Announcement and Clarification Concerning Certain Fannie Mae Multi-Class Structured Securities Backed Solely by FHA-Insured and VA-Guaranteed Mortgage Loans

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Announcement and Clarification Concerning Certain Fannie Mae Multi-Class Structured Securities Backed Solely by FHA-Insured and VA-Guaranteed Mortgage Loans

We have received several inquiries concerning certain Fannie Mae multi-class structured securities backed by FHA-insured and VA-guaranteed mortgage loans and are issuing this Announcement and Clarification in response to these inquiries. For certain of these securities, the servicer, in an effort to mitigate losses, is permitted to reduce the interest rate of any mortgage loan without removing the loan from the trust and, in the case of fixed-rate to fixed-rate modifications1, investors are entitled to receive interest payments based on the interest rate of the loan at the issue date of the securities (regardless of any subsequent reduction in the interest rate). For information about adjustable-rate to fixed-rate modifications, see Fannie Mae's "Announcement Clarifying Certain Features of Fannie Mae REMIC and Structured Grantor Trust Transactions Backed by FHA and VA Adjustable-Rate Single-Family Mortgage Groups" dated June 21, 2010.

In some cases, following an interest rate reduction, the seller is required to fund any interest payment shortfall created by the interest rate reduction. For many of these trusts, Fannie Mae has the option to purchase the affected mortgage loans from the related trusts in the event the seller fails to fund the required amounts following an interest rate reduction. Any such purchase will have the effect of a prepayment in full of the purchased mortgage loans.

In general, for the trusts listed in the table below, the seller has failed in its obligation to make interest shortfall payments as described above, and has notified Fannie Mae that it will not be funding these shortfall payments in the future. Going forward, Fannie Mae intends to exercise its right to purchase the impacted loans. The effect of such mortgage loan purchases on any particular trust will vary. However, it is likely that in certain cases the effect will be significant.

The precise timing and scope of the future purchases has not yet been determined; however, we do not anticipate the purchases will occur earlier than sixty days from the date of this announcement. Fannie Mae will release additional information on the anticipated mortgage loan purchases when available.

The following table lists the trusts as well as the approximate percent of loans in the related collateral groups that as of the date of this Announcement and Clarification, Fannie Mae has determined are subject to purchase by Fannie Mae (by unpaid principal balance as of the February 2011 distribution date). These percentages are subject to change.

Impacted Fannie Mae Trusts
Trust NumberCollateral GroupApproximate % of Group UPB

2001-T8

1
2

12%
18%

2001-T10   18%
2001-T12 1
2
20%
9%
2002-T1   25%
2002-T4   9%
2002-W3   8%
2002-W4 1
2
12%
17%
2002-W7 1
2
22%
16%
2002-W9   15%
2002-W10 1
2
19%
10%
2003-W2 1
2
12%
11%
2003-W3 1
2
13%
14%
2003-W6 1
2
3
4
5
6
15%
23%
26%
24%
18%
14%
2003-W8 1
2
3
4
24%
31%
23%
7%
2003-W12 1
2
3
24%
21%
14%
2003-W14 1
2
17%
6%
2003-W15 1
2
3
30%
24%
12%
2003-W17 1 25%
2003-W18 1
2
16%
11%
2003-W19 1
2
30%
14%
2004-T1 1
2
31%
15%
2004-T2 1
2
13%
14%
2004-T3 1
2
12%
20%
2004-W1 1
2
3
21%
16%
10%
2004-W9 1
2
3
14%
17%
11%
2004-W11 1
2
17%
5%
2004-W12 1
2
16%
8%
2005-W1 1
2
11%
13%

As a point of clarification, the customary four-month delinquency purchase option that applies to Fannie Mae single-family MBS trusts does not apply to multi-class structured securities backed solely by FHA and VA loans.

Inquiries regarding this Announcement should be directed to the Fannie Mae Fixed-Income Securities Help Line at (888) 266-3457, or fixedincome_marketing@fanniemae.com

1This includes loans that were originally adjustable rate loans, modified to fixed-rate loans and subsequently modified again to lower fixed-rate loans.

Certain statements in this announcement may be considered forward-looking statements within the meaning of the federal securities laws, including statements about our plans to purchase loans from trusts and the effect of these purchases on the trusts. Factors that may cause actual results to differ materially from the expectations in these and other forward-looking statements include issues related to the seller of the loans, servicing and operational constraints, as well as those discussed in our Annual Report on Form 10-K for the year ended December 31, 2010 and our reports on Form 10-Q and Form 8-K, filed with the SEC and available on the Investors page of our Web site at www.fanniemae.com and the SEC's Web site at www.sec.gov.

Originally Published: March 16, 2011