIPTION OF THE MORTGAGE POOL” and in the tables in ANNEX A and ANNEX B to this prospectus supplement.
 
SUMMARY OF PROSPECTUS SUPPLEMENT—Mortgage Pool
 
 
Characteristics

 
Initial principal balance
[          ]
 
Number of mortgage loans
[          ]
 
Number of mortgaged properties
[          ]
 
Number of balloon mortgage loans
[          ]
 
Number of ARD loans
[          ]
 
Number of full-period interest only mortgage loans
[          ]
 
Average cut-off date balance
[          ]
 
Range of cut-off date balance
[          ]
 
Weighted average mortgage rate
[          ]
 
Weighted average remaining Lockout period
[          ]
 
Range of remaining terms to maturity
[          ]
 
Weighted average underwritten debt service coverage ratio
[          ]
 
Weighted average cut-off date loan-to-value ratio
[          ]
____________________________
 
[Fotnotes as warranted to indicate any material calculation methods.]


                                                            
 
vii

 

 
SUMMARY OF PROSPECTUS SUPPLEMENT
 
This summary highlights selected information from this prospectus supplement.  It does not contain all of the information you need to consider in making your investment decision.  To understand all of the terms of the offering of the offered certificates, read this entire prospectus supplement and the entire accompanying prospectus carefully.
 
Title of Certificates
 
Banc of America Merrill Lynch Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 201[_]-[_].
 
Relevant Parties and Dates
 
Sponsor[s]
 
The Sponsor, Bank of America, National Association, is an indirect wholly-owned subsidiary of Bank of America Corporation.
 
See “BANK OF AMERICA, NATIONAL ASSOCIATION, AS SPONSOR”, “THE MORTGAGE LOAN PROGRAM”, and “THE POOLING AND SERVICING AGREEMENTS” in the accompanying prospectus for more information about the Sponsor, its securitization programs, its solicitation and underwriting criteria used to originate the mortgage loans and its material roles and duties in this securitization.
 
[If applicable, insert disclosure for other Sponsor[s].]
 
Depositor
 
The Depositor, Banc of America Merrill Lynch Commercial Mortgage Inc., is a Delaware corporation and was organized on December 13, 1995 for the limited purpose of acquiring, owning and transferring mortgage assets and selling interests in mortgage assets or bonds secured by mortgage assets.  The Depositor was incorporated in the State of Delaware on December 13, 1995 under the name “NationsLink Funding Corporation” and filed Certificates of Amendment to its Certificate of Incorporation changing its name to “Banc of America Commercial Mortgage Inc.”  on August 24, 2000 and further changing its name to “Banc of America Merrill Lynch Commercial Mortgage Inc.”  on July 1, 2010.  The Depositor is a wholly-owned subsidiary of the Sponsor.  It is not expected that the Depositor will have any business operations other than offering mortgage pass-through certificates or bonds secured by mortgage assets and related activities.
 
The Depositor maintains its principal office at Bank of America Tower, One Bryant Park, New York, New York 10036.  The Depositor’s telephone number is (980) 388-7451.  See “THE DEPOSITOR” in the accompanying prospectus.  Neither the depositor nor any of its affiliates has insured or guaranteed the offered certificates.
 
Issuing Entity
 
The Issuing Entity, Banc of America Merrill Lynch Commercial Mortgage Trust 201[_]-[_], will be a New York common law trust, formed on the Closing Date pursuant to the Pooling and Servicing Agreement.   See “THE ISSUING ENTITY” in this prospectus supplement.
 
Trustee
 
[_____________________].  See “THE TRUSTEE” in this prospectus supplement.
 
 
 
 
S-1

 
 
REMIC Administrator
 
[_____________________]  See “MATERIAL FEDERAL INCOME TAX CONSEQUENCES” and “THE POOLING AND SERVICING AGREEMENTS—Events of Default” and “—Rights Upon Event of Default” in the accompanying prospectus.
 
[Significant Originators]
 
[_____________________].  See “SIGNIFICANT ORIGINATORS AND OBLIGORS” in this prospectus supplement.
 
[Significant Obligors] .  See “SIGNIFICANT ORIGINATORS AND OBLIGORS” in this prospectus supplement.
 
Master Servicer
 
[_____________________].  See “THE SERVICERS—The Master Servicer” in this prospectus supplement.
 
Special Servicer
 
[_____________________].  See “THE SERVICERS—The Special Servicer” in this prospectus supplement.
 
Other Servicers
 
[_____________________].  See “THE SERVICERS—Other Servicers” in this prospectus supplement.
 
Swap Counterparty
 
[_____________________].  The long term senior unsecured debt of [_________] is currently rated “[__]”, “[__]” and “[__]” by [__] and [__], respectively.  See “[DESCRIPTION OF THE SWAP CONTRACT]—[THE SWAP COUNTERPARTY]” in this prospectus supplement.
 
[Other Parties]
 
[Name and brief identification of any derivative counterparty, liquidity provider or credit enhancement provider as required by Item 1103(a)(3)(ix) and/or Item 1114 of Regulation AB.]
 
Certain Relationships and Affiliations
 
Bank of America, National Association and its affiliates have several roles in this transaction.  Bank of America, National Association is the Sponsor and the Master Servicer, and the parent of the Depositor.  Bank of America, National Association originated or acquired the mortgage loans and will be selling them to the Depositor.  Bank of America, National Association is also an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, a managing underwriter for the offered certificates.  The Sponsor may also provide financing to the other originators of the mortgage loans.  [In this regard, the mortgage loans originated by [___] were financed by the Sponsor.]  In addition, the Sponsor and its affiliates may also have other investment banking or commercial banking relationships with borrowers, originators, servicers, trustees, certificate administrators and other transaction parties.  [Disclosure regarding any other affiliations including, for example, swap counterparty.]   These roles and the other potential relationships may give rise to conflicts of interest as further described in this prospectus supplement under “RISK FACTORS—Risks Related to the Certificates—Transaction Party Roles and Relationships Create Potential Conflicts of Interest”.  There are no additional relationships, agreements or arrangements outside of this transaction among the affiliated parties that are material to an understanding of the offered certificates.
 
It is also anticipated that [an affiliate of] the [Sponsor] [Depositor] [Issuing Entity] [specify entity described in Item 1119(a) of Regulation AB] will retain or otherwise be the initial holder of one or more certificates[, including the [identification of certificates having any special voting or control rights]; however such entity will have the right to dispose of such certificates at any time.
 
 
 
S-2

 
 
Cut-off Date
 
[________________] [__], 201[__].
 
Closing Date
 
On or about [________________] [__], 201[__].
 
Distribution Dates
 
The 10th day of each month or, if any such 10th day is not a business day, the next succeeding business day.  The first distribution date with respect to the offered certificates will occur in [_____  __] 201[_].
 
Determination Date
 
The earlier of (i) the 6th day of the month in which the related distribution date occurs, or if such 6th day is not a business day, then the immediately preceding business day, and (ii) the 4th business day prior to the related distribution date.
 
Record Date
 
For any distribution date, the last business day of the calendar month immediately preceding the month in which that distribution date occurs.  See “DESCRIPTION OF THE CERTIFICATES—Distributions—Method, Timing and Amount” in this prospectus supplement.
 
Collection Period
 
With respect to any distribution date, the period that begins immediately following the determination date in the calendar month preceding the month in which such distribution date occurs and ends on and includes the determination date in the calendar month in which such distribution date occurs. The first collection period applicable to the offered certificates will begin immediately following the cut-off date and end on the determination date in [________] 201[_].
 
Transaction Overview
 
On the closing date the sponsor will sell the mortgage loans to the depositor, which will in turn deposit them into a common law trust.  The trust, which is the issuing entity, will be formed by a pooling and servicing agreement, to be dated as of the cut-off date, among the depositor, master servicer, special servicer, trustee and REMIC administrator.  The master servicer will service the mortgage loans (other than the specially-serviced mortgage loans) in accordance with the pooling and servicing agreement and provide the information to the trustee necessary for the trustee to calculate distributions and other information regarding the certificates.
 
The transfers of the mortgage loans from the sponsor to the depositor to the issuing entity in exchange for the certificates are illustrated below:
 
 
 
S-3

 
 
 
 
The Mortgage Pool
 
The mortgage pool will consist primarily of [_____] multifamily and commercial mortgage loans with an initial pool balance of $[_________________].  On or prior to [___________] [__], 201[__], we will acquire the mortgage loans from the mortgage loan seller pursuant to a mortgage loan purchase and sale agreement.  A summary chart of certain aggregate characteristics of the mortgage loans is set forth in the table on page S-[__].  Further information regarding the mortgage loans is contained in this prospectus supplement under “DESCRIPTION OF THE MORTGAGE POOL”.  In addition, ANNEX A contains information on each mortgage loan in the mortgage pool on an individual basis, and ANNEX B summarizes aggregate information regarding the mortgage loans in the mortgage pool according to specific characteristics.
 
Each mortgage loan is secured by a first mortgage lien on a fee simple and/or leasehold interest in a commercial or multifamily rental property.  Set forth below are the number of mortgage loans, and the approximate percentage of the aggregate principal balance of the mortgage loans represented by such mortgage loans, that are secured by mortgaged properties operated for each indicated purpose:

 
Property Type
 
 
Number of Mortgage Loans
 
 
Percentage of
Initial Pool Balance
[Multifamily                                                                                                                                    ]
       
[Specify various types of commercial properties                                                                     ]
       
 
See “RISK FACTORS—Risks Associated With Multifamily Properties” and “—Risks Associated With [___________] Properties” and “DESCRIPTION OF THE MORTGAGE POOL—Additional Mortgage Loan Information” in this prospectus supplement.
 
 
 
S-4

 
 
The mortgaged properties are located throughout [____] states.  Set forth below are the number of mortgage loans, and the approximate percentage of the initial pool balance represented by such mortgage loans, that are secured by mortgaged properties located in the [_____] states with the highest concentrations:

 
State
 
 
Number of Mortgage Loans
 
 
Percentage of
Initial Pool Balance
[Specify all states with a concentration
of 10% or greater                                                                                                 ]
       

 
Certain Mortgage Loan Calculations
 
All numerical information provided in this prospectus supplement with respect to the mortgage loans is provided on an approximate basis. The principal balance of each mortgage loan as of the cut-off date assumes the timely receipt of all principal scheduled to be paid on or before the cut-off date and assumes no defaults, delinquencies or prepayments on any mortgage loan on or before the cut-off date. All percentages of the mortgage pool, or of any specified sub-group thereof, referred to in this prospectus supplement without further description are approximate percentages by aggregate cut-off date balance. The sum of the numerical data in any column of any table presented in this prospectus supplement may not equal the indicated total due to rounding. See "DESCRIPTION OF THE MORTGAGE POOL—Changes in Mortgage Pool Characteristics" in this prospectus supplement. See also the "GLOSSARY OF PRINCIPAL DEFINITIONS" in this prospectus supplement and ANNEX A (and its accompanying footnotes) to this prospectus supplement for definitions and other information relating to loan-to-value and debt service coverage ratios and other calculations presented in this prospectus supplement.
 
When information presented in this prospectus supplement, with respect to the mortgaged properties, is expressed as a percentage of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, the percentages are based on an allocated loan amount that has been assigned to the related mortgaged properties based upon one or more of the related appraised values, the relative underwritten net cash flow or prior allocations reflected in the related loan documents as set forth in ANNEX A to this prospectus supplement.
 
The cut-off date balance of each mortgage loan is the unpaid principal balance thereof as of the cut-off date, after application of all payments of principal due on or before such date, whether or not received. The cut-off date balances of the mortgage loans in the mortgage pool range from $[__] to $[__], and the average cut-off date balance is $[__]
 
[___________] of the mortgage loans, which [___________] of the mortgage loans, which represent [______]% of the initial pool balance, provide for monthly payments of principal and/or interest to be due on the first day of each month; the remainder of the mortgage loans provide for monthly payments to be due on the [____], [_____], [_____] or [_____] day of each month.
 
The annualized rate at which interest accrues on [____] of the mortgage loans, which represent [_____]% of the initial pool balance, is subject to adjustment on specified due dates by adding a fixed number of basis points to the value of a base index, subject, in [______] cases, to lifetime maximum and/or minimum mortgage rates, and in [_____] cases, to periodic maximum and/or minimum mortgage rates, in each case as described in this prospectus supplement.  The remaining mortgage loans bear interest at fixed mortgage rates.  [____] of the adjustable rate mortgage loans mentioned above, which represent [___]% of the initial pool balance, provide for mortgage rate adjustments to occur monthly, while the remainder of such mortgage loans provide for mortgage rate adjustments to occur semi-annually or annually.  [Identification of applicable Mortgage Loan Index.]  See “DESCRIPTION OF THE MORTGAGE POOL—Certain Terms and Conditions of the Mortgage Loans” in this prospectus supplement.
 
The amount of the monthly payment on all of the adjustable rate mortgage loans is subject to adjustment on specified due dates to an amount that would amortize the outstanding principal balance of the mortgage loan over its then remaining amortization schedule and pay interest at the then applicable mortgage rate.  Payment adjustments for adjustable rate mortgage loans will occur on the due date following each related interest rate adjustment.
 
[_________] of the mortgage loans provide for monthly payments of principal based on amortization schedules significantly longer than the remaining terms of such mortgage loans, thereby leaving substantial principal amounts
 
 
S-5

 
 
due and payable with corresponding interest payments, on their respective maturity dates, unless prepaid prior thereto.
 
 
THE CERTIFICATES
 
 
General
 
The certificates will be issued pursuant to a pooling and servicing agreement, and will represent in the aggregate the entire beneficial ownership interest in the trust fund, which will consist of the mortgage pool and certain related assets.  A summary chart of the initial class balances and pass-through rates of the certificates is set forth in the table on page S-[__].
 
Denominations.  The certificates will be issued, maintained and transferred on the book-entry records of The Depository Trust Company in minimum denominations of $[______], in the case of the Class [_] Certificates and $[_____], in the case of the Class [_] Certificates.  Investments in excess of the minimum denomination may be made in multiples of $1.  One certificate of each class may be issued in a different amount in order to evidence the remainder of the initial certificate balance of such class.
 
Certificate Registration.  The certificates will be represented by one or more global certificates registered in the name of Cede & Co., as nominee of The Depository Trust Company.  You may hold your offered certificates through:  DTC in the United States; or Clearstream Banking, or the Euroclear System in Europe.  Transfers within DTC, Clearstream Banking or Euroclear will be made in accordance with the usual rules and operating procedures of those systems.  We may elect to terminate the book-entry system through DTC with respect to all or any portion of any class of the offered certificates.  No person acquiring an interest in the certificates will be entitled to receive a certificate in fully registered, certificated form, except under the limited circumstances described in this prospectus supplement and in the accompanying prospectus.  See “DESCRIPTION OF THE CERTIFICATES—Book-Entry Registration of the Offered Certificates” in this prospectus supplement and “DESCRIPTION OF THE CERTIFICATES—Book-Entry Registration and Definitive Certificates” in the accompanying prospectus.
 
For purposes of calculating the pass-through rate for any class of certificates and any date of distribution, the applicable effective net mortgage rate for each mortgage loan is an annualized rate equal to—
 
●   
the mortgage rate in effect for such mortgage loan as of the [___] day of the most recently ended calendar month;
 
●   
reduced by [___] basis points; and
 
●   
if the accrual of interest on such mortgage loan is computed other than on the basis of a 360-day year consisting of twelve 30-day months (which is the basis of accrual for interest on the certificates), then adjusted to reflect that difference in computation.
 
See “DESCRIPTION OF THE CERTIFICATES—Distributions—Pass-Through Rates” and “—Certain Calculations with Respect to Individual Mortgage Loans” in this prospectus supplement.
 
Distributions
 
 
A.              General
 
Distributions on the certificates will occur monthly on each distribution date.
 
 
B.              Priority of Distributions
 
The servicing and trustee fees for the mortgage loans and certain expenses are payable out of collections on the mortgage loans, prior to any distributions to certificateholders.  A table setting forth the rates at which the various servicing and trustee fees accrue, as well as other information concerning the administrative expenses of the trust, are set forth in this prospectus supplement under “COMPENSATION AND EXPENSES”.  The remaining total of
 
 
S-6

 
 
all payments or other collections (or advances in lieu thereof) on or in respect of the mortgage loans (but excluding prepayment premiums, yield maintenance charges and excess interest, each as described in this prospectus supplement) that are available for distributions of interest on and principal of the certificates on any distribution date is referred to in this prospectus supplement as the available distribution amount for such date.  See “DESCRIPTION OF THE CERTIFICATES—Distributions—Available Distribution Amount” in this prospectus supplement.  On each distribution date, the trustee will apply the available distribution amount of such date for the following purposes and in the following order of priority:
 
[Summarize applicable priority of payments, for example:
 
First, [pro rata,] to the Class A Certificates [and the Class A-FL Regular Interest] [and the Class X Certificates], to pay interest then due on the Class A Certificates [and the Class A-FL Regular Interest] [and the Class X Certificates], as well as to reimburse any previously unreimbursed interest shortfalls on such certificates from prior distribution dates;
 
Second, to the Class A Certificates [and the Class A-FL Regular Interest], to the extent of amounts required to be distributed as principal, as a distribution of principal to the Class A Certificates [and the Class A-FL Regular Interest], until the certificate balance of the Class A Certificates is reduced to zero;
 
Third, to the Class A Certificates [and the Class A-FL Regular Interest], to reimburse the Class A Certificates [and the Class A-FL Regular Interest]  for any previously unreimbursed losses on the mortgage loans allocable to principal that were previously borne by such class;
 
Fourth, to the Class B Certificates, to pay interest then due on the Class B Certificates, as well as to reimburse any previously unreimbursed interest shortfalls on such certificates from prior distribution dates;
 
Fifth, to the Class B Certificates, to the extent of amounts required to be distributed as principal, as a distribution of principal to the Class B Certificates, until the certificate balance of the Class B Certificates is reduced to zero;
 
Sixth, to the Class B Certificates, to reimburse the Class B Certificates for any previously unreimbursed losses on the mortgage loans allocable to principal that were previously borne by such class; and
 
Finally, to the private certificates, in the amounts and order of priority provided for in the pooling and servicing agreement.]
 
[Summary of cases in which classes of certificates may be entitled to distributions from a credit support provider or from a particular group of mortgage loans or otherwise from less than all of the mortgage loans (if applicable and to the extent not already provided for in the priority of payments itself).]
 
 
C.              Interest and Principal Entitlements
 
A description of each class’s interest entitlement can be found under “DESCRIPTION OF THE CERTIFICATES—Distributions—Distributable Certificate Interest” in this prospectus supplement.  As a result of the priority of payments summarized above and as further described under such heading, there are circumstances in which your interest entitlement for a distribution date could be less than one full month’s interest at the pass-through rate on your certificate’s principal [or notional] amount.
 
The amount of principal required to be distributed to the classes entitled to principal on a particular distribution date also can be found under “DESCRIPTION OF THE CERTIFICATES—Distributions—Principal Distribution Amount” in this prospectus supplement.
 
 
D.              Prepayment Premiums
 
The manner in which prepayment premiums and yield maintenance charges received during a particular collection period will be allocated to one or more of the classes of offered certificates is described under
 
 
S-7

 
 
 
“DESCRIPTION OF THE CERTIFICATES—Distributions—Distribution of Prepayment Premiums” in this prospectus supplement.
 
[Floating Rate Certificates]
 
 
A.              Interest
 
The Class A-FL Certificates will bear interest on their outstanding principal balance at a floating rate of interest equal to [one]-month LIBOR plus [___]%.
 
The initial accrual period for the Class A-FL Certificates will begin on the closing date and end on [_________] [__], 201[_].
 
 
B.              Principal
 
The Class A-FL Certificates will be entitled to principal distributions in accordance with priorities of payments described under “DESCRIPTION OF THE CERTIFICATES—Distributions—Priority” and “—Distributions on the Class A-FL Certificates” in this prospectus supplement on each distribution date.
 
 
B.              Interest Rate Swap Contracts
 
The trust will enter into an interest rate swap contract on the closing date, with one or more eligible swap counterparties and/or amend any interest swap contracts then existing, to hedge the basis risk that results from the payment of interest on the Class A-FL Certificates. See “DESCRIPTION OF SWAP CONTRACT” in this prospectus supplement.
 
Under any such interest rate swap contract the related swap counterparty will be obligated to pay the trust interest at the interest rate on a notional amount equal to the principal amount of the Class A-FL Certificates and the trust will be obligated to pay to that swap counterparty an amount equal to $[___________] on that same notional amount. See “DESCRIPTION OF THE CERTIFICATES—Floating Rate Certificates” in this prospectus supplement.
 
Each interest rate swap contract will terminate, generally, on [_________] [__], 201[_].
 
[Insert description of any additional derivative agreements, including a brief summary of the terms and the credit enhancement provided by those derivative agreements.]]
 
Certain Yield and Prepayment Considerations
 
The yield on the offered certificates of any class will depend on, among other things, the pass-through rate for those certificates.  The yield on any offered certificate that is purchased at a discount or premium will also be affected by the rate and timing of distributions in respect of principal on such certificate, which in turn will be affected by —
 
  
the rate and timing of principal payments (including principal prepayments) on the mortgage loans; and
 
  
the extent to which such principal payments are applied on any date of distribution in reduction of the certificate balance of the class to which that certificate belongs.
 
See “DESCRIPTION OF THE CERTIFICATES—Distributions—Priority” and “—Distributions—Scheduled Principal Distribution Amount and Unscheduled Principal Distribution Amount” in this prospectus supplement.
 
An investor that purchases an offered certificate at a discount should consider the risk that a slower than anticipated rate of principal payments on that certificate will result in an actual yield that is lower than such investor’s expected yield.  An investor that purchases any offered certificate at a premium should consider the risk that a faster than anticipated rate of principal payments on such certificate will result in an actual yield that is lower than such investor’s expected yield.  Insofar as an investor’s initial investment in any offered certificate is repaid,
 
 
S-8

 
 
there can be no assurance that such amounts can be reinvested in a comparable alternative investment with a comparable yield.
 
The actual rate of prepayment of principal on the mortgage loans cannot be predicted.  The mortgage loans may be prepaid at any time, subject, in the case of [____] mortgage loans, to payment of a prepayment premium.  The investment performance of the offered certificates may vary materially and adversely from the investment expectations of investors due to prepayments on the mortgage loans being higher or lower than anticipated by investors.  The actual yield to the holder of an offered certificate may not be equal to the yield anticipated at the time of purchase of the certificate or, notwithstanding that the actual yield is equal to the yield anticipated at that time, the total return on investment expected by the investor or the expected weighted average life of the certificate may not be realized.  For a discussion of certain factors affecting prepayment of the mortgage loans, including the effect of prepayment premiums, see “YIELD AND MATURITY CONSIDERATIONS” in this prospectus supplement.
 
[The structure of the offered certificates causes the yield of certain classes to be particularly sensitive to changes in the rates of prepayment of the mortgage loans and other factors, as follows:]
 
[Allocation to the senior certificates, for so long as they are outstanding, of the entire unscheduled principal distribution amount for each date of distribution will generally accelerate the amortization of those certificates relative to the actual amortization of the mortgage loans.  Following retirement of the Class A Certificates, the unscheduled principal distribution amount for each date of distribution will be allocated to the Class B Certificates.]
 
[The following disclosure is applicable to stripped interest certificates, when offered...  The Stripped Interest Certificates.  The Class X Certificates are interest-only certificates and are not entitled to any distributions in respect of principal.  The yield to maturity of the Class X Certificates will be especially sensitive to the prepayment, repurchase, substitution and default experience on the mortgage loans, which may fluctuate significantly from time to time.  A rate of principal payments that is more rapid than expected by investors will have a material negative effect on the yield to maturity of the Class X Certificates.  See “YIELD AND MATURITY CONSIDERATIONS—Yield Sensitivity of the Class X Certificates” in this prospectus supplement.]
 
Advances
 
A.      P&I Advances
 
The master servicer (or the trustee, if applicable) is required to advance delinquent monthly mortgage loan payments if it determines that such advance will be recoverable.  The master servicer or the trustee, as applicable, will not advance balloon payments due at maturity, late payment charges or default interest.  Neither the master servicer nor the trustee will be required to advance prepayment premiums or yield maintenance charges.  If an advance is made, the master servicer will not advance its servicing fee, but will advance the trustee’s fee.
 
[Neither the master servicer nor the trustee will be required to advance any amounts due to be paid by the related swap counterparty for a distribution to the Class A-FL Certificates or be liable for any breakage, termination or other costs owed by the trust fund to the related swap counterparty. See “DESCRIPTION OF THE CERTIFICATES—Advances” in this prospectus supplement.]
 
B.      Property Protection Advances
 
The master servicer (or the trustee, if applicable) also may be required to make advances to pay delinquent real estate taxes, assessments and hazard insurance premiums and similar expenses necessary to protect and maintain a mortgaged property, to maintain the lien on a mortgaged property or enforce the related loan documents.
 
C.      Interest on Advances
 
The master servicer and the trustee, as applicable, will be entitled to interest as described in this prospectus supplement on any of the advances referenced in the two immediately preceding paragraphs, other than for advances referenced under the above Paragraph A in respect of payments not delinquent past applicable grace periods. Interest accrued on any of these outstanding advances may result in reductions in amounts otherwise payable on the certificates.
 
 
S-9

 
 
See “DESCRIPTION OF THE CERTIFICATES—Advances in Respect of Delinquencies” and “THE POOLING AND SERVICING AGREEMENTS—Certificate Account” in the accompanying prospectus.
 
Credit Support
 
A.General
 
Credit support for the offered certificates is provided by subordination.  The rights of the holders of the Class B and Class C Certificates to receive distributions with respect to the mortgage loans will be subordinate to the rights of the holders of the senior certificates, and the rights of the holders of the Class C certificates to receive distributions with respect to the mortgage loans will be subordinate to the rights of the holders of the Class B Certificates, in each case to the extent described in this prospectus supplement and in the accompanying prospectus.  This subordination is intended to enhance the likelihood of timely receipt by the holders of the senior certificates of the full amount of all interest payable in respect of such certificates on each date of distribution, and the ultimate receipt by those holders of principal in an amount equal to the entire aggregate certificate balance of the senior certificates.
 
Similarly, but to a lesser degree, this subordination is also intended to enhance the likelihood of timely receipt by the holders of the Class B Certificates of the full amount of all interest payable in respect of those certificates on each date of distribution, and the ultimate receipt by such holders of principal in an amount equal to the entire certificate balance of the Class B Certificates.  This subordination will be accomplished by the application of the available distribution amount on each date of distribution to distributions on the respective classes of certificates in the order described in this prospectus supplement under “DESCRIPTION OF THE CERTIFICATES—Distributions—Priority”.  No other form of credit support will be available for the benefit of the holders of the offered certificates.
 
The chart below describes the manner in which the rights of various classes will be senior to the rights of other classes.  Entitlement to receive principal and interest on any distribution date is depicted in descending order.
 
Subordination(1)
 
 

 
Priority of Payment
|
|
|
|
|
|
|
|
|
|
\/
 
Class A(2) and Class A-FL(2)(3)
[and Class X(2)]
(Credit Support [____]%)
 
/\
|
|
|
|
|
|
|
|
|
Order of
Loss Allocation
 
Class B
(Credit Support [____]%)
 
 
Class C
(Credit Support [____]%)
 
|_______________________
 
(1)  
The credit support percentage set forth in this chart shows the aggregate initial class balance of the classes of certificates subordinate to a class or classes as a percentage of the initial aggregate principal balance of the mortgage loans.
 
(2)  
[The Class A, [Class A-FL] and ]Class X] Certificates are entitled to pro rata distributions of interest.  Principal distributions to these classes, are subject to the payment priorities described under “DESCRIPTION OF THE CERTIFICATES—Distributions—Priority” and “—Distributions on the Class A-FL Certificates” in this prospectus supplement.
 
(3)  
[The Class A-FL Certificates are entitled to receive floating rate payments from the swap provider under the interest rate swap contract in exchange for the fixed rate payments to which the Class A-FL Regular Interest underlying the Class A-FL Certificates is entitled from the mortgage loans.  See “DESCRIPTION OF SWAP CONTRACT” in this prospectus supplement.]]
 
 
 
S-10

 
 
Allocation to the senior certificates, for so long as they are outstanding, of the entire unscheduled principal distribution amount for each Distribution Date will generally accelerate the amortization of such certificates relative to the actual amortization of the mortgage loans.  To the extent that the senior certificates are amortized faster than the mortgage loans, the percentage interest evidenced by the senior certificates in the trust fund will be decreased (with a corresponding increase in the interest in the trust fund evidenced by the Class B and Class C Certificates).  This will increase, relative to their respective certificate balances, the subordination afforded the senior certificates by the Class B and Class C Certificates.  Following retirement of the Class A Certificates, allocation to the Class B Certificates, for so long as they are outstanding, of the entire unscheduled principal distribution amount for each distribution date will provide a similar benefit to such class of certificates as regards the relative amount of subordination afforded thereto by the Class C Certificates.
 
B.Shortfalls in Available Funds
 
 
As a result of losses and other shortfalls experienced with respect to the mortgage loans or otherwise with respect to the trust fund (which may include shortfalls arising both from interest accrued on advances and from paying for nonrecoverable advances), the aggregate stated principal balance of the mortgage pool expected to be outstanding immediately following any date of distribution may be less than the aggregate certificate balance of the certificates immediately following the distributions on such date of distribution.
 
 
The following types of shortfalls in available funds will be allocated in the same manner as mortgage loan losses:
 
 
shortfalls resulting from additional compensation that the master servicer or special servicer is entitled to receive;
 
 
shortfalls resulting from interest on advances of principal and interest or property protection expenses made by the master servicer, the special servicer or, the trustee;
 
 
shortfalls resulting from extraordinary expenses of the trust;
 
 
shortfalls resulting from a reduction of a mortgage loan's interest rate or principal amount by a bankruptcy court, as the result of a workout or from other unanticipated or default-related expenses of the trust; and
 
 
shortfalls due to nonrecoverable advances being reimbursed from principal and/or interest collections.
 
 
See “DESCRIPTION OF THE CERTIFICATES—Credit Support” in this prospectus supplement.
 
Optional Termination
 
On any distribution date on which the aggregate principal balance of the pool of mortgage loans remaining in the trust is less than [_]% of the aggregate unpaid balance of the mortgage loans as of the cut-off date, certain entities specified in this prospectus supplement will have the option to purchase all of the remaining mortgage loans at the price specified in this prospectus supplement (and all property acquired through exercise of remedies in respect of any mortgage loan). The exercise of this option will terminate the trust and retire the then outstanding certificates. The trust could also be terminated in connection with an exchange of all the then outstanding certificates (other than the Class R Certificates).  See “DESCRIPTION OF THE CERTIFICATES—Termination; Retirement of Certificates” in this prospectus supplement and in the accompanying prospectus.
 
Material Federal Income Tax Consequences
 
One or more elections will be made to treat segregated portions of the trust fund as a “real estate mortgage investment conduit”, also referred to in this prospectus supplement as a “REMIC” for federal income tax purposes.  Upon the issuance of the offered certificates, Cadwalader, Wickersham & Taft LLP, counsel to the depositor, will deliver its opinion generally to the effect that, assuming compliance with all provisions of the pooling and servicing agreement, for federal income tax purposes, the trust fund will qualify as a REMIC under Sections 860A through 860G of the Internal Revenue Code.  For federal income tax purposes, the Class A, Class B and Class C Certificates [and the Class A-FL Regular Interest] will be the “regular interests” in the REMIC. [The portion of the trust fund representing the excess interest will be treated as a grantor trust for federal income tax purposes.  In the opinion of
 
 
S-11

 
 
counsel, the portion of the trust referred to in the prior sentence will qualify for treatment as a grantor trust for federal income tax purposes.]
 
[The Class A-FL Certificates will represent an undivided interest in a portion of the trust fund that is treated as a grantor trust for federal income tax purposes, which portion includes the Class A-FL Regular Interest, the Floating Rate Account and the beneficial interest of such class in the interest rate swap contract.]
 
Under the REMIC regulations, the Class R Certificates may constitute “noneconomic” residual interests for purposes of the REMIC Regulations.  Transfers of the Class R Certificates will be restricted under the pooling and servicing agreement in the case of persons other than U.S. Persons (as defined in this prospectus supplement) in a manner designed to prevent a transfer of a noneconomic residual interest from being disregarded under the REMIC regulations.  See “YIELD AND MATURITY CONSIDERATIONS” and “MATERIAL FEDERAL INCOME TAX CONSEQUENCES” in this prospectus supplement and “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs—Taxation of Owners of REMIC Residual Certificates—Excess Inclusions” and “—Noneconomic REMIC Residual Certificates” in the accompanying prospectus.
 
For further information regarding the federal income tax consequences of investing in the offered certificates, see “MATERIAL FEDERAL INCOME TAX CONSEQUENCES” in this prospectus supplement and in the accompanying prospectus.
 
ERISA Considerations
 
Subject to important considerations described under “CERTAIN ERISA CONSIDERATIONS” in this prospectus supplement and in the accompanying prospectus, the depositor expects the offered certificates to be eligible for purchase by persons investing assets of employee benefit plans or individual retirement accounts.  A benefit plan fiduciary considering the purchase of any offered certificates should consult with its counsel to determine whether all required conditions have been satisfied.
 
See “CERTAIN ERISA CONSIDERATIONS” in this prospectus supplement and in the accompanying prospectus.
 
Legal Investment
 
[The [Class _____] Certificates will constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended, so long as they are rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization.] [No class of offered certificates will] [The [Class _____] Certificates will not] constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended.]  If your investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities, then you may be subject to restrictions on investment in the offered certificates.  You should consult your own legal advisors for assistance in determining the suitability of and consequences to you of the purchase, ownership and sale of the offered certificates.
 
See “LEGAL INVESTMENT” in this prospectus supplement and in the accompanying prospectus.
 
[Certificate Ratings
 
The Depositor expects that the offered certificates will receive credit ratings from [__] nationally recognized statistical rating organizations.
 
The ratings of the offered certificates, if any, may be withdrawn or lowered, the offered certificates may receive an unsolicited rating from another nationally recognized statistical rating organization, or the Securities and Exchange Commission may determine that any rating agency retained by the Depositor to provide a security rating on the offered certificates no longer qualifies as a “nationally recognized statistical rating organization” or is no longer qualified to rate the offered certificates, any one of which may have an adverse effect on the liquidity and market price of the offered certificates.
 
 
 
S-12

 
 
RISK FACTORS
 
  
The risk factors discussed below and under the heading “RISK FACTORS” in the accompanying prospectus describe the material risks of an investment in the offered certificates and should be carefully considered by all potential investors.
 
  
The offered certificates are not suitable investments for all investors and may especially not be suitable for individual investors.
 
  
The offered certificates are complex financial instruments, so you should not purchase any offered certificates unless you or your financial advisor possess the necessary expertise to analyze the potential risks associated with an investment in mortgage-backed securities.
 
  
You should not purchase any offered certificates unless you understand, and are able to bear, the prepayment, credit, liquidity and market risks associated with ownership of such offered certificates.
 
Risks Related to the Certificates
 
 
Your Lack of Control Over
 
the Trust Fund Can
Create Risk
 
 
You and other certificateholders generally do not have the right to make decisions with respect to the administration of the trust.  See “SERVICING OF THE MORTGAGE LOANS—General” in this prospectus supplement.  Such decisions are generally made, subject to the express terms of the pooling and servicing agreement, by the master servicer, the trustee or the special servicer, as applicable.  You will not be a party to any of these agreements and will be relying on the persons who are to perform their duties under such agreements and to enforce the obligations of the other parties to do the same.  Any decision made by one of those parties in respect of the trust, even if such decision is determined to be in your best interests by such party, may be contrary to the decision that you or other certificateholders would have made and may negatively affect your interests.
 
The Offered Certificates May
 
Not Be a Suitable Investment
For You
 
 
For the reasons set forth in these “RISK FACTORS”, the yield to maturity and the aggregate amount and timing of distributions on the certificates are subject to material variability from period to period and over the life of the certificates.  The interaction of the foregoing factors and their effects are impossible to predict and are likely to change from time to time.  As a result, an investment in the offered certificates involves substantial risks and uncertainties and should be considered only by sophisticated investors with substantial investment experience with similar types of securities.
 
Transaction Party Roles and
 
Relationships Create
Potential
Conflicts
of Interest
 
 
 
The special servicer will have latitude in determining whether to liquidate or modify defaulted mortgage loans.  See “SERVICING OF THE MORTGAGE LOANS—Modifications, Waivers and Amendments” in this prospectus supplement.  [_________________], which we anticipate will be the initial directing certificateholder, is an affiliate of the special servicer.
 
 
S-13

 
The master servicer, the special servicer or an affiliate of either (including the sponsor) may purchase certain of the certificates or hold certain companion mortgage loans which are part of a split loan structure but which are not held in the trust fund or hold certain subordinate or mezzanine debt or interests therein related to the mortgage loans.  In addition, the holder of certain of the non-offered certificates has the right to remove a special servicer and appoint a successor, which may be an affiliate of such holder.  It is possible that the master servicer, the special servicer or affiliates thereof may be holders of such non-offered certificates.  This could cause a conflict between the master servicer’s or the special servicer’s duties to the trust under the pooling and servicing agreement and its interest as a holder of a certificate or a companion or subordinate mortgage loan or interests therein.  In addition, the master servicer is the sponsor, the originator of the mortgage loans and the mortgage loan seller.  This could cause a conflict between the master servicer’s duty to the trust under the pooling and servicing agreement and its interests in such other capacities.  However, the pooling and servicing agreement provides that the mortgage loans shall be administered in accordance with the servicing standards without regard to ownership of any certificate by the master servicer, the special servicer or any affiliate of the master servicer or the special servicer.  See “SERVICING OF THE MORTGAGE LOANS—General” in this prospectus supplement.
 
Additionally, any of those parties may, especially if it holds the non-offered certificates, or has financial interests in or other financial dealings with a borrower or sponsor under any of the mortgage loans, have interests when dealing with the mortgage loans that are in conflict with the interests of holders of the offered certificates.  For instance, if the special servicer or an affiliate holds non-offered certificates, the special servicer could seek to reduce the potential for losses allocable to those certificates from a troubled mortgage loan by deferring acceleration in hope of maximizing future proceeds.  The special servicer might also seek to reduce the potential for such losses by accelerating earlier than necessary to avoid advance interest or additional trust fund expenses.  Either action could result in less proceeds to the trust than would be realized if alternate action had been taken.  In general, a servicer is not required to act in a manner more favorable to the offered certificates or any particular class of offered certificates than to the non-offered certificates.
 
Additionally, each of the master servicer, the special servicer and sub-servicers under their employ currently services or will, in the future, service, in the ordinary course of its business, existing and new loans for third parties, including portfolios of loans similar to the mortgage loans that will be included in the trust.  The real properties securing these other loans may be in the same markets as, and compete with, certain of the real properties securing the mortgage loans that will be included in the trust.  Consequently, personnel of the master servicer, the special servicer and such sub-servicers may perform services, on behalf of the trust, with respect to the mortgage loans at the same time as they are performing services, on behalf of other persons, with respect to other mortgage loans secured by properties that compete with the mortgaged properties securing the mortgage loans.  This may pose inherent conflicts for the master servicer, the sub-servicers and the special servicer.
 
 
 
S-14

 
 
In addition, certain of the mortgage loans included in the trust fund may have been refinancings of debt previously held by the sponsor or an affiliate of the sponsor.
 
The sponsor, the underwriters or their respective affiliates may have other business relationships with the borrowers under the mortgage loans.  The sponsor, the underwriters or their respective affiliates may also have or have had equity investments in the borrowers (or in the owners of the borrowers) or properties under certain of the mortgage loans included in the trust.  The sponsor, the underwriters and their respective affiliates have made or may make or have preferential rights to make loans to, or equity investments in, affiliates of the borrowers under the mortgage loans.  The sponsor or its affiliates may also hold mezzanine debt related to a borrower, but which is not held in the trust fund.
 
In addition, the sponsor, the underwriters and their respective affiliates may provide financing to the purchasers of certificates, companion mortgage loans or mezzanine loans.
 
The related property managers and borrowers may experience conflicts of interest in the management and/or ownership of the real properties securing the mortgage loans because:
 
  
a substantial number of the mortgaged real properties are managed by property managers affiliated with the respective borrowers;
 
  
certain of the mortgaged real properties are self-managed by the borrowers themselves;
 
  
these property managers also may manage and/or franchise additional properties, including properties that may compete with the mortgaged properties; and
 
  
affiliates of the property managers and/or the borrowers, or the property managers and/or the borrowers themselves also may own other properties, including competing properties.
 
[To be included for transactions where static pool data is deemed not material or misleading:
 
The Prospective Performance of
 
the Commercial and
Multifamily Mortgage Loans
Included in a Particular Trust
Fund Should Be Evaluated
Separately from the
Performance of the Mortgage
Loans in any of our Other
Trusts
 
 
 
 
 
 
 
 
While there may be certain common factors affecting the performance and value of income-producing real properties in general, those factors do not apply equally to all income-producing real properties and, in many cases, there are unique factors that will affect the performance and/or value of a particular income-producing real property.   Moreover, the effect of a given factor on a particular real property will depend on a number of variables, including but not limited to property type, geographic location, competition, sponsorship and other
 
 
 
S-15

 
 
 
 
 
characteristics of the property and the related mortgage loan.  Each income-producing real property represents a separate and distinct business venture; and, as a result, each of the multifamily and commercial mortgage loans included in one of the depositor’s trusts requires a unique underwriting analysis.  Furthermore, economic and other conditions affecting real properties, whether worldwide, national, regional or local, vary over time.  The performance of a pool of mortgage loans originated and outstanding under a given set of economic conditions may vary significantly 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 the offered certificates independently from the performance of mortgage loans underlying any other series of offered certificates.   As a result of the distinct nature of each pool of commercial mortgage loans, and the separate mortgage loans within the pool, this prospectus supplement does not include disclosure concerning the delinquency and loss experience of static pools of periodic originations by the sponsor of assets of the type to be securitized (known as “static pool data”).  Because of the highly heterogeneous nature of the assets in commercial mortgage-backed securities transactions, static pool data for prior securitized pools, even those involving the same asset types (e.g., hotels or office buildings), may be misleading, since the economics of the properties and terms of the loans may be materially different.  In particular, static pool data showing a low level of delinquencies and defaults would not be indicative of the performance of this pool or any other pools of mortgage loans originated by the same sponsor or sponsors.  Therefore, investors should evaluate this offering on the basis of the information set forth in this prospectus supplement with respect to the mortgage loans, and not on the basis of any successful performance of other pools of securitized commercial mortgage loans.]
 
The Mortgage Loan Seller, the
 
Sponsor and the Depositor Are
Subject to Bankruptcy or
Insolvency Laws That May
Affect the Issuing Entity’s
Ownership of the Mortgage
Loans
 
 
 
 
 
 
In the event of the insolvency of the mortgage loan seller, the sponsor or the depositor, or a receivership or conservatorship of Bank of America Corporation, it is possible that the issuing entity’s right to payment from or ownership of the mortgage loans could be challenged.  Based upon opinions of counsel that the conveyance of the mortgage loans would generally be respected in the event of insolvency of the mortgage loan sellers, which opinions are subject to various assumptions and qualifications, the depositor believes that such a challenge will be unsuccessful, but there can be no assurance that a bankruptcy trustee, if applicable, or other interested party will not attempt to assert such a position.  If such challenge were successful, delays or reductions in payments on your certificates could occur.  Even if the challenge were not successful, payments on the certificates would be delayed while a court resolves the claim.
 
Legal opinions do not provide any guaranty as to what any particular court would actually decide, but rather an opinion as to the decision a court would reach if the issues were competently presented and the
 
 
 
S-16

 
 
court followed existing precedent as to legal and equitable principles applicable in bankruptcy cases.  In this regard, legal opinions on bankruptcy law matters unavoidably have inherent limitations primarily because of the pervasive equity powers of bankruptcy courts, the overriding goal of reorganization to which other legal rights and other policies may be subordinated, the potential relevance to the exercise of judicial discretion of future arising facts and circumstances, and the nature of the bankruptcy process.  As a result, the FDIC, a creditor, a bankruptcy trustee or another interested party, including an entity transferring a mortgage loan as debtor-in-possession, could still attempt to assert that the transfer of a mortgage loan was not a sale.  If such party’s challenge were successful, payments on the certificates would be reduced or delayed.  Even if the challenge were not successful, payments on the certificates would be delayed while a court resolves the claim.
 
The transfer of mortgage loans by Bank of America, National Association in connection with this offering is not expected to qualify for the securitization safe harbor (referred to herein as the FDIC Safe Harbor) adopted by the FDIC for securitizations sponsored by insured depository institutions (12 C.F.R. § 360.6 (referred to herein as the Rule)).  We cannot assure you that the FDIC, a bankruptcy trustee, if applicable, or another interested party would not attempt to assert that such transfer was not a sale.  Even if a challenge were not successful, it is possible that payments on the certificates would be delayed while a court resolves the claims.
 
The issuing entity has been organized as a common law trust, and as such is not eligible to be a “debtor” under the federal bankruptcy laws.  If the issuing entity were instead characterized as a “business trust” it could qualify as a debtor under those 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 issuing entity would be characterized as a “business trust.” If a bankruptcy court were to determine that the issuing entity was a “business trust”, it is possible that payments on the certificates would be delayed while the court resolved the issue.
 
Furthermore, Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act provides for an orderly liquidation authority (OLA) under which the FDIC can be appointed as receiver of certain systemically important non-bank financial companies and their direct or indirect subsidiaries in certain cases.  In January 2011, the current (and then-acting) general counsel of the FDIC issued an opinion in which he expressed his view that the FDIC, as receiver under the OLA, will not, in the exercise of its OLA repudiation powers, recover as property of a financial company assets transferred by the financial company prior to the end of the applicable transition period to be set forth in future regulations of the FDIC, provided that the transfer satisfies the conditions for the exclusion of assets from the financial company’s estate under the Bankruptcy Code.  The general counsel indicated he would recommend to the Board of Directors of the FDIC that such regulations set forth a transition period of at least 90 days.  If, however, the FDIC were to disregard or differently interpret the FDIC general counsel’s opinion, delays or reductions in payments on the certificates could occur.

 
 
S-17

 
 
[Risks Relating to the
 
Swap Contract]
 
The trust will have the benefit of a swap contract relating to the Class A-FL Certificates issued by [__________________________]. Because the Class A-FL Regular Interest accrues interest at a [fixed] rate of interest subject to a maximum pass-through rate equal to [the weighted average of the net interest rates on the mortgage loans], the ability of the holders of the Class A-FL Certificates to obtain the payment of interest at the designated pass-through rate (which payment of interest may be reduced in certain circumstances as described in this prospectus supplement) will depend on payment by the swap counterparty pursuant to the swap contract. See “DESCRIPTION OF SWAP CONTRACT—The Swap Counterparty” in this prospectus supplement.
 
If the swap counterparty’s long term or short term ratings fall below [its current ratings] by any rating agency, the swap counterparty will be required to post collateral or find a replacement swap counterparty that would not cause another rating agency trigger event. In the event that the swap counterparty fails to either post acceptable collateral or find an acceptable replacement swap counterparty after such a trigger event, the trustee will be required to take such actions (following the expiration of any applicable grace period), unless otherwise directed in writing by the holders of [__]% of the Class A-FL Certificates, to enforce the rights of the trust under the swap contract as may be permitted by the terms of the swap contract and use any termination fees received from the swap counterparty to enter into a replacement swap contract on substantially similar terms. If the costs attributable to entering into a replacement swap contract would exceed the net proceeds of the liquidation of the swap contract, a replacement swap contract will not be entered into and any such proceeds will instead be distributed to the holders of the Class A-FL Certificates. There can be no assurance that the swap counterparty will maintain its current ratings or have sufficient assets or otherwise be able to fulfill its obligations under the swap contract.

During the occurrence of a rating agency trigger event and in the event that a replacement swap counterparty is not found, the Class A-FL certificate pass-through rate will convert to a [fixed] interest rate, subject to a maximum pass-through rate equal to [the weighted average of the net interest rates on the mortgage loans]. Any such conversion to a [fixed] rate might result in a temporary delay of payment of the distributions to the holders of the Class A-FL Certificates if notice of the resulting change in payment terms of the Class A-FL Certificates is not given to DTC within the time frame in advance of the distribution date that DTC requires to modify the payment.

Distributions on the Class A-FL Regular Interest will be subject to a maximum pass-through rate equal to [the weighted average of the net interest rates on the mortgage loans]. If this [weighted average] drops below the [fixed] rate on the Class A-FL Regular Interest, the amount paid to the swap counterparty will be reduced and interest payments by the swap counterparty under the swap contract will be reduced, on a dollar for dollar basis, by an amount equal to the difference between the amount actually paid to the swap counterparty and the amount that
 
 
S-18

 
 
 
would have been paid if such [weighted average] had not dropped below such [fixed] rate. This will result in a corresponding reduction in the amounts paid by the swap counterparty pursuant to the swap contract, which will result in a reduced interest payment on the Class A-FL Certificates.

In addition, if the funds allocated to payment of interest distributions on the Class A-FL Regular Interest are insufficient to make all required interest payments on the Class A-FL Regular Interest, the amount paid to the swap counterparty will be reduced and interest paid by the swap counterparty under the swap contract will be reduced, on a dollar for dollar basis, by an amount equal to the difference between the amount actually paid to the swap counterparty and the amount that would have been paid if the funds allocated to payment of interest distributions on the Class A-FL Regular Interest had been sufficient to make all required interest payments on the Class A-FL Regular Interest. As a result, the holders of the Class A-FL Certificates may experience an interest shortfall. See “DESCRIPTION OF THE SWAP CONTRACT” in this prospectus supplement.]
 

Subordination of Certain Classes
 
of Certificates May Result in a
Loss to Holders of These
Certificates.
 
 
 
As and to the extent described in this prospectus supplement, the rights of the holders of the Class B and Class C Certificates to receive distributions of amounts collected or advanced on or in respect of the mortgage loans will be subordinated to those of the holders of the senior certificates and also, in the case of the holders of the Class C Certificates, also to those of the holders of the Class B Certificates.  See “DESCRIPTION OF THE CERTIFICATES—Distributions—Priority” and “—Credit Support” in this prospectus supplement.
 
Subordination of Subordinate
 
Certificates Increases Risk
of Loss
 
 
Subordinate certificateholders are more likely to suffer losses as a result of losses or delinquencies on the mortgage loans than are senior certificateholders.
 
  
The rights of each class of subordinate certificates to receive distributions of interest and principal are subordinate to the rights of the senior certificates and each class of subordinate certificates with a lower alphabetical designation.  For example, the Class B Certificates will not receive principal or interest on a distribution date until the Class A Certificates [and Class A-FL Certificates] [and Class X Certificates] have received the amounts to which they are entitled on that distribution date.
 
  
Losses that are realized on the mortgage loans will be allocated first to the Class C Certificates then to the Class B Certificates and so on, in reverse alphabetical order, until the outstanding class balances of those classes have been reduced to zero.
 
 
 
S-19

 
 
Modeling Assumptions Are
 
Unlikely To Match Actual
Experience
 
 
The “Assumed Final Maturity Date” and the tables set forth under “YIELD AND MATURITY CONSIDERATIONS” in this prospectus supplement are based on the maturity assumptions described in such section under “—Weighted Average Life”.
 
Decrement and Sensitivity Tables
 
Are Based Upon Assumptions
and
 Models
 
There will likely be discrepancies between the characteristics of the actual mortgage loans and the characteristics of the assumed mortgage loans used in preparing the decrement tables and the sensitivity tables.  Any such discrepancy may have an effect upon the percentages of initial class balances outstanding set forth in the decrement tables (and the weighted average lives of the offered certificates) and the yields to maturity set forth in the yield tables.  In addition, to the extent that the mortgage loans that actually are included in the mortgage pool have characteristics that differ from those assumed in preparing the decrement tables and the sensitivity tables, the class balance of a class of offered certificates could be reduced to zero earlier or later than indicated by the decrement tables and the yield to maturity may be higher or lower than indicated in the sensitivity tables.  It is impossible to predict with certainty the rate at which the mortgage loans will actually be repaid or that the mortgage loans will otherwise perform consistently with such assumptions.
 
The models used in this prospectus supplement for prepayments and defaults also do not purport to be a historical description of prepayment or default experience or a prediction of the anticipated rate of prepayment or default of any pool of mortgage loans, including the mortgage loans contained in the trust.  It is highly unlikely that the mortgage loans of a loan group will prepay or liquidate at any of the rates specified or that losses will be incurred according to one particular pattern.  The assumed percentages of CPR and the loss severity percentages shown are for illustrative purposes only.  For a description of CPR, see “YIELD AND MATURITY CONSIDERATIONS” in this prospectus supplement.  The actual rates of prepayment and liquidation and loss severity experience of the mortgage loans of a loan group may not correspond to any of the assumptions made in this prospectus supplement.  For these reasons, the weighted average lives of the offered certificates may differ from the weighted average lives shown in the tables.
 
It is highly unlikely that the mortgage loans will prepay at any constant rate until maturity or that all the mortgage loans will prepay at the same rate.  In addition, variations in the actual prepayment experience and the balance of the mortgage loans that prepay may increase or decrease the percentages of initial certificate balances (and weighted average lives) shown in the following tables.  Such variations may occur even if the average prepayment experience of the mortgage loans were to equal any of the specified CPR percentages.  Investors are urged to conduct their own analyses of the rates at which the mortgage loans may be expected to prepay.
 
 
S-20

 
 
See also “RISK FACTORS—Prepayment Models Are Illustrative Only and Do Not Predict Weighted Average Life and Maturity” in the accompanying prospectus.
 
Book-Entry System for Certificates
 
May Decrease Liquidity and
Delay
Payment
 
 
The offered certificates will be issued as book-entry certificates. Each class of book-entry certificates will be initially represented by one or more certificates registered in the name of a nominee for The Depository Trust Company, or DTC. Since transactions in the classes of book-entry certificates generally can be effected only through DTC and its participating organizations:
 
●       the liquidity of book-entry certificates in secondary trading markets that may develop may be limited because investors may be unwilling to purchase certificates for which they cannot obtain physical certificates;
 
●        your ability to pledge certificates to persons or entities that do not participate in the DTC system, or otherwise to take action in respect of the certificates, may be limited due to the lack of a physical security representing the certificates;
 
●        your access to information regarding the certificates may be limited since conveyance of notices and other communications by DTC to its participating organizations, and directly and indirectly through those participating organizations to you, will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect at that time; and
 
●        you may experience some delay in receiving distributions of interest and principal on your certificates because distributions will be made by the trustee to DTC and DTC will then be required to credit those distributions to the accounts of its participating organizations and only then will they be credited to your account either directly or indirectly through DTC's participating organizations.
 
See “DESCRIPTION OF THE CERTIFICATES—Registration and Denominations” in this prospectus supplement.
 
Geographic Concentration of the
 
Mortgaged Properties May
Adversely Affect Payments on
Your Certificates;
Concentrations of Mortgage
Loans and Borrowers May
Subject the Trust Fund to
an 
Increased Risk of Loss.
 
 
 
 
 
 
 
[______] mortgage loans, which represent [____]% of the initial pool balance, are secured by liens on mortgaged properties located in [_____________] [List of all states with respect to which a concentration of 10% or more exists.].  In general, that concentration increases the exposure of the mortgage pool to any adverse economic or other developments that may occur in [_________].  In recent periods, [_____________] (along with other regions of the United States) has experienced a significant downturn in the market value of real estate.
 
 
 
S-21

 
 
Increased Risk of Loss
 
Associated With Concentration
of Mortgage Loans and
Borrowers.
 
 
 
Several of the mortgage loans have cut-off date balances that are substantially higher than the average cut-off date balance.  In general, concentrations in a mortgage pool of loans with larger-than-average balances can result in losses that are more severe, relative to the size of the pool, than would be the case if the aggregate balance of the pool were more evenly distributed.  Concentration of borrowers also poses increased risks.  For instance, if a borrower that owns several mortgaged properties experiences financial difficulty at one mortgaged property, or at another income-producing property that it owns, it could attempt to avert foreclosure by filing a bankruptcy petition that might have the effect of interrupting monthly payments for an indefinite period on all of the related mortgage loans.

Risks Related to Construction,
 
Redevelopment, Renovation
and Repairs at Mortgaged
Properties.
 
 
 
Certain of the mortgaged properties are currently undergoing, or are expected to undergo in the future, construction, redevelopment, renovation or repairs. We cannot assure you that any current or planned construction, redevelopment, renovation or repairs will be completed, that such construction, redevelopment, renovation or repairs will be completed in the time frame contemplated, or that, when and if redevelopment or renovation is completed, such construction, 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 borrower to repay the related mortgage loan.
 
In the event that the related borrower fails to pay the costs for work completed or material delivered in connection with such ongoing redevelopment, renovation or repairs, the portion of the mortgaged 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. The existence of construction or renovation at a mortgaged property may make such mortgaged property less attractive to tenants or their customers, and accordingly could have a negative impact on net operating income.
 
Risks Relating to Net Cash
 
Flow.
 
There can be no assurance that estimates of net cash flow with respect to any mortgaged property as of the cut-off date or any other date accurately represent such mortgaged property’s future net cash flows. In this context, “net cash flow” means cash flow attributable to a particular mortgaged property as adjusted based on assumptions used by the mortgage loan seller.
 
Estimates of net cash flow with respect to any particular mortgaged property require the application of assumptions and subjective judgments related to future events, conditions and circumstances, including future income and expense levels regarding variables such as
 
 
S-22

 
 
the satisfaction of co-tenancy provision, full occupation of vacant space and successful re-letting at market rates of space subject to expiring leases.  Variations between actual and assumed results relating to such estimates may cause a mortgaged property’s actual net cash flow to differ, sometimes substantially, from estimated net cash flow.  In addition, each originator of commercial mortgage loans has its own underwriting criteria and no assurance can be given that assumptions and adjustments applied by one originator would be made by other lenders.
 
Additionally, such net cash flow estimates are not necessarily determined in accordance with generally accepted accounting principles and are therefore not a substitute for net income determined on that basis as a measure of the results of a mortgaged property’s operations.  Nor are they a substitute for cash flows from operating activities determined in accordance with generally accepted accounting principles as a measure of such mortgaged property’s liquidity.
 
The Credit Crisis and
 
Downturn in the Real Estate
Market Have Adversely
Affected the Value of
Commercial Mortgaged-
Backed Securities
 
 
 
 
 
Recent events in the real estate and securitization markets, as well as the debt markets and the economy generally, have caused significant dislocations, illiquidity and volatility in the market for commercial mortgage-backed securities, as well as in the wider global financial markets.  Declining real estate values, coupled with diminished availability of leverage and/or refinancings for multifamily and commercial real estate have resulted in increased delinquencies and defaults on multifamily and commercial mortgage loans.  In addition, the downturn in the general economy has affected the financial strength of many multifamily and commercial real estate tenants and has resulted in increased rent delinquencies and increased vacancies, particularly in the retail sector.  Any continued downturn may lead to increased vacancies, decreased rents or other declines in income from, or the value of, multifamily and commercial real estate, which would likely have an adverse effect on commercial mortgage-backed securities that are backed by loans secured by such multifamily and commercial real estate and thus affect the values of such multifamily and commercial mortgage-backed securities.  We cannot assure you that the dislocation in the commercial mortgage-backed securities market will not continue to occur or become more severe.  Even if the commercial mortgage-backed securities market does recover, the mortgaged properties and therefore, the mortgage loans and the certificates, may nevertheless decline in value.  Any further economic downturn may adversely affect the financial resources of the related borrower under a mortgage loan and may result in the inability of the related borrower to make principal and interest payments on, or refinance, the outstanding debt when due or to sell the mortgaged properties for an aggregate amount sufficient to pay off the outstanding debt when due.  In the event of default by a borrower under a mortgage loan, the trust may suffer a partial or total loss with respect to the certificates.  Any delinquency or loss on the related mortgaged properties may have an adverse effect on the distributions of principal and interest received by holders of the certificates.

 
S-23

 
 
In addition to credit factors directly affecting commercial mortgage-backed securities, the continuing fallout from a downturn in the residential mortgage-backed securities market and markets for other asset-backed and structured products has also affected the commercial mortgage-backed securities market by contributing to a decline in the market value and liquidity of securitized investments such as commercial mortgage-backed securities.  The deterioration of other structured products markets may continue to adversely affect the value of commercial mortgage-backed securities.  For example, increasing defaults and foreclosures in the residential real estate market may depress the overall economy and lead to increased vacancies, decreased rents or other declines in income from, or the value of, commercial real estate.  Similarly, a lack of credit liquidity coupled with higher mortgage rates may decrease demand for, and consequently the market value of, commercial properties, which could in turn potentially prevent commercial mortgage borrowers from refinancing their mortgages, and increase the likelihood of default.  Such economic conditions may also adversely affect the amount of liquidation proceeds the trust would realize in the event of a foreclosure.

Moreover, even if commercial mortgage-backed securities are performing as anticipated, the value of such commercial mortgage-backed securities in the secondary market may nevertheless decline as a result of a deterioration in general market conditions for other asset-backed or structured products.  Trading activity associated with commercial mortgage-backed securities indices may also drive spreads on those indices wider than spreads on commercial mortgage-backed securities, thereby resulting in a decrease in value of such commercial mortgage-backed securities.
 
The market conditions for commercial mortgage-backed securities can also be adversely affected by other events occurring in domestic or foreign jurisdictions that can affect markets generally, even where no direct connection to the particular commercial mortgage-backed securities or related mortgaged properties may be apparent, including but not limited to natural and man-made disasters, wars, revolts, insurrections, armed conflicts, terrorism, political crises, turbulence in equity, debt, commodity, foreign exchange or other markets, purchase, financing or other programs, policies or actions by governmental agencies or central banks, and accounting, tax, legal and regulatory developments.  Any such events may also adversely affect consumer spending and the availability of credit, with consequent adverse effects on the performance and value of the mortgaged properties and the ability of the related borrowers to make payments due on the related mortgage loans, including without limitation the ability of such borrowers to refinance such mortgaged properties and make the required balloon payment at maturity.
 
Balloon Loans May Present
 
Greater Risk than Fully-
Amortizing Loans
 
The mortgage loans have the amortization characteristics set forth in the following table:
 
 
 

 
S-24

 

 
 
Type of Amortization
 
Number of Mortgage Loans
 
% of Initial Pool Balance
Interest only
[___]
   [___]%
IO, Balloon
[___]
[___]
Balloon
[___]
[___]
Total
[___]
    [___]%

 
The timing of certain balloon payments is as set forth in the following table:

 
Type of Amortization
 
Number of Mortgage Loans
 
% of Initial Pool Balance
Balloon Payment due during the period between [DATE] and [DATE]
[___]
  [___]%
Interest Only until Maturity Date or Anticipated Maturity Date
[___]
  [___]%

 
Mortgage loans with balloon payments involve a greater likelihood of default than fully amortizing loans because the ability of a borrower to make a balloon payment typically will depend upon its ability either to refinance the loan or to sell the related mortgaged property.  See “RISK FACTORS—Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans—Increased Risk of Default Associated With Balloon Payments” in the accompanying prospectus.
 
Commercial Real Estate Values
 
May Fluctuate and Adversely
Affect Your Investment
 
 
There can be no assurance that values of the mortgaged properties have remained or will remain at their levels on the dates of origination of the related mortgage loans.  The value of any mortgaged property generally will change over time from its value on the appraisal or sales date.  If commercial real estate values generally or in a particular geographic area decline, the loan-to-value ratios shown in the tables in ANNEX A might not be a reliable indicator of the rates of delinquencies, foreclosures and losses that could occur on the mortgage loans.  If the commercial real estate market should experience an overall decline in property values large enough to cause the outstanding balances of the mortgage loans and any secondary financing on the related mortgaged properties to equal or exceed the value of the mortgaged properties, delinquencies, foreclosures and losses could be higher than those now generally experienced in the mortgage lending industry or in the sponsor’s prior securitizations involving the depositor.
 
 In addition, adverse economic conditions and other factors (which may or may not affect real property values) may affect the mortgagors’ timely payment of scheduled payments of principal and interest on the mortgage loans and, accordingly, the actual rates of delinquencies, foreclosures and losses with respect to any mortgage pool.  These other factors could include excessive building resulting in an oversupply of commercial properties of a particular type in a particular area or a decrease in employment reducing the demand for such commercial
 
 
 
S-25

 
 
properties in an area.  To the extent that credit enhancements do not cover such losses, your yield may be adversely impacted.
 
[[___] Mortgaged Properties are
 
Subject to Certain Risks.
 
Disclosure regarding property types with respect to which there exists a material concentration in the trust fund, with appropriate cross-reference to base prospectus disclosure.]
 
Materially Adverse
 
 
 
Environmental Conditions Will
Subject the Trust Fund to
Potential Liability.
 
 
 
[An environmental site assessment was performed at [each][all but [___] of the mortgaged properties during the [_____] month period prior to the cut-off date.  [Note any special environmental problems.]  [Otherwise,] no such environmental assessment revealed any material adverse environmental condition or circumstance at any mortgaged property[, except for-
 
  
those cases in which the condition or circumstance was remediated or an escrow for such remediation has been established; and
 
  
those cases in which an operations and maintenance plan or periodic monitoring of nearby properties was recommended, which recommendations are consistent with industry wide practices].
 
The pooling and servicing agreement to be dated as of the cut-off date, among the depositor, the master servicer, the special servicer, the trustee and the REMIC administrator, requires that the master servicer obtain an environmental site assessment of a mortgaged property securing a defaulted mortgage loan prior to acquiring title thereto or assuming its operation.  Such prohibition effectively precludes enforcement of the security for the related mortgage note until a satisfactory environmental site assessment is obtained (or until any required remedial action is thereafter taken), but will decrease the likelihood that the trust fund will become liable for a material adverse environmental condition at the mortgaged property.  However, there can be no assurance that the requirements of the pooling and servicing agreement will effectively insulate the trust fund from potential liability for a materially adverse environmental condition at any mortgaged property. See “THE POOLING AND SERVICING AGREEMENTS—Realization Upon Defaulted Mortgage Loans”, “RISK FACTORS—Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans—Adverse Environmental Conditions May Subject a Mortgage Loan to Additional Risk” and “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Environmental Considerations” in the accompanying prospectus.
 
[Different Underwriting
 
Guidelines May Affect
Performance of the
Mortgage Pool
 
 
 
To the extent all mortgage loans were not originated or acquired in accordance with the description of the sponsor's underwriting guidelines described in the accompanying prospectus (e.g., in cases when there is more than one sponsor or loan seller with respect to a particular series), such different underwriting guidelines used may be less stringent than the general guidelines employed by the sponsor.  [Disclosure regarding any associated material risks, e.g., certain of the
 
 
 
 
S-26

 
 
 
 
 
mortgage loans may have been originated with less than standard documentation or with higher maximum loan-to-value ratios.]  Accordingly, the mortgage loans may experience rates of delinquencies, defaults, foreclosure, bankruptcy and loss that are higher than those experienced by mortgage loans underwritten using Bank of America’s general underwriting standards.]
 
Other Responsible Parties May
 
Not Be Able To Make a
Required Repurchase or
Substitution of a Defective
Mortgage Loan.
 
 
 
 
In limited circumstances, the mortgage loan seller may be obligated to repurchase or replace a mortgage loan that it sold to us if the mortgage loan seller’s representations and warranties concerning that mortgage loan are materially breached or if there are material defects in the documentation for that 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.  There can be no assurance that the mortgage loan seller will be in a financial position to effect a repurchase or substitution and neither we nor any of our affiliates (except, in certain circumstances, for Bank of America, National Association 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 the mortgage loan seller’s representations and warranties or any material document defects, if such mortgage loan seller defaults on its obligation to do so.  The representations and warranties address the characteristics of the mortgage loans and mortgaged properties as of the date of issuance of the certificates.  They do not relieve you, the depositor or the issuing entity of the risk of defaults and losses on the mortgage loans.  In addition, 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 trust to incur a tax.  See “Description of the Mortgage Pool— Representations and Warranties; Repurchases and Substitutions” in this prospectus supplement.
 
Increases in Monthly Payments
 
[of Adjustable Rate Mortgage
Loans May Result in an
Increased Risk of Defaults.
 
 
 
[________] of the mortgage loans, which represent [____]% of the initial pool balance, are adjustable rate mortgage loans.  Increases in the required monthly payments on adjustable rate mortgage loans in excess of those assumed in the original underwriting of such loans may result in a default rate higher than that on mortgage loans with fixed mortgage rates.]
 
[Adjustable Rate Mortgage Loan
 
Borrowers May Be More Likely
to Prepay
 
With respect to mortgage loans having adjustable interest rates, mortgage interest rates on such mortgage loans at any time may not equal the prevailing mortgage interest rates for similar adjustable rate loans, and accordingly the prepayment rate may be lower or higher than would otherwise be anticipated.  Moreover, some mortgagors who prefer the certainty provided by fixed-rate mortgage loans may nevertheless obtain adjustable rate mortgage loans at a time when they regard the mortgage interest rates (and, therefore, the payments) on
 
 
 
S-27

 
 
 
 
fixed-rate mortgage loans as unacceptably high.  These mortgagors may be induced to refinance adjustable rate mortgage loans when the mortgage interest rates and monthly payments on comparable fixed-rate mortgage loans decline to levels which these mortgagors regard as acceptable, even though these mortgage interest rates and monthly payments may be significantly higher than the current mortgage interest rates and monthly payments on the mortgagors’ adjustable rate mortgage loans.  The ability to refinance a mortgage loan will depend on a number of factors prevailing at the time refinancing is desired, such as, among other things, real estate values, the mortgagor’s financial situation, prevailing mortgage interest rates, the mortgagor’s equity in the related mortgaged property, tax laws and prevailing general economic conditions.
 
 
 
Further, because the pass-through rates on the certificates will be based on the weighted average of the net mortgage interest rates of the related mortgage loans, disproportionate principal payments on the related mortgage loans having net mortgage interest rates higher or lower than the then-current pass-through rates on the certificates will affect the pass-through rates for the certificates for future periods and the yields on the certificates.  See “THE MORTGAGE POOL” in this prospectus supplement.]
 
Increased Concentrations
 
Resulting from Principal
Payments on the Mortgage
Loans May Expose Your
Certificates to Risk.
 
 
 
 
If and as payments in respect of principal (including any principal prepayments, liquidations and the principal portion of the repurchase prices of any mortgage loans repurchased due to breaches of representations) are received with respect to the mortgage loans, the remaining mortgage loans as a group may exhibit increased concentration with respect to the type of properties, property characteristics, number of mortgagors and affiliated mortgagors and geographic location.  Because unscheduled collections of principal on the mortgage loans is payable on the Class A, [Class A-FL,] [Class X,] Class B and Class C Certificates in sequential order, such classes that have a lower sequential priority are relatively more likely to be exposed to any risks associated with changes in concentrations of loan or property characteristics.
 
Market Considerations and
 
Limited Liquidity.
 
If you decide to sell your certificates, your ability to sell those certificates will depend on, among other things, whether and to what extent a secondary market then exists for your certificates, and you may have to sell at a discount from the price you paid for reasons unrelated to the performance of your certificates or the mortgage loans.  Pricing information regarding your certificates may not be generally available on an ongoing basis or on any particular date.
 
Your certificates will not be listed on any national securities exchange or traded on any automated quotation systems of any registered securities association or the NASDAQ Stock Market, and there is currently no secondary market for your certificates.  While we have been advised by the underwriters that they currently intend to make a market in the certificates, the underwriters have no obligation to do so,
 
 
 
S-28

 
 
any market-making may be discontinued at any time, and there can be no assurance that an active secondary market for the certificates will develop.  Accordingly, you may not have an active or liquid secondary market for your certificates.  Lack of liquidity could result in a substantial decrease in the market value of your certificates.  The market value of your 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.  No representation is made by any person or entity as to what the market value of any certificate will be at any time.  Furthermore, you should be aware that the market for securities of the same type as the certificates has in the past been volatile and offered very limited liquidity.
 
The primary source of ongoing information regarding the certificates, including information regarding the status of the mortgage loans and any credit support for the certificates, will be the periodic reports delivered to you.  We cannot assure you that any additional ongoing information regarding the certificates will be available through any other source.  The limited nature of the available information in respect of the certificates may adversely affect its liquidity, even if a secondary market for the certificates does develop.
 
We are not aware of any source through which pricing information regarding the certificates will be generally available on an ongoing basis or on any particular date.
 
In addition, you will generally have no redemption rights, and, except insofar as the certificates may be retired early as a result of prepayments or dispositions of mortgage loans, the certificates will be subject to early retirement only under certain specified circumstances described in this prospectus supplement.  See “DESCRIPTION OF THE CERTIFICATES—Termination; Retirement of Certificates” in this prospectus supplement and in the accompanying prospectus.
 
The market value of the certificates can decline even if those certificates and the mortgage loans are performing at or above your expectations.  The market value of the certificates will be sensitive to fluctuations in current interest rates.  However, a change in the market value of the certificates may be disproportionately impacted by upward or downward movement in current interest rates.
 
The commercial mortgage-backed securities market is currently experiencing unprecedented disruptions resulting from reduced investor demand and increased yield requirements for those securities.  As a result, the secondary market for commercial mortgage-backed securities is experiencing extremely limited liquidity.  These conditions may continue or worsen.  Accordingly, it is possible that for some period of time investors who desire to sell their certificates in the secondary market may find fewer potential purchasers and experience lower resale prices than under “normal” market conditions.
 
The market value of the certificates can decline even if those certificates and the mortgage loans are performing at or above your expectations.  The market value of the certificates will be sensitive to fluctuations in current interest rates.  However, a change in the market value of the certificates may be disproportionately impacted by upward or downward movement in current interest rates.
 
 
S-29

 
 
 
 
 
 
 
Over the past three years, LIBOR has experienced historically high volatility and significant fluctuations.  The pass-through rate on the Class A-FL certificates is based upon LIBOR and will fluctuate from one interest accrual period to another in response to changes in LIBOR.  As a result, the market value of the Class A-FL certificates will be particularly sensitive to fluctuations in LIBOR. We believe that LIBOR will continue to fluctuate and make no representation as to what LIBOR will be in the future. The market value of the 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 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:
 
● 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;
 
● legal and other requirements and restrictions that prohibit a particular entity from investing in commercial mortgage-backed securities, limit the amount or types of commercial mortgage-backed securities that it may acquire or require it to maintain increased capital or reserves as a result of its investment in commercial mortgage-backed securities;
 
● accounting standards that may affect an investor’s characterization or treatment of an investment in commercial mortgage-backed securities for financial reporting purposes;
 
●     increased regulatory compliance burdens imposed on commercial mortgage-backed securities or securitizations generally, or on classes of securitizers, that may make securitization a less attractive financing option for commercial mortgage loans;
 
● investors’ perceptions regarding the commercial 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;
 
investors’ perceptions regarding the capital markets in general, which may be adversely affected by political, social and economic events completely unrelated to the commercial real estate markets; and
 
the impact on demand generally for commercial mortgage-backed securities as a result of the existence or cancellation of government-sponsored economic programs.
 
Legal and Regulatory Provisions
 
Affecting Investors Could
Adversely Affect the
Liquidity of the Offered
Certificates
 
 
 
 
Except as regards their status under the Secondary Mortgage Market Enhancement Act of 1984, as amended, we make no representation as to the proper characterization of the offered certificates for legal investment, financial institution regulatory, financial reporting or other purposes, as to the ability of particular investors to purchase the offered certificates under applicable legal investment or other restrictions or as to the consequences of an investment in the offered certificates for such purposes or under such
 
 
 
S-30

 
 
restrictions.  However, the following are examples of statutory and regulatory concerns that may adversely affect the ability of particular investors to hold or acquire commercial mortgage-backed securities or the consequences to them of an investment in commercial mortgage-backed securities and, thus, the ability of investors in the offered certificates to resell their certificates in the secondary market:
 
  New Article 122a of the Banking Consolidation Directive (Directive 2006/48/EC (as amended)), which Member States of the European Union are in the process of implementing and applies to new securitizations issued on or after December 31, 2010 and, in relation to existing securitizations, from December 31, 2014 to the extent that new underlying exposures are added or substituted after that date, imposes a severe capital charge on a securitization position acquired by an EU regulated credit institution unless, among other conditions, (a) the originator, sponsor or original lender of the securitization has explicitly disclosed to the EU regulated credit institution that it will retain, on an ongoing basis, a material net economic interest of not less than 5% in respect of certain specified credit risk tranches or asset exposures, and (b) the acquiring institution is able to demonstrate that it has undertaken certain due diligence in respect of its securitization position and the underlying exposures and that procedures are established for such activities to be monitored on an on-going basis.  For purposes of this directive, an EU regulated credit institution may be subject to the capital requirements as a result of activities of its overseas affiliates, possibly including those that are based in the United States.  Since neither the depositor nor the mortgage loan seller will retain a 5% net economic interest with respect to the certificates in one of the forms prescribed by this directive, the adverse effect of this directive to EU-regulated institutions and their affiliates may cause them not to invest in the certificates.
 
  The Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in the United States requires that United States regulators amend their regulations, including their capital and legal investment regulations, to remove references to credit ratings and substitute other standards of creditworthiness.  These regulations may subject investments in rated commercial mortgage-backed securities by regulated institutions to greater capital charges, affect the legality of an investment in rated commercial mortgage-backed securities by such institutions or otherwise adversely affect the treatment of commercial mortgage-backed securities for regulatory purposes.  Any such regulations may have retroactive effect to investments made prior the effective date of such regulations.
 
  The Financial Accounting Standards Board has adopted changes to the accounting standards for structured products.  These changes, or any future changes, may affect the accounting for entities such as the trust, could under certain circumstances require an investor or its owner generally to consolidate the assets of the trust in its financial statements
 
 
 
S-31

 
 
and record third parties’ investments in the trust fund as liabilities of that investor or owner or could otherwise adversely affect the manner in which the investor or its owner must report an investment in commercial mortgage-backed securities for financial reporting purposes.
 
The offered certificates [will / will not] constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended.
 
Accordingly, all prospective investors in the offered certificates should consider the possible effects of legal investment, regulatory capital, accounting and other restrictions and requirements on the liquidity and value of their certificates, and whether those requirements and restrictions would apply in connection with their initial investments in the offered certificates.  In any event, all prospective investors whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities should consult with their own legal, accounting and other advisors in determining whether, and to what extent, the offered certificates will constitute legal investments for them or are subject to investment or other restrictions, unfavorable accounting treatment, capital charges or reserve requirements.  See “LEGAL INVESTMENT” in this prospectus supplement and in the accompanying prospectus.
 
The Volatile Economy and Credit
 
Crisis May Increase Loan
Defaults and Affect the Value
and Liquidity of Your
Investment.
 
 
 
 
The global economy recently experienced a significant recession, as well as a severe, ongoing disruption in the credit markets, including the general absence of investor demand for and purchases of commercial mortgage-backed securities and other asset-backed securities and structured financial products.  Although the United States economy, by some measurements, may be emerging from the recession, any recovery could be fragile and unsustainable, in which circumstances another, possibly more severe recession may ensue.  The global recession and financial crisis have resulted in increased vacancies, decreased rents and/or other declines in income from, or the value of, commercial real estate.  Additionally, a significant contraction in the availability of commercial mortgage financing, together with higher mortgage rates and decreases in commercial real estate values, have prevented many commercial mortgage borrowers from refinancing their maturing mortgage loans or selling their properties for proceeds sufficient to retire such loans.  These circumstances have significantly increased delinquency and default rates of securitized commercial mortgage loans over the last several years, with defaults occurring throughout the United States.  In addition, the declines in commercial real estate values have resulted in reduced borrower equity, which circumstances tend to give a borrower less incentive to cure delinquencies and avoid foreclosure.  Those declines in value have thus tended to result in lower recoveries and greater losses upon foreclosure sale or other liquidation.  Defaults, delinquencies and losses have further decreased property values, thereby resulting in additional
 
 
 
S-32

 
 
 
defaults by commercial mortgage borrowers, further credit constraints, further declines in property values and further adverse effects on the perception of the value of commercial mortgage-backed securities.  Although certain commercial mortgage lenders have made financing more available in recent months, the commercial real estate markets generally continue to experience persistent weakness, and further, the credit markets remain tight and financing availability remains limited and declines may occur in real estate values.
 
In addition, the financial crisis that emerged in 2008 and ensuing events have resulted in a substantial level of uncertainty in the financial markets, particularly with respect to mortgage related investments.  The responses to such crisis and events have included, among other things:
 
numerous actions of monetary and fiscal authorities in the United States and Europe, such as the conservatorship and the control by the U.S. government since September 2008 of the Federal Home Loan Mortgage Corporation (commonly referred to as Freddie Mac) and the Federal National Mortgage Association (commonly referred to as Fannie Mae);
 
the establishment of the Troubled Asset Relief Program through the Emergency Economic Stabilization Act of 2008 and resulting public investments in numerous financial institutions and other enterprises; and
 
the adoption or revision, or proposed adoption or revision, of statutes and regulations governing securitization markets in the United States and Europe, such as proposed revisions released in April 2010 to the Securities and Exchange Commission’s Regulation AB, the adoption of the Federal Deposit Insurance Corporation’s final securitization safe harbor rule, the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the proposed rules on credit risk retention and ongoing and pending regulatory implementation and certain European Union regulatory initiatives.
 
Ongoing developments associated with such responses could further adversely affect the already-constrained availability of credit for commercial real estate, which may in turn affect the performance of the mortgage loans or the performance or value of your certificates.
 
Investors should consider that general conditions in the commercial real estate and mortgage markets may adversely affect the performance of the mortgage loans and the performance of the certificates.  In addition, in connection with all the circumstances described above, you should be aware in particular that:
 
such circumstances may result in substantial delinquencies and defaults on the mortgage loans and adversely affect the amount of liquidation proceeds the trust fund would realize in the event of foreclosures and liquidations;
 
 
 
S-33

 
 
 
  defaults on the mortgage loans may occur in large concentrations over a period of time, which might result in rapid declines in the value of your certificates;
 
  notwithstanding that the mortgage loans were recently underwritten and originated, the values of the related mortgaged properties may have declined since the mortgage loans were originated and may decline following the issuance of the certificates and such declines may be substantial and occur in a relatively short period following the issuance of the certificates; and such declines may or may not occur for reasons largely unrelated to the circumstances of the particular property;
 
  if you determine to sell your certificates, you may be unable to do so or you may be able to do so only at a substantial discount from the price you paid; this may be the case for reasons unrelated to the then current performance of the certificates or the mortgage loans; and this may be the case within a relatively short period following the issuance of the certificates;
 
  if the mortgage loans default, then the yield on your investment may be substantially reduced notwithstanding that liquidation proceeds may be sufficient to result in the repayment of the principal of and accrued interest on your certificates; an earlier than anticipated repayment of principal (even in the absence of losses) in the event of a default in advance of the maturity date would tend to shorten the weighted average period during which you earn interest on your investment; and a later than anticipated repayment of principal (even in the absence of losses) in the event of a default upon the maturity date would tend to delay your receipt of principal and the interest on your investment may be insufficient to compensate you for that delay;
 
  even if liquidation proceeds received on defaulted mortgage loans are sufficient to cover the principal and accrued interest on those mortgage loans, the trust fund may experience losses in the form of special servicing fees, liquidation fees and other expenses (including indemnities), and you may bear losses as a result, or your yield may be adversely affected by such losses;
 
  the time periods to resolve defaulted mortgage loans may be long, and those periods may be further extended because of borrower bankruptcies and related litigation; and this may be especially true in the case of loans made to borrowers that have, or whose affiliates have, substantial debts other than the mortgage loan, including related subordinate or mezzanine financing;
 
  some participants in the commercial mortgage-backed securities markets have sought permission from the IRS to allow a purchaser of a mortgaged property acquired in respect of a mortgage loan held by a
 
 
 
S-34

 
 
REMIC to assume the extinguished debt in connection with a purchase of that property; if such permission is granted and the special servicer pursues such a resolution strategy, then the receipt of proceeds of a foreclosure property would be delayed for an extended period; and this may occur when it would be in your best interest for the property to be sold for cash, even at a lesser price, with the proceeds distributed to certificateholders;
 
  trading activity associated with indices of commercial mortgage-backed securities may also drive spreads on those indices wider than spreads on commercial mortgage-backed securities, thereby resulting in a decrease in value of such commercial mortgage-backed securities, including your certificates, and spreads on those indices may be affected by a variety of factors, and may or may not be affected for reasons involving the commercial real estate markets and may be affected for reasons that are unknown and cannot be discerned; and
 
  even if you intend to hold your certificates, depending on your circumstances, you may be required to report declines in the value of your certificates, and/or record losses, on your financial statements or regulatory or supervisory reports, and/or repay or post additional collateral for any secured financing, hedging arrangements or other financial transactions that you have entered into that are backed by or make reference to your certificates, in each case as if your certificates were to be sold immediately.
 
 
In connection with all the circumstances described above, the risks we described elsewhere in this prospectus supplement are heightened substantially, and you should review and carefully consider such risk factors in light of such circumstances.

 
 
S-35

 

 
DESCRIPTION OF THE MORTGAGE POOL
 
General
 
The issuing entity with respect to the Offered Certificates will be Banc of America Merrill Lynch Commercial Mortgage Trust 201[_]-[__] (the “Issuing Entity”).  The assets of the Issuing Entity will consist primarily of [___] conventional, multifamily and commercial mortgage loans (collectively, the “Mortgage Loans”), with an aggregate principal balance as of the respective due dates in [____________] 201[_] for the Mortgage Loans (collectively, the “Cut-off Date”), after deducting payments of principal due on such date, of approximately $[_________________] (with respect to each Mortgage Loan, the “Cut-off Date Balance” and, in the aggregate, the “Initial Pool Balance”).  Each Mortgage Loan is evidenced by one or more promissory notes or similar evidence of indebtedness (each a “Mortgage Note”) and in each case secured by a mortgage, deed of trust or other similar security instrument (a “Mortgage”) creating a first lien on a fee simple and/or leasehold interest in a retail, office, hospitality, multifamily, industrial, manufactured housing community, self-storage or other commercial property (each, a “Mortgaged Property”).  All percentages of the Mortgage Loans, or of any specified group of Mortgage Loans, referred to in this prospectus supplement without further description are approximate percentages by aggregate Cut-off Date Balance.  The Cut-off Date Balance of any Mortgage Loan is the unpaid principal balance thereof as of the Cut-off Date, after application of all payments due on or before such date, whether or not received.
 
The Mortgage Loans are not insured or guaranteed by any governmental entity or private mortgage insurer.  The Depositor has not undertaken any evaluation of the significance of the recourse provisions of any of a number of the Mortgage Loans that provide for recourse against the related borrower or another person in the event of a default.  Accordingly, investors should consider all of the Mortgage Loans to be nonrecourse loans as to which recourse in the case of default will be limited to the specific property and such other assets, if any, as were pledged to secure a Mortgage Loan.
 
On or prior to the Delivery Date, the Depositor will acquire the Mortgage Loans from the mortgage loan seller pursuant to the mortgage loan purchase and sale agreement and will then assign its interests in the Mortgage Loans, without recourse, to the Trustee for the benefit of the certificateholders.  See “—[Significant Originators and Obligors]” in this prospectus supplement and “THE POOLING AND SERVICING AGREEMENTS—Assignment of Mortgage Loans; Repurchases” in the accompanying prospectus.
 
The Mortgage Loans were originated between 20[__] and 20[__].  The Sponsor originated [____] of the Mortgage Loans, which represent [___]% of the Initial Pool Balance, and acquired the remaining Mortgage Loans from the respective originators thereof, generally in accordance with the underwriting criteria described in the accompanying prospectus under “BANK OF AMERICA, NATIONAL ASSOCIATION, AS SPONSOR”.
 
[None of the mortgage loans was 30 days or more delinquent as of the cut-off date, and no mortgage loan has been 30 days or more delinquent during the 12 months preceding the cut-off date (or since the date of origination if such mortgage loan has been originated within the past 12 months).[Insert delinquency and loss information as required by Item 1111(c), if applicable.]]
 
The Mortgage Loans were selected by the Sponsor, with advice from Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Underwriter”) as to the characteristics of the Mortgage Loans in each loan group that will optimize marketability of the certificates, from the Sponsor’s portfolio of multifamily and commercial mortgage loans[, and were chosen to meet the requirements imposed by rating agencies to achieve the credit support percentages listed in the table in the EXECUTIVE SUMMARY].
 
Certain Terms and Conditions of the Mortgage Loans
 
 
Due Dates.
 
[___] of the Mortgage Loans, which represent [___]% of the Initial Pool Balance, have Due Dates that occur on the first day of each month.  The remaining Mortgage Loans have Due Dates that occur on the [______] ([____]% of
 
 
 
S-36

 
 
the Mortgage Loans), [_____] ([____]% of the Mortgage Loans), [_____] ([____]% of the Mortgage Loans), and [_______] ([____]% of the Mortgage Loans) day of each month.
 
Mortgage Rates; Calculations of Interest.  [____] of the Mortgage Loans, which represent [____] of the Initial Pool Balance, bear interest at a per annum rate that is fixed for the remaining term of the Mortgage Loan, except as described below, each ARD loan will accrue interest at a higher rate after its anticipated repayment date.  As used in this prospectus supplement, the term mortgage rate does not include the incremental increase in rate at which interest may accrue on an ARD loan after its anticipated repayment date.
 
As of the Cut-off Date, the mortgage rates of the Mortgage Loans ranged as shown in the following chart:
 
 
Range of Mortgage Rates
 
Number of Mortgage Loans
 
Aggregate Cut-off Date Balance
 
% of Initial Pool Balance
[____]% - [____]%
[___]
$ [__________]
[__]%
[____]% - [____]%
[___]
$ [__________]
[__]%
[____]% - [____]%
[___]
$ [__________]
[__]%
[____]% - [____]%
[___]
$ [__________]
[__]%
[____]% - [____]%
[___]
$ [__________]
[__]%
Total
[___]
$ [__________]
100%
 
[____________] of the Mortgage Loans, which represent [____]% of the Initial Pool Balance, are ARM Loans.  The ARM Loans bear interest at mortgage rates that are subject to adjustment on periodically occurring Interest Rate Adjustment Dates by adding the related Gross Margin to the applicable value of the related Index, subject in [______] cases to rounding conventions and lifetime minimum and/or maximum mortgage rates and, in the case of [________] Mortgage Loans, which represent [____]% of the Initial Pool Balance, to periodic minimum and/or maximum mortgage rates.  The remaining Mortgage Loans are Fixed Rate Loans.  None of the ARM Loans is convertible into a Fixed Rate Loan.
 
[Identification of the applicable Mortgage Loan Index.]  The adjustments to the mortgage rates on the ARM Loans may in each case be based on the value of the related Index as available a specified number of days prior to the Interest Rate Adjustment Date, or may be based on the value of the related Index as most recently published as of an Interest Rate Adjustment Date or as of a designated date preceding an Interest Rate Adjustment Date.
 
  
[____] of the ARM Loans, which represent [___]% of the Initial Pool Balance, provide for Interest Rate Adjustment Dates that occur monthly;
 
  
[____] of the ARM Loans, which represent [___]% of the Initial Pool Balance, provide for Interest Rate Adjustment Dates that occur semi-annually; and
 
  
the remaining ARM Loans provide for Interest Rate Adjustment Dates that occur annually.
 
The monthly payments on each ARM Loan are subject to adjustment on each Payment Adjustment Date to an amount that would amortize fully the principal balance of the Mortgage Loan over its then remaining amortization schedule and pay interest at the mortgage rate in effect during the one month period preceding such Payment Adjustment Date.  The ARM Loans provide for “Payment Adjustment Dates” that occur on the Due Date following each related Interest Rate Adjustment Date.  None of the ARM Loans provide for negative amortization.
 
[________] of the Mortgage Loans provide for monthly payments of principal based on amortization schedules significantly longer than the remaining terms of those Mortgage Loans.  Thus, each of these Mortgage Loans will have a Balloon Payment due at its stated maturity date, unless prepaid prior thereto.
 
No Mortgage Loan currently prohibits principal prepayments; however, [certain] of the Mortgage Loans impose “Prepayment Premiums” in connection with full or partial prepayments.  Prepayment Premiums are payable to the Master Servicer as additional servicing compensation, to the extent not otherwise applied to offset Prepayment Interest Shortfalls, and may be waived by the Master Servicer in accordance with the servicing standard described under “SERVICING OF THE MORTGAGE LOANS—General” in this prospectus supplement.
 
 
S-37

 
 
Hyperamortization.  [____] of the Mortgage Loans, which represent [____] of the Initial Pool Balance, provide for changes in payments and accrual of interest if it is not paid in full by the related anticipated repayment date.  Commencing on the anticipated repayment date, the ARD loans generally will bear interest at a fixed per annum rate equal to the revised rate set forth in the related Mortgage Note extending until final maturity.  The excess interest rate is the difference in the rate of the revised rate over the mortgage rate.  Interest accrued at the excess interest rate is referred to in this prospectus supplement as Excess Interest.  In addition to paying interest (at the revised rate) from and after the anticipated repayment date, the borrower generally will be required to apply any excess cash flow from the related Mortgaged Property, after paying all permitted operating expenses and capital expenditures, to pay accrued interest at the mortgage rate, then principal and then interest at the excess interest rate on the ARD loan.
 
Amortization of Principal.  [___] Mortgage Loans, which represent [__]% of the Initial Pool Balance are balloon loans that provide for monthly payments of principal based on amortization schedules significantly longer than the respective remaining terms thereof, thereby leaving Balloon Payments due and payable on their respective Maturity Date, unless prepaid prior thereto.  In addition, [___], of the Mortgage Loans, including the Interest Only, ARD loans, representing [__]% of the Initial Pool Balance provide for payments of interest only through to the end of their respective loan terms.
 
 Prepayment Provisions.  The Mortgage Loans generally provide for a sequence of periods with different conditions relating to voluntary prepayments consisting of one or more of the following:
 
(1) a Lockout Period during which voluntary principal prepayments are prohibited, followed by
 
(2) one or more Prepayment Premium Periods during which any voluntary principal prepayment is to be accompanied by a Prepayment Premium (during such a period defeasance may also be possible as an alternative as described below under “—Defeasance”), followed by
 
(3) an Open Period during which voluntary principal prepayments may be made without an accompanying Prepayment Premium.
 
The periods applicable to any particular Mortgage Loan are indicated in ANNEX A under the Heading “Prepayment Penalty Description (Payments)”.
 
Voluntary principal prepayments (after any Lockout Period) may be made in full or in some cases in part, subject to certain limitations and, during a Prepayment Premium Period, payment of the applicable Prepayment Premium, as applicable.  As of the Cut-off Date, the remaining Lockout Periods ranged from [__] to [__] scheduled monthly payments.  As of the Cut-off Date, the weighted average remaining Lockout Period was [__] scheduled monthly payments.  As of the Cut-off Date, the Open Period ranged from [__] to [__] scheduled monthly payments, prior to and including the final scheduled monthly payment at maturity.  The weighted average Open Period was [__] scheduled monthly payments.  Prepayment Premiums on the Mortgage Loans are generally calculated on a basis of a yield maintenance formula (subject, in certain instances, to a minimum equal to a specified percentage of the principal amount prepaid).  The prepayment terms for each Mortgage Loan are summarized in the table included in ANNEX A to this prospectus supplement.
 
Prepayment Premiums actually collected on the Mortgage Loans will be distributed to the respective classes of certificateholders in the amounts and priorities described under “DESCRIPTION OF THE CERTIFICATES—Distributions—Distributions of Prepayment Premiums” in this prospectus supplement.  The Depositor makes no representation as to the enforceability of the provision of any Mortgage Loan requiring the payment of a Prepayment Premium or as to the collectibility of any Prepayment Premium.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Default Interest and Limitations on Prepayments” in the accompanying prospectus.
 
 Defeasance.  [_____] Mortgage Loans, representing [__]% of the Initial Pool Balance, permit the applicable borrower at any time during the related Defeasance Lockout Period, which is at least two years from the Delivery Date, provided no event of default exists, to obtain a release of a mortgaged property from the lien of the related Mortgage by exercising the Defeasance Option.  The borrower must meet certain conditions in order to exercise its Defeasance Option.  Among other conditions, the borrower must pay on the related Release Date:
 
 
S-38

 
 
(1) all interest accrued and unpaid on the principal balance of the Mortgage Note to and including the Release Date;
 
(2) all other sums, excluding scheduled interest or principal payments, due under the Mortgage Loan and all other loan documents executed in connection therewith; and
 
(3) the related Collateral Substitution Deposit.
 
In addition, the borrower must deliver a security agreement granting the trust fund a first priority lien on the Collateral Substitution Deposit and, generally, an opinion of counsel to such effect.  Simultaneously with such actions, the related Mortgaged Property will be released from the lien [Description of any exceptions, to the extent material.]  Mortgaged Property not released, in the case of a partial defeasance) will be substituted as the collateral securing the Mortgage Loan.  In general, a successor borrower established or designated pursuant to the related Mortgage Loan documents will assume all of the defeased obligations of a borrower exercising a Defeasance Option under a mortgage loan and the borrower will be relieved of all of the related defeased obligations.  Under the Pooling and Servicing Agreement, the Master Servicer is required to enforce any provisions of the related Mortgage Loan documents that require, as a condition to the exercise by the borrower of any defeasance rights, that the borrower pay any costs and expenses associated with such exercise.
 
The Depositor makes no representation as to the enforceability of the defeasance provisions of any Mortgage Loan.
 
Release or Substitution of Properties.  The Mortgage Loans that are secured by more than one Mortgaged Property and which permit release of one or more of the related Mortgaged Properties generally require that:  (1) prior to the release of a related Mortgaged Property, between [100]% and [125]% of the allocated loan amount for the Mortgaged Property be defeased and (2) certain debt service coverage ratio and loan-to-value ratio tests be satisfied with respect to the remaining Mortgaged Properties after the defeasance.  [Description of any exceptions, to the extent material.]
 
Furthermore, certain Mortgage Loans permit the release of specified parcels of real estate or improvements that secure such Mortgage Loans but were not assigned any material value or considered a source of any material cash flow for purposes of determining the related Appraisal Value or Underwritten Cash Flow.  Such parcels of real estate or improvements are permitted to be released without payment of a release price and consequent reduction of the principal balance of the related Mortgage Loan or substitution of additional collateral if zoning and other conditions are satisfied.
 
“Due-on-Sale” and “Due-on-Encumbrance” Provisions.  The Mortgage Loans generally contain both “due-on-sale” and “due-on-encumbrance” clauses that in each case, subject to certain limited exceptions, permit the holder of the Mortgage to accelerate the maturity of the related Mortgage Loan if the borrower sells or otherwise transfers or encumbers the related Mortgaged Property or prohibit the borrower from doing so without the consent of the mortgagee.  See “—Additional Mortgage Loan Information—Additional Financing” in this prospectus supplement.  Certain of the Mortgage Loans permit the transfer or further encumbrance of the related Mortgaged Property if certain specified conditions are satisfied or if the transfer is to a borrower reasonably acceptable to the mortgagee.  The Master Servicer and/or the Special Servicer, as applicable, will determine, in a manner consistent with the Servicing Standard and with the REMIC provisions, whether to exercise any right the mortgagee may have under any such clause to accelerate payment of the related Mortgage Loan upon, or to withhold its consent to, any transfer or further encumbrance of the related Mortgaged Property, provided that the Master Servicer will not waive any right that it may have, or grant any consent that it may otherwise withhold without obtaining the consent of the Special Servicer.  The Special Servicer’s consent will be deemed given if it does not respond within ten (10) business days following receipt by the Special Servicer of the Master’s Servicer’s request for such consent and all information reasonably requested by the Special Servicer as such time frame may be extended if the Special Servicer is required to seek the consent of the Directing Certificateholder, the mezzanine loan holder [or any nationally recognized statistical rating organization (“NRSRO”) within the meaning of Section 3(a)(62) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), retained by the Depositor to rate the offered certificates (each, a “Hired Rating Agency”), as described below.  In addition, the Special Servicer will not waive any right it has, or grant any consent that it may otherwise withhold, under any related “due-on-sale” or “due-on-encumbrance” clause for any Non-Specially Serviced Mortgage Loan that has a then Stated Principal
 
 
S-39

 
 
Balance that exceeds $2,500,000 or any Specially Serviced Mortgage Loan unless the Directing Certificateholder has approved such waiver and consent, which approval will be deemed given if the Directing Certificateholder does not respond within ten (10) business days after the Special Servicer has given a written notice of the matter and a written explanation of the surrounding circumstances and a request for approval of a waiver or consent related to the “due-on-encumbrance” or a “due-on-sale clause” to the Directing Certificateholder.
 
Ground Leases and Other Non-Fee Interests.  [___] Mortgage Loans, which represent [__]% of the Initial Pool Balance, are, in each such case, secured in whole or in part by a Mortgage on the applicable borrower’s leasehold interest in the related Mortgaged Property.  Generally, either (i) the lessor has subordinated its interest in the related Mortgaged Property to the interest of the holder of the related Mortgage Loan or (ii) the lessor has agreed to give the holder of the Mortgage Loan notice of, and has granted such holder the right to cure, any default or breach by the lessee.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Foreclosure—Leasehold Considerations” in the accompanying prospectus.
 
Additional Financing.  The existence of subordinated indebtedness encumbering a Mortgaged Property may increase the difficulty of refinancing the related Mortgage Loan at maturity and the possibility that reduced cash flow could result in deferred maintenance.  Also, in the event that the holder of the subordinated debt files for bankruptcy or is placed in involuntary receivership, foreclosure on the Mortgaged Property could be delayed.  In general, the Mortgage Loans either prohibit the related borrower from encumbering the Mortgaged Property with additional secured debt or require the consent of the holder of the first lien prior to that encumbrance.
 
Certain information about additional debt that has been or may be incurred is as set forth in the following table:
 
 
Type of Additional Debt
 
Number of Mortgage Loans
 
% of Initial
Pool Balance
Existing
[  ]
[  ]%
Secured
[  ]
[  ]%
Unsecured (1) 
[  ]
[  ]%
Future
[  ]
[  ]%
Secured
[  ]
[  ]%
Unsecured (1) 
[  ]
[  ]%
Secured or Unsecured (1) 
[  ]
[  ]%
_____________________
 
(1)
Excludes unsecured trade payables.
 
[The information required by Item 1111(b)(9)(i)(E) of Regulation AB will be provided in footnotes to the “Existing - Secured” item in the above chart or by adding such information in further text below or in an annex.]
 
Regardless of whether the terms of a Mortgage Loan prohibit the incurrence of subordinate debt, the related borrower may be permitted to incur additional indebtedness secured by furniture, fixtures and equipment, and to incur additional unsecured indebtedness.  In addition, although the Mortgage Loans generally restrict the transfer or pledging of general partnership and managing member interests in a borrower, subject to certain exceptions, the terms of the Mortgage Loans generally permit, subject to certain limitations, the transfer or pledge of a less than controlling portion of the limited partnership or managing membership equity interests in a borrower.  Moreover, in general the parent entity of any borrower that does not meet the single purpose entity criteria may not be restricted in any way from incurring mezzanine or other debt not secured by the related Mortgaged Property.
 
Certain information about mezzanine debt that has been or may be incurred is as set forth in the following table:
 
Type of Mezzanine Debt
 
Number of Mortgage Loans
 
% of Initial
Pool Balance
Future
[  ]
[  ]%
Existing
[  ]
[  ]%
Total
[  ]
[  ]%
 
 
 
S-40

 
 
With respect to all but [___] of these Mortgage Loans, the related mezzanine lender has entered into a mezzanine intercreditor agreement with the mortgagee, pursuant to which the related mezzanine lender, among other things:
 
  
has agreed, under certain circumstances, not to enforce its rights to realize upon collateral securing the mezzanine loan or take any exercise enforcement action with respect to the mezzanine loan without written confirmation from each Hired Rating Agency that such enforcement action would not cause the downgrade, withdrawal or qualification of the then-current ratings of the certificates,
 
  
has subordinated the mezzanine loan documents to the related Mortgage Loan documents and
 
  
has the option to purchase the related Mortgage Loan if such Mortgage Loan becomes defaulted or to cure the default as set forth in such mezzanine intercreditor agreement.
 
Certain Terms and Conditions of the MBS
 
[Description of any MBS included in the pool assets, including, to the extent applicable and material, the information referenced as to be provided in the accompanying prospectus under “DESCRIPTION OF THE TRUST FUNDS—MBS”.]
 
Certain Underwriting Matters
 
Environmental Assessments.  [Each] of the Mortgaged Properties was subject to an environmental site assessment, an environmental site assessment update or a transaction screen that was performed by an independent third-party environmental consultant with respect to each Mortgaged Property securing a Mortgage Loan in connection with the origination of such Mortgage Loan or was required to have environmental insurance in lieu of an environmental site assessment. In some cases, a third-party consultant also conducted a Phase II environmental site assessment of a Mortgaged Property. With respect to an environmental site assessment, if any, (i) no such environmental site assessment provides that as of the date of the report there is a material violation of applicable environmental laws with respect to any known circumstances or conditions relating to the related Mortgaged Property; or (ii) if any such environmental site assessment does reveal any such circumstances or conditions with respect to the related Mortgaged Property and such circumstances or conditions have not been subsequently remediated in all material respects, then generally, with certain exceptions, one or more of the following was the case: (A) a party not related to the related borrower with financial resources reasonably adequate to cure the circumstance or condition in all material respects was identified as a responsible party for such circumstance or condition, (B) the related borrower was required to provide additional security to cure the circumstance or condition in all material respects and to obtain and, for the period contemplated by the related loan documents, maintain an operations and maintenance plan, (C) the related borrower provided a “no further action” letter or other evidence that applicable federal, state or local governmental authorities had no current intention of taking any action, and are not requiring any action, in respect of such circumstance or condition, (D) such circumstances or conditions were investigated further and based upon such additional investigation, an independent environmental consultant recommended no further investigation or remediation, or recommended only the implementation of an operations and maintenance program, which the related borrower is required to do, (E) the expenditure of funds reasonably estimated to be necessary to effect such remediation was the lesser of (a) an amount equal to two percent of the outstanding principal balance of the related Mortgage Loan and (b) $200,000, (F) an escrow of funds exists reasonably estimated to be sufficient for purposes of effecting such remediation, (G) the related borrower or other responsible party is currently taking such actions, if any, with respect to such circumstances or conditions as have been required by the applicable governmental regulatory authority, (H) the related Mortgaged Property is insured under a policy of insurance, subject to certain per occurrence and aggregate limits and a deductible, against certain losses arising from such circumstances or conditions, or (I) a responsible party with financial resources reasonably adequate to cure the circumstance or condition in all material respects provided a guaranty or indemnity to the related borrower to cover the costs of any required investigation, testing, monitoring or remediation. We cannot assure you, however, that a responsible party will be financially able to address the subject condition or compelled to do so. See “RISK FACTORS—Risks Related to the Mortgage Loans—Adverse Environmental Conditions May Reduce Cash Flow from a Mortgaged Property” for more information regarding the environmental condition of certain Mortgaged Properties.
 
 
S-41

 
 
Neither the Sponsor nor any other person will make any representation or warranty with respect to environmental conditions arising after the Delivery Date, and will not be obligated to repurchase or substitute for any Mortgage Loan due to any such condition.
 
Generally.  Certain federal, state and local laws, regulations and ordinances govern the management, removal, encapsulation or disturbance of asbestos-containing materials.  Such laws, as well as common law, may impose liability for releases of or exposure to asbestos containing materials and may provide for third parties to seek recovery from owners or operators of real properties for personal injuries associated with such releases.
 
Owners of residential housing constructed prior to 1978 are required by federal law to disclose to potential residents or purchasers any known lead-based paint hazards and violations can incur treble damages for any failure to so notify.  In addition, the ingestion of lead-based paint chips or dust particles by children can result in lead poisoning, and the owner of a property where such circumstances exist may be held liable for such injuries and for the costs of removal or encapsulation of the lead-based paint.  Testing for lead-based paint or lead in the water was conducted with respect to certain of the Mortgaged Properties, generally based on the age and/or condition thereof.
 
The Environmental Protection Agency has identified certain health risks associated with elevated radon gas in buildings, and has recommended that certain mitigating measures be considered.
 
When recommended by environmental site assessments, operations and maintenance plans (addressing in some cases asbestos containing materials, lead-based paint, and/or radon) were generally required, except in the case of certain Mortgaged Properties where the environmental consultant conducting the assessment also identified the condition of the asbestos containing materials as good and non-friable (i.e., not easily crumbled). In certain instances where related loan documents required the submission of operations and maintenance plans, these plans have yet to be received. We cannot assure you that recommended operations and maintenance plans have been or will continue to be implemented. In many cases, certain potentially adverse environmental conditions were not tested for. For example, lead based paint and radon were tested only with respect to multifamily Mortgaged Properties and only if, in the case of lead based paint, the age of the Mortgaged Property warranted such testing and, in the case of radon, radon is prevalent in the geographic area where the Mortgaged Property is located; however, at several multifamily Mortgaged Properties located in geographic areas where radon is prevalent, radon testing was not conducted.
 
Certain of the Mortgaged Properties have off-site leaking underground storage tank sites located nearby which the environmental site assessments either have indicated are not likely to contaminate the related Mortgaged Properties but may require future monitoring or have identified a party not related to the borrower as responsible for such condition.  Certain other Mortgaged Properties may contain contaminants in the soil or groundwater at levels which the environmental consultant has advised are below regulatory levels or otherwise are indicative of conditions typically not of regulatory concern and are not likely to require any further action.  In some cases, there was no further investigation of a potentially adverse environmental condition.  In certain instances where the related Mortgage Loan documents required underground storage tank repair or removal and the submission of a confirmation that this work has been performed, the confirmations have yet to be received.
 
The information contained in this prospectus supplement regarding environmental conditions at the Mortgaged Properties is based on the environmental site assessments and has not been independently verified by the Sponsor, the Depositor, the originators, the Underwriters, the Master Servicer, the Special Servicer, the Trustee, the REMIC Administrator or any of their respective affiliates.  There can be no assurance that the environmental site assessments identified all environmental conditions and risks, or that any such environmental conditions will not have material adverse effect on the value or cash flow of the related Mortgaged Property.
 
The Pooling and Servicing Agreement requires that the Special Servicer obtain an environmental site assessment of a Mortgaged Property prior to acquiring title thereto or assuming its operation.  In the event a Phase I environmental site assessment already exists that is less than 12 months old, a new assessment will not be required under the Pooling and Servicing Agreement.  In the event a Phase I environmental site assessment already exists that is between 12 and 18 months old, only an updated data base search will be required.  Such requirement precludes enforcement of the security for the related Mortgage Loan until a satisfactory environmental site assessment is obtained (or until any required remedial action is taken), but will decrease the likelihood that the trust will become liable for a material adverse environmental condition at the Mortgaged Property.  However, there can be no
 
 
S-42

 
 
assurance that the requirements of the Pooling and Servicing Agreement will effectively insulate the trust from potential liability for a materially adverse environmental condition at any Mortgaged Property.
 
Property Condition Assessments.  Inspections of each of the Mortgaged Properties were conducted by independent licensed engineers in connection with or subsequent to the origination of the related Mortgage Loan, except that in connection with certain Mortgage Loans having an initial principal balance of $[2,000,000] or less, a site inspection may not have been performed in connection with the origination of any such Mortgage Loan.  Such inspections were generally commissioned to inspect the exterior walls, roofing, interior construction, mechanical and electrical systems and general condition of the site, buildings and other improvements located at a Mortgaged Property.  With respect to certain of the Mortgage Loans, the resulting reports indicated a variety of deferred maintenance items and recommended capital improvements.  The estimated cost of the necessary repairs or replacements at a Mortgaged Property was included in the related property condition assessment; and, in the case of certain Mortgaged Properties, such estimated cost exceeded $[100,000].  In general, with limited exception, cash reserves were established, or other security obtained, to fund or secure the payment of such estimated deferred maintenance or replacement items.  In addition, certain Mortgage Loans may require monthly deposits into cash reserve accounts to fund property maintenance expenses.
 
Appraisals and Market Studies.  An independent appraiser that was either state certified or a member of MAI performed an appraisal (or updated an existing appraisal) of each of the related Mortgaged Properties in connection with the origination of each Mortgage Loan in order to establish the appraised value of the related Mortgaged Property or Properties.  Such appraisal, appraisal update or property valuation was prepared on or about the “Appraisal Date” indicated on ANNEX A hereto, and except for certain Mortgaged Properties involving operating businesses, the appraiser represented in such appraisal or in a letter or other agreement that the appraisal conformed to the appraisal guidelines set forth in USPAP.  In general, such appraisals represent the analysis and opinions of the respective appraisers at or before the time made, and are not guarantees of, and may not be indicative of, present or future value.  We cannot assure you that another appraiser would not have arrived at a different valuation, even if such appraiser used the same general approach to and same method of appraising the Mortgaged Property.  In addition, appraisals seek to establish the amount a typically motivated buyer would pay a typically motivated seller.  Such amount could be significantly higher than the amount obtained from the sale of a Mortgaged Property under a distress or liquidation sale.
 
None of the Sponsor, the Depositor, the originators, the Underwriters, the Master Servicer, the Special Servicer, the Trustee, the REMIC Administrator or any of their respective affiliates has prepared or conducted its own separate appraisal or reappraisal of any Mortgaged Property.
 
Zoning and Building Code Compliance.  Each originator has generally examined whether the use and operation of the related Mortgaged Properties were in material compliance with zoning and land-use related ordinances, rules, regulations and orders applicable to the use of such Mortgaged Properties at the time such Mortgage Loans were originated. The related originator may have considered, among other things, legal opinions, certifications from government officials, zoning consultant's reports and/or representations by the related borrower contained in the related loan documents and information that is contained in appraisals and surveys, title insurance endorsements, or property condition assessments undertaken by independent licensed engineers. Certain violations may exist; however, the related originator does not have notice of any material existing violations with respect to the Mortgaged Properties securing such Mortgage Loans that materially and adversely affect (i) the value of the related Mortgaged Property as determined by the appraisal performed in connection with the origination of the related Mortgage Loan or (ii) the principal use of the Mortgaged Property as of the date of the related Mortgage Loan's origination.
 
 In some cases, the use, operation and/or structure of the related Mortgaged Property constitutes a permitted nonconforming use and/or structure that may not be rebuilt to its current state in the event of a material casualty event.  With respect to such Mortgaged Properties, the related originator has determined that in the event of a material casualty affecting the Mortgaged Property that:
 
(1)  the extent of the nonconformity is not material;
 
(2)  insurance proceeds together with the value of the remaining Mortgaged Property would be available and sufficient to pay off the related Mortgage in full;
 
 
 
S-43

 
 
(3)  the Mortgaged Property, if permitted to be repaired or restored in conformity with current law, would constitute adequate security for the related Mortgage Loan; or
 
(4)  the risk that the entire Mortgaged Property would suffer a material casualty to such a magnitude that it could not be rebuilt to its current state is remote.
 
Although the related originator expects insurance proceeds to be available for application to the related Mortgage Loan in the event of a material casualty, no assurance can be given that such proceeds would be sufficient to pay off such Mortgage Loan in full.  In addition, if the Mortgaged Property were to be repaired or restored in conformity with current law, no assurance can be given as to what its value would be relative to the remaining balance of the related Mortgage Loan or what would be the revenue producing potential of the Mortgaged Property.
 
Hazard, Liability and Other Insurance.  The Mortgage Loans generally require that each Mortgaged Property be insured by a hazard insurance policy in an amount (subject to an approved deductible) at least equal to the lesser of the outstanding principal balance of the related Mortgage Loan and 100% of the replacement cost of the improvements located on the related Mortgaged Property, and if applicable, that the related hazard insurance policy contain appropriate endorsements to avoid the application of co-insurance and not permit reduction in insurance proceeds for depreciation; provided that, in the case of certain of the Mortgage Loans, the hazard insurance may be in such other amounts as was required by the related originators.
 
In addition, if any material improvements on any portion of a Mortgaged Property securing any Mortgage Loan was, at the time of the origination of such Mortgage Loan, in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, and flood insurance was available, a flood insurance policy meeting any requirements of the then-current guidelines of the Federal Insurance Administration is required to be in effect with a generally acceptable insurance carrier, in an amount representing coverage generally not less than the least of (a) the outstanding principal balance of the related Mortgage Loan, (b) the full insurable value of the related Mortgaged Property, (c) the maximum amount of insurance available under the National Flood Insurance Act of 1973, as amended, or (d) 100% of the replacement cost of the improvements located on the related Mortgaged Property.
 
In general, the standard form of hazard insurance policy covers physical damage to, or destruction of, the improvements on the Mortgaged Property by fire, lightning, explosion, smoke, windstorm and hail, riot or strike and civil commotion, subject to the conditions and exclusions set forth in each policy.
 
Each Mortgage Loan generally also requires the related borrower to maintain comprehensive general liability insurance against claims for personal and bodily injury, death or property damage occurring on, in or about the related Mortgaged Property in an amount generally equal to at least $[1,000,000].
 
Each Mortgage Loan generally further requires the related borrower to maintain business interruption insurance in an amount not less than approximately [100]% of the gross rental income from the related Mortgaged Property for not less than [__] months or the restoration period plus [__] days, except that business interruption insurance may not be required in cases where the tenant is required to continue paying rent in the event of a casualty.
 
In general, the Mortgage Loans (including those secured by Mortgaged Properties located in California) do not require earthquake insurance.  [___] of the Mortgaged Properties securing [___]% of the Initial Pool Balance are located in areas that are considered a high earthquake risk.  These areas include all or parts of [identifications of locations].  No Mortgaged Property has a “probable maximum loss” or “PML” in excess of 20%, with the exception of [identification of any exceptions].
 
Following the September 11, 2001 terrorist attacks in the New York City area and Washington, D.C. area, many reinsurance companies (which assume some of the risk of policies sold by primary insurers) eliminated coverage for acts of terrorism from their reinsurance policies.  Without that reinsurance coverage, primary insurance companies would have to assume that risk themselves, which may cause them to eliminate such coverage in their policies, increase the amount of the deductible for acts of terrorism or charge higher premiums for such coverage.  In order to offset this risk, Congress passed the Terrorism Risk Insurance Act of 2002, which established the Terrorism Insurance Program. Under the Terrorism Insurance Program, the federal government shares in the risk of loss associated with certain future terrorist acts.
 
 
S-44

 
 
The Terrorism Insurance Program was extended through December 31, 2014 by the Terrorism Risk Insurance Program Reauthorization Act of 2007. The Terrorism Insurance Program is administered by the Secretary of the Treasury and through December 31, 2014 will provide some financial assistance from the United States Government to insurers in the event of another terrorist attack that results in an insurance claim. The program applies to United States risks only and to acts that are committed by an individual or individuals as an effort to influence or coerce United States civilians or the United States Government. The Terrorism Risk Insurance Program Reauthorization Act of 2007 requires an investigation by the Comptroller General to study the availability and affordability of insurance coverage for nuclear, biological, chemical and radiological attacks.
 
In addition, with respect to any act of terrorism for any program year, no compensation will be paid under the Terrorism Insurance Program unless the aggregate industry losses relating to such act of terror exceed $100 million. As a result, unless the borrowers obtain separate coverage for events that do not meet that threshold (which coverage may not be required by the respective loan documents and may not otherwise be obtainable), such events would not be covered. The Treasury Department has established procedures for the program under which the federal share of compensation equals 85% of that portion of insured losses that exceeds an applicable insurer deductible required to be paid during each program year (which insurer deductible was fixed by a program extension at 20% of an insurer’s direct earned premium for any program year). The federal share in the aggregate in any program year may not exceed $100 billion (and the insurers will be liable for any amount that exceeds this cap). An insurer that has paid its deductible is not liable for the payment of any portion of total annual United States wide losses that exceed $100 billion, regardless of the terms of the individual insurance contracts.
 
Through December 2014, insurance carriers are required under the program to provide terrorism coverage in their basic policies providing “special” form coverage. Any commercial property and casualty terrorism insurance exclusion that was in force on November 26, 2002 is automatically voided to the extent that it excludes losses that would otherwise be insured losses. Any state approval of those types of exclusions in force on November 26, 2002 is also voided. There can be no assurance that upon the expiration of the Terrorism Insurance Program subsequent terrorism insurance legislation will be enacted. Because it is a temporary program, there is no assurance that it will create any long-term changes in the availability and cost of such insurance. In addition, the provisions of any such legislation may include changes from the existing legislation.
 
To the extent that uninsured or underinsured casualty losses occur with respect to the related Mortgaged Properties, losses on commercial mortgage loans may result. In addition, the failure to maintain such insurance may constitute a default under a commercial mortgage loan, which could result in the acceleration and foreclosure of that commercial mortgage loan. Alternatively, the increased costs of maintaining such insurance could have an adverse effect on the financial condition of the mortgage loan borrowers.
 
Certain of the Mortgage Loans are secured by Mortgaged Properties that are not insured for acts of terrorism. Additionally, certain Mortgage Loans are secured by Mortgaged Properties for which coverage for acts of terrorism is required only if certain conditions (such as availability at reasonable rates or maximum cost limits) are satisfied. In both cases, if those casualty losses are not covered by standard casualty insurance policies, then in the event of a casualty from an act of terrorism, the amount available to make distributions on your certificates could be reduced.
 
[The Index]
 
[Description of Index, including 5 year history.]
 
[Delinquent Mortgage Loans]
 
[Description of delinquent Mortgage Loans, if any, included in the trust fund.  As of the related Cut-off Date, delinquent loans included for any particular takedown will not constitute 20% or more of the related pool assets, and such pool assets will not include any non-performing loans.]
 
Split Loan Structures
 
The Mortgage Loans identified on ANNEX A as Loan Numbers [_____] are loans that are part of split-loan structures, meaning that they are secured by a Mortgaged Property that also secures another mortgage loan that is not part of the trust fund and does not back any of the certificates.  [Description of the material payment priorities,
 
 
S-45

 
 
servicing provisions and control rights under (and any other material terms of) any intercreditor agreement governing such loans.]
 
Additional Mortgage Loan Information
 
ANNEX A to this prospectus supplement contains information concerning each Mortgage Loan in the Mortgage Pool on an individual basis.  The tables included in ANNEX B to this prospectus supplement set forth the specified characteristics of, in each case as indicated, the ARM Loans, the Fixed Rate Loans or all the Mortgage Loans.  Certain capitalized terms that appear in this prospectus supplement are defined in “GLOSSARY OF PRINCIPAL DEFINITIONS” in this prospectus supplement.  See ANNEX B to this prospectus supplement for certain information with respect to capital improvements, replacement, tax, insurance and tenant improvement reserve accounts, as well as certain other information with respect to multifamily mortgaged properties, other than manufactured housing properties.  ANNEX A and ANNEX B are incorporated by reference and constitute part of this prospectus supplement.
 
[10% and Other] Top 10 Mortgage Loans
 
Certain of the larger Mortgage Loans (by outstanding principal balance) are described below in the following table [and text] [and in ANNEX ___].  Terms used below relating to underwriting or property characteristics have the meanings assigned to such terms under “GLOSSARY OF PRINCIPAL DEFINITIONS” in this prospectus supplement.

 
Mortgage Loan
Name
 
Cut-off Date
Balance
 
Percent of
Initial Pool
Balance
 
Property
Type
 
Cut-off Date
Balance Per
SF/Unit/Pad
 
Cut-off
Date LTV
Ratio
 
Maturity
Date LTV
Ratio
 
Underwritten
DSCR
 
Mortgage
Rate
                 
                 
                 
                 
                 
                 
                 
                 
__________________
(1)
[Description (under this caption or in a referenced and incorporated Annex) of any mortgage loans representing 10% or more of the pool assets to include the information required by Item 1111(b)(9)(ii) of Regulation AB.]
 
Changes in Mortgage Pool Characteristics
 
The description in this prospectus supplement of the Mortgage Pool and the Mortgaged Properties is based upon the Mortgage Pool as constituted on the Cut-off Date, as adjusted for the scheduled principal payments due on the Mortgage Loans on or before the Cut-off Date.  Prior to the issuance of the Offered Certificates, a Mortgage Loan may be removed from the Mortgage Pool if the Depositor deems such removal necessary or appropriate or if it is prepaid.  A limited number of other mortgage loans may be included in the Mortgage Pool prior to the issuance of the Offered Certificates, unless including such Mortgage Loans would materially alter the characteristics of the Mortgage Pool as described in this prospectus supplement.  The Depositor believes that the information set forth herein is representative of the characteristics of the Mortgage Pool as of the Cut-off Date, although the range of mortgage rates and maturities, as well as the other characteristics of the Mortgage Loans described herein, may vary.
 
A Current Report on Form 8-K (the “Form 8-K”) will be available to purchasers of the Offered Certificates on or shortly after the Delivery Date and will be filed, together with the Pooling and Servicing Agreement, with the Securities and Exchange Commission (the “SEC”) on or shortly after the initial issuance of the Offered Certificates.  In the event Mortgage Loans are removed from the Mortgage Pool as set forth in the preceding paragraph, such removal will be noted in the Form 8-K.
 
 
 
S-46

 
 
[To be included for transactions where the issuer determines static pool data is material:
 
[Static Pool Information]
 
[Certain static pool information will be made available by the Depositor on [its] website at [_____________].][Information required by Item 1105 of Regulation AB to the extent material.]]
 
Representations and Warranties; Repurchases and Substitutions
 
In the mortgage loan purchase and sale agreement, the mortgage loan seller has represented and warranted [subject to the exceptions set forth in Annex [_] to this prospectus supplement] with respect to each Mortgage Loan, as of [the Delivery Date], or as of such other date specifically provided in the representation and warranty, among other things, substantially as follows:
 
(1) the information set forth in the Mortgage Loan Schedule attached to the Pooling and Servicing Agreement (which will contain a limited portion of the information set forth in ANNEX A to this prospectus supplement) with respect to the Mortgage Loans is true, complete and correct in all material respects as of the Cut-off Date;
 
(2) each Mortgage related to and delivered in connection with each Mortgage Loan constitutes a legal, valid and subject to (3) below enforceable first lien on the related Mortgaged Property subject only to Permitted Encumbrances;
 
(3) the Mortgage(s), Mortgage Note and Assignment of Leases (if a document separate from the Mortgage) for each Mortgage Loan and all other documents executed by or on behalf of the related borrower with respect to each Mortgage Loan are the legal, valid and binding obligations of the related borrower (subject to any non-recourse provisions contained in any of the foregoing agreements and any applicable state anti-deficiency legislation), enforceable in accordance with their respective terms, except with respect to provisions relating to default interest, late fees, additional interest, yield maintenance charges or prepayment premiums and except as such enforcement may be limited by bankruptcy, insolvency, receivership, reorganization, moratorium, redemption, liquidation or other laws affecting the rights of creditors generally and by general principles of equity regardless of whether such enforcement is considered in a proceeding in equity or at law;
 
(4) no Mortgage Loan was, as of the closing date of this securitization, or during the 12-month period prior thereto (or since the date of origination if such Mortgage Loan has been originated within the past 12 months), 30 days or more past due in respect of any Monthly Payment, without giving effect to any applicable grace or cure period;
 
(5) there is no right of offset, abatement, diminution, or rescission or valid defense or counterclaim with respect to any of the related Mortgage Note, Mortgage(s) or other agreements executed in connection therewith, except as enforcement may be limited by bankruptcy and principles of equity, and in each case, with respect to the enforceability of any provisions requiring the payment of default interest, late fees, additional interest, yield maintenance charges or prepayment premiums and, as of the closing date of this securitization, to the mortgage loan seller's actual knowledge no such rights have been asserted;
 
(6) other than payments due but not yet 30 days or more past due, there exists no material default, breach, violation or event of acceleration existing under any Mortgage Note, Mortgage, or any other documents executed by or on behalf of the related borrower with respect to each Mortgage Loan;
 
(7) in the case of each Mortgage Loan, the related Mortgaged Property (a) as of the date of origination of such Mortgage Loan, was not the subject of any proceeding pending, and subsequent to such date, the mortgage loan seller as of the closing date of this securitization has no actual knowledge of any proceeding pending for the condemnation of all or any material portion of such Mortgaged Property, and (b) to the mortgage loan seller's knowledge, is free and clear of any damage which would materially and adversely affect its value as security for such Mortgage Loan (except in any such case where an escrow of funds or a letter of credit was obtained in an amount equal to 125% of the amount estimated to be sufficient to effect the necessary repairs or such other amount as a prudent commercial lender would deem appropriate);
 
(8) at origination, each Mortgage Loan complied with or was exempt from, all applicable usury laws;
 
(9) in connection with or subsequent to the origination of the related Mortgage Loan, one or more environmental site assessments, an update of a previously conducted assessment or a transaction screen has been performed with respect to each Mortgaged Property and the mortgage loan seller has no actual knowledge
 
 
S-47

 
 
of any significant or material environmental condition or circumstance affecting such Mortgaged Property that was not disclosed in an Environmental Report or borrower questionnaire;
 
(10) each Mortgaged Property securing a Mortgage Loan is covered by an ALTA title insurance policy or an equivalent form of lender's title insurance policy (or, if not yet issued, evidenced by a “marked-up” pro forma title policy or a title commitment) in the original principal amount of such Mortgage Loan, insuring that the related Mortgage is a valid first priority lien on such Mortgaged Property subject only to the exceptions stated therein;
 
(11) the proceeds of each Mortgage Loan have been fully disbursed (except in those cases where the full amount of the Mortgage Loan has been fully disbursed but a portion thereof is being held in escrow or reserve accounts pending the satisfaction of certain conditions relating to leasing, repairs or other matters with respect to the related Mortgaged Property), and there is no obligation for future advances with respect thereto;
 
(12) the terms of the Mortgage have not been waived, modified, altered, satisfied, impaired, canceled, subordinated, or rescinded in any manner which would materially interfere with the benefits of the security intended to be provided by such Mortgage, except as specifically set forth in a written instrument (that has been duly submitted for recordation) in the related Mortgage File;
 
(13) all taxes and governmental assessments or charges or water or sewer bills that prior to the Cut-off Date became due and owing in respect of each related Mortgaged Property have been paid, or if in dispute, an escrow of funds in an amount sufficient to cover such payments has been established;
 
(14) the related borrower's interest in each Mortgaged Property securing a Mortgage Loan includes a fee simple and/or leasehold estate or interest in real property and the improvements thereon;
 
(15) no Mortgage Loan contains any equity participation by the mortgagee, is convertible by its terms into an equity ownership interest in the related Mortgaged Property or the related borrower, has a shared appreciation feature, provides for any contingent or additional interest in the form of participation in the cash flow of the related Mortgaged Property or provides for interest only payments without principal amortization (except as disclosed in this prospectus supplement) or provides for the negative amortization of interest, except for the ARD Loan to the extent described under “DESCRIPTION OF THE MORTGAGE POOL—Certain Terms and Conditions of the Mortgage Loans—Hyperamortization” in this prospectus supplement; and
 
(16) the appraisal obtained in connection with the origination of each Mortgage Loan, based upon the representation of the appraiser in a supplemental letter or in the related appraisal, satisfies the appraisal guidelines set forth in Title XI of the Financial Institutions Reform Recovery and Enforcement Act of 1989 (as amended).
 
If the mortgage loan seller has been notified of a material breach of any of the above representations and warranties as described in this prospectus supplement and in the accompanying prospectus and if the mortgage loan seller cannot cure the breach within [__] days following its receipt of appropriate notice, then the mortgage loan seller will be obligated to repurchase the affected Mortgage Loan within that [__]-day period or to substitute a qualified substitute mortgage loan for the affected Mortgage Loan, with terms substantially similar to those of the affected Mortgage Loan.  The related prospectus supplement will specify any further condition for substitution, which may include an obligation of the party making the substitution to pay a substitution shortfall amount (generally the amount by which the principal balance of the qualified substitute mortgage loan is less than the purchase price that would be paid in connection with a repurchase of the Mortgage Loan it is being substituted for).  The Purchase Price that the mortgage loan seller must pay for the affected Mortgage Loans is equal to the sum of
 
  
the unpaid principal balance of the Mortgage Loan,
 
  
unpaid accrued interest on the Mortgage Loan at the mortgage rate from the date to which interest was last paid to the Due Date in the Due Period in which the purchase is to occur, and
 
  
certain servicing expenses that are reimbursable to the Master Servicer and the Special Servicer.
 
The above repurchase or substitution obligations constitute the sole remedies available to the certificateholders and the Trustee for any breach of the mortgage loan seller’s representations and warranties regarding the Mortgage Loans.  The mortgage loan seller will be the sole Warranting Party in respect of the Mortgage Loans.  The
 
 
S-48

 
 
Depositor, the Master Servicer and their affiliates [(other than the mortgage loan seller)] are not obligated to repurchase or substitute any affected Mortgage Loan in connection with a breach of the mortgage loan seller’s representations and warranties.  However, the Depositor will not include any Mortgage Loan in the Mortgage Pool if anything has come to the Depositor’s attention prior to the Closing Date that would cause it to believe that the representations and warranties made by the mortgage loan seller regarding such Mortgage Loan are not correct in all material respects.  See “THE POOLING AND SERVICING AGREEMENTS—Representations and Warranties; Repurchases” in the accompanying prospectus.

 
S-49

 

 
THE SPONSOR
 
Bank of America, National Association, (the “Sponsor”) is an indirect wholly-owned subsidiary of Bank of America Corporation.
 
See “BANK OF AMERICA, NATIONAL ASSOCIATION, AS SPONSOR”, “THE MORTGAGE LOAN PROGRAM”, “BANK OF AMERICA, NATIONAL ASSOCIATION, AS SERVICER” and “THE POOLING AND SERVICING AGREEMENTS” in the accompanying prospectus for more information about the Sponsor, its securitization programs, its solicitation and underwriting criteria used to originate the mortgage loans and its material roles and duties in this securitization.
 
[Exceptions to Underwriting Guidelines. To be set forth by the Sponsor or other originator, and in the aggregate for all originators of less than 10% of pool assets: the number and aggregate principal amount of loans originated with exceptions to underwriting guidelines.]
 
[Provide a brief description of any legal proceedings pending against the Sponsor as contemplated in Item 1100(d)(1) of Regulation AB, or of which any property of the foregoing is the subject, that is material to certificateholders; include similar information as to any such proceedings known to be contemplated by governmental authorities.]
 
 
THE DEPOSITOR
 
Banc of America Merrill Lynch Commercial Mortgage Inc. (the “Depositor”), is a Delaware corporation and was organized on December 13, 1995 for the limited purpose of acquiring, owning and transferring mortgage assets and selling interests in mortgage assets or bonds secured by the mortgage assets.  The Depositor was incorporated in the State of Delaware on December 13, 1995 under the name “NationsLink Funding Corporation” and filed Certificates of Amendment to its Certificate of Incorporation changing its name to “Banc of America Commercial Mortgage Inc.”  on August 24, 2000 and further changing its name to “Banc of America Merrill Lynch Commercial Mortgage Inc.”  on July 1, 2010.  The Depositor is a wholly-owned subsidiary of the Sponsor.  It is not expected that the Depositor will have any business operations other than offering mortgage pass-through certificates or bonds secured by mortgage assets and related activities.
 
The Depositor maintains its principal office at Bank of America Tower, One Bryant Park, New York, New York 10036.  The Depositor’s telephone number is (980) 388-7451.  See “THE DEPOSITOR” in the accompanying prospectus.
 
[The depositor will have minimal ongoing duties with respect to the offered certificates and the mortgage loans.  The depositor’s duties will include, without limitation, (i) appointing a successor trustee in the event of the resignation or removal of the trustee, (ii) providing information in its possession with respect to the certificates to the tax administrator to the extent necessary to perform REMIC tax administration, (iii) indemnifying the trustee, the tax administrator and the trust for any liability, assessment or costs arising from the depositor’s bad faith, negligence or malfeasance in providing such information, (iv) indemnifying the trustee and the tax administrator against certain securities laws liabilities, and (v) signing or contracting with the master servicer, signing any annual report on Form 10-K, including the certification therein required under the Sarbanes-Oxley Act, and any distribution reports on Form 10-D and Current Reports on Form 8-K required to be filed by the trust.  The depositor is also required under the underwriting agreement to indemnify the underwriters for certain securities law liabilities.]
 
 [Provide a brief description of any legal proceedings pending against the depositor as contemplated in Item 1100(d)(1) of Regulation AB, or of which any property of the foregoing is the subject, that is material to certificateholders; include similar information as to any such proceedings known to be contemplated by governmental authorities.]
 
 
S-50

 
 
THE ISSUING ENTITY
 
The Issuing Entity will be a New York common law trust, formed on the closing date of this offering pursuant to the Pooling and Servicing Agreement.  The Mortgage Loans will be deposited by the Depositor into the trust under the Pooling and Servicing Agreement.  The trust will have no officers or directors and no continuing duties other than to hold the assets underlying the certificates and to issue the certificates. The assets of the Trust Fund will constitute the only assets of the Issuing Entity. The fiscal year end of the trust will be December 31 of each year.
 
The Trustee, the Certificate Administrator, the Master Servicer and the Special Servicer are the persons authorized to act on behalf of the Issuing Entity under the Pooling and Servicing Agreement with respect to the Mortgage Loans and the certificates. The roles and responsibilities of such persons are described in this prospectus supplement under “THE TRUSTEE”, “THE CERTIFICATE ADMINISTRATOR”, “THE SERVICERS” and “SERVICING OF THE MORTGAGE LOANS”. Additional information may also be found in the accompanying prospectus under “BANK OF AMERICA, NATIONAL ASSOCIATION, AS SERVICER” and “THE POOLING AND SERVICING AGREEMENTS”. Such persons are permitted only to take the actions specifically provided in the Pooling and Servicing Agreement. Under the Pooling and Servicing Agreement, they will not have the power on behalf of the trust to issue additional certificates representing interests in the trust, borrow money on behalf of the trust or make loans from the assets of the trust to any person or entity.
 
The Issuing Entity, as a common law trust, is not eligible to be a debtor in a bankruptcy proceeding. In the event of the insolvency or bankruptcy of Bank of America, National Association or the Depositor, the transfer of the Mortgage Loans to the trust may be challenged. See “RISK FACTORS—Special Powers of the FDIC in the Event of Insolvency of the Sponsor Could Delay or Reduce Distributions on the Certificates” and “—Insolvency of the Depositor May Delay or Reduce Collections on Mortgage Loans” in the accompanying prospectus.
 
 
THE TRUSTEE
 
[__________________], a [form of organization], will act as the trustee (the “Trustee”)under the Pooling and Servicing Agreement.  [Description of Trustee’s prior to experience to the extent required by 1109(b) to be included.]
 
[The Trustee’s principal corporate trust offices are located at [__________________] and its office for certificate transfer services is located at [__________________] (together, the “Corporate Trust Office”).  The telephone number of the Trustee is [____________].  The Depositor, the Sponsor, the Servicer and the Underwriter may maintain banking and other commercial relationships with the Trustee and its affiliates.  The Trustee may appoint one or more co-trustees if necessary to comply with the fiduciary requirements imposed by any jurisdiction in which a Mortgaged Property is located.]
 
[Under the terms of the Pooling and Servicing Agreement, the Trustee also is responsible for securities administration, which includes pool performance calculations, distribution calculations and the preparation of monthly distribution reports.  The Trustee does not independently verify the information received from the Servicer that it uses for these calculations nor does it monitor access to and activity in the Collection Account, compliance with covenants in the Pooling and Servicing Agreement or the basis for the addition, substitution or removal of Mortgage Loans from the Mortgage Pool.  As securities administrator, the Trustee is responsible for the preparation of tax returns on behalf of the trust and the preparation, for execution by the Depositor or the Master Servicer, of monthly reports on Form 10-D (based on information included in the monthly distribution date statements and other information provided by other transaction parties) and annual reports on Form 10-K that are required to be filed with the SEC on behalf of the trust.]
 
[The Trustee will also act as custodian of the Mortgage Files pursuant to the Pooling and Servicing Agreement.  In its capacity as custodian, the Trustee will be responsible to hold and safeguard the Mortgage Notes and other contents of the Mortgage Files on behalf of the certificateholders.  The Trustee will segregate the Mortgage Files by boarding each in an electronic tracking system, which identifies the owner of the Mortgage File and the Mortgage File’s specific location in the Trustee’s vault.]
 
 
S-51

 
 
 
[Provide a brief description of any legal proceedings pending against the trustee as contemplated in Item 1100(d)(1) of Regulation AB, or of which any property of the foregoing is the subject, that is material to certificateholders; include similar information as to any such proceedings known to be contemplated by governmental authorities.]
 
See “THE POOLING AND SERVICING AGREEMENTS—The Trustee”, “—Duties of the Trustee”, “—Certain Matters Regarding the Trustee” and “—Resignation and Removal of the Trustee” in the accompanying prospectus for more information about the Trustee and its obligations and rights (including limitations on its liability and its right to indemnity and reimbursement in certain circumstances) under the Pooling and Servicing Agreement.
 
[SIGNIFICANT ORIGINATORS AND OBLIGORS]
[Significant Originators]
 
[Description of each entity that satisfies the definition of “Significant Obligor” in Item 1101(k) of Regulation AB apart from the sponsor and its affiliates, if any, with respect to the Mortgage Loans to the extent required by Item 1110 of Regulation AB , including identification of all mortgage loan originators that originate 10% or more of the pool assets as required by Item 1110(a) of Regulation AB and the provision of the additional information with respect to mortgage loan originators that originate 20% or more of the pool assets as required by 1110(b) of Regulation AB.]
 
[Provide a brief description of any legal proceedings pending against the originators as contemplated in Item 1100(d)(1) of Regulation AB, or of which any property of the foregoing is the subject, that is material to certificateholders; include similar information as to any such proceedings known to be contemplated by governmental authorities.]
 
[Exceptions to Underwriting Guidelines. To be set forth by the significant originator, and in the aggregate for all originators of less than 10% of pool assets: the number and aggregate principal amount of loans originated with exceptions to underwriting guidelines.]
 
[Significant Obligors]
 
[Description of significant properties or obligors, if any, with respect to the Mortgage Loans to the extent required by Item 1112 of Regulation AB , including identification of all significant obligors as required by Item 1112(a) of Regulation AB and the provision of the additional information with respect to significant obligors of 20% or more of the pool assets as required by 1112(b) of Regulation AB.]
 
[Provide a brief description of any legal proceedings pending against the significant obligors as contemplated in Item 1100(d)(1) of Regulation AB, or of which any property of the foregoing is the subject, that is material to certificateholders; include similar information as to any such proceedings known to be contemplated by governmental authorities.]
 
 
THE SERVICERS
 
The Master Servicer
 
The Sponsor, through its Capital Markets Servicing Group, will act as master servicer (in such capacity, the “Master Servicer”) with respect to the Mortgage Pool.  See “SERVICING OF THE MORTGAGE LOANS” in this prospectus supplement and “BANK OF AMERICA, NATIONAL ASSOCIATION, AS SERVICER” in the accompanying prospectus.
 
[There are no legal proceedings pending against Bank of America, or to which any property of Bank of America is subject, that are material to the certificateholders, nor does Bank of America have actual knowledge of any proceedings of this type contemplated by governmental authorities.]
 
 
S-52

 
 
[Provide a brief description of any legal proceedings pending against the master servicer as contemplated in Item 1100(d)(1) of Regulation AB, or of which any property of the foregoing is the subject, that is material to certificateholders; include similar information as to any such proceedings known to be contemplated by governmental authorities.]
 
 
The Special Servicer
 
[_______________________________], a [____________________], will act as the special servicer (the “Special Servicer”) and will be responsible for the servicing and administration of the Specially Serviced Mortgage Assets.
 
[Description of the Special Servicer.]
 
The information set forth in this prospectus supplement concerning the Special Servicer has been provided by the Special Servicer.
 
 
Other Servicers
 
[Description of any other affiliated servicer, servicer of 10% or more of the pool assets, back-up servicer or otherwise significant servicer, if any, of the Mortgage Loans and include the information with respect thereto, to the extent required by Item 1108 of Regulation AB.]
 
 
COMPENSATION AND EXPENSES
 

Type / Recipient
Amount
Source
Frequency
Fees
     
 
 
Fee
 
Fee Rate1 or Range2
   
 
 
Trustee Fee
     
 
 
Master Servicing Fee
     
 
 
Sub-Servicing Fee
     
 
 
Special Servicing Fee
     
 
 
Workout Fee
     
 
 
Liquidation Fee
     
_________________
 
1
The fee rate in the case of the Trustee Fee, the Master Servicing Fee and the Sub-Servicing Fee is a rate per annum on the outstanding principal balance of each mortgage loan.  The fee rate in the case of the Workout Fee and Liquidation Fee is a one-time percentage of the principal balance of each specially serviced mortgage loan that is worked out or liquidated, as applicable.
 
2
Where a range is indicated, the fee rates vary by mortgage loan.  ANNEX A to this prospectus supplement contains the individual rates applicable to each mortgage loan.
 
Fees and expenses are paid prior to any distributions to Certificateholders; a servicer will typically retain its fee from amounts it collects in respect of the Mortgage Loans. In the event the Trustee succeeds to the role of Master Servicer, it will be entitled to the same Master Servicing Fee and related compensation described below as the predecessor Master Servicer and if the Trustee appoints a successor master servicer under the Pooling and Servicing Agreement, the Trustee may make such arrangements for the compensation of such successor out of the payments on the Mortgage Loans serviced by the predecessor Master Servicer as it and such successor shall agree, not to
 
 
S-53

 
 
exceed the Master Servicing Fee Rate. [Description of fees of any other trustees (if multiple trustees are involved).]  Any co-trustee, if applicable, will be paid by the Trustee, without reimbursement from the trust.
 
The principal compensation to be paid to the Master Servicer in respect of its master servicing activities will be the Master Servicing Fee.  The “Master Servicing Fee” will:
 
  
be payable monthly on a loan-by-loan basis from amounts received in respect of interest on each Mortgage Loan,
 
  
will accrue in accordance with the terms of the related Mortgage Note at a rate equal to [________]% per annum, in the case of Mortgage Loans other than Specially Serviced Mortgage Loans, and [____]% per annum, in the case of Specially Serviced Mortgage Loans, and
 
  
will be computed on the basis of the same principal amount and for the same period respecting which any related interest payment on the related Mortgage Loan is computed.
 
As additional servicing compensation, the Master Servicer will be entitled to retain all Prepayment Premiums, assumption and modification fees, late charges and penalty interest and, as and to the extent described below, Prepayment Interest Excesses collected from mortgagors.  In addition, the Master Servicer is authorized but not required to invest or direct the investment of funds held in the Certificate Account in Permitted Investments, and the Master Servicer will be entitled to retain any interest or other income earned on such funds, but will be required to cover any losses from its own funds without any right to reimbursement.
 
The principal compensation to be paid to the Special Servicer in respect of its special servicing activities will consist of the Special Servicing Fee (together with the Master Servicing Fee, the “Servicing Fees”) and the Workout Fee.  Like the Master Servicing Fee, the “Special Servicing Fee”:
 
  
will be payable monthly on a loan-by-loan basis from amounts received in respect of interest on each Specially Serviced Mortgage Loan and each Mortgage Loan as to which the related Mortgaged Property has become an REO Property,
 
●  
  
will accrue in accordance with the terms of the related Mortgage Note at a rate equal to [_____]% per annum, in the case of Mortgage Loans other than Specially Serviced Mortgage Loans, and [___]% per annum, in the case of Specially Serviced Mortgage Loans, and
 
●  
will be computed on the basis of the same principal amount and for the same period respecting which any related interest payment on the related Mortgage Loan is computed.
 
The “Workout Fee”:
 
●  
will equal a specified percentage (varying from [____]% to [____]% (the “Workout Fee Rate”) depending on the related unpaid principal balance) of, and
 
●  
will be payable from, all collections and proceeds received in respect of principal of each Mortgage Loan which is or has been a Specially Serviced Mortgage Loan (including those for which servicing has been returned to the Master Servicer);
 
●  
provided that, in the case of Liquidation Proceeds, the otherwise fixed Workout Fee Rate will be proportionately reduced to reflect the extent to which, if at all, the principal portion of such Liquidation Proceeds is less than the unpaid principal balance of the related Mortgage Loan immediately prior to the receipt thereof.
 
As additional servicing compensation, the Special Servicer will be entitled to retain all assumption and modification fees received on Mortgage Loans serviced thereby.
 
Although the Master Servicer and Special Servicer are each required to service and administer the Mortgage Pool in accordance with the general servicing standard described under “SERVICING OF THE MORTGAGE
 
 
S-54

 
 
LOANS—General” above and, accordingly, without regard to its right to receive compensation under the Pooling and Servicing Agreement, additional servicing compensation in the nature of assumption and modification fees, Prepayment Premiums and Prepayment Interest Excesses may, under certain circumstances, provide the Master Servicer or the Special Servicer with an economic disincentive to comply with such standard.
 
If a borrower voluntarily prepays a Mortgage Loan in whole or in part during any Due Period (as defined in this prospectus supplement) on a date that is prior to its Due Date in such Due Period, a Prepayment Interest Shortfall may result.  If such a principal prepayment occurs during any Due Period after the Due Date for such Mortgage Loan in such Due Period, the amount of interest (net of related Servicing Fees) that accrues on the amount of such principal prepayment may exceed (such excess, a “Prepayment Interest Excess”) the corresponding amount of interest accruing on the certificates.  As to any Due Period, to the extent Prepayment Interest Excesses collected for all Mortgage Loans are greater than Prepayment Interest Shortfalls incurred, such excess will be paid to the Master Servicer as additional servicing compensation.
 
As and to the extent described in this prospectus supplement under “DESCRIPTION OF THE CERTIFICATES—Advances”, the Master Servicer will be entitled to receive interest on Advances, and the Master Servicer and the Special Servicer will be entitled to receive interest on reimbursable servicing expenses, such interest to be paid, contemporaneously with the reimbursement of the related Advance or servicing expense, out of any other collections on the Mortgage Loans.
 
The Master Servicer generally will be required to pay all expenses incurred by it in connection with its servicing activities under the Pooling and Servicing Agreement, and will not be entitled to reimbursement therefor except as expressly provided in the Pooling and Servicing Agreement.  However, the Master Servicer will be permitted to pay certain of those expenses directly out of the Certificate Account and at times without regard to the relationship between the expense and the funds from which it is being paid.  The Master Servicer will be responsible for all fees of any sub-servicers, other than management fees earned in connection with the operation of an REO Property, which management fees the Master Servicer will be authorized to pay out of revenues received from that property (thereby reducing the portion of revenues that would otherwise be available for distribution to certificateholders).  See “DESCRIPTION OF THE CERTIFICATES—Distributions—Method, Timing and Amount” in this prospectus supplement and “THE POOLING AND SERVICING AGREEMENTS—Certificate Account” and “—Servicing Compensation and Payment of Expenses” in the accompanying prospectus.
 
The Trustee is obligated to pay routine ongoing expenses incurred by it in connection with its responsibilities under the Pooling and Servicing Agreement.  Those amounts will be paid by the Trustee out of its own funds, without reimbursement.  In addition to the Trustee Fee, the Trustee is also entitled to all investment income earned on amounts on deposit in the Certificate Account.
 
The Depositor, the Servicer and the Trustee are entitled to indemnification and reimbursement of certain expenses from the trust under the Pooling and Servicing Agreement as discussed in the accompanying prospectus under the headings “THE POOLING AND SERVICING AGREEMENTS—Certain Matters Regarding the Master Servicer, the Special Servicer, the REMIC Administrator and the Depositor” and “—The Trustee”.

 
S-55

 

 
[DESCRIPTION OF THE SWAP CONTRACT]
 
[General]
 
[On the Closing Date, the Depositor will transfer the Class A-FL Regular Interest to the Trust in exchange for the Class A-FL Certificates, which will represent all of the beneficial interest in the portion of the Trust consisting of the Class A-FL Regular Interest, the Swap Contract and the Floating Rate Account.
 
[The Trustee is required to establish and maintain a “Floating Rate Account”, which may be a sub-account of the Certificate Account, in the name of the Trustee for the benefit of the holders of the Class A-FL Certificates. Promptly upon receipt of any payment or other receipt in respect of the Class A-FL Regular Interest or the Swap Contract, the Trustee will be required to deposit the same into the Floating Rate Account.]
 
The Trustee, on behalf of the trust, will enter into the Swap Contract, related to the Class A-FL Regular Interest with the Swap Counterparty. The Trustee will make available to the Swap Counterparty the Distribution Date Statement, which statement will include LIBOR applicable to the related interest accrual period. See “DESCRIPTION OF THE CERTIFICATES—Distributions” in this prospectus supplement. The Trustee will also calculate the amounts, if any, due from or payable to the Swap Counterparty under the Swap Contract.
 
[Insert additional disclosure if the “significance percentage” or maximum probable exposure with respect to the interest rate swap payments under the Swap Contract made in substantially the same manner as that used in the Sponsor’s internal risk management process in respect of similar instruments are 10% or more of the aggregate principal balance of one or more classes of certificates in accordance with Item Rule 1115 of Reg AB.]
 
The Trustee may make withdrawals from the Floating Rate Account only for the following purposes: (i) to distribute to the holders of the Class A-FL Certificates the Class A-FL Available Funds for any Distribution Date; (ii) to withdraw any amount deposited into the Floating Rate Account that was not required to be deposited in such account; (iii) to pay any funds required to be paid to the Swap Counterparty under the Swap Contract; and (vi) to clear and terminate the account pursuant to the terms of the Pooling and Servicing Agreement.]
 
[The Swap Contract]
 
[The Swap Contract will provide that, so long as the Swap Contract is in effect, on the business day before each Distribution Date, commencing in [_____] [__], 201[_], (a) the Trustee will pay or cause to be paid to the Swap Counterparty [________], and (b) the Swap Counterparty will pay to the Trustee, for the benefit of the Class A-FL Certificateholders, [____________]. Such payments will be made on a net basis.
 
On any Distribution Date for which the funds allocated to payment of the Distributable Certificate Interest of the Class A-FL Regular Interest are insufficient to pay all amounts due to the Swap Counterparty under the Swap Contract for such Distribution Date, the amounts payable by the Swap Counterparty to the trust under the Swap Contract will be reduced, on a dollar for dollar basis, by the amount of such shortfall, and holders of the Class A-FL Certificates will experience a shortfall in their anticipated yield.
 
If the Swap Counterparty’s long term rating is not at least “[_]” by each Hired Rating Agency (a “Rating Agency Trigger Event”), the Swap Counterparty will be required to post collateral or find a replacement Swap Counterparty that would not cause another Rating Agency Trigger Event. In the event that the Swap Counterparty fails to either post acceptable collateral, fails to find an acceptable replacement swap counterparty under a Rating Agency Trigger Event, fails to make a payment to the trust required under the Swap Contract or an early termination date is designated under the Swap Contract in accordance with its terms (each such event, a “Swap Default”), then the Trustee will be required to take such actions (following the expiration of any applicable grace period), unless otherwise directed in writing by the holders of [__]%, by Certificate Balance, of the Class A-FL Certificates, to enforce the rights of the trust under the Swap Contract as may be permitted by the terms of the Swap Contract and use any termination fees received from the Swap Counterparty (as described in this prospectus supplement) to enter into a replacement interest rate swap contract on substantially identical terms. If the costs attributable to entering
 
 
S-56

 
 
into a replacement interest rate swap contract would exceed the net proceeds of the liquidation of the Swap Contract, a replacement interest rate swap contract will not be entered into and any such proceeds will instead be distributed to the holders of the Class A-FL Certificates.
 
Any conversion to distributions equal to distributions on the Class A-FL Regular Interest pursuant to a Swap Default will become permanent following the determination by either the Trustee or the holders of [__]% of the Class A-FL Certificates not to enter into a replacement interest rate swap contract and distribution of any termination payments to the holders of the Class A-FL Certificates. Any such Swap Default and the consequent conversion to distributions equal to distributions on the Class A-FL Regular Interest will not constitute a default under the Pooling and Servicing Agreement. Any such conversion to distributions equal to distributions on the Class A-FL Regular Interest might result in a temporary delay of payment of the distributions to the holders of the Class A-FL Certificates if notice of the resulting change in payment terms of the Class A-FL Certificates is not given to DTC within the time frame in advance of the Distribution Date that DTC requires to modify the payment.
 
The Trustee will have no obligation on behalf of the trust to pay or cause to be paid to the Swap Counterparty any portion of the amounts due to the Swap Counterparty under the Swap Contract for any Distribution Date unless and until the related interest payment on the Class A-FL Regular Interest for such Distribution Date is actually received by the Trustee.]
 
[Termination Fees]
 
[In the event of the termination of the Swap Contract and the failure of the Swap Counterparty to replace the Swap Contract, the Swap Counterparty may be obligated to pay a termination fee to the trust generally designed to compensate the trust for the cost, if any, of entering into a substantially similar interest rate swap contract with another swap counterparty. If the termination fee is not used to pay for such a replacement swap contract, then such termination fee will be distributed to the Class A-FL Certificateholders.]
 
[The Swap Counterparty]
 
[Insert description of the Swap Counterparty.]
 
[For a description of certain affiliations, relationships and related transactions, to the extent known and material, between the Swap Counterparty and the other transaction parties, see “SUMMARY OF PROSPECTUS SUPPLEMENT—Certain Relationships and Affiliations” in this prospectus supplement.]

 
S-57

 

 
SERVICING OF THE MORTGAGE LOANS
 
General
 
Each of the Master Servicer and the Special Servicer will be required to service and administer the Mortgage Loans for which it is responsible, either directly or through sub-servicers, on behalf of the Trustee and in the best interests of and for the benefit of the certificateholders (as determined by the Master Servicer or the Special Servicer, as the case may be, in its good faith and reasonable judgment).  Such servicing and administration will be in accordance with applicable law, the terms of the Pooling and Servicing Agreement, the terms of the respective Mortgage Loans and, to the extent consistent with the foregoing, in the same manner as would prudent institutional mortgage lenders and loan servicers servicing mortgage loans comparable to the Mortgage Loans in the jurisdictions where the Mortgaged Properties are located, and with a view to the maximization of timely and complete recovery of principal and interest.  The above servicing and administration will be performed but without regard to:
 
●  
any relationship that the Master Servicer or the Special Servicer, as the case may be, or any affiliate thereof, may have with the related mortgagor;
 
●  
the ownership of any certificate by the Master Servicer or the Special Servicer, as the case may be, or any affiliate thereof;
 
●  
the Master Servicer’s or the Special Servicer’s, as the case may be, obligation to make advances, whether in respect of delinquent payments of principal and/or interest or to cover certain servicing expenses; and
 
●  
the Master Servicer’s or the Special Servicer’s, as the case may be, right to receive compensation for its services under the Pooling and Servicing Agreement or with respect to any particular transaction.
 
Except as otherwise described under “—Inspections; Collection of Operating Information” below, the Master Servicer initially will be responsible for the servicing and administration of the entire Mortgage Pool.  The Master Servicer will transfer its servicing responsibilities to the Special Servicer, with respect to any Mortgage Loan
 
●  
which has a Balloon Payment which is past due or any other payment which is more than [__] days past due,
 
●  
as to which the borrower has entered into or consented to bankruptcy, appointment of a receiver or conservator or a similar insolvency proceeding, or the borrower has become the subject of a decree or order for such a proceeding which shall have remained in force undischarged or unstayed for a period of [__] days,
 
●  
as to which the Master Servicer shall have received notice of the foreclosure or proposed foreclosure of any other lien on the Mortgaged Property, or
 
●  
as to which, in the judgment of the Master Servicer, a payment default has occurred or is imminent and is not likely to be cured by the borrower within [__] days, and prior to acceleration of amounts due under the related Mortgage Note or commencement of any foreclosure or similar proceedings, with respect to the above Mortgage Loans, the Master Servicer will continue to receive payments on such Mortgage Loan (including amounts collected by the Special Servicer), to make certain calculations with respect to such Mortgage Loan and to make remittances and prepare certain reports to the certificateholders with respect to such Mortgage Loan.
 
If the related Mortgaged Property is acquired in respect of any such Mortgage Loan (upon acquisition, an “REO Property”), whether through foreclosure, deed-in-lieu of foreclosure or otherwise, the Special Servicer will continue to be responsible for the operation and management thereof.  The Mortgage Loans serviced by the Special Servicer are referred to in this prospectus supplement as the “Specially Serviced Mortgage Loans” and, together with any REO Properties, constitute the “Specially Serviced Mortgage Assets”.  The Master Servicer shall have no responsibility for the performance by the Special Servicer of its duties under the Pooling and Servicing Agreement.
 
 
S-58

 
 
If any Specially Serviced Mortgage Loan, in accordance with its original terms or as modified in accordance with the Pooling and Servicing Agreement, becomes a performing Mortgage Loan for at least [__] days, the Special Servicer will return servicing of such Mortgage Loan to the Master Servicer.
 
Set forth below is a description of certain pertinent provisions of the Pooling and Servicing Agreement relating to the servicing of the Mortgage Loans.  Reference is also made to the accompanying prospectus, in particular to the section captioned “THE POOLING AND SERVICING AGREEMENTS”, for additional important information regarding the terms and conditions of the Pooling and Servicing Agreement as they relate to the rights and obligations of the Master Servicer and the Special Servicer thereunder.
 
Modifications, Waivers and Amendments
 
 The Master Servicer or the Special Servicer may, consistent with its normal servicing practices, agree to modify, waive or amend any term of any Mortgage Loan, without the consent of the Trustee or any certificateholder, subject, however, to each of the following limitations, conditions and restrictions:
 
(a) with limited exception, the Master Servicer and the Special Servicer may not agree to any modification, waiver or amendment that will
 
(1) affect the amount or timing of any scheduled payments of principal or interest on the Mortgage Loan or
 
(2) in its judgment, materially impair the security for the Mortgage Loan or reduce the likelihood of timely payment of amounts due under the Mortgage Loan;
 
Unless, in any such case, in the Master Servicer’s or the Special Servicer’s judgment, as the case may be, a material default on the Mortgage Loan has occurred or a payment default is reasonably foreseeable, and the modification, waiver or amendment is reasonably likely to produce a greater recovery with respect to the Mortgage Loan, taking into account the time value of money, than would liquidation.
 
(b) [description of any additional limitations to permitted modification standards]
 
The Master Servicer and the Special Servicer will notify the Trustee of any modification, waiver or amendment of any term of any Mortgage Loan, and must deliver to the Trustee or the related Custodian, for deposit in the related Mortgage File, an original counterpart of the agreement related to that modification, waiver or amendment, promptly (and in any event within [__] business days) following the execution thereof.  Copies of each agreement that effects a modification, waiver or amendment of any term of any Mortgage Loan are to be available for review during normal business hours at the offices of the [Trustee].  See “DESCRIPTION OF THE CERTIFICATES—Reports to Certificateholders; Certain Available Information” in this prospectus supplement.
 
Asset Status Reports
 
The Special Servicer will be required to prepare a report (an “Asset Status Report”) for each mortgage loan which becomes a Specially Serviced Mortgage Loan not later than [__] days after the servicing of the mortgage loan is transferred to the Special Servicer.  Each Asset Status Report will be delivered to the Directing Certificateholder (as defined below), the Depositor and each Hired Rating Agency; provided, however, that the Special Servicer will not be required to deliver an Asset Status Report to the Directing Certificateholder if they are the same entity.  If the Directing Certificateholder does not disapprove an Asset Status Report within [__] business days, the Special Servicer will be required to implement the recommended action as outlined in the Asset Status Report.  The Directing Certificateholder may object to any Asset Status Report within [__] business days of receipt; provided, however, that the Special Servicer will be required to implement the recommended action as outlined in the Asset Status Report if it makes a determination in accordance with the Servicing Standards that the objection is not in the best interest of all the certificateholders or violates the servicing standards.  If the Directing Certificateholder disapproves the Asset Status Report and the Special Servicer has not made the affirmative determination described above, the Special Servicer will be required to revise the Asset Status Report as soon as practicable thereafter, but in no event later than [__] days after that disapproval.  The Special Servicer will be required to revise the Asset Status Report until the Directing Certificateholder fails to disapprove the revised Asset Status Report as described above or
 
 
S-59

 
 
until the Special Servicer makes a determination that the objection is not in the best interests of the certificateholders.
 
Inspections; Collection of Operating Information
 
 The Special Servicer will perform physical inspections of each Mortgaged Property at the times and in the manner as are consistent with the Special Servicer’s normal servicing procedures, but in any event
 
(1) at least once per calendar year, commencing in the calendar year 201[_], and
 
(2) if any scheduled payment becomes more than 60 days delinquent on the related Mortgage Loan, as soon as practicable after the occurrence of the delinquency.  The Special Servicer will prepare a written report of each such inspection describing the condition of the Mortgaged Property and specifying the existence of any material vacancies in the Mortgaged Property, of any sale, transfer or abandonment of the Mortgaged Property, of any material change in the condition or value of the Mortgaged Property, or of any waste committed on the Mortgaged Property.
 
With respect to each Mortgage Loan that requires the borrower to deliver these statements, the Special Servicer is also required to collect and review the annual operating statements of the related Mortgaged Property.  [Most] of the Mortgages obligate the related borrower to deliver annual property operating statements.  However, there can be no assurance that any operating statements required to be delivered will in fact be delivered, nor is the Special Servicer likely to have any practical means of compelling delivery in the case of an otherwise performing Mortgage Loan.
 
Copies of the inspection reports and operating statements referred to above are to be available for review by certificateholders during normal business hours at the offices of the [Trustee].  See “DESCRIPTION OF THE CERTIFICATES—Reports to Certificateholders; Certain Available Information” in this prospectus supplement.
 
Additional Obligations of the Master Servicer with Respect to ARM Loans
 
 The Master Servicer is responsible for calculating adjustments in the mortgage rate and the Monthly Payment for each ARM Loan and for notifying the related borrower of such adjustments.  If the base index for any ARM Loan is not published or is otherwise unavailable, then the Master Servicer is required to select a comparable alternative index over which it has no direct control, that is readily verifiable and that is acceptable under the terms of the related Mortgage Note.  If the mortgage rate or the Monthly Payment with respect to any ARM Loan is not properly adjusted by the Master Servicer pursuant to the terms of such Mortgage Loan and applicable law, the Master Servicer is required to deposit in the Certificate Account on or prior to the Due Date of the affected Monthly Payment, an amount equal to the excess, if any, of
 
(1) the amount that would have been received from the borrower if the mortgage rate or Monthly Payment had been properly adjusted, over
 
(2) the amount of such improperly adjusted Monthly Payment, subject to reimbursement only out of such amounts as are recovered from the borrower in respect of such excess.

 
S-60

 

 
DESCRIPTION OF THE CERTIFICATES
General
 
The certificates will be issued pursuant to the Pooling and Servicing Agreement and will represent in the aggregate the entire beneficial ownership interest in a trust fund consisting of:
 
●  
the Mortgage Loans and all payments under and proceeds of the Mortgage Loans received after the Cut-off Date (exclusive of payments of principal and interest due on or before the Cut-off Date);
 
●  
any REO Property;
 
●  
such funds or assets as from time to time are deposited in the Certificate Account;
 
●  
the rights of the mortgagee under all insurance policies with respect to the Mortgage Loans;
 
●  
certain rights of the Depositor under the mortgage loan purchase and sale agreement relating to Mortgage Loan document delivery requirements and the representations and warranties of the mortgage loan seller regarding the Mortgage Loans; and
 
●  
[the interest rate Swap Contract, dated the Closing Date (the “Swap Contract”), between the trust and [_______________] (the “Swap Counterparty”) and the rights of the trust under any and all swap contracts entered into from time to time after the Closing Date with respect to the Class A-FL Certificates].
 
 The certificates will consist of the following [__] classes:
 
(1)  the Class A[, Class A-FL and Class X] Certificates (the “Senior Certificates”);
 
(2)  the Class B Certificates;
 
(3)  the Class C Certificates; and the Class R Certificates; and
 
(4)  The Class A Certificates will have an initial certificate balance of $[____________], which represents [____]% of the Initial Pool Balance; [the Class A-FL Certificates will have an initial certificate balance of $[____________], which represents [____]% of the Initial Pool Balance;] [Class X Certificates will have an initial notional amount of $[____________];] the Class B Certificates will have an initial certificate balance of $[____________], which represents [____]% of the Initial Pool Balance the Class C Certificates will have an initial certificate balance of $[____________], which represents [___]% of the Initial Pool Balance; and the Class R Certificates will not have a certificate balance.
 
[On the Closing Date, the “Class A-FL Regular Interest” will also be issued by the trust as an uncertificated regular interest in one of the REMICs. The Class A-FL Regular Interest is not offered by this prospectus supplement. The Depositor will transfer the Class A-FL Regular Interest to the Trust in exchange for the Class A-FL Certificates. The Class A-FL Certificates are offered by this prospectus supplement. The Class A-FL Certificates will represent all of the beneficial ownership interest in the portion of the trust that consists of the Class A-FL Regular Interest, the Floating Rate Account and the Swap Contract.]
 
The certificate balance (“Certificate Balance”) of any class of certificates (other than [the Class X Certificates] and the Class R Certificates) outstanding at any time represents the maximum amount which the holders thereof are entitled to receive as distributions allocable to principal from the cash flow on the Mortgage Loans[, the Swap Contract] and the other assets in the trust fund.  On each Distribution Date, the certificate balance of each class of certificates will be reduced by any distributions of principal actually made on, and any Collateral Support Deficit actually allocated to, such class of certificates on such Distribution Date.
 
 
S-61

 
 
Only the Class A[, Class A-FL, Class X] and Class B Certificates (collectively, the “Offered Certificates”) are offered hereby.  The Class C Certificates and the Class R Certificates have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) and are not offered by this prospectus supplement.
 
The Offered Certificates will be issued, maintained and transferred on the book-entry records of DTC and its Participants in minimum denominations of $[______] and integral multiples of $1.  One certificate of each class may be issued in a different amount in order to evidence the remainder of the initial certificate balance of that class.  The Class R Certificates will be issued in registered, certificated form in minimum denominations of [20]% Percentage Interest in that class.  The “Percentage Interest” evidenced by any Offered Certificate is equal to the initial denomination thereof as of the Delivery Date, divided by the initial certificate balance of the class to which it belongs.
 
The Offered Certificates will initially be represented by one or more global certificates registered in the name of the nominee of DTC.  The Depositor has been informed by DTC that DTC’s nominee will be Cede & Co.  No Certificate Owner will be entitled to receive a definitive certificate representing its interest in such class, except as set forth below under “—Book-Entry Registration of the Offered Certificates—Definitive Certificates”.  Unless and until definitive certificates are issued, all references to actions by holders of the Offered Certificates will refer to actions taken by DTC upon instructions received from Certificate Owners through its Participants, and all references in this prospectus supplement to payments, notices, reports and statements to holders of the Offered Certificates will refer to payments notices, reports and statements to DTC or Cede & Co., as the registered holder of the Offered Certificates, for distribution to Certificate Owners through its Participants in accordance with DTC procedures.  See “DESCRIPTION OF THE CERTIFICATES—Book-Entry Registration and Definitive Certificates” in the accompanying prospectus.
 
Until definitive certificates are issued, interests in each class will be transferred on the book-entry records of DTC and its Participants.  [________________________] will initially serve as registrar (in such capacity, the “Certificate Registrar”) for purposes of recording and otherwise providing for the registration of the Offered Certificates and of transfers, if issued, of definitive certificates.
 
Book-Entry Registration of the Offered Certificates
 
General.  Certificate Owners that are not Direct or Indirect Participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, the certificates may do so only through Direct and Indirect Participants.  In addition, Certificate Owners will receive all distributions of principal of and interest on the certificates from the Trustee through DTC and its Direct and Indirect Participants.  Accordingly, Certificate Owners may experience delays in their receipt of payments.  Unless and until definitive certificates are issued, it is anticipated that the only registered certificateholder of the certificates will be Cede & Co., as nominee of DTC.  Certificate Owners will not be recognized by the Trustee or the Master Servicer as certificateholders, as such term is used in the Pooling and Servicing Agreement, and Certificate Owners will be permitted to receive information furnished to certificateholders and to exercise the rights of certificateholders only indirectly through DTC and its Direct and Indirect Participants.
 
Under the rules, regulations and procedures creating and affecting DTC and its operations (the “Rules”), DTC is required to make book-entry transfers of the Offered Certificates among Participants and to receive and transmit distributions of principal of, and interest on, the Offered Certificates.  Direct and Indirect Participants with which Certificate Owners have accounts with respect to the Offered Certificates similarly are required to make book-entry transfers and receive and transmit such distributions on behalf of their respective Certificate Owners.  Accordingly, although Certificate Owners will not possess physical certificates evidencing their interests in the Offered Certificates, the Rules provide a mechanism by which Certificate Owners, through their Direct and Indirect Participants, will receive distributions and will be able to transfer their interests in the Offered Certificates.
 
None of the Depositor, the Master Servicer or the Trustee will have any liability for any actions taken by DTC or its nominee, including, without limitation, actions for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Offered Certificates held by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest.
 
Definitive Class A Certificates.  Definitive Offered Certificates will be issued to Class A Certificate Owners or their nominees, respectively, rather than to DTC or its nominee, only under the limited conditions set forth in the
 
 
S-62

 
 
accompanying prospectus under “DESCRIPTION OF THE CERTIFICATES—Book-Entry Registration and Definitive Certificates”.
 
Upon the occurrence of an event described in the accompanying prospectus in the last paragraph under “DESCRIPTION OF THE CERTIFICATES—Book-Entry Registration and Definitive Certificates”, the Trustee is required to notify, through DTC, Direct Participants who have ownership of Offered Certificates as indicated on the records of DTC of the availability of definitive certificates.  Upon surrender by DTC of the definitive certificates representing the Offered Certificates and upon receipt of instructions from DTC for re-registration, the Trustee will reissue the Offered Certificates as definitive offered certificates issued in the respective principal amounts owned by individual Offered Certificate Owners.  Thereafter the Trustee and the Master Servicer will recognize the holders of such definitive offered certificates as certificateholders under the Pooling and Servicing Agreement.
 
For additional information regarding DTC and certificates maintained on the book-entry records thereof, see “DESCRIPTION OF THE CERTIFICATES—Book-Entry Registration and Definitive Certificates” in the accompanying prospectus.
 
Distributions
 
Method, Timing and Amount.  Distributions on the certificates will be made by the [Trustee], to the extent of available funds, on the [10th] day of each month or, if any such [10th] day is not a business day, then on the next succeeding business day, commencing in [_________] 201[__] (each, a “Distribution Date”).  These distributions (other than the final distribution on any certificate) will be made to the persons in whose names the certificates are registered at the close of business on each Record Date, which will be the last business day of the month preceding the month in which the related Distribution Date occurs.  Each distribution will be made by wire transfer in immediately available funds to the account specified by the certificateholder at a bank or other entity having appropriate facilities such transfer shall only be made if such certificateholder will have provided the [Trustee] with wiring instructions [no less than five business days prior to the related Record Date (which wiring instructions may be in the form of a standing order applicable to all subsequent distributions) and is the registered owner of certificates with an aggregate initial principal amount of at least $5,000,000], or otherwise by check mailed to such certificateholder.  The final distribution on any certificate will be made in like manner, but only upon presentation and surrender of such certificate at the location that will be specified in a notice of the pendency of such final distribution.  All distributions made with respect to a class of certificates will be allocated pro rata among the outstanding certificates of such class based on their respective Percentage Interests.
 
 Available Distribution Amount.  The aggregate amount available for distribution to certificateholders on each Distribution Date (the “Available Distribution Amount”) will, in general, equal the sum of the following amounts:
 
(a) the total amount of all cash received on the Mortgage Loans and any REO Properties that is on deposit in the Certificate Account as of the related Determination Date, exclusive of:
 
(1) all Monthly Payments collected but due on a Due Date subsequent to the related Due Period,
 
(2) all principal prepayments (together with related payments of interest thereon and related Prepayment Premiums), Liquidation Proceeds, Insurance and Condemnation Proceeds and other unscheduled recoveries received subsequent to the related Due Period, and
 
(3) all amounts in the Certificate Account that are due or reimbursable to any person other than the certificateholders; and
 
(b) all Advances made by the Master Servicer with respect to such Distribution Date.  See “THE POOLING AND SERVICING AGREEMENTS—Certificate Account” in the accompanying prospectus.
 
[The aggregate amount available for distributions to the holders of the Class A-FL Certificates on each Distribution Date (the “Class A-FL Available Funds”) will equal the sum of (i) the total amount of all principal and/or interest distributions on or in respect of the Class A-FL Regular Interest with respect to such Distribution Date and (ii) the amounts, if any, received from the Swap Counterparty pursuant to the Swap Contract for such
 
 
S-63

 
 
Distribution Date, less (iii) all amounts required to be paid to the Swap Counterparty pursuant to the Swap Contract for such Distribution Date. See “DESCRIPTION OF SWAP CONTRACT” in this prospectus supplement.]
 
The “Due Period” for each Distribution Date will be the period that begins on the [second] day of the month preceding the month in which such Distribution Date occurs and ends on the [first] day of the month in which such Distribution Date occurs.  For purposes of the discussion in the accompanying prospectus, the Due Period is also the Prepayment Period.  The “Determination Date” for each Distribution Date is the [5th] day of the month in which such Distribution Date occurs or, if any such [5th] day is not a business day, then the next preceding business day.
 
 Priority.  On each Distribution Date, for so long as the certificate balances of the Offered Certificates have not been reduced to zero, the [Trustee] will (except as otherwise described under “—Termination; Retirement of Certificates” below) apply amounts on deposit in the Certificate Account, to the extent of the Available Distribution Amount, in the following order of priority:
 
 [Description of applicable priority of payments, for example:
 
(1) to distributions of interest to the holders of the Class A Certificates [and the Class A-FL Regular Interest (other than if a Swap Contract is then in effect with respect to interest payments to be made to the Class A-FL Certificateholders)] [and Class X Certificates], pro rata (based upon their respective entitlements to interest for that Distribution Date), in an amount equal to all Distributable Certificate Interest in respect of the Senior Certificates for such Distribution Date and, to the extent not previously paid, for all prior Distribution Dates; [provided that if a Swap Contract is then in effect for the Class A-FL Certificates with respect to interest payments to be made to those Certificateholders, to each applicable Swap Counterparty, the amount of interest at the related fixed rate of interest due to each applicable Swap Counterparty under the related Swap Contract, and if applicable, to each interest rate Swap Counterparty, the amount of any swap termination payment due to that Swap Counterparty under the related Swap Contract due solely to a swap termination event resulting from a payment default by the trust or the insolvency of the Trust;]
 
(2) to distributions of principal to the holders of the Class A Certificates  [and the Class A-FL Regular Interest pro rata (based upon their respective entitlements to interest for that Distribution Date)] in an amount equal to the sum of:
 
(a) the product of the Class A Certificates’ [and the Class A-FL Regular Interest’s] Ownership Percentage (as calculated immediately prior to such Distribution Date), multiplied by the Scheduled Principal Distribution Amount for such Distribution Date, plus
 
(b) the entire Unscheduled Principal Distribution Amount for such Distribution Date (but not more than would be necessary to reduce the aggregate Certificate Balance of the Senior Certificates [other than the Class X Certificates] to zero);
 
(3) to distributions to the holders of the Class A Certificates [and the Class A-FL Regular Interest Certificates, pro rata] (based upon the aggregate unreimbursed Collateral Support Deficit allocated to each class), until all amounts of Collateral Support Deficit previously allocated to the Class A Certificates, but not previously reimbursed, have been reimbursed in full;
 
(4) to distributions of interest to the holders of the Class B Certificates in an amount equal to all Distributable Certificate Interest in respect of the Class B Certificates for such Distribution Date and, to the extent not previously paid, for all prior Distribution Dates;
 
(5) to distributions of principal to the holders of the Class B Certificates in an amount equal to the sum of
 
(a) the product of the Class B Certificates’ Ownership Percentage (as calculated immediately prior to such Distribution Date), multiplied by the Scheduled Principal Distribution Amount for such Distribution Date, plus
 
 
S-64

 
 
(b) if the certificate balances of the Senior Certificates have been reduced to zero, then to the extent not distributed in reduction of such certificate balances on such Distribution Date, the entire Unscheduled Principal Distribution Amount for such Distribution Date (but not more than would be necessary to reduce the certificate balance of the Class B Certificates to zero);
 
(6) to distributions to the holders of the Class B Certificates , until all amounts of Collateral Support Deficit previously allocated to the Class B Certificates, but not previously reimbursed, have been reimbursed in full;
 
(7) to distributions of interest to the holders of the Class C Certificates in an amount equal to all Distributable Certificate Interest in respect of the Class C Certificates for such Distribution Date and, to the extent not previously distributed, for all prior Distribution Dates;
 
(8) to distributions of principal to the holders of the Class C Certificates in an amount equal to the product of (a) the Class C Certificates’ Ownership Percentage (as calculated immediately prior to such Distribution Date), multiplied by (b) the Scheduled Principal Distribution Amount for such Distribution Date;
 
(9) to distributions to the holders of the Class C Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class C Certificates, but not previously reimbursed, have been reimbursed in full; and
 
(10)  to distributions to the holders of the Class R Certificates in an amount equal to the remaining balance, if any, of the Available Distribution Amount.
 
Reimbursement of previously allocated Collateral Support Deficit will not constitute distributions of principal for any purpose and will not result in an additional reduction in the certificate balance of the class of certificates in respect of which any such reimbursement is made.]
 
Distributions on the Class A-FL Certificates.  On each Distribution Date, for so long as the Certificate Balance of the Class A-FL Certificates has not been reduced to zero, the Trustee is required to apply amounts on deposit in the Floating Rate Account to the extent of available funds for the Class A-FL Certificates, after making any net swap payment to, or receiving any net swap payment from, the Swap Counterparty, in the following order of priority:
 
First, to the Class A-FL Certificates in respect of interest, up to an amount equal to the Distributable Certificate Interest with respect to the Class A-FL Certificates;
 
Second, to the Class A-FL Certificates in respect of principal, the Class A-FL Principal Distribution Amount until the Certificate Balance of that class is reduced to zero; and
 
Third, to the Class A-FL Certificates until all amounts of collateral support deficit previously allocated to the Class A-FL Certificates, but not previously reimbursed, have been reimbursed in full. See “DESCRIPTION OF SWAP CONTRACT” in this prospectus supplement.]
 
[Summary of cases in which classes of certificates may be entitled to distributions from a credit support provider or from a particular group of mortgage loans or otherwise from less than all of the mortgage loans (if applicable and to the extent not already provided for in the priority of payments itself).]
 
 Pass-Through Rates.  The “Pass-Through Rate” applicable to each class of certificates [other than the Class X Certificates] for the initial Distribution Date will equal approximately [_______]%  per annum.  With respect to any Distribution Date subsequent to the initial Distribution Date, the Pass-Through Rate for each class of certificates will equal the weighted average of the applicable effective Net Mortgage Rates for the Mortgage Loans, weighted on the basis of their respective stated principal balances immediately prior to such Distribution Date.  For purposes of calculating the Pass-Through Rate for any class of certificates and any Distribution Date, the “applicable effective Net Mortgage Rate” for each Mortgage Loan is:
 
 
S-65

 
 
(a) if such Mortgage Loan accrues interest on the basis of a 360-day year consisting of twelve 30-day months (a “30/360 basis”, which is the basis of accrual for interest on the certificates), the Net Mortgage Rate in effect for such Mortgage Loan as of the commencement of the related Due Period; and
 
(b) if such Mortgage Loan does not accrue interest on a 30/360 basis, the annualized rate at which interest would have to accrue during the one month period preceding the Due Date for such Mortgage Loan during the related Due Period on a 30/360 basis in order to produce the aggregate amount of interest (adjusted to the actual Net Mortgage Rate) accrued during such period.
 
The “Net Mortgage Rate” for each Mortgage Loan is equal to the related mortgage rate in effect from time to time less the Servicing Fee Rate.
 
[The Pass-Through Rate on the Class A-FL Certificates is a per annum rate equal to [one]-month LIBOR plus [_____]%; provided, however, under certain circumstances described under “DESCRIPTION OF SWAP CONTRACT—The Swap Contract” in this prospectus supplement, the Pass-Through Rate on the Class A-FL Certificates may be effectively reduced or may convert to a per annum rate equal to the Pass-Through Rate on the Class A-FL Regular Interest.]
 
[The Pass-through Rate for the Class X Certificates (the “Class X Pass-through Rate”) for any Distribution Date will equal the excess, if any, of (a) the weighted average of the applicable Net Mortgage Rates for the Mortgage Loans weighted on the basis of their respective stated principal balances as of the first day of the related Due Period or, in the case of the first Distribution Date, the Cut-off Date, over (b) the weighted average of the Pass-through Rates on all of the other Certificates (other than the Class R Certificates) weighted on the basis of their respective Certificate Balances immediately prior to that Distribution Date.  The Class X Pass-through Rate for the first Distribution Date is expected to be approximately [_______]% per annum.]
 
Distributable Certificate Interest.  The “Distributable Certificate Interest” in respect of each class of certificates for each Distribution Date represents that portion of the Accrued Certificate Interest in respect of such class of certificates for such Distribution Date that is net of such class’s allocable share (calculated as described below) of the aggregate of any Prepayment Interest Shortfalls resulting from voluntary principal prepayments made on the Mortgage Loans during the related Due Period that are not offset by Prepayment Interest Excesses collected during the related Due Period (the aggregate of such Prepayment Interest Shortfalls that are not so offset or covered, as to such Distribution Date, the “Net Aggregate Prepayment Interest Shortfall”).
 
The “Accrued Certificate Interest” in respect of each class of certificates for each Distribution Date is equal to one month’s interest at the Pass-Through Rate applicable to such class of certificates for such Distribution Date accrued on the related certificate balance outstanding immediately prior to such Distribution Date.  Accrued Certificate Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months.
 
 The portion of the Net Aggregate Prepayment Interest Shortfall for any Distribution Date that is allocable to each class of certificates will equal the product of:
 
(a) such Net Aggregate Prepayment Interest Shortfall, multiplied by
 
(b) a fraction, the numerator of which is equal to the Accrued Certificate Interest in respect of such class of certificates for such Distribution Date, and the denominator of which is equal to the Accrued Certificate Interest in respect of all the classes of certificates for such Distribution Date.
 
[The portion of the Net Aggregate Prepayment Interest Shortfall for any Distribution Date that is allocable to each class of certificates (other than the Class R Certificates, [and the Class X Certificates)] will equal the product of (a) the Net Aggregate Prepayment Interest Shortfall, multiplied by (b) a fraction, the numerator of which is equal to the Distributable Certificate Interest in respect of that class of certificates for the related Distribution Date, and the denominator of which is equal to the aggregate Distributable Certificate Interest in respect of all classes of certificates (other than the Class R Certificates and the Class X Certificates) for the related Distribution Date.]
 
[The Pass-Through Rate for the Class A-FL Certificates for each interest accrual period will be a floating rate equal to the sum of [one]-month LIBOR and [___]%.  See “—Floating Rate Certificates” below.]
 
 
S-66

 
 
[The [Trustee] will determine LIBOR for each accrual period, as described under “CASH FLOW AGREEMENTS—Swap Agreements” in the accompanying prospectus.]
 
Principal Distribution Amount.  The “Scheduled Principal Distribution Amount” for each Distribution Date will equal the aggregate of the principal portions of all Monthly Payments, including Balloon Payments [, net of any related Workout Fees payable therefrom to the Special Servicer], due during or, if and to the extent not previously received or advanced and distributed to certificateholders on a preceding Distribution Date, prior to the related Due Period, in each case to the extent paid by the related borrower or advanced by the Master Servicer and included in the Available Distribution Amount for such Distribution Date.  The Scheduled Principal Distribution Amount from time to time will include all late payments of principal made by a borrower, including late payments in respect of a delinquent Balloon Payment, regardless of the timing of such late payments, except to the extent such late payments are otherwise reimbursable to the Master Servicer for prior Advances.
 
 The “Unscheduled Principal Distribution Amount” for each Distribution Date will equal the aggregate of:
 
(a) all voluntary prepayments of principal received on the Mortgage Loans during the related Due Period [, net of any related Workout Fees payable therefrom to the Special Servicer and net of any unreimbursed Advances]; and
 
(b) any other collections (exclusive of payments by borrowers) received on the Mortgage Loans and any REO Properties during the related Due Period, whether in the form of Liquidation Proceeds, Insurance and Condemnation Proceeds, net income from REO Property or otherwise, that were identified and applied by the Master Servicer as recoveries of previously unadvanced principal of the related Mortgage Loan [, net of any related Workout Fees payable therefrom to the Special Servicer and net of any unreimbursed Advances].
 
The respective amounts which constitute the Scheduled Principal Distribution Amount and Unscheduled Principal Distribution Amount for any Distribution Date are in this prospectus supplement collectively referred to from time to time as the “Distributable Principal”.
 
[With respect to any Distribution Date, the “Class A-FL Principal Distribution Amount” will be an amount equal to the amount of principal allocated in respect of the Class A-FL Regular Interest on such Distribution Date. See “DESCRIPTION OF THE CERTIFICATES—Distributions—Priority” and “DESCRIPTION OF SWAP CONTRACT” in this prospectus supplement.]
 
The “Ownership Percentage” evidenced by any class or classes of certificates as of any date of determination will equal a fraction, expressed as a percentage, the numerator of which is the then certificate balance(s) of such class(es) of certificates, and the denominator of which is the then aggregate Stated Principal Balance of the Mortgage Pool.
 
Distribution of Prepayment Premiums.  On each Distribution Date, Prepayment Premiums collected on the Mortgage Loans during the related Prepayment Premium Period will be distributed by the Trustee as follows:  [Identification of the classes entitled to distributions of Prepayment Premiums and description of the applicable percentages, formulas or other method of allocation to such classes.]
 
Certain Calculations with Respect to Individual Mortgage Loans.  The “Stated Principal Balance” of each Mortgage Loan outstanding at any time represents the principal balance of such Mortgage Loan ultimately due and payable to the certificateholders subject to the Special Servicer’s right to receive any Workout Fee with respect to such Mortgage Loan.  The Stated Principal Balance of each Mortgage Loan will initially equal the Cut-off Date Balance thereof and, on each Distribution Date, will be reduced by the portion of the Distributable Principal for such date that is attributable to such Mortgage Loan.  The Stated Principal Balance of a Mortgage Loan may also be reduced in connection with any forced reduction of the actual unpaid principal balance thereof imposed by a court presiding over a bankruptcy proceeding wherein the related borrower is the debtor.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Foreclosure—Bankruptcy Laws” in the accompanying prospectus.  If any Mortgage Loan is paid in full or such Mortgage Loan (or any Mortgaged Property acquired in respect thereof) is otherwise liquidated, then, as of the first Distribution Date that follows the end of the Due Period in which such
 
 
S-67

 
 
payment in full or liquidation occurred, and notwithstanding that a loss may have occurred in connection with any such liquidation, the Stated Principal Balance of such Mortgage Loan shall be zero.
 
For purposes of calculating distributions on, and allocations of Collateral Support Deficit to, the certificates, as well as for purposes of calculating the amount of Servicing Fees payable each month, each REO Property will be treated as if there exists with respect thereto an outstanding mortgage loan (an “REO Loan”), and all references to “Mortgage Loan”, “Mortgage Loans” and “Mortgage Pool” in this prospectus supplement and in the accompanying prospectus, when used in such context, will be deemed to also be references to or to also include, as the case may be, any “REO Loans”.  Each REO Loan will generally be deemed to have the same characteristics as its actual predecessor Mortgage Loan, including the same adjustable or fixed mortgage rate (and, accordingly, the same Net Mortgage Rate and effective Net Mortgage Rate) and the same unpaid principal balance and Stated Principal Balance.  Amounts due on such predecessor Mortgage Loan, including any portion thereof payable or reimbursable to the Master Servicer, will continue to be “due” in respect of the REO Loan; and amounts received in respect of the related REO Property, net of payments to be made, or reimbursement to the Master Servicer or the Special Servicer for payments previously advanced, in connection with the operation and management of such property, generally will be applied by the Master Servicer as if received on the predecessor Mortgage Loan.  However, notwithstanding the terms of the predecessor Mortgage Loan, the Monthly Payment “due” on an REO Loan will in all cases, for so long as the related Mortgaged Property is part of the trust fund, be deemed to equal one month’s interest thereon at the applicable mortgage rate.
 
Credit Support
 
Subordination.  Credit support for the offered certificates will be provided by subordination.  The rights of holders of the Class B Certificates and the Class C Certificates to receive distributions of amounts collected or advanced on the Mortgage Loans will be subordinated, to the extent described in this prospectus supplement, to the rights of holders of the Senior Certificates.  The rights of holders of the Class C Certificates to receive distributions of amounts collected or advanced on the Mortgage Loans will be subordinated, to the extent described in this prospectus supplement, to the rights of holders of the Class B Certificates.  This subordination is intended to enhance the likelihood of timely receipt by the holders of the Senior Certificates of the full amount of all Distributable Certificate Interest payable in respect of such certificates on each Distribution Date, and the ultimate receipt by such holders of principal in an amount equal to the entire aggregate certificate balance of the Senior Certificates.  Similarly, but to a lesser degree, this subordination is also intended to enhance the likelihood of timely receipt by the holders of the Class B Certificates of the full amount of all Distributable Certificate Interest payable in respect of such certificates on each Distribution Date, and the ultimate receipt by such holders of principal in an amount equal to the entire certificate balance of the Class B Certificates.  This subordination will be accomplished by the application of the Available Distribution Amount on each Distribution Date in accordance with the order of priority described under “—Distributions—Priority” above.  No other form of Credit Support will be available for the benefit of the holders of the Offered Certificates.
 
Allocation to the Senior Certificates, for so long as they are outstanding, of the entire Unscheduled Principal Distribution Amount for each Distribution Date will generally accelerate the amortization of such certificates relative to the actual amortization of the Mortgage Loans.  To the extent that the Senior Certificates are amortized faster than the Mortgage Loans, the percentage interest evidenced by the Senior Certificates in the trust fund will be decreased (with a corresponding increase in the interest in the trust fund evidenced by the Class B and Class C Certificates), thereby increasing, relative to their respective certificate balances, the subordination afforded the Senior Certificates by the Class B and Class C Certificates.  Following retirement of the Senior Certificates, allocation to the Class B Certificates, for so long as they are outstanding, of the entire Unscheduled Principal Distribution Amount for each Distribution Date will provide a similar benefit to such class of certificates as regards the relative amount of subordination afforded thereto by the Class C Certificates.
 
 Allocation of Losses and Certain Expenses.  On each Distribution Date, immediately following the distributions to be made to the certificateholders on such date, the [Trustee] is to calculate the amount, if any, by which:
 
(a) the aggregate Stated Principal Balance of the Mortgage Pool expected to be outstanding immediately following such Distribution Date is less than
 
 
S-68

 
 
(b) the then aggregate certificate balance of the REMIC Regular Certificates (any such deficit, “Collateral Support Deficit”).  The [Trustee] will be required to allocate any such Collateral Support Deficit among the respective classes of certificates as follows:
 
●  
first, to the Class C Certificates, until the remaining certificate balance of such class of certificates is reduced to zero;
 
●  
second, to the Class B Certificates, until the remaining certificate balance of such class of certificates is reduced to zero; and
 
●  
last, to the Senior Certificates, until the remaining certificate balance of such class of certificates has been reduced to zero.
 
Any allocation of Collateral Support Deficit to a class of certificates will be made by reducing the certificate balance thereof by the amount so allocated.  Any Collateral Support Deficit allocated to a class of REMIC Regular Certificates will be allocated among the respective certificates of such class in proportion to the Percentage Interests evidenced thereby.  In general, Collateral Support Deficit will result from the occurrence of:
 
●  
losses and other shortfalls on or in respect of the Mortgage Loans arising from the inability of the Master Servicer and/or Special Servicer to collect all amounts due and owing under any such Mortgage Loan, including by reason of the fraud or bankruptcy of a borrower or a casualty of any nature at a Mortgaged Property, to the extent not covered by insurance (such losses and shortfalls, “Realized Losses”); provided that if any portion of the debt due under a Mortgage Loan is forgiven, whether in connection with a modification, waiver or amendment granted or agreed to by the Master Servicer or 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; and
 
●  
all Special Servicing Fees, Workout Fees and Liquidation Fees paid to the Special Servicer, any interest paid to the Master Servicer, the Special Servicer and/or the Trustee in respect of unreimbursed Advances, the costs of various opinions of counsel required or permitted to be obtained in connection with the servicing of the Mortgage Loans and the administration of the trust fund, property inspection costs incurred by the Special Servicer for Specially Serviced Mortgage Loans to the extent paid out of general collections, certain unanticipated, non-Mortgage Loan specific expenses of the trust fund, including certain reimbursements and indemnifications to the Trustee as described under “THE POOLING AND SERVICING AGREEMENTS—Certain Matters Regarding the Trustee” in the accompanying prospectus, certain reimbursements to the Master Servicer, the Special Servicer, the REMIC Administrator and the Depositor as described under “THE POOLING AND SERVICING AGREEMENTS—Certain Matters Regarding the Master Servicer, the Special Servicer, the REMIC Administrator and the Depositor” in the accompanying prospectus and certain federal, state and local taxes, and certain tax-related expenses, payable out of the trust fund as described under “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs—Prohibited Transactions Tax and Other Taxes” in the accompanying prospectus, if not advances by the Master Servicer, any amounts expended on behalf of the trust to remediate an adverse environmental condition at any Mortgaged Property securing a defaulted mortgage loan (see “THE POOLING AND SERVICING AGREEMENTS—Realization Upon Defaulted Mortgage Loans” in the accompanying prospectus), and any other expense of the trust fund not specifically included in the calculation of a Realized Loss for which there is no corresponding collection from a borrower (such expenses, reimbursements and costs, “Additional Trust Fund Expenses”).
 
Accordingly, the allocation of Collateral Support Deficit as described above will constitute an allocation of losses and other shortfalls experienced by the trust fund.
 
[Floating Rate Certificates]
 
[General. The Class A-FL Certificates will bear a floating rate of interest as described under “CASH FLOW AGREEMENTS—Swap Agreements” in the accompanying prospectus. Interest on the Class A-FL Certificates will accrue daily and will be computed based on the actual number of days elapsed and a 360-day year.  Accrual periods will begin on a Distribution Date and end on the day before the next related Distribution Date. The initial accrual
 
 
S-69

 
 
period for the Class A-FL Certificates will begin on the Closing Date and end on [_________ __], 201[_]. Interest and principal will be payable on each applicable distribution date. Payments of principal will be made or allocated to the Class A-FL Certificates on each Distribution Date as described under “—Distributions Priority” and “—Distributions on the Class A-FL Certificates” above.
 
Interest Rate Swap Contract.  The Trust may enter into one or more interest rate swap contracts with Eligible Swap Counterparties with respect to the Class A-FL Certificates to hedge some or all of the basis risk that results from the payment of interest on the Class A-FL Certificates at a per annum rate equal to the applicable interest rate index, plus or minus the Spread. In exchange for providing payments to the Trust at the applicable interest rate index plus the related Spread, each Swap Counterparty will be entitled to receive on each distribution date a payment from the Trust equal to [___________].
 
Eligible Swap Counterparty” means an entity engaged in the business of entering into derivative instrument contracts that satisfies the Rating Agency Condition.
 
Rating Agency Condition” means the written confirmation or reaffirmation, as the case may be, from each Hired Rating Agency then rating the certificates that any intended action will not result in the downgrading of its then-current rating of any class of certificates.
 
Spread” means the percentage with respect to the Class A-FL Certificates in excess of or below the applicable interest rate index applicable to that class as described under “DESCRIPTION OF THE CERTIFICATES” in this prospectus supplement.]
 
Cash Flow Agreements
 
[Statement of the name, organizational form and general character of the business of any third party derivative counterparty.  Description of the terms of the derivative instrument, to the extent material, as well as any material terms regarding substitution of the derivative instrument.  Statement regarding whether the significance percentage is less than 10%, at least 10% but less than 20%, or 20% or more.]  As used in the preceding sentence, “significance percentage” refers to the percentage that the amount of the significance estimate represents of the aggregate initial principal balance of [the mortgage loans][Class [___].  “Significance estimate” refers to the reasonable good-faith estimate of maximum probable exposure, made in substantially the same manner as that used in the sponsor's internal risk management process in respect of similar instruments.  [Summary financial information, if the significance percentage is 10% or more but less than 20%, and further financial information if the significance percentage is 20% or more, in each case to the extent required by Item 1115 of Regulation AB.]]
 
Advances
 
With respect to each Distribution Date, the Master Servicer will be obligated, subject to the recoverability determination described below, to make P&I Advances out of its own funds or, subject to the replacement thereof as and to the extent provided in the Pooling and Servicing Agreement, funds held in the Certificate Account that are not required to be part of the Available Distribution Amount for such Distribution Date, in an amount generally equal to the aggregate of all Monthly Payments (other than Balloon Payments and Excess Interest) and any Assumed Monthly Payments, in each case net of related Master Servicing Fees that were due or deemed due, as the case may be, in respect of the Mortgage Loans during the related Collection Period and that were not paid by or on behalf of the related borrowers or otherwise collected as of the close of business on the business day prior to the Master Servicer Remittance Date.  The Master Servicer’s obligations to make P&I Advances in respect of any Mortgage Loan will continue through liquidation of such Mortgage Loan or disposition of any REO Property acquired in respect thereof.  Subject to the recoverability determination described below, if the Master Servicer fails to make a required P&I Advance, then the Trustee will be required to make such P&I Advance.  Any such Advance by the Trustee would similarly be out of its own funds or, subject to the replacement thereof as and to the extent provided in the Pooling and Servicing Agreement, funds held in the Certificate Account that are not required to be part of the Available Distribution Amount for such Distribution Date.
 
The Master Servicer and the Trustee will be entitled to recover any Advance made out of its own funds from any amounts collected in respect of the Mortgage Loan as to which such Advance was made, whether in the form of late payments, Insurance and Condemnation Proceeds, Liquidation Proceeds or otherwise (“Related Proceeds”).  
 
 
S-70

 
 
Notwithstanding the foregoing neither the Master Servicer nor the Trustee will be obligated to make any Advance that it determines in its reasonable good faith judgment would, if made, not be recoverable out of Related Proceeds (a “Nonrecoverable Advance”), and the Master Servicer and the Trustee will be entitled to recover any Advance that it so determines to be a Nonrecoverable Advance out of general funds on deposit in the Certificate Account.  In arriving at a non-recoverability determination, the Master Servicer will consider the factors as described in the accompanying prospectus under “DESCRIPTION OF THE CERTIFICATES—Advances in Respect of Delinquencies”.  [Description of any other factors to be considered in making a non-recoverability determination.]  The Trustee will be entitled to rely on any non-recoverability determination made by the Master Servicer and the Trustee and Master Servicer will be entitled to rely on the non-recoverability determination made by the Special Servicer.  Neither the Master Servicer nor the Trustee will make a P&I Advance for Excess Interest or a Prepayment Premium.  Nonrecoverable Advances will represent a portion of the losses to be borne by the certificateholders.  See “DESCRIPTION OF THE CERTIFICATES—Advances in Respect of Delinquencies” and “THE POOLING AND SERVICING AGREEMENTS—Certificate Account” in the accompanying prospectus.
 
In connection with its recovery of any Advance or reimbursable servicing expense, each of the Master Servicer, the Special Servicer and the Trustee will be entitled to be paid, out of any amounts then on deposit in the Certificate Account, interest at [____]% per annum (the “Reimbursement Rate”) accrued on the amount of such Advance or expense from the date made to but not including the date of reimbursement.
 
To the extent not offset or covered by amounts otherwise payable on the Class C Certificates, interest accrued on outstanding Advances will result in a reduction in amounts payable on the Class B Certificates.  To the extent not offset or covered by amounts otherwise payable on the Class B and Class C Certificates, interest accrued on outstanding Advances will result in a reduction in amounts payable on the Senior Certificates.  To the extent that any holder of an Offered Certificate must bear the cost of the Master Servicer’s and/or Special Servicer’s Advances, the benefits of such Advances to such holder will be contingent on the ability of such holder to reinvest the amounts received as a result of such Advances at a rate of return equal to or greater than the Reimbursement Rate.
 
Each Distribution Date Statement delivered by the Trustee to the certificateholders will contain information relating to the amounts of Advances made with respect to the related Distribution Date.  See “DESCRIPTION OF THE CERTIFICATES—Reports to Certificateholders; Certain Available Information” in this prospectus supplement and “DESCRIPTION OF CERTIFICATES—Reports to Certificateholders” in the accompanying prospectus.
 
Appraisal Reductions
 
Promptly upon (i) a Mortgage Loan being modified by the Special Servicer, (ii) a Mortgage Loan becoming 60 days past due with respect to a payment, (iii) the passage of 60 days after the Special Servicer receives notice that the related borrower has become the subject of a bankruptcy proceeding or a receiver or similar official has been appointed with respect to the related Mortgaged Property, (iv) the related Mortgaged Property becoming an REO Property, or (v) the passage of 60 days after the third extension of a Mortgage Loan, the Special Servicer will be required to obtain an appraisal of the related Mortgaged Property.  Such appraisal will be used by the Special Servicer to determine whether an appraisal reduction amount exists with respect to the related Mortgage Loan.  If an appraisal reduction amount does exist with respect to such Mortgage Loan, to the extent of any delinquencies in respect of such Mortgage Loan, the Master Servicer is only required to advance a portion of the interest that it would otherwise be required to advance, taking into account the appraisal reduction amount of such Mortgage Loan.
 
Reports to Certificateholders; Certain Available Information
 
On each Distribution Date, the [Trustee] will be required to prepare a statement (a “Distribution Date Statement”) providing various items of information relating to distributions made on such date with respect to the relevant class and the recent status of the Mortgage Pool in accordance with Item 1121 of Regulation AB (17 C.F.R. 229.1121).  For a more detailed discussion of the particular items of information to be provided in each Distribution Date Statement, as well as a discussion of certain annual information reports to be furnished by the [Trustee] to persons who at any time during the prior calendar year were holders of the Offered Certificates, see “DESCRIPTION OF THE CERTIFICATES—Reports to Certificateholders” in the accompanying prospectus.
 
 
S-71

 
 
In addition, the Trustee and the Servicer will furnish to the Depositor and the Trustee the compliance statements and attestation reports in accordance with Item 1122 and 1123 of Regulation AB (17 C.F.R. 229.1122 and 229.1123) detailed under “THE POOLING AND SERVICING AGREEMENTS—Evidence as to Compliance” in the accompanying prospectus.
 
Copies of these statements and reports will be filed with the SEC through its EDGAR system located at “http://www.sec.gov” under the name of the Issuing Entity for so long as the Issuing Entity is subject to the reporting requirement of the Exchange Act.  The public also may read and copy any materials filed with the SEC at its Public Reference Room located 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 Trustee will make the Distribution Date Statement available each month to certificateholders and the other parties to the Pooling and Servicing Agreement via the Trustee’s internet website.  The Trustee will also make the periodic reports described in the accompanying prospectus under “For More Information” and “Incorporation of Certain Information by Reference” relating to the Issuing Entity available through its website on the same date they are filed with the SEC.  The Trustee’s internet website will initially be located at [_______________].  Assistance in using the website can be obtained by calling the Trustee’s customer service desk at [____________].  Parties that are unable to use the website are entitled to have a paper copy mailed to them at no charge via first class mail by calling the customer service desk.
 
The Pooling and Servicing Agreement requires that the [Trustee] make available at its offices primarily responsible for [administration of the trust fund], during normal business hours, for review by any holder of an Offered Certificate, originals or copies of, among other things, the following items:
 
●  
the Pooling and Servicing Agreement and any amendments thereto,
 
●  
all Distribution Date Statements delivered to holders of the relevant class of Offered Certificates since the Delivery Date,
 
●  
all officer’s certificates delivered to the Trustee since the Delivery Date as described under “THE POOLING AND SERVICING AGREEMENTS—Evidence as to Compliance” in the accompanying prospectus,
 
●  
all accountants’ reports delivered to the Trustee since the Delivery Date as described under “THE POOLING AND SERVICING AGREEMENTS—Evidence as to Compliance” in the accompanying prospectus,
 
●  
the most recent property inspection report prepared by or on behalf of the Special Servicer and delivered to the Trustee in respect of each Mortgaged Property,
 
●  
the most recent annual operating statements, if any, collected by or on behalf of the Special Servicer and delivered to the Trustee in respect of each Mortgaged Property, and
 
●  
any and all modifications, waivers and amendments of the terms of a Mortgage Loan entered into by the Master Servicer or the Special Servicer and delivered to the Trustee.
 
Copies of any and all of the foregoing items will be available from the [Trustee] upon request; however, the [Trustee] will be permitted to require payment of a sum sufficient to cover the reasonable costs and expenses of providing such copies.
 
Until such time as Definitive Class A Certificates are issued, the foregoing information will be available to Class A Certificate Owners only to the extent it is forwarded by or otherwise available through DTC and its Participants.  Conveyance of notices and other communications by DTC to Participants, and by Participants to Class A Certificate Owners, will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.  The Master Servicer, the Special Servicer, the Trustee, the Depositor, the REMIC Administrator and the Certificate Registrar are required to recognize as certificateholders
 
 
S-72

 
 
only those persons in whose names the certificates are registered on the books and records of the Certificate Registrar.  The initial registered holder of the Class [A] Certificates will be Cede & Co. as nominee for DTC.
 
Voting Rights
 
At all times during the term of the Pooling and Servicing Agreement, the voting rights for the series offered hereby (the “Voting Rights”) shall be allocated among the respective classes of certificateholders in proportion to the certificate balances of their certificates.  Voting Rights allocated to a class of certificateholders shall be allocated among such certificateholders in proportion to the Percentage Interests evidenced by their respective certificates.
 
Termination; Retirement of Certificates
 
 The obligations created by the Pooling and Servicing Agreement will terminate following the earliest of
 
(1) the final payment (or advance in respect thereof) or other liquidation of the last Mortgage Loan or REO Property subject thereto, and
 
(2) the purchase of all of the assets of the trust fund by the Master Servicer or the Depositor.  Written notice of termination of the Pooling and Servicing Agreement will be given to each certificateholder,[any Swap Counterparty] and each Hired Rating Agency and the final distribution will be made only upon surrender and cancellation of the certificates at the office of the Certificate Registrar or other location specified in such notice of termination.
 
 Any such purchase by the Master Servicer or the Depositor of all the Mortgage Loans and other assets in the trust fund is required to be made at a price equal to
 
(a) the sum of
 
(1) the aggregate Purchase Price of all the Mortgage Loans (exclusive of REO Loans) then included in the trust fund and
 
(2) the aggregate fair market value of all REO Properties then included in the trust fund (which fair market value for any REO Property may be less than the Purchase Price for the corresponding REO Loan), as determined by an appraiser mutually agreed upon by the Master Servicer and the Trustee, over
 
(b) the aggregate of amounts payable or reimbursable to the Master Servicer under the Pooling and Servicing Agreement.
 
Such purchase will effect early retirement of the then outstanding Offered Certificates, but the right of the Master Servicer or the Depositor to effect such termination is subject to the requirement that the then aggregate Stated Principal Balance of the Mortgage Pool be less than [__]% of the Initial Pool Balance.
 
On the final Distribution Date, the aggregate amount paid by the Master Servicer or the Depositor, as the case may be, for the Mortgage Loans and other assets in the trust fund (if the trust fund is to be terminated as a result of the purchase described in the preceding paragraph), together with all other amounts on deposit in the Certificate Account and not otherwise payable to a person other than the certificateholders (see “THE POOLING AND SERVICING AGREEMENTS—Certificate Account” in the accompanying prospectus), will be applied generally as described above under “—Distributions—Priority”, except that the distributions of principal described thereunder will, in the case of each class of certificates, be made, subject to available funds, in an amount equal to the related certificate balance then outstanding.
 
YIELD AND MATURITY CONSIDERATIONS
 
 
Yield Considerations
 
 General.  The yield on any Offered Certificate will depend on:
 
 
S-73

 
 
(1) the Pass-Through Rate in effect from time to time for such certificate;
 
(2) the price paid for such certificate and, if the price was other than par, the rate and timing of payments of principal on such certificate; and
 
(3) the aggregate amount of distributions on such certificate.
 
 Pass-Through Rate.  The Pass-Through Rate applicable to each class of Offered Certificates for any Distribution Date (other than the initial Distribution Date) will equal the weighted average of the applicable effective Net Mortgage Rates.  Accordingly, the yield on the Offered Certificates will be sensitive to
 
(1) adjustments to the mortgage rates on the ARM Loans and
 
(2) changes in the relative composition of the Mortgage Pool as a result of scheduled amortization, voluntary prepayments and involuntary liquidations of the Mortgage Loans.  See “DESCRIPTION OF THE MORTGAGE POOL” in this prospectus supplement and “—Yield Considerations—Rate and Timing of Principal Payments” below.
 
Rate and Timing of Principal Payments.  The yield to holders of Offered Certificates that are purchased at a discount or premium will be affected by the rate and timing of principal payments on the Mortgage Loans (including principal prepayments on the Mortgage Loans resulting from both voluntary prepayments by the mortgagors and involuntary liquidations).  The rate and timing of principal payments on the Mortgage Loans will in turn be affected by the amortization schedules thereof, the dates on which Balloon Payments are due and the rate and timing of principal prepayments and other unscheduled collections thereon (including for this purpose, collections made in connection with liquidations of Mortgage Loans due to defaults, casualties or condemnations affecting the Mortgaged Properties, or purchases of Mortgage Loans out of the trust fund).  Prepayments and, assuming the respective stated maturity dates therefor have not occurred, liquidations and purchases of the Mortgage Loans, will result in distributions on the Offered Certificates of amounts that would otherwise be distributed over the remaining terms of the Mortgage Loans.  Defaults on the Mortgage Loans, particularly at or near their stated maturity dates, may result in significant delays in payments of principal on the Mortgage Loans (and, accordingly, on the Offered Certificates) while work-outs are negotiated or foreclosures are completed.  See “SERVICING OF THE MORTGAGE LOANS—Modifications, Waivers and Amendments” in this prospectus supplement and “THE POOLING AND SERVICING AGREEMENTS—Realization Upon Defaulted Mortgage Loans” and “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Foreclosure” in the accompanying prospectus.  Because the rate of principal payments on the Mortgage Loans will depend on future events and a variety of factors (as described below), no assurance can be given as to such rate or the rate of principal prepayments in particular.  The Depositor is not aware of any relevant publicly available or authoritative statistics with respect to the historical prepayment experience of a large group of mortgage loans comparable to the Mortgage Loans.
 
The extent to which the yield to maturity of any class of Offered Certificates may vary from the anticipated yield will depend upon the degree to which such certificates are purchased at a discount or premium and when, and to what degree, payments of principal on the Mortgage Loans are in turn distributed on such certificates.  An investor should consider, in the case of any Offered Certificate purchased at a discount, the risk that a slower than anticipated rate of principal payments on a certificate could result in an actual yield to the investor that is lower than the anticipated yield and, in the case of any Offered Certificate purchased at a premium, the risk that a faster than anticipated rate of principal payments on a certificate could result in an actual yield to the investor that is lower than the anticipated yield.  In general, the earlier a payment of principal is made on an Offered Certificate purchased at a discount or premium, the greater will be the effect on an investor’s yield to maturity.  As a result, the effect on an investor’s yield of principal payments on the investor’s Offered Certificates occurring at a rate higher (or lower) than the rate anticipated by the investor during any particular period would not be fully offset by a subsequent like reduction (or increase) in the rate of principal payments.
 
Losses and Shortfalls.  The yield to holders of the Offered Certificates will also depend on the extent to which such holders are required to bear the effects of any losses or shortfalls on the Mortgage Loans.  Losses and other shortfalls on the Mortgage Loans will, with the exception of any Net Aggregate Prepayment Interest Shortfalls, generally be borne:
 
 
S-74

 
 
●  
first, by the holders of the Class C Certificates, to the extent of amounts otherwise distributable in respect of their certificates;
 
●  
second, by the holders of the Class B Certificates, to the extent of amounts otherwise distributable in respect of their certificates; and
 
●  
last, by the holders of the Senior Certificates.
 
As more fully described in this prospectus supplement under “DESCRIPTION OF THE CERTIFICATES—Distributions—Distributable Certificate Interest”, Net Aggregate Prepayment Interest Shortfalls will generally be borne by the respective classes of certificateholders on a pro rata basis.
 
Certain Relevant Factors.  The rate and timing of principal payments and defaults and the severity of losses on the Mortgage Loans may be affected by a number of factors, including, without limitation,
 
●  
prevailing interest rates
 
●  
the terms of the Mortgage Loans (for example [_____________]),
 
●  
Prepayment Premiums,
 
●  
adjustable mortgage rates and amortization terms that require Balloon Payments,
 
●  
the demographics and relative economic vitality of the areas in which the Mortgaged Properties are located and
 
●  
the general supply and demand for rental properties in such areas
 
●  
the quality of management of the Mortgaged Properties,
 
●  
the servicing of the Mortgage Loans,
 
●  
possible changes in tax laws and
 
●  
other opportunities for investment.  See “RISK FACTORS” and “DESCRIPTION OF THE MORTGAGE POOL” in this prospectus supplement and “RISK FACTORS” and “YIELD AND MATURITY CONSIDERATIONS—Yield and Prepayment Considerations” in the accompanying prospectus.
 
 The rate of prepayment on the Mortgage Pool is likely to be affected by prevailing market interest rates for mortgage loans of a comparable type, term and risk level.  When the prevailing market interest rate is below a mortgage coupon, a borrower may have an increased incentive to refinance its mortgage loan.  Although most of the Mortgage Loans are ARM Loans, adjustments to the mortgage rates thereon will generally be limited by lifetime and/or periodic caps and floors and, in each case, will be based on the related Index (which may not rise and fall consistently with mortgage interest rates then available) plus the related Gross Margin (which may be different from margins then offered on adjustable rate mortgage loans).  See “DESCRIPTION OF THE MORTGAGE POOL—Certain Terms and Conditions of the Mortgage Loans” and “—The Index” in this prospectus supplement.  As a result, the mortgage rates on the ARM Loans at any time may not be comparable to prevailing market interest rates.  In addition, as prevailing market interest rates decline, and without regard to whether the mortgage rates on the ARM Loans decline in a manner consistent therewith, related borrowers may have an increased incentive to refinance for purposes of either
 
(1) converting to a fixed rate loan and thereby “locking in” such rate, or
 
(2) taking advantage of a different index, margin or rate cap or floor on another adjustable rate mortgage loan.  The Mortgage Loans may be prepaid at any time and, in [___] cases (approximately [_____]% of the Initial Pool Balance), may be prepaid in whole or in part without payment of a Prepayment Premium.
 
 
S-75

 
 
Depending on prevailing market interest rates, the outlook for market interest rates and economic conditions generally, some borrowers may sell Mortgaged Properties in order to realize their equity therein, to meet cash flow needs or to make other investments.  In addition, some borrowers may be motivated by Federal and state tax laws (which are subject to change) to sell Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
 
The Depositor makes no representation as to the particular factors that will affect the rate and timing of prepayments and defaults on the Mortgage Loans, as to the relative importance of such factors, as to the percentage of the principal balance of the Mortgage Loans that will be prepaid or as to which a default will have occurred as of any date or as to the overall rate of prepayment or default on the Mortgage Loans.
 
Delay in Payment of Distributions.  Because monthly distributions will not be made to certificateholders until a date that is scheduled to be at least [_____] days and as many as [_____] days following the Due Dates for the Mortgage Loans during the related Due Period, the effective yield to the holders of the Offered Certificates will be lower than the yield that would otherwise be produced by the applicable Pass-Through Rates and purchase prices (assuming such prices did not account for such delay).
 
Unpaid Distributable Certificate Interest.  As described under “DESCRIPTION OF THE CERTIFICATES—Distributions—Priority” in this prospectus supplement, if the portion of the Available Distribution Amount distributable in respect of interest on any class of Offered Certificates on any Distribution Date is less than the Distributable Certificate Interest then payable for such class, the shortfall will be distributable to holders of such class of certificates on subsequent Distribution Dates, to the extent of available funds.  Any such shortfall will not bear interest, however, and will therefore negatively affect the yield to maturity of such class of certificates for so long as it is outstanding.
 
Weighted Average Life
 
The weighted average life of an Offered Certificate refers to the average amount of time that will elapse from the date of its issuance until each dollar allocable to principal of the certificate is distributed to the investor.  The weighted average life of an Offered Certificate will be influenced by, among other things, the rate at which principal on the Mortgage Loans is paid or otherwise collected, which may be in the form of scheduled amortization, voluntary prepayments, Insurance and Condemnation Proceeds and Liquidation Proceeds.
 
Prepayments on mortgage loans may be measured by a prepayment standard or model.  The model used in this prospectus supplement is the “CPR” model (as described in the accompanying prospectus).  As used in each of the following tables, the column headed “0%” assumes that none of the Mortgage Loans is prepaid before maturity.  The columns headed “[___]%”, “[___]%”, “[___]%” and “[___]%” assume that no prepayments are made on any Mortgage Loan during such Mortgage Loan’s Lockout Period, if any, or during such Mortgage Loan’s yield maintenance period, if any, and are otherwise made on each of the Mortgage Loans at the indicated CPRs.  There is no assurance, however, that prepayments of the Mortgage Loans (whether or not in a Lockout Period or a yield maintenance period) will conform to any particular CPR, and no representation is made that the Mortgage Loans will prepay in accordance with the assumptions at any of the CPRs shown or at any other particular prepayment rate, that all the Mortgage Loans will prepay in accordance with the assumptions at the same rate or that Mortgage Loans that are in a Lockout Period or a yield maintenance period will not prepay as a result of involuntary liquidations upon default or otherwise.  A “yield maintenance period” is any period during which a Mortgage Loan provides that voluntary prepayments be accompanied by a Prepayment Premium calculated on the basis of a yield maintenance formula.
 
 The following tables indicate the percentage of the initial certificate balance of each of the Class A Certificates [, Class A-FL Certificates] and the Class B Certificates that would be outstanding after each of the dates shown at various CPRs and the corresponding weighted average life of each such class of certificates.  The tables have been prepared on the basis of the following assumptions, among others:
 
(1) scheduled monthly payments of principal and interest on the Mortgage Loans, in each case prior to any prepayment of the loan, will be timely received (with no defaults) and will be distributed on the 15th day of each month commencing in [________] 201[_];
 
 
S-76

 
(2) the mortgage rate in effect for each Mortgage Loan as of the Cut-off Date will remain in effect
 
(a) in the case of each Fixed Rate Loan, to maturity and,
 
(b) in the case of each ARM Loan, until its next Interest Rate Adjustment Date, when a new mortgage rate that is to remain in effect to maturity will be calculated reflecting the value of the related Index as of [________] [__], 201[__], subject to such Mortgage Loan’s lifetime and/or periodic rate caps and floors, if any;
 
(3) all Mortgage Loans accrue and pay interest on a 30/360 basis;
 
(4) the monthly principal and interest payment due for each Mortgage Loan on the first Due Date following the Cut-off Date will continue to be due
 
(a) in the case of each Fixed Rate Loan, on each Due Date until maturity and
 
(b) in the case of each ARM Loan, until its next Payment Adjustment Date, when a new payment that is to be due on each Due Date until maturity will be calculated reflecting the appropriate mortgage rate and remaining amortization term;
 
(5) any principal prepayments on the Mortgage Loans will be received on their respective Due Dates at the respective levels of CPR set forth in the tables, and there will be no Net Aggregate Prepayment Interest Shortfalls in connection therewith; and
 
(6) the mortgage loan seller will not be required to repurchase or substitute any Mortgage Loan, and neither the master servicer nor the depositor will exercise its option to purchase all the Mortgage Loans and thereby cause an early termination of the trust fund.
 
Based on the foregoing assumptions, the following table indicates the resulting weighted average lives of the Class A Certificates and sets forth the percentage of the initial certificate balance of the Class A Certificates that would be outstanding after each of the dates shown at the indicated CPRs.  To the extent that the Mortgage Loans have characteristics that differ from those assumed in preparing the tables set forth below, the Class A Certificates or the Class B Certificates may mature earlier or later than indicated by the tables.  See “RISK FACTORS—Modeling Assumptions Are Unlikely To Match Actual Experience”.
 
Percent of the Initial Certificate Balance of the
Class A Certificates at the Respective CPRs
Set Forth Below:
 
 
Date
 
 
0%
 
 
%
 
 
%
 
 
%
 
 
%
Delivery Date
 
100.0
 
100.0
 
100.0
 
100.0
 
100.0
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
Weighted Average Life (years)(A)
                   
 
(A)
The weighted average life of a Class A Certificate is determined by
 
 
S-77

 
 
 
(1)
multiplying the amount of each principal distribution thereon by the number of years from the date of issuance of the Class A Certificates to the related Distribution Date,
 
 
(2)
summing the results and
 
 
(3)
dividing the sum by the aggregate amount of the reductions in the principal balance of such Class A Certificate.
 
[Based on the foregoing assumptions, the following table indicates the resulting weighted average lives of the Class A-FL Certificates and sets forth the percentage of the initial certificate balance of the Class A-FL Certificates that would be outstanding after each of the dates shown at the indicated CPRs.  To the extent that the Mortgage Loans have characteristics that differ from those assumed in preparing the tables set forth below, the Class A-FL Certificates or the Class B Certificates may mature earlier or later than indicated by the tables.  See “RISK FACTORS—Modeling Assumptions Are Unlikely To Match Actual Experience”.
 
Percent of the Initial Certificate Balance of the
Class A-FL Certificates at the Respective CPRs
Set Forth Below:
 
Date
 
 
0%
 
 
%
 
 
%
 
 
%
 
 
%
Delivery Date
 
100.0
 
100.0
 
100.0
 
100.0
 
100.0
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
Weighted Average Life (years)(A)
                   
 
(A)
The weighted average life of a Class A-FL Certificate is determined by
 
 
(1)
multiplying the amount of each principal distribution thereon by the number of years from the date of issuance of the Class A-FL Certificates to the related Distribution Date,
 
 
(2)
summing the results and
 
 
(3)
dividing the sum by the aggregate amount of the reductions in the principal balance of such Class A-FL Certificate.]
 
Based on the foregoing assumptions, the following table indicates the resulting weighted average lives of the Class B Certificates and sets forth the percentage of the initial certificate balance of the Class B Certificates that would be outstanding after each of the dates shown at the indicated CPRs.
 
 
S-78

 
 
Percent of the Initial Certificate Balance of the
Class B Certificates at the Respective CPRs
Set Forth Below:

 
 
Date
 
 
0%
 
 
%
 
 
%
 
 
%
 
 
%
Delivery Date
 
100.0
 
100.0
 
100.0
 
100.0
 
100.0
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
_________ 11, 20[__]
                   
Weighted Average Life (years)(A)
                   
 
(A)
The weighted average life of a Class B Certificate is determined by (1) multiplying the amount of each principal distribution thereon by the number of years from the date of issuance of the Class B Certificates to the related Distribution Date, (2) summing the results and (3) dividing the sum by the aggregate amount of the reductions in the principal balance of such Class B Certificate.
 
[The following disclosure is applicable to Stripped Interest Certificates, when offered...
 
Yield Sensitivity of the Class X Certificates
 
The yield to maturity of the Class X Certificates will be especially sensitive to the prepayment, repurchase, substitution and default experienced on the Mortgage Loans, which may fluctuate significantly from time to time.  A rapid rate of principal payments will have a material negative effect on the yield to maturity of the Class X Certificates.  There can be no assurance that the Mortgage Loans will prepay at any particular rate.  Prospective investors in the Class X Certificates should fully consider the associated risks, including the risk that such investors may not fully recover their initial investment.
 
The following table indicates the sensitivity of the pre-tax yield to maturity on the Class X Certificates to various constant rates of prepayment on the Mortgage Loans by projecting the monthly aggregate payments of interest on the Class X Certificates and computing the corresponding pre-tax yields to maturity on a corporate bond equivalent basis.  This computation is based on the assumptions described in the third paragraph under the heading “—Weighted Average Life” above, including the assumptions regarding the characteristics and performance of the Mortgage Loans which differ from the actual characteristics and performance thereof and assuming the aggregate purchase price set forth below.  Any differences between such assumptions and the actual characteristics and performance of the Mortgage Loans and of the Class X Certificates may result in yields being different from those shown in such table.  Discrepancies between assumed and actual characteristics and performance underscore the hypothetical nature of the table, which is provided only to give a general sense of the sensitivity of yields in varying prepayment scenarios.
 
Pre-Tax Yield to Maturity of the Class X Certificates
at the Following CPRs
 
Assumed Purchase Price
 
 
0%
 
 
%
 
 
%
 
 
%
 
 
%
 
 
%
$________________
 
____%
 
____%
 
____%
 
____%
 
____%
 
____%
 
Each pre-tax yield to maturity set forth in the preceding table was calculated by determining the monthly discount rate which, when applied to the assumed stream of cash flows to be paid on the Class X Certificates, would cause the discounted present value of such assumed stream of cash flows to equal the assumed purchase price listed
 
 
S-79

 
 
in the table.  Accrued interest is included in the assumed purchase price and is used in computing the corporate bond equivalent yields shown.  These yields do not take into account the different interest rates at which investors may be able to reinvest funds received by them as distributions on the Class X Certificates, and thus do not reflect the return on any investment in the Class X Certificates when any reinvestment rates other than the discount rates are considered.
 
Notwithstanding the assumed prepayment rates reflected in the preceding tables, it is highly unlikely that the Mortgage Loans will be prepaid according to one particular pattern.  For this reason, and because the timing of cash flows is critical to determining yields, the pre-tax yield to maturity on the Class X Certificates is likely to differ from those shown in the tables, even if all of the Mortgage Loans prepay at the indicated CPRs over any given time period or over the entire life of the certificates.
 
There can be no assurance that the Mortgage Loans will prepay at any particular rate or that the yield on the Class X Certificates will conform to the yields described in this prospectus supplement.  Investors are urged to make their investment decisions based on the determinations as to anticipated rates of prepayment under a variety of scenarios.  Investors in the Class X Certificates should fully consider the risk that a rapid rate of prepayments on the Mortgage Loans could result in the failure of such investors to fully recover their investments.]

 
S-80

 

 
[CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS]
 
[Identification of states and geographic regions relating to 10% or more of the Mortgage Loans by principal balance, and description of unique legal aspects, to the extent material.]
 
[Identification of any foreign countries in which Mortgaged Properties are located and description of any unique legal aspects, to the extent material.  Mortgage Loans secured by properties located in foreign countries will not equal or exceed 10% of the principal balance of the Mortgage Pool for any takedown.]
 
Other Aspects.  Please see the discussion under “CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS” in the accompanying prospectus regarding [other] legal aspects of the Mortgage Loans that you should consider prior to making any investment in the certificates.

 
S-81

 

 
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
 
 Upon the issuance of the Offered Certificates, [Cadwalader, Wickersham & Taft LLP], counsel to the Depositor, will deliver the following opinion:  [Assuming compliance with the provisions of the Pooling and Servicing Agreement, for federal income tax purposes, the trust fund will qualify as a “real estate mortgage investment conduit” (a “REMIC”) within the meaning of Sections 860A through 860G (the “REMIC Provisions”) of the Internal Revenue Code of 1986 (the “Code”), and
 
(1) the Class A, Class B[, Class X] and Class C Certi­fi­cates will evidence “regular interests” in such REMIC and
 
(2) the Class R Certificates will be the sole class of “residual interests” in such REMIC, each within the meaning of the REMIC Provisions in effect on the date hereof.] [Assuming compliance with the Pooling and Servicing Agreement, for federal income tax purposes, the trust fund will be classified as a grantor trust under Subpart E, part I of subchapter J of the Code, and not as an association taxable as a corporation or as a partnership.]
 
[The Class A-FL Certificates will represent an undivided interest in a portion of the trust fund that is treated as a grantor trust for federal income tax purposes, which portion includes the Class A-FL Regular Interest, the Floating Rate Account and the beneficial interest of such class in the interest rate Swap Contract.]
 
The [__________] Certificates [may] [will] [will not] be treated as having been issued with original issue discount for federal income tax reporting purposes.  The prepayment assumption that will be used in determining the rate of accrual of [original issue discount,] market discount and premium, if any, for federal income tax purposes will be based on the assumption that subsequent to the date of any determination the Mortgage Loans will prepay at a rate equal to [a CPR of __%].  No representation is made that the Mortgage Loans will prepay at that rate or at any other rate.  See “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs—Taxation of Owners of REMIC Regular Certificates-Original Issue Discount” in the accompanying prospectus.
 
The [___________________] Certificates may be treated for federal income tax purposes as having been issued at a premium.  Whether any holder of [either] such class of certificates will be treated as holding a certificate with amortizable bond premium will depend on such certificateholder’s purchase price and the distributions remaining to be made on such certificate at the time of its acquisition by such certificateholder.  Holders of [each] such class of certificates should consult their tax advisors regarding the possibility of making an election to amortize such premium.  See “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs—Taxation of Owners of REMIC Regular Certificates—Premium” in the accompanying prospectus.
 
The Offered Certificates will be treated as [assets described in Section 7701(a)(19)(C) of the Code and] “real estate assets” within the meaning of Section 856(c)(4)(A) of the Code, and interest (including original issue discount, if any) on the Offered Certificates will be interest described in Section 856(c)(3)(B) of the Code.  Moreover, the Offered Certificates will be “qualified mortgages” within the meaning of Section 860G(a)(3) of the Code. See “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs—Characterization of Investments in REMIC Certificates” in the accompanying prospectus.
 
[________________________], a [_______________], will act as REMIC Administrator for the trust fund.  [The Master Servicer will be responsible for the fees and normal disbursements of the REMIC Administrator.]  See “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs—Reporting and Other Administrative Matters” and “THE POOLING AND SERVICING AGREEMENTS—Certain Matters Regarding the Master Servicer, the Special Servicer, the REMIC Administrator and the Depositor”, “—Events of Default” and “—Rights Upon Event of Default” in the accompanying prospectus.
 
For further information regarding the federal income tax consequences of investing in the Offered Certificates, see “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs” in the accompanying prospectus.
 
 
S-82

 
 
[Taxation of the Swap Contract]
 
[Each holder of a Class A-FL Certificate will be treated for federal income tax purposes as having entered into its proportionate share of the rights of such class under the related Swap Contract.  Holders of the Class A-FL Certificates must allocate the price they pay for the certificates between their interest in the Class A-FL Regular Interest and the related Swap Contract based on their relative market values.  The portion, if any, allocated to the related Swap Contract will be treated as a swap premium (the “Swap Premium”) paid or received by the holders of the Class A-FL Certificates.  If the Swap Premium is paid by a holder, it will reduce the purchase price allocable to the Class A-FL Regular Interest.  If the Swap Premium is received by holders, it will be deemed to have increased the purchase price for the Class A-FL Regular Interest.  If the related Swap Contract is “on market,” no amount of the purchase price will be allocable to it.  Based on the anticipated issue prices of the Class A-FL Certificates and the Class A-FL Regular Interest, it is anticipated that the Class A-FL Regular Interest will be deemed to have been issued at a [premium] and that a related Swap Premium will be deemed to be paid to the holders of the Class A-FL Certificates.  The holder of a Class A-FL Certificate will be required to amortize any related Swap Premium under a level payment method as if the related Swap Premium represented the present value of a series of equal payments made or received over the life of the related Swap Contract (adjusted to take into account decreases in notional principal amount), discounted at a rate equal to the rate used to determine the amount of the related Swap Premium (or some other reasonable rate). Prospective purchasers of Class A-FL Certificates should consult with their own tax advisors regarding the appropriate method of amortizing any Swap Premium.
 
Regulations promulgated by the Treasury Department treat a non-periodic payment made under a swap contract as a loan for federal income tax purposes if the payment is “significant.”  It is not known whether any related Swap Premium would be treated in part as a loan under Treasury regulations.
 
Under Treasury regulations (i) all taxpayers must recognize periodic payments with respect to a notional principal contract under the accrual method of accounting, and (ii) any periodic payments received under a Swap Contract must be netted against payments made under the Swap Contract and deemed made or received as a result of the related Swap Premium over the recipient’s taxable year, rather than accounted for on a gross basis.  Net income or deduction with respect to net payments under a notional principal contract for a taxable year should constitute ordinary income or ordinary deduction.  The IRS could contend the amount is capital gain or loss, but such treatment is unlikely, at least in the absence of further regulations.  Any regulations requiring capital gain or loss treatment presumably would apply only prospectively.  Individuals may be limited in their ability to deduct any such net deduction and should consult their tax advisor prior to investing in the Class A-FL Certificates.
 
Any amount of proceeds from the sale, redemption or retirement of a Class A-FL Certificate that is considered to be allocated to the holder’s rights under the related Swap Contract or that the holder is deemed to have paid to the purchaser would be considered a “termination payment” allocable to such Certificate under Treasury regulations. A holder of a Class A-FL Certificate will have gain or loss from such a termination equal to (A)(i) any termination payment it received or is deemed to have received minus (ii) the unamortized portion of any Swap Premium paid (or deemed paid) by the holder upon entering into or acquiring its interest in the related Swap Contract or (B)(i) any termination payment it paid or is deemed to have paid minus (ii) the unamortized portion of the Swap Premium received upon entering into or acquiring its interest in the related Swap Contract.  Gain or loss realized upon the termination of the Swap Contract will generally be treated as capital gain or loss.  Moreover, in the case of a bank or thrift institution, Section 582(c) of the Code would likely not apply to treat such gain or loss as ordinary.
 
The Class A-FL Certificates, representing a beneficial ownership in the Class A-FL Regular Interest and in the related Swap Contract may constitute positions in a straddle, in which case, the straddle rules of Section 1092 of the Code would apply.  A selling holder’s capital gain or loss with respect to such regular interest would be short term because the holding period would be tolled under the straddle rules.  Similarly, capital gain or loss realized in connection with the termination of the swap contracts would be short term. If the holder of a Class A-FL Certificate incurred or continued to incur indebtedness to acquire or hold such Class A-FL Certificate, the holder would generally be required to capitalize a portion of the interest paid on such indebtedness until termination of the related Swap Contract.
 
For further information regarding the federal income tax consequences of investing in the Offered Certificates, see “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs— Taxation of Owners of REMIC Regular Certificates” in the accompanying prospectus.]

 
S-83

 

 
METHOD OF DISTRIBUTION
 
Subject to the terms and conditions set forth in an Underwriting Agreement, dated [_____________] [__], 201[_] (the “Underwriting Agreement”), Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Underwriter”), an affiliate of the Sponsor and the Depositor, has agreed to purchase and the Depositor has agreed to sell to the Underwriter each class of the Offered Certificates.  It is expected that delivery of the Class A [and Class A-FL] [and Class X] Certificates will be made only in book-entry form through the Same Day Funds Settlement System of DTC, and that the delivery of the Class B and Class R Certificates will be made at the offices of the Underwriter, [_____________________], on or about [_____________] [__], 201[_] against payment therefor in immediately available funds.
 
The Underwriting Agreement provides that the obligation of the Underwriter to pay for and accept delivery of its certificates is subject to, among other things, the receipt of certain legal opinions and to the conditions, among others, that no stop order suspending the effectiveness of the Depositor’s Registration Statement shall be in effect, and that no proceedings for such purpose shall be pending before or threatened by the SEC.
 
Proceeds to the Depositor from the sale of the Offered Certificates, before deducting expenses payable by the Depositor, will be approximately [____]% of the aggregate certificate balance of the Offered Certificates plus accrued interest thereon from the Cut-off Date.
 
The distribution of the Offered Certificates by the Underwriter may be effected from time to time in one or more negotiated transactions, or otherwise, at varying prices to be determined at the time of sale.  The Underwriter may effect such transactions by selling its certificates to or through dealers, and such dealers may receive compensation in the form of underwriting discounts, concessions or commissions from the Underwriter for whom they act as agent.  In connection with the sale of the Offered Certificates, the Underwriter may be deemed to have received compensation from the Depositor in the form of underwriting compensation.  The Underwriter and any dealers that participate with such Underwriter in the distribution of the Offered Certificates may be deemed to be underwriters and the proceeds from the sale of the Offered Certificates realized by the Underwriter and any dealers that participate with the Underwriter in the distribution of the Offered Certificates will constitute underwriting discounts and commissions.
 
The Underwriting Agreement provides that the Depositor will indemnify the Underwriter, and that under limited circumstances the Underwriter will indemnify the Depositor, against certain civil liabilities under the Securities Act, or contribute to payments required to be made in respect thereof.
 
There can be no assurance that a secondary market for the Offered Certificates will develop or, if it does develop, that it will continue.  The primary source of ongoing information available to investors concerning the Offered Certificates will be the monthly statements discussed in the accompanying prospectus under “DESCRIPTION OF THE CERTIFICATES—Reports to Certificateholders”, which will include information as to the outstanding principal balance of the Offered Certificates and the status of the applicable form of credit enhancement.  Except as described in this prospectus supplement under “DESCRIPTION OF THE CERTIFICATES—Reports to Certificateholders; Certain Available Information”, there can be no assurance that any additional information regarding the Offered Certificates will be available through any other source.  In addition, the Depositor is not aware of any source through which price information about the Offered Certificates will be generally available on an ongoing basis.  The limited nature of such information regarding the Offered Certificates may adversely affect the liquidity of the Offered Certificates, even if a secondary market for the Offered Certificates becomes available.
 
 
LEGAL MATTERS
 
Certain legal matters relating to the legality of the certificates will be passed upon for the Depositor by Cadwalader, Wickersham & Taft LLP.  Certain legal matters relating to the certificates will be passed upon for the Underwriter by Cadwalader, Wickersham & Taft LLP.  Certain federal income tax matters and other matters will be passed upon for the Depositor by Cadwalader, Wickersham & Taft LLP.
 
 
S-84

 
 
[RATINGS]
 
[The depositor expects that the offered certificates will receive credit ratings from the Hired Rating Agencies.
 
Although the Hired Rating Agencies are not contractually obligated to monitor the ratings on the offered certificates, we believe that the Hired Rating Agencies will continue to monitor the transaction while the offered certificates are outstanding. Ratings assigned on the offered certificates may be lowered, qualified or withdrawn at any time.  In addition, a rating agency not hired by the depositor to rate the transaction may assign ratings to the offered certificates that differ from the ratings provided by the Hired Rating Agencies.  A security rating is based on each rating agency’s independent evaluation of the mortgage loans and the availability of any credit enhancement for the offered certificates.  Any rating, or a change or withdrawal of any rating, by one rating agency will not necessarily correspond to a rating, or a change or a withdrawal of a rating, from any other rating agency.  See “RISK FACTORS—The Ratings of Your Certificates May Be Lowered or Withdrawn, or Your Certificates May Receive an Unsolicited Rating, Which May Adversely Effect the Liquidity and Market Value of the Your Certificates” in the accompanying prospectus.]
 
 
LEGAL INVESTMENT
 
[The Class [_____] Certificates] will constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended (“SMMEA”), so long as they are rated in one of the two highest rating categories by at least one NRSRO.  Pursuant to Section 939(e) of The Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC is required to establish creditworthiness standards in substitution for the foregoing ratings test, effective July 21, 2012; depending on the standards established by the SEC, it is possible that certain classes of the Certificates may no longer qualify as “mortgage related securities” for purposes of SMMEA as of July 21, 2012.]  [No Class of the Offered Certificates will] [The other Classes of Certificates will not] constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended (“SMMEA”)].  Irrespective of their status under SMMEA, the appropriate characterization of the Certificates under various legal investment restrictions, and the ability of investors subject to these restrictions to purchase the Certificates, may be subject to significant interpretive uncertainties.
 
Except as to the status of the Certificates under SMMEA, no representations are made as to the proper characterization of the Certificates for legal investment, financial institution regulatory, or other purposes, or as to the ability of particular investors to purchase the Certificates under applicable legal investment restrictions.  The uncertainties described above (and any unfavorable future determinations concerning the legal investment or financial institution regulatory characteristics of the Certificates) may adversely affect the liquidity and market value of the Offered Certificates.  Further, any ratings downgrade of a class of the Certificates below an “investment grade” rating by an NRSRO may affect the ability of an investor to purchase or retain that class of Certificates.  Accordingly, investors whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities should consult with their own legal advisors in determining whether and to what extent the Certificates will constitute legal investments for them or are subject to investment, capital, or other restrictions.
 
See “LEGAL INVESTMENT” in the accompanying prospectus.
 
 
CERTAIN ERISA CONSIDERATIONS
 
A fiduciary of any retirement plan or other employee benefit plan or arrangement, including individual retirement accounts and individual retirement annuities, Keogh plans and collective investment funds and separate accounts in which such plans, accounts or arrangements are invested, including insurance company general accounts, that is subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or Section 4975 of the Code (each, a “Plan”) should carefully review with its legal advisors whether the purchase or holding of Offered Certificates could give rise to a transaction that is prohibited or is not otherwise permitted either under ERISA or Section 4975 of the Code or whether there exists any statutory or administrative exemption applicable thereto.  Certain fiduciary and prohibited transaction issues arise only if the assets of the trust constitute “plan assets” for purposes of Part 4 of Title I of ERISA and Section 4975 of the Code (“Plan Assets”).  Whether the
 
 
S-85

 
 
assets of the trust will constitute Plan Assets at any time will depend on a number of factors, including the portion of any class of certificates that are held by “benefit plan investors” (as defined in U.S. Department of Labor Regulation Section 2510.3-101).
 
The U.S. Department of Labor issued an individual prohibited transaction exemption to NationsBank Corporation (predecessor in interest to Bank of America Corporation) an individual prohibited transaction exemption, Prohibited Transaction Exemption (“PTE”) 93-31, as amended by PTE 2007-5 (the “Exemption”).  This 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 such prohibited transactions pursuant to Sections 4975(a) and (b) of the Code, certain transactions, among others, relating to the servicing and operation of mortgage pools, such as the Mortgage Pool, and the purchase, sale and holding of mortgage pass-through certificates, such as the Offered Certificates, underwritten by an Exemption-Favored Party (as hereinafter defined), provided that certain conditions set forth in the Exemption are satisfied.  “Exemption-Favored Party” shall include (a) Bank of America Corporation, (b) each of the Underwriters, (c) any person directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with Bank of America Corporation (such as Merrill Lynch, Pierce, Fenner & Smith Incorporated) or any other Underwriter, and (d) any member of the underwriting syndicate or selling group of which a person described in (a), (b) or (c) is a manager or co-manager with respect to the Offered Certificates.
 
The Exemption sets forth five general conditions which must be satisfied for a transaction involving the purchase, sale and holding of an Offered Certificate to be eligible for exemptive relief thereunder.
 
●  
First, the acquisition of such Offered Certificate by a Plan must be on terms that are at least as favorable to the Plan as they would be in an arm’s-length transaction with an unrelated party.
 
●  
Second, the Offered Certificate at the time of acquisition by the Plan must be rated in one of the four highest generic rating categories by at least one of several specified credit rating agencies.
 
●  
Third, the Trustee cannot be an affiliate of any other member of the Restricted Group other than an underwriter; the “Restricted Group” consists of any Exemption-Favored Party, the Trustee, the Depositor, the Master Servicer, the Special Servicer, any sub-servicer, the mortgage loan seller, [any Swap Counterparty,]any borrower with respect to Mortgage Loans constituting more than 5% of the aggregate unamortized principal balance of the Mortgage Pool as of the date of initial issuance of the certificates and any affiliate of any of the aforementioned persons.
 
●  
Fourth, the sum of all payments made to and retained by the Exemption-Favored Parties must represent not more than reasonable compensation for underwriting the Offered Certificates; the sum of all payments made to and retained by the Depositor pursuant to the assignment of the Mortgage Loans to the trust fund must represent not more than the fair market value of such obligations; and the sum of all payments made to and retained by the Master Servicer, the Special Servicer and any sub-servicer must represent not more than reasonable compensation for such person’s services under the Pooling and Servicing Agreement and reimbursement of such person’s reasonable expenses in connection therewith.
 
●  
Fifth, the investing Plan must be an accredited investor as defined in Rule 501(a)(1) of Regulation D under the Securities Act.
 
A fiduciary of a Plan contemplating a purchase of any class of Offered Certificates in the secondary market must make its own determination that, at the time of such purchase, such certificate continues to satisfy the second and third general conditions set forth above.  A fiduciary of a Plan contemplating purchasing any class of Offered Certificates, whether in the initial issuance of such certificates or in the secondary market, must make its own determination that the first and fourth general conditions set forth above will be satisfied with respect to such certificates as of the date of such purchase.  A Plan’s authorizing fiduciary will be deemed to make a representation regarding satisfaction of the fifth general condition set forth above in connection with the purchase of any class of Offered Certificates.
 
[Further, the Exemption imposes additional requirements for purchases by Plans of classes of certificates subject to swap contracts, such as the Class A-FL Certificates, which benefit from the Swap Contract:
 
 
S-86

 
 
(a)      each swap contract must be an “eligible swap” with an “eligible swap counterparty” (as each term is defined in PTE 2000-58);
 
(b)      if a swap contract ceases to be an eligible swap and the swap contract cannot be replaced, the Trustee must notify Certificateholders that the Exemption will cease to apply with respect to the class or classes of certificates subject to such swap contract; and
 
(c)      the fiduciary of a Plan purchasing any class of certificates subject to a swap contract must be either:
 
    a “qualified professional asset manager” (as defined in PTE 84-14);
 
   an “in house asset manager” (as defined in PTE 96-23); or
 
   a Plan fiduciary with total assets under management of at least $100 million at the time of the acquisition of the certificates by the Plan.
 
The Depositor believes that the Swap Contract will meet all of the relevant requirements to be considered an “eligible swap” as of the Closing Date. However, any Plan contemplating purchase of the Class A-FL Certificates must make its own determination that all of the additional requirements of the Exemption are satisfied as of the date of such purchase and during the time that the Plan holds the Class A-FL Certificates.]
 
 The Exemption also requires that the trust meet the following requirements:
 
(i) the trust fund must consist solely of assets of the type that have been included in other investment pools;
 
(ii) certificates evidencing interests in such other investment pools must have been rated in one of the four highest categories of at least one of several specified credit rating agencies for at least one year prior to the Plan’s acquisition of an Offered Certificate; and
 
(iii) certificates evidencing interests in such other investment pools must have been purchased by investors other than Plans for at least one year prior to any Plan’s acquisition of such certificate.
 
The Depositor has confirmed to its satisfaction that such requirements have been satisfied as of the date hereof.
 
 If the general conditions of the Exemption are satisfied, the Exemption may provide an exemption from the restrictions imposed by Sections 406(a) and 407(a) of ERISA, as well as the excise taxes imposed by Sections 4975(a) and (b) of the Code by reason of Sections 4975(c)(1) (A) through (D) of the Code, in connection with
 
(i) the direct or indirect sale, exchange or transfer of Offered Certificates in the initial issuance of Offered Certificates between the Depositor or an Exemption-Favored Party and a Plan when the Depositor, an Exemption-Favored Party, the Trustee, the Master Servicer, the Special Servicer, a sub-servicer, the mortgage loan seller or a borrower is a party in interest (within the meaning of Section 3(14) of ERISA) or a disqualified person (within the meaning of Section 4975(e)(2) of the Code) (a “Party in Interest”) with respect to the investing Plan,
 
(ii) the direct or indirect acquisition or disposition in the secondary market of the Offered Certificates by a Plan and
 
(iii) the continued holding of the Offered Certificates by a Plan.  However, no exemption is provided from the restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of an Offered Certificate on behalf of an Excluded Plan (as defined in the next sentence) by any person who has discretionary authority or renders investment advice with respect to the assets of such Excluded Plan.
 
For purposes hereof, an “Excluded Plan” is a Plan sponsored by any member of the Restricted Group.
 
 Moreover, if the general conditions of the Exemption, as well as certain other specific conditions set forth in the Exemption, are satisfied, the Exemption may also provide an exemption from the restrictions imposed by Sections
 
 
S-87

 
 
406(b)(1) and (b)(2) of ERISA, and the excise taxes imposed by Sections 4975(a) and (b) of the Code by reason of Section 4975(c)(1)(E) of the Code, in connection with
 
(1) the direct or indirect sale, exchange or transfer of the Offered Certificates in the initial issuance of the Offered Certificates between the Depositor or an Exemption-Favored Party and a Plan when the person who has discretionary authority or renders investment advice with respect to the investment of Plan assets in such certificates is
 
(a) a borrower with respect to 5% or less of the fair market value of the Mortgage Pool or
 
(b) an affiliate of such a person,
 
(2) the direct or indirect acquisition or disposition in the secondary market of Offered Certificates by a Plan and
 
(3) the continued holding of Offered Certificates by a Plan.
 
Further, if the general conditions of the Exemption, as well as certain other conditions set forth in the Exemption, are satisfied, the Exemption may provide an exemption from the restrictions imposed by Sections 406(a), 406(b) and 407(a) of ERISA, and the excise taxes imposed by Sections 4975(a) and (b) of the Code by reason of Section 4975(c) of the Code, for transactions in connection with the servicing, management and operation of the Mortgage Pool.
 
Lastly, if the general conditions of the Exemption are satisfied, the Exemption also may provide an exemption from the restrictions imposed by Sections 406(a) and 407(a) of ERISA, and the excise taxes imposed by Sections 4975(a) and (b) of the Code by reason of Sections 4975(c)(1) (A) through (D) of the Code, if such restrictions are deemed to otherwise apply merely because a person is deemed to be a Party in Interest with respect to an investing Plan by virtue of providing services to the Plan (or by virtue of having certain specified relationships to such a person) solely as a result of the Plan’s ownership of Offered Certificates.
 
 Before purchasing an Offered Certificate, a fiduciary of a Plan should itself confirm that
 
(i) the Offered Certificates constitute “securities” for purposes of the Exemption and
 
(ii) the specific and general conditions and the other requirements set forth in the Exemption would be satisfied.  In addition to making its own determination as to the availability of the exemptive relief provided in the Exemption, the Plan fiduciary should consider the availability of any other prohibited transaction class exemptions.
 
See “CERTAIN ERISA CONSIDERATIONS” in the accompanying prospectus.  There can be no assurance that any such class exemption will apply with respect to any particular Plan investment in the Offered Certificates or, even if it were deemed to apply, that any exemption would apply to all transactions that may occur in connection with such investment.
 
A governmental plan as defined in Section 3(32) of ERISA is not subject to Title I of ERISA or Section 4975 of the Code.  However, such a governmental plan may be subject to a federal, state or local law which is, to a material extent, similar to the foregoing provisions of ERISA or the Code.  A fiduciary of a governmental plan should make its own determination as to the need for and the availability of any exemptive relief such a similar law.
 
Any Plan fiduciary considering whether to purchase an Offered Certificate on behalf of a Plan should consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and the Code to such investment.
 
The sale of Offered Certificates to a Plan is in no respect a representation by the Depositor or the Underwriters that this investment meets all relevant legal requirements with respect to investments by Plans generally or by any particular Plan, or that this investment is appropriate for Plans generally or for any particular Plan.
 
 
S-88

 
 
GLOSSARY OF PRINCIPAL DEFINITIONS
 
The following capitalized terms will have the respective meanings assigned to them in this “GLOSSARY OF PRINCIPAL DEFINITIONS” Section whenever they are used in this prospectus supplement.
 
Annual Debt Service” means the amount derived by multiplying the Monthly Payment set forth for each Mortgage Loan in ANNEX A to this prospectus supplement by twelve.
 
Appraisal Value” means, for any Mortgaged Property, the appraiser’s value as stated in the related appraisal available to the Depositor as of the date specified on ANNEX A, which may be an “as is” or “as stabilized” value.
 
ARM Loans” means mortgage loans that are subject to adjustment of their mortgage rate on specified dates.
 
Balloon Payments” means certain payments under Mortgage Loans that provide monthly payments of principal based on amortization schedules significantly longer than the remaining terms of such mortgage loans, thereby leaving substantial principal amounts due and payable on their respective maturity dates, unless prepaid prior to that Mortgage Loan’s maturity date.
 
Cash Flow” means with respect to any Mortgaged Property, the total cash flow available for Annual Debt Service on the related Mortgage Loan, generally calculated as the excess of Revenues over Expenses, capital expenditures and tenant improvements and leasing commissions.
 
(i)             “Revenues” generally consist of certain revenues received in respect of a Mortgaged Property, including, for example, (A) for the multifamily Mortgaged Properties, rental and other revenues; (B) for the Commercial Mortgaged Properties, base rent (less mark to market adjustments in some cases), percentage rent, expense reimbursements and other revenues; and (C) for hotel Mortgaged Properties, guest room rates, food and beverage charges, telephone charges and other revenues.
 
(ii)            “Expenses” generally consist of all expenses incurred for a Mortgaged Property, including for example, salaries and wages, the costs or fees of utilities, repairs and maintenance, marketing, insurance, management, landscaping, security (if provided at the Mortgaged Property) and the amount of real estate taxes, general and administrative expenses, ground lease payments, and other costs but without any deductions for debt service, depreciation and amortization or capital expenditures therefor.  In the case of hotel Mortgaged Properties, Expenses include, for example, expenses relating to guest rooms (hotels only), food and beverage costs, telephone bills, and rental and other expenses, and such operating expenses as general and administrative, marketing and franchise fees.
 
In certain cases, Full Year Cash Flow, Most Recent Cash Flow and/or U/W Cash Flow have been adjusted by removing certain non-recurring expenses and revenue or by certain other normalizations.  Such Cash Flow does not necessarily reflect accrual of certain costs such as capital expenditures and leasing commissions and does not reflect non-cash items such as depreciation or amortization.  In some cases, capital expenditures and non-recurring items may have been treated by a borrower as an expense but were deducted from Most Recent Expenses, Full Year Expenses or U/W Expenses to reflect normalized Most Recent Cash Flow, Full Year Cash Flow or U/W Cash Flow, as the case may be.  The Depositor has not made any attempt to verify the accuracy of any information provided by each borrower or to reflect changes that may have occurred since the date of the information provided by each borrower for the related Mortgaged Property.  Such Cash Flow was not necessarily determined in accordance with GAAP.  Such Cash Flow is not a substitute for net income determined in accordance with GAAP as a measure of the results of a Mortgaged Property’s operations or a substitute for cash flows from operating activities determined in accordance with GAAP as a measure of liquidity.  Moreover, in certain cases such Cash Flow may reflect partial year annualizations.
 
Certificate Owner” means a beneficial owner of an offered certificate.
 
Collateral Substitution Deposit” means an amount that will be sufficient to (a) purchase U.S. government obligations providing for payments on or prior to, but as close as possible to, all successive scheduled payment dates
 
 
S-89

 
 
 
from the Release Date to and including the related Maturity Date or Anticipated Repayment Date (or, in certain cases, the commencement of the related Open Period) in amounts sufficient to pay the scheduled payments due on such dates under such Mortgage Loan or the defeased amount thereof in the case of a partial defeasance and (b) pay any costs and expenses incurred in connection with the purchase of such U.S. government obligations.
 
Controlling Class” means, as of any date of determination, the outstanding class of Sequential Pay Certificates with the lowest payment priority that has a then outstanding certificate balance at least equal to 25% of its initial certificate balance (or, if no class of Sequential Pay Certificates has a certificate balance at least equal to 25% of its initial certificate balance, then the Controlling Class will be the outstanding class of Sequential Pay Certificates with the then largest outstanding class principal balance).  The Controlling Class as of the Delivery Date will be the Class C Certificates.
 
Controlling Class Certificateholder” means each Holder (or Certificate Owner, if applicable) of a certificate of the Controlling Class as certified to the Trustee from time to time by such Holder (or Certificate Owner).
 
Debt Service Coverage Ratio” means for any Mortgage Loan is the ratio of —
 
●  
Net Operating Income produced by the related Mortgaged Property for the period (annualized if the period was less than one year) covered by the most recent operating statement available to the depositor to
 
●  
the amount of the monthly payment in effect as of the Cut-off Date multiplied by 12.
 
Defeasance Lockout Period” or “DLP” means the time after the specified period, which period is at least two years from the Delivery Date, during which the related borrower may obtain the release of a Mortgaged Property from the lien of the related Mortgage by exercising its Defeasance Option.
 
Defeasance Option” means the option of the related borrower (provided no event of default exists under the related Mortgage Loan and other conditions are satisfied as described in this prospectus supplement) to obtain a release of a Mortgaged Property from the lien of the related Mortgage during the Defeasance Lockout Period, which is at least two years from the Delivery Date.
 
Definitive Class A Certificate” means a Class A Certificate in fully registered, certificated form.
 
Directing Certificateholder” means the Controlling Class Certificateholder (or a representative selected by such Controlling Class Certificateholder to act on its behalf) selected by the majority certificateholder of the Controlling Class, as certified by the Trustee from time to time; provided, however, that (i) absent such selection, or (ii) until a Directing Certificateholder is so selected, or (iii) upon receipt of a notice from a majority of the Controlling Class, by certificate balance, that a Directing Certificateholder is no longer designated, the Controlling Class Certificateholder that owns the largest aggregate certificate balance of the Controlling Class will be the Directing Certificateholder.
 
DTC” means The Depository Trust Company.
 
Due Date” means the date on which a monthly payment on a mortgage loan is first due.
 
ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
Fixed Rate Loan” means those mortgage loans which bear interest at a fixed mortgage rate.
 
Full Year Cash Flow” means, with respect to any Mortgaged Property, the Cash Flow derived therefrom that was available for debt service, calculated as Full Year Revenues less Full Year Expenses, Full Year capital expenditures and Full Year tenant improvements and leasing commissions.  See also “Cash Flow” above.
 
(i)            “Full Year Revenues” are the Revenues received (or annualized or estimated in certain cases) in respect of a Mortgaged Property for the 12 month period ended as of the Full Year End Date, based upon the latest available annual operating statement and other information furnished by the borrower for its most recently ended fiscal year.
 
 
S-90

 
 
(ii)            “Full Year Expenses” are the Expenses incurred (or annualized or estimated in certain cases) for a Mortgaged Property for the 12 month period ended as of the Full Year End Date, based upon the latest available annual operating statement and other information furnished by the borrower for its most recently ended fiscal year.  “Index” means the base index to which a fixed number of basis points are added in connection with ARM loans.
 
Full Year End Date” means, with respect to each Mortgage Loan, the date indicated on ANNEX A to this prospectus supplement as the “Full Year End Date” with respect to such Mortgage Loan, which date is generally the end date with respect to the period covered by the latest available annual operating statement provided by the related borrower.
 
Initial Pool Balance” means the initial aggregate principal balance of the Mortgage Loans.
 
Interest Rate Adjustment Date” means the date upon which the interest rate is adjusted in connection with an ARM Loan.
 
LIBOR” means, with respect to the Class A-FL certificates and each interest accrual period, the rate for deposits in U.S. dollars, for a period equal to one month that appears on the Reuters Screen LIBOR01 Page as of 11:00 a.m., London time, on the related LIBOR Determination Date.  If such rate does not appear on Reuters Screen LIBOR01 Page, the rate 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 four major banks in the London interbank market selected by the certificate administrator to provide such 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 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 certificate administrator will request the principal London office of each of those four banks to provide a quotation of its rate.  If at least two such quotations are provided, the rate for that interest accrual period will be the arithmetic mean of the quotations.  If fewer than two quotations are provided as requested, the rate for that interest accrual period will be the arithmetic mean of the rates quoted by major banks in New York City selected by the certificate administrator, at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date with respect to such interest accrual period for loans in U.S. dollars to leading European banks for a period equal to one month, commencing on the first day of 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 certificate administrator will determine LIBOR for each interest accrual period and the determination of LIBOR by the certificate administrator will be binding absent manifest error.  LIBOR for the initial interest accrual period will be set two LIBOR Business Days before the Closing Date.
 
LIBOR Business Day” means any day on which commercial banks are open for international business (including dealings in U.S. dollar deposits) in London, England.
 
LIBOR Determination Date” means, with respect to the Class A-FL certificates, (i) with respect to the initial interest accrual period, the date that is two (2) LIBOR Business Days prior to the Closing Date, and (ii) with respect to each interest accrual period thereafter, the date that is two (2) LIBOR Business Days prior to the beginning of the related interest accrual period.
 
Lockout Period” or “LOP” means a period under the terms of a Mortgage Loan during which voluntary principal payments are prohibited.
 
LTV Ratio” means LTV Ratio for any Mortgage Loan, as of any date of determination, is a fraction, expressed as a percentage—
 
●  
the numerator of which is the original principal balance of such Mortgage Loan or the balance as of the Cut-off Date of such Mortgage Loan, as applicable, and
 
●  
the denominator of which is the appraised value of the related Mortgaged Property as determined by an appraisal thereof obtained in connection with the origination of such Mortgage Loan.
 
 
S-91

 
 
Mortgage” means a mortgage, deed of trust or other similar security instrument securing a Mortgaged Property.
 
Mortgage Loan” means the conventional, multifamily and commercial mortgage loans primarily comprising the trust fund.
 
Mortgage Note” means the promissory note evidencing the Mortgage Loan.
 
Mortgaged Property” means a commercial or multifamily rental property that has a Mortgage that creates a first mortgage lien.
 
Most Recent Cash Flow” means, with respect to any Mortgaged Property for the 12 month period ended on the Most Recent End Date, the Cash Flow derived therefrom that was available for debt service, calculated as Most Recent Revenues less Most Recent Expenses, Most Recent capital expenditures and Most Recent tenant improvements and leasing commissions.  See also “Cash Flow”.
 
(i)            “Most Recent Revenues” are the Revenues received (or annualized or estimated in certain cases) in respect of a Mortgaged Property for the 12 month period ended on the Most Recent End Date, based upon operating statements and other information furnished by the related borrower.
 
(ii)            “Most Recent Expenses” are the Expenses incurred (or annualized or estimated in certain cases) for a Mortgaged Property for the 12 month period ended on the Most Recent End Date, based upon operating statements and other information furnished by the related borrower.  “Net Mortgage Rate” means mortgage rate in effect for a Mortgage Loan reduced by [ ] basis points.
 
Most Recent End Date” means, with respect to any Mortgage Loan, the date indicated on ANNEX A to this prospectus supplement as the “Most Recent End Date” with respect to such Mortgage Loan, which date is generally the end date with respect to the period covered by the latest available operating statement provided by the related borrower.
 
Net Operating Income” means—
 
●  
the revenue derived from the use and operation of a Mortgaged Property (consisting primarily of rental income and deposit forfeitures);
 
●  
less operating expenses (such as utilities, general administrative expenses, management fees, advertising, repairs and maintenance); and
 
●  
less fixed expenses (such as insurance and real estate taxes).
 
Net Operating Income generally does not reflect capital expenditures.
 
Non-Specially Serviced Mortgage Loan” means a Mortgage Loan that is not a Specially Serviced Mortgage Loan.
 
Open Period” means a period under the terms of a Mortgage Loan during which voluntary principal prepayments may be made without an accompanying Prepayment Premium.
 
Prepayment Premium” means a premium, charge (including, but not limited to, yield maintenance charges) or other fee due under the terms of a Mortgage Loan in relation to a voluntary principal prepayment.
 
Prepayment Premium Period” means a period under the terms of a Mortgage Loan during which any voluntary principal prepayment is to be accompanied by a Prepayment Premium.
 
Release Date” means the Due Date upon which the related borrower can exercise its Defeasance Option.
 
 
S-92

 
 
Servicing Transfer Event” means, with respect to any Mortgage Loan, any of the following events:  [Identification of the events, e.g., the failure of the related borrower to make a required payment that continues for a specified period of time, that will cause such Mortgage Loan to be serviced by the Special Servicer.]
 
Specially Serviced Mortgage Loan” means any Mortgage Loan as to which a Servicing Transfer Event has occurred.
 
U/W Cash Flow”, “Underwritten Cash Flow” or “Underwriting Cash Flow” means, with respect to any Mortgaged Property, the Cash Flow (as defined in this prospectus supplement) derived therefrom that was underwritten as available for debt service, calculated as U/W Revenues net of U/W Expenses, U/W Reserves and U/W tenant improvements and leasing commissions. See also the definition of “Cash Flow” in this prospectus supplement.
 
 
U/W Net Cash Flow” or “Underwritten Net Cash Flow” means, with respect to any Mortgaged Property, the Cash Flow (as defined above) derived therefrom that was underwritten as available for debt service, calculated as U/W Revenues less U/W Expenses, U/W Reserves and U/W tenant improvements and leasing commissions.
 
(i)            “U/W Revenues” are the anticipated Revenues in respect of a Mortgaged Property, generally determined by means of an estimate made at the origination of such Mortgage Loan or, as in some instances, as have been subsequently updated.  U/W Revenues have generally been calculated (a) assuming that the occupancy rate for the Mortgaged Property was consistent with the Mortgaged Property’s current or historical rate, or the relevant market rate, if such rate was less than the occupancy rate reflected in the most recent rent roll or operating statements, as the case may be, furnished by the related borrower, and (b) in the case of retail, office, industrial and warehouse Mortgaged Properties, assuming a level of reimbursements from tenants consistent with the terms of the related leases or historical trends at the Mortgaged Property, and in certain cases, assuming that a specified percentage of rent will become defaulted or otherwise uncollectible.  In addition, in the case of retail, office, industrial and warehouse Mortgaged Properties, upward adjustments may have been made with respect to such revenues to account for all or a portion of the rents provided for under any new leases scheduled to take effect later in the year or anticipated later in the Mortgage Loan term, or for future contractual rent steps. Also, in the case of certain Mortgaged Properties that are operated as a hotel property and are subject to an operating lease with a single operator, U/W Revenues were calculated based on revenues received by the operator rather than rental payments received by the related borrower under the operating lease.
 
(ii)            “U/W Expenses” are the anticipated Expenses in respect of a Mortgaged Property, generally determined by means of an estimate made at the origination of such Mortgage Loan or as in some instances as may be updated.  U/W Expenses were generally assumed to be equal to historical annual expenses reflected in the operating statements and other information furnished by the borrower, except that such expenses were generally modified by (a) if there was no management fee or a below market management fee, assuming that a management fee was payable with respect to the Mortgaged Property in an amount approximately equal to a percentage of assumed gross revenues for the year, (b) adjusting certain historical expense items upwards or downwards to amounts that reflect industry norms for the particular type of property and/or taking into consideration material changes in the operating position of the related Mortgaged Property (such as newly signed leases and market data) and (c) adjusting for non-recurring items (such as capital expenditures) and tenant improvement and leasing commissions, if applicable (in the case of certain retail, office, industrial and warehouse Mortgaged Properties, adjustments may have been made to account for tenant improvements and leasing commissions at costs consistent with historical trends or prevailing market conditions and, in other cases, operating expenses did not include such costs).
 
Actual conditions at the Mortgaged Properties will differ, and may differ substantially, from the assumed conditions used in calculating U/W Cash Flow. In particular, the assumptions regarding tenant vacancies, tenant improvements and leasing commissions, future rental rates, future expenses and other conditions if and to the extent used in calculating U/W Cash Flow for a Mortgaged Property, may differ substantially from actual conditions with respect to such Mortgaged Property. We cannot assure you that the actual costs of reletting and capital improvements will not exceed those estimated or assumed in connection with the origination or purchase of the Mortgage Loans.
 
In most cases, U/W Cash Flow describes the cash flow available after deductions for capital expenditures such as tenant improvements, leasing commissions and structural reserves. In those cases where such “reserves” were so included, no cash may have been actually escrowed. No representation is made as to the future net cash flow of the properties, nor is U/W Cash Flow set forth in this prospectus supplement intended to represent such future net cash
 
 
S-93

 
 
flow. In addition, U/W Cash Flow may reflect certain stabilized calculations, including amounts payable by a borrower principal for unoccupied space under a master lease or future rent steps.
 
(iii) “U/W NOI” means, with respect to any Mortgaged Property, the Cash Flow (as defined in this prospectus supplement) derived therefrom that was underwritten as available for debt service, calculated as U/W Revenues net of U/W Expenses. See also the definition of “Cash Flow” in this prospectus supplement.
 
U/W DSCR”, “Underwritten DSCR”, “Underwritten Debt Service Coverage Ratio”, “Underwriting DSCR” or “Underwriting Debt Service Coverage Ratio” means with respect to any Mortgage Loan (a) the U/W Cash Flow for the related Mortgage Loan divided by (b) the Annual Debt Service for such Mortgage Loan, except: [Identify any exceptions].
 
U/W Replacement Reserves” means, with respect to any Mortgaged Property, the aggregate amount of on-going reserves (generally for capital improvements and replacements) assumed to be maintained with respect to such Mortgaged Property. In each case, actual reserves, if any, may be less than the amount of U/W Reserves.
 
U/W Replacement Reserves Per Unit” means, with respect to any Mortgaged Property, (a) the related U/W Reserves, divided by (b) the number of Units, Keys, SF, Leasable Square Feet, Spaces, Acres or Pads, as applicable.
 

 
S-94

 
 
ANNEX A
 
Individual Mortgage Loan Information
 
Fold-out chart containing the following information for each mortgage loan:
 
Sequence
Loan Number
Loan Seller
Property Name
Property Address
County
City
State
Zip Code
Property Type
Property Subtype
Original Balance
Cut-off Date Balance
Maturity Date Balance
Loan Type
Mortgage Rate
Administrative Fee Rate
Sub-Servicing Fee Rate
Net Mortgage Rate
Note Date
First Payment Date
Interest Accrual Method
Monthly Payment
Original Term to Maturity (months)
Original Amortization Term (months)
Interest Only Period
Seasoning (months)
Remaining Term to Maturity (months)
Maturity Date
Cross-Collateralized Loans
Related Loans
Prepayment Penalty Description (payments)
Yield Maintenance Type
Appraisal Value
Appraisal Date
Cut-off Date LTV Ratio
Balloon LTV Ratio
Year Built/Renovated
Total Units/SF/Pads/Rooms
Units/SF/Pads/Rooms
Net Rentable Area (SF)
Loan Balance Per Unit/SF/Pad/Room
Occupancy Percent
Occupancy as of Date
 
 
A-1

 
 
U/W Revenues [*]
U/W Expenses [*]
U/W DSCR [*]
U/W Net Cash Flow [*]
 
U/W Replacement Reserves
U/W Replacement Reserves Per Unit/SF/Pad/Room
Most Recent Statement Type
Most Recent End Date
Most Recent Net Operating Income [**]
Full Year End Date
Full Year Net Operating Income [**]
 
Largest Tenant
Largest Tenant Leased SF
Largest Tenant % of Total SF
Largest Tenant Lease Expiration
Second Largest Tenant
Second Largest Tenant Leased SF
Second Largest Tenant % of Total SF
Second Largest Tenant Lease Expiration
Third Largest Tenant
Third Largest Tenant Leased SF
Third Largest Tenant % of Total SF
Third Largest Tenant Lease Expiration
% of Pool
 
[*] These “U/W” items, together with the definition of “U/W Net Cash Flow” in the GLOSSARY OF PRINCIPAL DEFINITIONS, are intended to provide the information with respect to the net cash flow and the components thereof required by Item 1111(b)(9)(i)(B) of Regulation AB.
 
[**] These “Net Operating Income” items, together with the definition of “Net Operating Income” in the GLOSSARY OF PRINCIPAL DEFINITIONS, are intended to provide the information with respect to net operating income and the components thereof.
 
 
A-2

 
 
ANNEX B
 
Summary Mortgage Loan Information
 
Mortgage Rates as of the Cut-off Date
 
 
Range of Mortgage Rates(%)
 
 
Number of
Mortgage
Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
             
             
             
             
             
Total
           
 
Weighted Average
Mortgage Rate (All Mortgage Loans):
 [______]% per annum
Weighted Average
Mortgage Rate (ARM Loans): [____]% per annum
Weighted Average
Mortgage Rate (Fixed Rate Loans): [_____]% per annum
 
Gross Margins
 
 
Range of Mortgage Rates(%)
 
 
Number of
ARM Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
Total
           
 
Weighted Average
Gross Margin: [____]% 
 
Frequency of Adjustments to Mortgage Rates and Monthly Payments for the ARM Loans
 
   
 
Mortgage Rate
Adjustment
Frequency
 
 
Monthly Payment Adjustment Frequency
 
 
Number of
Mortgage
Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by Aggregate Cut-off Date Balance
                     
                     
Total
                   
 
 
 
B-1

 
 
Maximum Lifetime Mortgage Rates for the ARM Loans
 
 
Range of Maximum
Lifetime Mortgage Rates (%)
 
 
Number of
ARM Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
Total
           
 
Weighted Average Maximum Lifetime
Mortgage Rate (ARM Loans): [_____]% per annum (A)
_____________________
 
(A)
This calculation does not include the [__________] ARM Loans without maximum lifetime Mortgage Rates.
 
Minimum Lifetime Mortgage Rates for the ARM Loans
 
 
Range of Minimum
Lifetime Mortgage Rates (%)
 
 
Number of
ARM Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
Total
           
 
Weighted Average Minimum Lifetime
Mortgage Rate (ARM Loans): [_____]% per annum (A)
_____________________
 
(A)
This calculation does not include the [__________] ARM Loans without minimum lifetime Mortgage Rates.
 
Maximum Annual Mortgage Rates for the ARM Loans
 
 
Range of Maximum
Lifetime Mortgage Rates (%)
 
 
Number of
ARM Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
             
             
             
Total
           
 
Weighted Average Maximum Annual
Mortgage Rate (ARM Loans): [_____]% per annum (A)
_____________________
 
(A)
This calculation does not include the [__________] ARM Loans without maximum annual Mortgage Rates.
 
 
B-2

 
 
Minimum Annual Mortgage Rates for the ARM Loans
 
 
Range of Minimum
Lifetime Mortgage Rates (%)
 
 
Number of
ARM Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
             
             
             
Total
           
 
Weighted Average Minimum Annual
Mortgage Rate (ARM Loans): [_____]% per annum (A)
_____________________
 
(A)
This calculation does not include the [__________] ARM Loans without maximum annual Mortgage Rates.
 
Cut-off Date Balances
 
 
Cut-off Date
Balance Range ($)
 
 
Number of
Mortgage
Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
             
             
Total
           
 
Average Cut-off Date
Balance (All Mortgage
Loans): $[____________]
 
Average Cut-off Date
Balance (ARM Loans): $[____________]
 
Average Cut-off Date
Balance (Fixed Rate Loans): $[____________]
 
Types of Mortgaged Properties
 
 
Property Type
 
 
Number of
Mortgage Loans
 
 
Aggregate
Cut-off
Date Balance
 
 
Aggregate
Cut-off
Balance
 
 
Percent by Aggregate
Cut-off Date Balance
 
 
Weighted Average
Occupancy Rate
Multifamily
                   
[other property types]
                   
Total
                   
 
 
B-3

 
 
Original Term to Stated Maturity (in Months)
 
 
Range in Original
Terms (in Months)
 
 
Number of
Mortgage
Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
Total
           
 
Weighted Average Original
Term to Stated Maturity
(All Mortgage Loans): [___] months
 
Weighted Average Original
Term to Stated Maturity
(ARM Loans): [___] months
 
Weighted Average Original
Term to Stated Maturity
(Fixed Rate Loans): [___] months
 
Remaining Term to Stated Maturity (in Months)
 
 
as of the Cut-off Date
 
 
Range in Remaining
Terms (in Months)
 
 
Number of
Mortgage
Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
Total
           
 
Weighted Average Remaining
Term to Stated Maturity
(All Mortgage Loans): [___] months
 
Weighted Average Remaining
Term to Stated Maturity
(ARM Loans): [___] months
 
Weighted Average Remaining
Term to Stated Maturity
(Fixed Rate Loans): [___] months
 
 
 
B-4

 
 
 
Original Amortization Term
 
 
Original Amortization Term (months)
 
 
Number of
Mortgage
Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
             
Total
           
 
(1)
For Mortgage Loans which accrue interest on the basis of actual days elapsed during each calendar month and a 360-day year, the amortization term is the term in which the loan would amortize if interest is paid on the basis of a 30-day month and a 360-day year.  The actual amortization term would be longer.

 
Remaining Stated Amortization Terms
 

 
Remaining Stated Amortization Terms (months)
 
 
Number of
Mortgage
Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
             
Total
           

 
Year of Origination
 
 
Year
 
 
Number of
Mortgage
Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
             
Total
           
 
 
Year of Scheduled Maturity
 
 
Year
 
 
Number of
Mortgage
Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
             
Total
           
 
The following table was prepared using operating statements obtained from the respective mortgagors or the related property managers.  In each case, the information contained in such operating statements was unaudited, and the Depositor has made no attempt to verify its accuracy.  In the case of [_____] Mortgage Loans ([____] ARM Loans and [___] Fixed Rate Loans), representing [__]% of the Initial Pool Balance, operating statements could not be obtained, and accordingly, Debt Service Coverage Ratios for those Mortgage Loans were not calculated.  The last day of the period (which may not correspond to the end of the calendar year most recent to the Cut-off Date)
 
 
B-5

 
 
covered by each operating statement from which a Debt Service Coverage Ratio was calculated is set forth in ANNEX A with respect to the related Mortgage Loan.
 
 
Debt Service Coverage Ratios(A)
 
 
Range of
Debt Service
Coverage Ratios
 
 
Number of
Mortgage
Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
Not Calculated (B)
           
Total
           
 
Weighted Average
 
Debt Service Coverage
Ratio (All Mortgage Loans): [______]x(C)
 
Weighted Average
 
Debt Service Coverage
Ratio (ARM Loans): [______]x(D)
 
Weighted Average
 
Debt Service Coverage
Ratio (Fixed Rate Loans): [______](E)
____________________
 
(A)
The Debt Service Coverage Ratios are based on the most recently available operating statements obtained from the respective mortgagors or the related property managers.
 
(B)
The Debt Service Coverage Ratios for these Mortgage Loans were not calculated due to a lack of available operating statements.
 
(C)
This calculation does not include the [________] Mortgage Loans as to which Debt Service Coverage Ratios were not calculated.
 
(D)
This calculation does not include the [________] ARM Loans as to which Debt Service Coverage Ratios were not calculated.
 
(E)
This calculation does not include the [________] Fixed Rate Loans as to which Debt Service Coverage Ratios were not calculated.
 
The following tables set forth the range of LTV Ratios of the Mortgage Loans at origination and the Cut-off Date.
 
Because it is based on the value of a Mortgaged Property determined as of loan origination, the information set forth in the table below is not necessarily a reliable measure of the related borrower’s current equity in each Mortgaged Property.  In a declining real estate market, the fair market value of a Mortgaged Property could have decreased from the value determined at origination, and the current actual loan-to-value ratio of a Mortgage Loan may be higher than even its LTV Ratio at origination, notwithstanding taking into account amortization since origination.
 
 
B-6

 
 
LTV Ratios at Maturity
 
 
Range of Original
LTV Ratios(%)
 
 
Number of
Mortgage
Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
             
             
Total
           
 
Weighted Average Original LTV
 
Ratio (All Mortgage Loans):
 
[_____]%
 
Weighted Average Original LTV
 
Ratio (ARM Loans): [_____]%
 
Weighted Average Original LTV
 
Ratio (Fixed Rate Loans):
 
[_____]%
 
 
LTV Ratios at Cut-off Date
 
 
Range of LTV Ratios(%)
as of Cut-off Date
 
 
Number of
Mortgage
Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
             
             
Total
           
 
Weighted Average LTV Ratio as
 
of Cut-off Date (All
 
Mortgage Loans):  [_____]%
 
Weighted Average LTV Ratio as
 
of Cut-off Date (ARM
 
Loans):  [_____]%
 
Weighted Average LTV Ratio as
 
of Cut-off Date (Fixed Rate
 
Loans):  [_____]%
 
The Mortgage Loans are secured by Mortgaged Properties located in [_____] different states.  The following table sets forth the states in which the Mortgaged Properties are located:
 
 
 
B-7

 
Geographic Distribution
 
 
State
 
 
Number of
Mortgage
Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
Total
           
 
 
Occupancy Rates
 
 
Range of
Occupancy Rates(A)
 
 
Number of
Mortgage
Loans
 
 
Aggregate Cut-off
Date Balance
 
 
Percent by
Aggregate Cut-off
Date Balance
             
             
             
             
             
Total
           
 
Weighted Average Occupancy Rate (All Mortgage
 
 Loans)(A):  [_____]%
 
Weighted Average Occupancy Rate (ARM
 
 Loans)(A):  [_____]%
 
Weighted Average Occupancy Rate (Fixed Rate
 
Loans)(A):  [_____]%

 
(A)
Physical occupancy rates calculated based on rent rolls provided by the respective Mortgagors or related property managers as of a date no more than [___] months prior to the Cut-off Date.
 
Prepayment Restrictions in Effect as of the Cut-off Date
 
                   
 
Weighted Averages
 
Prepayment
Restrictions
 
 
Number
of Loans
 
 
Aggregate
Cut-off
Date
Balance
 
 
% by Aggregate
Cut-off
Date
Balance
 
 
Cum. % of
Initial
Pool
Rate
 
 
Mortgage Rate
 
 
Stated
Remaining Term (Mo.)
 
 
Remaining
Amount.
Term (Mo.)
 
 
DSCR
 
 
Implied
DSR
     
 
Indicative
Cut-off
Date
LTV
Locked Out (A)
                                       
Yield Maintenance (B)
                                       
Declining
Percentage Premium
                                       
____% Premium
                                       
____% Premium
                                       
No Prepayment
       Restrictions
                                       
TOTALS
                                       
____________________
 
(A)
The weighted average term to the expiration of the Lockout periods is [___] years.  [_____] of the Mortgage Loans within their Lockout periods are subject to declining percentage Prepayment Premiums after the expiration of their Lockout periods; the remaining Mortgage Loans are subject to a yield maintenance-type Prepayment Premium following such expiration.
 
(B)
All Mortgage Loans subject to yield maintenance-type Prepayment Premiums remain subject to payment of the Prepayment Premium until at least [___] months prior to maturity.
 
 
B-8

 
 


 

You should rely on the information contained or incorporated by reference in this prospectus supplement and in the accompanying prospectus.  We are not offering the certificates in any state where the offer is not permitted. We do not claim the accuracy of the information in this prospectus supplement and the accompanying prospectus as of any date other than the dates stated on their respective covers.
 
TABLE OF CONTENTS
 
Prospectus Supplement
 
 
 
Executive Summary
 vi
Summary of Prospectus Supplement
   1
The Certificates
   6
Risk Factors
 13
Description of the Mortgage Pool
 36
The Sponsor
 50
The Depositor
 50
The Issuing Entity
 51
The Trustee
 51
[Significant Originators and Obligors]
 52
The Servicers
 52
Compensation and Expenses
 53
[Description of the Swap Contract]
 56
Servicing of the Mortgage Loans
 58
Description of the Certificates
 61
Yield and Maturity Considerations
 73
[Certain Legal Aspects of the Mortgage Loans]
 81
Material Federal Income Tax Consequences
 82
Method of Distribution
 84
Legal Matters
 84
[Ratings]
 85
Legal Investment
 85
Certain ERISA Considerations
 85
Glossary of Principal Definitions
 89
 
Prospectus
SUMMARY OF PROSPECTUS
   1
RISK FACTORS
   9
PROSPECTUS SUPPLEMENT
  41
CAPITALIZED TERMS USED IN THIS PROSPECTUS
  41
DESCRIPTION OF THE TRUST FUNDS
  42
YIELD AND MATURITY CONSIDERATIONS
  48
BANK OF AMERICA, NATIONAL ASSOCIATION,
 
     AS SPONSOR
  52
THE DEPOSITOR
  54
THE MORTGAGE LOAN PROGRAM
  54
BANK OF AMERICA, NATIONAL ASSOCIATION, AS SERVICER
  58
DESCRIPTION OF THE CERTIFICATES
  61
THE POOLING AND SERVICING AGREEMENTS
  69
DESCRIPTION OF CREDIT SUPPORT
  86
CASH FLOW AGREEMENTS
  91
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
  92
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
104
STATE AND OTHER TAX CONSEQUENCES
130
CERTAIN ERISA CONSIDERATIONS
130
LEGAL INVESTMENT
132
USE OF PROCEEDS
133
METHOD OF DISTRIBUTION
133
LEGAL MATTERS
134
RATING
134
AVAILABLE INFORMATION
135
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
135
GLOSSARY
136
 
 
Until [______] [_], 201[_], all dealers that buy, sell or trade the offered certificates, whether or not participating in this offering, may be required to deliver a prospectus supplement and the accompanying prospectus.  This is in addition to the dealers’ obligation to deliver a prospectus supplement and the accompanying prospectus, when acting as underwriters and with respect to their unsold allotments or subscriptions.
 
 
 
 

 
 
 
 
$[_________]
(Approximate)
 
 
Banc of America Merrill Lynch
Commercial Mortgage Trust
201[_]-[_]
 
 
 
 
Banc of America Merrill Lynch
Commercial Mortgage Inc.,
Mortgage Pass-Through
Certificates,
Series 201[_]-[_]
 
 
 
 
Class A Certificates  $[___________]
[Class A-FL Certificates  $[___________]]
Class B Certificates  $[___________]
[Class X Certificates  $[___________]]
 
 
___________________________

PROSPECTUS SUPPLEMENT
___________________________
 
 
 
Bank of America Merrill Lynch
 
 
 
 
 
[__________] [__], 201[_]
 
 
 
 


 
 
 
 
 
 
VERSION 1
 
Prospectus
 
Banc of America Merrill Lynch Commercial Mortgage Inc.
Depositor
 
Bank of America, National Association
Sponsor
 
Mortgage Pass-Through Certificates
 

Consider carefully the risk factors beginning on page [9] in this prospectus.
 
Neither the certificates nor the underlying mortgage loans are insured by any governmental agency.
 
The certificates will represent interests only in the related issuing entity and will not represent interests in or obligations of the depositor, the sponsor or any of their affiliates, including Bank of America Corporation.
 
This prospectus may be used to offer and sell any series of certificates only if accompanied by the prospectus supplement for that series.
 
 
                Each Issuing Entity—
 
  will issue a series of mortgage pass-through certificates, which will consist of one or more classes of certificates; and
 
  may own—
 
    multifamily and commercial mortgage loans; and
 
    mortgage-backed securities.
 
                Each Pool of Mortgage Loans—
 
  will be sold to the related issuing entity by the depositor, who will have in turn purchased the mortgage loans from the   sponsor;
 
  will be underwritten to the standards described in this prospectus or the accompanying prospectus supplement; and
 
  will be serviced by one or more servicers affiliated or unaffiliated with the depositor.
 
                Each Series of Certificates—
 
  will represent interests in the issuing entity and will be paid only from the trust assets;
 
  provide for the accrual of interest based on a fixed, variable or adjustable interest rate;
 
  will receive interest and principal payments based on the rate of payment of principal and the timing of receipt of payments on the mortgage loans;
 
  may be offered through underwriters, which may include Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of the depositor;
 
  will not be listed on any securities exchange; and
 
  may provide credit support by “subordinating” certain classes to other classes of certificates; any subordinate classes will be entitled to payment subject to the payment of more senior classes and will bear losses before more senior classes.
 
                The Certificateholders—
 
  may be entitled to the benefit of one or more of the following other types of credit support or derivative instruments as described in this prospectus and in more detail in the accompanying prospectus supplement:  guaranteed investment contracts, insurance, guarantees, letters of credit, certificate insurance, surety bonds, reserve funds, cash collateral accounts, pool insurance policies, special hazard insurance policies, mortgagor bankruptcy bonds, cross-collateralization, overcollateralization, excess interest and cash flow agreements.
 
 
Neither the SEC nor any state securities commission has approved these certificates or determined that this prospectus is accurate or complete.   Any representation to the contrary is a criminal offense.
 
[_____________] [__], 2011

 
 
 

 

 
 
For more information
 
Banc of America Merrill Lynch Commercial Mortgage Inc. has filed with the SEC additional registration materials relating to the certificates.  You may read and copy any of these materials at the SEC’s Public Reference Room at the following location:
 
SEC Public Reference Section
100 F Street, N.E.
Washington, D.C. 20549
 
You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information that has been filed electronically with the SEC.  The Internet address is http://www.sec.gov.
 
You may also contact Banc of America Merrill Lynch Commercial Mortgage Inc. in writing at Bank of America Tower, One Bryant Park, New York, New York 10036, or by telephone at (980) 388-7451.

See also the sections captioned “Available Information” and “Incorporation of Certain Information by Reference” appearing at the end of this prospectus.
 

 
 TABLE OF CONTENTS
   
   
SUMMARY OF PROSPECTUS
1
RISK FACTORS
9
The Limited Liquidity of Your Certificates May Have an Adverse Impact on Your Ability to Sell Your Certificates
9
Book Entry System for Certain Classes of Certificates May Decrease Liquidity and Delay Payment
9
Servicing Transfer Following Event of Default May Result in Payment Delays or Losses
10
The Nature of Ratings Are Limited and Will Not Guarantee that You Will Receive Any Projected Return on Your Certificates
10
The Ratings of Your Certificates May Be Lowered or Withdrawn, or Your Certificates May Receive an Unsolicited Rating, Which May Adversely Affect the Liquidity or Market Value of Your Certificates
11
The Limited Assets of Each Trust May Adversely Impact Your Ability To Recover Your Investment in the Event of Loss on the Underlying Mortgage Assets
11
The Limited Credit Support for Your Certificates May Not Be Sufficient To Prevent Loss on Your Certificates
12
Special Powers of the FDIC in the Event of Insolvency of the Sponsor Could Delay or Reduce Distributions on the Certificates
12
Insolvency of the Depositor May Delay or Reduce Collections on Mortgage Loans
14
Distributions on Your Certificates and Your Yield May Be Difficult To Predict
14
Prepayments of the Underlying Mortgage Loans Will Affect the Average Life of Your Certificates and Your Yield
14
Certificates Purchased at a Premium or a Discount Will Be Sensitive To the Rate of Principal Payment
17
Other Factors Affecting Yield, Weighted Average Life and Maturity
17
Prepayment Models Are Illustrative Only and Do Not Predict Actual Weighted Average Life and Maturity
19
Timing of Prepayments on the Mortgage Loans May Result in Interest Shortfalls on the Certificates
20
Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans
20
Exercise of Rights by Certain Certificateholders May Be Adverse to Other Certificateholders
23
Borrower Defaults May Adversely Affect Your Yield
23
The Borrower’s Form of Entity May Cause Special Risks
24
Borrower and Related Party Bankruptcy Proceedings Entail Certain Risks
25
Tenancies in Common May Hinder or Delay Recovery
25
Mortgaged Properties with Tenants Present Special Risks
26
Mortgaged Properties with Multiple Tenants May Increase Reletting Costs and Reduce Cash Flow
27
 
 
 
-i-

 
 
 
Tenant Bankruptcy Adversely Affects Property Performance
27
Risks Related to Enforceability
27
Potential Absence of Attornment Provisions Entails Risks
28
Risks Associated with Commercial Lending May Be Different than those for Residential Lending
28
Poor Property Management Will Lower the Performance of the Related Mortgaged Property
29
Particular Property Types Present Special Risks
30
The Operation of the Mortgaged Property upon Foreclosure of the Mortgage Loan May Affect Tax Status
35
One Action Rules May Limit Remedies
35
Property Value May Be Adversely Affected Even When Current Operating Income Is Not
35
Leasehold Interests Are Subject to Terms of the Ground Lease
36
Collateral Securing Cooperative Loans May Diminish in Value
36
Condominium Ownership May Limit Use and Improvements
37
Zoning Laws and Use Restrictions May Affect the Operation of a Mortgaged Property or the Ability to Repair or Restore a Mortgaged Property
37
Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses
37
Appraisals Are Limited in Reflecting the Value of a Mortgaged Property
38
Risks Relating to Costs of Compliance with Applicable Laws and Regulations
38
Additional Compensation to the Servicer Will Affect Your Right To Receive Distributions
38
Liquidity for Certificates May Be Limited
38
Mortgage Loan Repayments and Prepayments Will Affect Payment
38
Grace Periods Under the Mortgage Loans May Impact the Master Servicer’s Obligation To Advance
39
Risks to the Mortgaged Properties Relating to Terrorist Attacks and Foreign Conflicts
39
Inclusion of Delinquent Mortgage Loans in a Mortgage Asset Pool
39
Changes to REMIC Restrictions on Loan Modifications May Impact an Investment in the Certificates
39
PROSPECTUS SUPPLEMENT
41
CAPITALIZED TERMS USED IN THIS PROSPECTUS
41
DESCRIPTION OF THE TRUST FUNDS
42
General
42
Mortgage Loans
42
MBS
46
Certificate Accounts
47
Credit Support
47
Cash Flow Agreements
47
YIELD AND MATURITY CONSIDERATIONS
48
General
48
Pass-Through Rate
48
Payment Delays
48
 
 
 
-ii-

 
 
 
Certain Shortfalls in Collections of Interest
48
Yield and Prepayment Considerations
48
Weighted Average Life and Maturity
50
Other Factors Affecting Yield, Weighted Average Life and Maturity
51
BANK OF AMERICA, NATIONAL ASSOCIATION, AS SPONSOR
52
Other Originators
54
THE DEPOSITOR
54
THE MORTGAGE LOAN PROGRAM
54
Commercial Mortgage Loan Underwriting
54
Representations and Warranties
58
BANK OF AMERICA, NATIONAL ASSOCIATION, AS SERVICER
58
General
58
Special Servicing
60
Other Servicers
61
DESCRIPTION OF THE CERTIFICATES
61
General
61
Distributions
63
Distributions of Interest on the Certificates
63
Distributions of Principal on the Certificates
64
Distributions on the Certificates Concerning Prepayment Premiums or Concerning Equity Participations
64
Allocation of Losses and Shortfalls
64
Advances in Respect of Delinquencies
65
Reports to Certificateholders
66
Voting Rights
67
Termination
67
Book-Entry Registration and Definitive Certificates
68
THE POOLING AND SERVICING AGREEMENTS
69
General
69
Assignment of Mortgage Loans; Repurchases
70
Representations and Warranties; Repurchases
71
Collection and Other Servicing Procedures
72
Sub-Servicers
74
Certificate Account
74
Modifications, Waivers and Amendments of Mortgage Loans
76
Realization Upon Defaulted Mortgage Loans
77
Hazard Insurance Policies
79
Due-on-Sale and Due-on-Encumbrance Provisions
80
Servicing Compensation and Payment of Expenses
80
Evidence as to Compliance
80
Certain Matters Regarding the Master Servicer, the Special Servicer, the REMIC Administrator and the Depositor
81
Events of Default
82
Rights Upon Event of Default
83
Amendment
84
List of Certificateholders
85
The Trustee
85
Duties of the Trustee
85
Certain Matters Regarding the Trustee
85
Resignation and Removal of the Trustee
86
DESCRIPTION OF CREDIT SUPPORT
86
 
 
 
-iii-

 
 
 
General
86
Subordinate Certificates
87
Insurance or Guarantees Concerning the Mortgage Loans
87
Letter of Credit
88
Certificate Insurance and Surety Bonds
88
Reserve Funds
88
Cash Collateral Account
89
Pool Insurance Policy
89
Special Hazard Insurance Policy
90
Mortgagor Bankruptcy Bond
90
Cross Collateralization
91
Overcollateralization
91
Excess Interest
91
Cash Flow Agreements
91
Credit Support with Respect to MBS
91
CASH FLOW AGREEMENTS
91
Guaranteed Investment Contracts
92
Yield Maintenance Agreements
92
Swap Agreements
92
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
92
General
93
Types of Mortgage Instruments
93
Leases and Rents
93
Personalty
94
Foreclosure
94
Bankruptcy Laws
98
Environmental Considerations
99
Due-on-Sale and Due-on-Encumbrance Provisions
100
Junior Liens; Rights of Holders of Senior Liens
101
Subordinate Financing
102
Default Interest and Limitations on Prepayments
102
Applicability of Usury Laws
102
Certain Laws and Regulations
103
Americans with Disabilities Act
103
Servicemembers Civil Relief Act
103
Forfeiture for Drug and Money Laundering Violations
103
Federal Deposit Insurance Act; Commercial Mortgage Loan Servicing
104
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
104
General
104
REMICs
105
Grantor Trust Funds
122
STATE AND OTHER TAX CONSEQUENCES
130
CERTAIN ERISA CONSIDERATIONS
130
General
130
Plan Asset Regulations
131
Insurance Company General Accounts
131
Consultation With Counsel
132
Tax Exempt Investors
132
LEGAL INVESTMENT
132
USE OF PROCEEDS
133
METHOD OF DISTRIBUTION
133
LEGAL MATTERS
134
RATING
135
AVAILABLE INFORMATION
135
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
136
GLOSSARY
136

 
-iv-

 

 
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE APPLICABLE PROSPECTUS SUPPLEMENT
 
We provide information about the certificates in two separate documents that progressively provide more detail.  These documents are:
 
●  
this prospectus, which provides general information, some of which may not apply to a particular series of certificates, including your series; and
 
●  
the prospectus supplement for a series of certificates, which will describe the specific terms of that series of certificates.
 
You should rely only on the information provided in this prospectus and the applicable prospectus supplement, including the information incorporated by reference.  We have not authorized anyone to provide you with different information.  We are not offering the certificates in any state where the offer is not permitted.
 
We have included cross-references to captions in these materials which you can find related discussions that we believe will enhance your understanding of the topic being discussed.  The table of contents of this prospectus and the table of contents included in the applicable prospectus supplement list the pages on which these captions are located.
 
From time to time we use capitalized terms in this prospectus.  We can find the definitions of capitalized terms that are used in this prospectus on the pages indicated under the caption “Glossary” beginning on page [__] in this prospectus.
 
In this prospectus, the term “you” refers to a prospective investor in certificates, and the terms “Depositor,” “we,” “us” and “our” refer to Banc of America Merrill Lynch Commercial Mortgage Inc.


 
If you require additional information, the mailing address of our principal executive offices is Banc of America Merrill Lynch Commercial Mortgage Inc., Bank of America Tower, One Bryant Park, New York, New York 10036, and the telephone number is [(980) 388-7451].  For other means of acquiring additional information about us or a series of certificates, see “INCORPORATION OF CERTAIN INFORMATION BY REFERENCE” beginning on page [__] of this prospectus.
 
 


 

 
 
 

 

 
SUMMARY OF PROSPECTUS
 
This summary highlights selected information from this prospectus.  It does not contain all the information you need to consider in making your investment decision.  You should carefully review this prospectus and the related prospectus supplement in their entirety before making any investment in the certificates of any series.  As used in this prospectus, “you” refers to a prospective investor in certificates, and “we” refers to the depositor, Banc of America Merrill Lynch Commercial Mortgage Inc.  A “GLOSSARY” appears at the end of this prospectus.
 
Securities Offered
Mortgage pass-through certificates.
 
Sponsor(s)
Bank of America, National Association will be a sponsor of each series of certificates.  There may also be one or more other sponsors with respect to a series of certificates as described in the related prospectus supplement.  Any such additional sponsor may or may not be affiliated with Bank of America, National Association.  The mortgage loans either will be originated by the related sponsor or purchased by the sponsor from various entities that originated the mortgage loans either to the sponsor’s underwriting standards or to the underwriting standards described in the related prospectus supplement.  Each sponsor will sell the mortgage loans to the depositor on the closing date specified in the related prospectus supplement by means of a mortgage loan purchase agreement between the sponsor and the depositor.
 
Depositor
Banc of America Merrill Lynch Commercial Mortgage Inc., a Delaware corporation and a subsidiary of Bank of America, National Association, has its principal executive offices at Bank of America Tower, One Bryant Park, New York, New York 10036, and its telephone number is (980) 388-7451.
 
Issuing Entity
The issuing entity for each series of certificates will be a common law trust formed for such series by the depositor.
 
Trustee
The trustee for each series of certificates will be named in the related prospectus supplement.
 
Master Servicer
If the trust includes mortgage loans, the master servicer for the corresponding series of certificates will be named in the prospectus supplement.
 
Special Servicer
If the trust includes mortgage loans, the special servicer for the corresponding series of certificates will be named, or the circumstances under which a special servicer may be appointed, will be described in the prospectus supplement.
 
Other Servicers
In addition to the master servicer and the special servicer, one or more other servicers may perform servicing functions as sub-servicers for the master servicer or special servicer or otherwise as described in the related prospectus supplement.
 
MBS Administrator
If the trust includes mortgage-backed securities, the entity responsible for administering the mortgage-backed securities will be named in the prospectus supplement.
 
REMIC Administrator
The person responsible for the various tax-related administration duties for a series of certificates concerning real estate mortgage investment conduits will be named in the prospectus supplement.
 
 
 
 
 

 
 
 
The Mortgage Loans
Each series of certificates will, in general, be backed by a pool of mortgage loans referred to as a mortgage asset pool secured by first or junior liens on—
 
 
  residential properties consisting of five or more rental or cooperatively-owned dwelling units in high-rise, mid-rise or garden apartment buildings or other residential structures; or
 
 
  office buildings, retail stores, hotels or motels, nursing homes, hospitals or other health care-related facilities, recreational vehicle and mobile home parks, warehouse facilities, mini-warehouse facilities, self-storage facilities, industrial plants, parking lots, entertainment or sports arenas, restaurants, marinas, mixed use or various other types of income-producing properties or unimproved land.
 
 
However, no one of the following types of properties will be overly-represented in the trust at the time the trust is formed:  (1) restaurants; (2) entertainment or sports arenas; (3) marinas; or (4) nursing homes, hospitals or other health care-related facilities.
 
 
The mortgage loans will not be guaranteed or insured by Banc of America Merrill Lynch Commercial Mortgage Inc. or any of its affiliates or, unless otherwise provided in the prospectus supplement, by any governmental agency or by any other person.
 
 
If specified in the prospectus supplement, some mortgage loans may be delinquent as of the date the trust is formed.
 
 
As described in the prospectus supplement, a mortgage loan may—
 
 
  provide for no accrual of interest or for accrual of interest at an interest rate that is fixed over its term or that adjusts from time to time, or that may be converted at the borrower’s election from an adjustable to a fixed mortgage rate, or from a fixed to an adjustable mortgage rate;
 
 
  provide for level payments to maturity or for payments that adjust from time to time to accommodate changes in the mortgage rate or to reflect the occurrence of certain events, and may permit negative amortization;
 
 
  be fully amortizing or may be partially amortizing or nonamortizing, with a balloon payment due on its stated maturity date;
 
 
  may permit the negative amortization or deferral of accrued interest;
 
 
  may prohibit over its term or for a certain period prepayments and/or require payment of a premium or a yield maintenance payment in connection with certain prepayments;
 
 
  may permit defeasance and the release of real property collateral in connection with that defeasance;
 
 
 
-2-

 
 
 
 
 
  provide for payments of principal, interest or both, on due dates that occur monthly, quarterly, semi-annually or at any other interval as specified in the prospectus supplement; and
 
 
  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 10% or more of the related mortgage asset pool, by balance.
 
 
Each mortgage loan will have had an original term to maturity of not more than 40 years.  No mortgage loan will have been originated by Banc of America Merrill Lynch Commercial Mortgage Inc., although one of its affiliates may have originated some of the mortgage loans.
 
 
If any mortgage loan, or group of related mortgage loans, involves unusual credit risk, financial statements or other financial information concerning the related mortgaged property will be included in the related prospectus supplement.
 
 
As described in the prospectus supplement, the trust may also consist of mortgage participations, mortgage pass-through certificates and/or other mortgage-backed securities that evidence an interest in, or are secured by a pledge of, one or more mortgage loans similar to the other mortgage loans in the trust and which may or may not be issued, insured or guaranteed by the United States or any governmental agency.
 
Significant Originators
In addition to the sponsor(s) or their affiliates, one or more other persons may have originated the mortgage loans backing the certificates of a particular series.  The related prospectus supplement will describe any such originator with respect to mortgage loans representing 10% or more (by principal balance as of the applicable cut-off date) of the mortgage loans backing such series.
 
Significant Obligors
The related prospectus supplement also will identify any significant obligor or mortgaged property representing 10% or more (by principal balance as of the applicable cut-off date) of the mortgage loans backing the related series of certificates.
 
The Certificates
Each series of certificates will be issued in one or more classes pursuant to a pooling and servicing agreement or other agreement specified in the prospectus supplement and will represent in total the entire beneficial ownership interest in the trust.
 
 
As described in the prospectus supplement, the certificates of each series may consist of one or more classes that—
 
 
  are senior or subordinate to one or more other classes of certificates in entitlement to certain distributions on the certificates;
 
 
 
-3-

 
 
 
 
 
  are “stripped principal certificates” entitled to distributions of principal, with disproportionate, nominal or no distributions of interest;
 
 
  are “stripped interest certificates” entitled to distributions of interest, with disproportionate, nominal or no distributions of principal;
 
 
  provide for distributions of interest or principal that commence only after the occurrence of certain events, such as the retirement of one or more other classes of certificates of that series;
 
 
  provide for distributions of principal to be made, from time to time or for designated periods, at a rate that is faster (and, in some cases, substantially faster) or slower (and, in some cases, substantially slower) than the rate at which payments or other collections of principal are received on the mortgage assets in the trust;
 
 
  provide for distributions based solely or primarily on specified mortgage assets or a specified group of mortgage assets in the related trust fund;
 
 
  provide for distributions of principal to be made, subject to available funds, based on a specified principal payment schedule or other methodology; or
 
 
  provide for distribution based on collections on the mortgage assets in the trust attributable to prepayment premiums, yield maintenance payments or equity participations.
 
 
If specified in the prospectus supplement, a series of certificates may include one or more “controlled amortization classes“, which will entitle the holders to receive principal distributions according to a specified principal payment schedule.  Although prepayment risk cannot be eliminated entirely for any class of certificates, a controlled amortization class will generally provide a relatively stable cash flow so long as the actual rate of prepayment on the mortgage loans in the trust remains relatively constant at the rate of prepayment used to establish the specific principal payment schedule for those certificates.  Prepayment risk with respect to a given mortgage asset pool does not disappear, however, and the stability afforded to a controlled amortization class comes at the expense of one or more other classes of the same series.
 
 
Each class of certificates, other than certain classes of stripped interest certificates and certain classes of REMIC residual certificates will have an initial stated principal amount.  Each class of certificates, other than certain classes of stripped principal certificates and certain classes of REMIC residual certificates, will accrue interest on its certificate balance or, in the case of certain classes of stripped interest certificates, on a notional amount, based on a pass-through rate which may be fixed, variable or adjustable.  The prospectus supplement will specify the certificate balance, notional amount and/or pass-through rate for each class of certificates.
   
 
 
-4-

 
 
 
Distributions of Interest
   on the Certificates
 
Interest on each class of certificates (other than certain classes of stripped principal certificates and certain classes of REMIC residual certificates) of each series will accrue at the applicable pass-through rate on the certificate balance and will be paid on a distribution date.  However, in the case of certain classes of stripped interest certificates, the notional amount outstanding from time to time will be paid to certificateholders as provided in the prospectus supplement on a specified distribution date.
 
 
Distributions of interest concerning one or more classes of certificates may not commence until the occurrence of certain events, such as the retirement of one or more other classes of certificates.  Interest accrued concerning a class of accrual certificates prior to the occurrence of such an event will either be added to the certificate balance or otherwise deferred as described in the prospectus supplement.  Distributions of interest concerning one or more classes of certificates may be reduced to the extent of certain delinquencies, losses and other contingencies described in this prospectus and in the prospectus supplement.
   
Distributions of Principal
   of the Certificates
 
Each class of certificates of each series (other than certain classes of stripped interest certificates and certain classes of REMIC residual certificates) will have a certificate balance.  The certificate balance of a class of certificates outstanding from time to time will represent the maximum amount that the holders are then entitled to receive in respect of principal from future cash flow on the assets in the trust.  The initial total certificate balance of all classes of a series of certificates will not be greater than the outstanding principal balance of the related mortgage assets as of a specified cut-off date, after application of scheduled payments due on or before that date, whether or not received.  As described in the prospectus supplement, distributions of principal with respect to the related series of certificates will be made on each distribution date to the holders of the class certificates of the series then entitled until the certificate balances of those certificates have been reduced to zero.  Distributions of principal with respect to one or more classes of certificates—
 
 
  may be made at a rate that is faster (and, in some cases, substantially faster) or slower (and, in some cases, substantially slower) than the rate at which payments or other collections of principal are received on the assets in the trust;
 
 
  may not commence until the occurrence of certain events, such as the retirement of one or more other classes of certificates of the same series;
 
 
  may be made, subject to certain limitations, based on a specified principal payment schedule; or
 
 
  may be contingent on the specified principal payment schedule for another class of the same series and the rate at which payments and other collections of principal on the mortgage assets in the trust are received.  Unless otherwise specified in the prospectus supplement, distributions of principal of any class of certificates will be made on a pro rata basis among all of the certificates of that class.
   
 
 
-5-

 
 
 
Credit Support and Cash
   Flow Agreements
 
If specified in the prospectus supplement, partial or full protection against certain defaults and losses on the assets in the trust may be provided to one or more classes of certificates by (1) subordination of one or more other classes of certificates to classes in the same series, or by (2) one or more of the following other types of credit support:  limited guarantees, financial guaranty insurance policies, surety bonds, letters of credit, mortgage pool insurance policies, reserve funds, cross collateralization, overcollateralization and excess interest. If so provided in the prospectus supplement, the trust may include:
 
 
  guaranteed investment contracts;
 
 
  insurance, guarantees;
 
 
  letters of credit;
 
 
  certificate insurance;
 
 
  surety bonds;
 
 
  reserve funds, cash collateral accounts;
 
 
  pool insurance policies;
 
 
  special hazard insurance policies;
 
 
  mortgagor bankruptcy bonds;
 
 
  cross-collateralization;
 
 
  overcollateralization;
 
 
  excess interest; and
 
 
  cash flow agreements.
 
 
The above types of credit support and cash flow agreements are described in more detail in this prospectus under “DESCRIPTION OF CREDIT SUPPORT and “CASH FLOW AGREEMENTS”.
 
 
Certain relevant information regarding any applicable credit support or cash flow agreement will be set forth in the prospectus supplement for a series of certificates.
 
Advances
As specified in the prospectus supplement, if the trust includes mortgage loans, the master servicer, the special servicer, the trustee, any provider of credit support, and/or another specified person may be obligated to make, or have the option of making, certain advances concerning delinquent scheduled payments of principal and/or interest on mortgage loans.  Any advances made concerning a particular mortgage loan will be reimbursable from subsequent recoveries relating to the particular mortgage loan and as described in the prospectus supplement.  If specified in the prospectus supplement, any entity making  advances may be entitled to receive interest for a specified period during which those advances are outstanding, payable from amounts in the trust.  If the trust includes mortgage-backed securities,
 
 
 
-6-

 
 
 
 
any comparable advancing obligation of a party to the related pooling and servicing agreement, or of a party to the related mortgage-backed securities agreement, will be described in the prospectus supplement.
 
Optional Termination
If specified in the prospectus supplement, a series of certificates may be subject to optional early termination through the repurchase of the mortgage assets in the trust.  If provided in the related prospectus supplement, upon the reduction of the certificate balance of a specified class or classes of certificates by a specified percentage or amount, a specified party may be authorized or required to solicit bids for the purchase of all of the assets of the trust, or of a sufficient portion of those assets to retire that class or classes.
   
Material Federal Income
   Tax Consequences
The certificates of each series will constitute or evidence ownership of either—
 
 
  “regular interests” and “residual interests” in the trust, or a designated portion of the trust, treated as a REMIC under Sections 860A through 860G of the Code; or
 
 
  certificates in a trust treated as a grantor trust under applicable provisions of the Code.
 
 
If one or more REMIC elections are made, certificates that are regular interests will be treated as newly issued debt instruments of the REMIC and must be accounted for under an accrual method of accounting.  Certificates that are residual interests are not treated as debt instruments, but rather must be treated according to the rules prescribed in the Internal Revenue Code for REMIC residual interests, including restrictions on transfer and the reporting of net income or loss of the REMIC, including the possibility of a holder of such certificate having taxable income without a corresponding distribution of cash to pay taxes currently due.
 
 
If the certificates represent interests in a grantor trust, beneficial owners of certificates generally are treated as owning an undivided beneficial interest in the mortgage loans that are assets of the trust.
 
 
Investors are advised to consult their tax advisors and to review “MATERIAL FEDERAL INCOME TAX CONSEQUENCES” in this prospectus and in the prospectus supplement.
 
Certain ERISA Considerations
Fiduciaries of retirement plans and certain other employee benefit plans and arrangements, including individual retirement accounts, individual retirement annuities, Keogh plans, and collective investment funds and separate individual retirement accounts in which such plans, accounts, annuities or arrangements are invested, that are subject to the Employee Retirement Income Security Act of 1974, as amended, Section 4975 of the Internal Revenue Code of 1986, or any materially similar provisions of federal, state or local law should review with their legal advisors whether the purchase or holding of certificates could give rise to a transaction that is prohibited.
 
Legal Investment
If so specified in the prospectus supplement, certain classes of certificates will constitute “mortgage related securities” for purposes of
 
 
 
 
-7-

 
 
 
 
the Secondary Mortgage Market Enhancement Act of 1984, as amended.  If your investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities, then you may be subject to restrictions on investment in the certificates.  You should consult with your own legal advisors for assistance in determining the suitability of and consequences to you of the purchase, ownership and sale of the certificates.
 
 
See “LEGAL INVESTMENT” in this prospectus.
 
Rating
At their respective dates of issuance, each class of certificates will be rated not lower than investment grade by one or more nationally recognized statistical rating organizations.

 
 
 
 
 
 
 
 
-8-

 

 
RISK FACTORS
 
In considering an investment in the certificates of any series, you should consider carefully the following risk factors and the risk factors in the prospectus supplement.
 
The Limited Liquidity of Your Certificates May Have an Adverse Impact on Your Ability to Sell Your Certificates
 
The certificates of any series may have limited or no liquidity.  You may be forced to bear the risk of investing in the certificates for an indefinite period of time.  In addition, you may have no redemption rights, and the certificates are subject to early retirement only under certain circumstances.
 
Lack of a Secondary Market May Limit the Liquidity of Your Certificate.  We cannot assure you that a secondary market for the certificates will develop or, if it does develop, that it will provide certificateholders with liquidity of investment or that it will continue for as long as the certificates remain outstanding.
 
The prospectus supplement may indicate that an underwriter intends to establish a secondary market in the certificates, although no underwriter will be obligated to do so.  Any secondary market may provide less liquidity to investors than any comparable market for securities relating to single-family mortgage loans.  Unless specified in the prospectus supplement, the certificates will not be listed on any securities exchange.
 
The Limited Nature of Ongoing Information Regarding Your Certificate May Adversely Affect Liquidity.  The primary source of ongoing information regarding the certificates, including information regarding the status of the related mortgage assets and any credit support for the certificates, will be the periodic reports to certificateholders to be delivered pursuant to the related pooling and servicing agreement.
 
We cannot assure you that any additional ongoing information regarding the certificates will be available through any other source.  The limited nature of the information concerning a series of certificates may adversely affect liquidity, even if a secondary market for the certificates does develop.
 
The Liquidity of Your Certificate May Be Affected by External Sources Including Interest Rate Movement.  If a secondary market does develop for the certificates, the market value of the certificates will be affected by several factors, including—
 
perceived liquidity;
 
the anticipated cash flow (which may vary widely depending upon the prepayment and default assumptions concerning the underlying mortgage loans); and
 
prevailing interest rates.
 
The price payable at any given time for certain classes of certificates may be extremely sensitive to small fluctuations in prevailing interest rates.  The relative change in price for a certificate in response to an upward or downward movement in prevailing interest rates may not necessarily equal the relative change in price for the certificate in response to an equal but opposite movement in those rates.  Therefore, the sale of certificates by a holder in any secondary market that may develop may be at a discount from the price paid by the holder.  We are not aware of any source through which price information about the certificates will be generally available on an ongoing basis.
 
Book Entry System for Certain Classes of Certificates May Decrease Liquidity and Delay Payment
 
Because transactions in the classes of book entry certificates of any series generally can be effected only through DTC, DTC participants and indirect DTC participants:
 
 
-9-

 
 
your ability to pledge book entry certificates to someone who does not participate in the DTC system, or to otherwise take action relating to your book entry certificates, may be limited due to the lack of a physical certificate;
 
you may experience delays in your receipt of payments on book entry certificates because distributions will be made by the trustee, or a paying agent on behalf of the trustee, to Cede & Co., as nominee for DTC, rather than directly to you; and
 
you may experience delays in your receipt of payments on book-entry certificates in the event of misapplication of payments by DTC, DTC participants or indirect DTC participants or bankruptcy or insolvency of those entities and your recourse will be limited to your remedies against those entities.
 
Servicing Transfer Following Event of Default May Result in Payment Delays or Losses
 
Following the occurrence of an event of default under a pooling and servicing agreement, the trustee for the related series may, in its discretion or pursuant to direction from certificateholders, remove the defaulting master servicer or special servicer and succeed to its responsibilities, or may petition a court to appoint a successor master servicer or special servicer.  The trustee or the successor master servicer or special servicer will be entitled to reimbursement of its costs of effecting the servicing transfer from the predecessor master servicer or special servicer, or from the assets of the related trust if the predecessor fails to pay.  In the event that reimbursement to the trustee or the successor master servicer or special servicer is made from trust assets, the resulting shortfall will be borne by holders of the related certificates, to the extent not covered by any applicable credit support.  In addition, during the replacement process or for some time thereafter, mortgagors of the related mortgage loans may delay making their monthly payments or may inadvertently continue making payments to the predecessor master servicer or special servicer, potentially resulting in delays in distributions on the related certificates.
 
The Nature of Ratings Are Limited and Will Not Guarantee that You Will Receive Any Projected Return on Your Certificates
 
Any credit rating assigned by a rating agency to a class of certificates will reflect only its assessment of the likelihood that holders of the certificates will receive payments to which the certificateholders are entitled under the related pooling and servicing agreement.  Such rating will not constitute an assessment of the likelihood that—
 
principal prepayments on the related mortgage loans will be made;
 
the degree to which the rate of such prepayments might differ from that originally anticipated; or
 
the likelihood of early optional termination of the trust.
 
Any rating will not address the possibility that prepayment of the mortgage loans at a higher or lower rate than anticipated by an investor may cause such investor to experience a lower than anticipated yield or that an investor purchasing a certificate at a significant premium might fail to recover its initial investment under certain prepayment scenarios.  Therefore, a rating assigned by a rating agency does not guarantee or ensure the realization of any anticipated yield on a class of certificates.
 
The amount, type and nature of credit support given a series of certificates will be determined on the basis of criteria established by each rating agency rating classes of the certificates of such series.  Those criteria are sometimes based upon an actuarial analysis of the behavior of mortgage loans in a larger group.  There can be no assurance that the historical data supporting any such actuarial analysis will accurately reflect future experience, or that the data derived from a large pool of mortgage loans will accurately predict the delinquency, foreclosure or loss experience of any particular pool of mortgage loans.  In other cases, such criteria may be based upon determinations of the values of the properties that provide security for the mortgage loans.  However, we cannot assure you that those values will not decline in the future.  As a result, the credit support required in respect of the certificates of any series may be insufficient to fully protect the holders of such certificates from losses on the related mortgage asset pool.
 
 
-10-

 
 
The Ratings of Your Certificates May Be Lowered or Withdrawn, or Your Certificates May Receive an Unsolicited Rating, Which May Adversely Affect the Liquidity or Market Value of Your Certificates
 
Unless otherwise provided in the prospectus supplement (and in any event as may be required by the applicable regulations associated with the depositor’s use of Form S-3 for the registration statement pursuant to which the offering of the offered certificates is being made hereby), it is a condition to the issuance of the offered certificates that they be rated investment grade (i.e., in one of the four highest rating categories) by at least one nationally recognized statistical rating organization.  A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time.  No person is obligated to maintain the rating on any certificate, and accordingly, there can be no assurance to you that the ratings assigned to any certificate on the date on which the certificate is originally issued will not be lowered or withdrawn by a rating agency at any time thereafter.  The rating(s) of any series of certificates by any applicable rating agency may be lowered following the initial issuance of the certificates as a result of the downgrading of the obligations of any applicable credit support provider, or as a result of losses on the related mortgage loans in excess of the levels contemplated by the rating agency at the time of its initial rating analysis.  In addition, the Securities and Exchange Commission may determine that any rating agencies retained by the depositor to provide a security rating on any class of any series of offered certificates no longer qualifies as a “nationally recognized statistical rating organization” or is no longer qualified to rate any such class of offered certificates.  Neither the depositor nor the sponsor nor any of their respective affiliates will have any obligation to replace or supplement any credit support, or to take any other action to maintain any rating(s) of any series of certificates.  If any rating is revised or withdrawn or if any rating agencies retained by the depositor to provide a security rating on any class of any series of offered certificates no longer qualifies as a “nationally recognized statistical rating organization” or is no longer qualified to rate any such class of offered certificates, the liquidity and/or the market value of your certificate may be adversely affected.
 
Additionally, it is possible that rating agencies not hired by the depositor may provide unsolicited ratings that differ from the ratings provided by any rating agencies retained by the depositor.  There can be no assurance that an unsolicited rating will not be issued prior to or after the closing date of any series of certificates, and none of the sponsor, the depositor or the related underwriters is obligated to inform investors (or potential investors) in any series offered certificates if an unsolicited rating is issued after the date of each such prospectus supplement.  Consequently, if you intend to purchase offered certificates, you should monitor whether an unsolicited rating of the offered certificates has been issued by a non-hired rating agency and should consult with your financial and legal advisors regarding the impact of an unsolicited rating on a class of offered certificates.  If any non-hired rating agency provides an unsolicited rating that differs from (or is lower than) the rating provided by any rating agency retained by the depositor in connection with any series issuance, the liquidity and/or the market value of your offered certificate may be adversely affected.
 
Any downgrading or unsolicited rating of a class of offered certificates to below “investment grade” may affect your ability to purchase or retain, or otherwise impact the regulatory characteristics, of those certificates.
 
The Limited Assets of Each Trust May Adversely Impact Your Ability To Recover Your Investment in the Event of Loss on the Underlying Mortgage Assets
 
Except for any related insurance policies, reserve funds, or other external credit enhancement described in the prospectus supplement, the mortgage loans included in a trust fund will be the sole source of payments on the certificates of a series.  Unless specified in the prospectus supplement, neither the certificates nor the mortgage assets in the trust will be guaranteed or insured by Banc of America Merrill Lynch Commercial Mortgage Inc. or any of its affiliates, by any governmental agency or by any other person or entity.  No certificate will represent a claim against or security interest in the trust funds for any other series.  Therefore, if the related trust fund has insufficient assets to make payments, no other assets will be available for payment of the deficiency, and the holders of one or more classes of the certificates will be required to bear the consequent loss.
 
In addition, the mortgage loans are generally non-recourse loans.  If a default occurs under any mortgage loan, recourse generally may be had only against the specific properties and other assets that have been pledged to secure the loan.  Payment prior to maturity is consequently dependent primarily on the sufficiency of the net operating income of the mortgaged property.  Payment at maturity is primarily dependent upon the market value of the
 
 
-11-

 
 
mortgaged property or the borrower’s ability to refinance the property.  We will not have undertaken an evaluation of the financial condition of any borrower.
 
Amounts on deposit from time to time in certain accounts constituting part of the trust, including the certificate account and any accounts maintained as credit support, may be withdrawn for purposes other than the payment of principal of or interest on the related series of certificates under certain conditions.  On any distribution occurring after losses or shortfalls in collections on the mortgage assets have been incurred, all or a portion of those losses or shortfalls will be borne on a disproportionate basis among classes of certificates.
 
The Limited Credit Support for Your Certificates May Not Be Sufficient To Prevent Loss on Your Certificates
 
The prospectus supplement for a series of certificates will describe any credit support.  The credit support may not cover all potential losses.  For example, credit support may or may not cover loss by reason of fraud or negligence by a mortgage loan originator or other parties.  Any losses not covered by credit support may, at least in part, be allocated to one or more classes of certificates.
 
A series of certificates may include one or more classes of subordinate certificates, if provided in the prospectus supplement.  Although subordination is intended to reduce the likelihood of temporary shortfalls and ultimate losses to holders of senior certificates, the amount of subordination will be limited and may decline under certain circumstances.  In addition, if principal payments on one or more classes of certificates of a series are made in a specified order of priority, any related credit support may be exhausted before the principal of the later-paid classes of certificates of that series have been repaid in full.
 
The impact of losses and shortfalls experienced with respect to the mortgage assets may fall primarily upon those classes of certificates having a later right of payment.
 
If a form of credit support covers the certificates of more than one series and losses on the related mortgage assets exceed the amount of the credit support, it is possible that the holders of certificates of one (or more) series will disproportionately benefit from that credit support, to the detriment of the holders of certificates of one (or more) other series.
 
The amount of any applicable credit support supporting one or more classes of certificates may be determined on the basis of criteria established by each rating agency retained to provide a security rating for any series of offered certificates, based on an assumed level of defaults, delinquencies and losses on the underlying mortgage assets and certain other factors.  We cannot assure you that the loss experience on the related mortgage assets will not exceed such assumed levels.  If the losses on the related mortgage assets do exceed such assumed levels, the holders of one or more classes of certificates will be required to bear such additional losses.
 
Special Powers of the FDIC in the Event of Insolvency of the Sponsor Could Delay or Reduce Distributions on the Certificates
 
The mortgage loans will be originated or acquired by the sponsor, a national bank whose deposits are insured to the applicable limits by the FDIC.  If the sponsor becomes insolvent, is in an unsound condition or engages in violations of its bylaws or regulations applicable to it or if similar circumstances occur, the FDIC could act as conservator and, if a receiver were appointed, would act as a receiver for the sponsor.  As receiver, the FDIC would have broad powers to:
 
require the trust, as assignee of the depositor, to go through an administrative claims procedure to establish its rights to payments collected on the mortgage loans; or
 
request a stay of proceedings to liquidate claims or otherwise enforce contractual and legal remedies against the sponsor, or
 
if the sponsor is a servicer for a series of certificates, repudiate without compensation the sponsor’s ongoing servicing obligations under the related pooling and servicing agreement, such as its duty to collect and remit payments or otherwise service the mortgage loans.
 
 
 
-12-

 
 
If the FDIC were to take any of those actions, distributions on the certificates could be delayed or reduced.
 
By statute, the FDIC as conservator or receiver of the sponsor is authorized to repudiate any “contract” of the sponsor upon payment of “actual direct compensatory damages”. This authority may be interpreted by the FDIC to permit it to repudiate the transfer of the mortgage loans to the depositor.  Under an FDIC regulation, however, the FDIC as conservator or receiver of a bank has stated that it will not reclaim, recover or recharacterize a bank’s transfer of financial assets in connection with a securitization or participation, provided that the transfer meets all conditions for sale accounting treatment under generally accepted accounting principles, other than the “legal isolation” condition as it applies to institutions for which the FDIC may be appointed as conservator or receiver, was made for adequate consideration and was not made fraudulently, in contemplation of insolvency, or with the intent to hinder, delay or defraud the bank or its creditors.  For purposes of the FDIC regulation, the term securitization means, as relevant, the issuance by a special purpose entity of beneficial interests the most senior class of which at time of issuance is rated in one of the four highest categories assigned to long-term debt or in an equivalent short-term category (within either of which there may be sub-categories or gradations indicating relative standing) by one or more nationally recognized statistical rating organizations.  A special purpose entity, as the term is used in the regulation, means a trust, corporation, or other entity demonstrably distinct from the insured depository institution that is primarily engaged in acquiring and holding (or transferring to another special purpose entity) financial assets, and in activities related or incidental to these actions, in connection with the issuance by the special purpose entity (or by another special purpose entity that acquires financial assets directly or indirectly from the special purpose entity) of beneficial interests.  The transactions contemplated by this prospectus and the related prospectus supplement will be structured so that this FDIC regulation should apply to the transfer of the mortgage loans from the sponsor to the depositor.
 
If a condition required under the FDIC regulation, or other statutory or regulatory requirement applicable to the transaction, were found not to have been satisfied, the FDIC as conservator or receiver might refuse to recognize the sponsor’s transfer of the mortgage loans to the depositor.  In that event the depositor could be limited to seeking recovery based upon its security interest in the mortgage loans.  The FDIC’s statutory authority has been interpreted by the FDIC and at least one court to permit the repudiation of a security interest upon payment of actual direct compensatory damages measured as of the date of conservatorship or receivership.  These damages do not include damages for lost profits or opportunity, and no damages would be paid for the period between the date of conservatorship or receivership and the date of repudiation.  The FDIC could delay its decision whether to recognize the sponsor’s transfer of the mortgage loans for a reasonable period following its appointment as conservator or receiver for the sponsor.  If the FDIC were to refuse to recognize the sponsor’s transfer of the mortgage loans, distributions on the certificates could be delayed or reduced.
 
If specified in the applicable prospectus supplement, the sponsor will also act as servicer of the mortgage loans.  If the FDIC acted as receiver for the sponsor after the sponsor’s insolvency, the FDIC could prevent the termination of the sponsor as servicer of the mortgage loans, even if a contractual basis for termination exists.  This inability to terminate the sponsor as servicer could result in a delay or possibly a reduction in distributions on the certificates to the extent the sponsor received, but did not remit to the trustee, mortgage loan collections received by the sponsor before the date of insolvency or if the sponsor failed to make any required advances.
 
The collection of amounts with respect to the mortgage loans, which are the source of repayment for the certificates, will depend significantly on the performance by the master servicer and the special servicer of their respective roles under the pooling and servicing agreement and any other servicing agreements described in this prospectus supplement.  You will not be a party to any of these agreements and will be relying on the persons who are to perform their duties under such agreements and upon such persons, and the trustee in particular, to enforce the parties' obligations under such agreements.  In the event of the resignation or termination of the master servicer or the special servicer, the trustee may assume the related responsibilities and servicing functions or name a replacement as described under “THE POOLING AND SERVICING AGREEMENTS—Rights Upon Event of Default”.  In particular, any interruption or delay associated with such replacement could have a corresponding adverse effect on amounts collected on the mortgage loans and available for distribution on the certificates.
 
 
-13-

 
 
Insolvency of the Depositor May Delay or Reduce Collections on Mortgage Loans
 
Neither the United States Bankruptcy Code nor similar applicable state laws prohibit the depositor from filing a voluntary application for relief under these laws.  However, the transactions contemplated by this prospectus and the related prospectus supplement will be structured so that the voluntary or involuntary application for relief under the bankruptcy laws by the depositor is unlikely.  The depositor is a separate, limited purpose subsidiary, the certificate of incorporation of which contains limitations on the nature of the depositor’s business, including the ability to incur debt other than debt associated with the transactions contemplated by this prospectus, and restrictions on the ability of the depositor to commence voluntary or involuntary cases or proceedings under bankruptcy laws.  Further, the transfer of the mortgage loans to the related trust will be structured so that the trustee has no recourse to the depositor, other than for breaches or representations and warranties about the mortgage loans.
 
If the depositor were to become the subject of a proceeding under the bankruptcy laws, a court could conclude that the transfer of the mortgage loans from the depositor to the trust should not be characterized as an absolute transfer, and accordingly, that the mortgage loans should be included as part of the depositor’s estate.  Under these circumstances, the bankruptcy proceeding could delay or reduce distributions on the certificates.  In addition, a bankruptcy proceeding could result in the temporary disruption of distributions on the certificates.
 
Distributions on Your Certificates and Your Yield May Be Difficult To Predict
 
The yield on any offered certificate will depend on (a) the price at which such certificate is purchased by an investor and (b) the rate, timing and amount of distributions on such certificate.  The rate, timing and amount of distributions on any offered certificate will, in turn, depend on, among other things:
 
  the pass-through rate for such certificate;
 
  the rate and timing of principal payments (including principal prepayments) and other principal collections on or in respect of the mortgage loans and the extent to which such amounts are to be applied or otherwise result in a reduction of the certificate balance of the class of certificates to which such certificate belongs;
 
  the rate, timing and severity of realized losses and additional trust fund expenses (each as described in this prospectus supplement) and the extent to which such losses and expenses result in the failure to pay interest on, or a reduction of the certificate balance of, the class of certificates to which such certificate belongs;
 
  the timing and severity of any net aggregate prepayment interest shortfalls (each as described in this prospectus supplement) and the extent to which such shortfalls are allocated in reduction of the distributable certificate interest payable on the class of certificates to which such certificate belongs;
 
  the extent to which prepayment premiums and yield maintenance charges are collected and, in turn, distributed on the class of certificates to which such certificate belongs; and
 
  the rate and timing of reimbursement of advances.
 
It is impossible to predict with certainty any of the factors described in the preceding paragraph.  Accordingly, investors may find it difficult to analyze the effect that such factors might have on the yield to maturity of any class of offered certificates.
 
Prepayments of the Underlying Mortgage Loans Will Affect the Average Life of Your Certificates and Your Yield
 
As a result of prepayments on the mortgage loans in the trust, the amount and timing of distributions of principal and/or interest on the certificates of the related series may be highly unpredictable.  Prepayments on the mortgage loans in the trust will result in a faster rate of principal payments on one or more classes of the related series of certificates than if payments on those mortgage loans were made as scheduled.  Therefore, the prepayment experience on the mortgage loans in the trust may affect the average life of one or more classes of certificates of the related series.
 
 
-14-

 
 
The rate of principal payments on pools of mortgage loans varies among pools and from time to time is influenced by a variety of economic, demographic, geographic, social, tax and legal factors.  For example, if prevailing interest rates fall significantly below the mortgage rates borne by the mortgage loans included in the trust, principal prepayments on those mortgage loans are likely to be higher than if prevailing interest rates remain at or above the rates borne by those mortgage loans.  Conversely, if prevailing interest rates rise significantly above the mortgage rates borne by the mortgage loans included in the trust, then principal prepayments on those mortgage loans are likely to be lower than if prevailing interest rates remain at or below the mortgage rates borne by those mortgage loans.
 
Voluntary prepayments, if permitted, generally require payment of a prepayment premium or yield maintenance charge.  Nevertheless, we cannot assure you that the related borrowers will refrain from prepaying their mortgage loans due to the existence of a prepayment premium or yield maintenance charge.  Also, we cannot assure you that involuntary prepayments will not occur.
 
As described in the related prospectus supplement, the terms of certain mortgage loans, in connection with a partial release of the related mortgaged property, may permit a voluntary partial defeasance or a partial prepayment at any time with the delivery of the defeasance collateral, the payment of a prepayment premium and/or yield maintenance charge, as applicable.
 
The rate at which voluntary prepayments occur on the mortgage loans will be affected by a variety of factors, including:
 
the terms of the mortgage loans;
 
the length of any prepayment lockout period;
 
the level of prevailing interest rates;
 
the availability of mortgage credit;
 
the applicable prepayment premiums or yield maintenance charges;
 
the master servicer’s or special servicer’s ability to enforce those charges or premiums;
 
the occurrence of casualties or natural disasters; and
 
economic, demographic, tax, legal or other factors.
 
The rate of prepayment on a pool of mortgage loans is also affected by prevailing market interest rates for mortgage loans of a comparable type, term and risk level.  When the prevailing market interest rate is below a mortgage loan's interest rate, a borrower may have an increased incentive to refinance its mortgage loan.  Even in the case of adjustable rate mortgage loans, as prevailing market interest rates decline, and without regard to whether the mortgage interest rates on the adjustable rate mortgage loans decline in a manner consistent therewith, the related borrowers may have an increased incentive to refinance for purposes of either (1) converting to a fixed rate loan and thereby “locking in” that rate or (2) taking advantage of a different index, margin or rate cap or floor on another adjustable rate mortgage loan.
 
Depending on prevailing market interest rates, the outlook for market interest rates and economic conditions generally, some borrowers may sell mortgaged properties in order to realize their equity in the mortgaged properties, to meet cash flow needs or to make other investments.  In addition, some borrowers may be motivated by federal and state tax laws (which are subject to change) to sell mortgaged properties prior to the exhaustion of tax depreciation benefits.  We will make no representation as to the particular factors that will affect the prepayment of the mortgage loans in any trust fund, as to the relative importance of those factors, as to the percentage of the principal balance of the mortgage loans that will be paid as of any date or as to the overall rate of prepayment on the mortgage loans.
 
No prepayment premium or yield maintenance charge will be generally required for prepayments in connection with a casualty or condemnation.  In addition, if a mortgage loan seller repurchases any mortgage loan from the trust
 
 
-15-

 
 
due to a material breach of representations or warranties or a material document defect, the repurchase price paid will be passed through to the holders of the certificates with the same effect as if the mortgage loan had been prepaid in part or in full, except that no prepayment premium or yield maintenance charge would be payable.  The repurchase price paid by a mortgage loan seller may not include a liquidation fee if purchased within the timeframe set forth in the pooling and servicing agreement.  Such a repurchase may therefore adversely affect the yield to maturity on your certificates.
 
We cannot assure you what as to the actual rate of prepayment on the mortgage loans in the trust will be, or that the rate of prepayment will conform to any model in any prospectus supplement.  As a result, depending on the anticipated rate of prepayment for the mortgage loans in the trust, the retirement of any class of certificates of the related series could occur significantly earlier or later, and its average life could be significantly shorter or longer, than expected.
 
The extent to which prepayments on the mortgage loans in trust ultimately affect the average life of any class of certificates of the related series will depend on the terms and provisions of the certificates.  A class of certificates may provide that on any distribution date the holders of the certificates are entitled to a pro rata share of the prepayments on the mortgage loans in the trust fund that are distributable on that date.
 
A class of certificates that entitles the holders to a disproportionately large share of the prepayments on the mortgage loans in the trust increases the likelihood of early retirement of that class if the rate of prepayment is relatively fast.  This type of early retirement risk is sometimes referred to as “call risk“.
 
A class of certificates that entitles its holders  to a disproportionately small share of the prepayments on the mortgage loans in the trust increases the likelihood of an extended average life of that class if the rate of prepayment is relatively slow.  This type of prolonged retirement risk is sometimes referred to as “extension risk“.
 
As described in the prospectus supplement, the respective entitlements of the various classes of certificate-holders of any series to receive payments (and, in particular, prepayments) of principal of the mortgage loans in the trust may vary based on the occurrence of certain events (e.g., the retirement of one or more classes of certificates of that series) or subject to certain contingencies (e.g., prepayment and default rates with respect to those mortgage loans).
 
A series of certificates may include one or more controlled amortization classes, which will entitle the holders to receive principal distributions according to a specified principal payment schedule.  Although prepayment risk cannot be eliminated entirely for any class of certificates, a controlled amortization class will generally provide a relatively stable cash flow so long as the actual rate of prepayment on the mortgage loans in the trust remains relatively constant at the rate of prepayment used to establish the specific principal payment schedule for the certificates.  Prepayment risk concerning a given mortgage asset pool does not disappear, however, and the stability afforded to a controlled amortization class comes at the expense of one or more companion classes of the same series.
 
As described in the prospectus supplement, a companion class may entitle the holders to a disproportionately large share of prepayments on the mortgage loans in the trust when the rate of prepayment is relatively fast, and/or may entitle the holders to a disproportionately small share of prepayments on the mortgage loans in the trust when the rate of prepayment is relatively slow.  A class of certificates that entitles the holders of those certificates to a disproportionately large share of the prepayments on the mortgage loans in the related trust fund enhances the risk of early retirement of that class, or call risk, if the rate of prepayment is relatively fast; while a class of certificates that entitles the holders of those certificates to a disproportionately small share of the prepayments on the mortgage loans in the related trust fund enhances the risk of an extended average life of that class, or extension risk, if the rate of prepayment is relatively slow.  Thus, as described in the related prospectus supplement, a companion class absorbs some (but not all) of the “call risk” and/or “extension risk” that would otherwise belong to the related controlled amortization class if all payments of principal of the mortgage loans in the related trust fund were allocated on a pro rata basis.
 
Each controlled amortization class will either be a planned amortization class or a targeted amortization class or such other similar class as is described in the prospectus supplement.  In general, a planned amortization class has a “prepayment collar”, that is, a range of prepayment rates that can be sustained without disruption, that determines
 
 
-16-

 
 
the principal cash flow of those certificates.  That prepayment collar is not static, and may expand or contract after the issuance of the planned amortization class depending on the actual prepayment experience for the underlying mortgage loans.  Distributions of principal on a planned amortization class would be made in accordance with the specified schedule so long as prepayments on the underlying mortgage loans remain at a relatively constant rate within the prepayment collar and, as described below, companion classes exist to absorb “excesses” or “shortfalls” in principal payments on the underlying mortgage loans.  If the rate of prepayment on the underlying mortgage loans from time to time falls outside the prepayment collar, or fluctuates significantly within the prepayment collar, especially for any extended period of time, that event may have material consequences in respect of the anticipated weighted average life and maturity for a planned amortization class.  A targeted amortization class is structured so that principal distributions generally will be payable on it in accordance with its specified principal payments schedule so long as the rate of prepayments on the related mortgage assets remains relatively constant at the particular rate used in establishing that schedule.  A targeted amortization class will generally afford the holders of those certificates some protection against early retirement or some protection against an extended average life, but not both.
 
In general, the notional amount of a class of interest-only certificates will either (1) be based on the principal balances of some or all of the mortgage assets in the related trust fund or (2) equal the principal balances of one or more of the other classes of certificates of the same series.  Accordingly, the yield on those interest-only certificates will be inversely related to the rate at which payments and other collections of principal are received on those mortgage assets or distributions are made in reduction of the principal balances of those classes of certificates, as the case may be.
 
Consistent with the foregoing, if a class of certificates of any series consists of interest-only certificates or principal-only certificates, a lower than anticipated rate of principal prepayments on the mortgage loans in the related trust fund will negatively affect the yield to investors in principal-only certificates, and a higher than anticipated rate of principal prepayments on those mortgage loans will negatively affect the yield to investors in interest-only certificates.  If the offered certificates of a series include those certificates, the related prospectus supplement will include a table showing the effect of various assumed levels of prepayment on yields on those certificates.  Those tables will be intended to illustrate the sensitivity of yields to various assumed prepayment rates and will not be intended to predict, or to provide information that will enable investors to predict, yields or prepayment rates.
 
Certificates Purchased at a Premium or a Discount Will Be Sensitive To the Rate of Principal Payment
 
A series of certificates may include one or more classes offered at a premium or discount.  Yields on those classes of certificates will be sensitive, and in some cases extremely sensitive, to prepayments on the mortgage loans in the trust fund.  If the amount of interest payable with respect to a class is disproportionately large as compared to the amount of principal, as with certain classes of stripped interest certificates, a holder might fail to recover its original investment under some prepayment scenarios.  The yield to maturity of any class of certificates may vary from the anticipated yield due to the degree to which the certificates are purchased at a discount or premium and the amount and timing of distributions.
 
You should consider, in the case of any certificate purchased at a discount, the risk that a slower than anticipated rate of principal payments on the mortgage loans could result in an actual yield to such investor that is lower than the anticipated yield.  In the case of any certificate purchased at a premium, you should consider the risk that a faster than anticipated rate of principal payments could result in an actual yield to such investor that is lower than the anticipated yield.  Further information relating to yield on certificates particularly sensitive to principal prepayments will be included in the applicable prospectus supplement, including, in the case of interest only certificates and principal only certificates, a table demonstrating the particular sensitivity of those interest only certificates to the rate of prepayments.
 
Other Factors Affecting Yield, Weighted Average Life and Maturity
 
Balloon Payments; Extensions of Maturity.  Some or all of the mortgage loans included in a particular trust fund may require that balloon payments be made at maturity.  Because the ability of a borrower to make a balloon payment typically will depend upon its ability either to refinance the loan or to sell the related mortgaged property,
 
 
-17-

 
 
there is a risk that mortgage loans that require balloon payments may default at maturity, or that the maturity of that mortgage loan may be extended in connection with a workout.  In the case of defaults, recovery of proceeds may be delayed by, among other things, bankruptcy of the borrower or adverse conditions in the market where the property is located.  In order to minimize losses on defaulted mortgage loans, the master servicer or a special servicer, to the extent and under the circumstances set forth in this prospectus and in the related prospectus supplement, may be authorized to modify mortgage loans that are in default or as to which a payment default is imminent.  Any defaulted balloon payment or modification that extends the maturity of a mortgage loan may delay distributions of principal on a class of offered certificates and thereby extend the weighted average life of your certificates and, if those certificates were purchased at a discount, reduce your yield.
 
Negative Amortization.  The weighted average life of a class of certificates can be affected by mortgage loans that permit negative amortization to occur.  A mortgage loan that provides for the payment of interest calculated at a rate lower than the rate at which interest accrues on it would be expected during a period of increasing interest rates to amortize at a slower rate (and perhaps not at all) than if interest rates were declining or were remaining constant.  This slower rate of mortgage loan amortization would correspondingly be reflected in a slower rate of amortization for one or more classes of certificates of the related series.  In addition, negative amortization on one or more mortgage loans in any trust fund may result in negative amortization on the certificates of the related series.  The related prospectus supplement will describe, if applicable, the manner in which negative amortization in respect of the mortgage loans in any trust fund is allocated among the respective classes of certificates of the related series.  The portion of any mortgage loan negative amortization allocated to a class of certificates may result in a deferral of some or all of the interest payable on them, which deferred interest may be added to the principal balance of the certificates.  Accordingly, the weighted average lives of mortgage loans that permit negative amortization and that of the classes of certificates to which the negative amortization would be allocated or that would bear the effects of a slower rate of amortization on those mortgage loans, may increase as a result of that feature.
 
Negative amortization also may occur in respect of an adjustable rate mortgage loan that limits the amount by which its scheduled payment may adjust in response to a change in its mortgage interest rate, provides that its scheduled payment will adjust less frequently than its mortgage interest rate or provides for constant scheduled payments notwithstanding adjustments to its mortgage interest rate.  Accordingly, during a period of declining interest rates, the scheduled payment on that 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, thereby resulting in the accelerated amortization of that mortgage loan.  This acceleration in amortization of its principal balance will shorten the weighted average life of that mortgage loan and, correspondingly, the weighted average lives of those classes of certificates entitled to a portion of the principal payments on that mortgage loan.
 
The extent to which the yield on any offered certificate will be affected by the inclusion in the related trust fund of mortgage loans that permit negative amortization, will depend upon (1) whether that offered certificate was purchased at a premium or a discount and (2) the extent to which the payment characteristics of those mortgage loans delay or accelerate the distributions of principal on that certificate or, in the case of an interest-only certificate, delay or accelerate the amortization of the notional amount of that certificate.
 
Foreclosures and Payment Plans.  The number of foreclosures and the principal amount of the mortgage loans that are foreclosed in relation to the number and principal amount of mortgage loans that are repaid in accordance with their terms will affect the weighted average lives of those mortgage loans and, accordingly, the weighted average lives of and yields on the certificates of the related series.  Servicing decisions made with respect to the mortgage loans, including the use of payment plans prior to a demand for acceleration and the restructuring of mortgage loans in bankruptcy proceedings, may also have an effect upon the payment patterns of particular mortgage loans and thus the weighted average lives of and yields on the certificates of the related series.
 
Losses and Shortfalls on the Mortgage Assets.  The yield on your certificates will directly depend on the extent to which you are required to bear the effects of any losses or shortfalls in collections arising out of defaults on the mortgage loans in the related trust fund and the timing of those losses and shortfalls.  In general, the earlier that any loss or shortfall occurs, the greater will be the negative effect on yield for any class of certificates that is required to bear the effects of the shortfall.
 
The amount of any losses or shortfalls in collections on the mortgage assets in any trust fund, to the extent not covered or offset by draws on any reserve fund or under any instrument of credit support, will be allocated among
 
 
-18-

 
 
the respective classes of certificates of the related series in the priority and manner, and subject to the limitations, specified in the related prospectus supplement.  As described in the related prospectus supplement, those allocations may be effected by a reduction in the entitlements to interest and/or principal balances of one or more classes of certificates, or by establishing a priority of payments among those classes of certificates.
 
The yield to maturity on a class of subordinate certificates may be extremely sensitive to losses and shortfalls in collections on the mortgage loans in the related trust fund.
 
Additional Certificate Amortization.  In addition to entitling the holders of one or more classes of a series of certificates to a specified portion, which may during specified periods range from none to all, of the principal payments received on the mortgage assets in the related trust fund, one or more classes of certificates of any series, including one or more classes of offered certificates of those series, may provide for distributions of principal of those certificates from (1) amounts attributable to interest accrued but not currently distributable on one or more classes of accrual certificates, (2) excess funds or (3) any other amounts described in the related prospectus supplement.  In general, “excess funds” as used above will represent that portion of the amounts distributable in respect of the certificates of any series on any distribution date that represent (1) interest received or advanced on the mortgage assets in the related trust fund that is in excess of the interest currently accrued on the certificates of that series, or (2) prepayment premiums, payments from equity participations or any other amounts received on the mortgage assets in the related trust fund that do not constitute interest on, or principal of, those certificates.
 
The amortization of any class of certificates out of the sources described in the preceding paragraph would shorten the weighted average life of those certificates and, if those certificates were purchased at a premium, reduce the yield on those certificates.  The related prospectus supplement will discuss the relevant factors to be considered in determining whether distributions of principal of any class of certificates out of those sources would have any material effect on the rate at which those certificates are amortized.
 
Optional Early Termination.  If so specified in the related prospectus supplement, a series of certificates may be subject to optional early termination through the repurchase of the mortgage assets in the related trust fund by the party or parties specified in the related prospectus supplement, under the circumstances and in the manner set forth in the prospectus supplement.  If so provided in the related prospectus supplement, upon the reduction of the principal balance of a specified class or classes of certificates by a specified percentage or amount, the specified party may be authorized or required to solicit bids for the purchase of all of the mortgage assets of the related trust fund, or of a sufficient portion of those mortgage assets to retire that class or classes, as set forth in the related prospectus supplement.  In the absence of other factors, any early retirement of a class of offered certificates would shorten the weighted average life of those certificates and, if those certificates were purchased at premium, reduce the yield on those certificates.
 
Prepayment Models Are Illustrative Only and Do Not Predict Actual Weighted Average Life and Maturity
 
The rate at which principal payments are received on the mortgage loans in any trust fund will affect the ultimate maturity and the weighted average life of one or more classes of the certificates of that series.  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 certificates of any series will be influenced by the rate at which principal on the related mortgage loans, whether in the form of scheduled amortization or prepayments (for this purpose, the term “prepayment” includes voluntary prepayments, liquidations due to default and purchases of mortgage loans out of the related trust fund), is paid to that class.  Prepayment rates on loans are commonly measured relative to a prepayment standard or model, such as the Constant Prepayment Rate (“CPR”) prepayment model or the Standard Prepayment Assumption (“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 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 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 the loans in the first month of the life of the loans and an additional 0.2% per annum in each month thereafter until the thirtieth
 
 
-19-

 
 
month.  Beginning in the thirtieth month, and in each month thereafter during the life of the loans, 100% of SPA assumes a constant prepayment rate of 6% per annum each month.
 
Neither CPR nor SPA nor any other prepayment model or assumption purports to be a historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any particular pool of loans.  Moreover, the CPR and SPA models were developed based upon historical prepayment experience for single-family loans.  Thus, it is unlikely that the prepayment experience of the mortgage loans included in any trust fund will conform to any particular level of CPR or SPA.
 
The prospectus supplement with respect to each series of certificates will contain tables, if applicable, setting forth the projected weighted average life of each class of offered certificates of those series and the percentage of the initial principal balance of each class that would be outstanding on specified distribution dates based on the assumptions stated in that prospectus supplement, including assumptions that prepayments on the related mortgage loans are made at rates corresponding to various percentages of CPR or SPA, or at other rates specified in that prospectus supplement.  Those tables and assumptions will illustrate the sensitivity of the weighted average lives of the certificates to various assumed prepayment rates and will not be intended to predict, or to provide information that will enable investors to predict, the actual weighted average lives of the certificates.
 
Timing of Prepayments on the Mortgage Loans May Result in Interest Shortfalls on the Certificates
 
When a mortgage loan is prepaid in full, absent a provision in the mortgage loan requiring the borrower to pay interest through the end of the applicable interest accrual period, the mortgagor pays interest on the amount prepaid only to the date of prepayment.  Liquidation proceeds and amounts received in settlement of insurance claims are also likely to include interest only to the time of payment or settlement.  When a mortgage loan is prepaid in full or in part, an interest shortfall may result depending on the timing of the receipt of the prepayment and the timing of when those prepayments are passed through to certificateholders.  To partially mitigate this reduction in yield, the pooling and servicing agreement and/or underlying servicing agreements relating to a series may provide, to the extent specified in the applicable prospectus supplement, that for specified types of principal prepayments received, the applicable master servicer will be obligated, on or before each distribution date, to pay an amount equal to the lesser of (i) the aggregate interest shortfall with respect to the distribution date resulting from those principal prepayments by mortgagors and (ii) all or a portion of the master servicer’s or the special servicer’s, as applicable, servicing compensation for the distribution date as specified in the applicable prospectus supplement or other mechanisms specified in the applicable prospectus supplement.  To the extent these shortfalls from the mortgage loans are not covered by the amount of compensating interest or other mechanisms specified in the applicable prospectus supplement, they will be allocated among the classes of interest bearing certificates as described in the related prospectus supplement under “DESCRIPTION OF THE CERTIFICATES”.  No comparable interest shortfall coverage will be provided by the master servicer with respect to liquidations of any mortgage loans.  Any interest shortfall arising from liquidations will be covered by means of the subordination of the rights of subordinate certificateholders or any other credit support arrangements described in this prospectus.
 
Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans
 
General.  Mortgage loans made on the security of multifamily or commercial property may have a greater likelihood of delinquency and foreclosure, and a greater likelihood of loss than loans made on the security of an owner-occupied single-family property.  The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower.  Therefore, the value of an income-producing property is directly related to the net operating income derived from such property.
 
If the net operating income of the property is reduced (for example, if rental or occupancy rates decline or real estate tax rates or other operating expenses increase), the borrower’s ability to repay the loan may be impaired.  A number of the mortgage loans may be secured by liens on owner-occupied properties or on properties leased to a single tenant or in which only a few tenants produce a material amount of the rental income.  As the primary component of the net operating income of a property, rental income (and maintenance payments from tenant stockholders of a cooperative) and the value of any property are subject to the vagaries of the applicable real estate market and/or business climate.  Properties typically leased, occupied or used on a short-term basis, such as health
 
 
-20-

 
 
care-related facilities, hotels and motels, and mini-warehouse and self-storage facilities, tend to be affected more rapidly by changes in market or business conditions than do properties leased, occupied or used for longer periods, such as (typically) warehouses, retail stores, office buildings and industrial plants.  Commercial Properties may be secured by owner-occupied properties or properties leased to a single tenant.  Therefore, a decline in the financial condition of the borrower or a single tenant may have a disproportionately greater effect on the net operating income from such properties than would be the case with respect to properties with multiple tenants.
 
Changes in the expense components of the net operating income of a property due to the general economic climate or economic conditions in a locality or industry segment, such as (1) increases in interest rates, real estate and personal property tax rates and other operating expenses including energy costs, (2) changes in governmental rules, regulations and fiscal policies, including environmental legislation, and (3) acts of God may also affect the net operating income and the value of the property and the risk of default on the related mortgage loan.  In some cases leases of properties may provide that the lessee, rather than the mortgagor, is responsible for payment of certain of these expenses.  However, because leases are subject to default risks as well as when a tenant’s income is insufficient to cover its rent and operating expenses, the existence of such “net of expense” provisions will only temper, not eliminate, the impact of expense increases on the performance of the related mortgage loan.
 
Additional considerations may be presented by the type and use of a particular property.  For instance, properties that operate as hospitals and nursing homes are subject to significant governmental regulation of the ownership, operation, maintenance and financing of health care institutions.  Hotel, motel and restaurant properties are often operated pursuant to franchise, management or operating agreements that may be terminable by the franchisor or operator.  The transferability of a hotel’s or restaurant’s operating, liquor and other licenses upon a transfer of the hotel or the restaurant, whether through purchase or foreclosure, is subject to local law requirements.
 
In addition, the concentration of default, foreclosure and loss risks in mortgage loans in the trust will generally be greater than for pools of single-family loans because mortgage loans in the trust generally will consist of a smaller number of higher balance loans than would a pool of single-family loans of comparable aggregate unpaid principal balance.
 
Limited Recourse Nature of the Mortgage Loans May Make Recovery Difficult in the Event that a Mortgage Loan Defaults.  We anticipate that some or all of the mortgage loans included in any trust fund will be nonrecourse loans or loans for which recourse may be restricted or unenforceable.  In this type of mortgage loan, recourse in the event of borrower default will be limited to the specific real property and other assets that were pledged to secure the mortgage loan.  However, even with respect to those mortgage loans that provide for recourse against the borrower and its assets, we cannot assure you that enforcement of such recourse provisions will be practicable, or that the assets of the borrower will be sufficient to permit a recovery concerning a defaulted mortgage loan in excess of the liquidation value of the related property.
 
Cross-Collateralization Provisions May Have Limitations on Their Enforceability.  A mortgage pool may include groups of mortgage loans which are cross-collateralized and cross-defaulted.  These arrangements are designed primarily to ensure that all of the collateral pledged to secure the respective mortgage loans in a cross-collateralized group.  Cash flows generated on these type of mortgage loans are available to support debt service on, and ultimate repayment of, the total indebtedness.  These arrangements seek to reduce the risk that the inability of one or more of the mortgaged properties securing any such group of mortgage loans to generate net operating income sufficient to pay debt service will result in defaults and ultimate losses.
 
If the properties securing a group of mortgage loans which are cross-collateralized are not all owned by the same entity, creditors of one or more of the related borrowers could challenge the cross-collateralization arrangement as a fraudulent conveyance.  Under federal and state fraudulent conveyance statutes, the incurring of an obligation or the transfer of property by a person will be subject to avoidance under certain circumstances if the person did not receive fair consideration or reasonably equivalent value in exchange for such obligation or transfer and was then insolvent, was rendered insolvent by such obligation or transfer or had unreasonably small capital for its business.  A creditor seeking to enforce remedies against a property subject to such cross-collateralization to repay such creditor’s claim against the related borrower could assert that:
 
such borrower was insolvent at the time the cross-collateralized mortgage loans were made; and
 
 
 
-21-

 
 
such borrower did not, when it allowed its property to be encumbered by a lien securing the indebtedness represented by the other mortgage loans in the group of cross-collateralized mortgage loans, receive fair consideration or reasonably equivalent value for, in effect, “guaranteeing” the performance of the other borrowers.
 
Although the borrower making such “guarantee” will be receiving “guarantees” from each of the other borrowers in return, we cannot assure you that such exchanged “guarantees” would be found to constitute fair consideration or be of reasonably equivalent value.
 
The cross-collateralized mortgage loans may be secured by mortgage liens on properties located in different states.  Because of various state laws governing foreclosure or the exercise of a power of sale and because foreclosure actions are usually brought in state court, and the courts of one state cannot exercise jurisdiction over property in another state, it may be necessary upon a default under any such mortgage loan to foreclose on the related mortgaged properties in a particular order rather than simultaneously in order to ensure that the lien of the related mortgages is not impaired or released.
 
Increased Risk of Default Associated With Balloon Payments.  Some of the mortgage loans included in the trust may be nonamortizing or only partially amortizing over their terms to maturity.  These types of mortgage loans will require substantial payments of principal and interest (that is, balloon payments) at their stated maturity.  These loans involve a greater likelihood of default than self-amortizing loans because the ability of a borrower to make a balloon payment typically will depend upon its ability either to refinance the loan or to sell the related property.  The ability of a borrower to accomplish either of these goals will be affected by—
 
the value of the related property;
 
the level of available mortgage rates at the time of sale or refinancing;
 
the borrower’s equity in the related property;
 
the financial condition and operating history of the borrower and the related property;
 
tax laws;
 
rent control laws (pertaining to certain residential properties);
 
Medicaid and Medicare reimbursement rates (pertaining to hospitals and nursing homes);
 
prevailing general economic conditions; and
 
the availability of credit for loans secured by multifamily or commercial property.
 
Neither Banc of America Merrill Lynch Commercial Mortgage Inc. nor any of its affiliates will be required to refinance any mortgage loan.
 
As specified in the prospectus supplement, the master servicer or the special servicer will be permitted (within prescribed limits) to extend and modify mortgage loans that are in default or as to which a payment default is imminent.  Although the master servicer or the special servicer generally will be required to determine that any such extension or modification is reasonably likely to produce a greater recovery than liquidation, taking into account the time value of money, we cannot assure you that any such extension or modification will in fact increase the present value of receipts from or proceeds of the affected mortgage loans.
 
The Lender Under a Mortgage Loan May Have Difficulty Collecting Rents Upon the Default and/or Bankruptcy of the Related Borrower.  Each mortgage loan included in the trust secured by property that is subject to leases typically will be secured by an assignment of leases and rents.  Under such an assignment, the mortgagor assigns to the mortgagee its right, title and interest as lessor under the leases of the related property, and the income derived, as further security for the related mortgage loan, while retaining a license to collect rents for so long as there is no
 
 
-22-

 
 
default.  If the borrower defaults, the license terminates and the lender is entitled to collect rents.  Some state laws may require that the lender take possession of the property and obtain a judicial appointment of a receiver before becoming entitled to collect the rents.  In addition, if bankruptcy or similar proceedings are commenced by or in respect of the borrower, the lender’s ability to collect the rents may be adversely affected.
 
The Enforceability of Due-on-Sale and Debt-Acceleration Clauses May Be Limited in Certain Situations.  Mortgages may contain a due-on-sale clause, which permits the lender to accelerate the maturity of the mortgage loan if the borrower sells, transfers or conveys the related property or its interest in the property.  Mortgages also may include a debt-acceleration clause, which permits the lender to accelerate the debt upon a monetary or nonmonetary default of the mortgagor.  Such clauses are generally enforceable subject to certain exceptions.  The courts of all states will enforce clauses providing for acceleration in the event of a material payment default.  The equity courts of any state, however, may refuse the foreclosure of a mortgage or deed of trust when an acceleration of the indebtedness would be inequitable or unjust or the circumstances would render the acceleration unconscionable.
 
Adverse Environmental Conditions May Subject a Mortgage Loan to Additional Risk.  Under the laws of certain states, contamination of real property may give rise to a lien on the property to assure the costs of cleanup.  In several states, such a lien has priority over an existing mortgage lien on such property.  In addition, under the laws of some states and under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, a lender may be liable, as an “owner” or “operator”, for costs of addressing releases or threatened releases of hazardous substances at a property, if agents or employees of the lender have become sufficiently involved in the operations of the borrower, regardless of whether the environmental damage or threat was caused by the borrower or a prior owner.  A lender also risks such liability on foreclosure of the mortgage.
 
Certain Special Hazard Losses May Subject Your Certificates to an Increased Risk of Loss.  Unless otherwise specified in a prospectus supplement, the master servicer and special servicer for the trust will be required to cause the borrower on each mortgage loan in the trust to maintain such insurance coverage in respect of the property as is required under the related mortgage, including hazard insurance.  As described in the prospectus supplement, the master servicer and the special servicer may satisfy its obligation to cause hazard insurance to be maintained with respect to any property through acquisition of a blanket policy.
 
In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the improvements of the property by fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and civil commotion, subject to the conditions and exclusions specified in each policy.  Although the policies covering the properties will be underwritten by different insurers under different state laws in accordance with different applicable state forms, and therefore will not contain identical terms and conditions, most such policies typically do not cover any physical damage resulting from war, revolution, governmental actions, floods and other water-related causes, earth movement (including earthquakes, landslides and mudflows), wet or dry rot, vermin, domestic animals and certain other kinds of risks.  Unless the mortgage specifically requires the mortgagor to insure against physical damage arising from such causes, then, to the extent any consequent losses are not covered by credit support, such losses may be borne, at least in part, by the holders of one or more classes of certificates of the related series.
 
Exercise of Rights by Certain Certificateholders May Be Adverse to Other Certificateholders
 
The pooling and servicing agreement for a series may permit the holder of a class of subordinate certificates or a class of securities backed by a class of certificates to instruct the special servicer with respect to workout arrangements or foreclosure proceedings with respect to delinquent or other specially serviced mortgage loans.  This right is intended to permit the holder of a class of certificates that is highly sensitive to losses on the mortgage loans to attempt to mitigate losses by exercising limited power of direction over servicing activities which accelerate or delay realization of losses on the mortgage loans.  Such directions may, however, be adverse to the interest of those classes of senior certificates that are more sensitive to prepayments than to losses on the mortgage loans.  In particular, accelerating foreclosure will adversely affect the yield to maturity on interest only certificates, while delaying foreclosure will adversely affect the yield to maturity of principal only certificates.
 
Borrower Defaults May Adversely Affect Your Yield
 
The rate and timing of delinquencies or defaults on the mortgage loans will affect:
 
 
-23-

 
 
the aggregate amount of distributions on the offered certificates;
 
their yield to maturity;
 
the rate of principal payments; and
 
their weighted average life.
 
If losses on the mortgage loans exceed the aggregate principal amount of the classes of certificates subordinated to a particular class, such class will suffer a loss equal to the full amount of such excess (up to the outstanding principal amount of such certificate).
 
If you calculate your anticipated yield based on assumed rates of defaults and losses that are lower than the default rate and losses actually experienced and such losses are allocable to your certificates, your actual yield to maturity will be lower than the assumed yield.  Under certain extreme scenarios, such yield could be negative.  In general, the earlier a loss borne by you on your certificates occurs, the greater the effect on your yield to maturity.
 
Even if losses on the mortgage loans are not borne by your certificates, those losses may affect the weighted average life and yield to maturity of your certificates.  This may be so because those losses lead to your certificates having a higher percentage ownership interest in the trust and related distributions of principal payments on the mortgage loans than would otherwise have been the case.  The effect on the weighted average life and yield to maturity of your certificates will depend upon the characteristics of the remaining mortgage loans.
 
Additionally, delinquencies and defaults on the mortgage loans may significantly delay the receipt of distributions by you on your certificates, unless certain advances are made to cover delinquent payments or the subordination of another class of certificates fully offsets the effects of any such delinquency or default.
 
Additionally, the courts of any state may refuse the foreclosure of a mortgage or deed of trust when an acceleration of the indebtedness would be inequitable or unjust or the circumstances would render the action unconscionable.
 
The Borrower’s Form of Entity May Cause Special Risks
 
Most of the borrowers are legal entities rather than individuals.  Mortgage loans made to legal entities may entail risks of loss greater than those of mortgage loans made to individuals.  For example, a legal entity, as opposed to an individual, may be more inclined to seek legal protection from its creditors under the bankruptcy laws.  Unlike individuals involved in bankruptcies, most of the entities generally do not have personal assets and creditworthiness at stake.  The terms of the mortgage loans generally require that the borrowers covenant to be single purpose entities, although in many cases the borrowers are not required to observe all covenants and conditions that typically are required in order for them to be viewed under standard rating agency criteria as “special purpose entities”.  In addition, certain mortgage loans may not have borrower principals.  In general, borrowers’ organizational documents or the terms of the mortgage loans limit their activities to the ownership of only the related mortgaged property or properties and limit the borrowers’ ability to incur additional indebtedness.  These provisions are designed to mitigate the possibility that the borrowers’ financial condition would be adversely impacted by factors unrelated to the mortgaged property and the mortgage loan in the pool.  However, we cannot assure you that the related borrowers will comply with these requirements.  The bankruptcy of a borrower, or a general partner or managing member of a borrower, may impair the ability of the lender to enforce its rights and remedies under the related mortgage.
 
Many of the borrowers are not special purpose entities structured to limit the possibility of becoming insolvent or bankrupt, and therefore may be more likely to become insolvent or the subject of a voluntary or involuntary bankruptcy proceeding because such borrowers may be:
 
operating entities with businesses distinct from the operation of the mortgaged property with the associated liabilities and risks of operating an ongoing business; or
 
individuals that have personal liabilities unrelated to the mortgaged property.
 
 
 
-24-

 
 
However, any borrower, even a special purpose entity structured to be bankruptcy remote, as an owner of real estate will be subject to certain potential liabilities and risks.  We cannot provide assurances that any borrower will not file for bankruptcy protection or that creditors of a borrower or a corporate or individual general partner or managing member of a borrower will not initiate a bankruptcy or similar proceeding against such borrower or corporate or individual general partner or managing member.
 
Furthermore, with respect to any related borrowers, creditors of a common parent in bankruptcy may seek to consolidate the assets of such borrowers with those of the parent.  Consolidation of the assets of such borrowers would likely have an adverse effect on the funds available to make distributions on your certificates, and may lead to a downgrade, withdrawal or qualification of any securities ratings assigned to your certificates.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Bankruptcy Laws” in this prospectus.
 
In addition, with respect to certain mortgage loans, the borrowers may own the related mortgaged property as tenants in common.  These mortgage loans may be subject to prepayment, including during periods when prepayment might otherwise be prohibited, as a result of partition.  Although some of the related borrowers may have purported to waive any right of partition, we cannot assure you that any such waiver would be enforced by a court of competent jurisdiction.
 
Borrower and Related Party Bankruptcy Proceedings Entail Certain Risks
 
Under federal bankruptcy law, the filing of a petition in bankruptcy by or against a borrower will stay the commencement or continuation of a foreclosure action and delay the sale of the real property owned by that borrower.  In addition, even if a court determines that the value of the mortgaged property is less than the principal balance of the mortgage loan it secures, the court may prevent a lender from foreclosing on the mortgaged property (subject to certain protections available to the lender).  As part of a restructuring plan, a court also may reduce the amount of secured indebtedness to the then-current value of the mortgaged property, which action would make the lender a general unsecured creditor for the difference between the then-current value and the amount of its outstanding mortgage indebtedness.  A bankruptcy court also may: (1) grant a debtor a reasonable time to cure a payment default on a mortgage loan; (2) reduce periodic payments due under a mortgage loan; (3) change the rate of interest due on a mortgage loan; or (4) otherwise alter the mortgage loan’s repayment schedule.
 
Moreover, the filing of a petition in bankruptcy by, or on behalf of, a junior lienholder may stay the senior lienholder from taking action to foreclose on the junior lien.  Additionally, the borrower’s trustee or the borrower, as debtor in possession, has certain special powers to avoid, subordinate or disallow debts.  In certain circumstances, the claims of the securitization trustee may be subordinated to financing obtained by a debtor in possession subsequent to its bankruptcy.
 
Under federal bankruptcy law, the mortgagee will be stayed from enforcing a borrower’s assignment of rents and leases.  Federal bankruptcy law also may interfere with the master servicer’s or special servicer’s ability to enforce lockbox requirements.  The legal proceedings necessary to resolve these issues can be time consuming and may significantly delay or diminish the receipt of rents.  Rents also may escape an assignment to the extent they are used by the borrower to maintain the mortgaged property or for other court authorized expenses.
 
As a result of the foregoing, the trustee’s recovery with respect to borrowers in bankruptcy proceedings may be significantly delayed, and the aggregate amount ultimately collected may be substantially less than the amount owed.
 
Certain mortgage loans may have sponsors that have previously filed for bankruptcy protection, which in some cases may have involved the same property that currently secures the mortgage loan.  In each case, the related entity or person has emerged from bankruptcy.  However, we cannot assure you that such sponsors will not be more likely than other sponsors to utilize their rights in bankruptcy in the event of any threatened action by the mortgagee to enforce its rights under the related loan documents.
 
Tenancies in Common May Hinder or Delay Recovery
 
With respect to certain mortgage loans, the borrowers may own the related mortgaged property as tenants in common.  These mortgage loans may be subject to prepayment, including during periods when prepayment might
 
 
-25-

 
 
otherwise be prohibited, as a result of partition.  Although some of the related borrowers may have purported to waive any right of partition, we cannot assure you that any such waiver would be enforced by a court of competent jurisdiction.
 
In general, with respect to a tenant in common ownership structure, each tenant in common owns an undivided share in the property and if such tenant in common desires to sell its interest in the property (and is unable to find a buyer or otherwise needs to force a partition) such tenant in common has the ability to request that a court order a sale of the property and distribute the proceeds to each tenant in common proportionally.  As a result, if a borrower exercises such right of partition, the related mortgage loans may be subject to prepayment.  In addition, the tenant in common structure may cause delays in the enforcement of remedies; this may occur, for example, because of procedural or substantive issues resulting from the existence of multiple borrowers under the related loan, such as in bankruptcy, in which circumstance, each time a tenant in common borrower files for bankruptcy, the bankruptcy court stay will be reinstated.
 
In some cases, the related borrower may be a special purpose entity (in some cases bankruptcy remote), reducing the risk of bankruptcy.  There can be no assurance that a bankruptcy proceeding by a single tenant in common borrower will not delay enforcement of this pooled mortgage loan.  Additionally, in some cases, subject to the terms of the related mortgage loan documents, a borrower or a tenant in common borrower may assign its interests to one or more tenant in common borrowers.  Such change to, or increase in, the number of tenant in common borrowers increases the risks related to this ownership structure.
 
Mortgaged Properties with Tenants Present Special Risks
 
The income from, and market value of, the mortgaged properties leased to various tenants would be adversely affected if:
 
  space in the mortgaged properties could not be leased or relet;
 
  tenants were unable to meet their lease obligations;
 
  leasing or re leasing is restricted by exclusive rights of tenants to lease the mortgaged properties or other covenants not to lease space for certain uses or activities, or covenants limiting the types of tenants to which space may be leased;
 
  substantial re leasing costs were required and/or the cost of performing landlord obligations under existing leases materially increased;
 
  a significant tenant were to become a debtor in a bankruptcy case; or
 
  rental payments could not be collected for any other reason.
 
Repayment of the mortgage loans secured by retail, offices and industrial and warehouse properties will be affected by the expiration of leases and the ability of the respective borrowers to renew the leases or relet the space on comparable terms.  In addition, if a significant portion of tenants have leases which expire near or at maturity of the related mortgage loan, then it may make it more difficult for the related borrower to seek refinancing or make any applicable balloon payment.  Certain of the mortgaged properties may be leased in whole or in part by government sponsored tenants who have the right to cancel their leases at any time or for lack of appropriations.  Other tenants may have the right to cancel or terminate their leases prior to the expiration of the lease term or upon the occurrence of certain events including, but not limited to, the loss of an anchor tenant at the mortgaged property.  Additionally, mortgage loans may have concentrations of leases expiring at varying rates in varying percentages.
 
Even if vacated space is successfully relet, the costs associated with reletting, including tenant improvements and leasing commissions, could be substantial and could reduce cash flow from the mortgaged properties.  Moreover, if a tenant defaults in its obligations to a borrower, the borrower may incur substantial costs and experience significant delays associated with enforcing its rights and protecting its investment, including costs incurred in renovating and reletting the property.
 
 
-26-

 
 
In addition, certain mortgaged properties may have tenants that are paying rent but are not in occupancy or may have vacant space that is not leased, and in certain cases, the occupancy percentage could be less than 80%.  Any “dark” space may cause the mortgaged property to be less desirable to other potential tenants or the related tenant may be more likely to default in its obligations under the lease.  We cannot assure you that those tenants will continue to fulfill their lease obligations or that the space will be relet.
 
Additionally, in certain jurisdictions, if tenant leases are subordinated to the liens created by the mortgage but do not contain attornment provisions (provisions requiring the tenant to recognize as landlord under the lease a successor owner following foreclosure), the leases may terminate upon the transfer of the property to a foreclosing lender or purchaser at foreclosure.  Accordingly, if a mortgaged property is located in such a jurisdiction and is leased to one or more desirable tenants under leases that are subordinate to the mortgage and do not contain attornment provisions, such mortgaged property could experience a further decline in value if such tenants’ leases were terminated.
 
With respect to certain of the mortgage loans, the related borrower has given to certain tenants or others an option to purchase, a right of first refusal or a right of first offer to purchase all or a portion of the mortgaged property in the event a sale is contemplated, and such right is not subordinate to the related mortgage.  This may impede the mortgagee’s ability to sell the related mortgaged property at foreclosure, or, upon foreclosure, this may affect the value and/or marketability of the related mortgaged property.
 
Mortgaged Properties with Multiple Tenants May Increase Reletting Costs and Reduce Cash Flow
 
If a mortgaged property has multiple tenants, reletting expenditures may be more frequent than in the case of mortgaged properties with fewer tenants, thereby reducing the cash flow available for debt service payments.  Multi-tenanted mortgaged properties also may experience higher continuing vacancy rates and greater volatility in rental expenses.
 
Tenant Bankruptcy Adversely Affects Property Performance
 
The bankruptcy or insolvency of a major tenant, or a number of smaller tenants, in retail, office, industrial and warehouse properties may adversely affect the income produced by a mortgaged property.  Under the federal bankruptcy code a tenant has the option of assuming or rejecting any unexpired lease.  If the tenant rejects the lease, the landlord’s claim for breach of the lease would be a general unsecured claim against the tenant (absent collateral securing the claim).  The claim would be limited to the unpaid rent reserved under the lease for the periods prior to the bankruptcy petition (or earlier surrender of the leased premises) which are unrelated to the rejection, plus the greater of one year’s rent or 15% of the remaining reserved rent (but not more than three year’s rent).  There are several cases in which one or more tenants at a mortgaged property have declared bankruptcy.  We cannot assure you that any such tenant will affirm its lease.
 
Risks Related to Enforceability
 
All of the mortgages permit the lender to accelerate the debt upon default by the borrower.  The courts of all states will enforce acceleration clauses in the event of a material payment default.  Courts, however, may refuse to permit foreclosure or acceleration if a default is deemed immaterial or the exercise of those remedies would be unjust or unconscionable.
 
If a mortgaged property has tenants, the borrower typically assigns its income as landlord to the lender as further security, while retaining a license to collect rents as long as there is no default.  If the borrower defaults, the license terminates and the lender is entitled to collect rents.  In certain jurisdictions, such assignments may not be perfected as security interests until the lender takes actual possession of the property’s cash flow.  In some jurisdictions, the lender may not be entitled to collect rents until the lender takes possession of the property and secures the appointment of a receiver.  In addition, as previously discussed, if bankruptcy or similar proceedings are commenced by or for the borrower, the lender’s ability to collect the rents may be adversely affected.
 
 
-27-

 
 
Potential Absence of Attornment Provisions Entails Risks
 
In some jurisdictions, if tenant leases are subordinate to the liens created by the mortgage and do not contain attornment provisions (i.e., provisions requiring the tenant to recognize a successor owner following foreclosure as landlord under the lease), the leases may terminate upon the transfer of the property to a foreclosing lender or purchaser at foreclosure.  Not all leases were reviewed to ascertain the existence of attornment or subordination provisions.  Accordingly, if a mortgaged property is located in such a jurisdiction and is leased to one or more desirable tenants under leases that are subordinate to the mortgage and do not contain attornment provisions, such mortgaged property could experience a further decline in value if such tenants’ leases were terminated.  This is particularly likely if such tenants were paying above market rents or could not be replaced.
 
If a lease is not subordinate to a mortgage, the trust will not possess the right to dispossess the tenant upon foreclosure of the mortgaged property (unless otherwise agreed to with the tenant).  If the lease contains provisions inconsistent with the mortgage (e.g., provisions relating to application of insurance proceeds or condemnation awards) or which could affect the enforcement of the lender’s rights (e.g., a right of first refusal to purchase the property), the provisions of the lease will take precedence over the provisions of the mortgage.
 
Risks Associated with Commercial Lending May Be Different than those for Residential Lending
 
The mortgaged properties consist solely of multifamily rental and commercial properties.  Commercial and multifamily lending is generally viewed as exposing a lender to a greater risk of loss than residential one to four family lending because it usually involves larger loans to a single borrower or a group of related borrowers.
 
The repayment of a commercial or multifamily loan is typically dependent upon the ability of the applicable property to produce cash flow through the collection of rents or other operating revenues.  Even the liquidation value of a commercial property is determined, in substantial part, by the capitalization of the property’s cash flow.  However, net operating income can be volatile and may be insufficient to cover debt service on the loan at any given time.
 
The net operating incomes and property values of the mortgaged properties may be adversely affected by a large number of factors.  Some of these factors relate to the properties themselves, such as:
 
the age, design and construction quality of the properties;
 
perceptions regarding the safety, convenience and attractiveness of the properties;
 
the proximity and attractiveness of competing properties;
 
the adequacy of the property’s management and maintenance;
 
increases in operating expenses;
 
an increase in the capital expenditures needed to maintain the properties or make improvements;
 
dependence upon a single tenant and concentration of tenants in a particular business;
 
a decline in the financial condition of a major tenant;
 
an increase in vacancy rates; and
 
a decline in rental rates as leases are renewed or entered into with new tenants.
 
Other factors are more general in nature, such as:
 
national, regional or local economic conditions, including plant closings, military base closings, industry slowdowns and unemployment rates;
 
local real estate conditions, such as an oversupply of retail space, office space or multifamily housing;
 
 
-28-

 
 
demographic factors;
 
changes or continued weakness in specific industry segments;
 
the public perception of safety for customers and clients;
 
consumer confidence;
 
consumer tastes and preferences;
 
retroactive changes in building codes;
 
conversion of a property to an alternative use;
 
new construction in the market; and
 
number and diversity of tenants.
 
The volatility of net operating income will be influenced by many of the foregoing factors, as well as by:
 
the length of tenant leases;
 
the creditworthiness of tenants;
 
in the case of rental properties, the rate at which new rentals occur;
 
lease termination, rent abatement/offset, co tenancy or exclusivity provisions of tenant leases;
 
tenant defaults;
 
  the property’s “operating leverage” which is generally the percentage of total property expenses in relation to revenue, the ratio of fixed operating expenses to those that vary with revenues, and the level of capital expenditures required to maintain the property and to retain or replace tenants; and
 
  in the case of government sponsored tenants, the right of the tenant in some instances to cancel a lease due to a lack of appropriations.
 
 
Poor Property Management Will Lower the Performance of the Related Mortgaged Property
 
The successful operation of a real estate project depends upon the property manager’s performance and viability.  The property manager is responsible for:
 
responding to changes in the local market;
 
planning and implementing the rental structure;
 
operating the property and providing building services;
 
managing operating expenses; and
 
assuring that maintenance and capital improvements are carried out in a timely fashion.
 
Properties deriving revenues primarily from short term sources, such as short term or month to month leases, are generally more management intensive than properties leased to creditworthy tenants under long term leases.
 
Good management, by controlling costs, providing services to tenants and seeing to property maintenance and upkeep, can, in some cases, improve cash flow, reduce vacancy, leasing and repair costs and preserve property value.  Poor management could impair short-term cash flow and the long term viability of a property.
 
 
-29-

 
 
We make no representation or warranty as to the skills of any present or future managers.  Additionally, we cannot assure you that the property managers will be in a financial condition to fulfill their management responsibilities throughout the terms of their respective management agreements.
 
Furthermore, we cannot assure you that the mortgaged properties will not have related management which in the event that a related management company is incapable of performing its duties may affect one or more sets of mortgaged properties.  We also cannot assure you that the mortgaged properties will not be self-managed by the related borrower, in which case such self-management or affiliated management may make it more difficult to monitor the property management, replace that borrower as property manager in the event that the borrower’s management is detrimentally affecting the property or ensure that the borrower provides all information necessary to manage the mortgaged property to a replacement property manager in the event that the borrower is replaced as property manager.
 
Particular Property Types Present Special Risks
 
 
Retail Properties.
 
Several factors may adversely affect the value and successful operation of a retail property, including:
 
  changes in consumer spending patterns, local competitive conditions (such as the supply of retail space or the existence or construction of new competitive shopping centers or shopping malls);
 
alternative forms of retailing (such as direct mail, video shopping networks and internet web sites which reduce the need for retail space by retail companies);
 
the quality and philosophy of management;
 
the safety, convenience and attractiveness of the property to tenants and their customers or clients;
 
the public perception of the safety of customers at shopping malls and shopping centers;
 
the need to make major repairs or improvements to satisfy the needs of major tenants; and
 
traffic patterns and access to major thoroughfares.
 
The general strength of retail sales also directly affects retail properties.  The retailing industry is currently undergoing consolidation due to many factors, including growth in discount and alternative forms of retailing.  If the sales by tenants in the mortgaged properties that contain retail space were to decline, the rents that are based on a percentage of revenues may also decline, and tenants may be unable to pay the fixed portion of their rents or other occupancy costs.  The cessation of business by a significant tenant can adversely affect a retail property, not only because of rent and other factors specific to such tenant, but also because significant tenants at a retail property play an important part in generating customer traffic and making a retail property a desirable location for other tenants at such property.  In addition, certain tenants at retail properties may be entitled to terminate their leases if an anchor tenant fails to renew or terminates its lease, becomes the subject of a bankruptcy proceeding or ceases operations at such property.
 
The presence or absence of an “anchor tenant” or a “shadow anchor” in or near a shopping center also can be important because anchors play a key role in generating customer traffic and making a shopping center desirable for other tenants.  An “anchor tenant” is usually proportionately larger in size than most other tenants in the mortgaged property, is vital in attracting customers to a retail property and is located on the related mortgaged property.  A “shadow anchor” is usually proportionally larger in size than most tenants in the mortgaged property, is important in attracting customers to a retail property and is located sufficiently close and convenient to the mortgaged property, but not on the mortgaged property, so as to influence and attract potential customers.
 
If anchor stores in a mortgaged property were to close, the related borrower may be unable to replace those anchors in a timely manner or without suffering adverse economic consequences.  Certain of the tenants or anchor stores of the retail properties may have co tenancy clauses and/or operating covenants in their leases or operating
 
 
-30-

 
 
agreements which permit those tenants or anchor stores to cease operating under certain conditions, including, without limitation, certain other stores not being open for business at the mortgaged property or a subject store not meeting the minimum sales requirement under its lease.  In addition, in the event that a “shadow anchor” fails to renew its lease, terminates its lease or otherwise ceases to conduct business within a close proximity to the mortgaged property, customer traffic at the mortgaged property may be substantially reduced.  We cannot assure you that such space will be occupied or that the related mortgaged property will not suffer adverse economic consequences.
 
 
Office Properties.
 
A large number of factors may adversely affect the value of office properties, including:
 
  the number and quality of an office building’s tenants;
 
  the physical attributes of the building in relation to competing buildings (e.g., age, condition, design, access to transportation and ability to offer certain amenities, such as sophisticated building systems);
 
  the desirability of the area as a business location;
 
  the strength and nature of the local economy (including labor costs and quality, tax environment and quality of life for employees);
 
  an adverse change in population, patterns of telecommuting or sharing of office space;
 
  local competitive conditions, including the supply of office space or the existence or construction of new competitive office buildings;
 
  quality of management;
 
  changes in population and employment affecting the demand for office space;
 
  properties not equipped for modern business becoming functionally obsolete; and
 
  declines in the business of tenants, especially single tenanted property.
 
In addition, there may be significant costs associated with tenant improvements, leasing commissions and concessions in connection with reletting office space.  Moreover, the cost of refitting office space for a new tenant is often higher than the cost of refitting other types of property.
 
Medical office properties may be included in office properties.  The performance of a medical office property may depend on the proximity of such property to a hospital or other health care establishment and on reimbursements for patient fees from private or government sponsored insurance companies.  The sudden closure of a nearby hospital may adversely affect the value of a medical office property.  In addition, the performance of a medical office property may depend on reimbursements for patient fees from private or government sponsored insurers and issues related to reimbursement (ranging from non-payment to delays in payment) from such insurers could adversely impact cash flow at such mortgaged properties.  Moreover, medical office properties appeal to a narrow market of tenants and the value of a medical office property may be adversely affected by the availability of competing medical office properties.
 
 
Multifamily Properties.
 
Several factors may adversely affect the value and successful operation of a multifamily property, including:
 
the physical attributes of the apartment building (e.g., its age, appearance and construction quality);
 
the location of the property (e.g., a change in the neighborhood over time);
 
the ability and willingness of management to provide adequate maintenance and insurance;
 
 
-31-

 
 
the types of services or amenities the property provides;
 
the property’s reputation;
 
the level of mortgage interest rates (which may encourage tenants to purchase rather than lease housing);
 
  the tenant mix, such as the tenant population being predominantly students or being heavily dependent on workers from a particular business or personnel from a local military base;
 
the presence of competing properties;
 
  dependence on governmental programs that provide rental subsidies to tenants pursuant to tenant voucher programs, which vouchers may be used at other properties to influence tenant mobility;
 
  adverse local or national economic conditions which may limit the amount of rent that may be charged and may result in a reduction of timely rent payments or a reduction in occupancy levels; and
 
state and local regulations which may affect the building owner’s ability to increase rent to market rent for an equivalent apartment.
 
Certain states regulate the relationship of an owner and its tenants.  Commonly, these laws require a written lease, good cause for eviction, disclosure of fees and notification to residents of changed land use, while prohibiting unreasonable rules, retaliatory evictions and restrictions on a resident’s choice of unit vendors.  Apartment building owners have been the subject of suits under state “Unfair and Deceptive Practices Acts” and other general consumer protection statutes for coercive, abusive or unconscionable leasing and sales practices.  A few states offer more significant protection.  For example, there are provisions that limit the bases on which a landlord may terminate a tenancy or increase its rent or prohibit a landlord from terminating a tenancy solely by reason of the sale of the owner’s building.
 
In addition to state regulation of the landlord tenant relationship, numerous counties and municipalities impose rent control on apartment buildings.  These ordinances may limit rent increases to fixed percentages, to percentages of increases in the consumer price index, to increases set or approved by a governmental agency, or to increases determined through mediation or binding arbitration.  Any limitations on a borrower’s ability to raise property rents may impair such borrower’s ability to repay its multifamily loan from its net operating income or the proceeds of a sale or refinancing of the related multifamily property.
 
Certain of the mortgage loans are secured by mortgaged properties that are eligible (or become eligible in the future) for and have received low income housing tax credits pursuant to Section 42 of the Internal Revenue Code in respect of various units within the mortgaged property or have tenants that rely on rent subsidies under various government funded programs, including the Section 8 Tenant Based Assistance Rental Certificate Program of the United States Department of Housing and Urban Development.  Under HUD's Section 8 Tenant-Based Assistance Rental Voucher Program or Section 8 Tenant-Based Assistance Rental Certificate Program (now combined into one voucher program), the rents charged to some of the tenants are subsidized by housing assistance payments.  Those payments are made pursuant to housing assistance payments contracts between the borrower and a local housing authority which receives Section 8 funds from HUD.  The term of each housing assistance payments contract is limited to the term of the related tenant lease, generally one year, renewable at the option of the tenant.  Tenants may choose to move out of the mortgaged properties and utilize their vouchers elsewhere, and we cannot assure you that those units will be re-rented.  The housing assistance payments contracts impose certain management and maintenance obligations on the borrowers, and housing assistance payments can be suspended, reduced, or terminated if HUD or the local housing authority determines that the borrowers have breached the housing assistance payments contracts.  HUD may in the future elect, or be required by Congress, to take actions with the effect of limiting increases in rents subsidized under Section 8, or reducing rent levels currently in effect.  The ability of the respective borrowers to pay the housing assistance payments loans, and the value of their mortgaged properties and consequent ability to refinance the mortgage loans which are subject to housing assistance payments contracts, could be adversely affected by some or all of the above mentioned risks.  We can give you no assurance that these or any similar programs will be continued in their present form or that the level of assistance provided will
 
 
-32-

 
 
be sufficient to generate enough revenues for the related borrower to meet its obligations under the related mortgage loans.
 
Certain of the mortgage loans are secured or may be secured in the future by mortgaged properties that are subject to certain affordable housing covenants, in respect of various units within the mortgaged properties.
 
 
Hotel Properties.
 
Various factors may adversely affect the economic performance of a hotel, including:
 
adverse economic and social conditions, either local, regional or national (which may limit the amount that can be charged for a room and reduce occupancy levels);
 
the construction of competing hotels or resorts;
 
continuing expenditures for modernizing, refurbishing and maintaining existing facilities prior to the expiration of their anticipated useful lives;
 
a deterioration in the financial strength or managerial capabilities of the owner and operator of a hotel; and
 
  changes in travel patterns (including, for example, the decline in air travel following the terrorist attacks in New York City, Washington, D.C. and Pennsylvania and the current military operations in Afghanistan and Iraq) caused by changes in access, energy prices, strikes, relocation of highways, construction of additional highways or other factors.
 
Because hotel rooms generally are rented for short periods of time, the financial performance of hotels tends to be affected by adverse economic conditions and competition more quickly than other types of commercial properties.
 
Moreover, the hotel and lodging industry is generally seasonal in nature and different seasons affect different hotels depending on type and location.  This seasonality can be expected to cause periodic fluctuations in a hotel property’s room and restaurant revenues, occupancy levels, room rates and operating expenses.
 
When applicable, the liquor licenses for most of the mortgaged properties are commonly held by affiliates of the mortgagors, unaffiliated managers and operating lessees.  The laws and regulations relating to liquor licenses generally prohibit the transfer of such licenses to any person.  In the event of a foreclosure of a hotel property that holds a liquor license, the trustee or a purchaser in a foreclosure sale would likely have to apply for a new license, which might not be granted or might be granted only after a delay which could be significant.  We cannot assure you that a new license could be obtained promptly or at all.  The lack of a liquor license in a full service hotel could have an adverse impact on the revenue from the related mortgaged property or on the hotel’s occupancy rate.
 
Hotels may be operated under franchise, management or operating agreements that may be terminated by the franchisor, manager or operator.  It may be difficult to terminate a manager of a hotel after foreclosure of the related mortgage.
 
The performance of a hotel property affiliated with a franchise or hotel management company depends in part on:
 
the continued existence and financial strength of the franchisor or hotel management company;
 
the public perception of the franchise or hotel chain service mark; and
 
the duration of the franchise licensing or management agreements.
 
Any provision in a franchise agreement or management agreement providing for termination because of a bankruptcy of a franchisor or manager generally will not be enforceable.  Replacement franchises may require significantly higher fees.
 
 
-33-

 
 
 
The transferability of a franchise license agreement is generally restricted.  In the event of a foreclosure, the lender or its agent may not have the right to use the franchise license without the franchisor’s consent.  Conversely, in the case of certain mortgage loans, the lender may be unable to remove a franchisor or a hotel management company that it desires to replace following a foreclosure.
 
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 or to operate property independently of a franchise license. The loss of a franchise license could have a 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.
 
 
 
Self-Storage Properties.
 
Self-storage properties are considered vulnerable to competition, because both acquisition costs and break even occupancy are relatively low.  The conversion of self-storage facilities to alternative uses would generally require substantial capital expenditures.  Thus, if the operation of any of the self-storage properties becomes unprofitable due to:
 
decreased demand;
 
competition;
 
age of improvements; or
 
other factors affecting the borrower’s ability to meet its obligations on the related mortgage loan.
 
The liquidation value of that self-storage mortgaged property may be substantially less, relative to the amount owing on the mortgage loan, than if the self-storage property were readily adaptable to other uses.
 
Tenant privacy, anonymity and efficient access may heighten environmental risks.  No environmental assessment of a mortgaged property included an inspection of the contents of the self-storage units included in the self-storage properties and there is no assurance that all of the units included in the self-storage properties are free from hazardous substances or other pollutants or contaminants or will remain so in the future.
 
 
Industrial and Warehouse Properties.
 
Among the significant factors determining the value of industrial and warehouse properties are:
 
the quality of tenants;
 
building design and adaptability (e.g., clear heights, column spacing, zoning restrictions, number of bays and bay depths, divisibility and truck turning radius); and
 
the location of the property (e.g., proximity to supply sources and customers, availability of labor and accessibility to distribution channels).
 
In addition, industrial and warehouse properties may be adversely affected by reduced demand for industrial and warehouse space occasioned by a decline in a particular industrial site or in a particular industry segment, and a particular industrial and warehouse property may be difficult to relet to another tenant or may become functionally obsolete relative to newer properties.
 
 
-34-

 
 
 
Manufactured Housing Communities.
 
Significant factors determining the value of such properties are generally similar to the factors affecting the value of multifamily properties.  In addition, these properties are special purpose properties that could not be readily converted to general residential, retail or office use.  In fact, certain states also regulate changes in manufactured housing communities and require that the landlord give written notice to its tenants a substantial period of time prior to the projected change.  Consequently, if the operation of any of such properties becomes unprofitable such that the borrower becomes unable to meet its obligation on the related mortgage loan, the liquidation value of the related property may be substantially less, relative to the amount owing on the mortgage loan, than would be the case if such properties were readily adaptable to other uses.
 
 
Parking Garage Facilities.
 
Parking garage facilities present risks not associated with other properties.  Properties used for parking garages are more prone to environmental concerns than other property types.  Aspects of building site design and adaptability affect the value of a parking garage facility.  Site characteristics which are valuable to a parking garage facility include location, ceiling clearance heights, column spacing, zoning restrictions, number of bays and bay depths, divisibility, truck turning radius and overall functionality and accessibility.  In addition, because of the unique construction requirements of many parking garage facilities, any vacant parking garage facility may not be easily converted to other uses.
 
The Operation of the Mortgaged Property upon Foreclosure of the Mortgage Loan May Affect Tax Status
 
If the trust were to acquire a mortgaged property subsequent to a default on the related mortgage loan pursuant to a foreclosure or deed in lieu of foreclosure, the special servicer would be required to retain an independent contractor to operate and manage the mortgaged property.  Among other things, the independent contractor would not be permitted to perform construction work on the mortgaged property unless such construction generally was at least 10% complete at the time default on the related mortgage loan became imminent.  In addition, any net income from such operation and management, other than qualifying “rents from real property” (as defined in Section 856(d) of the Internal Revenue Code of 1986, as amended), or any rental income based on the net profits of a tenant or sub tenant or allocable to a service that is non-customary in the area and for the type of building involved, will subject the trust fund to federal (and possibly state or local) tax on such income at the highest marginal corporate tax rate (currently 35%), thereby reducing net proceeds available for distribution to certificateholders.  In addition, if the trust were to acquire one or more mortgaged properties pursuant to a foreclosure or deed in lieu of foreclosure, upon acquisition of those mortgaged properties, the trust may be required in certain jurisdictions, particularly in New York, to pay state or local transfer or excise taxes upon liquidation of such mortgaged properties.  Such state or local taxes may reduce net proceeds available for distribution to the certificateholders.
 
One Action Rules May Limit Remedies
 
Several states (including California) have laws that prohibit more than one “judicial action” to enforce a mortgage obligation, and some courts have construed the term “judicial action” broadly.  Accordingly, the special servicer is required to obtain advice of counsel prior to enforcing any of the trust fund’s rights under any of the mortgage loans that include mortgaged properties where the rule could be applicable.
 
Property Value May Be Adversely Affected Even When Current Operating Income Is Not
 
Various factors may adversely affect the value of a mortgaged property without affecting the property’s current net operating income.  These factors include, among others:
 
the existence of, or changes in, governmental regulations, fiscal policy, zoning or tax laws;
 
potential environmental legislation or liabilities or other legal liabilities;
 
the availability of refinancing;
 
changes in interest rate levels; and
 
 
-35-

 
 
reduction in, or loss of, real estate tax abatements, exemptions, tax incremental financing arrangements, or similar benefits.
 
Leasehold Interests Are Subject to Terms of the Ground Lease
 
Leasehold mortgages are subject to certain risks not associated with mortgage loans secured by the fee estate of the mortgagor.  The most significant of these risks is that the ground lease may terminate if, among other reasons, the ground lessee breaches or defaults in its obligations under the ground lease or there is a bankruptcy of the ground lessee or the ground lessor.  Accordingly, a leasehold mortgagee may lose the collateral securing its leasehold mortgage.  In addition, although the consent of the ground lessor generally will not be required for foreclosure, the terms and conditions of a leasehold mortgage may be subject to the terms and conditions of the ground lease, and the rights of a ground lessee or a leasehold mortgagee with respect to, among other things, insurance, casualty and condemnation may be affected by the provisions of the ground lease.
 
In Precision Indus. v. Qualitech Steel SBQ, LLC, 327 F.3d 537 (7th Cir. 2003), the United States Court of Appeals for the Seventh Circuit ruled with respect to an unrecorded lease of real property that where a statutory sale of the fee interest in leased property occurs under Section 363(f) of the Bankruptcy Code (11 U.S.C. § 363(f)) upon the bankruptcy of a landlord, such 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.
 
Generally, each related ground lease requires the lessor to give the lender notice of the borrower’s defaults under the ground lease and an opportunity to cure them; permits the leasehold interest to be assigned to the lender or the purchaser at a foreclosure sale (in some cases only upon the consent of the lessor) and contains certain other protective provisions typically included in a “mortgageable” ground lease.
 
Upon the bankruptcy of a lessor or a lessee under a ground lease, the debtor entity has the right to assume or reject the lease.  If a debtor lessor rejects the lease, the lessee has the right to remain in possession of its leased premises for the rent otherwise payable under the lease for the term of the lease (including renewals).  If a debtor lessee/borrower rejects any or all of the lease, the leasehold lender could succeed to the lessee/borrower’s position under the lease only if the lessor specifically grants the lender such right.  If both the lessor and the lessee/borrowers are involved in bankruptcy proceedings, the trustee may be unable to enforce the bankrupt lessee/borrower’s right to refuse to treat a ground lease rejected by a bankrupt lessor as terminated.  In such circumstances, a lease could be terminated notwithstanding lender protection provisions contained therein or in the mortgage.
 
Most of the ground leases securing the mortgaged properties provide that the ground rent increases during the term of the lease.  These increases may adversely affect the cash flow and net income of the borrower from the mortgaged property.
 
Collateral Securing Cooperative Loans May Diminish in Value
 
If specified in the related prospectus supplement, certain of the mortgage loans may be cooperative loans.  There are certain risks that differentiate cooperative loans from other types of mortgage loans.  Ordinarily, the cooperative incurs a blanket mortgage in connection with the construction or purchase of the cooperative’s apartment building and the underlying land.  The interests of the occupants under proprietary leases or occupancy agreements to which the cooperative is a party are generally subordinate to the interest of the holder of the blanket mortgage.  If the cooperative is unable to meet the payment obligations arising under its blanket mortgage, the mortgagee holding the blanket mortgage could foreclose on that mortgage and terminate all subordinate proprietary leases and occupancy agreements.  In addition, the blanket mortgage on a cooperative may provide financing in the form of a mortgage that does not fully amortize with a significant portion of principal being due in one lump sum at final maturity.  The inability of the cooperative to refinance this mortgage and its consequent inability to make such final payment could lead to foreclosure by the mortgagee providing the financing.  A foreclosure in either event by the holder of the blanket mortgage could eliminate or significantly diminish the value of the collateral securing the cooperative loans.
 
 
-36-

 
 
Condominium Ownership May Limit Use and Improvements
 
In the case of condominiums, a board of managers generally has discretion to make decisions affecting the condominium building and there may be no assurance that the borrower under a mortgage loan secured by one or more interests in that condominium will have any control over decisions made by the related board of managers.  Thus, decisions made by that related board of managers, including regarding assessments to be paid by the unit owners, insurance to be maintained on the condominium building and many other decisions affecting the maintenance, repair and, in the event of a casualty or condemnation, restoration of that building, may have a significant impact on the mortgage loans in the trust fund that are secured by mortgaged properties consisting of such condominium interests.  There can be no assurance that the related board of managers will always act in the best interests of the borrower under those mortgage loans.  Further, due to the nature of condominiums, a default under the related mortgage loan will not allow the special servicer the same flexibility in realizing on the collateral as is generally available with respect to properties that are not condominiums.  The rights of other unit owners, the documents governing the management of the condominium units and the state and local laws applicable to condominium units must be considered.  In addition, in the event of a casualty with respect to such a mortgaged property, due to the possible existence of multiple loss payees on any insurance policy covering that mortgaged property, there could be a delay in the allocation of related insurance proceeds, if any.  Consequently, servicing and realizing upon the collateral described above could subject the certificateholders to a greater delay, expense and risk than with respect to a mortgage loan secured by a property that is not a condominium.
 
Zoning Laws and Use Restrictions May Affect the Operation of a Mortgaged Property or the Ability to Repair or Restore a Mortgaged Property
 
Certain of the mortgaged properties may not comply with current zoning laws, including density, use, parking and set back requirements, due to changes in zoning requirements after such mortgaged properties were constructed.  These properties, as well as those for which variances or special permits were issued, are considered to be a “legal non-conforming use” and/or the improvements are considered to be “legal non-conforming structures”.  This means that the borrower is not required to alter the use or structure to comply with the existing or new law; however, the borrower may not be able to rebuild the premises “as is” in the event of a casualty loss.  This may adversely affect the cash flow of the property following the casualty.  If a casualty were to occur, we cannot assure you that insurance proceeds would be available to pay the mortgage loan in full.  In addition, if the property were repaired or restored in conformity with then-current law, the value of the property or the revenue producing potential of the property may not be equal to that which existed before the casualty.
 
In addition, certain of the mortgaged properties which are non-conforming may not be “legal non-conforming uses” or “legal non-conforming structures”.  The failure of a mortgaged property to comply with zoning laws or to be a “legal non-conforming use” or “legal non-conforming structure” may adversely affect market value of the mortgaged property or the borrower’s ability to continue to use it in the manner it is currently being used.
 
In addition, certain of the mortgaged properties may be subject to certain use restrictions imposed pursuant to restrictive covenants, reciprocal easement agreements or operating agreements or, in the case of mortgaged properties that are or constitute a portion of condominiums, condominium declarations or other condominium use restrictions or regulations, especially in a situation where the mortgaged property does not represent the entire condominium property.  Such use restrictions include, for example, limitations on the character of the improvements or the properties, limitations affecting noise and parking requirements, among other things, and limitations on the borrowers’ right to operate certain types of facilities within a prescribed radius.  These limitations could adversely affect the ability of the related borrower to lease the mortgaged property on favorable terms, thus adversely affecting the borrower’s ability to fulfill its obligations under the related mortgage loan.
 
Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses
 
Some of the mortgaged properties may not be readily convertible to alternative uses if those properties were to become unprofitable for any reason or if those properties were designated as historic sites.  Converting commercial properties and manufactured housing communities to alternate uses generally requires substantial capital expenditures.  The liquidation value of a mortgaged property consequently may be substantially less than would be the case if the property were readily adaptable to other uses.
 
 
-37-

 
 
Zoning or other restrictions also may prevent alternative uses.  See “—Zoning Laws and Use Restrictions May Affect the Operation of a Mortgaged Property or the Ability to Repair or Restore a Mortgaged Property” above.
 
Appraisals Are Limited in Reflecting the Value of a Mortgaged Property
 
Appraisals were obtained with respect to each of the mortgaged properties in connection with the origination of the applicable mortgage loan.  In general, appraisals represent the analysis and opinion of qualified appraisers and are not guarantees of present or future value.  One appraiser may reach a different conclusion than the conclusion that would be reached if a different appraiser were appraising that property.  Moreover, appraisals seek to establish the amount a typically motivated buyer would pay a typically motivated seller and, in certain cases, may have taken into consideration the purchase price paid by the borrower.  That amount could be significantly higher than the amount obtained from the sale of a mortgaged property under a distress or liquidation sale.  We cannot assure you that the information set forth in this prospectus supplement regarding appraised values or loan to value ratios accurately reflects past, present or future market values of the mortgaged properties.
 
Risks Relating to Costs of Compliance with Applicable Laws and Regulations
 
A borrower may be required to incur costs to comply with various existing and future federal, state or local laws and regulations applicable to the related mortgaged property, for example, zoning laws and the Americans with Disabilities Act of 1990, as amended, which requires all public accommodations to meet certain federal requirements related to access and use by persons with disabilities.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Americans with Disabilities Act” in this prospectus.  The expenditure of these costs or the imposition of injunctive relief, penalties or fines in connection with the borrower’s noncompliance could negatively impact the borrower’s cash flow and, consequently, its ability to pay its mortgage loan.
 
Additional Compensation to the Servicer Will Affect Your Right To Receive Distributions
 
To the extent described in this prospectus, the master servicer, the special servicer or the trustee, as applicable, will be entitled to receive interest on unreimbursed advances.  This interest will generally accrue from the date on which the related advance is made or the related expense is incurred through the date of reimbursement.  In addition, under certain circumstances, including delinquencies in the payment of principal and interest, a mortgage loan will be specially serviced and the special servicer will be entitled to compensation for special servicing activities.  The right to receive interest on advances or special servicing compensation is senior to the rights of certificateholders to receive distributions on the offered certificates.  The payment of interest on advances and the payment of compensation to the special servicer may lead to shortfalls in amounts otherwise distributable on your certificates.
 
Liquidity for Certificates May Be Limited
 
The certificates will not be listed on any securities exchange or traded on the NASDAQ Stock Market, and there is currently no secondary market for the certificates.  While the underwriters currently intend to make a secondary market in the offered certificates, they are not obligated to do so.  Accordingly, there may not be an active or liquid secondary market for the certificates.  Lack of liquidity could result in a substantial decrease in the market value of the certificates.  Many other factors may affect the market value of the certificates including the then prevailing interest rates.
 
Mortgage Loan Repayments and Prepayments Will Affect Payment
 
As principal payments or prepayments are made on a mortgage loan that is part of a pool of mortgage loans, the pool will be subject to more concentrated risks with respect to the diversity of mortgaged properties, types of mortgaged properties and number of borrowers, as described in the prospectus supplement.  Classes that have a later sequential designation or a lower payment priority are more likely to be exposed to this concentration risk than are classes with an earlier sequential designation or a higher priority.  This is the case because principal on the offered certificates is generally payable in sequential order, and no class entitled to distribution of principal generally receives principal until the principal amount of the preceding class or classes entitled to receive principal have been reduced to zero.
 
 
-38-

 
 
Grace Periods Under the Mortgage Loans May Impact the Master Servicer’s Obligation To Advance
 
The mortgage loans have grace periods for monthly payments ranging from zero to ten days; provided, however, certain states by statute may override the terms of some mortgage loans and increase such grace periods.  In some cases, such grace periods may run past the determination date.  If borrowers pay at the end of such grace periods rather than on the due dates for such monthly payments, the master servicer will be required to make an advance for such monthly payment (and monthly servicing reports will show significant advances as a result) even though the borrower is not technically delinquent under the terms of its mortgage loan.  No interest will accrue on these advances made by the master servicer until after the end of the related grace period.  For purposes of the foregoing discussions, a grace period is the number of days before a late payment charge is due on a mortgage loan, which may be different from the date an event of default would occur under the mortgage loan.
 
Risks to the Mortgaged Properties Relating to Terrorist Attacks and Foreign Conflicts
 
On September 11, 2001, the United States was subjected to multiple terrorist attacks which resulted in considerable uncertainty in the world financial markets.  The terrorist attacks on the World Trade Center and the Pentagon suggest an increased likelihood that large public areas such as shopping malls or large office buildings could become the target of terrorist attacks in the future.  The possibility of such attacks could (i) lead to damage to one or more of the mortgaged properties if any such attacks occur, (ii) result in higher costs for insurance premiums or make terrorism coverage unobtainable or (iii) impact leasing patterns or shopping patterns which could adversely impact leasing revenue and mall traffic and percentage rent.  As a result, the ability of the mortgaged properties to generate cash flow may be adversely affected.  In addition, the United States is engaged in continuing military operations in Iraq, Afghanistan and elsewhere.  It is uncertain what effect these operations will have on domestic and world financial markets, economies, real estate markets, insurance costs or business segments.  The full impact of these events is not yet known but could include, among other things, increased volatility in the price of securities including the certificates.  The terrorist attacks may also adversely affect the revenues or costs of operation of the mortgaged properties.  With respect to shopping patterns, such events have significantly reduced air travel throughout the United States and, therefore, have had a negative effect on revenues in areas heavily dependent on tourism.  The decrease in air travel may have a negative effect on certain of the mortgaged properties that are dependent on tourism or that are located in areas heavily dependent on tourism which could reduce the ability of the affected mortgaged properties to generate cash flow.  The attacks also could result in higher costs for insurance or for security, particularly for larger properties.  Accordingly, these disruptions, uncertainties and costs could materially and adversely affect your investment in the certificates.
 
Inclusion of Delinquent Mortgage Loans in a Mortgage Asset Pool
 
If provided in the prospectus supplement, the trust fund for a particular series of certificates may include mortgage loans that are past due.  However, in no case will delinquent assets constitute 50% or more, as measured by dollar volume, of the mortgage loans backing such series of certificates.  As specified in the related prospectus supplement, the servicing of such mortgage loans will be performed by the special servicer.  The same entity may act as both master servicer and special servicer.  Credit support provided with respect to a particular series of certificates may not cover all losses related to such delinquent mortgage loans, and investors should consider the risk that the inclusion of such mortgage loans in the trust fund may adversely affect the rate of defaults and prepayments concerning the subject mortgage asset pool and the yield on the certificates of such series.
 
Changes to REMIC Restrictions on Loan Modifications May Impact an Investment in the Certificates
 
On September 15, 2009, the IRS issued Revenue Procedure 2009-45 easing the tax requirements for a servicer to modify a commercial or multifamily mortgage loan held in a REMIC or grantor trust by interpreting the circumstances when default is “reasonably foreseeable” to include those where the servicer reasonably believes that there is a “significant risk of default” with respect to the mortgage loan upon maturity of the loan or at an earlier date, and that by making such modification the risk of default is substantially reduced.  Accordingly, if the servicer or the special servicer determined that the mortgage loan was at significant risk of default and permitted one or more modifications otherwise consistent with the terms of the related pooling and servicing agreement, any such modification may impact the timing of payments and ultimate recovery on the mortgage loan, and likewise on one or more classes of certificates in the related series, and the tax status of the REMIC.
 
 
-39-

 
 
In addition, final regulations were issued under the REMIC provisions of the Code that modify the tax restrictions imposed on a servicer’s ability to modify the terms of mortgage loans held by a REMIC relating to changes in the collateral, credit enhancement and recourse features to permit those modifications so long as the mortgage loan remains “principally secured” by real property (within the meaning of the final regulations).  The IRS has also issued Revenue Procedure 2010-30, describing circumstances in which it will not challenge the treatment of mortgage loans as “qualified mortgages” on the grounds that the mortgage loan is not “principally secured by real property”, that is, has a real property loan-to-value ratio greater than 125% following a release of liens on some or all of the real property securing such mortgage loan.  The general rule is that a mortgage loan must continue to be “principally secured by real property” following any such lien release, unless the lien release is pursuant to a defeasance permitted under the original loan documents and occurs more than two years after the startup day of the REMIC, all in accordance with the REMIC provisions.  Revenue Procedure 2010-30 also allows lien releases in certain “grandfathered transactions” and transactions in which the release is part of a “qualified pay-down transaction” even if the mortgage loan after the transaction might not otherwise be treated as principally secured by a lien on real property.  If the value of the real property securing a mortgage loan were to decline, the need to comply with the rules of Revenue Procedure 2010-30 could restrict the servicers’ actions in negotiating the terms of a workout or in allowing minor lien releases in circumstances in which, after giving effect to the release, the mortgage loan would not have a real property loan-to-value ratio of 125% or less.  This could impact the timing and ultimate recovery on a mortgage loan, and likewise on one or more classes of certificates.

 
 
-40-

 

 
PROSPECTUS SUPPLEMENT
 
To the extent appropriate, the prospectus supplement relating to each series of offered certificates will contain—
 
a description of the class or classes of such offered certificates, including the payment provisions with respect to each such class, the aggregate principal amount (if any) of each such class, the rate at which interest accrues from time to time (if at all), with respect to each such class or the method of determining such rate, and whether interest with respect to each such class will accrue from time to time on its aggregate principal amount (if any) or on a specified notional amount (if at all);
 
information with respect to any other classes of certificates of the same series;
 
the respective dates on which distributions are to be made;
 
information as to the assets, including the mortgage assets, constituting the related trust fund;
 
the circumstances, if any, under which the related trust fund may be subject to early termination;
 
additional information with respect to the method of distribution of such offered certificates;
 
whether one or more REMIC elections will be made and the designation of the “regular interests” and “residual interests” in each REMIC to be created and the identity of the person responsible for the various tax-related duties in respect of each REMIC to be created;
 
the initial percentage ownership interest in the related trust fund to be evidenced by each class of certificates of such series;
 
information concerning the trustee of the related trust fund;
 
if the related trust fund includes mortgage loans, information concerning the master servicer and any special servicer of such mortgage loans and the circumstances under which all or a portion, as specified, of the servicing of a mortgage loan would transfer from the master servicer to the special servicer;
 
information as to the nature and extent of subordination of any class of certificates of such series, including a class of offered certificates; and
 
whether such offered certificates will be initially issued in definitive or book-entry form.
 
CAPITALIZED TERMS USED IN THIS PROSPECTUS
 
From time to time we use capitalized terms in this prospectus.  Each of those capitalized terms will have the meaning assigned to it in the “GLOSSARY” attached to this prospectus.

 
 
-41-

 

 
DESCRIPTION OF THE TRUST FUNDS
 
General
 
The primary assets of each trust fund will consist of mortgage assets which will include—
 
various types of multifamily or commercial mortgage loans;
 
pass-through certificates or other mortgage-backed securities that evidence interests in, or that are secured by pledges of, one or more of various types of multifamily or commercial mortgage loans; or
 
a combination of such mortgage loans and mortgage backed securities.
 
We will establish each trust fund and select each mortgage asset.  We will purchase mortgage assets to be included in the trust fund and select each mortgage asset from the Mortgage Asset Seller who may not have originated the mortgage asset or issued the MBS and may be our affiliate.
 
We will not insure or guaranty the mortgage assets nor will any of its affiliates or, unless otherwise provided in the related prospectus supplement, by any governmental agency or instrumentality or by any other person.  The discussion below under the heading “—Mortgage Loans”, unless otherwise noted, applies equally to mortgage loans underlying any MBS included in a particular trust fund.
 
Mortgage Loans
 
General.  The mortgage loans will be evidenced by promissory notes (referred to in this prospectus as mortgage notes) notes secured by mortgages, deeds of trust or similar security instruments (referred to in this prospectus as mortgages) that create first or junior liens on fee or leasehold estates in properties consisting of—
 
residential properties consisting of five or more rental or cooperatively-owned dwelling units in high-rise, mid-rise or garden apartment buildings or other residential structures; or
 
office buildings, retail stores and establishments, hotels or motels, nursing homes, hospitals or other health care-related facilities, recreational vehicle and mobile home parks, warehouse facilities, mini-warehouse facilities, self-storage facilities, industrial plants, parking lots, entertainment or sports arenas, restaurants, marinas, mixed use or various other types of income-producing properties or unimproved land.
 
These multifamily properties may include mixed commercial and residential structures and apartment buildings owned by private cooperative housing corporations.  However, no one of the following types of commercial properties will represent security for a material concentration of the mortgage loans in any trust fund, based on principal balance at the time such trust fund is formed:  (1) restaurants; (2) entertainment or sports arenas; (3) marinas; or (4) nursing homes, hospitals or other health care-related facilities.  Unless otherwise specified in the related prospectus supplement, each mortgage will create a first priority mortgage lien on a borrower’s fee estate in a mortgaged property.  If a mortgage creates a lien on a borrower’s leasehold estate in a property, then, unless otherwise specified in the related prospectus supplement, the term of any such leasehold will exceed the term of the mortgage note by at least ten years.  Unless otherwise specified in the related prospectus supplement, each mortgage loan will have been originated by a person other than us; however, such person may be or may have been our affiliate.
 
If so provided in the related prospectus supplement, mortgage assets for a series of certificates may include mortgage loans secured by junior liens, and the loans secured by the related senior liens may not be included in the mortgage pool.  The primary risk to holders of mortgage loans secured by junior liens is the possibility that adequate funds will not be received in connection with a foreclosure of the related senior liens to satisfy fully both the senior liens and the mortgage loan.  In the event that a holder of a senior lien forecloses on a mortgaged property, the proceeds of the foreclosure or similar sale will be applied first to the payment of court costs and fees in connection
 
 
-42-

 
 
with the foreclosure, second to real estate taxes, third in satisfaction of all principal, interest, prepayment or acceleration penalties, if any, and any other sums due and owing to the holder of the senior liens.  The claims of the holders of the senior liens will be satisfied in full out of proceeds of the liquidation of the related mortgaged property, if such proceeds are sufficient, before the trust fund as holder of the junior lien receives any payments in respect of the mortgage loan.  If the master servicer were to foreclose on any mortgage loan, it would do so subject to any related senior liens.  In order for the debt related to such mortgage loan to be paid in full at such sale, a bidder at the foreclosure sale of such mortgage loan would have to bid an amount sufficient to pay off all sums due under the mortgage loan and any senior liens or purchase the mortgaged property subject to such senior liens.  In the event that such proceeds from a foreclosure or similar sale of the related mortgaged property are insufficient to satisfy all senior liens and the mortgage loan in the aggregate, the trust fund, as the holder of the junior lien, and, accordingly, holders of one or more classes of the certificates of the related series bear—
 
the risk of delay in distributions while a deficiency judgment against the borrower is obtained; and
 
the risk of loss if the deficiency judgment is not obtained and satisfied.  Moreover, deficiency judgments may not be available in certain jurisdictions, or the particular mortgage loan may be a nonrecourse loan, which means that, absent special facts, recourse in the case of default will be limited to the mortgaged property and such other assets, if any, that were pledged to secure repayment of the mortgage loan.
 
If so specified in the related prospectus supplement, the mortgage assets for a particular series of certificates may include mortgage loans that are delinquent as of the date such certificates are issued.  In that case, the related prospectus supplement will set forth, as to each such mortgage loan, available information as to the period of such delinquency, any forbearance arrangement then in effect, the condition of the related mortgaged property and the ability of the mortgaged property to generate income to service the mortgage debt.
 
Default and Loss Considerations with Respect to the Mortgage Loans.  Mortgage loans secured by liens on income-producing properties are substantially different from loans made on the security of owner-occupied single-family homes.  The repayment of a loan secured by a lien on an income-producing property is typically dependent upon the successful operation of such property (that is, its ability to generate income).  Moreover, as noted above, some or all of the mortgage loans included in a particular trust fund may be nonrecourse loans.
 
Lenders typically look to the Debt Service Coverage Ratio of a loan secured by income-producing property as an important factor in evaluating the likelihood of default on such a loan.  The Net Operating Income of a mortgaged property will generally fluctuate over time and may or may not be sufficient to cover debt service on the related mortgage loan at any given time.  As the primary source of the operating revenues of a non-owner occupied, income-producing property, rental income (and, with respect to a mortgage loan secured by a cooperative apartment building, maintenance payments from tenant-stockholders of a cooperative) may be affected by the condition of the applicable real estate market and/or area economy.  In addition, properties typically leased, occupied or used on a short-term basis, such as certain health care-related facilities, hotels and motels, and mini-warehouse and self-storage facilities, tend to be affected more rapidly by changes in market or business conditions than do properties typically leased for longer periods, such as warehouses, retail stores, office buildings and industrial plants.  Commercial Properties may be owner-occupied or leased to a small number of tenants.  Thus, the Net Operating Income of such a mortgaged property may depend substantially on the financial condition of the borrower or a tenant, and mortgage loans secured by liens on such properties may pose a greater likelihood of default and loss than loans secured by liens on Multifamily Properties or on multi-tenant Commercial Properties.
 
Increases in operating expenses due to the general economic climate or economic conditions in a locality or industry segment, such as increases in interest rates, real estate tax rates, energy costs, labor costs and other operating expenses, and/or to changes in governmental rules, regulations and fiscal policies, may also affect the likelihood of default on a mortgage loan.  As may be further described in the related prospectus supplement, in some cases leases of mortgaged properties may provide that the lessee, rather than the borrower/landlord, is responsible for payment of operating expenses.  However, the existence of such “net of expense” provisions will result in stable Net Operating Income to the borrower/landlord only to the extent that the lessee is able to absorb operating expense increases while continuing to make rent payments.
 
 
-43-

 
 
Lenders also look to the Loan-to-Value Ratio of a mortgage loan as a factor in evaluating the likelihood of loss if a property must be liquidated following a default.  The lower the Loan-to-Value Ratio, the greater the percentage of the borrower’s equity in a mortgaged property, and thus (a) the greater the incentive of the borrower to perform under the terms of the related mortgage loan (in order to protect such equity) and (b) the greater the cushion provided to the lender against loss on liquidation following a default.
 
Loan-to-Value Ratios will not necessarily constitute an accurate measure of the likelihood of liquidation loss in a pool of mortgage loans.  For example, the value of a mortgaged property as of the date of initial issuance of the related series of certificates may be less than the value determined at loan origination, and will likely continue to fluctuate from time to time based upon certain factors including changes in economic conditions and the real estate market.  Moreover, even when current, an appraisal is not necessarily a reliable estimate of value.  Appraised values of income-producing properties are generally based on
 
the market comparison method (recent resale value of comparable properties at the date of the appraisal), the cost replacement method (the cost of replacing the property at such date);
 
the income capitalization method (a projection of value based upon the property’s projected net cash flow); and
 
or upon a selection from or interpolation of the values derived from such methods.
 
Each of these appraisal methods can present analytical difficulties.  It is often difficult to find truly comparable properties that have recently been sold; the replacement cost of a property may have little to do with its current market value; and income capitalization is inherently based on inexact projections of income and expense and the selection of an appropriate capitalization rate and discount rate.  Where more than one of these appraisal methods are used and provide significantly different results, an accurate determination of value and, correspondingly, a reliable analysis of the likelihood of default and loss, is even more difficult.
 
Although there may be multiple methods for determining the value of a mortgaged property, value will in all cases be affected by property performance.  As a result, if a mortgage loan defaults because the income generated by the related mortgaged property is insufficient to cover operating costs and expenses and pay debt service, then the value of the mortgaged property will reflect that and a liquidation loss may occur.
 
While we believe that the foregoing considerations are important factors that generally distinguish loans secured by liens on income-producing real estate from single-family mortgage loans, there can be no assurance that all of such factors will in fact have been prudently considered by the originators of the mortgage loans, or that, for a particular mortgage loan, they are complete or relevant.  See “RISK FACTORS—Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans—General” and “—Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans—Increased Risk of Default Associated With Balloon Payments” in this prospectus.
 
Payment Provisions of the Mortgage Loans.  All of the mortgage loans will (1) have had original terms to maturity of not more than 40 years and (2) provide for scheduled payments of principal, interest or both, to be made on specified dates that occur monthly, quarterly, semi-annually or annually.  A mortgage loan may
 
provide for no accrual of interest or for accrual of interest at an interest rate that is fixed over its term or that adjusts from time to time, or that may be converted at the borrower’s election from an adjustable to a fixed Mortgage Rate, or from a fixed to an adjustable Mortgage Rate;
 
provide for level payments to maturity or for payments that adjust from time to time to accommodate changes in its interest rate or to reflect the occurrence of certain events, and may permit negative amortization;
 
may be fully amortizing or may be partially amortizing or nonamortizing, with a balloon payment due on its stated maturity date;
 
may permit the negative amortization or deferral of accrued interest;
 
 
-44-

 
 
may prohibit over its term or for a certain period prepayments and/or require payment of a premium or a yield maintenance payment in connection with certain prepayments;
 
may permit defeasance and the release of real property collateral in connection with that defeasance; and
 
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, in each case as described in the related prospectus supplement.
 
A mortgage loan may also contain a provision that entitles the lender to a share of appreciation of the related mortgaged property, or profits realized from the operation or disposition of such mortgaged property or the benefit, if any, resulting from the refinancing of the mortgage loan, as described in the related prospectus supplement.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Default Interest and Limitations on Prepayments” in the prospectus regarding the enforceability of prepayment premiums and yield maintenance charges.
 
Mortgage Loan Information in Prospectus Supplements.  Each prospectus supplement will contain certain information pertaining to the mortgage loans in the related trust fund, which, to the extent then applicable, will generally include the following:
 
the aggregate outstanding principal balance and the largest, smallest and average outstanding principal balance of the mortgage loans;
 
the type or types of property that provide security for repayment of the mortgage loans;
 
the earliest and latest origination date and maturity date of the mortgage loans;
 
the original and remaining terms to maturity of the mortgage loans, or the respective ranges of such terms to maturity, and the weighted average original and remaining terms to maturity of the mortgage loans;
 
the Loan-to-Value Ratios of the mortgage loans (either at origination or as of a more recent date), or the range of the Loan-to-Value-Ratios, and the weighted average of such Loan-to-Value Ratios;
 
the Mortgage Rates borne by the mortgage loans, or the range of the Mortgage Rate, and the weighted average Mortgage Rate borne by the mortgage loans;
 
with respect to mortgage loans with adjustable Mortgage Rates, the index or indices upon which such adjustments are based, the adjustment dates, the range of gross margins and the weighted average gross margin, and any limits on Mortgage Rate adjustments at the time of any adjustment and over the life of such mortgage loan (the index will be one of the following: one-month, three-month, six-month or one-year LIBOR (an average of the interest rate on one-month, three-month, six-month or one-year dollar-denominated deposits traded between banks in London), CMT (weekly or monthly average yields of U.S.  treasury short and long-term securities, adjusted to a constant maturity), COFI (an index of the weighted average interest rate paid by savings institutions in Nevada, Arizona and California), MTA (a one-year average of the monthly average yields of U.S. treasury securities) or the Prime Rate (an interest rate charged by banks for short-term loans to their most creditworthy customers));
 
information regarding the payment characteristics of the mortgage loans, including, without limitation, balloon payment and other amortization provisions, Lockout Periods and Prepayment Premiums;
 
the Debt Service Coverage Ratios of the mortgage loans (either at origination or as of a more recent date), or the range Debt Service Coverage Ratios, and the weighted average of such Debt Service Coverage Ratios, and
 
the geographic distribution of the mortgaged properties on a state-by-state basis.  In appropriate cases, the related prospectus supplement will also contain certain information available us that pertains to the
 
 
 
-45-

 
 
 
provisions of leases and the nature of tenants of the mortgaged properties.  If we are unable to provide the specific information described above at the time any offered certificates of a series are initially offered, more general information of the nature described above will be provided in the related prospectus supplement, and specific information will be set forth in a report which will be available to purchasers of those certificates at or before their initial issuance and will be filed as part of a Current Report on Form 8-K with the Securities and Exchange Commission (the “SEC”) within fifteen days following their issuance.
 
 
If any mortgage loan, or group of related mortgage loans, constitutes a concentration of credit risk, financial statements or other financial information with respect to the related mortgaged property or mortgaged properties will be included in the related prospectus supplement.
 
If and to the extent available and relevant to an investment decision in the offered certificates of the related series, information regarding the prepayment experience of a master servicer’s multifamily and/or commercial mortgage loan servicing portfolio will be included in the related prospectus supplement.  However, many servicers do not maintain records regarding such matters or, at least, not in a format that can be readily aggregated.  In addition, the relevant characteristics of a master servicer’s servicing portfolio may be so materially different from those of the related mortgage asset pool that such prepayment experience would not be meaningful to an investor.  For example, differences in geographic dispersion, property type and/or loan terms (e.g., mortgage rates, terms to maturity and/or prepayment restrictions) between the two pools of loans could render the master servicer’s prepayment experience irrelevant.  Because of the nature of the assets to be serviced and administered by a special servicer, no comparable prepayment information will be presented with respect to the special servicer’s multifamily and/or commercial mortgage loan servicing portfolio.
 
MBS
 
MBS may include (1) private-label (that is, not issued, insured or guaranteed by the United States or any agency or instrumentality of the United States) mortgage pass-through certificates or other mortgage-backed securities or (2) certificates issued and/or insured or guaranteed by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Governmental National Mortgage Association or the Federal Agricultural Mortgage Corporation; provided that, unless otherwise specified in the related prospectus supplement, each MBS will evidence an interest in, or will be secured by a pledge of, mortgage loans that conform to the descriptions of the mortgage loans contained in this prospectus.
 
Each MBS included in a mortgage asset pool: (a) either will (1) have been previously registered under the Securities Act of 1933, as amended (the “Securities Act”), (2) be exempt from such registration requirements, or (3) have been held for at least the holding period specified in Rule 144(k) under the Securities Act; and (b) will have been acquired (other than from us or any of our affiliates) in bona fide secondary market transactions.
 
Any MBS will have been issued pursuant to a MBS agreement which is a pooling and servicing agreement, an indenture or similar agreement.  The issuer of the MBS and/or the servicer of the underlying mortgage loans will be parties to the MBS agreement, generally together with a trustee or, in the alternative, with the original purchaser or purchasers of the MBS.
 
The MBS may have been issued in one or more classes with characteristics similar to the classes of the offered certificates described in this prospectus.  Distributions in respect of the MBS will be made by the issuer of the MBS, the servicer of the MBS, or the trustee of the MBS agreement or the MBS trustee on the dates specified in the related prospectus supplement.  The issuer of the MBS or the MBS servicer or another person specified in the related prospectus supplement may have the right or obligation to repurchase or substitute assets underlying the MBS after a certain date or under other circumstances specified in the related prospectus supplement.
 
Reserve funds, subordination or other credit support similar to that described for the offered certificates under “DESCRIPTION OF CREDIT SUPPORT” may have been provided with respect to the MBS.  The type, characteristics and amount of such credit support, if any, will be a function of the characteristics of the underlying mortgage loans and other factors and generally will have been established on the basis of the requirements of any rating agency that may have assigned a rating to the MBS, or by the initial purchasers of the MBS.
 
 
-46-

 
 
The prospectus supplement for a series of certificates that evidence interests in MBS will specify, to the extent available
 
the aggregate approximate initial and outstanding principal amount(s) and type of the MBS to be included in the trust fund;
 
the original and remaining term(s) to stated maturity of the MBS, if applicable;
 
the pass-through or bond rate(s) of the MBS or the formula for determining such rate(s);
 
the payment characteristics of the MBS;
 
the issuer of the MBS, servicer of the MBS and trustee of the MBS, as applicable, of each of the MBS;
 
a description of the related credit support, if any;
 
the circumstances under which the related underlying mortgage loans, or the MBS themselves, may be purchased prior to their maturity;
 
the terms on which mortgage loans may be substituted for those originally underlying the MBS;
 
the type of mortgage loans underlying the MBS and, to the extent available and appropriate under the circumstances, such other information in respect of the underlying mortgage loans described under “—Mortgage Loans—Mortgage Loan Information in Prospectus Supplements”; and
 
the characteristics of any cash flow agreements that relate to the MBS.
 
Certificate Accounts
 
Each trust fund will include one or more segregated accounts established and maintained on behalf of the certificateholders into which all payments and collections received or advanced with respect to the mortgage assets and other assets in the trust fund will be deposited to the extent described in this prospectus and in the related prospectus supplement.  See “THE POOLING AND SERVICING AGREEMENTS—Certificate Account”.
 
Credit Support
 
If so provided in the prospectus supplement for a series of certificates, partial or full protection against certain defaults and losses on the mortgage assets in the related trust fund may be provided to one or more classes of certificates of such series in the form of subordination of one or more of the types of credit support described in this prospectus under “DESCRIPTION OF CREDIT SUPPORT”.  The amount and types of credit support, the identity of the entity providing it (if applicable) and related information with respect to each type of credit support, if any, will be set forth in the prospectus supplement for a series of certificates.  See “RISK FACTORS—The Limited Credit Support for Your Certificates May Not Be Sufficient to Prevent Loss on Your Certificates” and “DESCRIPTION OF CREDIT SUPPORT” in this prospectus.
 
Cash Flow Agreements
 
If so provided in the prospectus supplement for a series of certificates, the related trust fund may include guaranteed investment contracts pursuant to which moneys held in the funds and accounts established for such series will be invested at a specified rate.  The related trust fund may also include certain other agreements, such as interest rate exchange agreements, interest rate cap or floor agreements, or other agreements designed to reduce the effects of interest rate fluctuations on the mortgage assets on one or more classes of certificates.  The principal terms of any such cash flow agreement, including, without limitation, provisions relating to the timing, manner and amount of payments and provisions relating to the termination of the cash flow agreement, will be described in the related
 
 
-47-

 
 
prospectus supplement.  The related prospectus supplement will also identify the obligor under any such cash flow agreement.  See “DESCRIPTION OF CREDIT SUPPORT —Cash Flow Agreements” in this prospectus.
 
YIELD AND MATURITY CONSIDERATIONS
 
General
 
The yield on any offered certificate will depend on the price paid by the certificateholder, the pass-through rate of the certificate and the amount and timing of distributions on the certificate.  See “RISK FACTORS—Prepayments on the Underlying Mortgage Loans Will Affect the Average Life of Your Certificates and Your Yield” in this prospectus.  The following discussion contemplates a trust fund that consists solely of mortgage loans.  While the characteristics and behavior of mortgage loans underlying an MBS can generally be expected to have the same effect on the yield to maturity and/or weighted average life of a class of certificates as will the characteristics and behavior of comparable mortgage loans, the effect may differ due to the payment characteristics of the MBS.  If a trust fund includes MBS, the related prospectus supplement will discuss the effect, if any, that the payment characteristics of the MBS may have on the yield to maturity and weighted average lives of the offered certificates of the related series.
 
Pass-Through Rate
 
The certificates of any class within a series may have a fixed, variable or adjustable pass-through rate, which may or may not be based upon the interest rates borne by the mortgage loans in the related trust fund.
 
The prospectus supplement with respect to any series of certificates will specify the pass-through rate for each class of offered certificates of such series or, in the case of a class of offered certificates with a variable or adjustable pass-through rate, the method of determining the pass-through rate; the effect, if any, of the prepayment of any mortgage loan on the pass-through rate of one or more classes of offered certificates; and whether the distributions of interest on the offered certificates of any class will be dependent, in whole or in part, on the performance of any obligor under a cash flow agreement.
 
Payment Delays
 
With respect to any series of certificates, a period of time will elapse between the date upon which payments on the mortgage loans in the related trust fund are due and the Distribution Date on which such payments are passed through to certificateholders.  That delay will effectively reduce the yield that would otherwise be produced if payments on such mortgage loans were distributed to certificateholders on the date they were due.
 
Certain Shortfalls in Collections of Interest
 
When a principal prepayment in full or in part is made on a mortgage loan, the borrower is generally charged interest on the amount of such prepayment only through the date of such prepayment, instead of through the Due Date for the next succeeding scheduled payment.  However, interest accrued on any series of certificates and distributable on any Distribution Date will generally correspond to interest accrued on the mortgage loans to their respective Due Dates during the related Due Period.  If a prepayment on any mortgage loan is distributable to Certificateholders on a particular Distribution Date, but such prepayment is not accompanied by interest to the Due Date for such mortgage loan in the related Due Period, then the interest charged to the borrower (net of servicing and administrative fees) may be less than the corresponding amount of interest accrued and otherwise payable on the certificates of the related series.  If and to the extent that any such shortfall is allocated to a class of offered certificates, the yield will be adversely affected.  The prospectus supplement for each series of certificates will describe the manner in which any such shortfalls will be allocated among the classes of such certificates.  The related prospectus supplement will also describe any amounts available to offset such shortfalls.
 
Yield and Prepayment Considerations
 
A certificate’s yield to maturity will be affected by the rate of principal payments on the mortgage loans in the related trust fund and the allocation the principal payments to reduce the principal balance (or notional amount, if
 
 
-48-

 
 
applicable) of such certificate.  The rate of principal payments on the mortgage loans in any trust fund will in turn be affected by the amortization schedules of the mortgage loans (which, in the case of mortgage loans, may change periodically to accommodate adjustments to the corresponding Mortgage Rates), the dates on which any balloon payments are due, and the rate of principal prepayments (including for this purpose, voluntary prepayments by borrowers and also prepayments resulting from liquidations of mortgage loans due to defaults, casualties or condemnations affecting the related mortgaged properties, or purchases of mortgage loans out of the related trust fund).  Because the rate of principal prepayments on the mortgage loans in any trust fund will depend on future events and a variety of factors (as described below), no assurance can be given as to such rate.
 
The extent to which the yield to maturity of a class of offered certificates of any series may vary from the anticipated yield will depend upon the degree to which they are purchased at a discount or premium and when, and to what degree, payments of principal on the mortgage loans in the related trust fund are in turn distributed on such certificates (or, in the case of a class of Stripped Interest Certificates, result in the reduction of the notional amount of the Stripped Interest Certificates).  An investor should consider, in the case of any offered certificate purchased at a discount, the risk that a slower than anticipated rate of principal payments on the mortgage loans in the related trust fund could result in an actual yield to such investor that is lower than the anticipated yield and, in the case of any offered certificate purchased at a premium, the risk that a faster than anticipated rate of principal payments on such mortgage loans could result in an actual yield to such investor that is lower than the anticipated yield.  In addition, if an investor purchases an offered certificate at a discount (or premium), and principal payments are made in reduction of the principal balance or notional amount of such investor’s offered certificates at a rate slower (or faster) than the rate anticipated by the investor during any particular period, any consequent adverse effects on such investor’s yield would not be fully offset by a subsequent increase (or decrease) in the rate of principal payments.
 
In general, the notional amount of a class of Stripped Interest Certificates will either –
 
be based on the principal balances of some or all of the mortgage assets in the related trust fund; or
 
equal the Certificate Balances of one or more of the other classes of certificates of the same series.
 
Accordingly, the yield on such Stripped Interest Certificates will be inversely related to the rate at which payments and other collections of principal are received on such mortgage assets or distributions are made in reduction of the Certificate Balances of such classes of certificates, as the case may be.
 
Consistent with the foregoing, if a class of certificates of any series consists of Stripped Interest Certificates or Stripped Principal Certificates, a lower than anticipated rate of principal prepayments on the mortgage loans in the related trust fund will negatively affect the yield to investors in Stripped Principal Certificates, and a higher than anticipated rate of principal prepayments on such mortgage loans will negatively affect the yield to investors in Stripped Interest Certificates.  If the offered certificates of a series include any such certificates, the related prospectus supplement will include a table showing the effect of various constant assumed levels of prepayment on yields on such certificates.  Such tables will be intended to illustrate the sensitivity of yields to various constant assumed prepayment rates and will not be intended to predict, or to provide information that will enable investors to predict, yields or prepayment rates.
 
The extent of prepayments of principal of the mortgage loans in any trust fund may be affected by a number of factors, including, without limitation—
 
the availability of mortgage credit, the relative economic vitality of the area in which the mortgaged properties are located;
 
the quality of management of the mortgaged properties;
 
the servicing of the mortgage loans; and
 
possible changes in tax laws and other opportunities for investment.
 
In general, those factors which increase the attractiveness of selling a mortgaged property or refinancing a mortgage loan or which enhance a borrower’s ability to do so, as well as those factors which increase the likelihood
 
 
-49-

 
 
of default under a mortgage loan, would be expected to cause the rate of prepayment in respect of any mortgage asset pool to accelerate.  In contrast, those factors having an opposite effect would be expected to cause the rate of prepayment of any mortgage asset pool to slow.
 
The rate of principal payments on the mortgage loans in any trust fund may also be affected by the existence of Lockout Periods and requirements that principal prepayments be accompanied by prepayment premiums, and by the extent to which such provisions may be practicably enforced.  To the extent enforceable, such provisions could constitute either an absolute prohibition (in the case of a Lockout Period) or a disincentive (in the case of a Prepayment Premium) to a borrower’s voluntarily prepaying its mortgage loan, thereby slowing the rate of prepayments.
 
The rate of prepayment on a pool of mortgage loans is likely to be affected by prevailing market interest rates for mortgage loans of a comparable type, term and risk level.  When the prevailing market interest rate is below a mortgage coupon, a borrower may have an increased incentive to refinance its mortgage loan.  Even in the case of adjustable rate mortgage loans, as prevailing market interest rates decline, and without regard to whether the Mortgage Rates on such adjustable rate mortgage loans decline in a manner consistent with the prevailing market interest rates, the related borrowers may have an increased incentive to refinance for purposes of either (1) converting to a fixed rate loan and thereby “locking in” such rate or (2) taking advantage of a different index, margin or rate cap or floor on another adjustable rate mortgage loan.  Therefore, as prevailing market interest rates decline, prepayment speeds would be expected to accelerate.
 
Depending on prevailing market interest rates, the outlook for market interest rates and economic conditions generally, some borrowers may sell mortgaged properties in order to realize their equity in the mortgaged properties, to meet cash flow needs or to make other investments.  In addition, some borrowers may be motivated by federal and state tax laws (which are subject to change) to sell mortgaged properties prior to the exhaustion of tax depreciation benefits.  We make no representation as to the particular factors that will affect the prepayment of the mortgage loans in any trust fund, as to the relative importance of such factors, as to the percentage of the principal balance of such mortgage loans that will be paid as of any date or as to the overall rate of prepayment on such mortgage loans.
 
Weighted Average Life and Maturity
 
The rate at which principal payments are received on the mortgage loans in any trust fund will affect the ultimate maturity and the weighted average life of one or more classes of the certificates of such series.  Unless otherwise specified in the related prospectus supplement, weighted average life refers to the average amount of time that will elapse from the date of issuance of an instrument until each dollar allocable as principal of such instrument is repaid to the investor.
 
The weighted average life and maturity of a class of certificates of any series will be influenced by the rate at which principal on the related mortgage loans, whether in the form of scheduled amortization or prepayments (for this purpose, the term “prepayment” includes voluntary prepayments by borrowers and also prepayments resulting from liquidations of mortgage loans due to default, casualties or condemnations affecting the related mortgaged properties and purchases of mortgage loans out of the related trust fund), is paid to such class.  Prepayment rates on loans are commonly measured relative to a prepayment standard or model, such as the CPR prepayment model or the SPA prepayment model.  CPR represents an assumed constant rate of prepayment each month (expressed as an annual percentage) relative to the then outstanding principal balance of a pool of mortgage loans for the life of such loans.  SPA represents an assumed variable rate of prepayment each month (expressed as an annual percentage) relative to the then outstanding principal balance of a pool of mortgage loans, with different prepayment assumptions often expressed as percentages of SPA.  For example, a prepayment assumption of 100% of SPA assumes prepayment rates of 0.2% per annum of the then outstanding principal balance of such loans in the first month of the life of the loans and an additional 0.2% per annum in each month thereafter until the thirtieth month.  Beginning in the thirtieth month, and in each month thereafter during the life of the loans, 100% of SPA assumes a constant prepayment rate of 6% per annum each month.
 
Neither CPR nor SPA nor any other prepayment model or assumption purports to be a historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any particular pool of mortgage loans.  Moreover, the CPR and SPA models were developed based upon historical prepayment experience for
 
 
-50-

 
 
single-family mortgage loans.  Thus, it is unlikely that the prepayment experience of the mortgage loans included in any trust fund will conform to any particular level of CPR or SPA.
 
The prospectus supplement with respect to each series of certificates will contain tables, if applicable, setting forth the projected weighted average life of each class of offered certificates of such series with a Certificate Balance, and the percentage of the initial Certificate Balance of each such class that would be outstanding on specified Distribution Dates, based on the assumptions stated in such prospectus supplement, including assumptions that prepayments on the related mortgage loans are made at rates corresponding to various percentages of CPR or SPA, or at such other rates specified in such prospectus supplement.  Such tables and assumptions will illustrate the sensitivity of the weighted average lives of the certificates to various assumed prepayment rates and will not be intended to predict, or to provide information that will enable investors to predict, the actual weighted average lives of the certificates.
 
Other Factors Affecting Yield, Weighted Average Life and Maturity
 
Balloon Payments; Extensions of Maturity.  Some or all of the mortgage loans included in a particular trust fund may require that balloon payments be made at maturity.  Because the ability of a borrower to make a balloon payment typically will depend upon its ability either to refinance the loan or to sell the related mortgaged property, there is a possibility that mortgage loans that require balloon payments may default at maturity, or that the maturity of such a mortgage loan may be extended in connection with a workout.  In the case of defaults, recovery of proceeds may be delayed by, among other things, bankruptcy of the borrower or adverse conditions in the market where the property is located.  In order to minimize losses on defaulted mortgage loans, the master servicer or the special servicer, to the extent and under the circumstances set forth in this prospectus and in the related prospectus supplement, may be authorized to modify mortgage loans that are in default or as to which a payment default is imminent.  Any defaulted balloon payment or modification that extends the maturity of a mortgage loan may delay distributions of principal on a class of offered certificates and thereby extend the weighted average life of such certificates and, if such certificates were purchased at a discount, reduce the yield.
 
Negative Amortization.  The weighted average life of a class of certificates can be affected by mortgage loans that permit negative amortization to occur (that is, mortgage loans that provide for the current payment of interest calculated at a rate lower than the rate at which interest accrues, with the unpaid portion of such interest being added to the related principal balance).  Negative amortization on one or more mortgage loans in any trust fund may result in negative amortization on the offered certificates of the related series.  The related prospectus supplement will describe, if applicable, the manner in which negative amortization in respect of the mortgage loans in any trust fund is allocated among the respective classes of certificates of the related series.  The portion of any mortgage loan negative amortization allocated to a class of certificates may result in a deferral of some or all of the interest payable, which deferred interest may be added to the Certificate Balance of the certificates.  In addition, an adjustable rate mortgage loan that permits negative amortization would be expected during a period of increasing interest rates to amortize at a slower rate (and perhaps not at all) than if interest rates were declining or were remaining constant.  Such slower rate of mortgage loan amortization would correspondingly be reflected in a slower rate of amortization for one or more classes of certificates of the related series.  Accordingly, the weighted average lives of mortgage loans that permit negative amortization (and that of the classes of certificates to which any such negative amortization would be allocated or that would bear the effects of a slower rate of amortization on such mortgage loans) may increase as a result of such feature.
 
Negative amortization may occur in respect of an adjustable rate mortgage loan that
 
limits the amount by which its scheduled payment may adjust in response to a change in its Mortgage Rate;
 
provides that its scheduled payment will adjust less frequently than its Mortgage Rate; or
 
provides for constant scheduled payments notwithstanding adjustments to its Mortgage Rate.
 
Accordingly, during a period of declining interest rates, the scheduled payment on such a mortgage loan may exceed the amount necessary to amortize the loan fully over its remaining amortization schedule and pay interest at the then applicable Mortgage Rate, thereby resulting in the accelerated amortization of such mortgage loan.  Any such acceleration in amortization of its principal balance will shorten the weighted average life of such mortgage
 
 
-51-

 
 
loan and, correspondingly, the weighted average lives of those classes of certificates entitled to a portion of the principal payments on such mortgage loan.
 
The extent to which the yield on any offered certificate will be affected by the inclusion in the related trust fund of mortgage loans that permit negative amortization, will depend upon (1) whether such offered certificate was purchased at a premium or a discount and (2) the extent to which the payment characteristics of such mortgage loans delay or accelerate the distributions of principal on such certificate (or, in the case of a Stripped Interest Certificate, delay or accelerate the reduction of the notional amount of a Stripped Interest Certificate).  See “—Yield and Prepayment Considerations” above.
 
Foreclosures and Payment Plans.  The number of foreclosures and the principal amount of the mortgage loans that are foreclosed in relation to the number and principal amount of mortgage loans that are repaid in accordance with their terms will affect the weighted average lives of those mortgage loans and, accordingly, the weighted average lives of and yields on the certificates of the related series.  Servicing decisions made with respect to the mortgage loans, including the use of payment plans prior to a demand for acceleration and the restructuring of mortgage loans in bankruptcy proceedings or otherwise, may also have an effect upon the payment patterns of particular mortgage loans and thus the weighted average lives of and yields on the certificates of the related series.
 
Losses and Shortfalls on the Mortgage Assets.  The yield to holders of the offered certificates of any series will directly depend on the extent to which such holders are required to bear the effects of any losses or shortfalls in collections arising out of defaults on the mortgage loans in the related trust fund and the timing of such losses and shortfalls.  In general, the earlier that any such loss or shortfall occurs, the greater will be the negative effect on yield for any class of certificates that is required to bear the effects of such loss or shortfall.
 
The amount of any losses or shortfalls in collections on the mortgage assets in any trust fund (to the extent not covered or offset by draws on any reserve fund or under any instrument of credit support) will be allocated among the respective classes of certificates of the related series in the priority and manner, and subject to the limitations, specified in the related prospectus supplement.  As described in the related prospectus supplement, such allocations may be effected by (1) a reduction in the entitlements to interest and/or the Certificate Balances of one or more such classes of certificates and/or (2) establishing a priority of payments among such classes of certificates.
 
The yield to maturity on a class of Subordinate Certificates may be extremely sensitive to losses and shortfalls in collections on the mortgage loans in the related trust fund.
 
Additional Certificate Amortization.  In addition to entitling the holders to a specified portion (which may during specified periods range from none to all) of the principal payments received on the mortgage assets in the related trust fund, one or more classes of certificates of any series, including one or more classes of offered certificates of such series, may provide for distributions of principal from
 
amounts attributable to interest accrued but not currently distributable on one or more classes of Accrual Certificates;
 
Excess Funds; or
 
any other amounts described in the related prospectus supplement.
 
The amortization of any class of certificates out of the sources described in the preceding paragraph would shorten the weighted average life of such certificates and, if such certificates were purchased at a premium, reduce the yield.  The related prospectus supplement will discuss the relevant factors to be considered in determining whether distributions of principal of any class of certificates out of such sources is likely to have any material effect on the rate at which such certificates are amortized and the consequent yield with respect thereto.
 
BANK OF AMERICA, NATIONAL ASSOCIATION, AS SPONSOR
 
Bank of America, National Association (“Bank of America”) will serve as a sponsor of each series of certificates.  One or more entities, which may or may not be affiliated with Bank of America, may also be a sponsor (each, a “Sponsor”) for a series of certificates.  Bank of America is a subsidiary of Bank of America Corporation.  
 
 
-52-

 
 
Bank of America is engaged in a general consumer banking, commercial banking, and trust business, offering a wide range of commercial, corporate, international, financial market, retail and fiduciary banking services.  Bank of America is a national banking association chartered by the Office of the Comptroller of the Currency (the “OCC”) and is subject to the regulation, supervision and examination of the OCC.
 
Bank of America and its affiliates have been active in the securitization market since inception and have sponsored publicly and privately offered securitization transactions since 1977.  Bank of America and its affiliates have been involved with the origination and securitization of residential and commercial mortgage loans and its affiliates have been involved with the origination of auto loans, student loans, home equity loans and credit card receivables as well as less traditional asset classes. Bank of America and its affiliates have served as sponsors, issuers, dealers, and servicers in a wide array of securitization transactions.
 
The Depositor’s securitization program principally is used to fund Bank of America’s commercial real estate business unit’s self-originated portfolio of loans secured by first liens on multifamily and commercial properties.  The Depositor’s securitization program may also include mortgage loans originated through correspondent arrangements.  While Bank of America currently does not rely on securitization as a material funding source, the Depositor’s securitization program is a material funding source for Bank of America’s portfolio of commercial real estate mortgage loans similar to the mortgage loans.
 
The tables below indicate the size and history of the commercial mortgage loan origination program for Bank of America and its affiliates.  Loans originated by for Bank of America and its affiliates have historically included primarily a mix of multifamily, office, retail, hotel and industrial and warehouse properties, though for Bank of America and its affiliates has also regularly originated loans on a variety of other commercial property types, including but not limited to self-storage facilities, manufactured housing communities, parking garage facilities and golf courses.
 
ORIGINATION VOLUME
 
 
(Dollar Amount of Closed Loans)
 
   
YEAR
       
Property Type
 
2007
   
2008
   
2009
   
2010
   
YTD
September 30, 2011
 
Multifamily
  $ 5,727,705,783     $ 138,807,117     $ 143,292,782     $ 0     $ 9,700,000  
Office
    9,754,616,060       52,902,572       467,190,226       435,331,927       280,300,000  
Retail
    4,759,236,250       100,700,000       0       238,220,000       851,906,000  
Industrial
    513,248,639       0       0       20,000,000       270,870,000  
Manufactured Housing
    0       0       0       0       65,835,000  
Self-Storage
    203,753,800       23,450,000       0       44,645,000       132,535,000  
Lodging
    7,311,318,619       1,070,108,333       15,222,390       137,850,000       86,050,000  
Mixed Use
    0       0       0       725,000,000       0  
Total
  $ 28,269,879,151     $ 1,385,968,022     $ 625,705,398     $ 901,046,927     $ 1,697,196,000  
 
Bank of America serves as a Sponsor and, if specified in the applicable prospectus supplement, a master, primary and/or special servicer in the Depositor’s securitization program, in addition to owning all of the Depositor’s equity.
 
Merrill Lynch Pierce Fenner & Smith Incorporated, which may act as an underwriter of certificates, is an affiliate of Bank of America and assists Bank of America and the Depositor in connection with the selection of mortgage loans for various transactions.  See “METHOD OF DISTRIBUTION” in the applicable prospectus supplement.
 
Bank of America’s headquarters and its executive offices are located at 214 North Tryon Street, Charlotte, North Carolina 28255, and the telephone number is (980) 386-8154.
 
See “THE MORTGAGE LOAN PROGRAM”, “BANK OF AMERICA, NATIONAL ASSOCIATION, AS SERVICER” and “THE POOLING AND SERVICING AGREEMENTS” for more information about the Sponsor’s
 
 
-53-

 
 
solicitation and underwriting criteria used to originate mortgage loans similar to the mortgage loans and its material roles and duties in each securitization.
 
Other Originators
 
If any originator or group of affiliated originators, apart from the Sponsor and its affiliates, originated 10% or more of the mortgage loans in a trust fund, the applicable prospectus supplement will disclose the identity of the originator and, if such originator or group of affiliated originators originated 20% or more of the mortgage loans, the applicable prospectus supplement will provide information about the originator’s form of organization and, to the extent material, a description of the originator’s origination program and how long it has been engaged in originating mortgage loans of the same type.  Each mortgage loan will have been underwritten either to the standards set forth above in this prospectus or to other underwriting standards set forth in the applicable prospectus supplement.
 
THE DEPOSITOR
 
Banc of America Merrill Lynch Commercial Mortgage Inc. (the “Depositor”), is a Delaware corporation and was organized on December 13, 1995 for the limited purpose of acquiring, owning and transferring mortgage assets and selling interests in the mortgage assets or bonds secured by the mortgage assets.  The Depositor was originally incorporated in the State of Delaware on December 13, 1995 under the name “NationsLink Funding Corporation” and filed Certificates of Amendment to its  Certificate of Incorporation changing its name to “Banc of America Commercial Mortgage Inc.” on August 24, 2000 and further changing its name to “Banc of America Merrill Lynch Commercial Mortgage Inc.” on July 1, 2010. The Depositor is a subsidiary of Bank of America, National Association.  The Depositor maintains its principal office at Bank of America Tower, One Bryant Park, New York, New York 10036.  The Depositor’s telephone number is (980) 388-7451.
 
Unless otherwise noted in the related prospectus supplement, neither we nor any of our affiliates will insure or guarantee distributions on the certificates of any series.
 
The Depositor and any director, officer, employee or agent of the Depositor shall be indemnified by the trust fund and held harmless against any loss, liability or expense incurred in connection with any legal action relating to the Pooling and Servicing Agreement or the certificates, other than any loss, liability or expense related to any specific mortgage loan or mortgage loans and any loss, liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties under the Pooling and Servicing Agreement or by reason of reckless disregard of its obligations and duties under the Pooling and Servicing Agreement.
 
THE MORTGAGE LOAN PROGRAM
 
Commercial Mortgage Loan Underwriting
 
 
General
 
The Depositor will purchase the mortgage loans from Bank of America, as the Sponsor.  The mortgage loans will have been either (i) originated by Bank of America or (ii) purchased by Bank of America from various entities that either originated the mortgage loans or acquired the mortgage loans pursuant to mortgage loan purchase programs operated by those entities.  The mortgage loans will have been underwritten materially in accordance with one or more of the following: (i) Bank of America’s general underwriting standards set forth below under “General Underwriting Standards or (ii) the underwriting standards set forth in the applicable prospectus supplement.
 
The underwriting standards used by mortgage loan originators are intended to evaluate the value and adequacy of the mortgage property as collateral and the mortgagor’s credit standing and repayment ability.  The underwriting standards used by originators other than Bank of America, unless such other originators use standards materially similar to Bank of America’s underwriting standards, will be described in the applicable prospectus supplement.
 
 
-54-

 
 
 
 
General Underwriting Standards
 
Origination Channels.  Bank of America originates mortgage loans (i) directly or through affiliates to mortgagor/borrowers; (ii) indirectly to mortgagor/borrowers via the use of mortgage loan brokers; and (iii) through other loan originators.
 
[The remainder of the discussion of Bank of America’s loan underwriting practices under this “Commercial Mortgage Loan Underwriting” caption applies also to describe the practices of any affiliate of Bank of America with respect to the origination by such affiliate of loans to be sold by Bank of America in this transaction.]
 
The Application.  Regardless of the channel in which the loan was originated, a mortgage application is completed containing information that assists in evaluating the adequacy of the mortgaged property as collateral for the loan, including the mortgagor’s credit standing and capacity to repay the loan.  During the application process, the applicant is required to authorize Bank of America to obtain a credit report that summarizes the applicant’s credit history and any record of bankruptcy or prior foreclosure.  In addition, the mortgagor and any borrower principal are required to complete a Certificate of Financial Condition which certifies to certain questions regarding its prior credit history.  If the collateral is considered a multifamily dwelling, the mortgagor is also required to submit a Home Mortgage Disclosure Act (HMDA) Data Collection Form which provides certain information in order to allow the federal government to monitor Bank of America’s compliance with equal credit opportunity, fair housing, and home mortgage disclosure laws.
 
Further, the Application requires supporting documentation (or other verification) for all material data provided by the mortgagor described in a checklist, including but not limited to the following:
 
rent roll;
 
existing mortgage verification;
 
credit references;
 
certified financial statements for mortgagor and borrower principals;
 
tenant/resident leases;
 
ground leases;
 
property operating statements;
 
real estate tax bills;
 
purchase contract (if applicable);
 
appraisal;
 
engineering report;
 
seismic report (if applicable);
 
environmental report;
 
site plan;
 
certificate of occupancy;
 
evidence of zoning compliance;
 
insurance policies; and
 
 
 
-55-

 
 
borrower structure/authority documents.
 
Underwriting Evaluation.  Each mortgage loan underwritten to Bank of America’s general underwriting standards is underwritten in accordance with guidelines established by Bank of America’s real estate structured finance group (“Guidelines”).  These underwriting standards applied by Bank of America are intended to evaluate the adequacy of the mortgaged property as collateral for the loan and the mortgagor’s repayment ability and creditworthiness.  The underwriting standards as established in the Guidelines are continually updated to reflect prevailing conditions in the CMBS market, new mortgage products, and the investment market for commercial loans.
 
Bank of America’s real estate structured finance group has the authority, with the approval from the appropriate credit committee to originate fixed-rate and floating-rate, first lien mortgage loans for securitization.  Bank of America’s real estate structured finance group is a vertically integrated entity, staffed by real estate professionals, and includes Bank of America’s loan underwriting, securitization, origination and closing groups.
 
Upon receipt of a loan package, Bank of America’s loan underwriters commence an extensive review of the borrower’s financial condition and creditworthiness as well as the real estate which will secure the loan.
 
Bank of America may utilize third party contractors to perform portions of its underwriting analysis, Bank of America may utilize third party contractors to perform portions of its underwriting analysis, however, any such contractor would apply the same underwriting guidelines.
 
Loan Analysis.  Generally, Bank of America performs both a credit analysis and collateral analysis with respect to a loan applicant and the real estate that will secure the loan.  In general, credit analysis of the borrower and the real estate includes a review of historical financial statements, including rent rolls (generally unaudited), third party credit reports, judgment, lien, bankruptcy and pending litigation searches and, if applicable, the loan payment history of the borrower.  Bank of America also performs a qualitative analysis which incorporates independent credit checks and review of published debt and equity information with respect to certain principals of the borrower as well as the borrower itself.  Borrowers are generally required to be single-purpose entities although they are not always required to be bankruptcy-remote entities.  The collateral analysis includes an analysis of the historical property operating statements, rent rolls and a projection of future performance and a review of tenant leases.  Bank of America requires third party appraisals, as well as environmental and property condition reports.  Each report is reviewed for acceptability by a Bank of America staff member, or an independent contractor, for compliance with program standards and such staff member approves or rejects such report.  The results of these reviews are incorporated into the underwriting report.
 
Loan Approval.  Prior to funding, all mortgage loans must be approved by Bank of America in accordance with its credit policies.
 
Escrow Requirements.  Bank of America generally requires borrowers to fund various escrows for taxes and insurance, capital expenses and replacement reserves.  Generally, the required escrows for mortgage loans originated by Bank of America are as follows:
 
Taxes—Typically an initial deposit and monthly escrow deposits equal to 1/12th of the annual property taxes (based on the most recent property assessment and the current millage rate) are required to provide for sufficient funds to satisfy all taxes and assessments.
 
Insurance—If the property is insured under an individual policy (i.e. the property is not covered by a blanket policy), typically an initial deposit and monthly escrow deposits equal to 1/12th of the annual property insurance premium are required to provide for sufficient funds to pay all insurance premiums.
 
Replacement Reserves—Replacement reserves are calculated based on an engineer’s judgment of the actual physical condition of the improvements and the expected remaining useful life of the improvements of the property during the term of the mortgage loan.
 
 
 
-56-

 
 
Immediate Repair—Typically, an immediate repair reserve is required.  An initial deposit, upon funding of the applicable mortgage loan, generally in an amount equal to 125% of the estimated costs of immediate repairs to be completed generally within the first year of the mortgage loan pursuant to the property condition report is required.
 
Tenant Improvement/Lease Commissions—In some cases, major tenants have lease expirations or termination rights within the mortgage loan term.  To mitigate this risk, special reserves may be required to be funded either at closing of the mortgage loan and/or during the mortgage loan term to cover certain anticipated leasing commissions or tenant improvement costs which might be associated with re-leasing the space occupied by such tenants.
 
Zoning and Building Code Compliance—Bank of America will generally examine whether the use and operation of the mortgaged properties are in material compliance with zoning and land-use related ordinances, rules, regulations and orders applicable to the use of such mortgaged properties at the time such mortgage loans are originated and, as part of its examination, will consider, among other things, legal opinions, certifications from government officials, zoning consultant’s reports and/or representations by the related borrower contained in the related mortgage loan documents and information which is contained in appraisals and surveys, title insurance endorsements, or property condition assessments undertaken by independent licensed engineers.
 
Hazard, Liability and Other Insurance—The mortgage loans generally require that each mortgaged property be insured by a hazard insurance policy in an amount (subject to an approved deductible) at least equal to the lesser of the outstanding principal balance of the related mortgage loan and 100% of the replacement cost of the improvements located on the related mortgaged property, and if applicable, that the related hazard insurance policy contain appropriate endorsements to avoid the application of co-insurance and not permit reduction in insurance proceeds for depreciation; provided that, in the case of certain of the mortgage loans, the hazard insurance may be in such other amounts as was required by the related originators.
 
In addition, if any material improvements on any portion of a mortgaged property securing any mortgage loan, at any time during the term of such mortgage loan is in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, the mortgage loan documents will require generally not less than the least of (a) the outstanding principal balance of the related mortgage loan, (b) the full insurable value of the related mortgaged property, (c) the maximum amount of insurance available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, each as amended, or (d) 100% of the replacement cost of the improvements located on the related mortgaged property.
 
In general, the standard form of hazard insurance policy covers physical damage to, or destruction of, the improvements on the mortgaged property by fire, lightning, explosion, smoke, windstorm and hail, riot or strike and civil commotion, subject to the conditions and exclusions set forth in each policy.
 
Each mortgage loan generally also requires the related borrower to maintain comprehensive general liability insurance against claims for personal and bodily injury, death or property damage occurring on, in or about the related mortgaged property in an amount generally equal to at least $1,000,000 on a per occurrence basis and $2,000,000 in the aggregate.
 
Each mortgage loan generally further requires the related borrower to maintain business interruption insurance in an amount not less than approximately 100% of the gross rental income from the related mortgaged property for not less than twelve (12) months.
 
 
Required Third Party Reports
 
Bank of America underwriters utilize specific information provided by licensed third party professionals in evaluating the collateral.  The following reports are ordered by Bank of America:
 
Appraisal.  An independent appraiser that is either a member of MAI or state certified is required to perform an appraisal (or updated an existing appraisal) of each of the related mortgaged properties in connection with the origination of each mortgage loan to establish the appraised value of the related mortgaged property or properties.  Such appraisal, appraisal update or property valuation is prepared on or about the “Appraisal Date” indicated in the
 
 
-57-

 
 
prospectus supplement, and except for certain mortgaged properties involving operating businesses, the appraiser represented in such appraisal or in a letter or other agreement that the appraisal conformed to the appraisal guidelines set forth in USPAP.  In general, such appraisals represent the analysis and opinions of the respective appraisers at or before the time made, and are not guarantees of, and may not be indicative of, present or future value.  All appraisals are in compliance with FIRREA.
 
Property Condition Assessments.  Inspections of each of the mortgaged properties (other than in the case of mortgaged properties secured solely by an interest in land) are conducted by independent licensed engineers in connection with or subsequent to the origination of the related mortgage loan.  Such inspections are generally commissioned to inspect the exterior walls, roofing, interior construction, mechanical and electrical systems and general condition of the site, buildings and other improvements located at a mortgaged property.  The resulting reports may indicate deferred maintenance items and recommended capital improvements.  The estimated cost of the necessary repairs or replacements at a mortgaged property is included in the related property condition assessment.  In general, with limited exception, cash reserves are established, or other security obtained, to fund or secure the payment of such estimated deferred maintenance or replacement items.  In addition, various mortgage loans require monthly deposits into cash reserve accounts to fund capital expenditures.
 
Environmental Site Assessment (“ESA”).  ESA’s are information-gathering investigations that identify environmental conditions that may impair, restrict the use of, and/or impose an environmental liability to the mortgaged property.  A Phase I ESA consists of inquiries, interviews, inspections, and research of public records to identify known or potential environmental concerns.  A Phase II ESA is a site specific investigation to determine the presence or absence of environmental concerns identified in the Phase I ESA.  Bank of America requires a Phase I ESA for all properties regardless of age or location and each such report must be in compliance with current standards prescribed by The American Society of Testing and Materials (“ASTM”).
 
Seismic Reports.  A seismic report is required for all properties located in Seismic Zones 3 or 4 as determined in accordance with the Uniform Building Code.
 
[As and to the extent described in the related prospectus supplement, the Sponsor will set forth exceptions to its underwriting guidelines.]
 
Representations and Warranties
 
As and to the extent described in the related prospectus supplement, the Sponsor will make representations and warranties regarding the mortgage loans that it transfers to the Depositor for a particular series of certificates.
 
[As and to the extent described in the related prospectus supplement, the Sponsor will set forth exceptions to the representations and warranties regarding the mortgage loans.]
 
BANK OF AMERICA, NATIONAL ASSOCIATION, AS SERVICER
 
General
 
Bank of America has been servicing commercial mortgage loans through its capital markets servicing group in excess of sixteen years.
 
 
Bank of America’s principal servicing offices are located at 900 West Trade Street, Suite 650, Attention: Capital Markets Servicing Group, NC1-026-06-01, Charlotte, North Carolina 28255.
 
 
-58-

 
 
 
The table below sets forth information about Bank of America’s portfolio of commercial mortgage loans as of the dates indicated:
 
Commercial Mortgage Loans
 
As of
December 31,
 2006
   
As of
December 31,
 2007
   
As of
December 31,
 2008
   
As of
December 31,
2009
   
As of
December 31,
2010
   
YTD
September 30,
2011
 
By Number
    9,473       9,476       10,528       9,958       10,280       10,050  
By Aggregate Unpaid Principal Balance
  $ 83,588,000,000     $ 125,378,446,000     $ 135,534,500,000     $ 132,764,400,000     $ 127,494,000,000     $ 120,059,368,273  
 
As of September 30, 2011, Bank of America’s portfolio consisted of 10,050 commercial mortgage loans with an unpaid principal balance of approximately $120,059,368,273, of which 4,437 commercial mortgage loans with an unpaid principal balance of approximately $71,515,715,104 were related to commercial mortgage-backed securities.
 
[Currently, there is no financial conditions that cause material risk to the servicing operations or a material impact on the related pool of mortgage loans or the related assets.]
 
With respect to the collections on the related pool of mortgage loans or the related asset, in accordance with the related Pooling and Servicing Agreement, Bank of America will establish a segregated custodial account.
 
As required by most pooling and servicing agreements, Bank of America may be required to advance funds for delinquent payments, subject to the servicer’s determination of recoverability.  A servicer will advance funds as an advance if a borrower’s payment is late in order to provide a certain amount of liquidity to the related trust fund month over month.  Servicers will make servicing advances or property protection advances for unpaid items on individual loans such as property taxes, insurance payments and life/safety repairs, all subject to the servicer's determination as to whether the advance would be ultimately recoverable.  Upon a determination of non-recoverability, the servicer’s advances are repaid first from certain funds available in the collection account.
 
[Information about periodic advances for the previous three years, to the extent material and to the extent data is available.]
 
In addition to servicing loans for securitized commercial mortgages, Bank of America also services loans that are held in its portfolio, whole loans that are held in the portfolio of third parties and whole loans that are originated by Bank of America and sold to a variety of investors.
 
Bank of America utilizes a mortgage-servicing technology platform with multiple capabilities and reporting functions that is widely used within the commercial mortgage industry.  This platform allows Bank of America to process mortgage servicing activities including but not limited to: (i) performing account maintenance; (ii) tracking borrower communications; (iii) tracking real estate tax escrow and payments, insurance escrow and payments, tracking replacement reserve escrows, operating statement data and rent rolls; (iv) entering and updating transaction data; and (v) generating various reports.
 
Bank of America has implemented and tested a business continuity plan.  In case of a disruption, all functions of the disrupted facility would be transferred to a business recovery facility.  The business recovery facility has access to all data and tools necessary to continue servicing all mortgage loans.  Bank of America’s business continuity plan is tested and updated annually.
 
Bank of America’s servicing policies and procedures are updated annually to keep pace with the changes in the industry and have been generally consistent for the last three years in all material respects.  The only significant changes in Bank of America’s policies and procedures have come in response to changes in federal or state law (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act) or investor requirements, such as updates issued by Federal National Mortgage Association or Federal Home Loan Mortgage Corporation.  Bank of America may perform any of its obligations under a pooling and servicing agreement through one or more third-party vendors, affiliates or subsidiaries.  Bank of America may engage third-party vendors to
 
 
-59-

 
 
provide technology or process efficiencies.  Bank of America monitors its third-party vendors in compliance with the guidelines reviewed by the OCC.  Bank of America has entered into contracts with third-party vendors for functions such as annual property inspections, real estate tax payment and tracking, hazard insurance, lockbox services and document printing.  Bank of America may also retain certain firms to act as a primary servicer and to provide cashiering or non-cashiering subservicing on certain loans.
 
Loans are serviced in accordance with the related loan agreements, mortgage documents, pooling and servicing agreements, inter-creditor agreements, if applicable, and the applicable servicing standard.
 
Custody services of original documents evidencing the mortgage loans for a particular series will typically be performed by the related trustee.  On occasion, Bank of America as servicer may have custody of certain of such documents as necessary for enforcement actions involving particular mortgage loans or otherwise.  To the extent Bank of America performs custodial functions as servicer, documents will be maintained in its vault.  Bank of America utilizes an electronic tracking system to identify the owner of the related mortgage file.
 
Property Damage.  When an underlying property is damaged and such damage is covered by insurance, Bank of America takes certain actions to ensure that the property is restored to its original condition.  These actions include depositing the insurance proceeds and funding the restoration of the property as would be done for a construction loan.  Bank of America maintains the staff to collect and review insurance policies and/or certificates relating to the coverages required under the mortgage loan documents.  Bank of America may, from time to time, retain a vendor to assist in the collection and review of insurance policies and/or certificates relating to the coverages required under the mortgage loan documents.  The vendor provides a feed to the Bank of America’s loan servicing system to provide updated information.
 
Special Servicing
 
 
Delinquencies, Losses, Bankruptcies and Recoveries
 
Bank of America monitors mortgage loans for a variety of situations that present the risk of delinquency or loss to a trust.  Those situations include, without limitation, situations where a mortgagor has sold or transferred the related mortgaged property, where there has been damage to the related mortgaged property, where the mortgagor is late in making payments for any number of reasons, and where the mortgagor has declared bankruptcy.  The following is a brief description of Bank of America’s policies and procedures to respond to each of these situations.
 
Collections and Loss Mitigation.  Account status is monitored and efforts are made to prevent a mortgage loan on which a payment is delinquent from going to foreclosure.  Based on account payment history, prior contact with the borrower, property status, and various other factors, an appropriate course of action is employed to make direct mail or phone contact with the borrower(s).  All of the preceding factors are considered when determining the appropriate timing for the contact efforts.
 
Initial phone contact is pursued by Bank of America’s collections department, when a loan payment is not received after the applicable grace period.  Each call made by the collection department attempts to: (i) obtain the reason for default; (ii) obtain information related to the mortgagor’s current financial situation; (iii) verify occupancy.  Loans serviced by Bank of America generally have grace periods of five to fifteen days after the Due Date in which a borrower can make a monthly payment without incurring a penalty or late charge.  In addition, a mortgage loan is not considered delinquent unless a full monthly payment has not been received by the close of business on the last day of the month of the Due Date.  For example, a mortgage loan with a Due Date of May 1 is considered delinquent if a full monthly payment is not received by May 31.
 
Late charges are generally assessed after the Due Date at the expiration of a grace period, if applicable.   There may be situations, based on the customer or account circumstances, where a late fee could be waived, providing the late fee is not required to pay interest on advances to a trust fund in accordance with the related pooling and servicing agreement.  Generally, the borrower is sent a reminder notice between the expiration of the grace period and 30 days delinquent.
 
The borrower is sent a notice of default when the payment has not been made after 30 days.  Notice periods are more specifically spelled out in individual loan documents.  General default communications may continue with a
 
 
-60-

 
 
late fee notice, account billing statements, breach letters, loss mitigation solicitations, occupancy and property status inquiries.  If after 30 days the payment has not been received, generally pooling and servicing agreements require the loan to be transferred to special servicing for default processing.  In recognition of the fact that mortgage loans that are delinquent are at higher risk for abandonment by the borrower, and may also face issues related to maintenance, Bank of America has developed guidelines for inspecting properties for which a monthly payment is delinquent.  Depending on various factors, such as the ability to contact the customer, the delinquency status of the account, and the property occupancy status, Bank of America will hire a vendor to inspect the related property to determine its condition.  If the inspection results indicate a need for property safeguarding measures, such as securing or winterizing, Bank of America will ensure the appropriate safeguards are implemented in accordance with industry, legal and investor standards.
 
Delinquent mortgage loans are reviewed for loss mitigation options, which can include a promise to pay, repayment plan, forbearance, moratorium, modification, special forbearance, deed-in-lieu of foreclosure, assumption, sale of property, demand arrears, or foreclosure.  Bank of America will opt for any one or more of these mitigation options depending on various factors, but will pursue more extensive loss mitigation solutions when a suitable arrangement for repayment or promise to pay is not feasible because of the borrower’s financial situation or unwillingness to support the property.  Payment activities on delinquent mortgage loans are monitored to ensure the appropriate application of partial payments where specific arrangements have been agreed to allow partial payments and to ensure an appropriate response to situations in which a customer has paid with a check that is returned for insufficient funds.  Asset plans are prepared by the 60th day after the loan has been transferred to Bank of America, as special servicer, per pooling and servicing agreement requirements (or as otherwise required to do so by the related pooling and servicing agreements).  If a workout or modification can be achieved with the borrower on the asset, the asset may be returned to the related trust fund as a corrected mortgage loan.
 
Bankruptcy.  When a mortgagor files for bankruptcy, Bank of America’s options for recovery are more limited.  Bank of America monitors bankruptcy proceedings and develops appropriate responses based on a variety of factors, including: (i) the chapter of the Bankruptcy Code under which the mortgagor filed; (ii) federal, state and local regulations; (iii) determination-of-claim requirements; (iv) motion requirements; and (v) specific orders issued through the applicable court.  Bank of America works in conjunction with its in-house and outside legal counsel to file all proof of claims, review plans, make objections and file motions for relief.
 
Foreclosure.  Bank of America, as Special Servicer works in conjunction with its in-house and outside legal counsel to foreclose a property when (i) it is apparent that foreclosure is the only resolution for the asset; and/or (ii) it determines in its reasonable judgment that it is in the best interest of the related trust fund.  Once the property is foreclosed and REO; Bank of America will work with its pre-approved vendors to either (i) sell the property or (ii) recondition, if necessary, and lease the property in preparation for liquidation.  Losses may be experienced on a mortgage loan during the real estate owned process if the value of the property at time of liquidation is less than the sum of the unpaid principal balance and all outstanding advances (including, but not limited to, the outstanding unpaid principal balance of the mortgage loan, interest advances, escrow advances, uncollected servicing fees, property maintenance fees, attorney fees, and other necessary fees).
 
Other Servicers
 
In the event that Bank of America or another servicer appoints a sub-servicer that meets the thresholds provided in Item 1108(a)(3) of Regulation AB (17 CFR 229.1108), the applicable prospectus supplement will provide the disclosure required by Item 1108(b) and (c) of Regulation AB (17 CFR 229.1108).  In the event that such appointment occurs after the issuance of the related series of certificates, the Depositor will report such appointment on Form 8-K.
 
DESCRIPTION OF THE CERTIFICATES
 
General
 
Each series of certificates will represent the entire beneficial ownership interest in the trust fund created pursuant to the related pooling and servicing agreement.  As described in the related prospectus supplement, the
 
 
-61-

 
 
certificates of each series, including the certificates of such series being offered for sale, may consist of one or more classes of certificates that, among other things:
 
provide for the accrual of interest on the Certificate Balance or Notional Amount at a fixed, variable or adjustable rate;
 
constitute Senior Certificates or Subordinate Certificates;
 
constitute Stripped Interest Certificates or Stripped Principal Certificates;
 
provide for distributions of interest or principal that commence only after the occurrence of certain events, such as the retirement of one or more other classes of certificates of such series;
 
provide for distributions of principal to be made, from time to time or for designated periods, at a rate that is faster (and, in some cases, substantially faster) or slower (and, in some cases, substantially slower) than the rate at which payments or other collections of principal are received on the mortgage assets in the related trust fund;
 
provide for distributions based solely or primarily on specified mortgage assets or a specified group of mortgage assets in the related trust fund;
 
provide for distributions of principal to be made, subject to available funds, based on a specified principal payment schedule or other methodology;
 
provide for distributions based on collections on the mortgage assets in the related trust fund attributable to Prepayment Premiums and Equity Participations or
 
be exchangeable, either separately or together with one or more classes of certificates, for one or more other classes of certificates.
 
If so specified in the related prospectus supplement, a class of certificates may have two or more component parts, each having characteristics that are otherwise described in this prospectus as being attributable to separate and distinct classes.  For example, a class of certificates may have a Certificate Balance on which it accrues interest at a fixed, variable or adjustable rate.  Such class of certificates may also have certain characteristics attributable to Stripped Interest Certificates insofar as it may also entitle the holders of Stripped Interest Certificates to distributions of interest accrued on a Notional Amount at a different fixed, variable or adjustable rate.  In addition, a class of certificates may accrue interest on one portion of its Certificate Balance at one fixed, variable or adjustable rate and on another portion of its Certificate Balance at a different fixed, variable or adjustable rate.
 
Each class of offered certificates of a series will be issued in minimum denominations corresponding to the principal balances or, in case of certain classes of Stripped Interest Certificates or REMIC Residual Certificates, notional amounts or percentage interests, specified in the related prospectus supplement.  As provided in the related prospectus supplement, one or more classes of offered certificates of any series may be issued in fully registered, definitive form or may be offered in book-entry format through the facilities of DTC.  The offered certificates of each series (if issued in fully registered definitive form) may be transferred or exchanged, subject to any restrictions on transfer described in the related prospectus supplement, at the location specified in the related prospectus supplement, without the payment of any service charges, other than any tax or other governmental charge payable in connection with that transfer or exchange.  Interests in a class of certificates offered in book-entry format will be transferred on the book-entry records of DTC and its participating organizations.  If so specified in the related prospectus supplement, arrangements may be made for clearance and settlement through Clearstream Banking, société anonyme, or Euroclear Bank S.A./N.V., as operator of the Euroclear System (in Europe), if they are participants in DTC.
 
 
-62-

 
 
Distributions
 
Distributions on the certificates of each series will be made on each Distribution Date from the Available Distribution Amount for such series and such Distribution Date.  The particular components of the Available Distribution Amount for any series and Distribution Date will be more specifically described in the related prospectus supplement.  Except as otherwise specified in the related prospectus supplement, the Distribution Date for a series of certificates will be the 11th day of each month (or, if any such 11th day is not a business day, the next succeeding business day), commencing in the month immediately following the month in which such series of certificates is issued.
 
Except as otherwise specified in the related prospectus supplement, distributions on the certificates of each series (other than the final distribution in retirement of any such certificate) will be made to the persons in whose names such certificates are registered at the close of business on the Record Date, and the amount of each distribution will be determined as of the close of business on the date specified in the related prospectus supplement.  All distributions with respect to each class of certificates on each Distribution Date will be allocated pro rata among the outstanding certificates in such class in proportion to the respective percentage interests evidenced by those certificates unless otherwise specified in the related prospectus supplement.  Payments will be made either by wire transfer in immediately available funds to the account of a certificateholder at a bank or other entity having appropriate facilities therefor, if such certificateholder has provided the person required to make such payments with wiring instructions no later than the related Record Date or such other date specified in the related prospectus supplement (and, if so provided in the related prospectus supplement, such certificate-holder holds certificates in the requisite amount or denomination specified in the prospectus supplement), or by check mailed to the address of such certificateholder as it appears on the Certificate Register; provided, however, the final distribution in retirement of any class of certificates (whether issued in fully registered definitive form or in book-entry format) will be made only upon presentation and surrender of such certificates at the location specified in the notice to certificateholders of such final distribution.
 
Distributions of Interest on the Certificates
 
Each class of certificates of each series (other than certain classes of Stripped Principal Certificates and certain classes of REMIC Residual Certificates that have no pass-through rate) may have a different pass-through rate, which in each case may be fixed, variable or adjustable.  The related prospectus supplement will specify the pass-through rate or, in the case of a variable or adjustable pass-through rate, the method for determining the pass-through rate, for each class of offered certificates.  Unless otherwise specified in the related prospectus supplement, interest on the certificates of each series will be calculated on the basis of a 360-day year consisting of twelve 30-day months.
 
Distributions of interest in respect of any class of certificates (other than a class of Accrual Certificates, which will be entitled to distributions of accrued interest commencing only on the Distribution Date or under the circumstances specified in the related prospectus supplement, and other than any class of Stripped Principal Certificates or REMIC Residual Certificates that is not entitled to any distributions of interest) will be made on each Distribution Date based on the Accrued Certificate Interest for such class and such Distribution Date, subject to the sufficiency of that portion, if any, of the Available Distribution Amount allocable to such class on such Distribution Date.  Prior to the time interest is distributable on any class of Accrual Certificates, the amount of Accrued Certificate Interest otherwise distributable on such class will be added to the Certificate Balance of such Accrual Certificates on each Distribution Date or otherwise deferred as described in the related prospectus supplement.  Unless otherwise provided in the related prospectus supplement, the Accrued Certificate Interest for each Distribution Date on a class of Stripped Interest Certificates will be similarly calculated except that it will accrue on a Notional Amount.  Reference to a Notional Amount with respect to a class of Stripped Interest Certificates is solely for convenience in making certain calculations and does not represent the right to receive any distributions of principal.  If so specified in the related prospectus supplement, the amount of Accrued Certificate Interest that is otherwise distributable on (or, in the case of Accrual Certificates, that may otherwise be added to the Certificate Balance of) one or more classes of the certificates of a series may be reduced to the extent that any Prepayment Interest Shortfalls, as described under “YIELD AND MATURITY CONSIDERATIONS—Certain Shortfalls in Collections of Interest”, exceed the amount of any sums that are applied to offset the amount of such shortfalls.  The particular manner in which such shortfalls will be allocated among some or all of the classes of certificates of that
 
 
-63-

 
 
series will be specified in the related prospectus supplement.  The related prospectus supplement will also describe the extent to which the amount of Accrued Certificate Interest that is otherwise distributable on (or, in the case of Accrual Certificates, that may otherwise be added to the Certificate Balance of) a class of offered certificates may be reduced as a result of any other contingencies, including delinquencies, losses and deferred interest on or in respect of the mortgage assets in the related trust fund.  Unless otherwise provided in the related prospectus supplement, any reduction in the amount of Accrued Certificate Interest otherwise distributable on a class of certificates by reason of the allocation to such class of a portion of any deferred interest on or in respect of the mortgage assets in the related trust fund will result in a corresponding increase in the Certificate Balance of such class.  See “RISK FACTORS—Prepayments on the Underlying Mortgage Loans Will Affect the Average Life of Your Certificates and Your Yield” and “YIELD AND MATURITY CONSIDERATIONS —Certain Shortfalls in Collections of Interest”.
 
Distributions of Principal on the Certificates
 
Each class of certificates of each series (other than certain classes of Stripped Interest Certificates and certain classes of REMIC Residual Certificates) will have a Certificate Balance, which, at any time, will equal the then maximum amount that the holders of certificates of such class will be entitled to receive as principal out of the future cash flow on the mortgage assets and other assets included in the related trust fund.  The outstanding Certificate Balance of a class of certificates will be reduced by distributions of principal made from time to time and, if and to the extent so provided in the related prospectus supplement, further by any losses incurred in respect of the related mortgage assets allocated thereto from time to time.  In turn, the outstanding Certificate Balance of a class of certificates may be increased as a result of any deferred interest on or in respect of the related mortgage assets being allocated thereto from time to time, and will be increased, in the case of a class of Accrual Certificates prior to the Distribution Date on which distributions of interest are required to commence, by the amount of any Accrued Certificate Interest in respect of such Accrual Certificate (reduced as described above).  The initial aggregate Certificate Balance of all classes of a series of certificates will not be greater than the aggregate outstanding principal balance of the related mortgage assets as of a specified date, after application of scheduled payments due on or before such date, whether or not received.  The initial Certificate Balance of each class of a series of certificates will be specified in the related prospectus supplement.  As and to the extent described in the related prospectus supplement, distributions of principal with respect to a series of certificates will be made on each Distribution Date to the holders of the class or classes of certificates of such series entitled thereto until the Certificate Balances of such certificates have been reduced to zero.  Distributions of principal with respect to one or more classes of certificates may be made at a rate that is faster (and, in some cases, substantially faster) than the rate at which payments or other collections of principal are received on the mortgage assets in the related trust fund.  Distributions of principal with respect to one or more classes of certificates may not commence until the occurrence of certain events, such as the retirement of one or more other classes of certificates of the same series, or may be made at a rate that is slower (and, in some cases, substantially slower) than the rate at which payments or other collections of principal are received on the mortgage assets in the related trust fund.  Distributions of principal with respect to Controlled Amortization Classes may be made, subject to available funds, based on a specified principal payment schedule.  Distributions of principal with respect to Companion Classes may be contingent on the specified principal payment schedule for a Controlled Amortization Class of the same series and the rate at which payments and other collections of principal on the mortgage assets in the related trust fund are received.  Unless otherwise specified in the related prospectus supplement, distributions of principal of any class of offered certificates will be made on a pro rata basis among all of the certificates of such class.
 
Distributions on the Certificates Concerning Prepayment Premiums or Concerning Equity Participations
 
If so provided in the related prospectus supplement, Prepayment Premiums or payments in respect of Equity Participations received on or in connection with the mortgage assets in any trust fund will be distributed on each Distribution Date to the holders of the class of certificates of the related series entitled thereto in accordance with the provisions described in such prospectus supplement.  Alternatively, we or any of our affiliates may retain such items or by any other specified person and/or may be excluded as trust assets.
 
Allocation of Losses and Shortfalls
 
The amount of any losses or shortfalls in collections on the mortgage assets in any trust fund (to the extent not covered or offset by draws on any reserve fund or under any instrument of credit support) will be allocated among
 
 
-64-

 
 
the respective classes of certificates of the related series in the priority and manner, and subject to the limitations, specified in the related prospectus supplement.  As described in the related prospectus supplement, such allocations may be effected by (1) a reduction in the entitlements to interest and/or the Certificate Balances of one or more such classes of certificates and/or (2) establishing a priority of payments among such classes of certificates.  See “DESCRIPTION OF CREDIT SUPPORT”.
 
Advances in Respect of Delinquencies
 
If and to the extent provided in the related prospectus supplement, if a trust fund includes mortgage loans, the master servicer, the special servicer, the trustee, any provider of credit support and/or any other specified person may be obligated to advance, or have the option of advancing, on or before each Distribution Date, from its or their own funds or from excess funds held in the related Certificate Account that are not part of the Available Distribution Amount for the related series of certificates for such Distribution Date, an amount up to the aggregate of any payments of principal (other than the principal portion of any balloon payments) and interest that were due on or in respect of such mortgage loans during the related Due Period and were delinquent on the related Determination Date.
 
Advances are intended to maintain a regular flow of scheduled interest and principal payments to holders of the class or classes of certificates entitled thereto, rather than to guarantee or insure against losses.  Accordingly, all advances made out of a specific entity’s own funds will be reimbursable out of related recoveries on the mortgage loans (including amounts drawn under any fund or instrument constituting credit support) respecting which such advances were made and such other specific sources as may be identified in the related prospectus supplement, including, in the case of a series that includes one or more classes of Subordinate Certificates, if so identified, collections on other mortgage assets in the related trust fund that would otherwise be distributable to the holders of one or more classes of such Subordinate Certificates.  No advance will be required to be made by a master servicer, special servicer or trustee if, in the judgment of the master servicer, special servicer or trustee, as the case may be, such advance would not be recoverable from recoveries on the mortgage loans or another specifically identified source.  Unless otherwise specified in the related prospectus supplement, this will be based on the advancing party’s estimation of the value of the mortgaged property in relation to the sum of the unpaid principal balance of the related mortgage loan, accrued interest, the amount of previously unreimbursed Advances and anticipated disposition expenses, and the advancing party’s determination that the advance would not ultimately be recoverable under any applicable insurance policies, from proceeds of liquidation of the mortgage loan or otherwise.  If previously made by a master servicer, special servicer or trustee, such an advance will be reimbursable thereto from any amounts in the related Certificate Account prior to any distributions being made to the related series of certificateholders.
 
If advances have been made by a master servicer, special servicer, trustee or other entity from excess funds in a Certificate Account, such master servicer, special servicer, trustee or other entity, as the case may be, will be required to replace such funds in such Certificate Account on or prior to any future Distribution Date to the extent that funds in such Certificate Account on such Distribution Date are less than payments required to be made to the related series of certificateholders on such date.  If so specified in the related prospectus supplement, the obligation of a master servicer, special servicer, trustee or other entity to make advances may be secured by a cash advance reserve fund or a surety bond.  If applicable, information regarding the characteristics of, and the identity of any obligor on, any such surety bond, will be set forth in the related prospectus supplement.
 
If and to the extent so provided in the related prospectus supplement, any entity making advances will be entitled to receive interest on certain or all of such advances for a specified period during which such advances are outstanding at the rate specified in such prospectus supplement, and such entity will be entitled to payment of such interest periodically from general collections on the mortgage loans in the related trust fund prior to any payment to the related series of certificateholders or as otherwise provided in the related pooling and servicing agreement and described in such prospectus supplement.
 
The prospectus supplement for any series of certificates evidencing an interest in a trust fund that includes MBS will describe any comparable advancing obligation of a party to the related pooling and servicing agreement or of a party to the agreement pursuant to which the MBS was issued.
 
 
-65-

 
 
 
Reports to Certificateholders
 
On each Distribution Date, together with the distribution to the holders of each class of the offered certificates of a series, a master servicer, manager or trustee, as provided in the related prospectus supplement, will forward to each such holder, a Distribution Date Statement that, unless otherwise provided in the related prospectus supplement, will set forth, among other things, in each case to the extent applicable and available and unless otherwise specified in the related prospectus supplement:
 
theamount of such distribution to holders of such class of offered certificates that was applied to reduce the Certificate Balance of such class;
 
the amount of such distribution to holders of such class of offered certificates that was applied to pay Accrued Certificate Interest;
 
the amount, if any, of such distribution to holders of such class of offered certificates that was allocable to (A) Prepayment Premiums and (B) payments on account of Equity Participations;
 
the amount, if any, by which such distribution is less than the amounts to which holders of such class of offered certificates are entitled;
 
if the related trust fund includes mortgage loans, the aggregate amount of advances included in such distribution;
 
if the related trust fund includes mortgage loans, the amount of servicing compensation received by the related master servicer (and, if payable directly out of the related trust fund, by any special servicer and any sub-servicer) and, if the related trust fund includes MBS, the amount of administrative compensation received by the MBS Administrator;
 
information regarding the aggregate principal balance of the related mortgage assets on or about such Distribution Date;
 
if the related trust fund includes mortgage loans, information regarding the number and aggregate principal balance of such mortgage loans that are delinquent;
 
if the related trust fund includes mortgage loans, information regarding the aggregate amount of losses incurred and principal prepayments made with respect to such mortgage loans during the specified period, generally corresponding in length to the period between Distribution Dates, during which prepayments and other unscheduled collections on the mortgage loans in the related trust fund must be received in order to be distributed on a particular Distribution Date);
 
the Certificate Balance or Notional Amount, as the case may be, of such class of certificates at the close of business on such Distribution Date, separately identifying any reduction in such Certificate Balance or Notional Amount due to the allocation of any losses in respect of the related mortgage assets, any increase in such Certificate Balance or Notional Amount due to the allocation of any negative amortization in respect of the related mortgage assets and any increase in the Certificate Balance of a class of Accrual Certificates, if any, in the event that Accrued Certificate Interest has been added to such balance;
 
if such class of offered certificates has a variable pass-through rate or an adjustable pass-through rate, the pass-through rate applicable thereto for such Distribution Date and, if determinable, for the next succeeding Distribution Date;
 
the amount deposited in or withdrawn from any reserve fund on such Distribution Date, and the amount remaining on deposit in such reserve fund as of the close of business on such Distribution Date;
 
 
 
-66-

 
 
if the related trust fund includes one or more instruments of credit support, such as a letter of credit, an insurance policy and/or a surety bond, the amount of coverage under each such instrument as of the close of business on such Distribution Date; and
 
the amount of credit support being afforded by any classes of Subordinate Certificates.
 
In the case of information furnished pursuant to the first 3 bulleted items above, the amounts will be expressed as a dollar amount per specified denomination of the relevant class of offered certificates or as a percentage.  The prospectus supplement for each series of certificates may describe additional information to be included in reports to the holders of the offered certificates of such series.
 
Each Distribution Date Statement will be filed with the SEC within 15 days after each Distribution Date on Form 10-D.  In addition, within a reasonable period of time after the end of each calendar year, the master servicer, manager or trustee for a series of certificates, as the case may be, will be required to furnish to each person who at any time during the calendar year was a holder of an offered certificate of such series a statement containing the information set forth in the first 3 bulleted items above, aggregated for such calendar year or the applicable portion during which such person was a certificateholder.  Such obligation will be deemed to have been satisfied to the extent that substantially comparable information is provided pursuant to any requirements of the Internal Revenue Code of 1986, as amended, are from time to time in force.  See, however, “—Book-Entry Registration and Definitive Certificates” below.
 
If the trust fund for a series of certificates includes MBS, the ability of the related master servicer, manager or trustee, as the case may be, to include in any Distribution Date Statement information regarding the mortgage loans underlying such MBS will depend on the reports received with respect to such MBS.  In such cases, the related prospectus supplement will describe the loan-specific information to be included in the Distribution Date Statements that will be forwarded to the holders of the offered certificates of that series in connection with distributions made to them.
 
Voting Rights
 
The voting rights evidenced by each series of certificates will be allocated among the respective classes of such series in the manner described in the related prospectus supplement.
 
Certificateholders will generally not have a right to vote, except with respect to required consents to certain amendments to the related pooling and servicing agreement and as otherwise specified in the related prospectus supplement.  See “THE POOLING AND SERVICING AGREEMENTS—Amendment”.  The holders of specified amounts of certificates of a particular series will have the right to act as a group to remove the related trustee and also upon the occurrence of certain events which if continuing would constitute an Event of Default on the part of the related master servicer, special servicer or REMIC administrator.  See “THE POOLING AND SERVICING AGREEMENTS—Events of Default”, “—Rights Upon Event of Default” and “—Resignation and Removal of the Trustee”.
 
Termination
 
The obligations created by the pooling and servicing agreement for each series of certificates will terminate following (1) the final payment or other liquidation of the last mortgage asset subject thereto or the disposition of all property acquired upon foreclosure of any mortgage loan subject thereto and (2) the payment (or provision for payment) to the certificateholders of that series of all amounts required to be paid to them pursuant to such pooling and servicing agreement.  Written notice of termination of a pooling and servicing agreement will be given to each certificateholder of the related series, and the final distribution will be made only upon presentation and surrender of the certificates of such series at the location to be specified in the notice of termination.
 
If so specified in the related prospectus supplement, a series of certificates may be subject to optional early termination through the repurchase of the mortgage assets in the related trust fund by the party or parties specified in the prospectus supplement, under the circumstances and in the manner set forth in the prospectus supplement.  If so provided in the related prospectus supplement upon the reduction of the Certificate Balance of a specified class or classes of certificates by a specified percentage or amount or upon a specified date, a party designated in the
 
 
-67-

 
 
prospectus supplement may be authorized or required to solicit bids for the purchase of all the mortgage assets of the related trust fund, or of a sufficient portion of such mortgage assets to retire such class or classes, under the circumstances and in the manner set forth in the prospectus supplement.
 
Book-Entry Registration and Definitive Certificates
 
If so provided in the prospectus supplement for a series of certificates, one or more classes of the offered certificates of such series will be offered in book-entry format through the facilities of DTC, and each such class will be represented by one or more global certificates registered in the name of DTC or its nominee.
 
DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking corporation” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  DTC was created to hold securities for its participating organizations and facilitate the clearance and settlement of securities transactions between its participating organizations through electronic computerized book-entry changes in their accounts, thereby eliminating the need for physical movement of securities certificates.  DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc.  The rules applicable to DTC and its participating organizations are on file with the SEC.
 
Purchases of book-entry certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the book-entry certificates on DTC’s records.  The ownership interest of each actual purchaser of a Book-Entry Certificate is in turn to be recorded on the Direct and Indirect Participants’ records.  Certificate Owners will not receive written confirmation from DTC of their purchases, but Certificate Owners are expected to receive written confirmations providing details of such transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which each Certificate Owner entered into the transaction.  Transfers of ownership interests in the book-entry certificates are to be accomplished by entries made on the books of DTC’s participating organizations acting on behalf of Certificate Owners.  Certificate Owners will not receive certificates representing their ownership interests in the book-entry certificates, except in the event that use of the book-entry system for the book-entry certificates of any series is discontinued as described below.
 
DTC has no knowledge of the actual Certificate Owners of the book-entry certificates; DTC’s records reflect only the identity of the Direct Participants to whose accounts such certificates are credited, which may or may not be the Certificate Owners.  DTC’s participating organizations will remain responsible for keeping account of their holdings on behalf of their customers.
 
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Certificate Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
 
Distributions on the book-entry certificates will be made to DTC.  DTC’s practice is to credit Direct Participants’ accounts on the related Distribution Date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on such date.  Disbursement of such distributions by DTC’s participating organizations to Certificate Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name”, and will be the responsibility of each such participating organization (and not of DTC, the depositor or any trustee, master servicer, special servicer or Manager), subject to any statutory or regulatory requirements as may be in effect from time to time.  Accordingly, under a book-entry system, Certificate Owners may receive payments after the related Distribution Date.
 
Unless otherwise provided in the related prospectus supplement, the only certificateholder of book-entry certificates will be the nominee of DTC, and the Certificate Owners will not be recognized as certificateholders under the pooling and servicing agreement.  Certificate Owners will be permitted to exercise the rights of certificateholders under the related pooling and servicing agreement only indirectly through DTC’s participating organization who in turn will exercise their rights through DTC.  We have been informed that DTC will take action
 
 
-68-

 
 
permitted to be taken by a certificateholder under a pooling and servicing agreement only at the direction of one or more Direct Participants to whose account with DTC interests in the book-entry certificates are credited.
 
Because DTC can act only on behalf of Direct Participants, who in turn act on behalf of Indirect Participants and certain Certificate Owners, the ability of a Certificate Owner to pledge its interest in book-entry certificates to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of its interest in book-entry certificates, may be limited due to the lack of a physical certificate evidencing such interest.
 
Unless otherwise specified in the related prospectus supplement, certificates initially issued in book-entry form will be issued in fully registered definitive form to Certificate Owners or their nominees, rather than to DTC or its nominee, only if (1) DTC notifies the certificate registrar in writing that DTC is unwilling or unable to continue as a depository for the certificates and a qualifying successor depository is not appointed by the depositor within ninety (90) days of such notification or (2) the trustee has instituted or has been directed to institute any judicial proceeding in a court to enforce the rights of the certificateholders under the related pooling and servicing agreement and under such book-entry certificate and the trustee has been advised by counsel that in connection with such proceeding it is necessary or appropriate for the trustee or its custodian to obtain possession of such book-entry certificate.  Upon the occurrence of either of the events described in the preceding sentence, DTC will be required to notify all Direct Participants of the availability through DTC of certificates in fully registered form.  Upon surrender by DTC of the certificate or certificates representing a class of book-entry certificates, together with instructions for registration, the trustee for the related series or other designated party will be required to issue to the Certificate Owners identified in such instructions the certificates in fully registered definitive form to which they are entitled, and thereafter the holders of such Definitive Certificates will be recognized as “certificateholders” under and within the meaning of the related pooling and servicing agreement.
 
THE POOLING AND SERVICING AGREEMENTS
 
General
 
The certificates of each series will be issued pursuant to a pooling and servicing agreement.  In general, the parties to a pooling and servicing agreement will include the depositor, the trustee, the master servicer, the special servicer and, if one or more REMIC elections have been made with respect to the trust fund, the REMIC administrator.  However, a pooling and servicing agreement that relates to a trust fund that includes MBS may include a manager as a party, but may not include a master servicer, special servicer or other servicer as a party.  All parties to each pooling and servicing agreement under which certificates of a series are issued will be identified in the related prospectus supplement.  If so specified in the related prospectus supplement, an affiliate of the depositor, or the mortgage asset seller may perform the functions of master servicer, special servicer, manager or REMIC administrator.  If so specified in the related prospectus supplement, the master servicer may also perform the duties of special servicer, and the master servicer, the special servicer or the trustee may also perform the duties of REMIC administrator.  Any party to a pooling and servicing agreement or any affiliate of any party may own certificates issued under the pooling and servicing agreement; however, unless other specified in the related prospectus supplement, except with respect to required consents to certain amendments to a pooling and servicing agreement, certificates issued under the pooling and servicing agreement that are held by the master servicer or special servicer for the related Series will not be allocated Voting Rights.
 
A form of a pooling and servicing agreement has been filed as an exhibit to the Registration Statement of which this prospectus is a part.  However, the provisions of each pooling and servicing agreement will vary depending upon the nature of the certificates to be issued under the pooling and servicing agreement and the nature of the related trust fund.  The following summaries describe certain provisions that may appear in a pooling and servicing agreement under which certificates that evidence interests in mortgage loans will be issued.  The prospectus supplement for a series of certificates will describe any provision of the related pooling and servicing agreement that materially differs from the description of the pooling and servicing agreement contained in this prospectus and, if the related trust fund includes MBS, will summarize all of the material provisions of the related agreement that provided for the issuance of the MBS.  The summaries in this prospectus do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the pooling and servicing agreement for each series of certificates and the description of such provisions in the related prospectus supplement.  We will provide a copy of the pooling and servicing agreement (without exhibits) that relates to any series of
 
 
-69-

 
 
certificates without charge upon written request of a holder of a certificate of such series addressed to it at its principal executive offices specified in this prospectus under “THE DEPOSITOR”.
 
Assignment of Mortgage Loans; Repurchases
 
At the time of issuance of any series of certificates, we will assign (or cause to be assigned) to the designated trustee the mortgage loans to be included in the related trust fund, together with, unless otherwise specified in the related prospectus supplement, all principal and interest to be received on or with respect to such mortgage loans after the Cut-off Date, other than principal and interest due on or before the Cut-off Date.  The trustee will, concurrently with such assignment, deliver the certificates to or at our direction in exchange for the mortgage loans and the other assets to be included in the trust fund for such series.  Each mortgage loan will be identified in a schedule appearing as an exhibit to the related pooling and servicing agreement.  Such schedule generally will include detailed information that pertains to each mortgage loan included in the related trust fund, which information will typically include the address of the related mortgaged property and type of such property; the Mortgage Rate and, if applicable, the applicable index, gross margin, adjustment date and any rate cap information; the original and remaining term to maturity; the amortization term; and the original and outstanding principal balance.
 
In addition, unless otherwise specified in the related prospectus supplement, we will, as to each mortgage loan to be included in a trust fund, deliver, or cause to be delivered, to the related trustee (or to a custodian appointed by the trustee as described below) the mortgage note endorsed, without recourse, either in blank or to the order of such trustee (or its nominee), the mortgage with evidence of recording indicated (except for any mortgage not returned from the public recording office), an assignment of the mortgage in blank or to the trustee (or its nominee) in recordable form, together with any intervening assignments of the mortgage with evidence of recording (except for any such assignment not returned from the public recording office), and, if applicable, any riders or modifications to such mortgage note and mortgage, together with certain other documents at such times as set forth in the related Pooling and Servicing Agreement.  Such assignments may be blanket assignments covering mortgages on mortgaged properties located in the same county, if permitted by law.  Notwithstanding the foregoing, a trust fund may include mortgage loans where the original mortgage note is not delivered to the trustee if we deliver or cause to be delivered, to the related trustee (or such custodian) a copy or a duplicate original of the mortgage note, together with an affidavit certifying that the original mortgage note has been lost or destroyed.  In addition, if we cannot deliver, with respect to any mortgage loan, the mortgage or any intervening assignment with evidence of recording concurrently with the execution and delivery of the related Pooling and Servicing Agreement because of a delay caused by the public recording office, we will deliver, or cause to be delivered, to the related trustee (or such custodian) a true and correct photocopy of such mortgage or assignment as submitted for recording.  We will deliver, or cause to be delivered, to the related trustee (or such custodian) such mortgage or assignment with evidence of recording indicated after receipt of such mortgage from the public recording office.  If we cannot deliver, with respect to any mortgage loan, the mortgage or any intervening assignment with evidence of recording concurrently with the execution and delivery of the related Pooling and Servicing Agreement because such mortgage or assignment has been lost, we will deliver, or cause to be delivered, to the related trustee (or such custodian) a true and correct photocopy of such mortgage or assignment with evidence of recording.  Unless otherwise specified in the related prospectus supplement, assignments of mortgage to the trustee (or its nominee) will be recorded in the appropriate public recording office, except in states where, in the opinion of counsel acceptable to the trustee, such recording is not required to protect the trustee’s interests in the mortgage loan against the claim of any subsequent transferee or any successor to or creditor of us or the originator of such mortgage loan.
 
The trustee (or a custodian appointed by the trustee) for a series of certificates will be required to review the mortgage loan documents delivered to it within a specified period of days after receipt of the mortgage loan documents, and the trustee (or such custodian) will hold such documents in trust for the benefit of the certificateholders of such series.  Unless otherwise specified in the related prospectus supplement, if any such document is found to be missing or defective, and such omission or defect, as the case may be, materially and adversely affects the interests of the certificateholders of the related series, the trustee (or such custodian) will be required to notify the master servicer, the special servicer and the depositor, and one of such persons will be required to notify the relevant mortgage asset seller.  In that case, and if the mortgage asset seller cannot deliver the document or cure the defect within a specified number of days after receipt of such notice, then, except as otherwise specified below or in the related prospectus supplement, the mortgage asset seller will be obligated to repurchase the related mortgage loan from the trustee at a price generally equal to the Purchase Price, or at such other price as will
 
 
-70-

 
 
be specified in the related prospectus supplement.  If so provided in the prospectus supplement for a series of certificates, a mortgage asset seller, in lieu of repurchasing a mortgage loan as to which there is missing or defective loan documentation, will have the option, exercisable upon certain conditions and/or within a specified period after initial issuance of such series of certificates, to replace such mortgage loan with one or more other mortgage loans, in accordance with standards that will be described in the prospectus supplement.  Unless otherwise specified in the related prospectus supplement, this repurchase or substitution obligation will constitute the sole remedy to holders of the certificates of any series or to the related trustee on their behalf for missing or defective mortgage loan documentation, and neither we nor, unless it is the mortgage asset seller, the master servicer or the special servicer will be obligated to purchase or replace a mortgage loan if a mortgage asset seller defaults on its obligation to do so.
 
The trustee will be authorized at any time to appoint one or more custodians pursuant to a custodial agreement to hold title to the mortgage loans in any trust fund and to maintain possession of and, if applicable, to review the documents relating to such mortgage loans, in any case as the agent of the trustee.  The identity of any such custodian to be appointed on the date of initial issuance of the certificates will be set forth in the related prospectus supplement.  Any such custodian may be one of our affiliates.
 
Representations and Warranties; Repurchases
 
Unless otherwise provided in the prospectus supplement for a series of certificates, the depositor will, with respect to each mortgage loan in the related trust fund, make or assign, or cause to be made or assigned, certain representations and warranties covering, by way of example
 
the accuracy of the information set forth for such mortgage loan on the schedule of mortgage loans appearing as an exhibit to the related Pooling and Servicing Agreement;
 
the enforceability of the related mortgage note and mortgage and the existence of title insurance insuring the lien priority of the related mortgage;
 
the Warranting Party’s title to the mortgage loan and the authority of the Warranting Party to sell the mortgage loan; and
 
the payment status of the mortgage loan.
 
It is expected that in most cases the Warranting Party will be the mortgage asset seller; however, the Warranting Party may also be an affiliate of the mortgage asset seller, the depositor or an affiliate of the depositor, the master servicer, the special servicer or another person acceptable to the depositor.  The Warranting Party, if other than the mortgage asset seller, will be identified in the related prospectus supplement.
 
Unless otherwise provided in the related prospectus supplement, each Pooling and Servicing Agreement will provide that the master servicer and/or trustee will be required to notify promptly any Warranting Party of any breach of any representation or warranty made by it in respect of a mortgage loan, which breach (unless the related prospectus sets forth a different standard) materially and adversely affects the interests of the certificateholders of the related series.  If such Warranting Party cannot cure such breach within a specified period following the date on which it was notified of such breach, then, unless otherwise provided in the related prospectus supplement, it will be obligated to repurchase such mortgage loan from the trustee at the applicable Purchase Price.  If so provided in the prospectus supplement for a series of certificates, a Warranting Party, in lieu of repurchasing a mortgage loan as to which a breach has occurred, will have the option, exercisable upon certain conditions and/or within a specified period after initial issuance of such series of certificates, to replace such mortgage loan with one or more other mortgage loans, in accordance with standards that will be described in the prospectus supplement.  Unless otherwise specified in the related prospectus supplement, this repurchase or substitution obligation will constitute the sole remedy available to holders of the certificates of any series or to the related trustee on their behalf for a breach of representation and warranty by a Warranting Party, and neither the depositor nor the master servicer, in either case unless it is the Warranting Party, will be obligated to purchase or replace a mortgage loan if a Warranting Party defaults on its obligation to do so.
 
In some cases, representations and warranties will have been made in respect of a mortgage loan as of a date prior to the date upon which the related series of certificates is issued, and thus may not address events that may
 
 
-71-

 
 
occur following the date as of which they were made.  However, the depositor will not include any mortgage loan in the trust fund for any series of certificates if anything has come to the depositor’s attention that would cause it to believe that the representations and warranties made in respect of such mortgage loan will not be accurate in all material respects as of the date of issuance.  The date as of which the representations and warranties regarding the mortgage loans in any trust fund were made will be specified in the related prospectus supplement.
 
Collection and Other Servicing Procedures
 
Unless otherwise specified in the related prospectus supplement, the master servicer and the special servicer for any mortgage pool, directly or through sub-servicers, will each be obligated under the related Pooling and Servicing Agreement to service and administer the mortgage loans in such mortgage pool for the benefit of the related certificateholders, in accordance with applicable law and further in accordance with the terms of such Pooling and Servicing Agreement, such mortgage loans and any instrument of credit support included in the related trust fund.  Subject to the foregoing, the master servicer and the special servicer will each have full power and authority to do any and all things in connection with such servicing and administration that it may deem necessary and desirable.
 
As part of its servicing duties, each of the master servicer and the special servicer will be required to make reasonable efforts to collect all payments called for under the terms and provisions of the mortgage loans that it services and will be obligated to follow such collection procedures as it would follow with respect to mortgage loans that are comparable to such mortgage loans and held for its own account; provided (1) such procedures are consistent with the terms of the related Pooling and Servicing Agreement and (2) do not impair recovery under any instrument of credit support included in the related trust fund.  Consistent with the foregoing, the master servicer and the special servicer will each be permitted, in its discretion, unless otherwise specified in the related prospectus supplement, to waive any Prepayment Premium, late payment charge or other charge in connection with any mortgage loan.
 
The master servicer and the special servicer for any trust fund, either separately or jointly, directly or through sub-servicers, will also be required to perform as to the mortgage loans in such trust fund various other customary functions of a servicer of comparable loans, including maintaining escrow or impound accounts, if required under the related Pooling and Servicing Agreement, for payment of taxes, insurance premiums, ground rents and similar items, or otherwise monitoring the timely payment of those items; attempting to collect delinquent payments; supervising foreclosures; negotiating modifications; conducting property inspections on a periodic or other basis; managing (or overseeing the management of) mortgaged properties acquired on behalf of such trust fund through foreclosure, deed-in-lieu of foreclosure or otherwise; and maintaining servicing records relating to such mortgage loans.  The related prospectus supplement will specify when and the extent to which servicing of a mortgage loan is to be transferred from the master servicer to the special servicer.  In general, and subject to the discussion in the related prospectus supplement, a special servicer will be responsible for the servicing and administration of
 
mortgage loans that are delinquent in respect of a specified number of scheduled payments;
 
mortgage loans as to which the related borrower has entered into or consented to bankruptcy, appointment of a receiver or conservator or similar insolvency proceeding, or the related borrower has become the subject of a decree or order for such a proceeding which shall have remained in force undischarged or unstayed for a specified number of days; and
 
REO Properties.
 
If so specified in the related prospectus supplement, a Pooling and Servicing Agreement also may provide that if a default on a mortgage loan has occurred or, in the judgment of the related master servicer, a payment default is reasonably foreseeable, the related master servicer may elect to transfer the servicing of the mortgage loan, in whole or in part, to the related special servicer.  Unless otherwise provided in the related prospectus supplement, when the circumstances no longer warrant a special servicer’s continuing to service a particular mortgage loan (e.g., the related borrower is paying in accordance with the forbearance arrangement entered into between the special servicer and such borrower), the master servicer will resume the servicing duties with respect thereto.  If and to the extent provided in the related Pooling and Servicing Agreement and described in the related prospectus supplement, a special servicer may perform certain limited duties in respect of mortgage loans for which the master servicer is primarily responsible (including, if so specified, performing property inspections and evaluating financial
 
 
-72-

 
 
statements); and a master servicer may perform certain limited duties in respect of any mortgage loan for which the special servicer is primarily responsible (including, if so specified, continuing to receive payments on such mortgage loan (including amounts collected by the special servicer)), making certain calculations with respect to such mortgage loan and making remittances and preparing certain reports to the trustee and/or certificateholders with respect to such mortgage loan.  Unless otherwise specified in the related prospectus supplement, the master servicer will be responsible for filing and settling claims in respect of particular mortgage loans under any applicable instrument of credit support.  See “DESCRIPTION OF CREDIT SUPPORT”.
 
A mortgagor’s failure to make required mortgage loan payments may mean that operating income is insufficient to service the mortgage debt, or may reflect the diversion of that income from the servicing of the mortgage debt.  In addition, a mortgagor that is unable to make mortgage loan payments may also be unable to make timely payment of taxes and otherwise to maintain and insure the related mortgaged property.  In general, the related special servicer will be required to monitor any mortgage loan that is in default, evaluate whether the causes of the default can be corrected over a reasonable period without significant impairment of the value of the related mortgaged property, initiate corrective action in cooperation with the Mortgagor if cure is likely, inspect the related mortgaged property and take such other actions as it deems necessary and appropriate.  A significant period of time may elapse before the special servicer is able to assess the success of any such corrective action or the need for additional initiatives.  The time within which the special servicer can make the initial determination of appropriate action, evaluate the success of corrective action, develop additional initiatives, institute foreclosure proceedings and actually foreclose (or accept a deed to a mortgaged property in lieu of foreclosure) on behalf of the certificateholders of the related series may vary considerably depending on the particular mortgage loan, the mortgaged property, the mortgagor, the presence of an acceptable party to assume the mortgage loan and the laws of the jurisdiction in which the mortgaged property is located.  If a mortgagor files a bankruptcy petition, the special servicer may not be permitted to accelerate the maturity of the mortgage loan or to foreclose on the related mortgaged property for a considerable period of time.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Bankruptcy Laws”.
 
Mortgagors may, from time to time, request partial releases of the mortgaged properties, easements, consents to alteration or demolition and other similar matters.  In general, the master servicer may approve such a request if it has determined, exercising its business judgment in accordance with the applicable servicing standard, that such approval will not adversely affect the security for, or the timely and full collectibility of, the related mortgage loan.  Any fee collected by the master servicer for processing such request will be retained by the master servicer as additional servicing compensation.
 
In the case of mortgage loans secured by junior liens on the related mortgaged properties, unless otherwise provided in the related prospectus supplement, the master servicer will be required to file (or cause to be filed) of record a request for notice of any action by a superior lienholder under a senior lien for the protection of the related trustee’s interest, where permitted by local law and whenever applicable state law does not require that a junior lienholder be named as a party defendant in foreclosure proceedings in order to foreclose such junior lienholder’s equity of redemption.  Unless otherwise specified in the related prospectus supplement, the master servicer also will be required to notify any superior lienholder in writing of the existence of the mortgage loan and request notification of any action (as described below) to be taken against the mortgagor or the mortgaged property by the superior lienholder.  If the master servicer is notified that any superior lienholder has accelerated or intends to accelerate the obligations secured by the related senior lien, or has declared or intends to declare a default under the mortgage or the promissory note secured by that senior lien, or has filed or intends to file an election to have the related mortgaged property sold or foreclosed, then, unless otherwise specified in the related prospectus supplement, the master servicer and the special servicer will each be required to take, on behalf of the related trust fund, whatever actions are necessary to protect the interests of the related certificateholders and/or to preserve the security of the related mortgage loan, subject to the application of the REMIC Provisions.  Unless otherwise specified in the related prospectus supplement, the master servicer or special servicer, as applicable, will be required to advance the necessary funds to cure the default or reinstate the senior lien, if such advance is in the best interests of the related certificateholders and the master servicer or special servicer, as applicable, determines such advances are recoverable out of payments on or proceeds of the related mortgage loan.
 
 
-73-

 
 
Sub-Servicers
 
A master servicer or special servicer may delegate its servicing obligations in respect of the mortgage loans to one or more third-party sub-servicers; provided that, unless otherwise specified in the related prospectus supplement, such master servicer or special servicer will remain obligated under the related Pooling and Servicing Agreement.  A sub-servicer for any series of certificates may be an affiliate of the depositor.  Unless otherwise provided in the related prospectus supplement, each subservicing agreement between a master servicer and a sub-servicer must provide for servicing of the applicable mortgage loans consistent with the related Pooling and Servicing Agreement.  Unless otherwise provided in the related prospectus supplement, the master servicer and special servicer in respect of any mortgage asset pool will each be required to monitor the performance of sub-servicers retained by it and will have the right to remove a sub-servicer retained by it at any time it considers such removal to be in the best interests of certificateholders.
 
Unless otherwise provided in the related prospectus supplement, a master servicer or special servicer will be solely liable for all fees owed by it to any sub-servicer, irrespective of whether the master servicer’s or special servicer’s compensation pursuant to the related Pooling and Servicing Agreement is sufficient to pay such fees.  Each Sub-Servicer will be reimbursed by the master servicer or special servicer, as the case may be, that retained it for certain expenditures which it makes, generally to the same extent such master servicer or special servicer would be reimbursed under a Pooling and Servicing Agreement.  See “—Certificate Account” and “—Servicing Compensation and Payment of Expenses”.
 
Certificate Account
 
General.  The master servicer, the trustee and/or the special servicer will, as to each trust fund that includes mortgage loans, establish and maintain or cause to be established and maintained the corresponding Certificate Account, which will be established so as to comply with the standards of each nationally recognized statistical rating organization within the meaning of Section 3(a)(62) of the Exchange Act (an “NRSRO”) retained by the Depositor to provide a security rating to any one or more classes of certificates of the related series (any such NRSRO retained by the Depositor, a “Rating Agency”).  A Certificate Account may be maintained as an interest-bearing or a noninterest-bearing account and the funds held in the Certificate Account may be invested pending each succeeding Distribution Date in United States government securities and other obligations that are acceptable to each Rating Agency.  Unless otherwise provided in the related prospectus supplement, any interest or other income earned on funds in a Certificate Account will be paid to the related master servicer, trustee or special servicer as additional compensation.  A Certificate Account may be maintained with the related master servicer, special servicer, trustee or mortgage asset seller or with a depository institution that is an affiliate of any of the foregoing or of the Depositor; provided that it complies with applicable Rating Agency standards.  If permitted by the applicable Rating Agency, a Certificate Account may contain funds relating to more than one series of mortgage pass-through certificates and may contain other funds representing payments on mortgage loans owned by the related master servicer or special servicer or serviced by either on behalf of others.
 
Deposits.  Unless otherwise provided in the related Pooling and Servicing Agreement and described in the related prospectus supplement, the following payments and collections received or made by the master servicer, the trustee or the special servicer subsequent to the Cut-off Date (other than payments due on or before the Cut-off Date) are to be deposited in the Certificate Account for each trust fund that includes mortgage loans, within a certain period following receipt (in the case of collections on or in respect of the mortgage loans) or otherwise as provided in the related Pooling and Servicing Agreement
 
all payments on account of principal, including principal prepayments, on the mortgage loans;
 
all payments on account of interest on the mortgage loans, including any default interest collected, in each case net of any portion of such default interest retained by the master servicer or the special servicer as its servicing compensation or as compensation to the trustee;
 
all proceeds received under any hazard, title or other insurance policy that provides coverage with respect to a mortgaged property or the related mortgage loan or in connection with the full or partial condemnation of a mortgaged property (other than proceeds applied to the restoration of the property or released to the
 
 
-74-

 
 
 
 
related borrower) and all other amounts received and retained in connection with the liquidation of defaulted mortgage loans or property acquired in respect of such defaulted mortgage loans, by foreclosure or otherwise, together with the net operating income (less reasonable reserves for future expenses) derived from the operation of any mortgaged properties acquired by the trust fund through foreclosure or otherwise;
 
 
any amounts paid under any instrument or drawn from any fund that constitutes credit support for the related series of certificates;
 
any advances made with respect to delinquent scheduled payments of principal and interest on the mortgage loans;
 
any amounts paid under any cash flow agreement;
 
all proceeds of the purchase of any mortgage loan, or property acquired in respect of a mortgage loan, by the depositor, any mortgage asset seller or any other specified person as described under “—Assignment of Mortgage Loans; Repurchases” and “—Representations and Warranties; Repurchases”, all proceeds of the purchase of any defaulted mortgage loan as described under “—Realization Upon Defaulted Mortgage Loans”, and all proceeds of any mortgage asset purchased as described under “DESCRIPTION OF THE CERTIFICATES—Termination”;
 
to the extent that any such item does not constitute additional servicing compensation to the master servicer or the special servicer and is not otherwise retained by the depositor or another specified person, any payments on account of modification or assumption fees, late payment charges, Prepayment Premiums or Equity Participations with respect to the mortgage loans;
 
all payments required to be deposited in the Certificate Account with respect to any deductible clause in any blanket insurance policy as described under “—Hazard Insurance Policies”;
 
any amount required to be deposited by the master servicer, the special servicer or the trustee in connection with losses realized on investments for the benefit of the master servicer, the special servicer or the trustee, as the case may be, of funds held in the Certificate Account; and
 
any other amounts required to be deposited in the Certificate Account as provided in the related Pooling and Servicing Agreement and described in the related prospectus supplement.
 
Withdrawals.  Unless otherwise provided in the related Pooling and Servicing Agreement and described in the related prospectus supplement, a master servicer, trustee or special servicer may make withdrawals from the Certificate Account for each trust fund that includes mortgage loans for any of the following purposes
 
to make distributions to the certificateholders on each Distribution Date;
 
to pay the master servicer or the special servicer any servicing fees not previously retained by the master servicer or the special servicer, such payment to be made out of payments and other collections of interest on the particular mortgage loans as to which such fees were earned;
 
to reimburse the master servicer, the special servicer or any other specified person for unreimbursed advances of delinquent scheduled payments of principal and interest made by it, and certain unreimbursed servicing expenses incurred by it, with respect to particular mortgage loans in the trust fund and particular properties acquired in respect of the trust fund.  Reimbursement for advances made or expenses incurred that are related to particular mortgage loans or properties will normally only be made out of amounts that represent late payments collected on those mortgage loans, Liquidation Proceeds, Insurance and Condemnation Proceeds collected on those mortgage loans and properties, any form of credit support related to those mortgage loans and net income collected on those properties.  However, if in the judgment of the master servicer, the special servicer or such other person, as applicable, the advances and/or expenses will not be recoverable from the above amounts, the reimbursement will be made from amounts collected
 
 
 
-75-

 
 
 
on other mortgage loans in the same trust fund or, if and to the extent so provided by the related Pooling and Servicing Agreement and described in the related prospectus supplement, only from that portion of amounts collected on such other mortgage loans that is otherwise distributable on one or more classes of Subordinate Certificates of the related series;
 
 
if and to the extent described in the related prospectus supplement, to pay the master servicer, the special servicer or any other specified person interest accrued on the advances and servicing expenses described in the bulleted clause immediately listed above incurred by it while such remain outstanding and unreimbursed;
 
to pay for costs and expenses incurred by the trust fund for environmental site assessments performed with respect to mortgaged properties that constitute security for defaulted mortgage loans, and for any containment, clean-up or remediation of hazardous wastes and materials present on such mortgaged properties, as described under “—Realization Upon Defaulted Mortgage Loans”;
 
to reimburse the master servicer, the special servicer, the REMIC administrator, the depositor, the trustee, or any of their respective directors, officers, employees and agents, as the case may be, for certain expenses, costs and liabilities incurred thereby, as and to the extent described under “—Certain Matters Regarding the Master Servicer, the Special Servicer, the REMIC Administrator and the Depositor” and “—Certain Matters Regarding the Trustee”;
 
if and to the extent described in the related prospectus supplement, to pay the fees of the trustee, the REMIC administrator and any provider of credit support;
 
if and to the extent described in the related prospectus supplement, to reimburse prior draws on any form of credit support;
 
to pay the master servicer, the special servicer or the trustee, as appropriate, interest and investment income earned in respect of amounts held in the Certificate Account as additional compensation;
 
to pay any servicing expenses not otherwise required to be advanced by the master servicer, the special servicer or any other specified person;
 
if one or more elections have been made to treat the trust fund or designated portions of the trust fund as a REMIC, to pay any federal, state or local taxes imposed on the trust fund or its assets or transactions, as and to the extent described under “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs—Prohibited Transactions Tax and Other Taxes”;
 
to pay for the cost of various opinions of counsel obtained pursuant to the related Pooling and Servicing Agreement for the benefit of certificateholders;
 
to make any other withdrawals permitted by the related Pooling and Servicing Agreement and described in the related prospectus supplement; and
 
to clear and terminate the Certificate Account upon the termination of the trust fund.
 
Modifications, Waivers and Amendments of Mortgage Loans
 
The master servicer and the special servicer may each agree to modify, waive or amend any term of any mortgage loan serviced by it in a manner consistent with the applicable “Servicing Standard” as defined in the related prospectus supplement; provided that, unless otherwise set forth in the related prospectus supplement, the modification, waiver or amendment will
 
not affect the amount or timing of any scheduled payments of principal or interest on the mortgage loan;
 
 
-76-

 
 
will not, in the judgment of the master servicer or the special servicer, as the case may be, materially impair the security for the mortgage loan or reduce the likelihood of timely payment of amounts due; and
 
will not adversely affect the coverage under any applicable instrument of credit support.
 
Unless otherwise provided in the related prospectus supplement, the special servicer also may agree to any other modification, waiver or amendment if, in its judgment,
 
a material default on the mortgage loan has occurred or a payment default is reasonably foreseeable or imminent;
 
such modification, waiver or amendment is reasonably likely to produce a greater recovery with respect to the mortgage loan, taking into account the time value of money, than would liquidation; and
 
unless inconsistent with the applicable “servicing standard”, such modification, waiver or amendment will not materially adversely affect the coverage under any applicable instrument of credit support.
 
In connection with (i) the release of a mortgaged property or any portion of a mortgaged property from the lien of the related mortgage or (ii) the taking of a mortgaged property or any portion of a mortgaged property by exercise of the power of eminent domain or condemnation, if the mortgage loan documents require the master servicer or the special servicer, as applicable, to calculate (or to approve the calculation of the related borrower of) the loan-to-value ratio of the remaining mortgaged property or mortgaged properties or the fair market value of the real property constituting the remaining mortgaged property or mortgaged properties, for purposes of REMIC qualification of the related mortgage loan, then such calculation shall exclude the value of personal property and going concern value, if any.
 
Realization Upon Defaulted Mortgage Loans
 
If a default on a mortgage loan has occurred, the special servicer, on behalf of the trustee, may at any time institute foreclosure proceedings, exercise any power of sale contained in the related mortgage, obtain a deed in lieu of foreclosure, or otherwise comparably convert ownership of, or acquire title to the related mortgaged property, by operation of law or otherwise.  In connection with such foreclosure or other conversion of ownership, the special servicer shall follow the servicing standard.  A Pooling and Servicing Agreement may grant the special servicer the right to direct the master servicer to advance costs and expenses to be incurred in any such proceedings, and such advances may be subject to reimbursement requirements.  A Pooling and Servicing Agreement may require the special servicer to consult with independent counsel regarding the order and manner should foreclose upon or comparably proceed against such properties if a mortgage loan or group of cross-collateralized mortgage loans are secured by real properties in multiple states including certain states with a statute, rule or regulation comparable to California’s “one action” rule.  Unless otherwise provided in the related prospectus supplement, when applicable state law permits the special servicer to select between judicial and non-judicial foreclosure in respect of any mortgaged property, a special servicer may make such selection so long as the selection is made in a manner consistent with the servicing standard.  Unless otherwise specified in the related prospectus supplement, the special servicer may not, however, acquire title to any mortgaged property, have a receiver of rents appointed with respect to any mortgaged property or take any other action with respect to any mortgaged property that would cause the trustee, for the benefit of the related series of certificateholders, or any other specified person to be considered to hold title to, to be a “mortgagee-in-possession” of, or to be an “owner” or an “operator” of such mortgaged property within the meaning of certain federal environmental laws, unless the special servicer has previously received a report prepared by a person who regularly conducts environmental audits (which report will be an expense of the trust fund) and either:
 
(1)      such report indicates that (a) the mortgaged property is in compliance with applicable environmental laws and regulations and (b) there are no circumstances or conditions present at the mortgaged property that have resulted in any contamination for which investigation, testing, monitoring, containment, clean-up or remediation could be required under any applicable environmental laws and regulations; or
 
(2)      the special servicer, based solely (as to environmental matters and related costs) on the information set forth in such report, determines that taking such actions as are necessary to bring the mortgaged property into
 
 
-77-

 
 
compliance with applicable environmental laws and regulations and/or taking the actions contemplated by clause (1)(b) above, is reasonably likely to produce a greater recovery, taking into account the time value of money, than not taking such actions.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Environmental Considerations”.
 
As and to the extent described in the related prospectus supplement, the Pooling and Servicing Agreement related to each series of certificates will provide that promptly upon a mortgage loan becoming a defaulted mortgage loan and upon the special servicer’s determination, in accordance with the servicing standard, that it would be in the best interests of the related certificateholders (as a collective whole as if such certificateholders constituted a single lender) to attempt to sell such mortgage loan, the special servicer must use reasonable efforts to solicit offers for such defaulted mortgage loan on behalf of the related certificateholders in such manner as will be reasonably likely to realize a fair price.  Following any such determination, the special servicer must provide not less than [5] Business Days’ notice to the trustee, the master servicer and the directing certificateholder of its intention to sell any such defaulted mortgage loan, and thereafter the special servicer will be required to accept the first (and, if multiple offers are contemporaneously received, the highest) cash offer received from any person that constitutes a fair price for the defaulted mortgage loan, subject to any consent or consultation rights of the directing certificateholder.
 
The Pooling and Servicing Agreement related to each series of certificates will require the special servicer to determine whether any cash offer received with respect to the sale of a defaulted mortgage loan constitutes a fair price for such defaulted mortgage loan when the highest offer is from a person other than an “interested person”; however, if the highest offer received is from an “interested person”, then the Pooling and Servicing Agreement related to each series of certificates will require the trustee to determine whether the cash offer received with respect to the sale of a defaulted mortgage loan constitutes a fair price, either itself or by retaining an independent third party as set forth in the following paragraph.
 
In the absence of any such sale with respect to any defaulted mortgage loan, the special servicer will generally be required to proceed against the related mortgaged property, subject to the discussion above.
 
Unless otherwise provided in the related prospectus supplement, if title to any mortgaged property is acquired by a trust fund as to which a REMIC election has been made, the special servicer, on behalf of the trust fund, will be required to sell the mortgaged property before the close of the third calendar year following the year of acquisition, unless (1) the IRS grants (or does not deny) an extension of time to sell such property or (2) the trustee receives an opinion of independent counsel to the effect that the holding of the property by the trust fund for longer than such period will not result in the imposition of a tax on the trust fund or cause the trust fund (or any designated portion of the trust fund) to fail to qualify as a REMIC under the Code at any time that any certificate is outstanding.  Subject to the foregoing and any other tax-related limitations, the special servicer will generally be required to attempt to sell any mortgaged property so acquired on the same terms and conditions it would if it were the owner.  Unless otherwise provided in the related prospectus supplement, if title to any mortgaged property is acquired by a trust fund as to which a REMIC election has been made, the special servicer will also be required to ensure that the mortgaged property is administered so that it constitutes “foreclosure property” within the meaning of Code Section 860G(a)(8) at all times, that the sale of such property does not result in the receipt by the trust fund of any income from nonpermitted assets as described in Code Section 860F(a)(2)(B), and that the trust fund does not derive any “net income from foreclosure property” within the meaning of Code Section 860G(c)(2), with respect to such property unless the method of operation that produces such income would produce a greater after-tax return than a different method of operation of such property.  If the trust fund acquires title to any mortgaged property, the special servicer, on behalf of the trust fund, may be required to retain an independent contractor to manage and operate such property.  The retention of an independent contractor, however, will not relieve the special servicer of its obligation to manage such mortgaged property as required under the related Pooling and Servicing Agreement.
 
If Liquidation Proceeds collected with respect to a defaulted mortgage loan are less than the outstanding principal balance of the defaulted mortgage loan plus interest accrued plus the aggregate amount of reimbursable expenses incurred by the special servicer and/or the master servicer in connection with such mortgage loan, then, to the extent that such shortfall is not covered by any instrument or fund constituting credit support, the trust fund will realize a loss in the amount of such shortfall.  The special servicer and/or the master servicer will be entitled to reimbursement out of the Liquidation Proceeds recovered on any defaulted mortgage loan, prior to the distribution of such Liquidation Proceeds to certificateholders, any and all amounts that represent unpaid servicing compensation in respect of the mortgage loan, unreimbursed servicing expenses incurred with respect to the mortgage loan and any
 
 
-78-

 
 
unreimbursed advances of delinquent payments made with respect to the mortgage loan.  In addition, if and to the extent set forth in the related prospectus supplement, amounts otherwise distributable on the certificates may be further reduced by interest payable to the master servicer and/or special servicer on such servicing expenses and advances.
 
Except as otherwise provided in the prospectus supplement, if any mortgaged property suffers damage such that the proceeds, if any, of the related hazard insurance policy are insufficient to restore fully the damaged property, neither the special servicer nor the master servicer will be required to expend its own funds to effect such restoration.
 
Hazard Insurance Policies
 
Unless otherwise specified in the related prospectus supplement, each Pooling and Servicing Agreement will require the master servicer (or the special servicer with respect to mortgage loans serviced by the special servicer) to use reasonable efforts to cause each mortgage loan borrower to maintain a hazard insurance policy that provides for such coverage as is required under the related mortgage or, if the mortgage permits the holder to dictate to the borrower the insurance coverage to be maintained on the related mortgaged property, such coverage as is consistent with the master servicer’s (or special servicer’s) normal servicing procedures.  Unless otherwise specified in the related prospectus supplement, such coverage generally will be in an amount equal to the lesser of the principal balance owing on such mortgage loan and the replacement cost of the related mortgaged property.  The ability of a master servicer (or special servicer) to assure that hazard insurance proceeds are appropriately applied may be dependent upon its being named as an additional insured under any hazard insurance policy and under any other insurance policy referred to below, or upon the extent to which information concerning covered losses is furnished by borrowers.  All amounts collected by a master servicer (or special servicer) under any such policy (except for amounts to be applied to the restoration or repair of the mortgaged property or released to the borrower in accordance with the master servicer’s (or special servicer’s) normal servicing procedures and/or to the terms and conditions of the related mortgage and mortgage note) will be deposited in the related Certificate Account.  The Pooling and Servicing Agreement may provide that the master servicer (or special servicer) may satisfy its obligation to cause each borrower to maintain such a hazard insurance policy by maintaining a blanket policy insuring against hazard losses on the mortgage loans in a trust fund, which may contain a deductible clause (not in excess of a customary amount).  If such blanket policy contains a deductible clause, the master servicer (or special servicer) will be required, in the event of a casualty covered by such blanket policy, to deposit in the related Certificate Account all additional sums that would have been deposited in the Certificate Account under an individual policy but were not because of such deductible clause.  Alternatively, the master servicer may self-insure against hazard losses so long as criteria set forth in the related Pooling and Servicing Agreement are met.
 
In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the improvements of the property by fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and civil commotion, subject to the conditions and exclusions specified in each policy.  Although the policies covering the mortgaged properties will be underwritten by different insurers under different state laws in accordance with different applicable state forms, and therefore will not contain identical terms and conditions, most such policies typically do not cover any physical damage resulting from war, revolution, governmental actions, floods and other water-related causes, earth movement (including earthquakes, landslides and mudflows), wet or dry rot, vermin and domestic animals.  Accordingly, a mortgaged property may not be insured for losses arising from any such cause unless the related mortgage specifically requires, or permits the holder to require, such coverage.
 
The hazard insurance policies covering the mortgaged properties will typically contain co-insurance clauses that in effect require an insured at all times to carry insurance of a specified percentage (generally 80% to 90%) of the full replacement value of the improvements on the property in order to recover the full amount of any partial loss.  If the insured’s coverage falls below this specified percentage, such clauses generally provide that the insurer’s liability in the event of partial loss does not exceed the lesser of (1) the replacement cost of the improvements less physical depreciation and (2) such proportion of the loss as the amount of insurance carried bears to the specified percentage of the full replacement cost of such improvements.
 
 
 
-79-

 
 
Due-on-Sale and Due-on-Encumbrance Provisions
 
Certain of the mortgage loans may contain a due-on-sale clause that entitles the lender to accelerate payment of the mortgage loan upon any sale or other transfer of the related mortgaged property made without the lender’s consent.  Certain of the mortgage loans may also contain a due-on-encumbrance clause that entitles the lender to accelerate the maturity of the mortgage loan upon the creation of any other lien or encumbrance upon the mortgaged property.  Unless otherwise provided in the related prospectus supplement, the master servicer (or special servicer) will determine whether to exercise any right the trustee may have under any such provision in a manner consistent with the master servicer’s (or special servicer’s) normal servicing procedures.  Unless otherwise specified in the related prospectus supplement, the master servicer or special servicer, as applicable, will be entitled to retain as additional servicing compensation any fee collected in connection with the permitted transfer of a mortgaged property.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Due-on-Sale and Due-on-Encumbrance Provisions”.
 
Servicing Compensation and Payment of Expenses
 
Unless otherwise specified in the related prospectus supplement, a master servicer’s primary servicing compensation with respect to a series of certificates will come from the periodic payment to it of a specified portion of the interest payments on each mortgage loan in the related trust fund, including mortgage loans serviced by the related special servicer.  If and to the extent described in the related prospectus supplement, a special servicer’s primary compensation with respect to a series of certificates may consist of any or all of the following components
 
a specified portion of the interest payments on each mortgage loan in the related trust fund, whether or not serviced by it;
 
an additional specified portion of the interest payments on each mortgage loan then currently serviced by it; and
 
subject to any specified limitations, a fixed percentage of some or all of the collections and proceeds received with respect to each mortgage loan which was at any time serviced by it, including mortgage loans for which servicing was returned to the master servicer.
 
Insofar as any portion of the master servicer’s or special servicer’s compensation consists of a specified portion of the interest payments on a mortgage loan, such compensation will generally be based on a percentage of the principal balance of such mortgage loan outstanding from time to time and, accordingly, will decrease with the amortization of the mortgage loan.  As additional compensation, a master servicer or special servicer may be entitled to retain all or a portion of late payment charges, Prepayment Premiums, modification fees and other fees collected from borrowers and any interest or other income that may be earned on funds held in the related Certificate Account.  A more detailed description of each master servicer’s and special servicer’s compensation will be provided in the related prospectus supplement.  Any sub-servicer will receive as its sub-servicing compensation a portion of the servicing compensation to be paid to the master servicer or special servicer that retained such sub-servicer.
 
In addition to amounts payable to any sub-servicer, a master servicer or special servicer may be required, to the extent provided in the related prospectus supplement, to pay from amounts that represent its servicing compensation certain expenses incurred in connection with the administration of the related trust fund, including, without limitation, payment of the fees and disbursements of independent accountants, payment of fees and disbursements of the trustee and any custodians appointed by the trustee and payment of expenses incurred in connection with distributions and reports to certificateholders.  Certain other expenses, including certain expenses related to mortgage loan defaults and liquidations and, to the extent so provided in the related prospectus supplement, interest on such expenses at the rate specified in the prospectus supplement, may be required to be borne by the trust fund.
 
Evidence as to Compliance
 
The master servicer and each other servicer will deliver annually to the trustee or master servicer, as applicable, on or before the date specified in the applicable Pooling and Servicing Agreement or in the applicable other servicing agreement (each such other servicing agreement, an “Underlying Servicing Agreement”), an officer’s certificate stating that (i) a review of the servicer’s or master servicer’s activities during the preceding calendar year
 
 
-80-

 
 
and of performance under the applicable Pooling and Servicing Agreement or Underlying Servicing Agreement has been made under the supervision of the officer, and (ii) to the best of the officer’s knowledge, based on the review, the servicer or master servicer has fulfilled all its obligations under the applicable Pooling and Servicing Agreement or Underlying Servicing Agreement throughout the year, or, if there has been a default in the fulfillment of any obligation, specifying the default known to the officer and the nature and status of the default.
 
In addition, each party that participates in the servicing and administration of more than 5% of the mortgage loans and other assets comprising a trust will deliver annually to the Depositor and the trustee, a report (an “Assessment of Compliance”) that assesses compliance by that party with the servicing criteria set forth in Item 1122(d) of Regulation AB (17 CFR 229.1122) and that contains the following:
 
a statement of the party’s responsibility for assessing compliance with the servicing criteria applicable to it;
 
a statement that the party used the criteria in Item 1122(d) of Regulation AB to assess compliance with the applicable servicing criteria;
 
the party’s assessment of compliance with the applicable servicing criteria during and as of the end of the prior calendar year, setting forth any material instance of noncompliance identified by the party; and
 
a statement that a registered public accounting firm has issued an attestation report on the party’s assessment of compliance with the applicable servicing criteria during and as of the end of the prior calendar year.
 
Each party which is required to deliver an Assessment of Compliance will also be required to simultaneously deliver a report (an “Attestation Report”) of a registered public accounting firm, prepared in accordance with the standards for attestation engagements issued or adopted by the Public Company Accounting Oversight Board, that expresses an opinion, or states that an opinion cannot be expressed, concerning the party’s assessment of compliance with the applicable servicing criteria.
 
The annual deliveries, to the extent required to be filed with the Depositor's annual report on Form 10-K, will be due from the applicable person(s) by a time sufficient to enable such filing.
 
Certain Matters Regarding the Master Servicer, the Special Servicer, the REMIC Administrator and the Depositor
 
Any entity serving as master servicer, special servicer or REMIC administrator under a Pooling and Servicing Agreement may be an affiliate of the depositor and may have other normal business relationships with the depositor or the depositor’s affiliates.  Unless otherwise specified in the prospectus supplement for a series of certificates, the related Pooling and Servicing Agreement will permit the master servicer, the special servicer and any REMIC administrator to resign from its obligations under the Pooling and Servicing Agreement only upon a determination that such obligations are no longer permissible under applicable law or are in material conflict by reason of applicable law with any other activities carried on by it.  No such resignation will become effective until the trustee or other successor has assumed the obligations and duties of the resigning master servicer, special servicer or REMIC administrator, as the case may be, under the Pooling and Servicing Agreement.  The master servicer and special servicer for each trust fund will be required to maintain a fidelity bond and errors and omissions policy or their equivalent that provides coverage against losses that may be sustained as a result of an officer’s or employee’s misappropriation of funds or errors and omissions, subject to certain limitations as to amount of coverage, deductible amounts, conditions, exclusions and exceptions permitted by the related Pooling and Servicing Agreement.
 
Unless otherwise specified in the related prospectus supplement, each Pooling and Servicing Agreement will further provide that none of the master servicer, the special servicer, the REMIC administrator, the depositor, any extension adviser or any director, officer, employee or agent of any of them will be under any liability to the related trust fund or certificateholders for any action taken, or not taken, in good faith pursuant to the Pooling and Servicing Agreement or for errors in judgment; provided, however, none of the master servicer, the special servicer, the REMIC administrator, the depositor, any extension adviser or any such person will be protected against any liability
 
 
-81-

 
 
that would otherwise be imposed by reason of willful misfeasance, bad faith or negligence in the performance of obligations or duties under the Pooling and Servicing Agreement or by reason of reckless disregard of such obligations and duties.  Unless otherwise specified in the related prospectus supplement, each Pooling and Servicing Agreement will further provide that the master servicer, the special servicer, the REMIC administrator, the depositor, any extension adviser and any director, officer, employee or agent of any of them will be entitled to indemnification by the related trust fund against any loss, liability or expense incurred in connection with any legal action that relates to such Pooling and Servicing Agreement or the related series of certificates; provided, however, such indemnification will not extend to any loss, liability or expense incurred by reason of willful misfeasance, bad faith or negligence in the performance of obligations or duties under such Pooling and Servicing Agreement, or by reason of reckless disregard of such obligations or duties.  In addition, each Pooling and Servicing Agreement will provide that none of the master servicer, the special servicer, the REMIC administrator, any extension adviser or the depositor will be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its respective responsibilities under the Pooling and Servicing Agreement and that in its opinion may involve it in any expense or liability.  However, each of the master servicer, the special servicer, the REMIC administrator, any extension adviser and the depositor will be permitted, in the exercise of its discretion, to undertake any such action that it may deem necessary or desirable with respect to the enforcement and/or protection of the rights and duties of the parties to the Pooling and Servicing Agreement and the interests of the related series of certificateholders under the Pooling and Servicing Agreement.  In such event, the legal expenses and costs of such action, and any liability resulting from such action, will be expenses, costs and liabilities of the related series of certificateholders, and the master servicer, the special servicer, the REMIC administrator, any extension adviser or the depositor, as the case may be, will be entitled to charge the related Certificate Account for this expense.
 
Any person into which the master servicer, the special servicer, the REMIC administrator or the depositor may be merged or consolidated, or any person resulting from any merger or consolidation to which the master servicer, the special servicer, the REMIC administrator or the depositor is a party, or any person succeeding to the business of the master servicer, the special servicer, the REMIC administrator or the depositor, will be the successor of the master servicer, the special servicer, the REMIC administrator or the depositor, as the case may be, under the related Pooling and Servicing Agreement.
 
Unless otherwise specified in the related prospectus supplement, a REMIC administrator will be entitled to perform any of its duties under the related Pooling and Servicing Agreement either directly or by or through agents or attorneys, and the REMIC administrator will not be responsible for any willful misconduct or negligence on the part of any such agent or attorney appointed by it with due care.
 
Events of Default
 
Unless otherwise provided in the prospectus supplement for a series of certificates, Events of Default under the related Pooling and Servicing Agreement will include, without limitation—
 
any failure by the master servicer to distribute or cause to be distributed to the certificateholders of such series, or to remit to the trustee for distribution to such certificateholders, any amount required to be so distributed or remitted, pursuant to, and at the time specified by, the terms of the Pooling and Servicing Agreement;
 
any failure by the special servicer to remit to the master servicer or the trustee, as applicable, any amount required to be so remitted, pursuant to, and at the time specified by, the terms of the Pooling and Servicing Agreement;
 
any failure by the master servicer or the special servicer duly to observe or perform in any material respect any of its other covenants or obligations under the related Pooling and Servicing Agreement, which failure continues unremedied for thirty days after written notice of such failure has been given to the master servicer or the special servicer, as the case may be, by any other party to the related Pooling and Servicing Agreement, or to the master servicer or the special servicer, as the case may be, with a copy to each other party to the related Pooling and Servicing Agreement, by certificateholders entitled to not less than 25% (or such other percentage specified in the related prospectus supplement) of the Voting Rights for such series;
 
 
-82-

 
 
 
any failure by a REMIC administrator (if other than the trustee) duly to observe or perform in any material respect any of its covenants or obligations under the related Pooling and Servicing Agreement, which failure continues unremedied for thirty days after written notice of such notice has been given to the REMIC administrator by any other party to the related Pooling and Servicing Agreement, or to the REMIC administrator, with a copy to each other party to the related Pooling and Servicing Agreement, by certificateholders entitled to not less than 25% (or such other percentage specified in the related prospectus supplement) of the Voting Rights for such series;
 
certain events involving a determination that the master servicer or the special servicer, as applicable, is no longer an approved servicer by any Rating Agency; and
 
certain events of insolvency, readjustment of debt, marshaling of assets and liabilities, or similar proceedings in respect of or relating to the master servicer, the special servicer or the REMIC administrator (if other than the trustee), and certain actions by or on behalf of the master servicer, the special servicer or the REMIC administrator (if other than the trustee) indicating its insolvency or inability to pay its obligations.
 
Material variations to the foregoing Events of Default (other than to add thereto or shorten cure periods or eliminate notice requirements) will be specified in the related prospectus supplement.  Unless otherwise specified in the related prospectus supplement, when a single entity acts as master servicer, special servicer and REMIC administrator, or in any two of the foregoing capacities, for any trust fund, an Event of Default in one capacity will (except where related only to an evaluation of the acceptability of such entity to act in a particular capacity by a rating agency retained by the depositor to provide a security rating on any one or more classes of certificates) constitute an event of default in each capacity.
 
Rights Upon Event of Default
 
If an Event of Default occurs with respect to the master servicer, the special servicer or a REMIC administrator under a Pooling and Servicing Agreement, then, in each and every such case, so long as the Event of Default remains unremedied, the depositor or the trustee will be authorized, and at the direction of certificateholders of the related series entitled to not less than 51% (or such other percentage specified in the related prospectus supplement) of the Voting Rights for such series, the trustee will be required, to terminate all of the rights and obligations of the defaulting party as master servicer, special servicer or REMIC administrator, as applicable, under the Pooling and Servicing Agreement, whereupon the trustee will succeed to all of the responsibilities, duties and liabilities of the defaulting party as master servicer, special servicer or REMIC administrator, as applicable, under the Pooling and Servicing Agreement (except that if the defaulting party is required to make advances under the Pooling and Servicing Agreement regarding delinquent mortgage loans, but the trustee is prohibited by law from obligating itself to make such advances, or if the related prospectus supplement so specifies, the trustee will not be obligated to make such advances) and will be entitled to similar compensation arrangements.  Unless otherwise specified in the related prospectus supplement, if the trustee is unwilling or unable so to act, it may (or, at the written request of certificateholders of the related series entitled to not less than 51% (or such other percentage specified in the related prospectus supplement) of the Voting Rights for such series, it will be required to) appoint, or petition a court of competent jurisdiction to appoint, a loan servicing institution or other entity that (unless otherwise provided in the related prospectus supplement) is acceptable to each applicable Rating Agency to act as successor to the master servicer, special servicer or REMIC administrator, as the case may be, under the Pooling and Servicing Agreement.  Pending such appointment, the trustee will be obligated to act in such capacity.  The trustee or a successor master servicer is entitled to be reimbursed for its costs in effecting a servicing transfer from the predecessor master servicer.  In the event that the predecessor master servicer fails to reimburse the trustee or successor servicer, the trustee or successor servicer will be entitled to reimbursement from the assets of the related trust.
 
If the same entity is acting as both trustee and REMIC administrator, it may be removed in both such capacities as described under “—Resignation and Removal of the Trustee” below.
 
No certificateholder will have any right under a Pooling and Servicing Agreement to institute any proceeding with respect to such Pooling and Servicing Agreement unless such holder previously has given to the trustee written
 
 
-83-

 
 
notice of default and the continuance of such default and unless the holders of certificates of any class evidencing not less than 25% of the aggregate Percentage Interests constituting such class have made written request upon the trustee to institute such proceeding in its own name as trustee under the Pooling and Servicing Agreement and have offered to the trustee reasonable indemnity and the trustee for sixty days after receipt of such request and indemnity has neglected or refused to institute any such proceeding.  However, the trustee will be under no obligation to exercise any of the trusts or powers vested in it by the Pooling and Servicing Agreement or to institute, conduct or defend any litigation under the Pooling and Servicing Agreement or in relation thereto at the request, order or direction of any of the holders of certificates covered by such Pooling and Servicing Agreement, unless such certificateholders have offered to the trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred in connection with such litigation.
 
Amendment
 
Except as otherwise specified in the related prospectus supplement, each Pooling and Servicing Agreement may be amended by the parties thereto, without the consent of any of the holders of certificates covered by such Pooling and Servicing Agreement, (1) to cure any ambiguity, (2) to correct or supplement any provision in the Pooling and Servicing Agreement which may be inconsistent with any other provision in the Pooling and Servicing Agreement or to correct any error, (3) to change the timing and/or nature of deposits in the Certificate Account; provided that (A) such change would not adversely affect in any material respect the interests of any certificateholder, as evidenced by an opinion of counsel, and (B) such change would not result in the withdrawal, downgrade or qualification of any of the then-current ratings of any Rating Agency, as evidenced by a letter from each such Rating Agency, (4) if a REMIC election has been made with respect to the related trust fund, to modify, eliminate or add to any of its provisions (A) to such extent as shall be necessary to maintain the qualification of the trust fund (or any designated portion of the trust fund) as a REMIC or to avoid or minimize the risk of imposition of any tax on the related trust fund; provided that the trustee has received an opinion of counsel to the effect that (1) such action is necessary or desirable to maintain such qualification or to avoid or minimize such risk, and (2) such action will not adversely affect in any material respect the interests of any holder of certificates covered by the Pooling and Servicing Agreement, or (B) to restrict the transfer of the REMIC Residual Certificates; provided that the depositor has determined that the then-current ratings of the classes of the certificates provided by any Rating Agency will not be withdrawn, downgraded or qualified, as evidenced by a letter from each such Rating Agency, and that any such amendment will not give rise to any tax with respect to the transfer of the REMIC Residual Certificates to a non-permitted transferee (See “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs—Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain Organizations” in the accompanying prospectus supplement), (5) to make any other provisions with respect to matters or questions arising under such Pooling and Servicing Agreement or any other change; provided that such action will not adversely affect in any material respect the interests of any certificateholder, or (6) to amend specified provisions that are not material to holders of any class of certificates offered by this prospectus.
 
The Pooling and Servicing Agreement may also be amended by the parties thereto with the consent of the holders of certificates of each class affected by an amendment evidencing, in each case, not less than 66 2/3% (or such other percentage specified in the related prospectus supplement) of the aggregate Percentage Interests constituting such class for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of such Pooling and Servicing Agreement or of modifying in any manner the rights of the holders of certificates covered by such Pooling and Servicing Agreement, except that no such amendment may (1) reduce in any manner the amount of, or delay the timing of, payments received on mortgage loans which are required to be distributed on a certificate of any class without the consent of the holder of such certificate or (2) reduce the aforesaid percentage of certificates of any class the holders of which are required to consent to any such amendment without the consent of the holders of all certificates of such class covered by such Pooling and Servicing Agreement then outstanding.
 
Notwithstanding the foregoing, if one or more REMIC elections have been made with respect to the related trust fund, the trustee will not be required to consent to any amendment to a Pooling and Servicing Agreement without having first received an opinion of counsel to the effect that such amendment or the exercise of any power granted to the master servicer, the special servicer, the depositor, the trustee or any other specified person in accordance with
 
 
-84-

 
 
such amendment will not result in the imposition of a tax on the related trust fund or cause such trust fund (or any designated portion of the trust fund) to fail to qualify as a REMIC.
 
List of Certificateholders
 
Unless otherwise specified in the related prospectus supplement, upon written request of three or more certificateholders of record made for purposes of communicating with other holders of certificates of the same series with respect to their rights under the related Pooling and Servicing Agreement, the trustee or other specified person will afford such certificateholders access during normal business hours to the most recent list of certificateholders of that series held by such person.  If such list is as of a date more than 90 days prior to the date of receipt of such certificateholders’ request, then such person, if not the registrar for such series of certificates, will be required to request from such registrar a current list and to afford such requesting certificateholders access thereto promptly upon receipt.
 
The Trustee
 
The trustee under each Pooling and Servicing Agreement will be named in the related prospectus supplement.  The commercial bank, national banking association, banking corporation or trust company that serves as trustee may have typical banking relationships with the depositor and its affiliates and with any master servicer, special servicer or REMIC administrator and its affiliates.
 
Duties of the Trustee
 
The trustee generally will be responsible under each Pooling and Servicing Agreement for providing general administrative services for the trust fund for any series, including, among other things, (i) establishing and maintaining the Certificate Account; (ii) calculation of the amounts payable to certificateholders on each Distribution Date; (iii) making distributions to certificateholders; (iv) preparation, for execution by the Depositor or the related master servicer, of reports, including reports on Form 10-D and Form 10-K as may be required under the Exchange Act; (v) maintaining any mortgage pool insurance policy, mortgagor bankruptcy bond, special hazard insurance policy or other form of credit enhancement that may be required with respect to any series; and (vi) making periodic advances on the mortgage loans to the limited extent described under “DESCRIPTION OF THE CERTIFICATES—Advances in Respect of Delinquencies”, if those amounts are not advanced by the master servicer or another servicer.
 
The trustee for each series of certificates will make no representation as to the validity or sufficiency of the related Pooling and Servicing Agreement, such certificates or any underlying mortgage asset or related document and will not be accountable for the use or application by or on behalf of any master servicer or special servicer of any funds paid to the master servicer or special servicer in respect of the certificates or the underlying mortgage assets.  If no Event of Default has occurred and is continuing, the trustee for each series of certificates will be required to perform only those duties specifically required under the related Pooling and Servicing Agreement.  However, upon receipt of any of the various certificates, reports or other instruments required to be furnished to it pursuant to the related Pooling and Servicing Agreement, a trustee will be required to examine such documents and to determine whether they conform to the requirements of such agreement.
 
Certain Matters Regarding the Trustee
 
As and to the extent described in the related prospectus supplement, the fees and normal disbursements of any trustee may be the expense of the related master servicer or other specified person or may be required to be borne by the related trust fund.  The trustee generally shall not be entitled to payment or reimbursement for any routine ongoing expenses incurred by it in the ordinary course of its duties as trustee under the Pooling and Servicing Agreement or for any other expenses.  If, however, one or more REMIC elections has been made, the expense is unanticipated and did not arise from the trustee’s gross negligence, bad faith or willful misconduct, the trustee shall be entitled to reimbursement from the trust fund for all reasonable expenses, disbursements and advances incurred or made it in accordance with any of the provisions of the Pooling and Servicing Agreement to the extent permitted by Treasury Regulations Section 1.860G-1(b)(3)(ii), which allows reimbursement for “unanticipated expenses”.
 
 
-85-

 
 
Unless otherwise specified in the related prospectus supplement, the trustee for each series of certificates will be entitled to indemnification, from amounts held in the Certificate Account for such series, for any loss, liability or expense incurred by the trustee in connection with the trustee’s acceptance or administration of its trusts under the related Pooling and Servicing Agreement; provided, however, such indemnification will not extend to any loss liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence on the part of the trustee in the performance of its obligations and duties under the Pooling and Servicing Agreement, or by reason of its reckless disregard of such obligations or duties.
 
Unless otherwise specified in the related prospectus supplement, the trustee for each series of certificates will be entitled to execute any of its trusts or powers under the related Pooling and Servicing Agreement or perform any of its duties under the Pooling and Servicing Agreement either directly or by or through agents or attorneys, and the trustee will not be responsible for any willful misconduct or negligence on the part of any such agent or attorney appointed by it with due care.
 
Resignation and Removal of the Trustee
 
The trustee may resign at any time, in which event the depositor will be obligated to appoint a successor trustee.  The depositor may also remove the trustee if the trustee ceases to be eligible to continue as such under the Pooling and Servicing Agreement or if the trustee becomes insolvent.  Upon becoming aware of such circumstances, the depositor will be obligated to appoint a successor trustee.  The trustee may also be removed at any time by the holders of certificates of the applicable series evidencing not less than 33⅓% (or such other percentage specified in the related prospectus supplement) of the Voting Rights for such series.  Any resignation or removal of the trustee and appointment of a successor trustee will not become effective until acceptance of the appointment by the successor trustee.  Any costs associated with the appointment of a successor trustee are required to be paid by the predecessor trustee and, if not paid, will be reimbursed to the person incurring such costs from the assets of the related trust.  Notwithstanding the foregoing, if the predecessor trustee has been removed by a vote of the holders of the certificates as provided in the paragraph above, any costs associated with the appointment of a successor trustee will be reimbursed to the party incurring such costs from the assets of the related trust.  Notwithstanding anything in this prospectus to the contrary, if any entity is acting as both trustee and REMIC administrator, then any resignation or removal of such entity as the trustee will also constitute the resignation or removal of such entity as REMIC administrator, and the successor trustee will serve as successor to the REMIC administrator as well.
 
DESCRIPTION OF CREDIT SUPPORT
 
General
 
Credit support may be provided with respect to one or more classes of the certificates of any series or with respect to the related mortgage assets.  Credit support may be in the form of limited guarantees, financial guaranty insurance policies, surety bonds, letters of credit, mortgage pool insurance policies, reserve funds, cross collateralization, overcollateralization and excess interest or any combination of the foregoing.  If and to the extent so provided in the related prospectus supplement, any of the foregoing forms of credit support may provide credit enhancement for more than one series of certificates.  The applicable prospectus supplement will describe the material terms of such credit enhancement, including any limits on the timing or amount of such credit enhancement or any conditions that must be met before such credit enhancement may be accessed.  If the provider of the credit enhancement is liable or contingently liable to provide payments representing 10% or more of the cash flow supporting any offered class of certificates, the applicable prospectus supplement will disclose the name of the provider, the organizational form of the provider, the general character of the business of the provider and the financial information required by Item 1114(b)(2) of Regulation AB (17 CFR 229.1114).  Copies of the limited guarantee, financial guaranty insurance policy, surety bond, letter of credit, pool insurance policy, mortgagor bankruptcy bond, special hazard insurance policy or Cash Flow Agreement, if any, relating to a series of certificates will be filed with the SEC as an exhibit to a Current Report on Form 8-K.
 
Unless otherwise provided in the related prospectus supplement for a series of certificates, the credit support will not provide protection against all risks of loss and will not guarantee payment to certificateholders of all amounts to which they are entitled under the related Pooling and Servicing Agreement.  If losses or shortfalls occur that exceed the amount covered by the related credit support or that are of a type not covered by such credit support,
 
 
-86-

 
 
certificateholders will bear their allocable share of deficiencies.  Moreover, if a form of credit support covers the offered certificates of more than one series and losses on the related mortgage assets exceed the amount of such credit support, it is possible that the holders of offered certificates of one (or more) such series will be disproportionately benefited by such credit support to the detriment of the holders of offered certificates of one (or more) other such series.
 
If credit support is provided with respect to one or more classes of certificates of a series, or with respect to the related mortgage assets, the related prospectus supplement will include a description of
 
the nature and amount of coverage under such credit support;
 
any conditions to payment under the credit support not otherwise described in this prospectus;
 
the conditions (if any) under which the amount of coverage under such credit support may be reduced and under which such credit support may be terminated or replaced; and
 
the material provisions relating to such credit support.
 
Additionally, the related prospectus supplement will set forth certain information with respect to the obligor, if any, under any instrument of credit support. See "RISK FACTORS—The Limited Credit Support for Your Certificates May Not Be Sufficient To Prevent Loss on Your Certificates" in this prospectus and "DESCRIPTION OF THE CERTIFICATES—Credit Support; Allocation of Losses and Certain Expenses" in the related prospectus supplement.
 
Subordinate Certificates
 
If so specified in the related prospectus supplement, one or more classes of certificates of a series may be Subordinate Certificates.  To the extent specified in the related prospectus supplement, the rights of the holders of Subordinate Certificates to receive distributions from the Certificate Account on any Distribution Date will be subordinated to the corresponding rights of the holders of Senior Certificates.  If so provided in the related prospectus supplement, the subordination of a class may apply only in the event of certain types of losses or shortfalls.  The related prospectus supplement will set forth information concerning the method and amount of subordination provided by a class or classes of Subordinate Certificates in a series and the circumstances under which such subordination will be available.
 
If the mortgage assets in any trust fund are divided into separate groups, each supporting a separate class or classes of certificates of the related series, credit support may be provided by cross-support provisions requiring that distributions be made on Senior Certificates evidencing interests in one group of mortgage assets prior to distributions on Subordinate Certificates evidencing interests in a different group of mortgage assets within the trust fund.  The prospectus supplement for a series that includes a cross-support provision will describe the manner and conditions for applying such provisions.
 
Insurance or Guarantees Concerning the Mortgage Loans
 
If so provided in the prospectus supplement for a series of certificates, mortgage loans included in the related trust fund will be covered for certain default risks by insurance policies or guarantees.  The limited guarantee may cover deficiencies in amounts otherwise payable on some or all of the certificates of a series.  The limited guarantee may cover timely distributions of interest or full distributions of principal or both on the basis of a schedule of principal distributions set forth in or determined in the manner specified in the related prospectus supplement.  The limited guarantee may provide additional protection against losses on the mortgage loans included in a trust fund, provide payment of administrative expenses, or establish a minimum reinvestment rate on the payments made on the mortgage loans or principal payment rate on the mortgage loans.  A limited guarantee will be limited in amount to the dollar amount or percentage of the principal balance of the mortgage loans or certificates specified in the applicable prospectus supplement.  The related prospectus supplement will describe the nature of such default risks and the extent of such coverage.
 
 
 
-87-

 
 
Letter of Credit
 
If so provided in the prospectus supplement for a series of certificates, deficiencies in amounts otherwise payable on such certificates or certain classes of certificates will be covered by one or more letters of credit, issued by a bank or other financial institution (which may be an affiliate of the depositor) specified in such prospectus supplement.  Under a letter of credit, the providing institution will be obligated to honor draws in an aggregate fixed dollar amount, net of unreimbursed payments under the letter of credit, generally equal to a percentage specified in the related prospectus supplement of the aggregate principal balance of some or all of the related mortgage assets on the related Cut-off Date or of the initial aggregate Certificate Balance of one or more classes of certificates.  If so specified in the related prospectus supplement, the letter of credit may permit draws only in the event of certain types of losses and shortfalls.  The amount available under the letter of credit will, in all cases, be reduced to the extent of the unreimbursed payments under the letter of credit and may otherwise be reduced as described in the related prospectus supplement.  The obligations of the providing institution under the letter of credit for each series of certificates will expire at the earlier of the date specified in the related prospectus supplement or the termination of the trust fund.
 
Certificate Insurance and Surety Bonds
 
If so provided in the prospectus supplement for a series of certificates, deficiencies in amounts otherwise payable on such certificates or certain classes of certificates will be covered by financial guaranty insurance policies or surety bonds provided by one or more insurance companies or sureties.  Such instruments may cover, with respect to one or more classes of certificates of the related series, timely distributions of interest or distributions of principal on the basis of a schedule of principal distributions set forth in or determined in the manner specified in the related prospectus supplement.  If specified in the prospectus supplement, the financial guaranty insurance policy will also guarantee against any payment made to a certificateholder that is subsequently recovered as a preferential transfer under the Bankruptcy Code.  The related prospectus supplement will describe any limitations on the draws that may be made under any such instrument.
 
Reserve Funds
 
If so provided in the prospectus supplement for a series of certificates, deficiencies in amounts otherwise payable on such certificates or certain classes will be covered (to the extent of available funds) by one or more reserve funds in which cash, a letter of credit, Permitted Investments, a demand note or a combination will be deposited, in the amounts specified in such prospectus supplement.  If so specified in the related prospectus supplement, the reserve fund for a series may also be funded over time by a specified amount of certain collections received on the related mortgage assets.
 
Amounts on deposit in any reserve fund for a series will be applied for the purposes, in the manner, and to the extent specified in the related prospectus supplement.  If so specified in the related prospectus supplement, reserve funds may be established to provide protection only against certain types of losses and shortfalls.  Additional information concerning any reserve fund will be set forth in the prospectus supplement, including the initial balance of the reserve fund, the required reserve fund balance to be maintained, the purposes for which funds in the reserve fund may be applied to make distributions to certificateholders and use of investment earnings from the reserve fund, if any.  Following each Distribution Date, amounts in a reserve fund in excess of any amount required to be maintained in such reserve funds may be released from the reserve fund under the conditions and to the extent specified in the related prospectus supplement.
 
If so specified in the related prospectus supplement, amounts deposited in any reserve fund will be invested in Permitted Investments.  Unless otherwise specified in the related prospectus supplement, any reinvestment income or other gain from such investments will be credited to the related reserve fund for such series, and any loss resulting from such investments will be charged to such reserve fund.  However, such income may be payable to any related master servicer or another service provider as additional compensation for its services.  The reserve fund, if any, for a series will not be a part of the trust fund unless otherwise specified in the related prospectus supplement.
 
 
 
-88-

 
 
Cash Collateral Account
 
If so specified in the related prospectus supplement, all or any portion of credit enhancement for a series of certificates may be provided by the establishment of a cash collateral account.  A cash collateral account will be similar to a reserve fund except that generally a cash collateral account is funded initially by a loan from a cash collateral lender, the proceeds of which are invested with the cash collateral lender or other eligible institution.  The loan from the cash collateral lender will be repaid from such amounts as are specified in the related prospectus supplement.  Amounts on deposit in the cash collateral account will be available in generally the same manner described above with respect to a reserve fund.  As specified in the related prospectus supplement, a cash collateral account may be deemed to be part of the assets of the related trust, may be deemed to be part of the assets of a separate cash collateral trust or may be deemed to be property of the party specified in the related prospectus supplement and pledged for the benefit of the holders of one or more classes of certificates of a series.
 
Pool Insurance Policy
 
If specified in the prospectus supplement relating to a series of certificates, credit enhancement may be provided by a mortgage pool insurance policy for the mortgage loans in the related trust fund.  Each mortgage pool insurance policy, in accordance with the limitations described in this prospectus and in the prospectus supplement, if any, will cover any loss by reason of default on a mortgage loan in an amount equal to a percentage specified in the applicable prospectus supplement of the unpaid principal balance of the mortgage loans.  The master servicer generally will be required to use its best efforts to maintain the mortgage pool insurance policy and to present claims to the pool insurer.  The mortgage pool insurance policies, however, are not blanket policies against loss, since claims may only be made respecting particular defaulted mortgage loans and only upon satisfaction of specified conditions precedent described below.  The mortgage pool insurance policies will generally not cover losses due to a failure to pay or denial of a claim under a primary mortgage insurance policy, regardless of the reason for nonpayment.
 
As more specifically provided in the related prospectus supplement, each mortgage pool insurance policy will provide for conditions under which claims may be presented and covered under the policy.  Upon satisfaction of these conditions, the pool insurer will have the option either (a) to purchase the property securing the defaulted mortgage loan at a price equal to its unpaid principal balance plus accrued and unpaid interest at the applicable Mortgage Rate to the date of purchase plus certain Advances, or (b) to pay the amount by which the sum of the unpaid principal balance of the defaulted mortgage loan plus accrued and unpaid interest at the Mortgage Rate to the date of payment of the claim plus certain Advances exceeds the proceeds received from an approved sale of the mortgaged property, in either case net of certain amounts paid or assumed to have been paid under any related primary mortgage insurance policy.
 
Certificateholders may experience a shortfall in the amount of interest payable on the related certificates in connection with the payment of claims under a mortgage pool insurance policy because the pool insurer is only required to remit unpaid interest through the date a claim is paid rather than through the end of the month in which the claim is paid.  In addition, certificateholders may also experience losses with respect to the related certificates in connection with payments made under a mortgage pool insurance policy to the extent that the related master servicer or special servicer expends funds to cover unpaid real estate taxes or to repair the related mortgaged property in order to make a claim under a mortgage pool insurance policy, as those amounts will not be covered by payments under the policy and will be reimbursable to the related servicer from funds otherwise payable to the certificateholders.  If any mortgaged property securing a defaulted mortgage loan is damaged and proceeds, if any from the related hazard insurance policy or applicable special hazard insurance policy are insufficient to restore the damaged property to a condition sufficient to permit recovery under the mortgage pool insurance policy, a servicer will generally not be required to expend its own funds to restore the damaged property unless (if so specified in the related prospectus supplement) it determines that (a) restoration will increase the proceeds to one or more classes of certificates on liquidation of the mortgage loan after reimbursement of the related servicer for its expenses and (b) the expenses will be recoverable by it through Liquidation Proceeds or insurance proceeds.
 
A mortgage pool insurance policy and some primary mortgage insurance policies will generally not insure against loss sustained by reason of a default arising from, among other things, fraud or negligence in the origination or servicing of a mortgage loan, including misrepresentation by the mortgagor, the seller or other persons involved in the origination of the mortgage loan, failure to construct a mortgaged property in accordance with plans and
 
 
-89-

 
 
specifications or bankruptcy, unless as specified in the related prospectus supplement, an endorsement to the mortgage pool insurance policy provides for insurance against that type of loss.
 
The original amount of coverage under each mortgage pool insurance policy will be reduced over the life of the related series of certificates by the aggregate amount of claims paid less the aggregate of the net amounts realized by the pool insurer upon disposition of all foreclosed properties.  The amount of claims paid includes some expenses incurred by the related servicer as well as accrued interest on delinquent mortgage loans to the date of payment of the claim.  Accordingly, if aggregate net claims paid under any mortgage pool insurance policy reach the original policy limit, coverage under that mortgage pool insurance policy will be exhausted and any further losses will be borne by the related certificates, to the extent not covered by other credit enhancements.
 
Special Hazard Insurance Policy
 
Any insurance policy covering special hazard losses obtained for a trust will be issued by the insurer named in the related prospectus supplement.  Each special hazard insurance policy will be subject to limitations described in this paragraph and in the related prospectus supplement, if any, and will protect the related certificateholders from special hazard losses.  Aggregate claims under a special hazard insurance policy will be limited to the amount set forth in the related Pooling and Servicing Agreement and will be subject to reduction as described in the related Pooling and Servicing Agreement.  A special hazard insurance policy will provide that no claim may be paid unless hazard and, if applicable, flood insurance on the mortgaged property securing the mortgage loan has been kept in force and other protection and preservation expenses have been paid by the related master servicer or special servicer, as the case may be.
 
In accordance with the foregoing limitations, a special hazard insurance policy will provide that, where there has been damage to the mortgaged property securing a foreclosed mortgage loan, title to which has been acquired by the insured, and to the extent the damage is not covered by the hazard insurance policy or flood insurance policy, if any, maintained by the mortgagor or the related master servicer or special servicer, as the case may be, the insurer will pay the lesser of (i) the cost of repair or replacement of the related mortgaged property or (ii) upon transfer of the property to the insurer, the unpaid principal balance of the mortgage loan at the time of acquisition of the related property by foreclosure or deed in lieu of foreclosure, plus accrued interest at the Mortgage Rate to the date of claim settlement and certain expenses incurred by the related master servicer or special servicer, as the case may be, with respect to the related mortgaged property.
 
If the mortgaged property is transferred to a third party in a sale approved by the special hazard insurer, the amount that the special hazard insurer will pay will be the amount under (ii) above reduced by the net proceeds of the sale of the mortgaged property.  If the unpaid principal balance plus accrued interest and certain Advances is paid by the special hazard insurer, the amount of further coverage under the related special hazard insurance policy will be reduced by that amount less any net proceeds from the sale of the mortgaged property.  Any amount paid as the cost of repair of the property will further reduce coverage by that amount.  Restoration of the property with the proceeds described under (i) above will satisfy the condition under any mortgage pool insurance policy that the property be restored before a claim under the policy may be validly presented with respect to the defaulted mortgage loan secured by the related mortgaged property.  The payment described under (ii) above will render presentation of a claim relating to a mortgage loan under the related mortgage pool insurance policy unnecessary.  Therefore, so long as a mortgage pool insurance policy remains in effect, the payment by the insurer under a special hazard insurance policy of the cost of repair or of the unpaid principal balance of the related mortgage loan plus accrued interest and certain Advances will not affect the total insurance proceeds paid to certificateholders, but will affect the relative amounts of coverage remaining under the related special hazard insurance policy and mortgage pool insurance policy.
 
Mortgagor Bankruptcy Bond
 
If specified in the related prospectus supplement, a bankruptcy bond to cover losses resulting from proceedings under the federal Bankruptcy Code with respect to a mortgage loan will be issued by an insurer named in the prospectus supplement.  Each bankruptcy bond will cover, to the extent specified in the related prospectus supplement, certain losses resulting from a reduction by a bankruptcy court of scheduled payments of principal and interest on a mortgage loan or a reduction by the court of the unpaid principal balance of a mortgage loan and will
 
 
-90-

 
 
cover certain unpaid interest on the amount of a principal reduction from the date of the filing of a bankruptcy petition.  The required amount of coverage under each bankruptcy bond will be set forth in the related prospectus supplement.
 
Cross Collateralization
 
If specified in the applicable prospectus supplement, the beneficial ownership of separate groups of mortgage loans included in a trust fund may be evidenced by separate classes of certificates.  In this case, credit support may be provided by a cross collateralization feature which requires that distributions be made to certain classes from mortgage loan payments that would otherwise be distributed to Subordinate Certificates evidencing a beneficial ownership interest in other loan groups within the same trust fund.  As a result, the amount of credit enhancement available to a class of certificates against future losses on the mortgage loans in which that class represents an interest may be reduced as the result of losses on a group of mortgage loans in which that class has no interest.  The applicable prospectus supplement for a series that includes a cross collateralization feature will describe its specific operation.
 
Overcollateralization
 
If specified in the related prospectus supplement, subordination provisions of a series may be used to accelerate to a limited extent the amortization of one or more classes of certificates relative to the amortization of the related mortgage loans.  The accelerated amortization is achieved by the application of certain excess interest to the payment of principal of one or more classes of certificates.  This acceleration feature creates, with respect to the mortgage loans or a group of mortgage loans, overcollateralization which results from the excess of the aggregate principal balance of the related mortgage loans, or group of mortgage loans, over the Class Balance of the related class or classes of certificates.  This acceleration may continue for the life of the related certificates, or may have a shorter duration.  In the case of limited acceleration, once the required level of overcollateralization is reached, and subject to certain provisions specified in the related prospectus supplement, this limited acceleration feature may cease, unless necessary to maintain the required level of overcollateralization.
 
Excess Interest
 
If specified in the related prospectus supplement, the mortgage loans in a trust may generate more interest than is necessary to pay the interest earned on the classes of certificates each month.  The excess interest may be used to maintain overcollateralization, to pay interest that was previously earned but not paid to certain classes of certificates and to reimburse certain classes of certificates for losses and certain shortfalls that they experienced previously.
 
Cash Flow Agreements
 
If specified in the applicable prospectus supplement, amounts received by the trustee under any Cash Flow Agreement described below under “CASH FLOW AGREEMENTS” may also be used to provide credit enhancement for one or more classes of certificates.
 
Credit Support with Respect to MBS
 
If so provided in the prospectus supplement for a series of certificates, any MBS included in the related trust fund and/or the related underlying mortgage loans may be covered by one or more of the types of credit support described in this prospectus.  The related prospectus supplement will specify, as to each such form of credit support, the information indicated above with respect thereto, to the extent such information is material and available.
 
CASH FLOW AGREEMENTS
 
If specified in the prospectus supplement, the trust fund may include cash flow agreements consisting of one or more guaranteed investment contracts, swap agreements or interest rate cap or floor agreements (also called yield maintenance agreements), each of which agreements is intended to reduce the effects of interest rate fluctuations on the assets or on one or more classes of certificates (each, a “Cash Flow Agreement”).  The applicable prospectus
 
 
-91-

 
 
supplement will describe the name, organizational form and general character of the business of the counterparty under any Cash Flow Agreement.  In addition, the prospectus supplement for the related series of certificates will disclose the significance percentage, calculated in accordance with Item 1115 of Regulation AB (17 CFR 229.1115).  To the extent this percentage is (a) 10% or more but less than 20%, the related prospectus supplement will provide financial data required by Item 301 of Regulation S-K (17 CFR 229.301) or (b) greater than 20%, the related prospectus supplement will provide financial statements required by Item 1115(b)(2) of Regulation AB (17 CFR 229.1115) and, in either case, the related prospectus supplement will contain a description of the operation and material terms of the Cash Flow Agreement, including, without limitation, conditions to payment or limits on the timing or amount of payments and material provisions relating to the termination or substitution of the Cash Flow Agreement.  Copies of the Cash Flow Agreement, if any, relating to a series of certificates will be filed with the SEC as an exhibit to a Current Report on Form 8-K.
 
Guaranteed Investment Contracts
 
If specified in the related prospectus supplement, the trustee on behalf of the trust may enter into one or more guaranteed investment contracts.  Guaranteed investment contracts are generally used to maximize the investment income on funds held between Distribution Dates pending distribution to certificateholders.  Under a guaranteed investment contract, the issuer of the contract, which is typically a highly rated financial institution, guarantees a fixed or floating rate of interest over the life of the contract, as well as the ultimate return of the principal.  Any payments received from the issuer of the contract by the trust will be distributed to the related class or classes of certificates as specified in the applicable prospectus supplement.
 
Yield Maintenance Agreements
 
If specified in the related prospectus supplement, the trustee on behalf of the trust will enter into one or more yield maintenance agreements in order to support the yield of one or more classes of certificates.  The counterparty to a yield maintenance agreement will receive an upfront payment and the trust will have no ongoing payment obligations.  Generally, if the index specified in the applicable prospectus supplement, which index will be one-month, three-month, six-month or one-year LIBOR, CMT, COFI, MTA or the Prime Rate, exceeds a percentage for a particular date specified in the applicable prospectus supplement, the counterparty to the yield maintenance agreement will be required to pay to the trustee an amount equal to that excess multiplied by a notional amount or the Class Balance or Balances of one or more classes of certificates multiplied by one-twelfth.  This amount may be adjusted to reflect the actual number of days in the interest accrual period for the related class or classes of certificates and will be paid to the class or classes of certificates as specified in the related prospectus supplement.
 
Swap Agreements
 
If specified in the related prospectus supplement, the trustee on behalf of the trust will enter into a swap agreement to support the yield on one or more classes of certificates.  Under the swap agreement, the trust will be obligated to pay an amount equal to a certain percentage of a notional amount set forth in the related prospectus supplement to the counterparty and the trust will be entitled to receive an amount equal to one-month, three-month, six-month or one-year LIBOR, CMT, COFI, MTA or the Prime Rate on the notional amount from the counterparty, until the swap agreement is terminated.  Only the net amount of the two obligations will be paid by the appropriate party.  In the event that the trust is required to make a payment to the counterparty, that payment will be paid on the related Distribution Date prior to distributions to certificateholders.  Generally, any payments received from the counterparty by the trust will be distributed to cover certain shortfalls as set forth in the applicable prospectus supplement.
 
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
 
The following discussion contains general summaries of certain legal aspects of mortgage loans secured by commercial and multifamily residential properties.  Because such legal aspects are governed by applicable state law (which laws may differ substantially), the summaries do not purport to be complete, to reflect the laws of any particular state, or to encompass the laws of all states in which the security for the mortgage loans (or mortgage loans underlying any MBS) is situated.  Accordingly, the summaries are qualified in their entirety by reference to
 
 
-92-

 
 
the applicable laws of those states.  See “DESCRIPTION OF THE TRUST FUNDS—Mortgage Loans”.  For purposes of the following discussion, “mortgage loan” includes a mortgage loan underlying an MBS.
 
General
 
Each mortgage loan will be evidenced by a note or bond and secured by an instrument granting a security interest in real property, which may be a mortgage, deed of trust or a deed to secure debt, depending upon the prevailing practice and law in the state in which the related mortgaged property is located.  Mortgages, deeds of trust and deeds to secure debt are in this prospectus collectively referred to as “mortgages”.  A mortgage creates a lien upon, or grants a title interest in, the real property covered by that mortgage, and represents the security for the repayment of the indebtedness customarily evidenced by a promissory note.  The priority of the lien created or interest granted will depend on the terms of the mortgage and, in some cases, on the terms of separate subordination agreements or intercreditor agreements with others that hold interests in the real property, the knowledge of the parties to the mortgage and, generally, the order of recordation of the mortgage in the appropriate public recording office.  However, the lien of a recorded mortgage will generally be subordinate to later-arising liens for real estate taxes and assessments and other charges imposed under governmental police powers.
 
Types of Mortgage Instruments
 
There are two parties to a mortgage:  a mortgagor (the borrower and usually the owner of the subject property) and a mortgagee (the lender).  In contrast, a deed of trust is a three-party instrument, among a trustor (the equivalent of a borrower), a trustee to whom the real property is conveyed, and a beneficiary (the lender) for whose benefit the conveyance is made.  Under a deed of trust, the trustor grants the property, irrevocably until the debt is paid, in trust and generally with a power of sale, to the trustee to secure repayment of the indebtedness evidenced by the related note.  A deed to secure debt typically has two parties, pursuant to which the borrower, or grantor, conveys title to the real property to the grantee, or lender, generally with a power of sale, until such time as the debt is repaid.  In a case where the borrower is a land trust, there would be an additional party because legal title to the property is held by a land trustee under a land trust agreement for the benefit of the borrower.  At origination of a mortgage loan involving a land trust, the borrower may execute a separate undertaking to make payments on the mortgage note.  In no event is the land trustee personally liable for the mortgage note obligation.  The mortgagee’s authority under a mortgage, the trustee’s authority under a deed of trust and the grantee’s authority under a deed to secure debt are governed by the express provisions of the related instrument, the law of the state in which the real property is located, certain federal laws and, in some deed of trust transactions, the directions of the beneficiary.
 
Leases and Rents
 
Mortgages that encumber income-producing property often contain an assignment of rents and leases and/or may be accompanied by a separate assignment of rents and leases, pursuant to which the borrower assigns to the lender the borrower’s right, title and interest as landlord under each lease and the income derived from such leases and rents, while (unless rents are to be paid directly to the lender) retaining a revocable license to collect the rents for so long as there is no default.  If the borrower defaults, the license terminates and the lender is entitled to collect the rents.  Local law may require that the lender take possession of the property and/or obtain a court-appointed receiver before becoming entitled to collect the rents.
 
In most states, hotel and motel room rates are considered accounts receivable under the Uniform Commercial Code; in cases where hotels or motels constitute loan security, the rates are generally pledged by the borrower as additional security for the loan.  In general, the lender must file financing statements in order to perfect its security interest in the room rates and must file continuation statements, generally every five years, to maintain perfection of such security interest.  In certain cases, mortgage loans secured by hotels or motels may be included in a trust fund even if the security interest in the room rates was not perfected or the requisite UCC filings were allowed to lapse.  Even if the lender’s security interest in room rates is perfected under applicable nonbankruptcy law, it will generally be required to commence a foreclosure action or otherwise take possession of the property in order to enforce its rights to collect the room rates following a default.  In the bankruptcy setting, however, the lender will be stayed from enforcing its rights to collect room rates, but those room rates (in light of certain revisions to the Bankruptcy Code which are effective for all bankruptcy cases commenced on or after October 22, 1994) constitute “cash collateral” and therefore cannot be used by the bankruptcy debtor without lender’s consent or a hearing at which the
 
 
-93-

 
 
lender’s interest in the room rates is given adequate protection (e.g., the lender receives cash payments from otherwise unencumbered funds or a replacement lien on unencumbered property, in either case equal in value to the amount of room rates that the debtor proposes to use, or other similar relief).  See “—Bankruptcy Laws”.
 
In the case of office and retail properties, the bankruptcy or insolvency of a major tenant or a number of smaller tenants may have an adverse impact on the mortgaged properties affected and the income produced by such mortgaged properties.  Under bankruptcy law, a tenant has the option of assuming (continuing), or rejecting (terminating) or, subject to certain conditions, assigning to a third party any unexpired lease.  If the tenant assumes its lease, the tenant must cure all defaults under the lease and provide the landlord with adequate assurance of its future performance under the lease.  If the tenant rejects the lease, the landlord’s claim for breach of the lease would (absent collateral securing the claim) be treated as a general unsecured claim.  The amount of the claim would be limited to the amount owed for unpaid pre-petition lease payments unrelated to the rejection, plus the greater of one year’s lease payments or 15% of the remaining lease payments payable under the lease (but not to exceed three years’ lease payments).  If the tenant assigns its lease, the tenant must cure all defaults under the lease and the proposed assignee must demonstrate adequate assurance of future performance under the lease.
 
Personalty
 
In the case of certain types of mortgaged properties, such as hotels, motels and nursing homes, personal property (to the extent owned by the borrower and not previously pledged) may constitute a significant portion of the property’s value as security.  The creation and enforcement of liens on personal property are governed by the UCC.  Accordingly, if a borrower pledges personal property as security for a mortgage loan, the lender generally must file UCC financing statements in order to perfect its security interest in the personal property, and must file continuation statements, generally every five years, to maintain that perfection.  [In certain cases, mortgage loans secured in part by personal property may be included in a trust fund even if the security interest in such personal property was not perfected or the requisite UCC filings were allowed to lapse.]
 
Foreclosure
 
General.  Foreclosure is a legal procedure that allows the lender to recover its mortgage debt by enforcing its rights and available legal remedies under the mortgage.  If the borrower defaults in payment or performance of its obligations under the note or mortgage, the lender has the right to institute foreclosure proceedings to sell the real property at public auction to satisfy the indebtedness.
 
Foreclosure procedures vary from state to state.  Two primary methods of foreclosing a mortgage are judicial foreclosure, involving court proceedings, and nonjudicial foreclosure pursuant to a power of sale granted in the mortgage instrument.  Other foreclosure procedures are available in some states, but they are either infrequently used or available only in limited circumstances.
 
A foreclosure action is subject to most of the delays and expenses of other lawsuits if defenses are raised or counterclaims are interposed, and sometimes requires several years to complete.
 
Judicial Foreclosure.  A judicial foreclosure proceeding is conducted in a court having jurisdiction over the mortgaged property.  Generally, the action is initiated by the service of legal pleadings upon all parties having a subordinate interest of record in the real property and all parties in possession of the property, under leases or otherwise, whose interests are subordinate to the mortgage.  Delays in completion of the foreclosure may occasionally result from difficulties in locating defendants.  When the lender’s right to foreclose is contested, the legal proceedings can be time-consuming.  Upon successful completion of a judicial foreclosure proceeding, the court generally issues a judgment of foreclosure and appoints a referee or other officer to conduct a public sale of the mortgaged property, the proceeds of which are used to satisfy the judgment.  Such sales are made in accordance with procedures that vary from state to state.
 
Equitable and Other Limitations on Enforceability of Certain Provisions.  United States courts have traditionally imposed general equitable principles to limit the remedies available to lenders in foreclosure actions.  These principles are generally designed to relieve borrowers from the effects of mortgage defaults perceived as harsh or unfair.  Relying on such principles, a court may alter the specific terms of a loan to the extent it considers necessary to prevent or remedy an injustice, undue oppression or overreaching, or may require the lender to
 
 
-94-

 
 
undertake affirmative actions to determine the cause of the borrower’s default and the likelihood that the borrower will be able to reinstate the loan.  In some cases, courts have substituted their judgment for the lender’s and have required that lenders reinstate loans or recast payment schedules in order to accommodate borrowers who are suffering from a temporary financial disability.  In other cases, courts have limited the right of the lender to foreclose in the case of a nonmonetary default, such as a failure to adequately maintain the mortgaged property or an impermissible further encumbrance of the mortgaged property.  Finally, some courts have addressed the issue of whether federal or state constitutional provisions reflecting due process concerns for adequate notice require that a borrower receive notice in addition to statutorily-prescribed minimum notice.  For the most part, these cases have upheld the reasonableness of the notice provisions or have found that a public sale under a mortgage providing for a power of sale does not involve sufficient state action to trigger constitutional protections.
 
In addition, some states may have statutory protection such as the right of the borrower to reinstate mortgage loans after commencement of foreclosure proceedings but prior to a foreclosure sale.
 
Nonjudicial Foreclosure/Power of Sale.  In states permitting nonjudicial foreclosure proceedings, foreclosure of a deed of trust is generally accomplished by a nonjudicial trustee’s sale pursuant to a power of sale typically granted in the deed of trust.  A power of sale may also be contained in any other type of mortgage instrument if applicable law so permits.  A power of sale under a deed of trust allows a nonjudicial public sale to be conducted generally following a request from the beneficiary/lender to the trustee to sell the property upon default by the borrower and after notice of sale is given in accordance with the terms of the mortgage and applicable state law.  In some states, prior to such sale, the trustee under the deed of trust must record a notice of default and notice of sale and send a copy to the borrower and to any other party who has recorded a request for a copy of a notice of default and notice of sale.  In addition, in some states the trustee must provide notice to any other party having an interest of record in the real property, including junior lienholders.  A notice of sale must be posted in a public place and, in most states, published for a specified period of time in one or more newspapers.  The borrower or junior lienholder may then have the right, during a reinstatement period required in some states, to cure the default by paying the entire actual amount in arrears (without regard to the acceleration of the indebtedness), plus the lender’s expenses incurred in enforcing the obligation.  In other states, the borrower or the junior lienholder is not provided a period to reinstate the loan, but has only the right to pay off the entire debt to prevent the foreclosure sale.  Generally, state law governs the procedure for public sale, the parties entitled to notice, the method of giving notice and the applicable time periods.
 
Public Sale.  A third party may be unwilling to purchase a mortgaged property at a public sale because of the difficulty in determining the exact status of title to the property (due to, among other things, redemption rights that may exist) and because of the possibility that physical deterioration of the property may have occurred during the foreclosure proceedings.  Therefore, it is common for the lender to purchase the mortgaged property for an amount equal to the secured indebtedness and accrued and unpaid interest plus the expenses of foreclosure, in which event the borrower’s debt will be extinguished, or for a lesser amount in order to preserve its right to seek a deficiency judgment if such is available under state law and under the terms of the mortgage loan documents.  (The mortgage loans, however, may be nonrecourse.  See “RISK FACTORS—Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans—Limited Recourse Nature of the Mortgage Loans May Make Recovery Difficult in the Event that a Mortgage Loan Defaults”.) Thereafter, subject to the borrower’s right in some states to remain in possession during a redemption period, the lender will become the owner of the property and have both the benefits and burdens of ownership, including the obligation to pay debt service on any senior mortgages, to pay taxes, to obtain casualty insurance and to make such repairs as are necessary to render the property suitable for sale.  The costs of operating and maintaining a commercial or multifamily residential property may be significant and may be greater than the income derived from that property.  The lender also will commonly obtain the services of a real estate broker and pay the broker’s commission in connection with the sale or lease of the property.  Depending upon market conditions, the ultimate proceeds of the sale of the property may not equal the lender’s investment in the property.  Moreover, because of the expenses associated with acquiring, owning and selling a mortgaged property, a lender could realize an overall loss on a mortgage loan even if the mortgaged property is sold at foreclosure, or resold after it is acquired through foreclosure, for an amount equal to the full outstanding principal amount of the loan plus accrued interest.
 
The holder of a junior mortgage that forecloses on a mortgaged property does so subject to senior mortgages and any other prior liens, and may be obliged to keep senior mortgage loans current in order to avoid foreclosure of
 
-95-

 
 
its interest in the property.  In addition, if the foreclosure of a junior mortgage triggers the enforcement of a “due-on-sale” clause contained in a senior mortgage, the junior mortgagee could be required to pay the full amount of the senior mortgage indebtedness or face foreclosure.
 
Rights of Redemption.  The purposes of a foreclosure action are to enable the lender to realize upon its security and to bar the borrower, and all persons who have interests in the property that are subordinate to that of the foreclosing lender, from exercise of their “equity of redemption”.  The doctrine of equity of redemption provides that, until the property encumbered by a mortgage has been sold in accordance with a properly conducted foreclosure and foreclosure sale, those having interests that are subordinate to that of the foreclosing lender have an equity of redemption and may redeem the property by paying the entire debt with interest.  Those having an equity of redemption must generally be made parties and joined in the foreclosure proceeding in order for their equity of redemption to be terminated.
 
The equity of redemption is a common-law (nonstatutory) right which should be distinguished from post-sale statutory rights of redemption.  In some states, after sale pursuant to a deed of trust or foreclosure of a mortgage, the borrower and foreclosed junior lienors are given a statutory period in which to redeem the property.  In some states, statutory redemption may occur only upon payment of the foreclosure sale price.  In other states, redemption may be permitted if the former borrower pays only a portion of the sums due.  The effect of a statutory right of redemption is to diminish the ability of the lender to sell the foreclosed property because the exercise of a right of redemption would defeat the title of any purchaser through a foreclosure.  Consequently, the practical effect of the redemption right is to force the lender to maintain the property and pay the expenses of ownership until the redemption period has expired.  In some states, a post-sale statutory right of redemption may exist following a judicial foreclosure, but not following a trustee’s sale under a deed of trust.
 
Anti-Deficiency Legislation.  Some or all of the mortgage loans may be nonrecourse loans, as to which recourse in the case of default will be limited to the mortgaged property and such other assets, if any, that were pledged to secure the mortgage loan.  However, even if a mortgage loan by its terms provides for recourse to the borrower’s other assets, a lender’s ability to realize upon those assets may be limited by state law.  For example, in some states a lender cannot obtain a deficiency judgment against the borrower following foreclosure or sale under a deed of trust.  A deficiency judgment is a personal judgment against the former borrower equal to the difference between the net amount realized upon the public sale of the real property and the amount due to the lender.  Other statutes may require the lender to exhaust the security afforded under a mortgage before bringing a personal action against the borrower.  In certain other states, the lender has the option of bringing a personal action against the borrower on the debt without first exhausting such security; however, in some of those states, the lender, following judgment on such personal action, may be deemed to have elected a remedy and thus may be precluded from foreclosing upon the security.  Consequently, lenders in those states where such an election of remedy provision exists will usually proceed first against the security.  Finally, other statutory provisions, designed to protect borrowers from exposure to large deficiency judgments that might result from bidding at below-market values at the foreclosure sale, limit any deficiency judgment to the excess of the outstanding debt over the fair market value of the property at the time of the sale.
 
Leasehold Considerations.  Mortgage loans may be secured by a mortgage on a ground lease.  Leasehold mortgages are subject to certain considerations not associated with mortgage loans secured by the fee estate of the mortgagor.  The most significant of these considerations is that the ground lease creating the leasehold estate could terminate, leaving the leasehold mortgagee without its security.  The ground lease may terminate, if among other reasons, the ground lessee breaches or defaults in its obligations under the ground lease or there is a bankruptcy of the ground lessee or the ground lessor.  This possibility may be minimized if the ground lease contains certain provisions protective of the mortgagee, but the ground leases that secure mortgage loans may not contain all of these protective provisions, and mortgages may not contain the other protection discussed in the next paragraph.  Protective ground lease provisions include the right of the leasehold mortgagee to receive notices from the ground lessor of any defaults by the mortgagor; the right to cure those defaults, with adequate cure periods; if a default is not susceptible of cure by the leasehold mortgagee, the right to acquire the leasehold estate through foreclosure or otherwise; the ability of the ground lease to be assigned to and by the leasehold mortgagee or purchaser at a foreclosure sale and for the simultaneous release of the ground lessee’s liabilities under the new lease; and the right of the leasehold mortgagee to enter into a new ground lease with the ground lessor on the same terms and conditions as the old ground lease upon a termination.
 
 
 
-96-

 
 
In addition to the preceding protections, a leasehold mortgagee may require that the ground lease or leasehold mortgage prohibit the ground lessee from treating the ground lease as terminated in the event of the ground lessor’s bankruptcy and rejection of the ground lease by the trustee for the debtor-ground lessor.  As further protection, a leasehold mortgage may provide for the assignment of the debtor-ground lessee’s right to reject a lease pursuant to Section 365 of the Bankruptcy Code, although the enforceability of that clause has not been established.  Without the protections described in the preceding paragraph, a leasehold mortgagee may lose the collateral securing its leasehold mortgage.  In addition, terms and conditions of a leasehold mortgage are subject to the terms and conditions of the ground lease.  Although certain rights given to a ground lessee can be limited by the terms of a leasehold mortgage, the rights of a ground lessee or a leasehold mortgagee with respect to, among other things, insurance, casualty and condemnation will be governed by the provisions of the ground lease.
 
Cooperative Shares.  The cooperative shares owned by the tenant stockholder and pledged to the lender are, in almost all cases, subject to restrictions on transfer as set forth in the cooperative’s certificate of incorporation and by-laws, as well as in the proprietary lease or occupancy agreement, and may be canceled by the cooperative for failure by the tenant stockholder to pay rent or other obligations or charges owed by the tenant stockholder, including mechanics’ liens against the cooperative apartment building incurred by the tenant stockholder.  The proprietary lease or occupancy agreement generally permits the cooperative to terminate the lease or agreement in the event an obligor fails to make payments or defaults in the performance of covenants required thereunder.  Typically, the lender and the cooperative enter into a recognition agreement which establishes the rights and obligations of both parties in the event of a default by the tenant stockholder on its obligations under the proprietary lease or occupancy agreement.  A default by the tenant stockholder under the proprietary lease or occupancy agreement will usually constitute a default under the security agreement between the lender and the tenant stockholder.
 
The recognition agreement generally provides that, in the event that the tenant stockholder has defaulted under the proprietary lease or occupancy agreement, the cooperative will take no action to terminate the lease or agreement until the lender has been provided an opportunity to cure the default.  The recognition agreement typically provides that if the proprietary lease or occupancy agreement is terminated, the cooperative will recognize the lender’s lien against proceeds from a sale of the cooperative apartment, subject, however, to the cooperative’s right to sums due under the proprietary lease or occupancy agreement.  The total amount owed to the cooperative by the tenant stockholder, which the lender generally cannot restrict and does not monitor, could reduce the value of the collateral below the outstanding principal balance of the cooperative loan and accrued and unpaid interest thereon.
 
Recognition agreements also provide that in the event of a foreclosure on a cooperative loan, the lender must obtain the approval or consent of the cooperative as required by the proprietary lease before transferring the cooperative shares or assigning the proprietary lease.  Generally, the lender is not limited by the agreement in any rights it may have to dispossess the tenant stockholders.
 
Foreclosure on the cooperative shares is accomplished by a sale in accordance with the provisions of Article 9 of the Uniform Commercial Code (the “UCC”) and the security agreement relating to those shares.  Article 9 of the UCC requires that a sale be conducted in a “commercially reasonable” manner.  Whether a foreclosure sale has been conducted in a “commercially reasonable” manner will depend on the facts in each case.  In determining commercial reasonableness, a court will look to the notice given the debtor and the method, manner, time, place and terms of the foreclosure.  Generally, a sale conducted according to the usual practice of banks selling similar collateral will be considered reasonably conducted.
 
Article 9 of the UCC provides that the proceeds of the sale will be applied first to pay the costs and expenses of the sale and then to satisfy the indebtedness secured by the lender’s security interest.  The recognition agreement, however, generally provides that the lender’s right to reimbursement is subject to the right of the cooperative corporation to receive sums due under the proprietary lease or occupancy agreement.  If there are proceeds remaining, the lender must account to the tenant stockholder for the surplus.  Conversely, if a portion of the indebtedness remains unpaid, the tenant stockholder is generally responsible for the deficiency.
 
See “RISK FACTORS—Collateral Securing Cooperative Loans May Diminish in Value” in this prospectus.
 
 
-97-

 
 
Bankruptcy Laws
 
Operation of the Bankruptcy Code and related state laws may interfere with or affect the ability of a lender to realize upon collateral and/or to enforce a deficiency judgment.  For example, under the Bankruptcy Code, virtually all actions (including foreclosure actions and deficiency judgment proceedings) to collect a debt are automatically stayed upon the filing of the bankruptcy petition and, often, no interest or principal payments are made during the course of the bankruptcy case.  The delay and the consequences caused by such automatic stay can be significant.  Also, under the Bankruptcy Code, the filing of a petition in bankruptcy by or on behalf of a junior lienor may stay the senior lender from taking action to foreclose out such junior lien.
 
Under the Bankruptcy Code, provided certain substantive and procedural safeguards protective of the lender are met, the amount and terms of a mortgage loan secured by a lien on property of the debtor may be modified under certain circumstances.  For example, the outstanding amount of the loan may be reduced to the then-current value of the property (with a corresponding partial reduction of the amount of lender’s security interest) pursuant to a confirmed plan or lien avoidance proceeding, thus leaving the lender a general unsecured creditor for the difference between such value and the outstanding balance of the loan.  Other modifications may include the reduction in the amount of each scheduled payment, by means of a reduction in the rate of interest and/or an alteration of the repayment schedule (with or without affecting the unpaid principal balance of the loan), and/or by an extension (or shortening) of the term to maturity.  Some bankruptcy courts have approved plans, based on the particular facts of the reorganization case, that effected the cure of a mortgage loan default by paying arrearages over a number of years.  Also, a bankruptcy court may permit a debtor, through its rehabilitative plan, to reinstate a loan mortgage payment schedule even if the lender has obtained a final judgment of foreclosure prior to the filing of the debtor’s petition.
 
Federal bankruptcy law may also have the effect of interfering with or affecting the ability of a secured lender to enforce the borrower’s assignment of rents and leases related to the mortgaged property.  Under the Bankruptcy Code, a lender may be stayed from enforcing the assignment, and the legal proceedings necessary to resolve the issue could be time-consuming, with resulting delays in the lender’s receipt of the rents.  Recent amendments to the Bankruptcy Code, however, may minimize the impairment of the lender’s ability to enforce the borrower’s assignment of rents and leases.  In addition to the inclusion of hotel revenues within the definition of “cash collateral” as noted previously in the Section entitled “—Leases and Rents”, the amendments provide that a pre-petition security interest in rents or hotel revenues extends (unless the bankruptcy court orders otherwise based on the equities of the case) to such post-petition rents or revenues and is intended to overrule those cases that held that a security interest in rents is unperfected under the laws of certain states until the lender has taken some further action, such as commencing foreclosure or obtaining a receiver prior to activation of the assignment of rents.
 
If a borrower’s ability to make payment on a mortgage loan is dependent on its receipt of rent payments under a lease of the related property, that ability may be impaired by the commencement of a bankruptcy case relating to a lessee under such lease.  Under the Bankruptcy Code, the filing of a petition in bankruptcy by or on behalf of a lessee results in a stay in bankruptcy against the commencement or continuation of any state court proceeding for past due rent, for accelerated rent, for damages or for a summary eviction order with respect to a default under the lease that occurred prior to the filing of the lessee’s petition.  In addition, the Bankruptcy Code generally provides that a trustee or debtor-in-possession may, subject to approval of the court, (1) assume the lease and retain it or assign it to a third party or (2) reject the lease.  If the lease is assumed, the trustee or debtor-in-possession (or assignee, if applicable) must cure any defaults under the lease, compensate the lessor for its losses and provide the lessor with “adequate assurance” of future performance.  Such remedies may be insufficient, and any assurances provided to the lessor may, in fact, be inadequate.  If the lease is rejected, the lessor will be treated as an unsecured creditor with respect to its claim for damages for termination of the lease.  The Bankruptcy Code also limits a lessor’s damages for lease rejection to the rent reserved by the lease (without regard to acceleration) for the greater of one year, or 15%, not to exceed three years, of the remaining term of the lease.
 
Pursuant to the federal doctrine of “substantive consolidation” or to the (predominantly state law) doctrine of “piercing the corporate veil”, a bankruptcy court, in the exercise of its equitable powers, also has the authority to order that the assets and liabilities of a related entity be consolidated with those of an entity before it.  Thus, property ostensibly the property of one entity may be determined to be the property of a different entity in bankruptcy, the automatic stay applicable to the second entity extended to the first and the rights of creditors of the first entity impaired in the fashion set forth above in the discussion of ordinary bankruptcy principles.  Depending on facts and
 
 
-98-

 
 
circumstances not wholly in existence at the time a loan is originated or transferred to the trust fund, the application of any of these doctrines to one or more of the mortgagors in the context of the bankruptcy of one or more of their affiliates could result in material impairment of the rights of the certificateholders.
 
For each mortgagor that is described as a “special purpose entity”, “single purpose entity” or “bankruptcy remote entity” in the related prospectus supplement, the activities that may be conducted by such mortgagor and its ability to incur debt are restricted by the applicable mortgage or the organizational documents of such mortgagor in such manner as is intended to make the likelihood of a bankruptcy proceeding being commenced by or against such mortgagor remote, and such mortgagor has been organized and is designed to operate in a manner such that its separate existence should be respected notwithstanding a bankruptcy proceeding in respect of one or more affiliated entities of such mortgagor.  However, the depositor makes no representation as to the likelihood of the institution of a bankruptcy proceeding by or in respect of any mortgagor or the likelihood that the separate existence of any mortgagor would be respected if there were to be a bankruptcy proceeding in respect of any affiliated entity of a mortgagor.
 
Environmental Considerations
 
General.  A lender may be subject to environmental risks when taking a security interest in real property.  Of particular concern may be properties that are or have been used for industrial, manufacturing, military or disposal activity.  Such environmental risks include the possible diminution of the value of a contaminated property or, as discussed below, potential liability for clean-up costs or other remedial actions that could exceed the value of the property or the amount of the lender’s loan.  In certain circumstances, a lender may decide to abandon a contaminated mortgaged property as collateral for its loan rather than foreclose and risk liability for clean-up costs.
 
Superlien Laws.  Under the laws of many states, contamination on a property may give rise to a lien on the property for clean-up costs.  In several states, such a lien has priority over all existing liens, including those of existing mortgages.  In these states, the lien of a mortgage may lose its priority to such a “superlien”.
 
CERCLA.  CERCLA, imposes strict liability on present and past “owners” and “operators” of contaminated real property for the costs of clean-up.  A secured lender may be liable as an “owner” or “operator” of a contaminated mortgaged property if agents or employees of the lender have become sufficiently involved in the management of such mortgaged property or the operations of the borrower.  Such liability may exist even if the lender did not cause or contribute to the contamination and regardless of whether or not the lender has actually taken possession of a mortgaged property through foreclosure, deed in lieu of foreclosure or otherwise.  Moreover, such liability is not limited to the original or unamortized principal balance of a loan or to the value of the property securing a loan.  Excluded from CERCLA’s definition of “owner” or “operator”, however, is a person “who without participating in the management of the facility, holds indicia of ownership primarily to protect his security interest”.  This is the so-called “secured creditor exemption”.
 
The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996, amended, among other things, the provisions of CERCLA with respect to lender liability and the secured creditor exemption.  The Act offers substantial protection of lenders by defining the activities in which a lender can engage and still have the benefit of the secured creditor exemption.  In order for a lender to be deemed to have participated in the management of a mortgaged property, the lender must actually participate in the operational affairs of the property of the borrower.  The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996 provides that “merely having the capacity to influence, or unexercised right to control” operations does not constitute participation in management.  A lender will lose the protection of the secured creditor exemption only if it exercises decision making control over the borrower’s environmental compliance and hazardous substance handling and disposal practices, or assumes day-to-day management of operational functions of the mortgaged property.  The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996 also provides that a lender will continue to have the benefit of the secured-creditor exemption even if it forecloses on a mortgaged property, purchases it at a foreclosure sale or accepts a deed-in-lieu of foreclosure; provided that the lender seeks to sell the mortgaged property at the earliest practicable commercially reasonable time on commercially reasonable terms.
 
Certain Other Federal and State Laws.  Many states have statutes similar to CERCLA, and not all those statutes provide for a secured creditor exemption.  In addition, under federal law, there is potential liability relating to hazardous wastes and underground storage tanks under the federal Resource Conservation and Recovery Act.
 
 
 
-99-

 
 
In addition, the definition of “hazardous substances” under CERCLA specifically excludes petroleum products.  Subtitle I of the Resource Conservation and Recovery Act governs underground petroleum storage tanks.  Under the Asset Conservation, Lender Liability and Deposit Insurance Act of 1996, the protections accorded to lenders under CERCLA are also accorded to the holders of security interests in underground storage tanks.  It should be noted, however, liability for cleanup of petroleum contamination may be governed by state law, which may not provide for any specific protection of secured creditors.
 
In a few states, transfers of some types of properties are conditioned upon cleanup of contamination prior to transfer.  In these cases, a lender that becomes the owner of a property through foreclosure, deed in lieu of foreclosure or otherwise, may be required to clean up the contamination before selling or otherwise transferring the property.
 
Beyond statute-based environmental liability, there exist common law causes of action (for example, actions based on nuisance or on toxic tort resulting in death, personal injury or damage to property) related to hazardous environmental conditions on a property.  While it may be more difficult to hold a lender liable in such cases, unanticipated or uninsured liabilities of the borrower may jeopardize the borrower’s ability to meet its loan obligations.
 
Additional Considerations.  The cost of remediating hazardous substance contamination at a property can be substantial.  If a lender becomes liable, it can bring an action for contribution against the owner or operator who created the environmental hazard, but that individual or entity may be without substantial assets.  Accordingly, it is possible that such costs could become a liability of the trust fund and occasion a loss to the certificateholders of the related series.
 
To reduce the likelihood of such a loss, unless otherwise specified in the related prospectus supplement, the Pooling and Servicing Agreement will provide that neither the master servicer nor the special servicer, acting on behalf of the trustee, may acquire title to a mortgaged property or take over its operation unless the special servicer, based solely (as to environmental matters) on a report prepared by a person who regularly conducts environmental audits, has made the determination that it is appropriate to do so, as described under “THE POOLING AND SERVICING AGREEMENTS—Realization Upon Defaulted Mortgage Loans”.
 
If a lender forecloses on a mortgage secured by a property, the operations on which are subject to environmental laws and regulations, the lender will be required to operate the property in accordance with those laws and regulations.  Such compliance may entail substantial expense, especially in the case of industrial or manufacturing properties.
 
In addition, a lender may be obligated to disclose environmental conditions on a property to government entities and/or to prospective buyers (including prospective buyers at a foreclosure sale or following foreclosure).  Such disclosure may decrease the amount that prospective buyers are willing to pay for the affected property, sometimes substantially, and thereby decrease the ability of the lender to recoup its investment in a loan upon foreclosure.
 
Environmental Site Assessments.  In most cases, an environmental site assessment of each mortgaged property will have been performed in connection with the origination of the related mortgage loan or at some time prior to the issuance of the related certificates.  Environmental site assessments, however, vary considerably in their content, quality and cost.  Even when adhering to good professional practices, environmental consultants will sometimes not detect significant environmental problems because to do an exhaustive environmental assessment would be far too costly and time-consuming to be practical.
 
Due-on-Sale and Due-on-Encumbrance Provisions
 
Certain of the mortgage loans may contain “due-on-sale” and “due-on-encumbrance” clauses that purport to permit the lender to accelerate the maturity of the loan if the borrower transfers or encumbers the related mortgaged property.  In recent years, court decisions and legislative actions placed substantial restrictions on the right of lenders to enforce such clauses in many states.  However, the Garn Act generally preempts state laws that prohibit the enforcement of due-on-sale clauses and permits lenders to enforce these clauses in accordance with their terms, subject to certain limitations as set forth in the Garn Act and the regulations promulgated under the Garn Act.  Accordingly, a master servicer may nevertheless have the right to accelerate the maturity of a mortgage loan that
 
 
-100-

 
 
contains a “due-on-sale” provision upon transfer of an interest in the property, without regard to the master servicer’s ability to demonstrate that a sale threatens its legitimate security interest.
 
Junior Liens; Rights of Holders of Senior Liens
 
If so provided in the related prospectus supplement, mortgage assets for a series of certificates may include mortgage loans secured by junior liens, and the loans secured by the related senior liens may not be included in the mortgage pool.  In addition to the risks faced by the holder of a first lien, holders of mortgage loans secured by junior liens also face the risk that adequate funds will not be received in connection with a foreclosure on the related mortgaged property to satisfy fully both the senior liens and the mortgage loan.  In the event that a holder of a senior lien forecloses on a mortgaged property, the proceeds of the foreclosure or similar sale will be applied first to the payment of court costs and fees in connection with the foreclosure, second to real estate taxes, third in satisfaction of all principal, interest, prepayment or acceleration penalties, if any, and any other sums due and owing to the holder of the senior liens.  The claims of the holders of the senior liens will be satisfied in full out of proceeds of the liquidation of the related mortgaged property, if such proceeds are sufficient, before the trust fund as holder of the junior lien receives any payments in respect of the mortgage loan.  In the event that such proceeds from a foreclosure or similar sale of the related mortgaged property are insufficient to satisfy all senior liens and the mortgage loan in the aggregate, the trust fund, as the holder of the junior lien, and, accordingly, holders of one or more classes of the certificates of the related series bear (1) the risk of delay in distributions while a deficiency judgment against the borrower is obtained and (2) the risk of loss if the deficiency judgment is not realized upon.  Moreover, deficiency judgments may not be available in certain jurisdictions or the mortgage loan may be nonrecourse.
 
The rights of the trust fund (and therefore the certificateholders), as beneficiary under a junior deed of trust or as mortgagee under a junior mortgage, are subordinate to those of the mortgagee or beneficiary under the senior mortgage or deed of trust, including the prior rights of the senior mortgagee or beneficiary to receive rents, hazard insurance and condemnation proceeds and to cause the property securing the mortgage loan to be sold upon default of the mortgagor or trustor, thereby extinguishing the junior mortgagee’s or junior beneficiary’s lien unless the master servicer asserts its subordinate interest in a property in foreclosure litigation or satisfies the defaulted senior loan.  As discussed more fully below, in many states a junior mortgagee or beneficiary may satisfy a defaulted senior loan in full, adding the amounts expended to the balance due on the junior loan.  Absent a provision in the senior mortgage, no notice of default is required to be given to the junior mortgagee.
 
The form of the mortgage or deed of trust used by many institutional lenders confers on the mortgagee or beneficiary the right both to receive all proceeds collected under any hazard insurance policy and all awards made in connection with any condemnation proceedings, and to apply such proceeds and awards to any indebtedness secured by the mortgage or deed of trust, in such order as the mortgage or beneficiary may determine.  Thus, in the event improvements on the property are damaged or destroyed by fire or other casualty, or in the event the property is taken by condemnation, the mortgagee or beneficiary under the senior mortgage or deed of trust will have the prior right to collect any insurance proceeds payable under a hazard insurance policy and any award of damages in connection with the condemnation and to apply the same to the indebtedness secured by the senior mortgage or deed of trust.  Proceeds in excess of the amount of senior mortgage indebtedness will, in most cases, be applied to the indebtedness of a junior mortgage or trust deed to the extent the junior mortgage or deed of trust so provides.  The laws of certain states may limit the ability of mortgagees or beneficiaries to apply the proceeds of hazard insurance and partial condemnation awards to the secured indebtedness.  In such states, the mortgagor or trustor must be allowed to use the proceeds of hazard insurance to repair the damage unless the security of the mortgagee or beneficiary has been impaired.  Similarly, in certain states, the mortgagee or beneficiary is entitled to the award for a partial condemnation of the real property security only to the extent that its security is impaired.
 
The form of mortgage or deed of trust used by many institutional lenders typically contains a “future advance” clause, which provides, in essence, that additional amounts advanced to or on behalf of the mortgagor or trustor by the mortgagee or beneficiary are to be secured by the mortgage or deed of trust.  While such a clause is valid under the laws of most states, the priority of any advance made under the clause depends, in some states, on whether the advance was an “obligatory” or “optional” advance.  If the mortgagee or beneficiary is obligated to advance the additional amounts, the advance may be entitled to receive the same priority as amounts initially made under the mortgage or deed of trust, notwithstanding that there may be intervening junior mortgages or deeds of trust and other
 
 
-101-

 
 
liens between the date of recording of the mortgage or deed of trust and the date of the future advance, and notwithstanding that the mortgagee or beneficiary had actual knowledge of such intervening junior mortgages or deeds of trust and other liens at the time of the advance.  Where the mortgagee or beneficiary is not obligated to advance the additional amounts and has actual knowledge of the intervening junior mortgages or deeds of trust and other liens, the advance may be subordinate to such intervening junior mortgages or deeds of trust and other liens.  Priority of advances under a “future advance” clause rests, in many other states, on state law giving priority to all advances made under the loan agreement up to a “credit limit” amount stated in the recorded mortgage.
 
Subordinate Financing
 
The terms of certain of the mortgage loans may not restrict the ability of the borrower to use the mortgaged property as security for one or more additional loans, or such restrictions may be unenforceable.  Where a borrower encumbers a mortgaged property with one or more junior liens, the senior lender is subjected to additional risk.  First, the borrower may have difficulty servicing and repaying multiple loans.  Moreover, if the subordinate financing permits recourse to the borrower (as is frequently the case) and the senior loan does not, a borrower may have more incentive to repay sums due on the subordinate loan.  Second, acts of the senior lender that prejudice the junior lender or impair the junior lender’s security may create a superior equity in favor of the junior lender.  For example, if the borrower and the senior lender agree to an increase in the principal amount of or the interest rate payable on the senior loan, the senior lender may lose its priority to the extent any existing junior lender is harmed or the borrower is additionally burdened.  Third, if the borrower defaults on the senior loan and/or any junior loan or loans, the existence of junior loans and actions taken by junior lenders can impair the security available to the senior lender and can interfere with or delay the taking of action by the senior lender.  Moreover, the bankruptcy of a junior lender may operate to stay foreclosure or similar proceedings by the senior lender.
 
Default Interest and Limitations on Prepayments
 
Forms of notes and mortgages used by lenders may contain provisions obligating the mortgagor to pay a late charge or additional interest if payments are not timely made, and in some circumstances may provide for prepayment fees or yield maintenance penalties if the obligation is paid prior to maturity or prohibit such prepayment for a specified period.  In certain states, there are or may be specific limitations upon the late charges which a lender may collect from a mortgagor for delinquent payments.  Certain states also limit the amounts that a lender may collect from a mortgagor as an additional charge if the loan is prepaid.  The enforceability under the laws of a number of states and the Bankruptcy Code of provisions providing for prepayment fees of penalties upon, or prohibition of, an involuntary prepayment is unclear, and no assurance can be given that, at the time a prepayment premium is required to be made on a mortgage loan in connection with an involuntary prepayment, the obligation to make such payment, or the provisions of any such prohibition, will be enforceable under applicable state law.  The absence of a restraint on prepayment, particularly with respect to mortgage loans having higher Mortgage Rates, may increase the likelihood of refinancing or other early retirements of the mortgage loans.
 
Applicability of Usury Laws
 
Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980 provides that state usury limitations shall not apply to certain types of residential (including multifamily) first mortgage loans originated by certain lenders after March 31, 1980.  Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980 authorized any state to reimpose interest rate limits by adopting, before April 1, 1983, a law or constitutional provision that expressly rejects application of the federal law.  In addition, even where Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980 is not so rejected, any state is authorized by the law to adopt a provision limiting discount points or other charges on mortgage loans covered by Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980.  Certain states have taken action to reimpose interest rate limits and/or to limit discount points or other charges.
 
No mortgage loan originated in any state in which application of Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980 has been expressly rejected or a provision limiting discount points or other charges has been adopted, will (if originated after that rejection or adoption) be eligible for inclusion in a trust fund unless (i) such mortgage loan provides for such interest rate, discount points and charges as are permitted in such state or (ii) such mortgage loan provides that the terms are to be construed in accordance with the laws of
 
 
-102-

 
 
another state under which such interest rate, discount points and charges would not be usurious and the borrower’s counsel has rendered an opinion that such choice of law provision would be given effect.
 
Certain Laws and Regulations
 
The mortgaged properties will be subject to compliance with various federal, state and local statutes and regulations.  Failure to comply (together with an inability to remedy any such failure) could result in material diminution in the value of a mortgaged property which could, together with the possibility of limited alternative uses for a particular mortgaged property (i.e., a nursing or convalescent home or hospital), result in a failure to realize the full principal amount of the related mortgage loan.
 
Americans with Disabilities Act
 
Under the ADA, in order to protect individuals with disabilities, public accommodations (such as hotels, restaurants, shopping centers, hospitals, schools and social service center establishments) must remove architectural and communication barriers which are structural in nature from existing places of public accommodation to the extent “readily achievable”. In addition, under the ADA, alterations to a place of public accommodation or a commercial facility are to be made so that, to the maximum extent feasible, such altered portions are readily accessible to and usable by disabled individuals.  The “readily achievable” standard takes into account, among other factors, the financial resources of the affected site, owner, landlord or other applicable person.  In addition to imposing a possible financial burden on the borrower in its capacity as owner or landlord, the ADA may also impose such requirements on a foreclosing lender who succeeds to the interest of the borrower as owner or landlord.  Furthermore, since the “readily achievable” standard may vary depending on the financial condition of the owner or landlord, a foreclosing lender who is financially more capable than the borrower of complying with the requirements of the ADA may be subject to more stringent requirements than those to which the borrower is subject.
 
Servicemembers Civil Relief Act
 
Under the terms of the Servicemembers Civil Relief Act (the “Relief Act”), a borrower who enters military service after the origination of such borrower’s mortgage loan (including a borrower who was in reserve status and is called to active duty after origination of the mortgage loan), upon notification by such borrower, shall not be charged interest, including fees and charges, in excess of 6% per annum during the period of such borrower’s active duty status.  Unless a court or administrative agency orders otherwise upon application of the lender.  The Relief Act applies to individuals who are members of the Army, Navy, Air Force, Marines, National Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service or the National Oceanic and Atmospheric Administration assigned to duty with the military.  The California Military and Veterans Code provides protection equivalent to that provided by the Relief Act to California national guard members called up to active service by the Governor of California, California national guard members called up to active service by the President and reservists called to active duty.  Because the Relief Act and the California Military Code apply to borrowers who enter military service, no information can be provided as to the number of mortgage loans that may be affected by the Relief Act or the California Military and Veterans Code.  Application of the Relief Act or the California Military and Veterans Code would adversely affect, for an indeterminate period of time, the ability of a master servicer or special servicer to collect full amounts of interest on certain of the mortgage loans.  Any shortfalls in interest collections resulting from the application of the Relief Act or the California Military and Veterans Code would result in a reduction of the amounts distributable to the holders of the related series of certificates, and would not be covered by advances or, unless otherwise specified in the related prospectus supplement, any form of credit support provided in connection with such certificates.  In addition, application of the Relief Act or the California Military and Veterans Code imposes limitations that would impair the ability of the master servicer or special servicer to foreclose on an affected mortgage loan during the borrower’s period of active duty status, and, under certain circumstances, during an additional three month period thereafter.
 
Forfeiture for Drug and Money Laundering Violations
 
Federal law provides that property purchased or improved with assets derived from criminal activity or otherwise tainted, or used in the commission of certain offenses, can be seized and ordered forfeited to the United States of America.  The offenses which can trigger such a seizure and forfeiture include, among others, violations of
 
 
-103-

 
 
the Racketeer Influenced and Corrupt Organizations Act, the Bank Secrecy Act, the anti-money laundering laws and regulations, including the USA Patriot Act of 2001 and the regulations issued pursuant to that Act, as well as the narcotic drug laws.  In many instances, the United States may seize the property even before a conviction occurs.
 
In the event of a forfeiture proceeding, a lender may be able to establish its interest in the property by proving that (1) its mortgage was executed and recorded before the commission of the illegal conduct from which the assets used to purchase or improve the property were derived or before the commission of any other crime upon which the forfeiture is based, or (2) the lender, at the time of the execution of the mortgage, “did not know or was reasonably without cause to believe that the property was subject to forfeiture”. However, there is no assurance that such a defense will be successful.
 
Federal Deposit Insurance Act; Commercial Mortgage Loan Servicing
 
Under the Federal Deposit Insurance Act, federal bank regulatory authorities, including the OCC, have the power to determine if any activity or contractual obligation of a bank constitutes an unsafe or unsound practice or violates a law, rule or regulation applicable to such bank.  If Bank of America, National Association or another bank is a servicer and/or a mortgage loan seller for a series and the OCC, which has primary regulatory authority over Bank of America, National Association and other banks, were to find that any obligation of Bank of America, National Association or such other bank under the related Pooling and Servicing Agreement or other agreement or any activity of Bank of America, National Association or such other bank constituted an unsafe or unsound practice or violated any law, rule or regulation applicable to it, the OCC could order Bank of America, National Association or such other bank among other things to rescind such contractual obligation or terminate such activity.
 
In March 2003, the OCC issued a temporary cease and desist order against a national bank (as to which no conservator or receiver had been appointed) asserting that, contrary to safe and sound banking practices, the bank was receiving inadequate servicing compensation in connection with several credit card securitizations sponsored by its affiliates because of the size and subordination of the contractual servicing fee, and ordered the bank, among other things, to immediately resign as servicer, to cease all servicing activity within 120 days and to immediately withhold funds from collections in an amount sufficient to compensate if for its actual costs and expenses of servicing (notwithstanding the priority of payments in the related securitization agreements).
 
While the depositor does not believe that the OCC would consider, with respect to any series, (i) provisions relating to Bank of America, National Association or another bank acting as a servicer under the related Pooling and Servicing Agreement, (ii) the payment or amount of the servicing compensation payable to Bank of America, National Association or another bank or (iii) any other obligation of Bank of America, National Association or another bank under the related Pooling and Servicing Agreement or other contractual agreement under which the depositor may purchase mortgage loans from Bank of America, National Association or another bank, to be unsafe or unsound or violative of any law, rule or regulation applicable to it, there can be no assurance that the OCC in the future would not conclude otherwise.  If the OCC did reach such a conclusion, and ordered Bank of America, National Association or another bank to rescind or amend any such agreement, payments on certificates could be delayed or reduced.
 
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
 
General
 
The following general discussion of the anticipated material federal income tax consequences of the purchase, ownership and disposition of offered certificates of any series thereof, to the extent it relates to matters of law or legal conclusions with respect thereto, represents the opinion of counsel to the depositor with respect to that series on the material matters associated with such consequences, subject to any qualifications set forth in this prospectus.  Counsel to the depositor for each series will be Cadwalader, Wickersham & Taft LLP, and a copy of the legal opinion of such counsel rendered in connection with any series of certificates will be filed by the depositor with the SEC on a Current Report on Form 8-K within 15 days after the Closing Date for such series of certificates.  This discussion is directed primarily to certificateholders that hold the certificates as “capital assets” within the meaning of Section 1221 of the Code (although portions thereof may also apply to
 
 
-104-

 
 
certificateholders who do not hold certificates as capital assets) and it does not purport to discuss all federal income tax consequences that may be applicable to the individual circumstances of particular investors, some of which (such as banks, insurance companies and foreign investors) may be subject to special treatment under the Code.  The authorities on which this discussion, and the opinion referred to below, are based are subject to change or differing interpretations, which could apply retroactively.  Prospective investors should note that no rulings have been or will be sought from the IRS with respect to any of the federal income tax consequences discussed below, and no assurance can be given the IRS will not take contrary positions.  In addition to the federal income tax consequences described in this prospectus, potential investors are advised to consider the state and local tax consequences, if any, of the purchase, ownership and disposition of offered certificates.  See “STATE AND OTHER TAX CONSEQUENCES”.  Prospective investors are advised to consult their tax advisors concerning the federal, state, local or other tax consequences to them of the purchase, ownership and disposition of offered certificates.
 
The following discussion addresses securities of two general types:  (1) REMIC Certificates representing interests in a trust fund, or a portion thereof, that the REMIC administrator will elect to have treated as a REMIC under the REMIC Provisions of the Code, and (2) Grantor Trust Certificates representing interests in a Grantor Trust Fund as to which no such election will be made.  The prospectus supplement for each series of certificates will indicate whether a REMIC election (or elections) will be made for the related trust fund and, if such an election is to be made, will identify all “regular interests” and “residual interests” in the REMIC.  For purposes of this tax discussion, references to a “certificateholder” or a “holder” are to the beneficial owner of a certificate.
 
The following discussion is limited in applicability to offered certificates.  Moreover, this discussion applies only to the extent that mortgage assets held by a trust fund consist solely of mortgage loans.  To the extent that other mortgage assets, including REMIC certificates and mortgage pass-through certificates, are to be held by a trust fund, the tax consequences associated with the inclusion of such assets will be disclosed in the related prospectus supplement.  In addition, if cash flow agreements other than guaranteed investment contracts are included in a trust fund, the anticipated material tax consequences associated with such cash flow agreements also will be discussed in the related prospectus supplement.  See “DESCRIPTION OF THE TRUST FUNDS—Cash Flow Agreements”.
 
Furthermore, the following discussion is based in part upon the rules governing original issue discount that are set forth in Sections 1271-1273 and 1275 of the Code and in the OID Regulations, and in part upon the REMIC Provisions and the REMIC Regulations.  The OID Regulations do not adequately address certain issues relevant to, and in some instances provide that they are not applicable to, securities such as the certificates.
 
REMICs
 
Classification of REMICs.  Upon the issuance of each series of REMIC Certificates, counsel to the depositor will give its opinion generally to the effect that, assuming compliance with all provisions of the related Pooling and Servicing Agreement and any other governing documents, the related trust fund (or each applicable portion thereof) will qualify as one or more REMICs and the REMIC Certificates offered with respect thereto will be considered to evidence ownership of REMIC Regular Certificates or REMIC Residual Certificates in a REMIC within the meaning of the REMIC Provisions.  The following general discussion of the anticipated federal income tax consequences of the purchase, ownership and disposition of REMIC Certificates, to the extent it relates to matters of law or legal conclusions with respect thereto, represents the opinion of counsel to the depositor for the applicable series as specified in the related prospectus supplement, subject to any qualifications set forth in this prospectus.  In addition, counsel to the depositor have prepared or reviewed the statements in this prospectus under the heading “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs”, and are of the opinion that such statements are correct in all material respects.  Such statements are intended as an explanatory discussion of the possible effects of the classification of any trust fund (or applicable portion thereof) as one or more REMICs for federal income tax purposes on investors generally and of related tax matters affecting investors generally, but do not purport to furnish information in the level of detail or with the attention to an investor’s specific tax circumstances that would be provided by an investor’s own tax advisor.  Accordingly, each investor is encouraged to consult its own tax advisors with regard to the tax consequences to it of investing in REMIC Certificates.
 
If an entity electing to be treated as a REMIC fails to comply with one or more of the ongoing requirements of the Code for such status during any taxable year, the Code provides that the entity will not be treated as a REMIC for such year and thereafter.  In that event, such entity may be taxable as a corporation under Treasury regulations,
 
 
-105-

 
 
and the related REMIC Certificates may not be accorded the status or given the tax treatment described below.  Although the Code authorizes the Treasury Department to issue regulations providing relief in the event of an inadvertent termination of REMIC status, no such regulations have been issued.  Any such relief, moreover, may be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of the trust fund’s income for the period in which the requirements for such status are not satisfied.  The Pooling and Servicing Agreement with respect to each REMIC will include provisions designed to maintain the trust fund’s status as a REMIC under the REMIC Provisions.  It is not anticipated that the status of any trust fund as a REMIC will be inadvertently terminated.
 
Characterization of Investments in REMIC Certificates.  In general, unless otherwise provided in the related prospectus supplement, the REMIC Certificates will be “real estate assets” within the meaning of Section 856(c)(5)(B) of the Code and assets described in Section 7701(a)(19)(C) of the Code in the same proportion that the assets of the REMIC underlying such certificates would be so treated.  However, to the extent that the REMIC assets constitute mortgages on property not used for residential or certain other prescribed purposes, the REMIC Certificates will not be treated as assets qualifying under Section 7701(a)(19)(C).  Moreover, if 95% or more of the assets of the REMIC qualify for any of the foregoing characterizations at all times during a calendar year, the REMIC Certificates will qualify for the corresponding status in their entirety for that calendar year.  Interest (including original issue discount) on the REMIC Regular Certificates and income allocated to the REMIC Residual Certificates will be interest described in Section 856(c)(3)(B) of the Code to the extent that such certificates are treated as “real estate assets” within the meaning of Section 856(c)(5)(B) of the Code.  In addition, except as otherwise provided in the applicable prospectus supplement, the REMIC Regular Certificates will be “qualified mortgages” for a REMIC within the meaning of Section 860G(a)(3) of the Code.  The determination as to the percentage of the REMIC’s assets that constitute assets described in the foregoing sections of the Code will be made with respect to each calendar quarter based on the average adjusted basis of each category of the assets held by the REMIC during such calendar quarter.  The REMIC Administrator will report those determinations to certificateholders in the manner and at the times required by applicable Treasury regulations.
 
Tiered REMIC Structures.  For certain series of REMIC Certificates, two or more separate elections may be made to treat designated portions of the related trust fund as REMICs for federal income tax purposes.  As to each such series of REMIC Certificates, in the opinion of counsel to the depositor, assuming compliance with all provisions of the related Pooling and Servicing Agreement, the Tiered REMICs will each qualify as a REMIC and the REMIC Certificates issued by the Tiered REMICs, will be considered to evidence ownership of REMIC Regular Certificates or REMIC Residual Certificates in the related REMIC within the meaning of the REMIC Provisions.
 
Solely for purposes of determining whether the REMIC Certificates will be “real estate assets” within the meaning of Section 856(c)(5)(B) of the Code and “loans secured by an interest in real property” under Section 7701(a)(19)(C) of the Code, and whether the income on such certificates is interest described in Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one REMIC.
 
 
Taxation of Owners of REMIC Regular Certificates.
 
General.  Except as otherwise stated in this discussion, REMIC Regular Certificates will be treated for federal income tax purposes as newly-issued debt instruments issued by the REMIC and not as ownership interests in the REMIC or its assets.  Moreover, holders of REMIC Regular Certificates that otherwise report income under a cash method of accounting will be required to report income with respect to REMIC Regular Certificates under an accrual method.
 
Original Issue Discount.  Certain REMIC Regular Certificates may be issued with “original issue discount” within the meaning of Section 1273(a) of the Code.  Any holders of REMIC Regular Certificates issued with original issue discount generally will be required to include original issue discount in income as it accrues, in accordance with the “constant yield” method described below, in advance of the receipt of the cash attributable to such income.  In addition, Section 1272(a)(6) of the Code provides special rules applicable to REMIC Regular Certificates and certain other debt instruments issued with original issue discount.  The following discussion is based in part on the OID Regulations and in part on provisions of the Tax Reform Act of 1986.
 
The Code requires that a reasonable prepayment assumption be used with respect to mortgage loans held by a REMIC in computing the accrual of original issue discount on REMIC Regular Certificates issued by that REMIC,
 
 
-106-

 
 
and that adjustments be made in the amount and rate of accrual of such discount to reflect differences between the actual prepayment rate and the prepayment assumption.  The prepayment assumption is to be determined in a manner prescribed in Treasury regulations; however, those regulations have not been issued.  The Committee Report indicates that the regulations will provide that the prepayment assumption used with respect to a REMIC Regular Certificate must be the same as that used in pricing the initial offering of such REMIC Regular Certificate.  The Prepayment Assumption used in reporting original issue discount for each series of REMIC Regular Certificates will be consistent with this standard and will be disclosed in the related prospectus supplement.  However, neither the depositor nor any other person will make any representation that the mortgage loans will in fact prepay at a rate conforming to the Prepayment Assumption or at any other rate.
 
The original issue discount, if any, on a REMIC Regular Certificate will be the excess of its stated redemption price at maturity over its issue price.  The issue price of a particular class of REMIC Regular Certificates will be the first cash price at which a substantial amount of REMIC Regular Certificates of that class is sold (excluding sales to bond houses, brokers and underwriters).  Although unclear under the OID Regulations, the depositor intends to treat the issue price of a class of REMIC Regular Certificates as to which less than a substantial amount of such class of REMIC Regular Certificates is sold for cash on or prior to the Closing Date as the fair market value of such class on the Closing Date.  Under the OID Regulations, the stated redemption price of a REMIC Regular Certificate is equal to the total of all payments to be made on such Certificate other than “qualified stated interest”.  “Qualified stated interest” is interest that is unconditionally payable at least annually (during the entire term of the instrument) at a single fixed rate, or, as discussed below under “Variable Rate REMIC Regular Certificates”, at a qualified variable rate.
 
If the accrued interest to be paid on the first Distribution Date is computed with respect to a period that begins prior to the Closing Date, a portion of the purchase price paid for a REMIC Regular Certificate will reflect such accrued interest.  In such cases, information returns provided to the certificateholders and the IRS will be based on the position that the portion of the purchase price paid for the interest accrued with respect to periods prior to the Closing Date is treated as part of the overall cost of such REMIC Regular Certificate (and not as a separate asset the cost of which is recovered entirely out of interest received on the next Distribution Date) and that portion of the interest paid on the first Distribution Date in excess of interest accrued for a number of days corresponding to the number of days from the Closing Date to the first Distribution Date should be included in the stated redemption price of such REMIC Regular Certificate.  However, the OID Regulations state that all or some portion of such accrued interest may be treated as a separate asset the cost of which is recovered entirely out of interest paid on the first Distribution Date.  It is unclear how an election to do so would be made under the OID Regulations and whether such an election could be made unilaterally by a certificateholder.
 
Notwithstanding the general definition of original issue discount, original issue discount on a REMIC Regular Certificate will be considered to be de minimis if it is less than 0.25% of the stated redemption price of the REMIC Regular Certificate multiplied by its weighted average maturity.  For this purpose, the weighted average maturity of the REMIC Regular Certificate is computed as the sum of the amounts determined, as to each payment included in the stated redemption price of such REMIC Regular Certificate, by multiplying (i) the number of complete years (rounding down for partial years) from the issue date until such payment is expected to be made (presumably taking into account the Prepayment Assumption) by (ii) a fraction, the numerator of which is the amount of the payment, and the denominator of which is the stated redemption price at maturity of such REMIC Regular Certificate.  Under the OID Regulations, original issue discount of only a de minimis amount (other than de minimis original issue discount attributable to a so-called “teaser” interest rate or an initial interest holiday) will be included in income as each payment of stated principal is made, based on the product of the total amount of such de minimis original issue discount and a fraction, the numerator of which is the amount of such principal payment and the denominator of which is the outstanding stated principal amount of the REMIC Regular Certificate.  The OID Regulations also would permit a certificateholder to elect to accrue de minimis original issue discount into income currently based on a constant yield method.  See “—Market Discount” below for a description of such election under the OID Regulations.
 
If original issue discount on a REMIC Regular Certificate is in excess of a de minimis amount, the holder of such certificate must include in ordinary gross income the sum of the “daily portions” of original issue discount for each day during its taxable year on which it held such REMIC Regular Certificate, including the purchase date but
 
 
-107-

 
 
excluding the disposition date.  In the case of an original holder of a REMIC Regular Certificate, the daily portions of original issue discount will be determined as follows.
 
As to each “accrual period”, that is, unless otherwise stated in the related prospectus supplement, each period that begins on a date that corresponds to a Distribution Date (or in the case of the first such period, begins on the Closing Date) and ends on the day preceding the immediately following Distribution Date, a calculation will be made of the portion of the original issue discount that accrued during such accrual period.  The portion of original issue discount that accrues in any accrual period will equal the excess, if any, of (1) the sum of (a) the present value, as of the end of the accrual period, of all of the distributions remaining to be made on the REMIC Regular Certificate, if any, in future periods and (b) the distributions made on such REMIC Regular Certificate during the accrual period of amounts included in the stated redemption price, over (2) the adjusted issue price of such REMIC Regular Certificate at the beginning of the accrual period.  The present value of the remaining distributions referred to in the preceding sentence will be calculated (1) assuming that distributions on the REMIC Regular Certificate will be received in future periods based on the mortgage loans being prepaid at a rate equal to the Prepayment Assumption, (2) using a discount rate equal to the original yield to maturity of the certificate and (3) taking into account events (including actual prepayments) that have occurred before the close of the accrual period.  For these purposes, the original yield to maturity of the certificate will be calculated based on its issue price and assuming that distributions on the certificate will be made in all accrual periods based on the mortgage loans being prepaid at a rate equal to the Prepayment Assumption.  The adjusted issue price of a REMIC Regular Certificate at the beginning of any accrual period will equal the issue price of such certificate, increased by the aggregate amount of original issue discount that accrued with respect to such certificate in prior accrual periods, and reduced by the amount of any distributions made on such REMIC Regular Certificate in prior accrual periods of amounts included in the stated redemption price.  The original issue discount accruing during any accrual period, computed as described above, will be allocated ratably to each day during the accrual period to determine the daily portion of original issue discount for such day.
 
A subsequent purchaser of a REMIC Regular Certificate that purchases such certificate at a cost (excluding any portion of such cost attributable to accrued qualified stated interest) less than its remaining stated redemption price will also be required to include in gross income the daily portions of any original issue discount with respect to such certificate.  However, each such daily portion will be reduced, if such cost is in excess of its “adjusted issue price”, in proportion to the ratio such excess bears to the aggregate original issue discount remaining to be accrued on such REMIC Regular Certificate.  The adjusted issue price of a REMIC Regular Certificate on any given day equals the sum of (1) the adjusted issue price (or, in the case of the first accrual period, the issue price) of such certificate at the beginning of the accrual period which includes such day and (2) the daily portions of original issue discount for all days during such accrual period prior to such day.
 
The Treasury has proposed regulations that create a special rule for accruing original issue discount on REMIC Regular Certificates providing for a delay between record and payment dates, such that the period over which original issue discount accrues coincides with the period over which the certificateholder’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, taxpayers 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 for 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.
 
Variable Rate REMIC Regular Certificates.  REMIC Regular Certificates may provide for interest based on a variable rate.  Under the OID Regulations, interest is treated as payable at a variable rate if, generally, (1) the issue price does not exceed the original principal balance by more than a specified amount and (2) the interest compounds or is payable at least annually at current values of (a) one or more “qualified floating rates”, (b) a single fixed rate and one or more qualified floating rates, (c) a single “objective rate”, or (d) a single fixed rate and a single objective rate that is a “qualified inverse floating rate”.  A floating rate is a qualified floating rate if variations in the rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds, where the rate is subject to a fixed multiple that is greater than 0.65, but not more than 1.35.  The rate may also be increased or decreased by a fixed spread or subject to a fixed cap or floor, or a cap or floor that is not reasonably expected as of the issue date to affect the yield of the instrument significantly.  An objective rate (other than a qualified floating
 
 
-108-

 
 
rate) is a rate that is determined using a single fixed formula and that is based on objective financial or economic information; provided that the information is not (1) within the control of the issuer or a related party or (2) unique to the circumstances of the issuer or a related party.  A qualified inverse floating rate is a rate equal to a fixed rate minus a qualified floating rate that inversely reflects contemporaneous variations in the cost of newly borrowed funds; an inverse floating rate that is not a qualified floating rate may nevertheless be an objective rate.  A class of REMIC Regular Certificates may be issued under this prospectus that does not have a variable rate under the OID Regulations, for example, a class that bears different rates at different times during the period it is outstanding so that it is considered significantly “front-loaded” or “back-loaded” within the meaning of the OID Regulations.  It is possible that a class of this type may be considered to bear “contingent interest” within the meaning of the OID Regulations.  The OID Regulations, as they relate to the treatment of contingent interest, are by their terms not applicable to REMIC Regular Certificates.  However, if final regulations dealing with contingent interest with respect to REMIC Regular Certificates apply the same principles as the OID Regulations, those regulations may lead to different timing of income inclusion than would be the case under the OID Regulations.  Furthermore, application of those principles could lead to the characterization of gain on the sale of contingent interest REMIC Regular Certificates as ordinary income.  Investors should consult their tax advisors regarding the appropriate treatment of any REMIC Regular Certificate that does not pay interest at a fixed rate or variable rate as described in this paragraph.
 
Under the REMIC Regulations, a REMIC Regular Certificate (1) bearing a rate that qualifies as a variable rate under the OID Regulations that is tied to current values of a variable rate (or the highest, lowest or average of two or more variable rates), including a rate based on the average cost of funds of one or more financial institutions, or a positive or negative multiple of a rate (plus or minus a specified number of basis points), or that represents a weighted average of rates on some or all of the mortgage loans, including a rate that is subject to one or more caps or floors, or (2) bearing one or more of these variable rates for one or more periods or one or more fixed rates for one or more periods, and a different variable rate or fixed rate for other periods qualifies as a regular interest in a REMIC.  Accordingly, unless otherwise indicated in the applicable prospectus supplement, REMIC Regular Certificates that qualify as regular interests under this rule will be treated in the same manner as obligations bearing a variable rate for original issue discount reporting purposes.
 
The amount of original issue discount with respect to a REMIC Regular Certificate bearing a variable rate of interest will accrue in the manner described above under “—Original Issue Discount” with the yield to maturity and future payments on that REMIC Regular Certificate generally to be determined by assuming that interest will be payable for the life of the REMIC Regular Certificate based on the initial rate for the relevant class.  Unless otherwise specified in the applicable prospectus supplement, variable interest will be treated as qualified stated interest, other than variable interest on an interest-only class, which will be treated as non-qualified stated interest includible in the stated redemption price at maturity.  Ordinary income reportable for any period will be adjusted based on subsequent changes in the applicable interest rate index.
 
Although unclear under the OID Regulations, unless required otherwise by applicable final regulations, REMIC Regular Certificates bearing an interest rate that is a weighted average of the net interest rates on mortgage loans having fixed or adjustable rates, will be treated as having qualified stated interest, except to the extent that initial “teaser” rates cause sufficiently “back-loaded” interest to create more than de minimis original issue discount.  The yield on those REMIC Regular Certificates for purposes of accruing original issue discount will be a hypothetical fixed rate based on the fixed rates, in the case of fixed rate mortgage loans, and initial “teaser rates” followed by fully indexed rates, in the case of adjustable rate mortgage loans.  In the case of adjustable rate mortgage loans, the applicable index used to compute interest on the mortgage loans for the initial interest accrual period will be deemed to be in effect beginning with the period in which the first weighted average adjustment date occurring after the issue date occurs.  Adjustments will be made in each accrual period either increasing or decreasing the amount of ordinary income reportable to reflect the actual pass-through interest rate on the REMIC Regular Certificates.
 
Deferred Interest.  Under the OID Regulations, all interest on a REMIC Regular Certificate as to which there may be deferred interest is includible in the stated redemption price at maturity thereof.  Accordingly, any deferred interest that accrues with respect to a class of REMIC Regular Certificates may constitute income to the holders of such REMIC Regular Certificates prior to the time distributions of cash with respect to such deferred interest are made.
 
 
 
-109-

 
 
Market Discount.  A certificateholder that purchases a REMIC Regular Certificate at a market discount, that is, in the case of a REMIC Regular Certificate issued without original issue discount, at a purchase price less than its remaining stated principal amount, or in the case of a REMIC Regular Certificate issued with original issue discount, at a purchase price less than its adjusted issue price will recognize gain upon receipt of each distribution representing stated redemption price.  In particular, under Section 1276 of the Code such a certificateholder generally will be required to allocate the portion of each such distribution representing stated redemption price first to accrued market discount not previously included in income, and to recognize ordinary income to that extent.  A certificateholder may elect to include market discount in income currently as it accrues rather than including it on a deferred basis in accordance with the foregoing.  If made, such election will apply to all market discount bonds acquired by such certificateholder on or after the first day of the first taxable year to which such election applies.  In addition, the OID Regulations permit a certificateholder to elect to accrue all interest and discount (including de minimis market or original issue discount) in income as interest, and to amortize premium, based on a constant yield method.  If such an election were made with respect to a REMIC Regular Certificate with market discount, the certificateholder would be deemed to have made an election to include currently market discount in income with respect to all other debt instruments having market discount that such certificateholder acquires during the taxable year of the election or thereafter, including de minimis market discount discussed in the following paragraph.  Similarly, a certificateholder that made this election for a certificate that is acquired at a premium would be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that such certificateholder owns or acquires.  See “—Premium” below.  Each of these elections to accrue interest, discount and premium with respect to a certificate on a constant yield method or as interest would be irrevocable except with the approval of the IRS.
 
However, market discount with respect to a REMIC Regular Certificate will be considered to be de minimis for purposes of Section 1276 of the Code if such market discount is less than 0.25% of the remaining stated redemption price of such REMIC Regular Certificate multiplied by the number of complete years to maturity remaining after the date of its purchase.  In interpreting a similar rule with respect to original issue discount on obligations payable in installments, the OID Regulations refer to the weighted average maturity of obligations, and it is likely that the same rule will be applied with respect to market discount, presumably taking into account the Prepayment Assumption.  If market discount is treated as de minimis under this rule, it appears that the actual discount would be treated in a manner similar to original issue discount of a de minimis amount.  See “—Original Issue Discount” above.  Such treatment would result in discount being included in income at a slower rate than discount would be required to be included in income using the method described above.
 
Section 1276(b)(3) of the Code specifically authorizes the Treasury Department to issue regulations providing for the method for accruing market discount on debt instruments, the principal of which is payable in more than one installment.  Until regulations are issued by the Treasury Department, certain rules described in the Committee Report apply.  The Committee Report indicates that in each accrual period market discount on REMIC Regular Certificates should accrue, at the certificateholder’s option:  (1) on the basis of a constant yield method, (2) in the case of a REMIC Regular Certificate issued without original issue discount, in an amount that bears the same ratio to the total remaining market discount as the stated interest paid in the accrual period bears to the total amount of stated interest remaining to be paid on the REMIC Regular Certificate as of the beginning of the accrual period, or (3) in the case of a REMIC Regular Certificate issued with original issue discount, in an amount that bears the same ratio to the total remaining market discount as the original issue discount accrued in the accrual period bears to the total original issue discount remaining on the REMIC Regular Certificate at the beginning of the accrual period.  Moreover, the Prepayment Assumption used in calculating the accrual of original issue discount is also used in calculating the accrual of market discount.  Because the regulations referred to in this paragraph have not been issued, it is not possible to predict what effect such regulations might have on the tax treatment of a REMIC Regular Certificate purchased at a discount in the secondary market.
 
To the extent that REMIC Regular Certificates provide for monthly or other periodic distributions throughout their term, the effect of these rules may be to require market discount to be includible in income at a rate that is not significantly slower than the rate at which such discount would accrue if it were original issue discount.  Moreover, in any event a holder of a REMIC Regular Certificate generally will be required to treat a portion of any gain on the sale or exchange of such certificate as ordinary income to the extent of the market discount accrued to the date of disposition under one of the foregoing methods, less any accrued market discount previously reported as ordinary income.
 
 
-110-

 
 
Further, under Section 1277 of the Code a holder of a REMIC Regular Certificate may be required to defer a portion of its interest deductions for the taxable year attributable to any indebtedness incurred or continued to purchase or carry a REMIC Regular Certificate purchased with market discount.  For these purposes, the de minimis rule referred to above applies.  Any such deferred interest expense would not exceed the market discount that accrues during such taxable year and is, in general, allowed as a deduction not later than the year in which such market discount is includible in income.  If such holder elects to include market discount in income currently as it accrues on all market discount instruments acquired by such holder in that taxable year or thereafter, the interest deferral rule described above will not apply.
 
Premium.  A REMIC Regular Certificate purchased at a cost (excluding any portion of such cost attributable to accrued qualified stated interest) greater than its remaining stated redemption price will be considered to be purchased at a premium.  The holder of such a REMIC Regular Certificate may elect under Section 171 of the Code to amortize such premium under the constant yield method over the life of the certificate.  If made, such an election will apply to all debt instruments having amortizable bond premium that the holder owns or subsequently acquires.  Amortizable premium will be treated as an offset to interest income on the related debt instrument, rather than as a separate interest deduction.  The OID Regulations also permit certificateholders to elect to include all interest, discount and premium in income based on a constant yield method, further treating the certificateholder as having made the election to amortize premium generally.  See “—Market Discount” above.  Although final Treasury regulations issued under Section 171 of the Code do not by their terms apply to prepayable obligations such as REMIC Regular Certificates, the Committee Report states that the same rules that apply to accrual of market discount (which rules will require use of a Prepayment Assumption in accruing market discount with respect to REMIC Regular Certificates without regard to whether such certificates have original issue discount) will also apply in amortizing bond premium.
 
Sale, Exchange, Redemption or Retirement.  If a holder of a REMIC Regular Certificate sells or exchanges a REMIC Regular Certificate, or such REMIC Regular Certificate is redeemed or retired, such certificateholder will recognize gain or loss equal to the difference, if any, between the amount realized and its adjusted basis in the REMIC Regular Certificate.  The adjusted basis of a REMIC Regular Certificate generally will equal the cost of the REMIC Regular Certificate to the seller, increased by any original issue discount or market discount previously included in the seller’s gross income with respect to the REMIC Regular Certificate and reduced by amounts included in the stated redemption price at maturity of the REMIC Regular Certificate that were previously received by the seller, by any amortized premium and by any recognized losses on the REMIC Regular Certificate.  Similarly, a holder who receives payment that is part of the stated redemption price at maturity of a REMIC Regular Certificate will recognize gain equal to the excess, if any, of the amount of the payment over an allocable portion of the holder’s adjusted basis in the REMIC Regular Certificate.  A holder of a REMIC Regular Certificate who receives a final payment that is less than the certificateholder’s adjusted basis in the REMIC Regular Certificate will generally recognize less.
 
Except as described above with respect to market discount, and except as provided in this paragraph, any gain or loss on the sale or exchange of a REMIC Regular Certificate realized by an investor who holds the REMIC Regular Certificate as a capital asset will be capital gain or loss and will be long term, or short term depending on whether the REMIC Regular Certificate has been held for the applicable capital gain holding period (currently more than one year).  Such gain will be treated as ordinary income (i) if the REMIC Regular Certificate is held as part of a “conversion transaction” as defined in Code Section 1258(c), up to the amount of interest that would have accrued on the REMIC Regular Certificateholder’s net investment in the conversion transaction at 120% of the appropriate applicable Federal rate under Code Section 1274(d) in effect at the time the taxpayer entered into the transaction minus any amount previously treated as ordinary income with respect to any prior disposition of property that was held as a part of the transaction, (ii) in the case of a non-corporate taxpayer, to the extent the taxpayer has made an election under Code Section 163(d)(4) to have net capital gains taxed as investment income at ordinary rates, or (iii) to the extent that the gain does not exceed the excess, if any, of (a) the amount that would have been includible in the gross income of the holder if its yield on the REMIC Regular Certificate were 110% of the applicable Federal rate as of the date of purchase, over (b) the amount of income actually includible in the gross income of the holder with respect to the REMIC Regular Certificate.  In addition, gain or loss recognized from the sale of a REMIC Regular Certificate by certain banks or thrift institutions will be treated as ordinary income or loss pursuant to Code Section 582(c).  Generally, short term capital gains of certain non corporate taxpayers are subject to the same tax rate as the ordinary income of those taxpayers for property held for not more than one year, and long term capital
 
 
-111-

 
 
gains of those taxpayers are subject to a lower maximum tax rate than ordinary income for those taxpayers for property held for more than one year.  The maximum tax rate for corporations is the same with respect to both ordinary income and capital gains.
 
Realized Losses.  Under Section 166 of the Code, both corporate holders of the REMIC Regular Certificates and non-corporate holders of the REMIC Regular Certificates that acquire such certificates in connection with a trade or business should be allowed to deduct, as ordinary losses, any losses sustained during a taxable year in which their certificates become wholly or partially worthless as the result of one or more realized losses on the mortgage loans.  However, it appears that a non-corporate holder that does not acquire a REMIC Regular Certificate in connection with a trade or business will not be entitled to deduct a loss under Section 166 of the Code until such holder’s certificate becomes wholly worthless (i.e., until its Certificate Balance has been reduced to zero) and that the loss will be characterized as a short-term capital loss.
 
Each holder of a REMIC Regular Certificate will be required to accrue interest and original issue discount with respect to such certificate, without giving effect to any reductions in distributions attributable to defaults or delinquencies on the mortgage loans or the Underlying Certificates until it can be established that any such reduction ultimately will not be recoverable.  As a result, the amount of taxable income reported in any period by the holder of a REMIC Regular Certificate could exceed the amount of economic income actually realized by the holder in such period.  Although the holder of a REMIC Regular Certificate eventually will recognize a loss or reduction in income attributable to previously accrued and included income that, as the result of a realized loss, ultimately will not be realized, the law is unclear with respect to the timing and character of such loss or reduction in income.
 
 
Taxation of Owners of REMIC Residual Certificates.
 
General.  Although a REMIC is a separate entity for federal income tax purposes, a REMIC generally is not subject to entity-level taxation, except with regard to prohibited transactions and certain other transactions.  See “—Prohibited Transactions Tax and Other Taxes” below.  Rather, the taxable income or net loss of a REMIC is generally taken into account by the holder of the REMIC Residual Certificates.  Accordingly, the REMIC Residual Certificates will be subject to tax rules that differ significantly from those that would apply if the REMIC Residual Certificates were treated for federal income tax purposes as direct ownership interests in the mortgage loans or as debt instruments issued by the REMIC.
 
A REMIC Residual Certificateholder generally will be required to report its daily portion of the taxable income or, subject to the limitations noted in this discussion, the net loss of the REMIC for each day during a calendar quarter that such holder owned such REMIC Residual Certificate.  For this purpose, the taxable income or net loss of the REMIC will be allocated to each day in the calendar quarter ratably using a “30 days per month/90 days per quarter/360 days per year” convention unless otherwise disclosed in the related prospectus supplement.  The daily amounts so allocated will then be allocated among the REMIC Residual Certificateholders in proportion to their respective ownership interests on such day.  Any amount included in the gross income or allowed as a loss of any REMIC Residual Certificateholder by virtue of this paragraph will be treated as ordinary income or loss.  The taxable income of the REMIC will be determined under the rules described below in “—Taxable Income of the REMIC” and will be taxable to the REMIC Residual Certificateholders without regard to the timing or amount of cash distributions by the REMIC until the REMIC’s termination.  Ordinary income derived from REMIC Residual Certificates will be “portfolio income” for purposes of the taxation of taxpayers subject to limitations under Section 469 of the Code on the deductibility of “passive losses”.
 
A holder of a REMIC Residual Certificate that purchased such certificate from a prior holder of such certificate also will be required to report on its federal income tax return amounts representing its daily share of the taxable income (or net loss) of the REMIC for each day that it holds such REMIC Residual Certificate.  Those daily amounts generally will equal the amounts of taxable income or net loss determined as described above.  The Committee Report indicates that certain modifications of the general rules may be made, by regulations, legislation or otherwise to reduce (or increase) the income of a REMIC Residual Certificateholder that purchased such REMIC Residual Certificate from a prior holder of such certificate at a price greater than (or less than) the adjusted basis (as defined below) such REMIC Residual Certificate would have had in the hands of an original holder of such certificate.  The REMIC Regulations, however, do not provide for any such modifications.
 
 
 
-112-

 
 
The amount of income REMIC Residual Certificateholders will be required to report (or the tax liability associated with such income) may exceed the amount of cash distributions received from the REMIC for the corresponding period.  Consequently, REMIC Residual Certificateholders should have other sources of funds sufficient to pay any federal income taxes due as a result of their ownership of REMIC Residual Certificates or unrelated deductions against which income may be offset, subject to the rules relating to “excess inclusions” and “noneconomic” residual interests discussed below.  The fact that the tax liability associated with the income allocated to REMIC Residual Certificateholders may exceed the cash distributions received by such REMIC Residual Certificateholders for the corresponding period may significantly adversely affect such REMIC Residual Certificateholders’ after-tax rate of return.  Such disparity between income and distributions may not be offset by corresponding losses or reductions of income attributable to the REMIC Residual Certificateholder until subsequent tax years and, then, may not be completely offset due to changes in the Code, tax rates or character of the income or loss.
 
Taxable Income of the REMIC.  The taxable income of the REMIC will equal the income from the mortgage loans (including interest, market discount and, if applicable, original issue discount and less premium) and other assets of the REMIC plus any cancellation of indebtedness income due to the allocation of realized losses to REMIC Regular Certificates, less the deductions allowed to the REMIC for interest (including original issue discount and reduced by any premium on issuance) on the REMIC Regular Certificates (and any other class of REMIC Certificates constituting “regular interests” in the REMIC not offered hereby), amortization of any premium on the mortgage loans, bad debt losses with respect to the mortgage loans and, except as described below, for servicing, administrative and other expenses.
 
For purposes of determining its taxable income, the REMIC will have an initial aggregate basis in its assets equal to the sum of the issue prices of all REMIC Certificates (or, if a class of REMIC Certificates is not sold initially, such class’s fair market value).  Such aggregate basis will be allocated among the mortgage loans and the other assets of the REMIC in proportion to their respective fair market values.  The issue price of any REMIC Certificates offered hereby will be determined in the manner described above under “—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount”.  The issue price of a REMIC Certificate received in exchange for an interest in the mortgage loans or other property will equal the fair market value of such interests in the mortgage loans or other property.  Accordingly, if one or more classes of REMIC Certificates are retained initially rather than sold, the REMIC Administrator may be required to estimate the fair market value of such interests in order to determine the basis of the REMIC in the mortgage loans and other property held by the REMIC.
 
The method of accrual by the REMIC of original issue discount income and market discount income with respect to mortgage loans that it holds will be equivalent to the method for accruing original issue discount income for holders of REMIC Regular Certificates (that is, under the constant yield method taking into account the Prepayment Assumption), but without regard to the de minimis rule applicable to REMIC Regular Certificates.  However, a REMIC that acquires loans at a market discount must include such market discount in income currently, as it accrues, on a constant yield basis.  See “—Taxation of Owners of REMIC Regular Certificates” above, which describes a method for accruing such discount income that is analogous to that required to be used by a REMIC as to mortgage loans with market discount that it holds.
 
A mortgage loan will be deemed to have been acquired with discount (or premium) to the extent that the REMIC’s basis in that mortgage loan, determined as described in the preceding paragraph, is less than (or greater than) its stated redemption price.  Any such discount will be includible in the income of the REMIC as it accrues, in advance of receipt of the cash attributable to such income, under a method similar to the method described above for accruing original issue discount on the REMIC Regular Certificates.  It is anticipated that each REMIC will elect under Section 171 of the Code to amortize any premium on the mortgage loans.  Premium on any mortgage loan to which such election applies may be amortized under a constant yield method, presumably taking into account a Prepayment Assumption.  Further, such an election would not apply to any mortgage loan originated on or before September 27, 1985.  Instead, premium on such a mortgage loan should be allocated among the principal payments thereon and be deductible by the REMIC as those payments become due or upon the prepayment of such mortgage loan.
 
A REMIC will be allowed deductions for interest (including original issue discount) on the REMIC Regular Certificates (including any other class of REMIC Certificates constituting “regular interests” in the REMIC not offered hereby) equal to the deductions that would be allowed if the REMIC Regular Certificates (including any
 
 
-113-

 
 
other class of REMIC Certificates constituting “regular interests” in the REMIC not offered hereby) were indebtedness of the REMIC.  Original issue discount will be considered to accrue for this purpose as described above under “—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount”, except that the de minimis rule and the adjustments for subsequent holders of REMIC Regular Certificates (including any other class of REMIC Certificates constituting “regular interests” in the REMIC not offered hereby) described in that section will not apply.
 
If a class of REMIC Regular Certificates is issued with an Issue Premium, the REMIC will have additional income in each taxable year in an amount equal to the portion of the Issue Premium that is considered to be amortized or repaid in that year.  Although the matter is not entirely certain, it is likely that Issue Premium would be amortized under a constant yield method in a manner analogous to the method of accruing original issue discount described above under “—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount”.
 
As a general rule, the taxable income of a REMIC will be determined in the same manner as if the REMIC were an individual having the calendar year as its taxable year and using the accrual method of accounting.  However, no item of income, gain, loss or deduction allocable to a prohibited transaction will be taken into account.  See “—Prohibited Transactions Tax and Other Taxes” below.  Further, the limitation on miscellaneous itemized deductions imposed on individuals by Section 67 of the Code (which allows such deductions only to the extent they exceed in the aggregate two percent of the taxpayer’s adjusted gross income) will not be applied at the REMIC level so that the REMIC will be allowed deductions for servicing, administrative and other non-interest expenses in determining its taxable income.  All such expenses will be allocated as a separate item to the holders of REMIC Certificates, subject to the limitation of Section 67 of the Code.  See “—Possible Pass-Through of Miscellaneous Itemized Deductions” below.  If the deductions allowed to the REMIC exceed its gross income for a calendar quarter, such excess will be the net loss for the REMIC for that calendar quarter.
 
Basis Rules, Net Losses and Distributions.  The adjusted basis of a REMIC Residual Certificate will be equal to the amount paid for such REMIC Residual Certificate, increased by amounts included in the income of the REMIC Residual Certificateholder and decreased (but not below zero) by distributions made, and by net losses allocated, to such REMIC Residual Certificateholder.
 
A REMIC Residual Certificateholder is not allowed to take into account any net loss for any calendar quarter to the extent such net loss exceeds such REMIC Residual Certificateholder’s adjusted basis in its REMIC Residual Certificate as of the close of such calendar quarter (determined without regard to such net loss).  Any loss that is not currently deductible by reason of this limitation may be carried forward indefinitely to future calendar quarters and, subject to the same limitation, may be used only to offset income from the REMIC Residual Certificate.  The ability of REMIC Residual Certificateholders to deduct net losses may be subject to additional limitations under the Code, as to which REMIC Residual Certificateholders should consult their tax advisors.
 
Any distribution on a REMIC Residual Certificate will be treated as a nontaxable return of capital to the extent it does not exceed the holder’s adjusted basis in such REMIC Residual Certificate.  To the extent a distribution on a REMIC Residual Certificate exceeds such adjusted basis, it will be treated as gain from the sale of such REMIC Residual Certificate.  Holders of certain REMIC Residual Certificates may be entitled to distributions early in the term of the related REMIC under circumstances in which their bases in such REMIC Residual Certificates will not be sufficiently large that such distributions will be treated as nontaxable returns of capital.  Their bases in such REMIC Residual Certificates will initially equal the amount paid for such REMIC Residual Certificates and will be increased by their allocable shares of taxable income of the REMIC.  However, such bases increases may not occur until the end of the calendar quarter, or perhaps the end of the calendar year, with respect to which such REMIC taxable income is allocated to the REMIC Residual Certificateholders.  To the extent such REMIC Residual Certificateholders’ initial bases are less than the distributions to such REMIC Residual Certificateholders, and increases in such initial bases either occur after such distributions or (together with their initial bases) are less than the amount of such distributions, gain will be recognized to such REMIC Residual Certificateholders on such distributions and will be treated as gain from the sale of their REMIC Residual Certificates.
 
The effect of these rules is that a REMIC Residual Certificateholder may not amortize its basis in a REMIC Residual Certificate, but may only recover its basis through distributions, through the deduction of any net losses of the REMIC or upon the sale of its REMIC Residual Certificate.  See “—Sales of REMIC Certificates” below.  For a discussion of possible modifications of these rules that may require adjustments to income of a holder of a REMIC
 
 
-114-

 
 
Residual Certificate other than an original holder in order to reflect any difference between the cost of such REMIC Residual Certificate to such REMIC Residual Certificateholder and the adjusted basis such REMIC Residual Certificate would have in the hands of an original holder see “—Taxation of Owners of REMIC Residual Certificates—General” above.
 
Regulations have been issued addressing the federal income tax treatment of “inducement fees” received by transferees of non-economic residual interests.  These regulations require inducement fees to be included in income over a period reasonably related to the period in which the related residual interest is expected to generate taxable income or net loss to its holder.  Under two safe harbor methods, inducement fees are permitted to be included in income (i) in the same amounts and over the same period that the taxpayer uses for financial reporting purposes; provided that such period is not shorter than the period the REMIC is expected to generate taxable income or (ii) ratably over the remaining anticipated weighted average life of all the regular and residual interests issued by the REMIC, determined based on actual distributions projected as remaining to be made on such interests under the Prepayment Assumption.  If the holder of a non-economic residual interest sells or otherwise disposes of the non-economic residual interest, any unrecognized portion of the inducement fee is required to be taken into account at the time of the sale of disposition.  Prospective purchasers of the REMIC Residual Certificates should consult with their tax advisors regarding the effect of these regulations.
 
Excess Inclusions.  Any “excess inclusions” with respect to a REMIC Residual Certificate will be subject to federal income tax in all events.  In general, the “excess inclusions” with respect to a REMIC Residual Certificate for any calendar quarter will be the excess, if any, of (1) the daily portions of REMIC taxable income allocable to such REMIC Residual Certificate over (2) the sum of the “daily accruals” (as defined below) for each day during such quarter that such REMIC Residual Certificate was held by such REMIC Residual Certificateholder.  The daily accruals of a REMIC Residual Certificateholder will be determined by allocating to each day during a calendar quarter its ratable portion of the product of the “adjusted issue price” of the REMIC Residual Certificate at the beginning of the calendar quarter and 120% of the “long-term Federal rate” in effect on the Closing Date.  For this purpose, the adjusted issue price of a REMIC Residual Certificate as of the beginning of any calendar quarter will be equal to the issue price of the REMIC Residual Certificate, increased by the sum of the daily accruals for all prior quarters and decreased (but not below zero) by any distributions made with respect to such REMIC Residual Certificate before the beginning of such quarter.  The issue price of a REMIC Residual Certificate is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of the REMIC Residual Certificates were sold.  The “long-term Federal rate” is an average of current yields on Treasury securities with a remaining term of greater than nine years, computed and published monthly by the IRS.
 
For REMIC Residual Certificateholders, an excess inclusion (1) will not be permitted to be offset by deductions, losses or loss carryovers from other activities, (2) will be treated as “unrelated business taxable income” to an otherwise tax-exempt organization and (3) will not be eligible for any rate reduction or exemption under any applicable tax treaty with respect to the 30% United States withholding tax imposed on distributions to REMIC Residual Certificateholders that are foreign investors.  See, however, “—Foreign Investors in REMIC Certificates” below.
 
In the case of any REMIC Residual Certificates held by a real estate investment trust, the aggregate excess inclusions with respect to such REMIC Residual Certificates, reduced (but not below zero) by the real estate investment trust taxable income (within the meaning of Section 857(b)(2) of the Code, excluding any net capital gain), will be allocated among the shareholders of such trust in proportion to the dividends received by such shareholders from such trust, and any amount so allocated will be treated as an excess inclusion with respect to a REMIC Residual Certificate as if held directly by such shareholder.  Treasury regulations yet to be issued could apply a similar rule to regulated investment companies, common trust funds and certain cooperatives; the REMIC Regulations currently do not address this subject.
 
In addition, under temporary and final Treasury regulations, effective August 1, 2006, a U.S. partnership that holds any REMIC Residual Certificates and has a partner who is a non-U.S. person (in contravention of the Pooling and Servicing Agreement) will be required to pay withholding tax in respect of any "excess inclusion" income allocable to such foreign partner, even if no cash distributions are made to such partner.
 
Noneconomic REMIC Residual Certificates.  Under the REMIC Regulations, transfers of “noneconomic” REMIC Residual Certificates will be disregarded for all federal income tax purposes if “a significant purpose of the
 
 
-115-

 
 
transfer was to enable the transferor to impede the assessment or collection of tax”.  If such transfer is disregarded, the purported transferor will continue to remain liable for any taxes due with respect to the income on such “noneconomic” REMIC Residual Certificate.  The REMIC Regulations provide that a REMIC Residual Certificate is noneconomic unless, based on the Prepayment Assumption and on any required or permitted clean up calls, or required liquidation provided for in the REMIC’s organizational documents, (1) the present value of the expected future distributions (discounted using the “applicable Federal rate” for obligations whose term ends on the close of the last quarter in which excess inclusions are expected to accrue with respect to the REMIC Residual Certificate, which rate is computed and published monthly by the IRS) on the REMIC Residual Certificate equals at least the present value of the expected tax on the anticipated excess inclusions, and (2) the transferor reasonably expects that the transferee will receive distributions with respect to the REMIC Residual Certificate at or after the time the taxes accrue on the anticipated excess inclusions in an amount sufficient to satisfy the accrued taxes.  The REMIC Regulations explain that a significant purpose to impede the assessment or collection of tax exists if the transferor, at the time of the transfer, either knew or should have known that the transferee would be unwilling or unable to pay taxes due on its share of the taxable income of the REMIC.  Under the REMIC Regulations, a safe harbor is provided if (1) the transferor conducted, at the time of the transfer, a reasonable investigation of the financial condition of the transferee and found that the transferee historically had paid its debts as they came due and found no significant evidence to indicate that the transferee would not continue to pay its debts as they came due in the future, (2) the transferee represents to the transferor that it understands that, as the holder of the noneconomic residual interest, the transferee may incur tax liabilities in excess of cash flows generated by the interest and that the transferee intends to pay taxes associated with holding the residual interest as they become due and (3) the transferee represents to the transferor that it will not cause income from the REMIC Residual Certificate to be attributable to a foreign permanent establishment or fixed base (within the meaning of an applicable income tax treaty) of the transferee or any other person.  Accordingly, all transfers of REMIC Residual Certificates that may constitute noneconomic residual interests will be subject to certain restrictions under the terms of the related Pooling and Servicing Agreement that are intended to reduce the possibility of any such transfer being disregarded.  Such restrictions will require the transferee to provide an affidavit to certify to the matters in the preceding sentence.  The transferor must have no actual knowledge or reason to know that those statements are false.
 
In addition to the three conditions set forth above, the REMIC Regulations contain a fourth requirement that must be satisfied in one of two alternative ways for the transferor to have a “safe harbor” against ignoring the transfer:
 
(1) the present value of the anticipated tax liabilities associated with holding the noneconomic residual interest not exceed the sum of:
 
(i) the present value of any consideration given to the transferee to acquire the interest;
 
(ii) the present value of the expected future distributions on the interest; and
 
(iii) the present value of the anticipated tax savings associated with holding the interest as the REMIC generates losses.
 
For purposes of the computations under this “minimum transfer price” alternative, the transferee is assumed to pay tax at the highest rate of tax specified in Section 11(b)(1) of the Code (currently 35%) or, in certain circumstances, the minimum tax rate specified in Section 55 of the Code.  Further, present values generally are computed using a discount rate equal to the short-term Federal rate set forth in Section 1274(d) of the Code for the month of the transfer and the compounding period used by the transferee.  The Fourth requirement may also be satisfied by the following second alternative method:
 
(2) (i) the transferee must be a domestic “C” corporation (other than a corporation exempt from taxation of a regulated investment company or real estate investment trust) that meets certain gross and net asset tests (generally, $100 million of gross assets and $10 million of net assets for the current year and the two preceding fiscal years);
 
(ii) the transferee must agree in writing that it will transfer the REMIC Residual Certificate only to a subsequent transferee that is an eligible corporation and meets the requirements for a safe harbor transfer; and
 
 
 
-116-

 
 
(iii) the facts and circumstances known to the transferor on or before the date of the transfer must not reasonably indicate that the taxes associated with ownership of the REMIC Residual Certificate will not be paid by the transferee.
 
The related prospectus supplement will disclose whether offered REMIC Residual Certificates may be considered “noneconomic” residual interests under the REMIC Regulations; provided, however, any disclosure that a REMIC Residual Certificate will not be considered “noneconomic” will be based upon certain assumptions, and the depositor will make no representation that a REMIC Residual Certificate will not be considered “noneconomic” for purposes of the above-described rules.  See “—Foreign Investors in REMIC Certificates” below for additional restrictions applicable to transfers of certain REMIC Residual Certificates to foreign persons.
 
Mark-to-Market Rules.  The IRS has issued regulations, relating to the requirement that a securities dealer mark to market securities held for sale to customers.  This mark-to-market requirement applies to all securities owned by a dealer, except to the extent that the dealer has specifically identified a security as held for investment.  The mark-to-market regulations provide that for purposes of this requirement, a REMIC Residual Certificate will not be treated as a security and thus generally may not be marked to market.
 
Possible Pass-Through of Miscellaneous Itemized Deductions.  Fees and expenses of a REMIC generally will be allocated to certain types of holders of the related REMIC Residual Certificates.  The applicable Treasury regulations indicate, however, in the case of a REMIC that is similar to a single class grantor trust, all or a portion of such fees and expenses should be allocated to such types of holders of the related REMIC Regular Certificates.  Unless otherwise stated in the related prospectus supplement, such fees and expenses will be allocated to the related REMIC Residual Certificates in their entirety and not to the holders of the related REMIC Regular Certificates.
 
With respect to REMIC Residual Certificates or REMIC Regular Certificates the holders of which receive an allocation of fees and expenses in accordance with the preceding discussion, if any holder thereof is an individual, estate or trust, or a “pass-through entity” beneficially owned by one or more individuals, estates or trusts, (1) an amount equal to such individual’s, estate’s or trust’s share of such fees and expenses will be added to the gross income of such holder and (2) such individual’s, estate’s or trust’s share of such fees and expenses will be treated as a miscellaneous itemized deduction allowable subject to the limitation of Section 67 of the Code, which permits such deductions only to the extent they exceed in the aggregate 2% of a taxpayer’s adjusted gross income.  In addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for an individual whose adjusted gross income exceeds a specified amount will be reduced by the lesser of (1) 3% of the excess of the individual’s adjusted gross income over such amount or (2) 80% of the amount of itemized deductions otherwise allowable for the taxable year.  Under current law, the applicable limitation is reduced to zero for taxable years beginning in 2010. For taxable years beginning after December 31, 2012 the overall limitation on itemized deductions will be fully reinstated.  The amount of additional taxable income reportable by REMIC Certificateholders that are subject to the limitations of either Section 67 or Section 68 of the Code may be substantial.  Furthermore, in determining the alternative minimum taxable income of such a holder of a REMIC Certificate that is an individual, estate or trust, or a “pass-through entity” beneficially owned by one or more individuals, estates or trusts, no deduction will be allowed for such holder’s allocable portion of servicing fees and other miscellaneous itemized deductions of the REMIC, even though an amount equal to the amount of such fees and other deductions will be included in such holder’s gross income.  Accordingly, such REMIC Certificates may not be appropriate investments for individuals, estates, or trusts, or pass-through entities beneficially owned by one or more individuals, estates or trusts.  Such prospective investors are encouraged to consult with their tax advisors prior to making an investment in such certificates.
 
Sales of REMIC Certificates.  If a REMIC Certificate is sold, the selling certificateholder will recognize gain or loss equal to the difference between the amount realized on the sale and its adjusted basis in the REMIC Certificate.  The adjusted basis of a REMIC Regular Certificate generally will equal the cost of such REMIC Regular Certificate to such certificateholder, increased by income reported by such certificateholder with respect to such REMIC Regular Certificate (including original issue discount and market discount income) and reduced (but not below zero) by distributions on such REMIC Regular Certificate received by such certificateholder and by any amortized premium.  The adjusted basis of a REMIC Residual Certificate will be determined as described above under “—Taxation of Owners of REMIC Residual Certificates—Basis Rules, Net Losses and Distributions”.  Except as provided in the following four paragraphs, any such gain or loss will be capital gain or loss; provided such REMIC Certificate is held as a capital asset (generally, property held for investment) within the meaning of Section 1221 of
 
 
-117-

 
 
the Code.  The Code as of the date of this prospectus provides for tax rates for individuals on ordinary income that are higher than the tax rates for long-term capital gains of individuals for property held for more than one year.  No such rate differential exists for corporations.  In addition, the distinction between a capital gain or loss and ordinary income or loss remains relevant for other purposes.
 
Gain from the sale of a REMIC Regular Certificate that might otherwise be a capital gain will be treated as ordinary income to the extent such gain does not exceed the excess, if any, of (1) the amount that would have been includible in the seller’s income with respect to such REMIC Regular Certificate assuming that income had accrued thereon at a rate equal to 110% of the “applicable Federal rate” (generally, a rate based on an average of current yields on treasury securities having a maturity comparable to that of the certificate based on the application of the Prepayment Assumption to such certificate), determined as of the date of purchase of such REMIC Regular Certificate, over (2) the amount of ordinary income actually includible in the seller’s income prior to such sale.  In addition, gain recognized on the sale of a REMIC Regular Certificate by a seller who purchased such REMIC Regular Certificate at a market discount will be taxable as ordinary income in an amount not exceeding the portion of such discount that accrued during the period such REMIC Certificate was held by such holder, reduced by any market discount included in income under the rules described above under “—Taxation of Owners of REMIC Regular Certificates—Market Discount” and “—Premium”.
 
REMIC Certificates will be “evidences of indebtedness” within the meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from the sale of a REMIC Certificate by a bank or thrift institution to which such Section applies will be ordinary income or loss.
 
A portion of any gain from the sale of a REMIC Regular Certificate that might otherwise be capital gain may be treated as ordinary income to the extent that such Certificate is held as part of a “conversion transaction” within the meaning of Section 1258 of the Code.  A conversion transaction generally is one in which the taxpayer has taken two or more positions in the same or similar property that reduce or eliminate market risk, if substantially all of the taxpayer’s return is attributable to the time value of the taxpayer’s net investment in such transaction.  The amount of gain so realized in a conversion transaction that is recharacterized as ordinary income generally will not exceed the amount of interest that would have accrued on the taxpayer’s net investment at 120% of the appropriate “applicable Federal rate” at the time the taxpayer enters into the conversion transaction, subject to appropriate reduction for prior inclusion of interest and other ordinary income items from the transaction.
 
Finally, a taxpayer may elect to have net capital gain taxed at ordinary income rates rather than capital gains rates in order to include such net capital gain in total net investment income for the taxable year, for purposes of the rule that limits the deduction of interest on indebtedness incurred to purchase or carry property held for investment to a taxpayer’s net investment income.
 
Except as may be provided in Treasury Department regulations yet to be issued, if the seller of a REMIC Residual Certificate reacquires such REMIC Residual Certificate, or acquires any other residual interest in a REMIC or any similar interest in a “taxable mortgage pool” (as defined in Section 7701(i) of the Code) during the period beginning six months before, and ending six months after, the date of such sale, such sale will be subject to the “wash sale” rules of Section 1091 of the Code.  In that event, any loss realized by the REMIC Residual Certificateholder on the sale will not be deductible, but instead will be added to such REMIC Residual Certificateholder’s adjusted basis in the newly-acquired asset.
 
Prohibited Transactions Tax and Other Taxes.  The Code imposes a tax on REMICs equal to 100% of the net income derived from “prohibited transactions”.  In general, subject to certain specified exceptions a prohibited transaction means the disposition of a mortgage loan, the receipt of income from a source other than a mortgage loan or certain other permitted investments, the receipt of compensation for services, or gain from the disposition of an asset purchased with the payments on the mortgage loans for temporary investment pending distribution on the REMIC Certificates.  It is not anticipated that any REMIC will engage in any prohibited transactions in which it would recognize a material amount of net income.
 
In addition, certain contributions to a REMIC made after the day on which the REMIC issues all of its interests could result in the imposition of a tax on the REMIC equal to 100% of the value of the contributed property.  Each Pooling and Servicing Agreement will include provisions designed to prevent the acceptance of any contributions that would be subject to such tax.
 
 
-118-

 
 
REMICs also are subject to federal income tax at the highest corporate rate on “net income from foreclosure property”, determined by reference to the rules applicable to real estate investment trusts.  “Net income from foreclosure property” generally means gain from the sale of a foreclosure property that is inventory property and gross income from foreclosure property other than qualifying rents and other qualifying income for a real estate investment trust.  As provided in each Pooling and Servicing Agreement, a REMIC may recognize “net income from foreclosure property” subject to federal income tax to the extent that the REMIC Administrator determines that such method of operation will result in a greater after-tax return to the trust fund than any other method of operation.
 
Unless otherwise disclosed in the related prospectus supplement, it is not anticipated that any material state or local income or franchise tax will be imposed on any REMIC.
 
Unless otherwise stated in the related prospectus supplement, and to the extent permitted by then applicable laws, any prohibited transactions tax or contributions tax will be borne by the related REMIC administrator, master servicer, special servicer, manager or trustee, in any case out of its own funds; provided that such person has sufficient assets to do so; and provided, further, that such tax arises out of a breach of such person’s obligations under the related Pooling and Servicing Agreement and in respect of compliance with applicable laws and regulations.  Any such tax not borne by a REMIC administrator, a master servicer, special servicer, manager or trustee will be charged against the related trust fund resulting in a reduction in amounts payable to holders of the related REMIC Certificates.
 
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain Organizations.  If a REMIC Residual Certificate is transferred to a “disqualified organization” (as defined below), a tax would be imposed in an amount (determined under the REMIC Regulations) equal to the product of (1) the present value (discounted using the “applicable Federal rate” for obligations whose term ends on the close of the last quarter in which excess inclusions are expected to accrue with respect to the REMIC Residual Certificate) of the total anticipated excess inclusions with respect to such REMIC Residual Certificate for periods after the transfer and (2) the highest marginal federal income tax rate applicable to corporations.  The anticipated excess inclusions must be determined as of the date that the REMIC Residual Certificate is transferred and must be based on events that have occurred up to the time of such transfer, the Prepayment Assumption and any required or permitted clean up calls or required liquidation provided for in the REMIC’s organizational documents.  Such a tax generally would be imposed on the transferor of the REMIC Residual Certificate, except that where such transfer is through an agent for a disqualified organization, the tax would instead be imposed on such agent.  However, a transferor of a REMIC Residual Certificate would in no event be liable for such tax with respect to a transfer if the transferee furnishes to the transferor an affidavit that the transferee is not a disqualified organization and, as of the time of the transfer, the transferor does not have actual knowledge that such affidavit is false.  Moreover, an entity will not qualify as a REMIC unless there are reasonable arrangements designed to ensure that (1) residual interests in such entity are not held by disqualified organizations and (2) information necessary for the application of the tax described herein will be made available.  Restrictions on the transfer of REMIC Residual Certificates and certain other provisions that are intended to meet this requirement will be included in each Pooling and Servicing Agreement, and will be discussed in any prospectus supplement relating to the offering of any REMIC Residual Certificate.
 
In addition, if a “pass-through entity” (as defined below) includes in income excess inclusions with respect to a REMIC Residual Certificate, and a disqualified organization is the record holder of an interest in such entity, then a tax will be imposed on such entity equal to the product of (1) the amount of excess inclusions on the REMIC Residual Certificate that are allocable to the interest in the pass-through entity held by such disqualified organization and (2) the highest marginal federal income tax rate imposed on corporations.  A pass-through entity will not be subject to this tax for any period, however, if each record holder of an interest in such pass-through entity furnishes to such pass-through entity (1) such holder’s social security number and a statement under penalties of perjury that such social security number is that of the record holder or (2) a statement under penalties of perjury that such record holder is not a disqualified organization.
 
If an “electing large partnership” holds a REMIC Residual Certificate, all interests in the electing large partnership are treated as held by disqualified organizations for purposes of the tax imposed upon a pass-through entity by Section 860E(e) of the Code.  An exception to this tax, otherwise available to a pass-through entity that is furnished certain affidavits by record holders of interests in the entity and that does not know such affidavits are false, is not available to an electing large partnership.
 
 
-119-

 
 
For these purposes, a “disqualified organization” means (1) the United States, any State or political subdivision thereof, any foreign government, any international organization, or any agency or instrumentality of the foregoing (but would not include instrumentalities described in Section 168(h)(2)(D) of the Code or the Federal Home Loan Mortgage Corporation), (2) any organization (other than a cooperative described in Section 521 of the Code) that is exempt from federal income tax, unless it is subject to the tax imposed by Section 511 of the Code or (3) any organization described in Section 1381(a)(2)(C) of the Code.  In addition, a “pass-through entity” means any regulated investment company, real estate investment trust, trust, partnership or certain other entities described in Section 860E(e)(6) of the Code.  In addition, a person holding an interest in a pass-through entity as a nominee for another person will, with respect to such interest, be treated as a pass-through entity.  For these purposes, an “electing large partnership” means a partnership (other than a service partnership or certain commodity pools) having more than 100 members that has elected to apply certain simplified reporting provisions under the Code.
 
Termination.  A REMIC will terminate immediately after the Distribution Date following receipt by the REMIC of the final payment in respect of the mortgage loans or upon a sale of the REMIC’s assets following the adoption by the REMIC of a plan of complete liquidation.  The last distribution on a REMIC Regular Certificate will be treated as a payment in retirement of a debt instrument.  In the case of a REMIC Residual Certificate, if the last distribution on such REMIC Residual Certificate is less than the REMIC Residual Certificateholder’s adjusted basis in such Certificate, such REMIC Residual Certificateholder should (but may not) be treated as realizing a loss equal to the amount of such difference, and such loss may be treated as a capital loss.
 
Reporting and Other Administrative Matters.  Solely for purposes of the administrative provisions of the Code, the REMIC will be treated as a partnership and REMIC Residual Certificateholders will be treated as partners.  Unless otherwise stated in the related prospectus supplement, the holder of the largest percentage interest in a class of REMIC Residual Certificates will be the “tax matters person” with respect to the related REMIC, and the REMIC administrator will file REMIC federal income tax returns on behalf of the related REMIC, and will be designated as and will act as agent of, and attorney-in-fact for, the tax matters person with respect to the REMIC in all respects.
 
As the tax matters person, the REMIC administrator, subject to certain notice requirements and various restrictions and limitations, generally will have the authority to act on behalf of the REMIC and the REMIC Residual Certificateholders in connection with the administrative and judicial review of items of income, deduction, gain or loss of the REMIC, as well as the REMIC’s classification.  REMIC Residual Certificateholders generally will be required to report such REMIC items consistently with their treatment on the related REMIC’s tax return and may in some circumstances be bound by a settlement agreement between the REMIC Administrator, as tax matters person, and the IRS concerning any such REMIC item.  Adjustments made to the REMIC tax return may require a REMIC Residual Certificateholder to make corresponding adjustments on its return, and an audit of the REMIC’s tax return, or the adjustments resulting from such an audit, could result in an audit of a REMIC Residual Certificateholder’s return.  Any person that holds a REMIC Residual Certificate as a nominee for another person may be required to furnish to the related REMIC, in a manner to be provided in Treasury Department regulations, the name and address of such person and other information.
 
Reporting of interest income, including any original issue discount, with respect to REMIC Regular Certificates is required annually, and may be required more frequently under Treasury Department regulations.  These information reports generally are required to be sent to individual holders of REMIC Regular Interests and the IRS; holders of REMIC Regular Certificates that are corporations, trusts, securities dealers and certain other non-individuals will be provided interest and original issue discount income information and the information set forth in the following paragraph upon request in accordance with the requirements of the applicable regulations.  The information must be provided by the later of 30 days after the end of the quarter for which the information was requested, or two weeks after the receipt of the request.  Reporting with respect to REMIC Residual Certificates, including income, excess inclusions, investment expenses and relevant information regarding qualification of the REMIC’s assets will be made as required under the Treasury Department regulations, generally on a quarterly basis.
 
As applicable, the REMIC Regular Certificate information reports will include a statement of the adjusted issue price of the REMIC Regular Certificate at the beginning of each accrual period.  In addition, the reports will include information required by regulations with respect to computing the accrual of any market discount.  Because exact computation of the accrual of market discount on a constant yield method would require information relating to the holder’s purchase price that the REMIC may not have, such regulations only require that information pertaining to
 
 
-120-

 
 
the appropriate proportionate method of accruing market discount be provided.  See “—Taxation of Owners of REMIC Regular Certificates—Market Discount”.
 
Unless otherwise specified in the related prospectus supplement, the responsibility for complying with the foregoing reporting rules will be borne by the REMIC administrator.
 
Backup Withholding with Respect to REMIC Certificates.  Payments of interest and principal, and proceeds from the sale of REMIC Certificates, may be subject to the “backup withholding tax” at a rate of 28% (increasing to 31% after 2012) unless the recipient of such payments is a U.S. Person and provides IRS Form W-9 with the correct taxpayer identification number; is a non-U.S. Person and provides IRS Form W-8BEN identifying the non-U.S. Person and stating that the beneficial owner is not a U.S. Person; or can be treated as an exempt recipient within the meaning of Treasury Regulations Section 1.6049-4(c)(1)(ii).  Any amounts deducted and withheld from a distribution to a recipient would be allowed as a credit against such recipient’s federal income tax.  Information reporting requirements may also apply regardless of whether withholding is required.  Furthermore, certain penalties may be imposed by the IRS on a recipient of payments that is required to supply information but that does not do so in the proper manner.
 
Foreign Investors in REMIC Certificates.  A REMIC Regular Certificateholder that is not a U.S. Person and is not subject to federal income tax as a result of any direct or indirect connection to the United States in addition to its ownership of a REMIC Regular Certificate will not, unless otherwise disclosed in the related prospectus supplement, be subject to United States federal income or withholding tax in respect of a distribution on a REMIC Regular Certificate; provided that the holder provides appropriate documentation.  The appropriate documentation includes Form W-8BEN, if the non-U.S. Person is a corporation or individual eligible for the benefits of the portfolio interest exemption or an exemption based on a treaty; Form W-8ECI if the non-U.S. Person is eligible for an exemption on the basis of its income from the REMIC Regular Certificate being effectively connected to a United States trade or business; Form W-8BEN or Form W-8IMY if the non-U.S. Person is a trust, depending on whether such trust is classified as the beneficial owner of the REMIC Regular Certificate; and Form W-8IMY, with supporting documentation as specified in the Treasury Regulations, required to substantiate exemptions from withholding on behalf of its partners, if the non-U.S. Person is a partnership.  An intermediary (other than a partnership) must provide Form W-8IMY, revealing all required information, including its name, address, taxpayer identification number, the country  under the laws of which it is created, and certification that it is not acting for its own account.  A “qualified intermediary” must certify that it has provided, or will provide, a withholding statement as required under Treasury Regulations Section 1.1441-1(e)(5)(v), but need not disclose the identity of its account holders on its Form W-8IMY, and may certify its account holders’ status without including each beneficial owner’s certification.  A non-”qualified intermediary” must additionally certify that it has provided, or will provide, a withholding statement that is associated with the appropriate Forms W-8 and W-9 required to substantiate exemptions from withholding on behalf of its beneficial owners.  The term “intermediary” means a person acting as custodian, a broker, nominee or otherwise as an agent for the beneficial owner of a REMIC Regular Certificate.  A “qualified intermediary” is generally a foreign financial institution or clearing organization or a non-U.S. branch or office of a U.S. financial institution or clearing organization that is a party to a withholding agreement with the IRS.
 
It is possible that the IRS may assert that the foregoing tax exemption should not apply with respect to a REMIC Regular Certificate held by a REMIC Residual Certificateholder that owns directly or indirectly a 10% or greater interest in the REMIC Residual Certificates.  If the holder does not qualify for exemption, distributions of interest, including distributions in respect of accrued original issue discount, to such holder may be subject to a tax rate of 30%.
 
In addition, the foregoing rules will not apply to exempt a United States shareholder of a controlled foreign corporation from taxation on such United States shareholder’s allocable portion of the interest income received by such controlled foreign corporation.
 
Further, it appears that a REMIC Regular Certificate would not be included in the estate of a nonresident alien individual and would not be subject to United States estate taxes.  However, certificateholders who are nonresident alien individuals should consult their tax advisors concerning this question.
 
Unless otherwise stated in the related prospectus supplement, transfers of REMIC Residual Certificates to investors that are not United States Persons will be prohibited under the related Pooling and Servicing Agreement.  
 
 
-121-

 
 
See “—Noneconomic REMIC Residual Certificates” above concerning the disregard of certain transfers having tax avoidance potential, and see “—Excess Inclusions” regarding the withholding obligations of U .S. partnerships having non-U.S. persons as partners.
 
Legislation enacted in March 2010 requires “foreign financial institutions” to enter into an agreement with the Treasury requiring them to obtain and to disclose to the Treasury information about certain investors. The legislation also requires certain other foreign entities to obtain and disclose information about their investors to the relevant withholding agent who would, in turn, be required to provide such information to the IRS.  The legislation imposes a 30% withholding tax on certain payments of income and capital gains to an applicable foreign entity (which includes foreign financial institutions as well as certain other financial entities) if that foreign entity fails to enter into the agreement otherwise fails to comply with the requirements of the legislation.  The legislation is expected to be effective for payments made after December 31, 2014, but would not apply to obligations, such as any REMIC Regular Certificates outstanding at any time before March 18, 2012.  If, with respect to any REMIC Regular Certificates issued on or after March 18, 2012, a Non-U.S. Person that is subject to the legislation fails to comply with the requirements of the legislation, payments with respect to a REMIC Regular Certificate held by such Non-U.S. Person would be subject to a 30% withholding tax.  Non-U.S. Persons should consult their tax advisors regarding their requirements with respect to the new legislation.
 
Grantor Trust Funds
 
Classification of Grantor Trust Funds.  With respect to each series of Grantor Trust Certificates, in the opinion of counsel to the depositor for such series, assuming compliance with all provisions of the related Pooling and Servicing Agreement, the related Grantor Trust Fund will be classified as a grantor trust under subpart E, part I of subchapter J of the Code and not as a partnership or an association taxable as a corporation.  The following general discussion of the anticipated federal income tax consequences of the purchase, ownership and disposition of Grantor Trust Certificates, to the extent it relates to matters of law or legal conclusions with respect thereto, represents the opinion of counsel to the depositor for the applicable series as specified in the related prospectus supplement, subject to any qualifications set forth in this prospectus.  In addition, counsel to the depositor has prepared or reviewed the statements in this prospectus under the heading “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—Grantor Trust Funds”, and is of the opinion that such statements are correct in all material respects.  Such statements are intended as an explanatory discussion of the possible effects of the classification of any Grantor Trust Fund as a grantor trust for federal income tax purposes on investors generally and of related tax matters affecting investors generally, but do not purport to furnish information in the level of detail or with the attention to an investor’s specific tax circumstances that would be provided by an investor’s own tax advisor.  Accordingly, each investor is advised to consult its own tax advisors with regard to the tax consequences to it of investing in Grantor Trust Certificates.
 
 
Characterization of Investments in Grantor Trust Certificates.
 
Grantor Trust Fractional Interest Certificates.  In the case of Grantor Trust Fractional Interest Certificates, unless otherwise disclosed in the related prospectus supplement, counsel to the depositor will deliver an opinion that, in general, Grantor Trust Fractional Interest Certificates will represent interests in (1) “loans . . . secured by an interest in real property” within the meaning of Section 7701(a)(19)(C)(v) of the Code when owned by a “domestic building and loan association”; (2) “obligation[s] (including any participation or certificate of beneficial ownership therein) which . . . [are] principally secured by an interest in real property” within the meaning of Section 860G(a)(3) of the Code to the extent that the assets of the Grantor Trust Fund consist of “qualified mortgages” within the meaning of Section 860G(a)(3) of the Code; and (3) “real estate assets” within the meaning of Section 856(c)(5)(B) of the Code to the extent that the assets of the Grantor Trust Fund are qualified assets.  In addition, counsel to the depositor will deliver an opinion that interest on Grantor Trust Fractional Interest Certificates will to the same extent be considered “interest on obligations secured by mortgages on real property or on interests in real property” within the meaning of Section 856(c)(3)(B) of the Code.
 
Grantor Trust Strip Certificates.  Even if Grantor Trust Strip Certificates evidence an interest in a Grantor Trust Fund consisting of mortgage loans that are “loans . . . secured by an interest in real property” within the meaning of Section 7701(a)(19)(C)(v) of the Code and “real estate assets” within the meaning of Section 856(c)(5)(B) of the Code, and the interest on which is “interest on obligations secured by mortgages on real property” within the
 
 
-122-

 
 
meaning of Section 856(c)(3)(B) of the Code, it is unclear whether the Grantor Trust Strip Certificates, and the income therefrom, will be so characterized.  However, the policies underlying such sections (namely, to encourage or require investments in mortgage loans by thrift institutions and real estate investment trusts) may suggest that such characterization is appropriate.  Counsel to the depositor will not deliver any opinion on these questions.  Prospective purchasers to which such characterization of an investment in Grantor Trust Strip Certificates is material should consult their tax advisors regarding whether the Grantor Trust Strip Certificates, and the income therefrom, will be so characterized.
 
The Grantor Trust Strip Certificates will be “obligation[s] (including any participation or Certificate of beneficial ownership therein) which . . . [are] principally secured by an interest in real property” within the meaning of Section 860G(a)(3)(A) of the Code.
 
 
Taxation of Owners of Grantor Trust Fractional Interest Certificates.
 
General.  Holders of a particular series of Grantor Trust Fractional Interest Certificates generally will be required to report on their federal income tax returns their shares of the entire income from the mortgage loans (including amounts used to pay reasonable servicing fees and other expenses) and will be entitled to deduct their shares of any such reasonable servicing fees and other expenses.  Because of stripped interests, market or original issue discount, or premium, the amount includible in income on account of a Grantor Trust Fractional Interest Certificate may differ significantly from the amount distributable thereon representing interest on the mortgage loans.  Under Section 67 of the Code, an individual, estate or trust holding a Grantor Trust Fractional Interest Certificate directly or through certain pass-through entities will be allowed a deduction for such reasonable servicing fees and expenses only to the extent that the aggregate of such holder’s miscellaneous itemized deductions exceeds two percent of such holder’s adjusted gross income.  In addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for an individual whose adjusted gross income exceeds a specified amount will be reduced by the lesser of (1) 3% of the excess of the individual’s adjusted gross income over such amount or (2) 80% of the amount of itemized deductions otherwise allowable for the taxable year.  The amount of additional taxable income reportable by holders of Grantor Trust Fractional Interest Certificates who are subject to the limitations of either Section 67 or Section 68 of the Code may be substantial.  Further, certificateholders (other than corporations) subject to the alternative minimum tax may not deduct miscellaneous itemized deductions in determining such holder’s alternative minimum taxable income.  Under tax legislation enacted in 2001, this limitation on deductions under Section 68 is reduced to zero for tax years beginning in 2010 and, under current law, will be reinstated in full for tax years beginning in 2014.  Although it is not entirely clear, it appears that in transactions in which multiple classes of Grantor Trust Certificates (including Grantor Trust Strip Certificates) are issued, such fees and expenses should be allocated among the classes of Grantor Trust Certificates using a method that recognizes that each such class benefits from the related services.  In the absence of statutory or administrative clarification as to the method to be used, it currently is intended to base information returns or reports to the IRS and certificateholders on a method that allocates such expenses among classes of Grantor Trust Certificates with respect to each period based on the distributions made to each such class during that period.
 
The federal income tax treatment of Grantor Trust Fractional Interest Certificates of any series will depend on whether they are subject to the “stripped bond” rules of Section 1286 of the Code.  Grantor Trust Fractional Interest Certificates may be subject to those rules if (1) a class of Grantor Trust Strip Certificates is issued as part of the same series of certificates or (2) the depositor or any of its affiliates retains (for its own account or for purposes of resale) a right to receive a specified portion of the interest payable on a mortgage asset.  Further, the IRS has ruled that an unreasonably high servicing fee retained by a seller or servicer will be treated as a retained ownership interest in mortgages that constitutes a stripped coupon.  The related prospectus supplement will include information regarding servicing fees paid to a master servicer, a special servicer, any sub-servicer or their respective affiliates.
 
If Stripped Bond Rules Apply.  If the stripped bond rules apply, each Grantor Trust Fractional Interest Certificate will be treated as having been issued with “original issue discount” within the meaning of Section 1273(a) of the Code, subject, however, to the discussion below regarding the treatment of certain stripped bonds as market discount bonds and the discussion regarding de minimis market discount.  See “—Market Discount” below.  Under the stripped bond rules, the holder of a Grantor Trust Fractional Interest Certificate (whether a cash or accrual method taxpayer) will be required to report interest income from its Grantor Trust Fractional Interest
 
 
-123-

 
 
Certificate for each month in an amount equal to the income that accrues on such Certificate in that month calculated under a constant yield method, in accordance with the rules of the Code relating to original issue discount.
 
The original issue discount on a Grantor Trust Fractional Interest Certificate will be the excess of such Certificate’s stated redemption price over its issue price.  The issue price of a Grantor Trust Fractional Interest Certificate as to any purchaser will be equal to the price paid by such purchaser of the Grantor Trust Fractional Interest Certificate.  The stated redemption price of a Grantor Trust Fractional Interest Certificate will be the sum of all payments to be made on such certificate, other than “qualified stated interest”, if any, as well as such certificate’s share of reasonable servicing fees and other expenses.  See “—If Stripped Bond Rules Do Not Apply” for a definition of “qualified stated interest”.  In general, the amount of such income that accrues in any month would equal the product of such holder’s adjusted basis in such Grantor Trust Fractional Interest Certificate at the beginning of such month (see “—Sales of Grantor Trust Certificates” below) and the yield of such Grantor Trust Fractional Interest Certificate to such holder.  Such yield would be computed as the rate (compounded based on the regular interval between payment dates) that, if used to discount the holder’s share of future payments on the mortgage loans, would cause the present value of those future payments to equal the price at which the holder purchased such certificate.  In computing yield under the stripped bond rules, a certificateholder’s share of future payments on the mortgage loans will not include any payments made in respect of any ownership interest in the mortgage loans retained by the depositor, the master servicer, the special servicer, any sub-servicer or their respective affiliates, but will include such certificateholder’s share of any reasonable servicing fees and other expenses.
 
Section 1272(a)(6) of the Code requires (1) the use of a reasonable prepayment assumption in accruing original issue discount and (2) adjustments in the accrual of original issue discount when prepayments do not conform to the prepayment assumption, with respect to certain categories of debt instruments, and regulations could be adopted applying those provisions to the Grantor Trust Fractional Interest Certificates.  It is unclear whether those provisions would be applicable to the Grantor Trust Fractional Interest Certificates or whether use of a reasonable prepayment assumption may be required or permitted without reliance on these rules.  It is also uncertain, if a prepayment assumption is used, whether the assumed prepayment rate would be determined based on conditions at the time of the first sale of the Grantor Trust Fractional Interest Certificate or, with respect to any holder, at the time of purchase of the Grantor Trust Fractional Interest Certificate by that holder.  Certificateholders are advised to consult their tax advisors concerning reporting original issue discount in general and, in particular, whether a prepayment assumption should be used in reporting original issue discount with respect to Grantor Trust Fractional Interest Certificates.
 
In the case of a Grantor Trust Fractional Interest Certificate acquired at a price equal to the principal amount of the mortgage loans allocable to such certificate, the use of a prepayment assumption generally would not have any significant effect on the yield used in calculating accruals of interest income.  In the case, however, of a Grantor Trust Fractional Interest Certificate acquired at a discount or premium (that is, at a price less than or greater than such principal amount, respectively), the use of a reasonable prepayment assumption would increase or decrease such yield, and thus accelerate or decelerate, respectively, the reporting of income.
 
If a prepayment assumption is not used, then when a mortgage loan prepays in full, the holder of a Grantor Trust Fractional Interest Certificate acquired at a discount or a premium generally will recognize ordinary income or loss equal to the difference between the portion of the prepaid principal amount of the mortgage loan that is allocable to such certificate and the portion of the adjusted basis of such certificate that is allocable to such certificateholder’s interest in the mortgage loan.  If a prepayment assumption is used, it appears that no separate item of income or loss should be recognized upon a prepayment.  Instead, a prepayment should be treated as a partial payment of the stated redemption price of the Grantor Trust Fractional Interest Certificate and accounted for under a method similar to that described for taking account of original issue discount on REMIC Regular Certificates.  See “—REMICs—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount” above.  It is unclear whether any other adjustments would be required to reflect differences between an assumed prepayment rate and the actual rate of prepayments.
 
In the absence of statutory or administrative clarification, it is currently intended to base information reports or returns to the IRS and certificateholders in transactions subject to the stripped bond rules on a Prepayment Assumption that will be disclosed in the related prospectus supplement and on a constant yield computed using a representative initial offering price for each class of certificates.  However, neither the depositor nor any other person will make any representation that the mortgage loans will in fact prepay at a rate conforming to such Prepayment Assumption or any other rate and certificateholders should bear in mind that the use of a representative
 
 
-124-

 
 
initial offering price will mean that such information returns or reports, even if otherwise accepted as accurate by the IRS, will in any event be accurate only as to the initial certificateholders of each series who bought at that price.
 
In light of the application of Section 1286 of the 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 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.
 
Under Treasury regulations Section 1.1286-1, certain stripped bonds are to be treated as market discount bonds and, accordingly, any purchaser of such a bond is to account for any discount on the bond as market discount rather than original issue discount.  This treatment only applies, however, if immediately after the most recent disposition of the bond by a person stripping one or more coupons from the bond and disposing of the bond or coupon (1) there is no original issue discount (or only a de minimis amount of original issue discount) or (2) the annual stated rate of interest payable on the original bond is no more than one percentage point lower than the gross interest rate payable on the original mortgage loan (before subtracting any servicing fee or any stripped coupon).  If interest payable on a Grantor Trust Fractional Interest Certificate is more than one percentage point lower than the gross interest rate payable on the mortgage loans, the related prospectus supplement will disclose that fact.  If the original issue discount or market discount on a Grantor Trust Fractional Interest Certificate determined under the stripped bond rules is less than 0.25% of the stated redemption price multiplied by the weighted average maturity of the mortgage loans, then such original issue discount or market discount will be considered to be de minimis.  Original issue discount or market discount of only a de minimis amount will be included in income in the same manner as de minimis original issue and market discount described in “—If Stripped Bond Rules Do Not Apply” and “—Market Discount” below.
 
If Stripped Bond Rules Do Not Apply.  Subject to the discussion below on original issue discount, if the stripped bond rules do not apply to a Grantor Trust Fractional Interest Certificate, the certificateholder will be required to report its share of the interest income on the mortgage loans in accordance with such certificateholder’s normal method of accounting.  The original issue discount rules will apply, even if the stripped bond rules do not apply, to a Grantor Trust Fractional Interest Certificate to the extent it evidences an interest in mortgage loans issued with original issue discount.
 
The original issue discount, if any, on the mortgage loans will equal the difference between the stated redemption price of such mortgage loans and their issue price.  For a definition of “stated redemption price”, see “—REMICs—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount” above.  In general, the issue price of a mortgage loan will be the amount received by the borrower from the lender under the terms of the mortgage loan, less any “points” paid by the borrower, and the stated redemption price of a mortgage loan will equal its principal amount, unless the mortgage loan provides for an initial “teaser”, or below-market interest rate.  The determination as to whether original issue discount will be considered to be de minimis will be calculated using the same test as in the REMIC discussion.  See “—REMICs—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount” above.
 
In the case of mortgage loans bearing adjustable or variable interest rates, the related prospectus supplement will describe the manner in which such rules will be applied with respect to those mortgage loans by the trustee or master servicer, as applicable, in preparing information returns to the certificateholders and the IRS.
 
If original issue discount is in excess of a de minimis amount, all original issue discount with respect to a mortgage loan will be required to be accrued and reported in income each month, based on a constant yield.  The OID Regulations suggest that no prepayment assumption is appropriate in computing the yield on prepayable obligations issued with original issue discount.  In the absence of statutory or administrative clarification, it currently is not intended to base information reports or returns to the IRS and certificateholders on the use of a prepayment assumption in transactions not subject to the stripped bond rules.  However, Section 1272(a)(6) of the
 
 
-125-

 
 
Code may require that a prepayment assumption be made in computing yield with respect to all mortgage-backed securities.  Certificateholders are advised to consult their own tax advisors concerning whether a prepayment assumption should be used in reporting original issue discount with respect to Grantor Trust Fractional Interest Certificates.  Certificateholders should refer to the related prospectus supplement with respect to each series to determine whether and in what manner the original issue discount rules will apply to mortgage loans in such series.
 
A purchaser of a Grantor Trust Fractional Interest Certificate that purchases such Grantor Trust Fractional Interest Certificate at a cost less than such certificate’s allocable portion of the aggregate remaining stated redemption price of the mortgage loans held in the related trust fund will also be required to include in gross income such certificate’s daily portions of any original issue discount with respect to such mortgage loans.  However, each such daily portion will be reduced, if the cost of such Grantor Trust Fractional Interest Certificate to such purchaser is in excess of such certificate’s allocable portion of the aggregate “adjusted issue prices” of the mortgage loans held in the related trust fund, approximately in proportion to the ratio such excess bears to such certificate’s allocable portion of the aggregate original issue discount remaining to be accrued on such mortgage loans.  The adjusted issue price of a mortgage loan on any given day equals the sum of (1) the adjusted issue price (or, in the case of the first accrual period, the issue price) of such mortgage loan at the beginning of the accrual period that includes such day and (2) the daily portions of original issue discount for all days during such accrual period prior to such day.  The adjusted issue price of a mortgage loan at the beginning of any accrual period will equal the issue price of such mortgage loan, increased by the aggregate amount of original issue discount with respect to such mortgage loan that accrued in prior accrual periods, and reduced by the amount of any payments made on such mortgage loan in prior accrual periods of amounts included in its stated redemption price.
 
Unless otherwise provided in the related prospectus supplement, the trustee or master servicer, as applicable, will provide to any holder of a Grantor Trust Fractional Interest Certificate such information as such holder may reasonably request from time to time with respect to original issue discount accruing on Grantor Trust Fractional Interest Certificates.  See “—Grantor Trust Reporting” below.
 
Market Discount.  If the stripped bond rules do not apply to a Grantor Trust Fractional Interest Certificate, a certificateholder may be subject to the market discount rules of Sections 1276 through 1278 of the Code to the extent an interest in a mortgage loan is considered to have been purchased at a “market discount”, that is, in the case of a mortgage loan issued without original issue discount, at a purchase price less than its remaining stated redemption price (as defined above), or in the case of a mortgage loan issued with original issue discount, at a purchase price less than its adjusted issue price (as defined above).  If market discount is in excess of a de minimis amount (as described below), the holder generally will be required to include in income in each month the amount of such discount that has accrued (under the rules described in the next paragraph) through such month that has not previously been included in income, but limited, in the case of the portion of such discount that is allocable to any mortgage loan, to the payment of stated redemption price on such mortgage loan that is received by (or, in the case of accrual basis certificateholders, due to) the trust fund in that month.  A certificateholder may elect to include market discount in income currently as it accrues (under a constant yield method based on the yield of the certificate to such holder) rather than including it on a deferred basis in accordance with the foregoing under rules similar to those described in “—REMICs—Taxation of Owners of REMIC Regular Certificates—Market Discount” above.
 
Section 1276(b)(3) of the Code authorized the Treasury Department to issue regulations providing for the method for accruing market discount on debt instruments, the principal of which is payable in more than one installment.  Until such time as regulations are issued by the Treasury Department, certain rules described in the Committee Report apply.  Under those rules, in each accrual period market discount on the mortgage loans should accrue, at the holder’s option:  (1) on the basis of a constant yield method, (2) in the case of a mortgage loan issued without original issue discount, in an amount that bears the same ratio to the total remaining market discount as the stated interest paid in the accrual period bears to the total stated interest remaining to be paid on the mortgage loan as of the beginning of the accrual period, or (3) in the case of a mortgage loan issued with original issue discount, in an amount that bears the same ratio to the total remaining market discount as the original issue discount accrued in the accrual period bears to the total original issue discount remaining at the beginning of the accrual period.  The prepayment assumption, if any, used in calculating the accrual of original issue discount is to be used in calculating the accrual of market discount.  The effect of using a prepayment assumption could be to accelerate the reporting of such discount income.  Because the regulations referred to in this paragraph have not been issued, it is not possible
 
 
-126-

 
 
to predict what effect such regulations might have on the tax treatment of a mortgage loan purchased at a discount in the secondary market.
 
Because the mortgage loans will provide for periodic payments of stated redemption price, such discount may be required to be included in income at a rate that is not significantly slower than the rate at which such discount would be included in income if it were original issue discount.
 
Market discount with respect to mortgage loans may be considered to be de minimis and, if so, will be includible in income under de minimis rules similar to those described above in “—REMICs—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount” above within the exception that it is less likely that a prepayment assumption will be used for purposes of such rules with respect to the mortgage loans.
 
Further, under the rules described above in “—REMICs—Taxation of Owners of REMIC Regular Certificates—Market Discount”, any discount that is not original issue discount and exceeds a de minimis amount may require the deferral of interest expense deductions attributable to accrued market discount not yet includible in income, unless an election has been made to report market discount currently as it accrues.  This rule applies without regard to the origination dates of the mortgage loans.
 
Premium.  If a certificateholder is treated as acquiring the underlying mortgage loans at a premium, that is, at a price in excess of their remaining stated redemption price, such certificateholder may elect under Section 171 of the Code to amortize using a constant yield method the portion of such premium allocable to mortgage loans originated after September 27, 1985.  Amortizable premium is treated as an offset to interest income on the related debt instrument, rather than as a separate interest deduction.  However, premium allocable to mortgage loans originated before September 28, 1985 or to mortgage loans for which an amortization election is not made, should be allocated among the payments of stated redemption price on the mortgage loan and be allowed as a deduction as such payments are made (or, for a certificateholder using the accrual method of accounting, when such payments of stated redemption price are due).
 
It is unclear whether a prepayment assumption should be used in computing amortization of premium allowable under Section 171 of the Code.  If premium is not subject to amortization using a prepayment assumption and a mortgage loan prepays in full, the holder of a Grantor Trust Fractional Interest Certificate acquired at a premium should recognize a loss equal to the difference between the portion of the prepaid principal amount of the mortgage loan that is allocable to the certificate and the portion of the adjusted basis of the certificate that is allocable to the mortgage loan.  If a prepayment assumption is used to amortize such premium, it appears that such a loss would be unavailable.  Instead, if a prepayment assumption is used, a prepayment should be treated as a partial payment of the stated redemption price of the Grantor Trust Fractional Interest Certificate and accounted for under a method similar to that described for taking account of original issue discount on REMIC Regular Certificates.  See “—REMICs—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount” above.  It is unclear whether any other adjustments would be required to reflect differences between the prepayment assumption and the actual rate of prepayments.
 
Taxation of Owners of Grantor Trust Strip Certificates.  The “stripped coupon” rules of Section 1286 of the Code will apply to the Grantor Trust Strip Certificates.  Except as described above in “—If Stripped Bond Rules Apply”, no regulations or published rulings under Section 1286 of the Code have been issued and some uncertainty exists as to how it will be applied to securities such as the Grantor Trust Strip Certificates.  Accordingly, holders of Grantor Trust Strip Certificates should consult their tax advisors concerning the method to be used in reporting income or loss with respect to such certificates.
 
The OID Regulations do not apply to “stripped coupons”, although they provide general guidance as to how the original issue discount sections of the Code will be applied.  In addition, the discussion below is subject to the discussion under “—Possible Application of Proposed Contingent Payment Rules” below and assumes that the holder of a Grantor Trust Strip Certificate will not own any Grantor Trust Fractional Interest Certificates.
 
Under the stripped coupon rules, it appears that original issue discount will be required to be accrued in each month on the Grantor Trust Strip Certificates based on a constant yield method.  In effect, each holder of Grantor Trust Strip Certificates would include as interest income in each month an amount equal to the product of such holder’s adjusted basis in such Grantor Trust Strip Certificate at the beginning of such month and the yield of such
 
 
-127-

 
 
Grantor Trust Strip Certificate to such holder.  Such yield would be calculated based on the price paid for that Grantor Trust Strip Certificate by its holder and the payments remaining to be made thereon at the time of the purchase, plus an allocable portion of the servicing fees and expenses to be paid with respect to the mortgage loans.  See “—If Stripped Bond Rules Apply” above.
 
As noted above, Section 1272(a)(6) of the Code requires that a prepayment assumption be used in computing the accrual of original issue discount with respect to certain categories of debt instruments, and that adjustments be made in the amount and rate of accrual of such discount when prepayments do not conform to such prepayment assumption.  Regulations could be adopted applying those provisions to the Grantor Trust Strip Certificates.  It is unclear whether those provisions would be applicable to the Grantor Trust Strip Certificates or whether use of a prepayment assumption may be required or permitted in the absence of such regulations.  It is also uncertain, if a prepayment assumption is used, whether the assumed prepayment rate would be determined based on conditions at the time of the first sale of the Grantor Trust Strip Certificate or, with respect to any subsequent holder, at the time of purchase of the Grantor Trust Strip Certificate by that holder.
 
The accrual of income on the Grantor Trust Strip Certificates will be significantly slower if a prepayment assumption is permitted to be made than if yield is computed assuming no prepayments.  In the absence of statutory or administrative clarification, it currently is intended to base information returns or reports to the IRS and certificateholders on the Prepayment Assumption disclosed in the related prospectus supplement and on a constant yield computed using a representative initial offering price for each class of certificates.  However, neither the depositor nor any other person will make any representation that the mortgage loans will in fact prepay at a rate conforming to the Prepayment Assumption or at any other rate and certificateholders should bear in mind that the use of a representative initial offering price will mean that such information returns or reports, even if otherwise accepted as accurate by the IRS, will in any event be accurate only as to the initial certificateholders of each series who bought at that price.  Prospective purchasers of the Grantor Trust Strip Certificates are encouraged to consult their tax advisors regarding the use of the Prepayment Assumption.
 
It is unclear under what circumstances, if any, the prepayment of a mortgage loan will give rise to a loss to the holder of a Grantor Trust Strip Certificate.  If a Grantor Trust Strip Certificate is treated as a single instrument (rather than an interest in discrete mortgage loans) and the effect of prepayments is taken into account in computing yield with respect to such Grantor Trust Strip Certificate, it appears that no loss may be available as a result of any particular prepayment unless prepayments occur at a rate faster than the Prepayment Assumption.  However, if a Grantor Trust Strip Certificate is treated as an interest in discrete mortgage loans, or if the Prepayment Assumption is not used, then when a mortgage loan is prepaid, the holder of a Grantor Trust Strip Certificate should be able to recognize a loss equal to the portion of the adjusted issue price of the Grantor Trust Strip Certificate that is allocable to such mortgage loan.
 
Possible Application of Contingent Payment Rules.  The coupon stripping rules’ general treatment of stripped coupons is to regard them as newly issued debt instruments in the hands of each purchaser.  To the extent that payments on the Grantor Trust Strip Certificates would cease if the mortgage loans were prepaid in full, the Grantor Trust Strip Certificates could be considered to be debt instruments providing for contingent payments.  Under the OID Regulations, debt instruments providing for contingent payments are not subject to the same rules as debt instruments providing for noncontingent payments.  Treasury Department regulations have been promulgated regarding contingent payment debt instruments, but it appears that Grantor Trust Strip Certificates, due to their similarity to other mortgage-backed securities (such as REMIC regular interests and debt instruments subject to Section 1272(a)(6) of the Code) that are expressly excepted from the application of such Regulations, may also be excepted from such regulations.  Like the OID Regulations, the contingent payment regulations do not specifically address securities, such as the Grantor Trust Strip Certificates, that are subject to the stripped bond rules of Section 1286 of the Code.
 
If the contingent payment rules similar to those under the OID Regulations were to apply, the holder of a Grantor Trust Strip Certificate would be required to apply a “noncontingent bond method”. Under the “noncontingent bond method”, the issuer of a Grantor Trust Strip Certificate determines a projected payment schedule.  Holders of Grantor Trust Strip Certificates are bound by the issuer’s projected payment schedule.  The projected payment schedule consists of all noncontingent payments and a projected amount for each contingent payment based on the comparable yield (as described below) of the Grantor Trust Strip Certificate.  The projected amount of each payment is determined so that the projected payment schedule reflects the projected yield.  The
 
 
-128-

 
 
projected amount of each payment must reasonably reflect the relative expected values of the payments to be received by the holders of a Grantor Trust Strip Certificate.  The comparable yield referred to above is a rate that, as of the issue date, reflects the yield at which the issuer would issue a fixed rate debt instrument with terms and conditions similar to the contingent payment debt instrument, including general market conditions, the credit quality of the issuer, and the terms and conditions of the mortgage loans.  The holder of a Grantor Trust Strip Certificate would be required to include as interest income in each month the adjusted issue price of the Grantor Trust Strip Certificate at the beginning of the period multiplied by the comparable yield.
 
Certificateholders should consult their tax advisors concerning the possible application of the contingent payment rules to the Grantor Trust Strip Certificates.
 
Sales of Grantor Trust Certificates.  Any gain or loss, equal to the difference between the amount realized on the sale or exchange of a Grantor Trust Certificate and its adjusted basis, recognized on such sale or exchange of a Grantor Trust Certificate by an investor who holds such Grantor Trust Certificate as a capital asset, will be capital gain or loss, except to the extent of accrued and unrecognized market discount, which will be treated as ordinary income, and (in the case of banks and other financial institutions) except as provided under Section 582(c) of the Code.  The adjusted basis of a Grantor Trust Certificate generally will equal its cost, increased by any income reported by the seller (including original issue discount and market discount income) and reduced (but not below zero) by any previously reported losses, any amortized premium and by any distributions with respect to such Grantor Trust Certificate.  The Code as of the date of this prospectus generally provides for tax rates of non-corporate taxpayers on ordinary income that are higher than the rates on long-term capital gains (generally, property held for more than one year).  No such rate differential exists for corporations.  In addition, the distinction between a capital gain or loss and ordinary income or loss remains relevant for other purposes.
 
Gain or loss from the sale of a Grantor Trust Certificate may be partially or wholly ordinary and not capital in certain circumstances.  Gain attributable to accrued and unrecognized market discount will be treated as ordinary income, as will gain or loss recognized by banks and other financial institutions subject to Section 582(c) of the Code.  Furthermore, a portion of any gain that might otherwise be capital gain may be treated as ordinary income to the extent that the Grantor Trust Certificate is held as part of a “conversion transaction” within the meaning of Section 1258 of the Code.  A conversion transaction generally is one in which the taxpayer has taken two or more positions in the same or similar property that reduce or eliminate market risk, if substantially all of the taxpayer’s return is attributable to the time value of the taxpayer’s net investment in such transaction.  The amount of gain realized in a conversion transaction that is recharacterized as ordinary income generally will not exceed the amount of interest that would have accrued on the taxpayer’s net investment at 120% of the appropriate “applicable Federal rate” (which rate is computed and published monthly by the IRS) at the time the taxpayer enters into the conversion transaction, subject to appropriate reduction for prior inclusion of interest and other ordinary income items from the transaction.
 
Finally, a taxpayer may elect to have net capital gain taxed at ordinary income rates rather than capital gains rates in order to include such net capital gain in total net investment income for that taxable year, for purposes of the rule that limits the deduction of interest on indebtedness incurred to purchase or carry property held for investment to a taxpayer’s net investment income.
 
Grantor Trust Reporting.  Unless otherwise provided in the related prospectus supplement, the trustee or master servicer, as applicable, will furnish to each holder of a Grantor Trust Certificate with each distribution a statement setting forth the amount of such distribution allocable to principal on the underlying mortgage loans and to interest thereon at the related pass-through rate.  In addition, the trustee or master servicer, as applicable, will furnish, within a reasonable time after the end of each calendar year, to each holder of a Grantor Trust Certificate who was such a holder at any time during such year, information regarding the amount of servicing compensation received by the master servicer, the special servicer or any sub-servicer, and such other customary factual information as the depositor or the reporting party deems necessary or desirable to enable holders of Grantor Trust Certificates to prepare their tax returns and will furnish comparable information to the IRS as and when required by law to do so.  Because the rules for accruing discount and amortizing premium with respect to the Grantor Trust Certificates are uncertain in various respects, there is no assurance the IRS will agree with the trustee’s or master servicer’s, as the case may be, information reports of such items of income and expense.  Moreover, such information reports, even if otherwise accepted as accurate by the IRS, will in any event be accurate only as to the initial certificateholders that bought their certificates at the representative initial offering price used in preparing such reports.
 
 
-129-

 
 
Final Treasury regulations 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 (i) a custodian of a person's account, (ii) a nominee and (iii) a broker holding an interest for a customer in street name. The trustee, or its designated agent, is required to calculate and provide information to requesting persons with respect to the trust fund in accordance with these regulations. The trustee (or its designated agent), or the applicable middleman (in the case of interests held through a middleman), is required to file information returns with the IRS and provide tax information statements to certificateholders in accordance with these regulations.
 
Backup Withholding.  In general, the rules described above in “—REMICs—Backup Withholding with Respect to REMIC Certificates” will also apply to Grantor Trust Certificates.
 
Foreign Investors.  In general, the discussion with respect to REMIC Regular Certificates in “—REMICs—Foreign Investors in REMIC Certificates” above applies to Grantor Trust Certificates except that Grantor Trust Certificates will, unless otherwise disclosed in the related prospectus supplement, be eligible for exemption from U.S. withholding tax, subject to the conditions described in such discussion, only to the extent the related mortgage loans were originated after July 18, 1984.
 
To the extent that interest on a Grantor Trust Certificate would be exempt under Sections 871(h)(1) and 881(c) of the Code from United States withholding tax, and the Grantor Trust Certificate is not held in connection with a certificateholder’s trade or business in the United States, such Grantor Trust Certificate will not be subject to United States estate taxes in the estate of a nonresident alien individual.
 
STATE AND OTHER TAX CONSEQUENCES
 
In addition to the federal income tax consequences described in “MATERIAL FEDERAL INCOME TAX CONSEQUENCES”, potential investors should consider the state and local tax consequences of the acquisition, ownership, and disposition of the offered certificates.  State and local tax law may differ substantially from the corresponding federal law, and the discussion above does not purport to describe any aspect of the tax laws of any state or other jurisdiction.  Therefore, prospective investors are encouraged to consult their tax advisors with respect to the various tax consequences of investments in the offered certificates.
 
CERTAIN ERISA CONSIDERATIONS
 
General
 
The Employee Retirement Income Security Act of 1974, as amended, and the Code impose certain requirements on retirement plans, and on certain other employee benefit plans and arrangements, including individual retirement accounts and annuities, Keogh plans and collective investment funds and separate accounts (and as applicable, insurance company general accounts) in which such plans, accounts or arrangements are invested that are subject to the fiduciary responsibility provisions of ERISA and Section 4975 of the Code (each, a “Plan”), and on persons who are fiduciaries with respect to such Plans, in connection with the investment of Plan assets.  Certain employee benefit plans, such as governmental plans (as defined in ERISA Section 3(32)), and, if no election has been made under Section 410(d) of the Code, church plans (as defined in Section 3(33) of ERISA) are not subject to ERISA requirements.  However, such plans may be subject to the provisions of other applicable federal and state law materially similar to ERISA or the Code.  Moreover, any such plan which is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code is subject to the prohibited transaction rules set forth in Section 503 of the Code.
 
ERISA generally imposes on Plan fiduciaries certain general fiduciary requirements, including those of investment prudence and diversification and the requirement that a Plan’s investments be made in accordance with the documents governing the Plan.  In addition, Section 406 of ERISA and Section 4975 of the Code prohibit a broad range of transactions involving assets of a Plan and persons who have certain specified relationships to the Plan, unless a statutory or administrative exemption is available.  Certain Parties in Interest that participate in a
 
 
-130-

 
 
prohibited transaction may be subject to an excise tax imposed pursuant to Section 4975 of the Code or a penalty imposed pursuant to Section 502(i) of ERISA, unless a statutory or administrative exemption is available.  These prohibited transactions generally are set forth in Section 406 of ERISA and Section 4975 of the Code.
 
Plan Asset Regulations
 
A Plan’s investment in offered certificates may cause the underlying mortgage assets and other assets included in a related trust fund to be deemed assets of such Plan.  The Plan Asset Regulations provide that when a Plan acquires an equity interest in an entity, the Plan’s assets include both such equity interest and an undivided interest in each of the underlying assets of the entity, unless certain exceptions not applicable here apply, or unless the equity participation in the entity by “benefit plan investors” (i.e., Plans and entities deemed to hold plan assets because of a Plan’s investment in the entity) is not “significant”, both as defined in the Plan Asset Regulations.  For this purpose, in general, equity participation by benefit plan investors will be “significant” on any date if 25% or more of the value of any class of equity interests in the entity is held by benefit plan investors.  Equity participation in a trust fund will be significant on any date if immediately after the most recent acquisition of any certificate, 25% or more of any class of certificates is held by benefit plan investors.
 
Any person who has discretionary authority or control respecting the management or disposition of Plan assets, and any person who provides investment advice with respect to such assets for a fee, is a fiduciary of the investing Plan.  If the mortgage assets and other assets included in a trust fund constitute Plan assets, then any party exercising management or discretionary control regarding those assets, such as the master servicer, any special servicer, any sub-servicer, the trustee, the obligor under any credit enhancement mechanism, or certain affiliates thereof may be deemed to be a Plan “fiduciary” and thus subject to the fiduciary responsibility provisions and prohibited transaction provisions of ERISA and the Code with respect to the investing Plan.  In addition, if the mortgage assets and other assets included in a trust fund constitute Plan assets, the purchase of certificates by a Plan, as well as the operation of the trust fund, may constitute or involve a prohibited transaction under ERISA or the Code.
 
The Plan Asset Regulations provide that where a Plan acquires a “guaranteed governmental mortgage pool certificate”, the Plan’s assets include such certificate but do not solely by reason of the Plan’s holdings of such certificate include any of the mortgages underlying such certificate.  The Plan Asset Regulations include in the definition of a “guaranteed governmental mortgage pool certificate” Ginnie Mae, Freddie Mac, Farmer Mac and Fannie Mae certificates.  Accordingly, even if such MBS included in a trust fund were deemed to be assets of Plan investors, the mortgages underlying such MBS would not be treated as assets of such Plans.  Private label mortgage participations, mortgage pass-through certificates or other mortgage-backed securities are not “guaranteed governmental mortgage pool certificates” within the meaning of the Plan Asset Regulations; potential Plan investors should consult their counsel and review the ERISA discussion in the related prospectus supplement before purchasing certificates if such MBS are included in the trust fund.
 
The DOL has granted to certain underwriters administrative exemptions, each an “Exemption”, for certain mortgage-backed and asset-backed certificates underwritten in whole or in part by the underwriters.  An Exemption might be applicable to the initial purchase, the holding, and the subsequent resale by a Plan of certain certificates, such as the offered certificates, underwritten by the underwriters, representing interests in pass-through trusts that consist of certain receivables, loans and other obligations; provided that the conditions and requirements of the Exemption are satisfied.  The loans described in the Exemptions include mortgage loans such as the mortgage assets.  However, it should be noted that in issuing the Exemptions, the DOL may not have considered interests in pools of the exact nature as some of the offered certificates.  If all of the conditions of an Exemption are met, whether or not a Plan’s assets would be deemed to include an ownership interest in the mortgage assets, the acquisition, holding and resale of the offered certificates by Plans would be exempt from certain of the prohibited transaction provisions of ERISA and the Code.
 
Insurance Company General Accounts
 
Sections I and III of PTCE 95-60 exempt from the application of the prohibited transaction provisions of Sections 406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code transactions in connection with the servicing, management and operation of a trust (such as the trust) in which an insurance company general account has an interest as a result of its acquisition of certificates issued by the trust; provided that certain conditions are
 
 
-131-

 
 
satisfied.  If these conditions are met, insurance company general accounts would be allowed to purchase certain classes of certificates which do not meet the requirements of any of the Exemptions solely because they (1) are subordinated to other classes of certificates in the trust and/or (2) have not received a rating at the time of the acquisition in one of the four highest rating categories from a nationally recognized statistical rating agency.  All other conditions of one of the Exemptions would have to be satisfied in order for PTCE 95-60 to be available.  Before purchasing such class of certificates, an insurance company general account seeking to rely on Sections I and III of PTCE 95-60 should itself confirm that all applicable conditions and other requirements have been satisfied.
 
The Small Business Job Protection Act of 1996 added a new Section 401(c) to ERISA, which provides certain exemptive relief from the provisions of Part 4 of Title I of ERISA and Section 4975 of the Code, including the prohibited transaction restrictions imposed by ERISA and the related excise taxes imposed by the Code, for transactions involving an insurance company general account.  Pursuant to Section 401(c) of ERISA, the DOL has issued final regulations providing guidance for the purpose of determining, in cases where insurance policies supported by an insurer’s general account are issued to or for the benefit of a Plan on or before December 31, 1998, which general account assets constitute Plan assets.  Any assets of an insurance company general account which support insurance policies issued to a Plan after December 31, 1998 or issued to Plans on or before December 31, 1998 for which the insurance company does not comply with the 401(c) Regulations may be treated as Plan assets.  In addition, because Section 401(c) does not relate to insurance company separate accounts, separate account assets are still treated as Plan assets of any Plan invested in such separate account.  Insurance companies contemplating the investment of general account assets in the offered certificates should consult with their legal counsel with respect to the applicability of Section 401(c) of ERISA.
 
Consultation With Counsel
 
Any Plan fiduciary which proposes to purchase offered certificates on behalf of or with assets of a Plan should consider its general fiduciary obligations under ERISA and should consult with its counsel with respect to the potential applicability of ERISA and the Code to such investment and the availability of any prohibited transaction exemption in connection with any planned purchase.
 
Tax Exempt Investors
 
A Plan that is exempt from federal income taxation pursuant to Section 501 of the Code nonetheless will be subject to federal income taxation to the extent that its income is “unrelated business taxable income” within the meaning of Section 512 of the Code.  All “excess inclusions” of a REMIC allocated to a REMIC Residual Certificate held by a Plan will be considered unrelated business taxable income and thus will be subject to federal income tax.  See “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs—Taxation of Owners of REMIC Residual Certificates—Excess Inclusions”.
 
LEGAL INVESTMENT
 
If so specified in the related prospectus supplement, certain classes of the offered certificates will constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended (“SMMEA”).  Generally, the only classes of the offered certificates which will qualify as “mortgage related securities” will be those that (1) are rated in one of two highest rating categories by at least one nationally recognized statistical rating organization (“NRSRO”) 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.  Pursuant to Section 939(e) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC is required to establish creditworthiness standards in substitution for the current ratings test in SMMEA, effective July 21, 2012.  Accordingly, depending upon the standards established by the SEC, it is possible that certain classes of offered certificates that are offered and sold prior to July 21, 2012 and specified to be “mortgage related securities” for purposes of SMMEA in the applicable prospectus supplement, may no longer qualify as such as of July 21, 2012, and that further classes of offered certificates may not qualify either.
 
The appropriate characterization of the offered certificates under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase these offered certificates, may be subject to
 
 
-132-

 
 
significant interpretive uncertainties. Except as to the status of certain classes of offered certificates as “mortgage related securities”, no representations are made as to the proper characterization of the offered certificates for legal investment purposes, financial institution regulatory purposes, or other purposes, or as to the ability of particular investors to purchase any offered certificates under applicable legal investment restrictions.  The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial institution regulatory characteristics of the offered certificates) may adversely affect the liquidity and/or market value of the offered certificates.  Further, any ratings downgrade of a class, of offered certificates below an “investment grade” rating by an NRSRO may affect the ability of an investor to purchase or retain, or otherwise impact the regulatory characteristics of those certificates.
 
Accordingly, all investors whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities should consult with their own legal advisors in determining whether and to what extent the offered certificates of any class or series constitute legal investments or are subject to investment, capital, or other restrictions and, if applicable, whether SMMEA has been overridden in any jurisdiction relevant to that investor.
 
USE OF PROCEEDS
 
The net proceeds to be received from the sale of the certificates of any series will be applied by the depositor to the purchase of trust assets or will be used by the depositor to cover expenses related thereto.  The depositor expects to sell the certificates from time to time, but the timing and amount of offerings of certificates will depend on a number of factors, including the volume of mortgage assets acquired by the depositor, prevailing interest rates, availability of funds and general market conditions.
 
METHOD OF DISTRIBUTION
 
The certificates offered hereby and by the related prospectus supplements will be offered in series through one or more of the methods described below.  The prospectus supplement prepared for each series will describe the method of offering being utilized for that series and will state the net proceeds to the depositor from such sale.
 
The depositor intends that offered certificates will be offered through the following methods from time to time and that offerings may be made concurrently through more than one of these methods or that an offering of the offered certificates of a particular series may be made through a combination of two or more of these methods.  Such methods are as follows:
 
1.      By negotiated firm commitment or best efforts underwriting and public re-offering by underwriters, which may include Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of the depositor;
 
2.      By placements by the depositor with institutional investors through dealers; and
 
3.      By direct placements by the depositor with institutional investors, in which event the Depositor will be an underwriter with respect to the certificates; and
 
4.      By inclusion as underlying securities backing another series of mortgage pass-through certificates issued by an entity of which the Depositor or an affiliate of the Depositor may act as the depositor.  In the event that the Depositor or an affiliate of the Depositor acts as depositor with respect to the other series of mortgage pass-through certificates, the Depositor or its affiliate will be an underwriter with respect to the underlying securities.
 
In addition, if specified in the related prospectus supplement, the offered certificates of a series may be offered in whole or in part to the seller of the related mortgage assets that would comprise the trust fund for such certificates.
 
If underwriters are used in a sale of any offered certificates (other than in connection with an underwriting on a best efforts basis), such certificates will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at fixed public offering prices or at
 
 
-133-

 
 
varying prices to be determined at the time of sale or at the time of commitment therefor.  Such underwriters may be broker-dealers affiliated with the depositor whose identities and relationships to the depositor will be as set forth in the related prospectus supplement.  The managing underwriter or underwriters with respect to the offer and sale of offered certificates of a particular series will be set forth on the cover of the prospectus supplement relating to such series and the members of the underwriting syndicate, if any, will be named in such prospectus supplement.
 
In connection with the sale of offered certificates, underwriters may receive compensation from the depositor or from purchasers of the offered certificates in the form of discounts, concessions or commissions.  Underwriters and dealers participating in the distribution of the offered certificates will be deemed to be underwriters in connection with such certificates, and any discounts or commissions received by them from the depositor and any profit on the resale of offered certificates by them will be deemed to be underwriting discounts and commissions under the Securities Act of 1933, as amended.
 
It is anticipated that the underwriting agreement pertaining to the sale of the offered certificates of any series will provide that the obligations of the underwriters will be subject to certain conditions precedent, that the underwriters will be obligated to purchase all such certificates if any are purchased (other than in connection with an underwriting on a best efforts basis) and that, in limited circumstances, the depositor will indemnify the several underwriters and the underwriters will indemnify the depositor against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended, or will contribute to payments required to be made in respect to such liabilities.
 
The prospectus supplement with respect to any series offered by placements through dealers will contain information regarding the nature of such offering and any agreements to be entered into between the depositor and purchasers of offered certificates of such series.
 
The depositor anticipates that the offered certificates will be sold primarily to institutional investors.  Purchasers of offered certificates, including dealers, may, depending on the facts and circumstances of such purchases, be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, in connection with reoffers and sales by them of offered certificates.  Holders of offered certificates should consult with their legal advisors in this regard prior to any such reoffer or sale.
 
If specified in the prospectus supplement relating to a series of certificates, the Depositor or any of its affiliates may purchase some or all of one or more classes of certificates of the series from the underwriter or underwriters at a price specified or described in the prospectus supplement.  This party may then, from time to time, offer and sell, pursuant to this prospectus, some or all of the certificates it purchased directly, through one or more underwriters to be designated at the time of the offering of the certificates or through dealers acting as agent and/or principal.  Any of these offerings may be restricted in the matter specified in the applicable prospectus supplement.  These transactions may be effected at market prices prevailing at the time of sale, at negotiated prices or at fixed prices.  The underwriters and dealers participating in the purchaser’s offering of certificates may receive compensation in the form of underwriting discounts or commissions from the purchaser and these dealers may receive commissions from the investors purchasing certificates for whom they may act as agent (which discounts or commissions will not exceed those customary in those types of transactions).  Any dealer that participates in the distribution of these certificates will be an “underwriter” within the meaning of the Securities Act, and any commissions and discounts received by a dealer and any profit on the resale of these certificates by a dealer will be underwriting discounts and commissions under the Securities Act.
 
LEGAL MATTERS
 
Certain legal matters relating to the certificates will be passed upon for the depositor by Cadwalader, Wickersham & Taft LLP.  Certain legal matters relating to the certificates will be passed upon for the underwriter by the counsel described in the related prospectus supplement under “LEGAL MATTERS”.  Certain federal income tax matters and other matters will be passed upon for the depositor by Cadwalader, Wickersham & Taft LLP.
 
 
 
-134-

 
 
RATING
 
Each class of offered certificates shall have been rated not lower than investment grade, that is, in one of the four highest rating categories, by at least one NRSRO.
 
Ratings on mortgage pass-through certificates address the likelihood of receipt by the holders of all collections on the underlying mortgage assets to which such holders are entitled.  These ratings address the structural, legal and issuer-related aspects associated with such certificates, the nature of the underlying mortgage assets and the credit quality of the guarantor, if any.  Ratings on mortgage pass-through certificates do not represent any assessment of the likelihood of principal prepayments by borrowers or of the degree by which such prepayments might differ from those originally anticipated.  As a result, certificateholders might suffer a lower than anticipated yield, and, in addition, holders of Stripped Interest Certificates might, in extreme cases fail to recoup their initial investments.  Furthermore, ratings on mortgage pass-through certificates do not address the price of such certificates or the suitability of such certificates to the investor.
 
A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning NRSRO.  Each security rating should be evaluated independently of any other security rating.
 
AVAILABLE INFORMATION
 
The depositor has filed with the SEC a Registration Statement (of which this prospectus forms a part) under the Securities Act, with respect to the offered certificates.  This prospectus and the prospectus supplement relating to each series of offered certificates contain summaries of the material terms of the documents referred to in this prospectus or in such prospectus supplement, but do not contain all of the information set forth in the Registration Statement pursuant to the rules and regulations of the SEC.  For further information, reference is made to such Registration Statement and the exhibits thereto.  Such Registration Statement and exhibits can be inspected and copied at prescribed rates at the public reference facilities maintained by the SEC at its Public Reference Section, 100 F Street, N.E., Washington, D.C.  20549[, and at its Midwest Regional Offices located as follows:  Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511].  You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC also maintains a site on the World Wide Web at “http://www.sec.gov” at which you can view and download copies of reports, proxy and information statements and other information filed electronically through the Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system.  The Depositor has filed the Registration Statement, including all exhibits thereto, through the EDGAR system, so the materials should be available by logging onto the SEC’s Web site.  The SEC maintains computer terminals providing access to the EDGAR system at each of the offices referred to above.
 
No dealer, salesman, or other person has been authorized to give any information, or to make any representations, other than those contained in this prospectus or any related prospectus supplement, and, if given or made, such information or representations must not be relied upon as having been authorized by the depositor or any other person.  Neither the delivery of this prospectus or any related prospectus supplement nor any sale made under this prospectus or any related prospectus supplement shall under any circumstances create an implication that there has been no change in the information in this prospectus since the date of this prospectus or in such prospectus supplement since the date of the prospectus supplement.  This prospectus and any related prospectus supplement are not an offer to sell or a solicitation of an offer to buy any security in any jurisdiction in which it is unlawful to make such offer or solicitation.
 
The master servicer, the trustee or another specified person will cause to be provided to registered holders of the offered certificates of each series periodic unaudited reports concerning the related trust fund.  If beneficial interests in a class or series of offered certificates are being held and transferred in book-entry format through the facilities of The DTC as described in this prospectus, then unless otherwise provided in the related prospectus supplement, such reports will be sent on behalf of the related trust fund to a nominee of DTC as the registered holder of the offered certificates.  Conveyance of notices and other communications by DTC to its participating organizations, and directly or indirectly through such participating organizations to the beneficial owners of the applicable offered
 
 
-135-

 
 
certificates, will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.  See “DESCRIPTION OF THE CERTIFICATES—Reports to Certificateholders” and “—Book-Entry Registration and Definitive Certificates”.
 
The depositor will file or cause to be filed with the SEC such periodic reports with respect to each trust fund as are required under the Exchange Act and the rules and regulations of the SEC and the related prospectus supplement will describe how to locate such reports of the depositor.
 
 
 
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
 
The depositor hereby incorporates by reference all documents and reports filed or caused to be filed by the depositor (other than Annual Reports on Form 10-K) with respect to a trust fund pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of an offering of offered certificates evidencing interests in that trust fund.  The depositor will provide or cause to be provided without charge to each person to whom this prospectus is delivered in connection with the offering of one or more classes of offered certificates, upon written or oral request of such person, a copy of any or all documents or reports incorporated in this prospectus by reference, in each case to the extent such documents or reports relate to one or more of such classes of such offered certificates, other than the exhibits to such documents (unless such exhibits are specifically incorporated by reference in such documents).  Such requests to the depositor should be directed in writing to its principal executive offices at Bank of America Tower, One Bryant Park, New York, New York 10036, or by telephone at (980) 388-7451.

 
GLOSSARY
 
The following capitalized terms will have the respective meanings assigned to them in this “GLOSSARY” section whenever they are used in this prospectus.
 
“401(c) Regulations” means those regulations issued by the DOL which provide guidance for the purpose of determining, in cases where insurance policies supported by an insurer’s general account are issued to or for the benefit of a Plan on or before December 31, 1998, which general account assets constitute Plan assets.
 
“Accrued Certificate Interest” means for each Distribution Date an amount equal to interest at the applicable pass-through rate accrued for a specified period (generally the most recently ended calendar month) on the outstanding Certificate Balance of such class of certificates immediately prior to such Distribution Date.
 
“Accrual Certificates” means one or more classes of certificates that may not be entitled to distributions of interest until the occurrence of certain events, such as the retirement of one or more other classes of certificates.
 
“ADA” means the Americans with Disabilities Act of 1990, as amended.
 
“Available Distribution Amount” means unless otherwise provided in the related prospectus supplement for any series of certificates and any Distribution Date the total of all payments or other collections (or advances in lieu of such collections and advances) on, under or in respect of the mortgage assets and any other assets included in the related trust fund that are available for distribution to the holders of certificates of such series on such date.
 
“Bankruptcy Code” means the U.S. Bankruptcy Code.
 
“CERCLA” means the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.
 
 
-136-

 
 
“Certificate Account” means for the trust fund one or more established and maintained on behalf of the certificateholders into which all payments and collections received or advanced with respect to the mortgage assets and other assets in the trust fund will be deposited to the extent described this prospectus and the related prospectus supplement.
 
“Certificate Balance” means the initial stated principal amount of each individual class of certificates for a given series other than real estate mortgage investment conduit residual certificates or certain classes of stripped interest certificates.
 
“Certificate Owner” means the actual purchaser of a book-entry certificate.
 
“Closing Date” means date of the initial issuance of the certificates of a given series.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Commercial Property” means office buildings, retail stores and establishments, hotels or motels, nursing homes, hospitals or other health care-related facilities, recreational vehicle and mobile home parks, warehouse facilities, mini-warehouse facilities, self-storage facilities, industrial plants, parking lots, entertainment or sports arenas, restaurants, marinas, mixed use or various other types of income-producing properties or unimproved land comprising some or all of the mortgaged properties included in the trust fund.
 
“Committee Report” means the Conference Committee Report accompanying the Tax Reform Act of 1986.
 
“Companion Class” means one or more classes of certificate where distributions of principal with respect to one or more other classes of certificates may be contingent on the specified principal payment schedule for a Controlled Amortization Class of the same series and the rate at which payments and other collections of principal on the mortgage assets in the related trust fund are received.
 
 “Controlled Amortization Class” means one or more classes of certificates where distributions of principal may be made, subject to available funds, based on a specified principal payment schedule.
 
“CPR” means the constant prepayment rate model representing an assumed constant rate of prepayment each month (expressed as an annual percentage) relative to the then outstanding principal balance of a pool of mortgage loans for the life of such mortgage loans.
 
“Cut-off Date” means the specified date initial aggregate outstanding principal balance of the related mortgage assets as of a specified date.
 
“Debt Service Coverage Ratio” means at any given time for a mortgage loan the ratio of —
 
the Net Operating Income derived from the related mortgaged property for a twelve-month period to
 
the annualized scheduled payments of principal and/or interest on the mortgage loan and any other loans senior to it that are secured by the related mortgaged property.
 
“Depositor” means Banc of America Merrill Lynch Commercial Mortgage Inc., a Delaware corporation. 
 
“Determination Date” means the date upon which that all scheduled payments on the mortgage loans in the trust fund are received or advanced by the master servicer, special servicer or other specified person will be distributed to certificateholders of the related series on the next succeeding Distribution Date.
 
“Direct Participant” means the securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations that maintain accounts with DTC.
 
“Distribution Date” means the date as described in the prospectus supplement upon which distributions on or with respect to the certificates will be made.
 
“DOL” means the United States Department of Labor.
 
“DTC” means The Depository Trust Company.
 
 
-137-

 
 
“Due Date” means a specified date upon which scheduled payments of interest, principal or both are to be made under a mortgage loan and may occur monthly, quarterly, semi-annually or annually.
 
“Due Period” means a specified time period (generally corresponding in length to the period between Distribution Dates).
 
“Equity Participation” means a provision under a mortgage loan that entitles the lender to a share of appreciation of the related mortgaged property, or profits realized from the operation or disposition of such mortgaged property or the benefit, if any, resulting from the refinancing of the mortgage loan.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
“Excess Funds” means in general that portion of the amounts distributable in respect of the certificates of any series on any Distribution Date that represent—
 
interest received or advanced on the mortgage assets in the trust fund that is in excess of the interest currently accrued on the certificates of such series; or
 
Prepayment Premiums, payments from Equity Participations or any other amounts received on the mortgage assets in the trust fund that do not constitute payments of interest or principal.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Fannie Mae” means the Federal National Mortgage Association.
 
“Farmer Mac” means the Federal Agricultural Mortgage Corporation.
 
“Freddie Mac” means the Federal Home Loan Mortgage Corporation.
 
“Garn Act” means the Garn-St Germain Depository Institutions Act of 1982.
 
“Ginnie Mae” means Governmental National Mortgage Association.
 
“Grantor Trust Certificates” means certificates in a trust treated as a grantor trust under applicable provisions of the Code.
 
“Grantor Trust Fractional Interest Certificate” means a Grantor Trust Certificate representing an undivided equitable ownership interest in the principal of the mortgage loans constituting the related Grantor Trust Fund, together with interest at a pass-through rate.
 
“Grantor Trust Fund” means that portion of the trust fund as to which no REMIC election has been made.
 
“Grantor Trust Strip Certificate” means a Grantor Trust Certificate representing ownership of all or a portion of the difference between interest paid on the mortgage loans constituting the related Grantor Trust Fund (net of normal administration fees) and interest paid to the holders of Grantor Trust Fractional Interest Certificates issued with respect to such Grantor Trust Fund.
 
“Indirect Participant” means those banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly.
 
“Insurance and Condemnation Proceeds’’ means proceeds applied to the restoration of a mortgaged property or released to the related borrower in connection with the full or partial condemnation of such mortgaged property.
 
“IRS” means the Internal Revenue Service.
 
“Issue Premium” means, in the case of a class of REMIC Regular Certificates issued at a price in excess of the stated redemption price of that class, the amount of such excess.
 
 
-138-

 
 
“Liquidation Proceeds” means all proceeds received under any hazard, title or other insurance policy (other than Insurance and Condemnation Proceeds) and all other amounts received and retained in connection with the liquidation of defaulted mortgage loans or property acquired in respect of such defaulted mortgage loans, by foreclosure or otherwise.
 
“Loan-to-Value Ratio” means for a mortgage loan the ratio (expressed as a percentage) of —
 
the then outstanding principal balance of the mortgage loan and any other loans senior that are secured by the related mortgaged property to
 
its fair market value as determined by an appraisal of such property conducted by or on behalf of the originator in connection with the origination of the mortgage loan.
 
“Lockout Period” means the period in which prepayments are prohibited under a mortgage loan.
 
“MBS” means mortgage participations, pass-through certificates or other mortgage-backed securities that may comprise the assets of the trust fund.
 
“Mortgage Asset Seller” means the entity from whom the depositor purchased a mortgage asset either directly or indirectly, included in the trust fund.  The Mortgage Asset Seller may or may not be the originator of the related mortgage loan or the issuer of the MBS and may be an affiliate of the depositor.
 
 “Mortgage Rate” means the rate at which a mortgage loan accrues interest which may be fixed over its term or that adjusts from time to time, converted at the borrower’s election from an adjustable to a fixed rate, or from a fixed to an adjustable rate.
 
“Multifamily Properties” means residential properties consisting of five or more rental or cooperatively-owned dwelling units in high-rise, mid-rise or garden apartment buildings or other residential structures comprising some or all of the mortgaged properties included in the trust fund.
 
“Net Operating Income” means for any given period, the total operating revenues derived from a mortgaged property during such period, minus the total operating expenses incurred in respect of such mortgaged property during such period other than —
 
noncash items such as depreciation and amortization;
 
capital expenditures; and
 
debt service on the related mortgage loan or on any other loans that are secured by such mortgaged property.
 
 “NCUA” means the National Credit Union Administration.
 
“Notional Amount” means the amount upon which a Stripped Interest Certificate is calculated to accrue interest which is either—
 
based on the principal balances of some or all of the mortgage assets in the related trust fund; or
 
equal to the Certificate Balances of one or more other classes of certificates of the same series.
 
“NRSRO” means a nationally recognized statistical rating organization within the meaning of Section 3(a)(62) of the Exchange Act.
 
“OCC” means the Office of the Comptroller of the Currency.
 
“OID Regulations” means the Treasury Department regulations issued under Sections 1271-1273 and 1275 of the Code.
 
 
-139-

 
 
“OTS” means the Office of Thrift Supervision.
 
“Parties in Interest” means “parties in interest” as defined in ERISA and “disqualified person” as defined in Section 4975 of the Code.
 
“Percentage Interest” means the undivided percentage interest represented by an offered certificate of a particular class which will be equal to the percentage obtained by dividing the initial principal balance or notional amount of such certificate by the initial Certificate Balance or Notional Amount of such class.
 
“Permitted Investments” means government securities and other obligations that are acceptable to each rating agency that has rated any one or more classes of certificates of the related series into which funds from the Certificate Account may be invested.
 
“Plan” means retirement plans, and on certain other employee benefit plans and arrangements, including individual retirement accounts, individual retirement annuities, Keogh plans and collective investment funds and separate accounts (and as applicable, insurance company general accounts) in which such plans, accounts or arrangements are invested that are subject to the fiduciary responsibility provisions of ERISA or Section 4975 of the Code.
 
“Plan Asset Regulations” means Section 2510.3-101 of the regulations issued by the DOL, concerning what constitutes assets of a Plan.
 
 “Pooling and Servicing Agreement” means pooling and servicing agreement or other agreement specified in the related prospectus supplement pursuant to which certificates of each series will be issued.
 
“Prepayment Assumption” means the prepayment assumption used in reporting original issue discount for each series of REMIC Regular Certificates or, if applicable, Grantor Trust Certificates, as disclosed in the related prospectus supplement.
 
“Prepayment Interest Shortfall” means the result when a prepayment on any mortgage loan is distributable to certificateholders on a particular Distribution Date, but such prepayment is not accompanied by interest thereon to the Due Date for such mortgage loan in the related Due Period, then the interest charged to the borrower (net of servicing and administrative fees) may be less than the corresponding amount of interest accrued and otherwise payable on the certificates of the related series.
 
“Prepayment Premium” means the payment of any premium or yield maintenance charge in connection with certain prepayments under a mortgage loan.
 
“PTCE 95-60” means Prohibited Transaction Class Exemption 95-60.
 
“Purchase Price” means the price as specified in the prospectus supplement at which a Mortgage Asset Seller will be required to repurchase a mortgage loan under the conditions set forth in the prospectus supplement.
 
“Rating Agency” means any NRSRO retained by the Depositor to rate any one or more classes of certificates of a particular series. 
 
“Record Date” means last business day of the month preceding the month in which the applicable Distribution Date occurs.
 
“Relief Act” means the Servicemembers Relief Act.
 
“REMIC” means a real estate mortgage investment conduit, within the meaning of, and formed in accordance with, the REMIC Provisions of the Code.
 
“REMIC Certificates” means certificates representing interests in a trust fund, or a portion of the trust fund, that the REMIC administrator will elect to have treated as REMIC.
 
“REMIC Provisions” means Sections 860A through 860G of the Code.
 
“REMIC Regular Certificates” means certificates evidencing or constituting ownership of “regular interests” in the trust fund or a designated portion of the trust under the REMIC Provisions.
 
 
-140-

 
 
“REMIC Regulations” means the Treasury Department regulations issued under the REMIC Provisions.
 
“REMIC Residual Certificateholder” means the holder of a REMIC Residual Certificate.
 
“REMIC Residual Certificates” means certificates evidencing or constituting ownership of “residual interests” in the trust or a designated portion of the trust under the REMIC Provisions.
 
“REO Properties” means mortgaged properties acquired on behalf of the trust fund through foreclosure, deed-in-lieu of foreclosure or otherwise.
 
“SEC” means the U.S. Securities and Exchange Commission.
 
“Securities Act” means the Securities Act of 2933, as amended.
 
“Senior Certificates” means certificates in a given series that are senior to one or more other classes of certificates in entitlement to certain distributions;
 
“SMMEA” means the Secondary Mortgage Market Enhancement Act of 1984, as amended.
 
“SPA” means the standard prepayment assumption representing an assumed variable rate of prepayment each month (expressed as an annual percentage) relative to the then outstanding principal balance of a pool of mortgage loans,.
 
“Stripped Interest Certificate” means those certificates entitled to distributions of interest, with disproportionate, nominal or no distributions of principal.
 
“Stripped Principal Certificate” means entitled to distributions of principal, with disproportionate, nominal or no distributions of interest;
 
“Subordinate Certificates” means certificates in a given series that are subordinate to one or more other classes of certificates in entitlement to certain distributions;
 
“Tiered REMIC” means designated portions of the trust fund treated as two or more REMICs.
 
“Treasury Department” means the United States Treasury Department.
 
“UCC” means for any jurisdiction the Uniform Commercial Code as in effect in that jurisdiction.
 
“U.S. Person” means—
 
a citizen or resident of the United States;
 
a corporation or partnership created or organized in, or under the laws of, the United States, any state or the District of Columbia, including an entity treated as a corporation or partnership for federal income tax purposes;
 
an estate whose income is subject to United States federal income tax purposes regardless of the source of its income; or
 
a trust as to which—
 
1. a court in the United States is able to exercise primary supervision over the administration of the trust, and
 
2. one or more United States persons have the authority to control all substantial decisions of the trust.
 
In addition, to the extent provided in the Treasury Department regulations, a trust will be a U.S. Person if it was in existence on August 20, 1996 and it elected to be treated as a U.S. Person.
 
“Voting Rights” means the voting rights evidenced by each series of certificates.
 
 
-141-

 
 
“Warranting Party” means a party that makes certain representations and warranties regarding the mortgage loans.
 
 
 
 
 
 
 
-142-

 
 
 
VERSION 2
[Healthcare Concentration]
 
Prospectus
 
Banc of America Merrill Lynch Commercial Mortgage Inc.
Depositor
 
Bank of America, National Association
Sponsor
 
Mortgage Pass-Through Certificates
 

Consider carefully the risk factors beginning on page [9] in this prospectus.
 
Neither the certificates nor the underlying mortgage loans are insured by any governmental agency.
 
The certificates will represent interests only in the related issuing entity and will not represent interests in or obligations of the depositor, the sponsor or any of their affiliates, including Bank of America Corporation.
 
This prospectus may be used to offer and sell any series of certificates only if accompanied by the prospectus supplement for that series.
 
 
                Each Issuing Entity—
 
  will issue a series of mortgage pass-through certificates, which will consist of one or more classes of certificates; and
 
  may own—
 
  multifamily and commercial mortgage loans; and
 
  mortgage-backed securities.
 
                Each Pool of Mortgage Loans—
 
  will be sold to the related issuing entity by the depositor, who will have in turn purchased the mortgage loans from the sponsor;
 
  will be underwritten to the standards described in this prospectus or the accompanying prospectus supplement; and
 
  will be serviced by one or more servicers affiliated or unaffiliated with the depositor.
 
                Each Series of Certificates—
 
  will represent interests in the issuing entity and will be paid only from the trust assets;
 
  provide for the accrual of interest based on a fixed, variable or adjustable interest rate;
 
  will receive interest and principal payments based on the rate of payment of principal and the timing of receipt of payments on the mortgage loans;
 
  may be offered through underwriters, which may include Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of the depositor;
 
  will not be listed on any securities exchange; and
 
  may provide credit support by “subordinating” certain classes to other classes of certificates; any subordinate classes will be entitled to payment subject to the payment of more senior classes and will bear losses before more senior classes.
 
                The Certificateholders—
 
  may be entitled to the benefit of one or more of the following other types of credit support or derivative instruments as described in this prospectus and in more detail in the accompanying prospectus supplement:  guaranteed investment contracts, insurance, guarantees, letters of credit, certificate insurance, surety bonds, reserve funds, cash collateral accounts, pool insurance policies, special hazard insurance policies, mortgagor bankruptcy bonds, cross-collateralization, overcollateralization, excess interest and cash flow agreements.
 
 
Neither the SEC nor any state securities commission has approved these certificates or determined that this prospectus is accurate or complete.   Any representation to the contrary is a criminal offense.
 
[_____________] [__], 2011

 
 
 

 

 
 
For more information
 
Banc of America Merrill Lynch Commercial Mortgage Inc. has filed with the SEC additional registration materials relating to the certificates.  You may read and copy any of these materials at the SEC’s Public Reference Room at the following location:
 
SEC Public Reference Section
100 F Street, N.E.
Washington, D.C. 20549
 
You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information that has been filed electronically with the SEC.  The Internet address is http://www.sec.gov.
 
You may also contact Banc of America Merrill Lynch Commercial Mortgage Inc. in writing at Bank of America Tower, One Bryant Park, New York, New York 10036, or by telephone at (980) 388-7451.

See also the sections captioned “Available Information” and “Incorporation of Certain Information by Reference” appearing at the end of this prospectus.
 

 
TABLE OF CONTENTS
 
Page
SUMMARY OF PROSPECTUS
1
RISK FACTORS
9
The Limited Liquidity of Your Certificates May Have an Adverse Impact on Your Ability to Sell Your Certificates
9
Book Entry System for Certain Classes of Certificates May Decrease Liquidity and Delay Payment
9
Servicing Transfer Following Event of Default May Result in Payment Delays or Losses
10
The Nature of Ratings Are Limited and Will Not Guarantee that You Will Receive Any Projected Return on Your Certificates
10
The Ratings of Your Certificates May Be Lowered or Withdrawn, or Your Certificates May Receive an Unsolicited Rating, Which May Adversely Affect the Liquidity or Market Value of Your Certificates
11
The Limited Assets of Each Trust May Adversely Impact Your Ability To Recover Your Investment in the Event of Loss on the Underlying Mortgage Assets
11
The Limited Credit Support for Your Certificates May Not Be Sufficient To Prevent Loss on Your Certificates
12
Special Powers of the FDIC in the Event of Insolvency of the Sponsor Could Delay or Reduce Distributions on the Certificates
12
Insolvency of the Depositor May Delay or Reduce Collections on Mortgage Loans
14
Distributions on Your Certificates and Your Yield May Be Difficult To Predict
14
Prepayments of the Underlying Mortgage Loans Will Affect the Average Life of Your Certificates and Your Yield
14
Certificates Purchased at a Premium or a Discount Will Be Sensitive To the Rate of Principal Payment
17
Other Factors Affecting Yield, Weighted Average Life and Maturity
17
Prepayment Models Are Illustrative Only and Do Not Predict Actual Weighted Average Life and Maturity
19
Timing of Prepayments on the Mortgage Loans May Result in Interest Shortfalls on the Certificates
20
Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans
20
Exercise of Rights by Certain Certificateholders May Be Adverse to Other Certificateholders
23
Borrower Defaults May Adversely Affect Your Yield
23
The Borrower’s Form of Entity May Cause Special Risks
24
Borrower and Related Party Bankruptcy Proceedings Entail Certain Risks
25
Tenancies in Common May Hinder or Delay Recovery
25
Mortgaged Properties with Tenants Present Special Risks
26
Mortgaged Properties with Multiple Tenants May Increase Reletting Costs and Reduce Cash Flow
27
 
 
-i-

 
 
Tenant Bankruptcy Adversely Affects Property Performance
27
Risks Related to Enforceability
27
Potential Absence of Attornment Provisions Entails Risks
28
Risks Associated with Commercial Lending May Be Different than those for Residential Lending
28
Poor Property Management Will Lower the Performance of the Related Mortgaged Property
29
Particular Property Types Present Special Risks
30
The Operation of the Mortgaged Property upon Foreclosure of the Mortgage Loan May Affect Tax Status
35
One Action Rules May Limit Remedies
35
Property Value May Be Adversely Affected Even When Current Operating Income Is Not
35
Leasehold Interests Are Subject to Terms of the Ground Lease
36
Collateral Securing Cooperative Loans May Diminish in Value
36
Condominium Ownership May Limit Use and Improvements
37
Zoning Laws and Use Restrictions May Affect the Operation of a Mortgaged Property or the Ability to Repair or Restore a Mortgaged Property
37
Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses
37
Appraisals Are Limited in Reflecting the Value of a Mortgaged Property
38
Risks Relating to Costs of Compliance with Applicable Laws and Regulations
38
Additional Compensation to the Servicer Will Affect Your Right To Receive Distributions
38
Liquidity for Certificates May Be Limited
38
Mortgage Loan Repayments and Prepayments Will Affect Payment
38
Grace Periods Under the Mortgage Loans May Impact the Master Servicer’s Obligation To Advance
39
Risks to the Mortgaged Properties Relating to Terrorist Attacks and Foreign Conflicts
39
Inclusion of Delinquent Mortgage Loans in a Mortgage Asset Pool
39
Changes to REMIC Restrictions on Loan Modifications May Impact an Investment in the Certificates
39
Health Care-Related Properties May Have Certain Risks Related to Governmental Subsidy and Government Regulation
40
PROSPECTUS SUPPLEMENT
41
CAPITALIZED TERMS USED IN THIS PROSPECTUS
41
DESCRIPTION OF THE TRUST FUNDS
42
General
42
Mortgage Loans
42
MBS
47
Certificate Accounts
49
Credit Support
49
Cash Flow Agreements
49
YIELD AND MATURITY CONSIDERATIONS
49
 
 
 
-ii-

 
 
General
49
Pass-Through Rate
49
Payment Delays
50
Certain Shortfalls in Collections of Interest
50
Yield and Prepayment Considerations
50
Weighted Average Life and Maturity
52
Other Factors Affecting Yield, Weighted Average Life and Maturity
52
BANK OF AMERICA, NATIONAL ASSOCIATION, AS SPONSOR
54
Other Originators
55
THE DEPOSITOR
55
THE MORTGAGE LOAN PROGRAM
56
Commercial Mortgage Loan Underwriting
56
Representations and Warranties
60
Bank of America, National Association, as servicer
60
General
60
Special Servicing
61
Other Servicers
63
DESCRIPTION OF THE CERTIFICATES
63
General
63
Distributions
64
Distributions of Interest on the Certificates
64
Distributions of Principal on the Certificates
65
Distributions on the Certificates Concerning Prepayment Premiums or Concerning Equity Participations
66
Allocation of Losses and Shortfalls
66
Advances in Respect of Delinquencies
66
Reports to Certificateholders
67
Voting Rights
68
Termination
68
Book-Entry Registration and Definitive Certificates
69
THE POOLING AND SERVICING AGREEMENTS
70
General
70
Assignment of Mortgage Loans; Repurchases
71
Representations and Warranties; Repurchases
72
Collection and Other Servicing Procedures
73
Sub-Servicers
75
Certificate Account
75
Modifications, Waivers and Amendments of Mortgage Loans
78
Realization Upon Defaulted Mortgage Loans
78
Hazard Insurance Policies
80
Due-on-Sale and Due-on-Encumbrance Provisions
81
Servicing Compensation and Payment of Expenses
81
Evidence as to Compliance
82
Certain Matters Regarding the Master Servicer, the Special Servicer, the REMIC Administrator and the Depositor
82
Events of Default
83
Rights Upon Event of Default
84
Amendment
85
List of Certificateholders
86
The Trustee
86
Duties of the Trustee
86
 
 
 
-iii-

 
 
Certain Matters Regarding the Trustee
86
Resignation and Removal of the Trustee
87
DESCRIPTION OF CREDIT SUPPORT
87
General
87
Subordinate Certificates
88
Insurance or Guarantees Concerning the Mortgage Loans
88
Letter of Credit
89
Certificate Insurance and Surety Bonds
89
Reserve Funds
89
Cash Collateral Account
90
Pool Insurance Policy
90
Special Hazard Insurance Policy
91
Mortgagor Bankruptcy Bond
92
Cross Collateralization
92
Overcollateralization
92
Excess Interest
92
Cash Flow Agreements
92
Credit Support with Respect to MBS
92
CASH FLOW AGREEMENTS
93
Guaranteed Investment Contracts
93
Yield Maintenance Agreements
93
Swap Agreements
93
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
94
General
94
Types of Mortgage Instruments
94
Leases and Rents
94
Personalty
95
Foreclosure
95
Bankruptcy Laws
99
Environmental Considerations
100
Due-on-Sale and Due-on-Encumbrance Provisions
102
Junior Liens; Rights of Holders of Senior Liens
102
Subordinate Financing
103
Default Interest and Limitations on Prepayments
103
Applicability of Usury Laws
103
Certain Laws and Regulations
104
Americans with Disabilities Act
104
Servicemembers Civil Relief Act
104
Forfeiture for Drug and Money Laundering Violations
105
Federal Deposit Insurance Act; Commercial Mortgage Loan Servicing
105
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
106
General
106
REMICs
106
Grantor Trust Funds
123
STATE AND OTHER TAX CONSEQUENCES
131
CERTAIN ERISA CONSIDERATIONS
131
General
131
Plan Asset Regulations
132
Insurance Company General Accounts
133
Consultation With Counsel
133
Tax Exempt Investors
133
LEGAL INVESTMENT
134
USE OF PROCEEDS
134
METHOD OF DISTRIBUTION
134
LEGAL MATTERS
136
 
 
 
-iv-

 
 
RATING
136
AVAILABLE INFORMATION
136
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
137
GLOSSARY
137
 

 
-v-

 

 
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE APPLICABLE PROSPECTUS SUPPLEMENT
 
We provide information about the certificates in two separate documents that progressively provide more detail.  These documents are:
 
●  
this prospectus, which provides general information, some of which may not apply to a particular series of certificates, including your series; and
 
●  
the prospectus supplement for a series of certificates, which will describe the specific terms of that series of certificates.
 
You should rely only on the information provided in this prospectus and the applicable prospectus supplement, including the information incorporated by reference.  We have not authorized anyone to provide you with different information.  We are not offering the certificates in any state where the offer is not permitted.
 
We have included cross-references to captions in these materials which you can find related discussions that we believe will enhance your understanding of the topic being discussed.  The table of contents of this prospectus and the table of contents included in the applicable prospectus supplement list the pages on which these captions are located.
 
From time to time we use capitalized terms in this prospectus.  We can find the definitions of capitalized terms that are used in this prospectus on the pages indicated under the caption “Glossary” beginning on page [__] in this prospectus.
 
In this prospectus, the term “you” refers to a prospective investor in certificates, and the terms “Depositor,” “we,” “us” and “our” refer to Banc of America Merrill Lynch Commercial Mortgage Inc.


 
If you require additional information, the mailing address of our principal executive offices is Banc of America Merrill Lynch Commercial Mortgage Inc., Bank of America Tower, One Bryant Park, New York, New York 10036, and the telephone number is [(980) 388-7451].  For other means of acquiring additional information about us or a series of certificates, see “INCORPORATION OF CERTAIN INFORMATION BY REFERENCE” beginning on page [__] of this prospectus.
 
 


 

 
  -i-
 

 

 
SUMMARY OF PROSPECTUS
 
This summary highlights selected information from this prospectus.  It does not contain all the information you need to consider in making your investment decision.  You should carefully review this prospectus and the related prospectus supplement in their entirety before making any investment in the certificates of any series.  As used in this prospectus, “you” refers to a prospective investor in certificates, and “we” refers to the depositor, Banc of America Merrill Lynch Commercial Mortgage Inc.  A “GLOSSARY” appears at the end of this prospectus.
 
Securities Offered
Mortgage pass-through certificates.
 
Sponsor(s)
Bank of America, National Association will be a sponsor of each series of certificates.  There may also be one or more other sponsors with respect to a series of certificates as described in the related prospectus supplement.  Any such additional sponsor may or may not be affiliated with Bank of America, National Association.  The mortgage loans either will be originated by the related sponsor or purchased by the sponsor from various entities that originated the mortgage loans either to the sponsor’s underwriting standards or to the underwriting standards described in the related prospectus supplement.  Each sponsor will sell the mortgage loans to the depositor on the closing date specified in the related prospectus supplement by means of a mortgage loan purchase agreement between the sponsor and the depositor.
 
Depositor
Banc of America Merrill Lynch Commercial Mortgage Inc., a Delaware corporation and a subsidiary of Bank of America, National Association, has its principal executive offices at Bank of America Tower, One Bryant Park, New York, New York 10036, and its telephone number is (980) 388-7451.
 
Issuing Entity
The issuing entity for each series of certificates will be a common law trust formed for such series by the depositor.
 
Trustee
The trustee for each series of certificates will be named in the related prospectus supplement.
 
Master Servicer
If the trust includes mortgage loans, the master servicer for the corresponding series of certificates will be named in the prospectus supplement.
 
Special Servicer
If the trust includes mortgage loans, the special servicer for the corresponding series of certificates will be named, or the circumstances under which a special servicer may be appointed, will be described in the prospectus supplement.
 
Other Servicers
In addition to the master servicer and the special servicer, one or more other servicers may perform servicing functions as sub-servicers for the master servicer or special servicer or otherwise as described in the related prospectus supplement.
 
MBS Administrator
If the trust includes mortgage-backed securities, the entity responsible for administering the mortgage-backed securities will be named in the prospectus supplement.
 
REMIC Administrator
The person responsible for the various tax-related administration duties for a series of certificates concerning real estate mortgage investment conduits will be named in the prospectus supplement.
 
 
 
 
 

 
 
 
 
   
   
The Mortgage Loans
Each series of certificates will, in general, be backed by a pool of mortgage loans referred to as a mortgage asset pool secured by first or junior liens on—
 
 
  residential properties consisting of five or more rental or cooperatively-owned dwelling units in high-rise, mid-rise or garden apartment buildings or other residential structures; or
 
 
  office buildings, retail stores, hotels or motels, nursing homes, hospitals or other health care-related facilities (as described immediately below), recreational vehicle and mobile home parks, warehouse facilities, mini-warehouse facilities, self-storage facilities, industrial plants, parking lots, entertainment or sports arenas, restaurants, marinas, mixed use or various other types of income-producing properties or unimproved land.
   
The health care-related facilities described in the second bulleted paragraph above may include—
 
  facilities providing acute medical care services;
 
  skilled nursing facilities;
 
  nursing homes;
 
  congregate care homes;
 
  assisted living facilities; and
 
  senior and age restricted housing.
 
 
However, no one of the following types of properties will be overly-represented in the trust at the time the trust is formed:  (1) restaurants; (2) entertainment or sports arenas; (3) marinas; or (4) nursing homes, hospitals or other health care-related facilities.
 
 
The mortgage loans will not be guaranteed or insured by Banc of America Merrill Lynch Commercial Mortgage Inc. or any of its affiliates or, unless otherwise provided in the prospectus supplement, by any governmental agency or by any other person.
 
 
If specified in the prospectus supplement, some mortgage loans may be delinquent as of the date the trust is formed.
 
 
As described in the prospectus supplement, a mortgage loan may—
 
 
  provide for no accrual of interest or for accrual of interest at an interest rate that is fixed over its term or that adjusts from time to time, or that may be converted at the borrower’s election from an adjustable to a fixed mortgage rate, or from a fixed to an adjustable mortgage rate;
 
 
  provide for level payments to maturity or for payments that adjust from time to time to accommodate changes in the mortgage rate or to reflect the occurrence of certain events, and may permit negative amortization;
 
 
 
-2-

 
 
 
 
  be fully amortizing or may be partially amortizing or nonamortizing, with a balloon payment due on its stated maturity date;
 
 
  may permit the negative amortization or deferral of accrued interest;
 
 
  may prohibit over its term or for a certain period prepayments and/or require payment of a premium or a yield maintenance payment in connection with certain prepayments;
 
 
  may permit defeasance and the release of real property collateral in connection with that defeasance;
 
 
  provide for payments of principal, interest or both, on due dates that occur monthly, quarterly, semi-annually or at any other interval as specified in the prospectus supplement; and
 
 
  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 10% or more of the related mortgage asset pool, by balance.
 
 
Each mortgage loan will have had an original term to maturity of not more than 40 years.  No mortgage loan will have been originated by Banc of America Merrill Lynch Commercial Mortgage Inc., although one of its affiliates may have originated some of the mortgage loans.
 
 
If any mortgage loan, or group of related mortgage loans, involves unusual credit risk, financial statements or other financial information concerning the related mortgaged property will be included in the related prospectus supplement.
 
 
As described in the prospectus supplement, the trust may also consist of mortgage participations, mortgage pass-through certificates and/or other mortgage-backed securities that evidence an interest in, or are secured by a pledge of, one or more mortgage loans similar to the other mortgage loans in the trust and which may or may not be issued, insured or guaranteed by the United States or any governmental agency.
 
Significant Originators
In addition to the sponsor(s) or their affiliates, one or more other persons may have originated the mortgage loans backing the certificates of a particular series.  The related prospectus supplement will describe any such originator with respect to mortgage loans representing 10% or more (by principal balance as of the applicable cut-off date) of the mortgage loans backing such series.
 
Significant Obligors
The related prospectus supplement also will identify any significant obligor or mortgaged property representing 10% or more (by principal
 
 
-3-

 
 
 
 
 
 
        balance as of the applicable cut-off date) of the mortgage loans backing the related series of certificates.
 
The Certificates
Each series of certificates will be issued in one or more classes pursuant to a pooling and servicing agreement or other agreement specified in the prospectus supplement and will represent in total the entire beneficial ownership interest in the trust.
 
 
As described in the prospectus supplement, the certificates of each series may consist of one or more classes that—
 
 
  are senior or subordinate to one or more other classes of certificates in entitlement to certain distributions on the certificates;
 
 
  are “stripped principal certificates” entitled to distributions of principal, with disproportionate, nominal or no distributions of interest;
 
 
  are “stripped interest certificates” entitled to distributions of interest, with disproportionate, nominal or no distributions of principal;
 
 
  provide for distributions of interest or principal that commence only after the occurrence of certain events, such as the retirement of one or more other classes of certificates of that series;
 
 
  provide for distributions of principal to be made, from time to time or for designated periods, at a rate that is faster (and, in some cases, substantially faster) or slower (and, in some cases, substantially slower) than the rate at which payments or other collections of principal are received on the mortgage assets in the trust;
 
 
  provide for distributions based solely or primarily on specified mortgage assets or a specified group of mortgage assets in the related trust fund;
 
 
  provide for distributions of principal to be made, subject to available funds, based on a specified principal payment schedule or other methodology; or
 
 
  provide for distribution based on collections on the mortgage assets in the trust attributable to prepayment premiums, yield maintenance payments or equity participations.
 
 
If specified in the prospectus supplement, a series of certificates may include one or more “controlled amortization classes“, which will entitle the holders to receive principal distributions according to a specified principal payment schedule.  Although prepayment risk cannot be eliminated entirely for any class of certificates, a controlled amortization class will generally provide a relatively stable cash flow so long as the actual rate of prepayment on the mortgage loans in the trust remains relatively constant at the rate of prepayment used to establish the specific principal payment schedule for those certificates.  Prepayment risk with respect to a given mortgage asset pool does not disappear, however, and the stability afforded to a controlled
 
 
-4-

 
 
 
 
                amortization class comes at the expense of one or more other classes of the same series.
 
 
Each class of certificates, other than certain classes of stripped interest certificates and certain classes of REMIC residual certificates will have an initial stated principal amount.  Each class of certificates, other than certain classes of stripped principal certificates and certain classes of REMIC residual certificates, will accrue interest on its certificate balance or, in the case of certain classes of stripped interest certificates, on a notional amount, based on a pass-through rate which may be fixed, variable or adjustable.  The prospectus supplement will specify the certificate balance, notional amount and/or pass-through rate for each class of certificates.
   
Distributions of Interest
   on the Certificates
 
Interest on each class of certificates (other than certain classes of stripped principal certificates and certain classes of REMIC residual certificates) of each series will accrue at the applicable pass-through rate on the certificate balance and will be paid on a distribution date.  However, in the case of certain classes of stripped interest certificates, the notional amount outstanding from time to time will be paid to certificateholders as provided in the prospectus supplement on a specified distribution date.
 
 
Distributions of interest concerning one or more classes of certificates may not commence until the occurrence of certain events, such as the retirement of one or more other classes of certificates.  Interest accrued concerning a class of accrual certificates prior to the occurrence of such an event will either be added to the certificate balance or otherwise deferred as described in the prospectus supplement.  Distributions of interest concerning one or more classes of certificates may be reduced to the extent of certain delinquencies, losses and other contingencies described in this prospectus and in the prospectus supplement.
   
Distributions of Principal
   of the Certificates
 
Each class of certificates of each series (other than certain classes of stripped interest certificates and certain classes of REMIC residual certificates) will have a certificate balance.  The certificate balance of a class of certificates outstanding from time to time will represent the maximum amount that the holders are then entitled to receive in respect of principal from future cash flow on the assets in the trust.  The initial total certificate balance of all classes of a series of certificates will not be greater than the outstanding principal balance of the related mortgage assets as of a specified cut-off date, after application of scheduled payments due on or before that date, whether or not received.  As described in the prospectus supplement, distributions of principal with respect to the related series of certificates will be made on each distribution date to the holders of the class certificates of the series then entitled until the certificate balances of those certificates have been reduced to zero.  Distributions of principal with respect to one or more classes of certificates—
 
 
  may be made at a rate that is faster (and, in some cases, substantially faster) or slower (and, in some cases, substantially slower) than the rate at which payments or other collections of principal are received on the assets in the trust;
 
-5-

 
 
 
 
 
 
  may not commence until the occurrence of certain events, such as the retirement of one or more other classes of certificates of the same series;
 
 
  may be made, subject to certain limitations, based on a specified principal payment schedule; or
 
 
  may be contingent on the specified principal payment schedule for another class of the same series and the rate at which payments and other collections of principal on the mortgage assets in the trust are received.  Unless otherwise specified in the prospectus supplement, distributions of principal of any class of certificates will be made on a pro rata basis among all of the certificates of that class.
   
Credit Support and Cash
   Flow Agreements
 
If specified in the prospectus supplement, partial or full protection against certain defaults and losses on the assets in the trust may be provided to one or more classes of certificates by (1) subordination of one or more other classes of certificates to classes in the same series, or by (2) one or more of the following other types of credit support:  limited guarantees, financial guaranty insurance policies, surety bonds, letters of credit, mortgage pool insurance policies, reserve funds, cross collateralization, overcollateralization and excess interest. If so provided in the prospectus supplement, the trust may include:
 
 
  guaranteed investment contracts;
 
 
  insurance, guarantees;
 
 
  letters of credit;
 
 
  certificate insurance;
 
 
  surety bonds;
 
 
  reserve funds, cash collateral accounts;
 
 
  pool insurance policies;
 
 
  special hazard insurance policies;
 
 
  mortgagor bankruptcy bonds;
 
 
  cross-collateralization;
 
 
  overcollateralization;
 
 
  excess interest; and
 
 
  cash flow agreements.
 
 
The above types of credit support and cash flow agreements are described in more detail in this prospectus under “DESCRIPTION OF CREDIT SUPPORT and “CASH FLOW AGREEMENTS”.
 
 
 
-6-

 
 
 
 
Certain relevant information regarding any applicable credit support or cash flow agreement will be set forth in the prospectus supplement for a series of certificates.
 
Advances
As specified in the prospectus supplement, if the trust includes mortgage loans, the master servicer, the special servicer, the trustee, any provider of credit support, and/or another specified person may be obligated to make, or have the option of making, certain advances concerning delinquent scheduled payments of principal and/or interest on mortgage loans.  Any advances made concerning a particular mortgage loan will be reimbursable from subsequent recoveries relating to the particular mortgage loan and as described in the prospectus supplement.  If specified in the prospectus supplement, any entity making  advances may be entitled to receive interest for a specified period during which those advances are outstanding, payable from amounts in the trust.  If the trust includes mortgage-backed securities,
 
 
any comparable advancing obligation of a party to the related pooling and servicing agreement, or of a party to the related mortgage-backed securities agreement, will be described in the prospectus supplement.
 
Optional Termination
If specified in the prospectus supplement, a series of certificates may be subject to optional early termination through the repurchase of the mortgage assets in the trust.  If provided in the related prospectus supplement, upon the reduction of the certificate balance of a specified class or classes of certificates by a specified percentage or amount, a specified party may be authorized or required to solicit bids for the purchase of all of the assets of the trust, or of a sufficient portion of those assets to retire that class or classes.
   
Material Federal Income
   Tax Consequences
The certificates of each series will constitute or evidence ownership of either—
 
 
  “regular interests” and “residual interests” in the trust, or a designated portion of the trust, treated as a REMIC under Sections 860A through 860G of the Code; or
 
 
  certificates in a trust treated as a grantor trust under applicable provisions of the Code.
 
 
If one or more REMIC elections are made, certificates that are regular interests will be treated as newly issued debt instruments of the REMIC and must be accounted for under an accrual method of accounting.  Certificates that are residual interests are not treated as debt instruments, but rather must be treated according to the rules prescribed in the Internal Revenue Code for REMIC residual interests, including restrictions on transfer and the reporting of net income or loss of the REMIC, including the possibility of a holder of such certificate having taxable income without a corresponding distribution of cash to pay taxes currently due.
   
If the certificates represent interests in a grantor trust, beneficial owners of certificates generally are treated as owning an undivided beneficial interest in the mortgage loans that are assets of the trust.
 
 
-7-

 
 
 
Investors are advised to consult their tax advisors and to review “MATERIAL FEDERAL INCOME TAX CONSEQUENCES” in this prospectus and in the prospectus supplement.
 
Certain ERISA Considerations
Fiduciaries of retirement plans and certain other employee benefit plans and arrangements, including individual retirement accounts, individual retirement annuities, Keogh plans, and collective investment funds and separate individual retirement accounts in which such plans, accounts, annuities or arrangements are invested, that are subject to the Employee Retirement Income Security Act of 1974, as amended, Section 4975 of the Internal Revenue Code of 1986, or any materially similar provisions of federal, state or local law should review with their legal advisors whether the purchase or holding of certificates could give rise to a transaction that is prohibited.
 
Legal Investment
If so specified in the prospectus supplement, certain classes of certificates will constitute “mortgage related securities” for purposes of
 
 
the Secondary Mortgage Market Enhancement Act of 1984, as amended.  If your investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities, then you may be subject to restrictions on investment in the certificates.  You should consult with your own legal advisors for assistance in determining the suitability of and consequences to you of the purchase, ownership and sale of the certificates.
 
 
See “LEGAL INVESTMENT” in this prospectus.
 
Rating
At their respective dates of issuance, each class of certificates will be rated not lower than investment grade by one or more nationally recognized statistical rating organizations.

 
 
 
-8-

 

 
RISK FACTORS
 
In considering an investment in the certificates of any series, you should consider carefully the following risk factors and the risk factors in the prospectus supplement.
 
The Limited Liquidity of Your Certificates May Have an Adverse Impact on Your Ability to Sell Your Certificates
 
The certificates of any series may have limited or no liquidity.  You may be forced to bear the risk of investing in the certificates for an indefinite period of time.  In addition, you may have no redemption rights, and the certificates are subject to early retirement only under certain circumstances.
 
Lack of a Secondary Market May Limit the Liquidity of Your Certificate.  We cannot assure you that a secondary market for the certificates will develop or, if it does develop, that it will provide certificateholders with liquidity of investment or that it will continue for as long as the certificates remain outstanding.
 
The prospectus supplement may indicate that an underwriter intends to establish a secondary market in the certificates, although no underwriter will be obligated to do so.  Any secondary market may provide less liquidity to investors than any comparable market for securities relating to single-family mortgage loans.  Unless specified in the prospectus supplement, the certificates will not be listed on any securities exchange.
 
The Limited Nature of Ongoing Information Regarding Your Certificate May Adversely Affect Liquidity.  The primary source of ongoing information regarding the certificates, including information regarding the status of the related mortgage assets and any credit support for the certificates, will be the periodic reports to certificateholders to be delivered pursuant to the related pooling and servicing agreement.
 
We cannot assure you that any additional ongoing information regarding the certificates will be available through any other source.  The limited nature of the information concerning a series of certificates may adversely affect liquidity, even if a secondary market for the certificates does develop.
 
The Liquidity of Your Certificate May Be Affected by External Sources Including Interest Rate Movement.  If a secondary market does develop for the certificates, the market value of the certificates will be affected by several factors, including—
 
perceived liquidity;
 
the anticipated cash flow (which may vary widely depending upon the prepayment and default assumptions concerning the underlying mortgage loans); and
 
prevailing interest rates.
 
The price payable at any given time for certain classes of certificates may be extremely sensitive to small fluctuations in prevailing interest rates.  The relative change in price for a certificate in response to an upward or downward movement in prevailing interest rates may not necessarily equal the relative change in price for the certificate in response to an equal but opposite movement in those rates.  Therefore, the sale of certificates by a holder in any secondary market that may develop may be at a discount from the price paid by the holder.  We are not aware of any source through which price information about the certificates will be generally available on an ongoing basis.
 
Book Entry System for Certain Classes of Certificates May Decrease Liquidity and Delay Payment
 
Because transactions in the classes of book entry certificates of any series generally can be effected only through DTC, DTC participants and indirect DTC participants:
 
 
-9-

 
 
your ability to pledge book entry certificates to someone who does not participate in the DTC system, or to otherwise take action relating to your book entry certificates, may be limited due to the lack of a physical certificate;
 
you may experience delays in your receipt of payments on book entry certificates because distributions will be made by the trustee, or a paying agent on behalf of the trustee, to Cede & Co., as nominee for DTC, rather than directly to you; and
 
you may experience delays in your receipt of payments on book-entry certificates in the event of misapplication of payments by DTC, DTC participants or indirect DTC participants or bankruptcy or insolvency of those entities and your recourse will be limited to your remedies against those entities.
 
Servicing Transfer Following Event of Default May Result in Payment Delays or Losses
 
Following the occurrence of an event of default under a pooling and servicing agreement, the trustee for the related series may, in its discretion or pursuant to direction from certificateholders, remove the defaulting master servicer or special servicer and succeed to its responsibilities, or may petition a court to appoint a successor master servicer or special servicer.  The trustee or the successor master servicer or special servicer will be entitled to reimbursement of its costs of effecting the servicing transfer from the predecessor master servicer or special servicer, or from the assets of the related trust if the predecessor fails to pay.  In the event that reimbursement to the trustee or the successor master servicer or special servicer is made from trust assets, the resulting shortfall will be borne by holders of the related certificates, to the extent not covered by any applicable credit support.  In addition, during the replacement process or for some time thereafter, mortgagors of the related mortgage loans may delay making their monthly payments or may inadvertently continue making payments to the predecessor master servicer or special servicer, potentially resulting in delays in distributions on the related certificates.
 
The Nature of Ratings Are Limited and Will Not Guarantee that You Will Receive Any Projected Return on Your Certificates
 
Any credit rating assigned by a rating agency to a class of certificates will reflect only its assessment of the likelihood that holders of the certificates will receive payments to which the certificateholders are entitled under the related pooling and servicing agreement.  Such rating will not constitute an assessment of the likelihood that—
 
principal prepayments on the related mortgage loans will be made;
 
the degree to which the rate of such prepayments might differ from that originally anticipated; or
 
the likelihood of early optional termination of the trust.
 
Any rating will not address the possibility that prepayment of the mortgage loans at a higher or lower rate than anticipated by an investor may cause such investor to experience a lower than anticipated yield or that an investor purchasing a certificate at a significant premium might fail to recover its initial investment under certain prepayment scenarios.  Therefore, a rating assigned by a rating agency does not guarantee or ensure the realization of any anticipated yield on a class of certificates.
 
The amount, type and nature of credit support given a series of certificates will be determined on the basis of criteria established by each rating agency rating classes of the certificates of such series.  Those criteria are sometimes based upon an actuarial analysis of the behavior of mortgage loans in a larger group.  There can be no assurance that the historical data supporting any such actuarial analysis will accurately reflect future experience, or that the data derived from a large pool of mortgage loans will accurately predict the delinquency, foreclosure or loss experience of any particular pool of mortgage loans.  In other cases, such criteria may be based upon determinations of the values of the properties that provide security for the mortgage loans.  However, we cannot assure you that those values will not decline in the future.  As a result, the credit support required in respect of the certificates of any series may be insufficient to fully protect the holders of such certificates from losses on the related mortgage asset pool.
 
 
-10-

 
 
The Ratings of Your Certificates May Be Lowered or Withdrawn, or Your Certificates May Receive an Unsolicited Rating, Which May Adversely Affect the Liquidity or Market Value of Your Certificates
 
Unless otherwise provided in the prospectus supplement (and in any event as may be required by the applicable regulations associated with the depositor’s use of Form S-3 for the registration statement pursuant to which the offering of the offered certificates is being made hereby), it is a condition to the issuance of the offered certificates that they be rated investment grade (i.e., in one of the four highest rating categories) by at least one nationally recognized statistical rating organization.  A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time.  No person is obligated to maintain the rating on any certificate, and accordingly, there can be no assurance to you that the ratings assigned to any certificate on the date on which the certificate is originally issued will not be lowered or withdrawn by a rating agency at any time thereafter.  The rating(s) of any series of certificates by any applicable rating agency may be lowered following the initial issuance of the certificates as a result of the downgrading of the obligations of any applicable credit support provider, or as a result of losses on the related mortgage loans in excess of the levels contemplated by the rating agency at the time of its initial rating analysis.  In addition, the Securities and Exchange Commission may determine that any rating agencies retained by the depositor to provide a security rating on any class of any series of offered certificates no longer qualifies as a “nationally recognized statistical rating organization” or is no longer qualified to rate any such class of offered certificates.  Neither the depositor nor the sponsor nor any of their respective affiliates will have any obligation to replace or supplement any credit support, or to take any other action to maintain any rating(s) of any series of certificates.  If any rating is revised or withdrawn or if any rating agencies retained by the depositor to provide a security rating on any class of any series of offered certificates no longer qualifies as a “nationally recognized statistical rating organization” or is no longer qualified to rate any such class of offered certificates, the liquidity and/or the market value of your certificate may be adversely affected.
 
Additionally, it is possible that rating agencies not hired by the depositor may provide unsolicited ratings that differ from the ratings provided by any rating agencies retained by the depositor.  There can be no assurance that an unsolicited rating will not be issued prior to or after the closing date of any series of certificates, and none of the sponsor, the depositor or the related underwriters is obligated to inform investors (or potential investors) in any series offered certificates if an unsolicited rating is issued after the date of each such prospectus supplement.  Consequently, if you intend to purchase offered certificates, you should monitor whether an unsolicited rating of the offered certificates has been issued by a non-hired rating agency and should consult with your financial and legal advisors regarding the impact of an unsolicited rating on a class of offered certificates.  If any non-hired rating agency provides an unsolicited rating that differs from (or is lower than) the rating provided by any rating agency retained by the depositor in connection with any series issuance, the liquidity and/or the market value of your offered certificate may be adversely affected.
 
Any downgrading or unsolicited rating of a class of offered certificates to below “investment grade” may affect your ability to purchase or retain, or otherwise impact the regulatory characteristics, of those certificates.
 
The Limited Assets of Each Trust May Adversely Impact Your Ability To Recover Your Investment in the Event of Loss on the Underlying Mortgage Assets
 
Except for any related insurance policies, reserve funds, or other external credit enhancement described in the prospectus supplement, the mortgage loans included in a trust fund will be the sole source of payments on the certificates of a series.  Unless specified in the prospectus supplement, neither the certificates nor the mortgage assets in the trust will be guaranteed or insured by Banc of America Merrill Lynch Commercial Mortgage Inc. or any of its affiliates, by any governmental agency or by any other person or entity.  No certificate will represent a claim against or security interest in the trust funds for any other series.  Therefore, if the related trust fund has insufficient assets to make payments, no other assets will be available for payment of the deficiency, and the holders of one or more classes of the certificates will be required to bear the consequent loss.
 
In addition, the mortgage loans are generally non-recourse loans.  If a default occurs under any mortgage loan, recourse generally may be had only against the specific properties and other assets that have been pledged to secure the loan.  Payment prior to maturity is consequently dependent primarily on the sufficiency of the net operating income of the mortgaged property.  Payment at maturity is primarily dependent upon the market value of the
 
 
-11-

 
 
mortgaged property or the borrower’s ability to refinance the property.  We will not have undertaken an evaluation of the financial condition of any borrower.
 
Amounts on deposit from time to time in certain accounts constituting part of the trust, including the certificate account and any accounts maintained as credit support, may be withdrawn for purposes other than the payment of principal of or interest on the related series of certificates under certain conditions.  On any distribution occurring after losses or shortfalls in collections on the mortgage assets have been incurred, all or a portion of those losses or shortfalls will be borne on a disproportionate basis among classes of certificates.
 
The Limited Credit Support for Your Certificates May Not Be Sufficient To Prevent Loss on Your Certificates
 
The prospectus supplement for a series of certificates will describe any credit support.  The credit support may not cover all potential losses.  For example, credit support may or may not cover loss by reason of fraud or negligence by a mortgage loan originator or other parties.  Any losses not covered by credit support may, at least in part, be allocated to one or more classes of certificates.
 
A series of certificates may include one or more classes of subordinate certificates, if provided in the prospectus supplement.  Although subordination is intended to reduce the likelihood of temporary shortfalls and ultimate losses to holders of senior certificates, the amount of subordination will be limited and may decline under certain circumstances.  In addition, if principal payments on one or more classes of certificates of a series are made in a specified order of priority, any related credit support may be exhausted before the principal of the later-paid classes of certificates of that series have been repaid in full.
 
The impact of losses and shortfalls experienced with respect to the mortgage assets may fall primarily upon those classes of certificates having a later right of payment.
 
If a form of credit support covers the certificates of more than one series and losses on the related mortgage assets exceed the amount of the credit support, it is possible that the holders of certificates of one (or more) series will disproportionately benefit from that credit support, to the detriment of the holders of certificates of one (or more) other series.
 
The amount of any applicable credit support supporting one or more classes of certificates may be determined on the basis of criteria established by each rating agency retained to provide a security rating for any series of offered certificates, based on an assumed level of defaults, delinquencies and losses on the underlying mortgage assets and certain other factors.  We cannot assure you that the loss experience on the related mortgage assets will not exceed such assumed levels.  If the losses on the related mortgage assets do exceed such assumed levels, the holders of one or more classes of certificates will be required to bear such additional losses.
 
Special Powers of the FDIC in the Event of Insolvency of the Sponsor Could Delay or Reduce Distributions on the Certificates
 
The mortgage loans will be originated or acquired by the sponsor, a national bank whose deposits are insured to the applicable limits by the FDIC.  If the sponsor becomes insolvent, is in an unsound condition or engages in violations of its bylaws or regulations applicable to it or if similar circumstances occur, the FDIC could act as conservator and, if a receiver were appointed, would act as a receiver for the sponsor.  As receiver, the FDIC would have broad powers to:
 
require the trust, as assignee of the depositor, to go through an administrative claims procedure to establish its rights to payments collected on the mortgage loans; or
 
request a stay of proceedings to liquidate claims or otherwise enforce contractual and legal remedies against the sponsor, or
 
if the sponsor is a servicer for a series of certificates, repudiate without compensation the sponsor’s ongoing servicing obligations under the related pooling and servicing agreement, such as its duty to collect and remit payments or otherwise service the mortgage loans.
 
 
 
-12-

 
 
If the FDIC were to take any of those actions, distributions on the certificates could be delayed or reduced.
 
By statute, the FDIC as conservator or receiver of the sponsor is authorized to repudiate any “contract” of the sponsor upon payment of “actual direct compensatory damages”. This authority may be interpreted by the FDIC to permit it to repudiate the transfer of the mortgage loans to the depositor.  Under an FDIC regulation, however, the FDIC as conservator or receiver of a bank has stated that it will not reclaim, recover or recharacterize a bank’s transfer of financial assets in connection with a securitization or participation, provided that the transfer meets all conditions for sale accounting treatment under generally accepted accounting principles, other than the “legal isolation” condition as it applies to institutions for which the FDIC may be appointed as conservator or receiver, was made for adequate consideration and was not made fraudulently, in contemplation of insolvency, or with the intent to hinder, delay or defraud the bank or its creditors.  For purposes of the FDIC regulation, the term securitization means, as relevant, the issuance by a special purpose entity of beneficial interests the most senior class of which at time of issuance is rated in one of the four highest categories assigned to long-term debt or in an equivalent short-term category (within either of which there may be sub-categories or gradations indicating relative standing) by one or more nationally recognized statistical rating organizations.  A special purpose entity, as the term is used in the regulation, means a trust, corporation, or other entity demonstrably distinct from the insured depository institution that is primarily engaged in acquiring and holding (or transferring to another special purpose entity) financial assets, and in activities related or incidental to these actions, in connection with the issuance by the special purpose entity (or by another special purpose entity that acquires financial assets directly or indirectly from the special purpose entity) of beneficial interests.  The transactions contemplated by this prospectus and the related prospectus supplement will be structured so that this FDIC regulation should apply to the transfer of the mortgage loans from the sponsor to the depositor.
 
If a condition required under the FDIC regulation, or other statutory or regulatory requirement applicable to the transaction, were found not to have been satisfied, the FDIC as conservator or receiver might refuse to recognize the sponsor’s transfer of the mortgage loans to the depositor.  In that event the depositor could be limited to seeking recovery based upon its security interest in the mortgage loans.  The FDIC’s statutory authority has been interpreted by the FDIC and at least one court to permit the repudiation of a security interest upon payment of actual direct compensatory damages measured as of the date of conservatorship or receivership.  These damages do not include damages for lost profits or opportunity, and no damages would be paid for the period between the date of conservatorship or receivership and the date of repudiation.  The FDIC could delay its decision whether to recognize the sponsor’s transfer of the mortgage loans for a reasonable period following its appointment as conservator or receiver for the sponsor.  If the FDIC were to refuse to recognize the sponsor’s transfer of the mortgage loans, distributions on the certificates could be delayed or reduced.
 
If specified in the applicable prospectus supplement, the sponsor will also act as servicer of the mortgage loans.  If the FDIC acted as receiver for the sponsor after the sponsor’s insolvency, the FDIC could prevent the termination of the sponsor as servicer of the mortgage loans, even if a contractual basis for termination exists.  This inability to terminate the sponsor as servicer could result in a delay or possibly a reduction in distributions on the certificates to the extent the sponsor received, but did not remit to the trustee, mortgage loan collections received by the sponsor before the date of insolvency or if the sponsor failed to make any required advances.
 
The collection of amounts with respect to the mortgage loans, which are the source of repayment for the certificates, will depend significantly on the performance by the master servicer and the special servicer of their respective roles under the pooling and servicing agreement and any other servicing agreements described in this prospectus supplement.  You will not be a party to any of these agreements and will be relying on the persons who are to perform their duties under such agreements and upon such persons, and the trustee in particular, to enforce the parties' obligations under such agreements.  In the event of the resignation or termination of the master servicer or the special servicer, the trustee may assume the related responsibilities and servicing functions or name a replacement as described under “THE POOLING AND SERVICING AGREEMENTS—Rights Upon Event of Default”.  In particular, any interruption or delay associated with such replacement could have a corresponding adverse effect on amounts collected on the mortgage loans and available for distribution on the certificates.
 
 
-13-

 
 
Insolvency of the Depositor May Delay or Reduce Collections on Mortgage Loans
 
Neither the United States Bankruptcy Code nor similar applicable state laws prohibit the depositor from filing a voluntary application for relief under these laws.  However, the transactions contemplated by this prospectus and the related prospectus supplement will be structured so that the voluntary or involuntary application for relief under the bankruptcy laws by the depositor is unlikely.  The depositor is a separate, limited purpose subsidiary, the certificate of incorporation of which contains limitations on the nature of the depositor’s business, including the ability to incur debt other than debt associated with the transactions contemplated by this prospectus, and restrictions on the ability of the depositor to commence voluntary or involuntary cases or proceedings under bankruptcy laws.  Further, the transfer of the mortgage loans to the related trust will be structured so that the trustee has no recourse to the depositor, other than for breaches or representations and warranties about the mortgage loans.
 
If the depositor were to become the subject of a proceeding under the bankruptcy laws, a court could conclude that the transfer of the mortgage loans from the depositor to the trust should not be characterized as an absolute transfer, and accordingly, that the mortgage loans should be included as part of the depositor’s estate.  Under these circumstances, the bankruptcy proceeding could delay or reduce distributions on the certificates.  In addition, a bankruptcy proceeding could result in the temporary disruption of distributions on the certificates.
 
Distributions on Your Certificates and Your Yield May Be Difficult To Predict
 
The yield on any offered certificate will depend on (a) the price at which such certificate is purchased by an investor and (b) the rate, timing and amount of distributions on such certificate.  The rate, timing and amount of distributions on any offered certificate will, in turn, depend on, among other things:
 
  the pass-through rate for such certificate;
 
  the rate and timing of principal payments (including principal prepayments) and other principal collections on or in respect of the mortgage loans and the extent to which such amounts are to be applied or otherwise result in a reduction of the certificate balance of the class of certificates to which such certificate belongs;
 
  the rate, timing and severity of realized losses and additional trust fund expenses (each as described in this prospectus supplement) and the extent to which such losses and expenses result in the failure to pay interest on, or a reduction of the certificate balance of, the class of certificates to which such certificate belongs;
 
  the timing and severity of any net aggregate prepayment interest shortfalls (each as described in this prospectus supplement) and the extent to which such shortfalls are allocated in reduction of the distributable certificate interest payable on the class of certificates to which such certificate belongs;
 
  the extent to which prepayment premiums and yield maintenance charges are collected and, in turn, distributed on the class of certificates to which such certificate belongs; and
 
  the rate and timing of reimbursement of advances.
 
It is impossible to predict with certainty any of the factors described in the preceding paragraph.  Accordingly, investors may find it difficult to analyze the effect that such factors might have on the yield to maturity of any class of offered certificates.
 
Prepayments of the Underlying Mortgage Loans Will Affect the Average Life of Your Certificates and Your Yield
 
As a result of prepayments on the mortgage loans in the trust, the amount and timing of distributions of principal and/or interest on the certificates of the related series may be highly unpredictable.  Prepayments on the mortgage loans in the trust will result in a faster rate of principal payments on one or more classes of the related series of certificates than if payments on those mortgage loans were made as scheduled.  Therefore, the prepayment experience on the mortgage loans in the trust may affect the average life of one or more classes of certificates of the related series.
 
 
-14-

 
 
The rate of principal payments on pools of mortgage loans varies among pools and from time to time is influenced by a variety of economic, demographic, geographic, social, tax and legal factors.  For example, if prevailing interest rates fall significantly below the mortgage rates borne by the mortgage loans included in the trust, principal prepayments on those mortgage loans are likely to be higher than if prevailing interest rates remain at or above the rates borne by those mortgage loans.  Conversely, if prevailing interest rates rise significantly above the mortgage rates borne by the mortgage loans included in the trust, then principal prepayments on those mortgage loans are likely to be lower than if prevailing interest rates remain at or below the mortgage rates borne by those mortgage loans.
 
Voluntary prepayments, if permitted, generally require payment of a prepayment premium or yield maintenance charge.  Nevertheless, we cannot assure you that the related borrowers will refrain from prepaying their mortgage loans due to the existence of a prepayment premium or yield maintenance charge.  Also, we cannot assure you that involuntary prepayments will not occur.
 
As described in the related prospectus supplement, the terms of certain mortgage loans, in connection with a partial release of the related mortgaged property, may permit a voluntary partial defeasance or a partial prepayment at any time with the delivery of the defeasance collateral, the payment of a prepayment premium and/or yield maintenance charge, as applicable.
 
The rate at which voluntary prepayments occur on the mortgage loans will be affected by a variety of factors, including:
 
the terms of the mortgage loans;
 
the length of any prepayment lockout period;
 
the level of prevailing interest rates;
 
the availability of mortgage credit;
 
the applicable prepayment premiums or yield maintenance charges;
 
the master servicer’s or special servicer’s ability to enforce those charges or premiums;
 
the occurrence of casualties or natural disasters; and
 
economic, demographic, tax, legal or other factors.
 
The rate of prepayment on a pool of mortgage loans is also affected by prevailing market interest rates for mortgage loans of a comparable type, term and risk level.  When the prevailing market interest rate is below a mortgage loan's interest rate, a borrower may have an increased incentive to refinance its mortgage loan.  Even in the case of adjustable rate mortgage loans, as prevailing market interest rates decline, and without regard to whether the mortgage interest rates on the adjustable rate mortgage loans decline in a manner consistent therewith, the related borrowers may have an increased incentive to refinance for purposes of either (1) converting to a fixed rate loan and thereby “locking in” that rate or (2) taking advantage of a different index, margin or rate cap or floor on another adjustable rate mortgage loan.
 
Depending on prevailing market interest rates, the outlook for market interest rates and economic conditions generally, some borrowers may sell mortgaged properties in order to realize their equity in the mortgaged properties, to meet cash flow needs or to make other investments.  In addition, some borrowers may be motivated by federal and state tax laws (which are subject to change) to sell mortgaged properties prior to the exhaustion of tax depreciation benefits.  We will make no representation as to the particular factors that will affect the prepayment of the mortgage loans in any trust fund, as to the relative importance of those factors, as to the percentage of the principal balance of the mortgage loans that will be paid as of any date or as to the overall rate of prepayment on the mortgage loans.
 
No prepayment premium or yield maintenance charge will be generally required for prepayments in connection with a casualty or condemnation.  In addition, if a mortgage loan seller repurchases any mortgage loan from the trust
 
 
-15-

 
 
due to a material breach of representations or warranties or a material document defect, the repurchase price paid will be passed through to the holders of the certificates with the same effect as if the mortgage loan had been prepaid in part or in full, except that no prepayment premium or yield maintenance charge would be payable.  The repurchase price paid by a mortgage loan seller may not include a liquidation fee if purchased within the timeframe set forth in the pooling and servicing agreement.  Such a repurchase may therefore adversely affect the yield to maturity on your certificates.
 
We cannot assure you what as to the actual rate of prepayment on the mortgage loans in the trust will be, or that the rate of prepayment will conform to any model in any prospectus supplement.  As a result, depending on the anticipated rate of prepayment for the mortgage loans in the trust, the retirement of any class of certificates of the related series could occur significantly earlier or later, and its average life could be significantly shorter or longer, than expected.
 
The extent to which prepayments on the mortgage loans in trust ultimately affect the average life of any class of certificates of the related series will depend on the terms and provisions of the certificates.  A class of certificates may provide that on any distribution date the holders of the certificates are entitled to a pro rata share of the prepayments on the mortgage loans in the trust fund that are distributable on that date.
 
A class of certificates that entitles the holders to a disproportionately large share of the prepayments on the mortgage loans in the trust increases the likelihood of early retirement of that class if the rate of prepayment is relatively fast.  This type of early retirement risk is sometimes referred to as “call risk“.
 
A class of certificates that entitles its holders  to a disproportionately small share of the prepayments on the mortgage loans in the trust increases the likelihood of an extended average life of that class if the rate of prepayment is relatively slow.  This type of prolonged retirement risk is sometimes referred to as “extension risk“.
 
As described in the prospectus supplement, the respective entitlements of the various classes of certificate-holders of any series to receive payments (and, in particular, prepayments) of principal of the mortgage loans in the trust may vary based on the occurrence of certain events (e.g., the retirement of one or more classes of certificates of that series) or subject to certain contingencies (e.g., prepayment and default rates with respect to those mortgage loans).
 
A series of certificates may include one or more controlled amortization classes, which will entitle the holders to receive principal distributions according to a specified principal payment schedule.  Although prepayment risk cannot be eliminated entirely for any class of certificates, a controlled amortization class will generally provide a relatively stable cash flow so long as the actual rate of prepayment on the mortgage loans in the trust remains relatively constant at the rate of prepayment used to establish the specific principal payment schedule for the certificates.  Prepayment risk concerning a given mortgage asset pool does not disappear, however, and the stability afforded to a controlled amortization class comes at the expense of one or more companion classes of the same series.
 
As described in the prospectus supplement, a companion class may entitle the holders to a disproportionately large share of prepayments on the mortgage loans in the trust when the rate of prepayment is relatively fast, and/or may entitle the holders to a disproportionately small share of prepayments on the mortgage loans in the trust when the rate of prepayment is relatively slow.  A class of certificates that entitles the holders of those certificates to a disproportionately large share of the prepayments on the mortgage loans in the related trust fund enhances the risk of early retirement of that class, or call risk, if the rate of prepayment is relatively fast; while a class of certificates that entitles the holders of those certificates to a disproportionately small share of the prepayments on the mortgage loans in the related trust fund enhances the risk of an extended average life of that class, or extension risk, if the rate of prepayment is relatively slow.  Thus, as described in the related prospectus supplement, a companion class absorbs some (but not all) of the “call risk” and/or “extension risk” that would otherwise belong to the related controlled amortization class if all payments of principal of the mortgage loans in the related trust fund were allocated on a pro rata basis.
 
Each controlled amortization class will either be a planned amortization class or a targeted amortization class or such other similar class as is described in the prospectus supplement.  In general, a planned amortization class has a “prepayment collar”, that is, a range of prepayment rates that can be sustained without disruption, that determines
 
 
-16-

 
 
the principal cash flow of those certificates.  That prepayment collar is not static, and may expand or contract after the issuance of the planned amortization class depending on the actual prepayment experience for the underlying mortgage loans.  Distributions of principal on a planned amortization class would be made in accordance with the specified schedule so long as prepayments on the underlying mortgage loans remain at a relatively constant rate within the prepayment collar and, as described below, companion classes exist to absorb “excesses” or “shortfalls” in principal payments on the underlying mortgage loans.  If the rate of prepayment on the underlying mortgage loans from time to time falls outside the prepayment collar, or fluctuates significantly within the prepayment collar, especially for any extended period of time, that event may have material consequences in respect of the anticipated weighted average life and maturity for a planned amortization class.  A targeted amortization class is structured so that principal distributions generally will be payable on it in accordance with its specified principal payments schedule so long as the rate of prepayments on the related mortgage assets remains relatively constant at the particular rate used in establishing that schedule.  A targeted amortization class will generally afford the holders of those certificates some protection against early retirement or some protection against an extended average life, but not both.
 
In general, the notional amount of a class of interest-only certificates will either (1) be based on the principal balances of some or all of the mortgage assets in the related trust fund or (2) equal the principal balances of one or more of the other classes of certificates of the same series.  Accordingly, the yield on those interest-only certificates will be inversely related to the rate at which payments and other collections of principal are received on those mortgage assets or distributions are made in reduction of the principal balances of those classes of certificates, as the case may be.
 
Consistent with the foregoing, if a class of certificates of any series consists of interest-only certificates or principal-only certificates, a lower than anticipated rate of principal prepayments on the mortgage loans in the related trust fund will negatively affect the yield to investors in principal-only certificates, and a higher than anticipated rate of principal prepayments on those mortgage loans will negatively affect the yield to investors in interest-only certificates.  If the offered certificates of a series include those certificates, the related prospectus supplement will include a table showing the effect of various assumed levels of prepayment on yields on those certificates.  Those tables will be intended to illustrate the sensitivity of yields to various assumed prepayment rates and will not be intended to predict, or to provide information that will enable investors to predict, yields or prepayment rates.
 
Certificates Purchased at a Premium or a Discount Will Be Sensitive To the Rate of Principal Payment
 
A series of certificates may include one or more classes offered at a premium or discount.  Yields on those classes of certificates will be sensitive, and in some cases extremely sensitive, to prepayments on the mortgage loans in the trust fund.  If the amount of interest payable with respect to a class is disproportionately large as compared to the amount of principal, as with certain classes of stripped interest certificates, a holder might fail to recover its original investment under some prepayment scenarios.  The yield to maturity of any class of certificates may vary from the anticipated yield due to the degree to which the certificates are purchased at a discount or premium and the amount and timing of distributions.
 
You should consider, in the case of any certificate purchased at a discount, the risk that a slower than anticipated rate of principal payments on the mortgage loans could result in an actual yield to such investor that is lower than the anticipated yield.  In the case of any certificate purchased at a premium, you should consider the risk that a faster than anticipated rate of principal payments could result in an actual yield to such investor that is lower than the anticipated yield.  Further information relating to yield on certificates particularly sensitive to principal prepayments will be included in the applicable prospectus supplement, including, in the case of interest only certificates and principal only certificates, a table demonstrating the particular sensitivity of those interest only certificates to the rate of prepayments.
 
Other Factors Affecting Yield, Weighted Average Life and Maturity
 
Balloon Payments; Extensions of Maturity.  Some or all of the mortgage loans included in a particular trust fund may require that balloon payments be made at maturity.  Because the ability of a borrower to make a balloon payment typically will depend upon its ability either to refinance the loan or to sell the related mortgaged property,
 
 
-17-

 
 
there is a risk that mortgage loans that require balloon payments may default at maturity, or that the maturity of that mortgage loan may be extended in connection with a workout.  In the case of defaults, recovery of proceeds may be delayed by, among other things, bankruptcy of the borrower or adverse conditions in the market where the property is located.  In order to minimize losses on defaulted mortgage loans, the master servicer or a special servicer, to the extent and under the circumstances set forth in this prospectus and in the related prospectus supplement, may be authorized to modify mortgage loans that are in default or as to which a payment default is imminent.  Any defaulted balloon payment or modification that extends the maturity of a mortgage loan may delay distributions of principal on a class of offered certificates and thereby extend the weighted average life of your certificates and, if those certificates were purchased at a discount, reduce your yield.
 
Negative Amortization.  The weighted average life of a class of certificates can be affected by mortgage loans that permit negative amortization to occur.  A mortgage loan that provides for the payment of interest calculated at a rate lower than the rate at which interest accrues on it would be expected during a period of increasing interest rates to amortize at a slower rate (and perhaps not at all) than if interest rates were declining or were remaining constant.  This slower rate of mortgage loan amortization would correspondingly be reflected in a slower rate of amortization for one or more classes of certificates of the related series.  In addition, negative amortization on one or more mortgage loans in any trust fund may result in negative amortization on the certificates of the related series.  The related prospectus supplement will describe, if applicable, the manner in which negative amortization in respect of the mortgage loans in any trust fund is allocated among the respective classes of certificates of the related series.  The portion of any mortgage loan negative amortization allocated to a class of certificates may result in a deferral of some or all of the interest payable on them, which deferred interest may be added to the principal balance of the certificates.  Accordingly, the weighted average lives of mortgage loans that permit negative amortization and that of the classes of certificates to which the negative amortization would be allocated or that would bear the effects of a slower rate of amortization on those mortgage loans, may increase as a result of that feature.
 
Negative amortization also may occur in respect of an adjustable rate mortgage loan that limits the amount by which its scheduled payment may adjust in response to a change in its mortgage interest rate, provides that its scheduled payment will adjust less frequently than its mortgage interest rate or provides for constant scheduled payments notwithstanding adjustments to its mortgage interest rate.  Accordingly, during a period of declining interest rates, the scheduled payment on that 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, thereby resulting in the accelerated amortization of that mortgage loan.  This acceleration in amortization of its principal balance will shorten the weighted average life of that mortgage loan and, correspondingly, the weighted average lives of those classes of certificates entitled to a portion of the principal payments on that mortgage loan.
 
The extent to which the yield on any offered certificate will be affected by the inclusion in the related trust fund of mortgage loans that permit negative amortization, will depend upon (1) whether that offered certificate was purchased at a premium or a discount and (2) the extent to which the payment characteristics of those mortgage loans delay or accelerate the distributions of principal on that certificate or, in the case of an interest-only certificate, delay or accelerate the amortization of the notional amount of that certificate.
 
Foreclosures and Payment Plans.  The number of foreclosures and the principal amount of the mortgage loans that are foreclosed in relation to the number and principal amount of mortgage loans that are repaid in accordance with their terms will affect the weighted average lives of those mortgage loans and, accordingly, the weighted average lives of and yields on the certificates of the related series.  Servicing decisions made with respect to the mortgage loans, including the use of payment plans prior to a demand for acceleration and the restructuring of mortgage loans in bankruptcy proceedings, may also have an effect upon the payment patterns of particular mortgage loans and thus the weighted average lives of and yields on the certificates of the related series.
 
Losses and Shortfalls on the Mortgage Assets.  The yield on your certificates will directly depend on the extent to which you are required to bear the effects of any losses or shortfalls in collections arising out of defaults on the mortgage loans in the related trust fund and the timing of those losses and shortfalls.  In general, the earlier that any loss or shortfall occurs, the greater will be the negative effect on yield for any class of certificates that is required to bear the effects of the shortfall.
 
The amount of any losses or shortfalls in collections on the mortgage assets in any trust fund, to the extent not covered or offset by draws on any reserve fund or under any instrument of credit support, will be allocated among
 
 
-18-

 
 
the respective classes of certificates of the related series in the priority and manner, and subject to the limitations, specified in the related prospectus supplement.  As described in the related prospectus supplement, those allocations may be effected by a reduction in the entitlements to interest and/or principal balances of one or more classes of certificates, or by establishing a priority of payments among those classes of certificates.
 
The yield to maturity on a class of subordinate certificates may be extremely sensitive to losses and shortfalls in collections on the mortgage loans in the related trust fund.
 
Additional Certificate Amortization.  In addition to entitling the holders of one or more classes of a series of certificates to a specified portion, which may during specified periods range from none to all, of the principal payments received on the mortgage assets in the related trust fund, one or more classes of certificates of any series, including one or more classes of offered certificates of those series, may provide for distributions of principal of those certificates from (1) amounts attributable to interest accrued but not currently distributable on one or more classes of accrual certificates, (2) excess funds or (3) any other amounts described in the related prospectus supplement.  In general, “excess funds” as used above will represent that portion of the amounts distributable in respect of the certificates of any series on any distribution date that represent (1) interest received or advanced on the mortgage assets in the related trust fund that is in excess of the interest currently accrued on the certificates of that series, or (2) prepayment premiums, payments from equity participations or any other amounts received on the mortgage assets in the related trust fund that do not constitute interest on, or principal of, those certificates.
 
The amortization of any class of certificates out of the sources described in the preceding paragraph would shorten the weighted average life of those certificates and, if those certificates were purchased at a premium, reduce the yield on those certificates.  The related prospectus supplement will discuss the relevant factors to be considered in determining whether distributions of principal of any class of certificates out of those sources would have any material effect on the rate at which those certificates are amortized.
 
Optional Early Termination.  If so specified in the related prospectus supplement, a series of certificates may be subject to optional early termination through the repurchase of the mortgage assets in the related trust fund by the party or parties specified in the related prospectus supplement, under the circumstances and in the manner set forth in the prospectus supplement.  If so provided in the related prospectus supplement, upon the reduction of the principal balance of a specified class or classes of certificates by a specified percentage or amount, the specified party may be authorized or required to solicit bids for the purchase of all of the mortgage assets of the related trust fund, or of a sufficient portion of those mortgage assets to retire that class or classes, as set forth in the related prospectus supplement.  In the absence of other factors, any early retirement of a class of offered certificates would shorten the weighted average life of those certificates and, if those certificates were purchased at premium, reduce the yield on those certificates.
 
Prepayment Models Are Illustrative Only and Do Not Predict Actual Weighted Average Life and Maturity
 
The rate at which principal payments are received on the mortgage loans in any trust fund will affect the ultimate maturity and the weighted average life of one or more classes of the certificates of that series.  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 certificates of any series will be influenced by the rate at which principal on the related mortgage loans, whether in the form of scheduled amortization or prepayments (for this purpose, the term “prepayment” includes voluntary prepayments, liquidations due to default and purchases of mortgage loans out of the related trust fund), is paid to that class.  Prepayment rates on loans are commonly measured relative to a prepayment standard or model, such as the Constant Prepayment Rate (“CPR”) prepayment model or the Standard Prepayment Assumption (“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 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 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 the loans in the first month of the life of the loans and an additional 0.2% per annum in each month thereafter until the 
 
 
-19-

 
 
thirtieth month.  Beginning in the thirtieth month, and in each month thereafter during the life of the loans, 100% of SPA assumes a constant prepayment rate of 6% per annum each month.
 
Neither CPR nor SPA nor any other prepayment model or assumption purports to be a historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any particular pool of loans.  Moreover, the CPR and SPA models were developed based upon historical prepayment experience for single-family loans.  Thus, it is unlikely that the prepayment experience of the mortgage loans included in any trust fund will conform to any particular level of CPR or SPA.
 
The prospectus supplement with respect to each series of certificates will contain tables, if applicable, setting forth the projected weighted average life of each class of offered certificates of those series and the percentage of the initial principal balance of each class that would be outstanding on specified distribution dates based on the assumptions stated in that prospectus supplement, including assumptions that prepayments on the related mortgage loans are made at rates corresponding to various percentages of CPR or SPA, or at other rates specified in that prospectus supplement.  Those tables and assumptions will illustrate the sensitivity of the weighted average lives of the certificates to various assumed prepayment rates and will not be intended to predict, or to provide information that will enable investors to predict, the actual weighted average lives of the certificates.
 
Timing of Prepayments on the Mortgage Loans May Result in Interest Shortfalls on the Certificates
 
When a mortgage loan is prepaid in full, absent a provision in the mortgage loan requiring the borrower to pay interest through the end of the applicable interest accrual period, the mortgagor pays interest on the amount prepaid only to the date of prepayment.  Liquidation proceeds and amounts received in settlement of insurance claims are also likely to include interest only to the time of payment or settlement.  When a mortgage loan is prepaid in full or in part, an interest shortfall may result depending on the timing of the receipt of the prepayment and the timing of when those prepayments are passed through to certificateholders.  To partially mitigate this reduction in yield, the pooling and servicing agreement and/or underlying servicing agreements relating to a series may provide, to the extent specified in the applicable prospectus supplement, that for specified types of principal prepayments received, the applicable master servicer will be obligated, on or before each distribution date, to pay an amount equal to the lesser of (i) the aggregate interest shortfall with respect to the distribution date resulting from those principal prepayments by mortgagors and (ii) all or a portion of the master servicer’s or the special servicer’s, as applicable, servicing compensation for the distribution date as specified in the applicable prospectus supplement or other mechanisms specified in the applicable prospectus supplement.  To the extent these shortfalls from the mortgage loans are not covered by the amount of compensating interest or other mechanisms specified in the applicable prospectus supplement, they will be allocated among the classes of interest bearing certificates as described in the related prospectus supplement under “DESCRIPTION OF THE CERTIFICATES”.  No comparable interest shortfall coverage will be provided by the master servicer with respect to liquidations of any mortgage loans.  Any interest shortfall arising from liquidations will be covered by means of the subordination of the rights of subordinate certificateholders or any other credit support arrangements described in this prospectus.
 
Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans
 
General.  Mortgage loans made on the security of multifamily or commercial property may have a greater likelihood of delinquency and foreclosure, and a greater likelihood of loss than loans made on the security of an owner-occupied single-family property.  The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower.  Therefore, the value of an income-producing property is directly related to the net operating income derived from such property.
 
If the net operating income of the property is reduced (for example, if rental or occupancy rates decline or real estate tax rates or other operating expenses increase), the borrower’s ability to repay the loan may be impaired.  A number of the mortgage loans may be secured by liens on owner-occupied properties or on properties leased to a single tenant or in which only a few tenants produce a material amount of the rental income.  As the primary component of the net operating income of a property, rental income (and maintenance payments from tenant stockholders of a cooperative) and the value of any property are subject to the vagaries of the applicable real estate market and/or business climate.  Properties typically leased, occupied or used on a short-term basis, such as health
 
 
-20-

 
 
care-related facilities, hotels and motels, and mini-warehouse and self-storage facilities, tend to be affected more rapidly by changes in market or business conditions than do properties leased, occupied or used for longer periods, such as (typically) warehouses, retail stores, office buildings and industrial plants.  Commercial Properties may be secured by owner-occupied properties or properties leased to a single tenant.  Therefore, a decline in the financial condition of the borrower or a single tenant may have a disproportionately greater effect on the net operating income from such properties than would be the case with respect to properties with multiple tenants.
 
Changes in the expense components of the net operating income of a property due to the general economic climate or economic conditions in a locality or industry segment, such as (1) increases in interest rates, real estate and personal property tax rates and other operating expenses including energy costs, (2) changes in governmental rules, regulations and fiscal policies, including environmental legislation, and (3) acts of God may also affect the net operating income and the value of the property and the risk of default on the related mortgage loan.  In some cases leases of properties may provide that the lessee, rather than the mortgagor, is responsible for payment of certain of these expenses.  However, because leases are subject to default risks as well as when a tenant’s income is insufficient to cover its rent and operating expenses, the existence of such “net of expense” provisions will only temper, not eliminate, the impact of expense increases on the performance of the related mortgage loan.
 
Additional considerations may be presented by the type and use of a particular property.  For instance, properties that operate as hospitals and nursing homes are subject to significant governmental regulation of the ownership, operation, maintenance and financing of health care institutions.  Hotel, motel and restaurant properties are often operated pursuant to franchise, management or operating agreements that may be terminable by the franchisor or operator.  The transferability of a hotel’s or restaurant’s operating, liquor and other licenses upon a transfer of the hotel or the restaurant, whether through purchase or foreclosure, is subject to local law requirements.
 
In addition, the concentration of default, foreclosure and loss risks in mortgage loans in the trust will generally be greater than for pools of single-family loans because mortgage loans in the trust generally will consist of a smaller number of higher balance loans than would a pool of single-family loans of comparable aggregate unpaid principal balance.
 
Limited Recourse Nature of the Mortgage Loans May Make Recovery Difficult in the Event that a Mortgage Loan Defaults.  We anticipate that some or all of the mortgage loans included in any trust fund will be nonrecourse loans or loans for which recourse may be restricted or unenforceable.  In this type of mortgage loan, recourse in the event of borrower default will be limited to the specific real property and other assets that were pledged to secure the mortgage loan.  However, even with respect to those mortgage loans that provide for recourse against the borrower and its assets, we cannot assure you that enforcement of such recourse provisions will be practicable, or that the assets of the borrower will be sufficient to permit a recovery concerning a defaulted mortgage loan in excess of the liquidation value of the related property.
 
Cross-Collateralization Provisions May Have Limitations on Their Enforceability.  A mortgage pool may include groups of mortgage loans which are cross-collateralized and cross-defaulted.  These arrangements are designed primarily to ensure that all of the collateral pledged to secure the respective mortgage loans in a cross-collateralized group.  Cash flows generated on these type of mortgage loans are available to support debt service on, and ultimate repayment of, the total indebtedness.  These arrangements seek to reduce the risk that the inability of one or more of the mortgaged properties securing any such group of mortgage loans to generate net operating income sufficient to pay debt service will result in defaults and ultimate losses.
 
If the properties securing a group of mortgage loans which are cross-collateralized are not all owned by the same entity, creditors of one or more of the related borrowers could challenge the cross-collateralization arrangement as a fraudulent conveyance.  Under federal and state fraudulent conveyance statutes, the incurring of an obligation or the transfer of property by a person will be subject to avoidance under certain circumstances if the person did not receive fair consideration or reasonably equivalent value in exchange for such obligation or transfer and was then insolvent, was rendered insolvent by such obligation or transfer or had unreasonably small capital for its business.  A creditor seeking to enforce remedies against a property subject to such cross-collateralization to repay such creditor’s claim against the related borrower could assert that:
 
such borrower was insolvent at the time the cross-collateralized mortgage loans were made; and
 
 
 
-21-

 
 
such borrower did not, when it allowed its property to be encumbered by a lien securing the indebtedness represented by the other mortgage loans in the group of cross-collateralized mortgage loans, receive fair consideration or reasonably equivalent value for, in effect, “guaranteeing” the performance of the other borrowers.
 
Although the borrower making such “guarantee” will be receiving “guarantees” from each of the other borrowers in return, we cannot assure you that such exchanged “guarantees” would be found to constitute fair consideration or be of reasonably equivalent value.
 
The cross-collateralized mortgage loans may be secured by mortgage liens on properties located in different states.  Because of various state laws governing foreclosure or the exercise of a power of sale and because foreclosure actions are usually brought in state court, and the courts of one state cannot exercise jurisdiction over property in another state, it may be necessary upon a default under any such mortgage loan to foreclose on the related mortgaged properties in a particular order rather than simultaneously in order to ensure that the lien of the related mortgages is not impaired or released.
 
Increased Risk of Default Associated With Balloon Payments.  Some of the mortgage loans included in the trust may be nonamortizing or only partially amortizing over their terms to maturity.  These types of mortgage loans will require substantial payments of principal and interest (that is, balloon payments) at their stated maturity.  These loans involve a greater likelihood of default than self-amortizing loans because the ability of a borrower to make a balloon payment typically will depend upon its ability either to refinance the loan or to sell the related property.  The ability of a borrower to accomplish either of these goals will be affected by—
 
the value of the related property;
 
the level of available mortgage rates at the time of sale or refinancing;
 
the borrower’s equity in the related property;
 
the financial condition and operating history of the borrower and the related property;
 
tax laws;
 
rent control laws (pertaining to certain residential properties);
 
Medicaid and Medicare reimbursement rates (pertaining to hospitals and nursing homes);
 
prevailing general economic conditions; and
 
the availability of credit for loans secured by multifamily or commercial property.
 
Neither Banc of America Merrill Lynch Commercial Mortgage Inc. nor any of its affiliates will be required to refinance any mortgage loan.
 
As specified in the prospectus supplement, the master servicer or the special servicer will be permitted (within prescribed limits) to extend and modify mortgage loans that are in default or as to which a payment default is imminent.  Although the master servicer or the special servicer generally will be required to determine that any such extension or modification is reasonably likely to produce a greater recovery than liquidation, taking into account the time value of money, we cannot assure you that any such extension or modification will in fact increase the present value of receipts from or proceeds of the affected mortgage loans.
 
The Lender Under a Mortgage Loan May Have Difficulty Collecting Rents Upon the Default and/or Bankruptcy of the Related Borrower.  Each mortgage loan included in the trust secured by property that is subject to leases typically will be secured by an assignment of leases and rents.  Under such an assignment, the mortgagor assigns to the mortgagee its right, title and interest as lessor under the leases of the related property, and the income derived, as further security for the related mortgage loan, while retaining a license to collect rents for so long as there is no
 
 
-22-

 
 
default.  If the borrower defaults, the license terminates and the lender is entitled to collect rents.  Some state laws may require that the lender take possession of the property and obtain a judicial appointment of a receiver before becoming entitled to collect the rents.  In addition, if bankruptcy or similar proceedings are commenced by or in respect of the borrower, the lender’s ability to collect the rents may be adversely affected.
 
The Enforceability of Due-on-Sale and Debt-Acceleration Clauses May Be Limited in Certain Situations.  Mortgages may contain a due-on-sale clause, which permits the lender to accelerate the maturity of the mortgage loan if the borrower sells, transfers or conveys the related property or its interest in the property.  Mortgages also may include a debt-acceleration clause, which permits the lender to accelerate the debt upon a monetary or nonmonetary default of the mortgagor.  Such clauses are generally enforceable subject to certain exceptions.  The courts of all states will enforce clauses providing for acceleration in the event of a material payment default.  The equity courts of any state, however, may refuse the foreclosure of a mortgage or deed of trust when an acceleration of the indebtedness would be inequitable or unjust or the circumstances would render the acceleration unconscionable.
 
Adverse Environmental Conditions May Subject a Mortgage Loan to Additional Risk.  Under the laws of certain states, contamination of real property may give rise to a lien on the property to assure the costs of cleanup.  In several states, such a lien has priority over an existing mortgage lien on such property.  In addition, under the laws of some states and under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, a lender may be liable, as an “owner” or “operator”, for costs of addressing releases or threatened releases of hazardous substances at a property, if agents or employees of the lender have become sufficiently involved in the operations of the borrower, regardless of whether the environmental damage or threat was caused by the borrower or a prior owner.  A lender also risks such liability on foreclosure of the mortgage.
 
Certain Special Hazard Losses May Subject Your Certificates to an Increased Risk of Loss.  Unless otherwise specified in a prospectus supplement, the master servicer and special servicer for the trust will be required to cause the borrower on each mortgage loan in the trust to maintain such insurance coverage in respect of the property as is required under the related mortgage, including hazard insurance.  As described in the prospectus supplement, the master servicer and the special servicer may satisfy its obligation to cause hazard insurance to be maintained with respect to any property through acquisition of a blanket policy.
 
In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the improvements of the property by fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and civil commotion, subject to the conditions and exclusions specified in each policy.  Although the policies covering the properties will be underwritten by different insurers under different state laws in accordance with different applicable state forms, and therefore will not contain identical terms and conditions, most such policies typically do not cover any physical damage resulting from war, revolution, governmental actions, floods and other water-related causes, earth movement (including earthquakes, landslides and mudflows), wet or dry rot, vermin, domestic animals and certain other kinds of risks.  Unless the mortgage specifically requires the mortgagor to insure against physical damage arising from such causes, then, to the extent any consequent losses are not covered by credit support, such losses may be borne, at least in part, by the holders of one or more classes of certificates of the related series.
 
Exercise of Rights by Certain Certificateholders May Be Adverse to Other Certificateholders
 
The pooling and servicing agreement for a series may permit the holder of a class of subordinate certificates or a class of securities backed by a class of certificates to instruct the special servicer with respect to workout arrangements or foreclosure proceedings with respect to delinquent or other specially serviced mortgage loans.  This right is intended to permit the holder of a class of certificates that is highly sensitive to losses on the mortgage loans to attempt to mitigate losses by exercising limited power of direction over servicing activities which accelerate or delay realization of losses on the mortgage loans.  Such directions may, however, be adverse to the interest of those classes of senior certificates that are more sensitive to prepayments than to losses on the mortgage loans.  In particular, accelerating foreclosure will adversely affect the yield to maturity on interest only certificates, while delaying foreclosure will adversely affect the yield to maturity of principal only certificates.
 
Borrower Defaults May Adversely Affect Your Yield
 
The rate and timing of delinquencies or defaults on the mortgage loans will affect:
 
 
-23-

 
 
the aggregate amount of distributions on the offered certificates;
 
their yield to maturity;
 
the rate of principal payments; and
 
their weighted average life.
 
If losses on the mortgage loans exceed the aggregate principal amount of the classes of certificates subordinated to a particular class, such class will suffer a loss equal to the full amount of such excess (up to the outstanding principal amount of such certificate).
 
If you calculate your anticipated yield based on assumed rates of defaults and losses that are lower than the default rate and losses actually experienced and such losses are allocable to your certificates, your actual yield to maturity will be lower than the assumed yield.  Under certain extreme scenarios, such yield could be negative.  In general, the earlier a loss borne by you on your certificates occurs, the greater the effect on your yield to maturity.
 
Even if losses on the mortgage loans are not borne by your certificates, those losses may affect the weighted average life and yield to maturity of your certificates.  This may be so because those losses lead to your certificates having a higher percentage ownership interest in the trust and related distributions of principal payments on the mortgage loans than would otherwise have been the case.  The effect on the weighted average life and yield to maturity of your certificates will depend upon the characteristics of the remaining mortgage loans.
 
Additionally, delinquencies and defaults on the mortgage loans may significantly delay the receipt of distributions by you on your certificates, unless certain advances are made to cover delinquent payments or the subordination of another class of certificates fully offsets the effects of any such delinquency or default.
 
Additionally, the courts of any state may refuse the foreclosure of a mortgage or deed of trust when an acceleration of the indebtedness would be inequitable or unjust or the circumstances would render the action unconscionable.
 
The Borrower’s Form of Entity May Cause Special Risks
 
Most of the borrowers are legal entities rather than individuals.  Mortgage loans made to legal entities may entail risks of loss greater than those of mortgage loans made to individuals.  For example, a legal entity, as opposed to an individual, may be more inclined to seek legal protection from its creditors under the bankruptcy laws.  Unlike individuals involved in bankruptcies, most of the entities generally do not have personal assets and creditworthiness at stake.  The terms of the mortgage loans generally require that the borrowers covenant to be single purpose entities, although in many cases the borrowers are not required to observe all covenants and conditions that typically are required in order for them to be viewed under standard rating agency criteria as “special purpose entities”.  In addition, certain mortgage loans may not have borrower principals.  In general, borrowers’ organizational documents or the terms of the mortgage loans limit their activities to the ownership of only the related mortgaged property or properties and limit the borrowers’ ability to incur additional indebtedness.  These provisions are designed to mitigate the possibility that the borrowers’ financial condition would be adversely impacted by factors unrelated to the mortgaged property and the mortgage loan in the pool.  However, we cannot assure you that the related borrowers will comply with these requirements.  The bankruptcy of a borrower, or a general partner or managing member of a borrower, may impair the ability of the lender to enforce its rights and remedies under the related mortgage.
 
Many of the borrowers are not special purpose entities structured to limit the possibility of becoming insolvent or bankrupt, and therefore may be more likely to become insolvent or the subject of a voluntary or involuntary bankruptcy proceeding because such borrowers may be:
 
operating entities with businesses distinct from the operation of the mortgaged property with the associated liabilities and risks of operating an ongoing business; or
 
individuals that have personal liabilities unrelated to the mortgaged property.
 
 
 
-24-

 
 
However, any borrower, even a special purpose entity structured to be bankruptcy remote, as an owner of real estate will be subject to certain potential liabilities and risks.  We cannot provide assurances that any borrower will not file for bankruptcy protection or that creditors of a borrower or a corporate or individual general partner or managing member of a borrower will not initiate a bankruptcy or similar proceeding against such borrower or corporate or individual general partner or managing member.
 
Furthermore, with respect to any related borrowers, creditors of a common parent in bankruptcy may seek to consolidate the assets of such borrowers with those of the parent.  Consolidation of the assets of such borrowers would likely have an adverse effect on the funds available to make distributions on your certificates, and may lead to a downgrade, withdrawal or qualification of any securities ratings assigned to your certificates.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Bankruptcy Laws” in this prospectus.
 
In addition, with respect to certain mortgage loans, the borrowers may own the related mortgaged property as tenants in common.  These mortgage loans may be subject to prepayment, including during periods when prepayment might otherwise be prohibited, as a result of partition.  Although some of the related borrowers may have purported to waive any right of partition, we cannot assure you that any such waiver would be enforced by a court of competent jurisdiction.
 
Borrower and Related Party Bankruptcy Proceedings Entail Certain Risks
 
Under federal bankruptcy law, the filing of a petition in bankruptcy by or against a borrower will stay the commencement or continuation of a foreclosure action and delay the sale of the real property owned by that borrower.  In addition, even if a court determines that the value of the mortgaged property is less than the principal balance of the mortgage loan it secures, the court may prevent a lender from foreclosing on the mortgaged property (subject to certain protections available to the lender).  As part of a restructuring plan, a court also may reduce the amount of secured indebtedness to the then-current value of the mortgaged property, which action would make the lender a general unsecured creditor for the difference between the then-current value and the amount of its outstanding mortgage indebtedness.  A bankruptcy court also may: (1) grant a debtor a reasonable time to cure a payment default on a mortgage loan; (2) reduce periodic payments due under a mortgage loan; (3) change the rate of interest due on a mortgage loan; or (4) otherwise alter the mortgage loan’s repayment schedule.
 
Moreover, the filing of a petition in bankruptcy by, or on behalf of, a junior lienholder may stay the senior lienholder from taking action to foreclose on the junior lien.  Additionally, the borrower’s trustee or the borrower, as debtor in possession, has certain special powers to avoid, subordinate or disallow debts.  In certain circumstances, the claims of the securitization trustee may be subordinated to financing obtained by a debtor in possession subsequent to its bankruptcy.
 
Under federal bankruptcy law, the mortgagee will be stayed from enforcing a borrower’s assignment of rents and leases.  Federal bankruptcy law also may interfere with the master servicer’s or special servicer’s ability to enforce lockbox requirements.  The legal proceedings necessary to resolve these issues can be time consuming and may significantly delay or diminish the receipt of rents.  Rents also may escape an assignment to the extent they are used by the borrower to maintain the mortgaged property or for other court authorized expenses.
 
As a result of the foregoing, the trustee’s recovery with respect to borrowers in bankruptcy proceedings may be significantly delayed, and the aggregate amount ultimately collected may be substantially less than the amount owed.
 
Certain mortgage loans may have sponsors that have previously filed for bankruptcy protection, which in some cases may have involved the same property that currently secures the mortgage loan.  In each case, the related entity or person has emerged from bankruptcy.  However, we cannot assure you that such sponsors will not be more likely than other sponsors to utilize their rights in bankruptcy in the event of any threatened action by the mortgagee to enforce its rights under the related loan documents.
 
Tenancies in Common May Hinder or Delay Recovery
 
With respect to certain mortgage loans, the borrowers may own the related mortgaged property as tenants in common.  These mortgage loans may be subject to prepayment, including during periods when prepayment might
 
 
-25-

 
 
otherwise be prohibited, as a result of partition.  Although some of the related borrowers may have purported to waive any right of partition, we cannot assure you that any such waiver would be enforced by a court of competent jurisdiction.
 
In general, with respect to a tenant in common ownership structure, each tenant in common owns an undivided share in the property and if such tenant in common desires to sell its interest in the property (and is unable to find a buyer or otherwise needs to force a partition) such tenant in common has the ability to request that a court order a sale of the property and distribute the proceeds to each tenant in common proportionally.  As a result, if a borrower exercises such right of partition, the related mortgage loans may be subject to prepayment.  In addition, the tenant in common structure may cause delays in the enforcement of remedies; this may occur, for example, because of procedural or substantive issues resulting from the existence of multiple borrowers under the related loan, such as in bankruptcy, in which circumstance, each time a tenant in common borrower files for bankruptcy, the bankruptcy court stay will be reinstated.
 
In some cases, the related borrower may be a special purpose entity (in some cases bankruptcy remote), reducing the risk of bankruptcy.  There can be no assurance that a bankruptcy proceeding by a single tenant in common borrower will not delay enforcement of this pooled mortgage loan.  Additionally, in some cases, subject to the terms of the related mortgage loan documents, a borrower or a tenant in common borrower may assign its interests to one or more tenant in common borrowers.  Such change to, or increase in, the number of tenant in common borrowers increases the risks related to this ownership structure.
 
Mortgaged Properties with Tenants Present Special Risks
 
The income from, and market value of, the mortgaged properties leased to various tenants would be adversely affected if:
 
  space in the mortgaged properties could not be leased or relet;
 
  tenants were unable to meet their lease obligations;
 
  leasing or re leasing is restricted by exclusive rights of tenants to lease the mortgaged properties or other covenants not to lease space for certain uses or activities, or covenants limiting the types of tenants to which space may be leased;
 
  substantial re leasing costs were required and/or the cost of performing landlord obligations under existing leases materially increased;
 
  a significant tenant were to become a debtor in a bankruptcy case; or
 
  rental payments could not be collected for any other reason.
 
Repayment of the mortgage loans secured by retail, offices and industrial and warehouse properties will be affected by the expiration of leases and the ability of the respective borrowers to renew the leases or relet the space on comparable terms.  In addition, if a significant portion of tenants have leases which expire near or at maturity of the related mortgage loan, then it may make it more difficult for the related borrower to seek refinancing or make any applicable balloon payment.  Certain of the mortgaged properties may be leased in whole or in part by government sponsored tenants who have the right to cancel their leases at any time or for lack of appropriations.  Other tenants may have the right to cancel or terminate their leases prior to the expiration of the lease term or upon the occurrence of certain events including, but not limited to, the loss of an anchor tenant at the mortgaged property.  Additionally, mortgage loans may have concentrations of leases expiring at varying rates in varying percentages.
 
Even if vacated space is successfully relet, the costs associated with reletting, including tenant improvements and leasing commissions, could be substantial and could reduce cash flow from the mortgaged properties.  Moreover, if a tenant defaults in its obligations to a borrower, the borrower may incur substantial costs and experience significant delays associated with enforcing its rights and protecting its investment, including costs incurred in renovating and reletting the property.
 
 
-26-

 
 
In addition, certain mortgaged properties may have tenants that are paying rent but are not in occupancy or may have vacant space that is not leased, and in certain cases, the occupancy percentage could be less than 80%.  Any “dark” space may cause the mortgaged property to be less desirable to other potential tenants or the related tenant may be more likely to default in its obligations under the lease.  We cannot assure you that those tenants will continue to fulfill their lease obligations or that the space will be relet.
 
Additionally, in certain jurisdictions, if tenant leases are subordinated to the liens created by the mortgage but do not contain attornment provisions (provisions requiring the tenant to recognize as landlord under the lease a successor owner following foreclosure), the leases may terminate upon the transfer of the property to a foreclosing lender or purchaser at foreclosure.  Accordingly, if a mortgaged property is located in such a jurisdiction and is leased to one or more desirable tenants under leases that are subordinate to the mortgage and do not contain attornment provisions, such mortgaged property could experience a further decline in value if such tenants’ leases were terminated.
 
With respect to certain of the mortgage loans, the related borrower has given to certain tenants or others an option to purchase, a right of first refusal or a right of first offer to purchase all or a portion of the mortgaged property in the event a sale is contemplated, and such right is not subordinate to the related mortgage.  This may impede the mortgagee’s ability to sell the related mortgaged property at foreclosure, or, upon foreclosure, this may affect the value and/or marketability of the related mortgaged property.
 
Mortgaged Properties with Multiple Tenants May Increase Reletting Costs and Reduce Cash Flow
 
If a mortgaged property has multiple tenants, reletting expenditures may be more frequent than in the case of mortgaged properties with fewer tenants, thereby reducing the cash flow available for debt service payments.  Multi-tenanted mortgaged properties also may experience higher continuing vacancy rates and greater volatility in rental expenses.
 
Tenant Bankruptcy Adversely Affects Property Performance
 
The bankruptcy or insolvency of a major tenant, or a number of smaller tenants, in retail, office, industrial and warehouse properties may adversely affect the income produced by a mortgaged property.  Under the federal bankruptcy code a tenant has the option of assuming or rejecting any unexpired lease.  If the tenant rejects the lease, the landlord’s claim for breach of the lease would be a general unsecured claim against the tenant (absent collateral securing the claim).  The claim would be limited to the unpaid rent reserved under the lease for the periods prior to the bankruptcy petition (or earlier surrender of the leased premises) which are unrelated to the rejection, plus the greater of one year’s rent or 15% of the remaining reserved rent (but not more than three year’s rent).  There are several cases in which one or more tenants at a mortgaged property have declared bankruptcy.  We cannot assure you that any such tenant will affirm its lease.
 
Risks Related to Enforceability
 
All of the mortgages permit the lender to accelerate the debt upon default by the borrower.  The courts of all states will enforce acceleration clauses in the event of a material payment default.  Courts, however, may refuse to permit foreclosure or acceleration if a default is deemed immaterial or the exercise of those remedies would be unjust or unconscionable.
 
If a mortgaged property has tenants, the borrower typically assigns its income as landlord to the lender as further security, while retaining a license to collect rents as long as there is no default.  If the borrower defaults, the license terminates and the lender is entitled to collect rents.  In certain jurisdictions, such assignments may not be perfected as security interests until the lender takes actual possession of the property’s cash flow.  In some jurisdictions, the lender may not be entitled to collect rents until the lender takes possession of the property and secures the appointment of a receiver.  In addition, as previously discussed, if bankruptcy or similar proceedings are commenced by or for the borrower, the lender’s ability to collect the rents may be adversely affected.
 
 
-27-

 
 
Potential Absence of Attornment Provisions Entails Risks
 
In some jurisdictions, if tenant leases are subordinate to the liens created by the mortgage and do not contain attornment provisions (i.e., provisions requiring the tenant to recognize a successor owner following foreclosure as landlord under the lease), the leases may terminate upon the transfer of the property to a foreclosing lender or purchaser at foreclosure.  Not all leases were reviewed to ascertain the existence of attornment or subordination provisions.  Accordingly, if a mortgaged property is located in such a jurisdiction and is leased to one or more desirable tenants under leases that are subordinate to the mortgage and do not contain attornment provisions, such mortgaged property could experience a further decline in value if such tenants’ leases were terminated.  This is particularly likely if such tenants were paying above market rents or could not be replaced.
 
If a lease is not subordinate to a mortgage, the trust will not possess the right to dispossess the tenant upon foreclosure of the mortgaged property (unless otherwise agreed to with the tenant).  If the lease contains provisions inconsistent with the mortgage (e.g., provisions relating to application of insurance proceeds or condemnation awards) or which could affect the enforcement of the lender’s rights (e.g., a right of first refusal to purchase the property), the provisions of the lease will take precedence over the provisions of the mortgage.
 
Risks Associated with Commercial Lending May Be Different than those for Residential Lending
 
The mortgaged properties consist solely of multifamily rental and commercial properties.  Commercial and multifamily lending is generally viewed as exposing a lender to a greater risk of loss than residential one to four family lending because it usually involves larger loans to a single borrower or a group of related borrowers.
 
The repayment of a commercial or multifamily loan is typically dependent upon the ability of the applicable property to produce cash flow through the collection of rents or other operating revenues.  Even the liquidation value of a commercial property is determined, in substantial part, by the capitalization of the property’s cash flow.  However, net operating income can be volatile and may be insufficient to cover debt service on the loan at any given time.
 
The net operating incomes and property values of the mortgaged properties may be adversely affected by a large number of factors.  Some of these factors relate to the properties themselves, such as:
 
the age, design and construction quality of the properties;
 
perceptions regarding the safety, convenience and attractiveness of the properties;
 
the proximity and attractiveness of competing properties;
 
the adequacy of the property’s management and maintenance;
 
increases in operating expenses;
 
an increase in the capital expenditures needed to maintain the properties or make improvements;
 
dependence upon a single tenant and concentration of tenants in a particular business;
 
a decline in the financial condition of a major tenant;
 
an increase in vacancy rates; and
 
a decline in rental rates as leases are renewed or entered into with new tenants.
 
Other factors are more general in nature, such as:
 
national, regional or local economic conditions, including plant closings, military base closings, industry slowdowns and unemployment rates;
 
local real estate conditions, such as an oversupply of retail space, office space or multifamily housing;
 
 
-28-

 
 
demographic factors;
 
changes or continued weakness in specific industry segments;
 
the public perception of safety for customers and clients;
 
consumer confidence;
 
consumer tastes and preferences;
 
retroactive changes in building codes;
 
conversion of a property to an alternative use;
 
new construction in the market; and
 
number and diversity of tenants.
 
The volatility of net operating income will be influenced by many of the foregoing factors, as well as by:
 
the length of tenant leases;
 
the creditworthiness of tenants;
 
in the case of rental properties, the rate at which new rentals occur;
 
lease termination, rent abatement/offset, co tenancy or exclusivity provisions of tenant leases;
 
tenant defaults;
 
  the property’s “operating leverage” which is generally the percentage of total property expenses in relation to revenue, the ratio of fixed operating expenses to those that vary with revenues, and the level of capital expenditures required to maintain the property and to retain or replace tenants; and
 
  in the case of government sponsored tenants, the right of the tenant in some instances to cancel a lease due to a lack of appropriations.
 
 
Poor Property Management Will Lower the Performance of the Related Mortgaged Property
 
The successful operation of a real estate project depends upon the property manager’s performance and viability.  The property manager is responsible for:
 
responding to changes in the local market;
 
planning and implementing the rental structure;
 
operating the property and providing building services;
 
managing operating expenses; and
 
assuring that maintenance and capital improvements are carried out in a timely fashion.
 
Properties deriving revenues primarily from short term sources, such as short term or month to month leases, are generally more management intensive than properties leased to creditworthy tenants under long term leases.
 
Good management, by controlling costs, providing services to tenants and seeing to property maintenance and upkeep, can, in some cases, improve cash flow, reduce vacancy, leasing and repair costs and preserve property value.  Poor management could impair short-term cash flow and the long term viability of a property.
 
 
-29-

 
 
We make no representation or warranty as to the skills of any present or future managers.  Additionally, we cannot assure you that the property managers will be in a financial condition to fulfill their management responsibilities throughout the terms of their respective management agreements.
 
Furthermore, we cannot assure you that the mortgaged properties will not have related management which in the event that a related management company is incapable of performing its duties may affect one or more sets of mortgaged properties.  We also cannot assure you that the mortgaged properties will not be self-managed by the related borrower, in which case such self-management or affiliated management may make it more difficult to monitor the property management, replace that borrower as property manager in the event that the borrower’s management is detrimentally affecting the property or ensure that the borrower provides all information necessary to manage the mortgaged property to a replacement property manager in the event that the borrower is replaced as property manager.
 
Particular Property Types Present Special Risks
 
 
Retail Properties.
 
Several factors may adversely affect the value and successful operation of a retail property, including:
 
  changes in consumer spending patterns, local competitive conditions (such as the supply of retail space or the existence or construction of new competitive shopping centers or shopping malls);
 
alternative forms of retailing (such as direct mail, video shopping networks and internet web sites which reduce the need for retail space by retail companies);
 
the quality and philosophy of management;
 
the safety, convenience and attractiveness of the property to tenants and their customers or clients;
 
the public perception of the safety of customers at shopping malls and shopping centers;
 
the need to make major repairs or improvements to satisfy the needs of major tenants; and
 
traffic patterns and access to major thoroughfares.
 
The general strength of retail sales also directly affects retail properties.  The retailing industry is currently undergoing consolidation due to many factors, including growth in discount and alternative forms of retailing.  If the sales by tenants in the mortgaged properties that contain retail space were to decline, the rents that are based on a percentage of revenues may also decline, and tenants may be unable to pay the fixed portion of their rents or other occupancy costs.  The cessation of business by a significant tenant can adversely affect a retail property, not only because of rent and other factors specific to such tenant, but also because significant tenants at a retail property play an important part in generating customer traffic and making a retail property a desirable location for other tenants at such property.  In addition, certain tenants at retail properties may be entitled to terminate their leases if an anchor tenant fails to renew or terminates its lease, becomes the subject of a bankruptcy proceeding or ceases operations at such property.
 
The presence or absence of an “anchor tenant” or a “shadow anchor” in or near a shopping center also can be important because anchors play a key role in generating customer traffic and making a shopping center desirable for other tenants.  An “anchor tenant” is usually proportionately larger in size than most other tenants in the mortgaged property, is vital in attracting customers to a retail property and is located on the related mortgaged property.  A “shadow anchor” is usually proportionally larger in size than most tenants in the mortgaged property, is important in attracting customers to a retail property and is located sufficiently close and convenient to the mortgaged property, but not on the mortgaged property, so as to influence and attract potential customers.
 
If anchor stores in a mortgaged property were to close, the related borrower may be unable to replace those anchors in a timely manner or without suffering adverse economic consequences.  Certain of the tenants or anchor stores of the retail properties may have co tenancy clauses and/or operating covenants in their leases or operating
 
 
-30-

 
 
agreements which permit those tenants or anchor stores to cease operating under certain conditions, including, without limitation, certain other stores not being open for business at the mortgaged property or a subject store not meeting the minimum sales requirement under its lease.  In addition, in the event that a “shadow anchor” fails to renew its lease, terminates its lease or otherwise ceases to conduct business within a close proximity to the mortgaged property, customer traffic at the mortgaged property may be substantially reduced.  We cannot assure you that such space will be occupied or that the related mortgaged property will not suffer adverse economic consequences.
 
 
Office Properties.
 
A large number of factors may adversely affect the value of office properties, including:
 
  the number and quality of an office building’s tenants;
 
  the physical attributes of the building in relation to competing buildings (e.g., age, condition, design, access to transportation and ability to offer certain amenities, such as sophisticated building systems);
 
  the desirability of the area as a business location;
 
  the strength and nature of the local economy (including labor costs and quality, tax environment and quality of life for employees);
 
  an adverse change in population, patterns of telecommuting or sharing of office space;
 
  local competitive conditions, including the supply of office space or the existence or construction of new competitive office buildings;
 
  quality of management;
 
  changes in population and employment affecting the demand for office space;
 
  properties not equipped for modern business becoming functionally obsolete; and
 
  declines in the business of tenants, especially single tenanted property.
 
In addition, there may be significant costs associated with tenant improvements, leasing commissions and concessions in connection with reletting office space.  Moreover, the cost of refitting office space for a new tenant is often higher than the cost of refitting other types of property.
 
Medical office properties may be included in office properties.  The performance of a medical office property may depend on the proximity of such property to a hospital or other health care establishment and on reimbursements for patient fees from private or government sponsored insurance companies.  The sudden closure of a nearby hospital may adversely affect the value of a medical office property.  In addition, the performance of a medical office property may depend on reimbursements for patient fees from private or government sponsored insurers and issues related to reimbursement (ranging from non-payment to delays in payment) from such insurers could adversely impact cash flow at such mortgaged properties.  Moreover, medical office properties appeal to a narrow market of tenants and the value of a medical office property may be adversely affected by the availability of competing medical office properties.
 
 
Multifamily Properties.
 
Several factors may adversely affect the value and successful operation of a multifamily property, including:
 
the physical attributes of the apartment building (e.g., its age, appearance and construction quality);
 
the location of the property (e.g., a change in the neighborhood over time);
 
the ability and willingness of management to provide adequate maintenance and insurance;
 
 
-31-

 
 
the types of services or amenities the property provides;
 
the property’s reputation;
 
the level of mortgage interest rates (which may encourage tenants to purchase rather than lease housing);
 
  the tenant mix, such as the tenant population being predominantly students or being heavily dependent on workers from a particular business or personnel from a local military base;
 
the presence of competing properties;
 
  dependence on governmental programs that provide rental subsidies to tenants pursuant to tenant voucher programs, which vouchers may be used at other properties to influence tenant mobility;
 
  adverse local or national economic conditions which may limit the amount of rent that may be charged and may result in a reduction of timely rent payments or a reduction in occupancy levels; and
 
state and local regulations which may affect the building owner’s ability to increase rent to market rent for an equivalent apartment.
 
Certain states regulate the relationship of an owner and its tenants.  Commonly, these laws require a written lease, good cause for eviction, disclosure of fees and notification to residents of changed land use, while prohibiting unreasonable rules, retaliatory evictions and restrictions on a resident’s choice of unit vendors.  Apartment building owners have been the subject of suits under state “Unfair and Deceptive Practices Acts” and other general consumer protection statutes for coercive, abusive or unconscionable leasing and sales practices.  A few states offer more significant protection.  For example, there are provisions that limit the bases on which a landlord may terminate a tenancy or increase its rent or prohibit a landlord from terminating a tenancy solely by reason of the sale of the owner’s building.
 
In addition to state regulation of the landlord tenant relationship, numerous counties and municipalities impose rent control on apartment buildings.  These ordinances may limit rent increases to fixed percentages, to percentages of increases in the consumer price index, to increases set or approved by a governmental agency, or to increases determined through mediation or binding arbitration.  Any limitations on a borrower’s ability to raise property rents may impair such borrower’s ability to repay its multifamily loan from its net operating income or the proceeds of a sale or refinancing of the related multifamily property.
 
Certain of the mortgage loans are secured by mortgaged properties that are eligible (or become eligible in the future) for and have received low income housing tax credits pursuant to Section 42 of the Internal Revenue Code in respect of various units within the mortgaged property or have tenants that rely on rent subsidies under various government funded programs, including the Section 8 Tenant Based Assistance Rental Certificate Program of the United States Department of Housing and Urban Development.  Under HUD's Section 8 Tenant-Based Assistance Rental Voucher Program or Section 8 Tenant-Based Assistance Rental Certificate Program (now combined into one voucher program), the rents charged to some of the tenants are subsidized by housing assistance payments.  Those payments are made pursuant to housing assistance payments contracts between the borrower and a local housing authority which receives Section 8 funds from HUD.  The term of each housing assistance payments contract is limited to the term of the related tenant lease, generally one year, renewable at the option of the tenant.  Tenants may choose to move out of the mortgaged properties and utilize their vouchers elsewhere, and we cannot assure you that those units will be re-rented.  The housing assistance payments contracts impose certain management and maintenance obligations on the borrowers, and housing assistance payments can be suspended, reduced, or terminated if HUD or the local housing authority determines that the borrowers have breached the housing assistance payments contracts.  HUD may in the future elect, or be required by Congress, to take actions with the effect of limiting increases in rents subsidized under Section 8, or reducing rent levels currently in effect.  The ability of the respective borrowers to pay the housing assistance payments loans, and the value of their mortgaged properties and consequent ability to refinance the mortgage loans which are subject to housing assistance payments contracts, could be adversely affected by some or all of the above mentioned risks.  We can give you no assurance that these or any similar programs will be continued in their present form or that the level of assistance provided will
 
 
-32-

 
 
be sufficient to generate enough revenues for the related borrower to meet its obligations under the related mortgage loans.
 
Certain of the mortgage loans are secured or may be secured in the future by mortgaged properties that are subject to certain affordable housing covenants, in respect of various units within the mortgaged properties.
 
 
Hotel Properties.
 
Various factors may adversely affect the economic performance of a hotel, including:
 
adverse economic and social conditions, either local, regional or national (which may limit the amount that can be charged for a room and reduce occupancy levels);
 
the construction of competing hotels or resorts;
 
continuing expenditures for modernizing, refurbishing and maintaining existing facilities prior to the expiration of their anticipated useful lives;
 
a deterioration in the financial strength or managerial capabilities of the owner and operator of a hotel; and
 
  changes in travel patterns (including, for example, the decline in air travel following the terrorist attacks in New York City, Washington, D.C. and Pennsylvania and the current military operations in Afghanistan and Iraq) caused by changes in access, energy prices, strikes, relocation of highways, construction of additional highways or other factors.
 
Because hotel rooms generally are rented for short periods of time, the financial performance of hotels tends to be affected by adverse economic conditions and competition more quickly than other types of commercial properties.
 
Moreover, the hotel and lodging industry is generally seasonal in nature and different seasons affect different hotels depending on type and location.  This seasonality can be expected to cause periodic fluctuations in a hotel property’s room and restaurant revenues, occupancy levels, room rates and operating expenses.
 
When applicable, the liquor licenses for most of the mortgaged properties are commonly held by affiliates of the mortgagors, unaffiliated managers and operating lessees.  The laws and regulations relating to liquor licenses generally prohibit the transfer of such licenses to any person.  In the event of a foreclosure of a hotel property that holds a liquor license, the trustee or a purchaser in a foreclosure sale would likely have to apply for a new license, which might not be granted or might be granted only after a delay which could be significant.  We cannot assure you that a new license could be obtained promptly or at all.  The lack of a liquor license in a full service hotel could have an adverse impact on the revenue from the related mortgaged property or on the hotel’s occupancy rate.
 
Hotels may be operated under franchise, management or operating agreements that may be terminated by the franchisor, manager or operator.  It may be difficult to terminate a manager of a hotel after foreclosure of the related mortgage.
 
The performance of a hotel property affiliated with a franchise or hotel management company depends in part on:
 
the continued existence and financial strength of the franchisor or hotel management company;
 
the public perception of the franchise or hotel chain service mark; and
 
the duration of the franchise licensing or management agreements.
 
Any provision in a franchise agreement or management agreement providing for termination because of a bankruptcy of a franchisor or manager generally will not be enforceable.  Replacement franchises may require significantly higher fees.
 
 
-33-

 
 
 
The transferability of a franchise license agreement is generally restricted.  In the event of a foreclosure, the lender or its agent may not have the right to use the franchise license without the franchisor’s consent.  Conversely, in the case of certain mortgage loans, the lender may be unable to remove a franchisor or a hotel management company that it desires to replace following a foreclosure.
 
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 or to operate property independently of a franchise license. The loss of a franchise license could have a 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.
 
 
 
Self-Storage Properties.
 
Self-storage properties are considered vulnerable to competition, because both acquisition costs and break even occupancy are relatively low.  The conversion of self-storage facilities to alternative uses would generally require substantial capital expenditures.  Thus, if the operation of any of the self-storage properties becomes unprofitable due to:
 
decreased demand;
 
competition;
 
age of improvements; or
 
other factors affecting the borrower’s ability to meet its obligations on the related mortgage loan.
 
The liquidation value of that self-storage mortgaged property may be substantially less, relative to the amount owing on the mortgage loan, than if the self-storage property were readily adaptable to other uses.
 
Tenant privacy, anonymity and efficient access may heighten environmental risks.  No environmental assessment of a mortgaged property included an inspection of the contents of the self-storage units included in the self-storage properties and there is no assurance that all of the units included in the self-storage properties are free from hazardous substances or other pollutants or contaminants or will remain so in the future.
 
 
Industrial and Warehouse Properties.
 
Among the significant factors determining the value of industrial and warehouse properties are:
 
the quality of tenants;
 
building design and adaptability (e.g., clear heights, column spacing, zoning restrictions, number of bays and bay depths, divisibility and truck turning radius); and
 
the location of the property (e.g., proximity to supply sources and customers, availability of labor and accessibility to distribution channels).
 
In addition, industrial and warehouse properties may be adversely affected by reduced demand for industrial and warehouse space occasioned by a decline in a particular industrial site or in a particular industry segment, and a particular industrial and warehouse property may be difficult to relet to another tenant or may become functionally obsolete relative to newer properties.
 
 
-34-

 
 
 
Manufactured Housing Communities.
 
Significant factors determining the value of such properties are generally similar to the factors affecting the value of multifamily properties.  In addition, these properties are special purpose properties that could not be readily converted to general residential, retail or office use.  In fact, certain states also regulate changes in manufactured housing communities and require that the landlord give written notice to its tenants a substantial period of time prior to the projected change.  Consequently, if the operation of any of such properties becomes unprofitable such that the borrower becomes unable to meet its obligation on the related mortgage loan, the liquidation value of the related property may be substantially less, relative to the amount owing on the mortgage loan, than would be the case if such properties were readily adaptable to other uses.
 
 
Parking Garage Facilities.
 
Parking garage facilities present risks not associated with other properties.  Properties used for parking garages are more prone to environmental concerns than other property types.  Aspects of building site design and adaptability affect the value of a parking garage facility.  Site characteristics which are valuable to a parking garage facility include location, ceiling clearance heights, column spacing, zoning restrictions, number of bays and bay depths, divisibility, truck turning radius and overall functionality and accessibility.  In addition, because of the unique construction requirements of many parking garage facilities, any vacant parking garage facility may not be easily converted to other uses.
 
The Operation of the Mortgaged Property upon Foreclosure of the Mortgage Loan May Affect Tax Status
 
If the trust were to acquire a mortgaged property subsequent to a default on the related mortgage loan pursuant to a foreclosure or deed in lieu of foreclosure, the special servicer would be required to retain an independent contractor to operate and manage the mortgaged property.  Among other things, the independent contractor would not be permitted to perform construction work on the mortgaged property unless such construction generally was at least 10% complete at the time default on the related mortgage loan became imminent.  In addition, any net income from such operation and management, other than qualifying “rents from real property” (as defined in Section 856(d) of the Internal Revenue Code of 1986, as amended), or any rental income based on the net profits of a tenant or sub tenant or allocable to a service that is non-customary in the area and for the type of building involved, will subject the trust fund to federal (and possibly state or local) tax on such income at the highest marginal corporate tax rate (currently 35%), thereby reducing net proceeds available for distribution to certificateholders.  In addition, if the trust were to acquire one or more mortgaged properties pursuant to a foreclosure or deed in lieu of foreclosure, upon acquisition of those mortgaged properties, the trust may be required in certain jurisdictions, particularly in New York, to pay state or local transfer or excise taxes upon liquidation of such mortgaged properties.  Such state or local taxes may reduce net proceeds available for distribution to the certificateholders.
 
One Action Rules May Limit Remedies
 
Several states (including California) have laws that prohibit more than one “judicial action” to enforce a mortgage obligation, and some courts have construed the term “judicial action” broadly.  Accordingly, the special servicer is required to obtain advice of counsel prior to enforcing any of the trust fund’s rights under any of the mortgage loans that include mortgaged properties where the rule could be applicable.
 
Property Value May Be Adversely Affected Even When Current Operating Income Is Not
 
Various factors may adversely affect the value of a mortgaged property without affecting the property’s current net operating income.  These factors include, among others:
 
the existence of, or changes in, governmental regulations, fiscal policy, zoning or tax laws;
 
potential environmental legislation or liabilities or other legal liabilities;
 
the availability of refinancing;
 
changes in interest rate levels; and
 
 
-35-

 
 
reduction in, or loss of, real estate tax abatements, exemptions, tax incremental financing arrangements, or similar benefits.
 
Leasehold Interests Are Subject to Terms of the Ground Lease
 
Leasehold mortgages are subject to certain risks not associated with mortgage loans secured by the fee estate of the mortgagor.  The most significant of these risks is that the ground lease may terminate if, among other reasons, the ground lessee breaches or defaults in its obligations under the ground lease or there is a bankruptcy of the ground lessee or the ground lessor.  Accordingly, a leasehold mortgagee may lose the collateral securing its leasehold mortgage.  In addition, although the consent of the ground lessor generally will not be required for foreclosure, the terms and conditions of a leasehold mortgage may be subject to the terms and conditions of the ground lease, and the rights of a ground lessee or a leasehold mortgagee with respect to, among other things, insurance, casualty and condemnation may be affected by the provisions of the ground lease.
 
In Precision Indus. v. Qualitech Steel SBQ, LLC, 327 F.3d 537 (7th Cir. 2003), the United States Court of Appeals for the Seventh Circuit ruled with respect to an unrecorded lease of real property that where a statutory sale of the fee interest in leased property occurs under Section 363(f) of the Bankruptcy Code (11 U.S.C. § 363(f)) upon the bankruptcy of a landlord, such 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.
 
Generally, each related ground lease requires the lessor to give the lender notice of the borrower’s defaults under the ground lease and an opportunity to cure them; permits the leasehold interest to be assigned to the lender or the purchaser at a foreclosure sale (in some cases only upon the consent of the lessor) and contains certain other protective provisions typically included in a “mortgageable” ground lease.
 
Upon the bankruptcy of a lessor or a lessee under a ground lease, the debtor entity has the right to assume or reject the lease.  If a debtor lessor rejects the lease, the lessee has the right to remain in possession of its leased premises for the rent otherwise payable under the lease for the term of the lease (including renewals).  If a debtor lessee/borrower rejects any or all of the lease, the leasehold lender could succeed to the lessee/borrower’s position under the lease only if the lessor specifically grants the lender such right.  If both the lessor and the lessee/borrowers are involved in bankruptcy proceedings, the trustee may be unable to enforce the bankrupt lessee/borrower’s right to refuse to treat a ground lease rejected by a bankrupt lessor as terminated.  In such circumstances, a lease could be terminated notwithstanding lender protection provisions contained therein or in the mortgage.
 
Most of the ground leases securing the mortgaged properties provide that the ground rent increases during the term of the lease.  These increases may adversely affect the cash flow and net income of the borrower from the mortgaged property.
 
Collateral Securing Cooperative Loans May Diminish in Value
 
If specified in the related prospectus supplement, certain of the mortgage loans may be cooperative loans.  There are certain risks that differentiate cooperative loans from other types of mortgage loans.  Ordinarily, the cooperative incurs a blanket mortgage in connection with the construction or purchase of the cooperative’s apartment building and the underlying land.  The interests of the occupants under proprietary leases or occupancy agreements to which the cooperative is a party are generally subordinate to the interest of the holder of the blanket mortgage.  If the cooperative is unable to meet the payment obligations arising under its blanket mortgage, the mortgagee holding the blanket mortgage could foreclose on that mortgage and terminate all subordinate proprietary leases and occupancy agreements.  In addition, the blanket mortgage on a cooperative may provide financing in the form of a mortgage that does not fully amortize with a significant portion of principal being due in one lump sum at final maturity.  The inability of the cooperative to refinance this mortgage and its consequent inability to make such final payment could lead to foreclosure by the mortgagee providing the financing.  A foreclosure in either event by the holder of the blanket mortgage could eliminate or significantly diminish the value of the collateral securing the cooperative loans.
 
 
-36-

 
 
Condominium Ownership May Limit Use and Improvements
 
In the case of condominiums, a board of managers generally has discretion to make decisions affecting the condominium building and there may be no assurance that the borrower under a mortgage loan secured by one or more interests in that condominium will have any control over decisions made by the related board of managers.  Thus, decisions made by that related board of managers, including regarding assessments to be paid by the unit owners, insurance to be maintained on the condominium building and many other decisions affecting the maintenance, repair and, in the event of a casualty or condemnation, restoration of that building, may have a significant impact on the mortgage loans in the trust fund that are secured by mortgaged properties consisting of such condominium interests.  There can be no assurance that the related board of managers will always act in the best interests of the borrower under those mortgage loans.  Further, due to the nature of condominiums, a default under the related mortgage loan will not allow the special servicer the same flexibility in realizing on the collateral as is generally available with respect to properties that are not condominiums.  The rights of other unit owners, the documents governing the management of the condominium units and the state and local laws applicable to condominium units must be considered.  In addition, in the event of a casualty with respect to such a mortgaged property, due to the possible existence of multiple loss payees on any insurance policy covering that mortgaged property, there could be a delay in the allocation of related insurance proceeds, if any.  Consequently, servicing and realizing upon the collateral described above could subject the certificateholders to a greater delay, expense and risk than with respect to a mortgage loan secured by a property that is not a condominium.
 
Zoning Laws and Use Restrictions May Affect the Operation of a Mortgaged Property or the Ability to Repair or Restore a Mortgaged Property
 
Certain of the mortgaged properties may not comply with current zoning laws, including density, use, parking and set back requirements, due to changes in zoning requirements after such mortgaged properties were constructed.  These properties, as well as those for which variances or special permits were issued, are considered to be a “legal non-conforming use” and/or the improvements are considered to be “legal non-conforming structures”.  This means that the borrower is not required to alter the use or structure to comply with the existing or new law; however, the borrower may not be able to rebuild the premises “as is” in the event of a casualty loss.  This may adversely affect the cash flow of the property following the casualty.  If a casualty were to occur, we cannot assure you that insurance proceeds would be available to pay the mortgage loan in full.  In addition, if the property were repaired or restored in conformity with then-current law, the value of the property or the revenue producing potential of the property may not be equal to that which existed before the casualty.
 
In addition, certain of the mortgaged properties which are non-conforming may not be “legal non-conforming uses” or “legal non-conforming structures”.  The failure of a mortgaged property to comply with zoning laws or to be a “legal non-conforming use” or “legal non-conforming structure” may adversely affect market value of the mortgaged property or the borrower’s ability to continue to use it in the manner it is currently being used.
 
In addition, certain of the mortgaged properties may be subject to certain use restrictions imposed pursuant to restrictive covenants, reciprocal easement agreements or operating agreements or, in the case of mortgaged properties that are or constitute a portion of condominiums, condominium declarations or other condominium use restrictions or regulations, especially in a situation where the mortgaged property does not represent the entire condominium property.  Such use restrictions include, for example, limitations on the character of the improvements or the properties, limitations affecting noise and parking requirements, among other things, and limitations on the borrowers’ right to operate certain types of facilities within a prescribed radius.  These limitations could adversely affect the ability of the related borrower to lease the mortgaged property on favorable terms, thus adversely affecting the borrower’s ability to fulfill its obligations under the related mortgage loan.
 
Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses
 
Some of the mortgaged properties may not be readily convertible to alternative uses if those properties were to become unprofitable for any reason or if those properties were designated as historic sites.  Converting commercial properties and manufactured housing communities to alternate uses generally requires substantial capital expenditures.  The liquidation value of a mortgaged property consequently may be substantially less than would be the case if the property were readily adaptable to other uses.
 
 
-37-

 
 
Zoning or other restrictions also may prevent alternative uses.  See “—Zoning Laws and Use Restrictions May Affect the Operation of a Mortgaged Property or the Ability to Repair or Restore a Mortgaged Property” above.
 
Appraisals Are Limited in Reflecting the Value of a Mortgaged Property
 
Appraisals were obtained with respect to each of the mortgaged properties in connection with the origination of the applicable mortgage loan.  In general, appraisals represent the analysis and opinion of qualified appraisers and are not guarantees of present or future value.  One appraiser may reach a different conclusion than the conclusion that would be reached if a different appraiser were appraising that property.  Moreover, appraisals seek to establish the amount a typically motivated buyer would pay a typically motivated seller and, in certain cases, may have taken into consideration the purchase price paid by the borrower.  That amount could be significantly higher than the amount obtained from the sale of a mortgaged property under a distress or liquidation sale.  We cannot assure you that the information set forth in this prospectus supplement regarding appraised values or loan to value ratios accurately reflects past, present or future market values of the mortgaged properties.
 
Risks Relating to Costs of Compliance with Applicable Laws and Regulations
 
A borrower may be required to incur costs to comply with various existing and future federal, state or local laws and regulations applicable to the related mortgaged property, for example, zoning laws and the Americans with Disabilities Act of 1990, as amended, which requires all public accommodations to meet certain federal requirements related to access and use by persons with disabilities.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Americans with Disabilities Act” in this prospectus.  The expenditure of these costs or the imposition of injunctive relief, penalties or fines in connection with the borrower’s noncompliance could negatively impact the borrower’s cash flow and, consequently, its ability to pay its mortgage loan.
 
Additional Compensation to the Servicer Will Affect Your Right To Receive Distributions
 
To the extent described in this prospectus, the master servicer, the special servicer or the trustee, as applicable, will be entitled to receive interest on unreimbursed advances.  This interest will generally accrue from the date on which the related advance is made or the related expense is incurred through the date of reimbursement.  In addition, under certain circumstances, including delinquencies in the payment of principal and interest, a mortgage loan will be specially serviced and the special servicer will be entitled to compensation for special servicing activities.  The right to receive interest on advances or special servicing compensation is senior to the rights of certificateholders to receive distributions on the offered certificates.  The payment of interest on advances and the payment of compensation to the special servicer may lead to shortfalls in amounts otherwise distributable on your certificates.
 
Liquidity for Certificates May Be Limited
 
The certificates will not be listed on any securities exchange or traded on the NASDAQ Stock Market, and there is currently no secondary market for the certificates.  While the underwriters currently intend to make a secondary market in the offered certificates, they are not obligated to do so.  Accordingly, there may not be an active or liquid secondary market for the certificates.  Lack of liquidity could result in a substantial decrease in the market value of the certificates.  Many other factors may affect the market value of the certificates including the then prevailing interest rates.
 
Mortgage Loan Repayments and Prepayments Will Affect Payment
 
As principal payments or prepayments are made on a mortgage loan that is part of a pool of mortgage loans, the pool will be subject to more concentrated risks with respect to the diversity of mortgaged properties, types of mortgaged properties and number of borrowers, as described in the prospectus supplement.  Classes that have a later sequential designation or a lower payment priority are more likely to be exposed to this concentration risk than are classes with an earlier sequential designation or a higher priority.  This is the case because principal on the offered certificates is generally payable in sequential order, and no class entitled to distribution of principal generally receives principal until the principal amount of the preceding class or classes entitled to receive principal have been reduced to zero.
 
 
-38-

 
 
Grace Periods Under the Mortgage Loans May Impact the Master Servicer’s Obligation To Advance
 
The mortgage loans have grace periods for monthly payments ranging from zero to ten days; provided, however, certain states by statute may override the terms of some mortgage loans and increase such grace periods.  In some cases, such grace periods may run past the determination date.  If borrowers pay at the end of such grace periods rather than on the due dates for such monthly payments, the master servicer will be required to make an advance for such monthly payment (and monthly servicing reports will show significant advances as a result) even though the borrower is not technically delinquent under the terms of its mortgage loan.  No interest will accrue on these advances made by the master servicer until after the end of the related grace period.  For purposes of the foregoing discussions, a grace period is the number of days before a late payment charge is due on a mortgage loan, which may be different from the date an event of default would occur under the mortgage loan.
 
Risks to the Mortgaged Properties Relating to Terrorist Attacks and Foreign Conflicts
 
On September 11, 2001, the United States was subjected to multiple terrorist attacks which resulted in considerable uncertainty in the world financial markets.  The terrorist attacks on the World Trade Center and the Pentagon suggest an increased likelihood that large public areas such as shopping malls or large office buildings could become the target of terrorist attacks in the future.  The possibility of such attacks could (i) lead to damage to one or more of the mortgaged properties if any such attacks occur, (ii) result in higher costs for insurance premiums or make terrorism coverage unobtainable or (iii) impact leasing patterns or shopping patterns which could adversely impact leasing revenue and mall traffic and percentage rent.  As a result, the ability of the mortgaged properties to generate cash flow may be adversely affected.  In addition, the United States is engaged in continuing military operations in Iraq, Afghanistan and elsewhere.  It is uncertain what effect these operations will have on domestic and world financial markets, economies, real estate markets, insurance costs or business segments.  The full impact of these events is not yet known but could include, among other things, increased volatility in the price of securities including the certificates.  The terrorist attacks may also adversely affect the revenues or costs of operation of the mortgaged properties.  With respect to shopping patterns, such events have significantly reduced air travel throughout the United States and, therefore, have had a negative effect on revenues in areas heavily dependent on tourism.  The decrease in air travel may have a negative effect on certain of the mortgaged properties that are dependent on tourism or that are located in areas heavily dependent on tourism which could reduce the ability of the affected mortgaged properties to generate cash flow.  The attacks also could result in higher costs for insurance or for security, particularly for larger properties.  Accordingly, these disruptions, uncertainties and costs could materially and adversely affect your investment in the certificates.
 
Inclusion of Delinquent Mortgage Loans in a Mortgage Asset Pool
 
If provided in the prospectus supplement, the trust fund for a particular series of certificates may include mortgage loans that are past due.  However, in no case will delinquent assets constitute 50% or more, as measured by dollar volume, of the mortgage loans backing such series of certificates.  As specified in the related prospectus supplement, the servicing of such mortgage loans will be performed by the special servicer.  The same entity may act as both master servicer and special servicer.  Credit support provided with respect to a particular series of certificates may not cover all losses related to such delinquent mortgage loans, and investors should consider the risk that the inclusion of such mortgage loans in the trust fund may adversely affect the rate of defaults and prepayments concerning the subject mortgage asset pool and the yield on the certificates of such series.
 
Changes to REMIC Restrictions on Loan Modifications May Impact an Investment in the Certificates
 
On September 15, 2009, the IRS issued Revenue Procedure 2009-45 easing the tax requirements for a servicer to modify a commercial or multifamily mortgage loan held in a REMIC or grantor trust by interpreting the circumstances when default is “reasonably foreseeable” to include those where the servicer reasonably believes that there is a “significant risk of default” with respect to the mortgage loan upon maturity of the loan or at an earlier date, and that by making such modification the risk of default is substantially reduced.  Accordingly, if the servicer or the special servicer determined that the mortgage loan was at significant risk of default and permitted one or more modifications otherwise consistent with the terms of the related pooling and servicing agreement, any such modification may impact the timing of payments and ultimate recovery on the mortgage loan, and likewise on one or more classes of certificates in the related series, and the tax status of the REMIC.
 
 
-39-

 
 
In addition, final regulations were issued under the REMIC provisions of the Code that modify the tax restrictions imposed on a servicer’s ability to modify the terms of mortgage loans held by a REMIC relating to changes in the collateral, credit enhancement and recourse features to permit those modifications so long as the mortgage loan remains “principally secured” by real property (within the meaning of the final regulations).  The IRS has also issued Revenue Procedure 2010-30, describing circumstances in which it will not challenge the treatment of mortgage loans as “qualified mortgages” on the grounds that the mortgage loan is not “principally secured by real property”, that is, has a real property loan-to-value ratio greater than 125% following a release of liens on some or all of the real property securing such mortgage loan.  The general rule is that a mortgage loan must continue to be “principally secured by real property” following any such lien release, unless the lien release is pursuant to a defeasance permitted under the original loan documents and occurs more than two years after the startup day of the REMIC, all in accordance with the REMIC provisions.  Revenue Procedure 2010-30 also allows lien releases in certain “grandfathered transactions” and transactions in which the release is part of a “qualified pay-down transaction” even if the mortgage loan after the transaction might not otherwise be treated as principally secured by a lien on real property.  If the value of the real property securing a mortgage loan were to decline, the need to comply with the rules of Revenue Procedure 2010-30 could restrict the servicers’ actions in negotiating the terms of a workout or in allowing minor lien releases in circumstances in which, after giving effect to the release, the mortgage loan would not have a real property loan-to-value ratio of 125% or less.  This could impact the timing and ultimate recovery on a mortgage loan, and likewise on one or more classes of certificates.
 
Health Care-Related Properties May Have Certain Risks Related to Governmental Subsidy and Government Regulation
 
Certain types of health care facilities typically receive a substantial portion of their revenues from government reimbursement programs, primarily Medicaid and Medicare.  Medicaid and Medicare are subject to statutory and regulatory changes, retroactive rate adjustments, administrative rulings, policy interpretations, delays by fiscal intermediaries and government funding restrictions.  Accordingly, we cannot assure you that payments under government reimbursement programs will, in the future, be sufficient to fully reimburse the cost of caring for program beneficiaries.  If such payments are insufficient, net operating income of those health care facilities that receive revenues from those sources, and consequently the ability of the related borrowers to meet their obligations under any mortgage loans secured thereby, could be adversely affected.
 
Health care facilities are generally subject to federal and state laws and licensing requirements that relate to the adequacy of medical care, distribution of pharmaceuticals, rate setting, equipment, personnel, operating policies and additions to facilities and services.  The failure of an operator to maintain or renew any required license or regulatory approval could prevent it from continuing operations at a health care facility or, if applicable, bar it from participation in government reimbursement programs.  Furthermore, under applicable federal and state laws and regulations, Medicare and Medicaid reimbursements are generally not permitted to be made to any person other than the provider who actually furnished the related medical goods and services.  Therefore, in the event of foreclosure, none of the trustee, the master servicer, the special servicer or a subsequent lessee or operator of any health care facilities securing a defaulted mortgage loan would generally be entitled to obtain from federal or state governments any outstanding reimbursement payments relating to services furnished at such property prior to such foreclosure.  Any of the aforementioned events may adversely affect the ability of a borrower to meet its obligations under a mortgage loan secured by health care facilities.
 

 
 
-40-

 

 
PROSPECTUS SUPPLEMENT
 
To the extent appropriate, the prospectus supplement relating to each series of offered certificates will contain—
 
a description of the class or classes of such offered certificates, including the payment provisions with respect to each such class, the aggregate principal amount (if any) of each such class, the rate at which interest accrues from time to time (if at all), with respect to each such class or the method of determining such rate, and whether interest with respect to each such class will accrue from time to time on its aggregate principal amount (if any) or on a specified notional amount (if at all);
 
information with respect to any other classes of certificates of the same series;
 
the respective dates on which distributions are to be made;
 
information as to the assets, including the mortgage assets, constituting the related trust fund;
 
the circumstances, if any, under which the related trust fund may be subject to early termination;
 
additional information with respect to the method of distribution of such offered certificates;
 
whether one or more REMIC elections will be made and the designation of the “regular interests” and “residual interests” in each REMIC to be created and the identity of the person responsible for the various tax-related duties in respect of each REMIC to be created;
 
the initial percentage ownership interest in the related trust fund to be evidenced by each class of certificates of such series;
 
information concerning the trustee of the related trust fund;
 
if the related trust fund includes mortgage loans, information concerning the master servicer and any special servicer of such mortgage loans and the circumstances under which all or a portion, as specified, of the servicing of a mortgage loan would transfer from the master servicer to the special servicer;
 
information as to the nature and extent of subordination of any class of certificates of such series, including a class of offered certificates; and
 
whether such offered certificates will be initially issued in definitive or book-entry form.
 
CAPITALIZED TERMS USED IN THIS PROSPECTUS
 
From time to time we use capitalized terms in this prospectus.  Each of those capitalized terms will have the meaning assigned to it in the “GLOSSARY” attached to this prospectus.

 
 
-41-

 

 
DESCRIPTION OF THE TRUST FUNDS
 
General
 
The primary assets of each trust fund will consist of mortgage assets which will include—
 
various types of multifamily or commercial mortgage loans;
 
pass-through certificates or other mortgage-backed securities that evidence interests in, or that are secured by pledges of, one or more of various types of multifamily or commercial mortgage loans; or
 
a combination of such mortgage loans and mortgage backed securities.
 
We will establish each trust fund and select each mortgage asset.  We will purchase mortgage assets to be included in the trust fund and select each mortgage asset from the Mortgage Asset Seller who may not have originated the mortgage asset or issued the MBS and may be our affiliate.
 
We will not insure or guaranty the mortgage assets nor will any of its affiliates or, unless otherwise provided in the related prospectus supplement, by any governmental agency or instrumentality or by any other person.  The discussion below under the heading “—Mortgage Loans”, unless otherwise noted, applies equally to mortgage loans underlying any MBS included in a particular trust fund.
 
Mortgage Loans
 
General.  The mortgage loans will be evidenced by promissory notes (referred to in this prospectus as mortgage notes) notes secured by mortgages, deeds of trust or similar security instruments (referred to in this prospectus as mortgages) that create first or junior liens on fee or leasehold estates in properties consisting of—
 
residential properties consisting of five or more rental or cooperatively-owned dwelling units in high-rise, mid-rise or garden apartment buildings or other residential structures; or
 
office buildings, retail stores and establishments, hotels or motels, nursing homes, hospitals or other health care-related facilities, recreational vehicle and mobile home parks, warehouse facilities, mini-warehouse facilities, self-storage facilities, industrial plants, parking lots, entertainment or sports arenas, restaurants, marinas, mixed use or various other types of income-producing properties or unimproved land.
 
These multifamily properties may include mixed commercial and residential structures and apartment buildings owned by private cooperative housing corporations.  However, no one of the following types of commercial properties will represent security for a material concentration of the mortgage loans in any trust fund, based on principal balance at the time such trust fund is formed:  (1) restaurants; (2) entertainment or sports arenas; (3) marinas; or (4) nursing homes, hospitals or other health care-related facilities.  Unless otherwise specified in the related prospectus supplement, each mortgage will create a first priority mortgage lien on a borrower’s fee estate in a mortgaged property.  If a mortgage creates a lien on a borrower’s leasehold estate in a property, then, unless otherwise specified in the related prospectus supplement, the term of any such leasehold will exceed the term of the mortgage note by at least ten years.  Unless otherwise specified in the related prospectus supplement, each mortgage loan will have been originated by a person other than us; however, such person may be or may have been our affiliate.
 
If so provided in the related prospectus supplement, mortgage assets for a series of certificates may include mortgage loans secured by junior liens, and the loans secured by the related senior liens may not be included in the mortgage pool.  The primary risk to holders of mortgage loans secured by junior liens is the possibility that adequate funds will not be received in connection with a foreclosure of the related senior liens to satisfy fully both the senior liens and the mortgage loan.  In the event that a holder of a senior lien forecloses on a mortgaged property, the proceeds of the foreclosure or similar sale will be applied first to the payment of court costs and fees in connection
 
 
-42-

 
 
with the foreclosure, second to real estate taxes, third in satisfaction of all principal, interest, prepayment or acceleration penalties, if any, and any other sums due and owing to the holder of the senior liens.  The claims of the holders of the senior liens will be satisfied in full out of proceeds of the liquidation of the related mortgaged property, if such proceeds are sufficient, before the trust fund as holder of the junior lien receives any payments in respect of the mortgage loan.  If the master servicer were to foreclose on any mortgage loan, it would do so subject to any related senior liens.  In order for the debt related to such mortgage loan to be paid in full at such sale, a bidder at the foreclosure sale of such mortgage loan would have to bid an amount sufficient to pay off all sums due under the mortgage loan and any senior liens or purchase the mortgaged property subject to such senior liens.  In the event that such proceeds from a foreclosure or similar sale of the related mortgaged property are insufficient to satisfy all senior liens and the mortgage loan in the aggregate, the trust fund, as the holder of the junior lien, and, accordingly, holders of one or more classes of the certificates of the related series bear—
 
the risk of delay in distributions while a deficiency judgment against the borrower is obtained; and
 
the risk of loss if the deficiency judgment is not obtained and satisfied.  Moreover, deficiency judgments may not be available in certain jurisdictions, or the particular mortgage loan may be a nonrecourse loan, which means that, absent special facts, recourse in the case of default will be limited to the mortgaged property and such other assets, if any, that were pledged to secure repayment of the mortgage loan.
 
If so specified in the related prospectus supplement, the mortgage assets for a particular series of certificates may include mortgage loans that are delinquent as of the date such certificates are issued.  In that case, the related prospectus supplement will set forth, as to each such mortgage loan, available information as to the period of such delinquency, any forbearance arrangement then in effect, the condition of the related mortgaged property and the ability of the mortgaged property to generate income to service the mortgage debt.
 
Default and Loss Considerations with Respect to the Mortgage Loans.  Mortgage loans secured by liens on income-producing properties are substantially different from loans made on the security of owner-occupied single-family homes.  The repayment of a loan secured by a lien on an income-producing property is typically dependent upon the successful operation of such property (that is, its ability to generate income).  Moreover, as noted above, some or all of the mortgage loans included in a particular trust fund may be nonrecourse loans.
 
Lenders typically look to the Debt Service Coverage Ratio of a loan secured by income-producing property as an important factor in evaluating the likelihood of default on such a loan.  The Net Operating Income of a mortgaged property will generally fluctuate over time and may or may not be sufficient to cover debt service on the related mortgage loan at any given time.  As the primary source of the operating revenues of a non-owner occupied, income-producing property, rental income (and, with respect to a mortgage loan secured by a cooperative apartment building, maintenance payments from tenant-stockholders of a cooperative) may be affected by the condition of the applicable real estate market and/or area economy.  In addition, properties typically leased, occupied or used on a short-term basis, such as certain health care-related facilities, hotels and motels, and mini-warehouse and self-storage facilities, tend to be affected more rapidly by changes in market or business conditions than do properties typically leased for longer periods, such as warehouses, retail stores, office buildings and industrial plants.  Commercial Properties may be owner-occupied or leased to a small number of tenants.  Thus, the Net Operating Income of such a mortgaged property may depend substantially on the financial condition of the borrower or a tenant, and mortgage loans secured by liens on such properties may pose a greater likelihood of default and loss than loans secured by liens on Multifamily Properties or on multi-tenant Commercial Properties.
 
Increases in operating expenses due to the general economic climate or economic conditions in a locality or industry segment, such as increases in interest rates, real estate tax rates, energy costs, labor costs and other operating expenses, and/or to changes in governmental rules, regulations and fiscal policies, may also affect the likelihood of default on a mortgage loan.  As may be further described in the related prospectus supplement, in some cases leases of mortgaged properties may provide that the lessee, rather than the borrower/landlord, is responsible for payment of operating expenses.  However, the existence of such “net of expense” provisions will result in stable Net Operating Income to the borrower/landlord only to the extent that the lessee is able to absorb operating expense increases while continuing to make rent payments.
 
 
-43-

 
 
Lenders also look to the Loan-to-Value Ratio of a mortgage loan as a factor in evaluating the likelihood of loss if a property must be liquidated following a default.  The lower the Loan-to-Value Ratio, the greater the percentage of the borrower’s equity in a mortgaged property, and thus (a) the greater the incentive of the borrower to perform under the terms of the related mortgage loan (in order to protect such equity) and (b) the greater the cushion provided to the lender against loss on liquidation following a default.
 
Loan-to-Value Ratios will not necessarily constitute an accurate measure of the likelihood of liquidation loss in a pool of mortgage loans.  For example, the value of a mortgaged property as of the date of initial issuance of the related series of certificates may be less than the value determined at loan origination, and will likely continue to fluctuate from time to time based upon certain factors including changes in economic conditions and the real estate market.  Moreover, even when current, an appraisal is not necessarily a reliable estimate of value.  Appraised values of income-producing properties are generally based on
 
the market comparison method (recent resale value of comparable properties at the date of the appraisal), the cost replacement method (the cost of replacing the property at such date);
 
the income capitalization method (a projection of value based upon the property’s projected net cash flow); and
 
or upon a selection from or interpolation of the values derived from such methods.
 
Each of these appraisal methods can present analytical difficulties.  It is often difficult to find truly comparable properties that have recently been sold; the replacement cost of a property may have little to do with its current market value; and income capitalization is inherently based on inexact projections of income and expense and the selection of an appropriate capitalization rate and discount rate.  Where more than one of these appraisal methods are used and provide significantly different results, an accurate determination of value and, correspondingly, a reliable analysis of the likelihood of default and loss, is even more difficult.
 
Although there may be multiple methods for determining the value of a mortgaged property, value will in all cases be affected by property performance.  As a result, if a mortgage loan defaults because the income generated by the related mortgaged property is insufficient to cover operating costs and expenses and pay debt service, then the value of the mortgaged property will reflect that and a liquidation loss may occur.
 
While we believe that the foregoing considerations are important factors that generally distinguish loans secured by liens on income-producing real estate from single-family mortgage loans, there can be no assurance that all of such factors will in fact have been prudently considered by the originators of the mortgage loans, or that, for a particular mortgage loan, they are complete or relevant.  See “RISK FACTORS—Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans—General” and “—Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans—Increased Risk of Default Associated With Balloon Payments” in this prospectus.
 
Payment Provisions of the Mortgage Loans.  All of the mortgage loans will (1) have had original terms to maturity of not more than 40 years and (2) provide for scheduled payments of principal, interest or both, to be made on specified dates that occur monthly, quarterly, semi-annually or annually.  A mortgage loan may
 
provide for no accrual of interest or for accrual of interest at an interest rate that is fixed over its term or that adjusts from time to time, or that may be converted at the borrower’s election from an adjustable to a fixed Mortgage Rate, or from a fixed to an adjustable Mortgage Rate;
 
provide for level payments to maturity or for payments that adjust from time to time to accommodate changes in its interest rate or to reflect the occurrence of certain events, and may permit negative amortization;
 
may be fully amortizing or may be partially amortizing or nonamortizing, with a balloon payment due on its stated maturity date;
 
may permit the negative amortization or deferral of accrued interest;
 
 
-44-

 
 
may prohibit over its term or for a certain period prepayments and/or require payment of a premium or a yield maintenance payment in connection with certain prepayments;
 
may permit defeasance and the release of real property collateral in connection with that defeasance; and
 
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, in each case as described in the related prospectus supplement.
 
A mortgage loan may also contain a provision that entitles the lender to a share of appreciation of the related mortgaged property, or profits realized from the operation or disposition of such mortgaged property or the benefit, if any, resulting from the refinancing of the mortgage loan, as described in the related prospectus supplement.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Default Interest and Limitations on Prepayments” in the prospectus regarding the enforceability of prepayment premiums and yield maintenance charges.
 
Mortgage Loan Information in Prospectus Supplements.  Each prospectus supplement will contain certain information pertaining to the mortgage loans in the related trust fund, which, to the extent then applicable, will generally include the following:
 
the aggregate outstanding principal balance and the largest, smallest and average outstanding principal balance of the mortgage loans;
 
the type or types of property that provide security for repayment of the mortgage loans;
 
the earliest and latest origination date and maturity date of the mortgage loans;
 
the original and remaining terms to maturity of the mortgage loans, or the respective ranges of such terms to maturity, and the weighted average original and remaining terms to maturity of the mortgage loans;
 
the Loan-to-Value Ratios of the mortgage loans (either at origination or as of a more recent date), or the range of the Loan-to-Value-Ratios, and the weighted average of such Loan-to-Value Ratios;
 
the Mortgage Rates borne by the mortgage loans, or the range of the Mortgage Rate, and the weighted average Mortgage Rate borne by the mortgage loans;
 
with respect to mortgage loans with adjustable Mortgage Rates, the index or indices upon which such adjustments are based, the adjustment dates, the range of gross margins and the weighted average gross margin, and any limits on Mortgage Rate adjustments at the time of any adjustment and over the life of such mortgage loan (the index will be one of the following: one-month, three-month, six-month or one-year LIBOR (an average of the interest rate on one-month, three-month, six-month or one-year dollar-denominated deposits traded between banks in London), CMT (weekly or monthly average yields of U.S.  treasury short and long-term securities, adjusted to a constant maturity), COFI (an index of the weighted average interest rate paid by savings institutions in Nevada, Arizona and California), MTA (a one-year average of the monthly average yields of U.S. treasury securities) or the Prime Rate (an interest rate charged by banks for short-term loans to their most creditworthy customers));
 
information regarding the payment characteristics of the mortgage loans, including, without limitation, balloon payment and other amortization provisions, Lockout Periods and Prepayment Premiums;
 
the Debt Service Coverage Ratios of the mortgage loans (either at origination or as of a more recent date), or the range Debt Service Coverage Ratios, and the weighted average of such Debt Service Coverage Ratios, and
 
the geographic distribution of the mortgaged properties on a state-by-state basis.  In appropriate cases, the related prospectus supplement will also contain certain information available us that pertains to the
 
 
 
-45-

 
 
 
provisions of leases and the nature of tenants of the mortgaged properties.  If we are unable to provide the specific information described above at the time any offered certificates of a series are initially offered, more general information of the nature described above will be provided in the related prospectus supplement, and specific information will be set forth in a report which will be available to purchasers of those certificates at or before their initial issuance and will be filed as part of a Current Report on Form 8-K with the Securities and Exchange Commission (the “SEC”) within fifteen days following their issuance.
 
 
If any mortgage loan, or group of related mortgage loans, constitutes a concentration of credit risk, financial statements or other financial information with respect to the related mortgaged property or mortgaged properties will be included in the related prospectus supplement.
 
If and to the extent available and relevant to an investment decision in the offered certificates of the related series, information regarding the prepayment experience of a master servicer’s multifamily and/or commercial mortgage loan servicing portfolio will be included in the related prospectus supplement.  However, many servicers do not maintain records regarding such matters or, at least, not in a format that can be readily aggregated.  In addition, the relevant characteristics of a master servicer’s servicing portfolio may be so materially different from those of the related mortgage asset pool that such prepayment experience would not be meaningful to an investor.  For example, differences in geographic dispersion, property type and/or loan terms (e.g., mortgage rates, terms to maturity and/or prepayment restrictions) between the two pools of loans could render the master servicer’s prepayment experience irrelevant.  Because of the nature of the assets to be serviced and administered by a special servicer, no comparable prepayment information will be presented with respect to the special servicer’s multifamily and/or commercial mortgage loan servicing portfolio.
 
Mortgage Loans Secured by Health Care-Related Properties.  The mortgaged properties may include health care related facilities which include:
 
senior housing generally consisting of facilities with respect to which the residents are ambulatory, handle their own affairs and typically are couples whose children have left the home and at which the accommodations are usually apartment style;
 
assisted living facilities consisting of typically single or double room occupancy, dormitory-style housing facilities which provide food service, cleaning and some personal care and with respect to which the tenants are able to medicate themselves but may require assistance with certain daily routines;
 
skilled nursing facilities that provide services to post trauma and frail residents with limited mobility who require extensive medical treatment; and
 
acute care facilities generally consisting of hospital and other facilities providing short-term, acute medical care services.
 
Certain types of health care-related properties, particularly acute care facilities, skilled nursing facilities and some assisted living facilities, typically receive a substantial portion of their revenues from government reimbursement programs, primarily Medicaid and Medicare.  Medicaid and Medicare are subject to statutory and regulatory changes, retroactive rate adjustments, administrative rulings, policy interpretations, delays by fiscal intermediaries and government funding restrictions.  Moreover, governmental payors have employed cost-containment measures that limit payments to health care providers, and there exist various proposals for national health care reform that could further limit those payments.  Therefore, we cannot assure you that payments under government reimbursement programs will, in the future, be sufficient to fully reimburse the cost of caring for program beneficiaries.  If such payments are insufficient, net operating income of those health care-related facilities that receive revenues from those sources, and consequently the ability of the related borrowers to meet their obligations under any mortgage loans secured thereby, could be adversely affected.
 
Moreover, health care-related facilities are generally subject to federal and state laws that relate to the adequacy of medical care, distribution of pharmaceuticals, rate setting, equipment, personnel, operating policies and additions to facilities and services.  In addition, facilities where such care or other medical services are provided are subject to periodic inspection by governmental authorities to determine compliance with various standards necessary to continued licensing under state law and continued participation in the Medicaid and Medicare reimbursement programs.  Providers of assisted living services are also subject to state licensing requirements in certain states.  The failure of an operator to maintain or renew any required license or regulatory approval could prevent it from continuing operations at a health care-related facility or, if applicable, bar it from participation in government reimbursement
 
 
-46-

 
 
programs.  Furthermore, under applicable federal and state laws and regulations, Medicare and Medicaid reimbursements are generally not permitted to be made to any person other than the provider who actually furnished the related medical goods and services.  Accordingly, in the event of foreclosure, none of the trustee, the master servicer, the special servicer or a subsequent lessee or operator of any health care-related facility securing a defaulted mortgage loan would generally be entitled to obtain from federal or state governments any outstanding reimbursement payments relating to services furnished at such property prior to such foreclosure.  Any of the aforementioned events may adversely affect the ability of the related borrowers to meet their mortgage loan obligations.
 
Government regulation applying specifically to acute care facilities, skilled nursing facilities and certain types of assisted living facilities includes health planning legislation, enacted by most states, intended, at least in part, to regulate the supply of nursing beds.  The most common method of control is the requirement that a state authority first make a determination of need, evidenced by its issuance of a certificate of need, before a long-term care provider can establish a new facility, add beds to an existing facility or, in some states, take certain other actions (for example, acquire major medical equipment, make major capital expenditures, add services, refinance long-term debt, or transfer ownership of a facility).  States also regulate nursing bed supply in other ways.  For example, some states have imposed moratoria on the licensing of new beds, or on the certification of new Medicaid beds, or have discouraged the construction of new nursing facilities by limiting Medicaid reimbursements allocable to the cost of new construction and equipment.  In general, a certificate of need is site specific and operator specific; it cannot be transferred from one site to another, or to another operator, without the approval of the appropriate state agency.  Accordingly, if a mortgage loan secured by a lien on such a health care-related mortgaged property were foreclosed upon, the purchaser at foreclosure might be required to obtain a new certificate of need or an appropriate exemption.  In addition, compliance by a purchaser with applicable regulations may in any case require the engagement of a new operator and the issuance of a new operating license.  Upon a foreclosure, a state regulatory agency may be willing to expedite any necessary review and approval process to avoid interruption of care to a facility’s residents, but there can be no assurance that any will do so or that any necessary licenses or approvals will be issued.
 
Further government regulation applicable to health care-related facilities is found in the form of federal and state “fraud and abuse” laws that generally prohibit payment or fee-splitting arrangements between health care providers that are designed to induce or encourage the referral of patients to, or the recommendation of, a particular provider for medical products or services.  Violation of these restrictions can result in license revocation, civil and criminal penalties, and exclusion from participation in Medicare or Medicaid programs.  The state law restrictions in this area vary considerably from state to state.  Moreover, the federal anti- kickback law includes broad language that potentially could be applied to a wide range of referral arrangements, and regulations designed to create “safe harbors” under the law provide only limited guidance.  Accordingly, there can be no assurance that such laws will be interpreted in a manner consistent with the practices of the owners or operators of the health care-related properties that are subject to such laws.
 
The operators of health care-related facilities are likely to compete on a local and regional basis with others that operate similar facilities, some of which competitors may be better capitalized, may offer services not offered by such operators, or may be owned by non-profit organizations or government agencies supported by endowments, charitable contributions, tax revenues and other sources not available to such operators.  The successful operation of a health care-related facility will generally depend upon the number of competing facilities in the local market, as well as upon other factors such as its age, appearance, reputation and management, the types of services it provides and, where applicable, the quality of care and the cost of that care.  The inability of a health care-related property to flourish in a competitive market may increase the likelihood of foreclosure on the related mortgage loan, possibly affecting the yield on one or more classes of the related series of offered certificates.
 
MBS
 
MBS may include (1) private-label (that is, not issued, insured or guaranteed by the United States or any agency or instrumentality of the United States) mortgage pass-through certificates or other mortgage-backed securities or (2) certificates issued and/or insured or guaranteed by the Federal Home Loan Mortgage Corporation, the Federal
 
 
-47-

 
 
National Mortgage Association, the Governmental National Mortgage Association or the Federal Agricultural Mortgage Corporation; provided that, unless otherwise specified in the related prospectus supplement, each MBS will evidence an interest in, or will be secured by a pledge of, mortgage loans that conform to the descriptions of the mortgage loans contained in this prospectus.
 
Each MBS included in a mortgage asset pool: (a) either will (1) have been previously registered under the Securities Act of 1933, as amended (the “Securities Act”), (2) be exempt from such registration requirements, or (3) have been held for at least the holding period specified in Rule 144(k) under the Securities Act; and (b) will have been acquired (other than from us or any of our affiliates) in bona fide secondary market transactions.
 
Any MBS will have been issued pursuant to a MBS agreement which is a pooling and servicing agreement, an indenture or similar agreement.  The issuer of the MBS and/or the servicer of the underlying mortgage loans will be parties to the MBS agreement, generally together with a trustee or, in the alternative, with the original purchaser or purchasers of the MBS.
 
The MBS may have been issued in one or more classes with characteristics similar to the classes of the offered certificates described in this prospectus.  Distributions in respect of the MBS will be made by the issuer of the MBS, the servicer of the MBS, or the trustee of the MBS agreement or the MBS trustee on the dates specified in the related prospectus supplement.  The issuer of the MBS or the MBS servicer or another person specified in the related prospectus supplement may have the right or obligation to repurchase or substitute assets underlying the MBS after a certain date or under other circumstances specified in the related prospectus supplement.
 
Reserve funds, subordination or other credit support similar to that described for the offered certificates under “DESCRIPTION OF CREDIT SUPPORT” may have been provided with respect to the MBS.  The type, characteristics and amount of such credit support, if any, will be a function of the characteristics of the underlying mortgage loans and other factors and generally will have been established on the basis of the requirements of any rating agency that may have assigned a rating to the MBS, or by the initial purchasers of the MBS.
 
The prospectus supplement for a series of certificates that evidence interests in MBS will specify, to the extent available
 
the aggregate approximate initial and outstanding principal amount(s) and type of the MBS to be included in the trust fund;
 
the original and remaining term(s) to stated maturity of the MBS, if applicable;
 
the pass-through or bond rate(s) of the MBS or the formula for determining such rate(s);
 
the payment characteristics of the MBS;
 
the issuer of the MBS, servicer of the MBS and trustee of the MBS, as applicable, of each of the MBS;
 
a description of the related credit support, if any;
 
the circumstances under which the related underlying mortgage loans, or the MBS themselves, may be purchased prior to their maturity;
 
the terms on which mortgage loans may be substituted for those originally underlying the MBS;
 
the type of mortgage loans underlying the MBS and, to the extent available and appropriate under the circumstances, such other information in respect of the underlying mortgage loans described under “—Mortgage Loans—Mortgage Loan Information in Prospectus Supplements”; and
 
the characteristics of any cash flow agreements that relate to the MBS.
 
 
-48-

 
 
Certificate Accounts
 
Each trust fund will include one or more segregated accounts established and maintained on behalf of the certificateholders into which all payments and collections received or advanced with respect to the mortgage assets and other assets in the trust fund will be deposited to the extent described in this prospectus and in the related prospectus supplement.  See “THE POOLING AND SERVICING AGREEMENTS—Certificate Account”.
 
Credit Support
 
If so provided in the prospectus supplement for a series of certificates, partial or full protection against certain defaults and losses on the mortgage assets in the related trust fund may be provided to one or more classes of certificates of such series in the form of subordination of one or more of the types of credit support described in this prospectus under “DESCRIPTION OF CREDIT SUPPORT”.  The amount and types of credit support, the identity of the entity providing it (if applicable) and related information with respect to each type of credit support, if any, will be set forth in the prospectus supplement for a series of certificates.  See “RISK FACTORS—The Limited Credit Support for Your Certificates May Not Be Sufficient to Prevent Loss on Your Certificates” and “DESCRIPTION OF CREDIT SUPPORT” in this prospectus.
 
Cash Flow Agreements
 
If so provided in the prospectus supplement for a series of certificates, the related trust fund may include guaranteed investment contracts pursuant to which moneys held in the funds and accounts established for such series will be invested at a specified rate.  The related trust fund may also include certain other agreements, such as interest rate exchange agreements, interest rate cap or floor agreements, or other agreements designed to reduce the effects of interest rate fluctuations on the mortgage assets on one or more classes of certificates.  The principal terms of any such cash flow agreement, including, without limitation, provisions relating to the timing, manner and amount of payments and provisions relating to the termination of the cash flow agreement, will be described in the related prospectus supplement.  The related prospectus supplement will also identify the obligor under any such cash flow agreement.  See “DESCRIPTION OF CREDIT SUPPORT —Cash Flow Agreements” in this prospectus.
 
YIELD AND MATURITY CONSIDERATIONS
 
General
 
The yield on any offered certificate will depend on the price paid by the certificateholder, the pass-through rate of the certificate and the amount and timing of distributions on the certificate.  See “RISK FACTORS—Prepayments on the Underlying Mortgage Loans Will Affect the Average Life of Your Certificates and Your Yield” in this prospectus.  The following discussion contemplates a trust fund that consists solely of mortgage loans.  While the characteristics and behavior of mortgage loans underlying an MBS can generally be expected to have the same effect on the yield to maturity and/or weighted average life of a class of certificates as will the characteristics and behavior of comparable mortgage loans, the effect may differ due to the payment characteristics of the MBS.  If a trust fund includes MBS, the related prospectus supplement will discuss the effect, if any, that the payment characteristics of the MBS may have on the yield to maturity and weighted average lives of the offered certificates of the related series.
 
Pass-Through Rate
 
The certificates of any class within a series may have a fixed, variable or adjustable pass-through rate, which may or may not be based upon the interest rates borne by the mortgage loans in the related trust fund.
 
The prospectus supplement with respect to any series of certificates will specify the pass-through rate for each class of offered certificates of such series or, in the case of a class of offered certificates with a variable or adjustable pass-through rate, the method of determining the pass-through rate; the effect, if any, of the prepayment of any mortgage loan on the pass-through rate of one or more classes of offered certificates; and whether the distributions of interest on the offered certificates of any class will be dependent, in whole or in part, on the performance of any obligor under a cash flow agreement.
 
 
-49-

 
 
Payment Delays
 
With respect to any series of certificates, a period of time will elapse between the date upon which payments on the mortgage loans in the related trust fund are due and the Distribution Date on which such payments are passed through to certificateholders.  That delay will effectively reduce the yield that would otherwise be produced if payments on such mortgage loans were distributed to certificateholders on the date they were due.
 
Certain Shortfalls in Collections of Interest
 
When a principal prepayment in full or in part is made on a mortgage loan, the borrower is generally charged interest on the amount of such prepayment only through the date of such prepayment, instead of through the Due Date for the next succeeding scheduled payment.  However, interest accrued on any series of certificates and distributable on any Distribution Date will generally correspond to interest accrued on the mortgage loans to their respective Due Dates during the related Due Period.  If a prepayment on any mortgage loan is distributable to Certificateholders on a particular Distribution Date, but such prepayment is not accompanied by interest to the Due Date for such mortgage loan in the related Due Period, then the interest charged to the borrower (net of servicing and administrative fees) may be less than the corresponding amount of interest accrued and otherwise payable on the certificates of the related series.  If and to the extent that any such shortfall is allocated to a class of offered certificates, the yield will be adversely affected.  The prospectus supplement for each series of certificates will describe the manner in which any such shortfalls will be allocated among the classes of such certificates.  The related prospectus supplement will also describe any amounts available to offset such shortfalls.
 
Yield and Prepayment Considerations
 
A certificate’s yield to maturity will be affected by the rate of principal payments on the mortgage loans in the related trust fund and the allocation the principal payments to reduce the principal balance (or notional amount, if applicable) of such certificate.  The rate of principal payments on the mortgage loans in any trust fund will in turn be affected by the amortization schedules of the mortgage loans (which, in the case of mortgage loans, may change periodically to accommodate adjustments to the corresponding Mortgage Rates), the dates on which any balloon payments are due, and the rate of principal prepayments (including for this purpose, voluntary prepayments by borrowers and also prepayments resulting from liquidations of mortgage loans due to defaults, casualties or condemnations affecting the related mortgaged properties, or purchases of mortgage loans out of the related trust fund).  Because the rate of principal prepayments on the mortgage loans in any trust fund will depend on future events and a variety of factors (as described below), no assurance can be given as to such rate.
 
The extent to which the yield to maturity of a class of offered certificates of any series may vary from the anticipated yield will depend upon the degree to which they are purchased at a discount or premium and when, and to what degree, payments of principal on the mortgage loans in the related trust fund are in turn distributed on such certificates (or, in the case of a class of Stripped Interest Certificates, result in the reduction of the notional amount of the Stripped Interest Certificates).  An investor should consider, in the case of any offered certificate purchased at a discount, the risk that a slower than anticipated rate of principal payments on the mortgage loans in the related trust fund could result in an actual yield to such investor that is lower than the anticipated yield and, in the case of any offered certificate purchased at a premium, the risk that a faster than anticipated rate of principal payments on such mortgage loans could result in an actual yield to such investor that is lower than the anticipated yield.  In addition, if an investor purchases an offered certificate at a discount (or premium), and principal payments are made in reduction of the principal balance or notional amount of such investor’s offered certificates at a rate slower (or faster) than the rate anticipated by the investor during any particular period, any consequent adverse effects on such investor’s yield would not be fully offset by a subsequent increase (or decrease) in the rate of principal payments.
 
In general, the notional amount of a class of Stripped Interest Certificates will either –
 
be based on the principal balances of some or all of the mortgage assets in the related trust fund; or
 
equal the Certificate Balances of one or more of the other classes of certificates of the same series.
 
 
-50-

 
 
Accordingly, the yield on such Stripped Interest Certificates will be inversely related to the rate at which payments and other collections of principal are received on such mortgage assets or distributions are made in reduction of the Certificate Balances of such classes of certificates, as the case may be.
 
Consistent with the foregoing, if a class of certificates of any series consists of Stripped Interest Certificates or Stripped Principal Certificates, a lower than anticipated rate of principal prepayments on the mortgage loans in the related trust fund will negatively affect the yield to investors in Stripped Principal Certificates, and a higher than anticipated rate of principal prepayments on such mortgage loans will negatively affect the yield to investors in Stripped Interest Certificates.  If the offered certificates of a series include any such certificates, the related prospectus supplement will include a table showing the effect of various constant assumed levels of prepayment on yields on such certificates.  Such tables will be intended to illustrate the sensitivity of yields to various constant assumed prepayment rates and will not be intended to predict, or to provide information that will enable investors to predict, yields or prepayment rates.
 
The extent of prepayments of principal of the mortgage loans in any trust fund may be affected by a number of factors, including, without limitation—
 
the availability of mortgage credit, the relative economic vitality of the area in which the mortgaged properties are located;
 
the quality of management of the mortgaged properties;
 
the servicing of the mortgage loans; and
 
possible changes in tax laws and other opportunities for investment.
 
In general, those factors which increase the attractiveness of selling a mortgaged property or refinancing a mortgage loan or which enhance a borrower’s ability to do so, as well as those factors which increase the likelihood of default under a mortgage loan, would be expected to cause the rate of prepayment in respect of any mortgage asset pool to accelerate.  In contrast, those factors having an opposite effect would be expected to cause the rate of prepayment of any mortgage asset pool to slow.
 
The rate of principal payments on the mortgage loans in any trust fund may also be affected by the existence of Lockout Periods and requirements that principal prepayments be accompanied by prepayment premiums, and by the extent to which such provisions may be practicably enforced.  To the extent enforceable, such provisions could constitute either an absolute prohibition (in the case of a Lockout Period) or a disincentive (in the case of a Prepayment Premium) to a borrower’s voluntarily prepaying its mortgage loan, thereby slowing the rate of prepayments.
 
The rate of prepayment on a pool of mortgage loans is likely to be affected by prevailing market interest rates for mortgage loans of a comparable type, term and risk level.  When the prevailing market interest rate is below a mortgage coupon, a borrower may have an increased incentive to refinance its mortgage loan.  Even in the case of adjustable rate mortgage loans, as prevailing market interest rates decline, and without regard to whether the Mortgage Rates on such adjustable rate mortgage loans decline in a manner consistent with the prevailing market interest rates, the related borrowers may have an increased incentive to refinance for purposes of either (1) converting to a fixed rate loan and thereby “locking in” such rate or (2) taking advantage of a different index, margin or rate cap or floor on another adjustable rate mortgage loan.  Therefore, as prevailing market interest rates decline, prepayment speeds would be expected to accelerate.
 
Depending on prevailing market interest rates, the outlook for market interest rates and economic conditions generally, some borrowers may sell mortgaged properties in order to realize their equity in the mortgaged properties, to meet cash flow needs or to make other investments.  In addition, some borrowers may be motivated by federal and state tax laws (which are subject to change) to sell mortgaged properties prior to the exhaustion of tax depreciation benefits.  We make no representation as to the particular factors that will affect the prepayment of the mortgage loans in any trust fund, as to the relative importance of such factors, as to the percentage of the principal balance of such mortgage loans that will be paid as of any date or as to the overall rate of prepayment on such mortgage loans.
 
 
-51-

 
 
Weighted Average Life and Maturity
 
The rate at which principal payments are received on the mortgage loans in any trust fund will affect the ultimate maturity and the weighted average life of one or more classes of the certificates of such series.  Unless otherwise specified in the related prospectus supplement, weighted average life refers to the average amount of time that will elapse from the date of issuance of an instrument until each dollar allocable as principal of such instrument is repaid to the investor.
 
The weighted average life and maturity of a class of certificates of any series will be influenced by the rate at which principal on the related mortgage loans, whether in the form of scheduled amortization or prepayments (for this purpose, the term “prepayment” includes voluntary prepayments by borrowers and also prepayments resulting from liquidations of mortgage loans due to default, casualties or condemnations affecting the related mortgaged properties and purchases of mortgage loans out of the related trust fund), is paid to such class.  Prepayment rates on loans are commonly measured relative to a prepayment standard or model, such as the CPR prepayment model or the SPA prepayment model.  CPR represents an assumed constant rate of prepayment each month (expressed as an annual percentage) relative to the then outstanding principal balance of a pool of mortgage loans for the life of such loans.  SPA represents an assumed variable rate of prepayment each month (expressed as an annual percentage) relative to the then outstanding principal balance of a pool of mortgage loans, with different prepayment assumptions often expressed as percentages of SPA.  For example, a prepayment assumption of 100% of SPA assumes prepayment rates of 0.2% per annum of the then outstanding principal balance of such loans in the first month of the life of the loans and an additional 0.2% per annum in each month thereafter until the thirtieth month.  Beginning in the thirtieth month, and in each month thereafter during the life of the loans, 100% of SPA assumes a constant prepayment rate of 6% per annum each month.
 
Neither CPR nor SPA nor any other prepayment model or assumption purports to be a historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any particular pool of mortgage loans.  Moreover, the CPR and SPA models were developed based upon historical prepayment experience for single-family mortgage loans.  Thus, it is unlikely that the prepayment experience of the mortgage loans included in any trust fund will conform to any particular level of CPR or SPA.
 
The prospectus supplement with respect to each series of certificates will contain tables, if applicable, setting forth the projected weighted average life of each class of offered certificates of such series with a Certificate Balance, and the percentage of the initial Certificate Balance of each such class that would be outstanding on specified Distribution Dates, based on the assumptions stated in such prospectus supplement, including assumptions that prepayments on the related mortgage loans are made at rates corresponding to various percentages of CPR or SPA, or at such other rates specified in such prospectus supplement.  Such tables and assumptions will illustrate the sensitivity of the weighted average lives of the certificates to various assumed prepayment rates and will not be intended to predict, or to provide information that will enable investors to predict, the actual weighted average lives of the certificates.
 
Other Factors Affecting Yield, Weighted Average Life and Maturity
 
Balloon Payments; Extensions of Maturity.  Some or all of the mortgage loans included in a particular trust fund may require that balloon payments be made at maturity.  Because the ability of a borrower to make a balloon payment typically will depend upon its ability either to refinance the loan or to sell the related mortgaged property, there is a possibility that mortgage loans that require balloon payments may default at maturity, or that the maturity of such a mortgage loan may be extended in connection with a workout.  In the case of defaults, recovery of proceeds may be delayed by, among other things, bankruptcy of the borrower or adverse conditions in the market where the property is located.  In order to minimize losses on defaulted mortgage loans, the master servicer or the special servicer, to the extent and under the circumstances set forth in this prospectus and in the related prospectus supplement, may be authorized to modify mortgage loans that are in default or as to which a payment default is imminent.  Any defaulted balloon payment or modification that extends the maturity of a mortgage loan may delay distributions of principal on a class of offered certificates and thereby extend the weighted average life of such certificates and, if such certificates were purchased at a discount, reduce the yield.
 
Negative Amortization.  The weighted average life of a class of certificates can be affected by mortgage loans that permit negative amortization to occur (that is, mortgage loans that provide for the current payment of interest
 
 
-52-

 
 
calculated at a rate lower than the rate at which interest accrues, with the unpaid portion of such interest being added to the related principal balance).  Negative amortization on one or more mortgage loans in any trust fund may result in negative amortization on the offered certificates of the related series.  The related prospectus supplement will describe, if applicable, the manner in which negative amortization in respect of the mortgage loans in any trust fund is allocated among the respective classes of certificates of the related series.  The portion of any mortgage loan negative amortization allocated to a class of certificates may result in a deferral of some or all of the interest payable, which deferred interest may be added to the Certificate Balance of the certificates.  In addition, an adjustable rate mortgage loan that permits negative amortization would be expected during a period of increasing interest rates to amortize at a slower rate (and perhaps not at all) than if interest rates were declining or were remaining constant.  Such slower rate of mortgage loan amortization would correspondingly be reflected in a slower rate of amortization for one or more classes of certificates of the related series.  Accordingly, the weighted average lives of mortgage loans that permit negative amortization (and that of the classes of certificates to which any such negative amortization would be allocated or that would bear the effects of a slower rate of amortization on such mortgage loans) may increase as a result of such feature.
 
Negative amortization may occur in respect of an adjustable rate mortgage loan that
 
limits the amount by which its scheduled payment may adjust in response to a change in its Mortgage Rate;
 
provides that its scheduled payment will adjust less frequently than its Mortgage Rate; or
 
provides for constant scheduled payments notwithstanding adjustments to its Mortgage Rate.
 
Accordingly, during a period of declining interest rates, the scheduled payment on such a mortgage loan may exceed the amount necessary to amortize the loan fully over its remaining amortization schedule and pay interest at the then applicable Mortgage Rate, thereby resulting in the accelerated amortization of such mortgage loan.  Any such acceleration in amortization of its principal balance will shorten the weighted average life of such mortgage loan and, correspondingly, the weighted average lives of those classes of certificates entitled to a portion of the principal payments on such mortgage loan.
 
The extent to which the yield on any offered certificate will be affected by the inclusion in the related trust fund of mortgage loans that permit negative amortization, will depend upon (1) whether such offered certificate was purchased at a premium or a discount and (2) the extent to which the payment characteristics of such mortgage loans delay or accelerate the distributions of principal on such certificate (or, in the case of a Stripped Interest Certificate, delay or accelerate the reduction of the notional amount of a Stripped Interest Certificate).  See “—Yield and Prepayment Considerations” above.
 
Foreclosures and Payment Plans.  The number of foreclosures and the principal amount of the mortgage loans that are foreclosed in relation to the number and principal amount of mortgage loans that are repaid in accordance with their terms will affect the weighted average lives of those mortgage loans and, accordingly, the weighted average lives of and yields on the certificates of the related series.  Servicing decisions made with respect to the mortgage loans, including the use of payment plans prior to a demand for acceleration and the restructuring of mortgage loans in bankruptcy proceedings or otherwise, may also have an effect upon the payment patterns of particular mortgage loans and thus the weighted average lives of and yields on the certificates of the related series.
 
Losses and Shortfalls on the Mortgage Assets.  The yield to holders of the offered certificates of any series will directly depend on the extent to which such holders are required to bear the effects of any losses or shortfalls in collections arising out of defaults on the mortgage loans in the related trust fund and the timing of such losses and shortfalls.  In general, the earlier that any such loss or shortfall occurs, the greater will be the negative effect on yield for any class of certificates that is required to bear the effects of such loss or shortfall.
 
The amount of any losses or shortfalls in collections on the mortgage assets in any trust fund (to the extent not covered or offset by draws on any reserve fund or under any instrument of credit support) will be allocated among the respective classes of certificates of the related series in the priority and manner, and subject to the limitations, specified in the related prospectus supplement.  As described in the related prospectus supplement, such allocations may be effected by (1) a reduction in the entitlements to interest and/or the Certificate Balances of one or more such classes of certificates and/or (2) establishing a priority of payments among such classes of certificates.
 
 
-53-

 
 
The yield to maturity on a class of Subordinate Certificates may be extremely sensitive to losses and shortfalls in collections on the mortgage loans in the related trust fund.
 
Additional Certificate Amortization.  In addition to entitling the holders to a specified portion (which may during specified periods range from none to all) of the principal payments received on the mortgage assets in the related trust fund, one or more classes of certificates of any series, including one or more classes of offered certificates of such series, may provide for distributions of principal from
 
amounts attributable to interest accrued but not currently distributable on one or more classes of Accrual Certificates;
 
Excess Funds; or
 
any other amounts described in the related prospectus supplement.
 
The amortization of any class of certificates out of the sources described in the preceding paragraph would shorten the weighted average life of such certificates and, if such certificates were purchased at a premium, reduce the yield.  The related prospectus supplement will discuss the relevant factors to be considered in determining whether distributions of principal of any class of certificates out of such sources is likely to have any material effect on the rate at which such certificates are amortized and the consequent yield with respect thereto.
 
BANK OF AMERICA, NATIONAL ASSOCIATION, AS SPONSOR
 
Bank of America, National Association (“Bank of America”) will serve as a sponsor of each series of certificates.  One or more entities, which may or may not be affiliated with Bank of America, may also be a sponsor (each, a “Sponsor”) for a series of certificates.  Bank of America is a subsidiary of Bank of America Corporation.  Bank of America is engaged in a general consumer banking, commercial banking, and trust business, offering a wide range of commercial, corporate, international, financial market, retail and fiduciary banking services.  Bank of America is a national banking association chartered by the Office of the Comptroller of the Currency (the “OCC”) and is subject to the regulation, supervision and examination of the OCC.
 
Bank of America and its affiliates have been active in the securitization market since inception and have sponsored publicly and privately offered securitization transactions since 1977.  Bank of America and its affiliates have been involved with the origination and securitization of residential and commercial mortgage loans and its affiliates have been involved with the origination of auto loans, student loans, home equity loans and credit card receivables as well as less traditional asset classes. Bank of America and its affiliates have served as sponsors, issuers, dealers, and servicers in a wide array of securitization transactions.
 
The Depositor’s securitization program principally is used to fund Bank of America’s commercial real estate business unit’s self-originated portfolio of loans secured by first liens on multifamily and commercial properties.  The Depositor’s securitization program may also include mortgage loans originated through correspondent arrangements.  While Bank of America currently does not rely on securitization as a material funding source, the Depositor’s securitization program is a material funding source for Bank of America’s portfolio of commercial real estate mortgage loans similar to the mortgage loans.
 
The tables below indicate the size and history of the commercial mortgage loan origination program for Bank of America and its affiliates.  Loans originated by for Bank of America and its affiliates have historically included primarily a mix of multifamily, office, retail, hotel and industrial and warehouse properties, though for Bank of America and its affiliates has also regularly originated loans on a variety of other commercial property types, including but not limited to self-storage facilities, manufactured housing communities, parking garage facilities and golf courses.
 
 
-54-

 
 
ORIGINATION VOLUME
(Dollar Amount of Closed Loans)
 
   
YEAR
       
Property Type
 
2007
   
2008
   
2009
   
2010
   
YTD
September 30, 2011
 
Multifamily
  $ 5,727,705,783     $ 138,807,117     $ 143,292,782     $ 0     $ 9,700,000  
Office
    9,754,616,060       52,902,572       467,190,226       435,331,927       280,300,000  
Retail
    4,759,236,250       100,700,000       0       238,220,000       851,906,000  
Industrial
    513,248,639       0       0       20,000,000       270,870,000  
Manufactured Housing
    0       0       0       0       65,835,000  
Self-Storage
    203,753,800       23,450,000       0       44,645,000       132,535,000  
Lodging
    7,311,318,619       1,070,108,333       15,222,390       137,850,000       86,050,000  
Mixed Use
    0       0       0       725,000,000       0  
Total
  $ 28,269,879,151     $ 1,385,968,022     $ 625,705,398     $ 901,046,927     $ 1,697,196,000  
 
Bank of America serves as a Sponsor and, if specified in the applicable prospectus supplement, a master, primary and/or special servicer in the Depositor’s securitization program, in addition to owning all of the Depositor’s equity.
 
Merrill Lynch Pierce Fenner & Smith Incorporated, which may act as an underwriter of certificates, is an affiliate of Bank of America and assists Bank of America and the Depositor in connection with the selection of mortgage loans for various transactions.  See “METHOD OF DISTRIBUTION” in the applicable prospectus supplement.
 
Bank of America’s headquarters and its executive offices are located at 214 North Tryon Street, Charlotte, North Carolina 28255, and the telephone number is (980) 386-8154.
 
See “THE MORTGAGE LOAN PROGRAM”, “BANK OF AMERICA, NATIONAL ASSOCIATION, AS SERVICER” and “THE POOLING AND SERVICING AGREEMENTS” for more information about the Sponsor’s solicitation and underwriting criteria used to originate mortgage loans similar to the mortgage loans and its material roles and duties in each securitization.
 
Other Originators
 
If any originator or group of affiliated originators, apart from the Sponsor and its affiliates, originated 10% or more of the mortgage loans in a trust fund, the applicable prospectus supplement will disclose the identity of the originator and, if such originator or group of affiliated originators originated 20% or more of the mortgage loans, the applicable prospectus supplement will provide information about the originator’s form of organization and, to the extent material, a description of the originator’s origination program and how long it has been engaged in originating mortgage loans of the same type.  Each mortgage loan will have been underwritten either to the standards set forth above in this prospectus or to other underwriting standards set forth in the applicable prospectus supplement.
 
THE DEPOSITOR
 
Banc of America Merrill Lynch Commercial Mortgage Inc. (the “Depositor”) is a Delaware corporation and was organized on December 13, 1995 for the limited purpose of acquiring, owning and transferring mortgage assets and selling interests in the mortgage assets or bonds secured by the mortgage assets.  The Depositor was originally incorporated in the State of Delaware on December 13, 1995 under the name “NationsLink Funding Corporation” and filed Certificates of Amendment to its Certificate of Incorporation changing its name to “Banc of America Commercial Mortgage Inc.” on August 24, 2000 and further changing its name to “Banc of America Merrill Lynch Commercial Mortgage Inc.” on July 1, 2010. The Depositor is a subsidiary of Bank of America, National Association.  The Depositor maintains its principal office at Bank of America Tower, One Bryant Park, New York, New York 10036.  The Depositor’s telephone number is (980) 388-7451.
 
Unless otherwise noted in the related prospectus supplement, neither we nor any of our affiliates will insure or guarantee distributions on the certificates of any series.
 
 
-55-

 
 
The Depositor and any director, officer, employee or agent of the Depositor shall be indemnified by the trust fund and held harmless against any loss, liability or expense incurred in connection with any legal action relating to the Pooling and Servicing Agreement or the certificates, other than any loss, liability or expense related to any specific mortgage loan or mortgage loans and any loss, liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties under the Pooling and Servicing Agreement or by reason of reckless disregard of its obligations and duties under the Pooling and Servicing Agreement.
 
THE MORTGAGE LOAN PROGRAM
 
Commercial Mortgage Loan Underwriting
 
 
General
 
The Depositor will purchase the mortgage loans from Bank of America, as the Sponsor.  The mortgage loans will have been either (i) originated by Bank of America or (ii) purchased by Bank of America from various entities that either originated the mortgage loans or acquired the mortgage loans pursuant to mortgage loan purchase programs operated by those entities.  The mortgage loans will have been underwritten materially in accordance with one or more of the following: (i) Bank of America’s general underwriting standards set forth below under “General Underwriting Standards or (ii) the underwriting standards set forth in the applicable prospectus supplement.
 
The underwriting standards used by mortgage loan originators are intended to evaluate the value and adequacy of the mortgage property as collateral and the mortgagor’s credit standing and repayment ability.  The underwriting standards used by originators other than Bank of America, unless such other originators use standards materially similar to Bank of America’s underwriting standards, will be described in the applicable prospectus supplement.
 
 
General Underwriting Standards
 
Origination Channels.  Bank of America originates mortgage loans (i) directly or through affiliates to mortgagor/borrowers; (ii) indirectly to mortgagor/borrowers via the use of mortgage loan brokers; and (iii) through other loan originators.
 
[The remainder of the discussion of Bank of America’s loan underwriting practices under this “Commercial Mortgage Loan Underwriting” caption applies also to describe the practices of any affiliate of Bank of America with respect to the origination by such affiliate of loans to be sold by Bank of America in this transaction.]
 
The Application.  Regardless of the channel in which the loan was originated, a mortgage application is completed containing information that assists in evaluating the adequacy of the mortgaged property as collateral for the loan, including the mortgagor’s credit standing and capacity to repay the loan.  During the application process, the applicant is required to authorize Bank of America to obtain a credit report that summarizes the applicant’s credit history and any record of bankruptcy or prior foreclosure.  In addition, the mortgagor and any borrower principal are required to complete a Certificate of Financial Condition which certifies to certain questions regarding its prior credit history.  If the collateral is considered a multifamily dwelling, the mortgagor is also required to submit a Home Mortgage Disclosure Act (HMDA) Data Collection Form which provides certain information in order to allow the federal government to monitor Bank of America’s compliance with equal credit opportunity, fair housing, and home mortgage disclosure laws.
 
Further, the Application requires supporting documentation (or other verification) for all material data provided by the mortgagor described in a checklist, including but not limited to the following:
 
rent roll;
 
existing mortgage verification;
 
credit references;
 
 
-56-

 
 
certified financial statements for mortgagor and borrower principals;
 
tenant/resident leases;
 
ground leases;
 
property operating statements;
 
real estate tax bills;
 
purchase contract (if applicable);
 
appraisal;
 
engineering report;
 
seismic report (if applicable);
 
environmental report;
 
site plan;
 
certificate of occupancy;
 
evidence of zoning compliance;
 
insurance policies; and
 
borrower structure/authority documents.
 
Underwriting Evaluation.  Each mortgage loan underwritten to Bank of America’s general underwriting standards is underwritten in accordance with guidelines established by Bank of America’s real estate structured finance group (“Guidelines”).  These underwriting standards applied by Bank of America are intended to evaluate the adequacy of the mortgaged property as collateral for the loan and the mortgagor’s repayment ability and creditworthiness.  The underwriting standards as established in the Guidelines are continually updated to reflect prevailing conditions in the CMBS market, new mortgage products, and the investment market for commercial loans.
 
Bank of America’s real estate structured finance group has the authority, with the approval from the appropriate credit committee to originate fixed-rate and floating-rate, first lien mortgage loans for securitization.  Bank of America’s real estate structured finance group is a vertically integrated entity, staffed by real estate professionals, and includes Bank of America’s loan underwriting, securitization, origination and closing groups.
 
Upon receipt of a loan package, Bank of America’s loan underwriters commence an extensive review of the borrower’s financial condition and creditworthiness as well as the real estate which will secure the loan.
 
Bank of America may utilize third party contractors to perform portions of its underwriting analysis, Bank of America may utilize third party contractors to perform portions of its underwriting analysis, however, any such contractor would apply the same underwriting guidelines.
 
Loan Analysis.  Generally, Bank of America performs both a credit analysis and collateral analysis with respect to a loan applicant and the real estate that will secure the loan.  In general, credit analysis of the borrower and the real estate includes a review of historical financial statements, including rent rolls (generally unaudited), third party credit reports, judgment, lien, bankruptcy and pending litigation searches and, if applicable, the loan payment history of the borrower.  Bank of America also performs a qualitative analysis which incorporates independent credit checks and review of published debt and equity information with respect to certain principals of the borrower as well as the borrower itself.  Borrowers are generally required to be single-purpose entities although they are not
 
 
-57-

 
 
always required to be bankruptcy-remote entities.  The collateral analysis includes an analysis of the historical property operating statements, rent rolls and a projection of future performance and a review of tenant leases.  Bank of America requires third party appraisals, as well as environmental and property condition reports.  Each report is reviewed for acceptability by a Bank of America staff member, or an independent contractor, for compliance with program standards and such staff member approves or rejects such report.  The results of these reviews are incorporated into the underwriting report.
 
Loan Approval.  Prior to funding, all mortgage loans must be approved by Bank of America in accordance with its credit policies.
 
Escrow Requirements.  Bank of America generally requires borrowers to fund various escrows for taxes and insurance, capital expenses and replacement reserves.  Generally, the required escrows for mortgage loans originated by Bank of America are as follows:
 
Taxes—Typically an initial deposit and monthly escrow deposits equal to 1/12th of the annual property taxes (based on the most recent property assessment and the current millage rate) are required to provide for sufficient funds to satisfy all taxes and assessments.
 
Insurance—If the property is insured under an individual policy (i.e. the property is not covered by a blanket policy), typically an initial deposit and monthly escrow deposits equal to 1/12th of the annual property insurance premium are required to provide for sufficient funds to pay all insurance premiums.
 
Replacement Reserves—Replacement reserves are calculated based on an engineer’s judgment of the actual physical condition of the improvements and the expected remaining useful life of the improvements of the property during the term of the mortgage loan.
 
Immediate Repair—Typically, an immediate repair reserve is required.  An initial deposit, upon funding of the applicable mortgage loan, generally in an amount equal to 125% of the estimated costs of immediate repairs to be completed generally within the first year of the mortgage loan pursuant to the property condition report is required.
 
Tenant Improvement/Lease Commissions—In some cases, major tenants have lease expirations or termination rights within the mortgage loan term.  To mitigate this risk, special reserves may be required to be funded either at closing of the mortgage loan and/or during the mortgage loan term to cover certain anticipated leasing commissions or tenant improvement costs which might be associated with re-leasing the space occupied by such tenants.
 
Zoning and Building Code Compliance—Bank of America will generally examine whether the use and operation of the mortgaged properties are in material compliance with zoning and land-use related ordinances, rules, regulations and orders applicable to the use of such mortgaged properties at the time such mortgage loans are originated and, as part of its examination, will consider, among other things, legal opinions, certifications from government officials, zoning consultant’s reports and/or representations by the related borrower contained in the related mortgage loan documents and information which is contained in appraisals and surveys, title insurance endorsements, or property condition assessments undertaken by independent licensed engineers.
 
Hazard, Liability and Other Insurance—The mortgage loans generally require that each mortgaged property be insured by a hazard insurance policy in an amount (subject to an approved deductible) at least equal to the lesser of the outstanding principal balance of the related mortgage loan and 100% of the replacement cost of the improvements located on the related mortgaged property, and if applicable, that the related hazard insurance policy contain appropriate endorsements to avoid the application of co-insurance and not permit reduction in insurance proceeds for depreciation; provided that, in the case of certain of the mortgage loans, the hazard insurance may be in such other amounts as was required by the related originators.
 
In addition, if any material improvements on any portion of a mortgaged property securing any mortgage loan, at any time during the term of such mortgage loan is in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, the mortgage loan documents will require generally not less than the least of (a) the outstanding principal balance of the related mortgage loan, (b) the full
 
 
-58-

 
 
insurable value of the related mortgaged property, (c) the maximum amount of insurance available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, each as amended, or (d) 100% of the replacement cost of the improvements located on the related mortgaged property.
 
In general, the standard form of hazard insurance policy covers physical damage to, or destruction of, the improvements on the mortgaged property by fire, lightning, explosion, smoke, windstorm and hail, riot or strike and civil commotion, subject to the conditions and exclusions set forth in each policy.
 
Each mortgage loan generally also requires the related borrower to maintain comprehensive general liability insurance against claims for personal and bodily injury, death or property damage occurring on, in or about the related mortgaged property in an amount generally equal to at least $1,000,000 on a per occurrence basis and $2,000,000 in the aggregate.
 
Each mortgage loan generally further requires the related borrower to maintain business interruption insurance in an amount not less than approximately 100% of the gross rental income from the related mortgaged property for not less than twelve (12) months.
 
 
Required Third Party Reports
 
Bank of America underwriters utilize specific information provided by licensed third party professionals in evaluating the collateral.  The following reports are ordered by Bank of America:
 
Appraisal.  An independent appraiser that is either a member of MAI or state certified is required to perform an appraisal (or updated an existing appraisal) of each of the related mortgaged properties in connection with the origination of each mortgage loan to establish the appraised value of the related mortgaged property or properties.  Such appraisal, appraisal update or property valuation is prepared on or about the “Appraisal Date” indicated in the prospectus supplement, and except for certain mortgaged properties involving operating businesses, the appraiser represented in such appraisal or in a letter or other agreement that the appraisal conformed to the appraisal guidelines set forth in USPAP.  In general, such appraisals represent the analysis and opinions of the respective appraisers at or before the time made, and are not guarantees of, and may not be indicative of, present or future value.  All appraisals are in compliance with FIRREA.
 
Property Condition Assessments.  Inspections of each of the mortgaged properties (other than in the case of mortgaged properties secured solely by an interest in land) are conducted by independent licensed engineers in connection with or subsequent to the origination of the related mortgage loan.  Such inspections are generally commissioned to inspect the exterior walls, roofing, interior construction, mechanical and electrical systems and general condition of the site, buildings and other improvements located at a mortgaged property.  The resulting reports may indicate deferred maintenance items and recommended capital improvements.  The estimated cost of the necessary repairs or replacements at a mortgaged property is included in the related property condition assessment.  In general, with limited exception, cash reserves are established, or other security obtained, to fund or secure the payment of such estimated deferred maintenance or replacement items.  In addition, various mortgage loans require monthly deposits into cash reserve accounts to fund capital expenditures.
 
Environmental Site Assessment (“ESA”).  ESA’s are information-gathering investigations that identify environmental conditions that may impair, restrict the use of, and/or impose an environmental liability to the mortgaged property.  A Phase I ESA consists of inquiries, interviews, inspections, and research of public records to identify known or potential environmental concerns.  A Phase II ESA is a site specific investigation to determine the presence or absence of environmental concerns identified in the Phase I ESA.  Bank of America requires a Phase I ESA for all properties regardless of age or location and each such report must be in compliance with current standards prescribed by The American Society of Testing and Materials (“ASTM”).
 
Seismic Reports.  A seismic report is required for all properties located in Seismic Zones 3 or 4 as determined in accordance with the Uniform Building Code.
 
[As and to the extent described in the related prospectus supplement, the Sponsor will set forth exceptions to its underwriting guidelines.]
 
 
-59-

 
 
Representations and Warranties
 
As and to the extent described in the related prospectus supplement, the Sponsor will make representations and warranties regarding the mortgage loans that it transfers to the Depositor for a particular series of certificates.
 
[As and to the extent described in the related prospectus supplement, the Sponsor will set forth exceptions to the representations and warranties regarding the mortgage loans.]
 
BANK OF AMERICA, NATIONAL ASSOCIATION, AS SERVICER
 
General
 
Bank of America has been servicing commercial mortgage loans through its capital markets servicing group in excess of sixteen years.
 
 
Bank of America’s principal servicing offices are located at 900 West Trade Street, Suite 650, Attention: Capital Markets Servicing Group, NC1-026-06-01, Charlotte, North Carolina 28255.
 
The table below sets forth information about Bank of America’s portfolio of commercial mortgage loans as of the dates indicated:
 
Commercial Mortgage Loans
 
As of
December 31,
 2006
   
As of
December 31,
 2007
   
As of
December 31,
 2008
   
As of
December 31,
2009
   
As of
December 31,
2010
   
YTD
September 30,
2011
 
By Number
    9,473       9,476       10,528       9,958       10,280       10,050  
By Aggregate Unpaid Principal Balance
  $ 83,588,000,000     $ 125,378,446,000     $ 135,534,500,000     $ 132,764,400,000     $ 127,494,000,000     $ 120,059,368,273  
 
As of September 30, 2011, Bank of America’s portfolio consisted of 10,050 commercial mortgage loans with an unpaid principal balance of approximately $120,059,368,273, of which 4,437 commercial mortgage loans with an unpaid principal balance of approximately $71,515,715,104 were related to commercial mortgage-backed securities.
 
[Currently, there is no financial conditions that cause material risk to the servicing operations or a material impact on the related pool of mortgage loans or the related assets.]
 
With respect to the collections on the related pool of mortgage loans or the related asset, in accordance with the related Pooling and Servicing Agreement, Bank of America will establish a segregated custodial account.
 
As required by most pooling and servicing agreements, Bank of America may be required to advance funds for delinquent payments, subject to the servicer’s determination of recoverability.  A servicer will advance funds as an advance if a borrower’s payment is late in order to provide a certain amount of liquidity to the related trust fund month over month.  Servicers will make servicing advances or property protection advances for unpaid items on individual loans such as property taxes, insurance payments and life/safety repairs, all subject to the servicer's determination as to whether the advance would be ultimately recoverable.  Upon a determination of non-recoverability, the servicer’s advances are repaid first from certain funds available in the collection account.
 
[Information about periodic advances for the previous three years, to the extent material and to the extent data is available.]
 
In addition to servicing loans for securitized commercial mortgages, Bank of America also services loans that are held in its portfolio, whole loans that are held in the portfolio of third parties and whole loans that are originated by Bank of America and sold to a variety of investors.
 
Bank of America utilizes a mortgage-servicing technology platform with multiple capabilities and reporting functions that is widely used within the commercial mortgage industry.  This platform allows Bank of America to
 
 
-60-

 
 
process mortgage servicing activities including but not limited to: (i) performing account maintenance; (ii) tracking borrower communications; (iii) tracking real estate tax escrow and payments, insurance escrow and payments, tracking replacement reserve escrows, operating statement data and rent rolls; (iv) entering and updating transaction data; and (v) generating various reports.
 
Bank of America has implemented and tested a business continuity plan.  In case of a disruption, all functions of the disrupted facility would be transferred to a business recovery facility.  The business recovery facility has access to all data and tools necessary to continue servicing all mortgage loans.  Bank of America’s business continuity plan is tested and updated annually.
 
Bank of America’s servicing policies and procedures are updated annually to keep pace with the changes in the industry and have been generally consistent for the last three years in all material respects.  The only significant changes in Bank of America’s policies and procedures have come in response to changes in federal or state law (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act) or investor requirements, such as updates issued by Federal National Mortgage Association or Federal Home Loan Mortgage Corporation.  Bank of America may perform any of its obligations under a pooling and servicing agreement through one or more third-party vendors, affiliates or subsidiaries.  Bank of America may engage third-party vendors to provide technology or process efficiencies.  Bank of America monitors its third-party vendors in compliance with the guidelines reviewed by the OCC.  Bank of America has entered into contracts with third-party vendors for functions such as annual property inspections, real estate tax payment and tracking, hazard insurance, lockbox services and document printing.  Bank of America may also retain certain firms to act as a primary servicer and to provide cashiering or non-cashiering subservicing on certain loans.
 
Loans are serviced in accordance with the related loan agreements, mortgage documents, pooling and servicing agreements, inter-creditor agreements, if applicable, and the applicable servicing standard.
 
Custody services of original documents evidencing the mortgage loans for a particular series will typically be performed by the related trustee.  On occasion, Bank of America as servicer may have custody of certain of such documents as necessary for enforcement actions involving particular mortgage loans or otherwise.  To the extent Bank of America performs custodial functions as servicer, documents will be maintained in its vault.  Bank of America utilizes an electronic tracking system to identify the owner of the related mortgage file.
 
Property Damage.  When an underlying property is damaged and such damage is covered by insurance, Bank of America takes certain actions to ensure that the property is restored to its original condition.  These actions include depositing the insurance proceeds and funding the restoration of the property as would be done for a construction loan.  Bank of America maintains the staff to collect and review insurance policies and/or certificates relating to the coverages required under the mortgage loan documents.  Bank of America may, from time to time, retain a vendor to assist in the collection and review of insurance policies and/or certificates relating to the coverages required under the mortgage loan documents.  The vendor provides a feed to the Bank of America’s loan servicing system to provide updated information.
 
Special Servicing
 
 
Delinquencies, Losses, Bankruptcies and Recoveries
 
Bank of America monitors mortgage loans for a variety of situations that present the risk of delinquency or loss to a trust.  Those situations include, without limitation, situations where a mortgagor has sold or transferred the related mortgaged property, where there has been damage to the related mortgaged property, where the mortgagor is late in making payments for any number of reasons, and where the mortgagor has declared bankruptcy.  The following is a brief description of Bank of America’s policies and procedures to respond to each of these situations.
 
Collections and Loss Mitigation.  Account status is monitored and efforts are made to prevent a mortgage loan on which a payment is delinquent from going to foreclosure.  Based on account payment history, prior contact with the borrower, property status, and various other factors, an appropriate course of action is employed to make direct mail or phone contact with the borrower(s).  All of the preceding factors are considered when determining the appropriate timing for the contact efforts.
 
 
 
-61-

 
 
Initial phone contact is pursued by Bank of America’s collections department, when a loan payment is not received after the applicable grace period.  Each call made by the collection department attempts to: (i) obtain the reason for default; (ii) obtain information related to the mortgagor’s current financial situation; (iii) verify occupancy.  Loans serviced by Bank of America generally have grace periods of five to fifteen days after the Due Date in which a borrower can make a monthly payment without incurring a penalty or late charge.  In addition, a mortgage loan is not considered delinquent unless a full monthly payment has not been received by the close of business on the last day of the month of the Due Date.  For example, a mortgage loan with a Due Date of May 1 is considered delinquent if a full monthly payment is not received by May 31.
 
Late charges are generally assessed after the Due Date at the expiration of a grace period, if applicable.   There may be situations, based on the customer or account circumstances, where a late fee could be waived, providing the late fee is not required to pay interest on advances to a trust fund in accordance with the related pooling and servicing agreement.  Generally, the borrower is sent a reminder notice between the expiration of the grace period and 30 days delinquent.
 
The borrower is sent a notice of default when the payment has not been made after 30 days.  Notice periods are more specifically spelled out in individual loan documents.  General default communications may continue with a late fee notice, account billing statements, breach letters, loss mitigation solicitations, occupancy and property status inquiries.  If after 30 days the payment has not been received, generally pooling and servicing agreements require the loan to be transferred to special servicing for default processing.  In recognition of the fact that mortgage loans that are delinquent are at higher risk for abandonment by the borrower, and may also face issues related to maintenance, Bank of America has developed guidelines for inspecting properties for which a monthly payment is delinquent.  Depending on various factors, such as the ability to contact the customer, the delinquency status of the account, and the property occupancy status, Bank of America will hire a vendor to inspect the related property to determine its condition.  If the inspection results indicate a need for property safeguarding measures, such as securing or winterizing, Bank of America will ensure the appropriate safeguards are implemented in accordance with industry, legal and investor standards.
 
Delinquent mortgage loans are reviewed for loss mitigation options, which can include a promise to pay, repayment plan, forbearance, moratorium, modification, special forbearance, deed-in-lieu of foreclosure, assumption, sale of property, demand arrears, or foreclosure.  Bank of America will opt for any one or more of these mitigation options depending on various factors, but will pursue more extensive loss mitigation solutions when a suitable arrangement for repayment or promise to pay is not feasible because of the borrower’s financial situation or unwillingness to support the property.  Payment activities on delinquent mortgage loans are monitored to ensure the appropriate application of partial payments where specific arrangements have been agreed to allow partial payments and to ensure an appropriate response to situations in which a customer has paid with a check that is returned for insufficient funds.  Asset plans are prepared by the 60th day after the loan has been transferred to Bank of America, as special servicer, per pooling and servicing agreement requirements (or as otherwise required to do so by the related pooling and servicing agreements).  If a workout or modification can be achieved with the borrower on the asset, the asset may be returned to the related trust fund as a corrected mortgage loan.
 
Bankruptcy.  When a mortgagor files for bankruptcy, Bank of America’s options for recovery are more limited.  Bank of America monitors bankruptcy proceedings and develops appropriate responses based on a variety of factors, including: (i) the chapter of the Bankruptcy Code under which the mortgagor filed; (ii) federal, state and local regulations; (iii) determination-of-claim requirements; (iv) motion requirements; and (v) specific orders issued through the applicable court.  Bank of America works in conjunction with its in-house and outside legal counsel to file all proof of claims, review plans, make objections and file motions for relief.
 
Foreclosure.  Bank of America, as Special Servicer works in conjunction with its in-house and outside legal counsel to foreclose a property when (i) it is apparent that foreclosure is the only resolution for the asset; and/or (ii) it determines in its reasonable judgment that it is in the best interest of the related trust fund.  Once the property is foreclosed and REO; Bank of America will work with its pre-approved vendors to either (i) sell the property or (ii) recondition, if necessary, and lease the property in preparation for liquidation.  Losses may be experienced on a mortgage loan during the real estate owned process if the value of the property at time of liquidation is less than the sum of the unpaid principal balance and all outstanding advances (including, but not limited to, the outstanding unpaid principal balance of the mortgage loan, interest advances, escrow advances, uncollected servicing fees, property maintenance fees, attorney fees, and other necessary fees).
 
 
-62-

 
 
Other Servicers
 
In the event that Bank of America or another servicer appoints a sub-servicer that meets the thresholds provided in Item 1108(a)(3) of Regulation AB (17 CFR 229.1108), the applicable prospectus supplement will provide the disclosure required by Item 1108(b) and (c) of Regulation AB (17 CFR 229.1108).  In the event that such appointment occurs after the issuance of the related series of certificates, the Depositor will report such appointment on Form 8-K.
 
DESCRIPTION OF THE CERTIFICATES
 
General
 
Each series of certificates will represent the entire beneficial ownership interest in the trust fund created pursuant to the related pooling and servicing agreement.  As described in the related prospectus supplement, the certificates of each series, including the certificates of such series being offered for sale, may consist of one or more classes of certificates that, among other things:
 
provide for the accrual of interest on the Certificate Balance or Notional Amount at a fixed, variable or adjustable rate;
 
constitute Senior Certificates or Subordinate Certificates;
 
constitute Stripped Interest Certificates or Stripped Principal Certificates;
 
provide for distributions of interest or principal that commence only after the occurrence of certain events, such as the retirement of one or more other classes of certificates of such series;
 
provide for distributions of principal to be made, from time to time or for designated periods, at a rate that is faster (and, in some cases, substantially faster) or slower (and, in some cases, substantially slower) than the rate at which payments or other collections of principal are received on the mortgage assets in the related trust fund;
 
provide for distributions based solely or primarily on specified mortgage assets or a specified group of mortgage assets in the related trust fund;
 
provide for distributions of principal to be made, subject to available funds, based on a specified principal payment schedule or other methodology;
 
provide for distributions based on collections on the mortgage assets in the related trust fund attributable to Prepayment Premiums and Equity Participations or
 
be exchangeable, either separately or together with one or more classes of certificates, for one or more other classes of certificates.
 
If so specified in the related prospectus supplement, a class of certificates may have two or more component parts, each having characteristics that are otherwise described in this prospectus as being attributable to separate and distinct classes.  For example, a class of certificates may have a Certificate Balance on which it accrues interest at a fixed, variable or adjustable rate.  Such class of certificates may also have certain characteristics attributable to Stripped Interest Certificates insofar as it may also entitle the holders of Stripped Interest Certificates to distributions of interest accrued on a Notional Amount at a different fixed, variable or adjustable rate.  In addition, a class of certificates may accrue interest on one portion of its Certificate Balance at one fixed, variable or adjustable rate and on another portion of its Certificate Balance at a different fixed, variable or adjustable rate.
 
Each class of offered certificates of a series will be issued in minimum denominations corresponding to the principal balances or, in case of certain classes of Stripped Interest Certificates or REMIC Residual Certificates,
 
 
-63-

 
 
notional amounts or percentage interests, specified in the related prospectus supplement.  As provided in the related prospectus supplement, one or more classes of offered certificates of any series may be issued in fully registered, definitive form or may be offered in book-entry format through the facilities of DTC.  The offered certificates of each series (if issued in fully registered definitive form) may be transferred or exchanged, subject to any restrictions on transfer described in the related prospectus supplement, at the location specified in the related prospectus supplement, without the payment of any service charges, other than any tax or other governmental charge payable in connection with that transfer or exchange.  Interests in a class of certificates offered in book-entry format will be transferred on the book-entry records of DTC and its participating organizations.  If so specified in the related prospectus supplement, arrangements may be made for clearance and settlement through Clearstream Banking, société anonyme, or Euroclear Bank S.A./N.V., as operator of the Euroclear System (in Europe), if they are participants in DTC.
 
Distributions
 
Distributions on the certificates of each series will be made on each Distribution Date from the Available Distribution Amount for such series and such Distribution Date.  The particular components of the Available Distribution Amount for any series and Distribution Date will be more specifically described in the related prospectus supplement.  Except as otherwise specified in the related prospectus supplement, the Distribution Date for a series of certificates will be the 11th day of each month (or, if any such 11th day is not a business day, the next succeeding business day), commencing in the month immediately following the month in which such series of certificates is issued.
 
Except as otherwise specified in the related prospectus supplement, distributions on the certificates of each series (other than the final distribution in retirement of any such certificate) will be made to the persons in whose names such certificates are registered at the close of business on the Record Date, and the amount of each distribution will be determined as of the close of business on the date specified in the related prospectus supplement.  All distributions with respect to each class of certificates on each Distribution Date will be allocated pro rata among the outstanding certificates in such class in proportion to the respective percentage interests evidenced by those certificates unless otherwise specified in the related prospectus supplement.  Payments will be made either by wire transfer in immediately available funds to the account of a certificateholder at a bank or other entity having appropriate facilities therefor, if such certificateholder has provided the person required to make such payments with wiring instructions no later than the related Record Date or such other date specified in the related prospectus supplement (and, if so provided in the related prospectus supplement, such certificate-holder holds certificates in the requisite amount or denomination specified in the prospectus supplement), or by check mailed to the address of such certificateholder as it appears on the Certificate Register; provided, however, the final distribution in retirement of any class of certificates (whether issued in fully registered definitive form or in book-entry format) will be made only upon presentation and surrender of such certificates at the location specified in the notice to certificateholders of such final distribution.
 
Distributions of Interest on the Certificates
 
Each class of certificates of each series (other than certain classes of Stripped Principal Certificates and certain classes of REMIC Residual Certificates that have no pass-through rate) may have a different pass-through rate, which in each case may be fixed, variable or adjustable.  The related prospectus supplement will specify the pass-through rate or, in the case of a variable or adjustable pass-through rate, the method for determining the pass-through rate, for each class of offered certificates.  Unless otherwise specified in the related prospectus supplement, interest on the certificates of each series will be calculated on the basis of a 360-day year consisting of twelve 30-day months.
 
Distributions of interest in respect of any class of certificates (other than a class of Accrual Certificates, which will be entitled to distributions of accrued interest commencing only on the Distribution Date or under the circumstances specified in the related prospectus supplement, and other than any class of Stripped Principal Certificates or REMIC Residual Certificates that is not entitled to any distributions of interest) will be made on each Distribution Date based on the Accrued Certificate Interest for such class and such Distribution Date, subject to the sufficiency of that portion, if any, of the Available Distribution Amount allocable to such class on such Distribution Date.  Prior to the time interest is distributable on any class of Accrual Certificates, the amount of Accrued
 
 
-64-

 
 
Certificate Interest otherwise distributable on such class will be added to the Certificate Balance of such Accrual Certificates on each Distribution Date or otherwise deferred as described in the related prospectus supplement.  Unless otherwise provided in the related prospectus supplement, the Accrued Certificate Interest for each Distribution Date on a class of Stripped Interest Certificates will be similarly calculated except that it will accrue on a Notional Amount.  Reference to a Notional Amount with respect to a class of Stripped Interest Certificates is solely for convenience in making certain calculations and does not represent the right to receive any distributions of principal.  If so specified in the related prospectus supplement, the amount of Accrued Certificate Interest that is otherwise distributable on (or, in the case of Accrual Certificates, that may otherwise be added to the Certificate Balance of) one or more classes of the certificates of a series may be reduced to the extent that any Prepayment Interest Shortfalls, as described under “YIELD AND MATURITY CONSIDERATIONS—Certain Shortfalls in Collections of Interest”, exceed the amount of any sums that are applied to offset the amount of such shortfalls.  The particular manner in which such shortfalls will be allocated among some or all of the classes of certificates of that series will be specified in the related prospectus supplement.  The related prospectus supplement will also describe the extent to which the amount of Accrued Certificate Interest that is otherwise distributable on (or, in the case of Accrual Certificates, that may otherwise be added to the Certificate Balance of) a class of offered certificates may be reduced as a result of any other contingencies, including delinquencies, losses and deferred interest on or in respect of the mortgage assets in the related trust fund.  Unless otherwise provided in the related prospectus supplement, any reduction in the amount of Accrued Certificate Interest otherwise distributable on a class of certificates by reason of the allocation to such class of a portion of any deferred interest on or in respect of the mortgage assets in the related trust fund will result in a corresponding increase in the Certificate Balance of such class.  See “RISK FACTORS—Prepayments on the Underlying Mortgage Loans Will Affect the Average Life of Your Certificates and Your Yield” and “YIELD AND MATURITY CONSIDERATIONS —Certain Shortfalls in Collections of Interest”.
 
Distributions of Principal on the Certificates
 
Each class of certificates of each series (other than certain classes of Stripped Interest Certificates and certain classes of REMIC Residual Certificates) will have a Certificate Balance, which, at any time, will equal the then maximum amount that the holders of certificates of such class will be entitled to receive as principal out of the future cash flow on the mortgage assets and other assets included in the related trust fund.  The outstanding Certificate Balance of a class of certificates will be reduced by distributions of principal made from time to time and, if and to the extent so provided in the related prospectus supplement, further by any losses incurred in respect of the related mortgage assets allocated thereto from time to time.  In turn, the outstanding Certificate Balance of a class of certificates may be increased as a result of any deferred interest on or in respect of the related mortgage assets being allocated thereto from time to time, and will be increased, in the case of a class of Accrual Certificates prior to the Distribution Date on which distributions of interest are required to commence, by the amount of any Accrued Certificate Interest in respect of such Accrual Certificate (reduced as described above).  The initial aggregate Certificate Balance of all classes of a series of certificates will not be greater than the aggregate outstanding principal balance of the related mortgage assets as of a specified date, after application of scheduled payments due on or before such date, whether or not received.  The initial Certificate Balance of each class of a series of certificates will be specified in the related prospectus supplement.  As and to the extent described in the related prospectus supplement, distributions of principal with respect to a series of certificates will be made on each Distribution Date to the holders of the class or classes of certificates of such series entitled thereto until the Certificate Balances of such certificates have been reduced to zero.  Distributions of principal with respect to one or more classes of certificates may be made at a rate that is faster (and, in some cases, substantially faster) than the rate at which payments or other collections of principal are received on the mortgage assets in the related trust fund.  Distributions of principal with respect to one or more classes of certificates may not commence until the occurrence of certain events, such as the retirement of one or more other classes of certificates of the same series, or may be made at a rate that is slower (and, in some cases, substantially slower) than the rate at which payments or other collections of principal are received on the mortgage assets in the related trust fund.  Distributions of principal with respect to Controlled Amortization Classes may be made, subject to available funds, based on a specified principal payment schedule.  Distributions of principal with respect to Companion Classes may be contingent on the specified principal payment schedule for a Controlled Amortization Class of the same series and the rate at which payments and other collections of principal on the mortgage assets in the related trust fund are received.  Unless otherwise specified in the related prospectus supplement, distributions of principal of any class of offered certificates will be made on a pro rata basis among all of the certificates of such class.
 
 
-65-

 
 
Distributions on the Certificates Concerning Prepayment Premiums or Concerning Equity Participations
 
If so provided in the related prospectus supplement, Prepayment Premiums or payments in respect of Equity Participations received on or in connection with the mortgage assets in any trust fund will be distributed on each Distribution Date to the holders of the class of certificates of the related series entitled thereto in accordance with the provisions described in such prospectus supplement.  Alternatively, we or any of our affiliates may retain such items or by any other specified person and/or may be excluded as trust assets.
 
Allocation of Losses and Shortfalls
 
The amount of any losses or shortfalls in collections on the mortgage assets in any trust fund (to the extent not covered or offset by draws on any reserve fund or under any instrument of credit support) will be allocated among the respective classes of certificates of the related series in the priority and manner, and subject to the limitations, specified in the related prospectus supplement.  As described in the related prospectus supplement, such allocations may be effected by (1) a reduction in the entitlements to interest and/or the Certificate Balances of one or more such classes of certificates and/or (2) establishing a priority of payments among such classes of certificates.  See “DESCRIPTION OF CREDIT SUPPORT”.
 
Advances in Respect of Delinquencies
 
If and to the extent provided in the related prospectus supplement, if a trust fund includes mortgage loans, the master servicer, the special servicer, the trustee, any provider of credit support and/or any other specified person may be obligated to advance, or have the option of advancing, on or before each Distribution Date, from its or their own funds or from excess funds held in the related Certificate Account that are not part of the Available Distribution Amount for the related series of certificates for such Distribution Date, an amount up to the aggregate of any payments of principal (other than the principal portion of any balloon payments) and interest that were due on or in respect of such mortgage loans during the related Due Period and were delinquent on the related Determination Date.
 
Advances are intended to maintain a regular flow of scheduled interest and principal payments to holders of the class or classes of certificates entitled thereto, rather than to guarantee or insure against losses.  Accordingly, all advances made out of a specific entity’s own funds will be reimbursable out of related recoveries on the mortgage loans (including amounts drawn under any fund or instrument constituting credit support) respecting which such advances were made and such other specific sources as may be identified in the related prospectus supplement, including, in the case of a series that includes one or more classes of Subordinate Certificates, if so identified, collections on other mortgage assets in the related trust fund that would otherwise be distributable to the holders of one or more classes of such Subordinate Certificates.  No advance will be required to be made by a master servicer, special servicer or trustee if, in the judgment of the master servicer, special servicer or trustee, as the case may be, such advance would not be recoverable from recoveries on the mortgage loans or another specifically identified source.  Unless otherwise specified in the related prospectus supplement, this will be based on the advancing party’s estimation of the value of the mortgaged property in relation to the sum of the unpaid principal balance of the related mortgage loan, accrued interest, the amount of previously unreimbursed Advances and anticipated disposition expenses, and the advancing party’s determination that the advance would not ultimately be recoverable under any applicable insurance policies, from proceeds of liquidation of the mortgage loan or otherwise.  If previously made by a master servicer, special servicer or trustee, such an advance will be reimbursable thereto from any amounts in the related Certificate Account prior to any distributions being made to the related series of certificateholders.
 
If advances have been made by a master servicer, special servicer, trustee or other entity from excess funds in a Certificate Account, such master servicer, special servicer, trustee or other entity, as the case may be, will be required to replace such funds in such Certificate Account on or prior to any future Distribution Date to the extent that funds in such Certificate Account on such Distribution Date are less than payments required to be made to the related series of certificateholders on such date.  If so specified in the related prospectus supplement, the obligation of a master servicer, special servicer, trustee or other entity to make advances may be secured by a cash advance reserve fund or a surety bond.  If applicable, information regarding the characteristics of, and the identity of any obligor on, any such surety bond, will be set forth in the related prospectus supplement.
 
 
 
-66-

 
 
If and to the extent so provided in the related prospectus supplement, any entity making advances will be entitled to receive interest on certain or all of such advances for a specified period during which such advances are outstanding at the rate specified in such prospectus supplement, and such entity will be entitled to payment of such interest periodically from general collections on the mortgage loans in the related trust fund prior to any payment to the related series of certificateholders or as otherwise provided in the related pooling and servicing agreement and described in such prospectus supplement.
 
The prospectus supplement for any series of certificates evidencing an interest in a trust fund that includes MBS will describe any comparable advancing obligation of a party to the related pooling and servicing agreement or of a party to the agreement pursuant to which the MBS was issued.
 
Reports to Certificateholders
 
On each Distribution Date, together with the distribution to the holders of each class of the offered certificates of a series, a master servicer, manager or trustee, as provided in the related prospectus supplement, will forward to each such holder, a Distribution Date Statement that, unless otherwise provided in the related prospectus supplement, will set forth, among other things, in each case to the extent applicable and available and unless otherwise specified in the related prospectus supplement:
 
theamount of such distribution to holders of such class of offered certificates that was applied to reduce the Certificate Balance of such class;
 
the amount of such distribution to holders of such class of offered certificates that was applied to pay Accrued Certificate Interest;
 
the amount, if any, of such distribution to holders of such class of offered certificates that was allocable to (A) Prepayment Premiums and (B) payments on account of Equity Participations;
 
the amount, if any, by which such distribution is less than the amounts to which holders of such class of offered certificates are entitled;
 
if the related trust fund includes mortgage loans, the aggregate amount of advances included in such distribution;
 
if the related trust fund includes mortgage loans, the amount of servicing compensation received by the related master servicer (and, if payable directly out of the related trust fund, by any special servicer and any sub-servicer) and, if the related trust fund includes MBS, the amount of administrative compensation received by the MBS Administrator;
 
information regarding the aggregate principal balance of the related mortgage assets on or about such Distribution Date;
 
if the related trust fund includes mortgage loans, information regarding the number and aggregate principal balance of such mortgage loans that are delinquent;
 
if the related trust fund includes mortgage loans, information regarding the aggregate amount of losses incurred and principal prepayments made with respect to such mortgage loans during the specified period, generally corresponding in length to the period between Distribution Dates, during which prepayments and other unscheduled collections on the mortgage loans in the related trust fund must be received in order to be distributed on a particular Distribution Date);
 
the Certificate Balance or Notional Amount, as the case may be, of such class of certificates at the close of business on such Distribution Date, separately identifying any reduction in such Certificate Balance or Notional Amount due to the allocation of any losses in respect of the related mortgage assets, any increase in such Certificate Balance or Notional Amount due to the allocation of any negative amortization in
 
 
-67-

 
 
 
 
in respect of the related mortgage assets and any increase in the Certificate Balance of a class of Accrual Certificates, if any, in the event that Accrued Certificate Interest has been added to such balance;
 
if such class of offered certificates has a variable pass-through rate or an adjustable pass-through rate, the pass-through rate applicable thereto for such Distribution Date and, if determinable, for the next succeeding Distribution Date;
 
the amount deposited in or withdrawn from any reserve fund on such Distribution Date, and the amount remaining on deposit in such reserve fund as of the close of business on such Distribution Date;
 
if the related trust fund includes one or more instruments of credit support, such as a letter of credit, an insurance policy and/or a surety bond, the amount of coverage under each such instrument as of the close of business on such Distribution Date; and
 
the amount of credit support being afforded by any classes of Subordinate Certificates.
 
In the case of information furnished pursuant to the first 3 bulleted items above, the amounts will be expressed as a dollar amount per specified denomination of the relevant class of offered certificates or as a percentage.  The prospectus supplement for each series of certificates may describe additional information to be included in reports to the holders of the offered certificates of such series.
 
Each Distribution Date Statement will be filed with the SEC within 15 days after each Distribution Date on Form 10-D.  In addition, within a reasonable period of time after the end of each calendar year, the master servicer, manager or trustee for a series of certificates, as the case may be, will be required to furnish to each person who at any time during the calendar year was a holder of an offered certificate of such series a statement containing the information set forth in the first 3 bulleted items above, aggregated for such calendar year or the applicable portion during which such person was a certificateholder.  Such obligation will be deemed to have been satisfied to the extent that substantially comparable information is provided pursuant to any requirements of the Internal Revenue Code of 1986, as amended, are from time to time in force.  See, however, “—Book-Entry Registration and Definitive Certificates” below.
 
If the trust fund for a series of certificates includes MBS, the ability of the related master servicer, manager or trustee, as the case may be, to include in any Distribution Date Statement information regarding the mortgage loans underlying such MBS will depend on the reports received with respect to such MBS.  In such cases, the related prospectus supplement will describe the loan-specific information to be included in the Distribution Date Statements that will be forwarded to the holders of the offered certificates of that series in connection with distributions made to them.
 
Voting Rights
 
The voting rights evidenced by each series of certificates will be allocated among the respective classes of such series in the manner described in the related prospectus supplement.
 
Certificateholders will generally not have a right to vote, except with respect to required consents to certain amendments to the related pooling and servicing agreement and as otherwise specified in the related prospectus supplement.  See “THE POOLING AND SERVICING AGREEMENTS—Amendment”.  The holders of specified amounts of certificates of a particular series will have the right to act as a group to remove the related trustee and also upon the occurrence of certain events which if continuing would constitute an Event of Default on the part of the related master servicer, special servicer or REMIC administrator.  See “THE POOLING AND SERVICING AGREEMENTS—Events of Default”, “—Rights Upon Event of Default” and “—Resignation and Removal of the Trustee”.
 
Termination
 
The obligations created by the pooling and servicing agreement for each series of certificates will terminate following (1) the final payment or other liquidation of the last mortgage asset subject thereto or the disposition of all
 
 
-68-

 
 
property acquired upon foreclosure of any mortgage loan subject thereto and (2) the payment (or provision for payment) to the certificateholders of that series of all amounts required to be paid to them pursuant to such pooling and servicing agreement.  Written notice of termination of a pooling and servicing agreement will be given to each certificateholder of the related series, and the final distribution will be made only upon presentation and surrender of the certificates of such series at the location to be specified in the notice of termination.
 
If so specified in the related prospectus supplement, a series of certificates may be subject to optional early termination through the repurchase of the mortgage assets in the related trust fund by the party or parties specified in the prospectus supplement, under the circumstances and in the manner set forth in the prospectus supplement.  If so provided in the related prospectus supplement upon the reduction of the Certificate Balance of a specified class or classes of certificates by a specified percentage or amount or upon a specified date, a party designated in the prospectus supplement may be authorized or required to solicit bids for the purchase of all the mortgage assets of the related trust fund, or of a sufficient portion of such mortgage assets to retire such class or classes, under the circumstances and in the manner set forth in the prospectus supplement.
 
Book-Entry Registration and Definitive Certificates
 
If so provided in the prospectus supplement for a series of certificates, one or more classes of the offered certificates of such series will be offered in book-entry format through the facilities of DTC, and each such class will be represented by one or more global certificates registered in the name of DTC or its nominee.
 
DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking corporation” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  DTC was created to hold securities for its participating organizations and facilitate the clearance and settlement of securities transactions between its participating organizations through electronic computerized book-entry changes in their accounts, thereby eliminating the need for physical movement of securities certificates.  DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc.  The rules applicable to DTC and its participating organizations are on file with the SEC.
 
Purchases of book-entry certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the book-entry certificates on DTC’s records.  The ownership interest of each actual purchaser of a Book-Entry Certificate is in turn to be recorded on the Direct and Indirect Participants’ records.  Certificate Owners will not receive written confirmation from DTC of their purchases, but Certificate Owners are expected to receive written confirmations providing details of such transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which each Certificate Owner entered into the transaction.  Transfers of ownership interests in the book-entry certificates are to be accomplished by entries made on the books of DTC’s participating organizations acting on behalf of Certificate Owners.  Certificate Owners will not receive certificates representing their ownership interests in the book-entry certificates, except in the event that use of the book-entry system for the book-entry certificates of any series is discontinued as described below.
 
DTC has no knowledge of the actual Certificate Owners of the book-entry certificates; DTC’s records reflect only the identity of the Direct Participants to whose accounts such certificates are credited, which may or may not be the Certificate Owners.  DTC’s participating organizations will remain responsible for keeping account of their holdings on behalf of their customers.
 
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Certificate Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
 
Distributions on the book-entry certificates will be made to DTC.  DTC’s practice is to credit Direct Participants’ accounts on the related Distribution Date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on such date.  Disbursement of such distributions by DTC’s participating organizations to Certificate Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered
 
 
-69-

 
 
in “street name”, and will be the responsibility of each such participating organization (and not of DTC, the depositor or any trustee, master servicer, special servicer or Manager), subject to any statutory or regulatory requirements as may be in effect from time to time.  Accordingly, under a book-entry system, Certificate Owners may receive payments after the related Distribution Date.
 
Unless otherwise provided in the related prospectus supplement, the only certificateholder of book-entry certificates will be the nominee of DTC, and the Certificate Owners will not be recognized as certificateholders under the pooling and servicing agreement.  Certificate Owners will be permitted to exercise the rights of certificateholders under the related pooling and servicing agreement only indirectly through DTC’s participating organization who in turn will exercise their rights through DTC.  We have been informed that DTC will take action permitted to be taken by a certificateholder under a pooling and servicing agreement only at the direction of one or more Direct Participants to whose account with DTC interests in the book-entry certificates are credited.
 
Because DTC can act only on behalf of Direct Participants, who in turn act on behalf of Indirect Participants and certain Certificate Owners, the ability of a Certificate Owner to pledge its interest in book-entry certificates to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of its interest in book-entry certificates, may be limited due to the lack of a physical certificate evidencing such interest.
 
Unless otherwise specified in the related prospectus supplement, certificates initially issued in book-entry form will be issued in fully registered definitive form to Certificate Owners or their nominees, rather than to DTC or its nominee, only if (1) DTC notifies the certificate registrar in writing that DTC is unwilling or unable to continue as a depository for the certificates and a qualifying successor depository is not appointed by the depositor within ninety (90) days of such notification or (2) the trustee has instituted or has been directed to institute any judicial proceeding in a court to enforce the rights of the certificateholders under the related pooling and servicing agreement and under such book-entry certificate and the trustee has been advised by counsel that in connection with such proceeding it is necessary or appropriate for the trustee or its custodian to obtain possession of such book-entry certificate.  Upon the occurrence of either of the events described in the preceding sentence, DTC will be required to notify all Direct Participants of the availability through DTC of certificates in fully registered form.  Upon surrender by DTC of the certificate or certificates representing a class of book-entry certificates, together with instructions for registration, the trustee for the related series or other designated party will be required to issue to the Certificate Owners identified in such instructions the certificates in fully registered definitive form to which they are entitled, and thereafter the holders of such Definitive Certificates will be recognized as “certificateholders” under and within the meaning of the related pooling and servicing agreement.
 
THE POOLING AND SERVICING AGREEMENTS
 
General
 
The certificates of each series will be issued pursuant to a pooling and servicing agreement.  In general, the parties to a pooling and servicing agreement will include the depositor, the trustee, the master servicer, the special servicer and, if one or more REMIC elections have been made with respect to the trust fund, the REMIC administrator.  However, a pooling and servicing agreement that relates to a trust fund that includes MBS may include a manager as a party, but may not include a master servicer, special servicer or other servicer as a party.  All parties to each pooling and servicing agreement under which certificates of a series are issued will be identified in the related prospectus supplement.  If so specified in the related prospectus supplement, an affiliate of the depositor, or the mortgage asset seller may perform the functions of master servicer, special servicer, manager or REMIC administrator.  If so specified in the related prospectus supplement, the master servicer may also perform the duties of special servicer, and the master servicer, the special servicer or the trustee may also perform the duties of REMIC administrator.  Any party to a pooling and servicing agreement or any affiliate of any party may own certificates issued under the pooling and servicing agreement; however, unless other specified in the related prospectus supplement, except with respect to required consents to certain amendments to a pooling and servicing agreement, certificates issued under the pooling and servicing agreement that are held by the master servicer or special servicer for the related Series will not be allocated Voting Rights.
 
A form of a pooling and servicing agreement has been filed as an exhibit to the Registration Statement of which this prospectus is a part.  However, the provisions of each pooling and servicing agreement will vary depending
 
 
-70-

 
 
upon the nature of the certificates to be issued under the pooling and servicing agreement and the nature of the related trust fund.  The following summaries describe certain provisions that may appear in a pooling and servicing agreement under which certificates that evidence interests in mortgage loans will be issued.  The prospectus supplement for a series of certificates will describe any provision of the related pooling and servicing agreement that materially differs from the description of the pooling and servicing agreement contained in this prospectus and, if the related trust fund includes MBS, will summarize all of the material provisions of the related agreement that provided for the issuance of the MBS.  The summaries in this prospectus do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the pooling and servicing agreement for each series of certificates and the description of such provisions in the related prospectus supplement.  We will provide a copy of the pooling and servicing agreement (without exhibits) that relates to any series of certificates without charge upon written request of a holder of a certificate of such series addressed to it at its principal executive offices specified in this prospectus under “THE DEPOSITOR”.
 
Assignment of Mortgage Loans; Repurchases
 
At the time of issuance of any series of certificates, we will assign (or cause to be assigned) to the designated trustee the mortgage loans to be included in the related trust fund, together with, unless otherwise specified in the related prospectus supplement, all principal and interest to be received on or with respect to such mortgage loans after the Cut-off Date, other than principal and interest due on or before the Cut-off Date.  The trustee will, concurrently with such assignment, deliver the certificates to or at our direction in exchange for the mortgage loans and the other assets to be included in the trust fund for such series.  Each mortgage loan will be identified in a schedule appearing as an exhibit to the related pooling and servicing agreement.  Such schedule generally will include detailed information that pertains to each mortgage loan included in the related trust fund, which information will typically include the address of the related mortgaged property and type of such property; the Mortgage Rate and, if applicable, the applicable index, gross margin, adjustment date and any rate cap information; the original and remaining term to maturity; the amortization term; and the original and outstanding principal balance.
 
In addition, unless otherwise specified in the related prospectus supplement, we will, as to each mortgage loan to be included in a trust fund, deliver, or cause to be delivered, to the related trustee (or to a custodian appointed by the trustee as described below) the mortgage note endorsed, without recourse, either in blank or to the order of such trustee (or its nominee), the mortgage with evidence of recording indicated (except for any mortgage not returned from the public recording office), an assignment of the mortgage in blank or to the trustee (or its nominee) in recordable form, together with any intervening assignments of the mortgage with evidence of recording (except for any such assignment not returned from the public recording office), and, if applicable, any riders or modifications to such mortgage note and mortgage, together with certain other documents at such times as set forth in the related Pooling and Servicing Agreement.  Such assignments may be blanket assignments covering mortgages on mortgaged properties located in the same county, if permitted by law.  Notwithstanding the foregoing, a trust fund may include mortgage loans where the original mortgage note is not delivered to the trustee if we deliver or cause to be delivered, to the related trustee (or such custodian) a copy or a duplicate original of the mortgage note, together with an affidavit certifying that the original mortgage note has been lost or destroyed.  In addition, if we cannot deliver, with respect to any mortgage loan, the mortgage or any intervening assignment with evidence of recording concurrently with the execution and delivery of the related Pooling and Servicing Agreement because of a delay caused by the public recording office, we will deliver, or cause to be delivered, to the related trustee (or such custodian) a true and correct photocopy of such mortgage or assignment as submitted for recording.  We will deliver, or cause to be delivered, to the related trustee (or such custodian) such mortgage or assignment with evidence of recording indicated after receipt of such mortgage from the public recording office.  If we cannot deliver, with respect to any mortgage loan, the mortgage or any intervening assignment with evidence of recording concurrently with the execution and delivery of the related Pooling and Servicing Agreement because such mortgage or assignment has been lost, we will deliver, or cause to be delivered, to the related trustee (or such custodian) a true and correct photocopy of such mortgage or assignment with evidence of recording.  Unless otherwise specified in the related prospectus supplement, assignments of mortgage to the trustee (or its nominee) will be recorded in the appropriate public recording office, except in states where, in the opinion of counsel acceptable to the trustee, such recording is not required to protect the trustee’s interests in the mortgage loan against the claim of any subsequent transferee or any successor to or creditor of us or the originator of such mortgage loan.
 
 
-71-

 
 
The trustee (or a custodian appointed by the trustee) for a series of certificates will be required to review the mortgage loan documents delivered to it within a specified period of days after receipt of the mortgage loan documents, and the trustee (or such custodian) will hold such documents in trust for the benefit of the certificateholders of such series.  Unless otherwise specified in the related prospectus supplement, if any such document is found to be missing or defective, and such omission or defect, as the case may be, materially and adversely affects the interests of the certificateholders of the related series, the trustee (or such custodian) will be required to notify the master servicer, the special servicer and the depositor, and one of such persons will be required to notify the relevant mortgage asset seller.  In that case, and if the mortgage asset seller cannot deliver the document or cure the defect within a specified number of days after receipt of such notice, then, except as otherwise specified below or in the related prospectus supplement, the mortgage asset seller will be obligated to repurchase the related mortgage loan from the trustee at a price generally equal to the Purchase Price, or at such other price as will be specified in the related prospectus supplement.  If so provided in the prospectus supplement for a series of certificates, a mortgage asset seller, in lieu of repurchasing a mortgage loan as to which there is missing or defective loan documentation, will have the option, exercisable upon certain conditions and/or within a specified period after initial issuance of such series of certificates, to replace such mortgage loan with one or more other mortgage loans, in accordance with standards that will be described in the prospectus supplement.  Unless otherwise specified in the related prospectus supplement, this repurchase or substitution obligation will constitute the sole remedy to holders of the certificates of any series or to the related trustee on their behalf for missing or defective mortgage loan documentation, and neither we nor, unless it is the mortgage asset seller, the master servicer or the special servicer will be obligated to purchase or replace a mortgage loan if a mortgage asset seller defaults on its obligation to do so.
 
The trustee will be authorized at any time to appoint one or more custodians pursuant to a custodial agreement to hold title to the mortgage loans in any trust fund and to maintain possession of and, if applicable, to review the documents relating to such mortgage loans, in any case as the agent of the trustee.  The identity of any such custodian to be appointed on the date of initial issuance of the certificates will be set forth in the related prospectus supplement.  Any such custodian may be one of our affiliates.
 
Representations and Warranties; Repurchases
 
Unless otherwise provided in the prospectus supplement for a series of certificates, the depositor will, with respect to each mortgage loan in the related trust fund, make or assign, or cause to be made or assigned, certain representations and warranties covering, by way of example
 
the accuracy of the information set forth for such mortgage loan on the schedule of mortgage loans appearing as an exhibit to the related Pooling and Servicing Agreement;
 
the enforceability of the related mortgage note and mortgage and the existence of title insurance insuring the lien priority of the related mortgage;
 
the Warranting Party’s title to the mortgage loan and the authority of the Warranting Party to sell the mortgage loan; and
 
the payment status of the mortgage loan.
 
It is expected that in most cases the Warranting Party will be the mortgage asset seller; however, the Warranting Party may also be an affiliate of the mortgage asset seller, the depositor or an affiliate of the depositor, the master servicer, the special servicer or another person acceptable to the depositor.  The Warranting Party, if other than the mortgage asset seller, will be identified in the related prospectus supplement.
 
Unless otherwise provided in the related prospectus supplement, each Pooling and Servicing Agreement will provide that the master servicer and/or trustee will be required to notify promptly any Warranting Party of any breach of any representation or warranty made by it in respect of a mortgage loan, which breach (unless the related prospectus sets forth a different standard) materially and adversely affects the interests of the certificateholders of the related series.  If such Warranting Party cannot cure such breach within a specified period following the date on which it was notified of such breach, then, unless otherwise provided in the related prospectus supplement, it will be obligated to repurchase such mortgage loan from the trustee at the applicable Purchase Price.  If so provided in the prospectus supplement for a series of certificates, a Warranting Party, in lieu of repurchasing a mortgage loan as to
 
 
-72-

 
 
which a breach has occurred, will have the option, exercisable upon certain conditions and/or within a specified period after initial issuance of such series of certificates, to replace such mortgage loan with one or more other mortgage loans, in accordance with standards that will be described in the prospectus supplement.  Unless otherwise specified in the related prospectus supplement, this repurchase or substitution obligation will constitute the sole remedy available to holders of the certificates of any series or to the related trustee on their behalf for a breach of representation and warranty by a Warranting Party, and neither the depositor nor the master servicer, in either case unless it is the Warranting Party, will be obligated to purchase or replace a mortgage loan if a Warranting Party defaults on its obligation to do so.
 
In some cases, representations and warranties will have been made in respect of a mortgage loan as of a date prior to the date upon which the related series of certificates is issued, and thus may not address events that may occur following the date as of which they were made.  However, the depositor will not include any mortgage loan in the trust fund for any series of certificates if anything has come to the depositor’s attention that would cause it to believe that the representations and warranties made in respect of such mortgage loan will not be accurate in all material respects as of the date of issuance.  The date as of which the representations and warranties regarding the mortgage loans in any trust fund were made will be specified in the related prospectus supplement.
 
Collection and Other Servicing Procedures
 
Unless otherwise specified in the related prospectus supplement, the master servicer and the special servicer for any mortgage pool, directly or through sub-servicers, will each be obligated under the related Pooling and Servicing Agreement to service and administer the mortgage loans in such mortgage pool for the benefit of the related certificateholders, in accordance with applicable law and further in accordance with the terms of such Pooling and Servicing Agreement, such mortgage loans and any instrument of credit support included in the related trust fund.  Subject to the foregoing, the master servicer and the special servicer will each have full power and authority to do any and all things in connection with such servicing and administration that it may deem necessary and desirable.
 
As part of its servicing duties, each of the master servicer and the special servicer will be required to make reasonable efforts to collect all payments called for under the terms and provisions of the mortgage loans that it services and will be obligated to follow such collection procedures as it would follow with respect to mortgage loans that are comparable to such mortgage loans and held for its own account; provided (1) such procedures are consistent with the terms of the related Pooling and Servicing Agreement and (2) do not impair recovery under any instrument of credit support included in the related trust fund.  Consistent with the foregoing, the master servicer and the special servicer will each be permitted, in its discretion, unless otherwise specified in the related prospectus supplement, to waive any Prepayment Premium, late payment charge or other charge in connection with any mortgage loan.
 
The master servicer and the special servicer for any trust fund, either separately or jointly, directly or through sub-servicers, will also be required to perform as to the mortgage loans in such trust fund various other customary functions of a servicer of comparable loans, including maintaining escrow or impound accounts, if required under the related Pooling and Servicing Agreement, for payment of taxes, insurance premiums, ground rents and similar items, or otherwise monitoring the timely payment of those items; attempting to collect delinquent payments; supervising foreclosures; negotiating modifications; conducting property inspections on a periodic or other basis; managing (or overseeing the management of) mortgaged properties acquired on behalf of such trust fund through foreclosure, deed-in-lieu of foreclosure or otherwise; and maintaining servicing records relating to such mortgage loans.  The related prospectus supplement will specify when and the extent to which servicing of a mortgage loan is to be transferred from the master servicer to the special servicer.  In general, and subject to the discussion in the related prospectus supplement, a special servicer will be responsible for the servicing and administration of
 
mortgage loans that are delinquent in respect of a specified number of scheduled payments;
 
mortgage loans as to which the related borrower has entered into or consented to bankruptcy, appointment of a receiver or conservator or similar insolvency proceeding, or the related borrower has become the subject of a decree or order for such a proceeding which shall have remained in force undischarged or unstayed for a specified number of days; and
 
REO Properties.
 
 
 
-73-

 
 
If so specified in the related prospectus supplement, a Pooling and Servicing Agreement also may provide that if a default on a mortgage loan has occurred or, in the judgment of the related master servicer, a payment default is reasonably foreseeable, the related master servicer may elect to transfer the servicing of the mortgage loan, in whole or in part, to the related special servicer.  Unless otherwise provided in the related prospectus supplement, when the circumstances no longer warrant a special servicer’s continuing to service a particular mortgage loan (e.g., the related borrower is paying in accordance with the forbearance arrangement entered into between the special servicer and such borrower), the master servicer will resume the servicing duties with respect thereto.  If and to the extent provided in the related Pooling and Servicing Agreement and described in the related prospectus supplement, a special servicer may perform certain limited duties in respect of mortgage loans for which the master servicer is primarily responsible (including, if so specified, performing property inspections and evaluating financial statements); and a master servicer may perform certain limited duties in respect of any mortgage loan for which the special servicer is primarily responsible (including, if so specified, continuing to receive payments on such mortgage loan (including amounts collected by the special servicer)), making certain calculations with respect to such mortgage loan and making remittances and preparing certain reports to the trustee and/or certificateholders with respect to such mortgage loan.  Unless otherwise specified in the related prospectus supplement, the master servicer will be responsible for filing and settling claims in respect of particular mortgage loans under any applicable instrument of credit support.  See “DESCRIPTION OF CREDIT SUPPORT”.
 
A mortgagor’s failure to make required mortgage loan payments may mean that operating income is insufficient to service the mortgage debt, or may reflect the diversion of that income from the servicing of the mortgage debt.  In addition, a mortgagor that is unable to make mortgage loan payments may also be unable to make timely payment of taxes and otherwise to maintain and insure the related mortgaged property.  In general, the related special servicer will be required to monitor any mortgage loan that is in default, evaluate whether the causes of the default can be corrected over a reasonable period without significant impairment of the value of the related mortgaged property, initiate corrective action in cooperation with the Mortgagor if cure is likely, inspect the related mortgaged property and take such other actions as it deems necessary and appropriate.  A significant period of time may elapse before the special servicer is able to assess the success of any such corrective action or the need for additional initiatives.  The time within which the special servicer can make the initial determination of appropriate action, evaluate the success of corrective action, develop additional initiatives, institute foreclosure proceedings and actually foreclose (or accept a deed to a mortgaged property in lieu of foreclosure) on behalf of the certificateholders of the related series may vary considerably depending on the particular mortgage loan, the mortgaged property, the mortgagor, the presence of an acceptable party to assume the mortgage loan and the laws of the jurisdiction in which the mortgaged property is located.  If a mortgagor files a bankruptcy petition, the special servicer may not be permitted to accelerate the maturity of the mortgage loan or to foreclose on the related mortgaged property for a considerable period of time.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Bankruptcy Laws”.
 
Mortgagors may, from time to time, request partial releases of the mortgaged properties, easements, consents to alteration or demolition and other similar matters.  In general, the master servicer may approve such a request if it has determined, exercising its business judgment in accordance with the applicable servicing standard, that such approval will not adversely affect the security for, or the timely and full collectibility of, the related mortgage loan.  Any fee collected by the master servicer for processing such request will be retained by the master servicer as additional servicing compensation.
 
In the case of mortgage loans secured by junior liens on the related mortgaged properties, unless otherwise provided in the related prospectus supplement, the master servicer will be required to file (or cause to be filed) of record a request for notice of any action by a superior lienholder under a senior lien for the protection of the related trustee’s interest, where permitted by local law and whenever applicable state law does not require that a junior lienholder be named as a party defendant in foreclosure proceedings in order to foreclose such junior lienholder’s equity of redemption.  Unless otherwise specified in the related prospectus supplement, the master servicer also will be required to notify any superior lienholder in writing of the existence of the mortgage loan and request notification of any action (as described below) to be taken against the mortgagor or the mortgaged property by the superior lienholder.  If the master servicer is notified that any superior lienholder has accelerated or intends to accelerate the obligations secured by the related senior lien, or has declared or intends to declare a default under the mortgage or the promissory note secured by that senior lien, or has filed or intends to file an election to have the related mortgaged property sold or foreclosed, then, unless otherwise specified in the related prospectus supplement, the master servicer and the special servicer will each be required to take, on behalf of the related trust fund, whatever
 
 
-74-

 
 
actions are necessary to protect the interests of the related certificateholders and/or to preserve the security of the related mortgage loan, subject to the application of the REMIC Provisions.  Unless otherwise specified in the related prospectus supplement, the master servicer or special servicer, as applicable, will be required to advance the necessary funds to cure the default or reinstate the senior lien, if such advance is in the best interests of the related certificateholders and the master servicer or special servicer, as applicable, determines such advances are recoverable out of payments on or proceeds of the related mortgage loan.
 
Sub-Servicers
 
A master servicer or special servicer may delegate its servicing obligations in respect of the mortgage loans to one or more third-party sub-servicers; provided that, unless otherwise specified in the related prospectus supplement, such master servicer or special servicer will remain obligated under the related Pooling and Servicing Agreement.  A sub-servicer for any series of certificates may be an affiliate of the depositor.  Unless otherwise provided in the related prospectus supplement, each subservicing agreement between a master servicer and a sub-servicer must provide for servicing of the applicable mortgage loans consistent with the related Pooling and Servicing Agreement.  Unless otherwise provided in the related prospectus supplement, the master servicer and special servicer in respect of any mortgage asset pool will each be required to monitor the performance of sub-servicers retained by it and will have the right to remove a sub-servicer retained by it at any time it considers such removal to be in the best interests of certificateholders.
 
Unless otherwise provided in the related prospectus supplement, a master servicer or special servicer will be solely liable for all fees owed by it to any sub-servicer, irrespective of whether the master servicer’s or special servicer’s compensation pursuant to the related Pooling and Servicing Agreement is sufficient to pay such fees.  Each Sub-Servicer will be reimbursed by the master servicer or special servicer, as the case may be, that retained it for certain expenditures which it makes, generally to the same extent such master servicer or special servicer would be reimbursed under a Pooling and Servicing Agreement.  See “—Certificate Account” and “—Servicing Compensation and Payment of Expenses”.
 
Certificate Account
 
General.  The master servicer, the trustee and/or the special servicer will, as to each trust fund that includes mortgage loans, establish and maintain or cause to be established and maintained the corresponding Certificate Account, which will be established so as to comply with the standards of each nationally recognized statistical rating organization within the meaning of Section 3(a)(62) of the Exchange Act (an “NRSRO”) retained by the Depositor to provide a security rating to any one or more classes of certificates of the related series (any such NRSRO retained by Depositor, a “Rating Agency”).  A Certificate Account may be maintained as an interest-bearing or a noninterest-bearing account and the funds held in the Certificate Account may be invested pending each succeeding Distribution Date in United States government securities and other obligations that are acceptable to each Rating Agency.  Unless otherwise provided in the related prospectus supplement, any interest or other income earned on funds in a Certificate Account will be paid to the related master servicer, trustee or special servicer as additional compensation.  A Certificate Account may be maintained with the related master servicer, special servicer, trustee or mortgage asset seller or with a depository institution that is an affiliate of any of the foregoing or of the Depositor; provided that it complies with applicable Rating Agency standards.  If permitted by the applicable Rating Agency, a Certificate Account may contain funds relating to more than one series of mortgage pass-through certificates and may contain other funds representing payments on mortgage loans owned by the related master servicer or special servicer or serviced by either on behalf of others.
 
Deposits.  Unless otherwise provided in the related Pooling and Servicing Agreement and described in the related prospectus supplement, the following payments and collections received or made by the master servicer, the trustee or the special servicer subsequent to the Cut-off Date (other than payments due on or before the Cut-off Date) are to be deposited in the Certificate Account for each trust fund that includes mortgage loans, within a certain period following receipt (in the case of collections on or in respect of the mortgage loans) or otherwise as provided in the related Pooling and Servicing Agreement
 
all payments on account of principal, including principal prepayments, on the mortgage loans;
 
 
 
-75-

 
 
all payments on account of interest on the mortgage loans, including any default interest collected, in each case net of any portion of such default interest retained by the master servicer or the special servicer as its servicing compensation or as compensation to the trustee;
 
all proceeds received under any hazard, title or other insurance policy that provides coverage with respect to a mortgaged property or the related mortgage loan or in connection with the full or partial condemnation of a mortgaged property (other than proceeds applied to the restoration of the property or released to the related borrower) and all other amounts received and retained in connection with the liquidation of defaulted mortgage loans or property acquired in respect of such defaulted mortgage loans, by foreclosure or otherwise, together with the net operating income (less reasonable reserves for future expenses) derived from the operation of any mortgaged properties acquired by the trust fund through foreclosure or otherwise;
 
any amounts paid under any instrument or drawn from any fund that constitutes credit support for the related series of certificates;
 
any advances made with respect to delinquent scheduled payments of principal and interest on the mortgage loans;
 
any amounts paid under any cash flow agreement;
 
all proceeds of the purchase of any mortgage loan, or property acquired in respect of a mortgage loan, by the depositor, any mortgage asset seller or any other specified person as described under “—Assignment of Mortgage Loans; Repurchases” and “—Representations and Warranties; Repurchases”, all proceeds of the purchase of any defaulted mortgage loan as described under “—Realization Upon Defaulted Mortgage Loans”, and all proceeds of any mortgage asset purchased as described under “DESCRIPTION OF THE CERTIFICATES—Termination”;
 
to the extent that any such item does not constitute additional servicing compensation to the master servicer or the special servicer and is not otherwise retained by the depositor or another specified person, any payments on account of modification or assumption fees, late payment charges, Prepayment Premiums or Equity Participations with respect to the mortgage loans;
 
all payments required to be deposited in the Certificate Account with respect to any deductible clause in any blanket insurance policy as described under “—Hazard Insurance Policies”;
 
any amount required to be deposited by the master servicer, the special servicer or the trustee in connection with losses realized on investments for the benefit of the master servicer, the special servicer or the trustee, as the case may be, of funds held in the Certificate Account; and
 
any other amounts required to be deposited in the Certificate Account as provided in the related Pooling and Servicing Agreement and described in the related prospectus supplement.
 
Withdrawals.  Unless otherwise provided in the related Pooling and Servicing Agreement and described in the related prospectus supplement, a master servicer, trustee or special servicer may make withdrawals from the Certificate Account for each trust fund that includes mortgage loans for any of the following purposes
 
to make distributions to the certificateholders on each Distribution Date;
 
to pay the master servicer or the special servicer any servicing fees not previously retained by the master servicer or the special servicer, such payment to be made out of payments and other collections of interest on the particular mortgage loans as to which such fees were earned;
 
to reimburse the master servicer, the special servicer or any other specified person for unreimbursed advances of delinquent scheduled payments of principal and interest made by it, and certain unreimbursed servicing expenses incurred by it, with respect to particular mortgage loans in the trust fund and particular 
 
 
 
-76-

 
 
 
properties acquired in respect of the trust fund.  Reimbursement for advances made or expenses incurred that are related to particular mortgage loans or properties will normally only be made out of amounts that represent late payments collected on those mortgage loans, Liquidation Proceeds, Insurance and Condemnation Proceeds collected on those mortgage loans and properties, any form of credit support related to those mortgage loans and net income collected on those properties.  However, if in the judgment of the master servicer, the special servicer or such other person, as applicable, the advances and/or expenses will not be recoverable from the above amounts, the reimbursement will be made from amounts collected on other mortgage loans in the same trust fund or, if and to the extent so provided by the related Pooling and Servicing Agreement and described in the related prospectus supplement, only from that portion of amounts collected on such other mortgage loans that is otherwise distributable on one or more classes of Subordinate Certificates of the related series;
 
 
if and to the extent described in the related prospectus supplement, to pay the master servicer, the special servicer or any other specified person interest accrued on the advances and servicing expenses described in the bulleted clause immediately listed above incurred by it while such remain outstanding and unreimbursed;
 
to pay for costs and expenses incurred by the trust fund for environmental site assessments performed with respect to mortgaged properties that constitute security for defaulted mortgage loans, and for any containment, clean-up or remediation of hazardous wastes and materials present on such mortgaged properties, as described under “—Realization Upon Defaulted Mortgage Loans”;
 
to reimburse the master servicer, the special servicer, the REMIC administrator, the depositor, the trustee, or any of their respective directors, officers, employees and agents, as the case may be, for certain expenses, costs and liabilities incurred thereby, as and to the extent described under “—Certain Matters Regarding the Master Servicer, the Special Servicer, the REMIC Administrator and the Depositor” and “—Certain Matters Regarding the Trustee”;
 
if and to the extent described in the related prospectus supplement, to pay the fees of the trustee, the REMIC administrator and any provider of credit support;
 
if and to the extent described in the related prospectus supplement, to reimburse prior draws on any form of credit support;
 
to pay the master servicer, the special servicer or the trustee, as appropriate, interest and investment income earned in respect of amounts held in the Certificate Account as additional compensation;
 
to pay any servicing expenses not otherwise required to be advanced by the master servicer, the special servicer or any other specified person;
 
if one or more elections have been made to treat the trust fund or designated portions of the trust fund as a REMIC, to pay any federal, state or local taxes imposed on the trust fund or its assets or transactions, as and to the extent described under “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs—Prohibited Transactions Tax and Other Taxes”;
 
to pay for the cost of various opinions of counsel obtained pursuant to the related Pooling and Servicing Agreement for the benefit of certificateholders;
 
to make any other withdrawals permitted by the related Pooling and Servicing Agreement and described in the related prospectus supplement; and
 
to clear and terminate the Certificate Account upon the termination of the trust fund.
 
 
-77-

 
 
Modifications, Waivers and Amendments of Mortgage Loans
 
The master servicer and the special servicer may each agree to modify, waive or amend any term of any mortgage loan serviced by it in a manner consistent with the applicable “Servicing Standard” as defined in the related prospectus supplement; provided that, unless otherwise set forth in the related prospectus supplement, the modification, waiver or amendment will
 
not affect the amount or timing of any scheduled payments of principal or interest on the mortgage loan;
 
will not, in the judgment of the master servicer or the special servicer, as the case may be, materially impair the security for the mortgage loan or reduce the likelihood of timely payment of amounts due; and
 
will not adversely affect the coverage under any applicable instrument of credit support.
 
Unless otherwise provided in the related prospectus supplement, the special servicer also may agree to any other modification, waiver or amendment if, in its judgment,
 
a material default on the mortgage loan has occurred or a payment default is reasonably foreseeable or imminent;
 
such modification, waiver or amendment is reasonably likely to produce a greater recovery with respect to the mortgage loan, taking into account the time value of money, than would liquidation; and
 
unless inconsistent with the applicable “servicing standard”, such modification, waiver or amendment will not materially adversely affect the coverage under any applicable instrument of credit support.
 
In connection with (i) the release of a mortgaged property or any portion of a mortgaged property from the lien of the related mortgage or (ii) the taking of a mortgaged property or any portion of a mortgaged property by exercise of the power of eminent domain or condemnation, if the mortgage loan documents require the master servicer or the special servicer, as applicable, to calculate (or to approve the calculation of the related borrower of) the loan-to-value ratio of the remaining mortgaged property or mortgaged properties or the fair market value of the real property constituting the remaining mortgaged property or mortgaged properties, for purposes of REMIC qualification of the related mortgage loan, then such calculation shall exclude the value of personal property and going concern value, if any.
 
Realization Upon Defaulted Mortgage Loans
 
If a default on a mortgage loan has occurred, the special servicer, on behalf of the trustee, may at any time institute foreclosure proceedings, exercise any power of sale contained in the related mortgage, obtain a deed in lieu of foreclosure, or otherwise comparably convert ownership of, or acquire title to the related mortgaged property, by operation of law or otherwise.  In connection with such foreclosure or other conversion of ownership, the special servicer shall follow the servicing standard.  A Pooling and Servicing Agreement may grant the special servicer the right to direct the master servicer to advance costs and expenses to be incurred in any such proceedings, and such advances may be subject to reimbursement requirements.  A Pooling and Servicing Agreement may require the special servicer to consult with independent counsel regarding the order and manner should foreclose upon or comparably proceed against such properties if a mortgage loan or group of cross-collateralized mortgage loans are secured by real properties in multiple states including certain states with a statute, rule or regulation comparable to California’s “one action” rule.  Unless otherwise provided in the related prospectus supplement, when applicable state law permits the special servicer to select between judicial and non-judicial foreclosure in respect of any mortgaged property, a special servicer may make such selection so long as the selection is made in a manner consistent with the servicing standard.  Unless otherwise specified in the related prospectus supplement, the special servicer may not, however, acquire title to any mortgaged property, have a receiver of rents appointed with respect to any mortgaged property or take any other action with respect to any mortgaged property that would cause the trustee, for the benefit of the related series of certificateholders, or any other specified person to be considered to hold title to, to be a “mortgagee-in-possession” of, or to be an “owner” or an “operator” of such mortgaged property within the meaning of certain federal environmental laws, unless the special servicer has previously received a
 
 
-78-

 
 
report prepared by a person who regularly conducts environmental audits (which report will be an expense of the trust fund) and either:
 
(1)      such report indicates that (a) the mortgaged property is in compliance with applicable environmental laws and regulations and (b) there are no circumstances or conditions present at the mortgaged property that have resulted in any contamination for which investigation, testing, monitoring, containment, clean-up or remediation could be required under any applicable environmental laws and regulations; or
 
(2)      the special servicer, based solely (as to environmental matters and related costs) on the information set forth in such report, determines that taking such actions as are necessary to bring the mortgaged property into compliance with applicable environmental laws and regulations and/or taking the actions contemplated by clause (1)(b) above, is reasonably likely to produce a greater recovery, taking into account the time value of money, than not taking such actions.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Environmental Considerations”.
 
As and to the extent described in the related prospectus supplement, the Pooling and Servicing Agreement related to each series of certificates will provide that promptly upon a mortgage loan becoming a defaulted mortgage loan and upon the special servicer’s determination, in accordance with the servicing standard, that it would be in the best interests of the related certificateholders (as a collective whole as if such certificateholders constituted a single lender) to attempt to sell such mortgage loan, the special servicer must use reasonable efforts to solicit offers for such defaulted mortgage loan on behalf of the related certificateholders in such manner as will be reasonably likely to realize a fair price.  Following any such determination, the special servicer must provide not less than [5] Business Days’ notice to the trustee, the master servicer and the directing certificateholder of its intention to sell any such defaulted mortgage loan, and thereafter the special servicer will be required to accept the first (and, if multiple offers are contemporaneously received, the highest) cash offer received from any person that constitutes a fair price for the defaulted mortgage loan, subject to any consent or consultation rights of the directing certificateholder.
 
The Pooling and Servicing Agreement related to each series of certificates will require the special servicer to determine whether any cash offer received with respect to the sale of a defaulted mortgage loan constitutes a fair price for such defaulted mortgage loan when the highest offer is from a person other than an “interested person”; however, if the highest offer received is from an “interested person”, then the Pooling and Servicing Agreement related to each series of certificates will require the trustee to determine whether the cash offer received with respect to the sale of a defaulted mortgage loan constitutes a fair price, either itself or by retaining an independent third party as set forth in the following paragraph.
 
In the absence of any such sale with respect to any defaulted mortgage loan, the special servicer will generally be required to proceed against the related mortgaged property, subject to the discussion above.
 
Unless otherwise provided in the related prospectus supplement, if title to any mortgaged property is acquired by a trust fund as to which a REMIC election has been made, the special servicer, on behalf of the trust fund, will be required to sell the mortgaged property before the close of the third calendar year following the year of acquisition, unless (1) the IRS grants (or does not deny) an extension of time to sell such property or (2) the trustee receives an opinion of independent counsel to the effect that the holding of the property by the trust fund for longer than such period will not result in the imposition of a tax on the trust fund or cause the trust fund (or any designated portion of the trust fund) to fail to qualify as a REMIC under the Code at any time that any certificate is outstanding.  Subject to the foregoing and any other tax-related limitations, the special servicer will generally be required to attempt to sell any mortgaged property so acquired on the same terms and conditions it would if it were the owner.  Unless otherwise provided in the related prospectus supplement, if title to any mortgaged property is acquired by a trust fund as to which a REMIC election has been made, the special servicer will also be required to ensure that the mortgaged property is administered so that it constitutes “foreclosure property” within the meaning of Code Section 860G(a)(8) at all times, that the sale of such property does not result in the receipt by the trust fund of any income from nonpermitted assets as described in Code Section 860F(a)(2)(B), and that the trust fund does not derive any “net income from foreclosure property” within the meaning of Code Section 860G(c)(2), with respect to such property unless the method of operation that produces such income would produce a greater after-tax return than a different method of operation of such property.  If the trust fund acquires title to any mortgaged property, the special servicer, on behalf of the trust fund, may be required to retain an independent contractor to manage and operate such
 
 
-79-

 
 
property.  The retention of an independent contractor, however, will not relieve the special servicer of its obligation to manage such mortgaged property as required under the related Pooling and Servicing Agreement.
 
If Liquidation Proceeds collected with respect to a defaulted mortgage loan are less than the outstanding principal balance of the defaulted mortgage loan plus interest accrued plus the aggregate amount of reimbursable expenses incurred by the special servicer and/or the master servicer in connection with such mortgage loan, then, to the extent that such shortfall is not covered by any instrument or fund constituting credit support, the trust fund will realize a loss in the amount of such shortfall.  The special servicer and/or the master servicer will be entitled to reimbursement out of the Liquidation Proceeds recovered on any defaulted mortgage loan, prior to the distribution of such Liquidation Proceeds to certificateholders, any and all amounts that represent unpaid servicing compensation in respect of the mortgage loan, unreimbursed servicing expenses incurred with respect to the mortgage loan and any  unreimbursed advances of delinquent payments made with respect to the mortgage loan.  In addition, if and to the extent set forth in the related prospectus supplement, amounts otherwise distributable on the certificates may be further reduced by interest payable to the master servicer and/or special servicer on such servicing expenses and advances.
 
Except as otherwise provided in the prospectus supplement, if any mortgaged property suffers damage such that the proceeds, if any, of the related hazard insurance policy are insufficient to restore fully the damaged property, neither the special servicer nor the master servicer will be required to expend its own funds to effect such restoration.
 
Hazard Insurance Policies
 
Unless otherwise specified in the related prospectus supplement, each Pooling and Servicing Agreement will require the master servicer (or the special servicer with respect to mortgage loans serviced by the special servicer) to use reasonable efforts to cause each mortgage loan borrower to maintain a hazard insurance policy that provides for such coverage as is required under the related mortgage or, if the mortgage permits the holder to dictate to the borrower the insurance coverage to be maintained on the related mortgaged property, such coverage as is consistent with the master servicer’s (or special servicer’s) normal servicing procedures.  Unless otherwise specified in the related prospectus supplement, such coverage generally will be in an amount equal to the lesser of the principal balance owing on such mortgage loan and the replacement cost of the related mortgaged property.  The ability of a master servicer (or special servicer) to assure that hazard insurance proceeds are appropriately applied may be dependent upon its being named as an additional insured under any hazard insurance policy and under any other insurance policy referred to below, or upon the extent to which information concerning covered losses is furnished by borrowers.  All amounts collected by a master servicer (or special servicer) under any such policy (except for amounts to be applied to the restoration or repair of the mortgaged property or released to the borrower in accordance with the master servicer’s (or special servicer’s) normal servicing procedures and/or to the terms and conditions of the related mortgage and mortgage note) will be deposited in the related Certificate Account.  The Pooling and Servicing Agreement may provide that the master servicer (or special servicer) may satisfy its obligation to cause each borrower to maintain such a hazard insurance policy by maintaining a blanket policy insuring against hazard losses on the mortgage loans in a trust fund, which may contain a deductible clause (not in excess of a customary amount).  If such blanket policy contains a deductible clause, the master servicer (or special servicer) will be required, in the event of a casualty covered by such blanket policy, to deposit in the related Certificate Account all additional sums that would have been deposited in the Certificate Account under an individual policy but were not because of such deductible clause.  Alternatively, the master servicer may self-insure against hazard losses so long as criteria set forth in the related Pooling and Servicing Agreement are met.
 
In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the improvements of the property by fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and civil commotion, subject to the conditions and exclusions specified in each policy.  Although the policies covering the mortgaged properties will be underwritten by different insurers under different state laws in accordance with different applicable state forms, and therefore will not contain identical terms and conditions, most such policies typically do not cover any physical damage resulting from war, revolution, governmental actions, floods and other water-related causes, earth movement (including earthquakes, landslides and mudflows), wet or dry rot, vermin and domestic animals.  Accordingly, a mortgaged property may not be insured for losses arising from any such cause unless the related mortgage specifically requires, or permits the holder to require, such coverage.
 
 
-80-

 
 
The hazard insurance policies covering the mortgaged properties will typically contain co-insurance clauses that in effect require an insured at all times to carry insurance of a specified percentage (generally 80% to 90%) of the full replacement value of the improvements on the property in order to recover the full amount of any partial loss.  If the insured’s coverage falls below this specified percentage, such clauses generally provide that the insurer’s liability in the event of partial loss does not exceed the lesser of (1) the replacement cost of the improvements less physical depreciation and (2) such proportion of the loss as the amount of insurance carried bears to the specified percentage of the full replacement cost of such improvements.
 
Due-on-Sale and Due-on-Encumbrance Provisions
 
Certain of the mortgage loans may contain a due-on-sale clause that entitles the lender to accelerate payment of the mortgage loan upon any sale or other transfer of the related mortgaged property made without the lender’s consent.  Certain of the mortgage loans may also contain a due-on-encumbrance clause that entitles the lender to accelerate the maturity of the mortgage loan upon the creation of any other lien or encumbrance upon the mortgaged property.  Unless otherwise provided in the related prospectus supplement, the master servicer (or special servicer) will determine whether to exercise any right the trustee may have under any such provision in a manner consistent with the master servicer’s (or special servicer’s) normal servicing procedures.  Unless otherwise specified in the related prospectus supplement, the master servicer or special servicer, as applicable, will be entitled to retain as additional servicing compensation any fee collected in connection with the permitted transfer of a mortgaged property.  See “CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS—Due-on-Sale and Due-on-Encumbrance Provisions”.
 
Servicing Compensation and Payment of Expenses
 
Unless otherwise specified in the related prospectus supplement, a master servicer’s primary servicing compensation with respect to a series of certificates will come from the periodic payment to it of a specified portion of the interest payments on each mortgage loan in the related trust fund, including mortgage loans serviced by the related special servicer.  If and to the extent described in the related prospectus supplement, a special servicer’s primary compensation with respect to a series of certificates may consist of any or all of the following components
 
a specified portion of the interest payments on each mortgage loan in the related trust fund, whether or not serviced by it;
 
an additional specified portion of the interest payments on each mortgage loan then currently serviced by it; and
 
subject to any specified limitations, a fixed percentage of some or all of the collections and proceeds received with respect to each mortgage loan which was at any time serviced by it, including mortgage loans for which servicing was returned to the master servicer.
 
Insofar as any portion of the master servicer’s or special servicer’s compensation consists of a specified portion of the interest payments on a mortgage loan, such compensation will generally be based on a percentage of the principal balance of such mortgage loan outstanding from time to time and, accordingly, will decrease with the amortization of the mortgage loan.  As additional compensation, a master servicer or special servicer may be entitled to retain all or a portion of late payment charges, Prepayment Premiums, modification fees and other fees collected from borrowers and any interest or other income that may be earned on funds held in the related Certificate Account.  A more detailed description of each master servicer’s and special servicer’s compensation will be provided in the related prospectus supplement.  Any sub-servicer will receive as its sub-servicing compensation a portion of the servicing compensation to be paid to the master servicer or special servicer that retained such sub-servicer.
 
In addition to amounts payable to any sub-servicer, a master servicer or special servicer may be required, to the extent provided in the related prospectus supplement, to pay from amounts that represent its servicing compensation certain expenses incurred in connection with the administration of the related trust fund, including, without limitation, payment of the fees and disbursements of independent accountants, payment of fees and disbursements of the trustee and any custodians appointed by the trustee and payment of expenses incurred in connection with distributions and reports to certificateholders.  Certain other expenses, including certain expenses related to
 
 
-81-

 
 
mortgage loan defaults and liquidations and, to the extent so provided in the related prospectus supplement, interest on such expenses at the rate specified in the prospectus supplement, may be required to be borne by the trust fund.
 
Evidence as to Compliance
 
The master servicer and each other servicer will deliver annually to the trustee or master servicer, as applicable, on or before the date specified in the applicable Pooling and Servicing Agreement or in the applicable other servicing agreement (each such other servicing agreement, an “Underlying Servicing Agreement”), an officer’s certificate stating that (i) a review of the servicer’s or master servicer’s activities during the preceding calendar year and of performance under the applicable Pooling and Servicing Agreement or Underlying Servicing Agreement has been made under the supervision of the officer, and (ii) to the best of the officer’s knowledge, based on the review, the servicer or master servicer has fulfilled all its obligations under the applicable Pooling and Servicing Agreement or Underlying Servicing Agreement throughout the year, or, if there has been a default in the fulfillment of any obligation, specifying the default known to the officer and the nature and status of the default.
 
In addition, each party that participates in the servicing and administration of more than 5% of the mortgage loans and other assets comprising a trust will deliver annually to the Depositor and the trustee, a report (an “Assessment of Compliance”) that assesses compliance by that party with the servicing criteria set forth in Item 1122(d) of Regulation AB (17 CFR 229.1122) and that contains the following:
 
a statement of the party’s responsibility for assessing compliance with the servicing criteria applicable to it;
 
a statement that the party used the criteria in Item 1122(d) of Regulation AB to assess compliance with the applicable servicing criteria;
 
the party’s assessment of compliance with the applicable servicing criteria during and as of the end of the prior calendar year, setting forth any material instance of noncompliance identified by the party; and
 
a statement that a registered public accounting firm has issued an attestation report on the party’s assessment of compliance with the applicable servicing criteria during and as of the end of the prior calendar year.
 
Each party which is required to deliver an Assessment of Compliance will also be required to simultaneously deliver a report (an “Attestation Report”) of a registered public accounting firm, prepared in accordance with the standards for attestation engagements issued or adopted by the Public Company Accounting Oversight Board, that expresses an opinion, or states that an opinion cannot be expressed, concerning the party’s assessment of compliance with the applicable servicing criteria.
 
The annual deliveries, to the extent required to be filed with the Depositor's annual report on Form 10-K, will be due from the applicable person(s) by a time sufficient to enable such filing.
 
Certain Matters Regarding the Master Servicer, the Special Servicer, the REMIC Administrator and the Depositor
 
Any entity serving as master servicer, special servicer or REMIC administrator under a Pooling and Servicing Agreement may be an affiliate of the depositor and may have other normal business relationships with the depositor or the depositor’s affiliates.  Unless otherwise specified in the prospectus supplement for a series of certificates, the related Pooling and Servicing Agreement will permit the master servicer, the special servicer and any REMIC administrator to resign from its obligations under the Pooling and Servicing Agreement only upon a determination that such obligations are no longer permissible under applicable law or are in material conflict by reason of applicable law with any other activities carried on by it.  No such resignation will become effective until the trustee or other successor has assumed the obligations and duties of the resigning master servicer, special servicer or REMIC administrator, as the case may be, under the Pooling and Servicing Agreement.  The master servicer and special servicer for each trust fund will be required to maintain a fidelity bond and errors and omissions policy or their equivalent that provides coverage against losses that may be sustained as a result of an officer’s or employee’s misappropriation of funds or errors and omissions, subject to certain limitations as to amount of coverage,
 
 
-82-

 
 
deductible amounts, conditions, exclusions and exceptions permitted by the related Pooling and Servicing Agreement.
 
Unless otherwise specified in the related prospectus supplement, each Pooling and Servicing Agreement will further provide that none of the master servicer, the special servicer, the REMIC administrator, the depositor, any extension adviser or any director, officer, employee or agent of any of them will be under any liability to the related trust fund or certificateholders for any action taken, or not taken, in good faith pursuant to the Pooling and Servicing Agreement or for errors in judgment; provided, however, none of the master servicer, the special servicer, the REMIC administrator, the depositor, any extension adviser or any such person will be protected against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or negligence in the performance of obligations or duties under the Pooling and Servicing Agreement or by reason of reckless disregard of such obligations and duties.  Unless otherwise specified in the related prospectus supplement, each Pooling and Servicing Agreement will further provide that the master servicer, the special servicer, the REMIC administrator, the depositor, any extension adviser and any director, officer, employee or agent of any of them will be entitled to indemnification by the related trust fund against any loss, liability or expense incurred in connection with any legal action that relates to such Pooling and Servicing Agreement or the related series of certificates; provided, however, such indemnification will not extend to any loss, liability or expense incurred by reason of willful misfeasance, bad faith or negligence in the performance of obligations or duties under such Pooling and Servicing Agreement, or by reason of reckless disregard of such obligations or duties.  In addition, each Pooling and Servicing Agreement will provide that none of the master servicer, the special servicer, the REMIC administrator, any extension adviser or the depositor will be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its respective responsibilities under the Pooling and Servicing Agreement and that in its opinion may involve it in any expense or liability.  However, each of the master servicer, the special servicer, the REMIC administrator, any extension adviser and the depositor will be permitted, in the exercise of its discretion, to undertake any such action that it may deem necessary or desirable with respect to the enforcement and/or protection of the rights and duties of the parties to the Pooling and Servicing Agreement and the interests of the related series of certificateholders under the Pooling and Servicing Agreement.  In such event, the legal expenses and costs of such action, and any liability resulting from such action, will be expenses, costs and liabilities of the related series of certificateholders, and the master servicer, the special servicer, the REMIC administrator, any extension adviser or the depositor, as the case may be, will be entitled to charge the related Certificate Account for this expense.
 
Any person into which the master servicer, the special servicer, the REMIC administrator or the depositor may be merged or consolidated, or any person resulting from any merger or consolidation to which the master servicer, the special servicer, the REMIC administrator or the depositor is a party, or any person succeeding to the business of the master servicer, the special servicer, the REMIC administrator or the depositor, will be the successor of the master servicer, the special servicer, the REMIC administrator or the depositor, as the case may be, under the related Pooling and Servicing Agreement.
 
Unless otherwise specified in the related prospectus supplement, a REMIC administrator will be entitled to perform any of its duties under the related Pooling and Servicing Agreement either directly or by or through agents or attorneys, and the REMIC administrator will not be responsible for any willful misconduct or negligence on the part of any such agent or attorney appointed by it with due care.
 
Events of Default
 
Unless otherwise provided in the prospectus supplement for a series of certificates, Events of Default under the related Pooling and Servicing Agreement will include, without limitation—
 
any failure by the master servicer to distribute or cause to be distributed to the certificateholders of such series, or to remit to the trustee for distribution to such certificateholders, any amount required to be so distributed or remitted, pursuant to, and at the time specified by, the terms of the Pooling and Servicing Agreement;
 
any failure by the special servicer to remit to the master servicer or the trustee, as applicable, any amount required to be so remitted, pursuant to, and at the time specified by, the terms of the Pooling and Servicing Agreement;
 
 
 
-83-

 
 
any failure by the master servicer or the special servicer duly to observe or perform in any material respect any of its other covenants or obligations under the related Pooling and Servicing Agreement, which failure continues unremedied for thirty days after written notice of such failure has been given to the master servicer or the special servicer, as the case may be, by any other party to the related Pooling and Servicing Agreement, or to the master servicer or the special servicer, as the case may be, with a copy to each other party to the related Pooling and Servicing Agreement, by certificateholders entitled to not less than 25% (or such other percentage specified in the related prospectus supplement) of the Voting Rights for such series;
 
any failure by a REMIC administrator (if other than the trustee) duly to observe or perform in any material respect any of its covenants or obligations under the related Pooling and Servicing Agreement, which failure continues unremedied for thirty days after written notice of such notice has been given to the REMIC administrator by any other party to the related Pooling and Servicing Agreement, or to the REMIC administrator, with a copy to each other party to the related Pooling and Servicing Agreement, by certificateholders entitled to not less than 25% (or such other percentage specified in the related prospectus supplement) of the Voting Rights for such series;
 
certain events involving a determination that the master servicer or the special servicer, as applicable, is no longer an approved servicer by any Rating Agency; and
 
certain events of insolvency, readjustment of debt, marshaling of assets and liabilities, or similar proceedings in respect of or relating to the master servicer, the special servicer or the REMIC administrator (if other than the trustee), and certain actions by or on behalf of the master servicer, the special servicer or the REMIC administrator (if other than the trustee) indicating its insolvency or inability to pay its obligations.
 
Material variations to the foregoing Events of Default (other than to add thereto or shorten cure periods or eliminate notice requirements) will be specified in the related prospectus supplement.  Unless otherwise specified in the related prospectus supplement, when a single entity acts as master servicer, special servicer and REMIC administrator, or in any two of the foregoing capacities, for any trust fund, an Event of Default in one capacity will (except where related only to an evaluation of the acceptability of such entity to act in a particular capacity by a rating agency retained by the depositor to provide a security rating on any one or more classes of certificates) constitute an event of default in each capacity.
 
Rights Upon Event of Default
 
If an Event of Default occurs with respect to the master servicer, the special servicer or a REMIC administrator under a Pooling and Servicing Agreement, then, in each and every such case, so long as the Event of Default remains unremedied, the depositor or the trustee will be authorized, and at the direction of certificateholders of the related series entitled to not less than 51% (or such other percentage specified in the related prospectus supplement) of the Voting Rights for such series, the trustee will be required, to terminate all of the rights and obligations of the defaulting party as master servicer, special servicer or REMIC administrator, as applicable, under the Pooling and Servicing Agreement, whereupon the trustee will succeed to all of the responsibilities, duties and liabilities of the defaulting party as master servicer, special servicer or REMIC administrator, as applicable, under the Pooling and Servicing Agreement (except that if the defaulting party is required to make advances under the Pooling and Servicing Agreement regarding delinquent mortgage loans, but the trustee is prohibited by law from obligating itself to make such advances, or if the related prospectus supplement so specifies, the trustee will not be obligated to make such advances) and will be entitled to similar compensation arrangements.  Unless otherwise specified in the related prospectus supplement, if the trustee is unwilling or unable so to act, it may (or, at the written request of certificateholders of the related series entitled to not less than 51% (or such other percentage specified in the related prospectus supplement) of the Voting Rights for such series, it will be required to) appoint, or petition a court of competent jurisdiction to appoint, a loan servicing institution or other entity that (unless otherwise provided in the related prospectus supplement) is acceptable to each applicable Rating Agency to act as successor to the master servicer, special servicer or REMIC administrator, as the case may be, under the Pooling and Servicing Agreement.  Pending such appointment, the trustee will be obligated to act in such capacity.  The trustee or a successor master servicer is entitled to be reimbursed for its costs in effecting a servicing transfer from the predecessor master
 
 
-84-

 
 
servicer.  In the event that the predecessor master servicer fails to reimburse the trustee or successor servicer, the trustee or successor servicer will be entitled to reimbursement from the assets of the related trust.
 
If the same entity is acting as both trustee and REMIC administrator, it may be removed in both such capacities as described under “—Resignation and Removal of the Trustee” below.
 
No certificateholder will have any right under a Pooling and Servicing Agreement to institute any proceeding with respect to such Pooling and Servicing Agreement unless such holder previously has given to the trustee written notice of default and the continuance of such default and unless the holders of certificates of any class evidencing not less than 25% of the aggregate Percentage Interests constituting such class have made written request upon the trustee to institute such proceeding in its own name as trustee under the Pooling and Servicing Agreement and have offered to the trustee reasonable indemnity and the trustee for sixty days after receipt of such request and indemnity has neglected or refused to institute any such proceeding.  However, the trustee will be under no obligation to exercise any of the trusts or powers vested in it by the Pooling and Servicing Agreement or to institute, conduct or defend any litigation under the Pooling and Servicing Agreement or in relation thereto at the request, order or direction of any of the holders of certificates covered by such Pooling and Servicing Agreement, unless such certificateholders have offered to the trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred in connection with such litigation.
 
Amendment
 
Except as otherwise specified in the related prospectus supplement, each Pooling and Servicing Agreement may be amended by the parties thereto, without the consent of any of the holders of certificates covered by such Pooling and Servicing Agreement, (1) to cure any ambiguity, (2) to correct or supplement any provision in the Pooling and Servicing Agreement which may be inconsistent with any other provision in the Pooling and Servicing Agreement or to correct any error, (3) to change the timing and/or nature of deposits in the Certificate Account; provided that (A) such change would not adversely affect in any material respect the interests of any certificateholder, as evidenced by an opinion of counsel, and (B) such change would not result in the withdrawal, downgrade or qualification of any of the then-current ratings of any Rating Agency, as evidenced by a letter from each such rating agency, (4) if a REMIC election has been made with respect to the related trust fund, to modify, eliminate or add to any of its provisions (A) to such extent as shall be necessary to maintain the qualification of the trust fund (or any designated portion of the trust fund) as a REMIC or to avoid or minimize the risk of imposition of any tax on the related trust fund; provided that the trustee has received an opinion of counsel to the effect that (1) such action is necessary or desirable to maintain such qualification or to avoid or minimize such risk, and (2) such action will not adversely affect in any material respect the interests of any holder of certificates covered by the Pooling and Servicing Agreement, or (B) to restrict the transfer of the REMIC Residual Certificates; provided that the depositor has determined that the then-current ratings of the classes of the certificates provided by any Rating Agency will not be withdrawn, downgraded or qualified, as evidenced by a letter from each such rating agency, and that any such amendment will not give rise to any tax with respect to the transfer of the REMIC Residual Certificates to a non-permitted transferee (See “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs—Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain Organizations” in the accompanying prospectus supplement), (5) to make any other provisions with respect to matters or questions arising under such Pooling and Servicing Agreement or any other change; provided that such action will not adversely affect in any material respect the interests of any certificateholder, or (6) to amend specified provisions that are not material to holders of any class of certificates offered by this prospectus.
 
The Pooling and Servicing Agreement may also be amended by the parties thereto with the consent of the holders of certificates of each class affected by an amendment evidencing, in each case, not less than 66 2/3% (or such other percentage specified in the related prospectus supplement) of the aggregate Percentage Interests constituting such class for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of such Pooling and Servicing Agreement or of modifying in any manner the rights of the holders of certificates covered by such Pooling and Servicing Agreement, except that no such amendment may (1) reduce in any manner the amount of, or delay the timing of, payments received on mortgage loans which are required to be distributed on a certificate of any class without the consent of the holder of such certificate or (2) reduce the aforesaid percentage of certificates of any class the holders of which are required to consent to any such amendment
 
 
-85-

 
 
without the consent of the holders of all certificates of such class covered by such Pooling and Servicing Agreement then outstanding.
 
Notwithstanding the foregoing, if one or more REMIC elections have been made with respect to the related trust fund, the trustee will not be required to consent to any amendment to a Pooling and Servicing Agreement without having first received an opinion of counsel to the effect that such amendment or the exercise of any power granted to the master servicer, the special servicer, the depositor, the trustee or any other specified person in accordance with such amendment will not result in the imposition of a tax on the related trust fund or cause such trust fund (or any designated portion of the trust fund) to fail to qualify as a REMIC.
 
List of Certificateholders
 
Unless otherwise specified in the related prospectus supplement, upon written request of three or more certificateholders of record made for purposes of communicating with other holders of certificates of the same series with respect to their rights under the related Pooling and Servicing Agreement, the trustee or other specified person will afford such certificateholders access during normal business hours to the most recent list of certificateholders of that series held by such person.  If such list is as of a date more than 90 days prior to the date of receipt of such certificateholders’ request, then such person, if not the registrar for such series of certificates, will be required to request from such registrar a current list and to afford such requesting certificateholders access thereto promptly upon receipt.
 
The Trustee
 
The trustee under each Pooling and Servicing Agreement will be named in the related prospectus supplement.  The commercial bank, national banking association, banking corporation or trust company that serves as trustee may have typical banking relationships with the depositor and its affiliates and with any master servicer, special servicer or REMIC administrator and its affiliates.
 
Duties of the Trustee
 
The trustee generally will be responsible under each Pooling and Servicing Agreement for providing general administrative services for the trust fund for any series, including, among other things, (i) establishing and maintaining the Certificate Account; (ii) calculation of the amounts payable to certificateholders on each Distribution Date; (iii) making distributions to certificateholders; (iv) preparation, for execution by the Depositor or the related master servicer, of reports, including reports on Form 10-D and Form 10-K as may be required under the Exchange Act; (v) maintaining any mortgage pool insurance policy, mortgagor bankruptcy bond, special hazard insurance policy or other form of credit enhancement that may be required with respect to any series; and (vi) making periodic advances on the mortgage loans to the limited extent described under “DESCRIPTION OF THE CERTIFICATES—Advances in Respect of Delinquencies”, if those amounts are not advanced by the master servicer or another servicer.
 
The trustee for each series of certificates will make no representation as to the validity or sufficiency of the related Pooling and Servicing Agreement, such certificates or any underlying mortgage asset or related document and will not be accountable for the use or application by or on behalf of any master servicer or special servicer of any funds paid to the master servicer or special servicer in respect of the certificates or the underlying mortgage assets.  If no Event of Default has occurred and is continuing, the trustee for each series of certificates will be required to perform only those duties specifically required under the related Pooling and Servicing Agreement.  However, upon receipt of any of the various certificates, reports or other instruments required to be furnished to it pursuant to the related Pooling and Servicing Agreement, a trustee will be required to examine such documents and to determine whether they conform to the requirements of such agreement.
 
Certain Matters Regarding the Trustee
 
As and to the extent described in the related prospectus supplement, the fees and normal disbursements of any trustee may be the expense of the related master servicer or other specified person or may be required to be borne by the related trust fund.  The trustee generally shall not be entitled to payment or reimbursement for any routine
 
 
-86-

 
 
ongoing expenses incurred by it in the ordinary course of its duties as trustee under the Pooling and Servicing Agreement or for any other expenses.  If, however, one or more REMIC elections has been made, the expense is unanticipated and did not arise from the trustee’s gross negligence, bad faith or willful misconduct, the trustee shall be entitled to reimbursement from the trust fund for all reasonable expenses, disbursements and advances incurred or made it in accordance with any of the provisions of the Pooling and Servicing Agreement to the extent permitted by Treasury Regulations Section 1.860G-1(b)(3)(ii), which allows reimbursement for “unanticipated expenses”.
 
Unless otherwise specified in the related prospectus supplement, the trustee for each series of certificates will be entitled to indemnification, from amounts held in the Certificate Account for such series, for any loss, liability or expense incurred by the trustee in connection with the trustee’s acceptance or administration of its trusts under the related Pooling and Servicing Agreement; provided, however, such indemnification will not extend to any loss liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence on the part of the trustee in the performance of its obligations and duties under the Pooling and Servicing Agreement, or by reason of its reckless disregard of such obligations or duties.
 
Unless otherwise specified in the related prospectus supplement, the trustee for each series of certificates will be entitled to execute any of its trusts or powers under the related Pooling and Servicing Agreement or perform any of its duties under the Pooling and Servicing Agreement either directly or by or through agents or attorneys, and the trustee will not be responsible for any willful misconduct or negligence on the part of any such agent or attorney appointed by it with due care.
 
Resignation and Removal of the Trustee
 
The trustee may resign at any time, in which event the depositor will be obligated to appoint a successor trustee.  The depositor may also remove the trustee if the trustee ceases to be eligible to continue as such under the Pooling and Servicing Agreement or if the trustee becomes insolvent.  Upon becoming aware of such circumstances, the depositor will be obligated to appoint a successor trustee.  The trustee may also be removed at any time by the holders of certificates of the applicable series evidencing not less than 33⅓% (or such other percentage specified in the related prospectus supplement) of the Voting Rights for such series.  Any resignation or removal of the trustee and appointment of a successor trustee will not become effective until acceptance of the appointment by the successor trustee.  Any costs associated with the appointment of a successor trustee are required to be paid by the predecessor trustee and, if not paid, will be reimbursed to the person incurring such costs from the assets of the related trust.  Notwithstanding the foregoing, if the predecessor trustee has been removed by a vote of the holders of the certificates as provided in the paragraph above, any costs associated with the appointment of a successor trustee will be reimbursed to the party incurring such costs from the assets of the related trust.  Notwithstanding anything in this prospectus to the contrary, if any entity is acting as both trustee and REMIC administrator, then any resignation or removal of such entity as the trustee will also constitute the resignation or removal of such entity as REMIC administrator, and the successor trustee will serve as successor to the REMIC administrator as well.
 
DESCRIPTION OF CREDIT SUPPORT
 
General
 
Credit support may be provided with respect to one or more classes of the certificates of any series or with respect to the related mortgage assets.  Credit support may be in the form of limited guarantees, financial guaranty insurance policies, surety bonds, letters of credit, mortgage pool insurance policies, reserve funds, cross collateralization, overcollateralization and excess interest or any combination of the foregoing.  If and to the extent so provided in the related prospectus supplement, any of the foregoing forms of credit support may provide credit enhancement for more than one series of certificates.  The applicable prospectus supplement will describe the material terms of such credit enhancement, including any limits on the timing or amount of such credit enhancement or any conditions that must be met before such credit enhancement may be accessed.  If the provider of the credit enhancement is liable or contingently liable to provide payments representing 10% or more of the cash flow supporting any offered class of certificates, the applicable prospectus supplement will disclose the name of the provider, the organizational form of the provider, the general character of the business of the provider and the financial information required by Item 1114(b)(2) of Regulation AB (17 CFR 229.1114).  Copies of the limited guarantee, financial guaranty insurance policy, surety bond, letter of credit, pool insurance policy, mortgagor
 
 
-87-

 
 
bankruptcy bond, special hazard insurance policy or Cash Flow Agreement, if any, relating to a series of certificates will be filed with the SEC as an exhibit to a Current Report on Form 8-K.
 
Unless otherwise provided in the related prospectus supplement for a series of certificates, the credit support will not provide protection against all risks of loss and will not guarantee payment to certificateholders of all amounts to which they are entitled under the related Pooling and Servicing Agreement.  If losses or shortfalls occur that exceed the amount covered by the related credit support or that are of a type not covered by such credit support, certificateholders will bear their allocable share of deficiencies.  Moreover, if a form of credit support covers the offered certificates of more than one series and losses on the related mortgage assets exceed the amount of such credit support, it is possible that the holders of offered certificates of one (or more) such series will be disproportionately benefited by such credit support to the detriment of the holders of offered certificates of one (or more) other such series.
 
If credit support is provided with respect to one or more classes of certificates of a series, or with respect to the related mortgage assets, the related prospectus supplement will include a description of
 
the nature and amount of coverage under such credit support;
 
any conditions to payment under the credit support not otherwise described in this prospectus;
 
the conditions (if any) under which the amount of coverage under such credit support may be reduced and under which such credit support may be terminated or replaced; and
 
the material provisions relating to such credit support.
 
Additionally, the related prospectus supplement will set forth certain information with respect to the obligor, if any, under any instrument of credit support. See "RISK FACTORS—The Limited Credit Support for Your Certificates May Not Be Sufficient To Prevent Loss on Your Certificates" in this prospectus and "DESCRIPTION OF THE CERTIFICATES—Credit Support; Allocation of Losses and Certain Expenses" in the related prospectus supplement.
 
Subordinate Certificates
 
If so specified in the related prospectus supplement, one or more classes of certificates of a series may be Subordinate Certificates.  To the extent specified in the related prospectus supplement, the rights of the holders of Subordinate Certificates to receive distributions from the Certificate Account on any Distribution Date will be subordinated to the corresponding rights of the holders of Senior Certificates.  If so provided in the related prospectus supplement, the subordination of a class may apply only in the event of certain types of losses or shortfalls.  The related prospectus supplement will set forth information concerning the method and amount of subordination provided by a class or classes of Subordinate Certificates in a series and the circumstances under which such subordination will be available.
 
If the mortgage assets in any trust fund are divided into separate groups, each supporting a separate class or classes of certificates of the related series, credit support may be provided by cross-support provisions requiring that distributions be made on Senior Certificates evidencing interests in one group of mortgage assets prior to distributions on Subordinate Certificates evidencing interests in a different group of mortgage assets within the trust fund.  The prospectus supplement for a series that includes a cross-support provision will describe the manner and conditions for applying such provisions.
 
Insurance or Guarantees Concerning the Mortgage Loans
 
If so provided in the prospectus supplement for a series of certificates, mortgage loans included in the related trust fund will be covered for certain default risks by insurance policies or guarantees.  The limited guarantee may cover deficiencies in amounts otherwise payable on some or all of the certificates of a series.  The limited guarantee may cover timely distributions of interest or full distributions of principal or both on the basis of a schedule of principal distributions set forth in or determined in the manner specified in the related prospectus supplement.  The limited guarantee may provide additional protection against losses on the mortgage loans included in a trust fund,
 
 
-88-

 
 
provide payment of administrative expenses, or establish a minimum reinvestment rate on the payments made on the mortgage loans or principal payment rate on the mortgage loans.  A limited guarantee will be limited in amount to the dollar amount or percentage of the principal balance of the mortgage loans or certificates specified in the applicable prospectus supplement.  The related prospectus supplement will describe the nature of such default risks and the extent of such coverage.
 
Letter of Credit
 
If so provided in the prospectus supplement for a series of certificates, deficiencies in amounts otherwise payable on such certificates or certain classes of certificates will be covered by one or more letters of credit, issued by a bank or other financial institution (which may be an affiliate of the depositor) specified in such prospectus supplement.  Under a letter of credit, the providing institution will be obligated to honor draws in an aggregate fixed dollar amount, net of unreimbursed payments under the letter of credit, generally equal to a percentage specified in the related prospectus supplement of the aggregate principal balance of some or all of the related mortgage assets on the related Cut-off Date or of the initial aggregate Certificate Balance of one or more classes of certificates.  If so specified in the related prospectus supplement, the letter of credit may permit draws only in the event of certain types of losses and shortfalls.  The amount available under the letter of credit will, in all cases, be reduced to the extent of the unreimbursed payments under the letter of credit and may otherwise be reduced as described in the related prospectus supplement.  The obligations of the providing institution under the letter of credit for each series of certificates will expire at the earlier of the date specified in the related prospectus supplement or the termination of the trust fund.
 
Certificate Insurance and Surety Bonds
 
If so provided in the prospectus supplement for a series of certificates, deficiencies in amounts otherwise payable on such certificates or certain classes of certificates will be covered by financial guaranty insurance policies or surety bonds provided by one or more insurance companies or sureties.  Such instruments may cover, with respect to one or more classes of certificates of the related series, timely distributions of interest or distributions of principal on the basis of a schedule of principal distributions set forth in or determined in the manner specified in the related prospectus supplement.  If specified in the prospectus supplement, the financial guaranty insurance policy will also guarantee against any payment made to a certificateholder that is subsequently recovered as a preferential transfer under the Bankruptcy Code.  The related prospectus supplement will describe any limitations on the draws that may be made under any such instrument.
 
Reserve Funds
 
If so provided in the prospectus supplement for a series of certificates, deficiencies in amounts otherwise payable on such certificates or certain classes will be covered (to the extent of available funds) by one or more reserve funds in which cash, a letter of credit, Permitted Investments, a demand note or a combination will be deposited, in the amounts specified in such prospectus supplement.  If so specified in the related prospectus supplement, the reserve fund for a series may also be funded over time by a specified amount of certain collections received on the related mortgage assets.
 
Amounts on deposit in any reserve fund for a series will be applied for the purposes, in the manner, and to the extent specified in the related prospectus supplement.  If so specified in the related prospectus supplement, reserve funds may be established to provide protection only against certain types of losses and shortfalls.  Additional information concerning any reserve fund will be set forth in the prospectus supplement, including the initial balance of the reserve fund, the required reserve fund balance to be maintained, the purposes for which funds in the reserve fund may be applied to make distributions to certificateholders and use of investment earnings from the reserve fund, if any.  Following each Distribution Date, amounts in a reserve fund in excess of any amount required to be maintained in such reserve funds may be released from the reserve fund under the conditions and to the extent specified in the related prospectus supplement.
 
If so specified in the related prospectus supplement, amounts deposited in any reserve fund will be invested in Permitted Investments.  Unless otherwise specified in the related prospectus supplement, any reinvestment income or other gain from such investments will be credited to the related reserve fund for such series, and any loss resulting
 
 
-89-

 
 
from such investments will be charged to such reserve fund.  However, such income may be payable to any related master servicer or another service provider as additional compensation for its services.  The reserve fund, if any, for a series will not be a part of the trust fund unless otherwise specified in the related prospectus supplement.
 
Cash Collateral Account
 
If so specified in the related prospectus supplement, all or any portion of credit enhancement for a series of certificates may be provided by the establishment of a cash collateral account.  A cash collateral account will be similar to a reserve fund except that generally a cash collateral account is funded initially by a loan from a cash collateral lender, the proceeds of which are invested with the cash collateral lender or other eligible institution.  The loan from the cash collateral lender will be repaid from such amounts as are specified in the related prospectus supplement.  Amounts on deposit in the cash collateral account will be available in generally the same manner described above with respect to a reserve fund.  As specified in the related prospectus supplement, a cash collateral account may be deemed to be part of the assets of the related trust, may be deemed to be part of the assets of a separate cash collateral trust or may be deemed to be property of the party specified in the related prospectus supplement and pledged for the benefit of the holders of one or more classes of certificates of a series.
 
Pool Insurance Policy
 
If specified in the prospectus supplement relating to a series of certificates, credit enhancement may be provided by a mortgage pool insurance policy for the mortgage loans in the related trust fund.  Each mortgage pool insurance policy, in accordance with the limitations described in this prospectus and in the prospectus supplement, if any, will cover any loss by reason of default on a mortgage loan in an amount equal to a percentage specified in the applicable prospectus supplement of the unpaid principal balance of the mortgage loans.  The master servicer generally will be required to use its best efforts to maintain the mortgage pool insurance policy and to present claims to the pool insurer.  The mortgage pool insurance policies, however, are not blanket policies against loss, since claims may only be made respecting particular defaulted mortgage loans and only upon satisfaction of specified conditions precedent described below.  The mortgage pool insurance policies will generally not cover losses due to a failure to pay or denial of a claim under a primary mortgage insurance policy, regardless of the reason for nonpayment.
 
As more specifically provided in the related prospectus supplement, each mortgage pool insurance policy will provide for conditions under which claims may be presented and covered under the policy.  Upon satisfaction of these conditions, the pool insurer will have the option either (a) to purchase the property securing the defaulted mortgage loan at a price equal to its unpaid principal balance plus accrued and unpaid interest at the applicable Mortgage Rate to the date of purchase plus certain Advances, or (b) to pay the amount by which the sum of the unpaid principal balance of the defaulted mortgage loan plus accrued and unpaid interest at the Mortgage Rate to the date of payment of the claim plus certain Advances exceeds the proceeds received from an approved sale of the mortgaged property, in either case net of certain amounts paid or assumed to have been paid under any related primary mortgage insurance policy.
 
Certificateholders may experience a shortfall in the amount of interest payable on the related certificates in connection with the payment of claims under a mortgage pool insurance policy because the pool insurer is only required to remit unpaid interest through the date a claim is paid rather than through the end of the month in which the claim is paid.  In addition, certificateholders may also experience losses with respect to the related certificates in connection with payments made under a mortgage pool insurance policy to the extent that the related master servicer or special servicer expends funds to cover unpaid real estate taxes or to repair the related mortgaged property in order to make a claim under a mortgage pool insurance policy, as those amounts will not be covered by payments under the policy and will be reimbursable to the related servicer from funds otherwise payable to the certificateholders.  If any mortgaged property securing a defaulted mortgage loan is damaged and proceeds, if any from the related hazard insurance policy or applicable special hazard insurance policy are insufficient to restore the damaged property to a condition sufficient to permit recovery under the mortgage pool insurance policy, a servicer will generally not be required to expend its own funds to restore the damaged property unless (if so specified in the related prospectus supplement) it determines that (a) restoration will increase the proceeds to one or more classes of certificates on liquidation of the mortgage loan after reimbursement of the related servicer for its expenses and (b) the expenses will be recoverable by it through Liquidation Proceeds or insurance proceeds.
 
 
-90-

 
 
A mortgage pool insurance policy and some primary mortgage insurance policies will generally not insure against loss sustained by reason of a default arising from, among other things, fraud or negligence in the origination or servicing of a mortgage loan, including misrepresentation by the mortgagor, the seller or other persons involved in the origination of the mortgage loan, failure to construct a mortgaged property in accordance with plans and specifications or bankruptcy, unless as specified in the related prospectus supplement, an endorsement to the mortgage pool insurance policy provides for insurance against that type of loss.
 
The original amount of coverage under each mortgage pool insurance policy will be reduced over the life of the related series of certificates by the aggregate amount of claims paid less the aggregate of the net amounts realized by the pool insurer upon disposition of all foreclosed properties.  The amount of claims paid includes some expenses incurred by the related servicer as well as accrued interest on delinquent mortgage loans to the date of payment of the claim.  Accordingly, if aggregate net claims paid under any mortgage pool insurance policy reach the original policy limit, coverage under that mortgage pool insurance policy will be exhausted and any further losses will be borne by the related certificates, to the extent not covered by other credit enhancements.
 
Special Hazard Insurance Policy
 
Any insurance policy covering special hazard losses obtained for a trust will be issued by the insurer named in the related prospectus supplement.  Each special hazard insurance policy will be subject to limitations described in this paragraph and in the related prospectus supplement, if any, and will protect the related certificateholders from special hazard losses.  Aggregate claims under a special hazard insurance policy will be limited to the amount set forth in the related Pooling and Servicing Agreement and will be subject to reduction as described in the related Pooling and Servicing Agreement.  A special hazard insurance policy will provide that no claim may be paid unless hazard and, if applicable, flood insurance on the mortgaged property securing the mortgage loan has been kept in force and other protection and preservation expenses have been paid by the related master servicer or special servicer, as the case may be.
 
In accordance with the foregoing limitations, a special hazard insurance policy will provide that, where there has been damage to the mortgaged property securing a foreclosed mortgage loan, title to which has been acquired by the insured, and to the extent the damage is not covered by the hazard insurance policy or flood insurance policy, if any, maintained by the mortgagor or the related master servicer or special servicer, as the case may be, the insurer will pay the lesser of (i) the cost of repair or replacement of the related mortgaged property or (ii) upon transfer of the property to the insurer, the unpaid principal balance of the mortgage loan at the time of acquisition of the related property by foreclosure or deed in lieu of foreclosure, plus accrued interest at the Mortgage Rate to the date of claim settlement and certain expenses incurred by the related master servicer or special servicer, as the case may be, with respect to the related mortgaged property.
 
If the mortgaged property is transferred to a third party in a sale approved by the special hazard insurer, the amount that the special hazard insurer will pay will be the amount under (ii) above reduced by the net proceeds of the sale of the mortgaged property.  If the unpaid principal balance plus accrued interest and certain Advances is paid by the special hazard insurer, the amount of further coverage under the related special hazard insurance policy will be reduced by that amount less any net proceeds from the sale of the mortgaged property.  Any amount paid as the cost of repair of the property will further reduce coverage by that amount.  Restoration of the property with the proceeds described under (i) above will satisfy the condition under any mortgage pool insurance policy that the property be restored before a claim under the policy may be validly presented with respect to the defaulted mortgage loan secured by the related mortgaged property.  The payment described under (ii) above will render presentation of a claim relating to a mortgage loan under the related mortgage pool insurance policy unnecessary.  Therefore, so long as a mortgage pool insurance policy remains in effect, the payment by the insurer under a special hazard insurance policy of the cost of repair or of the unpaid principal balance of the related mortgage loan plus accrued interest and certain Advances will not affect the total insurance proceeds paid to certificateholders, but will affect the relative amounts of coverage remaining under the related special hazard insurance policy and mortgage pool insurance policy.
 
 
-91-

 
 
Mortgagor Bankruptcy Bond
 
If specified in the related prospectus supplement, a bankruptcy bond to cover losses resulting from proceedings under the federal Bankruptcy Code with respect to a mortgage loan will be issued by an insurer named in the prospectus supplement.  Each bankruptcy bond will cover, to the extent specified in the related prospectus supplement, certain losses resulting from a reduction by a bankruptcy court of scheduled payments of principal and interest on a mortgage loan or a reduction by the court of the unpaid principal balance of a mortgage loan and will cover certain unpaid interest on the amount of a principal reduction from the date of the filing of a bankruptcy petition.  The required amount of coverage under each bankruptcy bond will be set forth in the related prospectus supplement.
 
Cross Collateralization
 
If specified in the applicable prospectus supplement, the beneficial ownership of separate groups of mortgage loans included in a trust fund may be evidenced by separate classes of certificates.  In this case, credit support may be provided by a cross collateralization feature which requires that distributions be made to certain classes from mortgage loan payments that would otherwise be distributed to Subordinate Certificates evidencing a beneficial ownership interest in other loan groups within the same trust fund.  As a result, the amount of credit enhancement available to a class of certificates against future losses on the mortgage loans in which that class represents an interest may be reduced as the result of losses on a group of mortgage loans in which that class has no interest.  The applicable prospectus supplement for a series that includes a cross collateralization feature will describe its specific operation.
 
Overcollateralization
 
If specified in the related prospectus supplement, subordination provisions of a series may be used to accelerate to a limited extent the amortization of one or more classes of certificates relative to the amortization of the related mortgage loans.  The accelerated amortization is achieved by the application of certain excess interest to the payment of principal of one or more classes of certificates.  This acceleration feature creates, with respect to the mortgage loans or a group of mortgage loans, overcollateralization which results from the excess of the aggregate principal balance of the related mortgage loans, or group of mortgage loans, over the Class Balance of the related class or classes of certificates.  This acceleration may continue for the life of the related certificates, or may have a shorter duration.  In the case of limited acceleration, once the required level of overcollateralization is reached, and subject to certain provisions specified in the related prospectus supplement, this limited acceleration feature may cease, unless necessary to maintain the required level of overcollateralization.
 
Excess Interest
 
If specified in the related prospectus supplement, the mortgage loans in a trust may generate more interest than is necessary to pay the interest earned on the classes of certificates each month.  The excess interest may be used to maintain overcollateralization, to pay interest that was previously earned but not paid to certain classes of certificates and to reimburse certain classes of certificates for losses and certain shortfalls that they experienced previously.
 
Cash Flow Agreements
 
If specified in the applicable prospectus supplement, amounts received by the trustee under any Cash Flow Agreement described below under “CASH FLOW AGREEMENTS” may also be used to provide credit enhancement for one or more classes of certificates.
 
Credit Support with Respect to MBS
 
If so provided in the prospectus supplement for a series of certificates, any MBS included in the related trust fund and/or the related underlying mortgage loans may be covered by one or more of the types of credit support described in this prospectus.  The related prospectus supplement will specify, as to each such form of credit support, the information indicated above with respect thereto, to the extent such information is material and available.
 
 
 
-92-

 
 
CASH FLOW AGREEMENTS
 
If specified in the prospectus supplement, the trust fund may include cash flow agreements consisting of one or more guaranteed investment contracts, swap agreements or interest rate cap or floor agreements (also called yield maintenance agreements), each of which agreements is intended to reduce the effects of interest rate fluctuations on the assets or on one or more classes of certificates (each, a “Cash Flow Agreement”).  The applicable prospectus supplement will describe the name, organizational form and general character of the business of the counterparty under any Cash Flow Agreement.  In addition, the prospectus supplement for the related series of certificates will disclose the significance percentage, calculated in accordance with Item 1115 of Regulation AB (17 CFR 229.1115).  To the extent this percentage is (a) 10% or more but less than 20%, the related prospectus supplement will provide financial data required by Item 301 of Regulation S-K (17 CFR 229.301) or (b) greater than 20%, the related prospectus supplement will provide financial statements required by Item 1115(b)(2) of Regulation AB (17 CFR 229.1115) and, in either case, the related prospectus supplement will contain a description of the operation and material terms of the Cash Flow Agreement, including, without limitation, conditions to payment or limits on the timing or amount of payments and material provisions relating to the termination or substitution of the Cash Flow Agreement.  Copies of the Cash Flow Agreement, if any, relating to a series of certificates will be filed with the SEC as an exhibit to a Current Report on Form 8-K.
 
Guaranteed Investment Contracts
 
If specified in the related prospectus supplement, the trustee on behalf of the trust may enter into one or more guaranteed investment contracts.  Guaranteed investment contracts are generally used to maximize the investment income on funds held between Distribution Dates pending distribution to certificateholders.  Under a guaranteed investment contract, the issuer of the contract, which is typically a highly rated financial institution, guarantees a fixed or floating rate of interest over the life of the contract, as well as the ultimate return of the principal.  Any payments received from the issuer of the contract by the trust will be distributed to the related class or classes of certificates as specified in the applicable prospectus supplement.
 
Yield Maintenance Agreements
 
If specified in the related prospectus supplement, the trustee on behalf of the trust will enter into one or more yield maintenance agreements in order to support the yield of one or more classes of certificates.  The counterparty to a yield maintenance agreement will receive an upfront payment and the trust will have no ongoing payment obligations.  Generally, if the index specified in the applicable prospectus supplement, which index will be one-month, three-month, six-month or one-year LIBOR, CMT, COFI, MTA or the Prime Rate, exceeds a percentage for a particular date specified in the applicable prospectus supplement, the counterparty to the yield maintenance agreement will be required to pay to the trustee an amount equal to that excess multiplied by a notional amount or the Class Balance or Balances of one or more classes of certificates multiplied by one-twelfth.  This amount may be adjusted to reflect the actual number of days in the interest accrual period for the related class or classes of certificates and will be paid to the class or classes of certificates as specified in the related prospectus supplement.
 
Swap Agreements
 
If specified in the related prospectus supplement, the trustee on behalf of the trust will enter into a swap agreement to support the yield on one or more classes of certificates.  Under the swap agreement, the trust will be obligated to pay an amount equal to a certain percentage of a notional amount set forth in the related prospectus supplement to the counterparty and the trust will be entitled to receive an amount equal to one-month, three-month, six-month or one-year LIBOR, CMT, COFI, MTA or the Prime Rate on the notional amount from the counterparty, until the swap agreement is terminated.  Only the net amount of the two obligations will be paid by the appropriate party.  In the event that the trust is required to make a payment to the counterparty, that payment will be paid on the related Distribution Date prior to distributions to certificateholders.  Generally, any payments received from the counterparty by the trust will be distributed to cover certain shortfalls as set forth in the applicable prospectus supplement.
 
 
-93-

 
 
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
 
The following discussion contains general summaries of certain legal aspects of mortgage loans secured by commercial and multifamily residential properties.  Because such legal aspects are governed by applicable state law (which laws may differ substantially), the summaries do not purport to be complete, to reflect the laws of any particular state, or to encompass the laws of all states in which the security for the mortgage loans (or mortgage loans underlying any MBS) is situated.  Accordingly, the summaries are qualified in their entirety by reference to the applicable laws of those states.  See “DESCRIPTION OF THE TRUST FUNDS—Mortgage Loans”.  For purposes of the following discussion, “mortgage loan” includes a mortgage loan underlying an MBS.
 
General
 
Each mortgage loan will be evidenced by a note or bond and secured by an instrument granting a security interest in real property, which may be a mortgage, deed of trust or a deed to secure debt, depending upon the prevailing practice and law in the state in which the related mortgaged property is located.  Mortgages, deeds of trust and deeds to secure debt are in this prospectus collectively referred to as “mortgages”.  A mortgage creates a lien upon, or grants a title interest in, the real property covered by that mortgage, and represents the security for the repayment of the indebtedness customarily evidenced by a promissory note.  The priority of the lien created or interest granted will depend on the terms of the mortgage and, in some cases, on the terms of separate subordination agreements or intercreditor agreements with others that hold interests in the real property, the knowledge of the parties to the mortgage and, generally, the order of recordation of the mortgage in the appropriate public recording office.  However, the lien of a recorded mortgage will generally be subordinate to later-arising liens for real estate taxes and assessments and other charges imposed under governmental police powers.
 
Types of Mortgage Instruments
 
There are two parties to a mortgage:  a mortgagor (the borrower and usually the owner of the subject property) and a mortgagee (the lender).  In contrast, a deed of trust is a three-party instrument, among a trustor (the equivalent of a borrower), a trustee to whom the real property is conveyed, and a beneficiary (the lender) for whose benefit the conveyance is made.  Under a deed of trust, the trustor grants the property, irrevocably until the debt is paid, in trust and generally with a power of sale, to the trustee to secure repayment of the indebtedness evidenced by the related note.  A deed to secure debt typically has two parties, pursuant to which the borrower, or grantor, conveys title to the real property to the grantee, or lender, generally with a power of sale, until such time as the debt is repaid.  In a case where the borrower is a land trust, there would be an additional party because legal title to the property is held by a land trustee under a land trust agreement for the benefit of the borrower.  At origination of a mortgage loan involving a land trust, the borrower may execute a separate undertaking to make payments on the mortgage note.  In no event is the land trustee personally liable for the mortgage note obligation.  The mortgagee’s authority under a mortgage, the trustee’s authority under a deed of trust and the grantee’s authority under a deed to secure debt are governed by the express provisions of the related instrument, the law of the state in which the real property is located, certain federal laws and, in some deed of trust transactions, the directions of the beneficiary.
 
Leases and Rents
 
Mortgages that encumber income-producing property often contain an assignment of rents and leases and/or may be accompanied by a separate assignment of rents and leases, pursuant to which the borrower assigns to the lender the borrower’s right, title and interest as landlord under each lease and the income derived from such leases and rents, while (unless rents are to be paid directly to the lender) retaining a revocable license to collect the rents for so long as there is no default.  If the borrower defaults, the license terminates and the lender is entitled to collect the rents.  Local law may require that the lender take possession of the property and/or obtain a court-appointed receiver before becoming entitled to collect the rents.
 
In most states, hotel and motel room rates are considered accounts receivable under the Uniform Commercial Code; in cases where hotels or motels constitute loan security, the rates are generally pledged by the borrower as additional security for the loan.  In general, the lender must file financing statements in order to perfect its security interest in the room rates and must file continuation statements, generally every five years, to maintain perfection of such security interest.  In certain cases, mortgage loans secured by hotels or motels may be included in a trust fund
 
 
-94-

 
 
even if the security interest in the room rates was not perfected or the requisite UCC filings were allowed to lapse.  Even if the lender’s security interest in room rates is perfected under applicable nonbankruptcy law, it will generally be required to commence a foreclosure action or otherwise take possession of the property in order to enforce its rights to collect the room rates following a default.  In the bankruptcy setting, however, the lender will be stayed from enforcing its rights to collect room rates, but those room rates (in light of certain revisions to the Bankruptcy Code which are effective for all bankruptcy cases commenced on or after October 22, 1994) constitute “cash collateral” and therefore cannot be used by the bankruptcy debtor without lender’s consent or a hearing at which the lender’s interest in the room rates is given adequate protection (e.g., the lender receives cash payments from otherwise unencumbered funds or a replacement lien on unencumbered property, in either case equal in value to the amount of room rates that the debtor proposes to use, or other similar relief).  See “—Bankruptcy Laws”.
 
In the case of office and retail properties, the bankruptcy or insolvency of a major tenant or a number of smaller tenants may have an adverse impact on the mortgaged properties affected and the income produced by such mortgaged properties.  Under bankruptcy law, a tenant has the option of assuming (continuing), or rejecting (terminating) or, subject to certain conditions, assigning to a third party any unexpired lease.  If the tenant assumes its lease, the tenant must cure all defaults under the lease and provide the landlord with adequate assurance of its future performance under the lease.  If the tenant rejects the lease, the landlord’s claim for breach of the lease would (absent collateral securing the claim) be treated as a general unsecured claim.  The amount of the claim would be limited to the amount owed for unpaid pre-petition lease payments unrelated to the rejection, plus the greater of one year’s lease payments or 15% of the remaining lease payments payable under the lease (but not to exceed three years’ lease payments).  If the tenant assigns its lease, the tenant must cure all defaults under the lease and the proposed assignee must demonstrate adequate assurance of future performance under the lease.
 
Personalty
 
In the case of certain types of mortgaged properties, such as hotels, motels and nursing homes, personal property (to the extent owned by the borrower and not previously pledged) may constitute a significant portion of the property’s value as security.  The creation and enforcement of liens on personal property are governed by the UCC.  Accordingly, if a borrower pledges personal property as security for a mortgage loan, the lender generally must file UCC financing statements in order to perfect its security interest in the personal property, and must file continuation statements, generally every five years, to maintain that perfection.  [In certain cases, mortgage loans secured in part by personal property may be included in a trust fund even if the security interest in such personal property was not perfected or the requisite UCC filings were allowed to lapse.]
 
Foreclosure
 
General.  Foreclosure is a legal procedure that allows the lender to recover its mortgage debt by enforcing its rights and available legal remedies under the mortgage.  If the borrower defaults in payment or performance of its obligations under the note or mortgage, the lender has the right to institute foreclosure proceedings to sell the real property at public auction to satisfy the indebtedness.
 
Foreclosure procedures vary from state to state.  Two primary methods of foreclosing a mortgage are judicial foreclosure, involving court proceedings, and nonjudicial foreclosure pursuant to a power of sale granted in the mortgage instrument.  Other foreclosure procedures are available in some states, but they are either infrequently used or available only in limited circumstances.
 
A foreclosure action is subject to most of the delays and expenses of other lawsuits if defenses are raised or counterclaims are interposed, and sometimes requires several years to complete.
 
Judicial Foreclosure.  A judicial foreclosure proceeding is conducted in a court having jurisdiction over the mortgaged property.  Generally, the action is initiated by the service of legal pleadings upon all parties having a subordinate interest of record in the real property and all parties in possession of the property, under leases or otherwise, whose interests are subordinate to the mortgage.  Delays in completion of the foreclosure may occasionally result from difficulties in locating defendants.  When the lender’s right to foreclose is contested, the legal proceedings can be time-consuming.  Upon successful completion of a judicial foreclosure proceeding, the court generally issues a judgment of foreclosure and appoints a referee or other officer to conduct a public sale of
 
 
-95-

 
 
the mortgaged property, the proceeds of which are used to satisfy the judgment.  Such sales are made in accordance with procedures that vary from state to state.
 
Equitable and Other Limitations on Enforceability of Certain Provisions.  United States courts have traditionally imposed general equitable principles to limit the remedies available to lenders in foreclosure actions.  These principles are generally designed to relieve borrowers from the effects of mortgage defaults perceived as harsh or unfair.  Relying on such principles, a court may alter the specific terms of a loan to the extent it considers necessary to prevent or remedy an injustice, undue oppression or overreaching, or may require the lender to undertake affirmative actions to determine the cause of the borrower’s default and the likelihood that the borrower will be able to reinstate the loan.  In some cases, courts have substituted their judgment for the lender’s and have required that lenders reinstate loans or recast payment schedules in order to accommodate borrowers who are suffering from a temporary financial disability.  In other cases, courts have limited the right of the lender to foreclose in the case of a nonmonetary default, such as a failure to adequately maintain the mortgaged property or an impermissible further encumbrance of the mortgaged property.  Finally, some courts have addressed the issue of whether federal or state constitutional provisions reflecting due process concerns for adequate notice require that a borrower receive notice in addition to statutorily-prescribed minimum notice.  For the most part, these cases have upheld the reasonableness of the notice provisions or have found that a public sale under a mortgage providing for a power of sale does not involve sufficient state action to trigger constitutional protections.
 
In addition, some states may have statutory protection such as the right of the borrower to reinstate mortgage loans after commencement of foreclosure proceedings but prior to a foreclosure sale.
 
Nonjudicial Foreclosure/Power of Sale.  In states permitting nonjudicial foreclosure proceedings, foreclosure of a deed of trust is generally accomplished by a nonjudicial trustee’s sale pursuant to a power of sale typically granted in the deed of trust.  A power of sale may also be contained in any other type of mortgage instrument if applicable law so permits.  A power of sale under a deed of trust allows a nonjudicial public sale to be conducted generally following a request from the beneficiary/lender to the trustee to sell the property upon default by the borrower and after notice of sale is given in accordance with the terms of the mortgage and applicable state law.  In some states, prior to such sale, the trustee under the deed of trust must record a notice of default and notice of sale and send a copy to the borrower and to any other party who has recorded a request for a copy of a notice of default and notice of sale.  In addition, in some states the trustee must provide notice to any other party having an interest of record in the real property, including junior lienholders.  A notice of sale must be posted in a public place and, in most states, published for a specified period of time in one or more newspapers.  The borrower or junior lienholder may then have the right, during a reinstatement period required in some states, to cure the default by paying the entire actual amount in arrears (without regard to the acceleration of the indebtedness), plus the lender’s expenses incurred in enforcing the obligation.  In other states, the borrower or the junior lienholder is not provided a period to reinstate the loan, but has only the right to pay off the entire debt to prevent the foreclosure sale.  Generally, state law governs the procedure for public sale, the parties entitled to notice, the method of giving notice and the applicable time periods.
 
Public Sale.  A third party may be unwilling to purchase a mortgaged property at a public sale because of the difficulty in determining the exact status of title to the property (due to, among other things, redemption rights that may exist) and because of the possibility that physical deterioration of the property may have occurred during the foreclosure proceedings.  Therefore, it is common for the lender to purchase the mortgaged property for an amount equal to the secured indebtedness and accrued and unpaid interest plus the expenses of foreclosure, in which event the borrower’s debt will be extinguished, or for a lesser amount in order to preserve its right to seek a deficiency judgment if such is available under state law and under the terms of the mortgage loan documents.  (The mortgage loans, however, may be nonrecourse.  See “RISK FACTORS—Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans—Limited Recourse Nature of the Mortgage Loans May Make Recovery Difficult in the Event that a Mortgage Loan Defaults”.) Thereafter, subject to the borrower’s right in some states to remain in possession during a redemption period, the lender will become the owner of the property and have both the benefits and burdens of ownership, including the obligation to pay debt service on any senior mortgages, to pay taxes, to obtain casualty insurance and to make such repairs as are necessary to render the property suitable for sale.  The costs of operating and maintaining a commercial or multifamily residential property may be significant and may be greater than the income derived from that property.  The lender also will commonly obtain the services of a real estate broker and pay the broker’s commission in connection with the sale or lease of the property.  Depending upon
 
 
-96-

 
 
market conditions, the ultimate proceeds of the sale of the property may not equal the lender’s investment in the property.  Moreover, because of the expenses associated with acquiring, owning and selling a mortgaged property, a lender could realize an overall loss on a mortgage loan even if the mortgaged property is sold at foreclosure, or resold after it is acquired through foreclosure, for an amount equal to the full outstanding principal amount of the loan plus accrued interest.
 
The holder of a junior mortgage that forecloses on a mortgaged property does so subject to senior mortgages and any other prior liens, and may be obliged to keep senior mortgage loans current in order to avoid foreclosure of its interest in the property.  In addition, if the foreclosure of a junior mortgage triggers the enforcement of a “due-on-sale” clause contained in a senior mortgage, the junior mortgagee could be required to pay the full amount of the senior mortgage indebtedness or face foreclosure.
 
Rights of Redemption.  The purposes of a foreclosure action are to enable the lender to realize upon its security and to bar the borrower, and all persons who have interests in the property that are subordinate to that of the foreclosing lender, from exercise of their “equity of redemption”.  The doctrine of equity of redemption provides that, until the property encumbered by a mortgage has been sold in accordance with a properly conducted foreclosure and foreclosure sale, those having interests that are subordinate to that of the foreclosing lender have an equity of redemption and may redeem the property by paying the entire debt with interest.  Those having an equity of redemption must generally be made parties and joined in the foreclosure proceeding in order for their equity of redemption to be terminated.
 
The equity of redemption is a common-law (nonstatutory) right which should be distinguished from post-sale statutory rights of redemption.  In some states, after sale pursuant to a deed of trust or foreclosure of a mortgage, the borrower and foreclosed junior lienors are given a statutory period in which to redeem the property.  In some states, statutory redemption may occur only upon payment of the foreclosure sale price.  In other states, redemption may be permitted if the former borrower pays only a portion of the sums due.  The effect of a statutory right of redemption is to diminish the ability of the lender to sell the foreclosed property because the exercise of a right of redemption would defeat the title of any purchaser through a foreclosure.  Consequently, the practical effect of the redemption right is to force the lender to maintain the property and pay the expenses of ownership until the redemption period has expired.  In some states, a post-sale statutory right of redemption may exist following a judicial foreclosure, but not following a trustee’s sale under a deed of trust.
 
Anti-Deficiency Legislation.  Some or all of the mortgage loans may be nonrecourse loans, as to which recourse in the case of default will be limited to the mortgaged property and such other assets, if any, that were pledged to secure the mortgage loan.  However, even if a mortgage loan by its terms provides for recourse to the borrower’s other assets, a lender’s ability to realize upon those assets may be limited by state law.  For example, in some states a lender cannot obtain a deficiency judgment against the borrower following foreclosure or sale under a deed of trust.  A deficiency judgment is a personal judgment against the former borrower equal to the difference between the net amount realized upon the public sale of the real property and the amount due to the lender.  Other statutes may require the lender to exhaust the security afforded under a mortgage before bringing a personal action against the borrower.  In certain other states, the lender has the option of bringing a personal action against the borrower on the debt without first exhausting such security; however, in some of those states, the lender, following judgment on such personal action, may be deemed to have elected a remedy and thus may be precluded from foreclosing upon the security.  Consequently, lenders in those states where such an election of remedy provision exists will usually proceed first against the security.  Finally, other statutory provisions, designed to protect borrowers from exposure to large deficiency judgments that might result from bidding at below-market values at the foreclosure sale, limit any deficiency judgment to the excess of the outstanding debt over the fair market value of the property at the time of the sale.
 
Leasehold Considerations.  Mortgage loans may be secured by a mortgage on a ground lease.  Leasehold mortgages are subject to certain considerations not associated with mortgage loans secured by the fee estate of the mortgagor.  The most significant of these considerations is that the ground lease creating the leasehold estate could terminate, leaving the leasehold mortgagee without its security.  The ground lease may terminate, if among other reasons, the ground lessee breaches or defaults in its obligations under the ground lease or there is a bankruptcy of the ground lessee or the ground lessor.  This possibility may be minimized if the ground lease contains certain provisions protective of the mortgagee, but the ground leases that secure mortgage loans may not contain all of these protective provisions, and mortgages may not contain the other protection discussed in the next paragraph.  
 
 
 
-97-

 
 
Protective ground lease provisions include the right of the leasehold mortgagee to receive notices from the ground lessor of any defaults by the mortgagor; the right to cure those defaults, with adequate cure periods; if a default is not susceptible of cure by the leasehold mortgagee, the right to acquire the leasehold estate through foreclosure or otherwise; the ability of the ground lease to be assigned to and by the leasehold mortgagee or purchaser at a foreclosure sale and for the simultaneous release of the ground lessee’s liabilities under the new lease; and the right of the leasehold mortgagee to enter into a new ground lease with the ground lessor on the same terms and conditions as the old ground lease upon a termination.
 
In addition to the preceding protections, a leasehold mortgagee may require that the ground lease or leasehold mortgage prohibit the ground lessee from treating the ground lease as terminated in the event of the ground lessor’s bankruptcy and rejection of the ground lease by the trustee for the debtor-ground lessor.  As further protection, a leasehold mortgage may provide for the assignment of the debtor-ground lessee’s right to reject a lease pursuant to Section 365 of the Bankruptcy Code, although the enforceability of that clause has not been established.  Without the protections described in the preceding paragraph, a leasehold mortgagee may lose the collateral securing its leasehold mortgage.  In addition, terms and conditions of a leasehold mortgage are subject to the terms and conditions of the ground lease.  Although certain rights given to a ground lessee can be limited by the terms of a leasehold mortgage, the rights of a ground lessee or a leasehold mortgagee with respect to, among other things, insurance, casualty and condemnation will be governed by the provisions of the ground lease.
 
Cooperative Shares.  The cooperative shares owned by the tenant stockholder and pledged to the lender are, in almost all cases, subject to restrictions on transfer as set forth in the cooperative’s certificate of incorporation and by-laws, as well as in the proprietary lease or occupancy agreement, and may be canceled by the cooperative for failure by the tenant stockholder to pay rent or other obligations or charges owed by the tenant stockholder, including mechanics’ liens against the cooperative apartment building incurred by the tenant stockholder.  The proprietary lease or occupancy agreement generally permits the cooperative to terminate the lease or agreement in the event an obligor fails to make payments or defaults in the performance of covenants required thereunder.  Typically, the lender and the cooperative enter into a recognition agreement which establishes the rights and obligations of both parties in the event of a default by the tenant stockholder on its obligations under the proprietary lease or occupancy agreement.  A default by the tenant stockholder under the proprietary lease or occupancy agreement will usually constitute a default under the security agreement between the lender and the tenant stockholder.
 
The recognition agreement generally provides that, in the event that the tenant stockholder has defaulted under the proprietary lease or occupancy agreement, the cooperative will take no action to terminate the lease or agreement until the lender has been provided an opportunity to cure the default.  The recognition agreement typically provides that if the proprietary lease or occupancy agreement is terminated, the cooperative will recognize the lender’s lien against proceeds from a sale of the cooperative apartment, subject, however, to the cooperative’s right to sums due under the proprietary lease or occupancy agreement.  The total amount owed to the cooperative by the tenant stockholder, which the lender generally cannot restrict and does not monitor, could reduce the value of the collateral below the outstanding principal balance of the cooperative loan and accrued and unpaid interest thereon.
 
Recognition agreements also provide that in the event of a foreclosure on a cooperative loan, the lender must obtain the approval or consent of the cooperative as required by the proprietary lease before transferring the cooperative shares or assigning the proprietary lease.  Generally, the lender is not limited by the agreement in any rights it may have to dispossess the tenant stockholders.
 
Foreclosure on the cooperative shares is accomplished by a sale in accordance with the provisions of Article 9 of the Uniform Commercial Code (the “UCC”) and the security agreement relating to those shares.  Article 9 of the UCC requires that a sale be conducted in a “commercially reasonable” manner.  Whether a foreclosure sale has been conducted in a “commercially reasonable” manner will depend on the facts in each case.  In determining commercial reasonableness, a court will look to the notice given the debtor and the method, manner, time, place and terms of the foreclosure.  Generally, a sale conducted according to the usual practice of banks selling similar collateral will be considered reasonably conducted.
 
Article 9 of the UCC provides that the proceeds of the sale will be applied first to pay the costs and expenses of the sale and then to satisfy the indebtedness secured by the lender’s security interest.  The recognition agreement, however, generally provides that the lender’s right to reimbursement is subject to the right of the cooperative
 
 
-98-

 
 
corporation to receive sums due under the proprietary lease or occupancy agreement.  If there are proceeds remaining, the lender must account to the tenant stockholder for the surplus.  Conversely, if a portion of the indebtedness remains unpaid, the tenant stockholder is generally responsible for the deficiency.
 
See “RISK FACTORS—Collateral Securing Cooperative Loans May Diminish in Value” in this prospectus.
 
Bankruptcy Laws
 
Operation of the Bankruptcy Code and related state laws may interfere with or affect the ability of a lender to realize upon collateral and/or to enforce a deficiency judgment.  For example, under the Bankruptcy Code, virtually all actions (including foreclosure actions and deficiency judgment proceedings) to collect a debt are automatically stayed upon the filing of the bankruptcy petition and, often, no interest or principal payments are made during the course of the bankruptcy case.  The delay and the consequences caused by such automatic stay can be significant.  Also, under the Bankruptcy Code, the filing of a petition in bankruptcy by or on behalf of a junior lienor may stay the senior lender from taking action to foreclose out such junior lien.
 
Under the Bankruptcy Code, provided certain substantive and procedural safeguards protective of the lender are met, the amount and terms of a mortgage loan secured by a lien on property of the debtor may be modified under certain circumstances.  For example, the outstanding amount of the loan may be reduced to the then-current value of the property (with a corresponding partial reduction of the amount of lender’s security interest) pursuant to a confirmed plan or lien avoidance proceeding, thus leaving the lender a general unsecured creditor for the difference between such value and the outstanding balance of the loan.  Other modifications may include the reduction in the amount of each scheduled payment, by means of a reduction in the rate of interest and/or an alteration of the repayment schedule (with or without affecting the unpaid principal balance of the loan), and/or by an extension (or shortening) of the term to maturity.  Some bankruptcy courts have approved plans, based on the particular facts of the reorganization case, that effected the cure of a mortgage loan default by paying arrearages over a number of years.  Also, a bankruptcy court may permit a debtor, through its rehabilitative plan, to reinstate a loan mortgage payment schedule even if the lender has obtained a final judgment of foreclosure prior to the filing of the debtor’s petition.
 
Federal bankruptcy law may also have the effect of interfering with or affecting the ability of a secured lender to enforce the borrower’s assignment of rents and leases related to the mortgaged property.  Under the Bankruptcy Code, a lender may be stayed from enforcing the assignment, and the legal proceedings necessary to resolve the issue could be time-consuming, with resulting delays in the lender’s receipt of the rents.  Recent amendments to the Bankruptcy Code, however, may minimize the impairment of the lender’s ability to enforce the borrower’s assignment of rents and leases.  In addition to the inclusion of hotel revenues within the definition of “cash collateral” as noted previously in the Section entitled “—Leases and Rents”, the amendments provide that a pre-petition security interest in rents or hotel revenues extends (unless the bankruptcy court orders otherwise based on the equities of the case) to such post-petition rents or revenues and is intended to overrule those cases that held that a security interest in rents is unperfected under the laws of certain states until the lender has taken some further action, such as commencing foreclosure or obtaining a receiver prior to activation of the assignment of rents.
 
If a borrower’s ability to make payment on a mortgage loan is dependent on its receipt of rent payments under a lease of the related property, that ability may be impaired by the commencement of a bankruptcy case relating to a lessee under such lease.  Under the Bankruptcy Code, the filing of a petition in bankruptcy by or on behalf of a lessee results in a stay in bankruptcy against the commencement or continuation of any state court proceeding for past due rent, for accelerated rent, for damages or for a summary eviction order with respect to a default under the lease that occurred prior to the filing of the lessee’s petition.  In addition, the Bankruptcy Code generally provides that a trustee or debtor-in-possession may, subject to approval of the court, (1) assume the lease and retain it or assign it to a third party or (2) reject the lease.  If the lease is assumed, the trustee or debtor-in-possession (or assignee, if applicable) must cure any defaults under the lease, compensate the lessor for its losses and provide the lessor with “adequate assurance” of future performance.  Such remedies may be insufficient, and any assurances provided to the lessor may, in fact, be inadequate.  If the lease is rejected, the lessor will be treated as an unsecured creditor with respect to its claim for damages for termination of the lease.  The Bankruptcy Code also limits a lessor’s damages for lease rejection to the rent reserved by the lease (without regard to acceleration) for the greater of one year, or 15%, not to exceed three years, of the remaining term of the lease.
 
 
 
-99-

 
 
Pursuant to the federal doctrine of “substantive consolidation” or to the (predominantly state law) doctrine of “piercing the corporate veil”, a bankruptcy court, in the exercise of its equitable powers, also has the authority to order that the assets and liabilities of a related entity be consolidated with those of an entity before it.  Thus, property ostensibly the property of one entity may be determined to be the property of a different entity in bankruptcy, the automatic stay applicable to the second entity extended to the first and the rights of creditors of the first entity impaired in the fashion set forth above in the discussion of ordinary bankruptcy principles.  Depending on facts and circumstances not wholly in existence at the time a loan is originated or transferred to the trust fund, the application of any of these doctrines to one or more of the mortgagors in the context of the bankruptcy of one or more of their affiliates could result in material impairment of the rights of the certificateholders.
 
For each mortgagor that is described as a “special purpose entity”, “single purpose entity” or “bankruptcy remote entity” in the related prospectus supplement, the activities that may be conducted by such mortgagor and its ability to incur debt are restricted by the applicable mortgage or the organizational documents of such mortgagor in such manner as is intended to make the likelihood of a bankruptcy proceeding being commenced by or against such mortgagor remote, and such mortgagor has been organized and is designed to operate in a manner such that its separate existence should be respected notwithstanding a bankruptcy proceeding in respect of one or more affiliated entities of such mortgagor.  However, the depositor makes no representation as to the likelihood of the institution of a bankruptcy proceeding by or in respect of any mortgagor or the likelihood that the separate existence of any mortgagor would be respected if there were to be a bankruptcy proceeding in respect of any affiliated entity of a mortgagor.
 
Environmental Considerations
 
General.  A lender may be subject to environmental risks when taking a security interest in real property.  Of particular concern may be properties that are or have been used for industrial, manufacturing, military or disposal activity.  Such environmental risks include the possible diminution of the value of a contaminated property or, as discussed below, potential liability for clean-up costs or other remedial actions that could exceed the value of the property or the amount of the lender’s loan.  In certain circumstances, a lender may decide to abandon a contaminated mortgaged property as collateral for its loan rather than foreclose and risk liability for clean-up costs.
 
Superlien Laws.  Under the laws of many states, contamination on a property may give rise to a lien on the property for clean-up costs.  In several states, such a lien has priority over all existing liens, including those of existing mortgages.  In these states, the lien of a mortgage may lose its priority to such a “superlien”.
 
CERCLA.  CERCLA, imposes strict liability on present and past “owners” and “operators” of contaminated real property for the costs of clean-up.  A secured lender may be liable as an “owner” or “operator” of a contaminated mortgaged property if agents or employees of the lender have become sufficiently involved in the management of such mortgaged property or the operations of the borrower.  Such liability may exist even if the lender did not cause or contribute to the contamination and regardless of whether or not the lender has actually taken possession of a mortgaged property through foreclosure, deed in lieu of foreclosure or otherwise.  Moreover, such liability is not limited to the original or unamortized principal balance of a loan or to the value of the property securing a loan.  Excluded from CERCLA’s definition of “owner” or “operator”, however, is a person “who without participating in the management of the facility, holds indicia of ownership primarily to protect his security interest”.  This is the so-called “secured creditor exemption”.
 
The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996, amended, among other things, the provisions of CERCLA with respect to lender liability and the secured creditor exemption.  The Act offers substantial protection of lenders by defining the activities in which a lender can engage and still have the benefit of the secured creditor exemption.  In order for a lender to be deemed to have participated in the management of a mortgaged property, the lender must actually participate in the operational affairs of the property of the borrower.  The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996 provides that “merely having the capacity to influence, or unexercised right to control” operations does not constitute participation in management.  A lender will lose the protection of the secured creditor exemption only if it exercises decision making control over the borrower’s environmental compliance and hazardous substance handling and disposal practices, or assumes day-to-day management of operational functions of the mortgaged property.  The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996 also provides that a lender will continue to have the benefit of the
 
 
-100-

 
 
secured-creditor exemption even if it forecloses on a mortgaged property, purchases it at a foreclosure sale or accepts a deed-in-lieu of foreclosure; provided that the lender seeks to sell the mortgaged property at the earliest practicable commercially reasonable time on commercially reasonable terms.
 
Certain Other Federal and State Laws.  Many states have statutes similar to CERCLA, and not all those statutes provide for a secured creditor exemption.  In addition, under federal law, there is potential liability relating to hazardous wastes and underground storage tanks under the federal Resource Conservation and Recovery Act.
 
In addition, the definition of “hazardous substances” under CERCLA specifically excludes petroleum products.  Subtitle I of the Resource Conservation and Recovery Act governs underground petroleum storage tanks.  Under the Asset Conservation, Lender Liability and Deposit Insurance Act of 1996, the protections accorded to lenders under CERCLA are also accorded to the holders of security interests in underground storage tanks.  It should be noted, however, liability for cleanup of petroleum contamination may be governed by state law, which may not provide for any specific protection of secured creditors.
 
In a few states, transfers of some types of properties are conditioned upon cleanup of contamination prior to transfer.  In these cases, a lender that becomes the owner of a property through foreclosure, deed in lieu of foreclosure or otherwise, may be required to clean up the contamination before selling or otherwise transferring the property.
 
Beyond statute-based environmental liability, there exist common law causes of action (for example, actions based on nuisance or on toxic tort resulting in death, personal injury or damage to property) related to hazardous environmental conditions on a property.  While it may be more difficult to hold a lender liable in such cases, unanticipated or uninsured liabilities of the borrower may jeopardize the borrower’s ability to meet its loan obligations.
 
Additional Considerations.  The cost of remediating hazardous substance contamination at a property can be substantial.  If a lender becomes liable, it can bring an action for contribution against the owner or operator who created the environmental hazard, but that individual or entity may be without substantial assets.  Accordingly, it is possible that such costs could become a liability of the trust fund and occasion a loss to the certificateholders of the related series.
 
To reduce the likelihood of such a loss, unless otherwise specified in the related prospectus supplement, the Pooling and Servicing Agreement will provide that neither the master servicer nor the special servicer, acting on behalf of the trustee, may acquire title to a mortgaged property or take over its operation unless the special servicer, based solely (as to environmental matters) on a report prepared by a person who regularly conducts environmental audits, has made the determination that it is appropriate to do so, as described under “THE POOLING AND SERVICING AGREEMENTS—Realization Upon Defaulted Mortgage Loans”.
 
If a lender forecloses on a mortgage secured by a property, the operations on which are subject to environmental laws and regulations, the lender will be required to operate the property in accordance with those laws and regulations.  Such compliance may entail substantial expense, especially in the case of industrial or manufacturing properties.
 
In addition, a lender may be obligated to disclose environmental conditions on a property to government entities and/or to prospective buyers (including prospective buyers at a foreclosure sale or following foreclosure).  Such disclosure may decrease the amount that prospective buyers are willing to pay for the affected property, sometimes substantially, and thereby decrease the ability of the lender to recoup its investment in a loan upon foreclosure.
 
Environmental Site Assessments.  In most cases, an environmental site assessment of each mortgaged property will have been performed in connection with the origination of the related mortgage loan or at some time prior to the issuance of the related certificates.  Environmental site assessments, however, vary considerably in their content, quality and cost.  Even when adhering to 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.
 
 
 
-101-

 
 
Due-on-Sale and Due-on-Encumbrance Provisions
 
Certain of the mortgage loans may contain “due-on-sale” and “due-on-encumbrance” clauses that purport to permit the lender to accelerate the maturity of the loan if the borrower transfers or encumbers the related mortgaged property.  In recent years, court decisions and legislative actions placed substantial restrictions on the right of lenders to enforce such clauses in many states.  However, the Garn Act generally preempts state laws that prohibit the enforcement of due-on-sale clauses and permits lenders to enforce these clauses in accordance with their terms, subject to certain limitations as set forth in the Garn Act and the regulations promulgated under the Garn Act.  Accordingly, a master servicer may nevertheless have the right to accelerate the maturity of a mortgage loan that contains a “due-on-sale” provision upon transfer of an interest in the property, without regard to the master servicer’s ability to demonstrate that a sale threatens its legitimate security interest.
 
Junior Liens; Rights of Holders of Senior Liens
 
If so provided in the related prospectus supplement, mortgage assets for a series of certificates may include mortgage loans secured by junior liens, and the loans secured by the related senior liens may not be included in the mortgage pool.  In addition to the risks faced by the holder of a first lien, holders of mortgage loans secured by junior liens also face the risk that adequate funds will not be received in connection with a foreclosure on the related mortgaged property to satisfy fully both the senior liens and the mortgage loan.  In the event that a holder of a senior lien forecloses on a mortgaged property, the proceeds of the foreclosure or similar sale will be applied first to the payment of court costs and fees in connection with the foreclosure, second to real estate taxes, third in satisfaction of all principal, interest, prepayment or acceleration penalties, if any, and any other sums due and owing to the holder of the senior liens.  The claims of the holders of the senior liens will be satisfied in full out of proceeds of the liquidation of the related mortgaged property, if such proceeds are sufficient, before the trust fund as holder of the junior lien receives any payments in respect of the mortgage loan.  In the event that such proceeds from a foreclosure or similar sale of the related mortgaged property are insufficient to satisfy all senior liens and the mortgage loan in the aggregate, the trust fund, as the holder of the junior lien, and, accordingly, holders of one or more classes of the certificates of the related series bear (1) the risk of delay in distributions while a deficiency judgment against the borrower is obtained and (2) the risk of loss if the deficiency judgment is not realized upon.  Moreover, deficiency judgments may not be available in certain jurisdictions or the mortgage loan may be nonrecourse.
 
The rights of the trust fund (and therefore the certificateholders), as beneficiary under a junior deed of trust or as mortgagee under a junior mortgage, are subordinate to those of the mortgagee or beneficiary under the senior mortgage or deed of trust, including the prior rights of the senior mortgagee or beneficiary to receive rents, hazard insurance and condemnation proceeds and to cause the property securing the mortgage loan to be sold upon default of the mortgagor or trustor, thereby extinguishing the junior mortgagee’s or junior beneficiary’s lien unless the master servicer asserts its subordinate interest in a property in foreclosure litigation or satisfies the defaulted senior loan.  As discussed more fully below, in many states a junior mortgagee or beneficiary may satisfy a defaulted senior loan in full, adding the amounts expended to the balance due on the junior loan.  Absent a provision in the senior mortgage, no notice of default is required to be given to the junior mortgagee.
 
The form of the mortgage or deed of trust used by many institutional lenders confers on the mortgagee or beneficiary the right both to receive all proceeds collected under any hazard insurance policy and all awards made in connection with any condemnation proceedings, and to apply such proceeds and awards to any indebtedness secured by the mortgage or deed of trust, in such order as the mortgage or beneficiary may determine.  Thus, in the event improvements on the property are damaged or destroyed by fire or other casualty, or in the event the property is taken by condemnation, the mortgagee or beneficiary under the senior mortgage or deed of trust will have the prior right to collect any insurance proceeds payable under a hazard insurance policy and any award of damages in connection with the condemnation and to apply the same to the indebtedness secured by the senior mortgage or deed of trust.  Proceeds in excess of the amount of senior mortgage indebtedness will, in most cases, be applied to the indebtedness of a junior mortgage or trust deed to the extent the junior mortgage or deed of trust so provides.  The laws of certain states may limit the ability of mortgagees or beneficiaries to apply the proceeds of hazard insurance and partial condemnation awards to the secured indebtedness.  In such states, the mortgagor or trustor must be allowed to use the proceeds of hazard insurance to repair the damage unless the security of the mortgagee or
 
 
-102-

 
 
beneficiary has been impaired.  Similarly, in certain states, the mortgagee or beneficiary is entitled to the award for a partial condemnation of the real property security only to the extent that its security is impaired.
 
The form of mortgage or deed of trust used by many institutional lenders typically contains a “future advance” clause, which provides, in essence, that additional amounts advanced to or on behalf of the mortgagor or trustor by the mortgagee or beneficiary are to be secured by the mortgage or deed of trust.  While such a clause is valid under the laws of most states, the priority of any advance made under the clause depends, in some states, on whether the advance was an “obligatory” or “optional” advance.  If the mortgagee or beneficiary is obligated to advance the additional amounts, the advance may be entitled to receive the same priority as amounts initially made under the mortgage or deed of trust, notwithstanding that there may be intervening junior mortgages or deeds of trust and other liens between the date of recording of the mortgage or deed of trust and the date of the future advance, and notwithstanding that the mortgagee or beneficiary had actual knowledge of such intervening junior mortgages or deeds of trust and other liens at the time of the advance.  Where the mortgagee or beneficiary is not obligated to advance the additional amounts and has actual knowledge of the intervening junior mortgages or deeds of trust and other liens, the advance may be subordinate to such intervening junior mortgages or deeds of trust and other liens.  Priority of advances under a “future advance” clause rests, in many other states, on state law giving priority to all advances made under the loan agreement up to a “credit limit” amount stated in the recorded mortgage.
 
Subordinate Financing
 
The terms of certain of the mortgage loans may not restrict the ability of the borrower to use the mortgaged property as security for one or more additional loans, or such restrictions may be unenforceable.  Where a borrower encumbers a mortgaged property with one or more junior liens, the senior lender is subjected to additional risk.  First, the borrower may have difficulty servicing and repaying multiple loans.  Moreover, if the subordinate financing permits recourse to the borrower (as is frequently the case) and the senior loan does not, a borrower may have more incentive to repay sums due on the subordinate loan.  Second, acts of the senior lender that prejudice the junior lender or impair the junior lender’s security may create a superior equity in favor of the junior lender.  For example, if the borrower and the senior lender agree to an increase in the principal amount of or the interest rate payable on the senior loan, the senior lender may lose its priority to the extent any existing junior lender is harmed or the borrower is additionally burdened.  Third, if the borrower defaults on the senior loan and/or any junior loan or loans, the existence of junior loans and actions taken by junior lenders can impair the security available to the senior lender and can interfere with or delay the taking of action by the senior lender.  Moreover, the bankruptcy of a junior lender may operate to stay foreclosure or similar proceedings by the senior lender.
 
Default Interest and Limitations on Prepayments
 
Forms of notes and mortgages used by lenders may contain provisions obligating the mortgagor to pay a late charge or additional interest if payments are not timely made, and in some circumstances may provide for prepayment fees or yield maintenance penalties if the obligation is paid prior to maturity or prohibit such prepayment for a specified period.  In certain states, there are or may be specific limitations upon the late charges which a lender may collect from a mortgagor for delinquent payments.  Certain states also limit the amounts that a lender may collect from a mortgagor as an additional charge if the loan is prepaid.  The enforceability under the laws of a number of states and the Bankruptcy Code of provisions providing for prepayment fees of penalties upon, or prohibition of, an involuntary prepayment is unclear, and no assurance can be given that, at the time a prepayment premium is required to be made on a mortgage loan in connection with an involuntary prepayment, the obligation to make such payment, or the provisions of any such prohibition, will be enforceable under applicable state law.  The absence of a restraint on prepayment, particularly with respect to mortgage loans having higher Mortgage Rates, may increase the likelihood of refinancing or other early retirements of the mortgage loans.
 
Applicability of Usury Laws
 
Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980 provides that state usury limitations shall not apply to certain types of residential (including multifamily) first mortgage loans originated by certain lenders after March 31, 1980.  Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980 authorized any state to reimpose interest rate limits by adopting, before April 1, 1983, a law or constitutional provision that expressly rejects application of the federal law.  In addition, even where Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980 is not so rejected, any state is authorized by the law to adopt a provision limiting discount points or other charges on mortgage loans covered by Title V of the
 
 
-103-

 
 
Depository Institutions Deregulation and Monetary Control Act of 1980.  Certain states have taken action to reimpose interest rate limits and/or to limit discount points or other charges.
 
No mortgage loan originated in any state in which application of Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980 has been expressly rejected or a provision limiting discount points or other charges has been adopted, will (if originated after that rejection or adoption) be eligible for inclusion in a trust fund unless (i) such mortgage loan provides for such interest rate, discount points and charges as are permitted in such state or (ii) such mortgage loan provides that the terms are to be construed in accordance with the laws of another state under which such interest rate, discount points and charges would not be usurious and the borrower’s counsel has rendered an opinion that such choice of law provision would be given effect.
 
Certain Laws and Regulations
 
The mortgaged properties will be subject to compliance with various federal, state and local statutes and regulations.  Failure to comply (together with an inability to remedy any such failure) could result in material diminution in the value of a mortgaged property which could, together with the possibility of limited alternative uses for a particular mortgaged property (i.e., a nursing or convalescent home or hospital), result in a failure to realize the full principal amount of the related mortgage loan.
 
Americans with Disabilities Act
 
Under the ADA, in order to protect individuals with disabilities, public accommodations (such as hotels, restaurants, shopping centers, hospitals, schools and social service center establishments) must remove architectural and communication barriers which are structural in nature from existing places of public accommodation to the extent “readily achievable”. In addition, under the ADA, alterations to a place of public accommodation or a commercial facility are to be made so that, to the maximum extent feasible, such altered portions are readily accessible to and usable by disabled individuals.  The “readily achievable” standard takes into account, among other factors, the financial resources of the affected site, owner, landlord or other applicable person.  In addition to imposing a possible financial burden on the borrower in its capacity as owner or landlord, the ADA may also impose such requirements on a foreclosing lender who succeeds to the interest of the borrower as owner or landlord.  Furthermore, since the “readily achievable” standard may vary depending on the financial condition of the owner or landlord, a foreclosing lender who is financially more capable than the borrower of complying with the requirements of the ADA may be subject to more stringent requirements than those to which the borrower is subject.
 
Servicemembers Civil Relief Act
 
Under the terms of the Servicemembers Civil Relief Act (the “Relief Act”), a borrower who enters military service after the origination of such borrower’s mortgage loan (including a borrower who was in reserve status and is called to active duty after origination of the mortgage loan), upon notification by such borrower, shall not be charged interest, including fees and charges, in excess of 6% per annum during the period of such borrower’s active duty status.  Unless a court or administrative agency orders otherwise upon application of the lender.  The Relief Act applies to individuals who are members of the Army, Navy, Air Force, Marines, National Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service or the National Oceanic and Atmospheric Administration assigned to duty with the military.  The California Military and Veterans Code provides protection equivalent to that provided by the Relief Act to California national guard members called up to active service by the Governor of California, California national guard members called up to active service by the President and reservists called to active duty.  Because the Relief Act and the California Military Code apply to borrowers who enter military service, no information can be provided as to the number of mortgage loans that may be affected by the Relief Act or the California Military and Veterans Code.  Application of the Relief Act or the California Military and Veterans Code would adversely affect, for an indeterminate period of time, the ability of a master servicer or special servicer to collect full amounts of interest on certain of the mortgage loans.  Any shortfalls in interest collections resulting from the application of the Relief Act or the California Military and Veterans Code would result in a reduction of the amounts distributable to the holders of the related series of certificates, and would not be covered by advances or, unless otherwise specified in the related prospectus supplement, any form of credit support provided in connection
 
 
-104-

 
 
with such certificates.  In addition, application of the Relief Act or the California Military and Veterans Code imposes limitations that would impair the ability of the master servicer or special servicer to foreclose on an affected mortgage loan during the borrower’s period of active duty status, and, under certain circumstances, during an additional three month period thereafter.
 
Forfeiture for Drug and Money Laundering Violations
 
Federal law provides that property purchased or improved with assets derived from criminal activity or otherwise tainted, or used in the commission of certain offenses, can be seized and ordered forfeited to the United States of America.  The offenses which can trigger such a seizure and forfeiture include, among others, violations of the Racketeer Influenced and Corrupt Organizations Act, the Bank Secrecy Act, the anti-money laundering laws and regulations, including the USA Patriot Act of 2001 and the regulations issued pursuant to that Act, as well as the narcotic drug laws.  In many instances, the United States may seize the property even before a conviction occurs.
 
In the event of a forfeiture proceeding, a lender may be able to establish its interest in the property by proving that (1) its mortgage was executed and recorded before the commission of the illegal conduct from which the assets used to purchase or improve the property were derived or before the commission of any other crime upon which the forfeiture is based, or (2) the lender, at the time of the execution of the mortgage, “did not know or was reasonably without cause to believe that the property was subject to forfeiture”. However, there is no assurance that such a defense will be successful.
 
Federal Deposit Insurance Act; Commercial Mortgage Loan Servicing
 
Under the Federal Deposit Insurance Act, federal bank regulatory authorities, including the OCC, have the power to determine if any activity or contractual obligation of a bank constitutes an unsafe or unsound practice or violates a law, rule or regulation applicable to such bank.  If Bank of America, National Association or another bank is a servicer and/or a mortgage loan seller for a series and the OCC, which has primary regulatory authority over Bank of America, National Association and other banks, were to find that any obligation of Bank of America, National Association or such other bank under the related Pooling and Servicing Agreement or other agreement or any activity of Bank of America, National Association or such other bank constituted an unsafe or unsound practice or violated any law, rule or regulation applicable to it, the OCC could order Bank of America, National Association or such other bank among other things to rescind such contractual obligation or terminate such activity.
 
In March 2003, the OCC issued a temporary cease and desist order against a national bank (as to which no conservator or receiver had been appointed) asserting that, contrary to safe and sound banking practices, the bank was receiving inadequate servicing compensation in connection with several credit card securitizations sponsored by its affiliates because of the size and subordination of the contractual servicing fee, and ordered the bank, among other things, to immediately resign as servicer, to cease all servicing activity within 120 days and to immediately withhold funds from collections in an amount sufficient to compensate if for its actual costs and expenses of servicing (notwithstanding the priority of payments in the related securitization agreements).
 
While the depositor does not believe that the OCC would consider, with respect to any series, (i) provisions relating to Bank of America, National Association or another bank acting as a servicer under the related Pooling and Servicing Agreement, (ii) the payment or amount of the servicing compensation payable to Bank of America, National Association or another bank or (iii) any other obligation of Bank of America, National Association or another bank under the related Pooling and Servicing Agreement or other contractual agreement under which the depositor may purchase mortgage loans from Bank of America, National Association or another bank, to be unsafe or unsound or violative of any law, rule or regulation applicable to it, there can be no assurance that the OCC in the future would not conclude otherwise.  If the OCC did reach such a conclusion, and ordered Bank of America, National Association or another bank to rescind or amend any such agreement, payments on certificates could be delayed or reduced.
 
 
 
-105-

 
 
 
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
 
General
 
The following general discussion of the anticipated material federal income tax consequences of the purchase, ownership and disposition of offered certificates of any series thereof, to the extent it relates to matters of law or legal conclusions with respect thereto, represents the opinion of counsel to the depositor with respect to that series on the material matters associated with such consequences, subject to any qualifications set forth in this prospectus.  Counsel to the depositor for each series will be Cadwalader, Wickersham & Taft LLP, and a copy of the legal opinion of such counsel rendered in connection with any series of certificates will be filed by the depositor with the SEC on a Current Report on Form 8-K within 15 days after the Closing Date for such series of certificates.  This discussion is directed primarily to certificateholders that hold the certificates as “capital assets” within the meaning of Section 1221 of the Code (although portions thereof may also apply to certificateholders who do not hold certificates as capital assets) and it does not purport to discuss all federal income tax consequences that may be applicable to the individual circumstances of particular investors, some of which (such as banks, insurance companies and foreign investors) may be subject to special treatment under the Code.  The authorities on which this discussion, and the opinion referred to below, are based are subject to change or differing interpretations, which could apply retroactively.  Prospective investors should note that no rulings have been or will be sought from the IRS with respect to any of the federal income tax consequences discussed below, and no assurance can be given the IRS will not take contrary positions.  In addition to the federal income tax consequences described in this prospectus, potential investors are advised to consider the state and local tax consequences, if any, of the purchase, ownership and disposition of offered certificates.  See “STATE AND OTHER TAX CONSEQUENCES”.  Prospective investors are advised to consult their tax advisors concerning the federal, state, local or other tax consequences to them of the purchase, ownership and disposition of offered certificates.
 
The following discussion addresses securities of two general types:  (1) REMIC Certificates representing interests in a trust fund, or a portion thereof, that the REMIC administrator will elect to have treated as a REMIC under the REMIC Provisions of the Code, and (2) Grantor Trust Certificates representing interests in a Grantor Trust Fund as to which no such election will be made.  The prospectus supplement for each series of certificates will indicate whether a REMIC election (or elections) will be made for the related trust fund and, if such an election is to be made, will identify all “regular interests” and “residual interests” in the REMIC.  For purposes of this tax discussion, references to a “certificateholder” or a “holder” are to the beneficial owner of a certificate.
 
The following discussion is limited in applicability to offered certificates.  Moreover, this discussion applies only to the extent that mortgage assets held by a trust fund consist solely of mortgage loans.  To the extent that other mortgage assets, including REMIC certificates and mortgage pass-through certificates, are to be held by a trust fund, the tax consequences associated with the inclusion of such assets will be disclosed in the related prospectus supplement.  In addition, if cash flow agreements other than guaranteed investment contracts are included in a trust fund, the anticipated material tax consequences associated with such cash flow agreements also will be discussed in the related prospectus supplement.  See “DESCRIPTION OF THE TRUST FUNDS—Cash Flow Agreements”.
 
Furthermore, the following discussion is based in part upon the rules governing original issue discount that are set forth in Sections 1271-1273 and 1275 of the Code and in the OID Regulations, and in part upon the REMIC Provisions and the REMIC Regulations.  The OID Regulations do not adequately address certain issues relevant to, and in some instances provide that they are not applicable to, securities such as the certificates.
 
REMICs
 
Classification of REMICs.  Upon the issuance of each series of REMIC Certificates, counsel to the depositor will give its opinion generally to the effect that, assuming compliance with all provisions of the related Pooling and Servicing Agreement and any other governing documents, the related trust fund (or each applicable portion thereof) will qualify as one or more REMICs and the REMIC Certificates offered with respect thereto will be considered to evidence ownership of REMIC Regular Certificates or REMIC Residual Certificates in a REMIC within the meaning of the REMIC Provisions.  The following general discussion of the anticipated federal income tax consequences of the purchase, ownership and disposition of REMIC Certificates, to the extent it relates to matters of law or legal conclusions with respect thereto, represents the opinion of counsel to the depositor for the applicable
 
 
-106-

 
 
series as specified in the related prospectus supplement, subject to any qualifications set forth in this prospectus.  In addition, counsel to the depositor have prepared or reviewed the statements in this prospectus under the heading “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs”, and are of the opinion that such statements are correct in all material respects.  Such statements are intended as an explanatory discussion of the possible effects of the classification of any trust fund (or applicable portion thereof) as one or more REMICs for federal income tax purposes on investors generally and of related tax matters affecting investors generally, but do not purport to furnish information in the level of detail or with the attention to an investor’s specific tax circumstances that would be provided by an investor’s own tax advisor.  Accordingly, each investor is encouraged to consult its own tax advisors with regard to the tax consequences to it of investing in REMIC Certificates.
 
If an entity electing to be treated as a REMIC fails to comply with one or more of the ongoing requirements of the Code for such status during any taxable year, the Code provides that the entity will not be treated as a REMIC for such year and thereafter.  In that event, such entity may be taxable as a corporation under Treasury regulations, and the related REMIC Certificates may not be accorded the status or given the tax treatment described below.  Although the Code authorizes the Treasury Department to issue regulations providing relief in the event of an inadvertent termination of REMIC status, no such regulations have been issued.  Any such relief, moreover, may be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of the trust fund’s income for the period in which the requirements for such status are not satisfied.  The Pooling and Servicing Agreement with respect to each REMIC will include provisions designed to maintain the trust fund’s status as a REMIC under the REMIC Provisions.  It is not anticipated that the status of any trust fund as a REMIC will be inadvertently terminated.
 
Characterization of Investments in REMIC Certificates.  In general, unless otherwise provided in the related prospectus supplement, the REMIC Certificates will be “real estate assets” within the meaning of Section 856(c)(5)(B) of the Code and assets described in Section 7701(a)(19)(C) of the Code in the same proportion that the assets of the REMIC underlying such certificates would be so treated.  However, to the extent that the REMIC assets constitute mortgages on property not used for residential or certain other prescribed purposes, the REMIC Certificates will not be treated as assets qualifying under Section 7701(a)(19)(C).  Moreover, if 95% or more of the assets of the REMIC qualify for any of the foregoing characterizations at all times during a calendar year, the REMIC Certificates will qualify for the corresponding status in their entirety for that calendar year.  Interest (including original issue discount) on the REMIC Regular Certificates and income allocated to the REMIC Residual Certificates will be interest described in Section 856(c)(3)(B) of the Code to the extent that such certificates are treated as “real estate assets” within the meaning of Section 856(c)(5)(B) of the Code.  In addition, except as otherwise provided in the applicable prospectus supplement, the REMIC Regular Certificates will be “qualified mortgages” for a REMIC within the meaning of Section 860G(a)(3) of the Code.  The determination as to the percentage of the REMIC’s assets that constitute assets described in the foregoing sections of the Code will be made with respect to each calendar quarter based on the average adjusted basis of each category of the assets held by the REMIC during such calendar quarter.  The REMIC Administrator will report those determinations to certificateholders in the manner and at the times required by applicable Treasury regulations.
 
Tiered REMIC Structures.  For certain series of REMIC Certificates, two or more separate elections may be made to treat designated portions of the related trust fund as REMICs for federal income tax purposes.  As to each such series of REMIC Certificates, in the opinion of counsel to the depositor, assuming compliance with all provisions of the related Pooling and Servicing Agreement, the Tiered REMICs will each qualify as a REMIC and the REMIC Certificates issued by the Tiered REMICs, will be considered to evidence ownership of REMIC Regular Certificates or REMIC Residual Certificates in the related REMIC within the meaning of the REMIC Provisions.
 
Solely for purposes of determining whether the REMIC Certificates will be “real estate assets” within the meaning of Section 856(c)(5)(B) of the Code and “loans secured by an interest in real property” under Section 7701(a)(19)(C) of the Code, and whether the income on such certificates is interest described in Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one REMIC.
 
 
Taxation of Owners of REMIC Regular Certificates.
 
General.  Except as otherwise stated in this discussion, REMIC Regular Certificates will be treated for federal income tax purposes as newly-issued debt instruments issued by the REMIC and not as ownership interests in the
 
 
-107-

 
 
REMIC or its assets.  Moreover, holders of REMIC Regular Certificates that otherwise report income under a cash method of accounting will be required to report income with respect to REMIC Regular Certificates under an accrual method.
 
Original Issue Discount.  Certain REMIC Regular Certificates may be issued with “original issue discount” within the meaning of Section 1273(a) of the Code.  Any holders of REMIC Regular Certificates issued with original issue discount generally will be required to include original issue discount in income as it accrues, in accordance with the “constant yield” method described below, in advance of the receipt of the cash attributable to such income.  In addition, Section 1272(a)(6) of the Code provides special rules applicable to REMIC Regular Certificates and certain other debt instruments issued with original issue discount.  The following discussion is based in part on the OID Regulations and in part on provisions of the Tax Reform Act of 1986.
 
The Code requires that a reasonable prepayment assumption be used with respect to mortgage loans held by a REMIC in computing the accrual of original issue discount on REMIC Regular Certificates issued by that REMIC, and that adjustments be made in the amount and rate of accrual of such discount to reflect differences between the actual prepayment rate and the prepayment assumption.  The prepayment assumption is to be determined in a manner prescribed in Treasury regulations; however, those regulations have not been issued.  The Committee Report indicates that the regulations will provide that the prepayment assumption used with respect to a REMIC Regular Certificate must be the same as that used in pricing the initial offering of such REMIC Regular Certificate.  The Prepayment Assumption used in reporting original issue discount for each series of REMIC Regular Certificates will be consistent with this standard and will be disclosed in the related prospectus supplement.  However, neither the depositor nor any other person will make any representation that the mortgage loans will in fact prepay at a rate conforming to the Prepayment Assumption or at any other rate.
 
The original issue discount, if any, on a REMIC Regular Certificate will be the excess of its stated redemption price at maturity over its issue price.  The issue price of a particular class of REMIC Regular Certificates will be the first cash price at which a substantial amount of REMIC Regular Certificates of that class is sold (excluding sales to bond houses, brokers and underwriters).  Although unclear under the OID Regulations, the depositor intends to treat the issue price of a class of REMIC Regular Certificates as to which less than a substantial amount of such class of REMIC Regular Certificates is sold for cash on or prior to the Closing Date as the fair market value of such class on the Closing Date.  Under the OID Regulations, the stated redemption price of a REMIC Regular Certificate is equal to the total of all payments to be made on such Certificate other than “qualified stated interest”.  “Qualified stated interest” is interest that is unconditionally payable at least annually (during the entire term of the instrument) at a single fixed rate, or, as discussed below under “Variable Rate REMIC Regular Certificates”, at a qualified variable rate.
 
If the accrued interest to be paid on the first Distribution Date is computed with respect to a period that begins prior to the Closing Date, a portion of the purchase price paid for a REMIC Regular Certificate will reflect such accrued interest.  In such cases, information returns provided to the certificateholders and the IRS will be based on the position that the portion of the purchase price paid for the interest accrued with respect to periods prior to the Closing Date is treated as part of the overall cost of such REMIC Regular Certificate (and not as a separate asset the cost of which is recovered entirely out of interest received on the next Distribution Date) and that portion of the interest paid on the first Distribution Date in excess of interest accrued for a number of days corresponding to the number of days from the Closing Date to the first Distribution Date should be included in the stated redemption price of such REMIC Regular Certificate.  However, the OID Regulations state that all or some portion of such accrued interest may be treated as a separate asset the cost of which is recovered entirely out of interest paid on the first Distribution Date.  It is unclear how an election to do so would be made under the OID Regulations and whether such an election could be made unilaterally by a certificateholder.
 
Notwithstanding the general definition of original issue discount, original issue discount on a REMIC Regular Certificate will be considered to be de minimis if it is less than 0.25% of the stated redemption price of the REMIC Regular Certificate multiplied by its weighted average maturity.  For this purpose, the weighted average maturity of the REMIC Regular Certificate is computed as the sum of the amounts determined, as to each payment included in the stated redemption price of such REMIC Regular Certificate, by multiplying (i) the number of complete years (rounding down for partial years) from the issue date until such payment is expected to be made (presumably taking into account the Prepayment Assumption) by (ii) a fraction, the numerator of which is the amount of the payment, and the denominator of which is the stated redemption price at maturity of such REMIC Regular Certificate.  Under
 
 
-108-

 
 
the OID Regulations, original issue discount of only a de minimis amount (other than de minimis original issue discount attributable to a so-called “teaser” interest rate or an initial interest holiday) will be included in income as each payment of stated principal is made, based on the product of the total amount of such de minimis original issue discount and a fraction, the numerator of which is the amount of such principal payment and the denominator of which is the outstanding stated principal amount of the REMIC Regular Certificate.  The OID Regulations also would permit a certificateholder to elect to accrue de minimis original issue discount into income currently based on a constant yield method.  See “—Market Discount” below for a description of such election under the OID Regulations.
 
If original issue discount on a REMIC Regular Certificate is in excess of a de minimis amount, the holder of such certificate must include in ordinary gross income the sum of the “daily portions” of original issue discount for each day during its taxable year on which it held such REMIC Regular Certificate, including the purchase date but excluding the disposition date.  In the case of an original holder of a REMIC Regular Certificate, the daily portions of original issue discount will be determined as follows.
 
As to each “accrual period”, that is, unless otherwise stated in the related prospectus supplement, each period that begins on a date that corresponds to a Distribution Date (or in the case of the first such period, begins on the Closing Date) and ends on the day preceding the immediately following Distribution Date, a calculation will be made of the portion of the original issue discount that accrued during such accrual period.  The portion of original issue discount that accrues in any accrual period will equal the excess, if any, of (1) the sum of (a) the present value, as of the end of the accrual period, of all of the distributions remaining to be made on the REMIC Regular Certificate, if any, in future periods and (b) the distributions made on such REMIC Regular Certificate during the accrual period of amounts included in the stated redemption price, over (2) the adjusted issue price of such REMIC Regular Certificate at the beginning of the accrual period.  The present value of the remaining distributions referred to in the preceding sentence will be calculated (1) assuming that distributions on the REMIC Regular Certificate will be received in future periods based on the mortgage loans being prepaid at a rate equal to the Prepayment Assumption, (2) using a discount rate equal to the original yield to maturity of the certificate and (3) taking into account events (including actual prepayments) that have occurred before the close of the accrual period.  For these purposes, the original yield to maturity of the certificate will be calculated based on its issue price and assuming that distributions on the certificate will be made in all accrual periods based on the mortgage loans being prepaid at a rate equal to the Prepayment Assumption.  The adjusted issue price of a REMIC Regular Certificate at the beginning of any accrual period will equal the issue price of such certificate, increased by the aggregate amount of original issue discount that accrued with respect to such certificate in prior accrual periods, and reduced by the amount of any distributions made on such REMIC Regular Certificate in prior accrual periods of amounts included in the stated redemption price.  The original issue discount accruing during any accrual period, computed as described above, will be allocated ratably to each day during the accrual period to determine the daily portion of original issue discount for such day.
 
A subsequent purchaser of a REMIC Regular Certificate that purchases such certificate at a cost (excluding any portion of such cost attributable to accrued qualified stated interest) less than its remaining stated redemption price will also be required to include in gross income the daily portions of any original issue discount with respect to such certificate.  However, each such daily portion will be reduced, if such cost is in excess of its “adjusted issue price”, in proportion to the ratio such excess bears to the aggregate original issue discount remaining to be accrued on such REMIC Regular Certificate.  The adjusted issue price of a REMIC Regular Certificate on any given day equals the sum of (1) the adjusted issue price (or, in the case of the first accrual period, the issue price) of such certificate at the beginning of the accrual period which includes such day and (2) the daily portions of original issue discount for all days during such accrual period prior to such day.
 
The Treasury has proposed regulations that create a special rule for accruing original issue discount on REMIC Regular Certificates providing for a delay between record and payment dates, such that the period over which original issue discount accrues coincides with the period over which the certificateholder’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, taxpayers 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 for periods of fewer than 32
 
 
-109-

 
 
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.
 
Variable Rate REMIC Regular Certificates.  REMIC Regular Certificates may provide for interest based on a variable rate.  Under the OID Regulations, interest is treated as payable at a variable rate if, generally, (1) the issue price does not exceed the original principal balance by more than a specified amount and (2) the interest compounds or is payable at least annually at current values of (a) one or more “qualified floating rates”, (b) a single fixed rate and one or more qualified floating rates, (c) a single “objective rate”, or (d) a single fixed rate and a single objective rate that is a “qualified inverse floating rate”.  A floating rate is a qualified floating rate if variations in the rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds, where the rate is subject to a fixed multiple that is greater than 0.65, but not more than 1.35.  The rate may also be increased or decreased by a fixed spread or subject to a fixed cap or floor, or a cap or floor that is not reasonably expected as of the issue date to affect the yield of the instrument significantly.  An objective rate (other than a qualified floating rate) is a rate that is determined using a single fixed formula and that is based on objective financial or economic information; provided that the information is not (1) within the control of the issuer or a related party or (2) unique to the circumstances of the issuer or a related party.  A qualified inverse floating rate is a rate equal to a fixed rate minus a qualified floating rate that inversely reflects contemporaneous variations in the cost of newly borrowed funds; an inverse floating rate that is not a qualified floating rate may nevertheless be an objective rate.  A class of REMIC Regular Certificates may be issued under this prospectus that does not have a variable rate under the OID Regulations, for example, a class that bears different rates at different times during the period it is outstanding so that it is considered significantly “front-loaded” or “back-loaded” within the meaning of the OID Regulations.  It is possible that a class of this type may be considered to bear “contingent interest” within the meaning of the OID Regulations.  The OID Regulations, as they relate to the treatment of contingent interest, are by their terms not applicable to REMIC Regular Certificates.  However, if final regulations dealing with contingent interest with respect to REMIC Regular Certificates apply the same principles as the OID Regulations, those regulations may lead to different timing of income inclusion than would be the case under the OID Regulations.  Furthermore, application of those principles could lead to the characterization of gain on the sale of contingent interest REMIC Regular Certificates as ordinary income.  Investors should consult their tax advisors regarding the appropriate treatment of any REMIC Regular Certificate that does not pay interest at a fixed rate or variable rate as described in this paragraph.
 
Under the REMIC Regulations, a REMIC Regular Certificate (1) bearing a rate that qualifies as a variable rate under the OID Regulations that is tied to current values of a variable rate (or the highest, lowest or average of two or more variable rates), including a rate based on the average cost of funds of one or more financial institutions, or a positive or negative multiple of a rate (plus or minus a specified number of basis points), or that represents a weighted average of rates on some or all of the mortgage loans, including a rate that is subject to one or more caps or floors, or (2) bearing one or more of these variable rates for one or more periods or one or more fixed rates for one or more periods, and a different variable rate or fixed rate for other periods qualifies as a regular interest in a REMIC.  Accordingly, unless otherwise indicated in the applicable prospectus supplement, REMIC Regular Certificates that qualify as regular interests under this rule will be treated in the same manner as obligations bearing a variable rate for original issue discount reporting purposes.
 
The amount of original issue discount with respect to a REMIC Regular Certificate bearing a variable rate of interest will accrue in the manner described above under “—Original Issue Discount” with the yield to maturity and future payments on that REMIC Regular Certificate generally to be determined by assuming that interest will be payable for the life of the REMIC Regular Certificate based on the initial rate for the relevant class.  Unless otherwise specified in the applicable prospectus supplement, variable interest will be treated as qualified stated interest, other than variable interest on an interest-only class, which will be treated as non-qualified stated interest includible in the stated redemption price at maturity.  Ordinary income reportable for any period will be adjusted based on subsequent changes in the applicable interest rate index.
 
Although unclear under the OID Regulations, unless required otherwise by applicable final regulations, REMIC Regular Certificates bearing an interest rate that is a weighted average of the net interest rates on mortgage loans having fixed or adjustable rates, will be treated as having qualified stated interest, except to the extent that initial “teaser” rates cause sufficiently “back-loaded” interest to create more than de minimis original issue discount.  The yield on those REMIC Regular Certificates for purposes of accruing original issue discount will be a hypothetical
 
 
-110-

 
 
fixed rate based on the fixed rates, in the case of fixed rate mortgage loans, and initial “teaser rates” followed by fully indexed rates, in the case of adjustable rate mortgage loans.  In the case of adjustable rate mortgage loans, the applicable index used to compute interest on the mortgage loans for the initial interest accrual period will be deemed to be in effect beginning with the period in which the first weighted average adjustment date occurring after the issue date occurs.  Adjustments will be made in each accrual period either increasing or decreasing the amount of ordinary income reportable to reflect the actual pass-through interest rate on the REMIC Regular Certificates.
 
Deferred Interest.  Under the OID Regulations, all interest on a REMIC Regular Certificate as to which there may be deferred interest is includible in the stated redemption price at maturity thereof.  Accordingly, any deferred interest that accrues with respect to a class of REMIC Regular Certificates may constitute income to the holders of such REMIC Regular Certificates prior to the time distributions of cash with respect to such deferred interest are made.
 
Market Discount.  A certificateholder that purchases a REMIC Regular Certificate at a market discount, that is, in the case of a REMIC Regular Certificate issued without original issue discount, at a purchase price less than its remaining stated principal amount, or in the case of a REMIC Regular Certificate issued with original issue discount, at a purchase price less than its adjusted issue price will recognize gain upon receipt of each distribution representing stated redemption price.  In particular, under Section 1276 of the Code such a certificateholder generally will be required to allocate the portion of each such distribution representing stated redemption price first to accrued market discount not previously included in income, and to recognize ordinary income to that extent.  A certificateholder may elect to include market discount in income currently as it accrues rather than including it on a deferred basis in accordance with the foregoing.  If made, such election will apply to all market discount bonds acquired by such certificateholder on or after the first day of the first taxable year to which such election applies.  In addition, the OID Regulations permit a certificateholder to elect to accrue all interest and discount (including de minimis market or original issue discount) in income as interest, and to amortize premium, based on a constant yield method.  If such an election were made with respect to a REMIC Regular Certificate with market discount, the certificateholder would be deemed to have made an election to include currently market discount in income with respect to all other debt instruments having market discount that such certificateholder acquires during the taxable year of the election or thereafter, including de minimis market discount discussed in the following paragraph.  Similarly, a certificateholder that made this election for a certificate that is acquired at a premium would be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that such certificateholder owns or acquires.  See “—Premium” below.  Each of these elections to accrue interest, discount and premium with respect to a certificate on a constant yield method or as interest would be irrevocable except with the approval of the IRS.
 
However, market discount with respect to a REMIC Regular Certificate will be considered to be de minimis for purposes of Section 1276 of the Code if such market discount is less than 0.25% of the remaining stated redemption price of such REMIC Regular Certificate multiplied by the number of complete years to maturity remaining after the date of its purchase.  In interpreting a similar rule with respect to original issue discount on obligations payable in installments, the OID Regulations refer to the weighted average maturity of obligations, and it is likely that the same rule will be applied with respect to market discount, presumably taking into account the Prepayment Assumption.  If market discount is treated as de minimis under this rule, it appears that the actual discount would be treated in a manner similar to original issue discount of a de minimis amount.  See “—Original Issue Discount” above.  Such treatment would result in discount being included in income at a slower rate than discount would be required to be included in income using the method described above.
 
Section 1276(b)(3) of the Code specifically authorizes the Treasury Department to issue regulations providing for the method for accruing market discount on debt instruments, the principal of which is payable in more than one installment.  Until regulations are issued by the Treasury Department, certain rules described in the Committee Report apply.  The Committee Report indicates that in each accrual period market discount on REMIC Regular Certificates should accrue, at the certificateholder’s option:  (1) on the basis of a constant yield method, (2) in the case of a REMIC Regular Certificate issued without original issue discount, in an amount that bears the same ratio to the total remaining market discount as the stated interest paid in the accrual period bears to the total amount of stated interest remaining to be paid on the REMIC Regular Certificate as of the beginning of the accrual period, or (3) in the case of a REMIC Regular Certificate issued with original issue discount, in an amount that bears the same ratio to the total remaining market discount as the original issue discount accrued in the accrual period bears to the
 
 
-111-

 
 
total original issue discount remaining on the REMIC Regular Certificate at the beginning of the accrual period.  Moreover, the Prepayment Assumption used in calculating the accrual of original issue discount is also used in calculating the accrual of market discount.  Because the regulations referred to in this paragraph have not been issued, it is not possible to predict what effect such regulations might have on the tax treatment of a REMIC Regular Certificate purchased at a discount in the secondary market.
 
To the extent that REMIC Regular Certificates provide for monthly or other periodic distributions throughout their term, the effect of these rules may be to require market discount to be includible in income at a rate that is not significantly slower than the rate at which such discount would accrue if it were original issue discount.  Moreover, in any event a holder of a REMIC Regular Certificate generally will be required to treat a portion of any gain on the sale or exchange of such certificate as ordinary income to the extent of the market discount accrued to the date of disposition under one of the foregoing methods, less any accrued market discount previously reported as ordinary income.
 
Further, under Section 1277 of the Code a holder of a REMIC Regular Certificate may be required to defer a portion of its interest deductions for the taxable year attributable to any indebtedness incurred or continued to purchase or carry a REMIC Regular Certificate purchased with market discount.  For these purposes, the de minimis rule referred to above applies.  Any such deferred interest expense would not exceed the market discount that accrues during such taxable year and is, in general, allowed as a deduction not later than the year in which such market discount is includible in income.  If such holder elects to include market discount in income currently as it accrues on all market discount instruments acquired by such holder in that taxable year or thereafter, the interest deferral rule described above will not apply.
 
Premium.  A REMIC Regular Certificate purchased at a cost (excluding any portion of such cost attributable to accrued qualified stated interest) greater than its remaining stated redemption price will be considered to be purchased at a premium.  The holder of such a REMIC Regular Certificate may elect under Section 171 of the Code to amortize such premium under the constant yield method over the life of the certificate.  If made, such an election will apply to all debt instruments having amortizable bond premium that the holder owns or subsequently acquires.  Amortizable premium will be treated as an offset to interest income on the related debt instrument, rather than as a separate interest deduction.  The OID Regulations also permit certificateholders to elect to include all interest, discount and premium in income based on a constant yield method, further treating the certificateholder as having made the election to amortize premium generally.  See “—Market Discount” above.  Although final Treasury regulations issued under Section 171 of the Code do not by their terms apply to prepayable obligations such as REMIC Regular Certificates, the Committee Report states that the same rules that apply to accrual of market discount (which rules will require use of a Prepayment Assumption in accruing market discount with respect to REMIC Regular Certificates without regard to whether such certificates have original issue discount) will also apply in amortizing bond premium.
 
Sale, Exchange, Redemption or Retirement.  If a holder of a REMIC Regular Certificate sells or exchanges a REMIC Regular Certificate, or such REMIC Regular Certificate is redeemed or retired, such certificateholder will recognize gain or loss equal to the difference, if any, between the amount realized and its adjusted basis in the REMIC Regular Certificate.  The adjusted basis of a REMIC Regular Certificate generally will equal the cost of the REMIC Regular Certificate to the seller, increased by any original issue discount or market discount previously included in the seller’s gross income with respect to the REMIC Regular Certificate and reduced by amounts included in the stated redemption price at maturity of the REMIC Regular Certificate that were previously received by the seller, by any amortized premium and by any recognized losses on the REMIC Regular Certificate.  Similarly, a holder who receives payment that is part of the stated redemption price at maturity of a REMIC Regular Certificate will recognize gain equal to the excess, if any, of the amount of the payment over an allocable portion of the holder’s adjusted basis in the REMIC Regular Certificate.  A holder of a REMIC Regular Certificate who receives a final payment that is less than the certificateholder’s adjusted basis in the REMIC Regular Certificate will generally recognize less.
 
Except as described above with respect to market discount, and except as provided in this paragraph, any gain or loss on the sale or exchange of a REMIC Regular Certificate realized by an investor who holds the REMIC Regular Certificate as a capital asset will be capital gain or loss and will be long term, or short term depending on whether the REMIC Regular Certificate has been held for the applicable capital gain holding period (currently more than one year).  Such gain will be treated as ordinary income (i) if the REMIC Regular Certificate is held as part of a
 
 
-112-

 
 
“conversion transaction” as defined in Code Section 1258(c), up to the amount of interest that would have accrued on the REMIC Regular Certificateholder’s net investment in the conversion transaction at 120% of the appropriate applicable Federal rate under Code Section 1274(d) in effect at the time the taxpayer entered into the transaction minus any amount previously treated as ordinary income with respect to any prior disposition of property that was held as a part of the transaction, (ii) in the case of a non-corporate taxpayer, to the extent the taxpayer has made an election under Code Section 163(d)(4) to have net capital gains taxed as investment income at ordinary rates, or (iii) to the extent that the gain does not exceed the excess, if any, of (a) the amount that would have been includible in the gross income of the holder if its yield on the REMIC Regular Certificate were 110% of the applicable Federal rate as of the date of purchase, over (b) the amount of income actually includible in the gross income of the holder with respect to the REMIC Regular Certificate.  In addition, gain or loss recognized from the sale of a REMIC Regular Certificate by certain banks or thrift institutions will be treated as ordinary income or loss pursuant to Code Section 582(c).  Generally, short term capital gains of certain non corporate taxpayers are subject to the same tax rate as the ordinary income of those taxpayers for property held for not more than one year, and long term capital gains of those taxpayers are subject to a lower maximum tax rate than ordinary income for those taxpayers for property held for more than one year.  The maximum tax rate for corporations is the same with respect to both ordinary income and capital gains.
 
Realized Losses.  Under Section 166 of the Code, both corporate holders of the REMIC Regular Certificates and non-corporate holders of the REMIC Regular Certificates that acquire such certificates in connection with a trade or business should be allowed to deduct, as ordinary losses, any losses sustained during a taxable year in which their certificates become wholly or partially worthless as the result of one or more realized losses on the mortgage loans.  However, it appears that a non-corporate holder that does not acquire a REMIC Regular Certificate in connection with a trade or business will not be entitled to deduct a loss under Section 166 of the Code until such holder’s certificate becomes wholly worthless (i.e., until its Certificate Balance has been reduced to zero) and that the loss will be characterized as a short-term capital loss.
 
Each holder of a REMIC Regular Certificate will be required to accrue interest and original issue discount with respect to such certificate, without giving effect to any reductions in distributions attributable to defaults or delinquencies on the mortgage loans or the Underlying Certificates until it can be established that any such reduction ultimately will not be recoverable.  As a result, the amount of taxable income reported in any period by the holder of a REMIC Regular Certificate could exceed the amount of economic income actually realized by the holder in such period.  Although the holder of a REMIC Regular Certificate eventually will recognize a loss or reduction in income attributable to previously accrued and included income that, as the result of a realized loss, ultimately will not be realized, the law is unclear with respect to the timing and character of such loss or reduction in income.
 
 
Taxation of Owners of REMIC Residual Certificates.
 
General.  Although a REMIC is a separate entity for federal income tax purposes, a REMIC generally is not subject to entity-level taxation, except with regard to prohibited transactions and certain other transactions.  See “—Prohibited Transactions Tax and Other Taxes” below.  Rather, the taxable income or net loss of a REMIC is generally taken into account by the holder of the REMIC Residual Certificates.  Accordingly, the REMIC Residual Certificates will be subject to tax rules that differ significantly from those that would apply if the REMIC Residual Certificates were treated for federal income tax purposes as direct ownership interests in the mortgage loans or as debt instruments issued by the REMIC.
 
A REMIC Residual Certificateholder generally will be required to report its daily portion of the taxable income or, subject to the limitations noted in this discussion, the net loss of the REMIC for each day during a calendar quarter that such holder owned such REMIC Residual Certificate.  For this purpose, the taxable income or net loss of the REMIC will be allocated to each day in the calendar quarter ratably using a “30 days per month/90 days per quarter/360 days per year” convention unless otherwise disclosed in the related prospectus supplement.  The daily amounts so allocated will then be allocated among the REMIC Residual Certificateholders in proportion to their respective ownership interests on such day.  Any amount included in the gross income or allowed as a loss of any REMIC Residual Certificateholder by virtue of this paragraph will be treated as ordinary income or loss.  The taxable income of the REMIC will be determined under the rules described below in “—Taxable Income of the REMIC” and will be taxable to the REMIC Residual Certificateholders without regard to the timing or amount of cash distributions by the REMIC until the REMIC’s termination.  Ordinary income derived from REMIC Residual
 
 
-113-

 
 
Certificates will be “portfolio income” for purposes of the taxation of taxpayers subject to limitations under Section 469 of the Code on the deductibility of “passive losses”.
 
A holder of a REMIC Residual Certificate that purchased such certificate from a prior holder of such certificate also will be required to report on its federal income tax return amounts representing its daily share of the taxable income (or net loss) of the REMIC for each day that it holds such REMIC Residual Certificate.  Those daily amounts generally will equal the amounts of taxable income or net loss determined as described above.  The Committee Report indicates that certain modifications of the general rules may be made, by regulations, legislation or otherwise to reduce (or increase) the income of a REMIC Residual Certificateholder that purchased such REMIC Residual Certificate from a prior holder of such certificate at a price greater than (or less than) the adjusted basis (as defined below) such REMIC Residual Certificate would have had in the hands of an original holder of such certificate.  The REMIC Regulations, however, do not provide for any such modifications.
 
The amount of income REMIC Residual Certificateholders will be required to report (or the tax liability associated with such income) may exceed the amount of cash distributions received from the REMIC for the corresponding period.  Consequently, REMIC Residual Certificateholders should have other sources of funds sufficient to pay any federal income taxes due as a result of their ownership of REMIC Residual Certificates or unrelated deductions against which income may be offset, subject to the rules relating to “excess inclusions” and “noneconomic” residual interests discussed below.  The fact that the tax liability associated with the income allocated to REMIC Residual Certificateholders may exceed the cash distributions received by such REMIC Residual Certificateholders for the corresponding period may significantly adversely affect such REMIC Residual Certificateholders’ after-tax rate of return.  Such disparity between income and distributions may not be offset by corresponding losses or reductions of income attributable to the REMIC Residual Certificateholder until subsequent tax years and, then, may not be completely offset due to changes in the Code, tax rates or character of the income or loss.
 
Taxable Income of the REMIC.  The taxable income of the REMIC will equal the income from the mortgage loans (including interest, market discount and, if applicable, original issue discount and less premium) and other assets of the REMIC plus any cancellation of indebtedness income due to the allocation of realized losses to REMIC Regular Certificates, less the deductions allowed to the REMIC for interest (including original issue discount and reduced by any premium on issuance) on the REMIC Regular Certificates (and any other class of REMIC Certificates constituting “regular interests” in the REMIC not offered hereby), amortization of any premium on the mortgage loans, bad debt losses with respect to the mortgage loans and, except as described below, for servicing, administrative and other expenses.
 
For purposes of determining its taxable income, the REMIC will have an initial aggregate basis in its assets equal to the sum of the issue prices of all REMIC Certificates (or, if a class of REMIC Certificates is not sold initially, such class’s fair market value).  Such aggregate basis will be allocated among the mortgage loans and the other assets of the REMIC in proportion to their respective fair market values.  The issue price of any REMIC Certificates offered hereby will be determined in the manner described above under “—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount”.  The issue price of a REMIC Certificate received in exchange for an interest in the mortgage loans or other property will equal the fair market value of such interests in the mortgage loans or other property.  Accordingly, if one or more classes of REMIC Certificates are retained initially rather than sold, the REMIC Administrator may be required to estimate the fair market value of such interests in order to determine the basis of the REMIC in the mortgage loans and other property held by the REMIC.
 
The method of accrual by the REMIC of original issue discount income and market discount income with respect to mortgage loans that it holds will be equivalent to the method for accruing original issue discount income for holders of REMIC Regular Certificates (that is, under the constant yield method taking into account the Prepayment Assumption), but without regard to the de minimis rule applicable to REMIC Regular Certificates.  However, a REMIC that acquires loans at a market discount must include such market discount in income currently, as it accrues, on a constant yield basis.  See “—Taxation of Owners of REMIC Regular Certificates” above, which describes a method for accruing such discount income that is analogous to that required to be used by a REMIC as to mortgage loans with market discount that it holds.
 
A mortgage loan will be deemed to have been acquired with discount (or premium) to the extent that the REMIC’s basis in that mortgage loan, determined as described in the preceding paragraph, is less than (or greater
 
 
-114-

 
 
than) its stated redemption price.  Any such discount will be includible in the income of the REMIC as it accrues, in advance of receipt of the cash attributable to such income, under a method similar to the method described above for accruing original issue discount on the REMIC Regular Certificates.  It is anticipated that each REMIC will elect under Section 171 of the Code to amortize any premium on the mortgage loans.  Premium on any mortgage loan to which such election applies may be amortized under a constant yield method, presumably taking into account a Prepayment Assumption.  Further, such an election would not apply to any mortgage loan originated on or before September 27, 1985.  Instead, premium on such a mortgage loan should be allocated among the principal payments thereon and be deductible by the REMIC as those payments become due or upon the prepayment of such mortgage loan.
 
A REMIC will be allowed deductions for interest (including original issue discount) on the REMIC Regular Certificates (including any other class of REMIC Certificates constituting “regular interests” in the REMIC not offered hereby) equal to the deductions that would be allowed if the REMIC Regular Certificates (including any other class of REMIC Certificates constituting “regular interests” in the REMIC not offered hereby) were indebtedness of the REMIC.  Original issue discount will be considered to accrue for this purpose as described above under “—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount”, except that the de minimis rule and the adjustments for subsequent holders of REMIC Regular Certificates (including any other class of REMIC Certificates constituting “regular interests” in the REMIC not offered hereby) described in that section will not apply.
 
If a class of REMIC Regular Certificates is issued with an Issue Premium, the REMIC will have additional income in each taxable year in an amount equal to the portion of the Issue Premium that is considered to be amortized or repaid in that year.  Although the matter is not entirely certain, it is likely that Issue Premium would be amortized under a constant yield method in a manner analogous to the method of accruing original issue discount described above under “—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount”.
 
As a general rule, the taxable income of a REMIC will be determined in the same manner as if the REMIC were an individual having the calendar year as its taxable year and using the accrual method of accounting.  However, no item of income, gain, loss or deduction allocable to a prohibited transaction will be taken into account.  See “—Prohibited Transactions Tax and Other Taxes” below.  Further, the limitation on miscellaneous itemized deductions imposed on individuals by Section 67 of the Code (which allows such deductions only to the extent they exceed in the aggregate two percent of the taxpayer’s adjusted gross income) will not be applied at the REMIC level so that the REMIC will be allowed deductions for servicing, administrative and other non-interest expenses in determining its taxable income.  All such expenses will be allocated as a separate item to the holders of REMIC Certificates, subject to the limitation of Section 67 of the Code.  See “—Possible Pass-Through of Miscellaneous Itemized Deductions” below.  If the deductions allowed to the REMIC exceed its gross income for a calendar quarter, such excess will be the net loss for the REMIC for that calendar quarter.
 
Basis Rules, Net Losses and Distributions.  The adjusted basis of a REMIC Residual Certificate will be equal to the amount paid for such REMIC Residual Certificate, increased by amounts included in the income of the REMIC Residual Certificateholder and decreased (but not below zero) by distributions made, and by net losses allocated, to such REMIC Residual Certificateholder.
 
A REMIC Residual Certificateholder is not allowed to take into account any net loss for any calendar quarter to the extent such net loss exceeds such REMIC Residual Certificateholder’s adjusted basis in its REMIC Residual Certificate as of the close of such calendar quarter (determined without regard to such net loss).  Any loss that is not currently deductible by reason of this limitation may be carried forward indefinitely to future calendar quarters and, subject to the same limitation, may be used only to offset income from the REMIC Residual Certificate.  The ability of REMIC Residual Certificateholders to deduct net losses may be subject to additional limitations under the Code, as to which REMIC Residual Certificateholders should consult their tax advisors.
 
Any distribution on a REMIC Residual Certificate will be treated as a nontaxable return of capital to the extent it does not exceed the holder’s adjusted basis in such REMIC Residual Certificate.  To the extent a distribution on a REMIC Residual Certificate exceeds such adjusted basis, it will be treated as gain from the sale of such REMIC Residual Certificate.  Holders of certain REMIC Residual Certificates may be entitled to distributions early in the term of the related REMIC under circumstances in which their bases in such
 
 
-115-

 
 
REMIC Residual Certificates will not be sufficiently large that such distributions will be treated as nontaxable returns of capital.  Their bases in such REMIC Residual Certificates will initially equal the amount paid for such REMIC Residual Certificates and will be increased by their allocable shares of taxable income of the REMIC.  However, such bases increases may not occur until the end of the calendar quarter, or perhaps the end of the calendar year, with respect to which such REMIC taxable income is allocated to the REMIC Residual Certificateholders.  To the extent such REMIC Residual Certificateholders’ initial bases are less than the distributions to such REMIC Residual Certificateholders, and increases in such initial bases either occur after such distributions or (together with their initial bases) are less than the amount of such distributions, gain will be recognized to such REMIC Residual Certificateholders on such distributions and will be treated as gain from the sale of their REMIC Residual Certificates.
 
The effect of these rules is that a REMIC Residual Certificateholder may not amortize its basis in a REMIC Residual Certificate, but may only recover its basis through distributions, through the deduction of any net losses of the REMIC or upon the sale of its REMIC Residual Certificate.  See “—Sales of REMIC Certificates” below.  For a discussion of possible modifications of these rules that may require adjustments to income of a holder of a REMIC Residual Certificate other than an original holder in order to reflect any difference between the cost of such REMIC Residual Certificate to such REMIC Residual Certificateholder and the adjusted basis such REMIC Residual Certificate would have in the hands of an original holder see “—Taxation of Owners of REMIC Residual Certificates—General” above.
 
Regulations have been issued addressing the federal income tax treatment of “inducement fees” received by transferees of non-economic residual interests.  These regulations require inducement fees to be included in income over a period reasonably related to the period in which the related residual interest is expected to generate taxable income or net loss to its holder.  Under two safe harbor methods, inducement fees are permitted to be included in income (i) in the same amounts and over the same period that the taxpayer uses for financial reporting purposes; provided that such period is not shorter than the period the REMIC is expected to generate taxable income or (ii) ratably over the remaining anticipated weighted average life of all the regular and residual interests issued by the REMIC, determined based on actual distributions projected as remaining to be made on such interests under the Prepayment Assumption.  If the holder of a non-economic residual interest sells or otherwise disposes of the non-economic residual interest, any unrecognized portion of the inducement fee is required to be taken into account at the time of the sale of disposition.  Prospective purchasers of the REMIC Residual Certificates should consult with their tax advisors regarding the effect of these regulations.
 
Excess Inclusions.  Any “excess inclusions” with respect to a REMIC Residual Certificate will be subject to federal income tax in all events.  In general, the “excess inclusions” with respect to a REMIC Residual Certificate for any calendar quarter will be the excess, if any, of (1) the daily portions of REMIC taxable income allocable to such REMIC Residual Certificate over (2) the sum of the “daily accruals” (as defined below) for each day during such quarter that such REMIC Residual Certificate was held by such REMIC Residual Certificateholder.  The daily accruals of a REMIC Residual Certificateholder will be determined by allocating to each day during a calendar quarter its ratable portion of the product of the “adjusted issue price” of the REMIC Residual Certificate at the beginning of the calendar quarter and 120% of the “long-term Federal rate” in effect on the Closing Date.  For this purpose, the adjusted issue price of a REMIC Residual Certificate as of the beginning of any calendar quarter will be equal to the issue price of the REMIC Residual Certificate, increased by the sum of the daily accruals for all prior quarters and decreased (but not below zero) by any distributions made with respect to such REMIC Residual Certificate before the beginning of such quarter.  The issue price of a REMIC Residual Certificate is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of the REMIC Residual Certificates were sold.  The “long-term Federal rate” is an average of current yields on Treasury securities with a remaining term of greater than nine years, computed and published monthly by the IRS.
 
For REMIC Residual Certificateholders, an excess inclusion (1) will not be permitted to be offset by deductions, losses or loss carryovers from other activities, (2) will be treated as “unrelated business taxable income” to an otherwise tax-exempt organization and (3) will not be eligible for any rate reduction or exemption under any applicable tax treaty with respect to the 30% United States withholding tax imposed on distributions to REMIC Residual Certificateholders that are foreign investors.  See, however, “—Foreign Investors in REMIC Certificates” below.
 
In the case of any REMIC Residual Certificates held by a real estate investment trust, the aggregate excess inclusions with respect to such REMIC Residual Certificates, reduced (but not below zero) by the real estate investment trust taxable income (within the meaning of Section 857(b)(2) of the Code, excluding any net capital
 
 
-116-

 
 
gain), will be allocated among the shareholders of such trust in proportion to the dividends received by such shareholders from such trust, and any amount so allocated will be treated as an excess inclusion with respect to a REMIC Residual Certificate as if held directly by such shareholder.  Treasury regulations yet to be issued could apply a similar rule to regulated investment companies, common trust funds and certain cooperatives; the REMIC Regulations currently do not address this subject.
 
In addition, under temporary and final Treasury regulations, effective August 1, 2006, a U.S. partnership that holds any REMIC Residual Certificates and has a partner who is a non-U.S. person (in contravention of the Pooling and Servicing Agreement) will be required to pay withholding tax in respect of any "excess inclusion" income allocable to such foreign partner, even if no cash distributions are made to such partner.
 
Noneconomic REMIC Residual Certificates.  Under the REMIC Regulations, transfers of “noneconomic” REMIC Residual Certificates will be disregarded for all federal income tax purposes if “a significant purpose of the transfer was to enable the transferor to impede the assessment or collection of tax”.  If such transfer is disregarded, the purported transferor will continue to remain liable for any taxes due with respect to the income on such “noneconomic” REMIC Residual Certificate.  The REMIC Regulations provide that a REMIC Residual Certificate is noneconomic unless, based on the Prepayment Assumption and on any required or permitted clean up calls, or required liquidation provided for in the REMIC’s organizational documents, (1) the present value of the expected future distributions (discounted using the “applicable Federal rate” for obligations whose term ends on the close of the last quarter in which excess inclusions are expected to accrue with respect to the REMIC Residual Certificate, which rate is computed and published monthly by the IRS) on the REMIC Residual Certificate equals at least the present value of the expected tax on the anticipated excess inclusions, and (2) the transferor reasonably expects that the transferee will receive distributions with respect to the REMIC Residual Certificate at or after the time the taxes accrue on the anticipated excess inclusions in an amount sufficient to satisfy the accrued taxes.  The REMIC Regulations explain that a significant purpose to impede the assessment or collection of tax exists if the transferor, at the time of the transfer, either knew or should have known that the transferee would be unwilling or unable to pay taxes due on its share of the taxable income of the REMIC.  Under the REMIC Regulations, a safe harbor is provided if (1) the transferor conducted, at the time of the transfer, a reasonable investigation of the financial condition of the transferee and found that the transferee historically had paid its debts as they came due and found no significant evidence to indicate that the transferee would not continue to pay its debts as they came due in the future, (2) the transferee represents to the transferor that it understands that, as the holder of the noneconomic residual interest, the transferee may incur tax liabilities in excess of cash flows generated by the interest and that the transferee intends to pay taxes associated with holding the residual interest as they become due and (3) the transferee represents to the transferor that it will not cause income from the REMIC Residual Certificate to be attributable to a foreign permanent establishment or fixed base (within the meaning of an applicable income tax treaty) of the transferee or any other person.  Accordingly, all transfers of REMIC Residual Certificates that may constitute noneconomic residual interests will be subject to certain restrictions under the terms of the related Pooling and Servicing Agreement that are intended to reduce the possibility of any such transfer being disregarded.  Such restrictions will require the transferee to provide an affidavit to certify to the matters in the preceding sentence.  The transferor must have no actual knowledge or reason to know that those statements are false.
 
In addition to the three conditions set forth above, the REMIC Regulations contain a fourth requirement that must be satisfied in one of two alternative ways for the transferor to have a “safe harbor” against ignoring the transfer:
 
(1) the present value of the anticipated tax liabilities associated with holding the noneconomic residual interest not exceed the sum of:
 
(i) the present value of any consideration given to the transferee to acquire the interest;
 
(ii) the present value of the expected future distributions on the interest; and
 
(iii) the present value of the anticipated tax savings associated with holding the interest as the REMIC generates losses.
 
For purposes of the computations under this “minimum transfer price” alternative, the transferee is assumed to pay tax at the highest rate of tax specified in Section 11(b)(1) of the Code (currently 35%) or, in certain circumstances,
 
 
-117-

 
 
the minimum tax rate specified in Section 55 of the Code.  Further, present values generally are computed using a discount rate equal to the short-term Federal rate set forth in Section 1274(d) of the Code for the month of the transfer and the compounding period used by the transferee.  The Fourth requirement may also be satisfied by the following second alternative method:
 
(2) (i) the transferee must be a domestic “C” corporation (other than a corporation exempt from taxation of a regulated investment company or real estate investment trust) that meets certain gross and net asset tests (generally, $100 million of gross assets and $10 million of net assets for the current year and the two preceding fiscal years);
 
(ii) the transferee must agree in writing that it will transfer the REMIC Residual Certificate only to a subsequent transferee that is an eligible corporation and meets the requirements for a safe harbor transfer; and
 
(iii) the facts and circumstances known to the transferor on or before the date of the transfer must not reasonably indicate that the taxes associated with ownership of the REMIC Residual Certificate will not be paid by the transferee.
 
The related prospectus supplement will disclose whether offered REMIC Residual Certificates may be considered “noneconomic” residual interests under the REMIC Regulations; provided, however, any disclosure that a REMIC Residual Certificate will not be considered “noneconomic” will be based upon certain assumptions, and the depositor will make no representation that a REMIC Residual Certificate will not be considered “noneconomic” for purposes of the above-described rules.  See “—Foreign Investors in REMIC Certificates” below for additional restrictions applicable to transfers of certain REMIC Residual Certificates to foreign persons.
 
Mark-to-Market Rules.  The IRS has issued regulations, relating to the requirement that a securities dealer mark to market securities held for sale to customers.  This mark-to-market requirement applies to all securities owned by a dealer, except to the extent that the dealer has specifically identified a security as held for investment.  The mark-to-market regulations provide that for purposes of this requirement, a REMIC Residual Certificate will not be treated as a security and thus generally may not be marked to market.
 
Possible Pass-Through of Miscellaneous Itemized Deductions.  Fees and expenses of a REMIC generally will be allocated to certain types of holders of the related REMIC Residual Certificates.  The applicable Treasury regulations indicate, however, in the case of a REMIC that is similar to a single class grantor trust, all or a portion of such fees and expenses should be allocated to such types of holders of the related REMIC Regular Certificates.  Unless otherwise stated in the related prospectus supplement, such fees and expenses will be allocated to the related REMIC Residual Certificates in their entirety and not to the holders of the related REMIC Regular Certificates.
 
With respect to REMIC Residual Certificates or REMIC Regular Certificates the holders of which receive an allocation of fees and expenses in accordance with the preceding discussion, if any holder thereof is an individual, estate or trust, or a “pass-through entity” beneficially owned by one or more individuals, estates or trusts, (1) an amount equal to such individual’s, estate’s or trust’s share of such fees and expenses will be added to the gross income of such holder and (2) such individual’s, estate’s or trust’s share of such fees and expenses will be treated as a miscellaneous itemized deduction allowable subject to the limitation of Section 67 of the Code, which permits such deductions only to the extent they exceed in the aggregate 2% of a taxpayer’s adjusted gross income.  In addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for an individual whose adjusted gross income exceeds a specified amount will be reduced by the lesser of (1) 3% of the excess of the individual’s adjusted gross income over such amount or (2) 80% of the amount of itemized deductions otherwise allowable for the taxable year.  Under current law, the applicable limitation is reduced to zero for taxable years beginning in 2010. For taxable years beginning after December 31, 2012 the overall limitation on itemized deductions will be fully reinstated.  The amount of additional taxable income reportable by REMIC Certificateholders that are subject to the limitations of either Section 67 or Section 68 of the Code may be substantial.  Furthermore, in determining the alternative minimum taxable income of such a holder of a REMIC Certificate that is an individual, estate or trust, or a “pass-through entity” beneficially owned by one or more individuals, estates or trusts, no deduction will be allowed for such holder’s allocable portion of servicing fees and other miscellaneous itemized deductions of the REMIC, even though an amount equal to the amount of such fees and other deductions will be included in such holder’s gross income.  Accordingly, such REMIC Certificates may
 
 
-118-

 
 
not be appropriate investments for individuals, estates, or trusts, or pass-through entities beneficially owned by one or more individuals, estates or trusts.  Such prospective investors are encouraged to consult with their tax advisors prior to making an investment in such certificates.
 
Sales of REMIC Certificates.  If a REMIC Certificate is sold, the selling certificateholder will recognize gain or loss equal to the difference between the amount realized on the sale and its adjusted basis in the REMIC Certificate.  The adjusted basis of a REMIC Regular Certificate generally will equal the cost of such REMIC Regular Certificate to such certificateholder, increased by income reported by such certificateholder with respect to such REMIC Regular Certificate (including original issue discount and market discount income) and reduced (but not below zero) by distributions on such REMIC Regular Certificate received by such certificateholder and by any amortized premium.  The adjusted basis of a REMIC Residual Certificate will be determined as described above under “—Taxation of Owners of REMIC Residual Certificates—Basis Rules, Net Losses and Distributions”.  Except as provided in the following four paragraphs, any such gain or loss will be capital gain or loss; provided such REMIC Certificate is held as a capital asset (generally, property held for investment) within the meaning of Section 1221 of the Code.  The Code as of the date of this prospectus provides for tax rates for individuals on ordinary income that are higher than the tax rates for long-term capital gains of individuals for property held for more than one year.  No such rate differential exists for corporations.  In addition, the distinction between a capital gain or loss and ordinary income or loss remains relevant for other purposes.
 
Gain from the sale of a REMIC Regular Certificate that might otherwise be a capital gain will be treated as ordinary income to the extent such gain does not exceed the excess, if any, of (1) the amount that would have been includible in the seller’s income with respect to such REMIC Regular Certificate assuming that income had accrued thereon at a rate equal to 110% of the “applicable Federal rate” (generally, a rate based on an average of current yields on treasury securities having a maturity comparable to that of the certificate based on the application of the Prepayment Assumption to such certificate), determined as of the date of purchase of such REMIC Regular Certificate, over (2) the amount of ordinary income actually includible in the seller’s income prior to such sale.  In addition, gain recognized on the sale of a REMIC Regular Certificate by a seller who purchased such REMIC Regular Certificate at a market discount will be taxable as ordinary income in an amount not exceeding the portion of such discount that accrued during the period such REMIC Certificate was held by such holder, reduced by any market discount included in income under the rules described above under “—Taxation of Owners of REMIC Regular Certificates—Market Discount” and “—Premium”.
 
REMIC Certificates will be “evidences of indebtedness” within the meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from the sale of a REMIC Certificate by a bank or thrift institution to which such Section applies will be ordinary income or loss.
 
A portion of any gain from the sale of a REMIC Regular Certificate that might otherwise be capital gain may be treated as ordinary income to the extent that such Certificate is held as part of a “conversion transaction” within the meaning of Section 1258 of the Code.  A conversion transaction generally is one in which the taxpayer has taken two or more positions in the same or similar property that reduce or eliminate market risk, if substantially all of the taxpayer’s return is attributable to the time value of the taxpayer’s net investment in such transaction.  The amount of gain so realized in a conversion transaction that is recharacterized as ordinary income generally will not exceed the amount of interest that would have accrued on the taxpayer’s net investment at 120% of the appropriate “applicable Federal rate” at the time the taxpayer enters into the conversion transaction, subject to appropriate reduction for prior inclusion of interest and other ordinary income items from the transaction.
 
Finally, a taxpayer may elect to have net capital gain taxed at ordinary income rates rather than capital gains rates in order to include such net capital gain in total net investment income for the taxable year, for purposes of the rule that limits the deduction of interest on indebtedness incurred to purchase or carry property held for investment to a taxpayer’s net investment income.
 
Except as may be provided in Treasury Department regulations yet to be issued, if the seller of a REMIC Residual Certificate reacquires such REMIC Residual Certificate, or acquires any other residual interest in a REMIC or any similar interest in a “taxable mortgage pool” (as defined in Section 7701(i) of the Code) during the period beginning six months before, and ending six months after, the date of such sale, such sale will be subject to the “wash sale” rules of Section 1091 of the Code.  In that event, any loss realized by the REMIC Residual
 
 
-119-

 
 
Certificateholder on the sale will not be deductible, but instead will be added to such REMIC Residual Certificateholder’s adjusted basis in the newly-acquired asset.
 
Prohibited Transactions Tax and Other Taxes.  The Code imposes a tax on REMICs equal to 100% of the net income derived from “prohibited transactions”.  In general, subject to certain specified exceptions a prohibited transaction means the disposition of a mortgage loan, the receipt of income from a source other than a mortgage loan or certain other permitted investments, the receipt of compensation for services, or gain from the disposition of an asset purchased with the payments on the mortgage loans for temporary investment pending distribution on the REMIC Certificates.  It is not anticipated that any REMIC will engage in any prohibited transactions in which it would recognize a material amount of net income.
 
In addition, certain contributions to a REMIC made after the day on which the REMIC issues all of its interests could result in the imposition of a tax on the REMIC equal to 100% of the value of the contributed property.  Each Pooling and Servicing Agreement will include provisions designed to prevent the acceptance of any contributions that would be subject to such tax.
 
REMICs also are subject to federal income tax at the highest corporate rate on “net income from foreclosure property”, determined by reference to the rules applicable to real estate investment trusts.  “Net income from foreclosure property” generally means gain from the sale of a foreclosure property that is inventory property and gross income from foreclosure property other than qualifying rents and other qualifying income for a real estate investment trust.  As provided in each Pooling and Servicing Agreement, a REMIC may recognize “net income from foreclosure property” subject to federal income tax to the extent that the REMIC Administrator determines that such method of operation will result in a greater after-tax return to the trust fund than any other method of operation.
 
Unless otherwise disclosed in the related prospectus supplement, it is not anticipated that any material state or local income or franchise tax will be imposed on any REMIC.
 
Unless otherwise stated in the related prospectus supplement, and to the extent permitted by then applicable laws, any prohibited transactions tax or contributions tax will be borne by the related REMIC administrator, master servicer, special servicer, manager or trustee, in any case out of its own funds; provided that such person has sufficient assets to do so; and provided, further, that such tax arises out of a breach of such person’s obligations under the related Pooling and Servicing Agreement and in respect of compliance with applicable laws and regulations.  Any such tax not borne by a REMIC administrator, a master servicer, special servicer, manager or trustee will be charged against the related trust fund resulting in a reduction in amounts payable to holders of the related REMIC Certificates.
 
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain Organizations.  If a REMIC Residual Certificate is transferred to a “disqualified organization” (as defined below), a tax would be imposed in an amount (determined under the REMIC Regulations) equal to the product of (1) the present value (discounted using the “applicable Federal rate” for obligations whose term ends on the close of the last quarter in which excess inclusions are expected to accrue with respect to the REMIC Residual Certificate) of the total anticipated excess inclusions with respect to such REMIC Residual Certificate for periods after the transfer and (2) the highest marginal federal income tax rate applicable to corporations.  The anticipated excess inclusions must be determined as of the date that the REMIC Residual Certificate is transferred and must be based on events that have occurred up to the time of such transfer, the Prepayment Assumption and any required or permitted clean up calls or required liquidation provided for in the REMIC’s organizational documents.  Such a tax generally would be imposed on the transferor of the REMIC Residual Certificate, except that where such transfer is through an agent for a disqualified organization, the tax would instead be imposed on such agent.  However, a transferor of a REMIC Residual Certificate would in no event be liable for such tax with respect to a transfer if the transferee furnishes to the transferor an affidavit that the transferee is not a disqualified organization and, as of the time of the transfer, the transferor does not have actual knowledge that such affidavit is false.  Moreover, an entity will not qualify as a REMIC unless there are reasonable arrangements designed to ensure that (1) residual interests in such entity are not held by disqualified organizations and (2) information necessary for the application of the tax described herein will be made available.  Restrictions on the transfer of REMIC Residual Certificates and certain other provisions that are intended to meet this requirement will be included in each Pooling and Servicing Agreement, and will be discussed in any prospectus supplement relating to the offering of any REMIC Residual Certificate.
 
 
-120-

 
 
In addition, if a “pass-through entity” (as defined below) includes in income excess inclusions with respect to a REMIC Residual Certificate, and a disqualified organization is the record holder of an interest in such entity, then a tax will be imposed on such entity equal to the product of (1) the amount of excess inclusions on the REMIC Residual Certificate that are allocable to the interest in the pass-through entity held by such disqualified organization and (2) the highest marginal federal income tax rate imposed on corporations.  A pass-through entity will not be subject to this tax for any period, however, if each record holder of an interest in such pass-through entity furnishes to such pass-through entity (1) such holder’s social security number and a statement under penalties of perjury that such social security number is that of the record holder or (2) a statement under penalties of perjury that such record holder is not a disqualified organization.
 
If an “electing large partnership” holds a REMIC Residual Certificate, all interests in the electing large partnership are treated as held by disqualified organizations for purposes of the tax imposed upon a pass-through entity by Section 860E(e) of the Code.  An exception to this tax, otherwise available to a pass-through entity that is furnished certain affidavits by record holders of interests in the entity and that does not know such affidavits are false, is not available to an electing large partnership.
 
For these purposes, a “disqualified organization” means (1) the United States, any State or political subdivision thereof, any foreign government, any international organization, or any agency or instrumentality of the foregoing (but would not include instrumentalities described in Section 168(h)(2)(D) of the Code or the Federal Home Loan Mortgage Corporation), (2) any organization (other than a cooperative described in Section 521 of the Code) that is exempt from federal income tax, unless it is subject to the tax imposed by Section 511 of the Code or (3) any organization described in Section 1381(a)(2)(C) of the Code.  In addition, a “pass-through entity” means any regulated investment company, real estate investment trust, trust, partnership or certain other entities described in Section 860E(e)(6) of the Code.  In addition, a person holding an interest in a pass-through entity as a nominee for another person will, with respect to such interest, be treated as a pass-through entity.  For these purposes, an “electing large partnership” means a partnership (other than a service partnership or certain commodity pools) having more than 100 members that has elected to apply certain simplified reporting provisions under the Code.
 
Termination.  A REMIC will terminate immediately after the Distribution Date following receipt by the REMIC of the final payment in respect of the mortgage loans or upon a sale of the REMIC’s assets following the adoption by the REMIC of a plan of complete liquidation.  The last distribution on a REMIC Regular Certificate will be treated as a payment in retirement of a debt instrument.  In the case of a REMIC Residual Certificate, if the last distribution on such REMIC Residual Certificate is less than the REMIC Residual Certificateholder’s adjusted basis in such Certificate, such REMIC Residual Certificateholder should (but may not) be treated as realizing a loss equal to the amount of such difference, and such loss may be treated as a capital loss.
 
Reporting and Other Administrative Matters.  Solely for purposes of the administrative provisions of the Code, the REMIC will be treated as a partnership and REMIC Residual Certificateholders will be treated as partners.  Unless otherwise stated in the related prospectus supplement, the holder of the largest percentage interest in a class of REMIC Residual Certificates will be the “tax matters person” with respect to the related REMIC, and the REMIC administrator will file REMIC federal income tax returns on behalf of the related REMIC, and will be designated as and will act as agent of, and attorney-in-fact for, the tax matters person with respect to the REMIC in all respects.
 
As the tax matters person, the REMIC administrator, subject to certain notice requirements and various restrictions and limitations, generally will have the authority to act on behalf of the REMIC and the REMIC Residual Certificateholders in connection with the administrative and judicial review of items of income, deduction, gain or loss of the REMIC, as well as the REMIC’s classification.  REMIC Residual Certificateholders generally will be required to report such REMIC items consistently with their treatment on the related REMIC’s tax return and may in some circumstances be bound by a settlement agreement between the REMIC Administrator, as tax matters person, and the IRS concerning any such REMIC item.  Adjustments made to the REMIC tax return may require a REMIC Residual Certificateholder to make corresponding adjustments on its return, and an audit of the REMIC’s tax return, or the adjustments resulting from such an audit, could result in an audit of a REMIC Residual Certificateholder’s return.  Any person that holds a REMIC Residual Certificate as a nominee for another person may be required to furnish to the related REMIC, in a manner to be provided in Treasury Department regulations, the name and address of such person and other information.
 
 
-121-

 
 
Reporting of interest income, including any original issue discount, with respect to REMIC Regular Certificates is required annually, and may be required more frequently under Treasury Department regulations.  These information reports generally are required to be sent to individual holders of REMIC Regular Interests and the IRS; holders of REMIC Regular Certificates that are corporations, trusts, securities dealers and certain other non-individuals will be provided interest and original issue discount income information and the information set forth in the following paragraph upon request in accordance with the requirements of the applicable regulations.  The information must be provided by the later of 30 days after the end of the quarter for which the information was requested, or two weeks after the receipt of the request.  Reporting with respect to REMIC Residual Certificates, including income, excess inclusions, investment expenses and relevant information regarding qualification of the REMIC’s assets will be made as required under the Treasury Department regulations, generally on a quarterly basis.
 
As applicable, the REMIC Regular Certificate information reports will include a statement of the adjusted issue price of the REMIC Regular Certificate at the beginning of each accrual period.  In addition, the reports will include information required by regulations with respect to computing the accrual of any market discount.  Because exact computation of the accrual of market discount on a constant yield method would require information relating to the holder’s purchase price that the REMIC may not have, such regulations only require that information pertaining to the appropriate proportionate method of accruing market discount be provided.  See “—Taxation of Owners of REMIC Regular Certificates—Market Discount”.
 
Unless otherwise specified in the related prospectus supplement, the responsibility for complying with the foregoing reporting rules will be borne by the REMIC administrator.
 
Backup Withholding with Respect to REMIC Certificates.  Payments of interest and principal, and proceeds from the sale of REMIC Certificates, may be subject to the “backup withholding tax” at a rate of 28% (increasing to 31% after 2012) unless the recipient of such payments is a U.S. Person and provides IRS Form W-9 with the correct taxpayer identification number; is a non-U.S. Person and provides IRS Form W-8BEN identifying the non-U.S. Person and stating that the beneficial owner is not a U.S. Person; or can be treated as an exempt recipient within the meaning of Treasury Regulations Section 1.6049-4(c)(1)(ii).  Any amounts deducted and withheld from a distribution to a recipient would be allowed as a credit against such recipient’s federal income tax.  Information reporting requirements may also apply regardless of whether withholding is required.  Furthermore, certain penalties may be imposed by the IRS on a recipient of payments that is required to supply information but that does not do so in the proper manner.
 
Foreign Investors in REMIC Certificates.  A REMIC Regular Certificateholder that is not a U.S. Person and is not subject to federal income tax as a result of any direct or indirect connection to the United States in addition to its ownership of a REMIC Regular Certificate will not, unless otherwise disclosed in the related prospectus supplement, be subject to United States federal income or withholding tax in respect of a distribution on a REMIC Regular Certificate; provided that the holder provides appropriate documentation.  The appropriate documentation includes Form W-8BEN, if the non-U.S. Person is a corporation or individual eligible for the benefits of the portfolio interest exemption or an exemption based on a treaty; Form W-8ECI if the non-U.S. Person is eligible for an exemption on the basis of its income from the REMIC Regular Certificate being effectively connected to a United States trade or business; Form W-8BEN or Form W-8IMY if the non-U.S. Person is a trust, depending on whether such trust is classified as the beneficial owner of the REMIC Regular Certificate; and Form W-8IMY, with supporting documentation as specified in the Treasury Regulations, required to substantiate exemptions from withholding on behalf of its partners, if the non-U.S. Person is a partnership.  An intermediary (other than a partnership) must provide Form W-8IMY, revealing all required information, including its name, address, taxpayer identification number, the country  under the laws of which it is created, and certification that it is not acting for its own account.  A “qualified intermediary” must certify that it has provided, or will provide, a withholding statement as required under Treasury Regulations Section 1.1441-1(e)(5)(v), but need not disclose the identity of its account holders on its Form W-8IMY, and may certify its account holders’ status without including each beneficial owner’s certification.  A non-”qualified intermediary” must additionally certify that it has provided, or will provide, a withholding statement that is associated with the appropriate Forms W-8 and W-9 required to substantiate exemptions from withholding on behalf of its beneficial owners.  The term “intermediary” means a person acting as custodian, a broker, nominee or otherwise as an agent for the beneficial owner of a REMIC Regular Certificate.  A “qualified intermediary” is generally a foreign financial institution or clearing organization or a non-U.S. branch or office of a U.S. financial institution or clearing organization that is a party to a withholding agreement with the IRS.
 
 
 
-122-

 
 
It is possible that the IRS may assert that the foregoing tax exemption should not apply with respect to a REMIC Regular Certificate held by a REMIC Residual Certificateholder that owns directly or indirectly a 10% or greater interest in the REMIC Residual Certificates.  If the holder does not qualify for exemption, distributions of interest, including distributions in respect of accrued original issue discount, to such holder may be subject to a tax rate of 30%.
 
In addition, the foregoing rules will not apply to exempt a United States shareholder of a controlled foreign corporation from taxation on such United States shareholder’s allocable portion of the interest income received by such controlled foreign corporation.
 
Further, it appears that a REMIC Regular Certificate would not be included in the estate of a nonresident alien individual and would not be subject to United States estate taxes.  However, certificateholders who are nonresident alien individuals should consult their tax advisors concerning this question.
 
Unless otherwise stated in the related prospectus supplement, transfers of REMIC Residual Certificates to investors that are not United States Persons will be prohibited under the related Pooling and Servicing Agreement.  See “—Noneconomic REMIC Residual Certificates” above concerning the disregard of certain transfers having tax avoidance potential, and see “—Excess Inclusions” regarding the withholding obligations of U .S. partnerships having non-U.S. persons as partners.
 
Legislation enacted in March 2010 requires “foreign financial institutions” to enter into an agreement with the Treasury requiring them to obtain and to disclose to the Treasury information about certain investors. The legislation also requires certain other foreign entities to obtain and disclose information about their investors to the relevant withholding agent who would, in turn, be required to provide such information to the IRS.  The legislation imposes a 30% withholding tax on certain payments of income and capital gains to an applicable foreign entity (which includes foreign financial institutions as well as certain other financial entities) if that foreign entity fails to enter into the agreement otherwise fails to comply with the requirements of the legislation.  The legislation is expected to be effective for payments made after December 31, 2014, but would not apply to obligations, such as any REMIC Regular Certificates outstanding at any time before March 18, 2012.  If, with respect to any REMIC Regular Certificates issued on or after March 18, 2012, a Non-U.S. Person that is subject to the legislation fails to comply with the requirements of the legislation, payments with respect to a REMIC Regular Certificate held by such Non-U.S. Person would be subject to a 30% withholding tax.  Non-U.S. Persons should consult their tax advisors regarding their requirements with respect to the new legislation.
 
Grantor Trust Funds
 
Classification of Grantor Trust Funds.  With respect to each series of Grantor Trust Certificates, in the opinion of counsel to the depositor for such series, assuming compliance with all provisions of the related Pooling and Servicing Agreement, the related Grantor Trust Fund will be classified as a grantor trust under subpart E, part I of subchapter J of the Code and not as a partnership or an association taxable as a corporation.  The following general discussion of the anticipated federal income tax consequences of the purchase, ownership and disposition of Grantor Trust Certificates, to the extent it relates to matters of law or legal conclusions with respect thereto, represents the opinion of counsel to the depositor for the applicable series as specified in the related prospectus supplement, subject to any qualifications set forth in this prospectus.  In addition, counsel to the depositor has prepared or reviewed the statements in this prospectus under the heading “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—Grantor Trust Funds”, and is of the opinion that such statements are correct in all material respects.  Such statements are intended as an explanatory discussion of the possible effects of the classification of any Grantor Trust Fund as a grantor trust for federal income tax purposes on investors generally and of related tax matters affecting investors generally, but do not purport to furnish information in the level of detail or with the attention to an investor’s specific tax circumstances that would be provided by an investor’s own tax advisor.  Accordingly, each investor is advised to consult its own tax advisors with regard to the tax consequences to it of investing in Grantor Trust Certificates.
 
 
Characterization of Investments in Grantor Trust Certificates.
 
Grantor Trust Fractional Interest Certificates.  In the case of Grantor Trust Fractional Interest Certificates, unless otherwise disclosed in the related prospectus supplement, counsel to the depositor will deliver an opinion
 
 
-123-

 
 
that, in general, Grantor Trust Fractional Interest Certificates will represent interests in (1) “loans . . . secured by an interest in real property” within the meaning of Section 7701(a)(19)(C)(v) of the Code when owned by a “domestic building and loan association”; (2) “obligation[s] (including any participation or certificate of beneficial ownership therein) which . . . [are] principally secured by an interest in real property” within the meaning of Section 860G(a)(3) of the Code to the extent that the assets of the Grantor Trust Fund consist of “qualified mortgages” within the meaning of Section 860G(a)(3) of the Code; and (3) “real estate assets” within the meaning of Section 856(c)(5)(B) of the Code to the extent that the assets of the Grantor Trust Fund are qualified assets.  In addition, counsel to the depositor will deliver an opinion that interest on Grantor Trust Fractional Interest Certificates will to the same extent be considered “interest on obligations secured by mortgages on real property or on interests in real property” within the meaning of Section 856(c)(3)(B) of the Code.
 
Grantor Trust Strip Certificates.  Even if Grantor Trust Strip Certificates evidence an interest in a Grantor Trust Fund consisting of mortgage loans that are “loans . . . secured by an interest in real property” within the meaning of Section 7701(a)(19)(C)(v) of the Code and “real estate assets” within the meaning of Section 856(c)(5)(B) of the Code, and the interest on which is “interest on obligations secured by mortgages on real property” within the meaning of Section 856(c)(3)(B) of the Code, it is unclear whether the Grantor Trust Strip Certificates, and the income therefrom, will be so characterized.  However, the policies underlying such sections (namely, to encourage or require investments in mortgage loans by thrift institutions and real estate investment trusts) may suggest that such characterization is appropriate.  Counsel to the depositor will not deliver any opinion on these questions.  Prospective purchasers to which such characterization of an investment in Grantor Trust Strip Certificates is material should consult their tax advisors regarding whether the Grantor Trust Strip Certificates, and the income therefrom, will be so characterized.
 
The Grantor Trust Strip Certificates will be “obligation[s] (including any participation or Certificate of beneficial ownership therein) which . . . [are] principally secured by an interest in real property” within the meaning of Section 860G(a)(3)(A) of the Code.
 
 
Taxation of Owners of Grantor Trust Fractional Interest Certificates.
 
General.  Holders of a particular series of Grantor Trust Fractional Interest Certificates generally will be required to report on their federal income tax returns their shares of the entire income from the mortgage loans (including amounts used to pay reasonable servicing fees and other expenses) and will be entitled to deduct their shares of any such reasonable servicing fees and other expenses.  Because of stripped interests, market or original issue discount, or premium, the amount includible in income on account of a Grantor Trust Fractional Interest Certificate may differ significantly from the amount distributable thereon representing interest on the mortgage loans.  Under Section 67 of the Code, an individual, estate or trust holding a Grantor Trust Fractional Interest Certificate directly or through certain pass-through entities will be allowed a deduction for such reasonable servicing fees and expenses only to the extent that the aggregate of such holder’s miscellaneous itemized deductions exceeds two percent of such holder’s adjusted gross income.  In addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for an individual whose adjusted gross income exceeds a specified amount will be reduced by the lesser of (1) 3% of the excess of the individual’s adjusted gross income over such amount or (2) 80% of the amount of itemized deductions otherwise allowable for the taxable year.  The amount of additional taxable income reportable by holders of Grantor Trust Fractional Interest Certificates who are subject to the limitations of either Section 67 or Section 68 of the Code may be substantial.  Further, certificateholders (other than corporations) subject to the alternative minimum tax may not deduct miscellaneous itemized deductions in determining such holder’s alternative minimum taxable income.  Under tax legislation enacted in 2001, this limitation on deductions under Section 68 is reduced to zero for tax years beginning in 2010 and, under current law, will be reinstated in full for tax years beginning in 2014.  Although it is not entirely clear, it appears that in transactions in which multiple classes of Grantor Trust Certificates (including Grantor Trust Strip Certificates) are issued, such fees and expenses should be allocated among the classes of Grantor Trust Certificates using a method that recognizes that each such class benefits from the related services.  In the absence of statutory or administrative clarification as to the method to be used, it currently is intended to base information returns or reports to the IRS and certificateholders on a method that allocates such expenses among classes of Grantor Trust Certificates with respect to each period based on the distributions made to each such class during that period.
 
 
-124-

 
 
The federal income tax treatment of Grantor Trust Fractional Interest Certificates of any series will depend on whether they are subject to the “stripped bond” rules of Section 1286 of the Code.  Grantor Trust Fractional Interest Certificates may be subject to those rules if (1) a class of Grantor Trust Strip Certificates is issued as part of the same series of certificates or (2) the depositor or any of its affiliates retains (for its own account or for purposes of resale) a right to receive a specified portion of the interest payable on a mortgage asset.  Further, the IRS has ruled that an unreasonably high servicing fee retained by a seller or servicer will be treated as a retained ownership interest in mortgages that constitutes a stripped coupon.  The related prospectus supplement will include information regarding servicing fees paid to a master servicer, a special servicer, any sub-servicer or their respective affiliates.
 
If Stripped Bond Rules Apply.  If the stripped bond rules apply, each Grantor Trust Fractional Interest Certificate will be treated as having been issued with “original issue discount” within the meaning of Section 1273(a) of the Code, subject, however, to the discussion below regarding the treatment of certain stripped bonds as market discount bonds and the discussion regarding de minimis market discount.  See “—Market Discount” below.  Under the stripped bond rules, the holder of a Grantor Trust Fractional Interest Certificate (whether a cash or accrual method taxpayer) will be required to report interest income from its Grantor Trust Fractional Interest Certificate for each month in an amount equal to the income that accrues on such Certificate in that month calculated under a constant yield method, in accordance with the rules of the Code relating to original issue discount.
 
The original issue discount on a Grantor Trust Fractional Interest Certificate will be the excess of such Certificate’s stated redemption price over its issue price.  The issue price of a Grantor Trust Fractional Interest Certificate as to any purchaser will be equal to the price paid by such purchaser of the Grantor Trust Fractional Interest Certificate.  The stated redemption price of a Grantor Trust Fractional Interest Certificate will be the sum of all payments to be made on such certificate, other than “qualified stated interest”, if any, as well as such certificate’s share of reasonable servicing fees and other expenses.  See “—If Stripped Bond Rules Do Not Apply” for a definition of “qualified stated interest”.  In general, the amount of such income that accrues in any month would equal the product of such holder’s adjusted basis in such Grantor Trust Fractional Interest Certificate at the beginning of such month (see “—Sales of Grantor Trust Certificates” below) and the yield of such Grantor Trust Fractional Interest Certificate to such holder.  Such yield would be computed as the rate (compounded based on the regular interval between payment dates) that, if used to discount the holder’s share of future payments on the mortgage loans, would cause the present value of those future payments to equal the price at which the holder purchased such certificate.  In computing yield under the stripped bond rules, a certificateholder’s share of future payments on the mortgage loans will not include any payments made in respect of any ownership interest in the mortgage loans retained by the depositor, the master servicer, the special servicer, any sub-servicer or their respective affiliates, but will include such certificateholder’s share of any reasonable servicing fees and other expenses.
 
Section 1272(a)(6) of the Code requires (1) the use of a reasonable prepayment assumption in accruing original issue discount and (2) adjustments in the accrual of original issue discount when prepayments do not conform to the prepayment assumption, with respect to certain categories of debt instruments, and regulations could be adopted applying those provisions to the Grantor Trust Fractional Interest Certificates.  It is unclear whether those provisions would be applicable to the Grantor Trust Fractional Interest Certificates or whether use of a reasonable prepayment assumption may be required or permitted without reliance on these rules.  It is also uncertain, if a prepayment assumption is used, whether the assumed prepayment rate would be determined based on conditions at the time of the first sale of the Grantor Trust Fractional Interest Certificate or, with respect to any holder, at the time of purchase of the Grantor Trust Fractional Interest Certificate by that holder.  Certificateholders are advised to consult their tax advisors concerning reporting original issue discount in general and, in particular, whether a prepayment assumption should be used in reporting original issue discount with respect to Grantor Trust Fractional Interest Certificates.
 
In the case of a Grantor Trust Fractional Interest Certificate acquired at a price equal to the principal amount of the mortgage loans allocable to such certificate, the use of a prepayment assumption generally would not have any significant effect on the yield used in calculating accruals of interest income.  In the case, however, of a Grantor Trust Fractional Interest Certificate acquired at a discount or premium (that is, at a price less than or greater than such principal amount, respectively), the use of a reasonable prepayment assumption would increase or decrease such yield, and thus accelerate or decelerate, respectively, the reporting of income.
 
If a prepayment assumption is not used, then when a mortgage loan prepays in full, the holder of a Grantor Trust Fractional Interest Certificate acquired at a discount or a premium generally will recognize ordinary income or loss equal to the difference between the portion of the prepaid principal amount of the mortgage loan that is
 
 
-125-

 
 
allocable to such certificate and the portion of the adjusted basis of such certificate that is allocable to such certificateholder’s interest in the mortgage loan.  If a prepayment assumption is used, it appears that no separate item of income or loss should be recognized upon a prepayment.  Instead, a prepayment should be treated as a partial payment of the stated redemption price of the Grantor Trust Fractional Interest Certificate and accounted for under a method similar to that described for taking account of original issue discount on REMIC Regular Certificates.  See “—REMICs—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount” above.  It is unclear whether any other adjustments would be required to reflect differences between an assumed prepayment rate and the actual rate of prepayments.
 
In the absence of statutory or administrative clarification, it is currently intended to base information reports or returns to the IRS and certificateholders in transactions subject to the stripped bond rules on a Prepayment Assumption that will be disclosed in the related prospectus supplement and on a constant yield computed using a representative initial offering price for each class of certificates.  However, neither the depositor nor any other person will make any representation that the mortgage loans will in fact prepay at a rate conforming to such Prepayment Assumption or any other rate and certificateholders should bear in mind that the use of a representative initial offering price will mean that such information returns or reports, even if otherwise accepted as accurate by the IRS, will in any event be accurate only as to the initial certificateholders of each series who bought at that price.
 
In light of the application of Section 1286 of the 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 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.
 
Under Treasury regulations Section 1.1286-1, certain stripped bonds are to be treated as market discount bonds and, accordingly, any purchaser of such a bond is to account for any discount on the bond as market discount rather than original issue discount.  This treatment only applies, however, if immediately after the most recent disposition of the bond by a person stripping one or more coupons from the bond and disposing of the bond or coupon (1) there is no original issue discount (or only a de minimis amount of original issue discount) or (2) the annual stated rate of interest payable on the original bond is no more than one percentage point lower than the gross interest rate payable on the original mortgage loan (before subtracting any servicing fee or any stripped coupon).  If interest payable on a Grantor Trust Fractional Interest Certificate is more than one percentage point lower than the gross interest rate payable on the mortgage loans, the related prospectus supplement will disclose that fact.  If the original issue discount or market discount on a Grantor Trust Fractional Interest Certificate determined under the stripped bond rules is less than 0.25% of the stated redemption price multiplied by the weighted average maturity of the mortgage loans, then such original issue discount or market discount will be considered to be de minimis.  Original issue discount or market discount of only a de minimis amount will be included in income in the same manner as de minimis original issue and market discount described in “—If Stripped Bond Rules Do Not Apply” and “—Market Discount” below.
 
If Stripped Bond Rules Do Not Apply.  Subject to the discussion below on original issue discount, if the stripped bond rules do not apply to a Grantor Trust Fractional Interest Certificate, the certificateholder will be required to report its share of the interest income on the mortgage loans in accordance with such certificateholder’s normal method of accounting.  The original issue discount rules will apply, even if the stripped bond rules do not apply, to a Grantor Trust Fractional Interest Certificate to the extent it evidences an interest in mortgage loans issued with original issue discount.
 
The original issue discount, if any, on the mortgage loans will equal the difference between the stated redemption price of such mortgage loans and their issue price.  For a definition of “stated redemption price”, see “—REMICs—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount” above.  In general, the issue price of a mortgage loan will be the amount received by the borrower from the lender under the terms of the mortgage loan, less any “points” paid by the borrower, and the stated redemption price of a mortgage loan will equal
 
 
-126-

 
 
its principal amount, unless the mortgage loan provides for an initial “teaser”, or below-market interest rate.  The determination as to whether original issue discount will be considered to be de minimis will be calculated using the same test as in the REMIC discussion.  See “—REMICs—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount” above.
 
In the case of mortgage loans bearing adjustable or variable interest rates, the related prospectus supplement will describe the manner in which such rules will be applied with respect to those mortgage loans by the trustee or master servicer, as applicable, in preparing information returns to the certificateholders and the IRS.
 
If original issue discount is in excess of a de minimis amount, all original issue discount with respect to a mortgage loan will be required to be accrued and reported in income each month, based on a constant yield.  The OID Regulations suggest that no prepayment assumption is appropriate in computing the yield on prepayable obligations issued with original issue discount.  In the absence of statutory or administrative clarification, it currently is not intended to base information reports or returns to the IRS and certificateholders on the use of a prepayment assumption in transactions not subject to the stripped bond rules.  However, Section 1272(a)(6) of the Code may require that a prepayment assumption be made in computing yield with respect to all mortgage-backed securities.  Certificateholders are advised to consult their own tax advisors concerning whether a prepayment assumption should be used in reporting original issue discount with respect to Grantor Trust Fractional Interest Certificates.  Certificateholders should refer to the related prospectus supplement with respect to each series to determine whether and in what manner the original issue discount rules will apply to mortgage loans in such series.
 
A purchaser of a Grantor Trust Fractional Interest Certificate that purchases such Grantor Trust Fractional Interest Certificate at a cost less than such certificate’s allocable portion of the aggregate remaining stated redemption price of the mortgage loans held in the related trust fund will also be required to include in gross income such certificate’s daily portions of any original issue discount with respect to such mortgage loans.  However, each such daily portion will be reduced, if the cost of such Grantor Trust Fractional Interest Certificate to such purchaser is in excess of such certificate’s allocable portion of the aggregate “adjusted issue prices” of the mortgage loans held in the related trust fund, approximately in proportion to the ratio such excess bears to such certificate’s allocable portion of the aggregate original issue discount remaining to be accrued on such mortgage loans.  The adjusted issue price of a mortgage loan on any given day equals the sum of (1) the adjusted issue price (or, in the case of the first accrual period, the issue price) of such mortgage loan at the beginning of the accrual period that includes such day and (2) the daily portions of original issue discount for all days during such accrual period prior to such day.  The adjusted issue price of a mortgage loan at the beginning of any accrual period will equal the issue price of such mortgage loan, increased by the aggregate amount of original issue discount with respect to such mortgage loan that accrued in prior accrual periods, and reduced by the amount of any payments made on such mortgage loan in prior accrual periods of amounts included in its stated redemption price.
 
Unless otherwise provided in the related prospectus supplement, the trustee or master servicer, as applicable, will provide to any holder of a Grantor Trust Fractional Interest Certificate such information as such holder may reasonably request from time to time with respect to original issue discount accruing on Grantor Trust Fractional Interest Certificates.  See “—Grantor Trust Reporting” below.
 
Market Discount.  If the stripped bond rules do not apply to a Grantor Trust Fractional Interest Certificate, a certificateholder may be subject to the market discount rules of Sections 1276 through 1278 of the Code to the extent an interest in a mortgage loan is considered to have been purchased at a “market discount”, that is, in the case of a mortgage loan issued without original issue discount, at a purchase price less than its remaining stated redemption price (as defined above), or in the case of a mortgage loan issued with original issue discount, at a purchase price less than its adjusted issue price (as defined above).  If market discount is in excess of a de minimis amount (as described below), the holder generally will be required to include in income in each month the amount of such discount that has accrued (under the rules described in the next paragraph) through such month that has not previously been included in income, but limited, in the case of the portion of such discount that is allocable to any mortgage loan, to the payment of stated redemption price on such mortgage loan that is received by (or, in the case of accrual basis certificateholders, due to) the trust fund in that month.  A certificateholder may elect to include market discount in income currently as it accrues (under a constant yield method based on the yield of the certificate to such holder) rather than including it on a deferred basis in accordance with the foregoing under rules similar to those described in “—REMICs—Taxation of Owners of REMIC Regular Certificates—Market Discount” above.
 
 
 
-127-

 
 
Section 1276(b)(3) of the Code authorized the Treasury Department to issue regulations providing for the method for accruing market discount on debt instruments, the principal of which is payable in more than one installment.  Until such time as regulations are issued by the Treasury Department, certain rules described in the Committee Report apply.  Under those rules, in each accrual period market discount on the mortgage loans should accrue, at the holder’s option:  (1) on the basis of a constant yield method, (2) in the case of a mortgage loan issued without original issue discount, in an amount that bears the same ratio to the total remaining market discount as the stated interest paid in the accrual period bears to the total stated interest remaining to be paid on the mortgage loan as of the beginning of the accrual period, or (3) in the case of a mortgage loan issued with original issue discount, in an amount that bears the same ratio to the total remaining market discount as the original issue discount accrued in the accrual period bears to the total original issue discount remaining at the beginning of the accrual period.  The prepayment assumption, if any, used in calculating the accrual of original issue discount is to be used in calculating the accrual of market discount.  The effect of using a prepayment assumption could be to accelerate the reporting of such discount income.  Because the regulations referred to in this paragraph have not been issued, it is not possible to predict what effect such regulations might have on the tax treatment of a mortgage loan purchased at a discount in the secondary market.
 
Because the mortgage loans will provide for periodic payments of stated redemption price, such discount may be required to be included in income at a rate that is not significantly slower than the rate at which such discount would be included in income if it were original issue discount.
 
Market discount with respect to mortgage loans may be considered to be de minimis and, if so, will be includible in income under de minimis rules similar to those described above in “—REMICs—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount” above within the exception that it is less likely that a prepayment assumption will be used for purposes of such rules with respect to the mortgage loans.
 
Further, under the rules described above in “—REMICs—Taxation of Owners of REMIC Regular Certificates—Market Discount”, any discount that is not original issue discount and exceeds a de minimis amount may require the deferral of interest expense deductions attributable to accrued market discount not yet includible in income, unless an election has been made to report market discount currently as it accrues.  This rule applies without regard to the origination dates of the mortgage loans.
 
Premium.  If a certificateholder is treated as acquiring the underlying mortgage loans at a premium, that is, at a price in excess of their remaining stated redemption price, such certificateholder may elect under Section 171 of the Code to amortize using a constant yield method the portion of such premium allocable to mortgage loans originated after September 27, 1985.  Amortizable premium is treated as an offset to interest income on the related debt instrument, rather than as a separate interest deduction.  However, premium allocable to mortgage loans originated before September 28, 1985 or to mortgage loans for which an amortization election is not made, should be allocated among the payments of stated redemption price on the mortgage loan and be allowed as a deduction as such payments are made (or, for a certificateholder using the accrual method of accounting, when such payments of stated redemption price are due).
 
It is unclear whether a prepayment assumption should be used in computing amortization of premium allowable under Section 171 of the Code.  If premium is not subject to amortization using a prepayment assumption and a mortgage loan prepays in full, the holder of a Grantor Trust Fractional Interest Certificate acquired at a premium should recognize a loss equal to the difference between the portion of the prepaid principal amount of the mortgage loan that is allocable to the certificate and the portion of the adjusted basis of the certificate that is allocable to the mortgage loan.  If a prepayment assumption is used to amortize such premium, it appears that such a loss would be unavailable.  Instead, if a prepayment assumption is used, a prepayment should be treated as a partial payment of the stated redemption price of the Grantor Trust Fractional Interest Certificate and accounted for under a method similar to that described for taking account of original issue discount on REMIC Regular Certificates.  See “—REMICs—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount” above.  It is unclear whether any other adjustments would be required to reflect differences between the prepayment assumption and the actual rate of prepayments.
 
Taxation of Owners of Grantor Trust Strip Certificates.  The “stripped coupon” rules of Section 1286 of the Code will apply to the Grantor Trust Strip Certificates.  Except as described above in “—If Stripped Bond Rules Apply”, no regulations or published rulings under Section 1286 of the Code have been issued and some uncertainty
 
 
-128-

 
 
exists as to how it will be applied to securities such as the Grantor Trust Strip Certificates.  Accordingly, holders of Grantor Trust Strip Certificates should consult their tax advisors concerning the method to be used in reporting income or loss with respect to such certificates.
 
The OID Regulations do not apply to “stripped coupons”, although they provide general guidance as to how the original issue discount sections of the Code will be applied.  In addition, the discussion below is subject to the discussion under “—Possible Application of Proposed Contingent Payment Rules” below and assumes that the holder of a Grantor Trust Strip Certificate will not own any Grantor Trust Fractional Interest Certificates.
 
Under the stripped coupon rules, it appears that original issue discount will be required to be accrued in each month on the Grantor Trust Strip Certificates based on a constant yield method.  In effect, each holder of Grantor Trust Strip Certificates would include as interest income in each month an amount equal to the product of such holder’s adjusted basis in such Grantor Trust Strip Certificate at the beginning of such month and the yield of such Grantor Trust Strip Certificate to such holder.  Such yield would be calculated based on the price paid for that Grantor Trust Strip Certificate by its holder and the payments remaining to be made thereon at the time of the purchase, plus an allocable portion of the servicing fees and expenses to be paid with respect to the mortgage loans.  See “—If Stripped Bond Rules Apply” above.
 
As noted above, Section 1272(a)(6) of the Code requires that a prepayment assumption be used in computing the accrual of original issue discount with respect to certain categories of debt instruments, and that adjustments be made in the amount and rate of accrual of such discount when prepayments do not conform to such prepayment assumption.  Regulations could be adopted applying those provisions to the Grantor Trust Strip Certificates.  It is unclear whether those provisions would be applicable to the Grantor Trust Strip Certificates or whether use of a prepayment assumption may be required or permitted in the absence of such regulations.  It is also uncertain, if a prepayment assumption is used, whether the assumed prepayment rate would be determined based on conditions at the time of the first sale of the Grantor Trust Strip Certificate or, with respect to any subsequent holder, at the time of purchase of the Grantor Trust Strip Certificate by that holder.
 
The accrual of income on the Grantor Trust Strip Certificates will be significantly slower if a prepayment assumption is permitted to be made than if yield is computed assuming no prepayments.  In the absence of statutory or administrative clarification, it currently is intended to base information returns or reports to the IRS and certificateholders on the Prepayment Assumption disclosed in the related prospectus supplement and on a constant yield computed using a representative initial offering price for each class of certificates.  However, neither the depositor nor any other person will make any representation that the mortgage loans will in fact prepay at a rate conforming to the Prepayment Assumption or at any other rate and certificateholders should bear in mind that the use of a representative initial offering price will mean that such information returns or reports, even if otherwise accepted as accurate by the IRS, will in any event be accurate only as to the initial certificateholders of each series who bought at that price.  Prospective purchasers of the Grantor Trust Strip Certificates are encouraged to consult their tax advisors regarding the use of the Prepayment Assumption.
 
It is unclear under what circumstances, if any, the prepayment of a mortgage loan will give rise to a loss to the holder of a Grantor Trust Strip Certificate.  If a Grantor Trust Strip Certificate is treated as a single instrument (rather than an interest in discrete mortgage loans) and the effect of prepayments is taken into account in computing yield with respect to such Grantor Trust Strip Certificate, it appears that no loss may be available as a result of any particular prepayment unless prepayments occur at a rate faster than the Prepayment Assumption.  However, if a Grantor Trust Strip Certificate is treated as an interest in discrete mortgage loans, or if the Prepayment Assumption is not used, then when a mortgage loan is prepaid, the holder of a Grantor Trust Strip Certificate should be able to recognize a loss equal to the portion of the adjusted issue price of the Grantor Trust Strip Certificate that is allocable to such mortgage loan.
 
Possible Application of Contingent Payment Rules.  The coupon stripping rules’ general treatment of stripped coupons is to regard them as newly issued debt instruments in the hands of each purchaser.  To the extent that payments on the Grantor Trust Strip Certificates would cease if the mortgage loans were prepaid in full, the Grantor Trust Strip Certificates could be considered to be debt instruments providing for contingent payments.  Under the OID Regulations, debt instruments providing for contingent payments are not subject to the same rules as debt instruments providing for noncontingent payments.  Treasury Department regulations have been promulgated regarding contingent payment debt instruments, but it appears that Grantor Trust Strip Certificates, due to their
 
 
-129-

 
 
similarity to other mortgage-backed securities (such as REMIC regular interests and debt instruments subject to Section 1272(a)(6) of the Code) that are expressly excepted from the application of such Regulations, may also be excepted from such regulations.  Like the OID Regulations, the contingent payment regulations do not specifically address securities, such as the Grantor Trust Strip Certificates, that are subject to the stripped bond rules of Section 1286 of the Code.
 
If the contingent payment rules similar to those under the OID Regulations were to apply, the holder of a Grantor Trust Strip Certificate would be required to apply a “noncontingent bond method”. Under the “noncontingent bond method”, the issuer of a Grantor Trust Strip Certificate determines a projected payment schedule.  Holders of Grantor Trust Strip Certificates are bound by the issuer’s projected payment schedule.  The projected payment schedule consists of all noncontingent payments and a projected amount for each contingent payment based on the comparable yield (as described below) of the Grantor Trust Strip Certificate.  The projected amount of each payment is determined so that the projected payment schedule reflects the projected yield.  The projected amount of each payment must reasonably reflect the relative expected values of the payments to be received by the holders of a Grantor Trust Strip Certificate.  The comparable yield referred to above is a rate that, as of the issue date, reflects the yield at which the issuer would issue a fixed rate debt instrument with terms and conditions similar to the contingent payment debt instrument, including general market conditions, the credit quality of the issuer, and the terms and conditions of the mortgage loans.  The holder of a Grantor Trust Strip Certificate would be required to include as interest income in each month the adjusted issue price of the Grantor Trust Strip Certificate at the beginning of the period multiplied by the comparable yield.
 
Certificateholders should consult their tax advisors concerning the possible application of the contingent payment rules to the Grantor Trust Strip Certificates.
 
Sales of Grantor Trust Certificates.  Any gain or loss, equal to the difference between the amount realized on the sale or exchange of a Grantor Trust Certificate and its adjusted basis, recognized on such sale or exchange of a Grantor Trust Certificate by an investor who holds such Grantor Trust Certificate as a capital asset, will be capital gain or loss, except to the extent of accrued and unrecognized market discount, which will be treated as ordinary income, and (in the case of banks and other financial institutions) except as provided under Section 582(c) of the Code.  The adjusted basis of a Grantor Trust Certificate generally will equal its cost, increased by any income reported by the seller (including original issue discount and market discount income) and reduced (but not below zero) by any previously reported losses, any amortized premium and by any distributions with respect to such Grantor Trust Certificate.  The Code as of the date of this prospectus generally provides for tax rates of non-corporate taxpayers on ordinary income that are higher than the rates on long-term capital gains (generally, property held for more than one year).  No such rate differential exists for corporations.  In addition, the distinction between a capital gain or loss and ordinary income or loss remains relevant for other purposes.
 
Gain or loss from the sale of a Grantor Trust Certificate may be partially or wholly ordinary and not capital in certain circumstances.  Gain attributable to accrued and unrecognized market discount will be treated as ordinary income, as will gain or loss recognized by banks and other financial institutions subject to Section 582(c) of the Code.  Furthermore, a portion of any gain that might otherwise be capital gain may be treated as ordinary income to the extent that the Grantor Trust Certificate is held as part of a “conversion transaction” within the meaning of Section 1258 of the Code.  A conversion transaction generally is one in which the taxpayer has taken two or more positions in the same or similar property that reduce or eliminate market risk, if substantially all of the taxpayer’s return is attributable to the time value of the taxpayer’s net investment in such transaction.  The amount of gain realized in a conversion transaction that is recharacterized as ordinary income generally will not exceed the amount of interest that would have accrued on the taxpayer’s net investment at 120% of the appropriate “applicable Federal rate” (which rate is computed and published monthly by the IRS) at the time the taxpayer enters into the conversion transaction, subject to appropriate reduction for prior inclusion of interest and other ordinary income items from the transaction.
 
Finally, a taxpayer may elect to have net capital gain taxed at ordinary income rates rather than capital gains rates in order to include such net capital gain in total net investment income for that taxable year, for purposes of the rule that limits the deduction of interest on indebtedness incurred to purchase or carry property held for investment to a taxpayer’s net investment income.
 
 
-130-

 
 
Grantor Trust Reporting.  Unless otherwise provided in the related prospectus supplement, the trustee or master servicer, as applicable, will furnish to each holder of a Grantor Trust Certificate with each distribution a statement setting forth the amount of such distribution allocable to principal on the underlying mortgage loans and to interest thereon at the related pass-through rate.  In addition, the trustee or master servicer, as applicable, will furnish, within a reasonable time after the end of each calendar year, to each holder of a Grantor Trust Certificate who was such a holder at any time during such year, information regarding the amount of servicing compensation received by the master servicer, the special servicer or any sub-servicer, and such other customary factual information as the depositor or the reporting party deems necessary or desirable to enable holders of Grantor Trust Certificates to prepare their tax returns and will furnish comparable information to the IRS as and when required by law to do so.  Because the rules for accruing discount and amortizing premium with respect to the Grantor Trust Certificates are uncertain in various respects, there is no assurance the IRS will agree with the trustee’s or master servicer’s, as the case may be, information reports of such items of income and expense.  Moreover, such information reports, even if otherwise accepted as accurate by the IRS, will in any event be accurate only as to the initial certificateholders that bought their certificates at the representative initial offering price used in preparing such reports.
 
Final Treasury regulations 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 (i) a custodian of a person's account, (ii) a nominee and (iii) a broker holding an interest for a customer in street name. The trustee, or its designated agent, is required to calculate and provide information to requesting persons with respect to the trust fund in accordance with these regulations. The trustee (or its designated agent), or the applicable middleman (in the case of interests held through a middleman), is required to file information returns with the IRS and provide tax information statements to certificateholders in accordance with these regulations.
 
Backup Withholding.  In general, the rules described above in “—REMICs—Backup Withholding with Respect to REMIC Certificates” will also apply to Grantor Trust Certificates.
 
Foreign Investors.  In general, the discussion with respect to REMIC Regular Certificates in “—REMICs—Foreign Investors in REMIC Certificates” above applies to Grantor Trust Certificates except that Grantor Trust Certificates will, unless otherwise disclosed in the related prospectus supplement, be eligible for exemption from U.S. withholding tax, subject to the conditions described in such discussion, only to the extent the related mortgage loans were originated after July 18, 1984.
 
To the extent that interest on a Grantor Trust Certificate would be exempt under Sections 871(h)(1) and 881(c) of the Code from United States withholding tax, and the Grantor Trust Certificate is not held in connection with a certificateholder’s trade or business in the United States, such Grantor Trust Certificate will not be subject to United States estate taxes in the estate of a nonresident alien individual.
 
STATE AND OTHER TAX CONSEQUENCES
 
In addition to the federal income tax consequences described in “MATERIAL FEDERAL INCOME TAX CONSEQUENCES”, potential investors should consider the state and local tax consequences of the acquisition, ownership, and disposition of the offered certificates.  State and local tax law may differ substantially from the corresponding federal law, and the discussion above does not purport to describe any aspect of the tax laws of any state or other jurisdiction.  Therefore, prospective investors are encouraged to consult their tax advisors with respect to the various tax consequences of investments in the offered certificates.
 
CERTAIN ERISA CONSIDERATIONS
 
General
 
The Employee Retirement Income Security Act of 1974, as amended, and the Code impose certain requirements on retirement plans, and on certain other employee benefit plans and arrangements, including individual retirement accounts and annuities, Keogh plans and collective investment funds and separate accounts (and as applicable,
 
 
-131-

 
 
insurance company general accounts) in which such plans, accounts or arrangements are invested that are subject to the fiduciary responsibility provisions of ERISA and Section 4975 of the Code (each, a “Plan”), and on persons who are fiduciaries with respect to such Plans, in connection with the investment of Plan assets.  Certain employee benefit plans, such as governmental plans (as defined in ERISA Section 3(32)), and, if no election has been made under Section 410(d) of the Code, church plans (as defined in Section 3(33) of ERISA) are not subject to ERISA requirements.  However, such plans may be subject to the provisions of other applicable federal and state law materially similar to ERISA or the Code.  Moreover, any such plan which is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code is subject to the prohibited transaction rules set forth in Section 503 of the Code.
 
ERISA generally imposes on Plan fiduciaries certain general fiduciary requirements, including those of investment prudence and diversification and the requirement that a Plan’s investments be made in accordance with the documents governing the Plan.  In addition, Section 406 of ERISA and Section 4975 of the Code prohibit a broad range of transactions involving assets of a Plan and persons who have certain specified relationships to the Plan, unless a statutory or administrative exemption is available.  Certain Parties in Interest that participate in a prohibited transaction may be subject to an excise tax imposed pursuant to Section 4975 of the Code or a penalty imposed pursuant to Section 502(i) of ERISA, unless a statutory or administrative exemption is available.  These prohibited transactions generally are set forth in Section 406 of ERISA and Section 4975 of the Code.
 
Plan Asset Regulations
 
A Plan’s investment in offered certificates may cause the underlying mortgage assets and other assets included in a related trust fund to be deemed assets of such Plan.  The Plan Asset Regulations provide that when a Plan acquires an equity interest in an entity, the Plan’s assets include both such equity interest and an undivided interest in each of the underlying assets of the entity, unless certain exceptions not applicable here apply, or unless the equity participation in the entity by “benefit plan investors” (i.e., Plans and entities deemed to hold plan assets because of a Plan’s investment in the entity) is not “significant”, both as defined in the Plan Asset Regulations.  For this purpose, in general, equity participation by benefit plan investors will be “significant” on any date if 25% or more of the value of any class of equity interests in the entity is held by benefit plan investors.  Equity participation in a trust fund will be significant on any date if immediately after the most recent acquisition of any certificate, 25% or more of any class of certificates is held by benefit plan investors.
 
Any person who has discretionary authority or control respecting the management or disposition of Plan assets, and any person who provides investment advice with respect to such assets for a fee, is a fiduciary of the investing Plan.  If the mortgage assets and other assets included in a trust fund constitute Plan assets, then any party exercising management or discretionary control regarding those assets, such as the master servicer, any special servicer, any sub-servicer, the trustee, the obligor under any credit enhancement mechanism, or certain affiliates thereof may be deemed to be a Plan “fiduciary” and thus subject to the fiduciary responsibility provisions and prohibited transaction provisions of ERISA and the Code with respect to the investing Plan.  In addition, if the mortgage assets and other assets included in a trust fund constitute Plan assets, the purchase of certificates by a Plan, as well as the operation of the trust fund, may constitute or involve a prohibited transaction under ERISA or the Code.
 
The Plan Asset Regulations provide that where a Plan acquires a “guaranteed governmental mortgage pool certificate”, the Plan’s assets include such certificate but do not solely by reason of the Plan’s holdings of such certificate include any of the mortgages underlying such certificate.  The Plan Asset Regulations include in the definition of a “guaranteed governmental mortgage pool certificate” Ginnie Mae, Freddie Mac, Farmer Mac and Fannie Mae certificates.  Accordingly, even if such MBS included in a trust fund were deemed to be assets of Plan investors, the mortgages underlying such MBS would not be treated as assets of such Plans.  Private label mortgage participations, mortgage pass-through certificates or other mortgage-backed securities are not “guaranteed governmental mortgage pool certificates” within the meaning of the Plan Asset Regulations; potential Plan investors should consult their counsel and review the ERISA discussion in the related prospectus supplement before purchasing certificates if such MBS are included in the trust fund.
 
The DOL has granted to certain underwriters administrative exemptions, each an “Exemption”, for certain mortgage-backed and asset-backed certificates underwritten in whole or in part by the underwriters.  An Exemption might be applicable to the initial purchase, the holding, and the subsequent resale by a Plan of certain certificates,
 
 
-132-

 
 
such as the offered certificates, underwritten by the underwriters, representing interests in pass-through trusts that consist of certain receivables, loans and other obligations; provided that the conditions and requirements of the Exemption are satisfied.  The loans described in the Exemptions include mortgage loans such as the mortgage assets.  However, it should be noted that in issuing the Exemptions, the DOL may not have considered interests in pools of the exact nature as some of the offered certificates.  If all of the conditions of an Exemption are met, whether or not a Plan’s assets would be deemed to include an ownership interest in the mortgage assets, the acquisition, holding and resale of the offered certificates by Plans would be exempt from certain of the prohibited transaction provisions of ERISA and the Code.
 
Insurance Company General Accounts
 
Sections I and III of PTCE 95-60 exempt from the application of the prohibited transaction provisions of Sections 406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code transactions in connection with the servicing, management and operation of a trust (such as the trust) in which an insurance company general account has an interest as a result of its acquisition of certificates issued by the trust; provided that certain conditions are satisfied.  If these conditions are met, insurance company general accounts would be allowed to purchase certain classes of certificates which do not meet the requirements of any of the Exemptions solely because they (1) are subordinated to other classes of certificates in the trust and/or (2) have not received a rating at the time of the acquisition in one of the four highest rating categories from a nationally recognized statistical rating agency.  All other conditions of one of the Exemptions would have to be satisfied in order for PTCE 95-60 to be available.  Before purchasing such class of certificates, an insurance company general account seeking to rely on Sections I and III of PTCE 95-60 should itself confirm that all applicable conditions and other requirements have been satisfied.
 
The Small Business Job Protection Act of 1996 added a new Section 401(c) to ERISA, which provides certain exemptive relief from the provisions of Part 4 of Title I of ERISA and Section 4975 of the Code, including the prohibited transaction restrictions imposed by ERISA and the related excise taxes imposed by the Code, for transactions involving an insurance company general account.  Pursuant to Section 401(c) of ERISA, the DOL has issued final regulations providing guidance for the purpose of determining, in cases where insurance policies supported by an insurer’s general account are issued to or for the benefit of a Plan on or before December 31, 1998, which general account assets constitute Plan assets.  Any assets of an insurance company general account which support insurance policies issued to a Plan after December 31, 1998 or issued to Plans on or before December 31, 1998 for which the insurance company does not comply with the 401(c) Regulations may be treated as Plan assets.  In addition, because Section 401(c) does not relate to insurance company separate accounts, separate account assets are still treated as Plan assets of any Plan invested in such separate account.  Insurance companies contemplating the investment of general account assets in the offered certificates should consult with their legal counsel with respect to the applicability of Section 401(c) of ERISA.
 
Consultation With Counsel
 
Any Plan fiduciary which proposes to purchase offered certificates on behalf of or with assets of a Plan should consider its general fiduciary obligations under ERISA and should consult with its counsel with respect to the potential applicability of ERISA and the Code to such investment and the availability of any prohibited transaction exemption in connection with any planned purchase.
 
Tax Exempt Investors
 
A Plan that is exempt from federal income taxation pursuant to Section 501 of the Code nonetheless will be subject to federal income taxation to the extent that its income is “unrelated business taxable income” within the meaning of Section 512 of the Code.  All “excess inclusions” of a REMIC allocated to a REMIC Residual Certificate held by a Plan will be considered unrelated business taxable income and thus will be subject to federal income tax.  See “MATERIAL FEDERAL INCOME TAX CONSEQUENCES—REMICs—Taxation of Owners of REMIC Residual Certificates—Excess Inclusions”.
 
 
-133-

 
 
LEGAL INVESTMENT
 
If so specified in the related prospectus supplement, certain classes of the offered certificates will constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended (“SMMEA”).  Generally, the only classes of the offered certificates which will qualify as “mortgage related securities” will be those that (1) are rated in one of two highest rating categories by at least one nationally recognized statistical rating organization (“NRSRO”) 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.  Pursuant to Section 939(e) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC is required to establish creditworthiness standards in substitution for the current ratings test in SMMEA, effective July 21, 2012.  Accordingly, depending upon the standards established by the SEC, it is possible that certain classes of offered certificates that are offered and sold prior to July 21, 2012 and specified to be “mortgage related securities” for purposes of SMMEA in the applicable prospectus supplement, may no longer qualify as such as of July 21, 2012, and that further classes of offered certificates may not qualify either.
 
The appropriate characterization of the offered certificates under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase these offered certificates, may be subject to significant interpretive uncertainties. Except as to the status of certain classes of offered certificates as “mortgage related securities”, no representations are made as to the proper characterization of the offered certificates for legal investment purposes, financial institution regulatory purposes, or other purposes, or as to the ability of particular investors to purchase any offered certificates under applicable legal investment restrictions.  The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial institution regulatory characteristics of the offered certificates) may adversely affect the liquidity and/or market value of the offered certificates.  Further, any ratings downgrade of a class of offered certificates below an “investment grade” rating by an NRSRO may affect the ability of an investor to purchase or retain, or otherwise impact the regulatory characteristics, of those certificates.
 
Accordingly, all investors whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities should consult with their own legal advisors in determining whether and to what extent the offered certificates of any class or series constitute legal investments or are subject to investment, capital, or other restrictions and, if applicable, whether SMMEA has been overridden in any jurisdiction relevant to that investor.
 
USE OF PROCEEDS
 
The net proceeds to be received from the sale of the certificates of any series will be applied by the depositor to the purchase of trust assets or will be used by the depositor to cover expenses related thereto.  The depositor expects to sell the certificates from time to time, but the timing and amount of offerings of certificates will depend on a number of factors, including the volume of mortgage assets acquired by the depositor, prevailing interest rates, availability of funds and general market conditions.
 
METHOD OF DISTRIBUTION
 
The certificates offered hereby and by the related prospectus supplements will be offered in series through one or more of the methods described below.  The prospectus supplement prepared for each series will describe the method of offering being utilized for that series and will state the net proceeds to the depositor from such sale.
 
The depositor intends that offered certificates will be offered through the following methods from time to time and that offerings may be made concurrently through more than one of these methods or that an offering of the offered certificates of a particular series may be made through a combination of two or more of these methods.  Such methods are as follows:
 
1.      By negotiated firm commitment or best efforts underwriting and public re-offering by underwriters, which may include Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of the depositor;
 
 
-134-

 
 
2.      By placements by the depositor with institutional investors through dealers; and
 
3.      By direct placements by the depositor with institutional investors, in which event the Depositor will be an underwriter with respect to the certificates; and
 
4.      By inclusion as underlying securities backing another series of mortgage pass-through certificates issued by an entity of which the Depositor or an affiliate of the Depositor may act as the depositor.  In the event that the Depositor or an affiliate of the Depositor acts as depositor with respect to the other series of mortgage pass-through certificates, the Depositor or its affiliate will be an underwriter with respect to the underlying securities.
 
In addition, if specified in the related prospectus supplement, the offered certificates of a series may be offered in whole or in part to the seller of the related mortgage assets that would comprise the trust fund for such certificates.
 
If underwriters are used in a sale of any offered certificates (other than in connection with an underwriting on a best efforts basis), such certificates will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at fixed public offering prices or at varying prices to be determined at the time of sale or at the time of commitment therefor.  Such underwriters may be broker-dealers affiliated with the depositor whose identities and relationships to the depositor will be as set forth in the related prospectus supplement.  The managing underwriter or underwriters with respect to the offer and sale of offered certificates of a particular series will be set forth on the cover of the prospectus supplement relating to such series and the members of the underwriting syndicate, if any, will be named in such prospectus supplement.
 
In connection with the sale of offered certificates, underwriters may receive compensation from the depositor or from purchasers of the offered certificates in the form of discounts, concessions or commissions.  Underwriters and dealers participating in the distribution of the offered certificates will be deemed to be underwriters in connection with such certificates, and any discounts or commissions received by them from the depositor and any profit on the resale of offered certificates by them will be deemed to be underwriting discounts and commissions under the Securities Act of 1933, as amended.
 
It is anticipated that the underwriting agreement pertaining to the sale of the offered certificates of any series will provide that the obligations of the underwriters will be subject to certain conditions precedent, that the underwriters will be obligated to purchase all such certificates if any are purchased (other than in connection with an underwriting on a best efforts basis) and that, in limited circumstances, the depositor will indemnify the several underwriters and the underwriters will indemnify the depositor against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended, or will contribute to payments required to be made in respect to such liabilities.
 
The prospectus supplement with respect to any series offered by placements through dealers will contain information regarding the nature of such offering and any agreements to be entered into between the depositor and purchasers of offered certificates of such series.
 
The depositor anticipates that the offered certificates will be sold primarily to institutional investors.  Purchasers of offered certificates, including dealers, may, depending on the facts and circumstances of such purchases, be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, in connection with reoffers and sales by them of offered certificates.  Holders of offered certificates should consult with their legal advisors in this regard prior to any such reoffer or sale.
 
If specified in the prospectus supplement relating to a series of certificates, the Depositor or any of its affiliates may purchase some or all of one or more classes of certificates of the series from the underwriter or underwriters at a price specified or described in the prospectus supplement.  This party may then, from time to time, offer and sell, pursuant to this prospectus, some or all of the certificates it purchased directly, through one or more underwriters to be designated at the time of the offering of the certificates or through dealers acting as agent and/or principal.  Any of these offerings may be restricted in the matter specified in the applicable prospectus supplement.  These transactions may be effected at market prices prevailing at the time of sale, at negotiated prices or at fixed prices.  The underwriters and dealers participating in the purchaser’s offering of certificates may receive compensation in
 
 
-135-

 
 
the form of underwriting discounts or commissions from the purchaser and these dealers may receive commissions from the investors purchasing certificates for whom they may act as agent (which discounts or commissions will not exceed those customary in those types of transactions).  Any dealer that participates in the distribution of these certificates will be an “underwriter” within the meaning of the Securities Act, and any commissions and discounts received by a dealer and any profit on the resale of these certificates by a dealer will be underwriting discounts and commissions under the Securities Act.
 
LEGAL MATTERS
 
Certain legal matters relating to the certificates will be passed upon for the depositor by Cadwalader, Wickersham & Taft LLP.  Certain legal matters relating to the certificates will be passed upon for the underwriter by the counsel described in the related prospectus supplement under “LEGAL MATTERS”.  Certain federal income tax matters and other matters will be passed upon for the depositor by Cadwalader, Wickersham & Taft LLP.
 
RATING
 
Each class of offered certificates shall have been rated not lower than investment grade, that is, in one of the four highest rating categories, by at least one NRSRO.
 
Ratings on mortgage pass-through certificates address the likelihood of receipt by the holders of all collections on the underlying mortgage assets to which such holders are entitled.  These ratings address the structural, legal and issuer-related aspects associated with such certificates, the nature of the underlying mortgage assets and the credit quality of the guarantor, if any.  Ratings on mortgage pass-through certificates do not represent any assessment of the likelihood of principal prepayments by borrowers or of the degree by which such prepayments might differ from those originally anticipated.  As a result, certificateholders might suffer a lower than anticipated yield, and, in addition, holders of Stripped Interest Certificates might, in extreme cases fail to recoup their initial investments.  Furthermore, ratings on mortgage pass-through certificates do not address the price of such certificates or the suitability of such certificates to the investor.
 
A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning NRSRO.  Each security rating should be evaluated independently of any other security rating.
 
AVAILABLE INFORMATION
 
The depositor has filed with the SEC a Registration Statement (of which this prospectus forms a part) under the Securities Act with respect to the offered certificates.  This prospectus and the prospectus supplement relating to each series of offered certificates contain summaries of the material terms of the documents referred to in this prospectus or in such prospectus supplement, but do not contain all of the information set forth in the Registration Statement pursuant to the rules and regulations of the SEC.  For further information, reference is made to such Registration Statement and the exhibits thereto.  Such Registration Statement and exhibits can be inspected and copied at prescribed rates at the public reference facilities maintained by the SEC at its Public Reference Section, 100 F Street, N.E., Washington, D.C.  20549[, and at its Midwest Regional Offices located as follows:  Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511].  You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC also maintains a site on the World Wide Web at “http://www.sec.gov” at which you can view and download copies of reports, proxy and information statements and other information filed electronically through the Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system.  The Depositor has filed the Registration Statement, including all exhibits thereto, through the EDGAR system, so the materials should be available by logging onto the SEC’s Web site.  The SEC maintains computer terminals providing access to the EDGAR system at each of the offices referred to above.
 
No dealer, salesman, or other person has been authorized to give any information, or to make any representations, other than those contained in this prospectus or any related prospectus supplement, and, if given or
 
 
-136-

 
 
made, such information or representations must not be relied upon as having been authorized by the depositor or any other person.  Neither the delivery of this prospectus or any related prospectus supplement nor any sale made under this prospectus or any related prospectus supplement shall under any circumstances create an implication that there has been no change in the information in this prospectus since the date of this prospectus or in such prospectus supplement since the date of the prospectus supplement.  This prospectus and any related prospectus supplement are not an offer to sell or a solicitation of an offer to buy any security in any jurisdiction in which it is unlawful to make such offer or solicitation.
 
The master servicer, the trustee or another specified person will cause to be provided to registered holders of the offered certificates of each series periodic unaudited reports concerning the related trust fund.  If beneficial interests in a class or series of offered certificates are being held and transferred in book-entry format through the facilities of The DTC as described in this prospectus, then unless otherwise provided in the related prospectus supplement, such reports will be sent on behalf of the related trust fund to a nominee of DTC as the registered holder of the offered certificates.  Conveyance of notices and other communications by DTC to its participating organizations, and directly or indirectly through such participating organizations to the beneficial owners of the applicable offered certificates, will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.  See “DESCRIPTION OF THE CERTIFICATES—Reports to Certificateholders” and “—Book-Entry Registration and Definitive Certificates”.
 
The depositor will file or cause to be filed with the SEC such periodic reports with respect to each trust fund as are required under the Exchange Act and the rules and regulations of the SEC and the related prospectus supplement will describe how to locate such reports of the depositor.
 
 
 
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
 
The depositor hereby incorporates by reference all documents and reports filed or caused to be filed by the depositor (other than Annual Reports on Form 10-K) with respect to a trust fund pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of an offering of offered certificates evidencing interests in that trust fund.  The depositor will provide or cause to be provided without charge to each person to whom this prospectus is delivered in connection with the offering of one or more classes of offered certificates, upon written or oral request of such person, a copy of any or all documents or reports incorporated in this prospectus by reference, in each case to the extent such documents or reports relate to one or more of such classes of such offered certificates, other than the exhibits to such documents (unless such exhibits are specifically incorporated by reference in such documents).  Such requests to the depositor should be directed in writing to its principal executive offices at Bank of America Tower, One Bryant Park, New York, New York 10036, or by telephone at (980) 388-7451.

 
GLOSSARY
 
The following capitalized terms will have the respective meanings assigned to them in this “GLOSSARY” section whenever they are used in this prospectus.
 
“401(c) Regulations” means those regulations issued by the DOL which provide guidance for the purpose of determining, in cases where insurance policies supported by an insurer’s general account are issued to or for the benefit of a Plan on or before December 31, 1998, which general account assets constitute Plan assets.
 
“Accrued Certificate Interest” means for each Distribution Date an amount equal to interest at the applicable pass-through rate accrued for a specified period (generally the most recently ended calendar month) on the outstanding Certificate Balance of such class of certificates immediately prior to such Distribution Date.
 
 
 
-137-

 
 
“Accrual Certificates” means one or more classes of certificates that may not be entitled to distributions of interest until the occurrence of certain events, such as the retirement of one or more other classes of certificates.
 
“ADA” means the Americans with Disabilities Act of 1990, as amended.
 
“Available Distribution Amount” means unless otherwise provided in the related prospectus supplement for any series of certificates and any Distribution Date the total of all payments or other collections (or advances in lieu of such collections and advances) on, under or in respect of the mortgage assets and any other assets included in the related trust fund that are available for distribution to the holders of certificates of such series on such date.
 
“Bankruptcy Code” means the U.S. Bankruptcy Code.
 
“CERCLA” means the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.
 
“Certificate Account” means for the trust fund one or more established and maintained on behalf of the certificateholders into which all payments and collections received or advanced with respect to the mortgage assets and other assets in the trust fund will be deposited to the extent described this prospectus and the related prospectus supplement.
 
“Certificate Balance” means the initial stated principal amount of each individual class of certificates for a given series other than real estate mortgage investment conduit residual certificates or certain classes of stripped interest certificates.
 
“Certificate Owner” means the actual purchaser of a book-entry certificate.
 
“Closing Date” means date of the initial issuance of the certificates of a given series.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Commercial Property” means office buildings, retail stores and establishments, hotels or motels, nursing homes, hospitals or other health care-related facilities, recreational vehicle and mobile home parks, warehouse facilities, mini-warehouse facilities, self-storage facilities, industrial plants, parking lots, entertainment or sports arenas, restaurants, marinas, mixed use or various other types of income-producing properties or unimproved land comprising some or all of the mortgaged properties included in the trust fund.
 
“Committee Report” means the Conference Committee Report accompanying the Tax Reform Act of 1986.
 
“Companion Class” means one or more classes of certificate where distributions of principal with respect to one or more other classes of certificates may be contingent on the specified principal payment schedule for a Controlled Amortization Class of the same series and the rate at which payments and other collections of principal on the mortgage assets in the related trust fund are received.
 
 “Controlled Amortization Class” means one or more classes of certificates where distributions of principal may be made, subject to available funds, based on a specified principal payment schedule.
 
“CPR” means the constant prepayment rate model representing an assumed constant rate of prepayment each month (expressed as an annual percentage) relative to the then outstanding principal balance of a pool of mortgage loans for the life of such mortgage loans.
 
“Cut-off Date” means the specified date initial aggregate outstanding principal balance of the related mortgage assets as of a specified date.
 
“Debt Service Coverage Ratio” means at any given time for a mortgage loan the ratio of —
 
the Net Operating Income derived from the related mortgaged property for a twelve-month period to
 
 
 
-138-

 
 
the annualized scheduled payments of principal and/or interest on the mortgage loan and any other loans senior to it that are secured by the related mortgaged property.
 
“Determination Date” means the date upon which that all scheduled payments on the mortgage loans in the trust fund are received or advanced by the master servicer, special servicer or other specified person will be distributed to certificateholders of the related series on the next succeeding Distribution Date.
 
“Depositor” means Banc of America Merrill Lynch Commercial Mortgage Inc., a Delaware corporation.
 
“Direct Participant” means the securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations that maintain accounts with DTC.
 
“Distribution Date” means the date as described in the prospectus supplement upon which distributions on or with respect to the certificates will be made.
 
“DOL” means the United States Department of Labor.
 
“DTC” means The Depository Trust Company.
 
“Due Date” means a specified date upon which scheduled payments of interest, principal or both are to be made under a mortgage loan and may occur monthly, quarterly, semi-annually or annually.
 
“Due Period” means a specified time period (generally corresponding in length to the period between Distribution Dates).
 
“Equity Participation” means a provision under a mortgage loan that entitles the lender to a share of appreciation of the related mortgaged property, or profits realized from the operation or disposition of such mortgaged property or the benefit, if any, resulting from the refinancing of the mortgage loan.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
“Excess Funds” means in general that portion of the amounts distributable in respect of the certificates of any series on any Distribution Date that represent—
 
interest received or advanced on the mortgage assets in the trust fund that is in excess of the interest currently accrued on the certificates of such series; or
 
Prepayment Premiums, payments from Equity Participations or any other amounts received on the mortgage assets in the trust fund that do not constitute payments of interest or principal.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Fannie Mae” means the Federal National Mortgage Association.
 
“Farmer Mac” means the Federal Agricultural Mortgage Corporation.
 
“Freddie Mac” means the Federal Home Loan Mortgage Corporation.
 
“Garn Act” means the Garn-St Germain Depository Institutions Act of 1982.
 
“Ginnie Mae” means Governmental National Mortgage Association.
 
“Grantor Trust Certificates” means certificates in a trust treated as a grantor trust under applicable provisions of the Code.
 
“Grantor Trust Fractional Interest Certificate” means a Grantor Trust Certificate representing an undivided equitable ownership interest in the principal of the mortgage loans constituting the related Grantor Trust Fund, together with interest at a pass-through rate.
 
“Grantor Trust Fund” means that portion of the trust fund as to which no REMIC election has been made.
 
 
-139-

 
 
“Grantor Trust Strip Certificate” means a Grantor Trust Certificate representing ownership of all or a portion of the difference between interest paid on the mortgage loans constituting the related Grantor Trust Fund (net of normal administration fees) and interest paid to the holders of Grantor Trust Fractional Interest Certificates issued with respect to such Grantor Trust Fund.
 
“Indirect Participant” means those banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly.
 
“Insurance and Condemnation Proceeds’’ means proceeds applied to the restoration of a mortgaged property or released to the related borrower in connection with the full or partial condemnation of such mortgaged property.
 
“IRS” means the Internal Revenue Service.
 
“Issue Premium” means, in the case of a class of REMIC Regular Certificates issued at a price in excess of the stated redemption price of that class, the amount of such excess.
 
“Liquidation Proceeds” means all proceeds received under any hazard, title or other insurance policy (other than Insurance and Condemnation Proceeds) and all other amounts received and retained in connection with the liquidation of defaulted mortgage loans or property acquired in respect of such defaulted mortgage loans, by foreclosure or otherwise.
 
“Loan-to-Value Ratio” means for a mortgage loan the ratio (expressed as a percentage) of —
 
the then outstanding principal balance of the mortgage loan and any other loans senior that are secured by the related mortgaged property to
 
its fair market value as determined by an appraisal of such property conducted by or on behalf of the originator in connection with the origination of the mortgage loan.
 
“Lockout Period” means the period in which prepayments are prohibited under a mortgage loan.
 
“MBS” means mortgage participations, pass-through certificates or other mortgage-backed securities that may comprise the assets of the trust fund.
 
“Mortgage Asset Seller” means the entity from whom the depositor purchased a mortgage asset either directly or indirectly, included in the trust fund.  The Mortgage Asset Seller may or may not be the originator of the related mortgage loan or the issuer of the MBS and may be an affiliate of the depositor.
 
 “Mortgage Rate” means the rate at which a mortgage loan accrues interest which may be fixed over its term or that adjusts from time to time, converted at the borrower’s election from an adjustable to a fixed rate, or from a fixed to an adjustable rate.
 
“Multifamily Properties” means residential properties consisting of five or more rental or cooperatively-owned dwelling units in high-rise, mid-rise or garden apartment buildings or other residential structures comprising some or all of the mortgaged properties included in the trust fund.
 
“Net Operating Income” means for any given period, the total operating revenues derived from a mortgaged property during such period, minus the total operating expenses incurred in respect of such mortgaged property during such period other than —
 
noncash items such as depreciation and amortization;
 
capital expenditures; and
 
debt service on the related mortgage loan or on any other loans that are secured by such mortgaged property.
 
 “NCUA” means the National Credit Union Administration.
 
 
-140-

 
 
“Notional Amount” means the amount upon which a Stripped Interest Certificate is calculated to accrue interest which is either—
 
based on the principal balances of some or all of the mortgage assets in the related trust fund; or
 
equal to the Certificate Balances of one or more other classes of certificates of the same series.
 
“NRSRO” means a nationally recognized statistical rating organization within the meaning of Section 3(a)(62) of the Exchange Act.
 
“OCC” means the Office of the Comptroller of the Currency.
 
“OID Regulations” means the Treasury Department regulations issued under Sections 1271-1273 and 1275 of the Code.
 
“OTS” means the Office of Thrift Supervision.
 
“Parties in Interest” means “parties in interest” as defined in ERISA and “disqualified person” as defined in Section 4975 of the Code.
 
“Percentage Interest” means the undivided percentage interest represented by an offered certificate of a particular class which will be equal to the percentage obtained by dividing the initial principal balance or notional amount of such certificate by the initial Certificate Balance or Notional Amount of such class.
 
“Permitted Investments” means government securities and other obligations that are acceptable to each rating agency that has rated any one or more classes of certificates of the related series into which funds from the Certificate Account may be invested.
 
“Plan” means retirement plans, and on certain other employee benefit plans and arrangements, including individual retirement accounts, individual retirement annuities, Keogh plans and collective investment funds and separate accounts (and as applicable, insurance company general accounts) in which such plans, accounts or arrangements are invested that are subject to the fiduciary responsibility provisions of ERISA or Section 4975 of the Code.
 
“Plan Asset Regulations” means Section 2510.3-101 of the regulations issued by the DOL, concerning what constitutes assets of a Plan.
 
 “Pooling and Servicing Agreement” means pooling and servicing agreement or other agreement specified in the related prospectus supplement pursuant to which certificates of each series will be issued.
 
“Prepayment Assumption” means the prepayment assumption used in reporting original issue discount for each series of REMIC Regular Certificates or, if applicable, Grantor Trust Certificates, as disclosed in the related prospectus supplement.
 
“Prepayment Interest Shortfall” means the result when a prepayment on any mortgage loan is distributable to certificateholders on a particular Distribution Date, but such prepayment is not accompanied by interest thereon to the Due Date for such mortgage loan in the related Due Period, then the interest charged to the borrower (net of servicing and administrative fees) may be less than the corresponding amount of interest accrued and otherwise payable on the certificates of the related series.
 
“Prepayment Premium” means the payment of any premium or yield maintenance charge in connection with certain prepayments under a mortgage loan.
 
“PTCE 95-60” means Prohibited Transaction Class Exemption 95-60.
 
“Purchase Price” means the price as specified in the prospectus supplement at which a Mortgage Asset Seller will be required to repurchase a mortgage loan under the conditions set forth in the prospectus supplement.
 
“Rating Agency” means any NRSRO retained by the Depositor to rate any one or more classes of certificates of a particular series.
 
 
-141-

 
 
“Record Date” means last business day of the month preceding the month in which the applicable Distribution Date occurs.
 
“Relief Act” means the Servicemembers Relief Act.
 
“REMIC” means a real estate mortgage investment conduit, within the meaning of, and formed in accordance with, the REMIC Provisions of the Code.
 
“REMIC Certificates” means certificates representing interests in a trust fund, or a portion of the trust fund, that the REMIC administrator will elect to have treated as REMIC.
 
“REMIC Provisions” means Sections 860A through 860G of the Code.
 
“REMIC Regular Certificates” means certificates evidencing or constituting ownership of “regular interests” in the trust fund or a designated portion of the trust under the REMIC Provisions.
 
“REMIC Regulations” means the Treasury Department regulations issued under the REMIC Provisions.
 
“REMIC Residual Certificateholder” means the holder of a REMIC Residual Certificate.
 
“REMIC Residual Certificates” means certificates evidencing or constituting ownership of “residual interests” in the trust or a designated portion of the trust under the REMIC Provisions.
 
“REO Properties” means mortgaged properties acquired on behalf of the trust fund through foreclosure, deed-in-lieu of foreclosure or otherwise.
 
“SEC” means the U.S. Securities and Exchange Commission.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
“Senior Certificates” means certificates in a given series that are senior to one or more other classes of certificates in entitlement to certain distributions;
 
“SMMEA” means the Secondary Mortgage Market Enhancement Act of 1984, as amended.
 
“SPA” means the standard prepayment assumption representing an assumed variable rate of prepayment each month (expressed as an annual percentage) relative to the then outstanding principal balance of a pool of mortgage loans,.
 
“Stripped Interest Certificate” means those certificates entitled to distributions of interest, with disproportionate, nominal or no distributions of principal.
 
“Stripped Principal Certificate” means entitled to distributions of principal, with disproportionate, nominal or no distributions of interest;
 
“Subordinate Certificates” means certificates in a given series that are subordinate to one or more other classes of certificates in entitlement to certain distributions;
 
“Tiered REMIC” means designated portions of the trust fund treated as two or more REMICs.
 
“Treasury Department” means the United States Treasury Department.
 
“UCC” means for any jurisdiction the Uniform Commercial Code as in effect in that jurisdiction.
 
“U.S. Person” means—
 
a citizen or resident of the United States;
 
a corporation or partnership created or organized in, or under the laws of, the United States, any state or the District of Columbia, including an entity treated as a corporation or partnership for federal income tax purposes;
 
 
-142-

 
 
an estate whose income is subject to United States federal income tax purposes regardless of the source of its income; or
 
a trust as to which—
 
1. a court in the United States is able to exercise primary supervision over the administration of the trust, and
 
2. one or more United States persons have the authority to control all substantial decisions of the trust.
 
In addition, to the extent provided in the Treasury Department regulations, a trust will be a U.S. Person if it was in existence on August 20, 1996 and it elected to be treated as a U.S. Person.
 
“Voting Rights” means the voting rights evidenced by each series of certificates.
 
“Warranting Party” means a party that makes certain representations and warranties regarding the mortgage loans.
 
 
 
-143-

 
 
 
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

 
Item 14. Other Expenses of Issuance and Distribution
 
The expenses expected to be incurred in connection with the issuance and distribution of the Certificates being registered, other than underwriting compensation, are as set forth below.
 
 
Filing Fee for Registration Statement
  $ 114.60 *
Legal Fees and Expenses
  $ 900,000.00 **
Accounting Fees and Expenses   $ 130,000.00 ** 
Trustee’s Fees and Expenses (including counsel fees)
  $ 60,000.00 **
Blue Sky Fees and Expenses
  $ 25,000.00 **
Printing and Engraving Fees
  $ 200,000.00 **
Rating Agency Fees
  $ 3,000,000.00 **
Miscellaneous
  $ 50,000.00 **
         
Total
  $ 4,536,900.00 **
         
_________________________
 
*    Represents the filing fee for $1,000,000 to the initial offering of the Mortgage Pass-Through Certificates registered hereunder by the registrant.

**  All amounts except the filing fees are estimates of expenses incurred or to be incurred in connection with the issuance and distribution of a single series of commercial mortgage-backed securities in an aggregate principal amount assumed for these purposes to be equal to $1,500,000,000.
 
Item 15. Indemnification of Directors and Officers
 
The pooling and servicing agreements will provide that no director, officer, employee or agent of the registrant is liable to the trust fund or the certificateholders referred to therein, except for such person’s own willful misfeasance, bad faith, gross negligence in the performance of duties or reckless disregard of obligations and duties.  The pooling and servicing agreements will further provide that, with the exceptions stated above, a director, officer, employee or agent of the registrant is entitled to be indemnified against any loss, liability or expense incurred in connection with legal action relating to such pooling and servicing agreements and related certificates other than such expenses related to particular mortgage assets as described therein.
 
Any underwriters who execute an Underwriting Agreement in the form filed as Exhibit 1.1 to this registration statement will agree to indemnify the registrant’s directors and its officers who signed this registration statement against certain liabilities which might arise under the Securities Act of 1933 from certain information furnished to the registrant by or on behalf of such indemnifying party.
 
Subsection (a) of Section 145 of the General Corporation Law of Delaware empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid
 
 
 

 
 
 
in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful.
 
Subsection (b) of Section 145 empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person acted in any of the capacities set forth above, against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification may be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
 
Section 145 further provides that to the extent a present or former director or officer of a corporation has been successful on the merits or otherwise in the defense of any action, suit or proceeding referred to in subsections (a) and (b) or in the defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith; that indemnification or advancement of expenses provided for by Section 145 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled; and empowers the corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under Section 145.
 
The by-laws of the registrant provide, in effect, that to the extent and under the circumstances permitted by applicable law, including subsections (a) and (b) of Section 145 of the General Corporation Law of the State of Delaware, the registrant (i) shall indemnify and hold harmless each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a director or officer, or his testator or intestate is or was a director or officer of the registrant, against expenses, judgments, fines and amounts paid in settlement, and (ii) shall indemnify and hold harmless each person who was or is a party or is threatened to be made a party to any such action, suit or proceeding if such person is or was serving at the request of the registrant as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise.

 
2

 

 
Item 16. Exhibits
 
Exhibits —
 
 
1.1
 -
Form of Underwriting Agreement.
 
4.1(a)
 -
Form of Pooling and Servicing Agreement.
  4.1(b)  -
Form of Mortgage Loan Purchase and Sale Agreement.
 
5.1
 -
Opinion of Cadwalader, Wickersham & Taft LLP with respect to legality.
 
8.1
 -
Opinion of Cadwalader, Wickersham & Taft LLP with respect to material tax matters (included with Exhibit 5.1).
 
23.2
 -
Consent of Cadwalader, Wickersham & Taft LLP (included with Exhibit 5.1).
 
24.1
 -
Power of Attorney( included on signature page to this Registration Statement).
 
_________________________


 
Item 17. Undertakings
 
(a)  The undersigned registrant hereby undertakes:
 
(1)  To file, during any period in which offers or sales are being made of the securities registered hereby, a post-effective amendment to this registration statement:
 
(i)  to include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
 
(ii)  to reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement.  Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
 
(iii)  to include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement;
 
provided, however, that:
 
(A)           Paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if the registration statement is on Form S-8 (17 CFR § 239.16b), and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) that are incorporated by reference in the registration statement; and
 
(B)           Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the registration statement is on Form S-3 (17 CFR § 239.13) or Form F-3 (17 CFR § 239.33) and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or
 
 
 
3

 
 
 
is contained in a form of prospectus filed pursuant to Rule 424(b) (17 CFR § 230.424(b)) that is part of the registration statement.
 
(C)           Provided, further, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is for an offering of asset-backed securities on Form S-1 (17 CFR § 239.11) or Form S-3 (17 CFR § 239.13), and the information required to be included in a post-effective amendment is provided pursuant to Item 1100(c) of Regulation AB (17 CFR § 229.1100(c)).
 
(2)  That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
 
(3)  To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
 
(4)  That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
 
(i)  each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement;
 
(ii)  each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; and
 
(5)    That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to the registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
 
(i)   any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
 
(ii)  any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
 
 
 
4

 
 
 
(iii) the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
 
(iv)  any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
 
(b)  The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
 
(c)  The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
 
(d)  Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
 
 

 
5

 

 
SIGNATURES
 
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 2nd day of November, 2011.
 
  BANC OF AMERICA MERRILL LYNCH COMMERCIAL MORTGAGE INC.  
       
       
       
 
By:
/s/ Michael J. Mazzei  
   
Michael J. Mazzei
 
   
Director and President
 
 
Each of the undersigned directors and officers of Banc of America Merrill Lynch Commercial Mortgage Inc. hereby severally constitutes and appoints David S. Fallick and Leland F. Bunch, and each of them as agents and attorneys-in-fact of the undersigned, in any and all capacities, with full power of substitution, to sign any and all pre- or post-effective amendments to this registration statement, any subsequent registration statement for the same offering which may be filed pursuant to Rule 462(b) under Securities Act of 1933, as amended, and any and all pre- or post-effective amendments thereto, and to file the same with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said agents and attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each said agent and attorney-in-fact, or any of them, may lawfully do or cause to be done by virtue hereof.
 
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons in the capacities and on the dates indicated:
 
SIGNATURE
TITLE
DATE
     
     
/s/ Michael J. Mazzei
Michael J. Mazzei
Director and President (Principal
Executive Officer)
November 2, 2011
     
     
/s/ David S. Fallick
David S. Fallick
Director and Vice President
November 2, 2011
     
     
/s/ John M. Gorman
John M. Gorman
Chief Financial Officer and
Treasurer (Principal Financial Officer)
November 2, 2011

 
 

 
 
 
EXHIBIT INDEX
 
Exhibit Number
 
 
 
1.1
 -
Form of Underwriting Agreement.
 
4.1(a)
 -
Form of Pooling and Servicing Agreement.
  4.1(b)  -
Form of Mortgage Loan Purchase and Sale Agreement.
 
5.1
 -
Opinion of Cadwalader, Wickersham & Taft LLP with respect to legality.
 
8.1
 -
Opinion of Cadwalader, Wickersham & Taft LLP with respect to material tax matters (included with Exhibit 5.1).
 
23.2
 -
Consent of Cadwalader, Wickersham & Taft LLP (included with Exhibit 5.1).
 
24.1
 -
Power of Attorney( included on signature page to this Registration Statement).
________________________