~ ilA9HINQ1'q~J 96RVIC$ BUABAU~ INC.

S(BJECf: P'irat Nat' 1. Bank of Fromont (970B2)

`,~ INDBX CATEaOliY:036 110 130

K98 FILE I: 111885011

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PUBLIC AVAILABILIT7 AATB: 11-18-85

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"action ~ C`-~~S~CC~ 194oC~ 3(c)~( 5) ~ --- ;... _

0!lice of th• Chief Co~unael "'"._ •.~ ~..--..._, ,. ,~;..,, ._--.

~; Diviaio~ of Cocporetio~'-' ~.n.~ns.%~.__._._..T....:..,.r:;-.:.. ,...... ....:.. ,.: r., S~curitiea and axchan~~u~l~ramisaion :..,•.,.: .

W~~hington, D.C. 20S 9~~ii~~t,ili~y, .~~~~/~'S

Rat first National Bank of Fremont -- Mo~t~,~ 0~ ~-.,..C~-.

Sacked Pass-throw h C~rtiEicates pEp'~?r S~~~rl~~.s•J

G~nt1~A~n:

W ar• acting as counsel to the Eicat National Bank of

lr~mont, Indiana (•lremont•), in connection with its proposed

ar~ation o! an investment trust (thy 'Trust') which will hold

debt obligation• ~vid~nc~d by promissory notes and secured by

liret mo[tgaq~s on or d~~da of truck conveying real pcoperty

(the 'Mort9age Loana•)t and the pcoposed Bale of one oc more

socies of non-r~desmabl• pass-through certificates (the

'C~rtificat~~•), Lech o! which will evidence a fractional

undivided inttr~st in the Mortgage Goana in th• Trust. The

atructur• o! the Trust and certain terms oL the proposed sale

o! the Certilicet~a at• mor• lolly d~accibed herein. On behalf

o! lr~oont, w• are a~~kir►q a •no-action• litter fro• the

Com~iasion conlirminq our opinion that:

(1) th• Certilicat~• will b~ exempt from the registration

t~quirem~nta o! th• S~curiti~s 1►ct o! 1933 by reason

at th• provisions o! Section 3(a)t2) thereot~ and

th~r~tor~ also ~x~mpt from the provisions of the Trust

Ind~ntur• 1►ct of 1939 by r~a~on o! the provisions of

Section 30~ia)(~)t]►) thec~oi.

(2) ~h~ Truit is exempt troy the c~giatration requirements

of the Inv~atm~nt Company Act o! 1910 by mason of the

provlsiona of 3~ction 3(c)tS)(C) ther~oE.

t

tai
Ottic~ of the Chief Counsel

page ~ U(;U(i~V

July 17, I98S

lr~mont is a commercial bank which i~ engaged ae part of

its burineaa in kh~ origination and servicing of ~oana secured

by mottgage~ on commercial and residential teal estate. !►remont propoa~s to establish the Trust with San Jose Tci-County Cank

(thy •Tru~t~e•), en entity related to Pr~nont through coa~mon

own~rahip, as trustee, and to assign to the Trustee, without

recouroe, one oc more Mortgag• Loans in their entirety.

1►lt~r assigning th• lloctgage Loans to the Trust, Fremont

will olt~r and sell C~rtiticate• which will represent an

undivided lracti~nal intoreat in the Mortgage Loans assembled

in the Trust. Th ~ Certificates will be in a forte suitable for

recording and will be offered and sold only to institutional

investo r . 1►r~mont intends to retain the right to service the

Mortgage Loan• pursuant to a written Service Agreement between

th• Tru~tae and Fremont. The !ee charged by Fremont !oc this

s~rvic• (•Service Fey•? will be the same as that charged to

u~ie~la~~~l e~i~itier for ~imilae ~~rvices.

Thy Trust will conduct no independent investment activity

o! any kind. 7►iter she Certificates are issued and sold, no

Mortgage Laana will be added to, withdc~awn from, or substituted

for those originally assigned by Fremont. All payments of

principal and interest on the llortgaq• Loans, except for the

Service l~~, will be passed through to the Certificate hol,ers.

While each o! the Mortgage Loans in the Trust will be

secured by a first mortgage or other lien on or interest in real

estate, Fremont a~lao int~nda to issue an irrevocable stand-by

letter o~ credit (the 'Utter of Credit•) to secure repayment

of each Mortgage Y.oan. Th• Truite• will b• authorised to draw

upon the Utter of Credit within 10 days o! any date on which

an inaufticient paym~~t is mad• to the Trustee to the extent of

the dit~~renc~ b~tw~~n the amount paid into tho Trust by the

mortgagors and the amount dui to the C~rtiticate holders.

Payment by Pcoaont under the Letter ~t Credit will not relieve

the d~taultinq wortyagor ~ro~ its continuing obligation to pay

the d~fault~d principal and int~r~~t in accordance with the

t~rma o! the particular Mottgaq• Loan. Mor~ov~r, to the fYt~nt

that the Trusty• draws upon the L~tt~r o! Credit to make any

payment to the C~rtificat• holdaca, lr~mont will be aubrogated

to the Trust~~'s right to proceed against a defaulting

mortgagor to recovetr the amount paid pursuant to its obligation

und~c the Utter of Credit.

r
Offic• o! the Chip! Counrel

Pad• 3

July 17, 19AS

UUUU17

Th• C~rtiticet~a will be issued io serial form, and all

principal end inr~r~st payments received by the Trust, after

payment the 8~rvic• l~~, will be pawed through to the Certiticat• hold[• up to the lull amount o! each Certiticat~, in th•

order of isruanc• o! the C~rtilic~te~. !or example, a 20-year

Moctgaq• Loan, paying interest a~mi-annually and principal

annually, ~iyht b• divided into a~v~ral separate series of

C~ctilicat~a. Ont a~riaa might c~pcesent the right to c~ceive

all principal pay~~nta !or th• iirat Liv• years o~ the hortgaqe

Loan and a portion of th• inter~at paid during that period. At

th• •nd o! th• !filth y~~r, this m~ri~a o! Certilicatea would b~

c~de~s~d and r~tir~d by th• Trustee. J►r~other a~rieo of Certificat~a ~i9ht r~prea~nt the right to rec~iv~ principal payments

in y~ara six through litt~en, together with a portion of the

intecQ~t peid in th• tir~t live years. This second aeries

would b~ c~de~~~d and r~tirtd by the Tcust~• at the •nd of year

titteen. ~ !final aerie• of Certiticetea in this example would

clpc~s~nt the right to receive principal Qayments is years

•ixt~~n through twenty, together with a portion of the interest

paym~nt~ in v~ara on• through fifteen. The selling price of

each i~ri~s gay vary according to maturity. Alternatively, in

ord~t to result in a sal• of all of the Certificates at the par

value, th• int~reat on th• Mortgage Loans and thus the Certificatea might incresa~ !or the principal installments du• in

let~c years. In th• above example, the third series would have

a hiyh~c rate than th• tir~t two aeries. In any event, th•

C~rtiEicat~a will not b~ r~d~~mabl~ at the option of the holder

ther~ot.

Bastd on the lor~goinq, it is our opinion that the CertiEicat~~ quality roc •x~mplion from th• r~giatration cequire~ents

of the S~cuciti~a.Act of 1933 tth~ •1933 pct') by virtue of

Section 3ts)(2) th~c~o~, b~caus• they a « securities which are

•qu~rant~~d Dy Ia] bank.' Although for purposes o~ the banking

laws the L~tt~r o! Credit will not t~c~nically establish a

guaranty ~~l~tionahip, th• Staff, in taking a previous no-action

position, •yre~d with the asa~rtion that the terms •guarantee'

~ncompass~a ~o~~thiny ~or~ than a ~~r• guaranty in th• legal

a~n~~. Ch~~ical Banks Lo~aa i N~ttl~ton Mortgage Investor•

(71-72 T.B.), lid. Sic. L. Rip. (CCB) 1 78,543 (Nov. 1, 1971).

in Ch~~ical Bank, the Stat! was apparently conc~rn~d with the

applicant'• aaa~rtion that !oc pucpoata of the application of

the •tcurities l~w~, th• term 'quara~t~~• re~~ra to all

arranq~m~nt~, including bank-isau~d l~tt~rs o~ cr~dlt, whereby

one p~raon agr~~a to a~~ to th• paym~~t ot, or in c~spect to, a
UUUUlf~i

0lEicv o! the Chi t Counsel

Paq~ ~ July 17, 1985

a~cucity i~au~d by another, without r~gard to whethec a technical guaranty c~lationahip •xiat~ b~twe~n the person aad th•

ia~u~r. In it• r~apon~• eo another no-action request on th•

•a~~ ie~u~, the Sta!! turth~c concluded that while the ua• of

the !~c• •9u~cant~~• in ita technical l~gal a~na• do~a not

strictly apply to l~tt~r• of cc~dit, the ter• should b• •int~rpr~t~d to cover the practical r~aliti~a of the aituatio~'.

gnit~d California Bank, I70-71 T.B.) led. Sic. L. app. (CCP)

~ 7A,10` lMacch 16, 1971). S~• alao Merrill Lynch, pi~rc~,

l~nn~r i eAith, ina. (A1-62 ~.~d. Sic. L. Rip. (CCe)

~ 77,089 (Nov. 4, 1981)i Banco d~ pond lB~Qt. 2T, 1980)i

Golde~e, Bacha i Co., (July 10, 1970).

Yn rvo r~c~nt l~tt~r~, the Start took a favorable no-action

position with r~sp~ct to the ia~uanc• of eortyay~-backed paasthrouyh c~rtiticat~a which rr~r• entitled to the b~n~tit o!

bank-iaau~d l~tt~c~ o! cc~dit without c~giatrstion uad~c the

1933 11ci. S~• Merrill Lynch end Banco d~ pond . Th• fact that

in this in~Ea`nc• the L~tt~r o! Credit will b~ iasu~d to secure

r~pay~a~nt of the Mortgay~ Loan• and not the dic~ct payer*nt of

the amounts dui under the C~rtificat~s should not alter that

r~ault. 8~~~, as in the two prior situations, the ltortgaye

Loans will b~ the sole aourc~ o! payaent of all aoounta due

under th•~C~rtiticat~e, and all amounts paid into the Trust by

the a~ortgayor, l~aa the S~svic• F~~, will be paid ov~c to the

C~rtiticat• hold~ra. lr~Aont•a L~tt~r o! Credit also will

•mpow~c the Trust~~ to draw •uftici~nt funds to oaks up any

detici~ncy in the a~aount• paid into the Trust by the aortgagor.

8~nc~, the 'practical c~aliti~~• o! the guaranty o! the paym~nt~ to b~ n~ad• by the mortgayor her• are the precis• equival~nt o! the guaranty o! the payment of the amounts dui under

the C~ctilicat~a in the prior situations whir• tho Stan has

talon a no acr.xon position with r~sp~ct to r~yistration under

the 19 3 Act. eaa~d on the lorRgoinq, it i• our opinion that

the C~rtiticat~s qualify as a~curiti~• quarant~~d by a bank and

are th~r~ior• ~x~~pt~d lco~ the c~giat~ation requicew~nta o!

the 1933 1►ct by the provisions o! Section 3(a)(2) th~r~ot.

8~ction 30~(a)(~)(A) o! the Trust ind~ntur• 1►ct o! 1939

(thy •1939 1►ct•) pcovid~• that any a~curity fx~apt~d trove kh•

provision• o! the 1933 J1ct by Section 3(a)t2) th~r~ot, is also

•x~mpt lco~ the provisions of the 1939 7►ct. Th~refor~, based

on our opinion that the C~rtiticat~a would b• ~x~~pt trove

c~yiitcation under the 1933 J1ct in r~lianc~ upon Section

3(a>(2) th~r~ol, w• lurth~r opine that the Cfrtiticatea will b•

•x~mPt fro• the provision• of the 1939 11ct in r~lianc• upon

Section 30~ta)t4)ll►) th~reot.
Ottic• of the Chip! Counsel

Pay• S

July 17, 1986

UUUV2y

Mith t~~pect to th• Investment Company Act of 19 0 (the

•19 0 Act'), it is our opinion that th4 Trust will not constitut• an 'inv~at~~nt company' a~ that tec~ is defined in Section

3(a)i3) o! the 19 0 Act, oc that the Tcust will b~ excluded

!ro■ the d~linition by 8~ction 3(c)(S)(C) ther~oi.

Thy propo~~d atructur~ of !h• Trust will not qualify it as

an 'inv~~t~~nt co~pany• a• that term is delin~d in Section 3(a)

o! the~19~0 pct. Th• p~rtin~nt portion o! Section 3(a) defines

an inv~ata~nt company as any issuer which •is engaged or

p~opoa~a to •nqa~• in the business of inv~atinq, c~investin9,

owning, holding, or trading in securities, and owns or proposes

to acquit• inv~stm~nt a~curiti~• having a value •xc~edinq ~0

p~c c~ntu~ o! the value of such i~au~r'• total a~a~ta (excluiiv• of gov~rn~~~t a~curities and cash ittsa) on an unconaolidat~d basis. 3fction 3(a)(3). Thy Trust will not tall within

this definition o! an in~~~~tment company, b~caua• it will not

'e~gaq~ in business•. 3se Merrill Lynch.

Th• Tcu~t will be a strictly paa~iv~ entity and will make

no inv~it~~nta or inve~tm~nt decisions. Once the Moctga9e

Loans are transferred to the Trust, it will be Lixad and no

other moctgaq• loans may b• added or d~l~ted. Funds received

by the Tcuat~~, ar the agent of the C~rtiticate holders, will

be held in the Tcu~t toc a brie! p~ciod prior to their di~-

tribution to the C~ctiticat~ holders. The Mortgag~ Loans will

be serviced by the originator and the Trust will require no

employees, oftic~rs, board of directors, or investment

adviazra. Th• Trust will •~rv• m~c~ly as a rec~ptacl• into

wF,ich the Mortgaq~ Loans will be placed.

Even i~ the Trust is conaid~r~d to b• engaq~d in business,

the Trust would b• ~xclud~d from the d~~:ni'tion of an inv~stment co~pany by Section 3tc)tS)(C) o! the 19 0 Act ar a p~rso~

with no r~d~~mabl• a~curiti~~, face amount certiticat~s o! the

inatallm~nt type or periodic payment plan c~rtificat~a outatandinq, who i~ primarily engaged in the buain~as of pucchaaing oc oth~rwis~ acquiring moctgaq~• end other lien• on and

int~r~at• in real ~atat~. The Tcust'a entire portfolio will

con~iat o! promissory not~a aecuc~d by first mortgag~a on or

deed• of trust conv~yinq specific parc~l~ o! real estate and

lmF~ov~m~nts thec~o~.

Thy positions edvocat~d herein have b~~n advanced on behalf

o! similar mortgage participation pools in situations whir• eh~

5tatf has agr~~d to take no action with c~spect to the creation

t
Oftic• o! the Chief Counsel

Paq• ~

July 17, 1965

VUU(~~:U

o! th• pools without c~yi~tc~tion under the 19 0 Act. 5~~,

Merrill Lynch, Pi~cc~, ~~nn~c i S~aith, Inc., (01-81 T.e:T-r.e.

Sic. L. Rip. (CCIi) 1 77,089 (liov~~b~c 1, 19A1)t 80~~ Savinq~

and ~.o~n Aa~oaiatian, f61 T.s.~ ~~d. Sic. L. lt~p. (CCH)

7 76,70 iOctob~r 16, 19e0).

oxs~d on th• tor~yoinq, w~ c~sp~cttully r~qu~at tbat th•

8tait r~cotu~nd to the Co~la~lon that it tak• no action to

entocc• th• 1933 11ct, 1939 1►ct, or th• 1940 11ct against tr~wont

oc the Tru~t~~ in connection with th• transaction• a• d~acrib~d

h~r~in.

ii any turth~c in~oc~ation is s~quir~d, pltaa~ contact the

un~i~r~ign~d.

Very tculy youca,

ICE MILLER 4NADI0 i YJ1

St~ph~n ck a

~JHst[

cc: G~orq~ McNaughtoR, Eaq.

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1933 1►ct/3(a) t 2) 1939 11ct/30~(a) (~) (A)

1940 Act/3tc) (S) (C1

hr. Girard 8. Dilior~ Divialon of Corporation linance

Stop 3-11

S~curiti~a and dxchanq• Commission

Washington, D.C. ZOS~9-100

R~: licat 

ass-t 

National 

rou 

Bank of Tremont -Mort a ~ Backed Cert Cates

Deac Mr. Dilior~:

'r'

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L

:l

This l~tt~r modi~i~+~ and supplements our letter of July 17,

sta!! 

1985, 

o! 

r~qu~stinq, 

the Division amo~q 

o! 

orh~c 

Corporation things, the corcurre~ce of the FinancQ (•Staf!•) in our opinion that the propoa~d olt~r and sale of one or moc• s~ri~s o~ non-r~d~~mabl• 

evide~;cing undivided 

pass-through c~rtiticates ('Certi~icatea•)

a~cur~d :~y first moctgey~a lydctional int~ceats in debt obligations on or duds of trust conv~yinq real prop~cty ('Moctgage Loans') held in a trust (•Trust') !or the b~n~::! ..L th• h~ld~ra o! th• Certiticat~a 

holdero') ac• exempt (•Certiticmte- from r~yistration under the S~curitiea 1►ct o! 1933 (•1933 J►ct') under Section 3(a) (2) th~reol. You have r~qu~st~d ~urth~r information 

o! the propoa~d transaction with r~ap~ct to several aspects r~latiny to the orga~i:anon o! the Pirst National Bank o~ lr~mont (Indiana) (•Bank•), which pro- poaes to originat~ the Mo~tgaqo Loans and trans~~~ them to the Trust, and th • Bank's affiliation with San Joae Tri-County Bank ('Tcuat~~'), the p[opoa~d trustee o! the Truatj the issuance
Mr. O~rard 8. DiPior~

1►uquat 18, 19AS 

Pay• 1

VUUu'~'~

o! 

and 

cr~clit 

a~l~ o! 

transaction 

the C~ctilic~t~~~ and the •tcuctura of the l~tt~r

th• payra~nts to 

by which th• ea~k propoa~s to quacant~~ b~ •~d• to C~rtiticat~hold~ra.

siona 

Thy 

o! 

bank 

the 

is 

National 

a rational bank which is subject ko th• provithe •up~rviaion o! th• 

~~nk 

Oific~ 

Act and is currently operating under

t~ncy. Th• Truat~~ 

of eh• Co~aptcoller of tht Cur8tat• of Illinois. 

is a bank chart~r~d under th• laMs of the

banking anc', it i• oup~cvi~~d 

Its bua~.n~aa la substantially contin~d to

Lanka and Trust Coap~ni~~. by th• Zllinoia Cowwiaalonec of

•banks' as tb~t t~r~ i• 

Tb• sank and th• Trusty• are both

1►c t .

d~tin~d in Section 3(a)(2) o! the 1933

both 

Th• 

are 

sank 

controlled, 

and th• Truat~• ar• aitiliat~d •ntiti~a in that

•ons. AppcoYioat~ly 

directly or indirectly, by the aaa~ perth• sank acs oMn~d ~y 

76• o! the outat~ndiny coon ahar~s o!

•ppcoxi~at~ly 7~~ of the 

tht~• p~r~ona. Th~a~ aaA~ persons own

Banco, a bank holdi~.~ 

outstanding coemon ahar~s o! Ban Jose

appcoxi~at~ly 8S! o! the 

cosp~ny, the aaa~ta o! which consist of

subeit that this affiliation 

outatandiny ahar~~ o! the Trustee. W~

ability o! th• Section should hav• no ~tl~ct on th• availo! C~rtilicat~bo'td~ra 3ta)t2) ~x~mption because the int~r~sts

•quarant~~' o! a bank 

will b• ad~quat~ly prot~ct~d by th•

will b~ bound by th• 

as d~tin~d in the 1933 J►ct. Thy Tcuste•

which sill r~quir• 

t~c~a o! a trust ind~ntur• ('ind~ntur~•)

of Ct~dit'), which 

it to draw upon a lrtt~r of credit (•Letter

any int~c~at payment 

will 

dat• 

b• issued by the Bank, promptly it on

made by th• mortga9ors, th~c~ la a d~tici~ncy in th• ~ay~~~ts

which c~quir~ it to act 

and by q~n~cal principles of trust law

of the C~rtificat~hold~c~. 

in good faith and in the best interests

the holders o! a ap~cili~d Moc~ov~r, th• Znd~~tucs will permit

cipal balance of a ~~rie• p~rcantaq• of the outstanding pcinTruat~~'a action as 

of C~rtiticat~a to direct the d~sc~ib~d turth~r h~c~in.

raap~ct 

Thy Sts!! 

to the 

has 

•x~mption 

talon a favorably no-action position with

pcopoa~d ori9lnator-~Mttlor provided by Section 3(a)t2) whir• the

mortgaq• loan , the tcuat~~ 

o! a tcuat ~itabliah~d to hold

po~inq to pcovid• additional 

o! that trust and th• parson prowere the aam~ entity. ~i a~curity to the c~rtiticat~hold~rs

(l~tt~r o! credit) ~ P nc (S~pt. ~2, 1980)

credit) ~ and Waah~r~9t 

B 

~t 

nco 

~_~_[_a 

once Dec. 17, 1478) (l~tt~r of

an. ~~~ •v~r q~ i Loan Association o! lyi>> tagrR~m~nt to repurchase).

►.
....

Nr. G~r~cd 8. Di~lor•

1►u9u~t 26, ~ 4~S

Paq~ 3 •

Thus l~tt~r• •~~• to in!licat• that

th• trust~~, the quar~ntor and the

~ortgaq• papa-through trust should

•akinq the d~~~c~ination o! vh~th~r

Section 3ta) (2) o! th• 1l~3 1►ct is

(1l: v i,:~;~

th• r~lationihip bttw~~n

originator/atttlor of a

b~ giv~n little wtight in

the •x~~ption pcovid~d by

availably.

You lu~th~c cpu~~t~d additional inloraation witb c~ap~ct

to the i~auanc• +~~d gal• o! the C~rtificat~a. TA• C~ctiticate•

will b• la~u~d in •~ci~a and each •~ri~a will r~p«s~nt an

int~c~at in a p~rttcular Mortgaq~ Loan which will b• id~ntifi~d

on the l~c~ o! ~h• C~ctiticat~. it i• currently anticipated

that the C~[titicat~• will b~ iaau~d by the Truat~~ and sold,

on a b~rt ~L"~et• ba~ia, by Sua~~r~ ~ Cowpany, inc. ('Und~cwrit~c'), a bcokecaq• house with o!lic~s in tort Mayne and

indi~napolia, Indiaaa. Tb• C~rtilicat~a will b~ otf~r~d and

•old •xaluaiv~ly to •accr~dit~d inv~atora• as that tic• is

d~tin~d in i~ction 2(1S) of the 1933 Act. Th• Ood~rvrit~r will

r~c~iv~ a cow~ia~ion on each aal~ o! C~ctilicat~a, th• aeount

o! which Mill not •xc~~d the r~~~onabl• and cuato~ary eo~wiasion

paid to und~rMrit~ca q~n~tally !or ai~ilar transactions. Thy

sank do~a not a~ticipat• that th• Certiticat~s will b• rated or

grad~d by a r~cognis~d rating aq~ncy.

Hold~~s of th• C~ctiticat~• will b• •ntitl~d to th• b~n~fit

o! one or nor• icr~vocabl~ stand-by l~tt~ra of credit in the

full Lac• awount o! each Mortga9~ Loan to s~eur• the pay~wenta

to b~ wad• on the C~rtilicat~a. Each L~tt~c of Credit will be

iaau~d by the sink for th• account o! a ap~cilic mortgagor and

will ~~lat~ to th• particulas a~ri~• of C~rtiticat~a which

~~pr~a~nt i~t~c~st• in the Mortgaq~ Loan !or which that mortgaqoc i• c~apon~ibl~. Th• Truat~• will hold the L~tt~rs of

Credit !or th• b~n~fit of tli~ C~rtiticat~hold~rs and, i~ the

payw~nta o! principal oc int~c~at actually ~aad• by a particular

mortgagor ac• inaultici~nt Co m~~t the obliyationa under the

C~rtilicat~a c~pc~a~ntinq an int~c~st in th• d~tici~nt moctgagor'a Mortgaq~ Loan, the Truat~~ will b~ r~quir~d to draw upon

the L~tt~r of Credit to Lund the d~lici~ncy for th• b~n~tit of

th• C~ctiticatehold~ra whom C~rtiticat~a r~lat• to th• unde~-

paid Mortgaq• Loan.

This acranq•m~n~ ditt~ra !ro• that proposed in our l~tte~

of July 17, 1985, in at l~aat on• significant c~~p~ct. Ociginally, th• Bank had propoa~d that the L~tt~rs of Credit a~cur~

c~paym~nt o! the individual Mort9aq~ Loans, rather than th•

payment to b• made under th• C~rtiticat~a. w• ar9u~d that
Nr. C~rard •. Di/lore

Auquat 26, 1l~s

b~cau~~ th• tunda t~c~iv~d in r~payw~ne of th• Mortq~g• Loans

vac• to b• th• rol• •ouca~ of pay~~nt of ali ~~ounts ~u• undec

th• C~ctitic~t~s and all ~~ount• paid by th• woctq~gora, leas

tb~ cuato~acy ~~cvic• i~~, ++ould b~ paid ov~c to tb• C~ctilicst~hola~rra, the 'practical c~aliti~~• o! tn• quar~nty of the

c~payw~nt of tb• NocL9aq~ Loan• v~c~ tb~ pr4~ci~• •quiv~l~nt of

the quac~nty of the payr~nt of •amount• du• under the C~ctiticat~~. in c~apo~s• to co~e~nta c~c~iv~d by th• und~raiyn~d in

t~l~phon• conv~r~~tio~• with th• 8tiii, the dank nov ba,s d!t*c-

•in~d to la~u• the L~tt~r• of Credit to quacant~• the pays~nts

to b~ •~a~ und~c kb• C~tliticat~a dic~ctiy. A,~ pr~viourly

noted, th~a• L~et~ra of Credit ~i:l b• icr~vocabl~r and dcawa

und~~ the L~tt~ca of Credit vill b• conditioned only upon th•

r~c~ipt by the tank of notice tco• the Truat~~ that the a.ounts

c~c~iv~d ~r~ not autlici~nt to ■~~t the obligationa to tb~

C~ctilic~t~hold~ra of a p~rticul~r atria. is light of the

pcior no-action po~itiona diacuaa~d in our l~tt~r o! July 17,

1965, ia~uinq the L~tt~c~ of Cc~dit to back the Ce~titicat~s

dic~atly ai4nitia~ntly atr~ngth~na the dank'a pciac aas~ction

that the C~rtiticat~• quality •• socuciti~a 'quarant~~d by a

bAnk' and should th~c~tor~ b~ ~x~apt~~ !roe the provisions of

the 193 11et by virtu• o! section 3(a)!2) th~r~oi.

Th• ~xist~~c~ of the L~tt~r• of Credit will not impair the

C~rtiticat~hold~c~'ci~ht to ~ntorc~ tA• t~r~a of ~acb Mortgage

Loin again~t the ~octgaqor. Thy Ind~ntur~ will p~ovid• that

the hold~ca o! 2S1 in principal a~ouat o! the outstanding

C~ttiticat~a in a a~ri~• will b~ ~ntitl~d to direct the Tcust~~

to proc~~d to enforce i,ta rights under the woctgaq• to which

that s~ri~s r~lat~a or to draw upon the aQpropriat~ L~tt~r o~

Credit it the 'Pcuat~~ !ails to do ao. Conaequ~ntly, as in

N w (J►vail. May 11, 19A~) and G~~ Sevin

aao • Ave Au9uat 12, 1963), si~ilar ttaniact one in

which ~ ta!! advised that it would not r~cou~nd entocc~~~rtt

•coon, the C~etiticat~hold~~~, through their r~pc~a~ntativ~,

the TcuaC~~, will have dic~ct c~cours~ to the r~sp~ctiv~ aortq~gora without b~inq rpuir~d to join the flank as a party, and

eh~ ~ortgaqoca will b• u~abl~ to raise any action or inaction

by the Bank as a dst~n~• to •uch a clam.

a~~~d upon eh• loc~9oinq and upon our l~tt~r o! July 17,

1995, w• c~ap~ctiully c~Qu~st that the Statt not r~cow~~nd to

the Coau~iaaion that i~ take any ~ctio~ to •ntocc~ the 1933 1►ct,

the Trust Ind~ntuc~ Act of 1939, or the Inv~at~ent Coeprny Act

of 19 0 against the Sank, the Tcuat~~, or the Und~rarit~r in
Mc. C~rard 8. Di~ior•

~uqu~t T6, 19iS

i~aq~ .S UUVV~~

oonn~ctton with tQ• d~sccib~d tcanaactiona. t~caus• th• dank has d~liv~r~d a non-binding couit~nt to one ~octq~yoc in eo~n~ction with tb~ proposed tcanaaction, the sank would •ppce- ai~t• a r~~pona• to tb~ r~qu~at ~ad~ b~r~by as promptly a• ay b~ practic~bl~. If toc +any c~~+~on the itaii d~t~cwin~• that it i• unable to c~spond ta~or~bly to tdi~ cpu~st, w• c~ap~cttully c~qu~~t the opportunity to di~cua• vitb the Seaft tb• c~ason~ for rucb d~t~c~inatioe prior to the lasuanc~ by eA• staff of a locw~l r~apo~a~.

Thank you !oc your con~id~ration,

very truly youca,

1

t

s

S

ICs MILLi~ DONJIDIO i ~YJ1l1

Step ~n Hac n

s.ta: ~~

ccs C~orq• T. McNaughton, Esq.
~'

Octo►er 17, l~iS

w~owe or s~~~ arncx ar ar~~ aowsa t)~S~~t ~:~:l,

ilrc n~sc M.c~ant~t taM~ of rr..onc tcAe 'Wsk•)

Ino~owinq l~tta\ts ~t~d July 17, aM A~,rqust 26. 1f~S

~.

rrrd t1r t~cti ~~~sent,~d ~n yc~u~ lrtttrs and p~►ctta~lwtly a nottnq that

the tul ~cxnt o[ tht' fncip~l rd tnt~rNt pry~abl~ purwr~t to the

t~~titicats~! vi11 ~ 9w ~nt~d ty • b~nic t?~ra~gA tJk i~~r+o~ a[ l~tt~s

o[ cr~dlt ~irsotlr rtl~tioq to LAS C1~~tiftcat~s, this Oi~iaian will cwt

r~oawrR ~ rry ~ntotawrnt Action to tlw~ O~wirian !i t!~ rnk, in r~ll~

upon ~r cPinlan as a~o~r+a~l that tAs ~sNpttans pcovl~d by l~cticn ~(a) (2f

of eM► Maur f t!N 11ct d 1!~ 7 t tl~~ •1l1~ Act" 1 and Mct lon X01 t~ 1 t ~I U►~ ~ tA~ lfru~t ZndMtute 11ct of l~~`M Itb~ •1!~! Act•) u~ ~raiLbl.~, ~~w and

~tll• tAt a~tt/[io~l~a witAw~\ a~a~plianor with t1w~ r~gistr~tlan rpuir~entr

of w 1!» Act o~ qw 1 ! tlast i,~h of a crust l,~,cur. pur~+c m the 1!»

11ct . ~\

'!~ Mvl~ian of ~wst~nt Ilr~aga.~~nt has tp~r~t~ us Lo intocs you that,

an t1~ bni• of t1» t~cta pr~t~~1 in your Mara o[ ,fly 17, one

11~p~rt 2t. 1lts. that Division Mo~u~~~! not r~a~oirM any ~a~a+t act 1c~e~

to the Clo~wisria~ and~r tht 2nwstwi~~~t Oa■p~ Jrct of YiiO if, in ra1l~+o~

~ r~+r ~i~i~ .. oo~~..i cn.c au~; arc i• .,~.~aa ~.~a~.~ ..~c~.+ ~~~~ ts~ cc~

ct tlwt Jlct, cn. arcicto.tN are ~oL\ without rpiatraticn o[ t!~ 'host as ~n

inwsdrnt co~pstd. '~.

Nc~ thi• po~ttion i~ b~Md upon the \c~p~~nt~atians ~ m d~ cb■wissicn

in your Lstt~cs, !t Mould D~ rot~d that`~ae~y diit~rust facts a oonditia+s

~tght rpuin a ~ii[~ rrnt conclwion. ~Uith~r, th!• r~~pa+~e only ~~x~s

r~,~ oivi•ion~. po.ieia, on «+eo~o.w.nc .cc~tcn .na eo.. not purpo~rc o~ .s ea.

any 1pal aonclusicn a~ tht qu~stian~ p~~~~t~d.

sir~o~ctly,

1Mf~M M. I~ttt~loopi

sp.ct.l cb~,n..i