$2,278,460,210. Guaranteed REMIC Pass-Through CertiÑcates Fannie Mae REMIC Trust

Transcription

1 PROSPECTUS SUPPLEMENT (To REMIC Prospectus dated May 1, 2002) $2,278,460,210 Guaranteed REMIC Pass-Through CertiÑcates Fannie Mae REMIC Trust The CertiÑcates Original Final We, the Federal National Mortgage Association Class Group Class Principal Interest Interest CUSIP Distribution Balance Type Rate Type Number Date (Fannie Mae), will issue the classes of certiñcates GA(1) ÏÏÏ 1 $199,666,000 PAC 5.0% FIX 31394U P F 3 May 2023 listed in the chart on this page. GB(1) ÏÏÏ 1 216,684,000 PAC 5.0 FIX 31394UPG1 December 2030 DI(1)ÏÏÏÏ 1 174,013,000(2) NTL 5.0 FIX/IO 31394UPH9 December 2034 DO(1) ÏÏÏ 1 174,013,000 PAC (3) PO 31394U P J 5 December 2034 Payments to CertiÑcateholders GD(1) ÏÏÏ CS(1) ÏÏÏ ,376,000 49,899,333(2) PAC NTL 5.0 (4) FIX INV/IO 31394UPK UPL0 November 2035 November 2035 CO(1) ÏÏÏ 1 24,949,667 PAC (3) PO 31394UPM8 November 2035 We will make monthly payments on the certiñ- SH(1) ÏÏÏ 1 9,870,333 PAC (4) INV 31394UPN6 November 2035 cates. You, the investor, will receive US(1) ÏÏÏ 1 177,863,579(2) NTL (4) INV/IO 31394UPQ9 November 2035 SN(1) ÏÏÏ 1 86,578,863 TAC/AD (4) INV 31394UPR7 July 2035 interest accrued on the balance of your certiñ- ZB(1) ÏÏÏ 1 9,874,830 SUP 5.5 FIX/Z 31394U P S 5 August 2035 GO(1) ÏÏÏ 1 20,467,728 SUP (3) PO 31394UPT3 August 2035 cate (except in the case of the accrual classes), FZ(1) ÏÏÏ 1 97,561 SUP (4) FLT/Z 31394UPV8 August 2035 and SJ(1) ÏÏÏÏ 1 1,000,000 SUP (4) INV 31394UPW6 August 2035 SU(1) ÏÏÏ 1 248,780 SUP (4) INV 31394UPX4 August 2035 principal to the extent available for payment on VA(1) ÏÏÏ 1 6,079,496 SUP/AD 5.0 FIX 31394UPY2 November 2016 your class. VB(1) ÏÏÏ ZP(1) ÏÏÏ ,838,291 8,391,872 SUP/AD SUP FIX FIX/Z 31394UPZ UQA3 July 2029 November 2035 We may pay principal at rates that vary from time KF(1) ÏÏÏ 1 50,000,000 CPT (4) FLT 31394UPU0 November 2035 FX(1) ÏÏÏ 1 128,863,579 CPT (4) FLT 31394U P P 1 November 2035 to time. We may not pay principal to certain classes QA(1) ÏÏÏ 2 26,548,559 PAC/AD 5.0 FIX 31394UQB1 November 2035 for long periods of time. QZ ÏÏÏÏÏÏ ZQ ÏÏÏÏÏÏ ,441 4,682,971 PAC/AD SUP FIX/Z FIX/Z 31394UQC UQD7 November 2035 November 2035 F ÏÏÏÏÏÏ 2 98,544,805 PT (4) FLT 31394UQE5 November 2035 The Fannie Mae Guaranty S ÏÏÏÏÏÏ WAÏÏÏÏÏÏ ,544,805(2) 1,000,000 NTL PAC/AD (4) 4.5 INV/IO FIX 31394UQF UQG0 November 2035 November 2035 WZÏÏÏÏÏÏ 2 1,685 PAC/AD 4.5 FIX/Z 31394UQH8 November 2035 We will guarantee that required payments of prin- ZWÏÏÏÏÏÏ 2 177,539 SUP 4.5 FIX/Z 31394UQJ4 November 2035 cipal and interest on the certiñcates are distributed TA(1) ÏÏÏ 3 210,219,030 PAC 5.5 FIX 31394UQK1 March 2025 to investors on time. TB(1) ÏÏÏ 3 190,458,555 PAC 5.5 FIX 31394UQL9 November 2031 TI(1) ÏÏÏÏ 3 141,582,230(2) NTL 5.5 FIX/IO 31394UQM7 March 2035 TO(1) ÏÏÏ 3 141,582,230 PAC (3) PO 31394UQN5 March 2035 The Trust and its Assets TD(1) ÏÏÏ DL(1) ÏÏÏ ,808,185 74,472,000 PAC PAC FIX FIX 31394UQP UQQ8 November 2035 November 2035 The trust will own FQ(1) ÏÏÏ SQ(1) ÏÏÏ ,325,000 24,325,000(2) PAC NTL (4) (4) FLT INV/IO 31394UQR UQS4 November 2035 November 2035 Fannie Mae MBS and SR(1) ÏÏÏ 3 3,822,500 PAC (4) INV 31394UQT2 November 2035 DE(1) ÏÏÏ 3 30,927,500 PAC 5.0 FIX 31394UQU9 November 2035 SX(1) ÏÏÏ 3 68,307,857 SEG(TAC)/TAC/AD (4) INV 31394UQV7 November 2035 underlying RCR and REMIC certiñcates backed by Fannie Mae MBS. ZT(1) ÏÏÏ 3 5,000,000 SEG(TAC)/SUP 5.5 FIX/Z 31394UQY1 November 2035 FD(1) ÏÏÏ SY(1) ÏÏÏ ,077,143 15,000,000 SEG(TAC)/TAC/AD SEG(TAC)/TAC/AD (4) (4) FLT INV 31394UQW UQX3 November 2035 November 2035 DS(1) ÏÏÏ 3 34,320,000(2) NTL (4) INV/IO 31394URA2 November 2035 The mortgage loans underlying the Fannie Mae MF(1) ÏÏÏ 3 1,916,875 SUP (4) FLT 31394URC8 July 2035 MS(1) ÏÏÏ 3 1,150,125 SUP (4) INV 31394URD6 July 2035 MBS are Ñrst lien, single-family, Ñxed-rate loans. MA(1)ÏÏÏ 3 10,241,000 SUP 5.5 FIX 31394URE4 July 2035 MB(1) ÏÏÏ 3 1,692,000 SUP 5.5 FIX 31394URF1 November 2035 If you own certiñcates of certain classes, you can ex- DF(1) ÏÏÏ 3 34,320,000 CPT (4) FLT 31394UQZ8 November 2035 change them for the corresponding RCR certiñcates to be PO(1) ÏÏÏ 3 4,680,000 CPT (3) PO 31394URB0 November 2035 issued at the time of the exchange. The P, GC, C, CW, KA ÏÏÏÏÏÏ 4 10,508,000 SC/JMP/SCH/AD 5.0 FIX 31394URG9 January 2035 SP, FN, GK, GI, GM, QB, QI, QC, O, TC, D, DA, TG, NZ ÏÏÏÏÏÏ 4 16,451,210 SC/JMP/SUP 5.0 FIX/Z 31394URH7 January 2035 OZ ÏÏÏÏÏÏ 4 500,000 SC/NSJ/SUP 5.0 FIX/Z 31394U R J 3 January 2035 IT, TH, TM, TN, TP, IL, TQ, JS, CH, BA, BC, BM, IY Z ÏÏÏÏÏÏ 4 1,000 SC/SEQ 5.0 FIX/Z 31394URK0 January 2035 and BE Classes are the RCR classes, as further described in this prospectus supplement. IV(1) ÏÏÏÏ BD(1) ÏÏÏ 5 5 2,318,181(2) 25,500,000 NTL NAS/SEQ FIX/IO FIX 31394URL URM6 February 2024 February 2024 The dealer will oåer the certiñcates (other than the GA, IW(1) ÏÏÏ 5 6,954,545(2) NTL 5.5 FIX/IO 31394URN4 April 2024 BN(1) ÏÏÏ 5 76,500,000 AS/SEQ 5.0 FIX 31394URP9 April 2024 GB, DI, DO, GD, TA, TB, TI, TO and TD Classes) from BQ ÏÏÏÏÏÏ 5 18,000,000 SEQ 5.5 FIX 31394URQ7 November 2025 time to time in negotiated transactions at varying prices. R ÏÏÏÏÏÏ 0 NPR 0 NPR 31394URR5 November 2035 RL ÏÏÏÏÏÏ 0 NPR 0 NPR 31394URS3 November 2035 We expect the settlement date to be October 27, Fannie Mae initially will retain the GA, GB, DI, DO, (1) Exchangeable classes. (3) Principal only classes. GD, TA, TB, TI, TO and TD Classes. (2) Notional balances. These classes are interest only classes. (4) Based on LIBOR. Carefully consider the risk factors starting on page S-15 of this prospectus supplement and on page 10 of the REMIC prospectus. Unless you understand and are able to tolerate these risks, you should not invest in the certiñcates. You should read the REMIC prospectus as well as this prospectus supplement. The certiñcates, together with interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or any agency or instrumentality thereof other than Fannie Mae. The certiñcates are exempt from registration under the Securities Act of 1933 and are ""exempted securities'' under the Securities Exchange Act of UBS Investment Bank The date of this Prospectus Supplement is September 19, 2005

2 TABLE OF CONTENTS Page AVAILABLE INFORMATION ÏÏÏÏÏÏÏÏ S- 3 Group 3 Principal Distribution Amount S-29 INCORPORATION BY REFERENCE S- 3 ZT Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-29 RECENT DEVELOPMENTS ÏÏÏÏÏÏÏÏÏ S- 4 Group 3 Cash Flow Distribution REFERENCE SHEET ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S- 7 AmountÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-29 ADDITIONAL RISK FACTORS ÏÏÏÏÏÏ S-15 Group 4 Principal Distribution Amount S-31 DESCRIPTION OF THE OZ Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-31 CERTIFICATESÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-17 Z Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-31 GENERAL ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-17 NZ Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-31 Structure ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-17 Group 4 Cash Flow Distribution Fannie Mae Guaranty ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-18 Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-32 Characteristics of CertiÑcates ÏÏÏÏÏÏÏÏ S-18 Group 5 Principal Distribution Amount S-32 Authorized Denominations ÏÏÏÏÏÏÏÏÏÏ S-19 STRUCTURING ASSUMPTIONS ÏÏÏÏÏÏÏÏÏÏÏ S-33 Distribution Dates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-19 Pricing Assumptions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-33 Record Date ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-19 Prepayment Assumptions ÏÏÏÏÏÏÏÏÏÏÏ S-33 Class FactorsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-19 Structuring Ranges and Rates ÏÏÏÏÏÏÏ S-33 No Optional Termination ÏÏÏÏÏÏÏÏÏÏÏ S-19 Initial EÅective Ranges ÏÏÏÏÏÏÏÏÏÏÏÏÏ S-34 Voting the Group 4 Underlying YIELD TABLES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-35 REMIC CertiÑcates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-19 GeneralÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-35 COMBINATION AND RECOMBINATION ÏÏÏÏ S-19 The Fixed Rate Interest Only GeneralÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-19 Classes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-36 ProceduresÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-20 The Principal Only Classes ÏÏÏÏÏÏÏÏÏÏ S-38 Additional Considerations ÏÏÏÏÏÏÏÏÏÏÏ S-20 The Inverse Floating Rate Classes ÏÏÏÏ S-39 THE TRUST MBSÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-20 WEIGHTED AVERAGE LIVES OF THE THE GROUP 4 UNDERLYING REMIC CERTIFICATES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-43 CERTIFICATES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-21 DECREMENT TABLESÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-44 FINAL DATA STATEMENT ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-22 CHARACTERISTICS OF THE R AND DISTRIBUTIONS OF INTEREST ÏÏÏÏÏÏÏÏÏÏ S-22 RL CLASSES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-56 Categories of Classes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-22 CERTAIN ADDITIONAL FEDERAL GeneralÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-23 INCOME TAX CONSEQUENCES ÏÏ S-57 Interest Accrual PeriodsÏÏÏÏÏÏÏÏÏÏÏÏÏ S-23 U.S. TREASURY CIRCULAR 230 NOTICE S-57 Accrual ClassesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-23 REMIC ELECTIONS AND SPECIAL TAX Notional ClassesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-23 ATTRIBUTES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-57 Floating Rate and Inverse Floating TAXATION OF BENEFICIAL OWNERS OF Rate Classes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-23 REGULAR CERTIFICATES ÏÏÏÏÏÏÏÏÏÏÏÏÏ S-58 CALCULATION OF LIBOR ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-24 TAXATION OF BENEFICIAL OWNERS OF DISTRIBUTIONS OF PRINCIPAL ÏÏÏÏÏÏÏÏÏÏ S-24 RESIDUAL CERTIFICATES ÏÏÏÏÏÏÏÏÏÏÏÏ S-58 Categories of Classes and Components S-24 TAXATION OF BENEFICIAL OWNERS OF RCR CERTIFICATES ComponentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-25 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-58 Principal Distribution AmountÏÏÏÏÏÏÏ S-25 GeneralÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-58 Group 1 Principal Distribution Amount S-26 Strip RCR Classes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-59 FZ Accrual AmountÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-26 Combination RCR Classes ÏÏÏÏÏÏÏÏÏÏÏ S-60 ZB Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-26 Exchanges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-60 ZP Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-26 TAX RETURN DISCLOSURE REQUIREMENTS Group 1 Cash Flow Distribution ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-60 Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-26 PLAN OF DISTRIBUTION ÏÏÏÏÏÏÏÏÏÏÏ S-61 Group 2 Principal Distribution Amount S-28 GeneralÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-61 WZ Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-28 Increase in CertiÑcates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-61 QZ Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-28 LEGAL MATTERS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-61 ZQ Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-28 EXHIBIT AÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A- 1 ZW Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-28 SCHEDULE 1 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A- 2 Group 2 Cash Flow Distribution PRINCIPAL BALANCE Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-28 SCHEDULESÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ B- 1 S-2 Page

3 AVAILABLE INFORMATION You should purchase the certiñcates only if you have read and understood this prospectus supplement and the following documents (the ""Disclosure Documents''): our Prospectus for Fannie Mae Guaranteed REMIC Pass-Through CertiÑcates dated May 1, 2002 (the ""REMIC Prospectus''); our Prospectus for Fannie Mae Guaranteed Mortgage Pass-Through CertiÑcates (Single- Family Residential Mortgage Loans) dated July 1, 2004 (the ""MBS Prospectus''); if you are purchasing any Group 4 Class or the R or RL Class, the disclosure document relating to the Group 4 Underlying REMIC CertiÑcates (the ""Underlying REMIC Disclosure Document''); and any information incorporated by reference in this prospectus supplement as discussed below under the heading ""Incorporation by Reference.'' You can obtain copies of the Disclosure Documents by writing or calling us at: Fannie Mae MBS Helpline 3900 Wisconsin Avenue, N.W., Area 2H-3S Washington, D.C (telephone ). In addition, the Disclosure Documents, together with the class factors, are available on our corporate Web site at You also can obtain copies of the Disclosure Documents, except the Underlying REMIC Disclosure Document, by writing or calling the dealer at: UBS Securities LLC Prospectus Department 1000 Harbor Boulevard Weehawken, New Jersey (telephone ). INCORPORATION BY REFERENCE In this prospectus supplement, we are incorporating by reference the MBS Prospectus and the Underlying REMIC Disclosure Document described above. In addition, we are incorporating by reference the documents listed below. This means that we are disclosing information to you by referring you to these documents. These documents are considered part of this prospectus supplement, so you should read this prospectus supplement, and any applicable supplements or amendments, together with these documents. You should rely only on the information provided or incorporated by reference in this prospectus supplement, the REMIC Prospectus and the MBS Prospectus and any applicable supplements or amendments. We incorporate by reference the following documents we have Ñled, or may Ñle, with the Securities and Exchange Commission (""SEC''): our Annual Report on Form 10-K for the Ñscal year ended December 31, 2003 (""Form 10-K''); all other reports we have Ñled pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 since the end of the Ñscal year covered by the Form 10-K until the date of this prospectus supplement, excluding any information ""furnished'' to the SEC on Form 8-K; and S-3

4 all proxy statements that we Ñle with the SEC and all documents that we Ñle with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 subsequent to the date of this prospectus supplement and prior to the completion of the oåering of the certiñcates, excluding any information we ""furnish'' to the SEC on Form 8-K. Any information incorporated by reference in this prospectus supplement is deemed to be modiñed or superseded for purposes of this prospectus supplement to the extent information contained or incorporated by reference in this prospectus supplement modiñes or supersedes such information. In such case, the information will constitute a part of this prospectus supplement only as so modiñed or superseded. We Ñle annual, quarterly and current reports, proxy statements and other information with the SEC. You can obtain copies of the periodic reports we Ñle with the SEC without charge by calling or writing our OÇce of Investor Relations, Fannie Mae, 3900 Wisconsin Avenue, NW, Washington, DC 20016, telephone: (202) The periodic and current reports that we Ñle with the SEC are also available on our Web site. Information appearing on our Web site is not incorporated in this prospectus supplement except as speciñcally stated in this prospectus supplement. In addition, you may read our SEC Ñlings and other information about Fannie Mae at the oçces of the New York Stock Exchange, the Chicago Stock Exchange and the PaciÑc Exchange. Our SEC Ñlings are also available at the SEC's Web site at You also may read and copy any document we Ñle with the SEC by visiting the SEC's Public Reference Room at 100 F Street, N.E., Washington, DC Please call the SEC at SEC-0330 for further information about the operation of the Public Reference Room. We are providing the address of the SEC's Web site solely for the information of prospective investors. Information appearing on the SEC's Web site is not incorporated in this prospectus supplement except as speciñcally stated in this prospectus supplement. RECENT DEVELOPMENTS On December 21, 2004, our Board of Directors (the ""Board'') announced the retirement of Chairman and Chief Executive OÇcer Franklin D. Raines and the resignation of Vice Chairman and Chief Financial OÇcer J. Timothy Howard. The Board further announced that the Audit Committee of the Board dismissed KPMG LLP as our independent auditor. On January 4, 2005, the Audit Committee of the Board approved the engagement of Deloitte & Touche LLP (""Deloitte'') as our independent auditor. Deloitte will serve as our auditor for each of the Ñscal years 2001, 2002, 2003 and Stephen B. Ashley, a member of the Board, currently is serving as the non-executive Chairman of the Board. On June 1, 2005, the Board announced that it had selected Daniel H. Mudd, the former Chief Operating OÇcer of Fannie Mae, to be the new President and Chief Executive OÇcer. Mr. Mudd had been serving as the interim Chief Executive OÇcer since the retirement of Mr. Raines. Executive Vice President Robert Levin currently is serving as the interim Chief Financial OÇcer. On December 15, 2004, the OÇce of the Chief Accountant of the Securities and Exchange Commission (""SEC'') issued a statement (the ""Statement'') regarding certain accounting issues relating to Fannie Mae, including determinations by the SEC that we should (i) restate our Ñnancial statements to eliminate the use of hedge accounting under Financial Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging Activities (""FAS 133''), (ii) evaluate the accounting under Financial Accounting Standard No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases (""FAS 91'') and restate our Ñnancial statements Ñled with the SEC if the amounts required for correction are material, and (iii) re-evaluate the information prepared under generally accepted accounting principles (""GAAP'') and non-gaap information that we previously provided to investors. On S-4

5 December 16, 2004, we Ñled a Current Report on Form 8-K with the SEC that includes a copy of the Statement. As a result of the SEC's Ñndings, we will restate our Ñnancial results from 2001 through June 30, 2004 to comply fully with the SEC's determination. In a Form 12b-25 Ñled with the SEC on November 15, 2004, we estimated that a loss of hedge accounting under FAS 133 for all derivatives could result in recording into earnings a net cumulative loss on derivative transactions of approximately $9.0 billion as of September 30, (We estimate that as of December 31, 2004, this net cumulative after-tax loss was approximately $8.4 billion.) We also stated that there would be a corresponding decrease to retained earnings and, accordingly, regulatory capital. In a Form 12b-25 Ñled with the SEC on March 17, 2005, we stated that if we do not qualify for hedge accounting for mortgage commitments accounted for as derivatives since our July 1, 2003 adoption of Financial Accounting Standard No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (""FAS 149''), we estimate that we would be required to record in earnings a net cumulative after-tax loss related to these commitments of approximately $2.4 billion as of December 31, We are working to determine the eåect of the restatement, including the eåect on each prior reporting period. We expect that the impact will be material to our reported GAAP and core business results for many, if not all, periods and will vary substantially from period to period based on the amount and types of derivatives held and Öuctuations in interest rates and volatility. Our restated Ñnancial statements also will reöect corrections as a result of our misapplication of FAS 91 for each prior reporting period described above. We also will consider the impact, if any, of the SEC's decision on FAS 91 for periods prior to those described above. Accordingly, on December 17, 2004, the Audit Committee of the Board concluded that our previously Ñled interim and audited Ñnancial statements and the independent auditor's reports thereon for the periods from January 2001 through the second quarter of 2004 should no longer be relied upon because such Ñnancial statements were prepared applying accounting practices that did not comply with GAAP. We have not yet Ñled our quarterly reports on Form 10-Q for the quarters ended September 30, 2004, March 31, 2005 and June 30, 2005, or our annual report on Form 10-K for the year ended December 31, The Ñnancial information regarding our anticipated results of operations for the quarter ended September 30, 2004 that was contained in our Form 12b-25 Ñled on November 15, 2004 and in a Form 8-K Ñled on November 16, 2004 was prepared applying the same policies and practices, and, accordingly, should not be relied upon. The Audit Committee has discussed the matters described above and in a Form 8-K Ñled with the SEC on December 22, 2004 with KPMG LLP, our independent auditor through December 21, On September 20, 2004, the OÇce of Federal Housing Enterprise Oversight (""OFHEO'') delivered its report to the Board of its Ñndings to date of the agency's special examination. Among other matters, the OFHEO report raised a number of questions and concerns about our accounting policies and practices with respect to FAS 91 and FAS 133. On February 23, 2005, we announced that OFHEO notiñed our Board and management of several additional accounting and internal control issues and questions that OFHEO identiñed in its ongoing special examination, and directed that these matters be included in the internal reviews by the Board and management and reviewed by Deloitte. OFHEO indicated that it has not completed its review of all aspects of these issues, but has identiñed policies that it believes appear to be inconsistent with generally accepted accounting principles as well as internal control deñciencies that raise safety and soundness concerns. The issues and questions include the following areas: securities accounting, loan accounting, consolidations, accounting for commitments, and practices to smooth certain income and expense amounts. OFHEO also raised concerns regarding journal entry controls, systems limitations, and database modiñcations, as well as FAS 149 and new developments relating to FAS 91. A summary of the additional questions raised in OFHEO's ongoing special examination of Fannie Mae has been Ñled as an exhibit to a Form 8-K that we Ñled with the SEC on February 23, S-5

6 Our Board and management are addressing the issues and questions raised by OFHEO. In addition, the Board designated its Special Review Committee to review the Ñndings of OFHEO's September 2004 special examination report. This review, led by former Senator Warren Rudman of the law Ñrm of Paul, Weiss, Rifkind, Wharton & Garrison (""Paul Weiss''), is focused on: accounting issues, including accounting policies, procedures and controls regarding FAS 91 and FAS 133; organization, structure and governance, including Board oversight and management responsibilities and resources; and executive compensation. Paul Weiss' work continues as it examines these areas and other issues that may arise in the course of its review, reporting regularly to the Board. We will report to OFHEO regarding each of these issues and will continue to work with OFHEO to resolve these matters as part of our ongoing internal reviews and restatement process. In light of the foregoing, management has initiated a comprehensive review of accounting routines and controls, the Ñnancial reporting process and the application of GAAP, which will include the issues OFHEO has identiñed, as well as issues identiñed by management and/or Deloitte. Management, working with accounting consultants, will develop a view on these issues, which then will be reviewed with the Audit Committee, Deloitte and OFHEO. Upon conclusion of this review, our Ñnancial statements will be restated where necessary and submitted to Deloitte for review as part of its audit. We are providing periodic updates to the SEC and the New York Stock Exchange on the restatement. In addition, the SEC and the U.S. Attorney's OÇce for the District of Columbia are conducting ongoing investigations into these matters. OFHEO is required to review our capital classiñcation quarterly, and as of September 30, 2004 and December 31, 2004, classiñed us as ""signiñcantly undercapitalized.'' As a result of this classiñcation, we submitted a capital restoration plan to OFHEO in January 2005, and on February 23, 2005, we announced that OFHEO approved our proposed capital restoration plan. Under the plan, we detail how we expect to meet our minimum capital requirement on an ongoing basis, as well as achieve OFHEO's 30 percent surplus capital requirement by September 30, A summary of the capital restoration plan was Ñled as an exhibit to a Form 8-K that we Ñled with the SEC on February 23, On May 19, 2005, OFHEO classiñed us as ""adequately capitalized'' as of March 31, OFHEO has noted that this classiñcation is subject to revision pending the outcome of ongoing accounting reviews, and that this classiñcation does not amend any existing capital restoration plans currently in place between Fannie Mae and OFHEO. In a Form 12b-25 Ñled with the SEC on August 9, 2005, we reported that, based on our current assessment, we are not likely to complete and Ñle our Annual Report on Form 10-K for the year ended December 31, 2004, which will contain restated Ñnancial information, prior to the second half of We also reported in that Form 12b-25 that we are uncertain whether Deloitte will be able to opine on either the eåectiveness of our internal control over Ñnancial reporting or management's process for assessing the eåectiveness of internal control over Ñnancial reporting as of December 31, 2004 or December 31, We also reported in that Form 12b-25 that current NYSE listing standards allow the NYSE to continue to list the securities of a listed company for up to nine months after a company is delinquent in Ñling its Annual Report on Form 10-K (until December 16, 2005, in the case of Fannie Mae). The NYSE, in its sole discretion, also may extend the listing of a company's securities for another three months after that date, depending on the company's circumstances. Under the rules of the NYSE, Fannie Mae would have a right to a review of any decision to delist its securities by a committee of the NYSE Board of Directors. Forms 8-K that we Ñle with the SEC prior to the completion of the oåering of the certiñcates are incorporated by reference in this prospectus supplement. This means that we are disclosing information to you by referring you to those documents. You should refer to ""Incorporation by Reference'' above for further details on the information that we incorporate by reference in this prospectus supplement and where to Ñnd it. S-6

7 REFERENCE SHEET This reference sheet is not a summary of the transaction and does not contain complete information about the certiñcates. You should purchase the certiñcates only after reading this prospectus supplement and each of the additional disclosure documents listed on page S-3. Assets Underlying Each Group of Classes Group Assets 1 Group 1 MBS 2 Group 2 MBS 3 Group 3 MBS JB RCR CertiÑcate VX REMIC CertiÑcate HX REMIC CertiÑcate 5 Group 5 MBS Assumed Characteristics of the Mortgage Loans Underlying the Trust MBS (as of October 1, 2005) Approximate Approximate Original Weighted Average Weighted Approximate Approximate Term to Remaining Term Average Weighted Principal Maturity to Maturity Loan Age Average Balance (in months) (in months) (in months) Coupon Group 1 MBS $1,000,000, % Group 2 MBS $ 53,000, % $ 78,000, % Group 3 MBS $1,000,000, % Group 5 MBS $ 120,000, % The actual remaining terms to maturity, weighted average loan ages and interest rates of most of the mortgage loans will diåer from the weighted averages shown above, perhaps signiñcantly. Characteristics of the Group 4 Underlying RCR and REMIC CertiÑcates Exhibit A describes the Group 4 Underlying RCR and REMIC CertiÑcates, including certain information about the related mortgage loans. To learn more about the Group 4 Underlying RCR and REMIC CertiÑcates, you should obtain from us the current class factors and the related disclosure document as described on page S-3. Class Factors The class factors are numbers that, when multiplied by the initial principal balance of a certiñcate, can be used to calculate the current principal balance of that certiñcate (after taking into account principal payments in the same month). We publish the class factors on or shortly after the 11th day of each month. Settlement Date We expect to issue the certiñcates on October 27, Distribution Dates We will make payments on the certiñcates on the 25th day of each calendar month, or on the next business day if the 25th day is not a business day. S-7

8 Book-Entry and Physical CertiÑcates We will issue the book-entry certiñcates through the U.S. Federal Reserve Banks and DTC, as applicable, which will electronically track ownership of the certiñcates and payments on them. We will issue physical certiñcates in registered, certiñcated form. We will issue the classes of certiñcates in the following forms: Fed Book-Entry All classes of certiñcates other than the R and RL Classes Physical R and RL Classes Exchanging CertiÑcates Through Combination and Recombination If you own certain certiñcates, you will be able to exchange them for a proportionate interest in the related RCR certiñcates as shown on Schedule 1. We will issue the RCR certiñcates upon such exchange. You can exchange your certiñcates by notifying us and paying an exchange fee. We use the principal and interest of the certiñcates exchanged to pay principal and interest on the related RCR certiñcates. Schedule 1 lists the available combinations of the certiñcates eligible for exchange and the related RCR certiñcates. Interest Rates During each interest accrual period, the Ñxed rate classes will bear interest at the applicable annual interest rates listed on the cover of this prospectus supplement or on Schedule 1. During the initial interest accrual period, the Öoating rate and inverse Öoating rate classes will bear interest at the initial interest rates listed below. During subsequent interest accrual periods, the Öoating rate and inverse Öoating rate will bear interest based on the formulas indicated below, but always subject to the speciñed maximum and minimum interest rates: Initial Maximum Minimum Formula for Interest Interest Interest Calculation of Class Rate Rate Rate Interest Rate(1) CS ÏÏÏÏÏÏÏÏÏÏÏ % % 0.00% 7.15% LIBOR SH ÏÏÏÏÏÏÏÏÏÏÏ % % 0.00% 14.3% (2 LIBOR) FX ÏÏÏÏÏÏÏÏÏÏÏ % % 0.30% LIBOR 30 basis points US ÏÏÏÏÏÏÏÏÏÏÏ % % 0.00% 7.2% LIBOR SN ÏÏÏÏÏÏÏÏÏÏÏ % % 3.00% % (1.25 LIBOR) KF ÏÏÏÏÏÏÏÏÏÏÏ % % 0.30% LIBOR 30 basis points FZ ÏÏÏÏÏÏÏÏÏÏÏ % % 0.30% LIBOR 30 basis points SJ ÏÏÏÏÏÏÏÏÏÏÏ % % 3.50% % ( LIBOR) SU ÏÏÏÏÏÏÏÏÏÏÏ % % 0.00% % ( LIBOR) F ÏÏÏÏÏÏÏÏÏÏÏ % % 0.30% LIBOR 30 basis points S ÏÏÏÏÏÏÏÏÏÏÏ % % 0.00% 6.7% LIBOR FQ ÏÏÏÏÏÏÏÏÏÏÏ % % 0.40% LIBOR 40 basis points SQ ÏÏÏÏÏÏÏÏÏÏÏ % % 0.00% 5.5% LIBOR SR ÏÏÏÏÏÏÏÏÏÏÏ % % 0.00% 42% ( LIBOR) SX ÏÏÏÏÏÏÏÏÏÏÏ % % 3.50% 12.1% ( LIBOR) FD ÏÏÏÏÏÏÏÏÏÏÏ % % 0.55% LIBOR 55 basis points SY ÏÏÏÏÏÏÏÏÏÏÏ % % 0.00% 23.65% ( LIBOR) DF ÏÏÏÏÏÏÏÏÏÏÏ % % 1.20% LIBOR 120 basis points DS ÏÏÏÏÏÏÏÏÏÏÏ % % 0.00% 5.05% LIBOR MF ÏÏÏÏÏÏÏÏÏÏÏ % % 0.70% LIBOR 70 basis points S-8

9 Initial Maximum Minimum Formula for Interest Interest Interest Calculation of Class Rate Rate Rate Interest Rate(1) MS ÏÏÏÏÏÏÏÏÏÏÏ % % 3.00% 13.5% ( LIBOR) SP ÏÏÏÏÏÏÏÏÏÏÏ % % 0.00% 14.3% (2 LIBOR) FN ÏÏÏÏÏÏÏÏÏÏÏ % % 0.35% LIBOR 35 basis points JS ÏÏÏÏÏÏÏÏÏÏÏ % % 0.00% % ( LIBOR) (1) We will establish LIBOR on the basis of the ""BBA Method.'' We will apply interest payments from exchanged REMIC certiñcates to the corresponding RCR certiñcates, on a pro rata basis, following any exchange. Notional Classes A notional class will not receive any principal. Its notional principal balance is the balance used to calculate accrued interest. The notional principal balances will equal the percentages of the outstanding balances speciñed below immediately before the related distribution date: Class DI ÏÏÏÏÏÏÏÏ 100% of the DO Class CS ÏÏÏÏÏÏÏÏ 100% of the sum of the FX1 and KF1 Components USÏÏÏÏÏÏÏÏ 100% of the sum of the KF1, KF2 and KF3 Components and FX Class GI ÏÏÏÏÏÏÏÏ 10% of the GA Class S ÏÏÏÏÏÏÏÏ 100% of the F Class QI ÏÏÏÏÏÏÏÏ % of the QA Class TI ÏÏÏÏÏÏÏÏ 100% of the TO Class SQ ÏÏÏÏÏÏÏÏ 100% of the FQ Class DSÏÏÏÏÏÏÏÏ 100% of the DF Class IT ÏÏÏÏÏÏÏÏ % of the TB Class IL ÏÏÏÏÏÏÏÏ % of the TA Class IV ÏÏÏÏÏÏÏÏ % of the BD Class IW ÏÏÏÏÏÏÏÏ % of the BN Class IY ÏÏÏÏÏÏÏÏ % of the sum of the BN and BD Classes Components The KF, FX, DF and PO Classes are made up of payment components. Each component will have the original principal balance, principal type and interest type as set forth below. Original Principal Balance Principal Type Interest Type KF1 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $13,746,869 PAC FLT KF2 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 5,438,397 PAC FLT KF3 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $29,814,734 TAC/AD FLT KF4 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,000,000 TAC/AD FLT FX1ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $36,152,464 PAC FLT FX2ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $14,302,270 PAC FLT FX3ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $78,408,845 TAC/AD FLT DF1ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $11,440,000 SUP FLT DF2 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $11,440,000 SEG(TAC)/SUP FLT DF3 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $11,440,000 SEG(TAC)/SUP FLT PO1 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,560,000 SUP PO PO2 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,560,000 SEG(TAC)/SUP PO PO3 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,560,000 SEG(TAC)/SUP PO S-9

10 Distributions of Principal Group 1 Principal Distribution Amount FZ Accrual Amount To the KF4 Component to its Targeted Balance, and thereafter to the FZ Class. ZB Accrual Amount To Aggregate Group II to its Targeted Balance, and thereafter to the ZB Class. ZP Accrual Amount To the VA and VB Classes, in that order, to zero, and thereafter to the ZP Class. Group 1 Cash Flow Distribution Amount 1. To Aggregate Group I to its Planned Balance. 2. (a) % of the remaining amount as follows: Ñrst, (x) % as follows: Ñrst, to the KF4 Component to its Targeted Balance; second, to the FZ Class to zero; and third, to the KF4 Component to zero, and (y) % to the SJ and SU Classes, pro rata, to zero; and second, to Segment Group II to zero, and (b) % of such remaining amount as follows: Ñrst, to Aggregate Group III to its Planned Balance; second, to Aggregate Group IV to its Planned Balance; third, (x) % of the remaining amount to the GO Class to zero, and (y) % of such remaining amount as follows: Ñrst, to Aggregate Group II to its Targeted Balance; second, to the ZB Class to zero; and third, to Aggregate Group II to zero; fourth, to Segment Group I to zero; Ñfth, to Aggregate Group IV to zero; and sixth, to Aggregate Group III to zero. 3. To Aggregate Group I to zero. For a description of Aggregate Groups I, II, III and IV and Segment Groups I and II, see ""Description of the CertiÑcatesÌDistributions of PrincipalÌGroup 1 Principal Distribution Amount'' in this prospectus supplement. Group 2 Principal Distribution Amount WZ Accrual Amount To the WA Class to zero, and thereafter to the WZ Class. QZ Accrual Amount To the QA Class to zero, and thereafter to the QZ Class. ZQ Accrual Amount To Aggregate Group V to its Planned Balance, and thereafter to the ZQ Class. S-10

11 ZW Accrual Amount To Aggregate Group VI to its Planned Balance, and thereafter to the ZW Class. Group 2 Cash Flow Distribution Amount (a) % of that amount to the F Class to zero, (b) % of such amount as follows: Ñrst, to Aggregate Group V to its Planned Balance; second, to the ZQ Class to zero; and third, to Aggregate Group V to zero, and (c) % of such amount as follows: Ñrst, to Aggregate Group VI to its Planned Balance; second, to the ZW Class to zero; and third, to Aggregate Group VI to zero. For a description of Aggregate Groups V and VI, see ""Description of the CertiÑcatesÌDistributions of PrincipalÌGroup 2 Principal Distribution Amount'' in this prospectus supplement. Group 3 Principal Distribution Amount ZT Accrual Amount To Aggregate Group IX to its Targeted Balance, and thereafter to the ZT Class. Group 3 Cash Flow Distribution Amount 1. To Aggregate Group VII to its Planned Balance. 2. To the DL Class to its Planned Balance. 3. To Aggregate Group VIII to its Planned Balance. 4. (a) % of the remaining amount as follows: Ñrst, to the MF, MS and MA Classes, pro rata, to zero; and second, to the MB Class to zero, and (b) % of such remaining amount as follows: Ñrst, to Segment Group III to its Targeted Balance; second, to the DF1 and PO1 Components, pro rata, to zero; and third, to Segment Group III to zero. 5. To Aggregate Group VIII to zero. 6. To the DL Class to zero. 7. To Aggregate Group VII to zero. For a description of Aggregate Groups VII, VIII and IX and Segment Group III, see ""Description of the CertiÑcatesÌDistributions of PrincipalÌGroup 3 Principal Distribution Amount'' in this prospectus supplement. Group 4 Principal Distribution Amount OZ Accrual Amount To the KA Class to its Scheduled Balance, and thereafter to the OZ Class. S-11

12 Z Accrual Amount To the KA Class to its Scheduled Balance, and thereafter to the Z Class. NZ Accrual Amount 1. If and only if the principal balance of the OZ Class has not been reduced to zero, to the KA Class to its Scheduled Balance. 2. Thereafter to the NZ Class. Group 4 Cash Flow Distribution Amount 1. If and only if the principal balance of the Group 4 MBS is less than the Group 4 MBS SpeciÑed Balance, to the OZ Class to zero. 2. If and only if the principal balance of the OZ Class has been reduced to zero, to the NZ Class to zero. 3. To the KA Class to its Scheduled Balance. 4. To the NZ and OZ Classes, in that order, to zero. 5. To the KA Class to zero. 6. To the Z Class to zero. Group 5 Principal Distribution Amount 1. To the BD Class the amount speciñed under ""Description of the CertiÑcatesÌDistributions of PrincipalÌGroup 5 Principal Distribution Amount'' in this prospectus supplement. 2. To the BN Class to zero. 3. To the BD and BQ Classes, in that order, to zero. We will apply principal payments from exchanged REMIC certiñcates to the corresponding RCR certiñcates, on a pro rata basis, following any exchange. S-12

13 Weighted Average Lives (years)* PSA Prepayment Assumption Group 1 Classes 0% 100% 112% 150% 175% 181% 250% 500% GA, GK, GI and GM ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ GB ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ DI, DO and GC ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ GD ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ CS, CO and SP ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ SH ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ US, FN and FX ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ SN ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ZB ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ GO ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ FZ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ SJ and SUÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ VA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ VB ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ZP ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ P ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ C ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ CW ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KF ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PSA Prepayment Assumption Group 2 Classes 0% 100% 300% 400% 450% 600% 800% QA, QB, QI and QC ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ QZ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ZQ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F and S ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ WA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ WZ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ZW ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PSA Prepayment Assumption Group 3 Classes 0% 100% 125% 212% 250% 263% 275% 300% 500% TA, TM, TN, TP, IL and TQ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TB, TG, IT and THÏÏÏÏÏÏÏÏ TI, TO and TC ÏÏÏÏÏÏÏÏÏÏÏÏ TD ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ DL ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ FQ, SQ, SR, DE and DAÏÏÏÏ SX, FD, SY and CHÏÏÏÏÏÏÏÏ ZT ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ DS, JS, DF and PO ÏÏÏÏÏÏÏÏ MF, MS and MA ÏÏÏÏÏÏÏÏÏÏ MB ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ O ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ D ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-13

14 PSA Prepayment Assumption Group 4 Classes 0% 100% 155% 180% 250% 251% 252% 500% KA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NZ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OZ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Z ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ CPR Prepayment Assumption 12.3% 12.4% KA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NZ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OZ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Z ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PSA Prepayment Assumption Group 5 Classes 0% 100% 276% 350% 500% IV, BD and BC ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ IW, BN and BMÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ BQ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ BA, IY and BE ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ * Determined as speciñed under ""Description of the CertiÑcatesÌWeighted Average Lives of the CertiÑcates'' in this prospectus supplement. S-14

15 ADDITIONAL RISK FACTORS The rate of principal payments on the cer- You may obtain additional information tiñcates will be aåected by the rate of principal about the Group 4 Underlying REMIC CertiÑpayments on the underlying mortgage loans. cates by reviewing their current class factors in The rate at which you receive principal pay- light of other information available in the rements on the certiñcates will be sensitive to the lated disclosure document. You may obtain that rate of principal payments on the mortgage document from us as described on page S-3. loans underlying the related MBS, including prepayments. Because borrowers generally may Yields may be lower than expected due to prepay their mortgage loans at any time without unexpected rate of principal payments. The ac- penalty, the rate of principal payments on the tual yield on your certiñcates probably will be mortgage loans is likely to vary over time. It is lower than you expect: highly unlikely that the mortgage loans will if you buy your certiñcates at a premium prepay and principal payments are faster than at any of the prepayment rates we assumed you expect, or in this prospectus supplement, or if you buy your certiñcates at a discount at any constant prepayment rate until and principal payments are slower than maturity. you expect. Payments on the Group 4 Classes also will Furthermore, in the case of interest only be aåected by the payment priority governing certiñcates and certiñcates purchased at a pre- the Group 4 Underlying REMIC CertiÑcates. If mium, you could lose money on your investment you invest in any Group 4 Classes, the rate at if prepayments occur at a rapid rate. which you receive payments also will be aåected Recent hurricanes in the Gulf Coast region by the priority sequence governing principal may present risk of increased mortgage loan payments on the Group 4 Underlying REMIC prepayments. In August and September 2005, CertiÑcates. Hurricane Katrina and Hurricane Rita and related In particular, as described in the Underlytensive events caused catastrophic damage to ex- ing REMIC Disclosure Document, principal areas along the Gulf Coast of the United payments on the Group 4 Underlying REMIC States, including portions of costal and inland CertiÑcates are governed by a principal balance Alabama, Florida, Louisiana, Mississippi, and schedule. As a result, the Group 4 Underlying Texas. The full extent of the physical damage REMIC CertiÑcates may receive principal payenvironmental resulting from severe Öooding, high winds and ments at a rate faster or slower than would contamination remains uncer- otherwise have been the case. In some cases, the tain at this time. Hundreds of thousands of Group 4 Underlying REMIC CertiÑcates may people have been displaced and interruptions in receive no principal payments for extended perithough the regional economy have been signiñcant. Al- ods. Prepayments on the related mortgage loans the long-term eåects are unclear, these may have occurred at a rate faster or slower events could lead to a general economic down- than the rate initially assumed. This prospectus turn in the Gulf Coast region, including job supplement contains no information as to losses and declines in real estate values. Accord- whether ingly, defaults on any mortgage loans in the aåected areas may increase, in turn resulting in the Group 4 Underlying REMIC CertiÑearly payments of principal of the certiñcates cates have adhered to their principal balbacked by those mortgage loans. Additionally, ance schedule, casualty losses on mortgage properties with hurricane any related support classes remain outment or Öood damage may result in early pay- standing, or of principal of the related certiñcates. the Group 4 Underlying REMIC CertiÑ- You must make your own decisions cates otherwise have performed as origi- about the various applicable assumptions, nally anticipated. including prepayment assumptions, when S-15

16 deciding whether to purchase the than you expect, even if the mortgage loans certiñcates. prepay at the indicated constant prepayment rates. In addition, slight diåerences between the Weighted average lives of the Jump and assumed mortgage loan characteristics and the Non-Sticky Jump Classes are especially sensiactual mortgage loans could aåect the weighted tive to prepayments under certain scenarios. average lives of the classes of certiñcates. The weighted average lives of the Jump and Non-Sticky Jump Classes are especially sensi- Level of Öoating rate index aåects yields on tive to the rate of principal payments, including certain certiñcates. The yield on any Öoating prepayments, of the related mortgage loans. rate or inverse Öoating rate certiñcate will be This sensitivity to prepayments is not necessa- aåected by the level of its interest rate index. If rily proportional to the changes in prepayment the level of the index diåers from the level you rates. In some scenarios, small changes in pre- expect, then your actual yield may be lower than payment rates of the related mortgage loans you expect. may have a dramatic eåect on the weighted Delay classes have lower yields and market average lives of the Jump and Non-Sticky Jump values. Since certain classes do not receive inter- Classes. For an illustration of this sensitivity, est immediately following each interest accrual see the related decrement tables for these classes period, these classes have lower yields and lower in this prospectus supplement. market values than they would if there were no Any change in principal priority of the such delay. NZ Class will, and any change in principal Reinvestment of certiñcate payments may priority of any other Jump or Non-Sticky Jump not achieve same yields as certiñcates. The rate Class may, remain in eåect for an extended of principal payments of the certiñcates is unperiod. Once a change in payment priority of the certain. You may be unable to reinvest the pay- NZ Class occurs, it will continue in eåect permaments on the certiñcates at the same yields nently. Once a change in principal priority of provided by the certiñcates. any other Jump or Non-Sticky Jump Class occurs, under many prepayment scenarios the new Unpredictable timing of last payment afpayment priority will continue in eåect for sub- fects yields on certiñcates. The actual Ñnal paysequent periods. Moreover, it is possible that ment of your class is likely to occur earlier, and under various prepayment scenarios the change could occur much earlier, than the Ñnal distribuin payment priority would remain in eåect tion date listed on the cover page of this proindeñnitely. spectus supplement. If you assume that the actual Ñnal payment will occur on the Ñnal Changes in the Öoating interest rate of the distribution date speciñed, your yield could be FZ Class may aåect the weighted average life of lower than you expect. the FZ Class. The rate at which interest will accrue and be added to the principal balance of Some investors may be unable to buy certhe FZ Class is likely to vary based on changes tain classes. Investors whose investment activiin its interest rate from time to time. As a result, ties are subject to legal investment laws and increases in the interest rate of the FZ Class regulations, or to review by regulatory authorimay have the eåect of increasing the weighted ties, may be unable to buy certain certiñcates. average life of that class while decreases in its You should obtain legal advice to determine interest rate may have the eåect of decreasing whether you may purchase the certiñcates. its weighted average life. Uncertain market for the certiñcates could Weighted average lives and yields on the make them diçcult to sell and cause their values certiñcates are aåected by actual characteristics to Öuctuate. We cannot be sure that a market for of the underlying mortgage loans. We have as- resale of the certiñcates will develop. Further, if sumed that the mortgage loans underlying the a market develops, it may not continue or be Trust MBS have certain characteristics. How- suçciently liquid to allow you to sell your certifever, the actual mortgage loans probably will icates. Even if you are able to sell your certiñhave diåerent characteristics from those we as- cates, the sale price may not be comparable to sumed. As a result, your yields could be lower similar investments that have a developed mar- S-16