Banc of America Securities LLC

Transcription

1 Supplement (To Prospectus Supplement dated January 26, 2006) $1,276,235,011 Guaranteed REMIC Pass-Through CertiÑcates Fannie Mae REMIC Trust This is a supplement to the prospectus supplement dated January 26, 2006 (the ""Prospectus Supplement''). If we use a capitalized term in this supplement without deñning it, you will Ñnd the deñnition of that term in the Prospectus Supplement. Notwithstanding anything set forth on page S-11 of the Prospectus Supplement, on each Distribution Date the notional principal balance of the XI Component will equal 100% of the outstanding principal balance of the Group 5 MBS immediately before that date. Carefully consider the risk factors starting on page S-15 of the 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. 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 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 Banc of America Securities LLC The date of this Supplement is February 28, 2006

2 Prospectus Supplement (To REMIC Prospectus dated May 1, 2002) $1,276,235,011 Guaranteed REMIC Pass-Through CertiÑcates Fannie Mae REMIC Trust The CertiÑcates Original Final We, the Federal National Mortgage Associ- Class Principal Interest Interest CUSIP Distribution ation (Fannie Mae), will issue the classes of Class Group Balance Type Rate Type Number Date certiñcates listed in the chart on this page. F ST ÏÏÏÏÏÏÏÏÏÏÏÏÏ ÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 1 1,600,023(2) $ 40,000,000 NTL PT (1) (1) INV/IO FLT 31395BTE BTD5 March 2036 March 2036 FN ÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 20,000,000 PT (1) FLT 31395BT F 0 March 2036 Payments to CertiÑcateholders PI(3) ÏÏÏÏÏÏÏÏÏÏÏ 1 42,775,329(2) NTL (1) INV/IO 31395BTG8 March 2036 OY(3) ÏÏÏÏÏÏÏÏÏÏ 1 11,666,000 PAC (4) PO 31395BTH6 March 2036 We will make monthly payments on the certiñcates. You, the investor, will receive FA ÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 50,000,000 PT (1) FLT 31395BTL7 March 2036 DI(3)ÏÏÏÏÏÏÏÏÏÏÏ OE(3) ÏÏÏÏÏÏÏÏÏÏ ,224,670(2) 4,697,638 NTL SUP (1) (4) INV/IO PO 31395B T J BTK9 March 2036 March 2036 interest accrued on the balance of your YS(3) ÏÏÏÏÏÏÏÏÏÏ 2 50,000,000(2) NTL (1) INV/IO 31395BTM5 March 2036 EO(3) ÏÏÏÏÏÏÏÏÏÏ 2 13,636,364 PT (4) PO 31395BTN3 March 2036 certiñcate (except in the case of the accrual and partial accrual classes), and KO(3) ÏÏÏÏÏÏÏÏÏÏ 2 36,363,637 PT (4) PO 31395BTR4 March 2036 FB ÏÏÏÏÏÏÏÏÏÏÏÏÏ SX(3) ÏÏÏÏÏÏÏÏÏÏ ,000, ,000,000(2) PT NTL (1) (1) FLT INV/IO 31395BT P BTQ6 March 2036 March 2036 principal to the extent available for pay- FP ÏÏÏÏÏÏÏÏÏÏÏÏÏ SP ÏÏÏÏÏÏÏÏÏÏÏÏÏ ,064, ,064,857(2) PAC NTL (1) (1) FLT INV/IO 31395BT S BTT0 March 2036 March 2036 ment on your class. OP ÏÏÏÏÏÏÏÏÏÏÏÏÏ MU ÏÏÏÏÏÏÏÏÏÏÏÏ ,563,143 4,168,000 PAC PAC (4) 5.50% PO FIX 31395BTU BTV5 March 2036 February 2036 We may pay principal at rates that vary from MW ÏÏÏÏÏÏÏÏÏÏÏÏ AGÏÏÏÏÏÏÏÏÏÏÏÏÏ ,000 5,426,000 PAC PAC FIX FIX 31395BTW BTX1 March 2036 March 2036 time to time. We may not pay principal to DOÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 3,912,167 SUP (4) PO 31395BTY9 March 2036 BH ÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 4,000,000 SUP 5.75 FIX 31395BTZ6 February 2035 certain classes for long periods of time. BJ ÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 1,000,000 SUP 7.00 FIX 31395BUA9 February 2035 BA ÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 20,252,000 SUP 6.00 FIX 31395BUB7 February 2035 The Fannie Mae Guaranty BC ÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 2,269,000 SUP 6.00 FIX 31395BUC5 March 2035 BD ÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 4,353,000 SUP 6.00 FIX 31395BUD3 July 2035 BE ÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 2,733,000 SUP 6.00 FIX 31395BUE1 September 2035 BG ÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 8,426,833 SUP 6.00 FIX 31395BUF8 March 2036 We will guarantee that required payments of principal and interest on the certiñcates are distributed to investors on time. In the case GC(3) ÏÏÏÏÏÏÏÏÏÏ 4 36,749,000 PAC 6.00 FIX 31395BU J 0 August 2033 of the Group 5 Classes, these payments will GD(3)ÏÏÏÏÏÏÏÏÏÏ 4 47,773,000 PAC 6.00 FIX 31395BUK7 July 2035 GE(3) ÏÏÏÏÏÏÏÏÏÏ 4 21,407,000 PAC 6.00 FIX 31395BUL5 March 2036 GA(3) ÏÏÏÏÏÏÏÏÏÏ 4 162,243,000 PAC 6.00 FIX 31395BUG6 October 2028 GB(3) ÏÏÏÏÏÏÏÏÏÏ 4 58,605,000 PAC 6.00 FIX 31395BUH4 January 2032 be subject to certain limitations described in KI(3)ÏÏÏÏÏÏÏÏÏÏÏ 4 1,911,648(2) NTL 6.00 FIX/IO 31395BUM3 March 2036 this prospectus supplement. PO(3) ÏÏÏÏÏÏÏÏÏÏ 4 992,164 SUP (4) PO 31395BUP6 March 2036 KA(3) ÏÏÏÏÏÏÏÏÏÏ 4 22,939,786 PAC 5.50 FIX 31395BUN1 March 2036 BI(3)ÏÏÏÏÏÏÏÏÏÏÏ 4 4,507,531(2) NTL 6.00 FIX/IO 31395BUQ4 July 2029 The Trust and its Assets FM(3)ÏÏÏÏÏÏÏÏÏÏ MS(3)ÏÏÏÏÏÏÏÏÏÏ ,055,231 8,507,967 SUP/AD SUP/AD (1) (1) FLT INV 31395BUR BUS0 July 2029 July 2029 The trust will own Fannie Mae MBS. MT(3)ÏÏÏÏÏÏÏÏÏÏ 4 3,512,118 SUP/AD (1) INV/T 31395BUT8 July 2029 IT(3)ÏÏÏÏÏÏÏÏÏÏÏ 4 7,437,427(2) NTL (1) INV/IO/T 31395BUU5 July 2029 ZC(3) ÏÏÏÏÏÏÏÏÏÏ 4 14,454,507 SUP 6.10 FIX/Z 31395BUV3 March 2036 The mortgage loans underlying the Fannie OX(3) ÏÏÏÏÏÏÏÏÏÏ 4 1,471,496 SUP (4) PO 31395BUW1 March 2036 TX(3) ÏÏÏÏÏÏÏÏÏÏ 4 23,170,467 SEG(TAC)/SCH/AD 5.50 FIX 31395BUX9 March 2036 Mae MBS are Ñrst lien, single-family, Ñxed- IP(3) ÏÏÏÏÏÏÏÏÏÏÏ 4 2,317,046(2) NTL 6.00 FIX/IO 31395BUY7 March 2036 rate and adjustable-rate loans. OW(3) ÏÏÏÏÏÏÏÏÏ 4 7,573,771 SEG(TAC)/SUP/AD (4) PO 31395BUZ4 March 2036 TG(3) ÏÏÏÏÏÏÏÏÏÏ 4 42,000,000 SEG(TAC)/SUP/AD (1) INV/T 31395BVA8 March 2036 TI(3)ÏÏÏÏÏÏÏÏÏÏÏ 4 42,000,000(2) NTL (1) FLT/IO/T 31395BVB6 March 2036 ZA(3) ÏÏÏÏÏÏÏÏÏÏ 4 150,000 SEG(TAC)/SUP/AD 6.10 FIX/Z 31395BVC4 March 2036 Carefully consider the risk factors start- ZY(3) ÏÏÏÏÏÏÏÏÏÏ 4 15,395,493 SUP 6.10 FIX/Z 31395BVD2 March 2036 ing on page S-15 of this prospectus sup- FC ÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 99,871,372(5) SEQ (1) FLT/AFC/PZ 31395BVE0 March 2036 plement and on page 10 of the REMIC X ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 99,871,372(5)(6) CPT (7) CPT/PZ 31395BVF7 March 2036 prospectus. Unless you understand and FWÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 145,285,713(2) SCH/AD (1) FLT 31395BVG5 January 2036 OT ÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 21,435,598 SCH/AD (4) PO 31395BVH3 January 2036 are able to tolerate these risks, you IW ÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 145,285,713(2) NTL (1) INV/IO 31395B V J 9 January 2036 should not invest in the certiñcates. CO ÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 3,278,689 PT (4) PO 31395BVL4 March 2036 ZK ÏÏÏÏÏÏÏÏÏÏÏ 6 30,000,000 CPT 6.10 FIX/Z 31395BVK6 March 2036 You should read the REMIC prospectus R ÏÏÏÏÏÏÏÏÏÏÏÏÏ 0 NPR 0.00 NPR 31395BVM2 March 2036 RL ÏÏÏÏÏÏÏÏÏÏÏÏÏ 0 NPR 0.00 NPR 31395BVN0 March 2036 as well as this prospectus supplement. (1) Based on LIBOR. (6) Notional balance. The X Class is made up of the The certiñcates, together with interest (2) Notional balances. These classes are interest only XI Component, which is an interest only thereon, are not guaranteed by the United classes. component, and the XP Component, which is a (3) Exchangeable classes. principal only component, each as further States and do not constitute a debt or (4) Principal only classes. described in this prospectus supplement. obligation of the United States or any (5) Subject to a variance of plus or minus 5%. (7) The XI Component bears interest at a variable rate as described in this prospectus supplement. 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 If you own certiñcates of certain classes, you can exchange them for the corresponding RCR certiñcates to be issued at the time of the exchange. The ES, PS, US, IS, OL, WO, SA, SB, SG, SK, UA, UI, UB, UC, WA, WI, WB, ND, NI, AD, AI, SF, NS, SM, AK, LO, Z, UK, IK and WD Classes are the RCR classes, as further described in this prospectus supplement. The dealer will oåer the certiñcates (other than the GA, GB, GC, GD and GE Classes) from time to time in negotiated transactions at varying prices. We expect the settlement date to be February 27, Fannie Mae initially will retain the GA, GB, GC, GD and GE Classes. Banc of America Securities LLC The date of this Prospectus Supplement is January 26, 2006

3 TABLE OF CONTENTS Page AVAILABLE INFORMATIONÏÏÏÏÏÏ S- 4 Floating Rate, Inverse Floating INCORPORATION BY Rate and Toggle ClassesÏÏÏÏÏÏÏÏÏ S-26 REFERENCE ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S- 4 Amounts Available for Payment of RECENT DEVELOPMENTS ÏÏÏÏÏÏÏ S- 5 Interest on the Group 5 ClassesÏÏ S-27 REFERENCE SHEET ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S- 8 The FC Class ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-27 ADDITIONAL RISK FACTORS ÏÏÏÏ S-15 The XI Component ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-28 DESCRIPTION OF THE CALCULATION OF LIBORÏÏÏÏÏÏÏÏÏÏÏÏ S-29 CERTIFICATES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-17 DISTRIBUTIONS OF PRINCIPAL ÏÏÏÏÏÏÏ S-29 GENERAL ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-17 Categories of Classes and Structure ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-17 Components ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-29 Fannie Mae Guaranty ÏÏÏÏÏÏÏÏÏÏÏÏ S-18 Principal Distribution Amount ÏÏÏÏ S-30 Characteristics of CertiÑcates ÏÏÏÏÏÏ S-18 Group 1 Principal Distribution Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-31 Authorized Denominations ÏÏÏÏÏÏÏÏ S-19 Group 2 Principal Distribution Distribution Dates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-19 Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-31 Record Date ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-19 Group 3 Principal Distribution Class Factors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-19 Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-31 No Optional Termination ÏÏÏÏÏÏÏÏÏ S-19 Group 4 Principal Distribution COMBINATION AND RECOMBINATION ÏÏ S-20 Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-32 General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-20 ZY Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏÏ S-32 Procedures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-20 ZA Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏÏ S-32 Additional Considerations ÏÏÏÏÏÏÏÏÏ S-20 ZC Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏÏ S-32 THE FIXED-RATE MBS ÏÏÏÏÏÏÏÏÏÏÏÏÏ S-21 Group 4 Cash Flow Distribution The Group 5 MBS (backed by ARM Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-32 Loans) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-22 Group 5 Principal Distribution Characteristics of the ARM Loans ÏÏÏ S-22 Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-33 The MTA IndexÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-22 Additions to Principal Balance of the FC Class ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-34 Mortgage Interest Accrual Rate and Interest Rate Changes ÏÏÏÏÏÏÏÏÏÏ S-22 Additions to Principal Balance of the XP Component ÏÏÏÏÏÏÏÏÏÏÏ S-34 Cap and Floor in Mortgage Interest Accrual Rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-23 Group 6 Principal Distribution Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-34 Monthly Payment Amount Amortization and Deferred ZK1 Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏ S-34 Interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-23 ZK2 Accrual Amount ÏÏÏÏÏÏÏÏÏÏÏ S-34 Borrower Payment OptionsÏÏÏÏÏÏÏÏ S-24 Group 6 Cash Flow Distribution FINAL DATA STATEMENTÏÏÏÏÏÏÏÏÏÏÏÏ S-24 Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-34 DISTRIBUTIONS OF INTEREST ÏÏÏÏÏÏÏÏ S-24 STRUCTURING ASSUMPTIONS ÏÏÏÏÏÏÏÏ S-35 Categories of Classes and Pricing AssumptionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-35 Components ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-24 Prepayment Assumptions ÏÏÏÏÏÏÏÏÏ S-35 Components ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-25 Structuring Ranges and Rate ÏÏÏÏÏÏ S-35 General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-25 Initial EÅective Ranges ÏÏÏÏÏÏÏÏÏÏÏ S-36 Interest Accrual Periods ÏÏÏÏÏÏÏÏÏÏ S-26 YIELD TABLES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-37 Accrual Classes and ComponentsÏÏÏ S-26 General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-37 Notional Classes and Component ÏÏ S-26 The Inverse Floating Rate Classes and the TI and SF Classes ÏÏÏÏÏÏ S-38 Page S-2

4 Page The Principal Only Classes ÏÏÏÏÏÏÏÏ S-43 Treatment of Payments under the The Fixed Rate Interest Only Notional Principal Contract ÏÏÏÏÏ S-62 Classes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-46 Special Consequences for BeneÑcial The X Class ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-48 Owners of X Class CertiÑcates ÏÏÏ S-63 WEIGHTED AVERAGE LIVES OF THE Disposition of the Notional CERTIFICATESÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-48 Principal Contract ÏÏÏÏÏÏÏÏÏÏÏÏÏ S-63 DECREMENT TABLES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-49 TAXATION OF BENEFICIAL OWNERS OF RESIDUAL CERTIFICATES ÏÏÏÏÏÏÏÏÏÏ S-64 CHARACTERISTICS OF THE R AND RL CLASSES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-58 TAXATION OF BENEFICIAL OWNERS OF RCR CERTIFICATESÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-64 CERTAIN ADDITIONAL FEDERAL INCOME TAX General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-64 CONSEQUENCESÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-59 Strip RCR Classes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-64 U.S. TREASURY CIRCULAR 230 Combination RCR Classes ÏÏÏÏÏÏÏÏÏ S-66 NOTICE ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-59 Exchanges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-66 REMIC ELECTIONS AND SPECIAL TAX RETURN DISCLOSURE TAX ATTRIBUTESÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-59 REQUIREMENTS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-66 TAXATION OF CERTIFICATES OF THE PLAN OF DISTRIBUTION ÏÏÏÏÏÏÏÏ S-66 FC AND X CLASSESÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-60 General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-66 Allocations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-60 Increase in CertiÑcatesÏÏÏÏÏÏÏÏÏÏÏÏ S-66 Tax Attributes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-61 LEGAL MATTERSÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-67 TAXATION OF BENEFICIAL OWNERS OF EXHIBIT A ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A- 1 REGULAR CERTIFICATESÏÏÏÏÏÏÏÏÏÏÏ S-61 Weighted Average Coupon Classes S-62 SCHEDULE 1ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A- 2 PRINCIPAL BALANCE TAXATION OF THE INTEREST SCHEDULES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ B- 1 CARRYOVER AMOUNTS ÏÏÏÏÏÏÏÏÏÏÏÏ S-62 Page S-3

5 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 January 1, 2006 (the ""MBS Prospectus''); 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 by writing or calling the dealer at: Banc of America Securities LLC Capital Markets Operations 100 W. 33rd Street, 3rd Floor New York, New York (telephone ). INCORPORATION BY REFERENCE In this prospectus supplement, we are incorporating by reference the MBS Prospectus 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 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. S-4

6 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 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, 2004 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 (the ""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 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 S-5

7 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, 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, S-6

8 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-7

9 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 4 Group 4 MBS 5 Group 5 MBS 6 Group 6 MBS Assumed Characteristics of the Mortgage Loans Underlying the Fixed-Rate MBS (as of February 1, 2006) 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 $ 76,363, % Group 2 MBS $200,000,001* % Group 3 MBS $200,000, % Group 4 MBS $500,000, % Group 6 MBS $200,000, % * As further described in this prospectus supplement, the mortgage loans underlying the Group 2 MBS provide for an interest only payment period of 10 years following origination. The approximate weighted average remaining term to expiration of the interest only payment period for these mortgage loans is assumed to be 119 months. 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. Assumed Characteristics of the Mortgage Loans Underlying the Group 5 MBS The table in Exhibit A of this prospectus supplement lists certain assumed characteristics of the mortgage loans underlying the Group 5 MBS as of February 1, However, the actual characteristics of most of those mortgage loans will diåer from the weighted averages in Exhibit A, perhaps signiñcantly. 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 February 27, S-8

10 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. 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 DTC Book-Entry Physical All classes of certiñcates other Group 5 Classes R and RL Classes than the Group 5 Classes and the 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. Components The X and ZK Classes are made up of payment components. Each component will have the original principal or notional principal balance, principal type and interest type as set forth below. Original Principal or Notional Principal Principal Interest Balance Type Type XI ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $99,871,372(1) NTL WAC/IO XP ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (2) SEQ PO ZK1 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $29,541,311 SUP FIX/Z ZK2 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 458,689 SCH/AD FIX/Z (1) Notional principal balance. (2) The principal balance of the XP Component initially will be equal to zero. The principal balance of the XP Component will increase as a result of the addition of certain deferred interest amounts on the ARM Loans as further described under ""Description of the CertiÑcatesÌDistributions of PrincipalÌAdditions to Principal Balance of the XP Component'' in this prospectus supplement. 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, inverse Öoating rate and toggle classes will bear interest at the initial interest rates listed below. During subsequent interest accrual periods, S-9

11 the Öoating rate and inverse Öoating rate classes 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) F ÏÏÏÏÏÏÏÏÏ % % 0.41% LIBOR 41 basis points ST ÏÏÏÏÏÏÏÏÏ % % 0.00% % ( LIBOR) FN ÏÏÏÏÏÏÏÏÏ % % 0.42% LIBOR 42 basis points PI ÏÏÏÏÏÏÏÏÏ % % 0.00% 6.58% LIBOR DI ÏÏÏÏÏÏÏÏÏ % % 0.00% 6.58% LIBOR FA ÏÏÏÏÏÏÏÏÏ % % 0.45% LIBOR 45 basis points YS ÏÏÏÏÏÏÏÏÏ % % 0.00% 6.55% LIBOR FB ÏÏÏÏÏÏÏÏÏ % % 0.30% LIBOR 30 basis points SX ÏÏÏÏÏÏÏÏÏ % % 0.00% 7.2% LIBOR FP ÏÏÏÏÏÏÏÏÏ % % 0.30% LIBOR 30 basis points SP ÏÏÏÏÏÏÏÏÏ % % 0.00% 6.7% LIBOR FM ÏÏÏÏÏÏÏÏÏ % % 0.30% LIBOR 30 basis points MS ÏÏÏÏÏÏÏÏÏ % % 0.00% % ( LIBOR) MT ÏÏÏÏÏÏÏÏÏ % % 0.00% % ( LIBOR) IT ÏÏÏÏÏÏÏÏÏ % % 0.00% % ( LIBOR) TG ÏÏÏÏÏÏÏÏÏ % % 0.00% 5,047.2% (720 LIBOR) TI ÏÏÏÏÏÏÏÏÏ % % 0.00% (720 LIBOR) 5,040% FW ÏÏÏÏÏÏÏÏÏ % % 0.30% LIBOR 30 basis points IW ÏÏÏÏÏÏÏÏÏ % % 0.00% 6.7% LIBOR ES ÏÏÏÏÏÏÏÏÏ % % 0.00% % ( LIBOR) PS ÏÏÏÏÏÏÏÏÏ % % 0.00% % ( LIBOR) US ÏÏÏÏÏÏÏÏÏ % % 0.00% % ( LIBOR) IS ÏÏÏÏÏÏÏÏÏ % % 0.00% 6.58% LIBOR SA ÏÏÏÏÏÏÏÏÏ % % 0.00% % ( LIBOR) SB ÏÏÏÏÏÏÏÏÏ % % 0.00% % ( LIBOR) SG ÏÏÏÏÏÏÏÏÏ % % 0.00% % (2.5 LIBOR) SK ÏÏÏÏÏÏÏÏÏ % % 0.00% 19.65% (3 LIBOR) SF ÏÏÏÏÏÏÏÏÏ % % 0.00% (3, LIBOR) 27, % NS ÏÏÏÏÏÏÏÏÏ % % 0.00% % ( LIBOR) SM ÏÏÏÏÏÏÏÏÏ % % 0.00% % ( LIBOR) (1) We will establish LIBOR on the basis of the ""BBA Method.'' On the initial distribution date, the FC Class will receive interest at an annual rate of 4.567%. On each subsequent distribution date, the FC Class will receive interest in amounts calculated as described under ""Description of the CertiÑcatesÌDistributions of InterestÌThe FC Class'' in this prospectus supplement. As described in this prospectus supplement, the X Class consists of two payment components, the XI and XP Components. On each distribution date, the XI Component will receive interest in the amount calculated as described under ""Description of the CertiÑcatesÌDistributions of InterestÌ The XI Component'' in this prospectus supplement. The XP Component is a principal only component and will receive no interest. We will apply interest payments from exchanged REMIC certiñcates to the corresponding RCR certiñcates, on a pro rata basis, following any exchange. S-10

12 Notional Classes and Component A notional class or notional component 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 current distribution date: Class or Component ST ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % of the F Class PI ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % of the OY Class DI ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % of the OE Class IS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % of the sum of the OY and OE Classes YS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % of the EO Class SX ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % of the KO Class SP ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100% of the FP Class KI ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % of the KA Class BI ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % of the FM Class IT ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % of the MS Class IP ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % of the TX Class TI ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100% of the TG Class UI ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25% of the GA Class WI ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % of the GB Class NI ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % of the GC Class AI ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % of the GD Class IK ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ % of the TX Class plus % of the KA Class XI ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100% of the FC Class IW ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100% of the FW Class Distributions of Principal Group 1 Principal Distribution Amount (a) % of that amount to the F and FN Classes, pro rata, to zero, and (b) % of that amount as follows: Ñrst, to the OY Class to its Planned Balance; second, to the OE Class to zero; and third, to the OY Class to zero. Group 2 Principal Distribution Amount To the FA, EO, FB and KO Classes, pro rata, to zero. Group 3 Principal Distribution Amount 1. To Aggregate Group I to its Planned Balance. 2. To Aggregate Group II to its Planned Balance. 3. (a) % of the remaining amount to the DO Class to zero, and S-11

13 (b) % of such remaining amount as follows: Ñrst, (x) % to the BH and BJ Classes, pro rata, to zero, and (y) % to the BA Class to zero; and second, to the BC, BD, BE and BG Classes, in that order, to zero. 4. To Aggregate Group II to zero. 5. To Aggregate Group I to zero. For a description of Aggregate Group I and Aggregate Group II, see ""Description of the CertiÑcatesÌDistributions of PrincipalÌGroup 3 Principal Distribution Amount'' in this prospectus supplement. Group 4 Principal Distribution Amount ZY Accrual Amount To Aggregate Group IV to its Targeted Balance, and thereafter to the ZY Class. ZA Accrual Amount To the TG and OW Classes, pro rata, to zero, and thereafter to the ZA Class. ZC Accrual Amount To the FM, MS and MT Classes, pro rata, to zero, and thereafter to the ZC Class. Group 4 Cash Flow Distribution Amount 1. To Aggregate Group III to its Planned Balance. 2. (a) % of the remaining amount as follows: (x) % as follows: Ñrst, to the Aggregate Group IV to its Targeted Balance; second, to the ZY Class to zero; and third, to Aggregate Group IV to zero, and (y) % to the OX Class to zero, and (b) % of such remaining amount as follows: Ñrst, to the KA Class to its Planned Balance; second, (x) % as follows: Ñrst, to the FM, MS and MT Classes, pro rata, to zero; and second, to the ZC Class to zero, and (y) % to the PO Class to zero; and third, to the KA Class to zero. 3. To Aggregate III to zero. For a description of Aggregate Group III and Aggregate Group IV, see ""Description of the CertiÑcatesÌDistributions of PrincipalÌGroup 4 Principal Distribution Amount'' in this prospectus supplement. S-12

14 Group 5 Principal Distribution Amount To the FC Class and the XP Component, in that order, to zero. Group 6 Principal Distribution Amount ZK1 Accrual Amount To Aggregate Group V to its Scheduled Balance, and thereafter to the ZK1 Component. ZK2 Accrual Amount To the FW and OT Classes, pro rata, to zero, and thereafter to the ZK2 Component. Group 6 Cash Flow Distribution Amount (a) % of that amount as follows: Ñrst, to Aggregate V to its Scheduled Balance; second, to the ZK1 Component to zero; and third, to Aggregate V to zero, and (b) % of that amount to the CO Class to zero. For a description of Aggregate Group V, see ""Description of the CertiÑcatesÌDistributions of PrincipalÌGroup 6 Principal Distribution Amount'' in this prospectus supplement. We will apply principal payments from exchanged REMIC certiñcates to the corresponding RCR certiñcates, on a pro rata basis, following any exchange. Weighted Average Lives (years)* Group 1 Classes 0% 100% 180% 250% 500% F, ST, FN, ES, IS and OLÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PI, OY and PS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ DI, OE and US ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Group 2 Classes 0% 100% 190% 300% 500% FA, YS, EO, FB, SX, KO, WO, SA, SB, SG and SK ÏÏÏÏÏÏÏ Group 3 Classes 0% 100% 121% 192% 250% 500% FP, SP and OPÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ MU ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ MW ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ AG ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ DO ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ BH, BJ and BA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ BC ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ BD ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ BE ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ BG ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ S-13

15 Group 4 Classes 0% 100% 128% 142% 237% 249% 300% 600% GA, UA, UB, UC and UIÏÏÏÏÏÏÏÏÏÏÏ GB, WA, WB and WIÏÏÏÏÏÏÏÏÏÏÏÏÏÏ GC, ND and NI ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ GD, AD and AI ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ GE ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KI and KA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PO ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ BI, FM, MS, MT, IT, NS and SM ÏÏ ZC ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OX and UK ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TX and IP ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OW, TG, TI and SF ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ZA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ZY ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ AK ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ LO ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Z ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ IK ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ WD ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ CPR Prepayment Assumption Group 5 Class and Component 0% 10% 20% 30% 40% FC and XI ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Group 6 Classes 0% 100% 281% 340% 500% 600% FW, OT and IW ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ZK ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ CO ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ * Determined as speciñed under ""Description of the CertiÑcatesÌWeighted Average Lives of the CertiÑcates'' in this prospectus supplement. S-14

16 ADDITIONAL RISK FACTORS The rate of principal payments on the cer- mortgage loans underlying the Group 2 MBS tiñcates will be aåected by the rate of principal represent accrued interest only during the Ñrst payments on the underlying mortgage loans. ten years following origination. Thereafter, the The rate at which you receive principal pay- scheduled monthly payments are increased to ments on the certiñcates will be sensitive to the amounts suçcient to pay current interest and to rate of principal payments on the mortgage fully amortize each of these mortgage loans by loans underlying the related MBS, including its maturity date. As a result, borrowers may be prepayments. Because borrowers generally may more likely to reñnance these mortgage loans on prepay their mortgage loans at any time without or before the dates on which the scheduled penalty, the rate of principal payments on the monthly payments increase. mortgage loans is likely to vary over time. It is Recent hurricanes in the Gulf Coast region highly unlikely that the mortgage loans will may present risk of increased mortgage loan prepay prepayments. In August and September 2005, at any of the prepayment rates we aslated Hurricane Katrina and Hurricane Rita and resumed in this prospectus supplement, or events caused catastrophic damage to ex- tensive areas along the Gulf Coast of the United at any constant prepayment rate until States, including portions of coastal and inland maturity. Alabama, Florida, Louisiana, Mississippi and In the case of the Group 5 MBS, the rate of Texas. The full extent of the physical damage principal payments also will be aåected by the resulting from severe Öooding, high winds and relationship over time of the interest rates on environmental contamination remains uncer- those loans, which are subject to monthly adbeen tain. Hundreds of thousands of people have justment, to the monthly payment amounts for displaced and interruptions in the regional those loans, which generally are subject to anlong-term economy have been signiñcant. Although the nual adjustment. Moreover, the rate of principal eåects are unclear, these events could payments will be aåected by various payment lead to a general economic downturn in the Gulf options available generally to the related borreal Coast region, including job losses and declines in estate values. Accordingly, defaults on any rowers as described in this prospectus supplement. mortgage loans in the aåected areas may in- crease, in turn resulting in early payments of Yields may be lower than expected due to principal to holders of certiñcates backed by unexpected rate of principal payments. The ac- those mortgage loans. Additionally, casualty tual yield on your certiñcates probably will be losses on mortgaged properties with hurricane lower than you expect: or Öood damage may result in early payment of if you buy your certiñcates at a premium principal to holders of the related certiñcates. and principal payments are faster than You must make your own decisions you expect, or about the various applicable assumptions, if you buy your certiñcates at a discount including prepayment assumptions, when and principal payments are slower than deciding whether to purchase the you expect. certiñcates. Application of the weighted average Furthermore, in the case of interest only Group 5 MBS pass-through rate cap to the certiñcates and certiñcates purchased at a pre- FC Class may adversely aåect its yield. The mium, you could lose money on your investment interest rate on the FC Class is subject to the if prepayments occur at a rapid rate. weighted average Group 5 MBS pass-through The mortgage loans underlying the Group 2 rate cap. Any resulting interest carryover MBS provide for interest only payments for a amount (i.e., the amount by which interest paylengthy initial period and thus may be more ments on the FC Class are reduced due to applilikely to be reñnanced than other mortgage cation of the weighted average Group 5 MBS loans. The scheduled monthly payments on the pass-through rate cap) will be paid to the FC S-15

17 Class on the current distribution date or future supplement. For so long as the FC Class remains distribution dates only to the extent the amount outstanding, we will not pay interest on the available for interest payments on the FC Class XI Component on any distribution date until we and XI Component exceeds the amount of cur- have paid all accrued and unpaid interest on the rent interest due on the FC Class. As a result, we FC Class on that date (including any interest cannot assure you that funds will be adequate to carryover amounts). cover the interest carryover amount on any distribution date. Our guaranty will not cover Weighted average lives and yields on the any interest carryover amounts. certiñcates are aåected by actual characteristics of the underlying mortgage loans. We have as- The FC Class may not receive its full ac- sumed that the mortgage loans underlying the crued interest amount on each distribution date. MBS have certain characteristics. However, the The amount of interest that we are obligated to actual mortgage loans probably will have diåerpay to the FC Class on each distribution date is ent characteristics from those we assumed. As a subject to certain limitations as described in this result, your yields could be lower than you exprospectus supplement. In the event the pect, even if the mortgage loans prepay at the amount available for interest payments on the indicated constant prepayment rates. In addi- FC Class is insuçcient to pay the full amount of tion, slight diåerences between the assumed current interest accrued on the FC Class for any mortgage loan characteristics and the actual distribution date due to the negative amortiza- mortgage loans could aåect the weighted avertion feature of the related mortgage loans, the age lives of the classes of certiñcates. amount of such insuçciency will be added to the principal balance of the FC Class. In that case, Level of Öoating rate index aåects yields on the eåective yield on the FC Class may be certain certiñcates. The yield on any Öoating reduced below the yield that otherwise would be rate or inverse Öoating rate certiñcate will be produced. aåected by the level of its interest rate index. If the level of the index diåers from the level you Application of principal distributions on expect, then your actual yield may be lower than the Group 5 MBS to pay interest on the FC and you expect. X Classes will have the eåect of lengthening the weighted average life of the FC Class. If as a Slight changes in LIBOR may signiñcantly result of the negative amortization feature of the aåect the interest rates of the toggle classes. The related mortgage loans, principal distributions toggle classes may be extremely sensitive to on the Group 5 MBS (rather than interest certain changes in monthly LIBOR values. In distributions only) are applied to pay interest particular, they may experience dramatic deon the FC and X Classes instead of being used to clines in their interest rates and yields as a reduce the principal balance of the FC Class, the result of certain changes in LIBOR, even if weighted average life of the FC Class will be those changes are slight. For an illustration of extended correspondingly. this sensitivity, see the related yield tables in The XI Component will receive interest only this prospectus supplement. from funds not required to be paid as interest on Delay classes have lower yields and market the FC Class. The amount of interest payments values. Since certain classes do not receive interon the XI Component will be very sensitive to est immediately following each interest accrual the level of LIBOR relative to the pass-through period, these classes have lower yields and lower rates on the Group 5 MBS and to the amount of market values than they would if there were no principal and interest distributed on the such delay. Group 5 MBS. The pass-through rates on the Group 5 MBS are calculated based upon the Reinvestment of certiñcate payments may interest rates of the related mortgage loans, not achieve same yields as certiñcates. The rate which adjust monthly based primarily on the of principal payments of the certiñcates is un- MTA index. See ""Description of the CertiÑ- certain. You may be unable to reinvest the paycatesìcertain Characteristics of the ARM ments on the certiñcates at the same yields LoansÌThe MTA Index'' in this prospectus provided by the certiñcates. S-16