USA Capital

Direct Lender Potential Liability for Prepaid Interest Explained

(Dec. 5): Some Direct Lenders have asked what their total potential liability might be for "Prepaid Interest" (as defined in the Debtors' Third Amended Joint Plan of Reorganization -- the "Plan").

The monthly "Check Statement" that USA Commercial Mortgage Company ("USACM") has mailed out to each Direct Lender in connection with loan payments collected in the month of September 2006 shows the amount due to or from the Direct Lender in the last column (under the heading "Total Due to (from) Investor") on each loan. If the number in the last column is negative, shown with parentheses ($$), as to any particular loan, that means there is Prepaid Interest on that loan.

This amount (which is reduced as payments are collected from the borrower) is the total, maximum amount of Prepaid Interest that the Direct Lender may owe on the subject loan, regardless of whether the Plan is confirmed by the Bankruptcy Court, and regardless of who the loan servicer may be if and when the Plan is confirmed. Please note that this is a total amount, not a monthly amount.

This Prepaid Interest amount may be reduced further by netting, shown on the monthly Check Statement as amounts not paid to the Direct Lender on performing or repaid loans.

If the Plan is confirmed, the netting of the Prepaid Interest against performing or repaid loans will continue until the Prepaid Interest has been collected from either the borrower or from netting. If the Prepaid Interest has not be repaid within two years, you may be asked to pay the remaining Prepaid Interest to the USACM estate to be used to pay creditors (not only those with diverted principal).



Direct Lender Potential Liability for Prepaid Interest Explained (Dec. 5): Some Direct Lenders have asked what their total potential liability might be for "Prepaid Interest" (as defined in the Debtors' Third Amended Joint Plan of Reorganization -- the "Plan"). The monthly "Check Statement" that USA Commercial Mortgage Company ("USACM") has mailed out to each Direct Lender in connection with loan payments collected in the month of September 2006 shows the amount due to or from the Direct Lender in the last column (under the heading "Total Due to (from) Investor") on each loan. If the number in the last column is negative, shown with parentheses ($$), as to any particular loan, that means there is Prepaid Interest on that loan. This amount (which is reduced as payments are collected from the borrower) is the total, maximum amount of Prepaid Interest that the Direct Lender may owe on the subject loan, regardless of whether the Plan is confirmed by the Bankruptcy Court, and regardless of who the loan servicer may be if and when the Plan is confirmed. Please note that this is a total amount, not a monthly amount. This Prepaid Interest amount may be reduced further by netting, shown on the monthly Check Statement as amounts not paid to the Direct Lender on performing or repaid loans. If the Plan is confirmed, the netting of the Prepaid Interest against performing or repaid loans will continue until the Prepaid Interest has been collected from either the borrower or from netting. If the Prepaid Interest has not be repaid within two years, you may be asked to pay the remaining Prepaid Interest to the USACM estate to be used to pay creditors (not only those with diverted principal).
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