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Item 2.03
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Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
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The Certificates were issued pursuant to
the Pooling and Servicing Agreement. The Certificates consist of classes (each, a “Class”) designated as the
Class A-1, Class A-4, Class A-5, Class A-SB, Class X-A, Class X-D, Class A-S, Class B, Class C, Class D, Class E, Class F-RR and
Class R Certificates.
The Certificates represent, in the aggregate,
the entire beneficial ownership interest in the Issuing Entity. The primary assets of the Issuing Entity are the Mortgage Loans,
which have an aggregate outstanding principal balance as of the cut-off date for the Securitization of approximately $727,153,745.
The assets of the Issuing Entity are the sole source of distributions on the Certificates. The Certificates do not represent obligations
of Arbor, the Depositor, the Mortgage Loan Seller or any other affiliate of Arbor.
The Mortgage Loans acquired on the Closing
Date were purchased by the Depositor from the Mortgage Loan Seller. Each of the Mortgage Loan Seller and the Depositor is a consolidated
affiliate of Arbor. The Mortgage Loan Seller made certain representations and warranties to the Depositor with respect to the Mortgage
Loans. If any such representations or warranties are materially inaccurate, or if any document required to be a part of the mortgage
file is missing or defective in a material way, the Depositor or another party to the Pooling and Servicing Agreement may compel
the Mortgage Loan Seller to repurchase the affected Mortgage Loans from it for an amount not exceeding par plus accrued interest
and certain additional charges, if then applicable. As Arbor intends that its only remaining interest in the Mortgage Loans will
consist of the rights and obligations of the Primary Servicer, the ownership of the Class F-RR Certificates by the Retaining Party
(as defined below), and certain non-binding consultation rights of the Risk Retention Consultation Party (as defined below), each
as described below, Arbor intends to account for the Securitization as a sale of the Mortgage Loans.
Arbor Multifamily Lending, LLC, a
wholly owned subsidiary of Arbor (the “Primary Servicer”) will act as a subservicer of the Mortgage Loans
for the Master Servicer pursuant to a primary servicing agreement between the Primary Servicer and the Master Servicer. The
Primary Servicer will be entitled to a primary servicing fee and a portion of certain other fees payable, or permitted to be
collected from borrowers under the Mortgage Loans, pursuant to the Pooling and Servicing Agreement.
In general, distributions of principal and
interest and distributions in reimbursement of realized losses on the Class A-1, Class A-4, Class A-5, Class A-SB, Class X-A and
Class X-D Certificates (except that the Class X-A and Class X-D Certificates are only entitled to distributions of interest) will
be senior to all distributions of principal and interest and distributions in reimbursement of realized losses on the Class A-S,
B, C, D, E and F-RR Certificates; distributions of principal and interest and distributions in reimbursement of realized losses
on the Class A-S Certificates will be senior to all distributions of principal and interest and distributions in reimbursement
of realized losses on the Class B, C, D, E and F-RR Certificates; distributions of principal and interest and distributions in
reimbursement of realized losses on the Class B Certificates will be senior to all distributions of principal and interest and
distributions in reimbursement of realized losses on the Class C, D, E and F-RR Certificates; distributions of principal and interest
and distributions in reimbursement of realized losses on the Class C Certificates will be senior to all distributions of principal
and interest and distributions in reimbursement of realized losses on the Class D, E and F-RR Certificates; distributions of principal
and interest and distributions in reimbursement of realized losses on the Class D Certificates will be senior to all distributions
of principal and interest and distributions in reimbursement of realized losses on the Class E and F-RR Certificates; distributions
of principal and interest and distributions in reimbursement of realized losses on the Class E Certificates will be senior to all
distributions of principal and interest and distributions in reimbursement of realized losses on the Class F-RR Certificates. The
Class R Certificates represent the “residual interest” under real estate mortgage investment conduit tax regulations
and are generally entitled to any amounts remaining on any distribution date after distributions to the other Classes of Certificates.
No distributions are expected to be made on the Class R Certificates.
As among the Class A-1, Class A-4, Class
A-5, Class A-SB, Class X-A and Class X-D Certificates, such Classes will, first, be entitled to distributions of interest pro
rata (based on their respective interest entitlements), second, (a) prior to a defined cross-over date, to the Class A-SB Certificates
to reduce the Class A-SB Certificates to a scheduled principal balance, then, sequentially to the Class A-1, Class A-4, Class A-5
and Class A-SB Certificates, in that order, in each case until the principal balance of such Class is reduced to zero and (b) after
such cross-over date, to the Class A-1, Class A-4, Class A-5 and Class A-SB Certificates, pro rata (based on their respective
principal balances), until the principal balance of each such Class is reduced to zero and, third, to the Class A-1, Class A-4,
Class A-5 and Class A-SB Certificates, pro rata (based on the amount of realized losses allocated to such class), in reimbursement
of realized losses previously allocated to such Class and interest thereon.
In general, realized losses on the Mortgage
Loans will be applied to reduce the outstanding principal balances of the Classes of Certificates as follows: first, to the Class
F-RR Certificates, second, to the Class E Certificates, third, to the Class D Certificates, fourth, to the Class C Certificates,
fifth, to the Class B Certificates and sixth, to the Class A-S Certificates, in that order, in each case until the principal balance
of such Class has been reduced to zero. Thereafter, any realized losses will be allocated pro rata (based on their respective
principal balances) to the Class A-1, Class A-4, Class A-5 and Class A-SB Certificates until the principal balance of each such
Class has been reduced to zero.
The Issuing Entity may be terminated at
the option of the Special Servicer, the Master Servicer or the holder of the Class R Certificates (in that order) at such time
as the aggregate principal balance of the Mortgage Loans is less than 1% of the aggregate principal balance of the Mortgage Loans
on the cut-off date.
The Mortgage Loan
Seller, in its capacity as the “retaining sponsor” for purposes of Regulation RR under the Securities Exchange
Act of 1934, as amended (the Mortgage Loan Seller in such capacity, the “Retaining
Sponsor”), has agreed to comply with the risk retention requirements of Regulation RR with respect to the
Securitization by causing Arbor Realty SR, Inc. (the “Retaining
Party”), to retain the Class F-RR Certificates with an initial principal balance of $63,626,745. The Class F-RR
Certificates represented not less than 5% of the fair value of the Certificates (excluding the Class R Certificates) as of
the Closing Date. However, if Regulation RR is modified or repealed, the Retaining Sponsor may choose to comply (or to cause
the Retaining Party or another “majority owned affiliate” (as defined in Regulation RR) of the Retaining Sponsor
to comply) with Regulation RR as then in effect. The Retaining Party is a wholly-owned subsidiary of Arbor and a
“majority-owned affiliate” of the Retaining Sponsor. The Retaining Party has appointed the Retaining Sponsor as
the initial risk retention consultation party under the Pooling and Servicing Agreement (in such capacity, the “Risk
Retention Consultation Party”). The Risk Retention Consultation Party has certain non-binding consultation
rights with respect to servicing “major decisions” (as defined in the Pooling and Servicing Agreement) that may
arise with respect to a Mortgage Loan.