adhere to its schedule and receive "Scheduled Payments" on a Distribution Date will largely
depend on the level of prepayments experienced by the related Mortgage Loans.
Each PAC Class exhibits an Effective Range of constant prepayment rates at which such
Class will receive Scheduled Payments. That range may differ from the Structuring Range used
to create the related principal balance schedule. Based on the Modeling Assumptions, the
initial Effective Ranges for the PAC Classes are as follows:
Initial Effective Ranges
PAC Classes
PA ........................................................................................
100% PSA through 500% PSA
PB ........................................................................................
100% PSA through 500% PSA
PC ........................................................................................
89% PSA through 500% PSA
PD ........................................................................................
63% PSA through 500% PSA
The principal payment stability of the PAC Classes will be supported by the Support
Classes.
If all of the Classes supporting a given Class are retired before the Class being
supported is retired, the outstanding Class will no longer have an Effective Range and
will become more sensitive to prepayments on the related Mortgage Loans.
There is no assurance that the related Mortgage Loans will have the characteristics assumed
in the Modeling Assumptions, which were used to determine the initial Effective Ranges. If the
initial Effective Ranges were calculated using the actual characteristics of the related Mortgage
Loans, the initial Effective Ranges could differ from those shown in the above table. Therefore,
even if the Mortgage Loans were to prepay at a constant rate within the initial Effective Range
shown for any Class in the above table, that Class could fail to receive Scheduled Payments.
Moreover, the Mortgage Loans will not prepay at any constant rate. Non-constant prepay-
ment rates can cause any PAC Class not to receive Scheduled Payments, even if prepayment
rates remain within the initial Effective Range, if any, for that Class. Further, the Effective Range
for any PAC Class can narrow or shift over time depending on the actual characteristics of the
related Mortgage Loans.
If the related Mortgage Loans prepay at rates that are generally below the Effective Range
for any PAC Class, the amount available to pay principal on the Securities may be insufficient to
produce Scheduled Payments on the related PAC Class, and its Weighted Average Life may be
extended, perhaps significantly.
If the related Mortgage Loans prepay at rates that are generally above the Effective Range
for any PAC Class, its supporting Classes may be retired earlier than that PAC Class, and the
Weighted Average Life of the PAC Class may be shortened, perhaps significantly.
Assumability
Each Mortgage Loan may be assumed, subject to HUD review and approval, upon the sale
of the related Mortgaged Property. See "Yield, Maturity and Prepayment Considerations
Assumability of Government Loans" in the Base Offering Circular.
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