Supplement to Prospectus dated April 13, 2001 $500,256,042. Guaranteed Grantor Trust Pass-Through CertiÑcates Fannie Mae Grantor Trust 2001-T4

Transcription

1 Supplement to Prospectus dated April 13, 2001 $500,256,042 Guaranteed Grantor Trust Pass-Through CertiÑcates Fannie Mae Grantor Trust 2001-T4 This is a supplement to the prospectus dated April 13, 2001 (the ""Prospectus''). If we use a capitalized term in this supplement without deñning it, you will Ñnd the deñnition of that term in the Prospectus. Notwithstanding anything set forth in the Prospectus, the actual original class balances of the CertiÑcates are listed below set forth opposite their respective class designations: Class Original Class Balance A1 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $487,787,023 PO ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,469,019 IO ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 269,525,826 Carefully consider the risk factors starting on page 6 of the Prospectus. Unless you understand and are able to tolerate these risks, you should not invest in the CertiÑcates. The CertiÑcates, together with any 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 The date of this Supplement is April 30, 2001

2 Prospectus $500,179,080 (Approximate) Guaranteed Grantor Trust Pass-Through CertiÑcates Fannie Mae Grantor Trust 2001-T4 Carefully consider the risk factors beginning on page 6 of this prospectus. Unless you understand and are able to tolerate these risks, you should not invest in the certiñcates. 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 of its agencies or instrumentalities 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 The CertiÑcates We, the Federal National Mortgage Association (""Fannie Mae''), will issue and guaranty the certiñcates listed in the chart on this page. The certiñcates will represent beneñcial ownership interests in the trust assets. Payments to CertiÑcateholders You, the investor, will receive monthly payments on your certiñcates, including interest to the extent accrued as described in this prospectus, and principal to the extent available for payment as described in this prospectus. The Fannie Mae Guaranty We will guarantee that the payments of monthly interest and principal described above are paid to investors on time and that any outstanding principal balance of each class of certiñcates is paid on the Ñnal distribution date. The Trust and Its Assets The trust will own certain Ñrst lien, one- to four-family, fully amortizing Ñxed-rate mortgage loans insured by the Federal Housing Administration or partially guaranteed by the Veterans Administration and having the characteristics described herein. Assumed Original Class Interest CUSIP Maturity Class Balance(1) Principal Type(2) Interest Rate Type(2) Number Date(3) A1 $487,710,776 PT 7.5% FIX 31359SR69 July 2028 PO 12,468,304 PT (4) PO 31359SR77 July 2028 IO 269,461,207(5) NTL (6) WAC/IO 31359SR85 July 2028 (1) May vary by plus or minus 5%. (2) See ""Description of the CertiÑcatesÌClass DeÑnitions and Abbreviations.'' (3) The Assumed Maturity Date is calculated assuming the maturity dates of the mortgage loans are not modiñed. Fannie Mae does not guarantee payment in full of the principal balances of the certiñcates on any Assumed Maturity Date. Fannie Mae will guarantee payment in full of the principal balances of the certiñcates no later than the distribution date in July (4) The PO Class will be a principal only class and will not bear interest. (5) The IO Class will be a notional class, will not have a principal balance and will bear interest on its notional principal balance. (6) The IO Class will bear interest during the initial interest accrual period at a per annum rate equal to approximately %. During each subsequent interest accrual period, the IO Class will bear interest as described in this prospectus. The dealer will oåer the certiñcates from time to time in negotiated transactions at varying prices. We expect the settlement date to be April 30, April 13, 2001 LEHMAN BROTHERS

3 TABLE OF CONTENTS Page Available Information ÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 Prepayment Assumptions ÏÏÏÏÏÏÏÏÏ 18 Reference Sheet ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4 Yield TablesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18 Risk Factors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18 SuitabilityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 The IO Class ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18 Yield Considerations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 The PO ClassÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19 Prepayment Considerations ÏÏÏÏÏÏÏÏÏ 7 Weighted Average Lives of the Repurchases by Seller ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 CertiÑcatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20 Reinvestment RiskÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 Maturity Considerations and Final Market and Liquidity Considerations 8 Distribution Date ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20 Fannie Mae Guaranty Considerations 8 Decrement Tables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21 General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 The Trust Agreement ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22 Structure ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 Transfer of Mortgage Loans to the Characteristics of CertiÑcates ÏÏÏÏÏ 9 Trust ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22 Fannie Mae Guaranty ÏÏÏÏÏÏÏÏÏÏÏÏ 9 Servicing Through Lenders ÏÏÏÏÏÏÏÏÏ 22 Distribution Dates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 Distributions on Mortgage Loans; Record Date ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 Deposits in the CertiÑcate Account 23 Class Factors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 Reports to CertiÑcateholdersÏÏÏÏÏÏÏÏ 23 Authorized DenominationsÏÏÏÏÏÏÏÏ 9 Servicing Compensation and Optional Termination ÏÏÏÏÏÏÏÏÏÏÏÏ 9 Payment of Certain Expenses by Fannie Mae ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23 The Mortgage Loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10 Collection and Other Servicing General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10 Procedures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23 Fannie Mae Mortgage Purchase Certain Matters Regarding Fannie Program ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13 Mae ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24 General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13 Events of Default ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25 Eligible Lenders ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13 Rights Upon Event of DefaultÏÏÏÏÏÏÏ 25 Eligible Mortgage Loans ÏÏÏÏÏÏÏÏÏÏ 13 Voting Rights ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25 Additional Considerations ÏÏÏÏÏÏÏÏ 13 Description of the CertiÑcates ÏÏÏÏÏ 14 Amendment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25 Book-Entry ProceduresÏÏÏÏÏÏÏÏÏÏÏÏÏ 14 TerminationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26 General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14 Certain Federal Income Tax Consequences ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26 Method of Payment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14 Interest Payments on the Certificates 14 Taxation of BeneÑcial Owners of CertiÑcatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27 Interest Calculation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14 Expenses of the Trust ÏÏÏÏÏÏÏÏÏÏÏÏ 28 Interest Accrual Period ÏÏÏÏÏÏÏÏÏÏÏ 14 The Notional Class ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14 Special Tax Attributes ÏÏÏÏÏÏÏÏÏÏÏÏÏ 29 Categories of ClassesÌInterest ÏÏÏÏ 15 ModiÑcations of Mortgage LoansÏÏÏÏ 29 Principal Payments on the Information Reporting and Backup CertiÑcatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15 Withholding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29 Principal CalculationÏÏÏÏÏÏÏÏÏÏÏÏÏ 15 Foreign Investors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29 Principal Distribution Amount ÏÏÏÏ 15 Legal Investment Considerations ÏÏ 30 Categories of ClassesÌPrincipal ÏÏÏ 15 Legal OpinionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30 Certain DeÑnitions Relating to ERISA Considerations ÏÏÏÏÏÏÏÏÏÏÏÏÏ 30 Payments on the CertiÑcatesÏÏÏÏÏÏ 15 Plan of Distribution ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31 Class DeÑnitions and Abbreviations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17 Legal Matters ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31 Structuring Assumptions ÏÏÏÏÏÏÏÏÏÏÏ 17 Index of DeÑned Terms ÏÏÏÏÏÏÏÏÏÏÏÏ 32 Pricing Assumptions ÏÏÏÏÏÏÏÏÏÏÏÏÏ 17 Exhibit A ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A-1 2 Page

4 AVAILABLE INFORMATION You should purchase the certiñcates only if you have read and understood this prospectus and our current Information Statement dated March 30, 2000 and its supplements (the ""Information Statement''), which we are incorporating by reference in this prospectus. You can obtain the Information Statement or additional copies of this prospectus by writing Fannie Mae at: Fannie Mae 3900 Wisconsin Avenue, N.W. Area 2H-3S Washington, D.C This prospectus, the Information Statement, and the class factors, are available on our website located at You can also obtain them by calling the Fannie Mae Helpline at or You also can obtain additional copies of this prospectus by writing the dealer at: Lehman Brothers Inc. Prospectus Department c/o ADP Services 55 Mercedes Way Edgewood, New York (telephone: ). 3

5 REFERENCE SHEET This reference sheet highlights information contained elsewhere in this prospectus. It 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 in its entirety and the Information Statement referred to on page 3. The CertiÑcates The certiñcates will represent beneñcial ownership interests in Fannie Mae Grantor Trust 2001-T4. The assets of the trust will consist of Ñrst lien, one- to four-family, fully amortizing Ñxed-rate, mortgage loans insured by the Federal Housing Administration or partially guaranteed by the Veterans Administration, as further described in this prospectus. Certain Characteristics of the Mortgage Loans Each of the mortgage loans was originated in accordance with the underwriting guidelines of the FHA or VA and substantially all were included in a Ginnie Mae pool. Generally, each mortgage loan was subsequently repurchased from a Ginnie Mae pool after a delinquency was not cured for at least 90 days. The mortgage loans are now reperforming as and to the extent described in the section of this prospectus entitled ""The Mortgage Loans.'' The tables appearing in Exhibit A set forth certain summary information regarding the assumed characteristics of the mortgage loans. Class Factor The class factor is a number that, when multiplied by the initial principal balance of a certiñcate, can be used to calculate the current principal balance or notional balance of that certiñcate (after taking into account distributions in the same month). We will publish the class factor for the certiñcates on or shortly after the 23rd day of each month. Settlement Date We expect to issue the certiñcates on April 30, Distribution Dates We will make payments on the certiñcates on the 25th day of each calendar month, or the next business day if the 25th day is not a business day, beginning in May Book-Entry CertiÑcates We will issue the certiñcates in book-entry form through The Depository Trust Company, which will electronically track ownership of the certiñcates and payments on them. Interest Payments During each interest accrual period, the certiñcates will accrue interest at the interest rate described on the cover of this prospectus. Notional Class The IO Class is a notional class and will bear interest as described in this prospectus on its notional principal balance. The notional principal balance of the IO Class will be equal to 100% of the aggregate stated principal balance of the non-discount mortgage loans immediately prior to the related 4

6 distribution date. See ""Description of the CertiÑcatesÌInterest Payments on the CertiÑcatesÌNotional Class'' and ""ÌYield TablesÌThe IO Class'' in this prospectus. Payments of Principal The sum of the Non-Discount Loan Principal Distribution Amount and the Non-PO Principal Distribution Amount will be paid to the A1 Class, to zero. The PO Principal Distribution Amount will be paid to the PO Class, to zero. For descriptions of the Non-Discount Loan Principal Distribution Amount, the PO Principal Distribution Amount and the Non-PO Principal Distribution Amount, see ""Description of the CertiÑcatesÌCertain DeÑnitions Relating to Payments on the CertiÑcates'' in this prospectus. Guaranty Payments We guarantee that we will pay to the holders of certiñcates (i) all required installments of principal and interest on the certiñcates on time and (ii) the remaining principal balance of each class of certiñcates no later than the distribution date in July Weighted Average Lives (years)* CPR Prepayment Assumption Class 0% 9% 12% 17% 21% 25% 30% A1 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PO ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ IO ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ * Determined as speciñed under ""Description of the CertiÑcatesÌWeighted Average Lives of the CertiÑcates'' in this prospectus supplement. 5

7 RISK FACTORS We describe below some of the risks associated with an investment in the certiñcates. Because each investor has diåerent investment needs and a diåerent risk tolerance, you should consult your own Ñnancial and legal advisors to determine whether the certiñcates are a suitable investment for you. Suitability You should have suçcient knowledge and experience to evaluate the merits and risks of the certiñcates and the information contained in this prospectus and the Information Statement. You should thoroughly understand the terms of the certiñcates. The certiñcates may not be a suitable investment. The certiñcates are not a suitable investment for every investor. Before investing, you should consider carefully the following: if and when the mortgage loans are liquidated due to borrower defaults, casualties or condemnations aåecting the proper- ties securing those loans; if and when the mortgage loans are repurchased; the actual characteristics of the mortgage loans; and in the case of the IO Class, Öuctuations in the weighted average of the net mortgage rates of the non-discount mortgage loans. Yields may be lower than expected due to You should be able to evaluate (either unexpected rate of principal payment. The acalone or with the help of a Ñnancial advilower than you expect: tual yield on your certiñcates probably will be sor) the economic, interest rate and other factors that may aåect your if you bought your certiñcates (including investment. the IO Class) at a premium and principal You should have suçcient Ñnancial reare faster than you expect, or payments on the related mortgage loans sources and liquidity to bear all risks associated with the certiñcates. if you bought your certiñcates (including the PO Class) at a discount and principal You should investigate any legal investpayments on the related mortgage loans ment restrictions that may apply to you. are slower than you expect. You should exercise particular caution if Furthermore, in the case of certiñcates puryour circumstances do not permit you to hold chased at a premium (including the IO Class), the certiñcates until maturity. you could lose money on your investment if Investors whose investment activities are prepayments occur at a rapid rate. subject to legal investment laws and regulations, In addition, in the case of the IO Class, if a or to review by regulatory authorities, may be disproportionately high rate of prepayments ocunable to buy certain certiñcates. You should curs on mortgage loans with relatively higher get legal advice to determine whether your interest rates, the yields on those certiñcates purchase of the certiñcates is a legal investment will decrease and may be lower than you expect. for you or is subject to any investment restrictions. Even if the mortgage loans are prepaid at a rate that on average is consistent with your Yield Considerations expectations, variations in the prepayment rate over time could signiñcantly aåect your yield. Factors that aåect your yield. Your eåec- Generally, the earlier the payment of principal, tive yield on the certiñcates will depend upon: the greater the eåect on the yield to maturity. the price you paid for the certiñcates; As a result, if the rate of principal prepayment during any period is faster or slower than you how quickly or slowly borrowers prepay expect, a corresponding reduction or increase in the mortgage loans; the prepayment rate during a later period may 6

8 not fully oåset the impact of the earlier prepayment rate on your yield. We used certain assumptions concerning the mortgage loans in preparing certain tabular information in this prospectus. If the actual mortgage loan characteristics diåer even slightly from those assumptions, the weighted average life and yield of the certiñcates will be aåected. The mortgage loans generally provide that the lender can require repayment in full if the borrower sells the property that secures the mortgage loan. However, some of the mortgage loans may be assumed by creditworthy purchasers of mortgaged properties from the original borrowers. Additionally, FHA and VA have his- torically permitted borrowers to sell the mort- gaged property without requiring the buyer to assume the mortgage and, at times, without verifying the buyer's creditworthiness. In this way, property sales by borrowers can aåect the rate of prepayment. In addition, if borrowers are able to reñnance their loans by obtaining new loans secured by the same properties, any reñ- nancing will aåect the rate of prepayment. Fur- thermore, the seller made representations and warranties with respect to the mortgage loans and may have to repurchase the related loans if they materially breach those representations and warranties. Any such repurchases will increase the rate of prepayment. You must make your own decision as to the assumptions, including the principal prepayment assumptions, you will use in deciding whether to purchase the certiñcates. Unpredictable timing of last payment af- fects yield on certiñcates. The actual Ñnal pay- ment on the certiñcates may occur earlier, and could occur much earlier, than the distribution date occurring in July If you assumed the actual Ñnal payment would occur on the distri- bution date occurring in July 2041, your yield could be lower than you expect. The servicer has the right under certain circumstances to recast the amortization sched- ule (based on a 30-year term) and/or extend the scheduled date of Ñnal payment on a mortgage loan (but not beyond July 2041). To the extent that the servicer so recasts the amortization schedule or extends the term of a mortgage loan, the weighted average lives of the related class or classes of certiñcates could be extended. Delayed payments reduce yield and market value. Because the certiñcates do not receive interest immediately following each interest accrual period, the certiñcates have lower yields and lower market values than they would if there were no such delay. Prepayment Considerations The rate of principal payments on the cer- tiñcates of a particular class generally will de- pend on the rate of principal payments on the mortgage loans. Principal payments on the mortgage loans may occur as a result of scheduled amortization or prepayments. The rate of principal payments is likely to vary considerably from time to time as a result of the liquidation of foreclosed mortgage loans, FHA insurance payments and VA guarantee payments, as well as because borrowers generally may prepay the mortgage loans at any time without penalty. It is highly unlikely that the mortgage loans will prepay: at the rates we assume, Under certain circumstances, collections of interest on the mortgage loans may be reduced. Nevertheless, we guarantee that you will receive the full amount of interest due on your certiñ- cates regardless of any such reduction in interest collected on the mortgage loans. at any constant prepayment rate until maturity, or at the same rate. Once the combined balance of the mortgage loans is reduced to 5% or less of their original level, the servicer may purchase all the remain- ing mortgage loans. If the servicer does not purchase the loans, Fannie Mae may do so. If the mortgage loans are purchased in this way, it would have the same eåect as a prepayment in full of all the mortgage loans. 7

9 In general, prepayment rates may be inöu- Market and Liquidity Considerations enced by: We cannot be sure that a market for resale the level of current interest rates relative of the certiñcates will develop. Further, if a to the rates borne by the mortgage loans, market develops, it may not continue or be homeowner mobility, suçciently liquid to allow you to sell your certificates. Even if you are able to sell your certiñ- existence of any prepayment premiums cates, the sale price may not be comparable to or prepayment restrictions, similar investments that have a developed mar- changes in FHA or VA program ket. Moreover, you may not be able to sell small guidelines, or large amounts of certiñcates at prices comparable to those available to other investors. the general creditworthiness of the borrowers, A number of factors may aåect the resale of repurchases of mortgage loans from the certiñcates, including: pools, and the method, frequency and complexity of general economic conditions. Because so many factors aåect the prepayment rate of the mortgage loans, we cannot estimate the prepayment experience of the mortgage loans. Repurchases by Seller the amount of certiñcates oåered for re- sale from time to time; Under certain circumstances, the seller is required to repurchase delinquent mortgage loans. Such repurchase of mortgage loans will have the same eåect on the related certiñcates as borrower prepayments. Reinvestment Risk Generally, a borrower may prepay a mortgage loan at any time. As a result, we cannot predict the amount of principal payments on the certiñcates. The certiñcates may not be an appropriate investment for you if you require a speciñc amount of principal on a regular basis or on a speciñc date. Because interest rates Öuctuate, you may not be able to reinvest the principal payments on the certiñcates at a rate of return that is as high as your rate of return on the certiñcates. You may have to reinvest those funds at a much lower rate of return. You should consider this risk in light of other investments that may be available to you. calculating principal and interest; the characteristics of the mortgage loans; past and expected prepayment levels of the mortgage loans and comparable loans; the outstanding principal amount of the certiñcates; any legal restrictions or tax treatment limiting demand for the certiñcates; the availability of comparable securities; the level, direction and volatility of inter- est rates generally; and general economic conditions. Fannie Mae Guaranty Considerations If we were unable to perform our guaranty obligations, certiñcateholders would receive only borrower payments and other recoveries on the mortgage loans. If that happened, delinquencies and defaults on the mortgage loans could di- rectly aåect the amounts that certiñcateholders would receive each month. GENERAL The material under this heading summarizes certain features of the CertiÑcates and is not complete. You will Ñnd additional information about the CertiÑcates in the other sections of this prospectus, as well as in the Information Statement and the Trust Agreement. If we use a capitalized term in this prospectus without deñning it, you will Ñnd the deñnition of such term in the Information Statement or in the Trust Agreement. 8

10 Structure. We, the Federal National Mortgage Association (""Fannie Mae''), a corporation organized and existing under the laws of the United States, under the authority contained in Section 304(d) of the Federal National Mortgage Association Charter Act (12 U.S.C et seq.), will create the Fannie Mae Grantor Trust speciñed on the cover of this prospectus (the ""Trust'') pursuant to a trust agreement (the ""Trust Agreement'') dated as of April 1, 2001 (the ""Issue Date''). We will execute the Trust Agreement in our corporate capacity and as trustee (the ""Trustee''). We will issue the CertiÑcates pursuant to the Trust Agreement. The assets of the Trust will consist of the Mortgage Loans and will evidence the entire beneñcial ownership interest in the payments of principal and interest on the Mortgage Loans. The Mortgage Loans are insured by the FHA or partially guaranteed by the VA and, as a result of past delinquency, have been repurchased from Ginnie Mae pools. Characteristics of CertiÑcates. The CertiÑcates will be represented by one or more certiñcates (the ""DTC CertiÑcates'') to be registered at all times in the name of the nominee of The Depository Trust Company (""DTC''), a New York-chartered limited purpose trust company, or any successor or depository selected or approved by us. We refer to the nominee of DTC as the ""Holder'' or ""CertiÑcateholder''. DTC will maintain the DTC CertiÑcates through its book-entry facilities. A Holder is not necessarily the beneñcial owner of a CertiÑcate. BeneÑcial owners ordinarily will hold CertiÑcates through one or more Ñnancial intermediaries, such as banks, brokerage Ñrms and securities clearing organizations. See ""Description of the CertiÑcatesÌBook-Entry Procedures'' in this prospectus. Fannie Mae Guaranty. We guarantee that we will pay to the Holders of CertiÑcates: required installments of principal and interest on the CertiÑcates on time, and the remaining principal balance of each Class of CertiÑcates no later than the Distribution Date in July 2041, whether or not we have received suçcient payments. If we were unable to perform these guaranty obligations, CertiÑcateholders would receive only the amounts paid or advanced and other recoveries on the Mortgage Loans. If that happened, delinquencies and defaults on the Mortgage Loans would directly aåect the amounts that CertiÑcateholders would receive each month. Our guaranty is not backed by the full faith and credit of the United States. Distribution Dates. We will make monthly payments on the 25th day of each calendar month, or the next business day if the 25th is not a business day. We refer to each such date as a ""Distribution Date.'' We will make the Ñrst payments to CertiÑcateholders in May Record Date. On each Distribution Date, we will make each monthly payment on the CertiÑcates to Holders of record on the last day of the preceding month. Class Factors. On or shortly after the 23rd calendar day of each month, we will publish a class factor (carried to eight decimal places) for each Class of CertiÑcates. When the factor is multiplied by the original principal balance or notional balance of a CertiÑcate of that Class, the product will equal the remaining principal balance or notional balance of the CertiÑcate after giving eåect to the payment of principal to be made on the following Distribution Date. Authorized Denominations. We will issue the Classes of CertiÑcates in minimum denominations of $1,000 and whole dollar increments above that amount. Optional Termination Either the Servicer or we may eåect an early termination of the Trust as described herein under ""The Trust AgreementÌTermination.'' 9

11 THE MORTGAGE LOANS General We expect that the Trust will consist of approximately 6,896 mortgage loans (collectively, the ""Mortgage Loans'' or the ""Pool'') having an aggregate principal balance of approximately $500,179,080 as of the Issue Date. This aggregate amount may vary by plus or minus 5%. Fannie Mae and Lehman Capital, A Division of Lehman Brothers Holdings Inc., as seller (the ""Seller'') and servicer (the ""Servicer'') will be parties to a sale and servicing agreement dated as of April 1, 2001 (the ""Sale and Servicing Agreement''). The Mortgage Loans consist of Ñrst lien, one- to four-family, fully amortizing Ñxed-rate mortgage loans. All of the Mortgage Loans are FHA-insured or partially guaranteed by the VA. Each Mortgage Loan is evidenced by a promissory note or similar evidence of indebtedness (a ""Mortgage Note'') that is secured by a Ñrst mortgage or deed of trust on a one-to-four-family residential property. Each Mortgage Note requires the borrower to make monthly payments of principal and interest. We refer to the property that secures repayment of a Mortgage Loan as the ""Mortgaged Property.'' While the Mortgage Loans generally have terms not more than 30 years in length, as of the Issue Date approximately 1.39% of the Mortgage Loans (based on aggregate principal balance) provided for a stated maturity date more than 30 years but not more than 40 years from their dates of origination. Each Mortgage Loan provides that the obligor on the related Mortgage Note (the ""borrower'') must make payments by a scheduled day of each month. This day is Ñxed at the time of origination. In addition, each Mortgage Loan provides that each borrower must pay interest on its outstanding principal balance at the rate speciñed or described in the related Mortgage Note (the ""Mortgage Interest Rate''). Interest is calculated on the basis of a 360-day year consisting of twelve 30-day months. If a borrower makes a payment earlier or later than the scheduled due date, the amortization schedule will not change, nor will the relative application of such payment to principal and interest. The information shown on Exhibit A summarizes certain assumed characteristics of the Mortgage Loans as of the Issue Date. The information in the tables is presented in aggregated form, on the basis of the characteristics speciñed in the tables, and does not reöect actual or assumed characteristics of any individual Mortgage Loan. The information in the tables does not give eåect to prepayments received on the Mortgage Loans on or after the Issue Date. Each of the Mortgage Loans was originated in accordance with the underwriting guidelines of FHA or VA, as the case may be, and was eligible to be included in a Ginnie Mae pool at the time of origination as permitted by the rules of the Government National Mortgage Association (""Ginnie Mae''). Substantially all the Mortgage Loans were pooled with Ginnie Mae and then purchased from the Ginnie Mae pool when the Mortgage Loan had a delinquency that was not cured for at least 90 days. The table below shows the contractual delinquency of the Mortgage Loans as of the Issue Date. A Mortgage Loan is ""contractually delinquent'' as of the Issue Date if delinquencies that occurred at any time during the term of the Mortgage Loan have not been cured. Contractually Delinquent Less than 30 days ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 47.68% 30Ó59 days ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38.54% 60Ó89 days ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.08% 90Ó120 days ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.70% As of the Issue Date, no Mortgage Loan was more than 120 days contractually delinquent. Neither the Servicer nor Fannie Mae has the right to repurchase a Mortgage Loan from the Trust based upon the Issue Date contractual delinquency of such Mortgage Loan. However, if at any time 10

12 the aggregate principal balance of Mortgage Loans which are 90 days or more delinquent (""90 Delinquent Loans'') exceeds 49.00% of the aggregate principal balance of the Mortgage Loans, the Seller is required to repurchase suçcient 90 Delinquent Loans to cause the trust to hold 90 Delinquent Loans with an aggregate principal balance of less than or equal to 49.00% of the aggregate principal balance of the Mortgage Loans. The following tables set forth certain information, as of the Issue Date, as to the Mortgage Loans. References to ""Aggregate Principal Balance Outstanding'' represent the aggregate of the Stated Principal Balances of the related Mortgage Loans as of the Issue Date. The sum of the percentage columns in the following tables may not equal 100% due to rounding. Issue Date Mortgage Loan Principal Balances(1) Aggregate Number of Principal Mortgage Balance Percent of Issue Date Mortgage Loan Principal Balances Loans Outstanding Pool $ 1Ó$ 50,000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,043 $ 70,557, % $ 50,001Ó$100,000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3, ,307, $100,001Ó$150,000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1, ,492, $150,001Ó$200,000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ,417, $200,001Ó$250,000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24 5,118, $250,001Ó$300,000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 285, Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,896 $500,179, % (1) As of the Issue Date, the average principal balance for the Mortgage Loans is expected to be approximately $72,532. Mortgage Interest Rates(1) Aggregate Number of Principal Mortgage Balance Percent of Mortgage Interest Rates(%) Loans Outstanding Pool Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 $ 298, % Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20 2,501, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 94 9,415, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1, ,094, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,220 98,408, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2, ,457, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,025 70,292, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ,542, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ,764, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 177 8,310, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34 1,343, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32 1,054, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ , Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ , Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ , Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 103, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 30, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4 76, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 7, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 73, Ó ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 22, Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,896 $500,179, % (1) As of the Issue Date, the weighted average mortgage interest rate of the Mortgage Loans is expected to be approximately 8.331%. 11

13 Original Terms to Stated Maturity(1) Aggregate Number of Principal Mortgage Balance Percent of Original Terms to Stated Maturity (Months) Loans Outstanding Pool 121Ó180ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 172 $ 7,211, % 181Ó240ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 61 3,322, Ó300ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 59 3,325, Ó360ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6, ,366, Greater than or equal to 361 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 111 6,953, Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,896 $500,179, % (1) As of the Issue Date, the weighted average original term to stated maturity of the Mortgage Loans is expected to be approximately 356 months. Remaining Terms to Stated Maturity(1) Aggregate Number of Principal Mortgage Balance Percent of Remaining Terms to Stated Maturity (Months) Loans Outstanding Pool 1Ó 12ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 $ 26, % 13Ó 24ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 46, Ó 36ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ , Ó 48ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ , Ó 60ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ , Ó 72ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ , Ó 84ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 57 1,125, Ó 96ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 69 1,531, Ó108ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 59 1,571, Ó120ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34 1,148, Ó132ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28 1,096, Ó144ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26 1,107, Ó156ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36 1,468, Ó168ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31 1,470, Ó180ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 67 3,698, Ó192ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ,276, Ó204ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 171 8,564, Ó216ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 116 5,488, Ó228ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 193 9,761, Ó240ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 153 8,175, Ó252ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ,593, Ó264ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ,487, Ó276ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ,999, Ó288ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ,633, Ó300ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ,277, Ó312ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ,946, Ó324ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ,268, Ó336ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ,668, Ó348ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ,532, Ó360ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ,643, Greater than or equal to 361 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 525, Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,896 $500,179, % (1) As of the Issue Date, the weighted average remaining term to stated maturity of the Mortgage Loans is expected to be approximately 289 months. 12

14 Fannie Mae Mortgage Purchase Program General We summarize below certain aspects of our program for purchasing residential mortgage loans for inclusion in a given pool. We may grant exceptions to the requirements of the program for a particular transaction. In several instances, the characteristics of the Mortgage Loans included in the Trust do not match the criteria described below. For more speciñc details regarding the Mortgage Loans included in the Trust see ""The Mortgage LoansÌGeneral'' above. Eligible Lenders We purchase mortgage loans from the following types of eligible institutions: federally and state-chartered savings and loan associations, mutual savings banks, commercial banks and similar Ñnancial institutions whose accounts are insured by the Federal Deposit Insurance Corporation (""FDIC'') or the National Credit Union Administration (""NCUA''); state-insured Ñnancial institutions; and Ñnancial institutions, principally mortgage bankers, and Ñnance companies that are Fannie Mae-approved mortgage sellers. We determine whether to approve a particular Ñnancial institution as a lender under our purchase program by applying certain criteria which generally include depth of mortgage origination experience, servicing experience and Ñnancial capacity. We will enter into a Fannie Mae Mortgage Selling and Servicing Contract with each approved lender. Eligible Mortgage Loans We may include both residential property loans and cooperative share loans in a given pool. Unless we make an exception, each mortgage loan that we include in a pool will comply with the terms of our current Selling Guide and, if underwritten through Desktop Underwriter*, our Guide to Underwriting with Desktop Underwriter (or any of our multifamily guides in the case of a Mortgage Loan secured by a multifamily property). Generally, we do not include construction loans or land development loans in our pools. A ""residential property loan'' is a mortgage loan that is secured by a mortgage or similar instrument on (1) a single-family residence (including a unit in a condominium project or planned unit development) or a manufactured home or (2) a multifamily project with Ñve or more apartments. A ""cooperative share loan'' is a mortgage loan secured by the stock, shares, membership agreement or other contractual agreements that evidence the borrower's ownership in the cooperative as well as the assignment of the occupancy rights to the borrower's dwelling unit in the cooperative. Each mortgage loan will be documented by an FHA or VA mortgage or other instrument that we accept. Each mortgage loan also will comply with all applicable federal and local laws, including laws covering usury, equal credit opportunity and disclosure. We do not require that payments on every mortgage loan that we can include in a pool be due on the Ñrst day of the month. In general, no mortgage loan can have a maturity date later than 30 years after origination. Additional Considerations Our Selling Guide requires that each lender that sells us conventional mortgage loans under our purchase program assume responsibility for underwriting these loans using the same underwriting * Desktop Underwriter» is our automated underwriting software application. 13

15 criteria that we apply to our portfolio purchases. (We can, however, grant exceptions to these criteria.) Using a random selection process, we review the quality of the credit and property underwriting applied to these loans. Book-Entry Procedures DESCRIPTION OF THE CERTIFICATES General. The CertiÑcates will be registered at all times in the name of the nominee of DTC. Under its normal procedures, DTC will record the amount of DTC CertiÑcates held by each Ñrm which participates in the book-entry system of DTC (each, a ""DTC Participant''), whether held for its own account or on behalf of another person. Initially, we will act as paying agent for the DTC CertiÑcates. In addition, State Street Bank and Trust Company (""State Street'') will perform certain administrative functions in connection with the DTC CertiÑcates. A ""beneñcial owner'' or an ""investor'' is anyone who acquires a beneñcial ownership interest in the DTC CertiÑcates. As an investor, you will not receive a physical certiñcate. Instead, your interest will be recorded on the records of the brokerage Ñrm, bank, thrift institution or other Ñnancial intermediary (a ""Ñnancial intermediary'') that maintains an account for you. In turn, the record ownership of the Ñnancial intermediary that holds your DTC CertiÑcates will be recorded by DTC. If the intermediary is not a DTC Participant, the record ownership of the intermediary will be recorded by a DTC Participant acting on its behalf. Therefore, you must rely on these various arrangements to transfer your beneñcial ownership interest in the DTC CertiÑcates only under the procedures of your Ñnancial intermediary and of DTC Participants. In general, ownership of DTC CertiÑcates will be subject to the prevailing rules, regulations and procedures governing the DTC and DTC Participants. Method of Payment. We will direct payments on the DTC CertiÑcates to DTC in immediately available funds. In turn, DTC will credit the payments to the accounts of the appropriate DTC Participants, in accordance with the DTC's procedures. These procedures currently provide for payments made in same-day funds to be settled through the New York Clearing House. DTC Participants and Ñnancial intermediaries will direct the payments to the investors in DTC CertiÑcates that they represent. Interest Payments on the CertiÑcates This section describes the payments of interest and principal that we will make on the CertiÑcates. We deñne certain capitalized terms used in this section in ""ÌCertain DeÑnitions Relating to Payments on the CertiÑcates'' below. Interest Calculation. We will pay interest on the CertiÑcates at the applicable annual interest rates shown on the cover of or described in this prospectus. We will calculate interest based on a 360-day year consisting of twelve 30-day months. We will pay interest monthly, on each Distribution Date, beginning in May Interest Accrual Period. Interest to be paid on each Distribution Date will accrue on the interest bearing CertiÑcates (the ""Delay Classes'') during the calendar month preceding the month in which the Distribution Date occurs (the ""Interest Accrual Period''). We will treat the PO Class as a Delay Class solely for the purpose of facilitating trading. The Notional Class. The IO Class will be a Notional Class. The Notional Class will have no principal balance. During each Interest Accrual Period, the IO Class will bear interest on its notional balance at a per annum rate equal to the weighted average of the Net Mortgage Rates of the Non- Discount Mortgage Loans (weighted by their respective Stated Principal Balances) minus 7.50%. The notional principal balance of the IO Class will equal 100% of the aggregate Stated Principal Balance of the Non-Discount Mortgage Loans. 14

16 We use the notional principal balance of the Notional Class to determine interest payments on that Class. Although the Notional Class will not have a principal balance and will not be entitled to any principal payments, we will publish a class factor for that Class. References in this prospectus to the principal balance of the CertiÑcates generally shall refer also to the notional principal balance of the Notional Class. Categories of ClassesÌInterest. categorized as follows: Interest Type* For the purpose of interest payments, the CertiÑcates will be Fixed RateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Principal Only ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interest Only ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Weighted Average Coupon ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ * See ""ÌClass DeÑnitions and Abbreviations'' below. Principal Payments on the CertiÑcates Classes Principal Calculation. The outstanding principal balance of any CertiÑcate at any time is the maximum amount that the Holder will be entitled to receive thereafter as principal from the cash Öow on the Mortgage Loans. The outstanding principal balance of any CertiÑcate as of any date of determination is equal to the initial outstanding principal balance of that CertiÑcate, reduced by all amounts previously paid as principal on that CertiÑcate. See ""ÌCertain DeÑnitions Relating to Payments on the CertiÑcates.'' Principal Distribution Amount On the Distribution Date in each month, we will pay principal on the CertiÑcates in an aggregate amount (the ""Principal Distribution Amount'') equal to the sum of the Non-Discount Loan Principal Distribution Amount, the Non-PO Principal Distribution Amount and the PO Principal Distribution Amount. On each Distribution Date, we will pay the sum of (i) the Non-Discount Loan Principal Distribution Amount and (ii) the Non-PO Principal Distribution Amount as principal of the A1 Class, until its principal balance is reduced to zero. On each Distribution Date, we will pay the PO Principal Distribution Amount as principal of the PO Class, until its principal balance is reduced to zero. We will include principal prepayments (including net liquidation proceeds) in amounts paid as principal of the CertiÑcates on each Distribution Date, provided the Servicer gives us information about them in time for inclusion in the published class factors for such month. See ""Reference SheetÌClass Factor'' in this prospectus. If we do not receive the information on time, we will pay the prepayments on the next Distribution Date. Categories of ClassesÌPrincipal. categorized as follows: Principal Type* A1 PO IO IO For the purpose of principal payments, the Classes will be Pass-Through ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Notional ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ * See ""ÌClass DeÑnitions and Abbreviations.'' Certain DeÑnitions Relating to Payments on the CertiÑcates Classes A1 and PO IO Discount Mortgage Loans. Mortgage Loans having Net Mortgage Rates lower than 7.50%. 15

17 Due Date. For any Distribution Date, the Ñrst day of the calendar month in which that Distribution Date occurs. Due Period. For any Distribution Date, the period beginning on the second day of the month immediately preceding the month in which that Distribution Date occurs and ending on the Ñrst day of the month in which that Distribution Date occurs. Liquidated Mortgage Loan. A defaulted Mortgage Loan with respect to which the Servicer has concluded that the full amount Ñnally recoverable on account of that Mortgage Loan has been received, whether or not this amount is equal to the principal balance of the Mortgage Loan. Net Mortgage Rate. For any Mortgage Loan, the Mortgage Interest Rate for such Mortgage Loan less the sum of (i) the Servicing Fee Rate and (ii) the rate at which the Guaranty Fee is calculated with respect to such Mortgage Loan. Non-Discount Loan Principal Distribution Amount. following, without duplication: For any Distribution Date, the sum of the all monthly payments of principal due on each Non-Discount Mortgage Loan during the related Due Period, plus the Stated Principal Balance of each Non-Discount Mortgage Loan that Fannie Mae, the Servicer or the Seller repurchases during the Due Period related to that Distribution Date, plus for each Non-Discount Mortgage Loan that was reported as having become a Liquidated Mortgage Loan during the related Due Period, the Stated Principal Balance of that Non- Discount Mortgage Loan, plus all partial and full principal prepayments that were reported as having been received during the related Due Period from borrowers on all such Non-Discount Mortgage Loans. Non-Discount Mortgage Loans. than 7.50%. Mortgage Loans having Net Mortgage Rates equal to or greater Non-PO Percentage. For any Discount Mortgage Loan, the related Net Mortgage Rate divided by 7.50%, expressed as a percentage. Non-PO Principal Distribution Amount. For any Distribution Date, the sum of the Non-PO Percentage of the following, without duplication: all monthly payments of principal due on each Discount Mortgage Loan during the related Due Period, plus the Stated Principal Balance of each Discount Mortgage Loan that Fannie Mae, the Servicer or the Seller repurchases during the Due Period related to that Distribution Date, plus for each Discount Mortgage Loan that was reported as having become a Liquidated Mortgage Loan during the related Due Period, the Stated Principal Balance of that Discount Mortgage Loan, plus all partial and full principal prepayments that were reported as having been received during the related Due Period from borrowers on all such Discount Mortgage Loans. PO Percentage. For any Discount Mortgage Loan, (7.50% minus the related Net Mortgage Rate) divided by 7.50%, expressed as a percentage. PO Principal Distribution Amount. the following, without duplication: For any Distribution Date, the sum of the PO Percentage of all monthly payments of principal due on each Discount Mortgage Loan during the related Due Period, plus 16