Announcement Clarifying Certain Features of Fannie Mae REMIC and Structured Grantor Trust Transactions Backed by FHA and VA Adjustable-Rate Single-Family Mortgage Groups

Announcement Clarifying Certain Features of Fannie Mae REMIC and Structured Grantor Trust Transactions Backed by FHA and VA Adjustable-Rate Single-Family Mortgage Groups

Fannie Mae REMIC and structured grantor trust certificates (Structured Trust Certificates) backed by FHA-insured and VA- guaranteed adjustable-rate residential mortgage loans (FHA ARM groups) are administered in accordance with FHA and VA guidelines, as applicable, and the related trust documentation. We wish to clarify certain servicing and payment features that apply to the FHA ARM groups and the related Structured Trust Certificates.

1. The FHA and VA loss mitigation guidelines for resolving payment delinquencies and defaults require that if a loan servicer determines that a modification of an adjustable-rate loan is appropriate, the loan must be converted to a fixed-rate loan as part of the modification process. Accordingly, where loans in FHA ARM groups have been modified, those loans have been converted to fixed-rate loans. For the percentage of fixed-rate loans in each FHA ARM group as of May 1, 2010, please visit our PoolTalk® application on our website at www.fanniemae.com. As a result of the rate conversion feature described above, it is possible over time that fixed-rate loans will represent an increasing proportion of the loans in the related FHA ARM groups.

2. To the extent required or permitted under the applicable FHA and VA guidelines, when an adjustable-rate loan converts to a fixed rate, any interest amounts that are due and unpaid (arrearages) generally are added to the outstanding principal balance of the loan at the time of the rate conversion. Interest accrues thereafter on the entire principal balance of the loan (including the arrearage amount), and the increased principal balance amortizes in full over the remaining life of the loan. In addition, at the time of the rate conversion, servicers generally are reimbursed for their prior advances to the trust of delinquent interest payments on account of the converted loan, with these reimbursements being made from monthly principal collections on the related FHA ARM group. Consequently, the rate of principal distributions on the Structured Trust Certificates may be delayed as a result of these servicer reimbursements.

3. Most of the Structured Trust Certificates backed by FHA ARM groups accrue interest based on the weighted average of the net mortgage interest rates (that is, mortgage rates net of trust expenses) of the loans in the related FHA ARM group. These Structured Trust Certificates will continue to accrue and receive interest based on then current net mortgage interest rates of all loans in the FHA ARM group, including net mortgage interest rates derived from fixed interest rates of loans that have converted from adjustable rates to fixed rates.

4. As a result of the servicing and payment features described above, monthly distributions on certificates collateralized by FHA ARM groups in the trusts listed below may have been greater than, or in some cases less than, the amounts that would have been distributed to holders if the related loans had not been converted to fixed rates.

5. For more information, please visit our PoolTalk® application on our website at www.fanniemae.com. Also, holders of any Structured Trust Certificates backed by FHA ARM groups may contact Fannie Mae at 1-800-237-8627 with any questions or concerns regarding the servicing or payment considerations described in this announcement.

Last revised: 06/21/10