FUND AMERICA INVESTORS CORP II, 424B5, 1998-05-01

FUND AMERICA INVESTORS CORP II
424B5, 1998-05-01
ASSET-BACKED SECURITIES

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<PAGE> 1

PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 28, 1998)

$60,373,853
(APPROXIMATE)

FUND AMERICA INVESTORS CORPORATION II
ISSUER
PASS-THROUGH CERTIFICATES, SERIES 1998-A

The Pass-Through Certificates, Series 1998-A, Class 1A (the "Class 1A
Certificates") and Class 2A (the "Class 2A Certificates," and together with the
Class 1A Certificates, the "Certificates"), will represent, in the aggregate,
the entire beneficial ownership interest in two groups of underlying securities,
each of which will constitute a separate sub-trust, held by a trust (the
"Trust") consisting primarily of a portion of (i) one class of Guaranteed REMIC
Pass-Through Certificates issued by Fannie Mae, formerly known as the Federal
National Mortgage Association ("Fannie Mae"), representing beneficial ownership
interest in a separate trust established by Fannie Mae (the "Pooled Fannie Mae
Certificate"), (ii) two classes of certificates issued by Freddie Mac, formerly
known as the Federal Home Loan Mortgage Corporation ("Freddie Mac"), as part of
separate series of such certificates, including one class of Payment Exchange
Certificates and one class of Multiclass REMIC Certificates (the "Pooled Freddie
Mac Certificates," and together with the Pooled Fannie Mae Certificate, the
"Pooled Agency Certificates"), and (iii) a single class of collateralized
mortgage obligations, Series 1993-2, issued by the Fund America Investors Trust
I (the "Pooled Non-Agency Certificate," and together with the Pooled Agency
Certificates, the "Pooled Certificates"). The Pooled Certificates or portions
thereof underlying the Class 1A Certificates are also referred to herein as the
"Group 1A Pooled Certificates" and the Pooled Certificates or portions thereof
underlying the Class 2A Certificates are also referred to herein as the "Group
2A Pooled Certificates." The designations used herein for each Pooled
Certificate and the allocation thereof to the Class 1A and/or Class 2A
Certificates are set forth under "Description of the Pooled
Certificates -- General" and the characteristics of the Pooled Certificates are
described herein under "Description of the Pooled Certificates" and in Annex 1
and Annex 2 attached hereto. Capitalized terms used herein and not otherwise
defined herein are defined in the Prospectus. (Cover continued on next page)

THESE CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
THESE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE ISSUER,
THE TRUSTEE, THE UNDERWRITER, OR ANY OF THEIR RESPECTIVE AFFILIATES.
DISTRIBUTIONS ON THE CERTIFICATES WILL BE MADE SOLELY FROM ASSETS TRANSFERRED OR
PLEDGED TO THE TRUST FOR THE BENEFIT OF CERTIFICATEHOLDERS.
------------------------------

Prospective investors should consider, among other things, the factors set
forth on Page (ii) herein, those under "Risk Factors," commencing at Page 26 of
the Prospectus and at Page S-14 of this Prospectus Supplement, and the
discussion under "Yield and Prepayment Considerations" commencing at Page S-28
herein.

<S> <C> <C>
====================================================================================================
INITIAL PRINCIPAL AMOUNT PASS-THROUGH RATE
- ----------------------------------------------------------------------------------------------------
Class 1A............................................... $23,500,002 (1)
- ----------------------------------------------------------------------------------------------------
Class 2A............................................... $36,873,851 (1)
====================================================================================================
</TABLE>

(1) The effective per annum interest rate borne by either Class of Certificates
during each Interest Accrual Period (as defined herein) with respect to a
Distribution Date (as defined herein) will equal a fraction, expressed as a
percentage truncated at the fourth decimal place, the numerator of which is
equal to the aggregate amount in respect of interest paid on the Pooled
Certificates relating to each Class for the related Interest Accrual Period
(after payment of the Trustee's Fee and subject to the adjustments of
certain amounts with respect to the Class 2A Certificates as described
herein) multiplied by 12, and the denominator of which is the principal
amount of such Class of related Certificates immediately prior to such
Distribution Date. Under certain circumstances, the principal amount of
either Class of Certificates could be paid in full while interest would
remain payable, in which case, the calculation of the effective per annum
interest rate borne by such Class of Certificates would not be meaningful.
The effective per annum interest rate borne by the Class 1A Certificates
during the first Interest Accrual Period is projected to be approximately
6.6985%. The effective per annum interest rate borne by the Class 2A
Certificates during the first Interest Accrual Period is projected assuming
a constant prepayment rate of 200% (as defined herein) to be approximately
7.7367%.

The Certificates will be purchased by Bear, Stearns & Co. Inc. (the
"Underwriter") from Fund America Investors Corporation II (the "Company") and
will be offered by the Underwriter from time to time in negotiated transactions
at varying prices to be determined at the time of sale. Proceeds to the Company
from the sale of the Certificates are expected to be approximately 108.3% of the
aggregate principal balance of the Certificates, plus accrued interest thereon
from April 1, 1998 to but not including the Closing Date, but before deducting
expenses payable by the Company, estimated to be $300,000.

The Certificates are offered by the Underwriter when, as and if issued,
delivered to and accepted by the Underwriter and subject to certain other
conditions. Delivery of the Certificates is expected to be made in book entry
form only, through the same day funds settlement system of The Depository Trust
Company on or about April 30, 1998.
------------------------------
BEAR, STEARNS & CO. INC.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS APRIL 28, 1998
<PAGE> 2
(cover continued from previous page)

The Pooled Fannie Mae Certificate is guaranteed as to timely distribution
of principal and, to a certain extent, interest by Fannie Mae. Freddie Mac
guarantees to the record holder of the Pooled Freddie Mac Certificates the
timely payment of interest and the payment of the principal amount of the
Pooled Freddie Mac Certificates as described in the applicable Freddie Mac
Offering Circulars. Payments with respect to the Pooled Non-Agency Certificate
are not guaranteed by Fannie Mae, Freddie Mac, Ginnie Mae, formerly known as
the Government National Mortgage Association ("Ginnie Mae"), or any other
person. The Pooled Non-Agency Certificate is a non-recourse obligation of a
single purpose trust, that is secured by underlying certificates which include
certain Fannie Mae, Freddie Mac, Ginnie Mae certificates and other non-agency
certificates that represent undivided ownership interests in agency
certificates.

The Pooled Fannie Mae Certificate is a portion of a class of a series of
Fannie Mae REMIC Certificates (an "Underlying Fannie Mae Series") which
represents beneficial ownership interest in a trust established by Fannie Mae
(the "Underlying Fannie Mae Trust"). The assets of the Underlying Fannie Mae
Trust include (i) a single "interest only" Fannie Mae Stripped Mortgage-Backed
Security included in Fannie Mae Stripped Mortgage-Backed Security Trust
000180-GN (the "Trust 180 SMBS"), (ii) certain other "interest only" Stripped
Mortgage-Backed Securities (the "IO SMBS" and, together with the Trust 180
SMBS, the "Fannie Mae SMBS") and (iii) all of the Class 5-C REMIC Certificates
evidencing beneficial ownership interests in Fannie Mae REMIC Trust 1994-5.
The Class 5-C Certificates are "principal only" Certificates. Underlying the
assets in the Underlying Fannie Mae Trust are certain Fannie Mae Mortgage
Pass-Through Certificates (the "Fannie Mae MBS") and certain "fully modified
pass-through" mortgage backed securities ("Ginnie Mae Certificates") guaranteed
as to timely payment of principal and interest by Ginnie Mae. Each Fannie Mae
MBS represents a beneficial ownership interest in a pool of first lien,
single-family, fixed rate residential mortgage loans ("Fannie Mae Mortgages").
Each Ginnie Mae Certificate is based on and backed by a pool of mortgage loans
("Ginnie Mae Mortgages") which are either insured by the Federal Housing
Administration ("FHA") or partially guaranteed by the Department of Veterans
Affairs ("VA").

The Pooled Freddie Mac Certificates are each one class of two separate
series of Payment Exchange Certificates or Multiclass REMIC Certificates (the
"Pooled Freddie Mac G063 Certificate" and the "Pooled Freddie Mac 2043
Certificate," respectively, and each an "Underlying Freddie Mac Series"). The
Pooled Freddie Mac G063 Certificate represents beneficial ownership interest in
a trust (the "Underlying Freddie Mac G063 Trust") established by Freddie Mac.
The assets of the Underlying Freddie Mac G063 Trust consist of Freddie Mac
Giant Stripped Securities, Series GS007, which in turn consists of Giant IO
Securities and Giant PO Securities, backed by Ginnie Mae-Related Securities
(Ginnie Mae Certificates and Giant Securities). The assets underlying each
Underlying Freddie Mac series are pools of fixed-rate, first lien, residential
mortgage loans and/or participations in mortgage loans ("Freddie Mac
Mortgages").

The Pooled Freddie Mac 2043 Certificate represents beneficial ownership
interest in a trust established by Freddie Mac (the "Underlying Freddie Mac
2043 Trust"). The assets of the Underlying Freddie Mac 2043 Trust consist of
Freddie Mac Gold Participation Certificates and Gold Giant Participation
Certificates.

The Pooled Non-Agency Certificate is a single class of a series of
collateralized mortgage obligations issued by a Delaware business trust
established by Fund America Investors Corporation, an affiliate of the Company
(the "Non-Agency Certificate Issuer"). The Pooled Non-Agency Certificate is a
non-recourse obligation of the Non-Agency Certificate Issuer secured by all of
its assets, that have been pledged to an indenture trustee for the benefit of
the holders of the Pooled Non-Agency Certificate (the "Underlying Non-Agency
Trust"). The assets of the Underlying Non-Agency Trust consist of (i) certain
classes of Fannie Mae Guaranteed REMIC Pass-Through Certificates, (ii) certain
classes of Fannie Mae Stripped Mortgage-Backed Securities, (iii) Freddie Mac
Multiclass Mortgage Participation Certificates ("Multiclass PCs"), (iv) Freddie
Mac Giant Mortgage Participation Certificates ("Stripped Giant PCs"), and (v)
certain mortgage pass-through certificates, participation certificates, or
collateralized mortgage obligations issued by issuers other than Fannie Mae,
Freddie Mac, or Ginnie Mae, which securities are backed by mortgage-backed
securities issued by Fannie Mae, Freddie Mac, or Ginnie Mae (collectively, the
"Underlying FAIT Certificates").

(ii)
<PAGE> 3

One class of the Pooled Certificates is entitled to receive distributions
of interest on the principal balance thereof based on a formula that varies
directly with the London interbank offered quotations for one-month Eurodollar
deposits ("LIBOR"), subject to minimum and maximum rates ("Pooled Floating Rate
Certificate"). One class of the Pooled Freddie Mac Certificates is an accrual
Class with a fixed interest rate (a "Pooled Accrual Certificate"). Amounts
representing interest are not distributed to the holders of the Pooled Accrual
Certificate, instead such amounts are added to the principal balance thereof.
The remaining class of the Pooled Freddie Mac Certificates is a Payment
Exchange Certificate (the "Pooled PEC/IO Certificate") which is an "interest
only" certificate that is entitled to receive interest payments on a notional
principal amount, and does not have an actual principal balance, and as such,
is not entitled to receive distributions of principal. Such Pooled PEC/IO
Certificate has a fixed interest rate of 8.00% and is also entitled to receive
interest payment supplement amounts that vary with the rate of prepayments
experienced on the mortgages underlying the Giant Stripped Securities (as
defined in the Underlying Offering Circular Term Sheets attached hereto in
Annex 2) and the level of LIBOR. Lower levels of LIBOR and faster prepayments
will increase the interest payment supplement amount, subject to the available
funds. The Pooled Non-Agency Certificate is entitled to receive distributions
of interest on the principal balance thereof based on a formula that varies
directly with LIBOR, subject to available funds and, under certain
circumstances, subject to the reallocation of interest payments to reduce
principal (the "Available Funds Class") as described in "Description of the
Pooled Certificates" and in Annex 1 and Annex 2 attached hereto.

In addition to the Pooled Certificates, the Trust shall include a Reserve
Fund for the benefit of the Class 2A Certificates. The Reserve Fund includes
three United States Treasury Securities (the "Treasury Securities") that will
provide funds equal to $7,700,000. On the Distribution Dates occurring in
February 1999, February 2001, and February 2002, distributions from the Reserve
Fund shall be applied to principal on the Class 2A Certificates. The Class 1A
Certificates are not entitled to distributions from the Reserve Fund. See
"Credit Enhancement--Reserve Funds" in the Prospectus and "The Reserve Fund"
herein.

It is a condition to the issuance of the Certificates that they be
assigned a rating of "Aaa" by Moody's Investors Service, Inc. ("Moody's") and
"AAA" by Fitch IBCA, Inc. ("Fitch," and together with Moody's, the "Rating
Agencies"). See "Ratings" herein.

Distributions of principal and interest on the Certificates with respect
to a month will be made on the first Business Day (as defined herein) after the
25th day of such month (each, a "Distribution Date") or, if such 25th day is
not a business day, then on the first Business Day after the first Business Day
after the 25th day of each month. On each Distribution Date, holders of each
Class of Certificates will be entitled to receive interest from funds received
as interest on the related group of Pooled Certificates and principal from
funds received as principal on the related group of Pooled Certificates, as
more fully described herein under "Description of the Certificates" herein.

THE CERTIFICATES ARE NOT SUITABLE INVESTMENTS FOR ALL INVESTORS. IN
PARTICULAR, NO INVESTOR SHOULD PURCHASE THE CERTIFICATES UNLESS THE INVESTOR
UNDERSTANDS AND IS ABLE TO BEAR THE PREPAYMENT, YIELD, LIQUIDITY, AND MARKET
RISKS ASSOCIATED WITH THE CERTIFICATES.

The Certificates are complex securities and it is important that each
investor in the Certificates possess, either alone or together with an
investment advisor, the expertise necessary to evaluate the information
contained and incorporated in this Prospectus Supplement in the context of that
investor's financial situation.

The yield to maturity on each Class of the Certificates will depend on the
purchase price of the Certificates, the amount of interest distributed on the
Certificates, and the rate and timing of principal payments on the related
group of Pooled Certificates which in turn will be affected by the rate and
timing of principal payments (including prepayments, repurchases, defaults, and
liquidations) on the Fannie Mae Mortgages, the Freddie Mac Mortgages and the
Ginnie Mae Mortgages (collectively, the "Mortgage Loans" and with respect to
any Pooled Certificates, the "Underlying Mortgage Loans" or a "Mortgage Pool").
Generally, the Mortgage Loans may be prepaid at any time without penalty. The
yield to maturity on the Certificates also will be sensitive to the level of
LIBOR. Mortgage Loan prepayment rates are likely to fluctuate significantly
from time to time, as is the level of LIBOR. Investors should consider the
associated risks, including:

(iii)
<PAGE> 4

-- The yield to maturity on the Certificates will be sensitive to the
level of LIBOR.

-- Low levels of LIBOR can reduce the interest due on the
Pooled Floating Rate Certificate and the Pooled Non-Agency
Certificate. Consequently, a low level of LIBOR may have a
negative effect on the yield to investors in the Certificates.

-- High levels of LIBOR can significantly reduce payments
to the Pooled PEC/IO Certificate and (especially in combination
with fast Mortgage prepayment rates) may result in lower than
anticipated yields to investors. Relatively high levels of LIBOR
will reduce the supplemental amount of interest available for
payments on the Pooled PEC/IO Certificate in excess of the amount
calculated at the base fixed rate. As prepayment rates decrease,
the supplemental amount will also decrease. Therefore, high
levels of LIBOR coupled with low prepayment rates may
significantly reduce the supplemental interest payments to the
Pooled PEC/IO Certificate.

-- Slight variations in Mortgage Loan characteristics could
substantially affect the weighted average life and yield of the
Certificates.

-- Although the Pooled Non-Agency Certificate is secured by payments
on Fannie Mae, Freddie Mac, and Ginnie Mae certificates, or indirect
interests therein, the Pooled Non-Agency Certificate is not itself
guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae or any other
person.

-- The Pooled Certificates were issued as parts of different
Underlying Series and the rates of prepayments on the Underlying
Mortgage Loans will be different. Under various circumstances,
including differing prepayment rates of the Underlying Mortgage Loans,
the Pooled Certificates could mature at times other than expected by
investors and either Class of the Certificates could have a cash flow
profile different from that expected by investors. For example, with
respect to the Class 1A Certificates, if one of the Class 1A Pooled
Certificates, either the Pooled PEC/IO Certificate or the Pooled
Floating Rate Certificate, were to mature prior to the other, the Class
1A Certificates would, at that point, have the payment and yield
characteristics of the remaining Class 1A Pooled Certificate.
Similarly, with respect to the Class 2A Certificates, if one or more of
the Class 2A Pooled Certificates, the Pooled PEC/IO Certificate, the
Pooled Floating Rate Certificate, the Pooled Accrual Certificate or the
Pooled Non-Agency Certificate, were to mature prior to the others, the
Class 2A Certificates would, at that point, have the payment and yield
characteristics of the remaining Class 2A Pooled Certificates.
Therefore, the Class 2A Certificates may, in the future, have the
payment and yield characteristics of one or more (or a combination of
any two or three) of the Class 2A Pooled Certificates. Similarly, the
Non-Agency Certificate may have certain of the yield characteristics of
any one of the underlying securities (or combination thereof), which
underlying security types include principal only securities, interest
only securities, inverse floater securities, discounted coupon classes,
and planned amortization classes.

-- The yield to investors on the Certificates can be expected to
decrease to the extent that the notional principal balance of the
Pooled PEC/IO Certificate reduces faster than anticipated.

-- If, on any Distribution Date, the amount by which the Pooled
Accrual Certificate has accreted exceeds the aggregate distributions of
principal for the Class 2A Certificates, the principal balance of the
Class 2A Certificates will be increased by the amount of such excess.

-- The yield to maturity of Certificates purchased at a discount or
premium will be more sensitive to the rate and timing of payments
thereon. Holders of Certificates purchased at a discount (or premium)
should consider the risk that a slower (or faster) than anticipated
rate of principal payments to the Certificates could result in an
actual yield that is lower than the anticipated yield.

-- As of the April 1998 Pooled Fannie Mae Certificate Distribution
Date and the April 1998 Pooled Non-Agency Certificate Payment Date, the
interest accrued and unpaid on the principal balance in respect of each
of the Pooled Fannie Mae Certificate and the Pooled Non-Agency
Certificate (in each case, an

(iv)
<PAGE> 5

"Interest Deficiency") allocable to the Class 2A Certificates was
approximately $887,454 and $707,126, respectively. There can be no
assurance as to whether holders of the Pooled Fannie Mae Certificate and
the Pooled Non-Agency Certificate will in the future receive full
distributions of interest at the rate calculated according to their
interest rate formula on a timely basis or whether payment of any of the
Interest Deficiency will be received.

To the extent statements contained herein do not relate to historic or
current information, this Prospectus Supplement may be deemed to contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "1933 Act"), and Section 21E of the Securities and
Exchange Act of 1934, as amended (the "1934 Act"). Actual results could differ
materially from those projected in such statements as a result of the matters
set forth below, under "Summary of Terms--Yield and Prepayment Considerations"
and "Yield and Prepayment Considerations" and elsewhere in this Prospectus
Supplement.

There is currently no secondary market for the Certificates and there can
be no assurance that one will develop. The Underwriter intends to establish a
market in the Certificates, but is not obligated to do so. There is no
assurance that any such market, if established, will continue.

No election will be made to treat the Trust or any of its assets as a
"real estate mortgage investment conduit" ("REMIC") for federal income tax
purposes.

The Certificates offered by this Prospectus Supplement constitute a
separate series of Certificates being offered by the Company pursuant to its
Prospectus dated April 28, 1998, of which this Prospectus Supplement is a part
and which accompanies this Prospectus Supplement. The Prospectus contains
important information regarding this offering which is not contained herein and
prospective investors are urged to read the Prospectus and this Prospectus
Supplement in full. Prospective investors are also urged to read the documents
relating to the Pooled Certificates described under "Description of the Pooled
Certificates--Additional Information" herein.

--------------------

REPORTS TO SECURITYHOLDERS

Unless and until definitive certificates are issued with respect to the
Certificates, monthly reports containing information concerning the Trust and
prepared by Trustee will be sent to Cede & Co., as nominee of The Depository
Trust Company ("DTC") and registered holder of the Certificates. Such reports
may be available to beneficial owners of the Certificates in accordance with
the regulations and procedures of DTC.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CERTIFICATES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING" HEREIN.

(v)
<PAGE> 6

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SUMMARY OF TERMS S-2
RISK FACTORS S-14
General S-14
Uncertainty of Yield S-14
DESCRIPTION OF THE CERTIFICATES S-15
Book Entry S-15
Payments of Interest and Principal S-16
Optional Termination S-18
Mandatory Termination S-19
Exchange of Certificates S-19
DESCRIPTION OF THE POOLED CERTIFICATES S-19
General S-19
Pooled Fannie Mae Certificate S-20
Pooled Freddie Mac Certificates S-20
Pooled Non-Agency Certificate S-21
Pooled Certificates - Principal Types S-22
The Underlying Mortgage Loans S-26
Additional Information S-26
THE RESERVE FUND S-27
YIELD AND PREPAYMENT CONSIDERATIONS S-28
General Considerations S-28
Final Scheduled Distribution Date S-30
Weighted Average Lives S-30
SPA Model S-30
Pricing Assumption S-30
Decrement and Weighted Average Life Table S-30
Pre-Tax Yield Tables S-37
Actual Experience Will Vary from Assumptions S-38
THE POOLING AGREEMENT S-38
General S-38
Assignment of Pooled Certificates S-38
Accounts S-39
Reports to Certificateholders S-39
Amendments S-40
Certificateholder Action S-41
Termination S-41
Indemnification of the Trustee S-41
Certain Matters Regarding the Trustee S-41
FEDERAL INCOME TAX CONSIDERATIONS S-42
Tax Characterization of the Trust S-42
ERISA CONSIDERATIONS S-43
LEGAL INVESTMENT S-44
UNDERWRITING S-45
LEGAL MATTERS S-45
RATINGS S-45
INDEX OF TERMS S-47
ANNEX 1 S-50
ANNEX 2 S-54
</TABLE>

S-1

<PAGE> 7

SUMMARY OF TERMS

The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying prospectus dated April 28, 1998 (the "Prospectus"). A
description of the Pooled Certificates being deposited into the Trust is set
forth under "Description of the Pooled Certificates--General" and in Annex 1
and Annex 2 hereto. Unless otherwise specified herein, references herein to an
amount or percentage of Pooled Certificates refers to the amount or percentage
calculated based on the aggregate outstanding principal balance or notional
principal balance as reported by Fannie Mae and Freddie Mac, and based on
information provided to holders of the Pooled Non-Agency Certificate with
respect to the Underlying Series (the "Pooled Certificate Principal Balance" or
the "Pooled Certificate Notional Principal Balance," as applicable) of such
Pooled Certificates as of each Certificate's April 1998 Pooled Certificate
Distribution Date after giving effect to distributions made on the Pooled
Certificates on or prior to such dates. References to "FNMA," "FHLMC," or
"GNMA" in the Prospectus shall be deemed to refer, respectively, to "Fannie
Mae," "Freddie Mac," or "Ginnie Mae" in this Prospectus Supplement.

Title of Certificates .. Pass-Through Certificates, Series 1998-A, Class 1A
and Class 2A.

Trust .................. The Certificates will represent the entire beneficial
ownership interest in two groups of underlying
securities, each of which will constitute a separate
sub-trust, held by a trust (the "Trust") formed
pursuant to a Pooling Agreement (the "Agreement")
between Fund America Investors Corporation II (the
"Company") and State Street Bank and Trust Company,
as Trustee (the "Trustee"). The Company expects to
acquire the Pooled Certificates and Treasury
Securities from Bear, Stearns & Co. Inc. (the
"Underwriter") on the Closing Date. See
"Underwriting" herein and "The Issuer" in the
Prospectus. The Trustee will act
as certificate administrator and will perform
certificate administration functions for the Trust,
including, among other things, calculating amounts
due to Certificateholders and the preparation and
distribution of monthly reports. Consequently,
there will be no separate servicing agreement among
the parties relating to the transaction. See "The
Pooling Agreement" herein.

Book-Entry;
Denominations .......... Each Class of Certificates will be registered as a
single certificate registered in the name of Cede &
Co. as nominee of The Depository Trust Company
("DTC"), and beneficial interests will be held by
investors through the book-entry facilities of DTC
in minimum denominations of $25,000 and increments
of $1 in excess thereof. See "Description of the
Certificates--Book Entry; Physical Certificates"
herein and "Description of the Certificates--
Book Entry Registration" in the Prospectus.

Pooled Certificates .... The Trust will consist primarily of the Pooled
Certificates and the Reserve Fund. The Pooled
Certificates will consist of two groups of
underlying securities which consist of a portion of
(i) one class of Guaranteed REMIC Pass-Through
Certificates issued by Fannie Mae representing
beneficial ownership interests in an Underlying
Fannie Mae Trust (the "Pooled Fannie Mae
Certificate"), (ii) two classes of
certificates issued by Freddie Mac as part of
separate Underlying Freddie Mac Series including one
class of Payment Exchange Certificates and one
class of Multiclass REMIC Certificates (the "Pooled
Freddie Mac Certificates" and together with the
Pooled Fannie

S-2
<PAGE> 8

Mae Certificates, the "Pooled Agency Certificates") and (iii) a
single class of collateralized mortgage obligations, Series 1993-2,
issued by the Fund America Investors Trust I (the "Pooled Non-Agency
Certificate", and together with the Pooled Agency Certificates, the
"Pooled Certificates"). The designations used herein for each
Pooled Certificate and the allocation thereof to the Class 1A and/or
Class 2A Certificates are set forth under "Description of the Pooled
Certificates--General" and the characteristics of the Pooled
Certificates are described herein under "Description of the Pooled
Certificates" and in Annex 1 and Annex 2 attached hereto.

The Pooled Fannie Mae Certificate is guaranteed
as to timely distribution of principal and, to a
certain extent, interest by Fannie Mae. Freddie
Mac guarantees to the record holder of the Pooled
Freddie Mac Certificates the timely payment of
interest and the payment of the principal amount
of the Pooled Freddie Mac Certificates as
described in the Underlying Freddie Mac Offering
Circulars. Payments with respect to the Pooled
Non-Agency Certificate are not guaranteed by
Fannie Mae, Freddie Mac, Ginnie Mae or any other
person. The Pooled Non-Agency Certificate is a
non-recourse obligation of a single purpose
trust, that is secured by payments on underlying
certificates which include certain Fannie Mae,
Freddie Mac, and Ginnie Mae certificates and
other non-agency certificates that represent
undivided ownership interests in agency
certificates. See "Description of the Pooled
Certificates--Pooled Freddie Mac
Certificates--General."

The Pooled Fannie Mae Certificate is a portion of
a class of a series of Fannie Mae REMIC
Certificates (an "Underlying Fannie Mae Series")
which represents beneficial ownership interest in
a trust established by Fannie Mae (the
"Underlying Fannie Mae Trust"). The assets of
the Underlying Fannie Mae Trust include (i) a
single "interest only" Fannie Mae Stripped
Mortgage-Backed Security included in Fannie Mae
Stripped Mortgage-Backed Security Trust 000180-GN
(the "Trust 180 SMBS"), (ii) certain other
"interest only" Stripped Mortgage-Backed
Securities (the "IO SMBS" and, together with the
Trust 180 SMBS, the "Fannie Mae SMBS"), and (iii)
all of the Class 5-C REMIC Certificates
evidencing beneficial ownership interests in
Fannie Mae REMIC Trust 1994-5. The Class 5-C
Certificates are "principal only" Certificates.
Underlying the assets in the Underlying Fannie
Mae Trust are certain Fannie Mae Mortgage
Pass-Through Certificates (the "Fannie Mae MBS")
and certain "fully modified pass-through"
mortgage backed securities ("Ginnie Mae
Certificates") guaranteed as to timely payment of
principal and interest by Ginnie Mae. Each
Fannie Mae MBS represents a beneficial ownership
interest in a pool of first lien, single-family,
fixed rate residential mortgage loans ("Fannie
Mae Mortgages"). Each Ginnie Mae Certificate is
based on and backed by a pool of mortgage loans
("Ginnie Mae Mortgages") which are either insured
by the Federal Housing Administration ("FHA") or
partially guaranteed by the Department of
Veterans Affairs ("VA"). Both classes of
Certificates are entitled to receive
distributions on the Pooled Fannie Mae
Certificate. The Class 1A Certificates will be
allocated approximately 61.4% of such
distributions and the Class 2A

S-3
<PAGE> 9

Certificates will be allocated approximately
38.6% of such distributions.

The Pooled Freddie Mac Certificates are each one
class of two separate series of Payment Exchange
Certificates or Multiclass REMIC Certificates
(the "Pooled Freddie Mac G063 Certificate" and
the "Pooled Freddie Mac 2043 Certificate,"
respectively, and each an "Underlying Freddie Mac
Series"). The Pooled Freddie Mac G063
Certificate represents beneficial ownership
interest in a trust (the "Underlying Freddie Mac
G063 Trust") established by Freddie Mac. The
assets of the Underlying Freddie Mac G063 Trust
consist of Freddie Mac Giant Stripped Securities,
Series GS007, which in turn consists of Giant IO
Securities and Giant PO Securities, backed by
Ginnie Mae-Related Securities (Ginnie Mae
Certificates and Giant Securities). The assets
underlying each Underlying Freddie Mac Series are
pools of fixed-rate, first lien, residential
mortgage loans and/or participations in mortgage
loans ("Freddie Mac Mortgages"). Both Classes of
Certificates are entitled to receive
distributions on the Pooled Freddie Mac G063
Certificate. The Class 1A Certificates will be
allocated approximately 23.5% of such
distributions and the Class 2A Certificates will
be allocated approximately 76.5% of such
distributions.

The Pooled Freddie Mac 2043 Certificate
represents beneficial ownership interest in a
trust established by Freddie Mac (the "Underlying
Freddie Mac 2043 Trust"). The assets of the
Underlying Freddie Mac 2043 Trust consist of
Freddie Mac Gold Participation Certificates and
Gold Giant Participation Certificates. Only the
Class 2A Certificates are entitled to receive
distributions on the Pooled Freddie Mac 2043
Certificate.

The Pooled Non-Agency Certificate is a single
class of a series of collateralized mortgage
obligations issued by a Delaware business trust
established by Fund America Investors
Corporation, an affiliate of the Company (the
"Non-Agency Certificate Issuer"). The Pooled
Non-Agency Certificate is a non-recourse
obligation of the Non-Agency Certificate Issuer
secured by all of its assets, that have been
pledged to an indenture trustee for the benefit
of the holders of the Pooled Non-Agency
Certificate (the "Underlying Non-Agency Trust").
The assets of the Underlying Non-Agency Trust
securing the Pooled Non-Agency Certificate
consist of (i) certain classes of Fannie Mae
Guaranteed REMIC Pass-Through Certificates, (ii)
certain classes of Fannie Mae Stripped
Mortgage-Backed Securities, (iii) Multiclass PCs,
(iv) Stripped Giant PCs, and (v) certain mortgage
pass-through certificates, participation
certificates, or collateralized mortgage
obligations issued by issuers other than Fannie
Mae, Freddie Mac, or Ginnie Mae, which securities
are backed by mortgage-backed securities issued
by Fannie Mae, Freddie Mac, or Ginnie Mae. Only
the Class 2A Certificates are entitled to receive
distributions on the Pooled Non-Agency
Certificate.

Each underlying series was issued pursuant to a
separate agreement (each, an "Underlying
Agreement").

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<PAGE> 10

In the case of the Pooled Fannie Mae Certificate, the distribution date is
the 25th day of the month (the "Pooled Fannie Mae Certificate Distribution
Date"). In the case of the Pooled Freddie Mac Certificates, the
distribution date is the 15th day of each month for the Pooled Freddie Mac
2043 Certificate (the "Pooled Freddie Mac 2043 Distribution Date") and the
17th day of each month for the Pooled Freddie Mac G063 Certificate (the
"Pooled Freddie Mac G063 Certificate Distribution Date"). In the case of
the Pooled Non-Agency Certificate, the distribution date is the 25th day
of the month (the "Pooled Non-Agency Certificate Payment Date" and, with
the Pooled Fannie Mae Certificate Distribution Date, the Pooled Freddie
Mac 2043 Distribution Date and the Pooled Freddie Mac G063 Distribution
Date, a "Pooled Certificate Distribution Date"), or if such day is not a
business day as defined in the Underlying Agreement, then the next
succeeding business day, as so defined.

One class of the Pooled Certificates is entitled
to receive distributions of interest on the
principal balance thereof based on a formula that
varies directly with LIBOR, subject to minimum
and maximum rates ("Pooled Floating Rate
Certificate"). One class of the Pooled Freddie
Mac Certificates is an accrual Class with a fixed
interest rate (a "Pooled Accrual Certificate").
Amounts representing interest are not distributed
to the holders of the Pooled Accrual Certificate,
instead such amounts are added to the principal
balance thereof. The remaining class of the
Pooled Freddie Mac Certificates is a Payment
Exchange Certificate (the "Pooled PEC/IO
Certificate") which is an "interest only"
certificate that is entitled to receive interest
payments on a notional principal amount, and does
not have an actual principal balance, and as
such, is not entitled to receive distributions of
principal. Such Pooled PEC/IO Certificate has a
fixed interest rate of 8.00% and is also entitled
to receive interest payment supplement amounts
that vary with the rate of prepayments
experienced on the mortgages underlying the Giant
Stripped Securities and the level of LIBOR.
Lower levels of LIBOR and faster prepayments will
increase the interest payment supplement amount,
subject to the available funds. The Pooled
Non-Agency Certificate is entitled to receive
distributions of interest on the principal
balance thereof based on a formula that varies
directly with LIBOR, subject to available funds
and, under certain circumstances, subject to the
reallocation of interest payments to reduce
principal (the "Available Funds Class") as
described in "Description of the Pooled
Certificates" and in Annex 1 and Annex 2 attached
hereto.

Annex 1 hereto sets forth approximate information
for each of the Pooled Certificates. The tables
and the descriptions of the Pooled Certificates
herein are subject to and qualified by reference
to the provisions of the Underlying Prospectus
Information (as defined below) and the other
documents related to the Pooled Certificates or
the other mortgage-backed securities issued as
part of the Underlying Series. THE INFORMATION
SET FORTH IN THE TABLES AND ELSEWHERE HEREIN HAS
BEEN DERIVED FROM INFORMATION PROVIDED BY FANNIE
MAE AND FREDDIE MAC, AND BASED ON INFORMATION
PROVIDED TO HOLDERS OF THE POOLED NON-AGENCY
CERTIFICATE, BUT SUCH INFORMATION HAS NOT BEEN
INDEPENDENTLY VERIFIED. THIS INFORMATION
COMPRISES ALL MATERIAL

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<PAGE> 11

INFORMATION ON THE SUBJECT THAT THE COMPANY AND THE UNDERWRITER POSSESS
OR CAN ACQUIRE WITHOUT UNREASONABLE EFFORT AND EXPENSE.

Annex 2 hereto contains the Prospectus Supplement
for the Pooled Fannie Mae Certificate (the
"Underlying Fannie Mae Prospectus Information"), the
cover page and terms sheet from the Offering
Circular Supplements for each of the Pooled Freddie
Mac Certificates (the "Underlying Freddie Mac
Offering Circular Term Sheets"), and the Prospectus
Supplement for the Pooled Non-Agency Certificate
(the "Underlying Non-Agency Prospectus Information,"
and together with the Underlying Fannie Mae
Prospectus Information and the Underlying Freddie
Mac Offering Circular Term Sheets, the "Underlying
Prospectus Information"). The Prospectuses
underlying the Prospectus Supplements for the Pooled
Fannie Mae Certificate and the Pooled Non-Agency
Certificate are incorporated herein by reference,
and the Offering Circular Supplements and the
related Offering Circulars for each of the Pooled
Freddie Mac Certificates are incorporated herein by
reference. The related Prospectuses and Offering
Circulars are hereinafter referred to as the
"Underlying Prospectuses." Investors should purchase
Certificates only if they have read and understood
this Prospectus Supplement, the Prospectus, the
Underlying Prospectus Information, and the other
documents described or incorporated by reference
herein "Description of the Pooled
Certificates--Additional Information."
It should be noted that there have been material
changes in facts and circumstances since the dates
of the Underlying Prospectus Information, including
changes in prepayment rates, prevailing interest
rates, and other economic factors, which may limit
the usefulness of, and be directly contrary to the
assumptions used in preparing the information set
forth in, such documents.

The Reserve Fund ........ On the Closing Date, the Company will fund a reserve
fund (the "Reserve Fund") with three United States
Treasury Securities (the "Treasury Securities") that
will provide funds equal to $7,700,000. Payments on
the Treasury Securities will be applied to pay
principal on the Class 2A Certificates on each of
the February 1999, February 2001, and February 2002
Distribution Dates. The Class 1A Certificates are
not entitled to distributions from the Reserve Fund.
See "The Reserve Fund" herein.

Closing Date ............ On or about April 30, 1998 (the "Closing Date").

Distribution Dates ...... Distributions of principal and interest on the
Certificates with respect to a month will be made on
the first Business Day (as defined herein) after the
25th day of such month (each, a "Distribution Date")
or, if such 25th day is not a business day, then on
the first Business Day after the first Business Day
after the 25th day of each month. A "Business Day"
means a day other than a Saturday, a Sunday, or a
day on which banking institutions in New York, New
York or the city in which the corporate trust office
of the Trustee is located are authorized or
obligated by law or executive order to be closed.
The first Distribution Date is expected to be May
27, 1998.

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<PAGE> 12

Record Date ............. Distributions will be made on each Distribution Date
to holders of record as of the close of business on
the last Business Day of the calendar month
preceding the month in which such Distribution Date
occurs; provided that for this purpose the
Distribution Date is deemed to occur on the 26th of
each month, without regard to whether such day is a
Business Day (the "Record Date"). See "Description
of the Certificates--Payments of Interest and
Principal" herein.
Original Principal
Amount .................. The initial aggregate principal amount of the Class
1A Certificates will be equal to the aggregate Group
1A Pooled Certificate Principal Balance following
the April 1998 Pooled Certificate Distribution Date
and the initial aggregate principal amount of the
Class 2A Certificates will be equal to the sum of
the (i) aggregate Group 2A Pooled Certificate
Principal Balance following the April 1998 Pooled
Certificate Distribution Date and (ii) the amount of
the Treasury Securities deposited in the Reserve
Fund. The original principal amount of the Class 1A
Certificates will be reduced to reflect any exchange
of Class 1A Certificates for a pro rata portion of
the Group 1A Pooled Certificates and the original
principal amount of the Class 2A Certificates will
be reduced to reflect any exchange of Class 2A
Certificates for a pro rata portion of the Group 2A
Pooled Certificates and Treasury Securities.

Distributions of Interest
and Principal ........... The effective per annum interest rate borne by
either Class of Certificates during the calendar
month preceding the month in which the Distribution
Date occurs (each, an "Interest Accrual Period")
will equal a fraction, expressed as a percentage
truncated at the fourth decimal place, the numerator
of which is equal to the aggregate amount in respect
of interest paid on the related Class of
Certificates for the related Interest Accrual Period
multiplied by 12, and the denominator of which is
the principal amount of the related Class of
Certificates immediately prior to such Distribution
Date. Under certain circumstances, the principal
amount of the related Class of Certificates could be
paid in full while interest would remain payable, in
which case, the calculation of the effective per
annum interest rate borne by the related Class of
Certificates would not be meaningful. The effective
per annum interest rate borne by the Class 1A
Certificates during the first Interest Accrual
Period is projected to be approximately 6.6985%.
The effective per annum interest rate borne by the
Class 2A Certificates during the first Interest
Accrued Period is projected to be, assuming a
constant prepayment rate of 200% SPA, approximately
7.7367%.
On each Distribution Date, holders of the
Certificates will be entitled to receive principal
from funds received as principal on the Pooled
Certificates (and, for the Class 2A Certificates,
from funds payable as principal from the Reserve
Fund, and under certain circumstances, from interest
paid on the Pooled Non-Agency Certificate) and
interest from funds received as interest (and, for
the Class 2A Certificates, on some Distribution
Dates, from funds received as principal, up to the
amount of accrual on the Pooled Accrual Certificates
for such Distribution Date) in each case, less the
Trustee's Fees, as more fully

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<PAGE> 13

described herein under "Description of the
Certificates" and "The Reserve Fund."

Optional Termination by
the Company, or its designee .. The Trust may be terminated, at the option of
the Company, or its designee, on any
Distribution Date on or after the date on
which the aggregate Pooled Certificate
Principal Balance and the amount of funds
payable as principal from the Reserve Fund has
declined to 10% or less of the sum of (i) the
initial aggregate Pooled Certificate Principal
Balance and (ii) the amount of funds payable
as principal from the Reserve Fund on the
Closing Date, as such sum is reduced by the
original face amount of any Certificates
exchanged for a pro rata portion of the Pooled
Certificates and Treasury Securities, as
appropriate. In addition, the sub-trust
consisting of either the Group 1A Pool or the
Group 2A Pool may be terminated, at the option
of the Company or its designee, on any
Distribution Date on or after the date on
which (i) in the case of the Group 1A Pool,
the aggregate Pooled Certificate Principal
Balance of the Group 1A Pooled Certificates
has declined to 10% or less of the initial
aggregate Group 1A Pooled Certificate
Principal Balance and (ii) in the case of the
Group 2A Pool, the aggregate Pooled
Certificate Principal Balance of the Group 2A
Pooled Certificates plus the amount of funds
payable as principal from the Reserve Fund has
declined to 10% or less of the initial
aggregate Group 2A Pooled Certificate
Principal Balance plus the amount of funds
payable as principal from the Reserve Fund on
the Closing Date, in both cases as reduced by
the original face amount of any Class 1A or
Class 2A Certificates exchanged for a pro rata
portion of the Group 1A Pooled Certificates or
the Group 2A Pooled Certificates and Treasury
Securities, respectively. In the event of any
such termination, the applicable
Certificateholders will receive the unpaid
principal balance of their Certificates plus
accrued interest thereon plus, in the case of
the Pooled Fannie Mae Certificate or the
Pooled Non-Agency Certificate, any Interest
Deficiency (as defined herein) and interest
thereon as described under "Description of the
Pooled Certificates--Pooled
Certificates--Interest Types." See
"Description of the Certificates--Optional
Termination" herein.

Mandatory Termination ......... On the Distribution Date following the first
Distribution Date on which the Group 1A or the
Group 2A Pooled Certificate Principal Balance
or Pooled Certificate Notional Principal
Balance of all but one of the Group 1A or the
Group 2A Pooled Certificates has been reduced
to zero, the Trust will be terminated with
respect to such group of Pooled Certificates
and the remaining Pooled Certificates or
Treasury Securities related to such Class of
Certificates will be distributed in kind pro
rata to the Certificateholders of the related
Class. See "Description of the
Certificates--Mandatory Termination" herein.

Exchange of Certificates ...... Beginning on the Distribution Date in May 1999
and on any Distribution Date thereafter,
holders of a minimum of 10% of the initial
principal amount of either Class of
Certificates, without taking into account any
reductions in the initial principal amount due
to a prior exchange of such Certificates, will
be entitled to exchange such Class of
Certificates for a pro rata portion of the
related group of Pooled Certificates and, with
respect to the Class 2A Certificates, the
Treasury

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<PAGE> 14

Securities. Holders of Certificates to be
exchanged will be charged an exchange fee by the
Trustee equal to the greater of (i) $500 and (ii)
0.02% of the outstanding principal amount of such
Class of Certificates.

Yield and Prepayment
Considerations ..... General Considerations. The yield to maturity and
weighted average life of the Certificates will be
affected by, among other things, the amount and timing of
principal and interest payments, the level of LIBOR, the
payment priorities and other characteristics of the
Pooled Certificates, the occurrence of an optional or
mandatory termination with respect to the Pooled
Certificates or the Certificates, and the purchase price
paid for the Certificates. In addition to the discussion
below, prospective investors should review the discussion
under "Yield and Prepayment Considerations" herein.
Mortgage Loan Prepayments. If prevailing mortgage rates
fall significantly below the mortgage rates on the Fannie
Mae Mortgages, the Freddie Mac Mortgages, or the Ginnie
Mae Mortgages (collectively, the "Mortgage Loans" and
with respect to any Pooled Certificates, the "Underlying
Mortgage Loans" or a "Mortgage Pool"), the Mortgage Loans
are likely to be subject to higher prepayment rates than
if prevailing rates remain at or above the mortgage rates
on the Mortgage Loans. Other factors affecting
prepayments of Mortgage Loans include changes in
mortgagors' housing needs, job transfers, unemployment,
net equity in the mortgaged properties, and servicing
decisions. The Mortgage Loans may be prepaid at any time
without penalty and, except for the Ginnie Mae Mortgages,
usually have due-on-sale clauses. Because the payment of
installments of principal of and interest on the
respective Mortgage Loans are guaranteed by one or more
government agencies, losses in respect of the respective
Underlying Mortgage Loans will have the effect of a
prepayment.

Timing of Payments. The timing and amount of payments on
the Mortgage Loans may significantly affect an investor's
yield. In general, the earlier a prepayment of principal
on a Mortgage Loan, the greater will be the effect on an
investor's yield to maturity. As a result, the effect on
an investor's yield of principal prepayments occurring at
a rate higher (or lower) than the rate anticipated during
the period immediately following the issuance of the
Certificates will not be offset by a subsequent like
reduction (or increase) in the rate of principal
prepayments. In addition, interest amounts on the Pooled
PEC/IO Certificate contain a supplemental amount that
varies directly with the level of prepayments on the
related Mortgage Loans. Furthermore, the effective yield
to Certificateholders will be slightly lower than the
yield that would otherwise be produced because, while
interest generally will accrue on the Certificates from
the first day of a month, the distribution of such
interest will not be made earlier than the Distribution
Date of the month following the month of accrual.

Underlying Securities. The Trust contains two groups of
Pooled Certificates which were issued at different times,
are backed by different Mortgage Pools, have different
allocations of principal and interest among various
classes and will perform differently in various

S-9
<PAGE> 15

interest and prepayment rate environments. The
performance characteristics of either Class of
Certificates will reflect a combination of the
performance characteristics of the related group
of Pooled Certificates. Because the Pooled
Non-Agency Certificate has an additional layer of
underlying assets, the inclusion of that Pooled
Certificate in the Trust may make it more
difficult to analyze the likely yield and payment
experience of the Class 2A Certificates.

Discounts and Premiums. In the case of any
Certificates purchased at a discount, a slower
than anticipated rate of principal payments on
the Certificates, other things being equal, could
result in an actual yield that is lower than the
anticipated yield. In the case of any
Certificates purchased at a premium, a faster
than anticipated rate of principal payments on
the Certificates, other things being equal, could
result in an actual yield that is lower than the
anticipated yield.

Notional Balances. The Pooled PEC/IO Certificate
has a notional principal balance which reduces
proportionately with the Giant Stripped
Securities (the "Related Certificates").
Accordingly, the amount and timing of payments on
the Pooled PEC/IO Certificate, and accordingly
the yield on the Certificates, will be sensitive
to the rate and timing of principal payments on
such Related Certificates. Relatively fast
prepayments of the underlying Mortgage Loans may
significantly shorten, and relatively slow
underlying Mortgage Loan prepayments may
significantly extend, the life of the Related
Certificates and therefore the Pooled PEC/IO
Certificate. Consequently, a rapid rate of
principal prepayments on the Mortgage Loans
underlying the Pooled PEC/IO Certificate will
have a negative effect on the yield on such
certificates and may reduce the yield on the
Certificates. If the life of the Related
Certificates is significantly shortened, the life
of the Pooled PEC/IO Certificate will be
significantly shortened and the yield to
investors in the Certificates can be expected to
decrease. Similarly, the exercise of any
optional redemption rights with respect to the
Underlying Series of which the Pooled PEC/IO
Certificate is a part may have a negative effect
on the yield on such certificates and may reduce
the yield on the Certificates. The Pooled PEC/IO
Certificate is part of both the Group 1A Pooled
Certificates and the Group 2A Pooled
Certificates.

Pooled Non-Agency Certificate. Although the
Pooled Non-Agency Certificate is secured by
payments on Fannie Mae, Freddie Mac, and Ginnie
Mae certificates, or indirect interests therein,
the Pooled Non-Agency Certificate is not itself
guaranteed by Fannie Mae, Freddie Mac, or Ginnie
Mae, or any other person.

Reinvestment Risk. Because prevailing interest
rates are subject to fluctuation, there can be no
assurance that investors in the Certificates will
be able to reinvest the distributions thereon at
yields equaling or exceeding the yield on the
Certificates. Yields on any such reinvestments
may be lower, and may even be significantly
lower, than the yield on the Certificates.
Generally, when prevailing interest rates
increase, prepayment rates on mortgage loans tend
to decrease, resulting in a reduced return of
principal to investors at a time when
reinvestment at such higher prevailing rates
would be desirable.

S-10
<PAGE> 16

Conversely, when prevailing interest rates decline, prepayment
rates on mortgage loans tend to increase, resulting in a greater
return of principal to investors at a time when reinvestment at
comparable yields may not be possible. Prospective investors in
the Certificates should consider the related reinvestment risks in
light of other investments that may be available to such
investors.

LIBOR. The yield to maturity on the Certificates will reflect
the amount and timing of interest amounts received on the Pooled
Certificates, certain of which are sensitive to the level of
LIBOR from time to time. For example, the amount of interest
payable on the Pooled Floating Rate Certificates and the
Non-Agency Certificate will vary with the level of LIBOR.
CONSEQUENTLY, A LOW LEVEL OF LIBOR WILL REDUCE THE INTEREST
PAYABLE ON THE POOLED FLOATING RATE CERTIFICATE AND THE POOLED
NON-AGENCY CERTIFICATE AND MAY THEREFORE REDUCE THE YIELD TO
INVESTORS IN THE CERTIFICATES. Similarly, the amount of interest
payable on the Pooled PEC/IO Certificate may vary inversely with
the level of LIBOR. Consequently, a high level of LIBOR can
significantly reduce the supplemental interest payments to the
Pooled PEC/IO Certificate and (especially in combination with
fast Mortgage prepayment rates) reduce the yield to investors in
the Certificates.

Unrelated Underlying Securities. The Pooled Certificates were
issued as parts of different Underlying Series and the rates of
prepayments on the Underlying Mortgage Loans will be different.
Under various circumstances, including differing prepayment rates
of the Underlying Mortgage Loans, the Pooled Certificates could
mature at times other than expected by investors and either Class
of the Certificates could have a cash flow profile different from
that expected by investors. For example, with respect to the
Class 1A Certificates, if one of the Class 1A Pooled
Certificates, either the Pooled PEC/IO Certificate or the Pooled
Floating Rate Certificate, were to mature prior to the other, the
Class 1A Certificate would, at that point, have the payment and
yield characteristics of the remaining Class 1A Pooled
Certificate. Similarly, with respect to the Class 2A
Certificates, if one or more of the Class 2A Pooled Certificates,
the Pooled PEC/IO Certificates, the Pooled Floating Rate
Certificate, the Pooled Accrual Certificate or the Pooled
Non-Agency Certificate, were to mature prior to the others, the
Class 2A Certificates would, at that point, have the payment and
yield characteristics of the remaining Class 2A Pooled
Certificates. Therefore, the Class 2A Certificates may, in the
future, have the payment and yield characteristics of one or more
(or a combination of any two or three) of the Class 2A Pooled
Certificates. Similarly, the Non-Agency Certificate may have
certain of the yield characteristics of any one the underlying
securities (or combination thereof), which underlying security
types include principal only securities, interest only
securities, inverse floater securities, discounted coupon
classes, and planned amortization classes. See Annex 1 attached
hereto.

Liquidity .. There is currently no secondary market for the Certificates, and
there can be no assurance that one will develop. The Underwriter
intends to establish a market in the Certificates, but it is not
obligated to do so. There is no assurance that any such market,
if established, will

S-11
<PAGE> 17

continue. Each Class of Certificateholders will
receive monthly reports pertaining to the related
Certificates as described under "The Pooling
Agreement--Reports to Certificateholders" herein.
There are a limited number of sources which
provide certain information about mortgage
pass-through certificates in the secondary
market; however, there can be no assurance that
any of these sources will provide information
about the related Class of Certificates.
Investors should consider the effect of limited
information on the liquidity of each Class of the
Certificates.

Certain Federal Income Tax
Consequences ............. No election will be made to treat the Trust as a
REMIC for federal income tax purposes. For federal
income tax purposes, the Trust will be classified
as a grantor trust under Subpart E, part I of
Subchapter J of the Code and not as a partnership
or as an association taxable as a corporation. See
"Federal Income Tax Considerations" herein and
"Certain Federal Income Tax Consequences--Federal
Income Tax Consequences for Securities as to Which
No REMIC Election is Made" in the Prospectus.

ERISA Considerations ..... Fiduciaries of employee benefit plans and certain
other retirement plans and arrangements, including
individual retirement accounts and annuities, Keogh
plans, and collective investment funds in which
such plans, accounts, annuities or arrangements are
invested, that are subject to the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), or corresponding provisions of the Code
(any of the foregoing, a "Plan"), persons acting on
behalf of a Plan, or persons using the assets of a
Plan (each, a "Plan Investor"), should review
carefully with their legal advisors whether the
purchase or holding of Certificates will result in
unfavorable consequences for the Plan or its
fiduciaries under the Plan Asset Regulations (as
defined in the Prospectus) or the prohibited
transaction provisions of ERISA or the Code (the
"Prohibited Transaction Provisions"). Such
consequences could result unless one of the
exceptions in, or exemptions from, the Plan Asset
Regulations and Prohibited Transaction Provisions
is applicable. See "ERISA Considerations" herein
and in the Prospectus. Each purchaser of a
Certificate, by virtue of its purchase of such
Certificate, will be deemed to have represented
either that (i) it is not a Plan Investor or (ii)
an exemption granted by the Department of Labor
exists which exempts the acquisition, holding or
transfer of a Certificate by such purchaser and the
operation and management of the Trust and its
assets, from the prohibited transaction rules of
ERISA and the related excise tax provisions of the
Code.

Legal Investment ......... Institutions whose investment activities are
subject to legal investment laws and regulations or
to review by certain regulatory authorities may be
subject to restrictions on investment in the
Certificates. Any such institution should consult
its legal advisors in determining whether and to
what extent there may be restrictions on its
ability to invest in the Certificates. The Class
1A Certificates will and the Class 2A Certificates
will not constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). See "Legal
Investment" herein and in the Prospectus.

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<PAGE> 18

Rating ................... As a condition of their issuance, each Class of the
Certificates will be rated "Aaa" by Moody's and
"AAA" by Fitch. Moody's and Fitch are referred to
herein as the "Rating Agencies."

The ratings of each Class of the Certificates
should be evaluated independently from similar
ratings on other types of securities. A rating is
not a recommendation to buy, sell or hold
securities and may be subject to revision or
withdrawal at any time by the rating Agencies. See
"Ratings" herein.

The Company has not requested a rating of the
Certificates by any rating agency other than the
Rating Agencies. However, there can be no
assurance as to whether any other rating agency
will rate the Certificates or, if it does, what
rating would be assigned by such other rating
agency. The rating assigned by such other rating
agency to the Certificates could be lower than the
respective ratings assigned by the Rating Agencies.

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<PAGE> 19
RISK FACTORS

GENERAL

In addition to the matters described elsewhere in this Prospectus
Supplement and Prospectus, particularly "Risk Factors" in the Prospectus,
prospective investors should consider the following:

UNCERTAINTY OF YIELD

The Certificates have no stated interest rate. Instead, each Class of
Certificateholders will receive on each Distribution Date an amount equal to in
general interest paid on the related group of Pooled Certificates for such
month less the Trustee's Fee subject to (i) the reallocation of certain amounts
of interest received in the Pooled Non-Agency Certificate to pay principal on
the Class 2A Certificates and (ii) the reallocation of certain amounts received
as principal to pay interest on the Class 2A Certificates. See "Description of
the Certificates--Payments of Interest and Principal" herein. The amount of
interest payable on the Pooled Certificates will vary based upon a number of
factors, including the rate of prepayments thereon and level of LIBOR. For
example, low rates of LIBOR may significantly reduce the amount of interest
payable on the Pooled Floating Rate Certificate and the Non-Agency Certificate
and relatively high rates of LIBOR may reduce the amount of interest payable on
the Pooled PEC/IO Certificate. See "Yield and Prepayment Considerations"
herein.

The yield to maturity on the Certificates will depend on the purchase
price of the Certificates, the amount of interest distributed on the
Certificates, and the rate and timing of principal payments on the Pooled
Certificates which in turn will be affected by the rate and timing of principal
payments (including prepayments, repurchases, defaults, and liquidations) on
the Mortgage Loans and the Underlying Mortgage Loans. Generally, the Mortgage
Loans may be prepaid at any time without penalty. The yield to maturity on the
Certificates also will be sensitive to the level of LIBOR. Mortgage Loan
prepayment rates are likely to fluctuate significantly from time to time, as is
the level of LIBOR. Investors should consider the associated risks, including:

-- The yield to maturity on the Certificates will be sensitive to the
level of LIBOR.

-- Slight variations in Mortgage Loan characteristics could
substantially affect the weighted average life and yield of the
Certificates.

S-14
<PAGE> 20

-- Although the Pooled Non-Agency Certificate is secured by payments on
Fannie Mae, Freddie Mac, and Ginnie Mae certificates, or indirect
interests therein, the Pooled Non-Agency Certificate is not itself
guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae or any other person.

-- The Pooled Certificates were issued as parts of different
Underlying Series and the rates of prepayments on the Underlying
Mortgage Loans will be different. Under various circumstances,
including differing prepayment rates of the Underlying Mortgage Loans,
the Pooled Certificates could mature at times other than expected by
investors and either Class of the Certificates could have a cash flow
profile different from that expected by investors. For example, with
respect to the Class 1A Certificates, if one of the Class 1A Pooled
Certificates, either the Pooled PEC/IO Certificate or the Pooled
Floating Rate Certificate, were to mature prior to the other, the Class
1A Certificate would, at that point, have the payment and yield
characteristics of the remaining Class 1A Pooled Certificate.
Similarly, with respect to the Class 2A Certificates, if one or more of
the Class 2A Pooled Certificates, the Pooled PEC/IO Certificates, the
Pooled Floating Rate Certificate, the Pooled Accrual Certificate or the
Pooled Non-Agency Certificate, were to mature prior to the others, the
Class 2A Certificates would, at that point, have the payment and yield
characteristics of the remaining Class 2A Pooled Certificates.
Therefore, the Class 2A Certificates may, in the future, have the
payment and yield characteristics of one or more (or a combination of
any two or three) of the Class 2A Pooled Certificates. Similarly, the
Non-Agency Certificate may have certain of the yield characteristics of
any one the underlying securities (or combination thereof), which
underlying security types include principal only securities, interest
only securities, inverse floater securities, discounted coupon classes,
and planned amortization classes. See Annex 1 attached hereto.

-- The yield to investors on the Certificates can be expected to
decrease to the extent that the notional principal balance of the
Pooled PEC/IO Certificate reduces faster than anticipated.

-- As of the April 1998 Pooled Fannie Mae Certificate Distribution
Date and the April 1998 Pooled Non-Agency Certificate Payment Date, the
Interest Deficiency in respect of each of the Pooled Fannie Mae
Certificate and Pooled Non-Agency Certificate was approximately
$887,454 and $707,126, respectively. There can be no assurance as to
whether holders of the Pooled Fannie Mae Certificate and the Pooled
Non-Agency Certificate will in the future receive full distributions of
interest at the rate calculated according to their interest rate
formula on a timely basis or whether payment of any of the Interest
Deficiency will be received.

DESCRIPTION OF THE CERTIFICATES

BOOK ENTRY

Each Class of Certificates will be represented by a single certificate
registered in the name of Cede & Co. ("Cede") as the nominee of DTC, and
beneficial interests therein will be held by investors through the book-entry
facilities of DTC, in minimum denominations of $25,000 and increments of $1 in
excess thereof. The certificates

S-15
<PAGE> 21

registered in the name of Cede can be held in physical certificate form by
investors only if (i) the Company advises the Trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as depository
with respect to the Certificates and the Company is unable to locate a
qualified successor within 30 days or (ii) the Company, at its option, elects
to terminate the book-entry system through DTC.

With respect to the certificates registered in the name of Cede, all
references herein to actions by holders of either Class of Certificates shall
refer to actions taken by DTC upon instructions from its participants, and all
references herein to distributions, notices, reports, and statements to holders
of either Class of Certificates shall refer to distributions, notices, reports,
and statements to DTC or Cede, as the case may be, for distribution to the
beneficial owners of the Certificates in accordance with DTC procedures.
Because DTC can only act on behalf of participants, who in turn act on behalf
of indirect participants and certain banks, the ability of a beneficial owner
of either Class of Certificate to pledge such Certificate to persons or
entities who do not participate in the DTC system may be limited. In addition,
beneficial owners of either Class of Certificates held through DTC may
experience delays in the receipt of distributions on such Certificates. The
book entry procedures of DTC are more fully described under "Description of the
Certificates--Book-Entry Registration" in the Prospectus.

If either Class of Certificates are issued in physical certificate form,
they will be transferable and exchangeable on a "Certificate Register" to be
maintained by the Trustee at the office or agency of the Trustee maintained for
that purpose in Boston, Massachusetts. Certificates surrendered to the Trustee
for registration of transfer or exchange must be accompanied by a written
instrument of transfer in form satisfactory to the Trustee. No service charge
will be made for any registration of transfer or exchange of such Certificates,
but payment of a sum sufficient to cover any tax or other governmental charge
may be required. Such office or agency of the Trustee is currently located at
Two International Place, Boston, Massachusetts 02110.

PAYMENTS OF INTEREST AND PRINCIPAL

Distributions of principal and interest on the Certificates with respect
to a month will be made on the first Business Day after the 25th day of such
month (each, a "Distribution Date") or, if such 25th day is not a business day,
then on the first Business Day after the first Business Day after the 25th day
of each month. The first Distribution Date is expected to be May 27, 1998.

Distributions will be made on each Distribution Date to holders of record
as of the close of business on the last Business Day of the calendar month
preceding the month in which such Distribution Date occurs; provided that for
this purpose the Distribution Date is deemed to occur on the 26th of each
month, without regard to whether such day is a Business Day (the "Record
Date").

The effective per annum interest rate borne by either Class of
Certificates during the calendar month preceding the month in which the
Distribution Date occurs (each, an "Interest Accrual Period") will equal a
fraction, expressed as a percentage truncated at the fourth decimal place, the
numerator of which is equal to the aggregate amount in respect of interest paid
on such Class of Certificates for the related Interest Accrual Period,
multiplied by 12, and the denominator of which is the principal amount of the
such Class of Certificates immediately prior to such Distribution Date. Under
certain circumstances, the principal amount of either Class of Certificates
could be paid in full while interest would remain payable, in which case, the
calculation of the effective per annum interest rate borne by such Class of
Certificates would not be meaningful. The effective per annum interest rate
borne by the Class 1A Certificates during the first Interest Accrual Period is
projected to be approximately 6.6985%. The effective per annum interest rate
borne by the Class 2A Certificates during the first Interest Accrual Period is
projected, assuming a constant prepayment rate of 200% SPA, to be approximately
7.7367%.

On each Distribution Date, holders of the Certificates will be entitled to
receive interest from funds received as interest (and, with respect to the
Class 2A Certificates, on some Distribution Dates, from funds received as
principal, up to the amount of accrual on the Pooled Accrual Certificate for
such Distribution Date) on the Pooled Certificates. On each Distribution Date,
holders of the Certificates will be entitled to receive principal from funds
received as principal on the Pooled Certificates (and, with respect to the
Class 2A Certificates, from funds payable

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<PAGE> 22

as principal from the Reserve Fund and, in certain circumstances, funds paid as
interest on the Pooled Non-Agency Certificate).

If, on any Distribution Date, the amount by which the Pooled Accrual
Certificate has accreted exceeds the aggregate distributions of principal on
the other Group 2A Pooled Certificates, the principal balance of the Class 2A
Certificates will be increased by the amount of such excess.

The Trustee as holder of the Pooled Certificates and the Reserve Fund,
will cause all distributions received by it on the Pooled Certificates and the
Treasury Securities, from whatever source, to be deposited directly into one or
more accounts held in trust by the Trustee for the benefit of the
Certificateholders (such accounts referred to collectively herein as the "Asset
Proceeds Account").

On each Distribution Date, the Trustee will apply the aggregate amount on
deposit in the Asset Proceeds Account as of such Distribution Date to pay the
Trustee Fee, the Class 1A Available Distribution, and the Class 2A Available
Distribution. From amounts with respect to interest received on the Pooled
Certificates, the Trustee shall first pay to the Trustee the Trustee Fee. The
Trustee then shall pay from amounts remaining in the Asset Proceeds Account the
Class 1A Available Distribution to the Class 1A Certificateholders and the
Class 2A Available Distribution to the Class 2A Certificateholders in the
following manner and order of priority:

The Class 1A Available Distribution shall be applied as follows:

first, from the Class 1A Available Distribution, the amount that
represents interest received; and

second, from the Class 1A Available Distribution, the amount that
represents principal received, to pay principal.

The Class 2A Available Distribution shall be applied as follows:

first, from amounts with respect to principal received on the Group 2A
Pooled Certificates and funds payable from the Reserve Fund, to the Class 2A
Certificateholders, an amount equal to the principal received on the Class 2A
Pooled Certificates and Treasury Securities, including any interest on the
Pooled Non-Agency Certificate allocated to principal as described below, less
the amount, if any, by which the principal amount on the Pooled Accrual
Certificate accrues; and

second, from the remaining Available Distribution, to the Class 2A
Certificateholders as interest.

On any Pooled Non-Agency Certificate Payment Date on which the outstanding
principal balance of the Underlying FAIT Certificates is less than the
outstanding principal balance of the Pooled Non-Agency Certificate, all
principal and interest received on the Pooled Non-Agency Certificate will be
paid to the Class 2A Certificateholders as principal as set forth above. After
$2,268,817.89 in distributions from the Pooled Non-Agency Certificate has been
allocated as principal, all subsequent distributions received with respect to
the Pooled Non-Agency Certificate will be allocated as interest on the Class 2A
Certificates. Notwithstanding any such reallocation, however, the Class 2A
Certificateholders will be required to include in income their allocable shares
of interest original issue discount attributable to the Pooled Non-Agency
Certificate.

"Available Distribution" means, either the "Class 1A Available
Distribution" or the "Class 2A Available Distribution," as appropriate.

"Class 1A Available Distribution" means, as of any Distribution Date, all
distributions received by the Trustee on the Group 1A Pooled Certificates and
deposited by the Trustee in the Asset Proceeds Account as of such Distribution
Date, minus the pro rata portion of the Trustee Fee paid to the Trustee, each
as of such Distribution Date.

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<PAGE> 23

"Class 2A Available Distribution" means, as of any Distribution Date, all
distributions received by the Trustee on the Group 2A Pooled Certificates and
the Treasury Securities and deposited by the Trustee in the Asset Proceeds
Account as of such Distribution Date, minus the pro rata portion of the Trustee
Fee paid to the Trustee, each as of such Distribution Date.

"Group 1A Pool" means, the Group 1A Pooled Certificates.

"Group 2A Pool" means, the Group 2A Pooled Certificates and the Treasury
Securities.

"Group 1A Pooled Certificates" means, (1) a portion of the Pooled Freddie
Mac G063 Certificate and (2) a portion of the Pooled Fannie Mae Certificate.

"Group 2A Pooled Certificates" means, (1) a portion of the Pooled Freddie
Mac G063 Certificate, (2) a portion of the Pooled Fannie Mae Certificate; (3)
the Pooled Freddie Mac 2043 Certificate, and (4) the Pooled Non-Agency
Certificate.

The Group 1A Pooled Certificates and the Group 2A Pooled Certificates will
each constitute a separate sub-trust.

"Trustee Fee" means, with respect to any Distribution Date, the monthly
fee equal to 1/12th of the product of 0.025% and the principal balance of the
Certificates immediately prior to the Distribution Date, but not less than $125
with respect to any Distribution Date. In any event, the Company shall not be
responsible for any portion of the Trustee Fee.

The full name of each abbreviated underlying series is set forth herein
under "Description of the Pooled Certificates--General." Copies of the
Underlying Agreements are available from the Underwriter, at 245 Park Avenue
New York, New York, Attention: MORTGAGE DEPARTMENT.

The Underwriter will convey the Pooled Certificates and Treasury
Securities to the Company on the Closing Date pursuant to a Purchase Agreement
dated as of the Closing Date. The Underwriter will be obligated to make
certain representations and warranties (see "The Pooling Agreement--Assignment
of Pooled Certificates" herein) with respect to the Pooled Certificates and
Treasury Securities, and those representations and warranties will be assigned
to the Trust for the benefit of the Certificateholders. If the Underwriter
breaches a representation or warranty with respect to the Pooled Certificates
or Treasury Securities which materially and adversely affects the interests of
the Certificateholders and the Underwriter repurchases, or elects to substitute
one or more securities for, a Pooled Certificate or Treasury Security, the
foregoing definition will be modified with respect to the related Distribution
Date to delete the portion thereof relating to the Pooled Certificate or
Treasury Security being repurchased or substituted for and to reflect, in the
case of a repurchase, the repurchase price received with respect thereto as
described herein under "The Pooling Agreement--Assignment of Pooled
Certificates" or in the case of a substitution, the addition of a comparable
provision with respect to the new mortgage related security or securities.

The sole source of payment on the Certificates will be distributions on
the related Pooled Certificates and, with respect to the Class 2A Certificates,
the Treasury Securities. The Certificates will not be guaranteed by the
Company, the Underwriter, the Trustee, or any other person.

OPTIONAL TERMINATION

The Trust may be terminated at the option of the Company, or its designee,
on any Distribution Date on or after the date on which the aggregate Pooled
Certificate Principal Balance and the amount of funds payable as principal from
the Reserve Fund has declined to 10% or less of the sum of (i) the initial
aggregate Pooled Certificate Principal Balance and (ii) the amount of funds
payable as principal from the Reserve Fund on the Closing Date, as such sum is
reduced by the original face amount of any Certificates exchanged for a pro
rata portion of the Pooled Certificates and, with respect to the Class 2A
Certificates, the Treasury Securities. In addition, the sub-trust consisting
of either the Group 1A Pool or the Group 2A Pool may be terminated, at the
option of the Company or its

S-18
<PAGE> 24

designee, on any Distribution Date on or after the date on which (i) in the
case of the Group 1A Pool, the aggregate Pooled Certificate Principal Balance
of the Group 1A Pooled Certificates has declined to 10% or less of the initial
aggregate Group 1A Pooled Certificate Principal Balance and (ii) in the case of
the Group 2A Pool, the aggregate Pooled Certificate Principal Balance of the
Group 2A Pooled Certificates plus the amount of funds payable as principal from
the Reserve Fund has declined to 10% or less of the initial aggregate Group 2A
Pooled Certificate Principal Balance plus the amount of funds payable as
principal from the Reserve Fund on the Closing Date, in both cases as reduced
by the original face amount of any Class 1A or Class 2A Certificates exchanged
for a pro rata portion of the Group 1A Pooled Certificates or the Group 2A
Pooled Certificates and Treasury Securities, respectively. In the event of any
such termination, the applicable Certificateholders will receive the unpaid
principal balance of their Certificates plus accrued interest thereon plus, in
the case of the Pooled Fannie Mae Certificate or the Pooled Non-Agency
Certificate, any Interest Deficiency (as defined herein) and interest thereon
as described under "Description of the Pooled Certificates--Pooled
Certificates--Interest Types." In connection with any such termination, the
aggregate amount then on deposit in the Asset Proceeds Account will be
disbursed to the Trustee, the applicable Certificateholders, and other persons
entitled thereto, in accordance with the terms of the Agreement.

MANDATORY TERMINATION

On the Distribution Date following the first Distribution Date on which
the Group 1A or Group 2A Pooled Certificate Principal Balance or Pooled
Certificate Notional Principal Balance of all but one of the Group 1A or Group
2A Pooled Certificates has been reduced to zero, the Trust will be terminated
with respect to such group of Pooled Certificates and the remaining Pooled
Certificates or Treasury Securities will be distributed in kind pro rata to the
Certificateholders of the related Class.

EXCHANGE OF CERTIFICATES

Beginning on the Distribution Date in May 1999 and on any Distribution
Date thereafter, holders of a minimum of 10% of the initial principal amount of
either Class of Certificates, without taking into account any reductions in the
initial principal amount due to a prior exchange of Certificates, will be
entitled to exchange such Class of Certificates for a pro rata portion of each
of the related Pooled Certificates and, with respect to the Class 2A
Certificates, the Treasury Securities. Holders of either Class of Certificates
to be exchanged will be charged an exchange fee by the Trustee equal to the
greater of (i) $500 and (ii) 0.02% of the outstanding principal amount of such
Class of Certificates. Holders will be required to provide the Trustee with
irrevocable written notice, accompanied by the exchange fee, of any proposed
exchange of such Class of Certificates at least five Business Days prior to the
proposed date of such exchange, which must be a Business Day.

DESCRIPTION OF THE POOLED CERTIFICATES

GENERAL

The Certificates will represent, in the aggregate, the entire beneficial
ownership interest in a Trust consisting primarily of two groups of Pooled
Certificates and the Reserve Fund containing the Treasury Securities. The
following is a list of the Pooled Certificates with the designations used
herein for such group of Pooled Certificates and other related information.
Definitions of abbreviations used for principal types and interest types appear
under "--Pooled Certificates--Principal Types" and "--Pooled
Certificates--Interest Types" herein.

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<PAGE> 25

<TABLE>
<S> <C>
POOLED FANNIE MAE CERTIFICATE
Guaranteed REMIC Pass-Through Certificates
Fannie Mae REMIC Trust 1994-6

Designation: F
% of Class in each group of
Pooled Certificates: Group 1A - 16.91%
Group 2A - 10.62%
Principal Type: Pass-Through
Current Principal
Balance of Pooled
Certificates in each group
of Pooled Certificates: Group 1A - $23,500,002.45
Group 2A - $14,755,033.87
Interest Type: Floater
Interest Rate or Formula: LIBOR + 200 basis points;
Minimum Rate: 2.00%; Maximum Rate: 10.00%

POOLED FREDDIE MAC CERTIFICATES
Multiclass Mortgage Securities, Series G063

Designation: A
% of Class in each group of
Pooled Certificates: Group 1A - 5.00%
Group 2A - 16.25%
Principal Type: Notional (Pass-Through)
Current Notional Principal
Balance of Pooled
Certificates in each group of
Pooled Certificates: Group 1A - $4,285,057.00
Group 2A - $13,926,435.25
Interest Type: PEC/IO
Interest Rate or Formula: 8.00% + Interest Payment Supplement Amount

Multiclass REMIC Certificates, Series 2043

Designation: ZB
% of Class in each group of
Pooled Certificates: Group 2A - 17.36%
Principal Type: TAC
Current Principal Balance
of Pooled Certificates
in each group of
Pooled Certificates: Group 2A - $12,150,000.00
Interest Type: Fix/Accrual
Interest Rate or Formula: 7.00%
</TABLE>

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<PAGE> 26

<TABLE>
<S> <C>
POOLED NON-AGENCY CERTIFICATE
Fund America Investors Trust I
Collateralized Mortgage Obligations, Series 1993-2

Designation: A-1
% of Class in each group of
Pooled Certificates: Group 2A - 3.41%
Principal Type: Pass-Through
Current Principal
Balance of Pooled
Certificates in each group of
Pooled Certificates: Group 2A - $2,268,817.89
Interest Type: Floater/Available Funds
Interest Rate or Formula: LIBOR + 200 basis points;
Minimum Rate: 2.00%;
Maximum Rate: 11.00%
</TABLE>

The Pooled Fannie Mae Certificate is guaranteed as to timely distribution
of principal and, to a certain extent, interest by Fannie Mae. Freddie Mac
guarantees to each holder of the Pooled Freddie Mac Certificates the timely
payment of interest at the rates described above and the payment of the
principal amount of the Pooled Freddie Mac Certificates as described in the
Underlying Freddie Mac Offering Circular. Payments with respect to the Pooled
Non-Agency Certificate are not guaranteed by Fannie Mae, Freddie Mac, Ginnie
Mae or any other person. The Pooled Non-Agency Certificate is a non-recourse
obligation of a single purpose trust, that is secured by payments on underlying
certificates which include certain Fannie Mae, Freddie Mac, and Ginnie Mae
certificates and other non-agency certificates that represent undivided
ownership interests in agency certificates.

The Pooled Fannie Mae Certificate is one class of an Underlying Fannie Mae
Series which represents beneficial ownership interests in a separate Underlying
Fannie Mae Trust. The assets of the Underlying Fannie Mae Trust consist of (i)
a single "interest only" Fannie Mae Stripped Mortgage-Backed Security
evidencing the beneficial ownership interest in the interest distributions made
in respect of the Class 58-IO REMIC Certificates evidencing beneficial
ownership interests in Fannie Mae REMIC Trust 1992-G58 and included in Fannie
Mae Stripped Mortgage-Backed Security Trust 000180-GN, (ii) "interest only"
Fannie Mae Stripped Mortgage-Backed Securities evidencing the respective
beneficial ownership interests in certain interest distributions made in
respect of certain "fully modified pass-through" mortgage-backed securities
Ginnie Mae Certificates guaranteed as to timely payment of principal and
interest by Ginnie Mae, held in the form of the respective Fannie Mae
Guaranteed MBS Pass-Through Certificates and included in the respective Fannie
Mae Stripped Mortgage-Backed Security Trusts and (iii) all of the Class 5-C
REMIC Certificates evidencing beneficial ownership interests in Fannie Mae
REMIC Trust 1994-5. The assets of Trust 1992-G58 consist of certain Ginnie Mae
Certificates. The assets of Trust 1994-5 consist of a single "principal only"
Fannie Mae Stripped Mortgage-Backed Security evidencing the beneficial
ownership interest in certain principal distributions made in respect of
certain Fannie Mae Guaranteed Mortgage Pass-Through Certificates held in the
form of Fannie Mae Guaranteed MBS Pass-Through Certificate CL-190250 and
included in the Fannie Mae Stripped Mortgage-Backed Security Trust 000250-CL.
Each MBS will represent a beneficial ownership interest in a pool of first
lien, single-family, fixed rate residential mortgage loans having the
characteristics described herein. Each Ginnie Mae Certificate is based on and
backed by a pool of first lien, single-family, fixed-rate residential mortgage
loans which are either insured by the FHA or partially guaranteed by the VA.
Both Classes of Certificates are entitled to receive distributions on the
Pooled Fannie Mae Certificate.

The Pooled Freddie Mac Certificates are each one class of two separate
Underlying Freddie Mac Series. The Pooled Freddie Mac G063 Certificate
represents beneficial ownership interest in the Underlying Freddie Mac G063
Trust established by Freddie Mac. The assets of the Underlying Freddie Mac
G063 Trust consist of Freddie Mac Giant Stripped Securities, Series GS007,
which in turn consists of Giant IO Securities and Giant PO Securities, backed
by Ginnie Mae-related securities (Ginnie Mae Certificates and Giant
Securities). The assets underlying each

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<PAGE> 27

Underlying Freddie Mac Series are Freddie Mac Mortgages. Both Classes of
Certificates are entitled to receive distributions on the Pooled Freddie Mac
G063 Certificate.

The Pooled Freddie Mac 2043 Certificate represents beneficial ownership
interest in the Underlying Freddie Mac 2043 Trust. The assets of the
Underlying Freddie Mac 2043 Trust consist of Freddie Mac Gold Participation
Certificates and Gold Giant Participation Certificates. Only the Class 2A
Certificates are entitled to receive distributions on the Pooled Freddie Mac
2043 Certificate.

The Pooled Non-Agency Certificate is a single class of a series of
collateralized mortgage obligations issued by the Non-Agency Certificate
Issuer. The Pooled Non-Agency Certificates are non-recourse obligations of the
Non-Agency Certificate Issuer secured by the all of the assets of the
Underlying Non-Agency Trust. The assets of the Underlying Non-Agency Trust
securing the Pooled Non-Agency Certificate consist of (i) certain classes of
Fannie Mae Guaranteed REMIC Pass-Through Certificates, (ii) certain classes of
Fannie Mae Stripped Mortgage-Backed Securities, (iii) Multiclass PCs, (iv)
Stripped Giant PCs, and (v) certain mortgage pass-through certificates,
participation certificates, or collateralized mortgage obligations issued by
issuers other than Fannie Mae, Freddie Mac, or Ginnie Mae, which securities are
backed by mortgage-backed securities issued by Fannie Mae, Freddie Mac or
Ginnie Mae. Only the Class 2A Certificates are entitled to receive
distributions on the Pooled Non-Agency Certificate.

The sponsor of the issuer of the Pooled Non-Agency Certificate is an
affiliate of the Company; however, the Underwriter acquired the Pooled
Non-Agency Certificate in the secondary trading market from parties
unaffiliated with the Company.

The distribution date for the Pooled Fannie Mae Certificate is the 25th
day of the month, the distribution date for the Pooled Freddie Mac Certificates
is the 15th or the 17th day of each month, and the distribution date for the
Pooled Non-Agency Certificate is the 25th day of the month, or if, in each
case, such day is not a business day as defined in the applicable Underlying
Agreement, then the next succeeding business day, as so defined.

Additional characteristics of the Pooled Certificates are described below
and in Annex 1 and Annex 2.

POOLED CERTIFICATES - PRINCIPAL TYPES

The Pooled Certificates were structured as a targeted amortization class
("TAC Class") or pass-through classes ("PT Classes").

A TAC Class is designed to receive principal payments using a
predetermined principal balance schedule derived by assuming a single constant
prepayment rate for the underlying Mortgage Loans.

A PT Class is designed to receive principal payments based on payments of
principal received on underlying assets. Payments of principal received on
underlying assets will be passed-through as principal on the PT Class.

The Pooled PEC/IO Certificate is an "interest only" certificate and does
not have an actual principal balance, and as such, is not entitled to receive
distributions of principal.

POOLED CERTIFICATES - INTEREST TYPES

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<PAGE> 28

principal (the "Available Funds Class"). The annual interest rate on the
Available Funds Class for any Interest Accrual Period is determined by
multiplying the interest paid on the related distribution date by 12 and then
dividing such amount by the principal balance of such Pooled Certificates.

The Fixed Class of the Pooled Certificates is a Pooled Accrual
Certificate. The Pooled Accrual Certificate accretes all of its interest at a
fixed rate, which is added to its outstanding principal balance (the "Accrual
Class"). This accretion continues so long as such respective class remains
outstanding and the accreted interest is paid as principal.

Distributions on the Pooled PEC/IO Certificate. The Pooled PEC/IO
Certificate has a notional principal balance which is the amount used as a
reference to calculate the amount of interest due on such certificate (a
"Notional Class"). The notional principal balance of the Pooled PEC/IO
Certificate reduces proportionately with the Giant Stripped Securities. A PEC
certificate represents the entire beneficial ownership interest in related
classes of multiclass securities issued under the same transaction, together
with rights and obligations under an associated interest payment exchange. The
Pooled PEC/IO Certificate receives distribution, at a fixed interest rate of
8.00%, plus is entitled to receive the interest payment supplement amount. The
interest payment supplement amount is a variable amount of interest which
varies inversely with the level of LIBOR and varies directly with the rate of
prepayments.

Distributions on the Pooled Fannie Mae Certificate. Principal will be
distributed monthly on the Pooled Fannie Mae Certificates in an amount (the
"Fannie Mae Principal Distribution Amount") equal to the sum of (i) the
distribution of principal concurrently made on the underlying REMIC
certificates and (ii) the amount ("Excess Interest") by which the aggregate
distributions of interest concurrently made on the Fannie Mae SMBS exceeds the
sum of (a) the interest accrued on the Pooled Fannie Mae Certificates during
the preceding Fannie Mae Interest Accrual Period, (b) any unpaid Interest
Deficiency and (c) interest, if any, accrued on a compounded basis and unpaid
on any such unpaid Interest Deficiency. On each Pooled Fannie Mae Certificate
Distribution Date, the Fannie Mae Principal Distribution Amount will be
distributed as principal of the Pooled Fannie Mae Certificate until the
principal balance thereof is reduced to zero. Interest to be distributed on
the Pooled Fannie Mae Certificate on a Pooled Fannie Mae Certificate
Distribution Date will be in an amount (the "Fannie Mae Interest Distribution
Amount") equal to the lesser of (a) the sum of (i) one month's interest on the
outstanding principal balance of the Pooled Fannie Mae Certificates immediately
prior to such Pooled Fannie Mae Certificate Distribution Date, (ii) any unpaid
Interest Deficiency (as defined below) and (iii) interest, if any, accrued on a
compounded basis on any unpaid Interest Deficiency and (b) the sum of (i) the
aggregate distributions of interest concurrently made on the Fannie Mae SMBS
and (ii) distributions of principal concurrently made on the underlying REMIC
certificates following the reduction of the principal balance of the Pooled
Fannie Mae Certificates to zero.

On each Fannie Mae Pooled Certificate Distribution Date, the Fannie Mae
Interest Distribution Amount will be applied to the distribution of interest on
the Pooled Fannie Mae Certificates in the following order:

(i) an amount equal to the interest accrued on the principal balance
of the Pooled Fannie Mae Certificates during the immediately preceding
Fannie Mae interest accrual period;

(ii) an amount equal to the Interest Deficiency with respect to the
Pooled Fannie Mae Certificate that has not been previously paid; and

(iii) an amount equal to the interest, if any, accrued on a
compounded basis and unpaid on any unpaid Interest Deficiency during each
Fannie Mae interest accrual period as to which such Interest Deficiency
remained unpaid to the Pooled Fannie Mae Certificate Distribution Date on
which such Interest Deficiency is paid, at the per annum rate in effect
from time to time with respect to the Pooled Fannie Mae Certificates.

On each Fannie Mae Pooled Certificate Distribution Date following the
reduction of the principal balance of the Pooled Fannie Mae Certificates to
zero and the payment in full of all accrued and unpaid interest thereon
(including any unpaid Interest Deficiency together with interest thereon), all
distributions from any remaining assets

S-23
<PAGE> 29

of the Underlying Fannie Mae Trust will be distributed monthly to holders of
the residual class of the Underlying Fannie Mae Series (the "Fannie Mae
Residual Class").

The Pooled Fannie Mae Certificate will bear interest during each Fannie
Mae interest accrual period subject to the applicable Maximum and Minimum
Interest Rates, at the rate determined as described below:

<TABLE>
<CAPTION>
Maximum Minimum Formula for Calculation
Interest Rate Interest Rate of Interest Rate
------------- ------------- ------------------------
<S> <C> <C>
10.00% 2.00% LIBOR + 200 basis points
</TABLE>

Each LIBOR value in respect of the Pooled Fannie Mae Certificate will be
established as provided in the underlying Fannie Mae agreement by Fannie Mae
two business days prior to the commencement of the related Fannie Mae interest
accrual period. The establishment of each LIBOR value by Fannie Mae and Fannie
Mae's determination of the rate of interest for the Pooled Fannie Mae
Certificates for the related Fannie Mae interest accrual period shall (in the
absence of manifest error) be final and binding. Each such rate of interest
may be obtained by telephoning Fannie Mae at 1-800-BEST-MBS or 202-752-6547.

Under certain circumstances of increased LIBOR levels, the Fannie Mae
Interest Distribution Amount may not be sufficient to pay the full amount of
interest accrued on the Pooled Fannie Mae Certificates at the LIBOR based
formula rate. Any such unpaid Interest Deficiency on a particular Pooled
Fannie Mae Certificate Distribution Date will be carried forward, with
interest, to subsequent Pooled Fannie Mae Certificate Distribution Dates. If
an unpaid Interest Deficiency remains on the Pooled Fannie Mae Certificate
Distribution Date upon which the principal balance of the Pooled Fannie Mae
Certificate is reduced to zero, all distributions on any Fannie Mae SMBS and
underlying REMIC certificates remaining in the Underlying Fannie Mae Trust will
be applied to the payment of any such unpaid Interest Deficiency (together with
any accrued and unpaid interest thereon) on such date and each Pooled Fannie
Mae Certificate Distribution Date thereafter before any distributions are made
to the Fannie Mae Residual Class. Once the notional principal balances of the
respective Fannie Mae SMBS and the principal balance of the underlying REMIC
certificates have been reduced to zero, holders of the Pooled Fannie Mae
Certificate will have no future entitlement to any unpaid Interest Deficiency
(or any accrued and unpaid interest thereon).

If the notional balances of the Fannie Mae SMBS are reduced to zero while
the principal balance of the Pooled Fannie Mae Certificate remains outstanding,
and the balance of the Pooled Fannie Mae Certificate equals the balance of the
underlying REMIC certificates, no further payments of interest will be made on
the Pooled Fannie Mae Certificate.

As of the April 1998 Pooled Fannie Mae Certificate Distribution Date, the
Interest Deficiency in respect of the Pooled Fannie Mae Certificate allocable
to the Class 2A Certificates was approximately $887,454. There can be no
assurance as to whether holders of the Pooled Fannie Mae Certificate will in
the future receive full distributions of interest at the rate calculated
according to their interest rate formula on a timely basis or whether the
payment of any of the Interest Deficiency will be received.

Distributions on the Pooled Non-Agency Certificate. Payments on the
Pooled Non-Agency Certificates are made on the 25th day of each month, or if
such date is not a business day, the next succeeding business day (the "Pooled
Non-Agency Certificate Payment Date"). Funds available for payment on the
Pooled Non-Agency Certificate from distributions on the related Underlying FAIT
Certificates, are applied as follows:

(i) first, as principal to the Pooled Non-Agency Certificate, in
an amount up to the greater of $774,075 or the amount required to
reduce the current principal amount of the Pooled Non-Agency
Certificate to its "Scheduled Balance" for such Payment Date as set
forth on Schedule III to the Non-Agency Certificate Prospectus.

(ii) second, as interest to the Pooled Non-Agency Certificate in
an amount equal to interest accrued on the Pooled Non-Agency
Certificate during the related Interest Accrual Period;

S-24
<PAGE> 30

(iii) third, as principal to the Pooled Non-Agency Certificate, until the
current principal amount of the Pooled Non-Agency Certificate has
been reduced to zero;

(iv) fourth, as interest on the Pooled Non-Agency Certificate, in
the amount of any interest which has accrued on the Pooled
Non-Agency Certificate prior to the related Interest Accrual Period
and has not been paid; and

(v) fifth, as interest to the Pooled Non-Agency Certificate, in
the amount of any interest on any accrued and unpaid interest, from
the payment date on which the interest was due to the Pooled
Non-Agency Certificate Payment Date on which the interest is paid,
at the interest rate in effect for the Pooled Non-Agency Certificate
during each Interest Accrual Period until paid.

The Pooled Non-Agency Certificate will bear interest during each interest
accrual period subject to the applicable Maximum and Minimum Interest Rates, at
the rate determined as described below:

<TABLE>
<CAPTION>
Maximum Minimum Formula for Calculation
Interest Rate Interest Rate of Interest Rate
- ------------- ------------- ------------------------
<S> <C> <C>
11.00% 2.00% LIBOR + 200 basis points
</TABLE>

The establishment of LIBOR with respect to each Pooled Non-Agency
Certificate by the Trustee and the Trustee's calculation of the rate of
interest applicable to the Pooled Non-Agency Certificate for the related
interest accrual period shall (in the absence of manifest error) be final and
binding. Each such rate of interest may be obtained by telephoning the Trustee
at (617) 985-4700.

Under certain circumstances of increased LIBOR levels and relatively high
rates of prepayments on the Underlying FAIT Certificates that are interest only
certificates and relatively low rates of prepayments on the Underlying FAIT
Certificates that are principal only certificates, the amount available for
payment on the Pooled Non-Agency Certificate may not be sufficient to pay the
full principal of and/or the amount of interest accrued on the Pooled
Non-Agency Certificate at the LIBOR based formula rate. With respect to any
such interest shortfalls, any such unpaid amounts on a particular Pooled
Non-Agency Certificate Payment Date will be carried forward, with interest, to
subsequent Pooled Non-Agency Certificate Payment Dates. If an unpaid interest
shortfall or principal amount remains on the maturity date for the Pooled
Non-Agency Certificate, holders of the Pooled Non-Agency Certificate, including
the Company, will have no future entitlement to any unpaid principal or
interest amounts (or any accrued and unpaid interest thereon).

As of the April 1998 Pooled Non-Agency Certificate Payment Date, the
Interest Deficiency in respect of the Pooled Non-Agency Certificate allocable
to the Class 2A Certificates was approximately $707,126. There can be no
assurance as to whether holders of the Pooled Non-Agency Certificate will in
the future receive full distributions of interest at the rate calculated
according to their interest rate formula on a timely basis or whether the
payment of any of the Interest Deficiency will be received.

On any Pooled Non-Agency Certificate Payment Date on which the outstanding
principal balance of the Underlying FAIT Certificates is less than the
outstanding principal balance of the Pooled Non-Agency Certificate, all
principal and interest received on the Pooled Non-Agency Certificate will be
paid to the Class 2A Certificateholders as principal as set forth above. After
$2,268,817.89 in distributions from the Pooled Non-Agency Certificate has been
allocated as principal, all subsequent distributions received with respect to
the Pooled Non-Agency Certificate will be allocated as interest on the Class 2A
Certificates. See "Description of the Certificates - Payments of Interest and
Principal" herein. Notwithstanding the foregoing, for accounting purposes,
each Distribution Date is deemed to occur in the same month as the concurrent
or immediately preceding Pooled Certificate Distribution Date.

S-25
<PAGE> 31

THE UNDERLYING MORTGAGE LOANS

The Mortgage Loans consist of conventional, fixed rate, one- to
four-family, fully-amortizing, level monthly payment, first mortgage loans with
original maturities of up to approximately 30 years. Payments on the Mortgage
Loans underlying the Pooled Certificates will either be distributed in the same
month of payment or the month succeeding the month of payment.

ADDITIONAL INFORMATION

The descriptions of the Pooled Certificates and the Mortgage Loans do not
purport to be complete. Set forth below are lists of documents relevant to
each of the Pooled Certificates.

Documents relevant to the Pooled Fannie Mae Certificate include the
following:

-- Fannie Mae Prospectus Supplement dated December 8, 1993 to
Prospectus dated December 29, 1992

-- Fannie Mae Guaranteed REMIC Pass-Through Certificates Prospectus
dated December 29, 1992.

-- Fannie Mae Guaranteed Mortgage Pass-Through Certificates Prospectus
dated December 1, 1993.

-- Fannie Mae Stripped Mortgage-Backed Security Prospectus dated
December 1, 1992.

-- Fannie Mae Guaranteed MBS Pass-Through Certificates Prospectus
dated December 1, 1992.

-- Fannie Mae Underlying Fannie Mae REMIC Trust Prospectus
Supplement dated December 21, 1992 to Prospectus dated December 29,
1992.

-- Fannie Mae Trust 1992-G58 Prospectus dated September 10, 1992.

-- Fannie Mae Information Statement dated February 16, 1993 and
any supplements thereto.

Documents relevant to the Pooled Freddie Mac G063 Certificate (the Pooled
PEC/IO Certificate) include the following:

-- Freddie Mac Offering Circular Supplement for Multiclass
Mortgage Securities, Payment Exchange Certificates and Modifiable
and Combinable REMIC Certificates, Series G063, dated January 1,
1997.

-- Freddie Mac Multiclass Series Offering Circular, dated
January 1, 1997

-- Freddie Mac's Giant GNMA-Backed Securities and Other
Pass-Through Securities Offering Circular dated January 1, 1997,
which describes Giant Securities generally, and its Stripped Giant
Securities, Series GS007 Offering Circular Supplement dated June 2,
1997

-- Freddie Mac's Information Statement dated March 31, 1997, its
Information Statement Supplement dated May 15, 1997 and any other
Information Statement Supplements published by Freddie Mac through
the time of purchase.

Documents relevant to the Pooled Freddie Mac 2043 Certificate include the
following:

-- Freddie Mac Offering Circular Supplement dated March 4, 1998
to Offering Circular dated April 1, 1998.

S-26
<PAGE> 32

Documents relevant to the Pooled Non-Agency Certificate include the
following:

-- Fund America Investors Trust I Prospectus Supplement for
Collateralized Mortgage Obligations, Series 1993-2, Class A-1, dated
September 8, 1993.

-- Fund America Investors Trust I Prospectus, dated September 8,
1993.

-- Copies of (i) the respective Offering Circulars, Prospectus
Supplements, REMIC Prospectuses, MBS Prospectuses, SMBS
Prospectuses, Mega Prospectuses, SMBS Prospectus Supplements,
Prospectuses and Fannie Mae Information Statements relating to the
Fannie Mae Securities, (ii) the respective Offering Circular
Supplements, Multiclass PC Offering Circulars, PC Offering
Circulars, Giant PC Offering Circulars, PC Offering Circular
Supplements, Giant PC Offering Circular Supplements and Freddie Mac
Information Statements relating to the Freddie Mac Securities, and
(iii) the respective Prospectus Supplements and Prospectuses
relating to the private mortgage-backed securities, may be obtained
from the Underwriter by writing or calling its Prospectus Department
at 245 Park Avenue, New York, New York 10167, Attention: Mortgage
Department. Such offering materials are typically prepared at the
time the related Underlying Securities are originally issued and are
not updated thereafter.

The Fannie Mae documents may be obtained from Fannie Mae by writing or
calling its MBS Helpline at 3900 Wisconsin Avenue, N.W., Area 2H-3S,
Washington, D.C. 20016; telephone 1-800-BEST-MBS or 202-752-6547.

Investors can order the Freddie Mac documents from Freddie Mac by writing
or calling its Investor Inquiry Department at 8200 Jones Branch Drive, McLean,
Virginia 22102; outside Washington, D.C. metropolitan area, telephone
800/336-3672; within Washington, D.C. metropolitan area, telephone
703/450-3777. Freddie Mac also publishes a supplemental statement applicable
to each series shortly after the applicable closing date. Investors can obtain
the supplemental statement, any offering materials for specific certificates,
and historic and current information concerning specific certificates from
Freddie Mac's Investor Inquiry Department. Freddie Mac's Internet Web-Site
(http://www.freddiemac.com) displays the offering circular supplements, the
supplemental statements, schedules of the certificates, and information,
updated monthly, regarding each class of the applicable Underlying Freddie Mac
Series.

In addition, copies of the respective Prospectus Supplements,
Prospectuses, Offering Circular Supplements, Offering Circulars, and the other
documents set forth above relating to the Pooled Certificates may be obtained
from the Underwriter by writing Bear, Stearns & Co. Inc., 245 Park Avenue, New
York, New York 10167, Attention: Mortgage Department.

THE RESERVE FUND

On the Closing Date, the Company will fund the Reserve Fund with three
United States Treasury Securities that will provide funds equal to $7,700,000.
Payments on the Treasury Securities will be applied to pay principal on the
Class 2A Certificates on the Distribution Date following receipt. On the
February 1999 Distribution Date, $6,000,000 will be applied to pay principal on
the Class 2A Certificates. On the February 2001 Distribution Date, $1,200,000
will be applied to pay principal on the Class 2A Certificates. On the February
2002 Distribution Date, $500,000 will be applied to pay principal on the Class
2A Certificates. The Class 1A Certificates are not entitled to funds on
deposit in the Reserve Fund.

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<PAGE> 33

YIELD AND PREPAYMENT CONSIDERATIONS

GENERAL CONSIDERATIONS

The yield to maturity and weighted average life of the Certificates will
be affected by, among other things, the amount and timing of principal
payments, including prepayments (for this purpose the term "prepayments"
includes payments resulting from refinancing, liquidations, purchases by the
original transferors or others), and interest payments on the Mortgage Loans,
the level of LIBOR, the payment priorities and other characteristics of the
Pooled Certificates, the purchase price paid for the Certificates, and the
occurrence of an optional or mandatory termination with respect to the
Certificates or the Pooled Certificates. No representation is made as to the
anticipated rate of prepayments on the Mortgage Loans or the anticipated yield
to maturity of the Certificates. Prospective investors are urged to consider
their own estimates as to the anticipated rate of future prepayments on the
Mortgage Loans and the suitability of the Certificates to their investment
objectives. If prevailing mortgage rates fall significantly below the mortgage
rates on the Mortgage Loans, the Mortgage Loans are likely to be subject to
higher prepayment rates than if prevailing rates remain at or above the
mortgage rates on the Mortgage Loans. Other factors affecting prepayments of
Mortgage Loans include changes in mortgagors' housing needs, job transfers,
unemployment, net equity in the mortgaged properties and servicing decisions.
The Mortgage Loans may be prepaid at any time without penalty and generally
have due-on-sale clauses. Because the payment of installments of principal of
and interest on the respective Mortgage Loans are guaranteed by one or more
governmental agencies, liquidations resulting from default, casualty or
condemnation in respect of the respective Mortgage Loans will have the effect
of a prepayment.

The timing and amount of payments, including prepayments, on the Mortgage
Loans may significantly affect an investor's yield. In general, the earlier a
prepayment of principal on the Mortgage Loans, the greater will be the effect
on an investor's yield to maturity. As a result, the effect on an investor's
yield of principal prepayments occurring at a rate higher (or lower) than the
rate anticipated by the investor during the period immediately following the
issuance of the Certificates will not be offset by a subsequent like reduction
(or increase) in the rate of principal prepayments. In addition, interest
amounts on the Pooled PEC/IO Certificate contain a supplemental amount that
varies directly with the level of prepayments on the related Mortgage Loans.

The Pooled Certificates were issued at different times, are backed
directly or indirectly by different Mortgage Pools, have different allocations
of principal and interest and payment priorities among various classes, are
subject to optional termination to the extent described herein and in the
Underlying Agreements and will perform differently in various interest and
prepayment rate environments. The performance characteristics of each Class of
Certificates will reflect a combination of the performance characteristics of
the related group of Pooled Certificates. Because the Pooled Non-Agency
Certificate has an additional layer of underlying assets, the inclusion of that
Pooled Certificate in the Trust may make it more difficult to predict the
likely yield and payment experience of the Class 2A Certificates.

Since interest generally will be due on each Mortgage Loan on the first
day of the month, but the distribution of such interest will not be made until
the Pooled Certificate Distribution Dates and then the amounts received with
respect to a Pooled Certificate Distribution Date will not be distributed until
the related Distribution Date, the yield to investors in the Certificates will
be lower than the yield produced without such delays. Since the amount of the
distributions on the Certificates is based on information in respect of the
Underlying Series, if such information is not received in a timely manner,
payments will not be made until the following Distribution Date and the yield
to investors may be lower than the yield produced if such information had been
received in a timely manner.

In the case of any Certificates purchased at a discount, a slower than
anticipated rate of principal payments on the Certificates, other things being
equal, could result in an actual yield that is lower than the anticipated
yield. In the case of any Certificates purchased at a premium, a faster than
anticipated rate of principal payments on the Certificates, other things being
equal, could result in an actual yield that is lower than the anticipated
yield.

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<PAGE> 34

The Pooled PEC/IO Certificate has a notional principal balance which
reduces proportionately with the principal balance of certain related classes
in the same Underlying Series. Accordingly, the amount and timing of payments
on the related groups of Pooled Certificates, and accordingly the yield on both
Classes of Certificates, will be sensitive to the rate and timing of principal
payments on such Related Certificates. Relatively fast prepayments of
underlying Mortgage Loans may significantly shorten, and relatively slow
prepayments of underlying Mortgage Loans may significantly extend, the life of
the Related Certificates and therefore the Pooled PEC/IO Certificate.
Generally, a rapid rate of principal prepayments on the Mortgage Loans
underlying the Pooled PEC/IO Certificate will have a negative effect on the
yield on such certificates and may reduce the yield on the Certificates. If
the life of the Related Certificates is significantly shortened, the life of
the Pooled PEC/IO Certificate will be significantly shortened and the yield to
investors in both Classes of Certificates can be expected to decrease.
Similarly, the exercise of any optional redemption rights with respect to the
Underlying Series of which the Pooled PEC/IO Certificate is a part may have a
negative effect on the yield on such certificates and may reduce the yield on
both Classes of Certificates. The Pooled PEC/IO Certificate is part of the
Group 1A Pooled Certificates and the Group 2A Pooled Certificates.

Because prevailing interest rates are subject to fluctuation, there can be
no assurance that investors in the Certificates will be able to reinvest the
payments thereon at yields equaling or exceeding the yields on the
Certificates. Yields on any such reinvestments may be lower, and may even be
significantly lower, than yields on the Certificates. Generally, when
prevailing interest rates increase, prepayment rates on mortgage loans tend to
decrease, resulting in a reduced return of principal to investors at a time
when reinvestment at such higher prevailing rates would be desirable.
Conversely, when prevailing interest rates decline, prepayment rates on
mortgage loans tend to increase, resulting in a greater return of principal to
investors at a time when reinvestment at comparable yields may not be possible.
Prospective investors in the Certificates should consider the related
reinvestment risks in light of other investments that may be available to such
investors.

The yield to maturity on the Certificates will reflect the amount and
timing of interest amounts received on the Pooled Certificates, certain of
which are sensitive to the level of LIBOR from time to time. For example, the
amount of interest payable on the Pooled Floating Rate Certificates and the
Non-Agency Certificate will vary with the level of LIBOR. Consequently, a low
level of LIBOR will reduce the interest payable on the Pooled Floating Rate
Certificate and the Pooled Non-Agency Certificate and may therefore reduce the
yield to investors in the Certificates. Similarly, the amount of interest
payable on the Pooled PEC/IO Certificate may vary inversely with the level of
LIBOR. Consequently, a high level of LIBOR can significantly reduce payments
to the Pooled PEC/IO Certificate and (especially in combination with fast
Mortgage prepayment rates) reduce the yield to investors in the Certificates.

The Pooled Certificates were issued as parts of different Underlying
Series and the rates of prepayments on the Underlying Mortgage Loans will be
different. Under various circumstances, including differing prepayment rates
of the Underlying Mortgage Loans, the Pooled Certificates could mature at times
other than expected by investors and either Class of the Certificates could
have a cash flow profile different from that expected by investors. For
example, with respect to the Class 1A Certificates, if one of the Class 1A
Pooled Certificates, either the Pooled PEC/IO Certificate or the Pooled
Floating Rate Certificate, were to mature prior to the other, the Class 1A
Certificate would, at that point, have the payment and yield characteristics of
the remaining Pooled Certificate. Similarly, with respect to the Class 2A
Certificates, if one or more of the Class 2A Pooled Certificates, the Pooled
PEC/IO Certificates, the Pooled Floating Rate Certificate, the Pooled Accrual
Certificate or the Pooled Non-Agency Certificate, were to mature prior to the
others, the Class 2A Certificates would, at that point, have the payment and
yield characteristics of the remaining Pooled Certificates. Therefore, the
Class 2A Certificates may, in the future, have the payment and yield
characteristics of one or more (or a combination of any two or three) of the
Class 2A Pooled Certificates. Similarly, the Non-Agency Certificate may have
certain of the yield characteristics of any one the underlying securities (or
combination thereof), which underlying security types include principal only
securities, interest only securities, inverse floater securities, discounted
coupon classes, and planned amortization classes.

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<PAGE> 35

FINAL SCHEDULED DISTRIBUTION DATE

The "Final Scheduled Distribution Date" for distributions on the
Certificates is the Distribution Date in July 26, 2027. The Final Scheduled
Distribution Date is the Distribution Date one month after the latest final
distribution date of any of the Pooled Certificates. Since the rate of payment
of principal on the Mortgage Loans can be expected to exceed the rate of
payments used in calculating such final distribution date, the date of the
final distribution on the Certificates is expected to be earlier, and could be
substantially earlier, than the Final Scheduled Distribution Date.

WEIGHTED AVERAGE LIVES

The weighted average life of a security refers to the average amount of
time that will elapse from the applicable settlement date until each dollar of
principal of such security will be distributed to the investor. The weighted
average life of a Certificate in either Class is determined by (i) multiplying
the amount of payments made in respect of principal on such Certificate in the
related Class on each Distribution Date by the number of years from the Closing
Date to such Distribution Date; (ii) summing the results; and (iii) dividing
the sum by the aggregate amount of the principal payments on such Certificate
in the related Class referred to in clause (i). The weighted average lives of
the Certificates will be influenced by, among other factors, the rate at which
principal is paid on the Mortgage Loans.

SPA MODEL

Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The standard prepayment assumption model used in
this Prospectus Supplement ("SPA") represents an assumed rate of prepayment
each month of the then outstanding principal balance of a pool of new mortgage
loans. SPA does not purport to be either a historical description of the
prepayment experience of any pool of mortgage loans or a prediction of the
anticipated rate of prepayment of any pool of mortgage loans, including the
Mortgage Loans underlying the Pooled Certificates. 100% SPA assumes prepayment
rates of 0.2% per annum of the then outstanding principal balance of such
mortgage loans in the first month of the life of the mortgage loans and an
additional 0.2% per annum in each month thereafter (for example 0.4% per annum
in the second month) until the thirtieth month. Beginning in the thirtieth
month and in each month thereafter during the life of the mortgage loans, 100%
SPA assumes a constant prepayment rate of 6% per annum. Multiples will be
calculated from this prepayment rate series; for example, 50% SPA assumes
prepayment rates will be 0.1% per annum in month one, 0.2% per annum in month
two, reaching 3.0% per annum in month 30 and remaining constant at 3.0% per
annum thereafter. 0% SPA assumes no prepayments.

PRICING ASSUMPTION

The Certificates were structured assuming, among other things, a
prepayment assumption of 200% SPA with respect to the Pooled Certificates. The
prepayment assumptions to be used for pricing purposes for the Certificates may
vary as determined at the time of sale. The actual prepayment rates may vary
considerably from the rates used for any pricing assumption.

DECREMENT AND WEIGHTED AVERAGE LIFE TABLE

The following tables indicates the percentages of the Original Principal
Balance of each Class of Certificates outstanding after certain dates and the
weighted average lives (in years), assuming various constant percentages of
SPA.

For the following tables it was assumed, among other things, that (i) the
Trust consists of the groups of Pooled Certificates related to a particular
Class of Certificates in the principal or notional amounts described in Annex 1
hereto and the Treasury Securities in the amount set forth under "The Reserve
Fund" herein; (ii) the initial principal balance of the Class 1A Certificates
will be $23,500,002 and the initial principal balance of the Class 2A
Certificates will be $36,873,851; (iii) Distribution Dates on the Certificates
occur on the 26th of each month

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<PAGE> 36

commencing in May 1998; (iv) each Mortgage Loan underlying a guaranteed
mortgage pass-through certificate issued by Fannie Mae, certificate issued by
Ginnie Mae, or a participation certificate issued by Freddie Mac has a mortgage
rate, remaining term to maturity, and loan age equal to the weighted average
mortgage rate, weighted average remaining term to maturity, and weighted
average loan age, respectively, of all of the Mortgage Loans underlying such
guaranteed mortgage pass-through certificate, certificate issued by Ginnie Mae,
or participation certificate, or in the case of the Pooled Freddie Mac 2043
Certificate, equal to the assumptions for such characteristics included in the
related Underlying Prospectus Information; (v) the Mortgage Loans prepay at the
constant percentages of SPA specified in the tables; (vi) all amounts due with
respect to the Mortgage Loans underlying the groups of the Pooled Certificates
are applied to the payment of the respective groups of Pooled Certificates on
the 26th day of each month and payments on the Treasury Securities are applied
to the payment of principal to the Class 2A Certificates on the Distribution
Dates occurring in the months in which they mature; (vii) there are no optional
terminations of the Certificates or the Pooled Certificates and the mandatory
termination is assumed not to occur; (viii) the settlement date is the Closing
Date, which is April 30, 1998; (ix) each month consists of 30 days; (x) any
reinvestment income on funds in the Asset Proceeds Account will be paid to the
Trustee and will not be available to make principal and interest payments on
the Certificates; (xi) the only expenses to be paid on any Distribution Date by
the Trust will be the monthly payment of the Trustee Fee, which is assumed to
equal 1/12 of the product of 0.025% and the principal balance immediately prior
to the applicable Distribution Date, but without giving effect to the minimum
Trustee Fee of $125 for any Distribution Date; (xii) interest rates applicable
to each Class of Certificates for each Interest Accrual Period subsequent to
the first Interest Accrual Period will be calculated based on the indicated
level of LIBOR; (xiii) there will be no substitution of Pooled Certificates;
and (xiv) no Certificates will be exchanged for pro rata portions of each of
the Pooled Certificates and Treasury Securities, as applicable.

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<PAGE> 37

<TABLE>
<CAPTION>
PERCENTAGE OF INITIAL PRINCIPAL AMOUNT OUTSTANDING OF THE CLASS 1A CERTIFICATES

LIBOR = 3.65%, 5.65%, 7.65% OR 9.65%

% of SPA

50% 100% 200% 300% 400%
--- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Balance 100 % 100 % 100 % 100 % 100 %
April 26, 1999 95 91 83 75 67
April 26, 2000 89 81 67 54 41
April 26, 2001 83 72 53 37 26
April 26, 2002 77 64 41 23 16
April 26, 2003 72 56 31 11 7
April 26, 2004 66 49 22 2 *
April 26, 2005 60 42 14 0 0
April 26, 2006 55 35 7 0 0
April 26, 2007 49 29 * 0 0
April 26, 2008 44 23 0 0 0
April 26, 2009 39 17 0 0 0
April 26, 2010 33 12 0 0 0
April 26, 2011 28 7 0 0 0
April 26, 2012 22 2 0 0 0
April 26, 2013 17 0 0 0 0
April 26, 2014 12 0 0 0 0
April 26, 2015 6 0 0 0 0
April 26, 2016 1 0 0 0 0
April 26, 2017 0 0 0 0 0
April 26, 2018 0 0 0 0 0
April 26, 2019 0 0 0 0 0
April 26, 2020 0 0 0 0 0
April 26, 2021 0 0 0 0 0
April 26, 2022 0 0 0 0 0
April 26, 2023 0 0 0 0 0
April 26, 2024 0 0 0 0 0
April 26, 2025 0 0 0 0 0
April 26, 2026 0 0 0 0 0
April 26, 2027 0 0 0 0 0
April 26, 2028 0 0 0 0 0
Weighted Average
Life (in years) 9.0 6.3 3.7 2.5 2.1
</TABLE>

* Principal balance less than 0.5% of Initial Principal Amount.
At LIBOR = 3.65%, this figure is equal to zero.

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<TABLE>
PERCENTAGE OF INITIAL PRINCIPAL AMOUNT OUTSTANDING OF THE CLASS 2A CERTIFICATES

LIBOR = 3.65%

% of SPA

50% 100% 200% 300% 400%
--- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Balance 100 % 100 % 100 % 100 % 100 %
April 26, 1999 84 82 70 64 56
April 26, 2000 83 80 52 29 23
April 26, 2001 80 76 37 18 13
April 26, 2002 79 74 30 10 7
April 26, 2003 79 73 26 5 3
April 26, 2004 80 73 22 1 *
April 26, 2005 81 73 18 0 0
April 26, 2006 82 73 5 0 0
April 26, 2007 82 74 0 0 0
April 26, 2008 84 75 0 0 0
April 26, 2009 86 78 0 0 0
April 26, 2010 89 81 0 0 0
April 26, 2011 93 84 0 0 0
April 26, 2012 97 88 0 0 0
April 26, 2013 101 91 0 0 0
April 26, 2014 105 72 0 0 0
April 26, 2015 110 53 0 0 0
April 26, 2016 116 33 0 0 0
April 26, 2017 111 12 0 0 0
April 26, 2018 103 0 0 0 0
April 26, 2019 74 0 0 0 0
April 26, 2020 44 0 0 0 0
April 26, 2021 12 0 0 0 0
April 26, 2022 0 0 0 0 0
April 26, 2023 0 0 0 0 0
April 26, 2024 0 0 0 0 0
April 26, 2025 0 0 0 0 0
April 26, 2026 0 0 0 0 0
April 26, 2027 0 0 0 0 0
April 26, 2028 0 0 0 0 0
Weighted Average
Life (in years) 18.3 13.8 3.2 1.9 1.5
</TABLE>

* Principal balance less than 0.5% of Initial Principal Amount.

S-33
<PAGE> 39

<TABLE>
PERCENTAGE OF INITIAL PRINCIPAL AMOUNT OUTSTANDING OF THE CLASS 2A CERTIFICATES

LIBOR = 5.65%

% of SPA

50% 100% 200% 300% 400%
--- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Balance 100 % 100 % 100 % 100 % 100 %
April 26, 1999 84 82 70 64 56
April 26, 2000 83 80 52 29 23
April 26, 2001 80 76 37 18 13
April 26, 2002 79 74 30 11 7
April 26, 2003 80 73 26 6 3
April 26, 2004 80 74 23 2 *
April 26, 2005 81 74 18 * 0
April 26, 2006 83 74 5 * 0
April 26, 2007 83 74 * 0 0
April 26, 2008 84 75 0 0 0
April 26, 2009 86 78 0 0 0
April 26, 2010 89 81 0 0 0
April 26, 2011 93 84 0 0 0
April 26, 2012 97 88 0 0 0
April 26, 2013 101 91 0 0 0
April 26, 2014 105 72 0 0 0
April 26, 2015 110 53 0 0 0
April 26, 2016 116 33 0 0 0
April 26, 2017 111 12 0 0 0
April 26, 2018 103 0 0 0 0
April 26, 2019 74 0 0 0 0
April 26, 2020 44 0 0 0 0
April 26, 2021 12 0 0 0 0
April 26, 2022 0 0 0 0 0
April 26, 2023 0 0 0 0 0
April 26, 2024 0 0 0 0 0
April 26, 2025 0 0 0 0 0
April 26, 2026 0 0 0 0 0
April 26, 2027 0 0 0 0 0
April 26, 2028 0 0 0 0 0
Weighted Average
Life (in years) 18.3 13.8 3.2 1.9 1.6
</TABLE>

* Principal balance less than 0.5% of Initial Principal Amount.

S-34

<PAGE> 40

<TABLE>

PERCENTAGE OF INITIAL PRINCIPAL AMOUNT OUTSTANDING OF THE CLASS 2A CERTIFICATES

LIBOR = 7.65%

% of SPA
<CAPTION>
50% 100% 200% 300% 400%
--- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Balance 100% 100% 100% 100% 100%
April 26, 1999 84 82 71 64 56
April 26, 2000 84 80 52 29 23
April 26, 2001 80 76 37 18 13
April 26, 2002 79 74 31 11 8
April 26, 2003 80 74 26 6 4
April 26, 2004 81 74 23 2 1
April 26, 2005 82 74 19 1 *
April 26, 2006 83 74 5 * 0
April 26, 2007 83 74 * * 0
April 26, 2008 84 75 0 0 0
April 26, 2009 86 78 0 0 0
April 26, 2010 89 81 0 0 0
April 26, 2011 93 84 0 0 0
April 26, 2012 97 88 0 0 0
April 26, 2013 101 91 0 0 0
April 26, 2014 105 72 0 0 0
April 26, 2015 110 53 0 0 0
April 26, 2016 116 33 0 0 0
April 26, 2017 111 12 0 0 0
April 26, 2018 103 0 0 0 0
April 26, 2019 74 0 0 0 0
April 26, 2020 44 0 0 0 0
April 26, 2021 12 0 0 0 0
April 26, 2022 0 0 0 0 0
April 26, 2023 0 0 0 0 0
April 26, 2024 0 0 0 0 0
April 26, 2025 0 0 0 0 0
April 26, 2026 0 0 0 0 0
April 26, 2027 0 0 0 0 0
April 26, 2028 0 0 0 0 0
Weighted Average
Life (in years) 18.3 13.8 3.2 1.9 1.6
</TABLE>

* Principal balance less than 0.5% of Initial Principal Amount.

S-35
<PAGE> 41

<TABLE>

PERCENTAGE OF INITIAL PRINCIPAL AMOUNT OUTSTANDING OF THE CLASS 2A CERTIFICATES

LIBOR = 9.65%

% of SPA
<CAPTION>

50% 100% 200% 300% 400%
--- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Balance 100% 100% 100% 100% 100%
April 26, 1999 84 82 71 64 56
April 26, 2000 84 81 53 29 23
April 26, 2001 80 76 37 18 13
April 26, 2002 79 74 31 11 8
April 26, 2003 80 74 26 6 4
April 26, 2004 81 74 23 2 1
April 26, 2005 82 74 19 1 *
April 26, 2006 83 74 5 1 *
April 26, 2007 83 74 * 1 0
April 26, 2008 84 76 0 * 0
April 26, 2009 87 78 0 * 0
April 26, 2010 90 81 0 0 0
April 26, 2011 93 84 0 0 0
April 26, 2012 97 88 0 0 0
April 26, 2013 101 91 0 0 0
April 26, 2014 105 72 0 0 0
April 26, 2015 110 53 0 0 0
April 26, 2016 116 33 0 0 0
April 26, 2017 111 12 0 0 0
April 26, 2018 103 0 0 0 0
April 26, 2019 74 0 0 0 0
April 26, 2020 44 0 0 0 0
April 26, 2021 12 0 0 0 0
April 26, 2022 0 0 0 0 0
April 26, 2023 0 0 0 0 0
April 26, 2024 0 0 0 0 0
April 26, 2025 0 0 0 0 0
April 26, 2026 0 0 0 0 0
April 26, 2027 0 0 0 0 0
April 26, 2028 0 0 0 0 0
Weighted Average
Life (in years) 18.3 13.8 3.2 1.9 1.6
</TABLE>

* Principal balance less than 0.5% of Initial Principal Amount.

S-36
<PAGE> 42

PRE-TAX YIELD TABLES

The significance of the effects of prepayments and changes in LIBOR on the
Certificates is illustrated in the following tables entitled "Sensitivity of
the Certificates to Prepayments and LIBOR," which shows the pre-tax yield (on a
corporate bond equivalent basis) to the holders of such Classes of Certificates
under different constant percentages of SPA and levels of LIBOR. The yields of
such Classes of Certificates set forth in the following tables were calculated
using the assumptions specified above under "--Decrement and Weighted Average
Life Tables" and assuming that (i) interest rates applicable to the related
groups of Pooled Certificates for each Interest Accrual Period subsequent to
the first Interest Accrual Period will be calculated based on the indicated
level of LIBOR, (ii) the aggregate purchase price (expressed as a percentage of
the initial principal balance) of the Certificates is 107% with respect to the
Class 1A Certificates and 110% with respect to the Class 2A Certificates (plus
accrued interest from April 1, 1998) and (iii) the Certificates are purchased
on April 30, 1998.

THE YIELD TO INVESTORS IN THE CERTIFICATES WILL BE SENSITIVE TO THE LEVEL
OF LIBOR AND TO THE RATE AND TIMING OF PRINCIPAL PAYMENTS (INCLUDING
PREPAYMENTS) OF THE MORTGAGE LOANS, WHICH GENERALLY CAN BE PREPAID AT ANY TIME.

Changes in LIBOR may not correlate with changes in prevailing mortgage interest
rates. It is possible that lower prevailing mortgage interest rates, which
might be expected to result in faster prepayments, could occur concurrently
with an increased level of LIBOR.

<TABLE>
<CAPTION>
SENSITIVITY OF THE CLASS 1A CERTIFICATES TO PREPAYMENTS AND LIBOR
(Pre-Tax Yield to Maturity)
% of SPA
LIBOR 50% 100% 200% 300% 400%
----- --- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
3.65% 6.8% 6.7% 6.7% 7.1% 7.3%
4.65% 6.9% 7.4% 7.6% 7.9% 8.2%
5.65% 6.9% 7.4% 8.3% 8.5% 8.1%
6.65% 6.9% 7.4% 8.1% 8.4% 7.8%
7.65% 6.9% 7.4% 8.1% 8.4% 7.8%
8.65% 6.9% 7.4% 8.1% 8.4% 7.8%
9.65% 6.9% 7.4% 8.1% 8.4% 7.8%
</TABLE>

<TABLE>
<CAPTION>
SENSITIVITY OF THE CLASS 2A CERTIFICATES TO PREPAYMENTS AND LIBOR
(Pre-Tax Yield to Maturity)
% of SPA
LIBOR 50% 100% 200% 300% 400%
----- --- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
3.65% 8.0% 7.8% 8.3% 9.3% 9.8%
4.65% 8.0% 7.9% 8.5% 9.6% 10.1%
5.65% 8.0% 7.9% 8.8% 9.1% 8.1%
6.65% 7.9% 7.9% 8.2% 7.9% 6.8%
7.65% 7.9% 7.9% 8.2% 7.8% 6.7%
8.65% 7.9% 7.8% 8.1% 7.8% 6.7%
9.65% 7.9% 7.8% 8.1% 7.8% 6.7%
</TABLE>

S-37
<PAGE> 43

The yields set forth in the above tables were calculated by determining
the monthly discount rates which when applied to the assumed stream of cash
flows to be paid on the Certificates, would cause the discounted present value
of such assumed stream of cash flows to equal the assumed purchase price of the
Certificates indicated, and converting such monthly rates to corporate bond
equivalent rates. Such calculation does not take into account variations that
may occur in the interest rates at which investors may be able to reinvest
funds received by them as payments of principal of and interest on the
Certificates and consequently does not purport to reflect the return of any
investment in the Certificates when such reinvestment rates are considered.

ACTUAL EXPERIENCE WILL VARY FROM ASSUMPTIONS

Discrepancies will exist between the characteristics of the actual Pooled
Certificates and Mortgage Loans and characteristics of the Pooled Certificates
and Mortgage Loans assumed in preparing the tables contained herein. To the
extent that the Pooled Certificates and Mortgage Loans have characteristics
which differ from those assumed in preparing the tables, the Certificates may
mature earlier or later than indicated by the tables, and the weighted average
lives and pre-tax yields and the cash flows on the Certificates may also
differ. In addition, it is unlikely that the Mortgage Loans will prepay at any
constant rate. The timing of changes in the rate of prepayment may
significantly affect the yield realized by a holder of the Certificates.

THE POOLING AGREEMENT

GENERAL

The Certificates will be issued pursuant to a Pooling Agreement between
Fund America Investors Corporation II, as the depositor, and State Street Bank
and Trust Company, as the Trustee (the "Agreement"). Reference is made to the
Prospectus for important information in addition to that set forth herein
regarding the terms and conditions of the Pooling Agreement and the
Certificates. References to the "FNMA," "FHLMC," or "GNMA" in the Prospectus
shall be deemed to mean, respectively, the "Fannie Mae," "Freddie Mac," or
"Ginnie Mae" in this Prospectus Supplement. The Certificates will be
transferable and exchangeable at the Corporate Trust Office of the Trustee,
which will serve as Certificate Registrar and Paying Agent. The Trustee will
provide to a prospective or actual Certificateholder without charge, upon
written request, a copy of the Agreement. Requests should be addressed to the
Trustee at Two International Place, Boston, Massachusetts 02110. The Trustee
will also act as securities administrator for the Trust. Consequently, there
will be no separate servicing agreement among the parties relating to the
transaction.

ASSIGNMENT OF POOLED CERTIFICATES

At the time of issuance of the Certificates, the Company will cause the
Pooled Certificates and Treasury Securities to be assigned to the Trustee. The
Underwriter, which will sell the Pooled Certificates and the Treasury
Securities to the Company, will represent to the Company, among other things,
that as of the Closing Date, (i) it is the owner of the Pooled Certificates and
Treasury Securities free and clear of any lien or adverse interests of any
person and (ii) that it has acquired its ownership in the Pooled Certificates
and Treasury Securities in good faith without notice of any adverse claim. The
Company, following its purchase and immediately prior to the transfer to the
Trustee, will make similar representations.

Upon discovery or receipt of notice by either the Company or the Trustee
of a breach of any of the representations and warranties regarding the Pooled
Certificates or Treasury Securities which materially and adversely affects the
interests of the Certificateholders, the Company, or the Trustee, the party
discovering such breach will give prompt notice to the other and to the
Underwriter. Within thirty days of the earlier of either discovery by or
notice to the Underwriter of any such breach, the Underwriter shall use its
best efforts promptly to cure such breach in all material respects and, if such
breach cannot be cured, the Underwriter shall, at the election of the Majority
Certificateholders, repurchase each Pooled Certificate or Treasury Security
affected by the breach at a repurchase price equal to (i) with respect to any
Treasury Security and any Pooled Certificate that is not a Pooled PEC/IO
Certificate, the outstanding principal balance of the Pooled Certificate as of
the date of repurchase plus

S-38

<PAGE> 44

accrued interest thereon or any Treasury Security at the amount payable at
maturity and (ii) with respect to the Pooled PEC/IO Certificate, the highest
bid obtained by the Trustee from three dealers then active in the market for
such Pooled PEC/IO Certificate (or such lesser number as may then be active).
In the event the Trustee is able to obtain a bid from only one active dealer,
then the Trustee may obtain an opinion (a "FMV Opinion") of an investment
banking firm of national reputation (other than an affiliate of the Company) to
determine whether such bid is at least equal to the fair market value of such
Pooled PEC/IO Certificate and the repurchase price shall be the higher of the
bid or the fair market value as stated in any such FMV Opinion. If the Trustee
is unable to obtain a bid from any active dealer, then the Trustee shall obtain
a FMV Opinion and the repurchase price shall be equal to the fair market value
of the Pooled PEC/IO Certificate as stated in such FMV Opinion.

Notwithstanding the foregoing, for a period of 90 days following the
Closing Date, in lieu of repurchasing Pooled Certificates, other than the
Pooled PEC/IO Certificate, as described above, the Underwriter may substitute
therefor one or more mortgage related securities issued by Ginnie Mae, Fannie
Mae, or Freddie Mac (each a "Substitute Pooled Certificate") which meet the
following criteria: (i) such substitution shall be (a) in the case of the
Pooled Accrual Certificate, with one or more accrual certificates bearing a
coupon no less than the coupon of the Pooled Accrual Certificate being
substituted for or (b) in the case of the Pooled Floating Rate Certificates,
with one or more floating rate certificates based on LIBOR whose combined
coupon will be at least equal to the coupon of the Pooled Certificates being
substituted for at all levels of LIBOR, (ii) the sum of the outstanding
principal amounts of the Substitute Pooled Certificates equals or exceeds the
sum of the outstanding principal amounts of the Pooled Certificates being
substituted for, (iii) the Substitute Pooled Certificates as of the date of
substitution ultimately are backed by mortgage loans (a) with a weighted
average pass-through rate no more than 50 basis points below or no more than 50
basis points above the weighted average pass-through rate of the mortgages
loans ultimately backing the Pooled Certificates being substituted for and (b)
which are conventional, fixed rate, one- to four-family, fully amortizing,
level payment, first mortgage loans with original maturities of up to 30 years,
(iv) the inclusion of which in the Trust Fund will not result in a withdrawal
or downgrading in the ratings assigned to such Class of Certificates by the
Rating Agencies, written confirmation of which shall be provided by the Rating
Agencies to the Trustee, and (v) such substitution will not cause the Trust to
lose its status as a grantor trust for federal income tax purposes as indicated
in an opinion of counsel to be provided to the Trustee. The Underwriter also
may substitute for any Treasury Security another Treasury Security that results
in this same aggregate payment amount of principal on the same Distribution
Date as the Treasury Security being substituted for.

ACCOUNTS

The Trustee shall establish and maintain the Asset Proceeds Account in the
name of the Trustee for the benefit of the Certificateholders. The Asset
Proceeds Account shall be an Eligible Account as defined in the Agreement. The
Trustee, in its capacity as holder of the Pooled Certificates and Treasury
Securities, will cause all distributions received by it on the Pooled
Certificates and Treasury Securities from whatever source, to be deposited
directly into the Asset Proceeds Account. Amounts on deposit in the Asset
Proceeds Account will be invested in certain investments permitted by the
Agreement ("Permitted Investments"). Any income on such investments will be
paid to the Trustee as additional compensation and losses on such investments
shall be reimbursed by the Trustee from its own funds.

REPORTS TO CERTIFICATEHOLDERS

On each Distribution Date, the Trustee will prepare, to the extent it
receives distribution information with respect to the Pooled Certificates and
Treasury Securities, and will forward by mail, a statement to each
Certificateholder and to the Company stating:

(i) the Class 1A Available Distribution and the Class 2A
Available Distribution for such Distribution Date;

(ii) the interest distribution amount and the principal
distribution amount for such Distribution Date for each Class of
Certificates and, with respect to each, the components thereof as
described in the

S-39
<PAGE> 45

definitions of such terms and as reported in the related
distribution information and the portion derived from the Treasury
Securities;

(iii) the principal balance of each Class of Certificates before
and after applying payments on such Distribution Date;

(iv) the effective interest rate on each Class of Certificates for
such Distribution Date;

(v) the outstanding Pooled Certificate Principal Balance or
Pooled Certificate Notional Principal Balance, as the case may be,
for each group of Pooled Certificates immediately prior to and after
taking into account distributions made on such Distribution Date of,
and the current interest rate, on each of the Pooled Certificates on
such Distribution Date;

(vi) the amount of interest received on the Pooled Non-Agency
Certificate used to pay principal in the current month;

(vii) the total amount of interest received on the Pooled
Non-Agency Certificate that has been applied to pay principal to the
Certificates;

(viii) the outstanding amount payable at maturity for the Class 2A
Certificates, immediately prior to and after taking into account
distributions made on such Distribution Date, of each of the
Treasury Securities;

(ix) the original principal amount of each Class of Certificates
and the original principal amount of each Class of Certificates as
reduced to reflect any exchange of Certificates for a pro rata
portion of the related Pooled Certificates and, with respect to the
Class 2A Certificates, Treasury Securities; and

(x) the amount of the Trustee Fee for such Distribution Date.

In the case of the information furnished pursuant to clauses (ii) and (iii)
above, the amounts shall also be expressed as a dollar amount per $1000 of
principal face amount.

In addition, the Trustee promptly will furnish to the Company and, upon
request, to the Certificateholders, copies of any notices, statements, reports,
or other information received by the Trustee in its capacity as the holder of
the Pooled Certificates.

On or before March 31st of each calendar year, commencing in 1999, the
Trustee will prepare and deliver by first class mail to the Company and each
person who at any time during the prior calendar year was a Certificateholder
of record a statement containing the information required to be contained in
the regular monthly report to Certificateholders, as set forth in clauses (ii)
and (v) above aggregated for such prior calendar year or in the case of a
Certificateholder, the applicable portion thereof during which such person was
a Certificateholder. Such obligation of the Trustee will be satisfied to the
extent that substantially comparable information is provided by the Trustee
pursuant to any requirements of the Code and regulations thereunder as from
time to time are in force.

AMENDMENTS

The Agreement may be amended by the Company and the Trustee, without the
prior written consent of any Certificateholder (i) to cure any ambiguity or
mistake, (ii) to correct or supplement any provision therein which may be
inconsistent with any other provision therein, (iii) to make any other
provisions with respect to matters or questions arising under the Agreement
that are not materially inconsistent with other provisions of the Agreement,
and (iv) to make such modifications as may be required in connection with a
substitution or repurchase of a Pooled Certificate permitted under the
Agreement; provided, however, that such amendment will not, as evidenced by an
opinion of counsel (at the expense of the party seeking such amendment)
delivered to the Trustee, adversely affect

S-40
<PAGE> 46

in any material respect the interests of any Certificateholder. Counsel shall
be entitled to rely on a letter from each Rating Agency that the modification
will not cause the then-existing rating of the Certificates to be downgraded as
conclusive evidence that the modification does not adversely affect in any
material respect the interests of any Certificateholder. The Agreement may
also be amended by the Company and the Trustee and the holders of Certificates
evidencing more than 50% of the aggregate principal amount of the Certificates
(the "Majority Certificateholders") for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of the Agreement
or modifying in any manner the rights of Certificateholders; provided, however,
that no such amendment may (i) reduce in any manner the amount of, or delay the
timing of, amounts required to be distributed on any Certificate without the
consent of the holder of such Certificate; (ii) modify the provisions of the
Section of the Agreement governing amendments of the Agreement, without the
consent of the holders of all Certificates; or (iii) be made unless the Trustee
has received an opinion of counsel (at the expense of the party seeking such
amendment) that such amendment will not adversely affect the status of the
Trust as a grantor trust for federal income tax purposes.

CERTIFICATEHOLDER ACTION

No Certificateholder will have any right to institute any action, suit or
proceeding in equity or at law upon or under or with respect to the Agreement
unless such holder previously has given to the Trustee and the Company a
written notice of default and unless also the Majority Certificateholders have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee thereunder and have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 30 days
after its receipt of such notice, request and offer of indemnity, will have
neglected or refused to institute any such action, suit or proceeding.

TERMINATION

The respective obligations and responsibilities of the Company and the
Trustee created by the Agreement will terminate upon the final distribution to
Certificateholders by the Trustee of all amounts required to be distributed
pursuant to the Agreement. Such distribution will occur, among other
circumstances, on the Distribution Date following the first Distribution Date
on which the principal balance or notional principal balance of all but one of
the Pooled Certificates has been reduced to zero, and if the Company exercises
its option to purchase the Pooled Certificates as described herein under
"Description of the Certificates--Optional Termination."

INDEMNIFICATION OF THE TRUSTEE

The Trustee and its directors, officers, employees, and agents, will be
indemnified by the Trust against any loss, liability, or expense arising out of
or incurred in connection with, the exercise and performance of any powers and
duties of the Trustee under the Agreement, with certain exceptions described in
the Agreement. The Trustee and its directors, officers, employees and agents
will not be protected against any liability which would otherwise be imposed by
reason of willful misfeasance, bad faith or negligence in the performance of
the obligations and duties of the Trustee.

CERTAIN MATTERS REGARDING THE TRUSTEE

The Trustee for the Certificates will be State Street Bank and Trust
Company. The Trustee's corporate office is located at Two International Place,
Boston, Massachusetts 02110 and its telephone number is (617) 786-3000.

The Trustee may at any time resign and be discharged from the trust by
giving 30 days' written notice thereof to the Company and the
Certificateholders. Upon receiving such notice of resignation, the Company
shall promptly appoint a successor trustee. If no successor trustee has been
so appointed and has accepted appointment within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee. If at any
time the Trustee fails to meet the eligibility requirements or is incapable of
acting, or certain insolvency events occur, then the Company shall remove

S-41
<PAGE> 47

the Trustee and appoint a successor trustee. The Majority Certificateholders
may at any time remove the Trustee and appoint a successor trustee. No
resignation, discharge or removal of the Trustee will become effective until a
successor trustee shall have assumed the Trustee's responsibilities and
obligations under the Agreement.

FEDERAL INCOME TAX CONSIDERATIONS

The following discussion represents the opinion of Hunton & Williams,
counsel to the Trust ("Counsel"), as to the material federal income tax
consequences of the purchase, ownership and disposition of Certificates.
However, the discussion does not purport to deal with federal income tax
consequences applicable to all categories of holders, some of which may be
subject to special rules. For example, it does not discuss the tax treatment
of Certificateholders that are insurance companies, regulated investment
companies or dealers in securities. Prospective investors are urged to consult
their own tax advisors in determining the Federal, state, local, foreign and
any other tax consequences to them of the purchase, ownership and disposition
of Certificates.

The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. No ruling on any of the
issues discussed below will be sought from the Internal Revenue Service (the
"IRS"). As a result, the IRS may disagree with all or part of the discussion
below.

TAX CHARACTERIZATION OF THE TRUST

Counsel is of the opinion that the Trust will be classified for federal
income tax purposes as a grantor trust under subpart E, Part I of subchapter J
of the Code and not as an association taxable as a corporation. Accordingly,
each holder of a Certificate will be treated for federal income tax purposes as
the owner of a pro rata undivided interest in, with respect to the Class 1A
Certificates, the Group 1A Pooled Certificates and, with respect to the Class
2A Certificates, the Group 2A Pooled Certificates and Treasury Securities
included in the Trust.

Each holder of a Certificate must report on its federal income tax return
the interest income and original issue discount attributable to the portion of
the Pooled Certificates and Treasury Securities that is allocable to such
Certificate and may deduct the portion of the expenses incurred by the Trust
that is allocable to such Certificate, at the same time and to the same extent
as such items would be reported by such holder if it had purchased and held
directly such interest in the Pooled Certificates and Treasury Securities and
incurred directly its share of expenses incurred by the Trust. Certain of the
Pooled Certificates were issued with original issue discount.
Certificateholders must include any such original issue discount in ordinary
income for federal income tax purposes as it accrues, in accordance with a
constant interest method that takes into account the compounding of interest,
in advance of receipt of the cash or a portion of the cash attributable to such
income. In general, the securities will be treated as "Standard Certificates"
as described in "Certain Federal Income Tax Consequences--Federal Income Tax
Consequences for Securities as to Which No REMIC Election is Made" in the
Prospectus.

A Certificateholder that is an individual, estate or trust will be allowed
deductions for such expenses only to the extent that the sum of those expenses
and the holder's other miscellaneous itemized deductions exceeds two percent of
such holder's adjusted gross income. In addition, in the case of a
Certificateholder who is an individual, certain otherwise allowable itemized
deductions will be reduced, but not by more than 80%, by an amount equal to 3%
of such Certificateholder's adjusted gross income in excess of a statutorily
defined threshold. Moreover, a Certificateholder that is not a corporation
cannot deduct such expenses for purposes of the alternative minimum tax (if
applicable). Such deductions will include servicing and administrative fees
paid to the Trustee.

A Certificateholder must allocate the purchase price of its Certificates
among its share of the Pooled Certificates and Treasury Securities based upon
the relative fair market value of the Pooled Certificates and Treasury
Securities as of the date such Certificateholder purchased its Certificates.

S-42
<PAGE> 48

The tax consequences to a Certificateholder of ownership of an undivided
interest in the Pooled Certificates are described in the Underlying
Prospectuses. The Underlying Prospectuses for each of the Pooled Agency
Certificates state that such Pooled Certificates are REMIC Regular Interests.
The Underlying Prospectus for the Pooled Non-Agency Certificate states that
such Pooled Certificate is a non-REMIC collateralized mortgage obligation. A
general discussion of the tax consequences to a holder of REMIC Regular
Interests and of non-REMIC bonds can be found in "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Securities" and
"--Federal Income Tax Consequences for Securities as to Which No REMIC Election
Is Made--Non-REMIC Bonds," respectively, in the Prospectus. It should be noted
that recently enacted tax legislation made a number of changes to the Code.
Included among the changes are (i) lower tax rates for certain capital gains of
individuals resulting from the holding of property for more than 18 months and
(ii) a provision that would subject pools of prepayable debt obligations to the
provisions of section 1272(a)(6) of the Code for taxable years beginning after
August 5, 1997. The consequences of the application of section 1272(a)(6) in
the case of the Trust are not clear, but may require the use of a prepayment
assumption that differs from the prepayment assumptions used for computing the
inclusion of any original issue discount on the Pooled Certificates.

The Certificates generally will be treated as qualifying assets for
domestic building and loan associations, mutual savings banks, and real estate
investment trusts, and income from the Certificates generally will constitute
qualifying income for such entities, in each case to the extent that the Pooled
Certificates, other than the Pooled Non-Agency Certificate, and the income
therefrom are treated as such. Neither the Pooled Non-Agency Certificate nor
the Treasury Securities will be treated as qualifying assets for such entities,
and the income therefrom will not be treated as qualifying income. See
"Certain Federal Income Tax Consequences--Federal Income Tax Consequences for
REMIC Securities," and "-- Federal Income Tax Consequences for Securities as to
Which No REMIC Election Is Made - Non-REMIC Bonds" in the Prospectus.

A Certificateholder may be subject to backup withholding as described in
"Certain Federal Income Tax Consequences--Federal Income Tax Consequences for
REMIC Securities" in the Prospectus. The backup withholding rate for
reportable payments (including interest payments and original issue discount)
made on or after January 1, 1993 is 31%.

ERISA CONSIDERATIONS

Fiduciaries of employee benefit plans and certain other retirement plans
and arrangements, including individual retirement accounts and annuities, Keogh
plans, and collective investment funds in which such plans, accounts, annuities
or arrangements are invested, that are subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or corresponding provisions
of the Code (any of the foregoing, a "Plan"), persons acting on behalf of a
Plan, or persons using the assets of a Plan (each, a "Plan Investor"), should
consult with their own counsel to determine whether the purchase or holding of
the Certificates could give rise to a transaction that is prohibited or is not
otherwise permissible either under ERISA or the Code.

Sections 406 and 407 of ERISA and Section 4975 of the Code prohibit
certain transactions that involve (i) a Plan that is subject to ERISA or
Section 4975 of the Code and any party in interest or disqualified person with
respect to the Plan and (ii) plan assets. The Plan Asset Regulations define
the assets of a benefit plan ("Plan Assets") to include not only securities
(such as the Certificates) held by a Plan but also the underlying assets of the
issuer of any equity securities (the "Look-Through Rule"), unless one or more
exceptions specified in the regulations are satisfied. The Certificates are
treated as equity securities for purposes of the Plan Asset Regulations.
Nonetheless, the Look-Through Rule will not apply to the Certificates as long
as one or more of the exceptions specified in the Plan Asset Regulations are
satisfied. One exception to the Look-Through Rule will apply if the security
is registered under the Securities Exchange Act of 1934, as amended, is freely
transferable and is part of a class of securities that is held by more than 100
unrelated investors (the "Publicly Offered Exception"). Another exception will
apply if, immediately after the most recent acquisition of an equity interest,
benefit plan investors do not own 25% or more of the value of any class of
equity interests in the trustee (the "Insignificant Participation Exception").
However, based on the information available to the Underwriter at the time of
the printing of the Prospectus, no assurances can be given that either the
Publicly Offered Exception or the Insignificant Participation

S-43
<PAGE> 49

Exception will apply to the initial purchase of the Certificates. In addition,
there can be no assurance that either the Publicly Offered Exception or the
Insignificant Participation Exception will apply to subsequent purchases of the
Certificates.

The Department of Labor has issued to Bear Stearns & Co. Inc. an
individual administrative exemption, Prohibited Transaction Exemption 90-30
("PTE 90-30"), from certain of the prohibited transaction rules of ERISA with
respect to the initial purchase, holding and resale by a Plan Investor of
certificates in pass-through trusts that meet the conditions and requirements
of that exemption. PTE 90-30 may apply to the acquisition, holding and resale
of the Class 1A Certificates, provided that the Group 1A Pooled Certificates
represent "guaranteed governmental mortgage pool certificates" within the
meaning of the Plan Asset Regulations and that the specified conditions of the
exemption are met. Both the Prospectus pursuant to which the Pooled Fannie Mae
Certificate was offered and the Offering Circular relating to the Pooled
Freddie Mac G063 Certificate state that Fannie Mae and Freddie Mac,
respectively, had been advised by their respective counsel that each such
respective class of Pooled Agency Certificates should qualify as "guaranteed
governmental mortgage pool certificates" within the meaning of the Plan Asset
Regulations. In addition, one or more alternative exemptions may be available
with respect to certain prohibited transactions, depending in part upon the
type of Plan fiduciary making the decision to acquire the Certificates and the
circumstances under which such decision is made, including, but not limited to,
(a) Prohibited Transaction Class Exemption 95-60, regarding investments by
insurance company general accounts, (b) Prohibited Transaction Class Exemption
91-38, regarding investments by bank collective investment funds; or (c)
Prohibited Transaction Class Exemption 90-1, regarding investments by insurance
company pooled separate accounts. A purchaser of Certificates should be aware,
however, that even if the conditions specified in one or more exemptions are
met, the scope of the relief provided by such exemptions might not cover all
acts that might be construed as prohibited transactions. Before purchasing
Certificates, a Plan Investor should consult with its counsel to determine
whether the conditions of any exemptions would be met. Each purchaser of a
Certificate, by virtue of its purchase of such Certificate, will be deemed to
have represented either that (i) it is not a Plan Investor or (ii) an exemption
granted by the Department of Labor exists which exempts the acquisition,
holding or transfer of a Certificate by such purchaser and the operation and
management of the Trust and its assets, from the prohibited transaction rules
of ERISA and the related excise tax provisions of the Code.

A governmental plan as defined in Section 3(32) of ERISA is not subject to
ERISA, or Code Section 4975. However, such governmental plan may be subject to
Federal, state and local law, which is, to a material extent, similar to the
provisions of ERISA or Code Section 4975 ("Similar Law"). A fiduciary of a
governmental plan should make its own determination as to the propriety of such
investment under applicable fiduciary or other investment standards, and the
need for the availability of any exemptive relief under any Similar Law.

LEGAL INVESTMENT

Institutions whose investment activities are subject to legal investment
laws and regulations or to review by certain regulatory authorities may be
subject to restrictions on investment in the Certificates. Any such
institution should consult its legal advisors in determining whether and to
what extent there may be restrictions on its ability to invest in the
Certificates. The Class 1A Certificates will and the Class 2A Certificates
will not constitute "mortgage related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984.

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting
Agreement dated April 28, 1998 and the related Terms Agreement dated the date
hereof (the "Underwriting Agreement") between the Company and Bear, Stearns &
Co. Inc. (the "Underwriter"), the Company has agreed to sell to the
Underwriter, and the Underwriter has agreed to purchase from the Company, all
of the Certificates. The Underwriting Agreement provides that the
Underwriter's obligations thereunder are subject to certain conditions
precedent, and that the Underwriter will be obligated to purchase all of the
Certificates if any are purchased.

S-44
<PAGE> 50

The Underwriter has advised the Company that it proposes to offer the
Certificates from time to time in one or more negotiated transactions, or
otherwise, at varying prices to be determined, in each case, at the time of
sale. The Underwriter may effect such transactions by selling the Certificates
to or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the Underwriter and/or commissions
from any purchaser of the Certificates for whom they may act as agents. The
Underwriter and any dealers that participate with the Underwriter in the
distribution of the Certificates may be deemed to be underwriters, and any
discounts, concessions or commissions received by them, and any profit on the
resale of the Certificates positioned by them, may be deemed to be
underwriting discounts and commissions under the 1933 Act.

The Company has agreed to indemnify the Underwriter against certain civil
liabilities, including liabilities under the Act, to the extent and under the
circumstances set forth in the Underwriting Agreement.

Because the Pooled Certificates and Treasury Securities were sold by the
Underwriter to the Company and, thereafter, the Certificates will be purchased
initially by the Underwriter from the Company, the economic risks and benefits
associated with the sale of the Pooled Certificates and Treasury Securities and
the purchase by the Underwriter of the Certificates are borne or realized
primarily by the Underwriter and its affiliates.

LEGAL MATTERS

Certain legal matters relating to the Certificates will be passed upon for
the Company and the Trust by Hunton & Williams, Richmond, Virginia. Certain
legal matters with respect to the Underwriter will be passed upon by Stroock &
Stroock & Lavan LLP, New York, New York.

RATINGS

As a condition to their issuance, the Certificates will be rated "Aaa" by
Moody's and "AAA" by Fitch.

The rating assigned by Moody's to the Certificates addresses the
likelihood of the receipt by Certificateholders of all distributions to which
such Certificateholders are entitled. The rating is based principally on the
guarantees of Fannie Mae, Freddie Mac and Ginnie Mae on the Pooled Certificates
and on the assets securing the Underlying FAIT Certificates. Moody's ratings
do not represent any assessment of the likelihood that prepayments will be made
by borrowers or the degree to which such prepayments will differ from that
originally anticipated. The rating does not address the possibility that, as a
result of prepayments, Certificateholders may suffer a lower than anticipated
yield on the Certificate.

The rating by Fitch on the Certificates addresses the likelihood of the
receipt by Certificateholders of all distributions to which such
Certificateholders are entitled. Fitch takes into consideration the credit
quality of Fannie Mae, Freddie Mac and Ginnie Mae, structural and legal aspects
associated with the Certificates and the extent to which the payment stream on
the Pooled Certificates and Treasury Securities is adequate to make payments
required under the Certificates. The rating of Fitch does not constitute a
statement regarding frequency of prepayments on the Mortgage Loans or the
corresponding effects on yield to investors, and does not represent any
assessment of the likelihood or rate of prepayments.

A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning
rating organization. Each security rating should be evaluated independently of
any other security rating. In the event that the ratings initially assigned to
the Certificates are subsequently lowered for any reason, no person or entity
is obligated to provide any additional credit support or credit enhancement
with respect to the Certificates.

The Company has not requested a rating of the Certificates by any rating
agency other than Moody's and Fitch. However, there can be no assurance as to
whether any other rating agency will rate the Certificates or, in

S-45
<PAGE> 51

such event, what rating would be assigned to the Certificates by such other
rating agency. The rating assigned by such other rating agency to the
Certificates may be lower than the rating assigned by or Moody's or Fitch.

S-46
<PAGE> 52
INDEX OF TERMS
<TABLE>
<CAPTION>
<S> <C>
1933 Act.......................................................................v
1934 Act.................................................................v a iii
Accrual Class...............................................................S-21
Agreement..............................................................S-2, S-36
Asset Proceeds Account......................................................S-16
Available Distribution......................................................S-16
Business Day.................................................................S-6
Cede........................................................................S-14
Certificate.................................................................S-15
Certificates...................................................................i
Class 1A Available Distribution.......................................S-16, S-17
Class 1A Certificates..........................................................i
Class 2A Available Distribution.......................................S-16, S-17
Class 2A Certificates..........................................................i
Closing Date.................................................................S-6
Code........................................................................S-40
Company...................................................................i, S-2
Distribution Date.................................................iii, S-6, S-15
DTC.......................................................................v, S-2
Excess Interest.............................................................S-21
Fannie Mae..........................................................i, S-2, S-36
Fannie Mae Interest Distribution Amount.....................................S-22
Fannie Mae MBS...........................................................ii, S-3
Fannie Mae Mortgages.....................................................ii, S-3
Fannie Mae Principal Distribution Amount....................................S-21
Fannie Mae Residual Class...................................................S-22
Fannie Mae SMBS..............................................................S-3
FHA......................................................................ii, S-3
FHLMC..................................................................S-2, S-36
Final Scheduled Distribution Date...........................................S-28
Fitch........................................................................iii
Fixed Class.................................................................S-21
Floater Classes.............................................................S-21
FMV Opinion.................................................................S-37
FNMA...................................................................S-2, S-36
Freddie Mac.........................................................i, S-2, S-36
Freddie Mac Mortgages....................................................ii, S-4
fully modified pass-through........................................ii, S-3, S-20
Ginnie Mae.........................................................ii, S-2, S-36
Ginnie Mae Certificates..................................................ii, S-3
Ginnie Mae Mortgages.....................................................ii, S-3
GNMA...................................................................S-2, S-36
Group 1A Pooled Certificates.............................................i, S-16
Group 2A Pooled Certificates.............................................i, S-16
Interest Accrual Period................................................S-7, S-15
interest only................................................ii, S-3, S-20, S-21
IO SMBS..................................................................ii, S-3
IRS.........................................................................S-40
LIBOR........................................................................iii
</TABLE>

S-47
<PAGE> 53
Majority Certificateholders.................................................S-39
Moody's......................................................................iii
Mortgage Loans..........................................................iii, S-8
Mortgage Pool...........................................................iii, S-8
mortgage related securities.................................................S-42
Multiclass PCs................................................................ii
Notional Class..............................................................S-21
Permitted Investments.......................................................S-37
Pooled 2043 Certificate......................................................S-4
Pooled Agency Certificates................................................i, S-3
Pooled Certificate Distribution Date.........................................S-5
Pooled Certificate Principal Balance.........................................S-2
Pooled Certificates.......................................................i, S-3
Pooled FAIT 1993-2 Certificate...............................................S-3
Pooled Fannie Mae Certificate.............................................i, S-2
Pooled Fannie Mae Certificate Distribution Date..............................S-4
Pooled Floating Rate Certificate.............................................S-5
Pooled Freddie Mac 2043 Certificate...........................................ii
Pooled Freddie Mac Certificate Distribution Date.............................S-5
Pooled Freddie Mac Certificates...........................................i, S-2
Pooled Freddie Mac G063 Certificate......................................ii, S-4
Pooled Non-Agency Certificate..................................................i
Pooled Non-Agency Certificate Payment Date...................................S-5
prepayments.................................................................S-26
principal only.....................................................ii, S-3, S-20
Prospectus...................................................................S-2
PT Classes..................................................................S-21
Rating Agencies........................................................iii, S-12
Record Date............................................................S-6, S-15
REMIC..........................................................................v
Reserve Fund.................................................................S-6
Similar Law.................................................................S-42
SMMEA.......................................................................S-12
SPA.........................................................................S-28
Standard Certificates.......................................................S-40
Stripped Giant PCs............................................................ii
Substitute Pooled Certificate...............................................S-37
Tax Counsel.................................................................S-40
Treasury Securities.....................................................iii, S-6
Trust.....................................................................i, S-2
Trust 180 SMBS...........................................................ii, S-3
Trustee......................................................................S-2
Trustee Fee.................................................................S-17
Underlying Agreement.........................................................S-4
Underlying Fannie Mae Prospectus Information.................................S-5
Underlying Fannie Mae Series.............................................ii, S-3
Underlying Fannie Mae Trusts.............................................ii, S-3
Underlying Freddie Mac 2043 Trust........................................ii, S-4
Underlying Freddie Mac G063 Trust........................................ii, S-4
Underlying Freddie Mac Offering Circular Term Sheets.........................S-6
Underlying Freddie Mac Series............................................ii, S-4
Underlying Mortgage Loans...............................................iii, S-8
Underlying Non-Agency Prospectus Information.................................S-6
Underlying Prospectus Information............................................S-6

S-48

<PAGE> 54
Underlying Prospectus........................................................S-6
Underwriter.........................................................i, S-2, S-43
Underwriting Agreement......................................................S-43
VA.......................................................................ii, S-3
Weighted average............................................................S-48

S-49

<PAGE> 55

ANNEX 1

POOLED CERTIFICATE CURRENT INFORMATION

The table in this Annex 1 sets forth information for each of the Pooled
Certificates concerning such Pooled Certificates and the related Mortgage
Loans. The table and the descriptions of the Pooled Certificates herein are
subject to and qualified by reference to the information with respect to the
provisions of the Underlying Agreements and Underlying Prospectuses and the
other prospectuses related to the Pooled Certificates. The information set
forth in the table and elsewhere herein has been derived from information
provided by Fannie Mae and Freddie Mac and based on information provided to
investors of the Pooled Non-Agency Certificate, but such information has not
been independently verified by the Depositor or the Underwriter. This
information comprises all material information on the subject that the
Depositor and the Underwriter possess or can acquire without unreasonable
expense or effort.

"Weighted average" numbers are calculated based on the loan balances as of
April 1, 1998.

The issue date for the Pooled Fannie Mae Certificate is January 28, 1994.
The issue dates for the Pooled Freddie Mac Certificates are as follows:
G063/A, June 30, 1997; and 2043/ZB, April 30, 1998. The issue date for the
Pooled Non-Agency Certificate is September 14, 1993.

The following is a description of each item reported in the following
table. The table should be read in conjunction with these descriptions and the
additional information contained in Annex 2.

1. ISSUER AND SERIES/CLASS. These first two columns indicate,
collectively, the issuer name, series, and class designation of
each Pooled Certificate. For the full name of each Pooled
Certificate, see "Description of the Pooled Certificates--General".

2. CERTIFICATE INTEREST TYPE. FLT indicates that the Pooled
Certificates bear interest at rates that are based on an index (in
this case, LIBOR) and that vary directly with changes in the index.
FIX indicates that the Pooled Certificates bear interest at a fixed
rate. Z indicates that the Pooled Certificates accrete the amount
of accrued interest otherwise distributable on such Pooled
Certificates, which amount will be added as principal to the
principal balance of such Pooled Certificates on each applicable
distribution date. Such accretion will continue until such Pooled
Certificate is retired. AF indicates that the Pooled Certificates
receive interest, subject to available funds on each Distribution
Date. PEC/IO indicates that the Pooled Certificates bear interest
at a fixed rate, plus is entitled to receive variable supplemental
amounts of interest, which interest varies inversely with LIBOR and
directly with the rate of prepayments.

3. CURRENT COUPON. This coupon indicates the interest rates
applicable to the May 1998 distribution on the Pooled Certificates.

4. GROUP/CLASS ORIGINAL PRINCIPAL BALANCE OR NOTIONAL PRINCIPAL
BALANCE IN TRUST. This column lists the original principal balance
or notional principal balance of the Pooled Certificates included in
the Trust and in the related group of Pooled Certificates.

5. GROUP/CLASS % IN TRUST. This is the percentage which the
respective Pooled Certificates constitute of its class and the
percentage in the related groups of Pooled Certificates.

6. GROUP/CLASS CURRENT PRINCIPAL BALANCE OR NOTIONAL PRINCIPAL
BALANCE IN TRUST. This column shows the principal balance or
notional principal balance of the Pooled Certificates included in
the Trust and in a related group of Pooled Certificates after the
distributions made in April 1998.

S-50
<PAGE> 56

7. ORIGINAL MORTGAGE LOAN BALANCE. This is the original
aggregate scheduled principal balance of the Mortgage Loans
underlying each Pooled Certificate in a related group of Pooled
Certificates.

8. CURRENT MORTGAGE LOAN BALANCE. This is the aggregate
scheduled principal balance of the Mortgage Loans underlying each
Pooled Certificate in a related group of Pooled Certificates as of
April 1, 1998.

9. WAC. Under this heading is the current weighted average of
the note rates on the Mortgage Loans underlying each Pooled
Certificate.

10. CNWAC. Under this heading is the current weighted average of
the net rates (that is, note rate less any servicing fee and any
other administrative fees) on the Mortgage Loans underlying each
Pooled Certificate.

11. WAM. Under this heading is the current weighted average of
the remaining terms to maturity of the Mortgage Loans underlying
each Pooled Certificate (in months).

12. WALA/CAGE. Under this heading is the weighted average months
since origination for the Mortgage Loans underlying each Pooled
Certificate.

S-51
<PAGE> 57

<TABLE>
<CAPTION>
Group/Class
Original Principal
or Notional
Certificate Principal Balance Group/Class % in
Issuer Series/Class Interest Type Current Coupon in Trust Trust
<S> <C> <C> <C> <C> <C>
Fannie Mae 1994-6/F FLT 7.69% Group 1A - Group 1A -16.91%
$25,359,785 Group 2A - 10.62%
Group 2A -
$15,922,742
Freddie Mac G063/A PEC/IO 9.07% Group 1A - Group 1A -
$5,000,000 5.00%
Group 2A - Group 2A -
$16,250,000 16.25%
Freddie Mac Group 2A -
(1,2) 2043/ZB FIX/Z 7.00% $12,150,000 Group 2A -17.36%

FAIT 1993-2/A-1 FLT/AF 7.75% Group 2A - Group 2A - 3.41%
$4,000,000
</TABLE>

<TABLE>
<CAPTION>
Group/Class Current
Principal or
Notional Principal Original Mortgage Current Mortgage
Balance in Trust Loan Balance Loan Balance WAC CNWAC WAM WALA/ CAGE
<C> <C> <C> <C> <C> <C> <C>
Group 1A - $150,000,000 $147,993,876 8.512 8.021 277 73
$23,500,002 (3) (3) (3) (3) (3) (3)
Group 2A -
$14,755,034
Group 1A - $337,000,000 $288,812,694 8.500 8.000 349 11
$4,285,057
Group 2A -
$13,926,435
Group 2A $1,633,194,000 $1,633,194,000 7.600 7.000 356 4
- -$12,150,000
Group 2A - $92,521,538 $72,665,361 7.758 7.203 200 72
$2,268,818 (3) (3) (3) (3) (3) (3)
</TABLE>

1 In cases where the Pooled Certificates receive payment from a specified
collateral group, only the characteristics of the group relating to the Pooled
Certificates have been used in calculating the above information.

2 Based on the assumptions for such Mortgage Loans included in the applicable
Underlying Freddie Mac Offering Circulars for such Pooled Certificates.

3 Based on original and current principal balances of the underlying
securities, rather than the balance of the Mortgage Loans underlying such
securities.

S-52
<PAGE> 58

UNDERLYING FAIT CERTIFICATES

<TABLE>
<CAPTION>
CLASS ORIGINAL
PRINCIPAL OR CLASS PERCENT IN
ISSUER SERIES CLASS CERTIFICATE TYPE (7) CURRENT COUPON NOTIONAL BALANCE TRUST
<S> <C> <C> <C> <C> <C> <C>
CMOT (1) 26 A PO 0.000000% 498,750,000.00 2.807018%
CMOT (1) 29 A PO 0.000000% 498,750,000.00 3.007519%
CMSC (2) 1990-7 7-D IO 2509.500000% 68,190.00 37.501100%
DBL (3) V V-1 PO 0.000000% 114,912,000.00 6.692077%
FBCS (4) 87B B-2 IO 8.985000% 275,000,000.00 18.245455%
FBCS (4) 87C C-1 PO 0.000000% 126,900,000.00 4.728132%
FBCS (4) 87D D-1 PO 0.000000% 110,000,000.00 6.727273%
FHLMC 1092 X IO 1009.000000% 100,000.00 100.000000%
FHLMC 1505 QB INV 7.495829% 9,660,000.00 27.950311%
FHLMC 158 I PAC IO 775.650000% 100,000.00 100.000000%
FNMA 91159 D PAC IO 1007.000000% 176,266.00 47.080037%
FNMA 91169 N IO 1008.400000% 75,000.00 33.333333%
FNMA 9178 PH PAC IO 1009.000000% 224,900.00 100.000000%
FNMA 9205 J IO 1007.000000% 500,000.00 20.000000%
FNMA 92177 S INV 9.487500% 32,360,659.00 15.450860%
FNMA 9276 H PAC IO 988.875000% 400,000.00 42.500000%
FNMA 9278 J PAC IO 1139.818600% 750,000.00 64.000000%
FNMA 9289 N PAC IO 999.611900% 103,243.00 100.000000%
FNMA 93129 O DSC 4.000000% 20,534,500.00 100.000000%
FNMA 93154 N DSC 3.500000% 12,861,965.00 100.000000%
FNMA 93184 M PO 0.000000% 102,693,600.00 20.146630%
FNMA 92G41 NS PAC IO 755.999670% 238,560.00 100.000000%
FNMA 92G55 D PO 0.000000% 3,438,000.00 4.508435%
FNMA 93G4 J PO 0.000000% 17,000,000.00 50.000000%
GNMA 1 A PO 0.000000% 923,060,000.00 3.351137%
MLTR (5) XVII A PO 0.000000% 100,456,000.00 8.461416%
SBST (6) 1987-1 A PO 0.000000% 200,000,000.00 3.000000%
</TABLE>

<TABLE>
<CAPTION>
CLASS CURRENT
PRINCIPAL OR
NOTIONAL BALANCE IN ORIGINAL MORTGAGE CURRENT MORTGAGE
TRUST LOAN BALANCE LOAN BALANCE WAC NWAC WAM WALA/ CAGE
<S> <C> <C> <C> <C> <C> <C>
671,290 500,000,000 23,981,826 12.000% 11.500% 174 177
766,718 500,000,000 25,559,797 12.000% 11.500% 171 179
1,897 400,000,088 50,569,159 10.000% 9.500% 218 133
532,046 115,200,000 7,661,948 12.000% 11.500% 176 174
3,324,600 275,000,000 18,221,525 9.680% 9.000% 206 142
303,474 126,900,000 6,418,519 11.500% 11.000% 199 149
542,026 110,000,000 8,057,143 11.500% 11.000% 193 157
10,396 400,120,000 41,595,661 9.710% 9.000% 252 94
2,700,000 500,000,000 320,287,917 7.644% 7.000% 285 60
7,860 300,000,000 25,112,403 10.172% 9.500% 240 106
7,761 300,000,000 47,138,173 8.603% 8.000% 96 79
4,605 750,000,000 138,150,594 9.014% 8.500% 267 82
30,525 600,000,000 61,080,356 9.559% 9.000% 261 86
26,512 500,000,000 132,559,877 8.601% 8.053% 266 78
5,000,000 1,100,000,000 570,573,502 8.028% 7.500% 278 68
2,920 1,000,000,000 206,162,993 8.524% 8.000% 102 73
60,194 1,000,000,000 212,994,740 8.531% 8.000% 102 73
10,289 480,000,000 105,498,523 8.950% 8.500% 274 72
20,534,500 1,100,000,000 619,410,043 7.037% 6.500% 118 58
12,861,965 300,000,000 182,392,017 6.658% 6.000% 118 58
19,703,053 288,000,001 199,336,420 7.513% 7.000% 289 59
25,722 596,997,450 167,578,877 9.003% 8.500% 264 86
155,000 129,905,376 20,367,023 10.500% 10.000% 233 118
6,136,347 * 206,785,284 * 75,339,608 8.500% 8.000% 275 75
1,547,816 925,365,000 46,303,147 11.500% 11.000% 200 151
770,290 100,457,000 9,103,650 11.500% 11.000% 146 206
252,155 200,000,000 8,405,333 11.500% 11.000% 192 161
</TABLE>

(1) CMOT = Collateralized Mortgage Obligation Trust
(2) CMSC = Collateralized Mortgage Securities Corporation
(3) DBL = Drexel Burnham Lambert CMO Trust Series V
(4) FBCS = First Boston Mortgage Securities Corp.
(5) MLTR = Merrill Lynch Trust XVII
(6) SBST = Salomon Brothers Mortgage Securities VI, Inc.
(7) As such abbreviations are described in the Underlying Non-Agency Prospectus
Information

* Based on the original principal balances of the underlying securities, rather
than the balance of the Mortgage Loans underlying such securities.

S-53
<PAGE> 59

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE> 60

ANNEX 2

POOLED CERTIFICATE INFORMATION

<PAGE> 61

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE> 62

ANNEX 2(A)

PROSPECTUS SUPPLEMENT
DATED DECEMBER 8, 1993
TO
PROSPECTUS DATED DECEMBER 29, 1992
RELATING TO

FEDERAL NATIONAL MORTGAGE ASSOCIATION
GUARANTEED REMIC PASS-THROUGH CERTIFICATES
FANNIE MAE REMIC TRUST 1994-6

<PAGE> 63

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE> 64
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 29, 1992)
- --------------------------------------------------------------------------------

$150,000,000
FEDERAL NATIONAL MORTGAGE ASSOCIATION

[FANNIEMAE LOGO]

GUARANTEED REMIC PASS-THROUGH CERTIFICATES
FANNIE MAE REMIC TRUST 1994-6

- --------------------------------------------------------------------------------

The Guaranteed REMIC Pass-Through Certificates offered hereby (the
"Certificates") will represent beneficial ownership interests in Fannie Mae
REMIC Trust 1994-6 (the "Trust"). The assets of the Trust will consist of (i) a
single "interest only" Fannie Mae Stripped Mortgage-Backed Security (the "58-IO
SMBS") evidencing the beneficial ownership interest in the interest
distributions made in respect of the Class 58-IO REMIC Certificates (the "Class
58-IO REMIC Certificates") evidencing beneficial ownership interests in Fannie
Mae REMIC Trust 1992-G58 ("Trust 1992-G58") and included in Fannie Mae Stripped
Mortgage-Backed Security Trust 000180-GN, (ii) "interest only" Fannie Mae
Stripped Mortgage-Backed Securities (together with the 58-IO SMBS, the "Trust
SMBS") evidencing the respective beneficial ownership interests in certain
interest distributions made in respect of certain "fully modified pass-through"
mortgage-backed securities ("GNMA Certificates") guaranteed as to timely payment
of principal and interest by the Government National Mortgage Association
("GNMA"), held in the form of the respective Fannie Mae Guaranteed MBS
Pass-Through Certificates (the "Mega Certificates") specified herein and
included in the respective Fannie Mae Stripped Mortgage-Backed Security Trusts
specified herein and (iii) all of the Class 5-C REMIC Certificates (the
"Underlying REMIC Certificates") evidencing beneficial ownership interests in
Fannie Mae REMIC Trust 1994-5 (the "Underlying REMIC Trust"). The assets of
Trust 1992-G58 consist of certain GNMA Certificates. The assets of Trust 1994-5
consist of a single "principal only" Fannie Mae Stripped Mortgage-Backed
Security (the "Underlying SMBS") evidencing the beneficial ownership interest in
certain principal distributions made in respect of certain Fannie Mae Guaranteed
Mortgage Pass-Through Certificates (the "MBS") held in the form of Fannie Mae
Guaranteed MBS Pass-Through Certificate CL-190250 and included in the Fannie Mae
Stripped Mortgage-Backed Security Trust 000250-CL. Each MBS will represent a
beneficial ownership interest in a pool (each, a "Pool") of first lien,
single-family, fixed-rate residential mortgage loans having the characteristics
described herein. Each GNMA Certificate is based on and backed by a Pool of
first lien, single-family, fixed-rate residential mortgage loans (together with
the mortgage loans underlying the MBS, the "Mortgage Loans") which are either
insured by the Federal Housing Administration ("FHA") or partially guaranteed by
the Department of Veterans Affairs ("VA").

THE CERTIFICATES WILL BE ISSUED AND GUARANTEED AS TO TIMELY DISTRIBUTION OF
PRINCIPAL AND, TO THE EXTENT SET FORTH HEREIN, INTEREST BY FANNIE MAE AND WILL
BE OFFERED BY FANNIE MAE PURSUANT TO ITS PROSPECTUS FOR GUARANTEED MORTGAGE
PASS-THROUGH CERTIFICATES (THE "MBS PROSPECTUS"), ITS PROSPECTUS FOR STRIPPED
MORTGAGE-BACKED SECURITIES (THE "SMBS PROSPECTUS") AND ITS PROSPECTUS FOR
GUARANTEED MBS PASS-THROUGH CERTIFICATES (THE "MEGA PROSPECTUS"), EACH AVAILABLE
AS DESCRIBED HEREIN, AND ITS PROSPECTUS FOR GUARANTEED REMIC PASS-THROUGH
CERTIFICATES (THE "REMIC PROSPECTUS") ACCOMPANYING THIS PROSPECTUS SUPPLEMENT.

THE CERTIFICATES MAY NOT BE SUITABLE INVESTMENTS FOR ALL INVESTORS. NO INVESTOR
SHOULD PURCHASE CERTIFICATES UNLESS SUCH INVESTOR UNDERSTANDS AND IS ABLE TO
BEAR THE PREPAYMENT, YIELD, LIQUIDITY AND OTHER RISKS ASSOCIATED WITH SUCH
CERTIFICATES. SEE "DESCRIPTION OF THE CERTIFICATES--PREPAYMENT CONSIDERATIONS
AND RISKS" AND "--YIELD CONSIDERATIONS" HEREIN.

An election will be made to treat the Trust as a "real estate mortgage
investment conduit" ("REMIC") pursuant to the Internal Revenue Code of 1986, as
amended (the "Code"). The R Class will be subject to transfer restrictions. See
"Description of the Certificates--Characteristics of the R Class" and "Certain
Additional Federal Income Tax Consequences" herein, and "Description of the
Certificates--Additional Characteristics of Residual Certificates" and "Certain
Federal Income Tax Consequences" in the REMIC Prospectus.

(Cover continued on next page)
- --------------------------------------------------------------------------------

THE CERTIFICATES, TOGETHER WITH ANY INTEREST THEREON, ARE NOT GUARANTEED BY THE
UNITED STATES. THE OBLIGATIONS OF FANNIE MAE UNDER ITS GUARANTY OF THE
CERTIFICATES ARE OBLIGATIONS SOLELY OF FANNIE MAE AND DO NOT CONSTITUTE AN
OBLIGATION OF THE UNITED STATES OR ANY AGENCY OR INSTRUMENTALITY THEREOF OTHER
THAN FANNIE MAE. THE CERTIFICATES ARE EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OF 1933 AND ARE "EXEMPTED SECURITIES" WITHIN THE MEANING
OF THE SECURITIES EXCHANGE ACT OF 1934.

<TABLE>
<CAPTION>
================================================================================
ORIGINAL FINAL
PRINCIPAL PRINCIPAL INTEREST INTEREST DISTRIBUTION
CLASS BALANCE TYPE(1) RATE TYPE(1) DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
F ......... $ 150,000,000 (2) (3) FLT October 2023
R(4) ...... 0 NPR 0 EXE October 2023
================================================================================
</TABLE>

(1) See "Description of the Certificates--Class Definitions and Abbreviations"
in the REMIC Prospectus and "Description of the
Certificates--Distributions of Interest" and "--Distributions of
Principal" herein.

(2) The F Class will be entitled to receive the entire Principal Distribution
Amount (as defined herein) on each Distribution Date until the principal
balance thereof is reduced to zero. See "Description of the
Certificates--Distributions of Principal" herein.

(3) The F Class will bear interest based on "LIBOR," as described under
"Description of the Certificates--Distributions of Interest" herein and
"Description of the Certificates--Indices Applicable to Floating Rate and
Inverse Floating Rate Classes" in the REMIC Prospectus and will be
entitled to receive the entire Interest Distribution Amount (as defined
herein) on each Distribution Date.

(4) The R Class will be entitled to receive the monthly distributions from the
remaining assets of the Trust, if any, after the principal balance of the
F Class has been reduced to zero and any unpaid interest deficiency
(together with any accrued and unpaid interest thereon) has been paid in
full. See "Description of the Certificates--Characteristics of the R
Class" herein.

- --------------------------------------------------------------------------------

The Certificates will be offered by Prudential Securities Incorporated (the
"Dealer") from time to time in negotiated transactions, at varying prices to be
determined at the time of sale.

The Certificates will be offered by the Dealer, subject to issuance by Fannie
Mae and to prior sale or to withdrawal or modification of the offer without
notice, when, as and if delivered to and accepted by the Dealer, and subject to
approval of certain legal matters by counsel. It is expected that the F Class
will be available through the book-entry system of the Federal Reserve Banks on
or about January 28, 1994 (the "Settlement Date"). It is expected that the R
Class in registered, certificated form will be available for delivery at the
offices of the Dealer at 100 Gold Street, New York, New York, on or about the
Settlement Date.

PRUDENTIAL SECURITIES INCORPORATED

December 8, 1993
<PAGE> 65
(Cover continued from previous page)

THE YIELD TO INVESTORS IN EACH CLASS WILL BE DIRECTLY RELATED TO THE LEVEL
OF LIBOR AND, AMONG OTHER THINGS, THE RATE OF DISTRIBUTIONS ON THE TRUST SMBS
AND THE UNDERLYING REMIC CERTIFICATES, WHICH IN TURN WILL BE SENSITIVE IN
VARYING DEGREES TO THE RATE OF PRINCIPAL PAYMENTS OF THE MORTGAGE LOANS, THE
CHARACTERISTICS OF THE MORTGAGE LOANS INCLUDED IN THE RELATED POOLS AND THE
PRIORITY SEQUENCES AFFECTING PRINCIPAL DISTRIBUTIONS ON THE UNDERLYING REMIC
CERTIFICATES. SUCH YIELDS WILL ALSO BE SENSITIVE TO THE AMOUNT OF EXCESS
INTEREST (AS DEFINED HEREIN) AVAILABLE FOR DISTRIBUTION AND THE PURCHASE PRICE
PAID FOR THE RELATED CLASS. ACCORDINGLY, INVESTORS SHOULD CONSIDER THE FOLLOWING
RISKS:

- THE MORTGAGE LOANS GENERALLY MAY BE PREPAID AT ANY TIME WITHOUT
PENALTY, AND, ACCORDINGLY, THE RATE OF PRINCIPAL PAYMENTS THEREON IS
LIKELY TO VARY CONSIDERABLY FROM TIME TO TIME.

- SLIGHT VARIATIONS IN MORTGAGE LOAN CHARACTERISTICS COULD
SUBSTANTIALLY AFFECT THE WEIGHTED AVERAGE LIVES AND YIELDS OF EITHER
OF THE CLASSES.

- IN THE CASE OF ANY CERTIFICATES PURCHASED AT A DISCOUNT TO THEIR
PRINCIPAL AMOUNTS, A SLOWER THAN ANTICIPATED RATE OF PRINCIPAL
PAYMENTS IS LIKELY TO RESULT IN A LOWER THAN ANTICIPATED YIELD.

- IN THE CASE OF ANY CERTIFICATES PURCHASED AT A PREMIUM TO THEIR
PRINCIPAL AMOUNTS, A FASTER THAN ANTICIPATED RATE OF PRINCIPAL
PAYMENTS IS LIKELY TO RESULT IN A LOWER THAN ANTICIPATED YIELD.

- THE YIELD ON THE F CLASS WILL BE SENSITIVE TO THE LEVEL OF LIBOR.
UNDER CERTAIN LIBOR AND PREPAYMENT SCENARIOS, THE INTEREST
DISTRIBUTION AMOUNT MAY NOT BE SUFFICIENT TO PAY THE FULL AMOUNT OF
INTEREST ACCRUED ON THE F CLASS AT THE LIBOR BASED FORMULA RATE. ANY
SUCH DEFICIENCY ON A PARTICULAR DISTRIBUTION DATE WILL BE CARRIED
FORWARD, WITH INTEREST, TO SUBSEQUENT DISTRIBUTION DATES. ONCE THE
NOTIONAL PRINCIPAL BALANCES OF THE RESPECTIVE TRUST SMBS AND THE
PRINCIPAL BALANCE OF THE UNDERLYING REMIC CERTIFICATES HAVE BEEN
REDUCED TO ZERO, HOLDERS OF THE F CLASS WILL HAVE NO FUTURE
ENTITLEMENT TO ANY UNPAID INTEREST DEFICIENCY OR INTEREST THEREON.

- THE DISTRIBUTIONS ON THE R CLASS WILL BE ESPECIALLY SENSITIVE TO THE
LEVEL OF LIBOR AND THE RATE OF PREPAYMENTS ON THE MORTGAGE LOANS,
SINCE NO DISTRIBUTIONS WILL BE MADE ON SUCH CLASS UNTIL THE
PRINCIPAL BALANCE OF THE F CLASS IS REDUCED TO ZERO AND ANY ACCRUED
AND UNPAID INTEREST THEREON (INCLUDING ANY UNPAID INTEREST
DEFICIENCY AND ANY ACCRUED AND UNPAID INTEREST THEREON) IS PAID IN
FULL. UNDER CERTAIN LIBOR AND PREPAYMENT SCENARIOS, LITTLE OR NO
ASSETS WOULD REMAIN IN THE TRUST AT SUCH TIME.

- THE RELATIONSHIP AMONG THE VARIOUS FACTORS THAT AFFECT THE
AVAILABILITY OF PRINCIPAL AND INTEREST DISTRIBUTIONS, AND
CORRESPONDINGLY, THE YIELD ON THE CERTIFICATES, IS COMPLEX, AND AN
INVESTMENT IN THE CERTIFICATES SHOULD ONLY BE MADE BY PERSONS
FAMILIAR WITH THE ANALYSIS OF MORTGAGE LOAN PREPAYMENT RATES AND
MORTGAGE-BACKED SECURITIES STRUCTURES.

SEE "DESCRIPTION OF THE CERTIFICATES--PREPAYMENT CONSIDERATIONS AND RISKS"--AND
"--YIELD CONSIDERATIONS" HEREIN.

IN ADDITION, INVESTORS SHOULD PURCHASE CERTIFICATES ONLY AFTER CONSIDERING
THE FOLLOWING:

- THE RATE OF DISTRIBUTIONS OF THE CERTIFICATES IS UNCERTAIN AND
INVESTORS MAY BE UNABLE TO REINVEST THE DISTRIBUTIONS THEREON AT
YIELDS EQUALING THE YIELDS ON THE CERTIFICATES. SEE "DESCRIPTION OF
THE CERTIFICATES REINVESTMENT RISK" IN THE REMIC PROSPECTUS.

- THE TRUST SMBS ARE "INTEREST ONLY" SECURITIES WITH NOTIONAL
PRINCIPAL BALANCES. IF SUCH NOTIONAL PRINCIPAL BALANCES ARE REDUCED
DISPROPORTIONATELY FASTER THAN THE PRINCIPAL BALANCE OF THE
UNDERLYING REMIC CERTIFICATES, ANY SUCH DISPROPORTIONATE REDUCTIONS
COULD SIGNIFICANTLY REDUCE THE AMOUNTS AVAILABLE TO PAY INTEREST ON
THE REMAINING PRINCIPAL BALANCE OF THE F CLASS.

- THE UNDERLYING REMIC CERTIFICATES WILL HAVE PRINCIPAL BALANCE
SCHEDULES AND WILL NOT BE SCHEDULED TO RECEIVE PRINCIPAL PAYMENTS
FOR EXTENDED PERIODS IN ACCORDANCE WITH THEIR PRINCIPAL BALANCE
SCHEDULES.

- THE ACTUAL FINAL PAYMENT OF THE F CLASS WILL LIKELY OCCUR EARLIER,
AND COULD OCCUR MUCH EARLIER, THAN THE FINAL DISTRIBUTION DATE FOR
SUCH CLASS SPECIFIED ON THE COVER PAGE. IN PARTICULAR, EXERCISE OF
THE RIGHT OF OPTIONAL LIQUIDATION OF THE TRUST BY HOLDERS OF THE R
CLASS AS DESCRIBED HEREIN WILL EFFECT THE EARLY RETIREMENT OF THE F
CLASS. SEE "DESCRIPTION OF THE CERTIFICATES--WEIGHTED AVERAGE LIVES
OF THE CERTIFICATES" HEREIN AND "DESCRIPTION OF THE
CERTIFICATES--WEIGHTED AVERAGE LIFE AND FINAL DISTRIBUTION DATES" IN
THE REMIC PROSPECTUS.

- INVESTORS WHOSE INVESTMENT ACTIVITIES ARE SUBJECT TO LEGAL
INVESTMENT LAWS AND REGULATIONS OR TO REVIEW BY REGULATORY
AUTHORITIES MAY BE SUBJECT TO RESTRICTIONS ON INVESTMENT IN CERTAIN
CLASSES OF THE CERTIFICATES. INVESTORS SHOULD CONSULT THEIR LEGAL
ADVISORS TO DETERMINE WHETHER AND TO WHAT EXTENT THE CERTIFICATES
CONSTITUTE LEGAL INVESTMENTS OR ARE SUBJECT TO RESTRICTIONS ON
INVESTMENT. SEE "LEGAL INVESTMENT CONSIDERATIONS" IN THE REMIC
PROSPECTUS.

The Dealer intends to make a market for the Certificates but is not
obligated to do so. There can be no assurance that such a secondary market will
develop or, if developed, that it will continue. Thus, investors may not be able
to sell their Certificates readily or at prices that will enable them to realize
their anticipated yield. No investor should purchase Certificates unless such
investor understands and is able to bear the risk that the value of the
Certificates will fluctuate over time and that the Certificates may not be
readily salable.

These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this Prospectus Supplement, the SMBS Prospectus, the
Mega Prospectus, the MBS Prospectus, the Prospectus Supplement for the
Underlying REMIC Trust dated December 21, 1993 (the "Underlying Prospectus"),
the Prospectus for Trust 1992-G58 dated September 10, 1992 (the "1992-G58
Prospectus") or the REMIC Prospectus. Any representation to the contrary is a
criminal offense.

This Prospectus Supplement does not contain complete information about the
Certificates. Investors should purchase Certificates only after reading this
Prospectus Supplement, the REMIC Prospectus, the MBS Prospectus dated December
1, 1993, the SMBS Prospectus dated December 1, 1992, the Mega Prospectus dated
December 1, 1992, the Underlying Prospectus, the 1992-G58 Prospectus and the
Fannie Mae Information Statement dated February 16, 1993 and any supplements
thereto (the "Information Statement"). The MBS Prospectus, the SMBS Prospectus,
the Mega Prospectus and the Information Statement are incorporated herein by
reference and, together with the Underlying Prospectus and the 1992-G58
Prospectus, may be obtained from Fannie Mae by writing or calling its MBS
Helpline at 3900 Wisconsin Avenue, N.W., Area 2H-3S, Washington, D.C. 20016
(telephone 1-800-BEST-MBS or 202-752-6547). Such documents (other than the
1992-G58 Prospectus) may also be obtained from Prudential Securities
Incorporated by writing or calling its Prospectus Department at 315 Hudson
Street, 7th Floor, New York, New York 10013 (telephone 212-776-8906).

S-2
<PAGE> 66
TABLE OF CONTENTS

PAGE
----

DESCRIPTION OF THE CERTIFICATES .......................................... S- 4
General ................................................................ S- 4
Structure ............................................................ S- 4
Distributions on Underlying
Securities ......................................................... S- 4
Fannie Mae Guaranty .................................................. S- 4
Characteristics of Certificates ...................................... S- 5
Authorized Denominations ............................................. S- 5
Distribution Dates ................................................... S- 5
Calculation of Interest
Distributions ...................................................... S-5
Calculation of Principal
Distributions ...................................................... S-5
Record Date .......................................................... S-6
REMIC Trust Factors .................................................. S-6
Voting the Trust SMBS and the
Underlying REMIC Trust ............................................. S-6
Optional Liquidation ................................................. S-6
The Trust SMBS ......................................................... S-6
The Underlying REMIC Certificates ...................................... S-7
Final Data Statement ................................................... S-7
Prepayment Considerations
and Risks ............................................................ S-7
Distributions of Interest .............................................. S-8
Categories of Classes ................................................ S-8
General .............................................................. S-8
Interest Accrual Period .............................................. S-9
Floating Rate Class .................................................. S-9
Calculation of LIBOR ................................................... S-9
Distributions of Principal ............................................. S-10
Categories of Classes ................................................ S-10
Principal Distribution Amount ........................................ S-10
Structuring Assumptions ................................................ S-10
Pricing Assumptions .................................................. S-10
PSA Assumptions ...................................................... S-10
Characteristics of the R Class ......................................... S-11
Yield Considerations ................................................... S-11
Weighted Average Lives of the
Certificates ......................................................... S-13
Decrement Tables ....................................................... S-14
CERTAIN ADDITIONAL FEDERAL INCOME
TAX CONSEQUENCES ....................................................... S-16
REMIC Elections and Special Tax
Attributes ........................................................... S-16
Taxation of Beneficial Owners of
Regular Certificates ................................................. S-16
Taxation of Beneficial Owners of
Residual Certificates ................................................ S-16
PLAN OF DISTRIBUTION ................................................... S-17
LEGAL MATTERS .......................................................... S-17
EXHIBIT A .............................................................. A-1

S-3
<PAGE> 67
DESCRIPTION OF THE CERTIFICATES

The following summaries describing certain provisions of the Certificates
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, the REMIC Prospectus, the MBS Prospectus, the SMBS
Prospectus, the Mega Prospectus, the Underlying Prospectus and the provisions of
the Trust Agreement (defined below). Capitalized terms used and not otherwise
defined in this Prospectus Supplement have the respective meanings assigned to
such terms in the REMIC Prospectus (including the Glossary contained therein),
the MBS Prospectus, the SMBS Prospectus, the Mega Prospectus, the 1992-G58
Prospectus, the Underlying Prospectus or the Trust Agreement (as the context may
require).

GENERAL

Structure. The Trust will be created pursuant to a trust agreement dated
as of September 1, 1987, as supplemented by an issue supplement thereto dated as
of January 1, 1994 (together, the "Trust Agreement"), executed by the Federal
National Mortgage Association ("Fannie Mae") in its corporate capacity and in
its capacity as Trustee, and the Certificates in the Classes and aggregate
original principal balances set forth on the cover hereof will be issued by
Fannie Mae pursuant thereto. A description of Fannie Mae and its business,
together with certain financial statements and other financial information, is
contained in the Information Statement.

The F Class will be designated as the "regular interest" and the R Class
will be designated as the "residual interest" in the REMIC constituted by the
Trust.

The assets of the Trust will consist of the Trust SMBS and the Underlying
REMIC Certificates (which evidence beneficial ownership interests in the
Underlying REMIC Trust).

Distributions on Underlying Securities. The Trust SMBS and the Underlying
REMIC Certificates provide that payments thereon will be passed through monthly,
commencing on the 25th day of the month following the month of the initial
issuance thereof (or, if such 25th day is not a business day, on the first
business day next succeeding such 25th day).

Fannie Mae Guaranty. Fannie Mae guarantees to the Holders of Certificates
(i) distribution on each Distribution Date of the Principal Distribution Amount
and the Interest Distribution Amount, in each case calculated as provided
herein, and (ii) distribution in full of the principal balance of the F Class no
later than the Final Distribution Date, whether or not sufficient funds are
available. Fannie Mae's guaranty does not cover the receipt of any unpaid
interest deficiency (or any accrued and unpaid interest thereon) once the
notional principal balances of the respective Trust SMBS and the principal
balance of the Underlying REMIC Certificates have been reduced to zero. In such
event, Holders of the F Class will have no future entitlement to any such
payments. See "Distributions of Interest" herein. Fannie Mae guarantees to each
holder of an MBS the timely payment of scheduled installments of principal of
and interest on the underlying Mortgage Loans, whether or not received, together
with the full principal balance of any foreclosed Mortgage Loan, whether or not
received. The guaranty obligations of Fannie Mae with respect to the Trust SMBS
and the Mega Certificates are described in the SMBS Prospectus and the Mega
Prospectus, respectively. The guaranty obligations of Fannie Mae with respect to
the Class 58-IO REMIC Certificates are described in the 1992-G58 Prospectus. In
addition, Fannie Mae guarantees to each holder of the Underlying REMIC
Certificates payment of any required installments of principal and payment in
full of the principal balance thereof not later than the applicable final
distribution date, whether or not sufficient funds are otherwise available
therefor.

The guaranties of Fannie Mae are not backed by the full faith and credit
of the United States. See "Description of the Certificates--Fannie Mae's
Guaranty" in the REMIC Prospectus, "The SMBS Certificates--Fannie Mae
Obligations" in the SMBS Prospectus, "The Certificates--Fannie Mae's Guaranty"
in the Mega Prospectus, "Description of Certificates The Corporation's Guaranty"
in the MBS Prospectus, "Description of the REMIC Certificates--General--Fannie
Mae Guaranty" in the 1992-G58 Prospectus and "Description of the
Certificates--General--Fannie Mae Guaranty" in the Underlying Prospectus.

S-4
<PAGE> 68
Characteristics of Certificates. The F Certificates will be issued and
maintained and may be transferred by Holders only on the book-entry system of
the Federal Reserve Banks. Such entities whose names appear on the book-entry
records of a Federal Reserve Bank as the entities for whose accounts such
Certificates have been deposited are herein referred to as "Holders" or
"Certificateholders." A Holder is not necessarily the beneficial owner of a
book-entry Certificate. Beneficial owners will ordinarily hold book-entry
Certificates through one or more financial intermediaries, such as banks,
brokerage firms and securities clearing organizations. See "Descriptions of the
Certificates--Denominations, Book-Entry Form" in the REMIC Prospectus.

The R Class will not be issued in book-entry form but will be issued in
fully registered, certificated form. As to the R Class, "Holders" or
"Certificateholders" refers to the registered owners thereof. The R Class will
be transferable and, if applicable, exchangeable at the corporate trust office
of the Transfer Agent, or at the agency of the Transfer Agent in New York, New
York. The Transfer Agent initially will be State Street Bank and Trust Company
in Boston, Massachusetts ("State Street"). A service charge may be imposed for
any registration of transfer or, if applicable, exchange of the R Class and
Fannie Mae may require payment of a sum sufficient to cover any tax or other
governmental charge. See also "Characteristics of the R Class" herein.

Distributions, if any, on the R Class will be made by check mailed by the
Paying Agent to the address of each person entitled thereto as it appears on the
Certificate Register maintained by the Certificate Registrar (initially State
Street) not later than each Distribution Date; provided, however, that the final
distribution to the Holders of the R Class will be made only upon presentation
and surrender of the Certificates of such Class at the office of the Paying
Agent. The Paying Agent initially will be State Street.

Authorized Denominations. The F Certificates will be issued in minimum
denominations of $1,000 and integral multiples of $1 in excess thereof. The R
Certificates will be issued in minimum percentage interests of 10% and integral
multiples of 1% percentage interests in excess thereof.

Distribution Dates. Distributions on the Certificates will be made on the
25th day of each month (or, if such 25th day is not a business day, on the first
business day next succeeding such 25th day), commencing in the month following
the Settlement Date.

Calculation of Interest Distributions. Interest on the F Class is
calculated on the basis of a 360-day year consisting of twelve 30-day months and
is distributable monthly on each Distribution Date, commencing in the month
after the Settlement Date. Interest to be distributed on the F Class on a
Distribution Date will be in an amount (the "Interest Distribution Amount")
equal to the lesser of (a) the sum of (i) one month's interest on the
outstanding principal balance of the F Class immediately prior to such
Distribution Date, (ii) any unpaid interest deficiency (as defined herein) and
(iii) interest, if any, accrued on a compounded basis and unpaid on any such
unpaid interest deficiency and (b) the sum of (i) the aggregate distributions of
interest concurrently made on the Trust SMBS and (ii) the aggregate
distributions of principal concurrently made on the Underlying REMIC
Certificates following the reduction of the principal balance of the F Class to
zero. Interest will accrue on the F Class during the one month period set forth
herein under "Distributions of Interest--Interest Accrual Period." In the event
that the Interest Distribution Amount for any Distribution Date is less than the
interest accrued on the principal balance of the F Class during the preceding
Interest Accrual Period, such deficiency will accrue interest during each
Interest Accrual Period thereafter, at the per annum interest rate applicable to
the F Class from time to time, to the extent such deficiency remains unpaid on a
subsequent Distribution Date.

Calculation of Principal Distributions. Principal on the F Class will be
distributed on each Distribution Date in an amount (the "Principal Distribution
Amount") equal to the sum of (i) the distribution of principal concurrently made
on the Underlying REMIC Certificates and (ii) the amount ("Excess Interest") by
which the aggregate distributions of interest concurrently made on the Trust
SMBS exceeds the sum of (a) the interest accrued on the F Class during the
preceding Interest Accrual Period, (b) any unpaid interest deficiency and (c)
interest, if any, accrued on a compounded basis and unpaid on any such unpaid
interest deficiency. See "Distributions of Principal" herein.

S-5
<PAGE> 69
Record Date. Each monthly distribution on the Certificates will be made to
Holders of record on the last day of the preceding month.

REMIC Trust Factors. As soon as practicable following the eleventh
calendar day of each month, Fannie Mae will publish or otherwise make available
for the F Class the factor (carried to eight decimal places) which, when
multiplied by the original principal balance of a Certificate of such Class,
will equal the remaining principal balance of such Certificate after giving
effect to the distribution of principal to be made on the following Distribution
Date.

Voting the Trust SMBS and the Underlying REMIC Trust. In the event any
issue arises under the applicable trust agreement governing any of the Trust
SMBS or the Underlying REMIC Trust that requires the vote of holders of
certificates outstanding thereunder, the Trustee will vote the related Trust
SMBS or the Underlying REMIC Certificates in accordance with instructions
received from Holders of Certificates having principal denominations aggregating
not less than 51% of the aggregate principal denominations of the F Class and,
following the final distribution of the F Class, Holders of Certificates having
percentage interests aggregating not less than 51% of the aggregate percentage
interests of the R Class. In the absence of such instructions, the Trustee will
vote in a manner consistent, in its sole judgment, with the best interests of
Certificateholders.

Optional Liquidation. At the option of the Holders of the R Class
representing in the aggregate 100% of the ownership percentages thereof, the
REMIC may adopt a plan of complete liquidation pursuant to which the Holders of
the R Class, or their designees, will purchase the Trust SMBS and Underlying
REMIC Certificates remaining in the Trust at such time. The Holders of the R
Class, however, may not exercise this option unless (i) the outstanding
principal balance of the F Class is less than 10% of the original principal
balance thereof, (ii) the proceeds of such liquidation are at least equal to the
sum of (x) the outstanding principal balance of the F Class and (y) any accrued
and unpaid interest thereon (including any unpaid interest deficiency and
interest accrued thereon) and (iii) Fannie Mae has received an opinion of
counsel, satisfactory to it, that such purchase will be part of a "qualified
liquidation" of the Trust within the meaning of Section 860F(a)(4)(A) of the
Code. Upon such liquidation (i) the F Class will then be redeemed for an amount
equal to the sum of (x) the outstanding principal balance thereof at the time of
such redemption and (y) any accrued and unpaid interest thereon (including any
unpaid interest deficiency and interest accrued thereon) and (ii) the R Class
will be redeemed for an amount equal to the excess of (x) the aggregate
liquidation proceeds over (y) the amount distributable to the F Class in
redemption thereof. Such liquidation will effect an early retirement of both the
F Class and the R Class.

THE TRUST SMBS

The Trust SMBS represent the respective beneficial ownership interests in
certain interest distributions made in respect of certain GNMA Certificates
having the general characteristics described in the SMBS Prospectus. The GNMA
Certificates underlying the Trust SMBS (other than the 58-IO SMBS) are held in
the form of the respective Mega Certificates specified in Exhibit A, the general
characteristics of which are described in the Mega Prospectus. The GNMA
Certificates underlying the 58-IO SMBS are held in the form of the Fannie Mae
Guaranteed REMIC Pass-Through Certificates that represent the beneficial
ownership interests in Trust 1992-G58, the general characteristics of which are
described in the 1992-G58 Prospectus. The GNMA Certificates underlying the Trust
SMBS have a Pass-Through Rate of 9.00%. Each GNMA Certificate is based on and
backed by a Pool of first lien, single-family, fixed-rate residential Mortgage
Loans that are either insured by the FHA or partially guaranteed by the VA.

The table contained in Exhibit A hereto sets forth certain information
with respect to each Trust SMBS, including the numerical designation of the
related Mega Certificate, the numerical designation of the related Fannie Mae
Stripped Mortgage-Backed Security Trust, the class, the CUSIP number, the issue
date, the interest rate, the final distribution date, the original notional
principal balance of the class, the percentage of such class in the Trust, the
current principal factor for such class and the

S-6
<PAGE> 70
current notional principal balance of such class contained in the Trust as of
January 1, 1994 (the "Issue Date"). The table also sets forth the approximate
weighted average WAC, the approximate weighted average WARM and the approximate
weighted average WALA of the Mortgage Loans underlying the related GNMA
Certificates as of the Issue Date, the minimum percentage of the GNMA
Certificates which are GNMA I Certificates and the designation of the underlying
security. "WARM" is the weighted average remaining maturity (in months) of the
Mortgage Loans in each Pool underlying the GNMA Certificates. "WALA" is the
weighted average loan age (in months) of the Mortgage Loans in each Pool
underlying the GNMA Certificates.

THE UNDERLYING REMIC CERTIFICATES

The Underlying REMIC Certificates represent beneficial ownership interests
in the Underlying REMIC Trust, the assets of which consist of the Underlying
SMBS. See the Underlying Prospectus for a discussion of the general
characteristics of the Underlying REMIC Certificates. The Underlying SMBS
represents the beneficial ownership interest in certain principal distributions
made in respect of certain MBS having the general characteristics described in
the MBS Prospectus. The MBS are held in the form of Mega Certificate CL-190250,
the general characteristics of which are described in the Mega Prospectus. Each
MBS evidences beneficial ownership interests in a Pool of conventional Level
Payment Mortgage Loans secured by a first mortgage or deed of trust on a one- to
four-family residential property, as described under "The Mortgage Pools" and
"Yield Considerations" in the MBS Prospectus.

The table contained in Exhibit A hereto sets forth certain information
with respect to the Underlying REMIC Certificates, including the numerical
designation of the Underlying REMIC Trust, the class designation of the
Underlying REMIC Certificates, the CUSIP number, the issue date, the interest
rate, the interest type, the final distribution date, the principal type, the
original principal balance of the class, the percentage of such class in the
Trust, the current principal factor for such class and the current principal
balance of such class contained in the Trust as of the Issue Date. The table
also sets forth the approximate weighted average WAC, the approximate weighted
average WAM and the approximate weighted average CAGE of the Mortgage Loans
underlying the MBS as of the Issue Date and the designation of the underlying
security.

FINAL DATA STATEMENT

Following the issuance of the Certificates, Fannie Mae will prepare a
Final Data Statement setting forth, among other things, the current notional
principal balance of each of the Trust SMBS as of the Settlement Date and the
current principal balance of the Underlying REMIC Certificates as of the
Settlement Date. The Final Data Statement will not accompany this Prospectus
Supplement but will be made available by Fannie Mae. To request the Final Data
Statement or further information regarding the Trust SMBS and the Underlying
REMIC Certificates, telephone Fannie Mae at 1-800-BEST-MBS or 202-752-6547. The
contents of the Final Data Statement and other data specific to the Certificates
are available in electronic form by calling Fannie Mae at 1-800-752-6440 or
202-752-6000. It should be noted that there may have been material changes in
facts and circumstances since the dates the SMBS Prospectus, the Mega Prospectus
and the 1992-G58 Prospectus were prepared, including, but not limited to,
changes in prepayment speeds and prevailing interest rates and other economic
factors, which may limit the usefulness of the information set forth in such
documents.

PREPAYMENT CONSIDERATIONS AND RISKS

The rate of distributions of principal of the F Class will be directly
related to the rate of principal distributions on the Underlying REMIC
Certificates and to Excess Interest, which in turn will be sensitive in varying
degrees to the rate of payments of principal of the underlying Mortgage Loans.
The Underlying REMIC Certificates are subordinate in priority of principal
distributions to certain other classes of certificates evidencing beneficial
ownership interests in the Underlying REMIC Trust and, accordingly,
distributions of principal of the related Mortgage Loans may for extended
periods be

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applied to the distribution of principal of those classes of certificates having
priority over the Underlying REMIC Certificates. In addition, the Underlying
REMIC Certificates will have Principal Balance Schedules and will not be
scheduled to receive principal payments for extended periods in accordance with
their Principal Balance Schedules. As a result of the foregoing characteristics,
distributions of principal in respect of the F Class during certain periods may
occur at a slower rate than would otherwise be the case. However, prepayments on
the related Mortgage Loans may occur at a rate faster or slower than that
assumed.

The amount available for distributions of interest on the F Class will be
directly related to the amount of interest distributed on the Trust SMBS, which
in turn will be sensitive in varying degrees to the rate of payments of
principal of the related underlying Mortgage Loans. The Trust SMBS are "Interest
Only" securities with notional principal balances. It is possible that the
notional principal balances of the respective Trust SMBS may be reduced to zero
prior to (and possibly substantially prior to) the reduction of the principal
balance of the Underlying REMIC Certificates to zero. In such event, the F Class
would receive no distributions of interest until the date on which the principal
balance thereof is reduced to zero. At such time any remaining distributions of
principal on the Underlying REMIC Certificates will be applied to any unpaid
interest deficiency (and any accrued and unpaid interest thereon). However, as
described above under "General--Fannie Mae Guaranty," Fannie Mae's guaranty does
not cover the receipt of any unpaid interest deficiency (or any accrued and
unpaid interest thereon) once the notional principal balances of the respective
Trust SMBS and the principal balance of the Underlying REMIC Certificates have
been reduced to zero. In such event, Holders of the F Class will have no future
entitlement to any such payments. See "Distributions of Interest" herein.

DISTRIBUTIONS OF INTEREST

Categories of Classes

For the purpose of payments of interest, the Classes will be categorized
as follows:

INTEREST TYPE* CLASSES
-------------- -------
Floating Rate F
Excess R

--------------
* See "Description of the Certificates--Class Definitions and
Abbreviations" in the REMIC Prospectus.

General. The F Class will bear interest at the per annum interest rate
described herein. Interest on the F Class is calculated on the basis of a
360-day year consisting of twelve 30-day months and is distributable monthly on
each Distribution Date, commencing in the month after the Settlement Date.
Interest to be distributed on the F Class on a Distribution Date will be in an
amount (the "Interest Distribution Amount") equal to the lesser of (a) the sum
of (i) one month's interest on the outstanding principal balance of the F Class
immediately prior to such Distribution Date, (ii) any unpaid interest deficiency
(as defined below) and (iii) interest, if any, accrued on a compounded basis and
unpaid on any such unpaid interest deficiency and (b) the sum of (i) the
aggregate distributions of interest concurrently made on the Trust SMBS and (ii)
the distribution of principal concurrently made on the Underlying REMIC
Certificates following the reduction of the principal balance of the F Class to
zero.

On each Distribution Date, the Interest Distribution Amount will be
applied to the distribution of interest on the F Class in the following order:

(i) an amount equal to the interest accrued on the principal
balance of the F Class during the immediately preceding Interest Accrual
Period;

(ii) an amount equal to the interest, if any, accrued and unpaid on
the principal balance of the F Class prior to the immediately preceding
Interest Accrual Period that has not been previously paid (an "interest
deficiency"); and

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(iii) an amount equal to the interest, if any, accrued on a
compounded basis and unpaid on any unpaid interest deficiency during each
Interest Accrual Period as to which such interest deficiency remained
unpaid to the Distribution Date on which such interest deficiency is paid,
at the per annum rate in effect from time to time with respect to the F
Class.

On each Distribution Date following the reduction of the principal balance
of the F Class to zero and the payment in full of all accrued and unpaid
interest thereon (including any unpaid interest deficiency together with
interest thereon), all distributions from any remaining assets of the Trust will
be distributed monthly to Holders of the R Class.

Interest Accrual Period. Interest to be distributed on a Distribution Date
will accrue on the F Class during the one-month period set forth below (an
"Interest Accrual Period").

CLASS INTEREST ACCRUAL PERIOD
----- -----------------------
F One month period beginning on the
25th day of the month preceding the month of the
Distribution Date and ending on the 24th day of
the month of the Distribution Date

Floating Rate Class. The F Class will bear interest during its initial
Interest Accrual Period at the Initial Interest Rate set forth below, and will
bear interest during each Interest Accrual Period thereafter, subject to the
applicable Maximum and Minimum Interest Rates, at the rate determined as
described below:

<TABLE>
<CAPTION>
INITIAL MAXIMUM MINIMUM FORMULA FOR
INTEREST INTEREST INTEREST CALCULATION OF
CLASS RATE RATE RATE INTEREST RATE
----- ---- ---- ---- -------------
<S> <C> <C> <C> <C>
F .............. 5.125% 10.00% 2.00% LIBOR + 200 basis points
</TABLE>

The yield with respect to such Class will be affected by changes in LIBOR,
which changes may not correlate with changes in mortgage interest rates. It is
possible that lower mortgage interest rates could occur concurrently with an
increase in the level of LIBOR. Conversely, higher mortgage interest rates could
occur concurrently with a decrease in the level of LIBOR. Under certain
circumstances of increased LIBOR levels, the Interest Distribution Amount may
not be sufficient to pay the full amount of interest accrued on the F Class at
the LIBOR based formula rate. Any such unpaid interest deficiency on a
particular Distribution Date will be carried forward, with interest, to
subsequent Distribution Dates. If an unpaid interest deficiency remains on the
Distribution Date upon which the principal balance of the F Class is reduced to
zero, all distributions on any Trust SMBS and Underlying REMIC Certificates
remaining in the Trust will be applied to the payment of any such unpaid
interest deficiency (together with any accrued and unpaid interest thereon) on
such date and each Distribution Date thereafter before any distributions are
made to the R Class. Once the notional principal balances of the respective
Trust SMBS and the principal balance of the Underlying REMIC Certificates have
been reduced to zero, Holders of the F Class will have no future entitlement to
any unpaid interest deficiency (or any accrued and unpaid interest thereon).

Each LIBOR value will be established as described herein by Fannie Mae two
business days prior to the commencement of the related Interest Accrual Period.
The establishment of each LIBOR value by Fannie Mae and Fannie Mae's
determination of the rate of interest for the F Class for the related Interest
Accrual Period shall (in the absence of manifest error) be final and binding.
Each such rate of interest may be obtained by telephoning Fannie Mae at
1-800-BEST-MBS or 202-752-6547.

CALCULATION OF LIBOR

On each LIBOR Determination Date, Fannie Mae will establish LIBOR for the
related Interest Accrual Period in the manner described in the REMIC Prospectus
under "Description of the Certificates--Indices Applicable to Floating Rate and
Inverse Floating Rate Classes--LIBOR."

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<PAGE> 73
If on the initial LIBOR Determination Date, Fannie Mae is unable to
determine LIBOR in the manner specified in the REMIC Prospectus, LIBOR for the
next succeeding Interest Accrual Period will be 3.125%.

DISTRIBUTIONS OF PRINCIPAL

Categories of Classes

For the purpose of payments of principal, the Classes will be categorized
as follows:

PRINCIPAL TYPE CLASSES
-------------- -------
(1) F
No Payment Residual(2) R
-------------
(1) The F Class will be entitled to receive the entire Principal
Distribution Amount on each Distribution Date until the principal
balance thereof is reduced to zero.
(2) See "Description of the Certificates--Class Definitions and
Abbreviations" in the REMIC Prospectus.

Principal Distribution Amount

Principal will be distributed monthly on the F Class in an amount (the
"Principal Distribution Amount") equal to the sum of (i) the distribution of
principal concurrently made on the Underlying REMIC Certificates and (ii) the
amount ("Excess Interest") by which the aggregate distributions of interest
concurrently made on the Trust SMBS exceeds the sum of (a) the interest accrued
on the F Class during the preceding Interest Accrual Period, (b) any unpaid
interest deficiency and (c) interest, if any, accrued on a compounded basis and
unpaid on any such unpaid interest deficiency.

On each Distribution Date, the Principal Distribution Amount will be
distributed as principal of the F Class until the principal balance thereof is
reduced to zero.

STRUCTURING ASSUMPTIONS

Pricing Assumptions. Unless otherwise specified, the information in the
tables in this Prospectus Supplement has been prepared on the basis of the
actual characteristics of the Pools underlying the Trust SMBS and the Underlying
REMIC Certificates and the priority sequences affecting the principal
distributions on the Underlying REMIC Certificates and the following assumptions
(the "Pricing Assumptions"):

- all payments (including prepayments) on the Mortgage Loans
underlying the GNMA Certificates are distributed in the month in
which such payments are received;

- the Mortgage Loans prepay at the constant percentages of PSA
specified in the related tables;

- the closing date for the sale of the Certificates is the Settlement
Date;

- the first Distribution Date for the Certificates occurs in the month
following the Settlement Date; and

- the right to cause the optional liquidation of the Trust described
herein is not exercised by the Holders of the R Class.

PSA Assumptions. Prepayments of mortgage loans commonly are measured
relative to a prepayment standard or model. The model used in this Prospectus
Supplement is the Public Securities Association's standard prepayment model
("PSA"). To assume a specified rate of PSA (for example, 250% PSA and 350% PSA)
is to assume a specified rate of prepayment each month of the then outstanding
principal balance of a pool of new mortgage loans computed as described under
"Description of the Certificates--Prepayment Considerations and Risks" in the
REMIC Prospectus. There is no assurance that prepayments will occur at any PSA
rate or at any other constant rate.

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<PAGE> 74
CHARACTERISTICS OF THE R CLASS

The R Certificates will not have principal balances and will not bear
interest. The Holders of the R Class will be entitled to receive the monthly
distributions from the remaining assets of the Trust, if any, after (i) the
principal balance of the F Class has been reduced to zero and (ii) any unpaid
interest deficiency and accrued and unpaid interest thereon have been paid in
full.

The R Class will be subject to certain transfer restrictions. No transfer
of record or beneficial ownership of an R Certificate will be allowed to a
"disqualified organization." In addition, no transfer of record or beneficial
ownership of an R Certificate will be allowed to any person that is not a "U.S.
Person" without the written consent of Fannie Mae. Under regulations issued by
the Treasury Department on December 23, 1992 (the "Regulations"), a transfer of
a "noneconomic residual interest" to a U.S. Person will be disregarded for all
federal tax purposes unless no significant purpose of the transfer is to impede
the assessment or collection of tax. Any transferee of an R Certificate must
execute and deliver an affidavit and an Internal Revenue Service Form W-9 on
which the transferee provides its taxpayer identification number. See
"Description of the Certificates--Additional Characteristics of Residual
Certificates" and "Certain Federal Income Tax Consequences--Taxation of
Beneficial Owners of Residual Certificates" in the REMIC Prospectus.
Transferors of an R Certificate should consult with their own tax advisors for
further information regarding such transfers.

The Holders of the R Class will be considered to be the holders of the
"residual interest" in the REMIC constituted by the Trust. See "Certain Federal
Income Tax Consequences" in the REMIC Prospectus. Pursuant to the Trust
Agreement, Fannie Mae will be obligated to provide to such Holders (i) such
information as is necessary to enable them to prepare their federal income tax
returns and (ii) any reports regarding the Certificates that may be required
under the Code.

YIELD CONSIDERATIONS

There can be no assurance that the Mortgage Loans will prepay at any of
the rates assumed herein or at any other particular rate, that the pre-tax
yields on the F Class will correspond to any of the pre-tax yields shown herein
or that the aggregate purchase price of the F Class will be as assumed. In
addition, there can be no assurance that LIBOR will correspond to the levels
shown herein. The rate of distributions of principal of the F Class will be
directly related to the rate of principal distributions on the Underlying REMIC
Certificates and the amount of Excess Interest, which in turn will be related to
the amortization (including prepayments) of the related Mortgage Loans and the
priority sequences affecting principal distributions on the Underlying REMIC
Certificates. The Underlying REMIC Certificates are subordinate in priority of
principal distributions to certain other classes of certificates evidencing
beneficial ownership interests in the Underlying REMIC Trust, and, accordingly,
distributions of principal of the related Mortgage Loans may for extended
periods be applied to the distribution of principal of those classes of
certificates having priority over the Underlying REMIC Certificates. In
addition, the Underlying REMIC Certificates will have Principal Balance
Schedules and will not be scheduled to receive principal payments for extended
periods in accordance with their Principal Balance Schedules. As a result of the
foregoing characteristics, distributions of principal in respect of the F Class
during certain periods may occur at a slower rate than would otherwise have been
the case. Further, it is not likely that the Mortgage Loans will prepay at a
constant PSA rate until maturity, that all of such Mortgage Loans will prepay at
the same rate or that the level of LIBOR will remain constant.

S-11
<PAGE> 75
event, the F Class would receive no distributions of interest until the date on
which the principal balance thereof is reduced to zero. Further, Fannie Mae's
guaranty does not cover the receipt of any unpaid interest deficiency (or any
accrued and unpaid interest thereon) once the notional principal balances of the
respective Trust SMBS and the principal balance of the Underlying REMIC
Certificates have been reduced to zero. In such event, Holders of the F Class
will have no future entitlement to any such payments. See "Distributions of
Interest" herein.

The yield on the F Class will also be sensitive to the level of LIBOR.
Under certain LIBOR and prepayment scenarios, the Interest Distribution Amount
may not be sufficient to pay the full amount of interest accrued on the F Class
at the LIBOR based formula rate. Although any such deficiency will be carried
forward, with interest, to subsequent Distribution Dates, the effective yield on
the F Class may be reduced below the yield otherwise produced because interest
payable on a Distribution Date will not be distributed until and unless funds
become available.

The distributions on the R Class will be especially sensitive to the level
of LIBOR and the rate of prepayments on the Mortgage Loans, since no
distributions will be made on such Class until the principal balance of the F
Class is reduced to zero and any accrued and unpaid interest thereon (including
any unpaid interest deficiency and any accrued and unpaid interest thereon) is
paid in full. Under certain LIBOR and prepayment scenarios, little or no assets
would remain in the Trust at such time.

The timing of changes in the rate of prepayments or the level of LIBOR may
significantly affect the actual yield to maturity to investors, even if the
average rate of principal prepayments or the average level of LIBOR is
consistent with the expectations of investors. In general, the earlier the
payment of principal of the Mortgage Loans or change in the level of LIBOR, the
greater the effect on an investor's yield to maturity. As a result, the effect
on an investor's yield of principal prepayments or the level of LIBOR occurring
at a rate or level higher (or lower) than the rate or level anticipated by the
investor during the period immediately following the issuance of the
Certificates may not be offset by a subsequent like reduction (or increase) in
the rate of principal prepayments or level of LIBOR.

The table below indicates the sensitivity of the pre-tax corporate bond
equivalent yields to maturity of the F Class to various constant percentages of
PSA and specified levels of LIBOR. The yields set forth in the table were
calculated by determining the monthly discount rates that, when applied to the
assumed streams of cash flows to be paid on the F Class, would cause the
discounted present value of such assumed streams of cash flows to equal the
assumed aggregate purchase price of such Class and converting such monthly rates
to corporate bond equivalent rates. Such calculations do not take into account
variations that may occur in the interest rates at which investors may be able
to reinvest funds received by them as distributions on the Certificates and
consequently do not purport to reflect the return on any investment in the
Certificates when such reinvestment rates are considered.

THE YIELD TO INVESTORS IN THE F CLASS WILL BE SENSITIVE TO THE LEVEL OF
LIBOR AND TO THE RATE OF PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS) OF THE
MORTGAGE LOANS, WHICH GENERALLY CAN BE PREPAID AT ANY TIME. IN ADDITION, THE
RATE OF PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS) OF THE MORTGAGE LOANS IS
LIKELY TO VARY, AND MAY VARY CONSIDERABLY, FROM POOL TO POOL.

Changes in LIBOR may not correlate with changes in prevailing mortgage
interest rates. It is possible that lower prevailing mortgage interest rates,
which might be expected to result in faster prepayments, could occur
concurrently with an increased level of LIBOR.

The information in the following table was prepared on the basis of the
Pricing Assumptions and the assumptions that (i) the interest rates applicable
to the F Class for each Interest Accrual Period subsequent to the initial
Interest Accrual Period will be based on the indicated level of LIBOR and

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(ii) the aggregate purchase price of the F Class (expressed as a percentage of
original principal balance) is as follows:

<TABLE>
<CAPTION>
CLASS PRICE*
----- ------
<S> <C>
F .......................................................... 100%
</TABLE>

- -----------
* The price does not include accrued interest. Accrued interest has been
added to such price in calculating the yields set forth in the table
below.

SENSITIVITY OF THE F CLASS TO PREPAYMENTS AND LIBOR
(PRE-TAX YIELDS TO MATURITY)

<TABLE>
<CAPTION>
PSA PREPAYMENT ASSUMPTION**
--------------------------------------------
I: 50% 100% 250% 500% 800%
LIBOR II: 150% 200% 350% 600% 900%
----- --- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1.125% ............. 3.2% 3.2% 3.2% 3.2% 3.2%
3.125% ............. 5.2% 5.2% 5.2% 5.2% 5.2%
5.125% ............. 7.2% 7.2% 7.2% 6.7% 6.2%
7.125% ............. 8.3% 8.5% 9.2% 6.7% 6.2%
8.000% ............. 8.3% 8.5% 9.4% 6.7% 6.2%
</TABLE>

- -----------
** The PSA percentages shown represent constant PSA percentages for the
Mortgage Loans underlying the Underlying REMIC Certificates (Row I) and
for the Mortgage Loans underlying the Trust SMBS (Row II).

WEIGHTED AVERAGE LIVES OF THE CERTIFICATES

The weighted average life of a Certificate is determined by (a)
multiplying the amount of the reduction, if any, of the principal balance of
such Certificate from one Distribution Date to the next Distribution Date by the
number of years from the Settlement Date to the second such Distribution Date,
(b) summing the results and (c) dividing the sum by the aggregate amount of the
reductions in principal balance of such Certificate referred to in clause (a).
The weighted average life of a Certificate will be influenced by the level of
LIBOR, the rate and distributions among Pools of prepayments of principal of the
underlying Mortgage Loans, whether the Holders of the R Class exercise their
option to liquidate the Trust when the principal balance of the F Class is less
than 10% of its original principal balance and other factors. See "Description
of the Certificates--Weighted Average Life and Final Distribution Dates" in the
REMIC Prospectus.

In general, the weighted average lives of the Certificates will be
shortened if the level of prepayments of principal of the Mortgage Loans
increases. However, the weighted average lives will depend upon a variety of
other factors, including the level of LIBOR, the timing of changes in the rate
of principal payments, the amount of Excess Interest available for distribution
on each Distribution Date and the priority sequences of principal distributions
on the Underlying REMIC Certificates. See "Distributions of Principal" herein.

The interaction of the foregoing factors may have varying effects at
different times during the life of the F Class. Accordingly, no assurance can be
given as to the weighted average life of the F Class. Further, to the extent the
prices of the Certificates represent discounts or premiums to their respective
original principal balances, variability in the weighted average lives of such
Certificates could result in variability in the related yields to maturity. For
an example of how the weighted average life of the F Class may be affected at
various constant prepayment rates and levels of LIBOR, see the Decrement Tables
below.

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<PAGE> 77
DECREMENT TABLES

The following decrement tables indicate the percentages of original principal
balance of the F Class that would be outstanding after each of the dates shown
at various constant PSA levels and LIBOR levels and the corresponding weighted
average life of such Class. Such tables have been prepared on the basis of (i)
the Pricing Assumptions and (ii) the assumption that the interest rates
applicable to the F Class for each Interest Accrual Period subsequent to the
initial Interest Accrual Period will be calculated based on the indicated level
of LIBOR. It is not likely that (i) all of the underlying Mortgage Loans will
have the interest rates, CAGEs or WALAs or remaining terms to maturity assumed,
(ii) the underlying Mortgage Loans will prepay at a constant PSA level or (iii)
LIBOR will correspond to the levels shown herein. In addition, a portion of the
payments (including prepayments) on the Mortgage Loans underlying the GNMA
Certificates will be distributed in the month following the month in which such
payment is received. Moreover, the diverse remaining terms to maturity of the
Mortgage Loans could produce slower or faster principal distributions than
indicated in the table at the specified PSA levels, even if the weighted average
remaining term to maturity and weighted average CAGE of the Mortgage Loans
underlying the Underlying REMIC Certificates are identical to the remaining term
to maturity and CAGE assumed and even if the distributions of the weighted
average remaining terms to maturity and WALAs of the Mortgage Loans underlying
the Trust SMBS are identical to the distributions of the remaining terms to
maturity and WALAs assumed.

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<PAGE> 78
PERCENT OF ORIGINAL PRINCIPAL BALANCE OF F CLASS OUTSTANDING

<TABLE>
<CAPTION>
LIBOR = 1.125% LIBOR = 3.125%
--------------------------------------- ----------------------------------------
PSA PREPAYMENT ASSUMPTION*** PSA PREPAYMENT ASSUMPTION***
--------------------------------------- ----------------------------------------
I: 50% 100% 250% 500% 800% I: 50% 100% 250% 500% 800%
DATE II: 150% 200% 350% 600% 900% II: 150% 200% 350% 600% 900%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent .... 100 100 100 100 100 100 100 100 100 100
January 1995 ....... 90 90 91 92 94 92 92 93 94 95
January 1996 ....... 81 82 76 79 54 85 86 80 83 57
January 1997 ....... 73 75 59 52 34 79 80 64 57 38
January 1998 ....... 66 69 46 36 14 73 76 52 43 18
January 1999 ....... 60 57 30 22 2 69 66 37 29 7
January 2000 ....... 54 43 13 9 0 64 54 22 17 1
January 2001 ....... 44 31 0 * 0 56 42 8 9 0
January 2002 ....... 33 21 0 0 0 47 34 0 3 0
January 2003 ....... 23 13 0 0 0 37 27 0 0 0
January 2004 ....... 12 3 0 0 0 28 18 0 0 0
January 2005 ....... 2 0 0 0 0 19 9 0 0 0
January 2006 ....... 0 0 0 0 0 10 0 0 0 0
January 2007 ....... 0 0 0 0 0 1 0 0 0 0
January 2008 ....... 0 0 0 0 0 0 0 0 0 0
January 2009 ....... 0 0 0 0 0 0 0 0 0 0
January 2010 ....... 0 0 0 0 0 0 0 0 0 0
January 2011 ....... 0 0 0 0 0 0 0 0 0 0
January 2012 ....... 0 0 0 0 0 0 0 0 0 0
January 2013 ....... 0 0 0 0 0 0 0 0 0 0
January 2014 ....... 0 0 0 0 0 0 0 0 0 0
January 2015 ....... 0 0 0 0 0 0 0 0 0 0
January 2016 ....... 0 0 0 0 0 0 0 0 0 0
January 2017 ....... 0 0 0 0 0 0 0 0 0 0
January 2018
and thereafter ... 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life (years)** ... 5.9 5.4 3.7 3.4 2.5 7.1 6.4 4.1 3.9 2.7
</TABLE>

<TABLE>
<CAPTION>
LIBOR = 5.125%
----------------------------------------
PSA PREPAYMENT ASSUMPTION***
----------------------------------------
I: 50% 100% 250% 500% 800%
DATE II: 150% 200% 350% 600% 900%
---- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C>
Initial Percent .... 100 100 100 100 100
January 1995 ....... 94 94 95 96 97
January 1996 ....... 89 90 83 87 59
January 1997 ....... 85 86 70 62 40
January 1998 ....... 81 84 59 47 20
January 1999 ....... 78 76 46 34 9
January 2000 ....... 76 66 31 22 3
January 2001 ....... 70 56 19 13 *
January 2002 ....... 63 49 8 8 0
January 2003 ....... 56 44 0 4 0
January 2004 ....... 48 37 0 1 0
January 2005 ....... 41 30 0 0 0
January 2006 ....... 34 22 0 0 0
January 2007 ....... 28 15 0 0 0
January 2008 ....... 26 8 0 0 0
January 2009 ....... 24 2 0 0 0
January 2010 ....... 19 0 0 0 0
January 2011 ....... 12 0 0 0 0
January 2012 ....... 5 0 0 0 0
January 2013 ....... 0 0 0 0 0
January 2014 ....... 0 0 0 0 0
January 2015 ....... 0 0 0 0 0
January 2016 ....... 0 0 0 0 0
January 2017 ....... 0 0 0 0 0
January 2018
and thereafter ... 0 0 0 0 0
Weighted Average
Life (years)** ... 9.8 8.1 4.6 4.2 2.8
</TABLE>

<TABLE>
<CAPTION>
LIBOR = 7.125% LIBOR = 8.000%
---------------------------------------- ----------------------------------------
PSA PREPAYMENT ASSUMPTION*** PSA PREPAYMENT ASSUMPTION***
---------------------------------------- ----------------------------------------
I: 50% 100% 250% 500% 800% I: 50% 100% 250% 500% 800%
DATE II: 150% 200% 350% 600% 900% II: 150% 200% 350% 600% 900%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent .... 100 100 100 100 100 100 100 100 100 100
January 1995 ....... 96 96 97 98 98 97 97 97 98 99
January 1996 ....... 93 93 87 89 61 94 95 89 90 61
January 1997 ....... 91 92 75 64 42 93 95 77 65 42
January 1998 ....... 89 92 66 50 21 93 95 68 50 22
January 1999 ....... 89 86 53 36 10 93 89 55 37 11
January 2000 ....... 89 77 40 24 4 93 79 41 25 5
January 2001 ....... 85 68 28 16 1 89 71 30 16 2
January 2002 ....... 78 62 18 10 0 83 65 20 11 *
January 2003 ....... 72 58 10 6 0 76 61 12 7 0
January 2004 ....... 66 51 3 3 0 70 54 5 4 0
January 2005 ....... 60 44 0 2 0 64 47 1 2 0
January 2006 ....... 54 38 0 * 0 58 41 * 1 0
January 2007 ....... 48 32 0 0 0 52 34 0 * 0
January 2008 ....... 47 26 0 0 0 51 28 0 0 0
January 2009 ....... 47 20 0 0 0 51 23 0 0 0
January 2010 ....... 42 15 0 0 0 46 18 0 0 0
January 2011 ....... 36 10 0 0 0 40 13 0 0 0
January 2012 ....... 30 5 0 0 0 34 8 0 0 0
January 2013 ....... 24 1 0 0 0 28 3 0 0 0
January 2014 ....... 19 0 0 0 0 23 0 0 0 0
January 2015 ....... 13 0 0 0 0 17 0 0 0 0
January 2016 ....... 7 0 0 0 0 11 0 0 0 0
January 2017 ....... 1 0 0 0 0 5 0 0 0 0
January 2018
and thereafter ... 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life (years)** ... 13.3 10.2 5.3 4.5 2.9 14.2 10.7 5.5 4.6 2.9
</TABLE>

* Indicates an outstanding balance greater than 0% and less than 0.5% of the
original principal balance.
** Determined as specified under "Weighted Average Lives of the Certificates"
herein.
*** The PSA percentages shown represent constant PSA percentages for the
Mortgage Loans underlying the Underlying REMIC Certificates (Row I) and the
Mortgage Loans underlying the Trust SMBS (Row II).

S-15
<PAGE> 79
CERTAIN ADDITIONAL FEDERAL INCOME TAX CONSEQUENCES

The following tax discussion, when read in conjunction with the discussion
of "Certain Federal Income Tax Consequences" in the REMIC Prospectus, describes
the current federal income tax treatment of investors in the Certificates. These
two tax discussions do not purport to deal with all federal tax consequences
applicable to all categories of investors, some of which may be subject to
special rules. Investors should consult their own tax advisors in determining
the federal, state, local and any other tax consequences to them of the
purchase, ownership and disposition of the Certificates.

REMIC ELECTIONS AND SPECIAL TAX ATTRIBUTES

An election will be made to treat the Trust as a REMIC for federal income
tax purposes. The F Class will be designated as the "regular interest," and the
R Class will be designated as the "residual interest," in the REMIC constituted
by the Trust.

As a consequence of the qualification of the Trust as a REMIC, the
Certificates generally will be treated as "qualifying real property loans" for
mutual savings banks and domestic building and loan associations, "regular or
residual interests in a REMIC" for domestic building and loan associations,
"real estate assets" for real estate investment trusts, and, except for the R
Class, as "qualified mortgages" for other REMICs. See "Certain Federal Income
Tax Consequences--Special Tax Attributes" in the REMIC Prospectus.

TAXATION OF BENEFICIAL OWNERS OF REGULAR CERTIFICATES

The F Class will be issued with original issue discount for federal income
tax purposes, which generally will result in recognition of some taxable income
in advance of the receipt of the cash attributable to such income. The
Prepayment Assumption that will be used in determining the rate of accrual of
original issue discount will be 250% PSA with respect to the Mortgage Loans
underlying the Underlying REMIC Certificates and 350% PSA with respect to the
Mortgage Loans underlying the Trust SMBS. See "Certain Federal Income Tax
Consequences--Taxation of Beneficial Owners of Regular Certificates--Original
Issue Discount" in the REMIC Prospectus. No representation is made as to whether
the Mortgage Loans underlying the Trust SMBS or the Underlying REMIC
Certificates will prepay at either such rate or any other rate. See "Description
of the Certificates--Weighted Average Lives of the Certificates" herein and
"Description of the Certificates--Weighted Average Life and Final Distribution
Dates" in the REMIC Prospectus.

The F Class will qualify as a regular interest under the Regulations
because it will receive interest at a variable rate subject to a
"funds-available cap." The funds-available cap will limit the amount of interest
to be paid on the F Class to the sum of (i) the aggregate distributions of
interest concurrently made on the Trust SMBS and (ii) the aggregate
distributions of principal concurrently made on the Underlying REMIC
Certificates following the reduction of the principal balance of the F Class to
zero. The F Class, however, will be issued with original issue discount because
under certain circumstances all or a portion of the interest that has accrued at
the variable rate may not be paid currently.

TAXATION OF BENEFICIAL OWNERS OF RESIDUAL CERTIFICATES

Under the Regulations, the R Class will not have significant value. As a
result, an organization to which section 593 of the Code applies and which is
the beneficial owner of an R Certificate may not use its allowable deductions to
offset any "excess inclusions" with respect to such Certificate. See "Certain
Federal Income Tax Consequences--Taxation of Beneficial Owners of Residual
Certificates--Excess Inclusions" in the REMIC Prospectus.

For purposes of determining the portion of the taxable income of the Trust
that generally will not be treated as excess inclusions, the rate to be used is
120% of the "federal long-term rate." The rate will be published on or about
December 20, 1993. See "Certain Federal Income Tax Consequences--Taxation of
Beneficial Owners of Residual Certificates--Excess Inclusions" and "--Foreign
Inves-

S-16
<PAGE> 80
tors--Residual Certificates" in the REMIC Prospectus. The federal income tax
consequences of any consideration paid to a transferee on the transfer of an R
Certificate are unclear; any transferee receiving such consideration should
consult its own tax advisors.

PLAN OF DISTRIBUTION

The Dealer will receive the Certificates in exchange for the Trust SMBS and
the Underlying REMIC Certificates pursuant to a Fannie Mae commitment. The
Dealer proposes to offer the Certificates directly to the public from time to
time in negotiated transactions at varying prices to be determined at the time
of sale. The Dealer may effect such transactions to or through dealers.

LEGAL MATTERS

Certain legal matters will be passed upon for the Dealer by Cleary,
Gottlieb, Steen & Hamilton.

S-17
<PAGE> 81
EXHIBIT A

TRUST SMBS
<TABLE>
<CAPTION>
ORIGINAL
FANNIE MAE NOTIONAL
STRIPPED DATE FINAL PRINCIPAL CLASS %
MEGA MORTGAGE-BACKED CUSIP OF INTEREST DISTRIBUTION BALANCE IN THE
CERTIFICATE SECURITY TRUST CLASS(1) NUMBER ISSUE RATE DATE OF CLASS TRUST
- ----------- -------------- -------- ------ ----- -------- ------------ --------- -------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
GN-100011 000109-GN 2 31364HLB1 November 1991 0.5% November 2021 $500,003,237 100.0000000000%
GN-100001 000071-GN 2 31364HGX9 February 1990 9.0 February 2020 398,872,152 23.2311021302
GN-100014 000114-GN 2 31364HLM7 November 1991 9.0 December 2021 100,000,551 67.6996269751
GN-100016 000119-GN 2 31364HLX3 January 1992 9.0 December 2021 140,000,000 7.1428571429
GN-100020 000131-GN 2 31364HMX2 April 1992 9.0 April 2022 80,026,660 68.7270966950
GN-100019 000132-GN 2 31364HMZ7 April 1992 9.0 April 2022 347,250,000 29.3102951764
GN-100031 000194-GN 2 31364HTN7 December 1992 9.0 December 2022 284,555,000 26.3569432974
(3) 000180-GN 2 31364HSJ7 October 1992 9.0 October 2022 200,100,000 25.8520629685
</TABLE>

<TABLE>
<CAPTION>
CURRENT APPROXIMATE APPROXIMATE
JANUARY NOTIONAL APPROXIMATE WEIGHTED WEIGHTED MINIMUM
1994 PRINCIPAL WEIGHTED AVERAGE AVERAGE % OF UNDERLYING
MEGA CLASS BALANCE IN AVERAGE WARM WALA GNMA I SECURITY
CERTIFICATE FACTOR THE TRUST WAC (IN MONTHS) (IN MONTHS) CERTIFICATES(2) TYPE
- ----------- ------- ---------- ----------- ----------- ----------- --------------- ----------

- -------------------
(1) See the SMBS Prospectus for a description of the related class designation.
(2) See "The GNMA CERTIFICATES GNMA" and "The GNMA CERTIFICATES GNMA
Certificates" in the SMBS Prospectus and "GNMA and the GNMA Programs" in
the 1992-G58 Prospectus for a description of the GNMA I and GNMA II
programs.
(3) The assets of Fannie Mae Stripped Mortgage-Backed Security Trust 000180-GN
consist of the Class 58-IO REMIC Certificates, which are not held in the
form of a Mega Certificate.

UNDERLYING REMIC CERTIFICATES
<TABLE>
<CAPTION>

ORIGINAL
UNDERLYING DATE FINAL PRINCIPAL CLASS %
REMIC CUSIP OF INTEREST INTEREST DISTRIBUTION PRINCIPAL BALANCE IN THE
TRUST CLASS NUMBER ISSUE RATE TYPE(1) DATE TYPE(1) OF CLASS TRUST
- ---------- ----- ------ ----- -------- -------- ------------ ---------- --------- -------

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994-5 C CM6471030 January 1994 (2) PO October 2023 CPT $150,000,000 100.0000000000%
</TABLE>

<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
JANUARY CURRENT APPROXIMATE WEIGHTED WEIGHTED
UNDERLYING 1994 PRINCIPAL WEIGHTED AVERAGE AVERAGE UNDERLYING
REMIC CLASS BALANCE IN AVERAGE WAM CAGE SECURITY
TRUST FACTOR THE TRUST WAC (IN MONTHS) (IN MONTHS) TYPE
- ---------- ------- ---------- ----------- ------------ ------------ ----------

- -------------------
(1) See "Description of the Certificates Class Definitions and Abbreviations"
in the REMIC Prospectus. The Underlying REMIC Certificates will have
Principal Balance Schedules and will not be scheduled to receive principal
payments for extended periods in accordance with their Principal Balance
Schedules.
(2) This Class is a Principal Only Class and bears no interest.

A-1
<PAGE> 82
================================================================================

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS SUPPLEMENT, THE REMIC PROSPECTUS, THE MBS
PROSPECTUS, THE SMBS PROSPECTUS, THE MEGA PROSPECTUS, THE UNDERLYING PROSPECTUS,
THE 1992-G58 PROSPECTUS AND THE INFORMATION STATEMENT AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE AFOREMENTIONED DOCUMENTS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
CERTIFICATES OFFERED HEREBY IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE AFOREMENTIONED DOCUMENTS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF OR THEREOF.

--------------------

TABLE OF CONTENTS

PAGE
----
PROSPECTUS SUPPLEMENT

Table of Contents ................................................... S-3
Description of the Certificates ..................................... S-4
Certain Additional Federal Income Tax
Consequences ....................................................... S-16
Plan of Distribution ................................................ S-17
Legal Matters ....................................................... S-17
Exhibit A ........................................................... A-1

REMIC PROSPECTUS

Prospectus Supplement ............................................... 2
Summary of Prospectus ............................................... 3
Description of the Certificates ..................................... 7
The Trust Agreement ................................................. 20
Certain Federal Income Tax
Consequences ....................................................... 22
Legal Investment Considerations ..................................... 32
Legal Opinion ....................................................... 33
ERISA Considerations ................................................ 33
Glossary ............................................................ 34

================================================================================

$150,000,000

FEDERAL NATIONAL
MORTGAGE ASSOCIATION

[FANNIE MAE LOGO]

GUARANTEED
REMIC PASS-THROUGH
CERTIFICATES

FANNIE MAE REMIC TRUST
1994-6

------------------
PROSPECTUS SUPPLEMENT
------------------

PRUDENTIAL SECURITIES INCORPORATED

December 8, 1993

================================================================================
<PAGE> 83

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE> 84

Annex 2(b)

Cover Page and Terms Sheet
for

Offering Circular Supplement
Dated June 2, 1997
relating to

Federal Home Loan Mortgage Corporation
Multiclass Mortgage Securities, Payment Exchange Certificates and
Modified and Combinable REMIC Certificates, Series G063
<PAGE> 85

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE> 86

OFFERING CIRCULAR SUPPLEMENT
(TO OFFERING CIRCULAR DATED JANUARY 1, 1997)

$337,000,000
FEDERAL HOME LOAN MORTGAGE CORPORATION
MULTICLASS MORTGAGE SECURITIES, PAYMENT EXCHANGE CERTIFICATES AND

MODIFIABLE AND COMBINABLE REMIC CERTIFICATES, SERIES G063
[FREDDIE MAC LOGO]

<TABLE>
<S> <C>
Offered Securities: Classes of Multiclass Securities and Payment Exchange
Certificates ("PECs") listed below; MACR Classes listed on
Appendix 1 to this Supplement
Guarantee: Principal and interest guaranteed by Freddie Mac, as
described in this Supplement
Tax Status: REMIC (Double-Tier)
Underlying Assets: Freddie Mac Stripped Giant Securities, Series GS007,
consisting of $500,187,500 of 8% Giant IO Securities and
$337,000,000 of Giant PO Securities, backed by
GNMA-Related Securities (GNMA Certificates and Giant
Securities)
Payment Dates: Monthly, beginning July 17, 1997
Form of Securities: Regular, PECs and MACR Classes: Book-entry (Participants
Trust Company)
Residual Classes (R and RS): Certificated
Offering Terms: Classes offered in negotiated transactions at varying prices
through Bear, Stearns & Co. Inc. (the "Underwriter")
Closing Date: June 30, 1997
</TABLE>

THE RISKS ASSOCIATED WITH THE SECURITIES MAY MAKE THEM UNSUITABLE FOR SOME
INVESTORS. SEE "CERTAIN RISK CONSIDERATIONS" AND "PREPAYMENT AND YIELD ANALYSIS"
IN THIS SUPPLEMENT.

INVESTORS SHOULD READ THIS SUPPLEMENT IN CONJUNCTION WITH THE DOCUMENTS LISTED
UNDER "AVAILABLE INFORMATION" IN THIS SUPPLEMENT.

THE OBLIGATIONS OF FREDDIE MAC UNDER ITS GUARANTEES OF THE SECURITIES ARE
OBLIGATIONS OF FREDDIE MAC ONLY. THE SECURITIES, INCLUDING ANY INTEREST THEREON,
ARE NOT GUARANTEED BY THE UNITED STATES AND DO NOT CONSTITUTE DEBTS OR
OBLIGATIONS OF THE UNITED STATES OR ANY AGENCY OR INSTRUMENTALITY OF THE UNITED
STATES OTHER THAN FREDDIE MAC. INCOME ON THE SECURITIES HAS NO EXEMPTION UNDER
FEDERAL LAW FROM FEDERAL, STATE OR LOCAL TAXATION. THE SECURITIES ARE EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND ARE
"EXEMPTED SECURITIES" WITHIN THE MEANING OF THE SECURITIES EXCHANGE ACT OF 1934.
================================================================================

<TABLE>
<CAPTION>
ORIGINAL WEIGHTED AVERAGE
CLASS OF MULTICLASS PRINCIPAL PRINCIPAL OR CLASS INTEREST CUSIP FINAL PAYMENT LIFE AT
SECURITIES OR PECS AMOUNT(1) OTHER TYPE(2) COUPON TYPE(2) NUMBER DATE(3) 160% PSA(4)
------------------- --------- ------------- ------ -------- ------ ------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
A ...................... $100,000,000 NTL(PT) (5) PEC/IO 3133TADZ2 June 17, 2027 --
F ...................... 161,000,000 PT (6) FLT 3133TA E 5 7 June 17, 2027 9.0Yrs
FA...................... 26,000,000 PT (6) FLT 3133TA E 6 5 June 17, 2027 9.0
FB ..................... 27,000,000 PT (6) FLT 3133TA E 7 3 June 17, 2027 9.0
FC ..................... 29,000,000 PT (6) FLT 3133TA E 8 1 June 17, 2027 9.0
FD...................... 30,000,000 PT (6) FLT 3133TA E 9 9 June 17, 2027 9.0
FE ..................... 31,000,000 PT (6) FLT 3133TA E A 6 June 17, 2027 9.0
FG...................... 33,000,000 PT (6) FLT 3133TA E B 4 June 17, 2027 9.0
IA ..................... 100,000,000 NTL(PT) 8% FIX/IO 3133TA E E 8 June 17, 2027 --
S ...................... 337,000,000 NTL(PT) (5) PEC/IO 3133TA F 6 4 June 17, 2027 --
SA...................... 337,000,000 NTL(PT) (6) INV/IO 3133TA F 7 2 June 17, 2027 --
SB ..................... 337,000,000 NTL(PT) (6) INV/IO 3133TA F 8 0 June 17, 2027 --
SC ..................... 337,000,000 NTL(PT) (6) INV/IO 3133TA F 9 8 June 17, 2027 --
R ...................... 0 NPR 0 NPR 3133TA F 4 9 June 17, 2027 --
RS ..................... 0 NPR 0 NPR 3133TA F 5 6 June 17, 2027 --
</TABLE>

================================================================================

(1) The amount shown for a Notional Class is its original notional principal
amount and does not represent principal that will be paid; see "Payments --
Interest" in this Supplement.
(2) See "Description of Multiclass Securities -- Standard Definitions and
Abbreviations for Classes" in the Multiclass Securities Offering Circular.
The abbreviation "PEC" denotes a Class whose Class Coupon varies, in whole
or in part, based upon payments of interest made to or from a related PECs
Class. The type of Class with which a Notional Class will reduce is
indicated in parentheses.
(3) See "Final Payment Dates" in this Supplement.
(4) Determined as described under "Prepayment and Yield Analysis" in this
Supplement, and subject to the assumptions and qualifications in that
section. Prepayments will not occur at the rate assumed, and the actual
weighted average lives of the Classes may differ significantly from those
shown.
(5) Calculated as described under "Terms Sheet -- Class Coupons -- PECs Classes"
in this Supplement. The minimum Class Coupons of the A and S Classes will be
8% and 0%, respectively.
(6) Calculated as shown under "Terms Sheet -- Class Coupons -- Floating Rate and
Inverse Floating Rate Classes" in this Supplement.

------------------------

BEAR, STEARNS & CO. INC.
OFFERING CIRCULAR SUPPLEMENT DATED JUNE 2, 1997
<PAGE> 87

CERTAIN RISK CONSIDERATIONS

THE SECURITIES ARE NOT SUITABLE INVESTMENTS FOR ALL INVESTORS. IN
PARTICULAR, NO INVESTOR SHOULD PURCHASE SECURITIES OF ANY CLASS UNLESS THE
INVESTOR UNDERSTANDS AND IS ABLE TO BEAR THE PREPAYMENT, YIELD, LIQUIDITY AND
MARKET RISKS ASSOCIATED WITH THAT CLASS.
------------------------

THE SECURITIES ARE COMPLEX SECURITIES AND IT IS IMPORTANT THAT EACH
INVESTOR IN ANY CLASS POSSESS, EITHER ALONE OR TOGETHER WITH AN INVESTMENT
ADVISOR, THE EXPERTISE NECESSARY TO EVALUATE THE INFORMATION CONTAINED AND
INCORPORATED IN THIS SUPPLEMENT IN THE CONTEXT OF THAT INVESTOR'S FINANCIAL
SITUATION.
------------------------

The yield of each Class will depend upon its purchase price, its
sensitivity to the rate of principal payments on the Mortgages and the actual
characteristics of the Mortgages. In addition, the yields of the Floating Rate,
Inverse Floating Rate and PECs Classes will be sensitive to the level of LIBOR.
The Mortgages are subject to prepayment at any time without penalty. Mortgage
prepayment rates are likely to fluctuate significantly from time to time, as is
the level of LIBOR. Investors should consider the associated risks, including:

- Fast Mortgage prepayment rates can reduce the yields of the Interest
Only Classes and any other Classes purchased at a premium over their
principal amounts. Under some prepayment scenarios, investors in the
Interest Only Classes could fail to fully recover their investments.

- Slow Mortgage prepayment rates can reduce the yields of the Principal
Only Classes and any other Classes purchased at a discount to their
principal amounts.

- Small differences in the characteristics of the Mortgages can have a
significant effect on the weighted average lives and yields of the
Classes.

- Low levels of LIBOR can reduce the yields of the Floating Rate
Classes.

- High levels of LIBOR can significantly reduce the yields of the
Inverse Floating Rate and PECs Classes and (especially in combination
with fast Mortgage prepayment rates) may result in the failure of
investors in those Classes to fully recover their investments.

- Relatively high levels of LIBOR will reduce, and relatively low levels
of LIBOR will increase, the aggregate amount of interest available for
payments on the PECs Classes. Pursuant to the "Interest Payment
Exchange" feature of the PECs Classes, such interest will be allocated
to the A and S Classes in varying proportions from period to period,
based on applicable levels of LIBOR and on calculated or actual
Mortgage prepayment rates.

See "Prepayment and Yield Analysis" in this Supplement.
------------------------

THE UNDERWRITER INTENDS TO MAKE A MARKET FOR THE PURCHASE AND SALE OF THE
SECURITIES AFTER THEIR INITIAL ISSUANCE BUT HAS NO OBLIGATION TO DO SO. THERE IS
NO ASSURANCE THAT SUCH A SECONDARY MARKET WILL DEVELOP OR, IF IT DEVELOPS, THAT
IT WILL CONTINUE. CONSEQUENTLY, INVESTORS MAY NOT BE ABLE TO SELL THEIR
SECURITIES READILY OR AT PRICES THAT WILL ENABLE THEM TO REALIZE THEIR DESIRED
YIELD. THE MARKET VALUES OF THE SECURITIES ARE LIKELY TO FLUCTUATE; SUCH
FLUCTUATIONS MAY BE SIGNIFICANT AND COULD RESULT IN SIGNIFICANT LOSSES TO
INVESTORS.
------------------------

THE SECONDARY MARKETS FOR MORTGAGE-RELATED SECURITIES HAVE EXPERIENCED
PERIODS OF ILLIQUIDITY AND CAN BE EXPECTED TO DO SO IN THE FUTURE. ILLIQUIDITY
CAN HAVE A SEVERELY ADVERSE EFFECT ON THE PRICES OF SECURITIES THAT ARE
ESPECIALLY SENSITIVE TO PREPAYMENT OR INTEREST RATE RISK OR THAT HAVE BEEN
STRUCTURED TO MEET THE INVESTMENT REQUIREMENTS OF LIMITED CATEGORIES OF
INVESTORS.

FREDDIE MAC'S MULTICLASS MORTGAGE SECURITIES OFFERING CIRCULAR DATED
JANUARY 1, 1997 (THE "MULTICLASS SECURITIES OFFERING CIRCULAR") ACCOMPANIES THIS
SUPPLEMENT. CAPITALIZED TERMS THAT ARE USED IN THIS SUPPLEMENT WITHOUT FURTHER
DEFINITION HAVE THE MEANINGS GIVEN THEM IN THE MULTICLASS SECURITIES OFFERING
CIRCULAR. INVESTORS SHOULD PURCHASE SECURITIES ONLY IF THEY HAVE READ AND
UNDERSTOOD THIS SUPPLEMENT, THE MULTICLASS SECURITIES OFFERING CIRCULAR AND THE
DOCUMENTS LISTED UNDER "AVAILABLE INFORMATION" IN THIS SUPPLEMENT.

S-2
<PAGE> 88

TERMS SHEET

THIS TERMS SHEET CONTAINS SELECTED INFORMATION ABOUT THIS SERIES. INVESTORS
SHOULD REFER TO THE REMAINDER OF THIS SUPPLEMENT FOR FURTHER INFORMATION.

MACR CERTIFICATES

This Series provides for the issuance of Classes (each, a "MACR Class") of
Modifiable and Combinable REMIC Certificates ("MACR Certificates") in exchange
for certain Classes of Multiclass Securities. Holders of such Multiclass
Securities will be entitled to exchange all or a portion of their Multiclass
Securities for related MACR Certificates, and Holders of MACR Certificates will
be entitled to exchange all or a portion of their MACR Certificates for related
Multiclass Securities or MACR Certificates. Appendix 1 to this Supplement shows
the characteristics of the MACR Classes and the "Combinations" of Classes of
Multiclass Securities and MACR Certificates.

See "MACR Certificates" in the Multiclass Securities Offering Circular for
a description of MACR Certificates and procedures for effecting exchanges. The
fee payable to Freddie Mac in connection with each exchange will equal 2/32 of
1% of the outstanding principal amount (exclusive of any notional principal
amount) of the Securities submitted for exchange (but not less than $5,000).

PAYMENT EXCHANGE CERTIFICATES

This Series also provides for the issuance of Classes (each, a "PECs
Class") of Payment Exchange Certificates ("PECs"). On the Closing Date, each
PECs Class will represent the entire beneficial interest in a Class or Classes
of Multiclass Securities, together with the rights and obligations of such PECs
Class under the associated interest payment exchange ("Interest Payment
Exchange"), as described under Class Coupons -- PECs Classes" in this Terms
Sheet and "Payment Exchange Certificates" in this Supplement. On the Closing
Date, the A Class will represent the entire beneficial interest in the IA and SB
Classes, and the S Class will represent the entire beneficial interest in the SC
Class, in each case subject to the Interest Payment Exchange feature of the
PECs.

The Holders of each Class of PECs will be entitled to receive payments of
interest from the underlying Class or Classes of Multiclass Securities, adjusted
for payments under the Interest Payment Exchange. Pursuant to the Interest
Payment Exchange, the A Class in effect will transfer to the S Class the amount
of payments received on the SB Class on each Payment Date in exchange for the
"Interest Payment Supplement Amount," if any, for that Payment Date as described
below.

As described in this Supplement, a Holder or Holders of proportionate
amounts of the Classes of PECs will be entitled, on a one-time basis and upon
payment of a conversion fee, to convert all or a portion of their PECs into the
underlying Multiclass Securities. Once PECs are converted into Multiclass
Securities, the Interest Payment Exchange will terminate as to those PECs and
the converted PECs will not be reissued.

See "Payment Exchange Certificates" in this Supplement for a description of
PECs and procedures for effecting a conversion. The fee payable to Freddie Mac
in connection with a conversion of PECs into Multiclass Securities will equal
2/32 of 1% of the outstanding notional principal amount of the PECs submitted
for conversion (but not more than $60,000).

As used in this Supplement, unless the context requires otherwise, the term
"Securities" includes Multiclass Securities, MACR Certificates and PECs and the
term "Classes" includes Classes of Multiclass Securities, MACR Certificates and
PECs.

CLASS COUPONS

Fixed Rate Classes

The Fixed Rate Classes will bear interest at the Class Coupons shown on the
cover page of this Supplement and on Appendix 1 to this Supplement.

S-3
<PAGE> 89

Principal Only Classes

The PC, PD, PE, PG, PH, PJ and PK Classes will be Principal Only Classes
and will not bear interest.

Floating Rate and Inverse Floating Rate Classes

The Floating Rate and Inverse Floating Rate Classes will bear interest as
follows:

<TABLE>
<CAPTION>
CLASS COUPON SUBJECT TO
---------------------------
CLASS INITIAL RATE* CLASS COUPON MINIMUM RATE MAXIMUM RATE
----- ------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
F, FA, FB, FC, FD, FE and FG............ 6.6875% LIBOR + 1% 1.0% 9.5%
SA...................................... 1.5 8.5% - LIBOR 0 1.5
SB...................................... 1.3125 7.0% - LIBOR 0 1.3125
SC...................................... 0 5.6875% - LIBOR 0 5.6875
</TABLE>

- ---------------

* Initial Rate will be in effect during the first Accrual Period; Class Coupon
will adjust monthly thereafter.

See "Payments -- Interest" in this Supplement and "Description of Multiclass
Securities -- Interest Rate Indices" in the Multiclass Securities Offering
Circular.

PECs Classes

Holders of each PECs Class will receive payments of interest from its
underlying Class or Classes of Multiclass Securities, adjusted as follows
pursuant to the Interest Payment Exchange.

The Holders of the A Class will be entitled to receive, on each Payment
Date, an amount of interest equal to (A) the aggregate amount of interest
received on that Payment Date on the underlying IA and SB Classes, minus (B) the
amount of interest received on that Payment Date on the underlying SB Class (the
"SB Amount") plus (C) commencing August 17, 1997, an amount of interest equal to
the "Interest Payment Supplement Amount" for that Payment Date.

The Holders of the S Class will be entitled to receive, on each Payment
Date, an amount of interest equal to (A) the amount of interest received on that
Payment Date on the underlying SC Class (the "SC Amount") plus (B) the SB Amount
for that Payment Date minus (C) commencing August 17, 1997, the Interest Payment
Supplement Amount for that Payment Date.

The "Interest Payment Supplement Amount" for any given Payment Date
("Payment Date II") is calculated as follows:

1. Determine the "Applicable PSA Rate" for the preceding Payment Date
("Payment Date I") using the "PSA Rate Table" shown below and the
level of LIBOR used to determine the Class Coupons of the Floating
Rate and Inverse Floating Rate Classes for the Accrual Period
applicable to Payment Date I. The "Applicable PSA Rate" for Payment
Date I will be equal to the lesser of (a) the "Calculated PSA Rate"
determined from the table (using linear interpolation for LIBOR
levels between those shown in the PSA Rate Table) and (b) the "Actual
PSA Rate" for Payment Date I. The Actual PSA Rate for Payment Date I
is the one-month PSA prepayment rate of the Mortgages applicable to
Payment Date I, as reflected by the actual reduction made on the
Stripped Giant Securities on Payment Date I.

2. Using the Applicable PSA Rate for Payment Date I and the "Premium
Table" attached as Appendix 2 to this Supplement, determine the
"Premium" for Payment Date I (using linear interpolation for
Applicable PSA Rates between those shown in the Premium Table).

3. The Interest Payment Supplement Amount for Payment Date II is equal
to the lesser of (a) the product of (i) the outstanding notional
principal amount of the A Class as of the Record Date for Payment
Date I, (ii) 1/100 of the Premium for Payment Date I and (iii)
1.006961062, and (b) the sum of the SB and SC Amounts for Payment
Date II.

S-4
<PAGE> 90

PSA RATE TABLE

<TABLE>
<CAPTION>
LIBOR CALCULATED PSA RATE
----- -------------------
<S> <C>
3.6875% and Lower............................. 1,000% PSA
4.6875........................................ 400% PSA
5.1875........................................ 275% PSA
5.6875........................................ 250% PSA
6.1875 and Higher............................. 160% PSA
</TABLE>

As a result of the Interest Payment Exchange, the Class Coupons of the PECs
Classes for each Accrual Period will equal:

<TABLE>
<CAPTION>
CLASS INITIAL RATE* CLASS COUPON
----- ------------- -------------------------------
<S> <C> <C>
A............................. 8.0% 8% + IPSA Percentage
S............................. 1.3125 7% - (LIBOR + IPSA Percentage),
but not less than 0%
</TABLE>

where the "IPSA Percentage" for either PECs Class is equal to the percentage
derived by dividing (a) 12 times the Interest Payment Supplement Amount for the
related Payment Date by (b) the outstanding notional principal amount of such
PECs Class as of the related Record Date.
- ---------------

* Initial Rate will be in effect during the first Accrual Period; Class Coupon
will adjust monthly thereafter.

NOTIONAL CLASSES

MULTICLASS SECURITIES

<TABLE>
<CAPTION>
ORIGINAL NOTIONAL
CLASS PRINCIPAL AMOUNT REDUCES PROPORTIONATELY WITH
- ----- ----------------- ----------------------------
<S> <C> <C>
IA $100,000,000 Stripped Giant Securities
SA 337,000,000 Stripped Giant Securities
SB 337,000,000 Stripped Giant Securities
SC 337,000,000 Stripped Giant Securities
</TABLE>

PECS CLASSES

<TABLE>
<CAPTION>
ORIGINAL NOTIONAL
CLASS PRINCIPAL AMOUNT REDUCES PROPORTIONATELY WITH
- ----- ----------------- ----------------------------
<S> <C> <C>
A $100,000,000 Stripped Giant Securities
S 337,000,000 Stripped Giant Securities
</TABLE>

MACR CLASSES

<TABLE>
<CAPTION>
ORIGINAL NOTIONAL
CLASS PRINCIPAL AMOUNT REDUCES PROPORTIONATELY WITH
- ----- ----------------- ----------------------------
<S> <C> <C>
IC $191,187,500 Stripped Giant Securities
ID 30,875,000 Stripped Giant Securities
IE 32,062,500 Stripped Giant Securities
IG 34,437,500 Stripped Giant Securities
IH 35,625,000 Stripped Giant Securities
IJ 36,812,500 Stripped Giant Securities
IK 39,187,500 Stripped Giant Securities
</TABLE>

See "Payments -- Interest -- Notional Classes" in this Supplement.

ALLOCATION OF PRINCIPAL

MULTICLASS SECURITIES

On each Payment Date, Freddie Mac will pay the "GNMA Principal Payment
Amount" for that Payment Date to F, FA, FB, FC, FD, FE and FG, pro rata, until
retired.

S-5
<PAGE> 91

MACR CLASSES

On any Payment Date when payments of principal are to be allocated from
Multiclass Securities to MACR Certificates, such payments will be allocated from
the applicable Class of Multiclass Securities to the related MACR Class.

See "Payments -- Principal" and "Prepayment and Yield Analysis" in this
Supplement.

FREDDIE MAC GUARANTEE

Freddie Mac guarantees to each Holder of a Security (i) the timely payment
of interest at the applicable Class Coupon and (ii) the payment of the principal
amount of the Holder's Security as described in this Supplement. The Government
National Mortgage Association ("GNMA") guarantees the payment of interest and
principal on GNMA Certificates.

REMIC STATUS

Freddie Mac will form an "Upper-Tier REMIC Pool" and a "Lower-Tier REMIC
Pool" for this Series. Elections will be made to treat each REMIC Pool as a
"real estate mortgage investment conduit" ("REMIC") pursuant to the Internal
Revenue Code (the "Code"). The R and RS Classes will be "Residual Classes" and
the other Classes of Multiclass Securities will be "Regular Classes." The
Residual Classes will be subject to transfer restrictions. See "Certain Federal
Income Tax Consequences" in this Supplement and in the Multiclass Securities
Offering Circular.

WEIGHTED AVERAGE LIVES (IN YEARS)*

<TABLE>
<CAPTION>
PSA PREPAYMENT ASSUMPTION
---------------------------------
0% 100% 160% 300% 500%
-- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
C, D, E, F, FA, FB, FC, FD,
FE, FG, G, H, J, K, L, M, N,
O, PC, PD, PE, PG, PH, PJ,
PK, Q, T and U and
Underlying GNMA-Related
Securities.................. 20.5 11.7 9.0 5.6 3.7
</TABLE>

--------------------
* Determined as described under "Prepayment and Yield Analysis" in
this Supplement, and subject to the assumptions and qualifications
in that section. Prepayments will not occur at any assumed rate
shown or any other constant rate and the actual weighted average
lives of any or all of the Classes and of the GNMA-Related
Securities are likely to differ from those shown, perhaps
significantly.

THE STRIPPED GIANT SECURITIES

As of the Closing Date, the Stripped Giant Securities will consist of
$500,187,500 of 8% Giant IO Securities and $337,000,000 of Giant PO Securities.
The Stripped Giant Securities will be backed by GNMA-Related Securities having
interest rates of 8.0% per annum. See "General Information -- Structure of
Transaction" in this Supplement.

ASSUMED MORTGAGE CHARACTERISTICS (AS OF JUNE 1, 1997)

<TABLE>
<CAPTION>
PER ANNUM
INTEREST RATE
REMAINING TERM OF RELATED
TO MATURITY LOAN AGE PER ANNUM GNMA-RELATED
PRINCIPAL BALANCE (IN MONTHS) (IN MONTHS) INTEREST RATE SECURITIES
- ----------------- -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
$337,000,000 356 3 8.5% 8.0%
</TABLE>

The actual remaining terms to maturity and loan ages of most of the
Mortgages differ from those shown above, in some cases significantly. See
"General Information -- Structure of Transaction" and "-- The Mortgages" in this
Supplement.

S-6
<PAGE> 92

Annex 2(c)

Cover Page and Terms Sheet
for

Offering Circular Supplement
dated March 4, 1998
to
Offering Circular
Dated April 1, 1998
Relating to

Federal Home Loan Mortgage Corporation
Multiclass REMIC Certificates and Modifiable and Combinable REMIC Certificates,
Series 2043
<PAGE> 93

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE> 94

OFFERING CIRCULAR SUPPLEMENT
(TO OFFERING CIRCULAR DATED APRIL 1, 1998)

$3,556,087,547
FREDDIE MAC
MULTICLASS REMIC CERTIFICATES
AND MODIFIABLE AND COMBINABLE REMIC CERTIFICATES, SERIES 2043

(LOGO)

<TABLE>
<S> <C>
Offered Securities: Classes of REMIC Certificates (Multiclass PCs) listed below;
MACR Classes listed on Appendix 1 to this Supplement
Guarantee: Principal and interest guaranteed by Freddie Mac, as
described in this Supplement
Tax Status: REMIC (Double-Tier)
Underlying Assets: Five Asset Groups, consisting of two Groups of Freddie Mac
7.0% PCs (Gold PCs and Gold Giant PCs), one Group of
Freddie Mac 6.5% PCs, one Group of Freddie Mac 6.0% PCs
and one Group of Freddie Mac Multiclass PCs
Payment Dates: Monthly, beginning May 15, 1998
Form of Securities: Regular and MACR Classes: Book-entry (Federal Reserve Banks)
Residual Classes (R and RS): Certificated
Offering Terms: Classes offered in negotiated transactions at varying prices
through Bear, Stearns & Co. Inc. (the "Underwriter")
Closing Date: April 30, 1998
</TABLE>

THE RISKS ASSOCIATED WITH THE SECURITIES MAY MAKE THEM UNSUITABLE FOR SOME
INVESTORS. SEE "CERTAIN RISK CONSIDERATIONS" AND "PREPAYMENT AND YIELD ANALYSIS"
IN THIS SUPPLEMENT.

INVESTORS SHOULD READ THIS SUPPLEMENT IN CONJUNCTION WITH THE DOCUMENTS LISTED
UNDER "AVAILABLE INFORMATION" IN THIS SUPPLEMENT.

<TABLE>
<CAPTION>
CLASS OF ORIGINAL WEIGHTED
REMIC PRINCIPAL PRINCIPAL OR CLASS INTEREST CUSIP FINAL PAYMENT AVERAGE
CERTIFICATES AMOUNT(1) OTHER TYPE(2) COUPON TYPE(2) NUMBER DATE(3) LIFE(4)
------------ --------- ------------- ------ -------- ------ ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
GROUP 1
A ................... $40,000,000 CPT/SCH 6.5% FIX 3133TDMA1 September 15, 2025 3.3Yrs
AB .................. 50,000,000 CPT/SCH 6.5 FIX 3133TDMB9 September 15, 2025 3.4
AC .................. 50,000,000 CPT/SCH 6.7 FIX 3133TDMC7 September 15, 2025 3.4
B ................... 56,632,500 TAC/AD 6.7 FIX 3133TDMD5 September 15, 2025 3.6
E ................... 77,078,500 TAC/AD 6.25 FIX 3133TDMR4 September 15, 2025 3.6
FA .................. 101,788,554 CPT (5) FLT 3133TDMW3 April 15, 2028 7.0
IA .................. 50,990,351 NTL(PAC) 7.0 FIX/IO 3133TDN77 January 15, 2018 --
IB .................. 34,978,000 NTL(PAC) 7.0 FIX/IO 3133TDN85 April 15, 2028 --
ID .................. 11,490,786 NTL(PAC) 7.0 FIX/IO 3133TDNA0 December 15, 2027 --
PB .................. 196,548,500 PAC 6.0 FIX 3133TDNE2 December 15, 2017 2.5
PC .................. 91,462,000 PAC 6.25 FIX 3133TDNF9 November 15, 2019 5.0
PG .................. 300,000,000 PAC 6.75 FIX 3133TDNG7 December 15, 2025 10.2
PJ .................. 204,779,000 PAC 6.5 FIX 3133TDNH5 August 15, 2025 8.0
PK .................. 49,183,000 PAC 6.5 FIX 3133TDNJ1 August 15, 2026 12.0
PL .................. 40,710,000 PAC 6.5 FIX 3133TDNK8 June 15, 2027 14.5
PM................... 33,533,400 PAC 6.25 FIX 3133TDNL6 April 15, 2006 0.8
PN .................. 25,601,100 PAC 6.25 FIX 3133TDNM4 December 15, 2017 4.2
PQ .................. 100,000,000 PAC 6.0 FIX 3133TDNP7 June 15, 2016 2.6
SA .................. 60,613,000 NTL(TAC/AD) (5) INV/IO 3133TDNU6 September 15, 2025 --
SB .................. 6,645,334 TAC/AD (5) INV 3133TDNV4 April 15, 2028 1.5
SC .................. 5,119,112 SUP (5) INV 3133TDNW2 April 15, 2028 25.4
VE .................. 23,495,000 AD 6.5 FIX 3133TDP91 April 15, 2008 5.5
VG .................. 19,099,000 AD 6.5 FIX 3133TDPA8 April 15, 2013 12.6
VH................... 5,071,000 AD 6.5 FIX 3133TDPB6 May 15, 2014 15.5
Z ................... 50,555,000 TAC 7.0 FIX/Z 3133TDPF7 April 15, 2028 12.2
ZA .................. 9,939,000 SUP 7.0 FIX/Z 3133TDPG5 March 15, 2028 19.4
ZB .................. 70,000,000 TAC 7.0 FIX/Z 3133TDPH3 November 15, 2025 2.9
ZP .................. 25,954,000 PAC 6.5 FIX/Z 3133TDPP5 April 15, 2028 21.1
GROUP 2
C ................... 56,628,400 SEQ 9.0 FIX 3133TDME3 January 15, 2025 4.5
D ................... 100,100,800 SEQ 6.5 FIX 3133TDMM5 January 15, 2025 4.5
DA................... 50,000,000 SEQ 6.25 FIX 3133TDMN3 November 15, 2022 3.5
DB .................. 14,160,400 SEQ 6.5 FIX 3133TDMP8 January 15, 2025 8.4
DV .................. 40,000,000 CPT/SEQ 6.5 FIX 3133TDMQ6 January 15, 2025 4.4
IC .................. 6,912,435 NTL(AD/SEQ) 7.0 FIX/IO 3133TDN93 January 15, 2016 --
VA .................. 9,648,400 AD/SEQ/LIQ 5.75 FIX 3133TDP59 April 15, 2003 2.6
VB .................. 6,222,000 AD/SEQ 6.0 FIX 3133TDP67 April 15, 2005 6.0
VC .................. 6,724,000 AD/SEQ 6.25 FIX 3133TDP75 February 15, 2007 7.9
VD .................. 47,375,500 AD/SEQ 6.5 FIX 3133TDP83 January 15, 2016 11.0
</TABLE>

<TABLE>
<CAPTION>
CLASS OF ORIGINAL WEIGHTED
REMIC PRINCIPAL PRINCIPAL OR CLASS INTEREST CUSIP FINAL PAYMENT AVERAGE
CERTIFICATES AMOUNT(1) OTHER TYPE(2) COUPON TYPE(2) NUMBER DATE(3) LIFE(4)
------------ --------- ------------- ------ -------- ------ ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
ZC .................. $29,749,000 SEQ 7.0% FIX/Z 3133TDPJ9 April 15, 2028 17.8Yrs
GROUP 3
CB .................. 76,480,000 PAC 6.0 FIX 3133TDMF0 August 15, 2009 2.5
CD .................. 117,900,000 PAC 6.0 FIX 3133TDMG8 September 15, 2016 4.0
CE .................. 139,795,000 PAC 6.0 FIX 3133TDMH6 December 15, 2020 6.0
CG................... 111,475,000 PAC 6.25 FIX 3133TDMJ2 June 15, 2023 8.0
CH................... 181,015,000 PAC 6.0 FIX 3133TDMK9 August 15, 2026 11.0
CJ .................. 124,900,000 PAC 6.5 FIX 3133TDML7 April 15, 2028 18.1
FB .................. 60,878,235 TAC/AD (5) FLT 3133TDMX1 March 15, 2027 2.5
G ................... 164,952,500 SCH 6.5 FIX 3133TDMY9 April 15, 2028 3.5
GA................... 50,000,000 CPT/SCH 6.5 FIX 3133TDMZ6 April 15, 2028 3.3
GB .................. 50,000,000 CPT/SCH 6.5 FIX 3133TDN28 April 15, 2028 3.6
GC................... 16,461,250 TAC/AD 7.0 FIX 3133TDN36 July 15, 2006 4.5
GD................... 8,962,500 TAC/AD 7.0 FIX 3133TDN44 August 15, 2009 9.8
GE .................. 37,500,000 TAC/AD 7.0 FIX 3133TDN51 January 15, 2018 14.0
GH................... 35,031,607 TAC/AD 7.0 FIX 3133TDN69 January 15, 2023 16.7
IE .................. 29,993,269 NTL(PAC) 6.5 FIX/IO 3133TDNB8 June 15, 2023 --
IG .................. 13,924,230 NTL(PAC) 6.5 FIX/IO 3133TDNC6 August 15, 2026 --
PT .................. 9,169,643 TAC 0.0 PO 3133TDNQ5 April 15, 2028 20.1
SD .................. 18,731,765 TAC/AD (5) INV 3133TDNX0 March 15, 2027 2.5
ZD .................. 25,497,500 SUP 6.5 FIX/Z 3133TDPK6 April 15, 2028 11.0
ZE .................. 21,250,000 TAC 7.0 FIX/Z 3133TDPL4 April 15, 2028 22.9
GROUP 4
EA .................. 125,000,000 SEQ 6.0 FIX 3133TDMS2 February 15, 2024 5.5
EB .................. 15,235,624 SEQ 6.0 FIX 3133TDMT0 April 15, 2025 12.0
EC .................. 12,534,105 SEQ 6.0 FIX 3133TDMU7 September 15, 2004 0.8
VJ .................. 8,172,116 AD/SEQ/LIQ 6.0 FIX 3133TDPC4 May 15, 2003 2.6
VK .................. 3,679,894 AD/SEQ 6.0 FIX 3133TDPD2 March 15, 2005 6.0
VL .................. 15,687,369 AD/SEQ 6.0 FIX 3133TDPE0 May 15, 2011 10.2
ZG .................. 2,830,938 SEQ 6.0 FIX/Z 3133TDPM2 August 15, 2013 13.4
ZH................... 20,348,894 SEQ 6.0 FIX/Z 3133TDPN0 April 15, 2028 19.6
GROUP 5
F ................... 66,858,653 SC/PT (5) FLT 3133TDMV5 December 15, 2023 16.5
PO .................. 41,937,454 SC/PT 0.0 PO 3133TDNN2 December 15, 2023 16.5
SJ .................. 38,223,084 SC/NTL(PT) (5) INV/IO 3133TDNZ5 December 15, 2023 --
SK .................. 3,714,370 SC/NTL(PT) (5) INV/IO 3133TDP26 December 15, 2023 --
RESIDUAL
R ................... 0 NPR 0.0 NPR 3133TDNR3 April 15, 2028 --
RS .................. 0 NPR 0.0 NPR 3133TDNS1 April 15, 2028 --
</TABLE>

================================================================================
(1) The amount shown for a Notional Class is its original notional principal
amount and does not represent principal that will be paid; see
"Payments -- Interest" in this Supplement.
(2) See "Description of Securities -- Standard Definitions and Abbreviations for
Classes" in the Offering Circular. The type of Class or Component with which
a Notional Class will reduce is indicated in parentheses.
(3) See "Final Payment Dates" in this Supplement.
(4) Determined as described under "Prepayment and Yield Analysis" in this
Supplement, and subject to the assumptions and qualifications in that
section. Weighted average lives are calculated at the "Prepayment
Assumption" shown under "Certain Federal Income Tax Consequences -- Regular
Classes" in this Supplement. Prepayments will not occur at the rates
assumed, and the actual weighted average lives of the Classes may differ
significantly from those shown.
(5) Calculated as shown under "Terms Sheet -- Class Coupons" in this Supplement.
BEAR, STEARNS & CO. INC.
OFFERING CIRCULAR SUPPLEMENT DATED MARCH 4, 1998
<PAGE> 95

CERTAIN RISK CONSIDERATIONS

THE SECURITIES ARE COMPLEX SECURITIES AND IT IS IMPORTANT THAT EACH INVESTOR
IN ANY CLASS POSSESS, EITHER ALONE OR TOGETHER WITH AN INVESTMENT ADVISOR, THE
EXPERTISE NECESSARY TO EVALUATE THE INFORMATION CONTAINED AND INCORPORATED IN
THIS SUPPLEMENT IN THE CONTEXT OF THAT INVESTOR'S FINANCIAL SITUATION.
------------------------

The yield of each Class will depend upon its purchase price, the rate of
principal payments on the related Assets (which will be sensitive to the rate of
principal payments on the related Mortgages) and the actual characteristics of
the related Mortgages. The yields of the Floating Rate and Inverse Floating Rate
Classes will also be sensitive to the level of LIBOR. In addition, principal
payments on the Mortgages underlying the Group 5 Assets will be allocated among
the various Classes of Series 1634, and such allocations will affect the
sensitivity of each related Class of this Series to Mortgage prepayment rates
generally. The Mortgages are subject to prepayment at any time without penalty.
Mortgage prepayment rates are likely to fluctuate significantly from time to
time, as is the level of LIBOR. Investors should consider the associated risks,
including:

- Fast prepayment rates on the related Mortgages can reduce the yields of
the Interest Only Classes and any other Classes purchased at a premium
over their principal amounts. Under some prepayment scenarios, investors
in the Interest Only Classes could fail to fully recover their
investments.
- Slow prepayment rates on the related Mortgages can reduce the yields of
the Principal Only Classes and any other Classes purchased at a discount
to their principal amounts.
- Small differences in the characteristics of the Mortgages can have a
significant effect on the weighted average lives and yields of the
related Classes.
- Low levels of LIBOR can reduce the yields of the Floating Rate Classes.
Conversely, high levels of LIBOR can significantly reduce the yields of
the Inverse Floating Rate Classes and (especially in combination with
fast Mortgage prepayment rates) may result in the failure of investors
in the SA, SH, SJ and SK Classes to fully recover their investments.
- In general, principal payment rates on the Support, TAC and Scheduled
Classes are likely to exhibit a higher sensitivity to prepayments on the
related Mortgages than are principal payment rates on the PAC Classes.
- The Group 5 Assets are Support Classes. In general, principal payment
rates on the Group 5 Assets are likely to exhibit a high degree of
sensitivity to Mortgage prepayments.

See "Prepayment and Yield Analysis" in this Supplement.
------------------------

FREDDIE MAC'S MULTICLASS REMIC CERTIFICATES OFFERING CIRCULAR DATED APRIL 1,
1998 (THE "OFFERING CIRCULAR") ACCOMPANIES THIS SUPPLEMENT. CAPITALIZED TERMS
THAT ARE USED IN THIS SUPPLEMENT WITHOUT FURTHER DEFINITION HAVE THE MEANINGS
GIVEN THEM IN THE OFFERING CIRCULAR. INVESTORS SHOULD PURCHASE SECURITIES ONLY
IF THEY HAVE READ AND UNDERSTOOD THIS SUPPLEMENT, THE OFFERING CIRCULAR AND THE
DOCUMENTS LISTED UNDER "AVAILABLE INFORMATION" IN THIS SUPPLEMENT.

S-2
<PAGE> 96

TERMS SHEET

THIS TERMS SHEET CONTAINS SELECTED INFORMATION ABOUT THIS SERIES. INVESTORS
SHOULD REFER TO THE REMAINDER OF THIS SUPPLEMENT FOR FURTHER INFORMATION.

MACR CERTIFICATES

This Series provides for the issuance of Classes (each, a "MACR Class") of
Modifiable and Combinable REMIC Certificates ("MACR Certificates") in exchange
for certain Classes of REMIC Certificates. Holders of such REMIC Certificates
will be entitled to exchange all or a portion of their REMIC Certificates for
related MACR Certificates, and Holders of MACR Certificates will be entitled to
exchange all or a portion of their MACR Certificates for related REMIC
Certificates. Appendix 1 to this Supplement shows the characteristics of the
MACR Classes and the "Combinations" of Classes of REMIC Certificates and MACR
Certificates.

See "MACR Certificates" in the Offering Circular for a description of MACR
Certificates and procedures for effecting exchanges. The fee payable to Freddie
Mac in connection with each exchange (except for an exchange involving
Combination 3) will equal 2/32 of 1% of the outstanding principal amount
(exclusive of any notional principal amount) of the Securities submitted for
exchange (but not less than $5,000). The fee payable to Freddie Mac in
connection with an exchange involving Combination 3 will equal 2/32 of 1% of the
outstanding notional principal amount of the Securities submitted for exchange
(but not less than $5,000 or more than $60,000).

CLASS COUPONS

The Fixed Rate Classes will bear interest at the Class Coupons shown on the
cover page of this Supplement and on Appendix 1 to this Supplement.

The PO and PT Classes will be Principal Only Classes and will not bear
interest.

The Floating Rate and Inverse Floating Rate Classes will bear interest as
follows:

REMIC CERTIFICATES

<TABLE>
<CAPTION>
CLASS COUPON SUBJECT TO
INITIAL ---------------------------
CLASS RATE(1) CLASS COUPON(2) MINIMUM RATE MAXIMUM RATE
----- ------- -------------------------------------- ------------ ------------
<S> <C> <C> <C> <C>
F..................... 6.65625% LIBOR + 1.00% 1.00% 9.0%
FA.................... 6.1375 LIBOR + 0.45% 0.45 9.0
FB.................... 6.0875 LIBOR + 0.40% 0.40 8.5
SA.................... 2.8625 8.55% - LIBOR 0 8.55
SB and SC............. 10.01875 29.925% - (LIBOR X 3.5) 0 29.925
SD.................... 7.840625 26.325% - (LIBOR X 3.25) 0 26.325
SJ.................... 3.2248575 13.11877% - (LIBOR X 1.7492) 0 13.11877
SK.................... 9.0 144.0% - (LIBOR X 18) 0 9.0
</TABLE>

MACR CLASSES

<TABLE>
<CAPTION>
CLASS COUPON SUBJECT TO
---------------------------
INITIAL MINIMUM MAXIMUM
CLASS RATE(1) CLASS COUPON(2) RATE RATE
----- ------- -------------------------------------- ------- -------
<S> <C> <C> <C> <C>
S and SH.............. 3.73651041% 12.753973517% - (LIBOR X 1.5942746198) 0% 12.753973517%
SL.................... 3.2248575 13.11877% - (LIBOR X 1.7492) 0 13.11877
SM.................... 9.0 144.0% - (LIBOR X 18) 0 9.0
</TABLE>

-----------------------

(1) Initial Rate will be in effect during the first Accrual Period;
Class Coupon will adjust monthly thereafter.
(2) LIBOR will be determined using the "BBA Method." See "Description of
Securities -- Interest Rate Indices" in the Offering Circular.

See "Payments -- Interest" in this Supplement.

S-3
<PAGE> 97

NOTIONAL CLASSES

REMIC CERTIFICATES

<TABLE>
<CAPTION>
ORIGINAL NOTIONAL
CLASS PRINCIPAL AMOUNT REDUCES PROPORTIONATELY WITH
- ----- ----------------- ----------------------------------------------------
<S> <C> <C>
IA $ 1,498,179 A-1 and AB-1, in the aggregate (PAC Components)
42,364,071 PB and PQ, in the aggregate (PAC Classes)
440,764 AC-1 (PAC Component)
6,687,337 PM, PN and the first $3,280,643 of PC (PAC Classes)
-----------
$50,990,351
===========
IB $ 9,448,000 The last $88,181,357 of PC (PAC Class)
13,153,250 PJ, PK, PL, VE, VG, VH and ZP, in the aggregate (PAC
and Accretion Directed Classes)
10,714,286 PG (PAC Class)
1,662,464 The last $46,549,000 of VE, VG, VH and ZP, in the
aggregate (PAC and Accretion Directed Classes)
-----------
$34,978,000
===========
IC $ 3,580,221 DV-2 and VD, in the aggregate (Accretion
Directed/Sequential Pay Class and Component)
1,722,929 VA (Accretion Directed/Sequential Pay Class)
888,857 VB (Accretion Directed/Sequential Pay Class)
720,428 VC (Accretion Directed/Sequenial Pay Class)
-----------
$ 6,912,435
===========
ID $10,524,000 PJ, PK and PL, in the aggregate (PAC Classes)
966,786 The first $27,070,000 of VE, VG, VH and ZP, in the
aggregate (PAC and Accretion Directed Classes)
-----------
$11,490,786
===========
IE $25,705,769 CB, CD and CE, in the aggregate (PAC Classes)
4,287,500 CG (PAC Class)
-----------
$29,993,269
===========
IG $13,924,230 CH (PAC Class)
SA $60,313,000 FA-1 (TAC/Accretion Directed Component)
SJ $38,223,084 F (Pass-Through Class)
SK $ 3,714,370 F (Pass-Through Class)
</TABLE>

MACR CLASS

<TABLE>
<S> <C> <C>
SH $41,937,454 F (Pass-Through Class)
</TABLE>

See "Payments -- Interest -- Notional Classes" in this Supplement.

S-4
<PAGE> 98

COMPONENTS

<TABLE>
<CAPTION>
ORIGINAL
DESIGNATION PRINCIPAL AMOUNT PRINCIPAL TYPE*
- ----------- ---------------- ---------------
<S> <C> <C>
A-1 $ 10,690,000 PAC
A-2 29,310,000 TAC/AD
------------
$ 40,000,000
============
AB-1 $ 10,284,500 PAC
AB-2 39,715,500 TAC/AD
------------
$ 50,000,000
============
AC-1 $ 10,284,500 PAC
AC-2 39,715,500 TAC/AD
------------
$ 50,000,000
============
DV-1 $ 37,252,400 SEQ
DV-2 2,747,600 AD/SEQ
------------
$ 40,000,000
============
FA-1 $ 60,613,000 TAC/AD
FA-2 23,258,666 TAC/AD
FA-3 17,916,888 SUP
------------
$101,788,554
============
GA-1 $ 8,750,000 PAC
GA-2 41,250,000 SCH
------------
$ 50,000,000
============
GB-1 $ 6,250,000 PAC
GB-2 25,000,000 PAC
GB-3 18,750,000 SCH
------------
$ 50,000,000
============
</TABLE>

--------------------------
* See "Description of Securities -- Standard Definitions and
Abbreviations for Classes" in the Offering Circular.

See "Payments -- Principal -- Component Classes" in this Supplement.

S-5
<PAGE> 99

ALLOCATION OF PRINCIPAL

REMIC CERTIFICATES

On each Payment Date, Freddie Mac will pay:

ACCRETION
DIRECTED
AND
ACCRUAL
- The "ZP Accrual Amount" for that Payment Date to VE, VG and VH, in
that order, until retired, and then to ZP

- The "Z/ZA/ZB Accrual Amount" for that Payment Date to the Classes and
Components shown below in the following order of priority:

ACCRETION
DIRECTED
1. To A-2, AB-2, AC-2, B, E and FA-1, pro rata, until retired
2. To FA-2 and SB, pro rata, until retired
3. To ZB and Z, in that order, until retired

ACCRUAL
4. To ZA

- The "Group 1 Asset Principal Amount" for that Payment Date to the
Classes and Components shown below in the following order of priority:

PAC
1. To the following PAC Classes and Components, until reduced to their
"Targeted Balances" for that Payment Date, allocated concurrently:
(A) 8.0784717089% to A-1, AB-1 and AC-1, pro rata
(B) 50.7953388363% to PB
(C) 41.1261894548% to PM, PQ and PN, in that order

2. To PC, until reduced to its Targeted Balance for that Payment Date

3. 48.2515255524% of the remainder of the Group 1 Asset Principal
Amount to PG, until reduced to its Targeted Balance for that Payment
Date

4. To PJ, PK, PL and ZP, in that order, until reduced to their Targeted
Balances for that Payment Date

5. To the TAC Classes and Components, until reduced to their Targeted
Balances for that Payment Date, allocated:

TAC
(A) To A-2, AB-2, AC-2, B, E and FA-1, pro rata, while outstanding,
and then

(B) To FA-2 and SB, pro rata, while outstanding, and then

SUPPORT
6. To ZA, until retired

7. To FA-3 and SC, pro rata, until retired

TAC
8. To FA-2 and SB, pro rata, until retired

9. To ZB, until retired

10. To A-2, AB-2, AC-2, B, E and FA-1, pro rata, until retired

11. To Z, until retired

S-6
<PAGE> 100

12. Concurrently:

( (A) 8.0784717089% to A-1, AB-1 and AC-1, pro rata, until retired
( (B) 50.7953388363% to PB, until retired
( (C) 41.1261894548% to PM, PQ and PN, in that order, until retired
PAC ( 13. To PC, until retired
(
( 14. Concurrently, until PL is retired:
( (A) 51.7484744476% to PJ, PK and PL, in that order, and
( (B) 48.2515255524% to PG

ACCRETION (15. To VE, VG and VH, in that order, until retired
DIRECTED (

( 16. 48.2515255524% of the remainder of the Group 1 Asset Principal
PAC ( Amount to PG, until PG is retired
( 17. To ZP, until retired

- The "ZC Accrual Amount" for that Payment Date to the Classes and
Component shown below in the following order of priority:

ACCRETION ( 1. To DV-2 and VA, pro rata, until retired
DIRECTED ( 2. To VB, VC and VD, in that order, until retired

ACCRUAL ( 3. To ZC

- The "Group 2 Asset Principal Amount" for that Payment Date to the
Classes and Components shown below in the following order of priority:

( 1. Concurrently, until DA is retired:
(
( (A) 22.4355908013% to C
( (B) 38.7774990379% to D
( (C) 24.3559080126% to DA
( (D) 14.4310021482% to DV-1
(
SEQUENTIAL( 2. Concurrently:
PAY ( (A) 19.9999999998% to C, until retired
( (B) 38.7770987458% to D, until retired
( (C) 26.7920458631% to DB, until retired
( (D) 14.4308553913% to DV-1, until retired
(
( 3. To DV-2 and VA, pro rata, until retired
(
( 4. To VB, VC, VD and ZC, in that order, until retired

ACCRETION - The "ZE Accrual Amount" for that Payment Date to GC, GD, GE
DIRECTED and GH,in that order, until retired, and then to ZE
AND
ACCRUAL

- The "ZD Accrual Amount" for that Payment Date to the Classes shown
below in the following order of priority:

( 1. To FB and SD, pro rata, until reduced to their Targeted Balances
ACCRETION ( for that Payment Date
DIRECTED ( 2. Concurrently, until reduced to their Targeted Balances for that
Payment Date:
(A) 92.8571419669% to GC, GD, GE, GH and ZE, in that order, and
(B) 7.1428580331% to PT

ACCRUAL ( 3. To ZD

S-7
<PAGE> 101

- The "Group 3 Asset Principal Amount" for that Payment Date to the
Classes and Components shown below in the following order of priority:

1. Beginning April 15, 2000, to the following PAC Classes and
Components, until reduced to their Targeted Balances for that
Payment Date, allocated:

PAC
(A) To CB, GA-1 and GB-1, pro rata, while outstanding, and then
(B) To CD and GB-2, pro rata, while outstanding, and then
(C) To CE, CG, CH and CJ, in that order

SCHEDULE

2. To G, GA-2 and GB-3, pro rata, until reduced to their Targeted
Balances for that Payment Date

3. To the TAC Classes, until reduced to their Targeted Balances for
that Payment Date, allocated:

TAC
(A) To FB and SD, pro rata, while outstanding, and then
(B) Concurrently:
(i) 92.8571419669% to GC, GD, GE, GH and ZE, in that order
(ii) 7.1428580331% to PT
SUPPORT
4. To ZD, until retired

TAC
5. To FB and SD, pro rata, until retired

6. Concurrently:
(A) 92.8571419669% to GC, GD, GE, GH and ZE, in that order, until
retired
(B) 7.1428580331% to PT, until retired

SCHEDULED
7. To G, GA-2 and GB-3, pro rata, until retired

PAC
8. To the PAC Classes and Components as described in step 1, but
without regard to their Targeted Balances, until retired

ACCRETION
DIRECTED
AND
ACCRUAL
- The "ZG/ZH Accrual Amount" for that Payment Date to VJ, VK, VL and ZG,
in that order, until retired, and then to ZH

SEQUENTIAL
PAY
- The "Group 4 Asset Principal Amount" for that Payment Date to EC, EA,
EB, VJ, VK, VL, ZG and ZH, in that order, until retired

PASS-
THROUGH
- The "Group 5 Asset Principal Amount" for that Payment Date to F and
PO, pro rata, until retired

S-8
<PAGE> 102

The Targeted Balances (shown under "Payments -- Principal -- Targeted
Balances Schedules" in this Supplement) were structured using, among other
things, the following structuring ranges and rates:

<TABLE>
<CAPTION>
CLASS OR COMPONENT STRUCTURING RANGE OR RATE
------------------ -------------------------
<S> <C>
Group 1 PAC
PB, PC, PG, PJ, PK, PL, PM, PN, PQ, ZP, A-1, AB-1 and
AC-1................................................... 100% PSA - 250% PSA
Group 3 PAC
CB, CD, CE, CG, CH, CJ, GA-1, GB-1 and GB-2............... 100% PSA - 250% PSA
Group 3 Scheduled
G, GA-2 and GB-3.......................................... 150% PSA - 195% PSA
Group 1 TAC
B, E, SB, Z, ZB, A-2, AB-2, AC-2, FA-1 and FA-2........... 215% PSA
Group 3 TAC
FB, GC, GD, GE, GH, PT, SD and ZE......................... 170% PSA
</TABLE>

MACR CLASSES

On any Payment Date when payments of principal are to be allocated from
REMIC Certificates to related MACR Certificates, such payments will be allocated
from the applicable Class or Classes of REMIC Certificates to the related MACR
Class.

See "Payments -- Principal" and "Prepayment and Yield Analysis" in this
Supplement.

FREDDIE MAC GUARANTEE

REMIC STATUS

Freddie Mac will form an "Upper-Tier REMIC Pool" and a "Lower-Tier REMIC
Pool" for this Series. Elections will be made to treat both REMIC Pools as "real
estate mortgage investment conduits" ("REMICs") pursuant to the Internal Revenue
Code. The R and RS Classes will be "Residual Classes" and the other Classes of
REMIC Certificates will be "Regular Classes." The Residual Classes will be
subject to transfer restrictions. See "Certain Federal Income Tax Consequences"
in this Supplement and the Offering Circular.

S-9
<PAGE> 103

WEIGHTED AVERAGE LIVES (IN YEARS)*

Group 1

<TABLE>
<CAPTION>
PSA PREPAYMENT ASSUMPTION
---------------------------------
0% 100% 205% 250% 500%
-- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
A............................. 9.8 7.5 3.3 2.9 1.7
AB and AC..................... 9.9 8.0 3.4 3.0 1.7
B and E....................... 10.3 9.4 3.6 3.1 1.6
FA............................ 15.4 14.0 7.0 2.4 1.1
PB............................ 8.6 2.5 2.5 2.5 2.1
PC............................ 15.5 5.0 5.0 5.0 3.2
PG............................ 21.3 10.2 10.2 10.2 5.6
PJ............................ 19.8 8.0 8.0 8.0 4.4
PK............................ 23.1 12.0 12.0 12.0 6.3
PL............................ 24.1 14.5 14.5 14.5 7.7
PM............................ 2.5 0.8 0.8 0.8 0.8
PN............................ 13.8 4.2 4.2 4.2 2.9
PQ............................ 9.3 2.6 2.6 2.6 2.3
SB............................ 17.7 14.6 1.5 1.4 0.6
SC............................ 29.6 29.2 25.4 1.5 0.3
VE............................ 5.5 5.5 5.5 5.5 5.4
VG............................ 12.6 12.6 12.6 12.6 8.9
VH............................ 15.5 15.5 15.5 15.5 9.3
Z............................. 27.7 22.8 12.2 6.4 2.2
ZA............................ 29.2 27.3 19.4 0.5 0.1
ZB............................ 23.7 17.3 2.9 1.5 0.8
ZP............................ 25.4 21.1 21.1 21.1 12.6
Group 1 Assets................ 20.0 11.4 7.4 6.4 3.6
</TABLE>

Group 2

<TABLE>
<CAPTION>
PSA PREPAYMENT ASSUMPTION
---------------------------------
0% 100% 195% 250% 500%
-- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
C............................. 16.7 7.2 4.5 3.7 2.2
D............................. 16.9 7.3 4.5 3.8 2.3
DA............................ 14.9 5.6 3.5 3.0 1.9
DB............................ 24.6 13.7 8.4 6.9 3.8
DV............................ 15.9 7.0 4.4 3.7 2.3
VA............................ 2.6 2.6 2.6 2.6 2.6
VB............................ 6.0 6.0 6.0 6.0 4.6
VC............................ 7.9 7.9 7.9 7.8 4.7
VD............................ 13.7 13.6 11.0 9.4 5.6
ZC............................ 27.8 22.5 17.8 15.5 9.2
Group 2 Assets................ 20.0 11.5 7.7 6.4 3.6
</TABLE>

--------------------

* Determined as described under "Prepayment and Yield Analysis" in this
Supplement, and subject to the assumptions and qualifications in that
section. Prepayments will not occur at any assumed rate shown or any
other constant rate and the actual weighted average lives of any or all
of the Classes and of the Assets are likely to differ from those shown,
perhaps significantly.

S-10
<PAGE> 104

Group 3

<TABLE>
<CAPTION>
PSA PREPAYMENT ASSUMPTION
---------------------------------
0% 100% 170% 250% 400%
-- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CB............................ 4.8 2.5 2.5 2.5 2.5
CD............................ 10.4 4.0 4.0 4.0 3.5
CE............................ 15.1 6.0 6.0 6.0 4.4
CG............................ 18.3 8.0 8.0 8.0 5.4
CH............................ 21.2 11.0 11.0 11.0 7.3
CJ............................ 23.9 18.1 18.1 18.1 12.3
FB and SD..................... 13.4 12.9 2.5 1.5 1.0
G............................. 23.2 9.2 3.5 3.2 2.0
GA............................ 20.0 8.0 3.3 3.0 2.1
GB............................ 14.5 5.7 3.6 3.5 2.8
GC............................ 4.5 4.5 4.5 2.0 1.3
GD............................ 9.8 9.8 9.8 2.5 1.5
GE............................ 15.9 15.9 14.0 3.0 1.7
GH............................ 21.9 19.5 16.7 3.8 2.0
PT............................ 26.6 21.1 20.1 3.6 1.8
ZD............................ 28.9 26.5 11.0 0.8 0.4
ZE............................ 27.0 21.7 22.9 5.0 2.2
Group 3 Assets................ 19.8 11.5 8.5 6.5 4.5
</TABLE>

Group 4

<TABLE>
<CAPTION>
PSA PREPAYMENT ASSUMPTION
---------------------------------
0% 75% 150% 250% 400%
-- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EA............................ 17.1 8.6 5.5 3.8 2.7
EB............................ 25.5 18.1 12.0 8.0 5.3
EC............................ 2.6 1.1 0.8 0.6 0.5
VJ............................ 2.6 2.6 2.6 2.6 2.6
VK............................ 6.0 6.0 6.0 6.0 5.7
VL............................ 10.2 10.2 10.2 8.9 6.5
ZG............................ 14.2 14.2 13.4 10.1 7.2
ZH............................ 27.9 24.3 19.6 15.1 10.7
Group 4 Assets................ 19.5 12.8 9.1 6.4 4.4
</TABLE>

Group 5

<TABLE>
<CAPTION>
PSA PREPAYMENT ASSUMPTION
---------------------------------
0% 100% 165% 250% 400%
-- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
F, J, PO, S, SL, SM and Group
5 Assets.................... 23.5 20.3 16.5 10.5 2.6
</TABLE>

THE ASSETS

The Group 1 Assets will consist of $1,633,194,000 of Freddie Mac 7.0% per
annum 30-year PCs. The Group 2 Assets will consist of $360,608,500 of Freddie
Mac 7.0% per annum 30-year PCs. The Group 3 Assets will consist of
$1,250,000,000 of Freddie Mac 6.5% per annum 30-year PCs. The Group 4 Assets
will consist of $203,488,940 of Freddie Mac 6.0% per annum 30-year PCs.

The Group 5 Assets will have the following characteristics:

<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
IN LOWER-TIER
PERCENTAGE OF CLASS REMIC POOL
IN LOWER-TIER AS OF CLOSING APRIL 1998 CLASS PRINCIPAL TYPE/
CLASS REMIC POOL DATE CLASS FACTOR COUPON INTEREST TYPE(1) FINAL PAYMENT DATE
- ------- ------------------- ---------------- ------------ ------ ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
1634-FD 78.2601250059% $66,858,668 1.0000000 (2) SUP/FLT/DLY December 15, 2023
1634-PO 88.9680531367 17,742,083 1.0000000 0.0% SUP/PO December 15, 2023
1634-SD 78.2601201408 19,636,811 1.0000000 (2) SUP/INV/DLY December 15, 2023
1634-SE 78.2601238862 4,558,545 1.0000000 (2) SUP/INV/DLY December 15, 2023
</TABLE>

- ---------------

(1) See "Description of Securities -- Standard Definitions and Abbreviations for
Classes" in the Offering Circular.
(2) Calculated as shown in the Asset Offering Circular. See Exhibit I to this
Supplement.

See "General Information -- Structure of Transaction" and "Prepayment and
Yield Analysis" in this Supplement and Exhibit I to this Supplement.

S-11
<PAGE> 105

MORTGAGE CHARACTERISTICS (AS OF APRIL 1, 1998)

GROUP 1 THROUGH GROUP 4 -- ASSUMED MORTGAGE CHARACTERISTICS

<TABLE>
<CAPTION>
REMAINING TERM PER ANNUM
TO MATURITY LOAN AGE PER ANNUM INTEREST RATE
ASSET GROUP PRINCIPAL BALANCE (IN MONTHS) (IN MONTHS) INTEREST RATE OF RELATED PCS
- ----------- ----------------- -------------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1 $1,633,194,000 356 4 7.6% 7.0%
2 360,608,500 356 3 7.6 7.0
3 1,250,000,000 357 2 7.2 6.5
4 203,488,940 356 3 6.825 6.0
</TABLE>

GROUP 5 -- MORTGAGE CHARACTERISTICS

<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE PER ANNUM
REMAINING TERM LOAN AGE PER ANNUM INTEREST RATE OF
SERIES TO MATURITY (IN MONTHS) INTEREST RATE RELATED PCS
- ------ ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
1634 295 53 6.982% 6.5%
</TABLE>

The actual remaining terms to maturity, loan ages and interest rates of
most of the Mortgages differ from those shown above, in some cases
significantly. See "General Information -- Structure of Transaction" and "-- The
Mortgages" in this Supplement.

S-12
<PAGE> 106

AVAILABLE INFORMATION

Investors should purchase Securities only if they have read and understood
this Supplement, the Offering Circular and the following documents:

- Freddie Mac's Offering Circular Supplement for its Series 1634
Multiclass PCs (the "Asset Offering Circular"), the cover page and
Terms Sheet from which are attached to this Supplement.

- Freddie Mac's Mortgage Participation Certificates Offering Circular
dated February 1, 1998 (the "PC Offering Circular"), which describes
Gold PCs generally.

- Freddie Mac's Giant Participation Certificates and Other Pass-Through
Participation Certificates Offering Circular dated January 1, 1997
the "Giant PC Offering Circular"), which describes Gold Giant PCs
generally.

- Freddie Mac's Information Statement dated March 31, 1998 and any
Information Statement Supplements published by Freddie Mac through
the time of purchase.

This Supplement incorporates by reference the documents listed above.
Investors can order these documents: from Freddie Mac, by writing, calling or
e-mailing its Investor Inquiry Department at 8200 Jones Branch Drive, McLean,
Virginia 22102 (outside Washington, D.C. metropolitan area, phone 800/336-FMPC;
within Washington, D.C. metropolitan area, phone 703/450-3777; e-mail:
[email protected]); or from the Underwriter, by writing or calling
its Prospectus Department at One MetroTech Center North, Brooklyn, New York
11201-3859 (phone 212/272-1581).

Freddie Mac will publish a Supplemental Statement (which will contain
schedules of the Assets and other information) applicable to this Series shortly
after the Closing Date. Investors can obtain the Supplemental Statement, any
offering materials for specific Assets and historic and current information
concerning specific Assets and the Securities from Freddie Mac's Investor
Inquiry Department.

Freddie Mac's Internet Web-Site (http://www.freddiemac.com) will display
this Supplement, the Supplemental Statement, schedules of the Assets and
information, updated monthly, regarding each Class of this Series.

GENERAL INFORMATION

THE AGREEMENT

Freddie Mac will create the Securities under the Multiclass REMIC
Certificate Agreement, dated as of April 1, 1998, and a Terms Supplement, to be
dated the Closing Date (together, the "Agreement"). Investors can order copies
of the Agreement by contacting the Investor Inquiry Department at Freddie Mac as
shown under "Available Information" in this Supplement. The Agreement is
incorporated by reference in this Supplement.

Holders and anyone having a beneficial interest in the Securities should
refer to the Agreement for a complete description of their rights and
obligations and the rights and obligations of Freddie Mac. Holders and
beneficial owners of Securities will acquire their Securities subject to all
terms and conditions of the Agreement, including the Terms Supplement.

FORM OF SECURITIES

The Regular Classes of REMIC Certificates and the MACR Classes will be
issued and may be held of record and transferred only on the book-entry system
of the Federal Reserve Banks by entities eligible to maintain book-entry
accounts with a Federal Reserve Bank ("Fed Participants"). The Residual Classes
will be issued and may be held of record only in certificated form and will be
transferable at Chase Bank of Texas, National Association or its successor (the
"Registrar"). The Classes will be issued in the denominations specified under
"Description of Securities -- Form of Securities, Holders, Minimum Principal
Amounts and Transfers" in the Offering Circular.

S-13
<PAGE> 107

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE> 108

ANNEX 2(D)

PROSPECTUS SUPPLEMENT
DATED SEPTEMBER 8, 1993
TO
PROSPECTUS DATED SEPTEMBER 29, 1993
RELATING TO

FUND AMERICA INVESTORS TRUST I
COLLATERIZED MORTGAGE OBLIGATIONS
SERIES 1993-2, CLASS A-1

<PAGE> 109

- --------------------------------------------------------------------------------

PROSPECTUS SUPPLEMENT
(To Prospectus dated September 8, 1993)
- --------------------------------------------------------------------------------

$117,350,000

Fund America Investors Trust I
Collateralized Mortgage Obligations, Series 1993-2, Class A-1

Fund America Investors Trust I (the "Issuer"), a trust to be established by
Fund America Investors Corporation, is offering $117,350,000 in aggregate
principal amount of Collateralized Mortgage Obligations, Series 1993-2, Class
A-1 (the "Bonds"), due October 25, 2023.

As more fully described herein, commencing with a rate of 5.125% per annum,
interest will accrue on the Bonds, subject to a maximum rate of 11.00% per annum
and a minimum rate of 2.00% per annum, at a rate per annum equal to 2.00% in
excess of the London interbank offered rate for one-month U.S. dollar deposits
("LIBOR"). Interest generally will be paid on the Bonds to the extent funds are
available therefor as described herein on the 25th day of each month or, if any
such day is not a business day, then on the next succeeding business day,
beginning in October, 1993; provided, however, that if all distributions on the
Underlying Securities (as defined below) due on such day have not been received
prior to 1:00 p.m. (Boston, Massachusetts time) on such day, payments will be
made on the next succeeding business day. Each such date of payment is referred
to herein as a "Payment Date." See "Description of the Bonds -- Interest" and
" -- Payments of Interest and Principal."

Principal payments on the Bonds will be made on each Payment Date to the
extent funds are available therefor and as described herein until the Bonds are
paid in full. See "Description of the Bonds -- Payments of Interest and
Principal."

The Bonds initially will be secured by some or all of the following: (i)
certain classes of Fannie Mae Guaranteed REMIC Pass-Through Certificates and
Fannie Mae Stripped Mortgage-Backed Securities (collectively, the "FNMA
Securities") issued by the Federal National Mortgage Association ("FNMA") and
certain classes of Freddie Mac Multiclass Mortgage Participation Certificates
and Freddie Mac Stripped Giant Mortgage Participation Certificates
(collectively, the "FHLMC Securities") issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") (the FNMA Securities and the FHLMC Securities being
collectively referred to herein as the "Agency Securities"); (ii) certain
mortgage pass-through certificates, participation certificates and
collateralized mortgage obligations issued by issuers other than FNMA and FHLMC
(the "Private Mortgage-Backed Securities"); (iii) cash, other mortgage-backed
securities or certain United States Treasury Securities (the "Temporary
Collateral"); and (iv) the Collection Account described herein. The Agency
Securities and the Private Mortgage-Backed Securities, together with any Agency
Securities or Private Mortgage-Backed Securities substituted for the Temporary
Collateral as described herein, are collectively referred to herein as the
"Underlying Securities." The Bonds represent obligations solely of the Issuer,
and are not insured or guaranteed by FNMA, FHLMC or any other government agency
or instrumentality or any other person or entity. The Issuer will have no
significant assets other than those pledged as collateral for the Bonds.

(Cover continued on next page)
------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

The Bonds will be purchased by The First Boston Corporation (the
"Underwriter") from the Issuer and will be offered by the Underwriter from time
to time in negotiated transactions at varying prices to be determined at the
time of sale. Proceeds to the Issuer from the sale of the Bonds are expected to
be approximately $117,350,000, before deducting expenses payable by the Issuer,
estimated to be $600,000. The Underwriter may, from time to time, buy and sell
Bonds, but is not obligated to do so. There is currently no secondary market for
the Bonds and there can be no assurance that one will develop. There is no
assurance that any such market, if established, will continue.

The Bonds are offered by the Underwriter when, as and if issued, delivered
to and accepted by the Underwriter and subject to certain other conditions.
Delivery of the Bonds is expected to be made in book entry form only through the
same day funds settlement system of The Depository Trust Company on or about
September 14, 1993.

CS FIRST BOSTON GROUP
- --------------------------------------------------------------------------------

The date of this Prospectus Supplement is September 8, 1993
<PAGE> 110

(Continued from Previous Page)
Prospective investors should consider:

- The yield on the Bonds will be sensitive to, among other things, the rate
and timing of principal payments on the Underlying Securities (which
likely will be different for different types of Underlying Securities)
and the level of LIBOR. In particular, yields will be adversely affected
if the Underlying Securities which are interest only securities prepay
more rapidly than expected while the Underlying Securities which are
principal only securities prepay more slowly than expected.

- As described under "Summary of Terms -- Yield and Prepayment
Considerations" and "Yield and Prepayment Considerations" herein, under
some prepayment and interest rate scenarios, an investor may not receive
all interest when due, or in certain cases, the total interest and
principal due on the Bonds.

- No election will be made to treat the Trust or any of its assets as a
"real estate mortgage investment conduit" for Federal income tax
purposes.

This Prospectus Supplement does not contain complete information about the
offering of the Bonds. Additional information is contained in the Prospectus and
prospective investors are urged to read both the Prospectus and this Prospectus
Supplement. Sales of Bonds may not be consummated unless the purchaser has
received both the Prospectus and this Prospectus Supplement.

Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Bonds, whether or not participating in this
distribution, may be required to deliver a Prospectus Supplement and Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus
Supplement and Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.

S-2
<PAGE> 111

SUMMARY OF TERMS

Securities Offered......... Collateralized Mortgage Obligations, Series 1993-2,
Class A-1 in the original principal amount of
$117,350,000 (the "Bonds").

The Bonds will be "Book Entry Bonds," as defined in
the Prospectus, and will be delivered through the
facilities of The Depository Trust Company (the
"Clearing Agency") in minimum denominations of
$100,000 and increments of $25,000 in excess
thereof. See "Description of Book Entry
Procedures" in this Prospectus Supplement and
"Special Considerations -- Book Entry
Registration" and "Description of the Bonds --
Book Entry Registration" in the Prospectus.

Issuer..................... The Issuer is a limited purpose Delaware business
trust established by a trust agreement (the
"Trust Agreement") between Fund America Investors
Corporation ("Fund America") and Wilmington Trust
Company (the "Issuer Trustee"). The beneficial
ownership interest in the Issuer will be
represented by certificates (the "Trust
Certificates") which will be initially sold by
Fund America to the Underwriter. See "Special
Considerations" in the Prospectus. The Bonds will
be obligations solely of the Issuer. No person or
entity other than the Issuer will be obligated to
pay the Bonds. See "The Issuer" in the
Prospectus. The Bonds will be issued pursuant to
an Indenture between the Issuer and the Indenture
Trustee.

Indenture Trustee.......... State Street Bank and Trust Company, as trustee. The
Indenture Trustee maintains its principal
corporate trust offices at 225 Franklin Street,
Boston, Massachusetts 02110.

Administrator.............. Certain administrative functions with respect to the
Bonds will be performed on behalf of the Issuer
by State Street Bank and Trust Company, as
administrator (the "Administrator"), pursuant to
an Administration Agreement (the "Administration
Agreement") between the Issuer and the
Administrator. See "The Issuer" in the
Prospectus.

Interest................... Interest generally will be paid on the Bonds to the
extent funds are available therefor as described
herein on the 25th day of each month or, if such
day is not a business day, on the next succeeding
business day, commencing in October 1993;
provided, however, that if the Indenture Trustee
has not received all distributions on the
Underlying Securities due on or before such day
prior to 1:00 p.m. Boston, Massachusetts time on
such day, payments on the Bonds will be made on
the next succeeding business day. Each such date
of payment is referred to herein as a "Payment
Date." The amount of interest payable on the
Bonds on each Payment Date will equal the
interest accrued during the period from the 25th
day of the month immediately preceding the month
in which the related Payment Date occurs (or
September 14, 1993 in the case of the first
Payment Date) through the 24th day of the month
in which the related Payment Date occurs (each,
an "Interest Accrual Period"). If there are not
sufficient funds available to pay current
interest on a Payment Date, any shortfall in the
amount of current interest paid on such Payment
Date will be deferred to succeeding Payment Dates
and will bear interest during each Interest
Accrual Period until paid at the interest rate in
effect for the Bonds

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<PAGE> 112

during such Interest Accrual Period. The failure
to pay current interest or any such previously
unpaid amounts with interest thereon prior to the
Stated Maturity Date of the Bonds because of the
insufficiency of funds in the Collection Account
will not constitute an Event of Default.

During the initial Interest Accrual Period, the
Bonds will bear interest on their outstanding
principal balance (the "Current Principal
Amount") at a rate of 5.125% per annum. During
each Interest Accrual Period thereafter, the
Bonds will bear interest on their Current
Principal Amount, subject to a maximum rate of
11.00% per annum and a minimum rate of 2.00% per
annum, at a rate per annum equal to 2.00% in
excess of the London interbank offered rate for
one-month U.S. dollar deposits ("LIBOR")
determined as described herein.

Principal.................. Principal payments on the Bonds will be made on each
Payment Date to the extent funds are available
therefor and as described herein until the Bonds
are paid in full. See "Description of the
Bonds -- Payments of Interest and Principal
herein.

There will be no Spread (as defined in the
Prospectus) and, consequently, no Spread will be
available to be applied to pay principal on the
Bonds. See "Description of the Bonds -- Payments
of Principal" in this Prospectus Supplement and
in the Prospectus.

Record Date................ The record date ("Record Date") for each Payment
Date will be the close of business on the last
day of the month preceding the month in which the
applicable Payment Date occurs.

Payments................... As more fully described herein, on each Payment Date
until the Bonds are paid in full, including
accrued interest, the Available Funds (as defined
herein) for such Payment Date will be applied as
follows:

(i) first, as principal on the Bonds, in an
amount up to the greater of $774,075 and the
amount required to reduce the Current Principal
Amount of the Bonds to their "Scheduled Balance"
for such Payment Date as set forth on Schedule
III hereto;

(ii) second, as interest on the Bonds, in an
amount equal to interest accrued on the Bonds
during the related Interest Accrual Period;

(iii) third, as principal on the Bonds, until the
Current Principal Amount of the Bonds has been
reduced to zero;

(iv) fourth, as interest on the Bonds, in the
amount of any interest which has accrued on the
Bonds prior to the related Interest Accrual
Period and has not been paid; and

(v) fifth, as interest on the Bonds, in the
amount of any interest accrued and unpaid on
previously accrued interest, from the Payment
Date on which the interest was due to the
Payment Date on which the interest is paid, at
the interest rate in effect for the Bonds during
each Interest Accrual Period until paid.

Any funds available after the Bonds have been paid
in full, including accrued interest, and all
expenses have been paid, will be paid to the
Issuer for distribution to the holders of the
Trust Certificates. See "Description of the
Bonds -- Payments of Interest and Principal"
herein.

S-4
<PAGE> 113

Certain Prepayment and
Yield Considerations..... General Considerations. The yields to maturity of
the Bonds will be affected by the amount and
timing of principal payments, including
prepayments, on the mortgage loans underlying the
Underlying Securities (the "Mortgage Loans"), the
payment priorities and other characteristics of
the Underlying Securities, the level of LIBOR,
the purchase prices paid for the Bonds, the
occurrence of an optional redemption of the Bonds
as described below and the occurrence of any
optional redemption of an Underlying Security. No
representation is made as to the anticipated rate
of prepayments on the Mortgage Loans, future
levels of LIBOR, or the anticipated yield to
maturity of the Bonds. Prospective investors are
urged to consider their own estimates as to the
anticipated rate of future prepayments on the
Mortgage Loans, anticipated levels of LIBOR, and
the suitability of the Bonds to their investment
objectives. In addition to the discussion below,
prospective investors should review the
discussion under "Yield and Prepayment
Considerations" herein.

Mortgage Loan Prepayments. If prevailing mortgage
rates fall significantly below the mortgage rates
on the Mortgage Loans, the Mortgage Loans are
likely to be subject to higher prepayment rates
than if prevailing rates remain at or above the
mortgage rates on the Mortgage Loans. Other
factors affecting prepayments of Mortgage Loans
include changes in mortgagors' housing needs, job
transfers, unemployment, net equity in the
mortgaged properties and servicing decisions. The
Mortgage Loans may be prepaid at any time without
penalty and, except for Mortgage Loans underlying
GNMA Certificates (as defined herein), generally
have due-on-sale clauses.

Timing of Payments. The timing and amount of
payments, including prepayments, on the Mortgage
Loans may significantly affect an investor's
yield. In general, the earlier a prepayment of
principal on the Mortgage Loans, the greater will
be the effect on an investor's yield to maturity.
As a result, the effect on an investor's yield of
principal prepayments occurring at a rate higher
(or lower) than the rate anticipated by the
investor during the period immediately following
the issuance of the Bonds will not be offset by a
subsequent like reduction (or increase) in the
rate of principal prepayments.

LIBOR. The Bonds will be sensitive to changes in the
level of LIBOR. If the level of LIBOR decreases,
the rate of interest accruing on the Bonds will
decrease. If the level of LIBOR increases, there
will be a higher rate of interest accruing on the
Bonds, but the amounts of interest received with
respect to certain Underlying Securities will be
reduced.

Underlying Securities. The Trust contains Underlying
Securities which were issued at different times,
are backed by different pools of Mortgage Loans,
have different allocations of principal and
interest and payment priorities among various
classes, and will perform differently in various
interest and prepayment rate environments. The
performance characteristics of the Bonds will
reflect a combination of the performance
characteristics of the various Underlying
Securities. As a result, it will be difficult to
predict the likely yield and payment experience
of the Bonds.

S-5
<PAGE> 114

Optional Redemptions of Underlying Securities. The
Underlying Securities are subject to optional
redemption to the extent described under
"Description of the Underlying
Securities -- Agency Securities" and " -- Private
Mortgage-Backed Securities" and on Schedule II
hereto. Any such optional redemption may have the
effect of increasing or decreasing the weighted
average life of the Bonds.

Distributions on Underlying Securities. Because the
aggregate principal amount of the Underlying
Securities is less than the aggregate original
principal amount of the Bonds, interest as well
as principal distributions on the Underlying
Securities will be required to pay the original
principal amount of the Bonds. ACCORDINGLY, THE
DISTRIBUTIONS ON THE UNDERLYING SECURITIES WILL
NOT BE SUFFICIENT TO PAY ALL THE PRINCIPAL AND
INTEREST ON THE BONDS UNDER CERTAIN SCENARIOS
INCLUDING SCENARIOS IN WHICH THERE ARE HIGH RATES
OF PREPAYMENTS ON THE UNDERLYING SECURITIES WHICH
ARE INTEREST ONLY SECURITIES AND LOW RATES OF
PREPAYMENTS ON THE UNDERLYING SECURITIES WHICH
ARE PRINCIPAL ONLY SECURITIES (ESPECIALLY IN
COMBINATION WITH HIGH LEVELS OF LIBOR).

Discounts and Premiums. In the case of any Bonds
purchased at a discount, a slower than
anticipated rate of principal payments, other
things being equal, could result in an actual
yield that is lower than the anticipated yield.
In the case of any Bonds purchased at a premium,
a faster than anticipated rate of principal
payments, other things being equal, could result
in an actual yield that is lower than the
anticipated yield.

Reinvestment Risk. Since prevailing interest rates
are subject to fluctuation, there can be no
assurance that investors in the Bonds will be
able to reinvest the payments thereon at yields
equaling or exceeding the yields on the Bonds.
Yields on any such reinvestments may be lower,
and may even be significantly lower, than yields
on the Bonds. Prospective investors in the Bonds
should consider the related reinvestment risks in
light of other investments that may be available
to such investors.

NO INVESTMENT SHOULD BE MADE IN BONDS UNLESS AN
INVESTOR HAS CONSIDERED CAREFULLY THE ASSOCIATED
RISKS OF INVESTING IN SUCH BONDS AS DISCUSSED
ABOVE AND UNDER "SPECIAL CONSIDERATIONS" AND
"YIELD AND PREPAYMENT CONSIDERATIONS" HEREIN.

Maturity of the Bonds...... The Stated Maturity Date of the Bonds, i.e., the
date on which all of the Bonds are required to be
fully paid, is October 25, 2023. The Stated
Maturity Date is the Payment Date one month after
the Payment Date on or immediately following the
final scheduled distribution on the last to
mature of the Underlying Securities. Since the
rate of payment of principal, including
prepayments, on the Mortgage Loans can be
expected to exceed the rate of principal payments
used in calculating such Stated Maturity Date and
since payments of interest on the Underlying
Securities also will be used to make principal
payments on the Bonds, the actual date of the
final payment on the Bonds may be earlier, and
could be substantially earlier, than the Stated
Maturity Date of the Bonds. In addition, the
Bonds may be redeemed prior to the final
distribution on the Underlying Securities under
the circumstances

S-6
<PAGE> 115

discussed under "Description of the
Bonds -- Optional Redemption" herein.

Optional Redemption........ The outstanding Bonds may be redeemed in whole, but
not in part, by the Issuer at the option of the
holders of a majority in interest of the Trust
Certificates on any Payment Date on or after the
earlier of (i) March 25, 2006 or (ii) the date on
which the Current Principal Amount of the Bonds
is reduced to or is less than 25% of the original
principal amount thereof (after taking into
account the distribution of principal otherwise
to be made on such Payment Date). Any optional
redemption will be at a redemption price equal to
100% of the Current Principal Amount of the Bonds
redeemed, plus any accrued and unpaid interest
thereon, including interest accrued on unpaid
interest. Following such redemption and payment
of certain expenses, the proceeds in the
Collection Account and any remaining collateral
securing the Bonds will be released to the Issuer
Trustee.

Security for the Bonds..... The Bonds will be secured by Collateral consisting
of the following:

A. Underlying
Securities............ Certain classes of Fannie Mae Guaranteed REMIC
Pass-Through Certificates and Fannie Mae Stripped
Mortgage-Backed Securities (collectively, the
"FNMA Securities") issued by the Federal National
Mortgage Association ("FNMA") and certain classes
of Freddie Mac Multiclass Mortgage Participation
Certificates and Freddie Mac Stripped Giant
Mortgage Participation Certificates
(collectively, the "FHLMC Securities") issued by
the Federal Home Loan Mortgage Corporation
("FHLMC") (the FNMA Securities and the FHLMC
Securities being collectively referred to herein
as the "Agency Securities"), (ii) certain
mortgage pass-through certificates, participation
certificates and collateralized mortgage
obligations issued by issuers other than FNMA,
FHLMC and the Government National Mortgage
Association ("GNMA"), which securities are backed
by mortgage-backed securities issued by FNMA,
FHLMC or GNMA (collectively, the "Private
Mortgage-Backed Securities") and (iii) cash,
other mortgage-backed securities, or certain
United States Treasury Securities (the "Temporary
Collateral"). The Issuer expects to substitute
additional Agency Securities or Private
Mortgage-Backed Securities for the Temporary
Collateral, as described herein. The Agency
Securities are solely obligations of FNMA and
FHLMC, respectively. The Underlying Securities
are not backed by the full faith and credit of
the United States. See "Security for the Bonds"
herein and Schedules I and II hereto.

B. Collection Account.... All distributions on the Underlying Securities
pledged as security for the Bonds will be
remitted to a collection account (the "Collection
Account") to be established with the Indenture
Trustee. Amounts on deposit in the Collection
Account will be available for application to the
payment of principal of and interest on the Bonds
on the following Payment Date. Amounts on deposit
in the Collection Account may only be invested in
Eligible Investments. See "Security for the
Bonds -- Collection Account" in the Prospectus.
There is no Assumed Reinvestment Rate (as defined
in the Prospectus) with respect to the Bonds. Any
reinvestment income will be used to pay principal
and interest on the Bonds, as described herein.

S-7
<PAGE> 116

Expense Fund............... The Issuer will deposit in an account established by
the Indenture Trustee (the "Expense Fund") on the
Closing Date cash in an amount necessary to meet
the requirements of each rating agency rating the
Bonds. Funds on deposit in the Expense Fund will
be used to pay amounts owing to the Indenture
Trustee pursuant to the Indenture, the fees of
the Administrator, and the fees of the Issuer
Trustee. Funds on deposit in the Expense Fund
will not be available to make payments on the
Bonds.

Certain Federal Income Tax
Consequences............. The Bonds may be issued with original issue discount
for federal income tax purposes. The Prepayment
Assumption (as defined in the Prospectus under
"Certain Federal Income Tax Consequences") that
will be used in determining the rate of accrual
of original issue discount is 500% of the SPA (as
defined herein). No representation is made that
the Bonds will prepay in accordance with that
assumption or at any other rate. Under proposed
regulations, payments on the Bonds (whether
denominated principal or interest) would be
treated as interest to the extent of accrued
interest. No election will be made to treat the
Issuer, any of the assets of the Issuer or the
arrangement by which the Bonds are issued as a
"real estate mortgage investment conduit" for
Federal income tax purposes. See "Certain Federal
Income Tax Consequences" herein and in the
Prospectus.

ERISA Matters.............. The Issuer, the Underwriter, the Issuer Trustee, the
Indenture Trustee, the Administrator, the holders
of the Trust Certificates, and certain of their
respective affiliates might be considered or
might become a "party in interest" within the
meaning of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or a
"disqualified person" within the meaning of
Section 4975 of the Internal Revenue Code of
1986, as amended, with respect to an employee
benefit plan or individual retirement account
(collectively, a "Plan") covered by such
statutes. If the assets of an investing Plan were
deemed to include assets of the Issuer and if
Bonds are owned by or subsequently acquired by a
"party in interest" or a "disqualified person"
with respect to such Plan (or conversely, if
Bonds are owned by or subsequently acquired by a
Plan, and there is an investment in the Issuer by
a "party in interest" or "disqualified person"
with respect to such Plan), an indirect
prohibited transaction in the nature of an
extension of credit between such Plan and such
"party in interest" or "disqualified person"
might be deemed to occur. However, pursuant to
regulations issued by the United States
Department of Labor defining "plan assets," if
the Bonds are considered to be indebtedness
without substantial equity features under local
law, the assets of the Issuer will not be
considered assets of any Plan holding Bonds,
thereby generally avoiding potential application
of these prohibited transactions and fiduciary
investment standard restrictions. It is
anticipated that the Bonds should be treated as
indebtedness without substantial equity features
for purposes of these regulations. Nevertheless,
even if the assets of the Issuer were deemed not
to be assets of any investing Plans, if the
above-described relationships exist, such an
indirect prohibited transaction might be deemed
to occur. Certain exemptions from the prohibited
transaction rules could be applicable, however,
depending in part upon the type of Plan fiduciary
making the decision to acquire a Bond and the
circumstances

S-8
<PAGE> 117

under which such decision is made. Included among
these exemptions are Prohibited Transaction Class
Exemption ("PTCE") 90-1, regarding investments by
insurance company separate accounts; PTCE 91-38,
regarding investments by bank collective
investment funds; and PTCE 84-14, regarding
transactions effected by a "qualified
professional asset manager." Even if the
conditions specified in one or more of these
exemptions are met, the scope of the relief
provided by these exemptions might or might not
cover all acts which might be construed as
prohibited transactions. Any Plan proposing to
acquire Bonds should consult with its counsel.
See "ERISA Matters" in this Prospectus Supplement
and in the Prospectus.

Liquidity................. The Underwriter may, from time to time, buy and sell
Bonds, but is not obligated to do so. There is
currently no secondary market for the Bonds, and
there can be no assurance that one will develop.
There is no assurance that any such market, if
established, will continue. Each Bondholder will
receive monthly reports pertaining to the Bonds
and the Underlying Securities. There are a
limited number of sources which provide certain
information about collateralized mortgage
obligations in the secondary market; however,
there can be no assurance that any of these
sources will provide information about the Bonds.
Investors should consider the effect of limited
information on the liquidity of the Bonds.

Legal Investment........... The Bonds constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA") and, as such,
are legal investments for certain entities to the
extent provided in SMMEA. There may be
restrictions on the ability of certain investors,
including depository institutions, either to
purchase the Bonds or to purchase Bonds
representing more than a specified percentage of
the investor's assets. Investors should consult
their own legal advisors in determining whether
and to what extent the Bonds constitute legal
investments for such investors. See "Legal
Investment" in the Prospectus.

Use of Proceeds............ The Issuer intends to use substantially all of the
net proceeds from the issuance of the Bonds to
acquire from the Underwriter the Underlying
Securities and the Temporary Collateral which
will be used to collateralize the Bonds. See "Use
of Proceeds" in the Prospectus.

Bond Ratings............... As a condition of their issuance, the Bonds will be
rated "AAA" by Fitch Investors Service, Inc.
("Fitch") and Duff & Phelps Credit Rating Co.
("D&P"). The ratings reflect the opinions of
Fitch and D&P (the "Rating Agencies") that the
Bonds will receive at least $117,350,000 in cash
on or prior to October 25, 2023. EXCEPT FOR THE
RECEIPT OF SUCH AMOUNTS, THE RATINGS DO NOT
ADDRESS THE LIKELIHOOD OF THE RECEIPT OF THE
ORIGINAL PRINCIPAL AMOUNT OF THE BONDS OR
INTEREST AT THE INTEREST RATES APPLICABLE FROM
TIME TO TIME ON THE BONDS. In addition, the
ratings do not address the possibility that
Bondholders may suffer lower than anticipated
yields. The analysis for the ratings will focus
primarily on the rate of prepayments of the
Mortgage Loans underlying the Underlying
Securities and the subsequent effect on the cash
flows of the Underlying Securities.

S-9
<PAGE> 118

The Issuer will request a rating of the Bonds by
both Rating Agencies. There can be no assurance
as to whether any rating agency not requested to
rate the Bonds will nonetheless issue a rating
and, if so, what such rating would be. A rating
assigned to the Bonds by another rating agency
that has not been requested by the Issuer to do
so may be lower than the rating assigned by a
Rating Agency requested by the Issuer to rate the
Bonds.

S-10
<PAGE> 119

SPECIAL CONSIDERATIONS

Prospective investors should consider:

- The yield on the Bonds will be sensitive to, among other things, the rate
and timing of principal prepayments on the Underlying Securities (which
likely will be different for different types of Underlying Securities)
and the level of LIBOR. In particular, yields will be adversely affected
if the Underlying Securities which are interest only securities prepay
more rapidly than expected while the Underlying Securities that are
principal only securities prepay more slowly than expected.

- As described under "Summary of Terms -- Yield and Prepayment
Considerations" and "Yield and Prepayment Considerations" herein, under
some prepayment and interest rate scenarios, an investor in the Bonds may
not receive all interest when due, or in certain cases, the total
interest and principal due on the Bonds.

- No election will be made to treat the Trust or any of its assets as a
"real estate mortgage investment conduit" for Federal income tax
purposes.

DESCRIPTION OF THE BONDS

The Bonds will be issued pursuant to an Indenture dated as of September 1,
1993 (the "Indenture"), between the Issuer and the Indenture Trustee. The
following summaries describing certain provisions of the Bonds do not purport to
be complete and are subject to, and are qualified in their entirety by reference
to, the Prospectus and the provisions of the Indenture.

The Bonds will be Book Entry Bonds and will be delivered through the
facilities of the Clearing Agency in minimum denominations of $100,000 and
increments of $25,000 in excess thereof. The Record Date for each Payment Date
is the close of business on the last day of the month preceding the month in
which such Payment Date occurs. The Bonds may be transferred through the
facilities of the Clearing Agency or otherwise as set forth in "Description of
Book Entry Procedures" in this Prospectus Supplement and "Description of the
Bonds -- Book Entry Registration" in the Prospectus.

General information with respect to the Bonds is included in the Prospectus
under "Description of the Bonds."

PAYMENTS OF INTEREST

Interest generally will be paid on the Bonds on the 25th day of each month
or, if such day is not a business day, on the next succeeding business day,
commencing in October 1993; provided, however, that if the Indenture Trustee has
not received all distributions on the Underlying Securities due on or before
such day prior to 1:00 p.m. Boston, Massachusetts time on such day, payments on
the Bonds will be made on the next succeeding business day. Each such date of
payment is referred to herein as a "Payment Date." The amount of interest
payable on the Bonds on each Payment Date will equal the interest accrued during
the period from the 25th day of the calendar month preceding the month in which
the related Payment Date occurs (or September 14, 1993 in the case of the first
Payment Date) through the 24th day of the calendar month in which the related
Payment Date occurs (each such period an "Interest Accrual Period"). During the
initial Interest Accrual Period, the Bonds will bear interest at a rate of
5.125% per annum. During each Interest Accrual Period thereafter, the Bonds will
bear interest, subject to a maximum rate of 11.00% per annum and a minimum rate
of 2.00% per annum, at a rate per annum equal to 2.00% in excess of the London
interbank offered rate for one-month U.S. dollar deposits ("LIBOR") determined
as described herein.

Commencing on October 21, 1993 and monthly thereafter on the second
business day prior to the first day of the related Interest Accrual Period for
the Bonds (each, a "LIBOR Determination Date"), the Indenture Trustee will
request each of the designated reference banks meeting the criteria set forth
herein (the "Reference Banks") to inform the Indenture Trustee of the quotation
offered by such bank's principal London office for one-month United States
dollar deposits as of 11:00 a.m. (London time) on such LIBOR Determination Date.
For purposes of calculating LIBOR, "business day" means a day on which banks are
open for dealing in foreign currency and exchange in London, Boston,
Massachusetts and New York City. In
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<PAGE> 120

lieu of making a request of the Reference Banks, the Indenture Trustee may rely
on the quotations for those Reference Banks that appear at such time on the
Reuters Screen LIBO Page (as defined in the International Swap Dealers
Association Inc. Code of Standard Wording, Assumptions and Provisions for Swaps,
1986 Edition), to the extent available.

LIBOR will be established by the Indenture Trustee on each LIBOR
Determination Date as follows:

(a) If on any LIBOR Determination Date two or more Reference Banks
provide such offered quotations, LIBOR for the next Interest Accrual Period
shall be the arithmetic mean of such offered quotations (rounded upwards if
necessary to the nearest whole multiple of 1/32%).

(b) If on any LIBOR Determination Date only one or none of the
Reference Banks provides such offered quotations, LIBOR for the next
Interest Accrual Period shall be whichever is the higher of (i) LIBOR as
determined on the previous LIBOR Determination Date or (ii) the Reserve
Interest Rate. The "Reserve Interest Rate" shall be the rate per annum
which the Indenture Trustee determines to be either (i) the arithmetic mean
(rounded upwards if necessary to the nearest whole multiple of 1/32%) of
the one-month United States dollar lending rates that New York City banks
selected by the Indenture Trustee are quoting, on the relevant LIBOR
Determination Date, to the principal London offices of at least two of the
Reference Banks to which such quotations are, in the opinion of the
Indenture Trustee, being so made, or (ii) in the event that the Indenture
Trustee can determine no such arithmetic mean, the lowest one-month United
States dollar lending rate which New York City banks selected by the
Indenture Trustee are quoting on such LIBOR Determination Date to leading
European banks.

(c) If on the October 21, 1993 LIBOR Determination Date, the Indenture
Trustee is required but is unable to determine the Reserve Interest Rate in
the manner provided in paragraph (b) above, LIBOR shall be 3.125%.

Each Reference Bank shall (i) be a leading bank engaged in transactions in
Eurodollar deposits in the international Eurocurrency market, (ii) have an
established place of business in London and (iii) be designated by the Indenture
Trustee. If any such Reference Bank should be unwilling or unable to act as such
or if the Indenture Trustee should terminate the appointment of any such
Reference Bank, the Indenture Trustee will promptly appoint another leading bank
meeting the criteria specified above.

The establishment of LIBOR on each LIBOR Determination Date by the
Indenture Trustee and the Indenture Trustee's calculation of the rate of
interest applicable to the Bonds for the related Interest Accrual Period shall
(in the absence of manifest error) be final and binding. Each such rate of
interest may be obtained by telephoning the Indenture Trustee at (617) 985-4700.

PAYMENTS OF INTEREST AND PRINCIPAL

As more fully described herein, on each Payment Date until the Bonds are
paid in full, including accrued interest, Available Funds (as defined below),
will be applied as follows:

(i) first, as principal to the Bonds, in an amount up to the greater
of $774,075 or the amount required to reduce the Current Principal Amount
of the Bonds to their "Scheduled Balance" for such Payment Date as set
forth on Schedule III hereto;

(ii) second, as interest to the Bonds in an amount equal to interest
accrued on the Bonds during the related Interest Accrual Period;

(iii) third, as principal to the Bonds, until the Current Principal
Amount of the Bonds has been reduced to zero;

(iv) fourth, as interest to the Bonds, in the amount of any interest
which has accrued on the Bonds prior to the related Interest Accrual Period
and has not been paid; and

(v) fifth, as interest to the Bonds, in the amount of any interest on
any accrued and unpaid interest, from the Payment Date on which the
interest was due to the Payment Date on which the interest is paid, at the
interest rate in effect for the Bonds during each Interest Accrual Period
until paid.

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Any funds available after the Bonds have been paid in full (including any
accrued interest) and all expenses have been paid, will be paid to the Issuer
for distribution to the holders of the Trust Certificates.

The "Available Funds" with respect to any Payment Date will be equal to the
aggregate amounts received in respect of the Underlying Securities and any
reinvestment income on amounts in the Collection Account during the Due Period
for such Payment Date. The "Due Period" for a Payment Date is the period from
the end of the preceding Due Period (or in the case of the first Payment Date,
from October 1, 1993) through 1:00 p.m. (Boston, Massachusetts time) on the
applicable Payment Date. An Event of Default will occur under the Indenture if
principal and interest on the Bonds is not paid as described above when funds
therefor are available in the Collection Account or if the Bonds are not paid in
full (including any accrued interest) by their Stated Maturity Date.

OPTIONAL REDEMPTION

The outstanding Bonds may be redeemed in whole, but not in part, by the
Issuer at the option of the holders of a majority in interest of the Trust
Certificates on any Payment Date on or after the earlier of (i) March 25, 2006
or (ii) the date on which the Current Principal Amount of the Bonds is reduced
to or is less than 25% of the original principal amount thereof (after taking
into account the distribution of principal otherwise to be made on such Payment
Date). Any such optional redemption will be at a redemption price equal to 100%
of the Current Principal Amount of the Bonds redeemed, plus any accrued and
unpaid interest thereon, including interest accrued on unpaid interest.
Following such redemption, the proceeds in the Collection Account and any
remaining Collateral (as defined below) securing the Bonds will be released to
the Issuer Trustee. The holders of the Trust Certificates may exercise their
right to cause the redemption of the Bonds upon (i) the election of the holders
of Trust Certificates evidencing ownership of a majority in interest thereof and
(ii) the payment by or on behalf of each holder of Trust Certificates of such
holder's pro rata share of the redemption price.

SECURITY FOR THE BONDS
GENERAL

The Issuer will pledge the Underlying Securities and the Temporary
Collateral to the Indenture Trustee to secure the Bonds. In addition, amounts on
deposit in the Collection Account will also be pledged to the Indenture Trustee
to secure the Bonds (the Underlying Securities, the Temporary Collateral, and
the Collection Account being collectively referred to herein as the
"Collateral"). The Collateral will equally and ratably secure the Bonds and will
secure only the Bonds.

The Underlying Securities include the Agency Securities and the Private
Mortgage-Backed Securities. Certain characteristics of the Underlying Securities
are described below. In addition, certain information with respect to the
expected Underlying Securities is set forth on Schedules I and II hereto.
Additional information is contained under "Security for the Bonds" in the
Prospectus. Certain of the information with respect to the Underlying Securities
has been derived from the original offering documents relating to such
Underlying Securities and from publicly available data and other data available
to the Issuer or the Underwriter with respect thereto. IT SHOULD BE NOTED THAT
THERE MAY HAVE BEEN MATERIAL CHANGES IN FACTS AND CIRCUMSTANCES SINCE THE DATES
SUCH DOCUMENTS WERE PREPARED, INCLUDING, BUT NOT LIMITED TO, CHANGES IN
PREPAYMENT SPEEDS AND PREVAILING INTEREST RATES AND OTHER ECONOMIC FACTORS,
WHICH MAY LIMIT THE USEFULNESS OF, AND BE DIRECTLY CONTRARY TO THE ASSUMPTIONS
USED IN PREPARING, THE INFORMATION SET FORTH IN SUCH DOCUMENTS.

The Issuer may, and it is anticipated that it will, on or before October
14, 1993, substitute additional Agency Securities or Private Mortgage-Backed
Securities (the "Substitute Collateral") for the Temporary Collateral. The
Substitute Collateral will either (a) constitute $20,689,300 of Fannie Mae
Guaranteed REMIC Pass-Through Certificates, Series 1993-184, Class M or (b)
constitute principal only Agency Securities or Private Mortgage-Backed
Securities which have an aggregate principal balance (as of the date of
substitution) of at least $20,689,300 and a final maturity not later than
October 25, 2023. From and after the date of substitution, the Substitute
Collateral will be Underlying Securities for all purposes.

Except as provided in the preceding paragraph, the Issuer expects to
acquire as the Underlying Securities, the securities described herein. There may
be certain differences, however, which are not expected to be material, between
the Underlying Securities which the Issuer currently expects to acquire and
which are

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described herein and the Underlying Securities which the Issuer ultimately will
acquire to secure the Bonds. Specific information with respect to the Underlying
Securities that are actually acquired, other than the Substitute Collateral,
will be set forth in a Current Report on Form 8-K which will be filed by the
Issuer with the Securities and Exchange Commission within 15 days after the
issuance of the Bonds. Specific information with respect to the Substitute
Collateral will be set forth in a Current Report on Form 8-K which will be filed
by the Issuer with the Securities and Exchange Commission within 15 days after
the date of substitution.

AGENCY SECURITIES

The FNMA Securities will consist of some or all of the following: (i)
Fannie Mae Guaranteed REMIC Pass-Through Certificates ("FNMA REMIC
Certificates") which represent beneficial ownership interests in certain Fannie
Mae REMIC Trusts, the assets of which consist of primarily Fannie Mae Guaranteed
Mortgage Pass-Through Certificates (the "FNMA MBS Certificates"), "fully
modified pass-through" Mortgage-Backed Securities ("GNMA Certificates") which
are backed by residential mortgage loans and are guaranteed as to timely payment
of principal and interest by the Government National Mortgage Association
("GNMA"), certain private participation certificates backed by GNMA
Certificates, or Fannie Mae Stripped Mortgage-Backed Securities (the "FNMA SMBS
Certificates") and (ii) interest only and principal only FNMA SMBS Certificates.
FNMA MBS Certificates represent beneficial ownership interests in pools of
residential mortgage loans. FNMA SMBS Certificates represent beneficial
ownership interests in the principal distributions or interest distributions on
certain GNMA Certificates or FNMA MBS Certificates held in the form of one or
more Guaranteed MBS Pass-Through Securities representing interests in a pool of
FNMA MBS Certificates ("Mega Certificates"), one or more stripped
mortgage-backed securities ("Pooled SMBS Certificates") and/or one or more FNMA
REMIC Certificates (such Mega, Pooled SMBS and REMIC Certificates being
collectively referred to herein as "Pooled Certificates"). The guarantee of GNMA
is backed by the full faith and credit of the United States. Each of the FNMA
REMIC Certificates is a REMIC regular interest in a REMIC trust established by
FNMA and is part of a multiclass issuance of REMIC pass-through certificates
issued by each REMIC trust. Principal and/or interest on the FNMA Securities are
distributed on the 25th day of each month or, if such day is not a business day,
on the next succeeding business day.

FNMA guarantees to each holder of a FNMA REMIC Certificate the timely
distribution of required installments of principal and interest and the
distribution of the principal balance of each FNMA REMIC Certificate in full no
later than the final distribution date specified for such FNMA REMIC Certificate
whether or not sufficient funds are available therefor in the related trust.
FNMA guarantees to each holder of a FNMA MBS Certificate the timely distribution
of scheduled installments of principal of and interest on the underlying
mortgage loans, whether or not received, and the distribution of the full
principal balance of any foreclosed mortgage loan. With respect to FNMA SMBS
Certificates, FNMA acknowledges that its obligations to make distributions to
holders of FNMA SMBS Certificates are primary obligations of FNMA ranking on a
parity with its obligations under its guaranty of the related Pooled
Certificates, and FNMA further acknowledges that FNMA is directly obligated to
the holders of SMBS Certificates in respect of such guaranty obligations to the
same extent as if such holders were holders of such Pooled Certificates. With
the exception of FNMA REMIC Certificates and FNMA SMBS Certificates backed by
GNMA Certificates, FNMA may repurchase the underlying mortgage loans, thus
indirectly effecting an early termination of the related REMIC trust or SMBS
Certificate, if only one mortgage loan remains in the pool of underlying
mortgage loans or the aggregate principal balance of all underlying mortgage
loans is less than one percent of the aggregate original principal balance of
such mortgage loans. FNMA may not effect an early termination of the REMIC Trust
relating to FNMA Securities backed by GNMA Certificates.

The FHLMC Securities will consist of some or all of the following: (i)
Freddie Mac Multiclass Mortgage Participation Certificates ("FHLMC Multiclass
PCs") which represent beneficial ownership interests in pools of Freddie Mac
Mortgage Participation Certificates (the "FHLMC PCs"), Freddie Mac Giant
Mortgage Participation Certificates (the "Giant PCs"), Freddie Mac Gold Mortgage
Participation Certificates (the "Gold PCs"), Freddie Mac Gold Giant Mortgage
Participation Certificates (the "Gold Giant PCs") and Freddie Mac Stripped Giant
Mortgage Participation Certificates (the "Stripped Giant PCs") and (ii) interest
and principal only Stripped Giant PCs. The FHLMC PCs, Giant PCs, Gold PCs and
Gold Giant PCs issued by FHLMC represent either an undivided interest in a group
of residential mortgages purchased by FHLMC or participations therein. The
Stripped Giant PCs represent an undivided interest in the principal
distributions

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or interest distributions on a group of "Standard Giant PCs," which in turn
represent beneficial ownership interests in one or more pools of Gold PCs and/or
Gold Giant PCs. Each FHLMC Multiclass PC is a class of REMIC regular interest
which is a part of a series of multiclass mortgage participation certificates
issued by FHLMC. Principal and interest on the FHLMC Securities are distributed
on the 15th day of each month, or if such day is not a business day, on the next
succeeding business day.

FHLMC guarantees to each holder of a FHLMC Multiclass PC the timely payment
of interest and the payment of principal as principal payments are required to
be made on the underlying FHLMC PCs, Giant PCs, Gold PCs, Gold Giant PCs and
Stripped Giant PCs in accordance with their terms. FHLMC guarantees to each
holder of a FHLMC PC or Giant PC the timely payment of interest to be paid on
the underlying mortgage loans as calculated by FHLMC, to the extent of such
holder's pro rata share of the unpaid principal balance of such mortgage loans.
FHLMC also guarantees to each holder of a FHLMC PC or Giant PC ultimate
collection of all principal on the underlying mortgage loans, without offset or
deductions, to the extent of such holder's pro rata share thereof. FHLMC
guarantees to each holder of a Gold PC or Gold Giant PC the timely payment of
interest and the timely payment of principal due to be paid on the underlying
mortgage loans as calculated by FHLMC, to the extent of such holder's pro rata
share of the unpaid principal balance of such mortgage loans. With respect to
principal only Stripped Giant PCs, FHLMC guarantees to each holder thereof the
payment of the principal amount thereof as payments are made on the underlying
Standard Giant PCs. With respect to interest only Stripped Giant PCs, FHLMC
guarantees to each holder thereof the timely payment of interest at the
applicable interest only Stripped Giant PC interest rate. Except as otherwise
indicated on Schedule I, the FHLMC Multiclass PCs included in the Underlying
Securities may be redeemed in whole, but not in part, at the option of FHLMC on
any distribution date on or after the date on which, after giving effect to
principal payments to be made on the series of multiclass mortgage participation
certificates issued by FHLMC of which such FHLMC Multiclass PCs form a part, the
aggregate outstanding principal amount of such series is less than 1% of the
aggregate original principal amount of such series.

The guarantees of FNMA and FHLMC are solely the obligations of FNMA and
FHLMC, respectively, and are not backed by the full faith and credit of the
United States.

PRIVATE MORTGAGE-BACKED SECURITIES

The Private Mortgage-Backed Securities have been issued by issuers other
than FNMA, FHLMC and GNMA and will include (i) various classes of mortgage
pass-through certificates and participation certificates evidencing an undivided
interest in pools of FNMA MBS Certificates, GNMA Certificates, or FHLMC PCs and
(ii) various classes of collateralized mortgage obligations secured by FNMA MBS
Certificates, GNMA MBS Certificates, or FHLMC PCs. Although the Private
Mortgage-Backed Securities may evidence interests in or be secured by FNMA MBS
Certificates, GNMA Certificates or FHLMC PCs, none of the Private
Mortgage-Backed Securities are themselves guaranteed by FNMA, GNMA or FHLMC, and
none of the Private Mortgage-Backed Securities are backed by the full faith and
credit of the United States.

CHARACTERISTICS OF AGENCY SECURITIES AND PRIVATE MORTGAGE-BACKED SECURITIES

All of the Mortgage Loans underlying the Underlying Securities are first
lien, one- to four-family, fixed rate residential mortgage loans with original
maturities of up to 30 years. All of the Mortgage Loans underlying the GNMA
Certificates and certain of the Mortgage Loans underlying the FNMA MBS
Certificates are either insured by the Federal Housing Administration ("FHA") or
partially guaranteed by the Department of Veterans Affairs ("VA"). The remaining
Mortgage Loans are conventional mortgage loans. Conventional mortgages generally
contain a due-on-sale clause providing that, in the event of a transfer or
prospective transfer of the underlying mortgaged property, the full unpaid
balance of the loan is due and payable at the option of the holder. FNMA and
FHLMC, in most cases, require mortgage servicers to enforce due-on-sale
provisions where permitted by applicable law. FHA and VA loans do not include
due-on-sale clauses.

Schedule I hereto sets forth information with respect to each Agency
Security which the Issuer currently expects to acquire, including the issuer,
the series, the class, the monthly payment date, the interest rate, the

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type of security, the maturity date of such class, the original principal
amount, the percentage of the applicable class included in the Trust, the class
factor, the class principal amount included in the Trust, the mortgage loan
balance of the applicable series, and the weighted average coupon, the weighted
average remaining term to maturity (in months), and the weighted average loan
age (in months) of the applicable Mortgage Loans. The class factor is the
percentage which, when multiplied by the original principal amount of a class of
Agency Securities, will equal the remaining principal amount of such class after
giving effect to the distribution of principal in the current month in the case
of FNMA Securities or FHLMC Securities backed by Gold PCs or Gold Giant PCs or
otherwise in the following month. Current information with respect to the Agency
Securities is provided as of August 1993, except as otherwise specified on
Schedule I.

Schedule II hereto sets forth information with respect to each Private
Mortgage-Backed Security which the Issuer currently expects to acquire,
including the issuer, the series, the class, the monthly payment date, the
interest rate, the type of security, the maturity date of such class, the
original principal amount or notional amount, the percentage of the applicable
class in the Trust, the class factor, the class principal amount or notional
amount included in the Trust, the type of collateral, the mortgage loan balance
of the applicable series, and the weighted average coupon, the weighted average
remaining term to maturity (in months), and the weighted average loan age (in
months) of the applicable Mortgage Loans, and the circumstances under which the
related series may be optionally redeemed. The class factor is the percentage
which, when multiplied by the original principal amount of a class of Private
Mortgage-Backed Securities, will equal the remaining principal amount of such
class after giving effect to the distribution of principal on the most recent
payment date for such Private Mortgage-Backed Security as set forth on Schedule
II. Current information with respect to the Private Mortgage-Backed Securities
is provided as of August 1993, except as otherwise specified on Schedule II.

The Underlying Securities include interest only securities ("IOs"),
principal only securities ("POs"), inverse floaters ("INVs"), discounted coupon
classes ("DSCs") and planned amortization classes ("PACs").

An IO pays only interest or primarily interest and pays no or a
disproportionately small amount of principal. A PO pays principal only and no
interest.

An INV has an interest rate that varies inversely with an objective index
such as LIBOR, i.e., as LIBOR increases, the INV interest rate will decrease.
The interest rate on an INV might be expressed as a multiple of the index, such
as 35% minus (3 X LIBOR). The interest rate on each of the Underlying Securities
which is an INV is based on LIBOR.

A DSC is a class issued with a fixed coupon and at a discount to its
principal amount.

Payment stability in a PAC class is necessarily offset by instability in
other classes of related mortgage-backed securities, which are said to "support"
the more stable classes. Such "support classes" are likely to be much more
sensitive to prepayments on the underlying mortgage loans than the classes they
support or such mortgage loans. The DSCs included in the Underlying Securities
are, and certain of the POs included in the Underlying Securities may be,
"support classes."

Various classes of Underlying Securities combine the characteristics of the
types of securities described above. For example, a "PAC IO" is a security that
pays interest based on a notional or nominal principal balance which is reduced
by predetermined amounts on specified payment dates to the extent of available
funds.

The Underlying Securities have been issued from time to time during the
past seven years. Since the issuance of the Underlying Securities, prepayments
on the underlying Mortgage Loans may have occurred at a rate faster or slower,
and interest may have accrued at a rate higher or lower, than that assumed at
the time of issuance. There is no assurance that any PACs are within their
"planned ranges," that any related support classes have not been retired or
significantly reduced, or that any of the Underlying Securities have performed

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in any other respect as originally anticipated. There can be no assurance that
the Underlying Securities will provide any anticipated cash flow or perform as
anticipated in the future. PACs that are outside their ranges likely will not
perform in the future as originally anticipated.

DISTRIBUTIONS ON UNDERLYING SECURITIES

The aggregate outstanding principal amount of the Underlying Securities as
of the date of the issuance of the Bonds is expected to be approximately
$93,427,803. The aggregate original principal amount of the Bonds is expected to
be $117,350,000. Because the aggregate principal amount of the Underlying
Securities is less than the aggregate original principal amount of the Bonds,
interest as well as principal distributions on the Underlying Securities
(including interest on the IO Underlying Securities) will be required to pay the
original principal amount of the Bonds. Accordingly, the distributions on the
Underlying Securities will not be sufficient to pay all the principal and
interest on the Bonds under certain scenarios including scenarios in which there
are high rates of prepayments on the Underlying Securities which are interest
only securities and low rates of prepayments on the Underlying Securities which
are principal only securities (especially in combination with high levels of
LIBOR).

ADDITIONAL INFORMATION

The descriptions of the Underlying Securities do not purport to be
complete. Copies of (i) the respective Offering Circulars, Prospectus
Supplements, REMIC Prospectuses, MBS Prospectuses, SMBS Prospectuses, Mega
Prospectuses, SMBS Prospectus Supplements, Prospectuses and FNMA Information
Statements relating to the FNMA Securities, (ii) the respective Offering
Circular Supplements, Multiclass PC Offering Circulars, PC Offering Circulars,
Giant PC Offering Circulars, PC Offering Circular Supplements, Giant PC Offering
Circular Supplements and FHLMC Information Statements relating to the FHLMC
Securities and (iii) the respective Prospectus Supplements and Prospectuses
relating to the Private Mortgage-Backed Securities, may be obtained from the
Underwriter by writing or calling its Prospectus Department at 55 E. 52nd
Street, New York, New York 10055 (telephone: (212) 909-2000). Such offering
materials are typically prepared at the time the related Underlying Securities
are originally issued and are not updated thereafter. Up to date information
concerning the Agency Securities can be obtained from FNMA and FHLMC.

COLLECTION ACCOUNT

All distributions on the Underlying Securities pledged as security for the
Bonds will be remitted to the Collection Account for the Bonds. Amounts on
deposit in the Collection Account, including the reinvestment income thereon,
will be available for application to the payment of principal of and interest on
the Bonds on the following Payment Date. Amounts on deposit in the Collection
Account may be invested only in Eligible Investments.

There is no Assumed Reinvestment Rate (as defined in the Prospectus) with
respect to the Bonds.

YIELD AND PREPAYMENT CONSIDERATIONS

GENERAL

The yield to maturity and weighted average life of the Bonds will be
affected by, among other things, the level of LIBOR and the amount and timing of
principal payments, including prepayments, on the Mortgage Loans.

Investors should carefully consider the associated risks of an investment
in the Bonds discussed below and under "Summary of Terms -- Yield and Prepayment
Considerations" and "Special Considerations."

STATED MATURITY DATE

The "Stated Maturity Date" for distributions on the Bonds is October 25,
2023. The Stated Maturity Date is the Payment Date one month after the Payment
Date on or immediately following the final scheduled distribution on the last to
mature of the Underlying Securities. Because the rate of payment of principal on
the

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Mortgage Loans can be expected to exceed the rate of payments used in
calculating such final scheduled distribution, and because interest payments on
the Underlying Securities will also be used to pay principal on the Bonds, the
actual date of the final distribution on the Bonds may be earlier, and could be
substantially earlier, than the Stated Maturity Date for the Bonds. In addition,
the Bonds may be redeemed prior to the final distribution on the Underlying
Securities under the circumstances discussed under "Description of the
Bonds -- Optional Redemption" herein.

WEIGHTED AVERAGE LIVES

The weighted average life of a security refers to the average amount of
time that will elapse from the date of its issuance until each dollar of
principal of such security will be distributed to the investor. The weighted
average life of a Bond is determined by (a) multiplying the amount of the
reduction, if any, of the principal balance of such Bond from one Payment Date
(or, in the case of the first distribution, from September 14, 1993) to the next
Payment Date by the number of years from the date of issuance to the second such
Payment Date, (b) summing the results and (c) dividing the sum by the aggregate
amount of the reductions in the principal balance of such Bond referred to in
clause (a). The weighted average lives of the Bonds will be influenced by, among
other factors, the rate at which principal is paid on the Mortgage Loans.

SPA MODEL

Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The standard prepayment assumption model used in
this Prospectus Supplement ("SPA") represents an assumed rate of prepayment each
month of the then outstanding principal balance of a pool of new mortgage loans.
SPA does not purport to be either a historical description of the prepayment
experience of any pool of mortgage loans or a prediction of the anticipated rate
of prepayment of any pool of mortgage loans, including the Mortgage Loans
underlying the Underlying Securities. 100% SPA assumes prepayment rates of 0.2%
per annum of the then outstanding principal balance of such mortgage loans in
the first month of the life of the mortgage loans and an additional 0.2% per
annum in each month thereafter (for example 0.4% per annum in the second month)
until the thirtieth month. Beginning in the thirtieth month and in each month
thereafter during the life of the mortgage loans, 100% SPA assumes a constant
prepayment rate of 6% per annum. Multiples will be calculated from this
prepayment rate series; for example, 500% SPA assumes prepayment rates will be
1.0% per annum in month one, 2.0% per annum in month two, reaching 30% per annum
in month 30 and remaining constant at 30% per annum thereafter. 0% SPA assumes
no prepayments.

PRICING ASSUMPTION

The Bonds were structured assuming, among other things, a prepayment
assumption of 500% SPA and LIBOR at a rate of 3.125%. The assumptions as to
prepayments and LIBOR to be used for pricing purposes for the Bonds may vary as
determined at the time of sale. The actual rates of prepayments and the actual
levels of LIBOR may vary considerably from the rates used for any pricing
assumption.

WEIGHTED AVERAGE LIFE, FINAL PAYMENT DATE AND PRE-TAX YIELD TABLES

The following three tables indicate the weighted average lives (in years),
the final Payment Dates and the pre-tax yields to maturity (on a corporate bond
equivalent basis) of the Bonds, assuming various constant percentages of SPA and
various constant levels of LIBOR.

For each of the following tables it was assumed, among other things, that
(i) the Collateral for the Bonds consists of the Underlying Securities in the
principal amounts described on Schedules I and II hereto, adjusted for actual
principal distributions on the FHLMC Securities and estimated principal
distributions on the other Underlying Securities during September 1993 which are
not part of the Trust; (ii) each Mortgage Loan underlying a FNMA MBS
Certificate, GNMA Certificate, a FHLMC PC or a FHLMC Gold PC has a mortgage
rate, remaining term to maturity and loan age equal to the weighted average
mortgage rate, weighted average remaining term to maturity and weighted average
loan age of the mortgage loans underlying such FNMA MBS Certificate, GNMA
Certificate, FHLMC PC or FHLMC Gold PC, as of August 1993 as

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reported by FNMA, FHLMC and GNMA as applicable; (iii) the Mortgage Loans prepay
at the constant percentages of SPA specified in the table after adjusting for
the principal distributions as set forth in clause (i); (iv) all amounts due
with respect to the Mortgage Loans are applied to the payment of (a) the Agency
Securities, in each case on the 15th or 25th of each month (as applicable) in
accordance with the terms set forth in the applicable offering document of FNMA
or FHLMC with respect thereto, or (b) the Private Mortgage-Backed Securities, on
the payment dates indicated with respect thereto on Schedule II; (v) for the
first Interest Accrual Period, the interest rate on the Bonds is 5.125%; (vii)
after the first Interest Accrual Period, LIBOR is equal to the levels shown in
the tables for LIBOR; (viii) there are no redemptions of the Underlying
Securities or redemptions of the Bonds; (ix) the closing date is September 14,
1993; (x) each distribution on the Bonds is made on the 25th day of the month,
commencing in October, 1993; (xi) each month consists of 30 days; (xii) there is
no reinvestment income on funds in the Collection Account; and (xiii) the
purchase price of the Bonds is 100% of the aggregate original principal amount
thereof.

WEIGHTED AVERAGE LIFE (IN YEARS) OF THE BONDS

<TABLE>
<CAPTION>
% OF SPA
-------------------------------------
100% 300% 500% 700% 1000%
LIBOR ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
1.125%............................... 3.7 2.0 1.4 1.3 1.1
3.125%............................... 4.5 2.2 1.6 1.4 1.1
5.125%............................... 5.3 2.6 1.8 1.6 1.1
7.125%............................... 6.0 3.1 2.1 1.6 1.1
</TABLE>

FINAL PAYMENT DATE OF THE BONDS

<TABLE>
<CAPTION>
% OF SPA
----------------------------------------------------------------------------------------------
LIBOR 100% 300% 500% 700% 1000%
----- ---------------- ------------------ ----------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
1.125%.................. January 25, 2023 September 25, 1998 December 25, 1997 August 25, 1998 January 25, 2015
3.125%.................. July 25, 2005 September 25, 1999 January 25, 1999 May 25, 2000 January 25, 2015
5.125%.................. June 25, 2007 October 25, 2002 May 25, 2001 May 25, 2022 January 25, 2015
7.125%.................. July 25, 2023 December 25, 2012 April 25, 2023 May 25, 2022 January 25, 2015
</TABLE>

PRE-TAX YIELD TO MATURITY ON THE BONDS

<TABLE>
<CAPTION>
% OF SPA
----------------------------------
LIBOR 100% 300% 500% 700% 1000%
----- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C>
1.125%......................................... 3.2% 3.3% 3.3% 3.3% 1.5%
3.125%......................................... 5.2 5.2 5.2 5.2 0.2
5.125%......................................... 7.2 7.1 7.1 5.3 (1.0)
7.125%......................................... 9.1 9.1 7.6 4.0 (2.3)
</TABLE>

The yields set forth in the above table were calculated by determining the
monthly discount rates which, when applied to the assumed stream of cash flows
to be paid on the Bonds, would cause the discounted present value of such
assumed stream of cash flows to equal the assumed purchase price of the Bonds
indicated above and converting such monthly rates to corporate bond equivalent
rates. Such calculation does not take into account variations that may occur in
the interest rates at which investors may be able to reinvest funds received by
them as payments of principal of and interest on the Bonds and consequently does
not purport to reflect the return of any investment in the Bonds when such
reinvestment rates are considered.

ACTUAL EXPERIENCE WILL VARY FROM ASSUMPTIONS

Discrepancies may exist between the characteristics of the actual
Underlying Securities and will exist between the characteristics of the actual
underlying Mortgage Loans and the characteristics of the Underlying Securities
and Mortgage Loans assumed in preparing the tables contained herein. To the
extent that the Underlying Securities and Mortgage Loans have characteristics
which differ from those assumed in preparing the tables, the Bonds may mature
earlier or later than indicated by the tables and the weighted average lives and
pre-tax yields may also differ. In addition, it is unlikely that the Mortgage
Loans will prepay at any

S-19
<PAGE> 128

constant rate or at the same rate, or that LIBOR will remain constant at any
level. The timing of changes in the rate of prepayment and level of LIBOR may
significantly affect the yield realized by a holder of the Bonds. Under certain
prepayment and LIBOR scenarios, investors may not receive the full amount of
their investments.

DESCRIPTION OF BOOK ENTRY PROCEDURES

The Bonds will be Book Entry Bonds and will be represented by a single
certificate registered in the name of the nominee of the Clearing Agency. The
Clearing Agency will maintain book entry records of ownership, transfers and
pledges of the Book Entry Bonds only in the names of its participants and
indirect participants (the "Clearing Agency Participants"), which include
securities brokers and dealers, banks and trust companies and clearing
corporations and may include certain other organizations. Prior to Book Entry
Termination (as defined below), Beneficial Owners who are not Clearing Agency
Participants may transfer and pledge their interests in the Bonds, and exercise
any other rights and remedies of Bondholders, only through Clearing Agency
Participants or other entities that maintain relationships with Clearing Agency
Participants. The Clearing Agency may charge its customary fee to Clearing
Agency Participants in connection with any such transfers and pledges. In
addition, prior to Book Entry Termination, payments of principal and interest on
the Bonds will be made to Beneficial Owners only through the Clearing Agency and
its Clearing Agency Participants. Consequently, Beneficial Owners may experience
some delay in the receipt of their payments. See "Special Considerations -- Book
Entry Registration" and "Description of the Bonds -- Book Entry Registration" in
the Prospectus.

The Bonds will be issued in definitive, fully registered form to Beneficial
Owners or their nominees, and thereupon such Beneficial Owners will become
Bondholders if, and only if, one of the following events shall occur (any such
event being referred to as "Book Entry Termination"): (i) the Clearing Agency or
the Issuer advises the Indenture Trustee in writing that the Clearing Agency is
no longer willing or able properly to discharge its responsibilities as a
clearing corporation with respect to such Bonds and the Issuer and the Indenture
Trustee are unable to engage a qualified successor to serve as the Clearing
Agency, or (ii) an Event of Default (as defined in the Prospectus) shall occur
and be continuing and the Clearing Agency and the Clearing Agency Participants,
at the direction of Beneficial Owners representing a majority of the outstanding
principal amount of such Bonds, advise the Indenture Trustee in writing that the
continuation of a book entry system is no longer in the best interests of
Beneficial Owners. Upon Book Entry Termination, Beneficial Owners will become
registered Bondholders and will deal directly with the Indenture Trustee with
respect to transfers, notices, payments and requests for redemption.

The Clearing Agency has advised the Issuer and the Indenture Trustee that,
prior to Book Entry Termination, the Clearing Agency will take any action
permitted to be taken by a Bondholder under the Indenture only at the direction
of one or more Clearing Agency Participants to whom the Book Entry Bonds are
credited in an account maintained by the Clearing Agency. The Clearing Agency
has advised that it will take such action with respect to any principal amount
of the Bonds only at the direction of and on behalf of Clearing Agency
Participants with respect to those principal amounts of such Bonds. For example,
if a vote of Beneficial Owners is required to accelerate maturity of the Bonds
following an Event of Default, the Clearing Agency, acting at the direction of
Clearing Agency Participants (which in turn are acting at the direction of
Beneficial Owners), may vote in favor of acceleration of maturity with respect
to a portion of the principal amount of the Bonds owned by a group of Beneficial
Owners and against acceleration with respect to other principal amounts of the
Bonds owned by a different group of Beneficial Owners.

ERISA MATTERS

The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes requirements on employee benefit plans (as defined in Section 3(3) of
ERISA) subject to ERISA ("ERISA Plans") and on persons who are fiduciaries (as
defined in Section 3(21) of ERISA) with respect to such Plans. As a general
rule, certain employee benefit plans, including governmental plans (as defined
in Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33)
of ERISA), are not subject to ERISA's requirements. Accordingly, assets of such
plans may be invested in the Bonds without regard to ERISA prohibited
transaction considerations described below subject to the provisions of other
applicable

S-20
<PAGE> 129

federal and state law. Any such plan which is qualified and exempt from taxation
under Sections 401(a) and 501(a) of the Code may nonetheless be subject to the
prohibited transaction rules set forth in Section 503 of the Code, and, under
certain circumstances in the case of church plans, Section 4975 of the Code.

Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification, requirements respecting delegation of investment authority and
the requirement that an ERISA Plan's investments be made in accordance with the
documents governing the ERISA Plan. A fiduciary that decides to invest the
assets of an ERISA Plan in the Bonds should consider, among other factors, the
extreme sensitivity of the investment to the rate of principal payments
(including prepayments) on the Mortgage Loans and to the level of LIBOR, as
discussed in "Prepayment and Yield Considerations" in this Prospectus
Supplement.

Section 406 of ERISA, and/or Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code") prohibit employee benefit plans, as well as
individual retirement accounts and certain types of Keogh Plans (each, a
"Plan"), from engaging in certain transactions with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect to
such Plans. A violation of these "prohibited transaction" rules may result in an
excise tax or other penalties and liabilities under ERISA and the Code for such
persons.

Certain transactions involving the purchase, holding or transfer of the
Bonds might be deemed to constitute prohibited transactions under ERISA and
Section 4975 of the Code if assets of the Issuer were deemed to be assets of a
Plan. Under regulations issued by the United States Department of Labor set
forth in 29 C.F.R. sec. 2510.3-101 (the "Plan Asset Regulations"), the assets of
the Issuer would be treated as plan assets of a Plan for the purposes of ERISA
and Section 4975 of the Code only if the Plan acquires an "Equity Interest" in
the Issuer and none of the exceptions contained in the Plan Asset Regulations is
applicable. An Equity Interest is defined under the Plan Asset Regulations as an
interest other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features. It is
anticipated that the Bonds should be treated as indebtedness without substantial
equity features for purposes of the Plan Asset Regulations. However, without
regard to whether the Bonds are treated as an Equity Interest for such purposes,
the acquisition or holding of Bonds by or on behalf of a Plan could be
considered to give rise to a prohibited transaction if the Issuer, the Issuer
Trustee, the Indenture Trustee, the Administrator, the holders of the Trust
Certificates, or any of their respective affiliates is or becomes a party in
interest or disqualified persons with respect to such Plan. In this event or in
the event that the Bonds were deemed to represent an Equity Interest in the
Issuer, certain exemptions from the prohibited transaction rules could be
applicable depending on the type and circumstances of the plan fiduciary making
the decision to acquire a Bond. Included among these exemptions are: Prohibited
Transaction Class Exemption ("PTCE") 90-1, regarding investments by insurance
company pooled separate accounts; PTCE 91-38 regarding investments by bank
collective investments funds; and PTCE 84-14, regarding transactions effected by
"qualified professional asset managers." Employee benefit plans that are
governmental plans, and certain church plans, may be subject to certain
requirements under the Code, as indicated above.

Any Plan proposing to invest in the Bonds should consult with its counsel
to confirm that such investment will not result in a prohibited transaction that
is not subject to an exemption and will satisfy the other requirements of ERISA
and the Code applicable to Plans.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The Bonds may be issued with original issue discount for federal income tax
purposes. The Prepayment Assumption that will be used in determining the rate of
accrual of original issue discount is 500% of the SPA (as defined herein). No
representation is made that the Bonds will prepay in accordance with that
assumption or at any other rate. Under proposed regulations, payments on the
Bonds (whether denominated principal or interest) would be treated as interest
to the extent of accrued interest.

No election will be made to treat the Issuer, any of the assets of the
Issuer or the arrangement by which the Bonds are issued as a "real estate
mortgage investment conduit" for Federal income tax purposes. See "Certain
Federal Income Consequences -- Non-REMIC Bonds" in the Prospectus. Winstead
Sechrest &

S-21
<PAGE> 130

Minick P.C. will deliver an opinion to the effect that the Issuer will not be a
"taxable mortgage pool" within the meaning of Section 7701(i) of the Code.

UNDERWRITING

The Issuer has entered into an Underwriting Agreement and a Terms Agreement
relating thereto (collectively, the "Underwriting Agreement"), with The First
Boston Corporation (the "Underwriter"). The Issuer has agreed to sell to the
Underwriter, and the Underwriter has agreed to purchase from the Issuer, all of
the Bonds.

The Underwriting Agreement provides that the obligation of the Underwriter
to pay for and accept delivery of the Bonds is subject, among other things, to
the approval of certain legal matters by its counsel and to the conditions,
among others, that no stop order suspending the effectiveness of the
registration statement relating to the Bonds shall be in effect, no proceedings
for such purpose shall be pending before or threatened by the Securities and
Exchange Commission and there shall have been no material adverse change in the
condition of the Issuer from that set forth in or contemplated by this
Prospectus Supplement and the Prospectus.

The Underwriter proposes to offer the Bonds from time to time in one or
more negotiated transactions or otherwise at varying prices to be determined, in
each case, at the time of sale. The Underwriter may effect such transactions by
selling such Bonds to or through dealers, and such dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Underwriter. In connection with the sale of the Bonds, the Underwriter
may be deemed to have received compensation from the Issuer in the form of
underwriting compensation. The Underwriter and any dealers that participate with
the Underwriter in the distribution of Bonds may be deemed to be underwriters
and any commissions received by them and any profit on the resale of such Bonds
positioned by them may be deemed to be underwriting discounts and commissions
under the Securities Act of 1933, as amended.

The Underwriter may, from time to time, buy and sell Bonds, but there can
be no assurance that an active secondary market will develop or that if one does
develop, that it will continue.

The Underwriting Agreement provides that the Issuer will indemnify the
Underwriter against certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended.

All of the Underlying Securities will be purchased in a privately
negotiated transaction by the Issuer from the Underwriter, which has acquired or
will acquire such Underlying Securities in open market or privately-negotiated
transactions. The terms of the proposed transactions are such that the economic
risks and benefits associated with acquiring the Underlying Securities and
selling the Bonds are borne or realized primarily by the Underwriter.

LEGAL MATTERS

Certain legal matters in connection with the Bonds will be passed upon for
the Issuer by Winstead Sechrest & Minick P.C., Dallas, Texas, and for the
Underwriter by Cleary, Gottlieb, Steen & Hamilton, Washington, D.C.

BOND RATINGS

As a condition to their issuance, the Bonds will be rated "AAA" by Fitch
and D&P. The ratings will reflect the opinions of the Rating Agencies that the
Bonds will receive at least $117,350,000 in cash on or prior to October 25,
2023. EXCEPT FOR THE RECEIPT OF SUCH AMOUNTS, THE RATINGS DO NOT ADDRESS THE
LIKELIHOOD OF THE RECEIPT OF THE ORIGINAL PRINCIPAL AMOUNT OF THE BONDS OR
INTEREST AT THE APPLICABLE INTEREST ON THE BONDS. IN ADDITION, THE RATINGS DO
NOT ADDRESS THE POSSIBILITY THAT THE BONDHOLDERS MAY SUFFER LOWER THAN
ANTICIPATED YIELDS. The analysis for the ratings will focus primarily on the
rate of prepayments of the Mortgage Loans underlying the Underlying Securities
and the subsequent effect on the cash flows of the Underlying Securities.

The Issuer will request a rating of the Bonds by both Rating Agencies.
There can no no assurance as to whether any rating agency not requested to rate
the Bonds will nonetheless issue a rating and, if so, what such rating would be.
A rating assigned to the Bonds by another rating agency that has not been
requested by the Issuer to do so may be lower than the rating assigned by a
Rating Agency requested by the Issuer to rate the Bonds.

S-22
<PAGE> 131

GLOSSARY

<TABLE>
<S> <C>
Administrator............................................... S-3
Agency Securities........................................... S-7
Available Funds............................................. S-13
Bonds....................................................... S-3
Clearing Agency............................................. S-3
Collection Account.......................................... S-7
Current Principal Amount.................................... S-4
D&P......................................................... S-9
Due Period.................................................. S-13
ERISA....................................................... S-8
FHLMC....................................................... S-7
FHLMC PCs................................................... S-14
FHLMC Securities............................................ S-7
Fitch....................................................... S-9
FNMA........................................................ S-7
FNMA MBS Certificates....................................... S-14
FNMA Securities............................................. S-7
Giant PCs................................................... S-14
GNMA........................................................ S-7
GNMA Certificates........................................... S-14
Gold Giant PCs.............................................. S-14
Gold PCs.................................................... S-14
Indenture Trustee........................................... S-3
Interest Accrual Period..................................... S-3
Issuer...................................................... S-3
Issuer Trustee.............................................. S-3
LIBOR....................................................... S-4
LIBOR Determination Date.................................... S-11
Mortgage Loans.............................................. S-5
Payment Date................................................ S-3
Plan........................................................ S-8
Private Mortgage-Backed Securities.......................... S-7
Rating Agencies............................................. S-9
Record Date................................................. S-4
Reference Banks............................................. S-11
SPA......................................................... S-18
Substitute Collateral....................................... S-13
Temporary Collateral........................................ S-7
Trust Certificates.......................................... S-3
Underlying Securities....................................... S-7
Underwriter................................................. S-22
</TABLE>

S-23
<PAGE> 132

SCHEDULE I

AGENCY SECURITIES
<TABLE>
<CAPTION>

CLASS CLASS FACTOR
MONTHLY INTEREST RATE CLASS ORIGINAL AS OF
PAYMENT AS OF MATURITY PRINCIPAL CLASS % SEPTEMBER
ISSUER SERIES CLASS DATE AUGUST 1993 TYPE(1) DATE AMOUNT IN TRUST 1993(2)
------ -------- ----- ------- ------------- ------- -------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FHLMC 1092 X 15 1,009.000% IO 06/15/21 $ 100,000 100.00% 0.40233000
FHLMC 1119 J 15 1,068.050 PAC IO 07/15/18 100,000 50.00 1.00000000
FHLMC 1181 C 15 1,025.375 IO 12/15/96 135,000 55.555556 0.33200000
FHLMC 1230 G 15 1,140.53125 PAC IO 05/15/04 240,000 100.00 0.77153330
FHLMC 1258 G 15 989.130 PAC IO 05/15/04 600,000 33.333333 0.87961500
FHLMC 1258 GA 15 1,170.750 PAC IO 05/15/04 50,000 100.00 1.00000000
FHLMC 1313 K 15 1,061.500 PAC IO 02/15/05 150,000 100.00 0.44826000
FHLMC 1505 QB 15 13.329161063(3) INV 05/15/23 9,660,000 27.950311 1.00000000
FHLMC 158 I 15 775.650 PAC IO 08/15/20 100,000 100.00 0.63103100
FHLMC(4) 190 M 15 509.000 PAC IO 10/15/21 94,700 100.00 0.14805060
FNMA 1991-105 M 25 1,079.06125 PAC IO 03/25/20 200,000 50.00 0.52585000
FNMA 1991-150 J 25 677.455 PAC IO 01/25/04 200,000 100.00 0.53769000
FNMA 1991-159 D 25 1,007.000 PAC IO 10/25/04 176,266 47.080037 0.79271109
FNMA 1991-169 N 25 1,008.400 IO 12/25/21 75,000 33.333333 0.63384001
FNMA 1992-177 S 25 16.98750(5) INV 10/25/22 32,360,659 15.450860 1.00000000
FNMA 1992-G41 NS 25 755.99967 PAC IO 08/25/22 238,560 100.00 0.86433602
FNMA 1992-G55 D 25 0.000 PO 11/25/17 3,438,000 4.508435 1.00000000
FNMA 1993-129 O 25 4.000 DSC 08/25/08 20,534,500 100.00 1.00000000
FNMA 1993-154 N 25 3.500 DSC 08/25/08 12,861,965 100.00 1.00000000
FNMA 1993-G4 J 25 0.000 PO 09/25/22 17,000,000 50.00 1.00000000
FNMA 1991-78 PH 25 1,009.000 PAC IO 07/25/21 224,900 100.00 0.53646510
FNMA 1992-5 J 25 1,007.000 IO 01/25/22 500,000 20.00 0.76131000
FNMA 1992-76 H 25 988.875 PAC IO 05/25/05 400,000 42.50 1.00000000
FNMA 1992-78 J 25 1,139.81860 PAC IO 06/25/07 750,000 64.00 0.85065625
FNMA 1992-89 N 25 999.61190 PAC IO 08/25/21 103,243 100.00 0.83502998
FNMA 1993-5 J 25 1,101.72619 PAC IO 10/25/01 357,099 57.994842 0.86378978
FNMA(6) 1993-184 M 25 0.000 PO 09/25/23 71,315,000 29.011148 1.00000000

<CAPTION>
WEIGHTED
AVERAGE
REMAINING
CURRENT WEIGHTED TERM TO WEIGHTED
MORTGAGE AVERAGE MATURITY AVERAGE
BALANCE OF COUPON OF (IN MONTHS) LOAN AGE
CLASS PRINCIPAL UNDERLYING UNDERLYING OF UNDERLYING (IN
AMOUNT IN TRUST MORTGAGE LOANS MORTGAGE LOANS MORTGAGE LOANS MONTHS)
AS OF AS OF AS OF AS OF AS OF
ISSUER SEPTEMBER 1993 AUGUST 1993 AUGUST 1993 AUGUST 1993 AUGUST 1993
------ ----------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
FHLMC $ 40,233 $ 171,344,485 9.70% 307 39
FHLMC 50,000 314,412,085 10.05 314 33
FHLMC 24,900 539,910,707 8.59 153 22
FHLMC 185,168 218,339,832 8.59 157 18
FHLMC 175,923 783,924,962 8.60 159 16
FHLMC 50,000 783,924,962 8.60 159 16
FHLMC 67,239 156,838,771 9.82 110 63
FHLMC 2,700,000 496,707,673 7.66 354 4
FHLMC 63,103 102,800,000 10.17 296 50
FHLMC(4) 14,020 97,076,645 10.14 307 40
FNMA 52,585 196,760,257 9.54 327 27
FNMA 107,538 197,029,006 8.64 152 25
FNMA 65,784 204,948,291 8.61 154 24
FNMA 15,846 508,134,516 9.03 328 26
FNMA 5,000,000 1,055,517,308 8.05 345 12
FNMA 206,196 507,856,608 9.02 332 28
FNMA 155,000 87,741,338 10.50 299 61
FNMA 20,534,500 1,100,000,000 7.05 178 2
FNMA 12,861,965 300,000,001 6.70 178 2
FNMA 8,500,000 423,955,650 8.50 342 18
FNMA 120,651 285,882,567 9.56 324 30
FNMA 76,131 403,246,836 8.62 332 22
FNMA 170,000 771,260,955 8.53 161 17
FNMA 408,315 773,808,305 8.54 161 17
FNMA 86,211 364,097,830 8.97 340 16
FNMA 178,890 574,448,830 7.96 169 10
FNMA(6) 20,689,300 200,000,000 7.53 356 4
</TABLE>

- ---------------

(1) The abbreviations contained under the heading "Type" have the following
meanings, as more fully described under "Security for the
Bonds -- Characteristics of Agency Securities and Private Mortgage-Backed
Securities": PAC = Planned Amortization Class; IO = Interest Only;
PO = Principal Only; INV = Inverse Floater; DSC = Discounted Coupon.

(2) Actual class factors for FHLMC Securities; estimated class factors for FNMA
Securities.

(3) Inverse Floater Formula: 20.76666%-(LIBOR X 2.333333); Cap = 20.76666%;
Floor = 0.0%.

(4) In addition to optional redemption by FHLMC as described under "Security for
the Bonds -- Agency Securities," this FHLMC Multiclass PC may be redeemed in
whole, but not in part, at the option of the holders of a related class of
Multiclass PCs and subject to the satisfaction of certain conditions, on any
distribution date on or after the date on which, after giving effect to
principal payments to be made on the series of FHLMC Multiclass PCs of which
such FHLMC Multiclass PC forms a part, the aggregate outstanding principal
amount of such series is less than 5% of the aggregate original principal
amount of such series.

(5) Inverse Floater Formula: 26.55%-(3 X LIBOR); Cap = 26.55%; Floor = 0.0%.

(6) This FNMA Security is expected to be issued in September 1993 and included
as Substitute Collateral as described under "Security for the
Bonds -- General." All information presented is based upon preliminary
publicly available or projected information with the exception of the Class
Principal Amount in Trust as of September 1993.

S-24
<PAGE> 133

SCHEDULE II

PRIVATE MORTGAGE-BACKED SECURITIES
<TABLE>
<CAPTION>

CLASS
INTEREST ORIGINAL EXPECTED
RATE PRINCIPAL CLASS FACTOR
MONTHLY AS OF CLASS OR AS OF
PAYMENT AUGUST MATURITY NOTIONAL CLASS % SEPTEMBER
ISSUER(1) SERIES CLASS DATES 1993 TYPE(2) DATE AMOUNT(3) IN TRUST 1993
--------- ------- ----- ------- --------- ------- -------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CMOT26 A 23 0.000% PO 04/23/17 $498,750,000 2.807018% 0.1850350414
CMOT29 A 23 0.000 PO 05/23/17 498,750,000 3.007519 0.1912564538
CMSC 1990-7 7-D 20 2,509.500 IO 10/20/20 68,190 37.501100 0.1319907611
DBLV V-I 1 0.000 PO 09/01/18 114,912,000 6.692077 0.2775875335
FBST 1987-B B-2 26 8.985 IO 04/26/17 275,000,000(N) 18.245455 0.2467090322
FBST 1987-C C-1 25 0.000 PO 04/25/17 126,900,000 4.728132 0.2184508512
FBST 1987-D D-1 25 0.000 PO 05/25/17 110,000,000 6.727273 0.2509786385
GNMA1 A 20 0.000 PO 05/20/17 923,060,000 3.351137 0.2115225132
MLTR A 25 0.000 PO 10/25/17 100,456,000 8.461416 0.2808565864
SBST 1987-1 A 20 0.000 PO 03/20/17 200,000,000 3.000000 0.1887848981

<CAPTION>
WEIGHTED
AVERAGE
REMAINING WEIGHTED
CLASS TERM TO AVERAGE
CURRENT WEIGHTED MATURITY LOAN AGE
PRINCIPAL CURRENT AVERAGE (IN MONTHS) (IN MONTHS)
OR MORTGAGE COUPON OF OF OF
NOTIONAL BALANCE UNDERLYING UNDERLYING UNDERLYING
AMOUNT OF UNDERLYING MORTGAGE MORTGAGE MORTGAGE
IN TRUST MORTGAGE LOANS LOANS LOANS LOANS
AS OF TYPE AS OF AS OF AS OF AS OF OPTIONAL
SEPTEMBER OF AUGUST AUGUST AUGUST AUGUST REDEMPTION
ISSUER(1) 1993(3) COLLATERAL 1993 1993 1993 1993 PROVISIONS
--------- ----------- ---------- -------------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CMOT26 $ 2,590,491 GNMA $ 94,923,889 12.00% 241 119 (4)
CMOT29 2,868,847 GNMA 98,157,868 12.00 238 122 (4)
CMSC 3,375 GNMA 197,933,762 10.00 285 75 (5)
DBLV 2,134,648 GNMA 31,611,828 12.00 242 118 (6)
FBST 12,378,626(N) FNMA 72,446,386 9.68 262 87 (7)
FBST 1,310,705 GNMA 28,536,494 11.50 267 93 (7)
FBST 1,857,242 GNMA 28,271,645 11.50 260 100 (7)
GNMA1 6,543,027 GNMA 201,910,143 11.50 266 94 (8)
MLTR 2,387,281 GNMA 28,938,722 11.50 211 149 (9)
SBST 1,132,689 GNMA 38,630,644 11.50 256 104 (7)
</TABLE>

- ---------------

(1) CMOT = Collateralized Mortgage Obligation Trust; CMSC = Collateralized
Mortgage Securities Corporation; DBLV = Drexel Burnham Lambert CMO Trust
Series V; FBST = First Boston Mortgage Securities Corp.; GNMAI = GNMA-Backed
Trust I; MLTR = Merrill Lynch Trust XVII; and SBST = Salomon Brothers
Mortgage Securities VI, Inc.

(2) The abbreviations contained under the heading "Type" have the following
meanings, as more fully described under "Security for the
Bonds -- Characteristics of Agency Securities and Private Mortgage-Backed
Securities": PO = Principal Only; IO = Interest Only.

(3) "N" designates a security with a notional principal amount.

FOOTNOTES CONTINUED ON NEXT PAGE.

S-25
<PAGE> 134

INITIALLY CAPITALIZED TERMS USED IN THE FOOTNOTES BELOW HAVE THE MEANINGS
SET FORTH IN THE APPLICABLE ORIGINAL PROSPECTUSES AND, IF APPLICABLE, ORIGINAL
PROSPECTUS SUPPLEMENTS (THE "OFFERING DOCUMENTS") RELATING TO EACH ISSUER'S
SECURITIES. THE INFORMATION PROVIDED IN THE FOOTNOTES BELOW IS ONLY A SUMMARY OF
THE OPTIONAL REDEMPTION PROVISIONS FOR THE SERIES OF SECURITIES INCLUDING OR
RELATING TO THE APPLICABLE PRIVATE MORTGAGE-BACKED SECURITY. SUCH SUMMARY HAS
BEEN PREPARED BASED SOLELY ON SUCH OFFERING DOCUMENTS. INVESTORS MUST NOT RELY
ON SUCH SUMMARY AND MUST REFER TO THE OFFERING DOCUMENTS.

ADDITIONAL FOOTNOTES TO SCHEDULE II

(4) All (but not less than all) of the outstanding Bonds may be redeemed at
the Issuer's option on any Payment Date as of which the outstanding principal
amount of the Bonds (after giving effect to the scheduled payment of principal
to be made on such Payment Date) would be less than 2% of their original
principal amount. In such event, (i) the Class A Bonds will be redeemed at 100%
of their outstanding principal amount, and (ii) the Class B Bonds will be
redeemed at an aggregate redemption price (inclusive of interest) equal to the
fair market value of the Certificates (determined in the manner described in the
Indenture) less the aggregate amount payable upon redemption of the Class A
Bonds.

(5) The Bonds may be redeemed in whole, but not in part, at the option of
the Issuer on any Payment Date on which, after giving effect to principal
payments due on such Payment Date, the aggregate outstanding principal amount of
the Bonds is less than or equal to 10% of the aggregate initial principal amount
of the Bonds. The redemption price for any class of Bonds so redeemed will be
equal to 100% of the unpaid principal amount of such Bonds, plus accrued
interest thereon through the last day of the calendar month preceding the month
in which the redemption occurs. Any optional redemption is subject to the
condition that the Trustee receive an opinion of counsel to the effect that,
among other things, the optional redemption (i) is part of a "qualified
liquidation" with the meaning of Section 860F(a)(4)(A) of the Internal Revenue
Code of 1986, as amended, (ii) will not cause either of the two segregated asset
pools to fail to qualify as a REMIC, and (iii) will not otherwise subject either
the Lower-Tier REMIC or the Upper-Tier REMIC to tax (other than a tax for which
provision for payment has been made).

(6) The Bonds may be redeemed in whole, but not in part, at the Issuer's
option on any Payment Date on which 2% or less of the original principal amount
of the Bonds is outstanding. In such event, (i) the Class V-1 Bonds will be
redeemed at 100% of their outstanding principal amount, and (ii) the Class V-2
Bonds will be redeemed at an aggregate redemption price equal to the greater of
(a) their outstanding principal amount plus accrued interest to the date one
month prior to the date of redemption and (b) the fair market value of the
Certificates (determined in the manner described in the Indenture) less the
aggregate amount payable upon redemption of the Class V-1 Bonds.

(7) These securities are not subject to optional redemption.

(8) The Bonds may be redeemed in whole on any Payment Date on which the
aggregate principal amount of Bonds then outstanding is less than 2% of the
initial aggregate principal amount of the Bonds. Such an optional redemption
will be at a redemption price equal to 100% of the unpaid principal amount of
the Bonds so redeemed, plus, in the case of the Class B Bonds, accrued interest
to the date of redemption.

(9) The Bonds may be redeemed in whole on any Payment Date on which the
aggregate principal amount of Bonds then outstanding is less than 2% of the
initial aggregate principal amount of the Bonds. Such an optional redemption
will be at a redemption price equal to 100% of the unpaid principal amount of
the Bonds so redeemed, plus, in the case of the Class B Bonds, accrued interest
through the last day of the month preceding the month of the date of redemption.

S-26
<PAGE> 135

SCHEDULE III

SCHEDULED BALANCES

The Scheduled Balance of the Bonds set forth below for each Payment Date
will be used to determine the allocation of principal and interest to the Bonds
as described in "Description of the Bonds -- Payments of Interest and
Principal." The actual Current Principal Amount of the Bonds could be
substantially higher or lower than the Scheduled Balance for any Payment Date
set forth below.

<TABLE>
<CAPTION>
PAYMENT DATE SCHEDULED BALANCE
------------ -----------------
<S> <C>
Initial Balance............... $117,350,000.00
October 1993.................. 116,575,923.02
November 1993................. 115,801,847.22
December 1993................. 115,027,770.24
January 1994.................. 114,253,694.43
February 1994................. 113,479,617.45
March 1994.................... 112,705,540.48
April 1994.................... 111,931,464.67
May 1994...................... 111,157,387.69
June 1994..................... 110,383,311.89
July 1994..................... 109,609,234.91
August 1994................... 108,835,157.93
September 1994................ 108,061,082.13
October 1994.................. 107,287,005.15
November 1994................. 106,512,929.34
December 1994................. 105,738,852.36
January 1995.................. 104,964,775.38
February 1995................. 104,190,699.58
March 1995.................... 103,416,622.60
April 1995.................... 102,642,545.62
May 1995...................... 101,868,469.82
June 1995..................... 101,094,392.84
July 1995..................... 100,320,317.03
August 1995................... 99,546,240.06
September 1995................ 98,772,163.08
October 1995.................. 97,998,087.27
November 1995................. 97,224,010.29
December 1995................. 96,449,934.49
January 1996.................. 95,675,857.51
February 1996................. 94,901,780.53
March 1996.................... 94,127,704.73
April 1996.................... 93,353,627.75
May 1996...................... 92,579,551.94
June 1996..................... 91,805,474.96
July 1996..................... 91,031,397.99
August 1996................... 90,257,322.18
September 1996................ 89,483,245.20
October 1996.................. 88,709,169.40
November 1996................. 87,935,092.42
December 1996................. 87,161,015.44
January 1997.................. 86,386,939.64
February 1997................. 85,612,862.66
March 1997.................... 84,838,786.85
</TABLE>

<TABLE>
<CAPTION>
PAYMENT DATE SCHEDULED BALANCE
------------ -----------------
<S> <C>
April 1997.................... $ 84,064,709.87
May 1997...................... 83,290,632.90
June 1997..................... 82,516,557.09
July 1997..................... 81,742,480.11
August 1997................... 80,968,403.13
September 1997................ 80,194,327.33
October 1997.................. 79,420,250.35
November 1997................. 78,646,174.54
December 1997................. 77,872,097.57
January 1998.................. 77,098,020.59
February 1998................. 76,323,944.78
March 1998.................... 75,549,867.80
April 1998.................... 74,775,792.00
May 1998...................... 74,001,715.02
June 1998..................... 73,227,638.04
July 1998..................... 72,453,562.24
August 1998................... 71,679,485.26
September 1998................ 70,905,409.45
October 1998.................. 70,131,332.48
November 1998................. 69,357,255.50
December 1998................. 68,583,179.69
January 1999.................. 67,809,102.71
February 1999................. 67,035,026.91
March 1999.................... 66,260,949.93
April 1999.................... 65,486,872.95
May 1999...................... 64,712,797.15
June 1999..................... 63,938,720.17
July 1999..................... 63,164,644.36
August 1999................... 62,390,567.38
September 1999................ 61,616,490.41
October 1999.................. 60,842,414.60
November 1999................. 60,068,337.62
December 1999................. 59,294,260.64
January 2000.................. 58,520,184.84
February 2000................. 57,746,107.86
March 2000.................... 56,972,032.06
April 2000.................... 56,197,955.08
May 2000...................... 55,423,878.10
June 2000..................... 54,649,802.29
July 2000..................... 53,875,725.31
August 2000................... 53,101,649.51
September 2000................ 52,327,572.53
October 2000.................. 51,553,495.55
</TABLE>

S-27
<PAGE> 136

<TABLE>
<CAPTION>
PAYMENT DATE SCHEDULED BALANCE
------------ -----------------
<S> <C>
November 2000................. $ 50,779,419.75
December 2000................. 50,005,342.77
January 2001.................. 49,231,266.96
February 2001................. 48,457,189.99
March 2001.................... 47,683,113.01
April 2001.................... 46,909,037.20
May 2001...................... 46,134,960.22
June 2001..................... 45,360,884.42
July 2001..................... 44,586,807.44
August 2001................... 43,812,730.46
September 2001................ 43,038,654.66
October 2001.................. 42,264,577.68
November 2001................. 41,490,501.87
December 2001................. 40,716,424.89
January 2002.................. 39,942,347.92
February 2002................. 39,168,272.11
March 2002.................... 38,394,195.13
April 2002.................... 37,620,118.15
May 2002...................... 36,846,042.35
June 2002..................... 36,071,965.37
July 2002..................... 35,297,889.57
August 2002................... 34,523,812.59
September 2002................ 33,749,735.61
October 2002.................. 32,975,659.80
November 2002................. 32,201,582.83
December 2002................. 31,427,507.02
January 2003.................. 30,653,430.04
February 2003................. 29,879,353.06
March 2003.................... 29,105,277.26
April 2003.................... 28,331,200.28
May 2003...................... 27,557,124.47
June 2003..................... 26,783,047.50
July 2003..................... 26,008,970.52
August 2003................... 25,234,894.71
</TABLE>

<TABLE>
<CAPTION>
PAYMENT DATE SCHEDULED BALANCE
------------ -----------------
<S> <C>
September 2003................ $ 24,460,817.73
October 2003.................. 23,686,741.93
November 2003................. 22,912,664.95
December 2003................. 22,138,587.97
January 2004.................. 21,364,512.17
February 2004................. 20,590,435.19
March 2004.................... 19,816,359.38
April 2004.................... 19,042,282.41
May 2004...................... 18,268,205.43
June 2004..................... 17,494,129.62
July 2004..................... 16,720,052.64
August 2004................... 15,945,976.25
September 2004................ 15,171,899.74
October 2004.................. 14,397,823.22
November 2004................. 13,623,746.70
December 2004................. 12,849,670.18
January 2005.................. 12,075,593.66
February 2005................. 11,301,517.15
March 2005.................... 10,527,440.63
April 2005.................... 9,753,364.12
May 2005...................... 8,979,287.60
June 2005..................... 8,205,211.08
July 2005..................... 7,431,134.57
August 2005................... 6,657,058.05
September 2005................ 5,882,981.53
October 2005.................. 5,108,905.02
November 2005................. 4,334,828.50
December 2005................. 3,560,751.98
January 2006.................. 2,786,675.47
February 2006................. 2,012,598.95
March 2006.................... 1,238,522.43
April 2006.................... 464,445.91
May 2006 and thereafter....... 0.00
</TABLE>

S-28
<PAGE> 137

PROSPECTUS

COLLATERALIZED MORTGAGE OBLIGATIONS
PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
AND CERTAIN NON-AGENCY CERTIFICATES
AND PRIVATE MORTGAGE-BACKED SECURITIES

FUND AMERICA INVESTORS CORPORATION II
AND CERTAIN TRUSTS, ALL OF THE BENEFICIAL OWNERSHIP INTEREST
IN WHICH IS OWNED BY FUND AMERICA INVESTORS CORPORATION II

This Prospectus relates to Collateralized Mortgage Obligations (the
"Bonds") and Pass-Through Certificates (the "Certificates" and, together with
the Bonds, the "Securities"), which may be sold from time to time in one or more
series (a "Series") by Fund America Investors Corporation II (the "Company") on
terms determined at the time of sale and described in this Prospectus and the
related Prospectus Supplement (a "Prospectus Supplement"). As specified in the
related Prospectus Supplement, the Securities of each Series will be either
Bonds secured by a trust estate (a "Trust Estate") and issued pursuant to an
Indenture, which Bonds representing indebtedness of the Company or an owner
trust (an "Owner Trust") beneficially owned by the Company, or Certificates
which will evidence a beneficial ownership interest in assets deposited into a
trust fund (a "Trust Fund") by the Company as depositor pursuant to a Trust
Agreement, as described herein. The issuer (the "Issuer") with respect to a
Series of Bonds will be the Company or the Owner Trust established to issue such
Bonds and, with respect to a Series of Certificates, will be the Trust Fund
established in respect of such Certificates.

The Securities of each Series will be secured by or will represent a
beneficial interest in certain mortgage-related assets (the "Mortgage Assets")
and may also be secured by, represent beneficial interests in, or have the
benefits of certain other assets (together with the Mortgage Assets, the
"Assets") which may include reinvestment income, reserve funds, cash accounts,
insurance policies, guarantees, letters of credit or other credit enhancement
("Credit Enhancement") as described in the related Prospectus Supplement. The
Mortgage Assets with respect to a Series of Bonds will consist of one or more of
the following: (i) mortgage-backed certificates, mortgage pass-through
certificates, or mortgage participation certificates ("Agency Securities")
issued or guaranteed by the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA") or the Federal Home Loan
Mortgage Corporation ("FHLMC"); (ii) pass-through certificates or participation
certificates, formed by the Company in connection with the issuance of the
related Series of Securities for purposes of ease of administration, which are
neither issued nor guaranteed by any agency or instrumentality of the United
States ("Non-Agency Certificates") and which evidence undivided interests in (a)
Agency Securities, (b) pools of single family (one- to four-unit) residential
mortgage loans or participation interests therein ("Mortgage Loans"), (c)
conditional sales contracts and installment sales or loan agreements or
participation interests therein either secured by manufactured housing ("Secured
Contracts") or unsecured ("Unsecured Contracts" and, together with the Secured
Contracts, the "Contracts") or (d) multifamily mortgage loans secured by rental
apartment buildings or projects containing five or more residential units, or
cooperative apartment building loans ("Multifamily Loans"); (iii) (A) a pool or
pools of Mortgage Loans, Contracts and/or Multifamily Loans, or (B) mortgage
pass-through or participation certificates representing beneficial interests in
certain mortgage loans or certain mortgage-backed securities, collateralized
mortgage obligations secured by certain mortgage loans or certain
mortgage-backed securities, and residual interest securities relating to
issuances of mortgage pass-through certificates or collateralized mortgage
obligations (collectively, "Private Mortgage-Backed Securities") and (iv)
participation or other interests in any of the foregoing. Private
Mortgage-Backed Securities may include securities formed or issued by the
Company (or an Owner Trust beneficially owned by the Company), an affiliate of
the Company, or by third parties. The Mortgage Assets with respect to a Series
of Certificates will consist of one or more of the following: (i) Agency
Securities, (ii) Non-Agency Certificates, (iii) Mortgage Loans, (iv) Contracts,
(v) Multifamily Loans, (vi) Private Mortgage-Backed Securities, and (vii)
participation or other interests in any of the foregoing. To the extent
specified in the related Prospectus Supplement, Mortgage Loans, Contracts and
Multifamily Loans may be secured by junior liens on the related mortgaged
properties, and may include Title I Loans.

Each Series will be issued in one or more Classes, one or more of which may
be Principal Only Securities, Interest Only Securities, Compound Interest
Securities, Variable Interest Rate Securities, Scheduled Amortization
Securities, Companion Securities, Special Allocation Securities, or any other
Class of Securities, if any, included in such Series and described in the
related Prospectus Supplement. Principal Only Securities will not accrue, and
will not be entitled to receive, any interest. Payments or distributions of
interest on each Class of Securities other than Principal Only Securities and
Compound Interest Securities will be made on each Payment Date or Distribution
Date as specified in the Prospectus Supplement. Interest will not be paid or
distributed on Compound Interest Securities on a current basis until the date or
period specified in the related Prospectus Supplement. Prior to such time,
interest on such Class of Compound Interest Securities will accrue and the
amount of interest so accrued will be added to the principal thereof on each
Payment Date or Distribution Date. The amount
(Cover continued on next page)

SEE "RISK FACTORS" BEGINNING ON PAGE 26 HEREIN FOR A DESCRIPTION OF CERTAIN
RISKS AND OTHER FACTORS WHICH SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT
IN THE SECURITIES.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR ANY RELATED PROSPECTUS
SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

Offers of the Securities of a Series may be made through one or more
different methods, including offerings through underwriters, as more fully
described under "Plan of Distribution" herein and in the related Prospectus
Supplement.

There will have been no public market for any Securities prior to the
offering thereof. There can be no assurance that a secondary market will develop
for the Securities of any Series or, if it does develop, that such market will
continue.

Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of Securities unless accompanied by a Prospectus
Supplement.
THE DATE OF THIS PROSPECTUS IS APRIL 28, 1998.
<PAGE> 138

(Cover continued from previous page)

of principal and interest available and payable on each Series on each Payment
Date or Distribution Date will be applied to the Classes of such Series in the
order and as otherwise specified in the related Prospectus Supplement. Principal
payments or distributions on each Class of a Series will be made on a pro rata,
random lot or other selection basis among Securities of such Class, as specified
in the related Prospectus Supplement. Securities of a Series will be subject to
redemption or repurchase only under the circumstances and according to the
priorities described herein and in the related Prospectus Supplement. The
Company or its affiliates may retain or hold for sale from time to time all or a
portion of one or more Classes of a Series.

Bonds of a Series will constitute non-recourse obligations of the related
Issuer and Certificates of a Series will evidence an interest in the related
Trust Fund only. Neither the Bonds nor the Certificates will be insured or
guaranteed by GNMA, FNMA, FHLMC, any governmental entity or, unless otherwise
specified in the related Prospectus Supplement, by any other person. Unless
otherwise specified in the related Prospectus Supplement, the Company's only
obligations, if any, with respect to a Series will be to obtain certain
representations and warranties from each Seller of the related Mortgage Assets
and to assign to the related Trustee (or, in the case of Bonds issued by an
Owner Trust, to such Owner Trust) the Company's rights with respect thereto, and
its obligations pursuant to certain representations and warranties made by it.
Unless otherwise specified in the Prospectus Supplement relating to a Series, no
affiliate of the Company will have any obligations with respect to such Series.

The yield on each Class of a Series will be affected by the rate of payment
of principal (including prepayments) on the related Trust Estate or Mortgage
Assets and the timing of receipt of such payments as described herein and in the
related Prospectus Supplement.

Each Private Mortgage-Backed Security and each participation or other
interest therein securing a Series of Bonds or underlying a Series of
Certificates (including Private Mortgage-Backed Securities formed or issued by
the Company or an affiliate of the Company) will have been acquired by the
Company, in a secondary market transaction, from a seller other than the issuer
thereof and any of its affiliates, and will have been (i) issued in an offering
registered under the Securities Act of 1933, as amended (the "Securities Act")
or (ii) issued in an offering exempt from the registration requirements of the
Securities Act and will have been held by persons other than the issuer of such
securities and its affiliates for at least three years.

If specified in the Prospectus Supplement for a Series, one or more
elections may be made to treat all or specified portions of the related Trust
Estate or Trust Fund as a "real estate mortgage investment conduit" ("REMIC") or
to treat the arrangement by which such Series is issued as a REMIC, for federal
income tax purposes. See "Certain Federal Income Tax Consequences".

--2--
<PAGE> 139

PROSPECTUS SUPPLEMENT AND CURRENT REPORT ON FORM 8-K

The Prospectus Supplement and Current Report on Form 8-K relating to a
Series to be offered hereunder will, among other things, set forth all of the
following with respect to such Series:

(i) whether the Securities of such Series are Bonds or
Certificates;

(ii) information as to the Assets, included in the related Trust
Estate or Trust Fund, or otherwise available for such Series including (A) the
certain characteristics of the Mortgage Assets included therein and (B) a
description of the Credit Enhancement, if any, with respect to such Series;

(iii) the aggregate original principal balance of each Class of such
Series entitled to payments or distributions allocable to principal and, if a
fixed rate of interest, the interest rate for each Class of such Series
entitled to distributions allocable to interest;

(iv) information as to any Class of such Series that has a rate of
interest that is subject to change from time to time and the basis on which
such interest rate will be determined;

(v) information as to any Class of such Series on which interest
will accrue and be added to the principal or, if applicable, notional principal
balance thereof;

(vi) information as to the method used to calculate the amount of
interest to be paid on any Class of such Series entitled to payments or
distributions of interest only;

(vii) information as to the nature and extent of subordination with
respect to any Class of such Series that is subordinate in right of payment to
any other Class of such Series;

(viii) the Stated Maturity of each Class of Bonds or the Assumed
Final Distribution Date of each Class of Certificates;

(ix) the circumstances, if any, under which the Securities of such
Series are subject to redemption or repurchase;

(x) the Payment Dates or Distribution Dates, as applicable, for
each Class of such Securities;

(xi) the method used to calculate the aggregate amounts of
principal and interest available and required to be applied to the Securities
of such Series on each Payment Date or Distribution Date, as applicable, and
with respect to a Series consisting of more than one Class, the basis on which
such amounts will be allocated among the Classes of such Series;

(xii) the identity of the Trustee for such Series;

(xiii) whether one or more elections will be made to treat all or
specified portions of the Assets securing such Series or included in the
related Trust Fund as a REMIC and, if applicable, the designation of the
regular interests and residual interests therein; and

(xiv) information with respect to the plan of distribution of such
Series.

The actual characteristics of the Mortgage Assets relating to a Series
will not deviate in any material respect from the parameters specified in the
related Prospectus Supplement; provided, however, that if the characteristics
described in the initial related Prospectus Supplement materially differ from
the actual characteristics, a supplement to the related Prospectus Supplement
will be distributed.

- 3 -
<PAGE> 140
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith is required to file reports and other information (the
"Reports") with the Securities and Exchange Commission (the "Commission"). The
Company has filed with the Commission a Registration Statement under the
Securities Act of 1933, as amended, with respect to the Securities. This
Prospectus, which forms a part of the Registration Statement, and the
Prospectus Supplement relating to each Series of Securities contain summaries
of the material documents referred to herein and therein, but do not contain
all of the information contained in such Registration Statement pursuant to the
rules and regulations of the Commission. The Registration Statement can be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street
N.W., 1st Floor, Room 1024, Washington, D.C. 20549, and at the following
regional offices of the Commission: Chicago Regional Office, Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and New York
Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048.

The Company does not plan to send any financial information to holders
of Securities. The Trustee, however, will include with each payment or
distribution on Securities of a Series a statement containing certain payment
information with respect to such Securities.

The Company's principal executive offices are located at 6400 S.
Fiddler's Green Circle, Suite 1200B, Englewood, Colorado 80111. Its telephone
number is (303) 290-6025.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents heretofore filed by the Company with the
Commission under the Exchange Act are incorporated by reference in this
Prospectus:

(1) the Company's Annual Report on Form 10-K for its fiscal year
ended December 31, 1996;

(2) the Company's Quarterly Report on Form 10-Q for its fiscal
quarter ended March 31, 1997; and

(3) the Company's Quarterly Report on Form 10-Q for its fiscal
quarter ended June 30, 1997.

All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Securities shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in an other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.

The Company will provide without charge to each person to whom a copy
of this Prospectus has been delivered, upon the request of such person, a copy
of any or all of the documents referred to above which have been or may be
incorporated in this Prospectus by reference (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
any such document). Requests for such copies should be directed to Helen M.
Dickens, Vice President, Fund America Investors Corporation II, 6400 S.
Fiddler's Green Circle, Suite 1200B, Englewood, Colorado 80111 (303/290-6025).

- 4 -
<PAGE> 141
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUPPLEMENT AND CURRENT REPORT ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

INDEX OF PRINCIPAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

SUMMARY OF PROSPECTUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Prepayment and Yield Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Security Interests and Other Aspects of the Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Limited Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Limited Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Limitations, Reduction and Substitution of Credit Enhancement . . . . . . . . . . . . . . . . . . . . . . . 30
Original Issue Discount; Residual Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Funds Available for Redemptions or Repurchases at the Request of Holders . . . . . . . . . . . . . . . . . . 30
Book Entry Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Nature of Direct or Indirect Backing for Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Insurance Considerations for Certain Non-Agency Certificates and Private
Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Certain Matters Relating to Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Junior Lien Mortgage Loans; Liquidation of Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . 32
Remedies Following Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Risks Associated With Mortgaged Properties Not Located in the United States . . . . . . . . . . . . . . . . 33
Deposits, Substitutions and Withdrawals of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Other Legal Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

DESCRIPTION OF THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
The Bonds - General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
The Certificates - General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Form of Securities; Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
REMIC Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Classes of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Payments or Distributions of Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Redemption of Bonds; Termination or Repurchase with Respect to Certificates . . . . . . . . . . . . . . . . 40
Book Entry Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

ASSETS SECURING OR UNDERLYING THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Agency Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Non-Agency Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Multifamily Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>

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TABLE OF CONTENTS
(continued)

<TABLE>
<CAPTION>
Page
----
<S> <C>
Private Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Characteristics of Agency Securities and Private Mortgage-Backed Securities . . . . . . . . . . . . . . . . 52
Deposit, Substitution and Withdrawal of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

CREDIT ENHANCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Cross-Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Pool Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Special Hazard Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
FHA Insurance on the Multifamily Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Bankruptcy Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Reserve Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Other Insurance, Guarantees and Similar Instruments or Agreements . . . . . . . . . . . . . . . . . . . . . 56

SERVICING OF THE MORTGAGE LOANS, MULTIFAMILY LOANS AND CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Servicing Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Payments on Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Servicing Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Primary Mortgage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Standard Hazard Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Title Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Claims Under Primary Mortgage Insurance Policies and Standard Hazard Insurance Policies;
Other Realization Upon Defaulted Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Administration and Servicing Compensation and Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 64

THE INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Modification of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Rights Upon Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
List of Holders of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Issuer's Annual Compliance Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Trustee's Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Reports by Trustee to Bondholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

THE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Assignment of Mortgage Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Repurchase or Substitution of Mortgage Loans, Contracts and Multifamily Loans . . . . . . . . . . . . . . . 71
Evidence as to Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
List of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Administration of the Certificate Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Reports to Holders of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Rights Upon Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
</TABLE>

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TABLE OF CONTENTS
(continued)

<TABLE>
<CAPTION>
Page
----
<S> <C>
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

THE ISSUER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Owner Trust Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

CERTAIN LEGAL ASPECTS OF THE MORTGAGE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
The Mortgage Loans and Multifamily Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Consumer Protection Laws with respect to Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
The Title I Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

LEGAL INVESTMENT MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

CERTAIN FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Federal Income Tax Consequences for REMIC Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Status of REMIC Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Qualification as a REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Taxation of Regular Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Taxation of Residual Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Limitations on Deduction of Certain Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Taxation of Certain Foreign Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Backup Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Federal Income Tax Consequences for Securities as to Which No REMIC Election Is Made . . . . . . . . . . . . 111
Non-REMIC Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Standard Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Stripped Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Reporting Requirements and Backup Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Taxation of Certain Foreign Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

FINANCIAL INFORMATION AND ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
</TABLE>

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<PAGE> 144
INDEX OF PRINCIPAL TERMS

<TABLE>
<CAPTION>
Page
<S> <C>
Accrued Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Adjustable Multifamily Loan Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Adjustable Rate Multifamily Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Advance Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Agency Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Annual Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Applicable Accounting Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
APR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, 51
Assumed Final Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Bankruptcy Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Beneficial Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 41
BIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Bond Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Book Entry Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23, 40
Certificate Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Certificate Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Certificate Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Certificates of Beneficial Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Clearing Agency Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 41
Clearing Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23, 40
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Collateral Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Companion Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 75
Compound Interest Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 37
Contract Loan Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Contract Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 50
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 50
Conventional Multifamily Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Cooperative Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 42
Counsel to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
CPTs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Credit Enhancement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23, 53
Custodial Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Cut-off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Deposit Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Deposit Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 35
Disqualified Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
DOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25, 92
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>

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<TABLE>
<S> <C>
FAMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58, 72, 91
FHA Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
FHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
FHA-Insured Multifamily Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
FHLMC Certificate Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
FHLMC Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
FHLMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Final REMIC Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
FLTs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
FmHA Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
FNMA Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Funding Agreement Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Funding Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Garn-St. Germain Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
GNMA Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
GNMA Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
GNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Guaranty Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Initial Depositor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Interest Accrual Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Interest Only Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 37
INVs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
IOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Loan-to-Value Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Manufactured Home Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Manufactured Home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Manufacturer's Invoice Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Market Discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Maximum Variable Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Minimum Variable Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Monthly Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 94
Mortgage Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Mortgage Pool Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Mortgage Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Mortgage Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Mortgaged Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Mortgagors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Multifamily Loan Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 49
Multifamily Loan Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Multifamily Loan Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Multifamily Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
NCUA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58, 91
Nonrecoverable Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
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Non-Agency Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Non-Agency Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Non-Agency Pooling and Administration Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Non-Agency Servicers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Non-Agency Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Non-Priority Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Non-REMIC Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Notional Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
OID Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Original Issue Discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33, 95
Original Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
OTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83, 91
Owner Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 35
Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
PACs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Pass-Through Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Permitted Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Plan Asset Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
PMBS Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
PMBS Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
PMBS Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
PMBS Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Policy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Pool Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
POs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Premium REMIC Regular Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Prepayment Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Principal Only Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 37
Principal Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Priority Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Private Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Prohibited Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36, 92
Property Improvement Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
PTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Regular Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 94
Regular Securityholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Relief Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
REMIC Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
REMIC Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 94
Remittance Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Remittance Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Residual Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Residual Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 30, 94
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Residual Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Residuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Retail Class Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SAIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Scheduled Amortization Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Scheduled Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Secured Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, 50
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Servicers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SMMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26, 90
Special Allocation Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Special Hazard Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Standard Indenture Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Stripped Certificateholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Stripped Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Subordinated Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
TACs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
TAMRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Thrift Institution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Title I Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Title I Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Title I Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Title V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
TMP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 57
U.S. Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
UCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Underlying Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Unsecured Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, 50
VA Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
VA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Variable Interest Rate Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Window Period Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Zs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>

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<PAGE> 148
SUMMARY OF PROSPECTUS

The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in the
Prospectus Supplement with respect to the Series offered thereby and to the
related Indenture or Agreement, as applicable. Unless otherwise specified,
initially capitalized terms used and not defined in this Summary of Prospectus
have the meanings given to them in this Prospectus and in the related
Prospectus Supplement. See "Index of Principal Terms" herein.

Securities Offered . . . . . . . Bonds and Certificates issuable in Series.
Bonds of a Series will be issued pursuant to
an indenture (the "Indenture") between the
respective Issuer (as defined below) and the
Trustee (the "Trustee") for such Series, and
will be secured by the Assets included in a
trust estate (the "Trust Estate") and
pledged to secure such Series. Such
Indenture may be in the form of a Terms
Indenture incorporating by reference the
Standard Indenture Provisions (the "Standard
Indenture Provisions") of the Issuer.
Certificates of a Series will be issued
pursuant to a pooling agreement or a pooling
and administration agreement (each, an
"Agreement") between the Company, the
Administrator, if any, and the Trustee for
such Series and will evidence beneficial
interests in the Assets included in a trust
fund (the "Trust Fund") and assigned to the
Trustee for the applicable Series. With
respect to each Series, a bank, trust
company or other fiduciary acting as a
trustee and named in the Prospectus
Supplement with respect to such Series (the
"Trustee" with respect to such Series) will
enter into the related Indenture or
Agreement, as indicated above. Holders of
Securities are referred to herein as
"Holders" or "Securityholders."

The Securities of any Series may be issued
in one or more classes (each a "Class"), as
specified in the related Prospectus
Supplement. One or more Classes of
Securities of each Series

(i) may be entitled to receive payments or
distributions allocable only to principal
("Principal Only Securities"), only to
interest ("Interest Only Securities") or to
any combination thereof;

(ii) may be entitled to receive payments or
distributions only of prepayments of
principal throughout the lives of the
Securities of such Series or during
specified periods;

(iii) may be subordinated in the right to
receive payments or distributions of
scheduled payments of principal, prepayments
of principal, interest or any combination
thereof to one or more other Classes of such
Series throughout the lives of the
Securities of such Series or during
specified periods;

(iv) may be entitled to receive such
payments or distributions only after the
occurrence of events specified in the
Prospectus Supplement;

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<PAGE> 149
(v) may be entitled to receive payments or
distributions in accordance with a schedule
or formula or on the basis of collections
from designated portions of the Assets
securing such Series or in the related Trust
Fund;

(vi) as to Securities entitled to payments
or distributions allocable to interest, may
be entitled to receive interest at a rate
that is subject to change from time to time
("Variable Interest Rate Securities") or at
a fixed rate;

(vii) may accrue interest, with such accrued
interest added to the principal amount of
the Securities of such Class and no payments
being made thereon until such time as is
specified in the related Prospectus
Supplement ("Compound Interest Securities").

The timing and amounts of such distributions
may vary among Classes, over time, or
otherwise as specified in the related
Prospectus Supplement.

The Company or its affiliates may retain or
hold for sale from time to time all or a
portion of one or more Classes of a Series.

The Securities of each Class of a Series
will be issued either in fully registered
form or in book entry form in the authorized
denominations specified in the Prospectus
Supplement. The Securities will not be
guaranteed or insured by GNMA, FNMA, FHLMC,
any governmental entity or, unless otherwise
specified in the related Prospectus
Supplement, by any other person and, except
as otherwise specified in the related
Prospectus Supplement, the Mortgage Assets
(other than Agency Securities) relating to a
Series will not be guaranteed or insured by
any governmental agency or instrumentality
or any other insurer.

The Company . . . . . . . . . . . Fund America Investors Corporation II (the
"Company") is a limited purpose Delaware
corporation formed on December 14, 1992. The
Company's principal executive offices are
located at 6400 S. Fiddler's Green Circle,
Suite 1200B, Englewood, Colorado 80111;
telephone number (303) 290-6025. See "The
Issuer -- The Company."

Issuer . . . . . . . . . . . . . The Issuer with respect to a Series of Bonds
will be the Company or an owner trust
established by it (the "Owner Trust") for
the purpose of issuing one or more Series of
Bonds. Each such Owner Trust will be created
pursuant to an Agreement (the "Deposit Trust
Agreement") between the Company, acting as
depositor, and a bank, trust company or
other fiduciary, acting as owner trustee
(the "Owner Trustee"). Each Series of Bonds
will be non-recourse obligations of the
related Issuer. The Issuer with respect to a
Series of Bonds will not have, nor be
expected in the future to have, any
significant assets available for payments on
such Series of Bonds, other than the Assets
included in the related Trust Estate.

- 13 -
<PAGE> 150
The Issuer with respect to a Series of
Certificates will be the Trust Fund
established by the Company pursuant to the
related Agreement.

Unless otherwise specified in a related
Prospectus Supplement (i) each Series of
Bonds will be separately secured by the
related Trust Estate, which will constitute
the only significant assets available to
make payments on the Bonds of such Series
and (ii) each Series of Certificates will be
entitled to distributions only from the
Assets included in the related Trust Fund
and any other Assets pledged or otherwise
available for the benefit of Holders of such
Series as specified in the related
Prospectus Supplement.

The Administrator;
Non-Agency Administrator . . . . With respect to a Series of Securities for
which the related Trust Estate or Trust Fund
includes Mortgage Loans, Multifamily Loans,
and Contracts, the entity or entities named
as the Administrator in the related
Prospectus Supplement, if any (the
"Administrator"), will act as administrator,
and may act as a servicer, with respect to
such Mortgage Loans, Multifamily Loans, and
Contracts. The Administrator may be an
affiliate of the Company. With respect to a
Series of Certificates for which the Trust
Fund does not include Mortgage Loans,
Multifamily Loans or Contracts, there will
be no Administrator unless otherwise
specified in the related Prospectus
Supplement.

With respect to a Non-Agency Certificate,
the entity named as the Non-Agency
Administrator will act as administrator, and
may act as servicer, with respect to the
underlying Mortgage Loans, Multifamily
Loans, and Contracts. The Non-Agency
Administrator may be an affiliate of the
Company.

Payments or Distributions of
Interest . . . . . . . . . . . . Each Class of a Series (other than a Class
of Principal Only Securities) will accrue
interest at the rate set forth in (or, in
the case of Variable Interest Securities, as
determined as provided in) the related
Prospectus Supplement (the "Bond Interest
Rate" with respect to a Class of Bonds and
the "Certificate Interest Rate" with respect
to a Class of Certificates). One or more
Classes may be entitled to receive payments
or distributions of interest only to the
extent of amounts available to make such
payments or distributions. Interest on each
Class will accrue during the respective
periods and be paid or distributed on the
respective dates specified in the related
Prospectus Supplement (each such period an
"Interest Accrual Period" and each such date
a "Payment Date" with respect to a Class of
Bonds and a "Distribution Date" with respect
to a Class of Certificates). Interest on all
Securities which bear or receive interest,
other than Compound Interest Securities,
will be due and payable on the Payment
Dates, or distributed on the Distribution
Dates, as applicable, specified in the
related Prospectus Supplement. However,
failure to pay or distribute interest on a
current basis may not necessarily be an
Event of Default with respect to a

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<PAGE> 151
particular Series or Class of Securities.
Interest on any Class of Compound Interest
Securities will not be paid or distributed
currently, but will accrue and the amount of
the interest so accrued will be added to the
principal thereof on each Payment Date or
Distribution Date, as applicable, until such
time as is specified in the related
Prospectus Supplement. Principal Only
Securities will not accrue, and will not be
entitled to receive, any interest. Upon
maturity or earlier redemption of the
Securities of any Class, interest will be
paid to the date specified in the related
Prospectus Supplement.

Each payment of interest on each Class of
Securities (or addition to principal of a
Class of Compound Interest Securities) on a
Payment Date or Distribution Date, as
applicable, will include all interest
accrued during the related Interest Accrual
Period. If the Interest Accrual Period for a
Series ends on a date other than a Payment
Date or Distribution Date, as applicable,
for such Series, the yield realized by the
Holders of such Securities may be lower than
the yield that would result if the Interest
Accrual Period ended on such Payment Date or
Distribution Date. Additionally, if so
specified in the related Prospectus
Supplement, interest accrued for an Interest
Accrual Period for one or more Classes may
be calculated on the assumption that
principal payments or distributions (and
additions to principal of the Securities),
and allocations of losses on the Mortgage
Assets (if so specified in the related
Prospectus Supplement), are made on the
first day of the preceding Interest Accrual
Period and not on the Payment Date or
Distribution Date, as applicable, for such
preceding Interest Accrual Period when
actually made or added. Such method would
produce a lower effective yield than if
interest were calculated on the basis of the
actual principal amount outstanding.

With respect to each Class of Variable
Interest Rate Securities of a Series, the
related Prospectus Supplement will set
forth: (i) the initial Bond Interest Rate or
Certificate Interest Rate, as applicable,
(or the manner of determining the initial
Bond Interest Rate or Certificate Interest
Rate); (ii) the formula, index or other
method by which the Bond Interest Rate or
Certificate Interest Rate, as applicable,
will be determined from time to time; (iii)
the periodic intervals at which such
determination will be made; (iv) the
interest rate cap (the "Maximum Variable
Interest Rate") if any, and the interest
rate floor (the "Minimum Variable Interest
Rate"), if any, on the Bond Interest Rate or
Certificate Interest Rate for such Variable
Interest Rate Securities; and any other
terms relevant to such Class of Securities.
See "Description of the Securities --
Payments or Distributions of Principal and
Interest -- Payments or Distributions of
Interest."

Payments or Distributions
of Principal . . . . . . . . . . Principal payments or distributions on the
Securities of a Series will be made from
amounts available therefor on each Payment
Date or Distribution Date, as applicable, in
an aggregate amount determined as set forth
in the related Prospectus Supplement and

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<PAGE> 152
will be allocated among the respective
Classes of a Series of Securities at the
times, in the manner and in the priority set
forth in the related Prospectus Supplement.

Except with respect to Compound Interest
Securities and Interest Only Securities,
unless specified otherwise in the related
Prospectus Supplement, on each Payment Date
or Distribution Date, as applicable,
principal payments or distributions will be
made on the Securities of a Series in an
aggregate amount determined in the related
Prospectus Supplement. If a Series has a
Class of Compound Interest Securities,
additional principal payments on the
Securities of such Series will be made on
each Payment Date or Distribution Date, as
applicable, in an amount equal to the
interest accrued, but not then payable or
distributable, on such Class of Compound
Interest Securities for the related Interest
Accrual Period. See "Description of the
Securities -- Payments or Distributions of
Principal and Interest -- Payments or
Distributions of Principal."

Unscheduled Payments or
Distributions . . . . . . . . . . If specified in the related Prospectus
Supplement, the Securities of a Series will
be subject to receipt of payments or
distributions before the next scheduled
Payment Date or Distribution Date as
described under "Description of Securities
-- Payments or Distributions of Principal
and Interest -- Unscheduled Payments or
Distributions."

Allocation of Losses . . . . . . If so specified in the related Prospectus
Supplement, on any Payment Date or
Distribution Date, as applicable, on which
the principal balance of the Mortgage Assets
relating to a Series is reduced due to
losses on such Mortgage Assets, (i) the
amount of such losses will be allocated
first, to reduce the aggregate outstanding
principal balance of the Subordinate
Securities of such Series or other
subordination, if any, and, thereafter, to
reduce the aggregate outstanding principal
balance of the remaining Securities of such
Series in the priority and manner specified
in such Prospectus Supplement until the
aggregate outstanding principal balance of
each Class of such Securities so specified
has been reduced to zero or paid in full,
thus reducing the amount of principal
payable or distributable on each such Class
of Securities or (ii) such losses may be
allocated in any other manner set forth in
the related Prospectus Supplement. Unless
otherwise specified in the related
Prospectus Supplement, such reductions of
principal of a Class or Classes of
Securities will be allocated to the Holders
of the Securities of such Class or Classes
pro rata in the proportion which the
outstanding principal of each Security of
such Class or Classes bears to the aggregate
outstanding principal balance of all
Securities of such Class. See "Description
of the Securities -- Payments or
Distributions of Principal and Interest --
Payments or Distributions of Principal."

- 16 -
<PAGE> 153
Stated Maturity and Assumed
Final Distribution Date . . . . . The "Stated Maturity" for each Class of
Bonds of a Series will be the date specified
in the related Prospectus Supplement no
later than which all the Bonds of such Class
will be fully paid, as determined on the
basis of the assumptions set forth in the
related Prospectus Supplement. The "Assumed
Final Distribution Date" for each Class of
Certificates of a Series will be the date
specified in the related Prospectus
Supplement after which no Certificates of
such Class will remain outstanding, as
determined on the basis of the assumptions
set forth in the related Prospectus
Supplement. The Assumed Final Distribution
Date of a Class of Certificates may equal
the maturity date of the Mortgage Asset in
the related Trust Fund which has the latest
stated maturity or will be determined as
described herein and in the related
Prospectus Supplement.

The actual maturity date of the Securities
of a Series will depend primarily upon the
level of prepayments with respect to the
Mortgage Asset (including the Underlying
Mortgage Loans if such Mortgage Assets
consist of Mortgage Certificates) securing
or underlying such Series of Securities. The
actual maturity of any Securities is likely
to occur earlier and may occur substantially
earlier than its Stated Maturity or Assumed
Final Distribution Date, as applicable, as a
result of the application of prepayments to
the reduction of the principal balances of
the Securities. The rate of prepayments on
the Mortgage Assets securing or underlying a
Series will depend on a variety of factors,
including certain characteristics of such
Mortgage Loans and the prevailing level of
interest rates from time to time, as well as
on a variety of economic, demographic, tax,
legal, social and other factors. No
assurance can be given as to the actual
prepayment experience with respect to a
Series. See "Special Considerations."

Redemption of Bonds . . . . . . . To the extent provided in the related
Prospectus Supplement, the Bonds of any
Class of a Series may be (i) redeemed at the
request of holders of such Bonds; (ii)
redeemed at the option of the Company or
another party specified in the related
Prospectus Supplement; or (iii) subject to
special redemption under certain
circumstances. The circumstances and terms
under which the Bonds of a Series may be
redeemed will be described in the related
Prospectus Supplement.

Termination or Repurchase with
Respect to Certificates . . . . . To the extent provided in the related
Prospectus Supplement, the Certificates of
any Class of a Series may be (i) repurchased
at the request of holders of such
Certificates; (ii) repurchased at the option
of the Company, the Administrator, if any,
or another party specified in the related
Prospectus Supplement; or (iii) subject to
special repurchase under certain
circumstances. In addition, if so specified
in the Prospectus Supplement for a Series of
Certificates, the Company, the
Administrator, if any, or another party
specified in the related Prospectus
Supplement

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<PAGE> 154
may, at its option, cause an early
termination of the Trust Fund for such
Series by repurchasing all of the Mortgage
Assets from such Trust Fund, under the
circumstances specified in such Prospectus
Supplement. The circumstances and terms
under which the Certificates of a Series may
be repurchased and the circumstances and
terms under which the related Trust Fund may
be terminated will be described in the
related Prospectus Supplement.

Assets Securing or
Underlying the Securities . . . . Each Series of Bonds will be separately
secured by a Trust Estate, and each Series
of Certificates will represent beneficial
ownership interests in a Trust Fund. The
Mortgage Assets included in the Trust Estate
with respect to a Series of Bonds will
include Mortgage Assets consisting of one or
more of the following, as specified in the
related Prospectus Supplement:

(i) mortgage-backed certificates,
mortgage pass-through certificates
or mortgage participation
certificates, including residual
interests ("Agency Securities")
issued or guaranteed by the
Government National Mortgage
Association ("GNMA"), the Federal
National Mortgage Association
("FNMA") or the Federal Home Loan
Mortgage Corporation ("FHLMC");

(ii) non-publicly offered pass-through
certificates or participation
certificates which are neither
issued nor guaranteed by any agency
or instrumentality of the United
States ("Non-Agency Certificates")
and which evidence undivided
interests in (a) Agency Securities,
(b) a pool (a "Mortgage Pool") of
single family (one- to four-unit)
residential mortgage loans or
participation interests therein
("Mortgage Loans"), (c) a pool (a
"Contract Pool") of conditional
sales contracts and installment
sales or loan agreements or
participation interests therein
secured by manufactured housing
("Contracts") or (d) a pool (a
"Multifamily Loan Pool") of
multifamily mortgage loans
including cooperative apartment
building loans ("Multifamily
Loans");

(iii) (A) a pool or pools of Mortgage
Loans, Contracts and/or Multifamily
Loans or (B) mortgage pass-through
certificates representing
beneficial interests in certain
mortgage loans or certain
mortgage-backed securities,
collateralized mortgage obligations
secured by certain mortgage loans
or certain mortgage-backed
securities, and residual interest
securities relating to issuances of
mortgage pass-through certificates
or collateralized mortgage
obligations (collectively, "Private
Mortgage-Backed Securities"); and

(iv) participation or other interests in
any of the foregoing.

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<PAGE> 155
The Mortgage Assets included in the Trust
Fund with respect to a Series of
Certificates will include Mortgage Assets
consisting of one or more of the following,
as specified in the related Prospectus
Supplement:

(i) Agency Securities,

(ii) Non-Agency Certificates,

(iii) a Mortgage Pool,

(iv) a Contract Pool,

(v) a Multifamily Loan Pool,

(vi) Private Mortgage-Backed Securities,
and

(vii) participation or other interests in
any of the foregoing.

A Trust Estate or Trust Fund may also
include, or the related Securities may also
have the benefits of, certain other Assets,
including but not limited to: reinvestment
income, reserve funds, cash accounts,
insurance policies, guarantees, letters of
credit or other credit enhancement as
described in the related Prospectus
Supplement, intended to decrease the
likelihood that holders of Securities will
experience delays in payments or
distributions of scheduled payments on, or
losses in respect of, the assets included in
such Trust Estate or Trust Fund. The
Securities of any Series will be entitled to
payment only from the Assets included in the
related Trust Estate or Trust Fund and any
other Assets pledged or otherwise available
for the benefit of the holders of such
Securities as specified in the related
Prospectus Supplement.

A. Agency Securities . . . . . . Agency Securities will consist of:

(i) "fully modified pass-through"
mortgage-backed certificates
guaranteed as to timely payment of
principal and interest by the GNMA
("GNMA Certificates"),

(ii) guaranteed mortgage pass-through
certificates issued and guaranteed
as to timely payment of principal
and interest by the FNMA ("FNMA
Certificates"),

(iii) mortgage participation certificates
issued and guaranteed as to timely
payment of interest and, unless
otherwise specified in the related
Prospectus Supplement, ultimate
payment of principal by the FHLMC
("FHLMC Certificates"),

(iv) stripped mortgage-backed securities
representing an undivided interest
in all or a part of either the
principal distributions (but not
the interest distributions) or the
interest distributions (but not the
principal distributions)

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<PAGE> 156
or in some specified portion of the
principal and interest
distributions (but not all of such
distributions) on certain GNMA,
FNMA or FHLMC Certificates and,
unless otherwise specified in the
Prospectus Supplement, guaranteed
to the same extent as the
underlying securities,

(v) other types of mortgage-backed
certificates, mortgage pass-
through certificates or mortgage
participation certificates issued
or guaranteed by GNMA, FNMA or
FHLMC, such as FNMA Guaranteed
REMIC Pass-Through Certificates and
FHLMC Multiclass Mortgage
Participation Certificates, and
including residual interest
securities, as described in the
related Prospectus Supplement or

(vi) a combination of such Agency
Securities.

All GNMA Certificates will be backed by the
full faith and credit of the United States.
No FHLMC or FNMA Certificates will be
backed, directly or indirectly, by the full
faith and credit of the United States.

The Prospectus Supplement for a Series will
describe any Agency Securities to be
included in the related Trust Estate or
Trust Fund, and will specify certain
characteristics of the mortgage loans
underlying such Agency Securities. See
"Assets Securing or Underlying the
Securities -- Agency Securities."

B. Non-Agency Certificates . . . Non-Agency Certificates will evidence an
undivided interest in Agency Securities, a
Mortgage Loan Pool, a Contract Pool, or a
Multifamily Loan Pool. Non-Agency
Certificates themselves will have been
formed by the Company in connection with the
issuance of the related Series of Securities
for purposes of ease of administration, and
will not be insured or guaranteed by the
United States or any agency or
instrumentality thereof. Unless otherwise
specified in the related Prospectus
Supplement relating to a Series, payments on
the Non- Agency Certificates to be included
in the related Trust Estate or Trust Fund
will be distributed directly to the related
Trustee as registered owner of such
Non-Agency Certificates. The Prospectus
Supplement for a Series will describe any
Non-Agency Certificates to be included in
the related Trust Estate or Trust Fund, and
will specify certain characteristics of the
Agency Securities, Mortgage Loans, Contracts
or Multifamily Loans underlying such
Non-Agency Certificates. See "Assets
Securing or Underlying the Securities --
Non-Agency Certificates."

C. Private Mortgage-Backed
Securities . . . . . . . . . Private Mortgage-Backed Securities may
include (a) mortgage pass- through
certificates representing beneficial
interests in certain mortgage loans or
certain mortgage-backed securities, (b)
collateralized mortgage obligations secured
by certain mortgage loans or certain
mortgage-backed securities or (c) residual
interest securities relating to an issuance
of securities

- 20 -
<PAGE> 157
of the type referred to in clause (a) or
(b). Private Mortgage-Backed Securities may
include stripped mortgage-backed securities
representing an undivided interest in all or
a part of either the principal distributions
(but not the interest distributions) or the
interest distributions (but not the
principal distributions) or in some
specified portion of the principal and
interest distributions (but not all of such
distributions) on certain mortgage loans.
Private Mortgage-Backed Securities may
include securities formed or issued by the
Company (or an Owner Trust beneficially
owned by it), by an affiliate of the
Company, or by third parties. Although
individual mortgage loans underlying a
Private Mortgage-Backed Security may be
insured or guaranteed by the United States
or an agency or instrumentality thereof,
they need not be, and the Private
Mortgage-Backed Securities themselves will
not be so insured or guaranteed. The
mortgage loans underlying Private
Mortgage-Backed Securities may be secured by
single-family property, multifamily
property, manufactured homes, or by an
assignment of the proprietary lease or
occupancy agreement relating to a specific
dwelling within a Cooperative and the
related shares issued by such Cooperative.
Unless otherwise specified in the related
Prospectus Supplement relating to a Series,
payments on the Private Mortgage-Backed
Securities relating to a Series will be
distributed directly to the related Trustee
as registered owner of such Private
Mortgage-Backed Securities. The Prospectus
Supplement for a Series will describe any
Private Mortgage-Backed Securities to be
included in the related Trust Estate or
Trust Fund, and will specify certain
characteristics of the mortgage loans
underlying such Private Mortgage-Backed
Securities. See "Assets Securing or
Underlying the Securities -- Private
Mortgage-Backed Securities."

D. Mortgage Loans . . . . . . . Unless otherwise specified in the related
Prospectus Supplement, the Mortgage Loans
underlying the Non-Agency Certificates
included in the Trust Estate or Trust Funds
for a Series, or the Mortgage Loans included
in the Trust Estate or Trust Fund for a
Series of Securities will be conventional
mortgage loans originated or acquired by the
Company, either directly or through an
affiliate. The residential properties
securing the Mortgage Loans may be located
in or outside of the United States. If so
specified in the related Prospectus
Supplement, the Mortgage Loans relating to a
Series may include cooperative apartment
loans with respect to individual units in
cooperative apartment complexes, which loans
are secured by security interests in shares
issued by private, non-profit, cooperative
housing corporations ("Cooperatives") and in
the related proprietary leases or occupancy
agreements granting exclusive rights to
occupy specific dwelling units in such
Cooperatives' buildings. In addition, the
Mortgage Loans may be secured by junior
liens on the related mortgaged properties.
Mortgage Loans may include Title I Loans.

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<PAGE> 158
The related Prospectus Supplement for a
Series will describe any Mortgage Loans
underlying the Non-Agency Certificates to be
included in the related Trust Estate or
Trust Fund, or the Mortgage Loans included
in the Trust Estate or Trust Fund for a
Series of Securities, and will specify
certain information regarding the payment
terms of such Mortgage Loans. See "Assets
Securing or Underlying the Securities --
Mortgage Loans."

E. Contracts . . . . . . . . . . The Contracts underlying the Non-Agency
Certificates included in the Trust Estate or
Trust Fund, for a Series, or the Contracts
included in the Trust Estate or Trust Fund
for a Series of Securities will consist of
conditional sales contracts and installment
sales or loan agreements or participation
interests therein secured by new or used
Manufactured Homes (as defined herein). As
specified in the related Prospectus
Supplement, Contracts may either be secured
by new or used Manufactured Homes (as
defined herein) (a "Secured Contract") or
unsecured (an "Unsecured Contract").
Contracts may be conventional (i.e., not
insured or guaranteed by any government
agency), insured by the Federal Housing
Administration ("FHA"), including Title I
Contracts, or partially guaranteed by the
Veterans Administration ("VA"), as specified
in the related Prospectus Supplement. Unless
otherwise specified in the related
Prospectus Supplement, each Contract will be
fully amortizing and will bear interest at a
fixed annual percentage rate ("APR"). The
related Prospectus Supplement for a Series
will describe any Contracts underlying the
Non-Agency Certificates included in the
related Trust Estate or Trust Fund, for a
Series, or the Contracts included in the
Trust Estate or Trust Fund for a Series of
Securities. The Unsecured Contracts included
in the Trust Estate or Trust Fund for a
Series will not constitute a material
concentration of the assets of such Trust
Estate or Trust Fund. See "Assets Securing
or Underlying the Securities -- Contracts."

F. Multifamily Loans . . . . . . Multifamily Loans underlying the Non-Agency
Certificates included in the Trust Estate or
Trust Fund for a Series or the Multifamily
Loans included in the Trust Estate or Trust
Fund for a Series of Securities may, as
specified in the related Prospectus
Supplement, include fixed rate or adjustable
rate Multifamily Loans. Multifamily Loans
may be conventional multifamily mortgage
loans ("Conventional Multifamily Loans") or
mortgage loans insured by the FHA
("FHA-Insured Multifamily Loans") in each
case secured by rental apartment buildings
or projects containing five or more
residential units or may be mortgage loans
with respect to apartment buildings owned by
Cooperatives. Multifamily Loans may include
Title I Loans. Adjustable rate Multifamily
Loans ("Adjustable Rate Multifamily Loans")
may, as described in the related Prospectus
Supplement, permit or require periodic
changes in the interest rates borne by the
Multifamily Loans ("Adjustable Multifamily
Loan Rates") and in the monthly payments
made on the Multifamily Loans. Multifamily
Loans relating to a Series may, as described
in the related Prospectus Supplement,
provide for

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no amortization of the principal amount of
such loans prior to maturity or for a
specified period after origination, and
require the entire unpaid principal balance
to be paid in a lump sum at maturity or may
provide for full amortization of principal
over the term of the Multifamily Loan.
Multifamily Loans may provide for negative
amortization as specified in the related
Prospectus Supplement.

The related Prospectus Supplement for a
Series will describe any Multifamily Loans
underlying the Non-Agency Certificates to be
included in the related Trust Estate or
Trust Fund, for a Series, or the Multifamily
Loans included in the Trust Estate or Trust
Fund for a Series of Securities. See "Assets
Securing or Underlying the Securities --
Multifamily Loans."

Advances . . . . . . . . . . . . Unless otherwise specified in the Prospectus
Supplement for a Series, the Servicer or
Servicers of the related Mortgage Loans,
Contracts and Multifamily Loans and the
Non-Agency Servicers (in the case of
Non-Agency Certificates) will be obligated
to advance delinquent installments of
principal and interest (less applicable
servicing fees) on such Mortgage Loans,
Contracts and Multifamily Loans. Unless
otherwise specified in the related
Prospectus Supplement, in the event a
Servicer or Non-Agency Servicer fails to
make such advances, the related
Administrator, if any, and the related Non-
Agency Administrator, (in the case of
Non-Agency Certificates), if any, shall be
obligated to make the advance. Any such
obligation to make advances may be limited
to amounts due holders of the related
Securities or Non-Agency Certificates, as
applicable, to amounts deemed to be
recoverable from late payments or
liquidation proceeds, to specified periods
or any combination thereof, in each case as
specified in the related Prospectus
Supplement. Any such advance will be
recoverable by the applicable Servicer (or
the related Administrator) as specified in
the related Prospectus Supplement.

Credit Enhancement . . . . . . . If specified in the related Prospectus
Supplement, a Series, or certain Classes
within such Series, may have the benefit of
one or more types of credit enhancement
("Credit Enhancement") including but not
limited to subordination, cross support,
mortgage pool insurance, special hazard
insurance, a bankruptcy bond, reserve funds,
other insurance, guarantees and similar
instruments and arrangements. The protection
against losses afforded by any such Credit
Enhancement will be limited. See "Credit
Enhancement."

Book Entry Registration . . . . . If the Prospectus Supplement for a Series so
provides, Securities of one or more Classes
of such Series may be issued in book entry
form ("Book Entry Securities") in which case
a single Bond or Certificate, as applicable,
will be issued in the name of a clearing
agency (a "Clearing Agency") registered with
the Securities and Exchange Commission, or
its nominee. Transfers and pledges of Book
Entry Securities may be made only through
entries on the books of the Clearing Agency
in the name of

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<PAGE> 160
brokers, dealers, banks and other
organizations eligible to maintain accounts
with the Clearing Agency ("Clearing Agency
Participants") or their nominees. Transfers
and pledges by purchasers and other
beneficial owners of Book Entry Securities
("Beneficial Owners") other than Clearing
Agency Participants may be effected only
through Clearing Agency Participants.
Beneficial Owners will receive payments or
distributions of principal and interest,
and, if applicable, may tender Securities
for redemption or repurchase to the related
Trustee, only through the Clearing Agency
and Clearing Agency Participants. Except as
otherwise specified in this Prospectus or a
related Prospectus Supplement, the terms
"Securityholders" and "holders" shall be
deemed to include Beneficial Owners. See
"Special Considerations -- Book Entry
Registration" and "Description of the
Securities -- Book Entry Registration."

Certain Federal Income Tax
Consequences . . . . . . . . . . The federal income tax consequences to
Holders of a Series will depend on, among
other factors, whether one or more elections
are made to treat the related Trust Estate
or Trust Fund or specified portions thereof
as a "real estate mortgage investment
conduit" ("REMIC") under the provisions of
the Internal Revenue Code of 1986, as
amended (the "Code"). The Prospectus
Supplement for each Series will specify
whether such an election will be made.

If the applicable Prospectus Supplement so
specifies with respect to a Series of
Securities, one or more REMIC elections will
be made with respect to such Series of
Securities. Securities of such Series will
be designated as "regular interests" in a
REMIC ("Regular Securities") or as "residual
interests" in a REMIC ("Residual
Securities").

If the applicable Prospectus Supplement so
specifies with respect to a Series of
Securities, the Securities of such Series
will not be treated as regular or residual
interests in a REMIC for federal income tax
purposes but instead will be treated as (i)
indebtedness of the Issuer, (ii) an
undivided beneficial ownership interest in
the Mortgage Assets (and the arrangement
pursuant to which the Mortgage Assets will
be held and the Securities will be issued
will be treated as a grantor trust under
Subpart E, part I of subchapter J of Chapter
1 of Subtitle A of the Code and not as an
association taxable as a corporation for
federal income tax purposes); (iii) equity
interests in an association that will
satisfy the requirements for qualification
as a real estate investment trust; or (iv)
interests in an entity that will satisfy the
requirements for qualification as a
partnership for federal income tax purposes.
The federal income tax consequences to
Holders of any such Series will be described
in the related Prospectus Supplement to the
extent not described herein.

Compound Interest Securities and Principal
Only Securities will, and certain other
Classes of Securities may, be issued with

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<PAGE> 161
original issue discount that is not de
minimis. In such cases, the Holder will be
required to include the original issue
discount in gross income as it accrues,
which may be prior to the receipt of cash,
or a portion of the cash, attributable to
such income. If a Security is issued at a
premium, the Holder will be entitled to make
an election to amortize such premium on a
constant yield method. Securities
constituting regular or residual interests
in a REMIC will generally represent
qualifying assets for domestic building and
loan associations and real estate investment
trusts to the extent that the underlying
mortgage loans and interest thereon qualify
for such treatment. Non-REMIC Securities
will not qualify for such treatment.

A Holder of a Residual Security will be
required to include in its income its pro
rata share of the taxable income of the
REMIC. In certain circumstances, the Holder
of a Residual Security may have REMIC
taxable income or tax liability attributable
to REMIC taxable income for a particular
period in excess of cash distributions for
such period or have an after-tax return that
is less than the after- tax return on
comparable debt instruments. In addition, a
portion (or, in some cases, all) of the
income from a Residual Security (i) may not
be subject to offset by losses from other
activities, (ii) for a Holder that is
subject to tax under the Code on unrelated
business taxable income, may be treated as
unrelated business taxable income and (iii)
for a foreign Holder, may not qualify for
exemption from or reduction of withholding.
Further, individual Holders are subject to
limitations on the deductibility of expenses
of the REMIC. See "Certain Federal Income
Tax Consequences."

ERISA Considerations . . . . . . A fiduciary of any employee benefit plan
subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"),
or the Code should carefully review with its
own legal advisors whether the purchase or
holding of Securities could give rise to a
transaction prohibited or otherwise
impermissible under ERISA or the Code. See
"ERISA Considerations." To the extent
described in the Prospectus Supplement for a
Series, certain Classes of Securities of
such Series may not be transferred unless
the Trustee and the Company are furnished
with a letter of representation or an
opinion of counsel to the effect that such
transfer will not result in a violation of
the prohibited transaction provisions of
ERISA and the Code and will not subject the
Trustee, the Company or the Administrator,
if any, to additional obligations under
ERISA. Additionally, unless otherwise
specified in the related Prospectus
Supplement, Securities representing an
"equity" interest in a Mortgage Pool
consisting of multifamily mortgage loans may
not be transferred to an employee benefit
plan or other retirement plan or arrangement
subject to ERISA. See "Description of the
Securities -- General" and "ERISA
Considerations."

Legal Investment Matters . . . . Unless otherwise specified in the related
Prospectus Supplement, Securities of each
Series will constitute "mortgage related

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<PAGE> 162
securities" under the Secondary Mortgage
Market Enhancement Act of 1984 ("SMMEA")
and, as such, will be legal investments for
certain types of institutional investors to
the extent provided in SMMEA, subject, in
any case, to any other regulations which may
govern investments by such institutional
investors. See "Legal Investment Matters."

Use of Proceeds . . . . . . . . . Substantially all of the net proceeds from
the sale of a Series will be applied to the
simultaneous purchase of the Mortgage Assets
included in the related Trust Estate or
Trust Fund or to reimburse the amounts
previously used to effect such purchase, the
costs of carrying the Mortgage Assets until
sale of such Series and to pay other
expenses connected with pooling the Mortgage
Assets and issuing such Series. See "Use of
Proceeds."

Rating . . . . . . . . . . . . . It is a condition to the issuance of each
Class of a Series specified as being offered
by the related Prospectus Supplement that
the Securities of such Class be rated in one
of the four highest rating categories
established for such Securities by a
nationally recognized statistical rating
agency.

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<PAGE> 163
RISK FACTORS

Prospective investors in the Securities should consider, among other
things, the following factors in connection with the purchase of the
Securities:

GENERAL

An investment in Securities secured by or evidencing interests in a
Mortgage Pool may be affected, among other things, by a decline in real estate
values or a decline in mortgage interest rates. If the residential real estate
market should experience an overall decline in property values such that the
outstanding balances of the Mortgage Loans, and any secondary financing on the
related Mortgaged Properties, in a particular Mortgage Pool become equal to or
greater than the value of the Mortgaged Properties, the actual rates of
delinquencies, foreclosures and losses could be higher than those now generally
experienced in the mortgage lending industry. To the extent that such losses
are not covered by applicable insurance policies, if any, or by any Credit
Enhancement as described herein, Holders of Securities secured by or evidencing
interests in such Mortgage Pool will bear all risk of loss resulting from
default by Mortgagors and will have to look primarily to the value of the
related Mortgaged Properties for recovery of the outstanding principal and
unpaid interest of the defaulted Mortgage Loans. See "Assets Securing or
Underlying the Securities -- Mortgage Loans."

An investment in Securities secured by or evidencing interests in a
Multifamily Loan Pool may also be affected, among other things, by a decline in
real estate values or a decline in mortgage interest rates. The actual rates
of delinquencies, foreclosures and losses on Multifamily Loans could be
affected by adverse changes in general economic conditions and by local
conditions including excessive building resulting in an oversupply of rental
housing stock or a decrease in employment reducing the demand for rental units
in the area, by federal, state or local regulations and controls affecting
rents, prices of goods, fuel and energy consumption and prices, water and
environmental restrictions affecting new construction, by increasing labor and
materials costs, and by the relative attractiveness to tenants of the
multifamily rental projects securing such Multifamily Loans and their
neighborhoods. Repayment of a Multifamily Loan secured by an apartment
building owned by a cooperative will depend primarily on the receipt of
payments from the tenant-stockholders of the cooperative and its ability to
refinance the loan at maturity. To the extent that such losses are not covered
by applicable insurance policies, if any, or by any Credit Enhancement, Holders
of Securities secured by or evidencing interests in a Multifamily Loan Pool
will bear all risk of loss resulting from default by mortgagors and will have
to look primarily to the value of the multifamily projects for recovery of the
outstanding principal and unpaid interest of the defaulted Multifamily Loans.
See "Assets Securing or Underlying the Securities -- Multifamily Loans."

An investment in Securities secured by or evidencing interests in
Contracts may be affected by, among other things, a downturn in regional or
local economic conditions. These regional or local economic conditions are
often volatile, and historically have affected the delinquency, loan loss and
repossession experience of Contracts. To the extent that losses on Contracts
are not covered by applicable insurance policies, if any, or by any Credit
Enhancement, Holders of the Securities secured by or evidencing interests in
such Contracts will bear all risk of loss resulting from default by obligors
and will have to look primarily to the value of the Manufactured Homes for
recovery of the outstanding principal and unpaid interest of the defaulted
Contracts. See "Assets Securing or Underlying the Securities -- Contracts."

PREPAYMENT AND YIELD CONSIDERATIONS

The prepayment experience on the Mortgage Loans, the Multifamily
Loans, and the Contracts included in a Trust Estate or Trust Fund or underlying
the Non-Agency Certificates included in a Trust Estate or Trust Fund, and on
the mortgage loans underlying the Agency Securities and the Private
Mortgage-Backed Securities (the "Underlying Mortgage Loans") will affect the
average life of each Class of Securities relating to a Trust Estate or Trust
Fund including such Mortgage Assets. Prepayments on the Mortgage Loans, the
Multifamily Loans, the Contracts and the Underlying Mortgage Loans may be
influenced by a variety of economic, geographic, social and other factors,
including the difference between the interest rates on the Mortgage Loans, the
Multifamily Loans, the Contracts or the Underlying Mortgage Loans (giving
consideration to the cost of refinancing) and prevailing mortgage rates. In
general, if mortgage

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<PAGE> 164
interest rates fall below the interest rates on the Mortgage Loans, the
Multifamily Loans, the Contracts or the Underlying Mortgage Loans relating to a
Series, the rate of prepayment would be expected to increase and
Securityholders of such Series may be unable to reinvest such payments in
securities of comparable quality having interest rates similar to those borne
by the Securities of such Series. Conversely, if mortgage interest rates rise
above the interest rates on the Mortgage Loans, the Multifamily Loans, the
Contracts or the Underlying Mortgage Loans, the rate of prepayment would be
expected to decrease. Prepayments on Multifamily Loans may also be influenced
by a variety of economic factors affecting project sale or refinancing,
including, without limitation, the relative tax benefits of continued ownership
of the property as a result of changes in federal tax law, among other factors.
Prepayments may be influenced by a variety of economic, geographic, social and
other factors, including aging, seasonality and interest rate fluctuations.
Other factors affecting prepayment of mortgage loans include changes in housing
needs, job transfers, unemployment and servicing decisions.

Additional prepayment, yield and weighted average life considerations
with respect to a Series of Securities will be set forth in the related
Prospectus Supplement.

SECURITY INTERESTS AND OTHER ASPECTS OF THE CONTRACTS

Secured Contracts. Each Secured Contract will be secured by a
security interest in a Manufactured Home. Perfection of security interests in
the Manufactured Homes and enforcement of rights to realize upon the value of
the Manufactured Homes as collateral for the Secured Contracts are subject to a
number of Federal and state laws, including the Uniform Commercial Code as
adopted in each state and each state's certificate of title statutes. The
steps necessary to perfect the security interest in a Manufactured Home will
vary from state to state. Because of the expense and administrative
inconvenience involved, the Servicer (in the case of a Series of Certificates)
or the Non-Agency Servicer (in the case of Non-Agency Certificates) of a
Secured Contract will not amend any certificate of title to change the
lienholder specified therein from such Servicer or Non-Agency Servicer, as
applicable to the Trustee (in the case of a Series of Certificates) or
Certificate Trustee (in the case of Non-Agency Certificates) and will not
deliver any certificate of title to such trustee or note thereon the trustee's
interest. Consequently, in some states, in the absence of such an amendment,
the assignment to such trustee of the security interest in the Manufactured
Home may not be effective or such security interest may not be perfected and,
in the absence of such notation or delivery to such trustee, the assignment of
the security interest in the Manufactured Home may not be effective against
creditors of the Servicer or Non-Agency Servicer, as applicable or a trustee in
bankruptcy of such servicer.

Unsecured Contracts. The obligations of the obligor under any
Unsecured Contract included in the related Trust Estate or Trust Fund for a
Series will not be secured by an interest in the related real estate or
otherwise, and the related Trust Estate or Trust Fund, as the owner of such
Unsecured Contract, will be a general unsecured creditor as to such
obligations. As a consequence, in the event of a default under an Unsecured
Contract, the related Trust Estate or Trust Fund will have recourse only
against the obligor's assets generally, along with all other general unsecured
creditors of the obligor. In a bankruptcy or insolvency proceeding relating to
an obligor on an Unsecured Contract, the obligations of the obligor under such
Unsecured Contract may be discharged in their entirety, notwithstanding the
fact that the portion of such obligor's assets made available to the related
Trust Estate or Trust Fund as a general unsecured creditor to pay amounts due
and owing thereunder are insufficient to pay all such amounts. An obligor on
an Unsecured Contract may not demonstrate the same degree of concern over
performance of the obligor's obligations under such Unsecured Contract as if
such obligations were secured by the real estate owned by such obligor.

Federal and State Consumer Protection Laws. In addition, numerous
Federal and state consumer protection laws impose requirements on lending under
conditional sales contracts and installment loan agreements such as the
Contracts, and the failure by the lender or seller of goods to comply with such
requirements could give rise to liabilities of assignees for amounts due under
such agreements and claims by such assignees may be subject to set-off as a
result of such lender's or seller's noncompliance. These laws would apply to a
Trustee (in the case of a Series of Certificates) or Certificate Trustee (in
the case of Non-Agency Certificates) as an assignee of Contracts. Each Seller
of Contracts will warrant that each Contract complies with all requirements of
law and, in the case of Secured Contracts, will make certain warranties
relating to the validity, subsistence, perfection and priority of the security
interest in each Manufactured Home securing a Secured Contract. A breach of
any such warranty that materially adversely affects any Contract would create
an obligation of the Seller to repurchase such Contract unless such breach is
cured. If any related Credit Enhancement is exhausted and recovery of amounts
due on the Contracts is dependent on repossession and resale

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<PAGE> 165
of Manufactured Homes securing Contracts that are in default, certain other
factors may limit the ability of the Holders to realize upon the Manufactured
Homes or may limit the amount realized to less than the amount due.

LIMITED LIQUIDITY

There will be no market for the Securities of any Series prior to the
issuance thereof, and there can be no assurance that a secondary market will
develop or, if it does develop, that it will provide the related Holders with
liquidity of investment or will continue for the life of such Series. The
market value of the Securities will fluctuate with changes in prevailing rates
of interest. Consequently, the sale of Securities by a Holder in any market
that may develop may be at a discount from par value or their purchase price.
Unless otherwise specified in the Prospectus Supplement for a Series, Holders
of the Securities of such Series will have no right to request redemption or
repurchase of such Securities, and such Securities will be subject to
redemption only under the limited circumstances described in such Prospectus
Supplement.

LIMITED ASSETS

The Issuer with respect to a Series will not have, nor will it be
expected in the future to have, any significant assets available for payments
on such Series other than the Assets in the related Trust Estate or Trust Fund,
as applicable. The Bonds will be non-recourse obligations of the related
Issuer and each Series of Bonds will be separately secured. Unless otherwise
specified in the related Prospectus Supplement, no Series of Bonds will have
any claim against or any security interest in the Mortgage Assets or other
Assets pledged to secure any other Series. If the Mortgage Assets and other
Assets securing a Series of Bonds is insufficient to make payments on such
Bonds, no other assets of an Issuer will be available for payment of the
deficiency. In addition, unless otherwise set forth in the Prospectus
Supplement for a Series of Certificates, the Trust Fund for such Series will be
the only available source of funds to make distributions on the Certificates of
such Series.

The only obligations, if any, of the Company with respect to a Series
will be to obtain certain representations and warranties from each Seller of
the related Mortgage Assets and to assign to the related Trustee (or, in the
case of Bonds issued by an Owner Trust, to such Owner Trust) the Company's
rights with respect thereto, and its obligations pursuant to certain
representations and warranties made by it. The Company does not have, and is
not expected in the future to have, any significant assets. If the Company
were required to repurchase a Mortgage Asset included in the Trust Estate or
Trust Fund for a Series, its only sources of funds to make such repurchase
would be from funds obtained from the enforcement of a corresponding
obligation, if any, on the part of the Seller of such Mortgage Asset or the
related Servicer (if any), as the case may be, or from a Reserve Fund, if any,
established to provide funds for such repurchases.

Immediately after each required payment or distribution of principal
of, and interest on, a Series has been paid in full, funds held in one or more
accounts maintained pursuant to the related Indenture or Agreement, as
applicable, if not required to be deposited in any related Reserve Fund or
otherwise applied pursuant to the related Indenture or Agreement, may be
withdrawn under certain circumstances and conditions described in the related
Prospectus Supplement, or may be distributed to a party specified in such
Indenture or Agreement. In addition, certain amounts remaining in related
Reserve Funds with respect to a Series may likewise be withdrawn or
distributable to a party specified in the related Indenture or Agreement after
such Reserve Funds reach certain prescribed balances, or after the principal
balances of the Securities of such Series have been reduced to a prescribed
level, in which cases such amounts would no longer be available to make
payments on such Securities.

Because payments or distributions of principal on the Securities of a
Series may, if so provided in the related Prospectus Supplement, be applied to
outstanding Classes of such Series in the priority specified in the related
Prospectus Supplement, a deficiency that arises after Securities of a Class of
any such Series having higher priority in payment have been fully or partially
repaid will have a disproportionately greater effect on the Securities of
Classes of such Series having lower priority in payment. The disproportionate
effect of any such deficiency is further increased in the case of Classes of
Compound Interest Securities of any Series because, prior to the retirement of
all Classes of such Series having higher priority in payment than such Compound
Interest Securities, interest is not payable, unless

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otherwise provided in the related Prospectus Supplement, but is accrued and
added to the principal of such Compound Interest Securities.

In addition, due to the priority of payments and the allocation of
losses, defaults experienced on the Mortgage Assets included in the Trust
Estate or Trust Fund for a Series of Special Allocation Securities may have a
disproportionate effect on a specified Class or Classes within such Series. If
so specified in the Prospectus Supplement for a Series of Special Allocation
Securities, on any Payment Date or Distribution Date, as applicable, for such
Series on which the principal balance of the related Mortgage Assets is reduced
due to losses on such Mortgage Assets (i) the amount of such losses shall be
allocated first to reduce the aggregate outstanding principal balance of the
Subordinate Securities and thereafter to reduce the aggregate outstanding
principal balance of the remaining Securities in the priority and manner
specified in such Prospectus Supplement until the aggregate outstanding
principal balance of each Class of Securities so specified has been reduced to
zero or paid in full, thereby reducing the amount of principal payable on each
such Class of Securities or (ii) such losses may be allocated in any other
manner set forth in the related Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, such reductions of principal of
a Class of a Series will be allocated to the Holders of the Securities of such
Class pro rata in their proportion which the outstanding principal balance of
each Security of such Class bears to the aggregate outstanding principal
balance of all Securities of such Class.

LIMITATIONS, REDUCTION AND SUBSTITUTION OF CREDIT ENHANCEMENT

As specified in the related Prospectus Supplement with respect to each
Series, Credit Enhancement will be provided to the extent required by the
rating agencies requested to rate any Securities of such Series of
Certificates. Credit Enhancement with respect to a Series will be provided in
one or more of the forms described in the related Prospectus Supplement,
including, but not limited to, prioritization as to payments of one or more
Classes of such Series, a Mortgage Pool Insurance Policy, a Special Hazard
Insurance Policy, a bankruptcy bond, one or more Reserve Funds, other
insurance, guarantees and similar instruments and agreements, or any
combination thereof. Regardless of the form of Credit Enhancement provided
with respect to a Series, the amount of coverage will be limited in amount and
in most cases will be subject to periodic reduction in accordance with a
schedule or formula. Furthermore, such Credit Enhancement may provide only
very limited coverage as to certain types of losses, and may provide no
coverage as to certain other types of losses. The related Trustee will
generally be permitted to reduce, terminate or substitute all or a portion of
the Credit Enhancement for a Series, if the applicable rating agencies indicate
that the then-current rating of the Securities of such Series will not be
adversely affected.

ORIGINAL ISSUE DISCOUNT; RESIDUAL CERTIFICATES

All of the Compound Interest Securities and Principal Only Securities
will be, and certain of the other Securities may be, issued with original issue
discount for federal income tax purposes. A Holder of a Security issued with
original issue discount will be required to include original issue discount in
ordinary gross income for federal income tax purposes as it accrues, in advance
of receipt of the cash, or a portion of the cash, attributable to such income.
Accrued but unpaid interest on the Compound Interest Securities generally will
be treated as original issue discount for this purpose. At certain rapid
Mortgage Asset prepayment rates, original issue discount may accrue on certain
Classes of Securities, including certain variable rate Regular Securities, that
may never be received as cash, resulting in a subsequent loss on such
Securities. See "Certain Federal Income Tax Consequences -- Federal Income Tax
Consequences for REMIC Securities -- Taxation of Regular Securities -- Original
Issue Discount" and "Certain Federal Income Tax Consequences -- Federal Income
Tax Consequences for Securities as to Which No REMIC Election Is Made -- Non-
REMIC Bonds" and "-- Standard Certificates -- Premium and Discount -- Original
Issue Discount" and "-- Stripped Certificates -- Taxation of Stripped
Certificates -- Original Issue Discount."

An election may be made to treat all or any portion of any Trust
Estate or Trust Fund or a portion thereof as a REMIC for federal income tax
purposes. Holders ("Residual Holders") of Securities representing the residual
interests in the related REMIC ("Residual Securities") must report on their
federal income tax returns their pro rata share of REMIC taxable income or
loss. All or a portion of the REMIC taxable income reportable by Residual
Holders may be treated as such holders' "excess inclusion" subject to special
rules for federal income tax purposes. The REMIC taxable income, and possibly
the tax liabilities of the Residual Holders, may exceed the cash distributions
on the Residual

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Securities during certain periods. Residual Holders who are individuals may be
subject to limitations on the deductibility of servicing fees on the related
Mortgage Assets and other REMIC administrative expenses. Hence, Residual
Holders may experience an after-tax return that is significantly lower than
would be anticipated based upon the stated interest rate, if any, of their
Residual Securities. See "Certain Federal Income Tax Consequences -- Federal
Income Tax Consequences for REMIC Securities -- Taxation of Residual
Securities."

FUNDS AVAILABLE FOR REDEMPTIONS OR REPURCHASES AT THE REQUEST OF HOLDERS

With respect to any Series for which the related Prospectus Supplement
provides for redemptions or repurchases of the Securities of such Series at the
request of Holders, there can be no assurance that amounts available for such
redemptions or repurchases, if any, for such Securities will be sufficient to
permit such Securities to be redeemed or repurchased within a reasonable time
after redemption or repurchase is requested, for reasons including the
following:

1. Scheduled principal payments on the related Mortgage Assets
generally will be minimal in the early years and will increase in the later
years of such Mortgage Assets. As a result, funds available to be applied to
redemptions or repurchases at the request of Holders, may be expected to be
limited in the early years and to increase during the later years of each
Series. Accordingly, the availability of funds for redemptions or repurchases
of Securities of any Series at the request of Holders will depend largely upon
the rates of prepayment of the related Mortgage Assets. See "Certain Yield,
Prepayment and Weighted Average Life Considerations" in the related Prospectus
Supplement.

2. Prepayments of principal on Mortgage Assets are less likely to
occur during periods of higher interest rates when it is more likely that
requests for redemption by Holders will be made. During periods in which
prevailing interest rates are higher than the interest rate paid on Securities
that may be redeemed at the request of Holders, greater numbers of such
Securities are expected to be tendered for redemption in order to take
advantage of the higher interest rates payable on other investments then
available. During such periods, there will likely also be a reduction in the
rate of prepayments on the related Mortgage Assets, thus limiting the funds
available to satisfy requested redemption by Holders.

3. As specified in the related Prospectus Supplement, certain
Holders, such as personal representatives of deceased Holders, may have certain
priorities as to redemption at the request of Holders.

BOOK ENTRY REGISTRATION

Because transfers and pledges of Book Entry Securities can be effected
only through book entries at a Clearing Agency through Clearing Agency
Participants, the liquidity of the secondary market for Book Entry Securities
may be reduced to the extent that some investors are unwilling to hold
Securities in book entry form in the name of Clearing Agency Participants and
the ability to pledge Book Entry Securities may be limited due to lack of a
physical certificate. Beneficial Owners of Book Entry Securities may, in
certain cases, experience delay in the receipt of payments of principal and
interest since such payments will be forwarded by the related Trustee to the
Clearing Agency who will then forward payment to the Clearing Agency
Participants who will thereafter forward payment to Beneficial Owners. In the
event of the insolvency of the Clearing Agency or of a Clearing Agency
Participant in whose name Securities are recorded, the ability of Beneficial
Owners to obtain timely payment and (if the limits of applicable insurance
coverage by the Securities Investor Protection Corporation are exceeded, or if
such coverage is otherwise unavailable) ultimate payment of principal and
interest on Book Entry Securities may be impaired.

NATURE OF DIRECT OR INDIRECT BACKING FOR SECURITIES

Only Agency Securities are guaranteed by an agency or instrumentality
of the United States and only the guarantee by GNMA of GNMA Certificates is
entitled to the full faith and credit of the United States. The guaranteed by
FNMA and FHLMC of FNMA Certificates and FHLMC Certificates, respectively, are
backed only by the credit of FNMA, a federally chartered privately owned
corporation, or by the credit of FHLMC, a federally chartered corporation
controlled by the Federal Home Loan Banks. See "Assets Securing or Underlying
the Securities - Agency Securities." Although payment of principal of, and
interest on, any Agency Security securing or underlying a Series will be

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guaranteed by either GNMA, FNMA or FHLMC, such guarantee will run only to such
Agency Security and will not guarantee the payment of principal or interest on
the Securities of such Series. The Prospectus Supplement for a Series with
respect to which the related Trust Estate or Trust Fund includes Non-Agency
Certificates or Private Mortgage-Backed Securities may describe certain
arrangements through which such Non-Agency Certificates or Private
Mortgage-Backed Securities and/or the related Underlying Mortgage Loans are
insured, guaranteed or otherwise backed, but any such guarantee will inure only
to the benefit of such Non-Agency Certificates or Private Mortgage-Backed
Securities or Underlying Mortgage loans, as the case may be, and will not
guarantee the payment of principal or interest on the Securities of such
Series. Any such backing may be subject to contingencies described in the
applicable Prospectus Supplement and will be limited to the credit and assets
of the particular specified insurer or guarantor and will not be entitled to
the full faith and credit of the United States or to any agency or
instrumentality thereof.

INSURANCE CONSIDERATIONS FOR CERTAIN NON-AGENCY CERTIFICATES AND PRIVATE
MORTGAGE-BACKED SECURITIES

Potential investors should be aware that (a) any decline in the value
of a property securing an Underlying Mortgage Loan with respect to Non-Agency
Certificate or Private Mortgage-Backed Security may result in a loss on such
Non-Agency Certificate or Private Mortgage-Backed Security if the Mortgagor on
such Underlying Mortgage Loan defaults and the loss is not covered by any
insurance policy, guarantee or comparable instrument, and (b) any hazard loss
not covered by a standard hazard insurance policy or any applicable special
hazard insurance policy or comparable instrument covering a defaulted
Underlying Mortgage Loan with respect to a Non-Agency Certificate or Private
Mortgage-Backed Security will result in a loss on such Non-Agency Certificate
or Private Mortgage-Backed Security. Any such loss on a Non-Agency Certificate
or Private Mortgage-Backed Security, if not covered by funds available in the
Reserve Fund, if any, or Collection Account, or by a guarantee, will result in
a loss to Holders.

CERTAIN MATTERS RELATING TO INSOLVENCY

The Sellers of the Mortgage Assets to the Company and the Company will
intend that the transfers of such Mortgage Assets to the Company and, in turn
to the applicable Trust Funds or Owner Trusts, constitute sales rather than
pledges to secure indebtedness of the Seller. However, if a Seller of Mortgage
Assets were to become a debtor under the federal bankruptcy code, it is
possible that a creditor or trustee-in-bankruptcy of such Seller may argue that
the sale thereof by such Seller is a pledge rather than a sale. This position,
if argued or accepted by a court, could result in a delay in or reduction of
distributions to the related Holders.

JUNIOR LIEN MORTGAGE LOANS; LIQUIDATION OF MORTGAGE LOANS

An overall decline in the residential real estate market could
adversely affect the values of the properties securing the Mortgage Loans,
including Title I Loans, with junior liens such that the outstanding principal
balances, together with any senior financing thereon, exceeds the value of the
Mortgaged Properties. Since Mortgage Loans secured by junior (i.e. second,
third, etc.) liens are subordinate to the rights of the beneficiaries under the
related senior deeds of trust or senior mortgages, such a decline would
adversely affect the position of the related junior beneficiary or junior
mortgagee before having such an effect on the position of the related senior
beneficiaries or senior mortgagees. A rise in interest rates over a period of
time, the general condition of a Mortgaged Property and other factors may also
have the effect of reducing the value of the Mortgaged Property from the value
at the time the junior lien Mortgage Loan was originated. As a result, the
ratio of the amount of the Mortgage Loan to the value of the Mortgaged Property
may exceed the ratio in effect at the time the Mortgage Loan was originated.
Such an increase may reduce the likelihood that, in the event of a default by
the borrower, liquidation or other proceeds will be sufficient to satisfy the
junior lien Mortgage Loan after satisfaction of any senior liens and the
payment of any liquidation expenses.

Even assuming that the Mortgaged Property provides adequate security
for the junior lien Mortgage Loan, substantial delay could be encountered in
connection with the liquidation of a defaulted Mortgage Loan and corresponding
delays in the receipt of related proceeds by Holders could occur. Further,
liquidation expenses (such as legal fees, real estate taxes, and maintenance
and preservation expenses) could reduce the proceeds available for payment to
Holders and thereby reduce the security for the junior lien Mortgage Loan. In
the event that any Mortgaged Properties fail to provide adequate security for
the related junior lien Mortgage Loan and any related Credit Enhancement has
been exhausted, Holders would experience a loss.

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Liquidation expenses with respect to defaulted Mortgage Loans do not
vary directly with the outstanding principal balance of the Mortgage Loans at
the time of default. Therefore, assuming that a Servicer took the same steps
in realizing upon defaulted Mortgage Loans having small remaining principal
balances as in the case of defaulted Mortgage Loans having larger principal
balances, the amount realized after expenses of liquidation would be smaller as
a percentage of the outstanding principal balance of the smaller Mortgage
Loans. To the extent the average outstanding principal balances of the
Mortgage Loans in a Trust Estate or Trust Fund are relatively small,
realizations net of liquidation expenses may also be relatively small as a
percentage of the principal amount of the Mortgage Loans.

REMEDIES FOLLOWING DEFAULT

The market value of the Mortgage Assets securing or underlying a
Series will fluctuate as general interest rates fluctuate. Following an Event
of Default with respect to a Series of Bonds, there is no assurance that the
market value of the Mortgage Assets securing such Series of Bonds will be equal
to or greater than the unpaid principal and accrued interest due on the Bonds
of such Series, together with any other expenses or liabilities payable
thereon. If the Mortgage Assets securing a Series of Bonds are sold by the
Trustee following an Event of Default, the proceeds of such sale may be
insufficient to pay in full the principal of and interest on such Bonds, and
any Classes on which principal payments have previously been made may have, in
the aggregate, a greater proportion of their principal repaid than will Classes
on which principal payments have not previously been made. However, in certain
events the Trustee may be restricted from selling the Mortgage Assets securing
a Series of Bonds. See "The Indenture -- Events of Default."

In the event the principal of the Securities of a Series is declared
due and payable, the Holders of any such Securities issued at a discount from
par ("original issue discount") may be entitled, under applicable provisions of
the federal Bankruptcy Code, to receive no more than an amount equal to the
unpaid principal amount thereof less unamortized original issue discount
("accrued value"). There is no assurance as to how such accrued value would be
determined if such event occurred.

RISKS ASSOCIATED WITH MORTGAGED PROPERTIES NOT LOCATED IN THE UNITED STATES.

If so provided in the related Prospectus Supplement, the Trust Estate
or Trust Fund with respect to a Series may include Mortgage Loans or
Multifamily Loans that are, or Non-Agency Certificates backed by Mortgage Loans
or Multifamily Loans that are, secured by Mortgaged Properties not located in
the United States. The related Prospectus Supplement will set forth certain
material risks associated with such Mortgage Loans or Multifamily Loans which
are different and additional to those associated with similar properties in the
United States, including restrictions on enforcement of the rights of the
holder of the debt secured by such properties, currency exchange rate
fluctuations, currency exchange controls and general trends or conditions in
the related real estate market.

DEPOSITS, SUBSTITUTIONS AND WITHDRAWALS OF ASSETS

To the extent provided in the Prospectus Supplement for a Series, the
related Issuer or the Company may, subsequent to the issuance of such Series,
deposit additional Assets and withdraw Assets previously included in the
related Trust Estate or Trust Fund or Assets deposited in a Reserve Fund for
such Series. The effect of deposit or substitution of other Assets (i) for a
Series of Bonds may be to overcollateralize such Series, thus limiting the
amount of funds available for application to payments of principal on such
Series and (ii) for a Series of Bonds or Certificates, may be to alter the
characteristics of the Assets securing or underlying such Series, either of
which may alter the timing and amount of principal and/or interest payments or
distributions on, and the maturity of, or the date of the final distribution
on, the Securities of such Series. See "Assets Securing or Underlying the
Securities -- Deposit, Substitution and Withdrawal of Assets."

OTHER LEGAL CONSIDERATIONS

Applicable state laws generally regulate interest rates and other
charges, require certain disclosures, and require licensing of the originators
of the Mortgage Loans and Contracts. In addition, other state laws, public
policy and general principles of equity relating to the protection of
consumers, unfair and deceptive practices and debt recollection practices may
apply to the origination, servicing and collection of the Mortgage Loans and
Contracts. Depending on the

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provisions of the applicable law and the specified facts and circumstances
involved, violations of these laws, policies and principles may limit
collection of all or part of the principal of or interest on the Mortgage Loans
and Contracts, and may entitle the borrower to a refund of amounts previously
paid. See "Certain Legal Aspects of the Mortgage Assets."

The Mortgage Loans and Contracts are also subject to federal laws,
including:

(i) the Federal Truth in Lending Act and Regulation Z promulgated
thereunder, which require certain disclosures to the borrowers regarding the
terms thereof.

(ii) the Equal Credit Opportunity Act and Regulation B promulgated
thereunder, which prohibit discrimination on the basis of age, race, color,
sex, religion, martial status, national origin, receipt of public assistance or
the exercise of any right under the Consumer Credit Protection Act, in the
extension of credit; and

(iii) the Fair Credit Reporting Act, which regulates the use and
reporting of information related to the borrower's credit experience.
Violations of certain provisions of these federal laws may limit the ability of
the Servicer or the Administrator, if any, to collect all or part of the
principal of or interest on the Mortgage Loans and Contracts and in addition
could subject the Servicer or the Administrator, if any, to damages and
administrative enforcement.

Unless otherwise specified in the related Prospectus Supplement, the
related Seller or the Company will be required to repurchase any Mortgage Loan
or Contract which, at the time of origination, did not comply with applicable
federal and state laws or regulations.

DESCRIPTION OF THE SECURITIES

GENERAL

The following summaries describe certain features common to each
Series. Such summaries do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all of the provisions of the
Indenture or Agreement, as applicable, and the Prospectus Supplement relating
to each Series. When particular provisions or terms used or referred to in an
Indenture or Agreement are referred to herein, such provisions or terms shall
be as used or referred to in such Indenture or Agreement.

Neither the Bonds nor the Certificates will be insured or guaranteed
by GNMA, FNMA, FHLMC, any governmental entity or, unless otherwise specified in
the related Prospectus Supplement by any other person. Unless otherwise
specified in the related Prospectus Supplement, the Company's only obligations
with respect to a Series will be to obtain certain representations and
warranties from each Seller and to assign to the related Trustee the Company's
rights with respect thereto, and its obligations pursuant to certain
representations and warranties made by it. Unless otherwise specified in the
Prospectus Supplement relating to a Series, no affiliate of the Company will
have any obligations with respect to such Series.

The Mortgage Assets relating to a Series, other than the Agency
Securities, will not be, insured or guaranteed by any governmental entity or,
unless otherwise specified in the related Prospectus Supplement, by any other
person. With respect to a Series for which the related Trust Estate or Trust
Fund includes Mortgage Loans, Contracts or Multifamily Loans, to the extent
that delinquent payments on or losses in respect of defaulted Mortgage Loans,
Contracts or Multifamily Loans, are not advanced by the related Servicer, the
Administrator, if any, or any other entity or paid from any applicable Credit
Enhancement, such delinquencies may result in delays in payments or
distributions to the Holders of one or more Classes of such Series, and such
losses will be borne by the Holders of one or more Classes of such Series.

In addition, with respect to a Series for which the related Trust
Estate or Trust Fund includes Mortgage Assets other than Mortgage Loans, late
payments on such Mortgage Assets may result in delays in payments or
distributions to the Holders of one or more Classes of such Series, and losses
on such Mortgage Assets will be borne by the Holders

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of one or more Classes of such Series, to the extent such late payments and
losses are not advanced or paid from any applicable Credit Enhancement.

THE BONDS - GENERAL

The Bonds will be issued in Series pursuant to an Indenture between
the applicable Issuer and the related Trustee named in the related Prospectus
Supplement, each such Indenture as supplemented by or as incorporated by
reference into a Series Supplement, if any, with respect to each Series. A
form of Indenture has been filed with the Commission as an Exhibit to the
Registration Statement of which Prospectus forms a part. A copy of the
Indenture or the Series Supplement for a Series, if any, will be filed with the
Commission as an Exhibit to a Current Report on Form 8-K to be filed with the
Commission within 15 days of issuance of such Series of Bonds.

The "Issuer" with respect to a Series of Bonds will be the Company or
a trust beneficially owned initially by the Company (each, a "Trust"). Each
such Trust will be created by an agreement (the "Deposit Trust Agreement")
between the Company, acting as depositor, and a bank, trust company or other
fiduciary, acting as owner trustee (the "Owner Trustee"), solely for the
purpose of issuing one or more Series of Bonds. The Company may sell or assign
its beneficial ownership interest in any Trust, in whole or in part, to another
entity or entities at the time of, or subsequent to, the issuance of any Bonds
by such Trust. Each Series of Bonds will be non-recourse obligations of the
related Issuer. The Issuer with respect to a Series of Bonds will not have,
nor be expected in the future to have, any significant assets available for
payments on such Series of Bonds other than the Assets included in the related
Trust Estate. Unless otherwise specified in the related Prospectus Supplement,
each Series of Bonds will be separately secured by the related Trust Estate,
which will constitute the only significant assets available to make payments on
the Bonds of such Series. Accordingly, the investment characteristics of a
Series of Bonds will be determined by the Assets included in the related Trust
Estate and will not be affected by the identity of the obligor with respect to
such Series of Bonds.

THE CERTIFICATES - GENERAL

The Certificates will be issued in Series pursuant to separate
Agreements between the Company, the Administrator, if any, and the related
Trustee named in the Prospectus Supplement. A form of Trust Agreement has been
filed as an Exhibit to the Registration Statement of which this Prospectus
forms a part. The Agreement relating to a Series of Certificates will be filed
as an Exhibit to a Report on Form 8-K to be filed with the Commission within 15
days following the issuance of such Series of Certificates.

The "Issuer" with respect to a Series of Certificates will be the
related Trust Fund established by the Company pursuant to the related
Agreement. Each Series of Certificates will be entitled to distributions only
from the Assets included in the related Trust Fund and any other Assets pledged
or otherwise available for the benefit of the Holders of such Series as
specified in the related Prospectus Supplement. Accordingly, the investment
characteristics of a Series of Certificates will be determined by the Assets
included in the related Trust Fund. The Certificates of a Series will not
represent obligations of the Company, any Administrator, any Servicer or any
affiliate thereof.

FORM OF SECURITIES; TRANSFER AND EXCHANGE

As specified in the related Prospectus Supplement, the Securities of
each Series will be issued either in book entry form or fully registered
certificated form in the minimum denominations for each Class specified in the
related Prospectus Supplement. Unless otherwise specified in the Prospectus
Supplement, the original Principal Balance of each Security will equal the
aggregate payments or distributions allocable to principal to which such
Security is entitled. Unless otherwise specified in the related Prospectus
Supplement, payments or distributions allocable to interest on each Security of
a Series that is not entitled to payments or distributions allocable to
principal will be calculated based on the Notional Principal Balance of such
Security. The "Notional Principal Balance" of a Security will be a notional
amount assigned to such security and will not evidence an interest in or
entitlement to payments or distributions allocable to principal, but will be
used solely for convenience in expressing the calculation of interest and for
certain other purposes.

Except as described below under "Book Entry Registration" with respect
to Book Entry Securities, the Securities of each Series will be transferable
and exchangeable on a register to be maintained at the corporate trust office

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of the related Trustee or such other office or agency maintained for such
purposes by the Trustee in New York City. Unless otherwise specified in the
Prospectus Supplement with respect to a Series, under the related Indenture or
Agreement, the Trustee will be appointed initially as the "Registrar" for such
Series for purposes of maintaining books and records of the ownership and
transfer of the Securities of such Series. Unless otherwise specified in the
Prospectus Supplement with respect to a Series, no service change will be made
for any registration of transfer or exchange of Securities of such Series, but
payment of a sum sufficient to cover any tax or other governmental charge may
be required.

Under current law the purchase and holding of a Class of Securities
entitled only to a specified percentage of payments or distributions of either
interest or principal or a notional amount of either interest or principal on
the related Mortgage Assets or a Class of Securities entitled to receive
payments or distributions of interest and principal on the Mortgage Assets only
after payments or distributions to other Classes or after the occurrence of
certain specified events by or on behalf of any employee benefit plan or other
retirement arrangement (including individual retirement accounts and annuities,
Keogh plans and collective investment funds in which such plans, accounts or
arrangements are invested) subject to provisions of ERISA or the Code, may
result in "prohibited transactions" within the meaning of ERISA and the Code.
See "ERISA Considerations." Unless otherwise specified in the related
Prospectus Supplement, transfer of Securities of such a Class will not be
registered unless the transferee (i) executes a representation letter stating
that it is not, and is not purchasing on behalf of, any such plan, account or
arrangement or (ii) provides an opinion of counsel satisfactory to the related
Trustee and the Company that the purchase of Securities of such a Class by or
on behalf of such plan, account or arrangement is permissible under applicable
law and will not subject the related Trustee, the Administrator, if any, or the
Company to any obligation or liability in addition to those undertaken in the
Agreement.

REMIC ELECTION

As to each Series, one or more elections may be made to treat all or
specified portions of the related Trust Estate or Trust Fund as a REMIC for
federal income tax purposes. The related Prospectus Supplement will specify
whether a REMIC election is to be made. Alternatively, the Indenture or
Agreement for a Series may provide that a REMIC election may be made at the
discretion of the Company, the Administrator, if any, or another entity and may
only be made if certain conditions are satisfied. As to any such Series, the
terms and provisions applicable to the making of a REMIC election, as well as
any material federal income tax consequences to Holders of such Series not
otherwise described herein, will be set forth in the related Prospectus
Supplement. If such an election is made with respect to a Series, one or more
of the Classes of such Series will be designated as evidencing the "residual
interests" in the related REMIC or REMICs, as defined in the Code. All other
Classes of such Series will constitute "regular interests" in the related REMIC
or REMICs, as defined in the Code. As to each Series with respect to which a
REMIC election is to be made, the Administrator, if any, the related Trustee, a
Residual Holder or another person as specified in the related Prospectus
Supplement will be obligated to take all actions required in order to comply
with applicable laws and regulations and will be obligated to pay any
prohibited transaction taxes. The person so specified, unless otherwise
provided in the related Prospectus Supplement, will be entitled to
reimbursement for any such payment from the assets of the related Trust Estate
or Trust Fund or, if applicable, from any Residual Holder.

CLASSES OF SECURITIES

Each Series will be issued in one or more Classes. If specified in
the Prospectus Supplement, one or more Classes of a Series may be secured by
(in the case of Bonds), or evidence beneficial ownership interests in (in the
case of Certificates), separate groups of Assets included in the related Trust
Estate or Trust Fund or otherwise available for the benefit of such Series.

If specified in the related Prospectus Supplement, the Certificates of
a Series will have an aggregate original principal balance equal to the
aggregate unpaid principal balance of the Mortgage Assets included in the
related Trust Fund as of the close of business on the first day of the month of
creation of such Trust Fund (the "Cut-off Date") after deducting payments of
principal due on or before the Cut-off Date and, unless otherwise specified in
the related Prospectus Supplement, will bear interest in the aggregate equal to
the Pass-Through Rate for such Series. The "Pass- Through Rate" for a Series
will equal the rate of interest borne by the related Mortgage Assets, net of
the aggregate servicing fees and any other amounts (including fees payable to
the Administrator, if any, for such Series) as are

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specified in the Prospectus Supplement. The original principal balance of the
Certificates of a Series and the Certificate Interest Rate on the Classes of
such Certificates will be determined in the manner specified in the Prospectus
Supplement.

Each Class of Securities that is entitled to payments or distributions
allocable to interest will bear interest at the applicable Bond Interest Rate
or Certificate Interest Rate, which in either case may be a fixed rate (which
may be zero) or, in the case of Variable Interest Securities, may be a rate
that is subject to change from time to time (a) in accordance with a schedule,
(b) in reference to an index, or (c) otherwise in each case as specified in the
related Prospectus Supplement. Notwithstanding the foregoing, if so specified
in the related Prospectus Supplement, one or more Classes of a Series may be
entitled to receive payments or distributions of interest only to the extent of
amounts available to make such payments or distributions. One or more Classes
of Securities may provide for interest that accrues, but is not currently
payable ("Compound Interest Securities"). With respect to any Class of
Compound Interest Securities, if specified in the related Prospectus
Supplement, any interest that has accrued but is not paid on a given Payment
Date or Distribution Date will be added to the aggregate principal balance of
such Class on that Payment Date or Distribution Date.

A Series may include one or more Classes entitled only to payments or
distributions (i) allocable to interest ("Interest Only Securities"), (ii)
allocable to principal ("Principal Only Securities"), and allocable as between
scheduled payments of principal and Principal Prepayments, as defined below
under "Payments or Distributions of Principal and Interest" or (iii) allocable
to both principal (and allocable as between scheduled payments of principal and
Principal Prepayments) and interest. A Series may include one or more classes
as to which payments or distributions will be allocated (i) on the basis of
collections from designated portions of the Assets included in the related
Trust Estate or Trust Fund, (ii) in accordance with a schedule or formula,
(iii) in relation to the occurrence of events, or (iv) otherwise, in each case
as specified in the related Prospectus Supplement. The timing and amounts of
such payments or distributions may vary among Classes, over time or otherwise,
in each case as specified in the related Prospectus Supplement.

A Series of Securities may include one or more Classes of Scheduled
Amortization Securities and Companion Securities. "Scheduled Amortization
Securities" are Securities with respect to which payments or distributions of
principal are to be made in specified amounts on specified Payment Dates or
Distribution Dates, to the extent of funds available on such Payment Date or
Distribution Date. "Companion Securities" are Securities which receive
payments or distributions of all or a portion of any funds available on a given
Payment Date or Distribution Date which are in excess of amounts required to be
applied to payments or distributions on Scheduled Amortization Securities on
such Payment Date or Distribution Date. Because of the manner of application
of payments or distributions of principal to Companion Securities, the weighted
average lives of Companion Securities of a Series may be expected to be more
sensitive to the actual rate of prepayments on the Mortgage Assets in the
related Trust Estate or Trust Fund than will the Scheduled Amortization
Securities of such Series.

One or more Series of Securities may constitute Series of "Special
Allocation Securities," which may include Senior Securities, Subordinated
Securities, Priority Securities and Non-Priority Securities. As more fully
described in the related Prospectus Supplement for a Series of Special
Allocation Securities, Special Allocation Securities are Securities for which
the timing and/or priority of payments or distributions of principal and/or
interest may favor one or more Classes of such Securities over one or more
other Classes of such Securities. Such timing and/or priority may be modified
or reordered upon the occurrence of one or more specified events. Unless
otherwise specified in the related Prospectus Supplement for a Series of
Special Allocation Securities, losses on the Assets included in the related
Trust Estate or Trust Fund may be disproportionately borne by one or more
Classes of such Series, and the proceeds and distributions from such Assets may
be applied to the payment in full of one or more Classes of such Series before
the balance, if any, of such proceeds are applied to one or more other Classes
within such Series. For example, Special Allocation Securities in a Series may
be comprised of one or more Classes of Senior Securities having a priority in
right to payments or distributions of principal and interest over one or more
Classes of Subordinated Securities, to the extent described in the related
Prospectus Supplement, as a form of Credit Enhancement. See "Credit
Enhancement -- Subordination". Typically, Subordinated Securities of a Series
will carry a rating by the rating agencies rating the Securities of such Series
lower than that of the Senior Securities of such Series. In addition, one or
more Classes of Securities of a Series ("Priority Securities") may be entitled
to a priority of payments or distributions of principal or

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interest from Assets included in the related Trust Estate or Trust Fund over
another Class of Securities of such Series ("Non-Priority Securities"), but
only after the exhaustion of other Credit Enhancement applicable to such
Series. Priority Securities and Non-Priority Securities nonetheless may be
within the same rating category.

PAYMENTS OR DISTRIBUTIONS OF PRINCIPAL AND INTEREST

General

Payments or distributions of principal and interest on the Securities
of a Series will be made by the related Trustee, to the extent of funds
available therefor, on the related Payment Date or Distribution Date. Payments
or distributions will be made to the persons in whose names the Securities of
such Series are registered at the close of business on the dates specified in
the related Prospectus Supplement (each, a "Record Date"). With respect to
Securities other than Book Entry Securities, payments or distributions will be
made by check or money order mailed to Securityholders of such Series at their
addresses appearing in the books and records maintained by or on behalf of the
Issuer of such Series or, if specified in the related Prospectus Supplement, in
the case of Securities that are of a certain minimum denomination as specified
in the related Prospectus Supplement, upon written request by a holder of such
Series, by wire transfer or by such other means as are agreed upon with such
Securityholder; provided, however, that the final payment or distribution in
retirement of a Series (other than Book Entry Securities) will be made only
upon presentation and surrender of such Securities at the office or agency of
the related Trustee specified in the notice to Securityholders of such final
distribution. With respect to Book Entry Securities, such payments or
distributions will be made as described below under "Book Entry Registration"
and in the related Prospectus Supplement.

Unless otherwise specified in the related Prospectus Supplement,
payments or distributions allocable to principal and interest on the Securities
of a Series will be made by the related Trustee out of, and only to the extent
of, funds in a separate account established and maintained under the related
Indenture or Agreement for the benefit of Securityholders of such Series (the
"Collection Account" with respect to a Series of Bonds and the "Certificate
Account" with respect to a Series of Certificates), including any funds
transferred from any related Reserve Fund. As between Securities of different
Classes of a Series and as between payments or distributions of principal (and,
if applicable, between payments or distributions of Principal Prepayments and
scheduled payments of principal) and interest, payments or distributions made
on any Payment Date or Distribution Date will be applied as specified in the
related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, payments or distributions to any Class of Securities
will be made pro rata to all Securityholders of that Class. If so specified in
the related Prospectus Supplement, the amounts received by the Trustee as
described below under "Assets Securing or Underlying the Securities" will be
invested in the Permitted Instruments specified herein and in the related
Prospectus Supplement and all income or other gain from such investments will
be deposited in the related Collection Account or Certificate Account and will
be available to make payments or distributions on the Securities of the
applicable Series on the next succeeding Payment Date or Distribution Date in
the manner specified in the related Prospectus Supplement.

Payments or Distributions of Interest

Each Class of a Series (other than a Class of Principal Only
Securities) will accrue interest at the applicable Bond Interest Rate or
Certificate Interest Rate. One or more Classes may be entitled to receive
payments or distributions of interest only to the extent of amounts available
to make such payments or distributions. Interest on each Class will accrue
during the related Interest Accrual Period and will be paid or distributed on
the related Payment Date or Distribution Date. Interest on all Securities
which bear or receive interest, other than Compound Interest Securities, will
be due and payable on the Payment Dates, or distributed on the Distribution
Dates, as applicable, specified in the related Prospectus Supplement. However,
failure to pay or distribute interest on a current basis may not necessarily be
an Event of Default with respect to a particular Series or Class of Securities.
Interest on any Class of Compound Interest Securities will not be paid or
distributed currently, but will accrue and the amount of the interest so
accrued will be added to the principal thereof on each Payment Date or
Distribution Date, as applicable, until the date specified in the related
Prospectus Supplement. Principal Only Securities will not accrue, and will not
be entitled to receive, any interest. Upon maturity or earlier redemption of
the Securities of any Class, interest will be paid to the date specified in the
related Prospectus Supplement.

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Each payment of interest on each Class of Securities (or addition to
principal of a Class of Compound Interest Securities) on a Payment Date or
Distribution Date, as applicable, will include all interest accrued during the
related Interest Accrual Period. If the Interest Accrual Period for a Series
ends on a date other than a Payment Date or Distribution Date, as applicable,
for such Series, the yield realized by the Holders of such Securities may be
lower than the yield that would result if the Interest Accrual Period ended on
such Payment Date or Distribution Date. Additionally, if so specified in the
related Prospectus Supplement, interest accrued for an Interest Accrual Period
for one or more Classes may be calculated on the assumption that principal
payments or distributions (and additions to principal of the Securities), and
allocations of losses on the Mortgage Assets (if so specified in the related
Prospectus Supplement), are made on the first day of the preceding Interest
Accrual Period and not on the Payment Date or Distribution Date, as applicable,
for such preceding Interest Accrual Period when actually made or added. Such
method would produce a lower effective yield than if interest were calculated
on the basis of the actual principal amount outstanding.

A Series may include one or more Classes of Variable Interest Rate
Securities. With respect to each Class of Variable Interest Securities of a
Series, the related Prospectus Supplement will set forth: (i) the initial Bond
Interest Rate or Certificate Interest Rate, as applicable (or the manner of
determining the initial Bond Interest Rate or Certificate Interest Rate); (ii)
the formula, index or other method by which the Bond Interest Rate or
Certificate Interest Rate, as applicable, will be determined from time to time;
(iii) the periodic intervals at which such determination will be made; (iv) the
Maximum Variable Interest Rate, if any, and the Minimum Variable Interest Rate;
and (v) any other terms relevant to such Class of Securities.

Payments or Distributions of Principal

Principal payments or distributions on the Securities of a Series will
be made from amounts available therefor on each Payment Date or Distribution
Date, as applicable, in an aggregate amount determined as set forth in the
related Prospectus Supplement and will be allocated among the respective
Classes of a Series of Securities at the times, in the manner and in the
priority set forth in the related Prospectus Supplement.

Except with respect to Compound Interest Securities and Interest Only
Securities, unless specified otherwise in the related Prospectus Supplement, on
each Payment Date or Distribution Date, as applicable, principal payments or
distributions will be made on the Securities of a Series in an aggregate amount
determined in the related Prospectus Supplement. If a Series of Securities has
a Class of Compound Interest Securities, additional principal payments on the
Securities of such Series will be made on each Payment Date or Distribution
Date, as applicable, in an amount equal to the interest accrued, but not then
payable or distributable, on such Class of Compound Interest Securities for the
related Interest Accrual Period.

If so specified in the related Prospectus Supplement, on any Payment
Date or Distribution Date, as applicable, on which the principal balance of the
Mortgage Assets relating to a Series is reduced due to losses on such Mortgage
Assets, (i) the amount of such losses will be allocated first, to reduce the
aggregate outstanding principal balance of the Subordinate Securities of such
Series or other subordination, if any, and, thereafter, to reduce the aggregate
outstanding principal balance of the remaining Securities of such Series in the
priority and manner specified in such Prospectus Supplement until the aggregate
outstanding principal balance of each Class of such Securities of such Series
so specified has been reduced to zero or paid in full, thus reducing the amount
of principal payable or distributable on each such Class of Securities or (ii)
such losses may be allocated in any other manner set forth in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, such reductions of principal of a Class or Classes of Securities
will be allocated to the Holders of the Securities of such Class or Classes pro
rata in the proportion which the outstanding principal of each Security of such
Class or Classes bears to the aggregate outstanding principal balance of all
Securities of such Class.

If so provided in the related Prospectus Supplement, one or more
Classes of Senior Securities of a Series will be entitled to receive all or a
disproportionate percentage of the payments of principal which are received on
the related Mortgage Assets in advance of their scheduled due dates and are not
accompanied by amounts representing scheduled interest due after the month of
such payments ("Principal Prepayments") in the percentages and under the
circumstances or for the periods specified in the Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, any such
allocation of principal prepayments to such Class or Classes will have the
effect of accelerating

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the amortization of such Senior Securities while increasing the interests
evidenced by the Subordinated Securities in rights to the benefit of the Assets
in the related Trust Estate or in the related Trust Fund. Increasing the
interests of the Subordinated Securities relative to that of the Senior
Securities is intended to preserve the availability of the subordination credit
enhancement provided to the Priority Securities by the Subordinated Securities.
See "Credit Enhancement -- Subordination."

Unscheduled Payments or Distributions

If specified in the related Prospectus Supplement, the Securities of a
Series will be subject to receipt of payments or distributions before the next
scheduled Payment Date or Distribution Date under the circumstances and in the
manner described below and in the related Prospectus Supplement. If
applicable, the related Trustee will be required to make such unscheduled
payments or distributions on the Securities of a Series on the date and in the
amount specified in the related Prospectus Supplement if, due to substantial
payments of principal (including Principal Prepayments) on the related Mortgage
Assets, low rates then available for reinvestment of such payments or both, the
Trustee determines, based on the assumptions specified in the related Indenture
or Agreement, that the amount anticipated to be on deposit in the Collection
Account or Certificate Account for such Series on the next related Payment Date
or Distribution Date, together with, if applicable, any amounts available to be
withdrawn from any related Reserve Fund or from any other Credit Enhancement
provided for such Series, may be insufficient to make required payments or
distributions on the Securities of such Series on such Payment Date or
Distribution Date. Unless otherwise specified in the related Prospectus
Supplement, the amount of any such unscheduled payment or distribution that is
allocable to principal will not exceed the amount that would otherwise have
been required to be paid or distributed as principal on the Securities of such
Series on the next Payment Date or Distribution Date. Unless otherwise
specified in the related Prospectus Supplement, all unscheduled payments or
distributions will include interest at the applicable Bond Interest Rate or
Certificate Interest Rate (if any) on the amount of the unscheduled payment or
distribution allocable to principal for the period and to the date specified in
such Prospectus Supplement.

Unless otherwise specified in the related Prospectus Supplement, all
payments or distributions allocable to principal in any unscheduled payment or
distribution made on the Securities of a Series will be made in the same
priority and manner as payments or distributions of principal on such
Securities would have been made on the next Payment Date or Distribution Date,
and with respect to Securities of the same Class, unscheduled payments or
distributions of principal will be made on a pro rata basis. Notice of any
unscheduled payment or distribution will be given by the Trustee prior to the
date of such payment or distribution.

REDEMPTION OF BONDS; TERMINATION OR REPURCHASE WITH RESPECT TO CERTIFICATES

To the extent provided in the related Prospectus Supplement, the Bonds
of any Class of a Series may be (i) redeemed at the request of holders of such
Bonds; (ii) redeemed at the option of the Company or another party specified in
the related Prospectus Supplement; or (iii) subject to special redemption under
certain circumstances. The circumstances and terms under which the Bonds of a
Series may be redeemed will be described in the related Prospectus Supplement.

To the extent provided in the related Prospectus Supplement, the
Certificates of any Class of a Series may be (i) repurchased at the request of
holders of such Certificates; (ii) repurchased at the option of the Company,
the Administrator, if any, or another party specified in the related Prospectus
Supplement; or (iii) subject to special repurchase under certain circumstances.
In addition, if so specified in the Prospectus Supplement for a Series of
Certificates, the Company, the Administrator, if any, or another party
specified in the related Prospectus Supplement may, at its option, cause an
early termination of the Trust Fund for such Series by repurchasing all of the
Mortgage Assets from such Trust Fund, under the circumstances specified in such
Prospectus Supplement. The circumstances and terms under which the
Certificates of a Series may be repurchased and the circumstances and terms
under which the related Trust Fund may be terminated will be described in the
related Prospectus Supplement.

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BOOK ENTRY REGISTRATION

If the Prospectus Supplement for a Series so provides, Securities of
any Class of such Series may be issued in book entry form ("Book Entry
Securities") and held in the form of a single bond or certificate issued in the
name of a Clearing Agency ("Clearing Agency") registered with the Securities
and Exchange Commission or its nominee. Transfers and pledges of Book Entry
Securities may be made only through entries on the books of the Clearing Agency
in the name of brokers, dealers, banks and other organizations eligible to
maintain accounts with the Clearing Agency ("Clearing Agency Participants") or
their nominees. Clearing Agency Participants may also be Beneficial Owners (as
defined below) of Book Entry Securities.

Purchasers and other Beneficial Owners of Book Entry Securities
("Beneficial Owners") may not hold Book Entry Securities directly, but may
hold, transfer or pledge their ownership interest in the Book Entry Securities
only through Clearing Agency Participants. Additionally, Beneficial Owners
will receive all payments or distributions of principal and interest with
respect to Book Entry Securities, and, if applicable, may request redemption or
repurchase of Book Entry Securities, only through the Clearing Agency and the
Clearing Agency Participants. Beneficial Owners will not be registered holders
of Securities or be entitled to receive definitive certificates representing
their ownership interest in the Securities except under the limited
circumstances, if any, described in the related Prospectus Supplement. See
"Special Considerations -- Book Entry Registration."

If Securities of a Series are issued as Book Entry Securities, the
Clearing Agency will be required to make book entry transfers among Clearing
Agency Participants, to receive and transmit payments or distributions of
principal and interest with respect to the Securities of such Series, and to
receive and transmit requests for redemption or repurchase with respect to such
Securities. Clearing Agency Participants with whom Beneficial Owners have
accounts with respect to such Book Entry Securities will be similarly required
to make book entry transfers and receive and transmit payments or distributions
and redemption or repurchase requests on behalf of their respective Beneficial
Owners. Accordingly, although Beneficial Owners will not be registered holders
of Securities and will not possess physical certificates, a method will be
provided whereby Beneficial Owners may receive payments or distributions,
transfer their interests, and submit redemption or repurchase requests.

ASSETS SECURING OR UNDERLYING THE SECURITIES

Each Series of Bonds will be secured by a pledge by the Issuer of such
Bonds to the related Trustee of the Assets included in the related Trust
Estate, and each Series of Certificates will represent a beneficial interest in
the Assets included in the related Trust Fund and transferred to the related
Trustee by the Company. Such Assets may include (i) Mortgage Assets and
payments or distributions thereon (subject, if specified in the Prospectus
Supplement, to certain exclusions); (ii) if specified in the Prospectus
Supplement, reinvestment income on such payments or distributions; (iii) with
respect to a Trust Estate or Trust Fund that includes Mortgage Loans, Contracts
or Multifamily Loans, all property acquired by foreclosure or deed in lieu of
foreclosure with respect to any such Mortgage Loan, Contract or Multifamily
Loan and certain rights of the Administrator, if any, and the Servicers under
any policies required to be maintained in respect of the related Mortgage
Assets; and (iv) if so specified in the Prospectus Supplement, one or more
forms of Credit Enhancement. The primary Assets of any Trust Estate or Trust
Fund will consist of Mortgage Assets. The Company expects to acquire Mortgage
Assets from various sellers (each, a "Seller"), which may be affiliates of the
Company, in open market or privately negotiated transactions. Such
acquisitions may be made through an affiliate of the Company.

Mortgage Assets may be acquired by the Company from affiliates of the
Company. The following is a brief description of the Mortgage Assets expected
to be included in the Trust Estates and Trust Funds. If specific information
respecting the Mortgage Assets is not known at the time a Series is initially
offered, more general information of the nature described below will be
provided in the related Prospectus Supplement, and specific information will be
set forth in a report on Form 8-K to be filed with the Securities and Exchange
Commission within fifteen days after the initial issuance of such Series. A
copy of the related Indenture or Agreement with respect to each Series will be
attached to the Form 8-K and will be available for inspection at the corporate
trust office of the related Trustee specified in the related Prospectus
Supplement. A schedule of the Mortgage Assets relating to each Series, will be
attached to the related Indenture or Agreement delivered to the Trustee upon
delivery of such Series.

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MORTGAGE LOANS

The Mortgage Loans will be evidenced by promissory notes (the
"Mortgage Notes") secured by mortgages or deeds of trust (the "Mortgages")
creating liens on residential properties (the "Mortgaged Properties"). Such
Mortgage Loans will be within the broad classification of single family
mortgage loans, defined generally as loans on residences containing one to four
dwelling units. If so specified in the Prospectus Supplement, the Mortgage
Loans may include cooperative apartment loans ("Cooperative Loans") secured by
security interests in shares issued by private, non-profit, cooperative housing
corporations ("Cooperatives") and in the related proprietary leases or
occupancy agreements granting exclusive rights to occupy specific dwelling
units in such Cooperatives' buildings, or the Mortgage Loans may be secured by
junior liens on the related mortgaged properties, including Title I Loans. The
Mortgaged Properties securing the Mortgage Loans may be located in or outside
of the United States, and may include investment properties and vacation and
second homes. Each Mortgage Loan will be selected by the Company for inclusion
in a Trust Estate or Trust Fund from among those acquired by the Company or
originated or acquired by one or more affiliates of the Company, including
newly originated loans.

Unless otherwise specified in the related Prospectus Supplement, the
Mortgage Loans included in the Trust Estate or Trust Fund for a Series or
underlying a Non-Agency Certificate included in the Trust Estate or Trust Fund
for a Series will be "conventional" mortgage loans, that is, they will not be
insured or guaranteed by any governmental agency, the principal and interest on
such Mortgage Loans will be payable on the first day of each month, and the
interest will be calculated based on a 360-day year of twelve 30-day months.
When full payment is made on a Mortgage Loan during a month, the mortgagor is
charged interest only on the days of the month actually elapsed up to the date
of such prepayment, at a daily interest rate that is applied to the principal
amount of the loan so prepaid.

The payment terms of the Mortgage Loans to be included in a Trust
Estate or Trust Fund for a Series or underlying a Non-Agency Certificate
included in the Trust Estate or Trust Fund for a Series will be described in
the related Prospectus Supplement and may include any of the following features
or combinations thereof or other features described in the related Prospectus
Supplement:

(a) Interest may be payable at a fixed rate, a rate adjustable
from time to time in relation to an index, a rate that is fixed for period of
time or under certain circumstances and is followed by an adjustable rate, a
rate that otherwise varies from time to time, or a rate that is convertible
from an adjustable rate to a fixed rate. Changes to an adjustable rate may be
subject to periodic limitations, maximum rates, minimum rates or a combination
of such limitations. Accrued interest may be deferred and added to the
principal of a loan for such periods and under such circumstances as may be
specified in the related Prospectus Supplement. Mortgage Loans may provide for
the payment of interest at a rate lower than the specified mortgage rate for a
period of time or for the life of the Mortgage Loan with the amount of any
difference contributed from funds supplied by the seller of the Mortgaged
Property or another source.

(b) Principal may be payable on a level debt service basis to
fully amortize the loan over its term, may be calculated on the basis of an
amortization schedule that is significantly longer than the original term to
maturity or on an interest rate that is different from the interest rate on the
Mortgage Loan or may not be amortized during all or a portion of the original
term. Payment of all or a substantial portion of the principal may be due on
maturity. Principal may include interest that has been deferred and added to
the principal balance of the Mortgage Loan.

(c) Monthly payments of principal and interest may be fixed for
the life of the loan, may increase over a specified period of time or may
change from period to period. Mortgage Loans may include limits on periodic
increases or decreases in the amount of monthly payments and may include
maximum or minimum amounts of monthly payments.

(d) Prepayments of principal may be subject to a prepayment fee,
which may be fixed for the life of the loan or may decline over time, and may
be prohibited for the life of the loan or for certain periods ("lockout
periods"). Certain loans may permit prepayments after expiration of the
applicable lockout period and may require the payment of a prepayment fee in
connection with any such subsequent prepayment. Other loans may permit
prepayments without payment of a fee unless the prepayment occurs during
specified time periods. The loans may include "due-on-sale" clauses which
permit the mortgagee to demand payment of the entire mortgage loan in
connection with the sale or

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certain transfers of the related mortgaged property. Other Mortgage Loans may
be assumable by persons meeting the then applicable underwriting standards of
the Company.

With respect to a Series for which the related Trust Estate or Trust
Fund includes Mortgage Loans, or for which Mortgage Loans underlie the
Non-Agency Certificates included in the related Trust Estate or Trust Fund, the
related Prospectus Supplement may specify, among other things, information
regarding the interest rates (the "Mortgage Rates"), the average principal
balance and the aggregate principal balance of such Mortgage Loans, the years
of origination and original principal balances and the original loan-to-value
ratios of such Mortgage Loans.

Unless otherwise specified in the Prospectus Supplement, the
"Loan-to-Value Ratio" of any Mortgage Loan will be determined by dividing the
amount of the loan by the "Original Value" of the related mortgaged property.
The principal amount of the "loan," for purposes of computation of the
Loan-to-Value Ratio of any Mortgage Loan, will include any part of an
origination fee that has been financed. In some instances, it may also include
amounts which the seller or some other party to the transaction has paid to the
mortgagor, such as minor reductions in the purchase price made at the closing.
The "Original Value" of a mortgaged property is (a) in the case of any newly
originated mortgage loan, the lesser of (i) the value of the mortgaged
property, based on an appraisal thereof acceptable to the Company and (ii) the
selling price, and (b) in the case of any mortgage loan used to retire a
previous mortgage loan, the value of the mortgaged property, based on an
appraisal thereof acceptable to the Company.

There can be no assurance that the Original Value will reflect actual
real estate values during the term of a Mortgage Loan. If the residential real
estate market should experience an overall decline in property values such that
the outstanding principal balances of the Mortgage Loans become equal to or
greater than the values of the Mortgaged Properties, the actual rates of
delinquencies, foreclosures and losses could be significantly higher than those
now generally experienced in the mortgage lending industry. In addition,
adverse economic conditions (which may or may not affect real estate values)
may affect the timely and ultimate payment by mortgagors of scheduled payments
of principal and interest on the Mortgage Loans and, accordingly, the actual
rates of delinquencies, foreclosures and losses with respect to the Mortgage
Loans.

AGENCY SECURITIES

Government National Mortgage Association (GNMA)

GNMA is a wholly-owned corporate instrumentality of the United States
within the United States Department of Housing and Urban Development. Section
306(g) of Title III of the National Housing Act of 1934, as amended (the
"Housing Act"), authorizes GNMA to guarantee the timely payment of the
principal of and interest on certificates which represent an interest in a pool
of mortgage loans insured by the Federal Housing Administration ("FHA Loans"),
or guaranteed by the Farmers Home Administration ("FmHA Loans") or partially
guaranteed by the Veterans' Administration ("VA Loans").

Section 306(g) of the Housing Act provides that "the full faith and
credit of the United States is pledged to the payment of all amounts which may
be required to be paid under any guarantee under this subsection." In order to
meet its obligations under any such guarantee, GNMA may, under Section 306(d)
of the Housing Act, borrow from the United States Treasury in an amount which
is at any time sufficient to enable GNMA, with no limitations as to amount, to
perform its obligations under its guarantee.

GNMA Certificates. Each GNMA Certificate relating to a series (which
may be issued under either the GNMA I program or the GNMA II program, as
referred to by GNMA) will be a "fully modified pass-through" mortgage-backed
certificate issued and serviced by a mortgage banking company or other
financial concern ("GNMA Issuer") approved by GNMA or approved by FNMA as a
seller-servicer of FHA Loans, FmHA Loans and/or VA Loans. Each GNMA
Certificate will represent a fractional undivided interest in a pool of
mortgage loans which may include FHA Loans, FmHA Loans and/or VA Loans. Each
such mortgage loan is secured by a one- to four-family residential property.
Each such GNMA Certificate will provide for the payment by or on behalf of the
GNMA Issuer to the registered holder of such GNMA Certificate of scheduled
monthly payments of principal and interest equal to the registered holder's
proportionate interest in the aggregate amount of the monthly principal and
interest payment on each FHA Loan, FmHA

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Loan or VA Loan underlying such GNMA Certificate, less the applicable servicing
and guarantee fee which together equal the difference between the interest on
the FHA Loan, FmHA Loan or VA Loan and the pass-through rate on the GNMA
Certificate. In addition, each payment will include proportionate pass-through
payments of any prepayments of principal on the FHA Loans, FmHA Loans or VA
Loans underlying such GNMA Certificate and liquidation proceeds in the event of
a foreclosure or other disposition of any such FHA Loans, FmHA Loans or VA
Loans.

The full and timely payment of principal of and interest on each GNMA
Certificate will be guaranteed by GNMA, which obligation is backed by the full
faith and credit of the United States.

Each such GNMA Certificate will have an original maturity of not more
than 30 years (but may have an original maturity of substantially less than 30
years). GNMA will approve the issuance of each such GNMA Certificate in
accordance with a guarantee agreement (a "Guaranty Agreement") between GNMA and
the GNMA Issuer. Pursuant to its Guaranty Agreement, a GNMA Issuer will be
required to advance its own funds in order to make timely payments of all
amounts due on the GNMA Certificate, even if the payments received by the GNMA
Issuer on the mortgage loans underlying each such GNMA Certificate are less
than the amounts due on such GNMA Certificate.

If a GNMA Issuer is unable to make payments on a GNMA Certificate as
such payments become due, it is required promptly to notify GNMA and request
GNMA to make such payments. Upon such notification and request, GNMA will make
such payments directly to the registered holder of the GNMA Certificate. In
the event no payment is made by a GNMA Issuer and the GNMA Issuer fails to
notify and request GNMA to make such payment, the holder of the GNMA
Certificate will have recourse only against GNMA to obtain such payment. In
the case of GNMA Certificates issued in definitive form, the Trustee, as
registered holder of the GNMA Certificates pledged to secure a series of Bonds,
will have the right to proceed directly against GNMA under the terms of the
Guaranty Agreements relating to such GNMA Certificates for any amounts that are
not paid when due. In the case of GNMA Certificates issued in book-entry form,
The Participants Trust Corporation ("PTC"), or its nominee, will have the right
to proceed against GNMA in such event.

All mortgage loans underlying a particular GNMA I Certificate must
have the same interest rate (except for pools of mortgage loans secured by
manufactured homes) over the term of the loan. The interest rate on each GNMA
I Certificate will equal the interest rate on the mortgage loans included in
the pool of mortgage loans underlying such GNMA I Certificate, less one-half
percentage point per annum of the unpaid principal balance of the mortgage
loans.

Mortgage loans underlying a particular GNMA II Certificate may have
per annum interest rates that vary from each other by up to one percentage
point. The interest rate on each GNMA II Certificate will be between one-half
percentage point and one and one-half percentage points lower than the highest
interest rate on the mortgage loans included in the pool of mortgage loans
underlying such GNMA II Certificate (except for pools of mortgage loans secured
by manufactured homes).

Regular monthly installment payments on each GNMA Certificate relating
to a series will be comprised of interest due as specified on such GNMA
Certificate plus the scheduled principal payments on the FHA Loans of VA Loans
underlying such GNMA Certificate due on the first day of the month in which the
scheduled monthly installment on such GNMA Certificate is due. Such regular
monthly installments on each such GNMA Certificate are required to be paid to
the Trustee as registered holder by the 15th day of each month in the case of a
GNMA I Certificate and are required to be mailed to the Trustee by the 20th day
of each month in the case of a GNMA II Certificate. Any principal prepayments
on any FHA Loans, FmHA Loans or VA Loans underlying a GNMA Certificate relating
to a series or any other early recovery of principal on such loan will be
passed through to the Trustee as the registered holder of such GNMA
Certificate.

GNMA Certificates may be backed by graduated payment mortgage loans or
by "buydown" mortgage loans for which funds will have been provided (and
deposited into escrow accounts) for application to the payment of a portion of
the borrowers' monthly payments during the early years of such mortgage loan.
Payments due the registered holders of GNMA Certificates backed by pools
containing "buydown" mortgage loans will be computed in the same manner as
payments derived from non-"buydown" GNMA Certificates and will include amounts
to be collected from both the borrower and the related escrow account. The
graduated payment mortgage loans will provide for graduated

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interest payments that, during the early years of such mortgage loans, will be
less than the amount of stated interest on such mortgage loans. The interest
not so paid will be added to the principal of such graduated payment mortgage
loans and, together with interest thereon, will be paid in subsequently years.
The obligations of GNMA and of a GNMA Issuer will be the same irrespective of
whether the GNMA Certificates relating to a series of Certificates are backed
by graduated payment mortgage loans or "buydown" mortgage loans. No statistics
comparable to the FHA's prepayment experience on level payment, non-"buydown"
mortgage loans are available in respect of graduated payment or "buydown"
mortgages. GNMA Certificates included in the Trust Estate or Trust Fund for a
Series or underlying a Non-Agency Certificate included in the Trust Estate or
Trust Fund for a Series may be held in book-entry form.

If specified in the related Prospectus Supplement, GNMA Certificates
included in the Trust Estate or Trust Fund for a Series or underlying a
Non-Agency Certificate included in the Trust Estate or Trust Fund for a Series
may be held on deposit at PTC, a limited purpose trust company organized under
the banking law of the State of New York. PTC operates a private sector,
industry-owned depository and settlement facility for the book-entry transfer
of interests in GNMA Certificates. Distributions of principal of and interest
on each GNMA Certificate held through PTC will be credited by PTC to the PTC
participant on whose account the GNMA Certificate is credited.

If specified in the related Prospectus Supplement, GNMA Certificates
included in the Trust Estate or Trust Fund for a Series or underlying a
Non-Agency Certificate included in the Trust Estate or Trust Fund for a Series
may be backed by multifamily mortgage loans having the characteristics
specified in such Prospectus Supplement.

Federal National Mortgage Association (FNMA)

FNMA is a federally chartered and privately owned corporation
organized and existing under the Federal National Mortgage Association Charter
Act (the "Charter Act"). FNMA was originally established in 1938 as a United
States government agency to provide supplemental liquidity to the mortgage
market and was transformed into a stockholder-owned and privately-managed
corporation by legislation enacted in 1968.

FNMA provides funds to the mortgage market primarily by purchasing
mortgage loans from lenders, thereby replenishing their funds for additional
lending. FNMA acquires funds to purchase mortgage loans from many capital
market investors that may not ordinarily invest in mortgages, thereby expanding
the total amount of funds available for housing. Operating nationwide, FNMA
helps to redistribute mortgage funds from capital surplus to capital-short
areas.

FNMA Certificates. FNMA Certificates are Guaranteed Mortgage
Pass-Through Certificates representing fractional undivided interests in a pool
of mortgage loans formed by FNMA. Each mortgage loan must meet the applicable
standards of the FNMA purchase program. Mortgage loans comprising a pool are
either provided by FNMA from its own portfolio or purchased pursuant to the
criteria of the FNMA purchase program.

Mortgage loans underlying FNMA Certificates relating to a series will
consist of conventional mortgage loans, FHA Loans or VA Loans. Original
maturities of substantially all of the conventional, level payment mortgage
loans underlying a FNMA Certificate are expected to be between either 8 to 15
years or 20 to 30 years. The original maturities of substantially all of the
fixed rate level payment FHA Loans or VA Loans are expected to be 30 years.

Mortgage loans underlying a FNMA Certificate may have annual interest
rates that vary by as much as two percentage points from each other. The rate
of interest payable on a FNMA Certificate is equal to the lowest interest rate
of any mortgage loan in the related pool, less a specified minimum annual
percentage representing servicing compensation and FNMA's guaranty fee. Thus,
the annual interest rates on the mortgage loans underlying a FNMA Certificate
will generally be between 50 basis points and 250 points greater than the
annual FNMA Certificate pass-through rate. If specified in the related
Prospectus Supplement, FNMA Certificates included in the Trust Estate or Trust
Fund with respect to a Series or underlying a Non-Agency Certificate included
in the Trust Estate or Trust Fund for a Series may be backed by adjustable rate
mortgages.

Regular monthly installment payments on each FNMA Certificate will be
comprised of interest due as specified by such FNMA Certificate plus the
scheduled principal payments on the Mortgage Loans underlying such FNMA
Certificate due during the period beginning on the second day of the month
prior to the month in which the scheduled

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monthly installment on such FNMA Certificate is due and ending on the first day
of such month in which the scheduled monthly installment on such FNMA
Certificate is due. Such regular monthly installments on each such FNMA
Certificate will be distributed to the holder of record on the 25th day of each
month. Any principal prepayments on the mortgage loans underlying any FNMA
Certificate included in the Trust Estate or Trust Fund with respect to a Series
or underlying a Non-Agency Certificate included in the Trust Estate or Trust
Fund for a Series or any other early recovery of principal on such mortgage
loans will be passed through to the holder of record of such FNMA Certificate
on the 25th day of the month next following such prepayment or recovery and, in
turn, a portion of such amounts will be paid or distributed to Holders of such
Series, secured thereby, as additional principal payments.

FNMA guarantees to each registered holder of a FNMA Certificate that
it will distribute amounts representing such holder's proportionate share of
scheduled principal and interest payments at the applicable pass-through rate
provided for by such FNMA Certificate on the underlying mortgage loans, whether
or not received, and such holder's proportionate share of the full principal
amount of any foreclosed or other finally liquidated mortgage loan, whether or
not such principal amount is actually recovered. The obligations of FNMA under
its guarantees are obligations solely of FNMA and are not backed by, nor
entitled to, the full faith and credit of the United States. Although the
Secretary of the Treasury of the United States has discretionary authority to
lend FNMA up to $2.25 billion outstanding at any time, neither the United
States nor any agency thereof is obligated to finance FNMA's operations or to
assist FNMA in any other manner. If FNMA were unable to satisfy its
obligations, distributions to holders of FNMA Certificates would consist solely
of payments and other recoveries on the underlying mortgage loans and,
accordingly, monthly distributions to holders of FNMA Certificates would be
affected by delinquent payments and defaults on such mortgage loans.

If specified in the related Prospectus Supplement, FNMA Certificates
included in the Trust Estate or Trust Fund for a Series or underlying a
Non-Agency Certificate included in the Trust Estate or Trust Fund for a Series
may be backed by multifamily mortgage loans having the characteristics
specified in such Prospectus Supplement.

Federal Home Loan Mortgage Corporation (FHLMC)

FHLMC is a corporate instrumentality of the United States created
pursuant to Title III of the Emergency Home Finance Act of 1970, as amended
(the "FHLMC Act"). The common stock of FHLMC is owned by the Federal Home Loan
Banks. FHLMC was established primarily for the purpose of increasing the
availability of mortgage credit for the financing of urgently needed housing.
It seeks to provide an enhanced degree of liquidity for residential mortgage
investments primarily by assisting in the development of secondary markets for
conventional mortgages. The principal activity of FHLMC currently consists of
the purchase of first lien conventional mortgage loans or participation
interests in such mortgage loans and the sale of the mortgage loans or
participations so purchased in the form of mortgage securities, primarily FHLMC
Certificates. FHLMC is confined to purchasing, so far as practicable, mortgage
loans that it deems to be of such quality, type and class as to meet generally
the purchase standards imposed by private institutional mortgage investors.

FHLMC Certificates. Each FHLMC Certificate represents an undivided
interest in a pool of mortgage loans that may consist of first lien
conventional loans, FHA Loans or VA Loans (a "FHLMC Certificate group"). FHLMC
Certificates are sold under the terms of a Mortgage Participation Certificate
Agreement. A FHLMC Certificate may be issued under either FHLMC's Cash Program
or Guarantor Program.

Unless otherwise described in the related Prospectus Supplement,
mortgage loans underlying the FHLMC Certificates relating to a series will
consist of mortgage loans with original terms to maturity of between 10 and 30
years. Each such mortgage loan must meet the applicable standards set forth in
FHLMC Act. A FHLMC Certificate group may include whole loans, participation
interests in whole loans and undivided interests in whole loans and/or
participations comprising another FHLMC Certificate group. Under the Guarantor
Program any such FHLMC Certificate group may include only whole loans or
participation interests in whole loans.

FHLMC guarantees to each registered holder of a FHLMC Certificate the
timely payment of interest on the underlying mortgage loans to the extent of
the applicable Certificate rate on the registered holder's pro rata share of
the unpaid principal balance outstanding on the underlying mortgage loans in
the FHLMC Certificate group represented

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by such FHLMC Certificate, whether or not received. FHLMC also guarantees to
each registered holder of a FHLMC Certificate collection by such holder of all
principal on the underlying mortgage loans, without any offset or deduction, to
the extent of such holder's pro rata share thereof, but does not, except if and
to the extent specified in the Prospectus Supplement for a Series, guarantee
the timely payment of scheduled principal. Under FHLMC's Gold PC Program,
FHLMC guarantees the timely payment of principal based on the difference
between the pool factor published in the month preceding the month of
distribution and the pool factor published in such month of distribution.
Pursuant to its guarantees, FHLMC indemnifies holders of FHLMC Certificates
against any diminution in principal by reason of charges for property repairs,
maintenance and foreclosure. FHLMC may remit the amount due on account of its
guarantee of collection of principal at any time after default on an underlying
mortgage loan, but not later than (i) 30 days following foreclosure sale, (ii)
30 days following payment of the claim by any mortgage insurer, or (iii) 30
days following the expiration of any right of redemption, whichever occurs
later, but in any event no later than one year after demand has been made upon
the mortgagor for accelerated payment of principal. In taking actions
regarding the collection of principal after default on the mortgage loans
underlying FHLMC Certificates, including the timing of demand for acceleration,
FHLMC reserves the right to exercise its judgment with respect to the mortgage
loans in the same manner as for mortgage loans which it has purchased but not
sold. The length of time necessary for FHLMC to determine that a mortgage loan
should be accelerated varies with the particular circumstances of each
mortgagor, and FHLMC has not adopted standards which require that the demand be
made within any specified period.

FHLMC Certificates are not guaranteed by the United States or by any
Federal Home Loan Bank and do not constitute debts or obligations of the United
States or any Federal Home Loan Bank. The obligations of FHLMC under its
guarantee are obligations solely of FHLMC and are not backed by, nor entitled
to, the full faith and credit of the United States. If FHLMC were unable to
satisfy such obligations, distributions to holders of FHLMC Certificates would
consist solely of payments and other recoveries on the underlying mortgage
loans and, accordingly, monthly distributions to holders of FHLMC Certificates
would be affected by delinquent payments and defaults on such mortgage loans.

In addition to FHLMC's guarantees of timely payment of interest and
ultimate collection of principal, FHLMC guarantees with respect to FHLMC
Certificates representing certain qualifying mortgage loans the timely payment
by each mortgagor of the monthly principal scheduled to be paid under the
amortization schedule applicable to each such mortgage loan ("Scheduled
Principal"). Servicers of the mortgage loans comprising these FHLMC
Certificates are required to pay Scheduled Principal to FHLMC whether or not
received from the mortgagors. FHLMC, in turn, guarantees to pay Scheduled
Principal to each registered holder of such FHLMC Certificates whether or not
received from the servicers. FHLMC monthly payments of Scheduled Principal are
computed based upon the servicer's monthly report to FHLMC of the amount of
Scheduled Principal due to be paid on the related mortgage loans. The
Prospectus Supplement for each Series for which the related Trust Estate or
Trust Fund includes FHLMC Certificates or for which the related Trust Estate or
Trust Fund includes Non-Agency Certificates backed by FHLMC Certificates will
set forth the nature of FHLMC's guarantee with respect to scheduled principal
payments on the mortgage loans in the pools represented by such FHLMC
Certificates.

Requests for registration of ownership of FHLMC Certificates made on
or before the last business day of a month are made effective as of the first
day of that month. With respect to FHLMC Certificates sold by FHLMC on or
after January 2, 1985, a Federal Reserve Bank which maintains book-entry
accounts with respect thereto will make payments of interest and principal each
month to holders in accordance with the holders' instructions. The first
payment to a holder of a FHLMC Certificate will normally be received by the
15th day of the second month following the month in which the purchaser became
recognized as the holder of such FHLMC Certificate. Thereafter, payments will
normally be received by the 15th day of each month.

A FHLMC Certificate may be issued under programs created by FHLMC,
including its Cash Program or Guarantor Program. Under FHLMC's Cash Program,
the pooled mortgage loans underlying a FHLMC Certificate are purchased for cash
from a number of sellers. With respect to FHLMC Certificate Pools formed prior
to June 1, 1987, under the Cash Program, there is no limitation on the amount
by which interest rates on the mortgage loans underlying a FHLMC Certificate
may exceed the interest rate on the FHLMC Certificate. Under such program,
FHLMC purchases groups of whole mortgage loans at specified percentages of
their unpaid principal balances, adjusted for accrued or prepaid interest,
which, when applied to the interest rate of the mortgage loans purchased,
results in the yield (expressed

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as a percentage) required by FHLMC. The required yield, which includes a
minimum servicing fee retained by the servicer, is calculated using the
outstanding principal balance of the mortgage loans, an assumed term and a
prepayment period as determined by FHLMC. No mortgage loan is purchased by
FHLMC at greater than 100% of its outstanding principal balance. Thus, the
range of interest rates on the mortgage loans in a FHLMC Certificate Pool
formed prior to June 1987 under the Cash Program will vary since mortgage loans
are purchased and identified to a FHLMC Certificate Pool based upon their yield
to FHLMC rather than on the interest rates on the mortgage loans. With respect
to FHLMC Certificate Pools formed on or after June 1, 1987, the range of
interest rates on the mortgage loans and participations in a FHLMC Certificate
Pool which is comprised of 15- or 30-year fixed-rate single family mortgage
loans bought by FHLMC under the Cash Program will be restricted to one
percentage point. In addition, the minimum interest rate on any mortgage loan
in a FHLMC Certificate Pool will be greater than or equal to the annual
pass-through rate on the related FHLMC Certificate, and the maximum interest
rate will not be more than two percentage points above such pass-through rate.

Under FHLMC's Guarantor Program, the mortgage loans underlying a FHLMC
Certificate are purchased from a single seller in exchange for such FHLMC
Certificate. The interest rate on a FHLMC Certificate under such program is
established based upon the lowest interest rate on the underlying mortgage
loans, minus a minimum servicing fee and the amount of FHLMC's management and
guaranty income as agreed upon between the seller and FHLMC. Under the
Guarantor Program, the range between the lowest and highest annual interest
rates on the mortgage loans in a FHLMC Certificate Pool may not exceed two
percentage points. For some FHLMC Certificates issued pursuant to purchase
contracts under the Guarantor Program on or after September 1, 1987, the range
of the interest rates on the mortgage loans in a FHLMC Certificate Pool will
not exceed one percentage point.

If specified in the related Prospectus Supplement, FHLMC Certificates
included in the Trust Estate or Trust Fund for a Series or underlying a
Non-Agency Certificate included in the Trust Estate or Trust Fund for a Series
may be backed by multifamily mortgage loans having the characteristics
specified in such Prospectus Supplement.

Stripped Agency Securities

Agency Securities may consist of one or more stripped mortgage-backed
securities, each as described herein and in the related Prospectus Supplement.
Each such Agency Security will represent an undivided interest in all or part
of either the principal distributions (but not the interest distributions) or
the interest distributions (but not the principal distributions), or in some
specified portion of the principal and interest distributions (but not all of
such distributions) on certain GNMA Certificates, FNMA Certificates, FHLMC
Certificates, or other Agency Securities. The underlying securities will be
held under a trust agreement by GNMA, FNMA or FHLMC each as trustee, or by
another trustee named in the related Prospectus Supplement. FHLMC, FNMA or
GNMA will guarantee each stripped Agency Security to the same extent as such
entity guarantees the underlying securities backing such stripped Agency
Security, unless otherwise specified in the related Prospectus Supplement.

Other Agency Securities

If specified in the related Prospectus Supplement, a Trust Estate or
Trust Fund may include, or Non-Agency Certificates included in a Trust Estate
or Trust Fund may be backed by, other mortgage pass-through or participation
certificates issued or guaranteed by GNMA, FNMA or FHLMC, such as FNMA
Guaranteed REMIC Pass-Through Certificates and FHLMC Multiclass Mortgage
Participation Certificates. The characteristics of any such mortgage
pass-through or participation certificates will be described in such Prospectus
Supplement. If so specified, a combination of different types of Agency
Securities may be included in a Trust Estate or Trust Fund or may back
Non-Agency Certificates.

NON-AGENCY CERTIFICATES

Each Non-Agency Certificate will evidence an undivided interest in
Agency Securities, a Mortgage Pool, a Contract Pool or a Multifamily Loan Pool.
Unless otherwise specified in the Prospectus Supplement, the Non-Agency
Certificates will have the characteristics described herein. Non-Agency
Certificates backed directly by Mortgage Loans, Contracts, or Multifamily Loans
will be issued pursuant to a pooling and administration agreement (the
"Non-Agency

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Pooling and Administration Agreement") between the Company, as the entity
forming such Non-Agency Certificates, an administrator (the "Non-Agency
Administrator") and a trustee acting under such Pooling and Administration
Agreement (the "Certificate Trustee"). Non-Agency Certificates backed by
Agency Securities may be issued pursuant to a Funding Agreement (the "Funding
Agreement") between the Company, as the entity forming such Non-Agency
Certificates and a trustee acting under such Funding Agreement (the "Funding
Agreement Trustee"). Non-Agency Certificates will be formed by the Company in
connection with the issuance of the related Series of Securities for purposes
of ease of administration of the assets underlying such Non-Agency
Certificates. Non-Agency Certificates themselves will not have been and will
not be publicly offered. It is expected that non-Agency Certificates will
primarily be used by the Company to back Series of Bonds, as opposed to
Certificates.

The Mortgage Loans, Contracts, and Multifamily Loans directly backing
the Non-Agency Certificates issued under a Non-Agency Pooling and
Administration Agreement will be serviced by one or more loan servicing
institutions (the "Non- Agency Servicers") pursuant to servicing agreements
between each Servicer and the Company (each a "Non-Agency Servicing
Agreement"). All of the Company's right, title and interest in the Servicing
Agreements with respect to the Mortgage Loans, Contracts, and Multifamily Loans
will be assigned to the Certificate Trustee. Pursuant to the Non-Agency
Pooling and Administration Agreement, the Servicers of the Mortgage Loans,
Contracts, and Multifamily Loans covered thereby will be required to deposit
with the Certificate Trustee all collections received by such Servicers on the
Mortgage Loans, Contracts, and Multifamily Loans (net of a servicing fee to be
retained by the Non-Agency Servicers). Monthly distributions of the principal
and interest (adjusted to the pass-through rate borne by such Non-Agency
Certificate) components of such collections will be made to the Trustee for the
Bonds of the applicable Series for deposit into the Collection Account. The
Mortgage Loans, Contracts, and Multifamily Loans underlying any such Non-Agency
Certificates may be covered by

(i) individual policies of primary mortgage insurance
insuring against all or a portion of any foreclosure losses on the
particular Mortgage Loans, Contracts, and Multifamily Loans covered
thereby;

(ii) a pool insurance policy insuring against foreclosure
losses on all of the Mortgage Loans, Contracts, and Multifamily Loans
in the underlying pool up to a specified limit of liability;

(iii) a policy of special hazard insurance insuring against
losses from causes not covered by standard fire and extended coverage
policies of insurance, and/or

(iv) such other policies of insurance or other forms of
support (including, without limitation, obligations to advance
delinquent payments and overcollateralization) as shall be specified
in the Prospectus Supplement for a Series which is secured or backed
by Non-Agency Certificates backed directly by Mortgage Loans,
Contracts, or Multifamily Loans, including, if applicable, any
insurance for Title I Loans under the Title I Program.

All of the Company's rights, title and interest in the Agency
Securities directly backing Non-Agency Certificates issued under a Funding
Agreement will be assigned to the Funding Agreement Trustee. Pursuant to the
Funding Agreement, distributions on the Agency Securities will be collected by
the Funding Agreement Trustee, and monthly payments of the principal and
interest (adjusted to the pass-through rate borne by the Non-Agency
Certificates) components of such distributions will be made to the Trustee for
the applicable Series for deposit into the Collection Account. Each of the
Agency Securities sold or assigned to the Funding Agreement Trustee will have
the benefit of the applicable guarantees and other attributes described
hereinabove under "GNMA Certificates," "FNMA Certificates" and "FHLMC
Certificates," as the case may be, and in the related Prospectus Supplement for
the Series which is secured or backed by Non-Agency Certificates backed by
Agency Securities.

Any default by any insurer under a policy of insurance covering a
Mortgage Loan, Contracts, or Multifamily Loans, any loss or losses in excess of
policy limits, any failure by a Non-Agency Servicer or other obligor to make
advances in respect of delinquent payments or any loss occasioned by an
uninsured cause will adversely affect distributions to the Trustee for the
related Series and, as a consequence, may result in there being insufficient
funds in the related Collection Account with which to make required payments or
distributions of principal and interest on the Securities of such Series.

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<PAGE> 186
MULTIFAMILY LOANS

Each pool of Multifamily Loans included in the Trust Estate or Trust
Fund with respect to a Series or underlying a Non-Agency Certificate included
in the Trust Estate or Trust Fund for a Series (the "Multifamily Loan Pool")
will consist of Conventional Multifamily Loans or FHA-Insured Multifamily Loans
secured by mortgages or deeds of trust or other similar security instruments
creating a first lien on rental apartment buildings or projects containing five
or more units, including, but not limited to, high-rise, mid-rise and garden
apartments or Multifamily Loans secured by apartment buildings owned by
cooperative housing corporations. The Company expects that these loans will
have been originated by mortgagees in the ordinary course of their real estate
lending activities. Each Multifamily Loan Pool will be composed of Multifamily
Loans bearing interest at the annual fixed or adjustable rates of interest
specified in the Prospectus Supplement.

The related Prospectus Supplement may specify for the Multifamily
Loans contained in the related Multifamily Loan Pool, among other things, the
dates of origination of the Multifamily Loans; the interest rates on the
Multifamily Loans, if fixed rate, and in the case of Adjustable Multifamily
Loans, the initial Adjustable Multifamily Rates, the index or formula, if any,
used to determine the Adjustable Multifamily Rate, the margin or margins, if
any, to be added or subtracted from the Index to calculate the Multifamily Loan
Rate, and the maximum and minimum percentage adjustment, if any, for the life
of the Multifamily Loan and on any annual basis, and the frequency of
adjustment; the number of Multifamily Loans in the Multifamily Loan Pool; the
original loan amounts or range of original loan amounts of Multifamily Loans
contained in the Multifamily Loan Pool; the original Loan-to-Value Ratio on a
weighted average basis of the Multifamily Loans contained in the Multifamily
Loan Pool; and the original and remaining terms of the loans on a weighted
average basis. The related Prospectus Supplement may also specify the number
and type of units contained in each property secured by a Multifamily Loan
contained in a Multifamily Loan Pool, the loan amount per unit for each
project, the percentage of units in each property occupied as a specified date,
the appraised value of each property and whether each property is subject to
local rent control ordinances. The related Prospectus Supplement may set forth
the types and locations of properties securing the Multifamily Loans, the
balloon, principal amortization or interest only terms, if any, and whether the
Multifamily Loan financed the acquisition or rehabilitation of the underlying
properties or refinanced prior indebtedness. Unless otherwise specified in the
related Prospectus Supplement, the properties securing the Multifamily Loans
will be located in one or more states in the United States, the District of
Columbia, or Puerto Rico.

Certain of the Multifamily Loans may be secured by apartment buildings
owned by Cooperatives. The Cooperative apartment building and the land under
the building will be owned by a private, non-profit cooperative. The
Cooperative owns all of the apartment units in the building and all common
areas. The Cooperative is owned by tenant-stockholders who, through ownership
of stock, shares or membership certificates in the corporation, receive
proprietary leases or occupancy agreements which confer exclusive rights to
occupy specific apartments or units. Generally, a tenant- stockholder of a
Cooperative must make a monthly payment to the cooperative representing such
tenant-stockholder's pro rata share of the cooperative's payments for its
mortgage loan, real property taxes, maintenance expenses and other capital or
ordinary expenses. Such payments to the Cooperative are in addition to any
payments of principal and interest the tenant-stockholder must make on any
loans of the tenant-stockholder secured by its shares in the Cooperative. The
Cooperative will be directly responsible for building management and, in most
cases, payment of real estate taxes and hazard and liability insurance. The
Cooperative's ability to meet debt service obligations on the Multifamily
Loans, as well as all other operating expenses, will be dependent in large part
on the receipt of maintenance payments from the tenant-stockholders, as well as
any rental income from units or commercial assessments on the
tenant-stockholders. The Cooperative's ability to pay the principal amount of
the Multifamily Loan at maturity depends primarily on its ability to pay the
principal amount of the Multifamily Loan. The Company, the Seller and the
Administrator or Non-Agency Administrator, if any, will have no obligation to
provide refinancing for the Multifamily Loans.

CONTRACTS

Each pool of Contracts included in the Trust Estate or Trust Fund with
respect to a Series or underlying a Non- Agency Certificate included in the
Trust Estate or Trust Fund for a Series (the "Contract Pool") will consist of
manufactured housing conditional sales contracts and installment loan
agreements or participation interests therein

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(collectively, "Contracts"). As specified in the related Prospectus
Supplement, Contracts may either be secured by a Manufactured Home (a "Secured
Contract") or unsecured (an "Unsecured Contract"). The Contracts may be
conventional manufactured housing contracts or contracts insured by the FHA,
including Title I Contracts, or partially guaranteed by the VA. Each Contract
is secured by a Manufactured Home. Unless otherwise specified in the related
Prospectus Supplement, the Contracts included in the Trust Estate or Trust Fund
with respect to a Series will be fully amortizing and will bear interest at a
fixed annual percentage rate ("APR").

The Manufactured Homes securing the Secured Contracts consist of
manufactured homes within the meaning of 42 United States Code, Section
5402(6), which defines a "Manufactured Home" as "a structure, transportable in
one or more sections, which in the traveling mode, is eight body feet or more
in width or forty body feet or more in length, or, when erected on site, is
three hundred twenty or more square feet, and which is built on a permanent
chassis and designed to be used as a dwelling with or without permanent
foundation when connected to the required utilities, and includes the plumbing,
heating, air-conditioning, and electrical systems contained therein; except
that such term shall include any structure which meets all the requires of
[this] paragraph except the size requirements and with respect to which the
manufacturer voluntarily files a certification required by the Secretary of
Housing and Urban Development and complies with the standards established under
[this] chapter." Moreover, if an election is made to treat a Trust Estate or
Trust Fund including Contracts as a REMIC as described in "Certain Federal
Income Tax Consequences -- Certain Income Tax Consequences for REMIC
Securities," the related Manufactured Homes will have a minimum of 400 square
feet of living space and a minimum width in excess of 102 inches.

Unless otherwise specified in the Prospectus Supplement with respect
to a Series for which the related Trust Estate or Trust Fund includes Contracts
or with respect to which the related Trust Estate or Trust Fund includes Non-
Agency Certificates backed by Contracts, for purposes of calculating the
loan-to-value ratio of a Secured Contract relating to a new Manufactured Home,
the "Collateral Value" is no greater than the sum of a fixed percentage of the
list price of the unit actually billed by the manufacturer to the dealer
(exclusive of freight to the dealer site) including "accessories" identified in
the invoice (the "Manufacturer's Invoice Price"), plus the actual cost of any
accessories purchased from the dealer, a delivery and set-up allowance,
depending on the size of the unit and the cost of state and local taxes, filing
fees and up to three years prepaid hazard insurance premiums. Unless otherwise
specified in the related Prospectus Supplement, the Collateral Value of a used
Manufactured Home is the least of the sales price, the appraised value, and the
National Automobile Dealer's Association book value plus prepaid taxes and
hazard insurance premiums. The appraised value of a Manufactured Home is based
upon the age and condition of the manufactured housing unit and the quality and
condition of the mobile home park in which it is situated, if applicable.

The related Prospectus Supplement may specify for the Contracts
contained in the related Contract Pool, among other things, the date of
origination of the Contracts; the APRs on the Contracts; the Contract
Loan-to-Value Ratios; the minimum and maximum outstanding principal balance as
of the Cut-off Date and the average outstanding principal balance; the
outstanding principal balances of the Contracts included in the Contract Pool;
and the original maturities of the Contracts and the last maturity date of any
Contract.

The Unsecured Contracts included in the Trust Estate or Trust Fund for
a Series of Securities will not constitute a material concentration of the
assets of such Trust Estate or Trust Fund.

PRIVATE MORTGAGE-BACKED SECURITIES

Private Mortgage-Backed Securities may consist of (a) mortgage
pass-through certificates evidencing an undivided interest in a pool of
Underlying Mortgage Loans or certain mortgage-backed securities, or (b)
collateralized mortgage obligations secured by Underlying Mortgage Loans or
certain mortgage-backed securities. Private Mortgage- Backed Securities may
include stripped mortgage-backed securities representing an undivided interest
in all or a part of either the principal distributions (but not the interest
distributions) or the interest distributions (but not the principal
distributions) or in some specified portion of the principal and interest
distributions (but not all of such distributions) on certain Underlying
Mortgage Loans or on certain underlying mortgage-backed securities. Private
Mortgage-Backed Securities will have been issued pursuant to a pooling and
servicing agreement, an indenture or similar agreement (a "PMBS Agreement").
Generally, the seller/servicer of the Underlying Mortgage Loans will have
entered into the PMBS Agreement with the trustee under such PMBS Agreement (the
"PMBS Trustee"). The PMBS Trustee or its agent, or

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a custodian, will possess the Underlying Mortgage Loans relating to such
Private Mortgage-Backed Security. Underlying Mortgage Loans relating to a
Private Mortgage-Backed Security will be serviced by a servicer (the "PMBS
Servicer") directly or by one or more subservicers who may be subject to the
supervision of the PMBS Servicer.

The issuer of the Private Mortgage-Backed Securities (the "PMBS
Issuer") will be a financial institution or other entity engaged generally in
the business of mortgage lending, a public agency or instrumentality of a
state, local or federal government, or a limited purpose corporation organized
for the purpose of, among other things, establishing trusts and acquiring and
selling housing loans to such trusts and selling beneficial interests in such
trusts. If so specified in the related Prospectus Supplement, the PMBS Issuer
may be the Company or an affiliate of the Company. The obligations of the PMBS
Issuer will generally be limited to certain representations and warranties with
respect to the assets conveyed by it to the related trust. Unless otherwise
specified in the related Prospectus Supplement, neither the PMBS Issuer nor any
agency or instrumentality of the United States nor any other person will have
guaranteed any of the assets conveyed to the related trust or any of the
Private Mortgage-Backed Securities issued under the PMBS Agreement.

Distributions of principal and interest will be made on the Private
Mortgage-Backed Securities on the dates specified in the related Prospectus
Supplement. The Private Mortgage-Backed Securities may be entitled to receive
nominal or no principal distributions or nominal or no interest distributions.
Principal and interest distributions will be made on the Private
Mortgage-Backed Securities by the PMBS Trustee or the PMBS Servicer. The PMBS
Issuer or the PMBS Servicer may have the right to repurchase assets underlying
the Private Mortgage-Backed Securities after a certain date or under other
circumstances specified in the related Prospectus Supplement.

The Underlying Mortgage Loans relating to the Private Mortgage-Backed
Securities may consist of fixed rate, level payment, fully amortizing loans or
graduated payment mortgage loans, buydown loans, adjustable rate mortgage
loans, or loans having balloon or other special payment features. Such
Underlying Mortgage Loans may be secured by single family property, multifamily
property, manufactured homes or by an assignment of the proprietary lease or
occupancy agreement relating to a specific dwelling within a Cooperative and
the related shares issued by such Cooperative.

Credit support in the form of reserve funds, subordination of other
private mortgage certificates issued under the PMBS Agreement, letters of
credit, surety bonds, insurance policies or other types of credit support may
be provided with respect to the Underlying Mortgage Loans relating to the
Private Mortgage-Backed Securities or with respect to the Private
Mortgage-Backed Securities themselves.

The Prospectus Supplement for a Series for which the related Trust
Estate or Trust Fund includes Private Mortgage-Backed Securities will describe
such Private Mortgage-Backed Securities and will specify certain
characteristics of the mortgage loans underlying the Private Mortgage-Backed
Securities.

CHARACTERISTICS OF AGENCY SECURITIES AND PRIVATE MORTGAGE-BACKED SECURITIES

The Agency Securities and the Private Mortgage-Backed Securities may
include component securities ("CPTs"), floaters ("FLTs"), inverse floaters
("INVs"), interest only securities ("IOs"), principal only securities ("POs"),
planned amortization classes ("PACs"), targeted amortization classes ("TACs"),
residual interest securities ("Residuals"), accrual securities ("Zs"), and
other types of securities, including securities which combine the
characteristics of two or more of such types of securities. The exact types
and characteristics of such securities will be set forth in the related
Prospectus Supplement for a Series for which the related Trust Estate or Trust
Fund includes such securities.

A CPT is a security that consists of multiple payment components which
have differing principal and/or interest characteristics. The payment
characteristics of a CPT will reflect a combination of the payment
characteristics of such components.

An FLT has an interest rate that varies directly with an objective
index such as LIBOR, i.e., as LIBOR increases, the FLT interest rate will
increase.

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An INV has an interest rate that varies inversely with an objective
index such as LIBOR, i.e., as LIBOR increases, the INV interest rate will
decrease. The interest rate on a INV might be expressed as a multiple of the
index, such as 35% - (3 x LIBOR).

An IO pays only interest or primarily interest and pays no
disproportionately small amount of principal. A PO pays principal only and no
interest.

A PAC is a security with respect to which principal payments are made
in predetermined amounts on specified payment dates to the extent funds are
available on such payment dates. Generally, a PAC will adhere to its payment
schedule if the underlying mortgage loans prepay at a constant prepayment
assumption in the "planned range" between certain specified prepayment rates.
The cash flow of a PAC is thus relatively stable if prepayments are within such
"planned range." Payment stability in a PAC is necessarily offset by
instability in other classes of related mortgage- backed securities, which are
said to "support" the more stable classes. Such "support classes" are likely
to be much more sensitive to prepayments on the underlying mortgage loans than
the classes they support or such mortgage loans.

A TAC, like a PAC, is designed to provide more stable cash flows, but
is more likely than a PAC to have the expected maturity extended or shortened.

A Residual generally represents an interest in the residual cash flows
from the collateral relating to an issuance of mortgage-backed securities after
the other classes of securities supported by such collateral are paid on a
payment date. Residuals include both securities with stated principal and
interest and those without stated principal and interest.

A Z is a security that accretes all of interest, which is added to the
outstanding principal balance of such security. This accretion may continue
until such security begins receiving principal payments, until such other
events has occurred or until the security is retired.

DEPOSIT, SUBSTITUTION AND WITHDRAWAL OF ASSETS

With respect to a Series, to the extent provided in the related
Indenture or Agreement and the related Prospectus Supplement, the related
Issuer or the Company may deposit or withdraw Assets or substitute new Mortgage
Assets for Mortgage Assets previously included in the related Trust Estate or
Trust Fund or for Assets deposited in a Reserve Fund for such Series.

CREDIT ENHANCEMENT

GENERAL

Various forms of credit enhancement ("Credit Enhancement") may be
provided with respect to one or more Classes of a Series or with respect to the
Assets in the related Trust Estate or Trust Fund. Credit Enhancement may be in
the form of the subordination of one or more Classes of such Series, the
establishment of one or more Reserve Funds, the use of a cross-support feature,
use of a Mortgage Pool Insurance Policy, Special Hazard Insurance Policy,
bankruptcy bond, or another form of Credit Enhancement described in the related
Prospectus Supplement, or any combination of the foregoing. Unless otherwise
specified in the related Prospectus Supplement, any Credit Enhancement with
respect to a Series will not provide protection against all risks of loss and
will not guarantee repayment of the entire principal balance of the Securities
of such Series and interest thereon. If losses occur which exceed the amount
covered by such Credit Enhancement or which are not covered by the Credit
Enhancement, Holders will bear their allocable share of deficiencies.

SUBORDINATION

If so specified in the related Prospectus Supplement, payments or
distributions in respect of scheduled principal, interest or any combination
thereof that otherwise would have been payable or distributable to one or more
Classes of a Series (the "Subordinated Securities") will instead be payable to
one or more other Classes of such Series (the "Senior Securities") under the
circumstances and to the extent provided in such Prospectus Supplement. If
specified in the

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Prospectus Supplement, delays in receipt of scheduled payments on the Mortgage
Assets and losses on defaulted Mortgage Assets will be borne first by the
various Classes of Subordinated Securities and thereafter by the various
Classes of Senior Securities, in each case under the circumstances and subject
to the limitations specified in the Prospectus Supplement. The aggregate
payments or distributions in respect of delinquent payments or distributions on
the Mortgage Assets over the lives of the Securities of a Series or at any
time, the aggregate losses in respect of defaulted Mortgage Assets which must
be borne by the Subordinated Securities by virtue of subordination and the
amount of the payments or distributions otherwise payable or distributable to
the Subordinated Securities that will be distributable to Holders of Senior
Securities on any Payment Date or Distribution Date may be limited as specified
in the related Prospectus Supplement. If aggregate payments or distributions in
respect of delinquent payments or distributions on the Mortgage Assets or
aggregate losses in respect of such Mortgage Assets were to exceed the total
amounts payable or distributable and available for payment or distribution to
Holders of Subordinated Securities of, if applicable, were to exceed the
specified maximum amount, Holders of Senior Securities could experience losses
on their Securities.

In addition to or in lieu of the foregoing, if so specified in the
related Prospectus Supplement, all or any portion of payments or distributions
otherwise payable or distributable to Holders of Subordinated Securities on any
Payment Date or Distribution Date may instead be deposited into one or more
Reserve Fund (as defined below) established by the related Trustee. If so
specified in the related Prospectus Supplement, such deposits may be made on
each Payment Date or Distribution Date, on each Distribution Date for specified
periods, or on each Distribution Date until the balance in the Reserve Fund has
reached a specified amount and, following payments from the Reserve Fund to
Holders of Senior Securities or otherwise, thereafter to the extent necessary
to restore the balance in the Reserve Fund to required levels, in each case as
specified in such Prospectus Supplement. If so specified in the related
Prospectus Supplement, amounts on deposit in the Reserve Fund may be released
to the Company or the Holders of any Class of Securities at the times and under
the circumstances specified in such Prospectus Supplement.

If specified in the related Prospectus Supplement, various Classes of
Senior Securities and Subordinated Securities may themselves be subordinate in
their right to receive certain distributions to other Classes of Senior and
Subordinated Securities, respectively, through a cross-support mechanism or
otherwise.

As between Classes of Senior Securities and as between Classes of
Subordinated Securities, payments or distributions may be allocated among such
Classes (i) in the order of their Stated Maturities or Assumed Final
Distribution Dates, (ii) in accordance with a schedule or formula, (iii) in
relation to the occurrence of events, or (iv) otherwise, in each case as
specified in the related Prospectus Supplement. As between Classes of
Subordinated Securities, payments or distributions to Holders of Senior
Securities on account of delinquencies or losses and payments to any Reserve
Fund will be allocated as specified in the related Prospectus Supplement.

CROSS-SUPPORT

If specified in the related Prospectus Supplement, separate Classes of
related Series of Securities may represent the beneficial ownership of or be
separately secured by, separate groups of Assets included in the Trust Estate
or Trust Fund for a Series or otherwise available for the benefit of such
Securities. In such case, Credit Enhancement may be provided by a
cross-support feature which may require that distributions or payments be made
with respect to Securities evidencing beneficial ownership of or secured by one
or more asset groups prior to distributions to Subordinated Securities
evidencing a beneficial ownership interest in or secured by other asset groups
within the same Trust Estate or Trust Fund. The Prospectus Supplement for a
Series which includes a cross-support feature will describe the manner and
conditions for applying such cross-support feature.

If specified in the Prospectus Supplement, the coverage provided by
one or more forms of Credit Enhancement may apply concurrently to two or more
separate Trust Estates or Trust Funds for a separate Series of Securities. If
applicable, the Prospectus Supplement will identify the Trust Funds to which
such credit support relates and the manner of determining the amount of the
coverage provided thereby and of the application of such coverage to the
identified Trust Funds.

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POOL INSURANCE

With respect to a Series for which the related Trust Estate or Trust
Fund includes Mortgage Loans (and, if specified in the related Prospectus
Supplement, a Series for which the related Trust Fund includes Contracts), in
order to decrease the likelihood that Holders of the Securities of such Series
will experience losses in respect of such Mortgage Loans, if specified in the
related Prospectus Supplement, one or more mortgage pool insurance policies
(each, a "Mortgage Pool Insurance Policy") will be obtained. Such Mortgage Pool
Insurance Policy will, subject to the limitations described below and in the
Prospectus Supplement, cover loss by reason of default in payments on such
Mortgage Loans up to the amounts specified in the Prospectus Supplement or
report on Form 8-K and for the periods specified in the Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the
Administrator or the Trustee under the related Indenture or Agreement will
agree to use its best reasonable efforts to cause to be maintained in effect
any such Mortgage Pool Insurance Policy and to file claims thereunder to the
issuer of such Mortgage Pool Insurance Policy (the "Pool Insurer"). A Mortgage
Pool Insurance Policy, however, is not a blanket policy against loss, since
claims thereunder may only be made respecting particular defaulted Mortgage
Loans and only upon satisfaction of certain conditions precedent set forth in
such policy as described in the related Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, the Mortgage Pool Insurance
Policies, if any, will not cover losses due to a failure to pay or denial of a
claim under a primary mortgage insurance policy, irrespective of the reason
therefor. The related Prospectus Supplement will describe the terms of any
applicable Mortgage Pool Insurance Policy and will set forth certain
information with respect to the related Pool Insurer.

SPECIAL HAZARD INSURANCE

With respect to a Series for which the related Trust Estate or Trust
Fund includes Mortgage Loans (and, if specified in the related Prospectus
Supplement, each Series for which the related Trust Estate or Trust Fund
includes Contracts), in order to decrease the likelihood that Holders of the
Securities of such Series will experience losses in respect of such Mortgage
Loans, if specified in the related Prospectus Supplement, one or more Special
Hazard Insurance Policies will be obtained. Such a "Special Hazard Insurance
Policy" with respect to a Series will, subject to limitations described below
and in the related Prospectus Supplement, protect Holders of the Securities of
such Series from (i) loss by reason of damage to Mortgaged Properties caused by
certain hazards (including earthquakes and, to a limited extent, tidal waves
and related water damage) not covered by the standard form of hazard insurance
policy for the respective states in which the Mortgaged Properties are located
or under flood insurance policies, if any, covering the Mortgaged Properties,
and (ii) loss caused by reason of the application of the coinsurance clause
contained in hazard insurance policies. See "Servicing of the Mortgage Loans,
Multifamily Loans and Contracts -- Standard Hazard Insurance." Any Special
Hazard Insurance Policy may not cover losses occasioned by war, civil
insurrection, certain governmental actions, errors in design, faulty
workmanship or materials (except under certain circumstances), nuclear
reaction, flood (if the Mortgaged Property is located in a federally designated
flood area), chemical contamination and certain other risks. Aggregate claims
under each Special Hazard Insurance Policy will be limited as described in the
related Prospectus Supplement. Any Special Hazard Insurance Policy may also
provide that no claim may be paid unless hazard and if applicable, flood
insurance on the Mortgaged Property has been kept in force and other protection
and preservation expenses have been paid.

The related Prospectus Supplement will describe the terms of any
applicable Special Hazard Insurance Policy and will set forth certain
information with respect to the related Special Hazard Insurer.

FHA INSURANCE ON THE MULTIFAMILY LOANS

There are two primary FHA insurance programs that are available for
Multifamily Loans. Sections 221(d)(3) and (d)(4) of the Housing Act allow HUD
to insurance mortgage loans that are secured by newly constructed and
substantially rehabilitated multifamily rental projects. Section 244 of the
Housing Act provides for coinsurance of such mortgage loans made under Sections
221(d)(3) and (d)(4) by HUD/FHA and a HUD-approved coinsurer. Generally the
term of such a mortgage loan can be up to 40 years and the ratio of loan amount
to property replacement cost can be up to 90%.

Section 223(f) of the Housing Act allows HUD to insure mortgage loans
made for the purchase or refinancing of existing apartment projects which are
at least three years old. Section 244 also provides for coinsurance of mortgage
loans made under Section 223(f). Under Section 223(f), the loan proceeds cannot
be used for substantial rehabilitation

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work, but repairs may be made for up to, in general, the greater of 15% of the
value of the project or a dollar amount per apartment unit established from
time to time by HUD. In general the loan term may not exceed 35 years and a
loan to value ratio of no more than 85% is required for the purchase of a
project and 70% for the refinancing of a project.

FHA insurance is generally payable in cash or at the option of the
mortgagee in debentures. Such insurance does not cover 100% of the mortgage
loan but is instead subject to certain deductions and certain losses of
interest from the date of the default.

BANKRUPTCY BOND

In the event of a bankruptcy of a borrower, the bankruptcy court may
establish the value of the property securing the related Mortgage Loan at an
amount less than the then outstanding principal balance of such Mortgage Loan.
The amount of the secured debt could be reduced to such value, and the holder
of such Mortgage Loan thus would become an unsecured creditor to the extent the
outstanding principal balance of such Mortgage Loan exceeds the value so
assigned to the property by the bankruptcy court. In addition, certain other
modifications of the terms of a Mortgage Loan can result from a bankruptcy
proceeding, including the reduction in monthly payments required to be made by
the borrower. See "Certain Legal Aspects of the Mortgage Assets" herein. If so
provided in the related Prospectus Supplement, the Company will obtain a
bankruptcy bond or similar insurance contract (the "bankruptcy bond") for
proceedings with respect to borrowers under the Bankruptcy Code. The bankruptcy
bond will cover certain losses resulting from a reduction by a bankruptcy court
of scheduled payments of principal of and interest on a Mortgage Loan or a
reduction by such court of the principal amount of a Mortgage Loan and will
cover certain unpaid interest on the amount of such a principal reduction from
the date of the filing of a bankruptcy petition.

A bankruptcy bond with respect to a Series will provide coverage in
the aggregate amount specified in the related Prospectus Supplement. Such
amount will be reduced by payments made under such bankruptcy bond in respect
of the related Mortgage Loans, unless otherwise specified in the related
Prospectus Supplement, and will not be restored.

If specified in the related Prospectus Supplement, other forms of
Credit Enhancement may be provided to cover such bankruptcy-related losses. Any
bankruptcy bond or other form of Credit Enhancement provided to cover
bankruptcy-related losses will be described in the related Prospectus
Supplement.

RESERVE FUNDS

If specified in the Prospectus Supplement with respect to a Series,
assets such as cash, U.S. Treasury securities, instruments evidencing ownership
of principal or interest payments thereon, letters of credit, demand notes,
certificates of deposit or a combination thereof in the aggregate amount
specified in such Prospectus Supplement will be deposited by the related Issuer
or the Company in one or more accounts (each, a "Reserve Fund") established and
maintained with the related Trustee. Such cash and the payments on such other
assets will be used to enhance the likelihood of timely payment or distribution
of principal of, and interest on, or, if so specified in the related Prospectus
Supplement, to provide additional protection against losses in respect of, the
Assets in the related Trust Estate or Trust Fund, to pay the expenses of the
related Trust Estate or Trust Fund or for such other purposes specified in such
Prospectus Supplement. Whether or not the related Issuer or the Company has any
obligation to make such a deposit, certain amounts to which the Holders of the
Subordinated Securities of such Series, if any, the related Issuer or the
Company would otherwise be entitled may instead be deposited into the Reserve
Fund from time to time and in the amounts as specified in the related
Prospectus Supplement. Any cash in any Reserve Fund and the proceeds of any
other instrument upon maturity will be invested in Permitted Instruments. If a
letter of credit is deposited with the Trustee, such letter of credit will be
irrevocable. Unless otherwise specified in the Prospectus Supplement with
respect to a Series, any instrument deposited therein will name the related
Trustee, in its capacity as trustee for the Holders of the Securities of such
Series, as beneficiary and will be issued by an entity acceptable to each
rating agency that rates such Securities. Additional information with respect
to such instruments deposited in the Reserve Funds may be set forth in the
Prospectus Supplement.

OTHER INSURANCE, GUARANTEES AND SIMILAR INSTRUMENTS OR AGREEMENTS

If specified in the Prospectus Supplement with respect to a Series,
the related Trust Estate or Trust Fund may also include or the Securities of
such Series may also have the benefits of, assets such as insurance,
guarantees, surety

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bonds, letters of credit, guaranteed investment contracts, swap agreements,
option agreements or similar arrangements for the purpose of (i) maintaining
timely payments or providing additional protection against losses on the Assets
included in such Trust Estate or Trust Fund, (ii) paying administrative
expenses, (iii) establishing a minimum reinvestment rate on the payments or
distributions made in respect of such Assets, (iv) guaranteeing timely payment
or distribution of principal and interest on the Securities of such Series, or
(v) for such other purpose as is specified in such Prospectus Supplement. Such
arrangements may include agreements under which Holders of the Securities of a
Series are entitled to receive amounts deposited in various accounts held by
the related Trustee upon the terms specified in the related Prospectus
Supplement. Such arrangements may be in lieu of any obligation of the Servicers
or the Administrator, if any, to advance delinquent installments in respect of
the Mortgage Loans. See "Servicing of Mortgage Loans, Multifamily Loans and
Contracts -- Advances".

SERVICING OF THE MORTGAGE LOANS,
MULTIFAMILY LOANS AND CONTRACTS

Except as otherwise noted, the description set forth below of the
servicing of Mortgage Loans, Multifamily Loans and Contracts is applicable to
Mortgage Loans, Multifamily Loans and Contracts (i) included in the Trust
Estate or Trust Fund with respect to a Series of Securities and (ii)
underlying Non-Agency Certificates. Accordingly, except as otherwise noted,
references under the heading "Servicing of the Mortgage Loans, Multifamily
Loans and Contracts" to the "Administrator," the "Servicers," a "Servicing
Agreement," and the "Trustee" should be read as applying to the related
Non-Agency Servicers, the Non-Agency Servicing Agreements and the Certificate
Trustees with respect to Non-Agency Certificates.

Unless otherwise provided in the related Prospectus Supplement, with
respect to a Series of Securities for which the related Trust Estate or Trust
Fund includes Mortgage Loans, Multifamily Loans and Contracts or Non-Agency
Certificates, such Mortgage Loans, Multifamily Loans and Contracts will be
serviced either (i) by the related Administrator as sole servicer, (ii) by the
related Administrator as administrator or master servicer, (iii) by one or more
loan servicing institutions as servicers or (iv) by another institution as
master servicer. If an institution other than an Administrator acts as the sole
servicer or as the master servicer for a Series or with respect to a Non-Agency
Certificate, the Administrator may have no servicing obligations with respect
to such Series or such Non-Agency Certificate. Generally, the discussion in
this section of the Prospectus is applicable under circumstances when the
Administrator is an affiliate of the Company. If the Administrator is not an
affiliate of the Company, the discussion relating to the servicing of the
Mortgage Loans, Multifamily Loans and Contracts as set forth below may be
modified or superseded by any discussion relating to the servicing of the
Mortgage Loans, Multifamily Loans and Contracts set forth in the Prospectus
Supplement.

The Prospectus Supplement for each Series of Certificates for which
the related Trust Estate or Trust Fund includes Mortgage Loans, Multifamily
Loans or Contracts, and for each Series for which the related Trust Estate or
Trust Fund includes Non-Agency Certificates, will specify whether the
Administrator, if any, or another institution will act as sole servicer or
master servicer. If an Administrator acts as master servicer or administrator,
all references to the Servicer under the heading "Servicing of the Mortgage
Loans, Multifamily Loans and Contracts" (and in the case of a Series of
Certificates, under the heading "The Agreement") should be read to refer to the
direct Servicers of such series, acting under the supervision of the
Administrator as master servicer or administrator. If an institution other than
an Administrator acts as sole Servicer for a series, or acts as master servicer
for such series, all references to the Servicer herein and under the headings
"Servicing of the Mortgage Loans, Multifamily Loans and Contracts" and "The
Agreement" should be read to refer to such institution as sole or master
servicer, as appropriate.

Unless otherwise specified in the related Prospectus Supplement, the
Mortgage Loans, Multifamily Loans and Contracts will be serviced by one or more
loan servicing institutions (the "Servicers"), which may include an
Administrator, pursuant to servicing agreements between each Servicer and the
Administrator or the Trustee (each, a "Servicing Agreement").

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SERVICING AGREEMENTS

Unless otherwise specified in the related Prospectus Supplement, each
Servicer must be a FNMA- or FHLMC-approved servicer of conventional mortgage
loans. In addition, the Administrator, if any, will require adequate servicing
experience, where appropriate, and financial stability, generally including a
net worth of at least $1,000,000, as well as satisfaction of certain other
criteria.

Each Servicer will be required to perform the customary functions of a
mortgage loan servicer, including collection of payments from borrowers (the
"Mortgagors") and remittance of such collections to the Trustee, maintenance of
applicable standard hazard insurance and primary mortgage insurance policies,
maintenance of escrow or impoundment accounts of Mortgagors for payment of
taxes, insurance, and other items required to be paid by the Mortgagor pursuant
to the Mortgage Loan, Multifamily Loan and Contract, attempting to cure
delinquencies, supervising foreclosures, management of Mortgaged Properties
under certain circumstances, and maintaining accounting records relating to the
Mortgage Loans, Multifamily Loans and Contracts, as applicable. Unless
otherwise specified in the related Prospectus Supplement, each Servicer will
also be obligated to make advances in respect of delinquent installments of
principal and interest on Mortgage Loans, Multifamily Loans and Contracts, as
applicable, as described more fully under " -- Payments on Mortgage Loans" and
" -- Advances," and in respect of certain taxes and insurance premiums not paid
on a timely basis by Mortgagors.

The Servicers will be entitled to a monthly servicing fee as specified
in the related Prospectus Supplement. The Servicers will also generally be
entitled to collect and retain, as part of their servicing compensation, late
payment charges and assumption underwriting fees. The Servicers will be
reimbursed from proceeds of one or more of the insurance policies described
herein ("Insurance Proceeds") or from proceeds received in connection with the
liquidation of defaulted Mortgage Loans ("Liquidation Proceeds") for certain
expenditures. See " -- Advances" and " -- Administration and Servicing
Compensation and Payment of Expenses" herein.

Each Servicer will be required to service each Mortgage Loan,
Multifamily Loan and Contract, as applicable, pursuant to the terms of its
Servicing Agreement for the entire term of such Mortgage Loan, Multifamily Loan
and Contract, as applicable, unless such Servicing Agreement is earlier
terminated by the Trustee, or in the event of a monetary default, by the
Trustee or the Administrator, on behalf of the Trustee. Upon termination of a
Servicing Agreement, the Trustee or the Administrator will act as Servicer of
the related Mortgage Loans pursuant to a Servicing Agreement on the same terms
and conditions applicable to any other Servicer.

PAYMENTS ON MORTGAGE LOANS

Each Servicer will establish and maintain a separate account (each, a
"Custodial Account"). Subject to the following paragraph, each Custodial
Account must be an account the deposits in which are fully insured by either
the Federal Deposit Insurance Corporation ("FDIC") or the National Credit Union
Administration ("NCUA") or are, to the extent such deposits are in excess of
the coverage provided by such insurance, continuously secured by certain
obligations issued or guaranteed by the United States of America. If at any
time the amount on deposit in such Custodial Account shall exceed the amount so
insured or secured, the applicable Servicer must remit to the Trustee the
amount on deposit in such Custodial Account which exceeds the amount so insured
or secured, less any amount such Servicer may retain for its own account
pursuant to its Servicing Agreement.

Notwithstanding the foregoing, the deposits in a Servicer's Custodial
Account will not be required to be fully insured or secured as described above,
and such Servicer will not be required to remit amounts on deposit therein in
excess of the amount so insured or secured, so long as such Servicer meets
certain requirements established by the rating agencies requested to rate the
Securities of the applicable Series.

Each Servicer is required to deposit into its Custodial Account on a
daily basis all amounts in respect of each Mortgage Loan received by such
Servicer, with interest adjusted to a rate (the "Remittance Rate") equal to the
related Mortgage Rate less the Servicer's servicing fee rate. On the 18th day
of each month, or such other day specified in the related Prospectus Supplement
(the "Remittance Date"), each Servicer of the Mortgage Loans will remit to the
Trustee all funds held in its Custodial Account with respect to each Mortgage
Loan; provided, however, that Principal

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Prepayments may be remitted on the Remittance Date in the month following the
month of such prepayment. Each Servicer will be required, pursuant to the terms
of the related Servicing Agreement and as specified in the related Prospectus
Supplement, to remit with each Principal Prepayment interest thereon at the
Remittance Rate through the last day of the month in which such Principal
Prepayment is made. Each Servicer is also required to advance its own funds as
described below.

ADVANCES

Unless otherwise specified in the related Prospectus Supplement, with
respect to a delinquent Mortgage Loan, Multifamily Loan or Contract, the
related Servicer will be obligated to advance its own funds or funds from its
Custodial Account equal to the aggregate amount of payments of principal and
interest (adjusted to the applicable Remittance Rate) which were due on a due
date and which are delinquent as of the close of business on the business day
preceding the Remittance Date ("Monthly Advance"). Such advances are required
to be made by the Servicer unless the Servicer, with the concurrence of the
Administrator, if any, determines that such advance ultimately would not be
reimbursable under any applicable insurance policy, from the proceeds of
liquidation of the related Mortgaged Properties, or from any other source (any
amount not so reimbursable being referred to herein as a "Nonrecoverable
Advance"). Such advance obligation will continue through the month following
the month of final liquidation of such Mortgage Loan, Multifamily Loan or
Contract. Any Servicer funds thus advanced will be reimbursable to such
Servicer out of recoveries on the Mortgage Loans, Multifamily Loans or
Contracts with respect to which such amounts were advanced. The Servicers will
also be obligated to make advances with respect to certain taxes and insurance
premiums not paid by Mortgagors on a timely basis. Funds so advanced are
reimbursable to the Servicers out of recoveries on the related Mortgage Loans,
Multifamily Loans or Contracts and out of other recoveries to the extent
advanced funds are subsequently determined to be non-recoverable. Each
Servicer's right of reimbursement for any advance will be prior to the rights
of the Holders of the Securities of the applicable Series to receive any
related Insurance Proceeds or Liquidation Proceeds.

Unless otherwise specified in the Prospectus Supplement with respect
to a Series, the Administrator, if any, will be obligated pursuant to the
related Indenture or Agreement to advance on or before the applicable Payment
Date or Distribution Date an amount equal to any Monthly Advance which a
Servicer fails to remit, but will not be obligated to make such advance if the
Administrator determines it to be a Nonrecoverable Advance. Failure by a
Servicer to make a required Monthly Advance will be grounds for termination
under the related Servicing Agreement.

SERVICING PROCEDURES

Unless otherwise specified in the related Prospectus Supplement, each
Servicer will service the Mortgage Loans, Multifamily Loans and Contracts
pursuant to written guidelines promulgated by the Company or the Administrator.
The Administrator will exercise its best reasonable efforts to insure that the
Servicers service the Mortgage Loans, Multifamily Loans and Contracts in
compliance with such guidelines and in a manner consistent with industry
standards.

Mortgage Loans. The Servicer will be responsible for making
reasonable efforts to collect all payments called for under the Mortgage Loans.
The Servicer will be obligated to follow such normal practices and procedures
as it deems necessary or advisable to realize upon a defaulted Mortgage Loan.
In this regard, the Servicer may (directly or through a local assignee) sell
the property at a foreclosure or trustee's sale, negotiate with the Mortgagor
for a deed in lieu of foreclosure or, in the event a deficiency judgment is
available against the Mortgagor or other person (see "Certain Legal Aspects of
the Mortgage Assets -- The Mortgage Loans and Multifamily Loans --
Anti-Deficiency Legislation and Other Limitations on Lenders" for a description
of the limited availability of deficiency judgments), foreclose against such
property and proceed for the deficiency against the appropriate person. The
amount of the ultimate net recovery (including the proceeds of any Mortgage
Pool Insurance Policy or other applicable Credit Enhancement), after
reimbursement to the Servicer of its expenses incurred in connection with the
liquidation of any such defaulted Mortgage Loan and prior unreimbursed advances
of principal and interest with respect thereto will be deposited in the
Certificate Account or Collection Accounts for the applicable Series (or, in
the case of a Mortgage Loan underlying a Non-Agency Certificate in an account
maintained by the related Certificate Trustee) when realized, and will be paid
or distributed to Holders of the Securities of such Series on the next Payment
Date or Distribution Date following the

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month of receipt (or, in the case of a Mortgage Loan underlying a Non-Agency
Certificate, will be distributed to the Trustee for the related Series in
accordance with the terms of such Non-Agency Certificate).

With respect to Cooperative Loans, any prospective purchaser will
generally have to obtain the approval of the board of directors of the relevant
Cooperative before purchasing the shares and acquiring rights under the related
proprietary lease or occupancy agreement. See "Certain Legal Aspects of the
Mortgage Assets" herein. This approval is usually based on the purchaser's
income and net worth and numerous other factors. Although the Cooperative's
approval is unlikely to be unreasonably withheld or delayed, the necessity of
acquiring such approval could limit the number of potential purchasers for
those shares and otherwise limit the ability to sell and realize the value of
those shares.

In general, a "tenant-stockholder" (as defined in Code Section
216(b)(2)) of a corporation that qualifies as a "cooperative housing
corporation" within the meaning of Code Section 216(b)(1) is allowed a
deduction for amounts paid or accrued within his taxable year to the
corporation representing his proportionate share of certain interest expenses
and certain real estate taxes allowable as a deduction under Code Section
216(a) to the corporation under Code Sections 163 and 164. In order for a
corporation to qualify under Code Section 216(b)(1) for its taxable year in
which such items are allowable as a deduction to the corporation, such Section
requires, among other things, that at least 80% of the gross income of the
corporation be derived from its tenant-stockholders (as defined in Code Section
216(b)(2). By virtue of this requirement, the status of a corporation for
purposes of Code Section 216(b)(1) must be determined on a year-to- year basis.
Consequently, there can be no assurance that Cooperatives relating to the
Cooperative Loans will qualify under such Section for any particular year. In
the event that such a Cooperative fails to qualify for one or more years, the
value of the collateral securing any related Cooperative Loans could be
significantly impaired because no deduction would be allowable to
tenant-stockholders under Code Section 216(a) with respect to those years. In
view of the significance of the tax benefits accorded tenant-stockholders of a
corporation that qualifies under Code Section 216(b)(1), the likelihood that
such a failure would be permitted to continue over a period of years appears
remote.

The Servicer will expend its own funds to restore property securing a
Mortgage Loan which has sustained uninsured damage only if it determines that
such restoration will increase the proceeds to Holders of liquidation of the
Mortgage Loan after the reimbursement to the Servicer of its expenses.

If a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer will be obligated (to the extent it has knowledge of
such conveyance) to exercise its right to accelerate the maturity of the
Mortgage Loan, unless it reasonably believes it is unable to enforce that
Mortgage Loan's "due-on-sale" clause under the applicable law. If it reasonably
believes it may be restricted by law, for any reason, from enforcing such a
"due-on- sale" clause, the Servicer may enter into an assumption and
modification agreement with the person to whom such property has been or is
about to be conveyed, pursuant to which such person becomes liable under the
Mortgage Note, provided such person satisfies the criteria required to maintain
the coverage provided by applicable insurance policies (unless otherwise
restricted by applicable law). Any fee collected by the Servicer for entering
into an assumption agreement will be retained by the Servicer as additional
servicing compensation. For a description of circumstances in which the
Servicer may be unable to enforce "due-on-sale" clauses, see "Certain Legal
Aspects of the Mortgage Assets -- The Mortgage Loans and Multifamily Loans --
Enforceability of Certain Provisions." In connection with any such assumption,
the Mortgage Rate borne by the related Mortgage Note may not be decreased.

The Servicer will maintain with one or more depository institutions
one or more accounts into which it will deposit all payments of taxes,
insurance premiums, assessments or comparable items received for the account of
the mortgagors. Withdrawals from such account or accounts may be made only to
effect payment of taxes, insurance premiums, assessments or comparable items,
to reimburse the Servicer out of related collections for any cost incurred in
paying taxes, insurance premiums and assessments or otherwise preserving or
protecting the value of the Mortgages, to refund to mortgagors any amounts
determined to be overages and to pay interest to mortgagors on balances in such
account or accounts to the extent required by law.

So long as it acts as servicer of the Mortgage Loans, the Servicer
will be required to maintain certain insurance covering errors and omissions in
the performance of its obligations as servicer and certain fidelity bond
coverage ensuring against losses through wrongdoing of its officers, employees
and agents.

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Contracts. With respect to a Trust Estate or Trust Fund that includes
Contracts, pursuant to each Servicing Agreement, the Servicer will service and
administer the Contracts assigned to the Trustee as more fully set forth below.
The Administrator, either directly or through Servicers subject to general
supervision by the Administrator, will perform diligently all services and
duties specified in each Agreement, in the same manner as prudent lending
institutions of manufactured housing installment sales contracts of the same
type as the Contracts in those jurisdictions where the related Manufactured
Homes are located. The Administrator will monitor the performance of each
Servicer, if any, and, unless the related Prospectus Supplement states
otherwise, will remain liable for the servicing of the Contracts in accordance
with the terms of the Agreement. The duties to be performed by the Servicer
will include collection and remittance of principal and interest payments,
collection of insurance claims and, if necessary, repossession.

Each Servicing Agreement will provide that, when any Manufactured Home
securing a Secured Contract is about to be conveyed by the borrower, the
Servicer (to the extent it has knowledge of such prospective conveyance and
prior to the time of the consummation of such conveyance) may exercise its
rights to accelerate the maturity of such Contract under the applicable
"due-on-sale" clause, if any, unless the Servicer reasonably believes it is
unable to enforce such "due-on-sale" clause under applicable law. In such case,
the Servicer is authorized to take or enter into an assumption agreement from
or with the person to whom such Manufactured Home has been or is about to be
conveyed, pursuant to which such person becomes liable under the related
Secured Contract, provided such person satisfies the criteria required to
maintain the coverage provided by applicable insurance policies (unless
otherwise restricted by applicable law). Where authorized by the Contract the
APR may be increased, upon assumption, to the then-prevailing market rate, but
will not be decreased.

Under each Servicing Agreement, the Servicer will repossess or
otherwise comparably convert the ownership of properties securing such of the
related Contracts as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such repossession or other conversion, the Servicer will follow
such practices and procedures as it deems necessary or advisable and as shall
be normal and usual in its general servicing activities. The Servicer, however,
will not be required to expend its own funds in connection with any
repossession or towards the restoration of any property unless it determines
(i) that such restoration or repossession will increase the proceeds of
liquidation of the related Contract to the Holders after reimbursement to
itself for such expenses and (ii) that such expenses will be recoverable to it
either through liquidation proceeds or through insurance proceeds.

PRIMARY MORTGAGE INSURANCE

Generally, Mortgage Loans that the Company acquires do not have
Loan-to-Value Ratios in excess of 80% of their Original Value. Unless otherwise
specified in the Prospectus Supplement, Mortgage Loans that the Company
acquires that have an original principal amount exceeding 80% of Original Value
usually will have primary mortgage insurance. The Company generally requires
such coverage to continue until the Loan-to-Value Ratio drops below 80%.

The primary mortgage insurance policies will not insure against
certain losses which may be sustained in the event of a personal bankruptcy of
the mortgagor under a Mortgage Loan.

The primary mortgage insurance policies generally provide that no
claim may be validly presented thereunder unless (i) certain cash advances have
been made, and (ii) where there has been physical loss or damage to the
Mortgaged Property, it has been restored to its condition as of the date it was
insured, reasonable wear and tear excepted. Assuming the satisfaction of these
conditions, the issuer of a primary mortgage insurance policy will be required,
within the applicable policy limits, to pay either (a) an amount equal to the
principal balance of the defaulted Mortgage Loan covered thereby, plus accrued
and unpaid interest thereon to the date of claim, property preservation
expenses, certain other costs and other advances made by the insured, against
receipt of good and marketable title to the Mortgaged Property or (b) the
product of the amount described in clause (a), subject to certain exceptions,
multiplied by the applicable percentage of insurance coverage.

Any primary mortgage insurance relating to a pool of Contracts will be
described in the related Prospectus Supplement.

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Claim payments, if any, under each primary mortgage insurance policy
will be required to be remitted by the Servicers to the Administrator and will
be treated in the same manner as a prepayment of a Mortgage Loan.

STANDARD HAZARD INSURANCE

Mortgage Loans

Unless otherwise specified in the Prospectus Supplement, the Servicer
will be required pursuant to a Servicing Agreement to cause to be maintained
for each Mortgage Loan a standard hazard insurance policy. The coverage of such
policy is required to be in an amount not less than the maximum insurable value
of the improvements securing such Mortgage Loan from time to time or the
principal balance owing on such Mortgage Loan from time to time, whichever is
less. In all events, such coverage shall be in an amount sufficient to ensure
avoidance of the applicability of the co-insurance provisions under the terms
and conditions of the applicable policy. The ability of each Servicer to assure
that hazard insurance proceeds are appropriately applied may be dependent on
its being named as an additional insured under any standard hazard insurance
policy and under any flood insurance policy referred to below, or upon the
extent to which information in this regard is furnished to such Servicer by
Mortgagors. All amounts collected by a Servicer under a standard hazard
insurance policy will be deposited in such Servicer's Custodial Account. Unless
otherwise specified in the related Prospectus Supplement, each Servicing
Agreement will provide that the related Servicer may satisfy its obligation to
cause hazard insurance policies to be maintained by maintaining a blanket
policy insuring against hazard losses on the Mortgage Loans serviced by such
Servicer.

In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements on the property by
fire, lightning, explosion, smoke, windstorm and hail, riot, strike and civil
commotion, subject to the conditions and exclusions particularized in each
policy. Although the policies relating to the Mortgage Loans will be under
written by different insurers and, therefore, will not contain identical terms
and conditions, the basic terms thereof are dictated by state law. Such
policies typically do not cover any physical damage resulting from the
following: war, revolution, governmental actions, floods and other
water-related causes, earth movement (including earthquakes, landslides and mud
flow), nuclear reactions, wet or dry rot, vermin, rodents, insects or domestic
animals, theft and, in certain cases, vandalism. The foregoing list is merely
indicative of certain kinds of uninsured risks and is not intended to be
all-inclusive. If the property securing a Mortgage Loan is located in a
federally designated flood area, the Agreement will require that flood
insurance be maintained in such amounts as would be required by the Federal
National Mortgage Association in connection with its mortgage loan purchase
program. The Administrator may also purchase special hazard insurance against
certain of the uninsured risks described above. See "Credit Enhancement --
Special Hazard Insurance".

Since the amount of hazard insurance the Administrator is required to
cause to be maintained on the improvements securing the Mortgage Loans declines
as the principal balances owing thereon decrease, if the residential properties
securing the Mortgage Loans appreciate in value over time, the effect of
coinsurance in the event of partial loss may be that hazard insurance proceeds
will be insufficient to restore fully the damaged property.

The Administrator will not require that a standard hazard or flood
insurance policy be maintained on the cooperative dwelling relating to any
Cooperative Loan. Generally, the Cooperative itself is responsible for
maintenance of hazard insurance for the property owned by the Cooperative and
the tenant-stockholders of that Cooperative do not maintain individual hazard
insurance policies. To the extent, however, that a Cooperative and the related
borrower on a Cooperative Loan do not maintain such insurance or do not
maintain adequate coverage or any insurance proceeds are not applied to the
restoration of damaged property, any damage to such borrower's cooperative
dwelling or such Cooperative's building could significantly reduce the value of
the collateral securing such Cooperative Loan to the extent not covered by
other credit support.

Secured Contracts

Unless otherwise specified in the Prospectus Supplement, the terms of
each Servicing Agreement will require the Servicer to cause to be maintained
with respect to each Secured Contract one or more hazard insurance policies
which provide, at a minimum, the same coverage as a standard form fire and
extended coverage insurance policy that

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is customary for manufactured housing, issued by a company authorized to issue
such policies in the state in which the Manufactured Home is locate, and in an
amount which is not less than the maximum insurable value of such Manufactured
Home or the principal balance due from the borrower on the related Secured
Contract, whichever is less. When a Manufactured Home's location was, at the
time of origination of the related Secured Contract, within a federally
designated special flood hazard area, the Administrator also shall cause such
flood insurance to be maintained, which coverage shall be at least equal to the
minimum amount specified in the preceding sentence or such lesser amount as may
be available under the federal flood insurance program.

The Servicer may maintain, in lieu of causing individual hazard
insurance policies to be maintained with respect to each Manufactured Home, and
shall maintain, to the extent that the related Secured Contract does not
require the borrower to maintain a hazard insurance policy with respect to the
related Manufactured Home, one or more blanket insurance policies covering
losses on the borrowers' interests in the Secured Contracts resulting from the
absence or insufficiency of individual hazard insurance policies.

The Servicer, to the extent practicable, will cause the borrowers to
pay all taxes and similar governmental charges when and as due. To the extent
that nonpayment of any taxes or charges would result in the creation of a lien
upon any Manufactured Home having a priority equal or senior to the lien of the
related Secured Contract, the Servicer will pay any such delinquent tax or
charge.

If the Servicer repossesses a Manufactured Home on behalf of the
Trustee, the Servicer will either (i) maintain at its expense hazard insurance
with respect to such Manufactured Home, or (ii) indemnify the Trustee against
any damage to such Manufactured Home prior to resale or other disposition.

Multifamily Loans

Unless otherwise provided in the Prospectus Supplement relating to a
Series of Certificates for which the related Trust Fund includes Multifamily
Loans or relating to a Series for which the related Trust Estate or Trust Fund
includes Non-Agency Certificates backed by Multifamily Loans, the Servicer will
be required to be maintained, for each Multifamily Loan, a standard hazard
insurance policy with extended coverage in an amount which is at least equal to
the lesser of the original principal balance of the Multifamily Loan, or the
replacement cost of the related Multifamily Project. Where any part of any
improvement to the Multifamily Project is located in an area identified by the
Flood Emergency Management Agency as having special flood hazards and flood
insurance has been made available, the Master Servicer is required to cause to
be maintained with a generally acceptable insurance carrier a flood insurance
policy meeting the requirements of the current guidelines of the Federal
Insurance Administration, providing coverage in an amount not less than (i) the
original principal balance of the Multifamily Loan, (ii) the insurable value of
the Multifamily Project, or (iii) the maximum amount of insurance available
under the Flood Disaster Protection Act of 1973, as amended, which ever is
less.

Additional insurance coverage for specific properties in a Multifamily
Loan Pool included in the Trust Fund for a Series will be described in the
related Prospectus Supplement.

TITLE INSURANCE POLICIES

The Servicing Agreements will require that a title insurance policy be
in effect on each of the Mortgaged Properties and that such title insurance
policy contain no coverage exceptions, except those permitted pursuant to the
guidelines heretofore established by FNMA.

CLAIMS UNDER PRIMARY MORTGAGE INSURANCE POLICIES AND STANDARD HAZARD INSURANCE
POLICIES; OTHER REALIZATION UPON DEFAULTED LOANS

Each Servicer will present claims to any primary insurer under any
related primary mortgage insurance policy and to the hazard insurer under any
related Standard Hazard Insurance Policy. All collections under any related
primary mortgage insurance policy or any related standard hazard insurance
policy (less any proceeds to be applied to the restoration or repair of the
related Mortgaged Property) will be remitted to the Trustee.

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If any Mortgaged Property securing a defaulted Mortgage Loan is
damaged and proceeds, if any, from the related standard hazard insurance policy
are insufficient to restore the damaged property to a condition sufficient to
permit recovery under any applicable Mortgage Pool Insurance Policy or any
related primary mortgage insurance policy, each Servicer will be required to
expend its own funds to restore the damaged property. In the event that a
Servicer fails to make a required expenditure, the Administrator, if any, will
be required to make such expenditure. In either case, the Servicer, the
Administrator, if any, will be required to make such expenditures only to the
extent it determines such expenditures are recoverable from Insurance Proceeds
or Liquidation Proceeds.

If recovery under any applicable Mortgage Pool Insurance Policy or any
related primary mortgage insurance policy is not available, the Servicer or the
Administrator, if any, as the case may be, will nevertheless be obligated to
attempt to realize upon the defaulted Mortgage Loan. Foreclosure proceedings
will be conducted by the Servicer with the concurrence of the Administrator, if
any. If the proceeds of any liquidation of the Mortgaged Property securing the
defaulted Mortgage Loan are less than the principal balance of the defaulted
Mortgage Loan plus interest accrued thereon, a loss will be realized on such
Mortgage Loan, to the extent the applicable Credit Enhancement is not
sufficient, in the amount of such difference plus the aggregate of expenses
incurred by the Servicer in connection with such proceedings and which are
reimbursable under the Agreement. Consequently, any default by an insurer
under any insurance policy or bankruptcy bond, any losses in excess of any
insurance policy or bankruptcy limits, any uninsured loss and any interest
shortfalls not otherwise covered as described herein or in the Prospectus
Supplement will likely result in losses being borne by one or more Holders of
the affected Series.

Because Insurance Proceeds cannot exceed deficiency claims and certain
expenses incurred by the Servicer, no payments under the related Mortgage Pool
Insurance Policy, if any, will result in a recovery on the Mortgage Loans which
exceeds the principal balance of the defaulted Mortgage Loan together with
accrued interest thereon. In addition, where a Mortgaged Property securing a
defaulted Mortgage Loan can be resold for an amount exceeding the principal
balance of the related Mortgage Loan together with accrued interest and
expenses, it may be expected that, where retention of any such amount is
legally permissible, the Pool Insurer will exercise its right under the related
Mortgage Pool Insurance Policy, if any, to purchase such Mortgaged Property and
realize for itself any excess proceeds.

Liquidation Proceeds and Insurance Proceeds may initially be credited
to a separate account (the "Advance Account") in order to facilitate the
reimbursement of advances made by Servicers, the Administrator or an insurer.
Such proceeds will be held in the Advance Account until the earlier of the date
of final reimbursement to the appropriate parties and the second Remittance
Date after the date on which they were deposited in the Advance Account.
Interest shortfalls may be suffered on Securities if and to the extent that
Liquidation Proceeds and Insurance Proceeds are retained in the Advance Account
during a period in which Servicers are not making Monthly Advances.

ADMINISTRATION AND SERVICING COMPENSATION AND PAYMENT OF EXPENSES

With respect to each Mortgage Loan, Multifamily Loan and Contract, the
Administrator may receive compensation with respect to each interest payment
thereon in an amount specified in the related Prospectus Supplement. As
compensation for its servicing duties, each Servicer will be entitled to a
monthly servicing fee in the amount specified in the related Prospectus
Supplement. In addition to the primary compensation, each Servicer will retain
all assumption underwriting fees and late payment charges, to the extent
collected from Mortgagors.

The Administrator and each Servicer will be entitled to reimbursement
for certain expenses incurred by it in connection with the liquidation of
defaulted Mortgage Loans, Multifamily Loans and Contracts. No loss will be
suffered on the Securities by reason of such expenses to the extent claims for
such expenses are paid directly under any applicable Mortgage Pool Insurance
Policy, a primary mortgage insurance policy, the special hazard insurance
policy or from other forms of Credit Enhancement. In the event, however, that
the defaulted Mortgage Loans are not covered by a Mortgage Pool Insurance
Policy, Primary Mortgage Insurance Policies, Special Hazard Insurance Policy,
Standard Hazard Insurance Policies or another form of Credit Enhancement, or
claims are either not made or not paid under such policies or Credit
Enhancement, or if coverage thereunder has ceased, a loss will occur on the
Securities of the affected Series to the extent that the proceeds from the
liquidation of a defaulted Mortgage Loan, Multifamily Loan or Contract, after
reimbursement of the Administrator's and the Servicer's expenses, are less than
the principal balance of such defaulted Mortgage Loan, Multifamily Loan or
Contract.

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THE INDENTURE

The following summaries describe certain provisions of the Indenture
not described elsewhere in this Prospectus. Where particular provisions or
terms used in the Indenture are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summaries.
The description set forth below is subject to modification in the Prospectus
Supplement for a Series of Bonds to describe the terms and provisions of the
particular Indenture relating to such Series of Bonds.

MODIFICATION OF INDENTURE

With the consent of the holders of not less than two-thirds of the
then aggregate principal amount of the outstanding Bonds of any Series issued
under an Indenture, the related Trustee and the related Issuer may execute a
supplemental indenture to add provisions to, or change in any manner or
eliminate any provisions of, the Indenture with respect to such Series or
modify (except as provided below) in any manner the rights of the holders of
such Bonds.

Without the consent of the Holder of each outstanding Bond of such
Series affected thereby, however, no supplemental indenture shall (a) change
the Stated Maturity of the principal of, or any installment of interest on, any
Bond of such Series or reduce the principal amount thereof, the interest rate
specified thereon (except as provided in the related Indenture with respect to
any Class of Bonds which are Variable Interest Rate Securities), the redemption
price with respect thereto or the earliest date on which any Bonds of such
Series may be redeemed at the option of the Issuer, or change any place of
payment where, or the coin or currency in which, any Bond of such Series or any
interest thereon is payable, or impair the right to institute suit for the
enforcement of certain provisions of the Indenture regarding payment, (b)
reduce the percentage of the aggregate principal amount of the outstanding
Bonds of such Series, the consent of the Holders of which is required for any
such supplemental indenture, or the consent of the Holders of which is required
for any waiver of compliance with certain provisions of the Indenture or of
certain defaults thereunder and their consequences as provided for in the
Indenture, (c) modify the provisions of the Indenture specifying the
circumstances under which such a supplemental indenture may not change the
provisions of the Indenture without the consent of the Holders of each
outstanding Bond of such Series affected thereby, or the provisions of the
Indenture with respect to certain remedies available in an Event of Default (as
described below), except to increase any percentage specified therein or to
provide that certain other provisions of the Indenture cannot be modified or
waived without the consent of the Holder of each outstanding Bond affected
thereby, (d) modify or alter the provisions of the Indenture regarding the
voting of Bonds held by the Issuer or an affiliate of the Issuer, (e) permit
the creation of any lien ranking prior to or on the parity with the lien of the
Indenture with respect to any part of the property subject to a lien under the
Indenture or terminate the lien of the Indenture on any property at any time
subject thereto or deprive the Holder of any Bond of such Series of the
security afforded by the lien of the Indenture, or (f) modify any of the
provisions of the Indenture in such manner as to affect the rights of the
Holders of Bonds of such Series to the benefits of any provisions for the
redemption at the request of Holders of Bonds of such Series contained therein.

Each Issuer and the respective Trustee may also enter into
supplemental indentures, without obtaining the consent of Holders of such
Series, to cure ambiguities or make minor corrections, to provide for the
issuance of Bonds in bearer or registered form or for the conversion of any
outstanding Bonds to or from bearer form and to do such other things as would
not adversely affect the interests of the Holders of such Series.

EVENTS OF DEFAULT

An "Event of Default" with respect to any Series of Bonds is defined
in the respective Indenture under which such Bonds are issued as being: (a)
unless otherwise specified in the Prospectus Supplement for such Series, a
default in the payment of principal of any Bond of such Series or a default for
ten days or more in the payment of any interest on any Bond of such Series; (b)
a default in the observance of certain negative covenants in the Indenture or
in the observance of certain covenants relating to redemptions of Bonds of such
Series; (c) a default in the observance of any other covenant of the Indenture,
and the continuation of any such default for a period of sixty days after
notice to the Issuer by the Trustee or to the Issuer and the Indenture Trustee
by the Holders of at least 25% in principal amount of the Bonds of such Series
then outstanding; (d) the failure of the lien of the Indenture to constitute a
valid first priority security interest in the Trust Estate, (e) any
representation or warranty made by the Issuer in the Indenture or in any

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certificate delivered pursuant thereto having been incorrect in a material
respect as of the time made, and the circumstance in respect of which such
representation or warranty is incorrect not having been cured within thirty
days after notice thereof is given to the Issuer by the Trustee or by the
Holders of at least 25% in principal amount of the Bonds of such Series then
outstanding; or (f) certain events of bankruptcy, insolvency, receivership or
reorganization of the Issuer.

RIGHTS UPON EVENT OF DEFAULT

In case an Event of Default should occur and be continuing with
respect to a Series of Bonds, the Trustee may, and on request of Holders of
more than 50% in principal amount of the Bonds of such Series then outstanding
shall, declare the principal of such Series of Bonds to be due and payable.
Such declaration may under certain circumstances be rescinded by the Holders of
a majority in principal amount of the Bonds of such Series then outstanding.

If, following an Event of Default, a Series of Bonds has been declared
to be due and payable, the Trustee may, in its discretion (provided that the
Holders of the Bonds of such Series have not directed the Trustee to sell the
Assets included in the related Trust Estate), refrain from selling such Assets
and continue to apply all amounts received on such Assets to payments due on
the Bonds of such Series in accordance with their terms, notwithstanding the
acceleration of the maturity of such Bonds. The Trustee, however, must sell
the Assets included in the related Trust Estate for such Series if collections
in respect of such Assets are determined to be insufficient to make all
scheduled payments on Bonds of such Series, in which case payments will be made
on the Bonds in the same manner as described in the next sentence with regard
to instances in which such Assets are sold. In addition, upon an Event of
Default the Trustee may, in its discretion (provided that, unless the Event of
Default relates to a default in payment of principal or interest, the Trustee
must receive the consent of the Holders of all outstanding Bonds of such
Series, and certain other conditions must be met), sell the Assets included in
the related Trust Estate for such Series, in which event the Bonds of such
Series will be payable pro rata, without regard to their Stated Maturities, out
of the collections on, or the proceeds from the sale of, such Assets and any
overdue installments of interest on the Bonds will, to the extent permitted by
applicable law, bear interest at the highest stated interest rate borne by any
Bond of such Series.

Subject to the provisions of the Indenture relating to the duties of
the Trustee, in case an Event of Default shall occur and be continuing, the
Trustee shall be under no obligation to exercise any of the rights and powers
under the Indenture at the request or direction of any of the Holders of Bonds,
unless such Holders have offered to the Trustee reasonable security or
indemnity satisfactory to it against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction. Subject
to such provisions for indemnification and certain limitations contained in the
Indenture, the Holders of a majority in principal amount of the outstanding
Bonds of a Series shall have the right to direct the time, method, and place of
conducting any proceeding or any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee with respect to the Bonds of such
Series; and the Holders of a majority in principal amount of the Bonds of a
Series then outstanding may, in certain cases, waive any default with respect
thereto, except a default in the payment of principal or interest or a default
in respect of a covenant or provision of the Indenture that cannot be modified
without the waiver or consent of the Holder of each outstanding Bond affected
thereby.

LIST OF HOLDERS OF BONDS

Three or more Holders of the Bonds of any Series (each of whom has
owned a Bond of such Series for at least six months) may, by written request to
the Trustee, obtain access to the list of all Holders of the Bonds of such
Series maintained by the Trustee for the purpose of communicating with other
Holders with respect to their rights under the Indenture. The Trustee may
elect not to afford the requesting Holders access to the list of Holders if it
agrees to mail the desired communication or proxy, on behalf of the requesting
Holders, to all Holders.

ISSUER'S ANNUAL COMPLIANCE STATEMENT

The Issuer will be required to file annually with the Trustee a
written statement as to the fulfillment of its obligations under the Indenture.

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TRUSTEE'S ANNUAL REPORT

The Trustee will be required to mail each year to all Holders a brief
report relating to its eligibility and qualifications to continue as the
Trustee under the Indenture, any amounts advanced by it under the Indenture,
the amount, interest rate and maturity date of certain indebtedness owing by
the Issuer to it in the Trustee's individual capacity, the property and funds
physically held by the Trustee as such, any release, or release and
substitution, of property subject to the lien of the Indenture which has not
been previously reported, any additional Series of Bonds not previously
reported and any action taken by it which materially affects the Bonds and
which has not been previously reported.

SATISFACTION AND DISCHARGE OF INDENTURE

The Indenture will be discharged with respect to the Assets securing
the Bonds of a Series upon the delivery to the Trustee for cancellation of all
of the Bonds of such Series or, with certain limitations, upon deposit with the
Trustee of funds sufficient for the payment in full of all of the Bonds of such
Series.

REPORTS BY TRUSTEE TO BONDHOLDERS

On each Principal Payment Date or Special Redemption Date, the Trustee
will send a report to each Holder setting forth, among other things, the amount
of such payment representing interest, the amount thereof, if any, representing
principal and the outstanding principal amount of an individual Bond of each
Class (or the aggregate principal amount of the Bonds of each Class in the case
of Holders of Bonds on which payments of interest only are then being made)
after giving effect to the payments made on such Principal Payment Date or
Special Redemption Date.

LIMITATION ON SUITS

No Holder of a Bond of any Series will have any right to institute any
proceedings with respect to the Indenture unless (1) such Holder has previously
given written notice to the Trustee of a continuing Event of Default with
respect to such Series; (2) the Holders of at least 25% in principal amount of
the Bonds of such Series then outstanding have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee; (3) such Holders have offered to the Trustee reasonable
indemnity satisfactory to it against the costs, expenses and liabilities to be
incurred in compliance with such request; (4) for 60 days after its receipt of
such notice, request and offer of indemnity the Trustee has failed to institute
any such proceedings; and (5) no direction inconsistent with such written
request has been given to the Trustee during such 60-day period by the Holders
of at least 50% in principal amount of the Bonds of such Series then
outstanding.

THE AGREEMENT

The following summaries describe certain provisions of the Agreement
not described elsewhere in this Prospectus. Where particular provisions or
terms used in the Agreements are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as a part of such
summaries. The description set forth below is subject to modification in the
Prospectus Supplement for a Series of Certificates to describe the terms and
provisions of the particular Agreement relating to such Series of Certificates.

Generally, the discussion in this section of the Prospectus is
applicable under circumstances when the Administrator is an affiliate of the
Company. If the Administrator is not an affiliate of the Company, the
discussion relating to pooling and administration (or master servicing) as set
forth below may be modified or superseded by any discussion relating to the
pooling and administration (or master servicing) set forth in the Prospectus
Supplement. In addition, certain of the following summaries only apply to an
Agreement relating to series of Certificates for which the related Trust Fund
includes Mortgage Loans, Multifamily Loans or Contracts. Provisions of
Agreements relating to series of Certificates for which the related Trust Fund
includes other types of Mortgage Assets will be summarized and described in the
related Prospectus Supplement.

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ASSIGNMENT OF MORTGAGE ASSETS

Assignment of Mortgage Loans

At the time of issuance of the Certificates of a Series, the Company
will assign the Mortgage Loans to the related Trustee, together with all
principal and interest (subject to exclusions or adjustments specified in the
related Prospectus Supplement received by the Company on or with respect to
such Mortgage Loans on or after the Cut-off Date) other than principal and
interest due and payable on or before the Cut-off Date. The Trustee will,
concurrently with such assignment, execute, countersign and deliver the
Certificates to the Company in exchange for the Mortgage Loans. Each Mortgage
Loan will be identified in a schedule appearing as an exhibit to the Agreement.

In addition, as to each Mortgage Loan, the Company will deliver to the
Trustee the Mortgage Note and Mortgage, any assumption and modification
agreement, an assignment of the Mortgage in recordable form, evidence of title
insurance and, if applicable, the certificate of private mortgage insurance. In
instances where recorded documents cannot be delivered due to delays in
connection with recording, the Company may deliver copies thereof and deliver
the original recorded documents promptly upon receipt.

With respect to any Mortgage Loans which are Cooperative Loans, the
Company, as depositor, will cause to be delivered to the Trustee, the related
original Cooperative note endorsed to the order of the Trustee, the original
security agreement, the proprietary lease or occupancy agreement, the
recognition agreement, an executed financing agreement and the relevant stock
certificate and related blank stock powers. The Company will file in the
appropriate office an assignment and a financing statement evidencing the
Trustee's security interest in each Cooperative Loan.

Unless otherwise specified in the related Prospectus Supplement, in
the Agreement the Company generally will represent and warrant to the Trustee,
among other things, that (i) the information set forth in the schedule of
Mortgage Loans attached thereto is correct in all material respects; (ii) a
lender's title insurance policy or binder for each Mortgage Loan subject to the
Agreement was issued on the date of origination thereof and each such policy or
binder assurance is valid and remains in full force and effect; (iii) at the
date of initial issuance of the Certificates, the Company has good title to the
Mortgage Loans and the Mortgage Loans are free of offsets, defenses or
counterclaims; (iv) at the date of initial issuance of the Certificates, each
Mortgage is a valid first lien on the property securing the Mortgage Note
(subject only to (a) the lien of current real property taxes and assessments,
(b) covenants, conditions, and restrictions, rights of way, easements and other
matters of public record as of the date of the recording of such Mortgage, such
exceptions appearing of record being acceptable to mortgage lending
institutions generally in the area wherein the property subject to the Mortgage
is located or specifically reflected in the appraisal obtained by the Company
and (c) other matters to which like properties are commonly subject which do
not materially interfere with the benefits of the security intended to be
provided by such Mortgage) and such property is free of material damage and is
in good repair or, with respect to junior Lien Mortgage Loans, that such
Mortgage is a valid junior lien Mortgage, as the case may be, and specifying
the percentage of the Mortgage Loan Pool comprised of junior Lien Mortgage
Loans; (v) at the date of initial issuance of the Certificates, no Mortgage
Loan is 30 or more days delinquent and there are no delinquent tax or
assessment liens against the property covered by the related Mortgage; (vi) at
the date of initial issuance of the Certificates, the portion of each Mortgage
Loan, if any, which in the circumstances set forth above under "Servicing of
the Mortgage Loans, Multifamily Loans and Contracts -- Primary Mortgage
Insurance" should be insured with a private mortgage insurer is so insured; and
(vii) each Mortgage Loan at the time it was made complied in all material
respects with applicable state and federal laws, including, with out
limitation, usury, equal credit opportunity and disclosure laws.

In the event that the Company has acquired the Mortgage Loans for a
Series, if so specified in the related Prospectus Supplement, the Company may,
in lieu of making the representations set forth in the preceding paragraph,
cause the entity from which such Mortgage Loans were acquired to make such
representations (other than those regarding the Company's title to the Mortgage
Loans, which will in all events be made by the Company), in the sales agreement
pursuant to which such Mortgage Loans are acquired, or if such entity is acting
as a Servicer, in its servicing agreement. In such event such representations,
and the Company's rights against such entity in the event of a breach thereof,
will be assigned to the Trustee for the benefit of the holders of the
Certificates of such Series.

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Assignment of Contracts

The Company will cause the Contracts to be assigned to the Trustee,
together with principal and interest due on or with respect to the Contracts
after the Cut-off Date specified in the related Prospectus Supplement. Each
Contract will be identified in a loan schedule ("Contract Loan Schedule")
appearing as an exhibit to the related Agreement.

In addition, with respect to each Contract, the Company will deliver
or cause to be delivered to the Trustee, the original Contract and copies of
documents and instruments related to each Contract and the security interest in
the Manufactured Home securing each Contract. To give notice of the right,
title and interest of the Certificateholders to the Contracts, the Company will
cause a UCC-1 financing statement to be filed identifying the Trustee as the
secured party and identifying all Contracts as collateral. Unless otherwise
specified in the related Prospectus Supplement, the Contracts will not be
stamped or otherwise marked to reflect their assignment from the Company to the
Trustee. Therefore, if a subsequent purchaser were able to take physical
possession of the Contracts without notice of such assignment, the interest of
the Holders of the Certificates of the applicable Series in the Contracts could
be defeated. See "Certain Legal Aspects of the Mortgage Assets."

Unless otherwise specified in the Prospectus Supplement, the Company
will provide limited representations and warranties to the Trustee concerning
the Contracts. Such representations and warranties will include: (i) that the
information contained in the Contract Loan Schedule provides an accurate
listing of the Contracts and that the information respecting such Contracts set
forth in such Contract Loan Schedule is true and correct in all material
respects at the date or dates respecting which such information is furnished;
(ii) that, immediately prior to the conveyance of the Contracts, the Company
had good title to, and was sole owner of, each such Contract; and (iii) that
there has been no other sale by it of such Contract and that the Contract is
not subject to any lien, charge, security interest or other encumbrance.

Assignment of Multifamily Loans

The Company will cause the Multifamily Loans constituting the
Multifamily Loan Pool to be assigned to the Trustee, together with principal
and interest due on or with respect to the Multifamily Loans after the Cut-off
Date specified in the related Prospectus Supplement. The Trustee will,
concurrently with such assignment, authenticate and deliver the Certificates.
Each Multifamily Loan will be identified in a schedule appearing as an exhibit
to the Agreement (the "Multifamily Loan Schedule").

In addition, the Company, will, as to each Multifamily Loan, deliver
or cause to be delivered to the Trustee, the mortgage note endorsed without
recourse, the mortgage or deed of trust with evidence of recording indicated
thereon and an assignment of the instrument in recordable from (but not
recorded).

The Trustee will review and hold such documents in trust for the
benefit of the Holders of the Certificates of the applicable Series. Unless
otherwise provided in the related Prospectus Supplement, if any such document
is found to be defective in any material respect and the Company, the entity
from which the Company acquired such Multifamily Loan (the "Multifamily Loan
Seller") or the Administrator, as the case may be, does not cure such a defect
with 60 days, or within such other period specified in the related Prospectus
Supplement, the Company, the Multifamily Loan Seller or the Administrator, as
the case may be, will, not later than 90 days or within such other period
specified in the related Prospectus Supplement, after the Trustee's notice to
the Company, the Multifamily Loan Seller or the Administrator of the defect,
repurchase the related Multifamily Loan or any property acquired in respect
thereof from the Trustee. Unless otherwise specified in the related Prospectus
Supplement, such repurchase shall be at a price equal to the remaining unpaid
principal balance of such Multifamily Loan (or, in the case of a foreclosed
Multifamily Loan, the unpaid principal balance of such Multifamily Loan
immediately prior to foreclosure), plus accrued but unpaid interest to the date
of the next scheduled payment on such Multifamily Loan at the related
Remittance Rate, less any unreimbursed Advances made with respect to such
Multifamily Loan. Unless otherwise provided in the related Prospectus
Supplement, the repurchase obligation constitutes the sole remedy available to
the Holders of the applicable Series of Certificates or the Trustee for
material defect in a Multifamily Loan document.

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Unless otherwise specified in the related Prospectus Supplement, the
Company will, at the time of delivery of the Certificates of a Series, cause
the assignment to the Trustee of the Multifamily Loans constituting a
Multifamily Loan Pool to be recorded in the appropriate public office for real
property records. If specified in the related Prospectus Supplement, the
Company will cause such assignments to be so recorded within the time after
delivery of the Certificates as is specified in the related Prospectus
Supplement, in which event, the Agreement may, as specified in the Prospectus
Supplement, require the Multifamily Loan Seller or the Administrator to
repurchase from the Trustee any Multifamily Loan required to be recorded but
not recorded within such time, at the price described above with respect to
repurchase by any reason of defective documentation. Unless otherwise provided
in the related Prospectus Supplement, the repurchase obligation would
constitute the sole remedy to the Holders of the applicable Series of
Certificates or the Trustee for the failure of a Multifamily Loan to be
recorded.

Unless otherwise specified in the related Prospectus Supplement, each
Multifamily Loan Seller will have represented, among other things, that (i)
immediately prior to the transfer and assignment of the Multifamily Loans, such
Multifamily Loan Seller had good title to, and was the sole owner of, each
Multifamily Loan and there has been no other sale or assignment thereof, (ii)
as of the date of such transfer, the Multifamily Loans are subject to no
offsets, defenses or counterclaims, (iii) each Multifamily Loan at the time it
was made complied in all material respects with applicable state and federal
laws, including usury, and disclosure laws, (iv) a lender's policy of title
insurance was issued on the date of the origination of each Multifamily Loan
and each such policy is valid and remains in full force and effect, (v) as of
the date of such transfer, each mortgage note subject to the agreement is a
valid first lien on the related Multifamily Project (subject only to (a) the
lien of current real property taxes and assessments, (b) covenants, conditions
and restrictions, rights of way, easements and other matters of public record
as of the date of recording of such instrument of indebtedness, such exceptions
appearing of record and either being acceptable to mortgage lending
institutions generally or specifically reflected in the appraisal made in
connection with the origination of the related Multifamily Loan and (c) other
matters to which like properties are commonly subject which do not materially
interfere with the benefits of the security intended to be provided by the
instrument of indebtedness) and such property is free of material damage and is
in good repair, (vi) as of the date of such transfer, no Multifamily Loan is
more than 30 days delinquent in payment and there are no delinquent tax or
assessment liens against the related apartment project, and (vii) with respect
to each Multifamily Loan, if the Multifamily Project is located in an area
identified by the Secretary of Housing and Urban Development as having special
flood hazards and subject in certain circumstances to the availability of flood
insurance under the National Flood Insurance Act of 1968, as amended, such
Multifamily Project is covered by flood insurance if applicable regulations at
the time such Multifamily Loan was originated required that such flood
insurance coverage be obtained.

All of the representations and warranties of a Multifamily Loan Seller
in respect of a Multifamily Loan will have been made as of the date on which
such Multifamily Loan Seller sold the Multifamily Loan to the Company or its
affiliate; the date as of which such representations and warranties were made
may be a date prior to the date of the initial issuance of the related Series
of Certificates. A substantial period of time may have elapsed between the date
as of which the representations and warranties were made and the later date of
initial issuance of the related Series of Certificates. Since the
representations and warranties referred to in the preceding paragraph, unless
otherwise specified in the related Prospectus Supplement, are the only
representations and warranties that will be made by a Multifamily Loan Seller,
the Multifamily Loan Seller's repurchase obligations described below will not
arise if, during the period commencing on a date of sale of a Multifamily Loan
by the Multifamily Loan Seller to the Company or its affiliate, the relevant
event occurs that would have given rise to such an obligation had the event
occurred prior to the sale of the affected Multifamily Loan. Nothing, however,
has come to the Company's attention that would cause it to believe that the
representations and warranties referred to in the preceding paragraph will not
be accurate and complete in all material respects in respect of Multifamily
Loans as of the date of initial issuance of the related Series of Certificates.

Assignment of Agency Securities, Non-Agency Certificates, and Private
Mortgage-Backed Securities

With respect to each Series, unless otherwise specified in the related
Prospectus Supplement, the Company will cause any Agency Securities, Non-Agency
Certificates, and Private Mortgage-Backed Securities included in the related
Trust Fund to be registered in the name of the Trustee. The Trustee (or its
custodian) will have possession of any certificated Agency Securities and
Private Mortgage-Backed Securities. Unless otherwise specified in the related
Prospectus Supplement, the Trustee will not be in possession of or be assignee
of record of any underlying assets for

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an Agency Security, Non-Agency Certificate, or Private Mortgage-Backed
Security. Each Agency Security, Non-Agency Certificate, and Private
Mortgage-Backed Security will be identified in a schedule appearing as an
exhibit to the related Agreement. The Company will represent and warrant to the
Trustee, among other things, the information contained in such schedule is true
and correct and that immediately prior to the transfer of the related
securities to the Trustee, the Company had good title to, and was the sole
owner of, each such security.

REPURCHASE OR SUBSTITUTION OF MORTGAGE LOANS, CONTRACTS AND MULTIFAMILY LOANS

The Trustee will review the documents delivered to it with respect to
the Mortgage Loans, Contracts and Multifamily Loans included in the related
Trust Fund. Unless otherwise specified in the related Prospectus Supplement, if
any document is not delivered or is found to be defective in any material
respect and the Company cannot deliver such document or cure such defect within
90 days after notice thereof (which the Trustee will undertake to give within
45 days of the delivery of such documents), and if any other party obligated to
deliver such document or cure such defect has not done so and has not
substituted or repurchased the affected Mortgage Loan, Multifamily Loan or
Contract, then the Company will, not later than the first date designated for
the deposit of payments into the Certificate Account (a "Deposit Date") which
is more than ten days after such 90-day period, (a) if so provided in the
Prospectus Supplement remove the affected Mortgage Loan, Multifamily Loan or
Contract from the Trust Fund and substitute one or more other Mortgage Loans,
Multifamily Loans or Contracts therefor or (b) repurchase the Mortgage Loan,
Multifamily Loan or Contract from the Trustee for a price equal to 100% of its
principal balance plus one month's interest thereon at the applicable
Remittance Rate. Such purchase price will be deposited in the Certificate
Account on such Deposit Date. Unless otherwise specified in the Prospectus
Supplement, this repurchase and, if applicable, substitution obligation
constitutes the sole remedy available to Holders of the Certificates of the
applicable Series or the Trustee against the Company for a material defect in a
document relating to a Mortgage Loan, Multifamily Loan or Contract.

Unless otherwise specified in the related Prospectus Supplement, the
Company will agree to either (a) cure any breach of any representation or
warranty that materially and adversely affects the interests of the Holders of
the Certificates of the applicable Series in a Mortgage Loan, Multifamily Loan
or Contract within 90 days of its discovery by the Company or its receipt of
notice thereof from the Trustee, (b) repurchase such Mortgage Loan, Multifamily
Loan or Contract not later than the first Deposit Date which is more than ten
days after such 90-day period for a price equal to 100% of its principal
balance plus one month's interest thereon at the applicable Remittance Rate, or
(c) if so specified in the Prospectus Supplement, remove such Mortgage Loan,
Multifamily Loan or Contract from the Trust Fund and substitute one or more
other mortgage loans or contracts therefor. Such purchase price will be
deposited in the Certificate Account on such Deposit Date. Unless otherwise
specified in the related Prospectus Supplement, this repurchase and, if
applicable, substitution obligation will constitute the sole remedies available
to Holders of the Certificates of the applicable Series or the Trustee for any
such breach.

If the Prospectus Supplement for a Series of Certificates so provides,
then in lieu of agreeing to repurchase or substitute Mortgage Loans, Contracts
or Multifamily Loans as described above, the Company may obtain such an
agreement from the entity which sold such Mortgage Loans, Contracts or
Multifamily Loans to the Company, which agreement will be assigned to the
Trustee for the benefit of the holders of the Certificates of such series.

If a REMIC election is to be made with respect to all or a portion of
a Trust Fund, there may be federal income tax limitations on the right to
substitute Mortgage Loans, Multifamily Mortgage Loans or Contracts as described
above.

EVIDENCE AS TO COMPLIANCE

The related Agreement will provide that on or before a specified date
in each year, beginning the first such date that is at least a specified number
of months after the Cut-off Date, a firm of independent public accountants will
furnish a statement to the Trustee to the effect that, based on an examination
of certain specified documents and records relating to the servicing of the
Administrator's mortgage loan portfolio conducted substantially in compliance
with the audit program for mortgages serviced for FNMA or FHLMC, the United
States Department of Housing and Urban Development Mortgage Audit Standards or
the Uniform Single Audit Program for Mortgage Bankers (the "Applicable
Accounting Standards"), such firm is of the opinion that such servicing has
been conducted in compliance with the

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Applicable Accounting Standards except for (a) such expenses as such firm shall
believe to be immaterial and (b) such other exceptions as shall be set forth in
such statement.

LIST OF CERTIFICATEHOLDERS

Upon written request of the Trustee, the Registrar for a Series of
Certificates will provide to the Trustee, within fifteen days after receipt of
such request, a list of the names and addresses of all Holders of record of
such Series as of the most recent Record Date for payment of distributions to
Holders of that Series. Upon written request of three or more Holders of record
of a Series of Certificates for purposes of communicating with other Holders
with respect to their rights under the Agreement for such Series, the Trustee
will afford such Holders access during business hours to the most recent list
of Holders of that Series held by the Trustee. With respect to Book Entry
Certificates, the only named Holder on the Certificate Register will be the
Clearing Agency.

The Agreement will not provide for the holding of any annual or other
meetings of Holders of Certificates.

ADMINISTRATION OF THE CERTIFICATE ACCOUNT

The Agreement with respect to a Series will require that the
Certificate Account be any of the following: (i) an account maintained with a
depository institution the debt obligations of which (or, in the case of a
depository institution which is a part of a holding company structure, the debt
obligations of the holding company of which) have a long-term or short-term
rating acceptable to each rating agency that rated the Certificates, (ii) an
account or accounts the deposits in which are fully insured by either the Bank
Insurance Fund (the "BIF") or the Federal Deposit Insurance Corporation (the
"FDIC") or the Savings Association Insurance Fund (as successor to the Federal
Savings and Loan Insurance Corporation) ("SAIF") of the FDIC, (iii) an account
maintained with and in the name of the Trustee, in trust, and in respect of
which the amounts from time to time on deposit therein are insured by the BIF
or the SAIF (to the limits established by the FDIC), provided that all funds in
such account are invested in Permitted Instruments (as defined below) within
one business day of receipt or are remitted to the Holders within one business
day of receipt therein; (iv) a trust account maintained with the corporate
trust department of a federal or state chartered depository institution or
trust company with trust powers and acting in its fiduciary capacity for the
benefit of the Trustee, or (v) an account which will not cause any rating
agency rating the Certificates of such Series to downgrade or withdraw its
then-current rating assigned to the Certificates. The instruments in which
amounts in the Certificate Account may be invested are limited to United States
government securities and other investments acceptable to the rating agencies
rating such series of Certificates, and may include one or more Certificates of
a Series ("Permitted Instruments"). Unless otherwise specified in the related
Prospectus Supplement, a Certificate Account may be maintained as an interest
bearing account, or the funds held therein may be invested pending each
succeeding Distribution Date in Permitted Instruments. Unless otherwise
specified in the related Prospectus Supplement, the Administrator or the
Trustee will be entitled to receive any such interest or other income earned on
funds in the Certificate Account as additional compensation. Unless otherwise
specified in the related Prospectus Supplement, the following payments and
collections received or made subsequent to the Cut-off Date (including
scheduled payments of principal and interest due after the Cut-off Date but
received on or before the Cut-off Date) will be deposited in the Certificate
Account:

(i) all Mortgagor payments on account of principal, including
Principal Prepayments and, if specified in the related Prospectus Supplement,
prepayment penalties;

(ii) all Mortgagor payments on account of interest, subject to
exclusions or adjustments as described in the related Prospectus Supplement
adjusted to the Remittance Rate;

(iii) all Liquidation Proceeds net of certain amounts reimbursed to
the Servicers or the Administrator, as described above;

(iv) all Insurance Proceeds, other than proceeds to be applied to
the restoration or repair of the related property or released to the Mortgagor
and net of certain amounts reimbursed to the Servicers or the Administrator, as
described above;

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(v) all condemnation awards or settlements which are not released
to the Mortgagor in accordance with normal servicing procedures;

(vi) any Advances made as described under "Servicing of the
Mortgage Loans, Multifamily Loans and Contracts -- Advances" and certain other
amounts required under the Agreement to be deposited in the Certificate
Account;

(vii) all proceeds of any Mortgage Loan, Multifamily Loan or
Contract or property acquired in respect thereof repurchased by the
Administrator, the Company, the Seller or the Servicer or otherwise as
described above or under "Termination" below;

(viii) all amounts, if any, required to be transferred to the
Certificate Account from any Credit Enhancement for the related Series; and

(ix) all other amounts required to be deposited in the Certificate
Account pursuant to the related Agreement.

REPORTS TO HOLDERS OF CERTIFICATES

Concurrently with each distribution on the Certificates of a Series,
unless otherwise specified in the related Prospectus Supplement, the Trustee
will furnish to Holders of such Certificates a statement generally setting
forth, to the extent applicable to such Series, among other things:

(i) the aggregate amount of such distribution allocable to
principal, separately identifying the amount allocable to each Class;

(ii) the amount of such distribution allocable to interest,
separately identifying the amount allocable to each Class;

(iii) the aggregate principal balance of each Class of the
Certificates after giving effect to distributions on such Distribution Date;

(iv) the aggregate principal balance of any Class Certificates
which are Compound Interest Securities after giving effect to any increase in
such principal balance that results from the accrual of interest that is not
yet distributable thereon;

(v) if applicable, the amount otherwise distributable to Holders
of any Class of Certificates that was distributed to Holders of other Classes
of Certificates;

(vi) if any Class of Certificates has priority in the right to
receive Principal Prepayments, the amount of Principal Prepayments in respect
of the related Mortgage Assets;

(vii) the aggregate principal balance and number of Mortgage Loans,
Multifamily Loans and Contracts which were delinquent as to a total of two
installments of principal and interest; and

(viii) as of the most recent date for which information was
available, the aggregate principal balances of Mortgage Loans, Multifamily
Loans and Contracts which (a) were delinquent 30-59 days, 60-89 days, and 90
days or more, and (b) were in foreclosure; and

(ix) the amount of coverage then remaining under any Credit
Enhancement.

The Administrator or the Trustee will also furnish annually customary
information deemed necessary for Holders of such Certificates to prepare their
tax returns.

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EVENTS OF DEFAULT

"Events of Default" under the Agreement with respect to a Series will
consist of (i) any failure by the Administrator to duly observe or perform in
any material respect any of its covenants or agreements in such Agreement
materially affecting the rights of Holders of the Certificates of such Series
which continues unremedied for 60 days after the giving of written notice of
such failure to the Company by the Trustee or to the Administrator and the
Trustee by the Holders of such Certificates evidencing interests aggregating
not less than 25% of the affected Class of Certificates; and (ii) certain
events of insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings and certain actions by the Administrator
indicating its insolvency, reorganization or inability to pay its obligations.

RIGHTS UPON EVENT OF DEFAULT

As long as an Event of Default under an Agreement remains unremedied
by the Administrator, the Trustee, or Holders of Certificates of each Class of
Certificates affected thereby evidencing, as to each such Class interests
aggregating not less than 51%, may terminate all of the rights and obligations
of the Administrator under the Agreement, whereupon the Trustee, or a new
Administrator appointed pursuant to the Agreement, will succeed to all the
responsibilities, duties and liabilities of the Administrator under the
Agreement and will be entitled to similar compensation arrangements.
Notwithstanding its termination as Administrator, the Administrator will be
entitled to receive amounts earned by it under the Agreement prior to such
termination. Following such termination, the Company shall appoint any
established housing finance institution having a net worth of not less than
$10,000,000 to act as successor to the Administrator under such Agreement. If
no such successor shall have been appointed within 30 days following such
termination, then either the Company or the Trustee may petition a court of
competent jurisdiction for the appointment of a successor Administrator.
Pending the appointment of a successor Administrator, the Trustee shall act as
Administrator. The Trustee, the Company and such successor Administrator may
agree upon the compensation to be paid to such successor Administrator, which
in no event may be greater than the compensation previously paid to the
terminated Administrator under such Agreement.

No Holder of Certificates will have any right under the Agreement to
institute any proceeding with respect to the Agreement, unless such Holder
previously has given to the Trustee written notice of default and unless the
Holders of Certificates as specified in the Prospectus Supplement have made
written request to the Trustee to institute such proceeding in its own name as
Trustee thereunder and have offered to the Trustee reasonable indemnity and the
Trustee for 60 days has neglected or refused to institute any such proceedings.
However, the Trustee is under no obligation to exercise any of the trusts or
powers vested in it by the Agreement or to make any investigation of matters
arising thereunder or to institute, conduct or defend any litigation thereunder
or in relation thereto at the request, order or direction of any of the
Holders, unless such Holders have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.

AMENDMENT

The Agreement with respect to a Series may be amended by the Company,
the Administrator and the Trustee without the consent of the Holder of the
Certificates of such Series, to cure any ambiguity, to correct or supplement
any provision therein which may be defective or inconsistent with any other
provision therein or to add any other provisions with respect to matters or
questions arising under the Agreement provided that such amendment is not
materially inconsistent with the provisions of the Agreement and that in each
case, subject as stated in the next sentence, such action will not adversely
affect in any material respect the interests of any Holders of that Series. An
amendment described above shall not be deemed to adversely affect in any
material respect the interests of the Holders of that Series if either (a) an
opinion of counsel satisfactory to the Trustee is obtained to such effect, or
(b) the person requesting the amendment obtains a letter from the rating agency
then rating the Certificates of that Series that the amendment would not result
in a downgrading or withdrawal of the rating then assigned by it to such
Certificates. Notwithstanding the foregoing, the Company, the Administrator
and the Trustee may amend each Agreement without the consent of the Holders of
the Certificates of the relevant Series in order to modify, eliminate or add to
any of its provisions to such extent as may be appropriate or necessary to
maintain REMIC status of all or any portion of any Trust Fund as to which a
REMIC election has been made with respect to the applicable Certificates or to
avoid or minimize the risk of the imposition of any tax on the Trust Fund
created by such Agreement that would be a claim against the Trustee at any time

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prior to final redemption of the Certificates, provided that the Trustee has
obtained the opinion of independent counsel to the effect that such action is
necessary or appropriate to maintain REMIC status or to avoid or minimize the
risk of the imposition of such a tax. Unless otherwise specified in the
Prospectus Supplement, the Agreement may also be amended by the Company, the
Administrator, and the Trustee with the consent of the Holders of Certificates
evidencing interests aggregating not less than 66% of the aggregate principal
balance of the Certificates of the applicable Series for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions of such Agreement or of modifying in any manner the rights of
Holders of Certificates of that Series; provided, however, that no such
amendment may (i) reduce in any manner the amount of, or delay the timing of,
collections of payments received on the related Mortgage Assets or
distributions which are required to be made on any Certificate without the
consent of the Holder of such Certificate, (ii) adversely affect in any
material respect the interests of the Holders of any Class of Certificates in
any manner other than as described in clause (i), without the consent of the
Holders of Certificates of such Class evidencing at least 66% of the interests
of such Class or (iii) reduce the aforesaid percentage of Certificates of any
Class required to consent to any such amendment, without the consent of the
Holders of all Certificates of such Class then outstanding.

TERMINATION

Unless otherwise specified in the related Prospectus Supplement, the
obligations of the Company, as depositor, the Administrator, as servicer, and
the Trustee created by the Agreement with respect to a Series will terminate
upon the payment to Holders of the Certificates of such series of all amounts
held by the Administrator or in the Certificate Account and required to be paid
to them pursuant to the Agreement after the later of (i) the maturity or other
liquidation of the last Mortgage Loan, Multifamily Loan or Contract subject
thereto or the disposition of all property acquired upon foreclosure of any
such Mortgage Loan, Multifamily Loan or Contract or (ii) the repurchase by the
Company from the Trust Fund of all the outstanding Certificates or all
remaining Assets in the Trust Fund. The Agreement will establish the repurchase
price for the Assets in the Trust Fund and the allocation of such purchase
price among the Classes of Certificates. The exercise of such right will effect
early retirement of the Certificates of that Series, but the Company's right so
to repurchase will be subject to the conditions set forth in the related
Prospectus Supplement. If a REMIC election is to be made with respect to all
or a portion of a Trust Fund, there may be additional conditions to the
termination of such Trust Fund which will be described in the related
Prospectus Supplement. In no event, however, will the trust created by the
Agreement continue beyond the expiration of 21 years from the death of the
survivor of certain persons named in the Agreement. The Trustee will give
written notice of termination of the Agreement to each Holder of Certificates
of the applicable Certificates, and the final distribution will be made only
upon surrender and cancellation of the Certificates at an office or agency of
the Trustee specified in such notice of termination.

USE OF PROCEEDS

Unless otherwise specified in an applicable Prospectus Supplement,
substantially all of the net proceeds to be received from the sale of each
Series of Securities will be applied to the simultaneous purchase of the
Mortgage Assets related to such Series or to reimburse the amounts previously
used to effect such a purchase, the costs of carrying such Mortgage Assets
until sale of the Certificates and other expenses connected with pooling the
Mortgage Assets and issuing the Securities.

THE ISSUER

THE COMPANY

Fund America Investors Corporation II (the "Company") was incorporated
in the State of Delaware on December 14, 1992 as a limited purpose finance
corporation. All of its outstanding capital stock is owned by Steven B. Chotin.
The Company maintains its principal office at 6400 S. Fiddler's Green Circle,
Suite 1200B, Englewood, Colorado 80111. Its telephone number is (303) 290-6025.

As specified in the related Prospectus Supplement, the Administrator,
if any, with respect to any series of Securities evidencing interests in
Mortgage Loans, Multifamily Loans or Contracts, and the Non-Agency
Administrator with respect to any Non-Agency Certificate, may be an affiliate
of the Company. The Company anticipates that it will acquire Mortgage Loans,
Multifamily Loans, Agency Securities, Non-Agency Certificates, Private
Mortgage-Backed

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Securities and Contracts in the open market or in privately negotiated
transactions, which may be through or from an affiliate.

Neither the Company nor any of its affiliates will insure or guarantee
the Securities of any Series. See "Special Considerations -- Limited Assets."

OWNER TRUST ISSUER

Any Owner Trust established to act as an Issuer of one or more Series
of Bonds will be created pursuant to a Deposit Trust Agreement between Steven
B. Chotin or the Company (the "Initial Depositor"), acting as depositor, and
the related Owner Trustee. The Initial Depositor (if Steven B. Chotin) will
transfer all of the certificates representing beneficial ownership of each such
Owner Trust ("Certificates of Beneficial Ownership") to the Company prior to
any issuance of Bonds by such Owner Trust. The Company may sell or assign such
Certificates of Beneficial Ownership, in whole or in part, to another entity or
entities at the time of, or subsequent to, the issuance of any Bonds by such
Owner Trust.

The Owner Trust issuing a Series of Bonds will pledge the Assets
securing such Series of Bonds to the Trustee under the Indenture for such
Series. Each Indenture will prohibit such Owner Trust from incurring debt
obligations other than Bonds and similar Series of Bonds unless (i) the
debtholder's sole recourse with respect to such obligations is to collateral
other than the Assets pledged to secure such Bonds or (ii) such obligations are
subordinate to the Bonds.

Each Deposit Trust Agreement will provide that the Owner Trust created
under such agreement may not engage in any activities other than (i) issuing
and selling one or more series of Bonds and other similar series of bonds, (ii)
purchasing, owning, holding, pledging, or selling Mortgage Assets; provided,
however, that any indebtedness incurred in connection with such transactions
shall be secured only by collateral other than the Assets pledged to secure the
Bonds or shall be subordinate to the Bonds, and (iii) other activities which
are necessary or convenient to accomplish the foregoing and are incidental
thereto.

No Deposit Trust Agreement will be subject to amendment without the
prior written consent of the related Owner Trustee and holders representing 50%
of the Certificates of Beneficial Ownership of the Owner Trust. In addition,
the amendment of certain provisions of a Deposit Trust Agreement may require
the consent of the Trustee with respect to each Series of Bonds issued by the
related Owner Trust. The holders of Certificates of Beneficial Ownership of an
Owner Trust will not be liable for payment of principal or interest on the
Bonds of any series issued by such Owner Trust and each of the holders of the
Bonds of such series will be deemed to have released such holders of
Certificates of Beneficial Ownership from any such claim, liability or
obligation on or with respect to such Bonds.

Each Deposit Trust Agreement will provide that the holders of
Certificates of Beneficial Ownership of the Owner Trust created under such
agreement shall indemnify the related Owner Trustee against all losses and
liability suffered by it in acting upon the holders' instructions, except in
the case of willful misconduct or gross negligence on the part of such Owner
Trustee. The Owner Trustee will have no liability for action taken by it in
good faith in reliance upon direction to it for the disposition of monies or
collateral pursuant to a Deposit Trust Agreement.

MANAGEMENT AGREEMENT

The Issuer with respect to a Series of Bonds may enter into a
management agreement (the "Management Agreement") with Fund America Management
Corporation ("FAMC") or another entity (FAMC or such other entity which has
entered into a Management Agreement with the Issuer being referred to herein as
the "Manager"), pursuant to which the Manager will, among other things, prepare
and make such reports as are required to be delivered by the Issuer to the
Trustee and provide advisory, accounting, administrative, clerical and other
services required in the conduct of the Issuer's business. As compensation for
its services, the Issuer will pay the Manager a management fee. The Manager
will not assume any responsibility under the Management Agreement other than to
render services called for thereunder and may subcontract to a third party all
or a portion of its duties thereunder. The Manager and its affiliates,
shareholders, directors, officers and employees will not be liable to the
Issuer, the Holders of Bonds or others, except by reason of acts constituting
bad faith, gross negligence or willful misconduct. The Manager and its
affiliates will be

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indemnified with respect to all expenses, losses, damages, liabilities,
demands, charges and claims of any nature in respect of acts or omissions
performed or omitted by it in accordance with the standards set forth in the
preceding sentence.

All of the outstanding common stock of the FAMC is owned by Steven B.
Chotin, who also owns all of the outstanding common stock of the Company and
who may act as Initial Depositor with respect to the formation of any Trust
Issuers. See "The Issuer -- The Company" and "-- Owner Trust Issuer."

THE TRUSTEE

Any commercial bank or trust company serving as Trustee may have
normal banking relationships with the Company or the Administrator. In
addition, the Trustee will have the power and the responsibility for appointing
co-trustees or separate trustees of all or any part of the Trust Estate or
Trust Fund relating to a particular Series of Securities. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee by the Indenture or Agreement, as applicable, shall be
conferred or imposed upon the Trustee and such separate trustee or co-trustee
jointly, or in any jurisdiction in which the Trustee shall be incompetent or
unqualified to perform certain acts, singly upon such separate trustee or
co-trustee who shall exercise and perform such rights, powers, duties and
obligations solely at the direction of the Trustee.

The Trustee will make no representations as to the validity or
sufficiency of the applicable Indenture or Agreement, the related Securities or
of any Mortgage Loan, Agency Security, Contract, Multifamily Loan or related
document, and will not be accountable for the use or application by the Company
or an Issuer of any funds paid to the Company or such Issuer in respect of the
Securities or the related Assets, or amounts deposited in the related
Collection Account, Certificate Account or deposited into any other account for
purposes of making payments or distributions to Holders. If no Event of
Default has occurred, the Trustee will be required to perform only those duties
specifically required of it under the applicable Indenture or Agreement.
However, upon receipt of the various certificates, reports or other instruments
required to be furnished to it, the Trustee will be required to examine them to
determine whether they conform to the requirements of the applicable Indenture
or Agreement.

The Trustee may resign at any time and the Company or the Issuer, as
applicable, may remove the Trustee if the Trustee ceases to be eligible to
continue as such under the applicable Indenture or Agreement, if the Trustee
becomes insolvent or in such other instances, if any, as are set forth in the
applicable Indenture or Agreement. Following any resignation or removal of the
Trustee, the Company, the Issuer or Administrator, as applicable, will be
obligated to appoint a successor Trustee. Any resignation or removal of the
Trustee and appointment of a successor Trustee does not become effective until
acceptance of the appointment by the successor Trustee.

Pursuant to the Trust Indenture Act of 1939, as amended, the Trustee
may have a "conflicting interest" if any Event of Default occurs with respect
to one or more Classes of Bonds which are Special Allocation Securities issued
under the Indenture. In such event, the Trustee may be required to resign its
trusteeship with respect to one or more Classes of such Bonds and a successor
Trustee would be appointed for such Classes.

CERTAIN LEGAL ASPECTS OF THE MORTGAGE ASSETS

The following discussion contains summaries of certain legal aspects
of residential and multi-family mortgage loans which are general in nature.
Because such legal aspects are governed primarily by applicable state law
(which laws may differ substantially), the summaries do not purport to be
complete nor to reflect the laws of any particular state, nor to encompass the
laws of all states in which the security for the Mortgage Loans or Multifamily
Loans is situated. The summaries are qualified in their entirety be reference
to the applicable federal and state laws governing the Mortgage Loans and
Multifamily Loans.

In addition, the following discussion also contains a summary of the
Title I Program, which may be applicable to certain of the Mortgage Loans,
Multifamily Loans and Contracts. With respect to each Series for which the
related Trust Estate or Trust Fund includes Non-Agency Certificates backed by
Contracts or for which the related Trust Fund

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includes Contracts, the related Prospectus Supplement will contain a discussion
of certain legal aspects of manufactured housing contracts.

THE MORTGAGE LOANS AND MULTIFAMILY LOANS

General

Mortgages. The Mortgage Loans and Multifamily Loans will be secured
either by deeds of trust or mortgages. A mortgage creates a lien upon the real
property encumbered by the mortgage. It is not prior to the lien for real
estate taxes and assessments. Priority between mortgages depends on their terms
and generally on the order of filing with a state or county office. There are
two parties to a mortgage: the mortgagor, who is the borrower and homeowner or
the land trustee (as described below), and the mortgagee, who is the lender.
Under the mortgage instrument, the mortgagor delivers to the mortgagee a note
or bond and the mortgage. In the case of a land trust, there are three parties
because title to the property is held by a land trustee under a land trust
agreement of which the borrower/homeowner is the beneficiary; at origination of
a mortgage loan, the borrower executes a separate undertaking to make payments
on the mortgage note. Although a deed of trust is similar to a mortgage, a deed
of trust formally has three parties, the borrower-homeowner called the trustor
(similar to a mortgagor), a lender (similar to a mortgagee) called the
beneficiary, and a third-party grantee called the trustee. Under a deed of
trust, the borrower grants the property, irrevocably until the debt is paid, in
trust and generally with a power of sale, to the trustee to secure payment of
the obligation. The trustee's authority under a deed of trust and the
mortgagee's authority under a mortgage are governed by law, the express
provisions of the deed of trust or mortgage and, in some cases, the directions
of the beneficiary.

Cooperative Loans. Certain of the Mortgage Loans may be Cooperative
Loans. The private, non-profit, cooperative apartment corporation owns all the
real property that comprises the project, including the land, separate dwelling
units and all common areas. The cooperative is directly responsible for project
management and, in most cases, payment of real estate taxes and hazard and
liability insurance. If there is a blanket mortgage on the cooperative
apartment building and/or underlying land, as is generally the case, the
cooperative, as project mortgagor, is also responsible for meeting these
mortgage obligations. A blanket mortgage is ordinarily incurred by the
cooperative in connection with the construction or purchase of the
cooperative's apartment building. The interest of the occupant under
proprietary leases or occupancy agreements to which that cooperative is a party
are generally subordinate to the interest of the holder of the blanket mortgage
in that building. If the cooperative is unable to meet the payment obligations
arising under its blanket mortgage, the mortgagee holding the blanket mortgage
could foreclose on that mortgage and terminate all subordinate proprietary
leases and occupancy agreements. In addition, the blanket mortgage on a
cooperative may provide financing in the form of a mortgage that does not fully
amortize with a significant portion of principal being due in one lump sum at
final maturity. The inability of the cooperative to refinance this mortgage and
its consequent inability to make such final payment could lead to foreclosure
by the mortgagee providing the financing. A foreclosure in either event by the
holder of the blanket mortgage could eliminate or significantly diminish the
value of any collateral held by the lender who financed the purchase by an
individual tenant-stockholder of cooperative shares or, in the case of a pool
of Mortgage Loans including Cooperative Loans, the collateral securing the
Cooperative Loans.

The cooperative is owned by tenant-stockholders who, through ownership
of stock shares or membership certificates in the corporation, receive
proprietary leases or occupancy agreements which confer exclusive rights to
occupy specific units. Generally, a tenant-stockholder of a cooperative must
make a monthly payment to the cooperative representing such
tenant-stockholder's pro rata share of the cooperative's payments for its
blanket mortgage, real property taxes, maintenance expenses and other capital
or ordinary expenses. An ownership interest in a cooperative and accompanying
occupancy rights is financed through a cooperative share loan evidenced by a
promissory note and secured by a security interest in the occupancy agreement
or proprietary lease and in the related cooperative shares. The lender takes
possession of the share certificate and a counterpart of the proprietary lease
or occupancy agreement and a financing statement covering the proprietary lease
or occupancy agreement and the cooperative shares is filed in the appropriate
state and local offices to perfect the lender's interest in its collateral.
Subject to the limitations discussed below, upon default of the
tenant-stockholder, the lender may sue for judgment on the promissory note,
dispose of the collateral at a public or private sale or otherwise proceed
against the collateral or tenant-stockholder as an individual as provided in
the security agreement covering the assignment of the proprietary lease or
occupancy agreement and the pledge of cooperative shares.

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Foreclosure

Mortgages. Foreclosure of a deed of trust is generally accomplished
by a non-judicial trustee's sale under a specific provision in the deed of
trust that authorizes the trustee to sell the property to a third party upon
any default by the borrower under the terms of the note or deed of trust. In
some states, the trustee must record a notice of default and send a copy to the
borrower-trustor and any person who has recorded a request for a copy of a
notice of default and notice of sale. In addition, the trustee must provide
notice in some states to any other individual having an interest in the real
property, including any junior lien holders. The borrower, or any other person
having a junior encumbrance on the real estate, may, during a reinstatement
period, cure the default by paying the entire amount in arrears plus the costs
and expenses incurred in enforcing the obligation. Generally, state law
controls the amount of foreclosure expenses and costs, including attorney's
fees, which may be recovered by a lender. If the deed of trust is not
reinstated, a notice of sale must be posted in a public place and, in most
states, published for a specific period of time in one or more newspapers. In
addition, some state laws require that a copy of the notice of sale be posted
on the property and sent to all parties having an interest in the real
property.

Foreclosure of a mortgage is generally accomplished by judicial
action. The action is initiated by the service of legal pleadings upon all
parties having an interest in the real property. Delays in completion of the
foreclosure may occasionally result from difficulties in locating necessary
parties defendant. Judicial foreclosure proceedings are often not protested by
any of the parties defendant. However, when the mortgagee's right to foreclose
is contested, the legal proceedings necessary to resolve the issue can be time
consuming. After the completion of judicial foreclosure, the court generally
issues a judgment of foreclosure and appoints a referee or other court officer
to conduct the sale of the property.

In case of foreclosure under either a mortgage or a deed of trust, the
sale by the referee or other designated officer or by the trustee is a public
sale. However, because of the difficulty a potential buyer at the sale would
have in determining the exact status of title and because the physical
condition of the property may have deteriorated during foreclosure proceedings,
it is uncommon for a third party to purchase the property at the foreclosure
sale. Rather, it is common for the lender to purchase the property from the
trustee or referee for an amount equal to the principal amount of the mortgage
or deed of trust, accrued and unpaid interest and expenses of foreclosure.
Thereafter, the lender will assume the burdens of ownership, including
obtaining casualty insurance and making such repairs at its own expense as are
necessary to render the property suitable for sale. The lender will commonly
obtain the services of a real estate broker and pay the broker's commission in
connection with the sale of the property. Depending upon market conditions, the
ultimate proceeds of the sale of the property may not equal the lender's
investment in the property. Any loss may be reduced by the receipt of any
mortgage insurance proceeds.

When the beneficiary under a junior deed of trust cures the default
and state law allows the beneficiary to reinstate or redeem by paying the full
amount of the senior deed of trust, then in those states the amount paid by the
beneficiary to so cure or redeem generally becomes a part of the indebtedness
secured by the junior deed of trust. See "Junior Liens; Rights of Senior
Mortgagors or Beneficiaries" below.

A sale conducted in accordance with the terms of the power of sale
contained in a mortgage or deed of trust is generally presumed to be conducted
regularly and fairly, and a conveyance of the real property by the trustee
confers, in most states, legal title to the real property to the purchaser,
free of all junior mortgages or deeds of trust and free of all other liens and
claims subordinate to the mortgage or deed of trust under which the sale is
made (with the exception of certain governmental liens). The purchaser's title
is, however, subject to all senior liens, encumbrances and mortgages and may be
subject to mechanic's and materialman's liens in some states. Thus, if the
mortgage or deed of trust being foreclosed is a junior mortgage or deed of
trust, the sheriff or trustee will convey title to the purchaser of the real
property, subject to any existing first mortgages or deed of trust and any
other prior liens and claims. The foreclosure of a junior mortgage or deed of
trust, generally, will have an effect on the first mortgage or deed of trust,
if the senior mortgage or deed of trust grants to the senior mortgagee or
beneficiary the right to accelerate its indebtedness under a "due-on-sale"
clause or "due on further encumbrance" clause contained in the senior mortgage
or deed of trust. See "Anti-Deficiency Legislation and Other Limitations on
Lenders" below.

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The proceeds received by the sheriff or trustee from the sale are
applied pursuant to the terms of the deed of trust, which may require
application first to the costs, fees and expenses of sale and then in
satisfaction of the indebtedness secured by the mortgage or deed of trust under
which the sale was conducted. In some states, any surplus money remaining may
be available to satisfy claims of the holders of junior mortgages or deeds of
trust and other junior liens and claims in order of their priority, whether or
not the mortgagor or trustee is in default, while in some states, any surplus
money remaining may be payable directly to the mortgagor or trustor. Any
balance remaining is generally payable to the mortgagor or trustor. Following
the sale, in some states the mortgagee or beneficiary following a foreclosure
of a mortgage or deed of trust may not obtain a deficiency judgment against the
mortgagor or trustor. A junior lienholder whose rights in the property are
terminated by the foreclosure by a senior lienholder will not share in the
proceeds from the subsequent disposition of the property.

Cooperative Loans. The cooperative shares owned by the
tenant-stockholder and pledged to the lender are, in almost all cases, subject
to restrictions on transfer as set forth in the cooperative's Certificate of
Incorporation and Bylaws, as well as the proprietary lease or occupancy
agreement, and may be canceled by the cooperative for failure by the
tenant-stockholder to pay rent or other obligations or charges owned by such
tenant-stockholder, including mechanics' liens against the cooperative
apartment building incurred by such tenant-stockholder. The proprietary lease
or occupancy agreement generally permits the cooperative to terminate such
lease or agreement in the event an obligor fails to make payments or defaults
in the performance of covenants required thereunder. Typically, the lender and
the cooperative enter into a recognition agreement which establishes the rights
and obligations of both parties in the event of a default by the
tenant-stockholder on its obligations under the proprietary lease or occupancy
agreement. A default by the tenant-stockholder under the proprietary lease or
occupancy agreement will usually constitute a default under the security
agreement between the lender and the tenant-stockholder.

The recognition agreement generally provides that, in the event that
the tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the cooperative will take no action to terminate such lease or
agreement until the lender has been provided with an opportunity to cure the
default. The recognition agreement typically provides that if the proprietary
lease or occupancy agreement is terminated, the cooperative will recognize the
lender's lien against proceeds from a sale of the cooperative apartment,
subject, however, to the cooperative's right to sums due under such proprietary
lease or occupancy agreement. The total amount owed to the cooperative by the
tenant-stockholder, which the lender generally cannot restrict and does not
monitor, could reduce the value of the collateral below the outstanding
principal balance of the cooperative loan and accrued and unpaid interest
thereon.

Recognition agreements also provide that in the event of a foreclosure
on a cooperative loan, the lender must obtain the approval or consent of the
cooperative as required by the proprietary lease before transferring the
cooperative shares or assigning the proprietary lease. Generally, the lender is
not limited in any rights it may have to dispossess the tenant-stockholders.

In some states, foreclosure on the cooperative shares is accomplished
by a sale in accordance with the provisions of Article 9 of the Uniform
Commercial Code (the "UCC") and the security agreement relating to those
shares. Article 9 of the UCC requires that a sale be conducted in a
"commercially reasonable" manner. Whether a foreclosure sale has been conducted
in a "commercially reasonable" manner will depend on the facts in each case. In
determining commercial reasonableness, a court will look to the notice given
the debtor and the method, manner, time, place and terms of the foreclosure.
Generally, a sale conducted according to the usual practice of banks selling
similar collateral will be considered reasonably conducted. Article 9 of the
UCC provides that the proceeds of the sale will be applied first to pay the
costs and expenses of the sale and then to satisfy the indebtedness secured by
the lender's security interest. The recognition agreement, however, generally
provides that the lender's right to reimbursement is subject to the right of
the cooperative corporation to receive sums due under the proprietary lease or
occupancy agreement. If there are proceeds remaining, the lender must account
to the tenant-stockholder for the surplus. Conversely, if a portion of the
indebtedness remains unpaid, the tenant-stockholder is generally responsible
for the deficiency. See "Anti-Deficiency Legislation and Other Limitations on
Lenders" below.

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Junior Liens; Rights of Senior Mortgagees or Beneficiaries

Certain of the Mortgage Loans, including Title I Loans, may be secured
by mortgages or deeds of trust providing for junior (i.e. second, third, etc.)
liens on the related Mortgaged Properties which are junior to the other
mortgages or deeds of trust held by other lenders or institutional investors.
The rights of the beneficiary under a junior deed of trust or as mortgagee
under a junior mortgage are subordinate to those of the mortgagee or
beneficiary under the senior mortgage or deed of trust, including the prior
rights of the senior mortgagee or beneficiary to receive hazard insurance and
condemnation proceeds and to cause the property securing the Mortgage Loans to
be sold upon default of the mortgagor or trustor. As discussed more fully
below, a junior mortgagee or beneficiary in some states may satisfy a defaulted
senior loan in full and in some states may cure such default and bring the
senior loan current, in either event adding the amounts expended to the balance
due on the junior loan. In most states, absent a provision in the mortgage or
deed of trust, no notice of default is required to be given to a junior
mortgagee or beneficiary.

The forms of the mortgage or deed of trust used by most institutional
lenders generally confer on the mortgagee or beneficiary the right both to
receive all proceeds collected under any hazard insurance policy and all awards
made in connection with any condemnation proceedings, and to apply such
proceeds and awards to any indebtedness secured by the mortgage or deed of
trust, in such order as the mortgagee or beneficiary may determine. Thus, in
the event improvements on the property are damaged or destroyed by fire or
other casualty, or in the event the property is taken by condemnation, the
mortgagee or beneficiary under the underlying first mortgage or deed of trust
may have the prior right to collect any insurance proceeds payable under a
hazard insurance policy and any award of damages in connection with the
condemnation and to apply the same to the indebtedness secured by the first
mortgage or deed of trust. In those situations, proceeds in excess of the
amount of first mortgage indebtedness generally may be applied to the
indebtedness of a junior mortgage or trust deed.

Other provisions typically found in the form of the mortgagee or deed
of trust generally used by most institutional lenders obligates the mortgagor
or trustor to pay before delinquency all taxes and assessments on the property
and, when due, all encumbrances, charges and liens on the property which appear
prior to the mortgage or deed of trust, to provide and maintain fire insurance
on the property, to maintain and repair the property and not to commit or
permit any waste thereof, and to appear in and defend any action or proceeding
purporting to affect the property or the rights of the mortgagee or beneficiary
under the mortgage or deed of trust. Upon a failure of the mortgagor or trustor
to perform any of these obligations, the mortgagee or beneficiary typically is
given the right under the mortgage or deed of trust to perform the obligation
itself, at its election, with the mortgagor or trustor agreeing to reimburse
the mortgagee or beneficiary for any sums expended by the mortgagee or
beneficiary on behalf of the trustor. All sums so expended by the mortgagee or
beneficiary generally become part of the indebtedness secured by the mortgage
or deed of trust.

Right of Redemption

In some states, after sale pursuant to a deed of trust or foreclosure
of a mortgage, the borrower and foreclosed junior lienors are given a statutory
period in which to redeem the property from the foreclosure sale. In some
states, redemption may occur only upon payment of the entire principal balance
of the loan, accrued interest and expenses of foreclosure. In other states,
redemption may be authorized if the former borrower pays only a portion of the
sums due. The effect of a statutory right of redemption is to diminish the
ability of the lender to sell the foreclosed property. The rights of redemption
would defeat the title of any purchaser from the lender subsequent to
foreclosure or sale under a deed of trust. Consequently, the practical effect
of the redemption right is to force the lender to retain the property and pay
the expenses of ownership until the redemption period has run.

Anti-Deficiency Legislation and Other Limitations on Lenders

Certain states have imposed statutory prohibitions that limit the
remedies of a beneficiary under a deed of trust or a mortgagee under a
mortgage. In some states, statutes limit the right of the beneficiary or
mortgagee to obtain a deficiency judgment against the borrower following
foreclosure or sale under a deed of trust. A deficiency judgment would be a
personal judgment against the former borrower equal in most cases to the
difference between the net amount realized upon the public sale of the real
property and the amount due to the lender. Other statutes require the
beneficiary or mortgagee to exhaust the security afforded under a deed of trust
or mortgage by foreclosure in an attempt to satisfy

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the full debt before bringing a personal action against the borrower. Finally,
other statutory provisions limit any deficiency judgment against the former
borrower following a judicial sale to the excess of the outstanding debt over
the fair market value of the property at the time of the public sale. The
purpose of these statutes is generally to prevent a beneficiary or a mortgagee
from obtaining a large deficiency judgment against the former borrower as a
result of low or no bids at the judicial sale.

In addition to laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including the federal bankruptcy laws and
state laws affording relief to debtors, may interfere with or affect the
ability of the secured mortgage lender to realize upon collateral and/or
enforce a deficiency judgment. For example, with respect to federal bankruptcy
law, a court with federal bankruptcy jurisdiction may permit a debtor through
his or her Chapter 11 or Chapter 13 rehabilitative plan to cure a monetary
default in respect of a mortgage loan on a debtor's residence by paying
arrearages within a reasonable time period and reinstating the original
mortgage loan payment schedule even though the lender accelerated the mortgage
loan and final judgment of foreclosure had been entered in state court
(provided no sale of the residence had yet occurred) prior to the filing of the
debtor's petition. Some courts with federal bankruptcy jurisdiction have
approved plans, based on the particular fact of the reorganization case, that
effected the curing of a mortgage loan default by paying arrearages over a
number of years.

Courts with federal bankruptcy jurisdiction have also indicated that
the terms of a mortgage loan secured by property of the debtor may be modified.
These courts have suggested that such modifications may include reducing the
amount of each monthly payment, changing the rate of interest, altering the
repayment schedule and reducing the lender's security interest to the value of
the residence, thus leaving the lender a general unsecured creditor for the
difference between the value of the residence and the outstanding balance of
the loan.

The Internal Revenue Code of 1986, as amended, provides priority to
certain tax liens over the lien of the mortgage. In addition, substantive
requirements are imposed upon mortgage lenders in connection with the
origination and the servicing of mortgage loans by numerous federal and some
state consumer protection laws. These laws include the federal Truth-in-Lending
Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair
Credit Billing Act, Fair Credit Reporting Act and related statutes. These
federal laws impose specific statutory liabilities upon lenders who originate
mortgage loans and who fail to comply with the provisions of the law. In some
cases, this liability may affect assignees of the mortgage loans.

Generally, Article 9 of the UCC governs foreclosure on cooperative
shares and the related proprietary lease or occupancy agreement. Some courts
have interpreted section 9-504 of the UCC to prohibit a deficiency award unless
the creditor establishes that the sale of the collateral (which, in the case of
a Cooperative Loan, would be the shares of the cooperative and the related
proprietary lease or occupancy agreement) was conducted in a commercially
reasonable manner.

Enforceability of Certain Provisions

Certain of the Mortgage Loans will contain due-on-sale clauses. These
clauses permit the lender to accelerate the maturity of a loan if the borrower
sells, transfers, or conveys the property. The enforceability of these clauses
was the subject of legislation or litigation in many states, and in some cases
the enforceability of these clauses was limited or denied. However, the
Garn-St. Germain Depository Institutions Act of 1982 (the "Garn-St. Germain
Act") preempts state constitutional, statutory and case law prohibiting the
enforcement of due-on-sale clauses and permits lenders to enforce these clauses
in accordance with their terms, subject to certain limited exceptions. The
Garn-St. Germain Act does "encourage" lenders to permit assumption of loans at
the original rate of interest or at some other rate less than the average of
the original rate and the market rate.

Exempted from the general rule of enforceability of due-on-sale
clauses were mortgage loans (originated other than by federal savings and loan
associations and federal savings banks) that were made or assumed during the
period beginning on the date a state, by statute or final appellate court
decision having statewide effect, prohibited the exercise of due-on-sale
clauses and ending on October 15, 1982 ("Window Period Loans"). However, this
exception applied only to transfers of property underlying Window Period Loans
occurring between October 15, 1982 and October 15, 1985 and does not restrict
enforcement of a due-on-sale clause in connection with current transfers of
property underlying

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Window Period Loans. Due-on-sale clauses contained in mortgage loans originated
by federal savings and loan associations or federal savings banks are fully
enforceable pursuant to regulations of the Office of Thrift Supervision (the
"OTS"), as successor to the Federal Home Loan Bank Board which preempt state
law restrictions on the enforcement of due-on-sale clauses.

The Garn-St. Germain Act also sets forth nine instances in which a
mortgage lender covered by the Garn-St. Germain Act (including federal savings
and loan associations and federal savings banks) may not exercise a due-on-sale
clause, notwithstanding the fact that a transfer of the property may have
occurred. These include intra-family transfers, certain transfers by operation
of law, leases of fewer than three years and the creation of a junior
encumbrance. Regulations promulgated under the Garn-St. German Act by the
Federal Home Loan Bank Board as succeeded by the OTS, also prohibit the
imposition of a prepayment penalty upon the acceleration of a loan pursuant to
a due-on-sale clause. If interest rates were to rise above the interest rates
on the Mortgage Loans, then any inability of the Servicer or the Administrator
to enforce due-on-sale clauses may result in the related Trust Estate or Trust
Fund including a greater number of loans bearing below-market interest rates
than would otherwise be the case, since a transferee of the property underlying
a Mortgage Loan would have a greater incentive in such circumstances to assume
the transferor's Mortgage Loan. Any inability to enforce due-on-sale clauses
may affect the average life of the Mortgage Loans and the number of Mortgage
Loans that may be outstanding until maturity.

Upon foreclosure, courts have imposed general equitable principles.
These equitable principles are generally designed to relieve the borrower from
the legal effect of his defaults under the loan documents. Examples of judicial
remedies that have been fashioned include requirements that the lender
undertake affirmative and expensive actions to determine the causes for the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's judgment and have required that lenders reinstate loans or recast
payment schedules in order to accommodate borrowers who are suffering from
temporary financial disability. In other cases, courts have limited the right
of the lender to foreclose if the default under the mortgage instrument is not
monetary, such as the borrower failing to adequately maintain the property or
the borrower executing a second mortgage or deed of trust affecting the
property. Finally, some courts have been faced with the issue of whether or not
federal or state constitutional provisions reflecting due process concerns for
adequate notice require that borrowers under deeds of trust or mortgages
receive notices in addition to the statutorily-prescribed minimum. For the most
part, these cases have upheld the notice provisions as being reasonable or have
found that the sale by a trustee under a deed of trust, or under a mortgage
having a power of sale, does not involve sufficient state action to afford
constitutional protections to the borrower.

The standard forms of note, mortgage and deed of trust generally
contain provisions obligating the borrower to pay a late charge if payments are
not timely made, and in some circumstances may provide for prepayment fees or
penalties if the obligation is paid prior to maturity. In certain states, there
are or may be specific limitations upon late charges which a lender may collect
from a borrower for delinquent payments. Certain states also limit the amounts
that a lender may collect from a borrower as an additional charge if the loan
is prepaid. Late charges (to the extent permitted by law and not waived) will
be retained by the Administrator , the Non-Agency Administrator, the Servicer
or the Non-Agency Servicer as additional servicing compensation.

Adjustable Rate Loans

The laws of certain states may provide that mortgage notes relating to
adjustable rate loans are not negotiable instruments under the Uniform
Commercial Code. In such event, the Trustee will not be deemed to be a "holder
in due course" within the meaning of the Uniform Commercial Code and may take
such a mortgage note subject to certain restrictions on its ability to
foreclose and to certain contractual defenses available to a mortgagor.

Environmental Legislation

Certain states impose a statutory lien for associated costs on
property that is the subject of a cleanup action by the state on account of
hazardous wastes or hazardous substances released or disposed of on the
property. Such a lien will generally have priority over all subsequent liens on
the property and, in certain of these states, will have priority over prior
recorded liens including the lien of a mortgage. In addition, under federal
environmental legislation and under

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state law in a number of states, a secured party which takes a deed in lieu of
foreclosure or acquires a mortgaged property at a foreclosure sale or assumes
active control over the operation or management of a property so as to be
deemed an "owner" or "operator" of the property may be liable for the costs of
cleaning up a contaminated site. Although such costs could be substantial, it
is unclear whether they would be imposed on a secured lender (such as a
Certificate Trustee, a PMBS Trustee, or a Trust Estate or Trust Fund) to
homeowners. In the event that title to a property securing a Mortgage Loan or
Multifamily Loan in a pool of Mortgage Loans was acquired by a Certificate
trustee, a PMBS Trustee, or a Trust Estate or Trust Fund and cleanup costs were
incurred in respect of the property, the Holders of the related Securities
might realize a loss if such costs were required to be paid. In addition, the
presence of certain environmental contamination, including, but not limited to,
lead-based paint, asbestos and leaking underground storage tanks could result
in the holders of the related Securities realizing a loss if associated costs
were required to be paid. The Company, the Administrator, the Underwriters, the
Sellers, the Servicers, the Non-Agency Administrator, the Non-Agency Servicers
and any of their respective affiliates (i) have not caused any environmental
site assessments or evaluations to be conducted with respect to any properties
securing the Mortgage Loans or Multifamily Loans, (ii) are not required to make
any such assessments or evaluations and (iii) make no representations or
warranties and assume no liability with respect to the absence or effect of
hazardous wastes or hazardous substances on any property or any casualty
resulting from the presence or effect of hazardous wastes or hazardous
substances.

Applicability of Usury Laws

Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980, enacted in March 1980 ("Title V"), provides that state
usury limitations shall not apply to certain types of residential first
mortgage loans originated by certain lenders after March 31, 1980. The OTS, as
successor to the Federal Home Loan Bank Board, is authorized to issue rules and
regulations and to publish interpretations governing implementation of Title V.
The statute authorized any state to reimpose interest rate limits by adopting,
before April 1, 1983, a law or constitutional provision which expressly rejects
application of the federal law. Certain states have enacted legislation
rejecting the federal law. In addition, even where Title V is not so rejected,
any state is authorized by the law to adopt a provision limiting discount
points or other charges on mortgage loans covered by Title V.

With respect to Title I Loans, Section 529 of the National Housing Act
(12 U.S.C. -- 1735f-7) provides that state usury limitations are not applicable
to any loan, mortgage or advance which is insured under Title I. The statute
authorized any state to reimpose interest rate limits by adopting a provision
of law. No state has enacted any reported statute to reimpose interest rate
limits with respect to any loan, mortgage or advance that is insured under
Title I.

Soldiers' and Sailors' Civil Relief Act

Generally, under the terms of the Soldiers' and Sailors' Civil Relief
Act of 1940, as amended (the "Relief Act"), a borrower who enters military
service after the origination of such borrower's Mortgage Loan (including a
borrower who is a member of the National Guard or is in reserve status at the
time of the origination of the Mortgage Loan and is later called to active
duty) may not be charged interest above an annual rate of 6% during the period
of such borrower's active duty status, unless a court orders otherwise upon
application of the lender. It is possible that such interest rate limitation or
similar limitations under state law could have an effect, for an indeterminate
period of time, on the ability of the Servicers to collect full amounts of
interest on certain of the Mortgage Loans. In addition, the Relief Act imposes
limitations which would impair the ability of the Servicers to foreclose on an
affected Mortgage Loan during the borrower's period of active duty status.
Thus, in the event that such a Mortgage Loan goes into default there may be
delays and losses occasioned by the inability to realize upon the related
Mortgaged Property in a timely fashion.

Unless otherwise specified in the Prospectus Supplement for a Series
of Securities, any shortfalls in interest collections resulting from
application of the Relief Act to the related Mortgage Loans would result in
losses to the holders of such Certificates.

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CONSUMER PROTECTION LAWS WITH RESPECT TO CONTRACTS

Numerous Federal and state consumer protection laws impose substantial
requirements upon creditors involved in consumer finance. These laws include
the Federal Truth-in-Lending Act, Regulation "Z", the Equal Credit Opportunity
Act, Regulation "B", the Fair Credit Reporting Act, and related statutes.
These laws can impose specific statutory liabilities upon creditors who fail to
comply with their provisions and may affect the enforceability of the contract.

Courts have imposed general equitable principles upon repossession and
litigation involving deficiency balances. These equitable principles are
generally designed to relieve a consumer from the legal consequences of a
default.

In several cases, consumers have asserted that the remedies provided
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. For the most part, courts have upheld the notice provisions of the UCC
and related laws as reasonable or have found that the repossession and resale
by the creditor does not involve sufficient state action to afford
constitutional protection to consumers.

The so-called "Holder-in-Due Course" rule of the Federal Trade
Commission is intended to defeat the ability of the transferor of a consumer
credit contract which is the seller of goods which gave rise to the transaction
(and certain related lenders and assignees) to transfer such contract free of
notice of claims by the debtor thereunder. The effect of this rule is to
subject the assignee of a Contract to all claims and defenses which the debtor
could assert against the related contractor. Liability under this rule is
limited to amounts paid under a Contract; however, the obligor also may be able
to assert the rule to set off remaining amounts due as a defense against a
claim brought by the Trust against such obligor.

The obligations of the obligor under each Unsecured Contract are not
secured by an interest in the related real estate or otherwise, and the related
Trust Estate or Trust Fund, as the owner of an Unsecured Contract, will be a
general unsecured creditor as to such obligations. As a consequence, in the
event of a default under an Unsecured Contract, the related Trust Estate or
Trust Fund will have recourse only against the obligor's assets generally,
along with all other general unsecured creditors of the obligor. In a
bankruptcy or insolvency proceeding relating to an obligor on an Unsecured
Contract, the obligations of the obligor under such Unsecured Contract may be
discharged in their entirety, notwithstanding the fact that the portion of such
obligor's assets made available to the Trust Estate or Trust Fund as a general
unsecured creditor to pay amounts due and owing thereunder are insufficient to
pay all such amounts.

THE TITLE I PROGRAM

Certain of the Mortgage Loans or Contracts contained in a Trust Fund
may be loans insured under the FHA Title I credit insurance program created
pursuant to Sections 1 and 2(a) of the National Housing Act of 1934 (the "Title
I Program"). Under the Title I Program, the FHA is authorized and empowered to
insure qualified lending institutions against losses on eligible loans. The
Title I Program operates as a coinsurance program in which the FHA insures up
to 90% of certain losses incurred on an individual insured loan, including the
unpaid principal balance of the loan, but only to the extent of the insurance
coverage available in the lender's FHA insurance coverage reserve account. The
owner of the loan bears the uninsured loss on each loan.

The types of loans, which are eligible for insurance by the FHA under
the Title I Program, include property improvement loans ("Property Improvement
Loans" or "Title I Loans") and manufactured home loans ("Manufactured Home
Loans" or "Title I Contracts"). A Property Improvement Loan or Title I Loan is
a loan made to finance actions or items that substantially protect or improve
the basic livability or utility of a property and includes: (1) single family,
multifamily and nonresidential property improvement loans; (2) manufactured
home improvement loans, where the home is classified as personalty; (3)
historic preservation loans; and (4) fire safety equipment loans in existing
health care facilities. A Manufactured Home Loan or Title I Contract is a loan
for the purchase or refinancing of a

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manufactured home and/or the lot on which to place such home and includes: (1)
manufactured home purchase loans; (2) manufactured home lot loans; and (3)
combination loans.

In addition to these types of loans, there are two basic methods of
lending or originating loans which include a "direct loan" or a "dealer loan".
With respect to a direct loan, the borrower makes application directly to a
lender without any assistant from a dealer, which application may be filled out
by the borrower or by a person acting at the direction of the borrower who does
not have a financial interest in the loan transaction, and the lender may
disburse the loan proceeds solely to the borrower or jointly to the borrower
and other parties to the transaction. With respect to a dealer loan, the
dealer, who has a direct or indirect financial interest in the loan
transaction, assists the borrower in preparing the loan application or
otherwise assists the borrower in obtaining the loan from the lender and the
lender may disburse proceeds solely to the dealer or the borrower or jointly to
the borrower and the dealer or other parties. With respect to a dealer Title I
Loan, a dealer may include a seller, a contractor or supplier of goods or
services, and with respect to a dealer Title I Contract, a dealer is a person
engaged in the business of manufactured home retail sales.

Loans insured under the Title I Program are required to have fixed
interest rates and, generally, provide for equal installment payments due
weekly, biweekly, semi-monthly, or monthly, except that a loan may be payable
quarterly or semi-annually in order to correspond with the borrower's irregular
flow of income. The first or last payments (or both) may vary in amount but may
not exceed 150% of the regular installment payment, and the first payment may
be due no later than two months from the date of the loan. The note must
contain a provision permitting full or partial prepayment of the loan. The
interest rate may be established by the lender and must be fixed for the term
of the loan and recited in the note. Interest on an insured loan must accrue
from the date of the loan and be calculated according to the actuarial method.
The lender must assure that the note and all other documents evidencing the
loan are in compliance with applicable Federal, state and local laws.

Each insured lender is required to use prudent lending standards in
underwriting individual loans and to satisfy the applicable loan underwriting
requirements under the Title I Program prior to its approval of the loan and
disbursement of loan proceeds. Generally, the lender must exercise prudence and
diligence to determine whether the borrower and any co-maker is solvent and an
acceptable credit risk, with a reasonable ability to make payments on the loan
obligation. The lender's credit application and review must determine whether
the borrower's income will be adequate to meet the periodic payments required
by the loan, as well as the borrower's other housing and recurring expenses,
which determination must be made in accordance with the expense-to-income
ratios published by the Secretary of HUD.

Under the Title I Program, the FHA does not review or approve for
qualification for insurance the individual loans insured thereunder at the time
of approval by the lending institution (as is typically the case with other
federal loan programs). If, after a loan has been made and reported for
insurance under the Title I Program, the lender discovers any material
misstatement of fact or that the loan proceeds have been misused by the
borrower, dealer or any other party, it shall promptly report this to the FHA.
In such case, provided that the validity of any lien on the property has not
been impaired, the insurance of the loan under the Title I Program will not be
affected unless such material misstatement of fact or misuse of loan proceeds
was caused by (or was knowingly sanctioned by) the lender or its employees.

Requirements for Title I Loans

The maximum principal amounts for Title I Loans must not exceed the
actual cost of the project plus any applicable fees and charges allowed under
the Title I Program; provided that such maximum principal amount does not
exceed the following loan amounts: (i) $25,000 for a single family property
improvement loan and nonresidential property improvement loans; (ii) the lesser
of $60,000 or an average of $12,000 per dwelling unit for multifamily property
improvement loans; and (iii) $17,500 for a manufactured home improvement loan
when the manufactured home qualifies as real property. Generally, the term of
a Title I Loan may not be less than six months nor greater than 20 years and 32
days, except that the maximum term of a single family property improvement loan
on a manufactured home is limited to 15 years and 32 days and the maximum term
of a manufactured home improvement loan is limited to 12 years and 32 days. A
borrower may obtain multiple Title I Loans with respect to multiple properties,
and a borrower may obtain more than one Title I Loan with respect to a single
property, in each case as long as the total

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outstanding balance of all Title I Loans on the same property does not exceed
the maximum loan amount for the type of Title I Loan thereon having the highest
permissible loan amount.

Borrower eligibility for a Title I Loan requires that the borrower
have at least a one-half interest in either fee simple title to the real
property, a lease thereof for a term expiring at least six months after the
final maturity of the Title I Loan or a recorded land installment contract for
the purchase of the real property, and that the borrower have equity in the
property being improved at least equal to the amount of the Title I Loan if
such loan amount exceeds $15,000. Any Title I Loan in excess of $5,000 must be
secured by a recorded lien on the improved property which is evidenced by a
mortgage or deed of trust executed by the borrower and all other owners in fee
simple.

The proceeds from a Title I Loan may be used only to finance property
improvements which substantially protect or improve the basic livability or
utility of the property as disclosed in the loan application. The Secretary of
HUD has published a list of items and activities which cannot be financed with
proceeds from any Title I Loan and from time to time the Secretary of HUD may
amend such list of items and activities. With respect to any dealer Title I
Loan, before the lender may disburse funds, the lender must have in its
possession a completion certificate on a HUD-approved form, signed by the
borrower and the dealer. With respect to any direct Title I Loan, the lender is
required to obtain, promptly upon completion of the improvements but not later
than six months after disbursement of the loan proceeds with one six month
extension if necessary, a completion certificate, signed by the borrower. The
lender is required to conduct an on-site inspection on any Title I Loan where
the principal obligation is $7,500 or more, and on any direct Title I Loan
where the borrower fails to submit a completion certificate.

Requirements for Title I Contracts

The maximum principal amount for any Title I Contract must not exceed
the sum of certain itemized amounts, which include a specified percentage of
the purchase price of the manufactured home depending on whether it is a new or
existing home; provided that such maximum amount does not exceed the following
loan amounts: (i) $48,600 for a new or existing manufactured home purchase
loan; (ii) $16,200 for a manufactured home lot purchase; and (iii) $64,800 for
a combination loan (i.e. a loan to purchase a new or existing manufactured home
and the lot for such home). Generally, the term of a Title I Contract may not
be less than six months nor greater than 20 years and 32 days, except that the
maximum term of a manufactured home lot loan is limited to 15 years and 32 days
and the maximum term of a multimodule manufactured home and lot in combination
is limited to 25 years and 32 days.

Borrower eligibility for a Title I Contract requires that the borrower
become the owner of the property to be financed with such loan and occupy the
manufactured home as the borrower's principal residence, except for a
manufactured home lot loan which allows six months from the date of the loan to
occupy the home as the borrower's principal residence. If a manufactured home
is classified as realty, then ownership of the home must be in fee simple, and
also, the ownership of the manufactured home lot must be in fee simple, except
for a lot which consists of a share in a cooperative association that owns and
operates a manufactured home park. The borrower's minimum cash down payment
requirement to obtain financing through a Title I Contract is as follows: (i)
at least 5% of the first $5,000 and 10% of the balance of the purchase price of
a new manufactured home and at least 10% of the purchase price of an existing
manufactured home for a manufactured home purchase loan, or in lieu of a full
or partial cash down payment, the trade-in of the borrower's equity in an
existing manufactured home; (ii) at least 10% of the purchase price and
development costs of a lot for a manufactured home lot loan; and (iii) at least
5% of the first $5,000 and 10% of the balance of the purchase price of the
manufactured home and lot for a combination loan.

Any manufactured home financed by a Title I Contract must be certified
by the manufacturer to have been constructed in compliance with the National
Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C.
Sections 5401-5426), so as to conform to all applicable Federal construction
and safety standards, and with respect to the purchase of a new manufactured
home, the manufacturer must furnish the borrower with a one year written
warranty on a HUD approved form which obligates the manufacturer to correct any
nonconformity with all applicable Federal construction and safety standards or
any defects in materials or workmanship which become evident within one year
after the date of delivery. The regulations under the Title I Program set forth
certain additional requirements relating to the construction, transportation
and installation of any manufactured home and standards for the manufactured
homesite financed by any Title I Contract. The proceeds from a Title I Contract
may be used as follows:

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the purchase or refinancing of a manufactured home, a suitably developed lot
for a manufactured home already owned by the borrower or a manufactured home
and suitably developed lot for the home in combination; or the refinancing of
an existing manufactured home already owned by the borrower in connection with
the purchase of a manufactured home lot or an existing lot already owned by the
borrower in connection with the purchase of a manufactured home. In addition,
the proceeds for a Title I Contract which is a manufactured home purchase loan
may be used for the purchase, construction or installation of a garage,
carport, patio or other comparable appurtenance to the manufactured home, and
the proceeds for a Title I Contract which is a combination loan may be used for
the purchase, construction or installation of a foundation, garage, carport,
patio or other comparable appurtenance to the manufactured home. The proceeds
from a Title I Contract cannot be used for the purchase of furniture or the
financing of any items and activities which are set forth on the list published
by the Secretary of HUD as amended from time to time.

Any Title I Contract must be secured by a recorded lien on the
manufactured home (or lot or home and lot, as appropriate), its furnishings,
equipment, accessories and appurtenance, which lien must be a first lien,
superior to any other lien on the property which is evidenced by a properly
recorded financing statement, a properly recorded security instrument executed
by the borrower and any other owner of the property or other acceptable
instrument. With respect to any Title I Contract involving a manufactured home
purchase loan or combination loan and the sale of the manufactured home by a
dealer, the lender or its agent (other than a manufactured home dealer) must
conduct a site-of-placement inspection within 60 days after the date of the
loan to verify that the terms and conditions of the purchase contract have been
met, the manufactured home and any options and appurtenances included in the
purchase price or financed with the loan have been delivered and installed and
the placement certificate executed by the borrower and the dealer is in order.

FHA Insurance Coverage

Under the Title I Program the FHA establishes an insurance coverage
reserve account for each lender which has been granted a Title I insurance
contract. The amount of insurance coverage in this account is a maximum of 10%
of the amount disbursed, advanced or expended by the lender in originating or
purchasing eligible loans registered with the FHA for Title I insurance, with
certain adjustments permitted or required by the Title I regulations. The
balance in the insurance coverage reserve account is the maximum amount of
insurance claims the FHA is required to pay to the related lender. Loans to be
insured under the Title I Program will be registered for insurance by the FHA,
and the increase in Title I insurance coverage to which the lender is entitled
by reason of the reporting of such loans under the lender's contract of
insurance will be included in the insurance coverage reserve account for the
originating or purchasing lender following the receipt and acknowledgment by
the FHA of a loan report on the prescribed form pursuant to the Title I
regulations. The FHA charges a fee, which is the equivalent of an insurance
premium, of 0.50% of the related loan amount, multiplied by the number of years
of the loan term. Although the total insurance premium charged by the FHA is
0.50%, the annual installment varies depending upon the type and maturity of
the loan. Thus, the effective cost of the insurance premium charge may vary
between 0.50% and 1.0% per annum, unless the loan is held to maturity. The FHA
bills the related lender in advance for the applicable insurance premium charge
on each loan insured under the Title I Program, on approximately the
anniversary date of the date the Secretary of HUD acknowledges the loan report.
If a loan insured under the Title I Program is prepaid during the year, the FHA
will not refund or abate the insurance premium.

Under the Title I Program the FHA will reduce the insurance coverage
available in the lender's FHA insurance coverage reserve account with respect
to loans insured under the lender's contract of insurance by (i) the amount of
the FHA insurance claims approved for payment relating to such insured loans,
(ii) prior to October 1, 1995, the amount of the Annual Reductions attributable
to the contract of insurance and (iii) the amount of reduction of the lender's
FHA insurance coverage reserve account by reason of the sale, assignment or
transfer of loans registered under the lender's contract of insurance. Such
insurance coverage also may be reduced for any FHA insurance claims previously
disbursed to the lender that are subsequently rejected by the FHA. After a
lender has held its Title I contract of insurance for five years, the lender's
FHA insurance coverage reserve account is subject to an annual reduction (the
"Annual Reduction") on each October 1 in an amount equal to 10% of the
insurance coverage reserves available on such date with respect to such
contract of insurance; provided that such Annual Reduction shall not reduce the
insurance coverage to an amount less than $50,000. On June 5, 1995 the FHA
announced the elimination of such annual reductions, effective as of October 1,
1995.

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Upon the receipt and acknowledgment by the FHA of a loan report,
originations of new loans will increase a lender's insurance coverage reserve
account balance by 10% of the amount disbursed, advanced or expended in
originating such loans registered with the FHA for insurance under the Title I
Program. A lender is permitted to sell or otherwise transfer loans reported
for insurance under the Title I Program only to another lender. Upon any such
transfer, except a transfer with recourse or under a guaranty or repurchase
agreement, the seller is required to file a transfer report with the FHA
reporting the transfer of such loans. Upon notification and approval of such
transfer, the insurance coverage reserve account of the selling lender is
reduced, and the insurance coverage reserve account of the purchasing lender is
increased, by an amount equal to the lesser of 10% of the actual purchase price
of the loans or the net unpaid principal balance of the loans, up to the total
amount of the selling lender's insurance coverage reserve account. Thus, in
the event the selling lender's insurance coverage reserve account was less than
10% of the unpaid principal balance of its portfolio of loans reported for
insurance under the Title I Program prior to the sale, the seller's insurance
coverage reserve account may be exhausted as the result of a sale of only a
portion of its total portfolio, with the result that its remaining Title I
Program portfolio may be ineligible for Title I Program benefits until the
lender originates or otherwise acquires additional loans reported for insurance
under the Title I Program. Accordingly, the insurance coverage reserves
transferred to the purchasing lender in such case will be less than 10% of the
lesser of the purchase price or the principal balance of the portfolio of loans
purchased. Additionally, pursuant to FHA regulations, not more than $5,000 in
insurance coverage shall be transferred to or from a lender's insurance
coverage reserve account during any October 1 to September 30 fiscal year
without the approval of the Secretary of HUD. Such HUD approval is generally
viewed as automatic, provided the formal requirements for transfer are
satisfied, but HUD does have the right under FHA regulations to withhold
approval.

Unlike most other FHA insurance programs, the obligation of the FHA to
reimburse a lender for losses in the portfolio of insured loans held by such
lender is limited to the amount in an insurance coverage reserve account
maintained on a lender-by-lender basis and not on a loan-by-loan basis. Except
when to do so would be in HUD's best interest (for instance, to prevent HUD
from paying out claims in excess of 10% of the aggregate original loan balance
for a pool of poorly underwritten loans), the FHA does not track or "earmark"
the loans within a lender's portfolio to determine whether the lender's
insurance coverage reserve account, reduced as the result of an insurance claim
by the lender, are, in fact, attributable to the insured loan with respect to
which the claim was made. For this reason, if a lender is holding insured
loans as a fiduciary on behalf of multiple non-affiliated beneficiaries, in
order for such a lender to cause its insurance coverage reserve account to be
reduced only by an amount to which a particular beneficiary is entitled by
reason of the insured loans beneficially held by it, the lender must segregate
or "earmark" its insurance coverage reserve account on its own books and
records according to which beneficiary is entitled to what portion of the
insurance coverage in the lender's insurance coverage reserve account as if the
insurance coverage were not commingled by the FHA in such insurance coverage
reserve account. In this way the lender can determine at what point the
portion of insurance coverage in such insurance coverage reserve account
"earmarked" for a given beneficiary has been exhausted and stop submitting
additional insurance claims on behalf of such beneficiary. In the event that,
for any reason, such lender continues to submit claims with respect to loans
held on behalf of a beneficiary whose portion of insurance coverage in its
insurance coverage reserve account has been exhausted, the FHA will continue to
honor such claims until all insurance coverage in such lender's insurance
coverage reserve account has been exhausted, even though such insurance
coverage reserve account may, in fact, be held by the lender for the benefit of
a different beneficiary than the beneficiary of the insured loans to which the
claims relate under a separate contractual agreement.

Claims Procedures Under Title I

The term "default" is defined under FHA regulations as the failure of
the borrower to make any payment due under the note for a period of 30 days
after such payment is due. The "date of default" is considered to be the date
30 days after the borrower's first failure to make an installment payment on
the note that is not covered by subsequent payments applied to overdue
installments in the order they became due. When a loan reported for insurance
under the Title I Program goes into default, the lender is required to contact
the borrower and any co-maker and co-signer by telephone or in person to
determine the reasons for the default and to seek a cure. If such lender is
not able to effect a cure after diligent efforts, it may provide the borrower
with a notice of default stating that the loan will be accelerated in 30 days
if the loan is not brought current or the borrower does not enter into a loan
modification agreement or repayment plan. The notice of default must meet
certain requirements set forth in the FHA regulations and must conform to
applicable state law provisions. Such lender is permitted to rescind the
acceleration of maturity of the loan

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only if the borrower brings the loan current, executes a modification agreement
or agrees to an acceptable repayment plan.

Following acceleration of maturity of a secured property improvement
loan, the lender has the option to proceed against the security or make a claim
under its contract of insurance. If the lender chooses to proceed against the
mortgaged property under a security instrument (or if it accepts a voluntary
conveyance or surrender of the mortgaged property), (i) the lender must proceed
against the loan security by foreclosure and acquire good, marketable title to
the property securing the loan and (ii) the lender must take all actions
necessary under applicable law to preserve its rights, if any, to obtain a
deficiency judgment against the borrower, provided however, the lender may
still file an FHA insurance claim, but only with the prior approval of the
Secretary of HUD.

If a lender files an insurance claim with the FHA under the Title I
Program, the FHA reviews the claim, the complete loan file, certification of
compliance with applicable state and local laws in carrying out any foreclosure
or repossession and, where the borrower is in bankruptcy or deceased, evidence
that the lender has properly filed proofs of claims. Generally, a lender must
file its claim of insurance with the FHA no later than (i) for any Title I
Loan, nine months after the date of default of such loan or (ii) for any Title
I Contract, three months after the date of sale of the property securing the
loan, but not to exceed 18 months after the date of default of such loan.
Concurrently with filing the insurance claim, the lender is required to assign
to the United States of America it's entire interest in the note (or a judgment
in lieu of the note), in any securities held and in any claims filed in any
legal proceedings. If, at the time the note is assigned to the United States,
the Secretary of HUD has reason to believe that the note is not valid or
enforceable against the borrower, the FHA may deny the claim and reassign the
note to the lender. If either such defect is discovered after the FHA has paid
a claim, the FHA may require the lender to repurchase the paid claim and to
accept an assignment of the loan note. If the lender subsequently obtains a
valid and enforceable judgment against the borrower, the lender may resubmit a
new insurance claim with an assignment of the judgment. The FHA may contest
any insurance claim previously paid by it and make a demand for repurchase of
the loan with respect to which the claim was paid at any time up to two years
from the date the claim was certified for payment and may do so thereafter in
the event of fraud or misrepresentation on the part of the lender.

A claim for reimbursement of loss with respect to a loan eligible for
insurance under the Title I Program is required to be made on an FHA-approved
form executed by a duly qualified officer of the lender and must be accompanied
by copies of certain relevant documents and documentation specified in the FHA
regulations to support the claim. The lender is required, among other things,
to document its efforts to effect recourse against any dealer in accordance
with any recourse agreement with such dealer. If the loan is subject to an
unsatisfied dealer recourse Agreement claim, the lender is also required to
assign its rights under such recourse agreement. The FHA has the right to deny
any claim for insurance in whole or in part based upon a violation of the FHA
regulations unless a waiver of compliance is granted. The lender is permitted
to appeal any such claim denial and resubmit the claim within six months of the
date of the claim denial, subject to a reprocessing fee.

Under the Title I Program the amount of an FHA insurance claim
payment, when made, is equal to the Claimable Amount, up to the amount of
insurance coverage in the lender's insurance coverage reserve account. The
"Claimable Amount" is equal to 90% of the sum of: (a) the unpaid loan
obligation (net unpaid principal and the uncollected interest earned to the
date of default) with adjustments thereto if the lender has proceeded against
property securing such loan; (b) the interest on the unpaid amount of the loan
obligation from the date of default to the date of the claim's initial
submission for payment plus 15 calendar days (the total period not to exceed
nine months from the date of default), calculated at the rate of 7% per annum;
(c) the uncollected court costs; (d) the attorneys' fees not to exceed $500;
(e) the expenses for recording the assignment of the security to the United
States; and (f) if the loan is a Title I Contract, certain costs incurred in
connection with the foreclosure or repossession of the manufactured home and/or
lot.

LEGAL INVESTMENT MATTERS

Unless otherwise specified in the related Prospectus Supplement, the
Securities of a Series constitute "mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA") so long as they
are rated in one of the two highest rating categories established for such
Securities by at least one nationally

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recognized statistical rating organization. As "mortgage related securities,"
such Securities will constitute legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business entities
(including but not limited to state-chartered savings banks, commercial banks,
savings and loan associations and insurance companies, as well as trustees and
state government employee retirement systems) created pursuant to or existing
under the laws of the United States or any State (including the District of
Columbia and Puerto Rico) whose authorized investments are subject to State
regulation to the same extent that, under applicable law, obligations issued by
or guaranteed as to principal and interest by the United States or any agency
or instrumentality thereof constitute legal investments for such entities.
Pursuant to SMMEA, Alaska, Arkansas, Colorado, Connecticut, Delaware, Florida,
Georgia, Illinois, Kansas, Louisiana, Maryland, Michigan, Missouri, Nebraska,
New Hampshire, New York, North Carolina, Ohio, South Dakota, Utah, Virginia,
and West Virginia each enacted legislation prior to the October 4, 1991
deadline for such enactments, limiting to varying extends the ability of
certain entities (in particular, insurance companies) to invest in "mortgage
related securities," in most cases by requiring the affected investors to rely
upon existing state law, and not SMMEA. Accordingly, the investors affected by
such legislation will be authorized to invest in the Securities only to the
extent provided in such legislation.

Institutions whose investment activities are subject to legal
investment laws or regulations or review by certain regulatory authorities may
be subject to restrictions on investment in certain Classes of the Securities.
Any financial institution which is subject to the jurisdiction of the
Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation ("FDIC"), the Office of
Thrift Supervision ("OTS"), the National Credit Union Administration ("NCUA"),
or other federal or state agencies with similar authority should review any
applicable rules, guidelines and regulations prior to purchasing the
Securities. The Federal Financial Institutions Examination Council, for
example, has issued a Supervisory Policy Statement on Securities Activities
effective February 10, 1992 (the "Policy Statement"). The Policy Statement has
been adopted by the Comptroller of the Currency, the Federal Reserve Board, the
FDIC, the OTS, and the NCUA (with certain modifications), with respect to the
depository institutions that they regulate. The Policy Statement prohibits
depository institutions from investing in certain "high-risk mortgage
securities" (including securities such as certain Classes of Securities),
except under limited circumstances, and sets forth certain investment practices
deemed to be unsuitable for regulated institutions. The NCUA issued final
regulations effective December 2, 1991 that restrict and in some instances
prohibit the investment by federal credit unions in certain types of mortgage
related securities.

Notwithstanding SMMEA, there may be other restrictions on the ability
of certain investors, including depository institutions, either to purchase
Securities or to purchase Securities representing more than a specified
percentage of the investors' assets.

The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to "prudent investor" provisions, percentage-of-assets limits and provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying", or in securities which are issued in book-entry
form.

If specified in the related Prospectus Supplement, other Classes of
Securities offered pursuant to this Prospectus will not constitute "mortgage
related securities" under SMMEA. The appropriate characterization of those
Securities under various legal investment restrictions, and thus the ability of
investors subject to these restrictions to purchase the Securities, may be
subject to significant interpretive uncertainties. No representation is made as
to the proper characterization of Securities not qualifying as "mortgage
related securities" for legal investment or financial institution regulatory
purposes, or as to the ability of particular investors to purchase such
Securities under applicable legal investment restrictions. The uncertainties
described above (and any unfavorable future determination concerning legal
investment or financial institution regulatory characteristics of such
Certificates) may adversely affect the liquidity of such Securities.

Investors should consult their own legal advisors in determining
whether and to what extent the Certificates constitute legal investments for
such investors.

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ERISA CONSIDERATIONS

In considering an investment in a Security of the assets of any
employee benefit plan or retirement arrangement, including individual
retirement accounts and annuities, Keogh plans, and collective investment funds
in which such plans, accounts, annuities or arrangements are invested, that are
described in or subject to the Plan Asset Regulations, ERISA, or corresponding
provisions of the Code (each hereinafter referred to as a Plan), a fiduciary
should consider, among other things, (i) the purposes, requirements, and
liquidity needs of such Plan; (ii) the impact of the plan asset provisions of
ERISA and DOL regulations concerning the definition of plan assets; (iii)
whether the investment satisfies the diversification requirements of section
404(a)(1)(C) of ERISA; and (iv) whether the investment is prudent, considering
the nature of an investment in a Security and the fact that no market in which
such fiduciary can sell or otherwise dispose of Securities may be created or,
if created, will continue to exist for the life of the Securities. The
prudence of a particular investment must be determined by the responsible
fiduciary (usually the trustee or investment manager) with respect to each Plan
taking into account all of the facts and circumstances of the investment.

Sections 406 and 407 of ERISA and section 4975 of the Code prohibit
certain transactions that involve (i) a Plan and any "party in interest" or
"disqualified person" with respect to such Plan, and (ii) plan assets. The
Plan Asset Regulations issued by the DOL define "plan assets" to include not
only securities (such as the Securities) held by a Plan but also the underlying
assets of the issuer of any equity securities, unless one or more exceptions
specified in those Regulations are satisfied. Thus, under the Plan Asset
Regulations, a Plan that acquires a Security could be treated for ERISA
purposes as having acquired a direct interest in some or all of the assets in
the related Trust. Such treatment could cause certain transactions with
respect to such assets to be deemed "prohibited transactions" under ERISA and,
in addition, could result in a finding of an improper delegation by the plan
fiduciary of its duty to manage plan assets.

The DOL has issued several exemptions from certain of the prohibited
transaction rules of ERISA and the related excise tax provisions of section
4975 of the Code. Those exemptions include, but are not limited to: (1)
Prohibited Transaction Class Exemption 95-6 ("PTCE 95-6"), regarding
investments by insurance company general accounts; (2) Prohibited Transaction
Class Exemption 91-38, regarding investment by bank collective investment
funds; (3) Prohibited Transaction Class Exemption 90-1, regarding investments
by insurance company pooled separate accounts; (4) Prohibited Transaction Class
Exemption 83-1, regarding acquisitions by Plans of interests in mortgage pools;
and (5) various underwriter exemptions. Before purchasing any Securities, a
Plan subject to the fiduciary responsibility provisions of ERISA or described
in section 4975(e)(1) of the Code should consult with its counsel to determine
whether the conditions of any exemption would be met. A purchaser of
Securities should be aware, however, that certain of the exemptions do not
apply to the purchase, sale, and holding of subordinated certificates. In
addition, PTCE 83-1 will not apply to Securities evidencing interests in a
Trust or Trust Fund that contains Contracts. Moreover, even if the conditions
specified in one or more exemptions are met, the scope of the relief provided
by an exemption might not cover all acts that might be construed as prohibited
transactions.

The Plan Asset Regulations will not apply to a Security if (1) the
Security is registered under the Securities Exchange Act of 1934, is freely
transferable and is part of a class of Securities than is held by more than 100
unrelated investors (the "Publicly Offered Exception") or (2) immediately after
the most recent acquisition of a Security of the same Series, benefit plan
investors do not own 25% or more of the value of any class of Securities in
that Series (the "Insignificant Participation Exception"). A purchaser of
Securities should be aware, however, that determining whether the Insignificant
Participation Exception applies is administratively impracticable in many
situations. Prior to purchasing a Security, a Plan should consult with its
counsel to determine whether the Publicly Offered Exception, the Insignificant
Participation Exception, or any other exception to the Plan Asset Regulations
would apply to the purchase of the Security.

Section 403 of ERISA requires that all plan assets be held in trust.
However, under regulations that became effective on June 17, 1982, even if the
underlying assets of an issuer of securities (such as the Securities) are
deemed to be plan assets of a Plan investing in such securities, the "holding
in trust" requirement of section 403 of ERISA will be satisfied if such
securities are held in trust on behalf of the Plan.

Because the purchase or holding of Securities may result in
unfavorable consequences for a Plan or its fiduciaries under the Plan Asset
Regulations or the prohibited transaction provisions of ERISA or the Code, (i)
certain

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classes of Securities will not be offered for sale to, and are not transferable
to, any Plan Investor and (ii) certain Classes of Securities will not be
offered for sale to, and are not transferable to, any Plan Investor unless such
Plan Investor provides the Company with a Benefit Plan Opinion (i.e., an
opinion of counsel satisfactory to the Company and the Servicer (and upon which
the Company, the Servicer, the Trustee, the TMP, and their respective counsel
are authorized to rely) generally to the effect that the ownership of a
Security of such class will not (1) cause any of the assets in the related
Trust Estate or Trust Fund to be regarded as plan assets for purposes of the
Plan Asset Regulations; (2) give rise to any fiduciary duty under ERISA on the
part of the Company, the Trustee, a Servicer, or the TMP; or (3) be treated as,
or result in, a prohibited transaction under sections 406 and 407 of ERISA or
section 4975 of the Code.) The Prospectus Supplement for an affected Series
will indicate which classes of Securities are restricted in their availability
to benefit plan investors.

In considering the possible application of the Plan Asset Regulations,
potential Plan Investors should be aware that, with respect to certain Series
and under certain circumstances, the Servicer and the holders of a majority in
interest of the related Residual Securities may have a right to redeem the
Securities of such Series, at its option. In such cases, the Servicer's
purpose for the retention of such a redemption right is to enable the Servicer
to terminate its administration obligations with respect to the Securities in
the event such obligations become unprofitable. The Servicer undertakes no
obligation to consider the interests of Securityholders in deciding whether to
exercise any redemption right.

As described in "Federal Income Tax Consequences" above, an investment
in a Security may produce UBTI for tax- exempt employee benefit plans.
Potential investors also should be aware that ERISA requires that the assets of
a Plan be valued at their fair market value as of the close of the plan year.
Neither the Company, the Servicer nor the Underwriters currently intend to
provide valuations to Securityholders.

Prospective purchasers of Securities that are insurance companies
should be aware that the United States Supreme Court interpreted the fiduciary
responsibility rules of ERISA in John Hancock Mutual Life Insurance Co. v.
Harris Bank and Trust. In John Hancock, the Supreme Court rules that assets
held in an insurance company's general account may be deemed to be "plan
assets" for ERISA purposes under certain circumstances. Prospective purchasers
of Securities that are insurance companies should consult with their counsel
with respect to the application of the John Hancock case and PTCE 95-60 to
their purchase of Securities, and should be aware that certain restrictions may
apply to their purchase of Securities.

Due to the complexity of the rules applicable to Plans and Plan
fiduciaries, and the considerable uncertainty that exists with respect to many
aspects of those rules, Plan Investors contemplating the acquisition of
Securities should consult their legal advisors with respect to the ERISA, Code,
and other consequences of an investment in the Securities.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of
Securities of any Series, to the extent it relates to matters of law or legal
conclusions with respect thereto, represents the opinion of counsel to the
Company with respect to that Series on the material matters associated with
such consequences, subject to any qualifications set forth herein. Counsel to
the Company for each Series will be Andrews & Kurth L.L.P. or Hunton &
Williams, as specified in the Prospectus Supplement ("Counsel to the Company").
The discussion below does not purport to address all federal income tax
consequences that may be applicable to particular categories of investors, some
of which may be subject to special rules. The authorities on which this
discussion is based are subject to change or differing interpretations, and any
such change or interpretation could apply retroactively. The discussion focuses
primarily on investors who will hold the Securities as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code, although much of the discussion is applicable to
other investors as well. Investors should note that, although the Treasury has
issued final regulations under the REMIC provision of the Code (the "REMIC
Regulations"), no currently effective regulations or other administrative
guidance has been issued with respect to certain provisions of the

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Code that are or may be applicable to Securityholders, particularly the
provisions dealing with market discount and stripped debt securities. Although
the Treasury recently issued final regulations dealing with original issue
discount and premium, those regulations do not address directly the treatment
of REMIC Regular Securities and certain other types of securities.
Furthermore, the REMIC Regulations do not address many of the issues that arise
in connection with the formation and operation of a REMIC. Hence, definitive
guidance cannot be provided with respect to many aspects of the tax treatment
of Securityholders, particularly Residual Securityholders (as described below).

Moreover, this summary and the opinion referred to below are based on
current law, and there can be no assurance that the Service will not take
positions that would be materially adverse to investors. Finally, the summary
does not purport to address the anticipated state income tax consequences to
investors of owning and disposing of the Securities. Consequently, investors
should consult their own tax advisors in determining the federal, state,
foreign, and any other tax consequences to them of the purchase, ownership, and
disposition of the Securities.

For purposes of this discussion, where the applicable Prospectus
Supplement provides for a fixed retained yield with respect to the Mortgage
Loans, Agency Securities, Private Mortgage-Backed Securities, Multifamily Loans
or Contracts underlying a Series of Securities, references to the Mortgage
Loans, Agency Securities, Private Mortgage- Backed Securities, Multifamily
Loans or Contracts will be deemed to refer to that portion of the Mortgage
Loans, Agency Securities, Private Mortgage-Backed Securities, Multifamily Loans
or Contracts held by the Trust Fund or Trust Estate which does not include the
fixed retained yield.

FEDERAL INCOME TAX CONSEQUENCES FOR REMIC SECURITIES

GENERAL

With respect to a particular Series of Securities, an election may be
made to treat the Trust Fund, Trust Estate or one or more trusts or segregated
pools of assets therein as one or more REMICs within the meaning of Code
Section 860D. A Trust Fund, Trust Estate or a portion or portions thereof as to
which a REMIC election will be made will be referred to as a "REMIC Pool." For
purposes of this discussion, Securities of a Series as to which one or more
REMIC elections are made are referred to as "REMIC Securities" and will consist
of one or more Classes of "Regular Securities" and one Class of "Residual
Securities" in the case of each REMIC Pool. Qualification as a REMIC requires
ongoing compliance with certain conditions. Upon the issuance of each Series of
REMIC Securities, counsel to the Company will give its opinion generally to the
effect that, assuming (i) the making of an appropriate election, (ii)
compliance with the Agreement or Indenture, as applicable, and (iii) continuing
compliance with the applicable provisions of the Code, as it may be amended
from time to time, and any applicable Treasury regulations adopted thereunder,
each REMIC Pool will qualify as a REMIC. The following general discussion of
the anticipated federal income tax consequences of the purchase, ownership and
disposition of REMIC Securities, to the extent it relates to matters of law or
legal conclusions with respect thereto, represents the opinion of counsel to
the Company, subject to any qualifications set forth herein. In addition,
counsel to the Company has prepared or reviewed the statements in this
Prospectus under the heading "Certain Federal Income Tax Consequences - Federal
Income Tax Consequences for REMIC Securities," and is of the opinion that such
statements are correct in all material respects. Such statements are intended
as an explanatory discussion of the possible effects of the classification of
any Trust Fund or Trust Estate (or applicable portion thereof) as a REMIC for
federal income tax purposes on investors generally and of related tax matters
affecting investors generally, but do not purport to furnish information in the
level of detail or with the attention to an investor's specific tax
circumstances that would be provided by an investor's own tax advisor.
Accordingly, each investor is advised to consult its own tax advisors with
regard to the tax consequences to it of investing in REMIC Securities. With
respect to each Series of REMIC Securities, the Regular Securities will be
considered to be "regular interests" in the REMIC Pool and generally will be
treated for federal income tax purposes as if they were newly originated debt
instruments, and the Residual Securities will be considered to be "residual
interests" in the REMIC Pool. The Prospectus Supplement for each Series of
Securities will indicate whether one or more REMIC elections with respect to
the related Trust Fund or Trust Estate will be made, in which event references
to "REMIC" or "REMIC Pool" herein shall be deemed to refer to each such REMIC
Pool. For purposes of this discussion, unless otherwise specified herein or in
the applicable Prospectus Supplement, the term "Mortgage Loans" will be used to
refer to Mortgage Loans, Agency Securities, Private Mortgage- Backed Securities
(other than residual interests and collateralized mortgage loans), Multifamily
Loans and Contracts.

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STATUS OF REMIC SECURITIES

REMIC Securities held by a thrift institution taxed as a mutual
savings bank or a domestic building and loan association (a "Thrift
Institution") would be treated as "loans... secured by an interest in real
property" within the meaning of Code Section 7701(a)(19)(C)(v) or as other
assets described in Code Section 7701(a)(19)(C) in the same proportion that the
assets of the related REMIC Pool would so qualify. REMIC Securities held by a
real estate investment trust (a "REIT") will constitute "real estate assets"
within the meaning of Code Section 856(c)(4)(A), and interest on the REMIC
Securities will be considered "interest on obligations secured by mortgages on
real property or on interests in real property" within the meaning of Code
Section 856(c)(3)(B) in the same proportion that, for both purposes, the assets
of the REMIC Pool would be so treated. However, if at all times 95% or more of
the assets of the REMIC Pool constitute qualifying assets for Thrift
Institutions and REITs, the REMIC Securities will be treated entirely as
qualifying assets for such entities (and the income will be treated entirely as
qualifying income). Moreover, the REMIC Regulations provide that, for purposes
of Code Section 856(c)(4)(A), payments of principal and interest on the
Mortgage Loans that are reinvested pending distribution to holders of REMIC
Securities constitute qualifying assets for such entities. Where two REMIC
Pools are part of a tiered structure they will be treated as one REMIC for
purposes of the tests described above respecting asset ownership of more or
less than 95%. Notwithstanding the foregoing, however, REMIC income received by
a REIT owning a residual interest in a REMIC Pool could be treated in part as
non-qualifying REIT income if the REMIC Pool holds Mortgage Loans with respect
to which income is contingent on mortgagor profits or property appreciation. In
addition, if the assets of the REMIC include buy-down Mortgage Loans, it is
possible that the percentage of such assets constituting "loans . . . secured
by an interest in real property" for purposes of Code Section
7701(a)(19)(C)(v), may be required to be reduced by the amount of the related
buy-down funds. REMIC Securities held by a regulated investment company will
not constitute "Government securities" within the meaning of Code Section
851(b)(3)(A)(i). REMIC Securities held by certain financial institutions will
constitute an "evidence of indebtedness" within the meaning of Code Section
582(c)(1) and REMIC Securities will not constitute "Government securities"
within the meaning of Code Section 851(b)(3)(A)(i). However, Regular
Securities acquired by another REMIC on its Startup Day (as defined below) in
exchange for regular or residual interests in the REMIC generally will
constitute "qualified mortgages" within the meaning of Code Section 860G(a)(3).
Regular Securities held by a financial asset securitization investment trust (a
"FASIT") generally will qualify for treatment as "permitted assets" within the
meaning of Section 8606(c)(1)(a) of the Code.

QUALIFICATION AS A REMIC

In order for the REMIC Pool to qualify as a REMIC, there must be
ongoing compliance on the part of the REMIC Pool with the requirements set
forth in the Code. The REMIC Pool must fulfill an asset test, which requires
that no more than a de minimis amount of the assets of the REMIC Pool, as of
the close of the third calendar month beginning after the "Startup Day" (which
for purposes of this discussion is the date of issuance of the REMIC
Securities) and at all times thereafter, may consist of assets other than
"qualified mortgages" and "permitted investments." The REMIC Regulations
provide a "safe harbor" pursuant to which the de minimis requirement will be
met if at all times the aggregate adjusted basis of any nonqualified assets
(i.e. , assets other than qualified mortgages and permitted investments) is
less than 1% of the aggregate adjusted basis of all the REMIC Pool's assets.

If a REMIC Pool fails to comply with one or more of the requirements
of the Code for REMIC status during any taxable year, the REMIC Pool will not
be treated as a REMIC for such year and thereafter. In this event, the
classification of the REMIC for federal income tax purposes is uncertain. The
REMIC Pool might be entitled to treatment as a grantor trust under the rules
described in "Federal Income Tax Consequences for Securities as to Which No
REMIC Election Is Made" herein. In that case, no entity-level tax would be
imposed on the REMIC Pool. Alternatively, the Regular Securities may continue
to be treated as debt instruments for federal income tax purposes, but the
REMIC Pool could be treated as a taxable mortgage pool (a "TMP"). If the REMIC
Pool is treated as a TMP, any residual income of the REMIC Pool (i.e. , income
from the Mortgage Loans less interest and original issue discount expense
allocable to the Regular Securities and any administrative expenses of the
REMIC Pool) would be subject to corporate income tax at the REMIC Pool level.
On the other hand, an entity with multiple classes of ownership interests may
be treated as a separate association taxable as a corporation under Treasury
regulations, and the Regular Securities may be treated as equity interests
therein. The Code, however, authorizes the Treasury Department to issue
regulations

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that address situations where failure to meet one or more of the requirements
for REMIC status occurs inadvertently and in good faith, and disqualification
of the REMIC Pool would occur absent regulatory relief. Investors should be
aware, however, that the Conference Committee Report to the 1986 Act (the
"Committee Report") indicates that the relief may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the REMIC
Pool's income for the period of time in which the requirements for REMIC status
are not satisfied.

TAXATION OF REGULAR SECURITIES

General

Payments received by holders of Regular Securities generally should be
accorded the same tax treatment under the Code as payments received on ordinary
taxable corporate debt instruments. In general, interest, original issue
discount and market discount on a Regular Security will be treated as ordinary
income to a holder of the Regular Security (the "Regular Securityholder") as
they accrue, and principal payments on a Regular Security will be treated as a
return of capital to the extent of the Regular Securityholder's basis in the
Regular Security allocable thereto. Regular Securityholders must use the
accrual method of accounting with regard to Regular Securities, regardless of
the method of accounting otherwise used by such Regular Securityholders.

Original Issue Discount

Regular Securities may be issued with "original issue discount" within
the meaning of Code Section 1273(a). Holders of any class of Regular
Securities having original issue discount generally must include original issue
discount in ordinary income for federal income tax purposes as it accrues, in
accordance with a constant interest method that takes into account the
compounding of interest, in advance of receipt of the cash or a portion of the
cash attributable to such income. Based in part on Treasury regulations
governing original issue discount (the "OID Regulations") and in part on the
provisions of the 1986 Act, the Company anticipates that the amount of original
issue discount required to be included in a Regular Securityholder's income in
any taxable year will be computed in a manner substantially as described below.
Regular Securityholders should be aware, however, that the OID Regulations
either do not address, or are subject to varying interpretations with regard
to, several issues relevant to securities, such as the Regular Securities, that
are subject to prepayment. The 1986 Act requires that the amount and rate of
accrual of original issue discount be calculated based on a reasonable assumed
prepayment rate for the Mortgage Loans in a manner prescribed by regulations
not yet issued ("Prepayment Assumption") and provides for adjusting the amount
and rate of accrual of such discount where the actual prepayment rate differs
from the Prepayment Assumption. The Committee Report indicates that the
regulations will require that the Prepayment Assumption be the prepayment
assumption that is used in determining the initial offering price of such
Securities. The Prospectus Supplement for each Series of such Securities will
specify the Prepayment Assumption determined by the Company for the purposes of
determining the amount and rate of accrual of original issue discount. No
representation is made that the Securities will prepay at the Prepayment
Assumption or at any other rate. Moreover, the OID Regulations include an
anti-abuse rule allowing the Internal Revenue Service ("IRS") to apply or
depart from the OID Regulations where necessary or appropriate to ensure a
reasonable tax result in light of the applicable statutory provisions. A tax
result will not be considered unreasonable under the anti-abuse rule in the
absence of a substantial effect on the present value of a taxpayer's tax
liability. Investors are advised to consult their own tax advisors as to the
discussion herein and the appropriate method for reporting interest and
original issue discount with respect to the Regular Securities.

Under the OID Regulations, each Regular Security (except to the extent
described below with respect to a Regular Security on which distributions of
principal are made in a single installment or upon an earlier distribution by
lot of a specified principal amount upon the request of a Regular
Securityholder or by random lot (a "Retail Class Security")) will be treated as
a single installment obligation for purposes of determining the original issue
discount includible in a Regular Securityholder's income. The total amount of
original issue discount on a Regular Security is the excess of the "stated
redemption price at maturity" of the Regular Security over its "issue price."
The issue price of a Regular Security is the first price at which a substantial
amount of Regular Securities of that class are first sold (other than to bond
houses, brokers, underwriters and wholesalers). Unless specified otherwise in
the Prospectus Supplement, the Company will determine original issue discount
by including the amount paid by an initial Regular Securityholder for accrued
interest that relates to a period prior to the issue date of the Regular
Security in the issue price

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of a Regular Security and will include in the stated redemption price at
maturity any interest paid on the first Distribution Date (or Payment Date) to
the extent such interest is attributable to a period in excess of the number of
days between the issue date and such first Distribution Date (or Payment Date).
The stated redemption price at maturity of a Regular Security always includes
the original principal amount of the Regular Security, but generally will not
include distributions of stated interest if such interest distributions
constitute "qualified stated interest." Under the OID Regulations, qualified
stated interest generally means stated interest that is unconditionally payable
in cash or in property (other than debt instruments of the issuer), or that
will be constructively received, at least annually at a single fixed rate or at
a permissible variable rate. The special rules applicable to variable rate
Regular Securities are described below. Any stated interest in excess of the
qualified stated interest is included in the stated redemption price at
maturity. If the amount of original issue discount is "de minimis" as described
below, the amount of original issue discount is treated as zero, and all stated
interest is treated as qualified stated interest. Distributions of interest on
Regular Securities with respect to which deferred interest will accrue may not
constitute qualified stated interest, in which case the stated redemption price
at maturity of such Regular Securities includes all distributions of interest
as well as principal thereon. Moreover, if the interval between the issue date
and the first Distribution Date (or Payment Date) on a Regular Security is
longer than the interval between subsequent Distribution Dates (or Payment
Dates) (and interest paid on the first Distribution Date (or Payment Date) is
less than would have been earned if the stated interest rate were applied to
outstanding principal during each day in such interval), the stated interest
distributions on such Regular Security technically do not constitute qualified
stated interest. The OID Regulations provide that in such case a special rule,
applying solely for the purpose of determining whether original issue discount
is de minimis, provides that the interest shortfall for the long first period
(i.e., the interest that would have been earned if interest had been paid on
the first Distribution Date (or Payment Date) for each day the Regular Security
was outstanding) is treated as original issue discount assuming the stated
interest would otherwise be qualified stated interest. Also in such case the
stated redemption price at maturity is treated as equal to the issue price plus
the greater of the amount of foregone interest or the excess, if any, of the
Security's stated principal amount over its issue price. The OID Regulations
indicate that all interest on a long first period Regular Security that is
issued with non-de minimis original issue discount will be included in the
Regular Security's stated redemption price at maturity. Regular Securityholders
should consult their own tax advisors to determine the issue price and stated
redemption price at maturity of a Regular Security.

Under a de minimis rule, original issue discount on a Regular Security
will be considered to be zero if such original issue discount is less than
0.25% of the stated redemption price at maturity of the Regular Security
multiplied by the weighted average maturity of the Regular Security. For this
purpose, the weighted average maturity of the Regular Security is computed as
the sum of the amounts determined by multiplying the number of full years
(i.e., rounding down partial years) from the issue date until each distribution
in reduction of stated redemption price at maturity is scheduled to be made by
a fraction, the numerator of which is the amount of each distribution included
in the stated redemption price at maturity of the Regular Security and the
denominator of which is the stated redemption price at maturity of the Regular
Security. Although currently unclear, it appears that the schedule of such
distributions should be determined in accordance with the Prepayment
Assumption. In addition, if the original issue discount is de minimis, all
stated interest (including stated interest that would otherwise be treated as
original issue discount) is treated as qualified stated interest. Unless the
Holder of a Regular Security elects to accrue all discount under a constant
yield to maturity method, as described below, the holder of a Regular Security
will include any de minimis original issue discount in income on a pro rata
basis as stated principal payments on the Regular Security are made, or, if
earlier, upon anticipation of the Regular Security. If a subsequent Holder of a
Regular Security issued with de minimis original issue discount purchases the
Regular Security at a premium, the subsequent Holder does not include any
original issue discount in income. If a subsequent Holder purchases such
Regular Security at a discount, all discount is reported as market discount, as
described below.

Of the total amount of original issue discount on a Regular Security,
the Regular Securityholder generally must include in gross income for any
taxable year the sum of the "daily portions," as defined below, of the original
issue discount on the Regular Security accrued during an accrual period for
each day on which he holds the Regular Security, including the date of purchase
but excluding the date of disposition. Although not free from doubt, the
Company intends to treat the monthly period ending on the day before each
Distribution Date or Payment Date as the accrual period, rather than the
monthly period corresponding to the prior calendar month. With respect to each
Regular Security, a calculation

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will be made of the original issue discount that accrues during each successive
full accrual period (or shorter period from the date of original issue) that
ends on the day before the related Distribution Date or Payment Date for the
Regular Security. In the case of an original holder of a Regular Security, the
daily portions of original issue discount with respect to such Regular Security
generally will be determined by allocating to each day in any accrual period
the Regular Security's ratable portion of the excess, if any, of (i) the sum of
(a) the present value of all of the remaining distributions to be made on the
Regular Security as of the end of that accrual period that are included in the
Regular Security's stated redemption price at maturity and (b) the
distributions made on the Regular Security during the accrual period that are
included in the Regular Security's stated redemption price at maturity, over
(ii) the adjusted issue price of the Regular Security at the beginning of the
accrual period. The present value of the remaining distributions referred to in
the preceding sentence is calculated based on (i) the yield to maturity of the
Regular Security at the issue date giving effect to the Prepayment Assumption,
(ii) events (including actual prepayments) that have occurred prior to the end
of the accrual period and (iii) the Prepayment Assumption. The effect of these
rules is to adjust the rate of original issue discount accrual to correspond to
the actual prepayment experience. For these purposes, the adjusted issue price
of a Regular Security at the beginning of any accrual period equals the issue
price of the Regular Security, increased by the aggregate amount of original
issue discount with respect to the Regular Security that accrued in all prior
accrual periods and reduced by the amount of distributions included in the
Regular Security's stated redemption price at maturity that were made on the
Regular Security in such prior periods.

Under the method described above, the daily portions of original issue
discount required to be included in income by a Regular Securityholder
generally will increase to take into account prepayments on the Regular
Securities as a result of prepayments on the Mortgage Loans that exceed the
Prepayment Assumption, and generally will decrease (but not below zero for any
period) if the prepayments are slower than the Prepayment Assumption. To the
extent specified in the applicable Prospectus Supplement, an increase in
prepayments on the Mortgage Loans with respect to a Series of Regular
Securities can result in both a change in the priority of principal payments
with respect to certain Classes of Regular Securities and either an increase or
decrease in the daily portions of original issue discount with respect to such
Regular Securities.

In the case of a Retail Class Security, the yield to maturity of such
Security will be determined based upon the anticipated payment characteristics
of the Class as a whole under the Prepayment Assumption. In general, the
original issue discount accruing on each Retail Class Security in a full
accrual period would be its allocable share of the original issue discount with
respect to the entire Class, as determined in accordance with the preceding
paragraph. However, in the case of a distribution of the entire principal
amount of any Retail Class Security (or portion thereof), (a) the remaining
unaccrued original issue discount allocable to such Security (or to such
portion) will accrue at the time of such distribution, and (b) the accrual of
original issue discount allocable to each remaining Security of such Class (or
the remaining principal amount of a Retail Class Security after a distribution
in reduction of a portion of its principal amount has been received) will be
adjusted by reducing the present value of the remaining payments on such Class
and the adjusted issue price of such Class to the extent attributable to the
portion of the principal amount thereof that was distributed.

A subsequent holder of a Regular Security issued with original issue
discount who purchases the Regular Security at a cost less than the remaining
stated redemption price at maturity will also be required to include in gross
income the sum of the daily portions of original issue discount on the Regular
Security. In computing the daily portions of original issue discount for a
subsequent purchaser (as well as an initial purchaser who purchases a Regular
Security at a price higher than the issue price but less than the stated
redemption price at maturity), however, the daily portion for any day is
reduced by the amount that would be the daily portion for such day (computed in
accordance with the rules set forth above) multiplied by a fraction, the
numerator of which is the amount, if any, by which the price paid by such
purchaser for the Regular Security exceeds the excess of (i) the sum of its
issue price and the aggregate amount of original issue discount that would have
been includible in the gross income of an original holder of the Regular
Security who purchased the Regular Security at its issue price, over (ii) the
amount of any prior distributions included in the stated redemption price at
maturity, and the denominator of which is the sum of the daily portions for
such

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Regular Security (computed in accordance with the rules set forth above) for
all days beginning on the date after the date of purchase and ending on the
date on which the remaining principal amount of such Regular Security is
expected to be reduced to zero under the Prepayment Assumption. Alternatively,
such a subsequent holder may accrue original issue discount by treating the
purchase as a purchase at original issuance and applying the constant yield to
maturity method.

The OID Regulations provide that a holder that acquires a Regular
Security may elect to include in gross income all stated interest, original
issue discount, de minimis original issue discount, market discount (as
described below under "Market Discount"), de minimis market discount and
unstated interest (as adjusted for any amortizable bond premium or acquisition
premium) currently as it accrues using the constant yield to maturity method.
If such an election were made with respect to a Regular Security with market
discount, the Regular Securityholder would be deemed to have made an election
to include in income currently market discount with respect to all other debt
instruments having market discount that such Regular Securityholder acquires
during the year of the election or thereafter. Similarly, a Regular
Securityholder that makes this election for a Regular Security that is acquired
at a premium will be deemed to have made an election to amortize bond premium
with respect to all debt instruments having amortizable bond premium that such
Regular Securityholder owns or acquires. The election to accrue interest,
discount and premium on a constant yield method with respect to a Regular
Security can not be revoked without the consent of the IRS.

Regular Securities may provide for interest based on a variable rate.
The OID Regulations provide special rules for variable rate instruments that
meet three requirements. First, the issue price must not exceed the
noncontingent principal payments by more than the lesser of (i) 1.5% of the
product of the noncontingent principal payments and the weighted average
maturity or (ii) 15% of the noncontingent principal payments. Second, the
instrument must provide for stated interest (compounded or paid at least
annually) at (i) one or more qualified floating rates, (ii) a single fixed rate
and a single objective rate that is a qualified inverse floating rate, (iii) a
single fixed rate and one or more qualified floating rates; or (iv) a single
objective rate. Third, the instrument must provide that each qualified floating
rate or objective rate in effect during the term of the Regular Security is set
at a current value of that rate (one occurring in the interval beginning three
months before and ending one year after the rate is first in effect on the
Regular Security). If interest on a Regular Security is stated at a fixed rate
for an initial period of less than 1 year followed by a variable rate that is
either a qualified floating rate or an objective rate and the value of the
variable rate on the issue date is intended to approximate the fixed rate, the
fixed rate and the variable rate together constitute a single qualified
floating rate or objective rate. A rate is a qualified floating rate if
variations in the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the Regular Security's
currency denomination. A multiple of a qualified floating rate is not a
qualified floating rate unless it is a rate equal to (i) the product of a
qualified floating rate as described in the previous sentence and a fixed
multiple that is greater than 0.65 but no greater than 1.35, or (ii) a product
described in clause (i) increased or decreased by a fixed rate. A variable rate
is not a qualified floating rate if it is subject to a cap, floor or a
restriction on the amount of increase or decrease in stated interest rate
(governor) unless: (i) the cap, floor or governor is fixed throughout the
Regular Security's term, (ii) the cap or floor is not reasonably expected to
cause the yield on the Regular Security to be significantly less or more,
respectively, than the expected yield without the cap or floor, or (iii) the
governor is not reasonably expected to cause the yield to be significantly more
or less than the expected yield without the governor. An objective rate is a
rate (other than a qualified floating rate) that (i) is determined using a
single fixed formula, (ii) is based on objective financial or economic
information, and (iii) is not based on information that either is within the
control of the issuer (or a related party) or is unique to the circumstances of
the issuer (or related party), such as dividends, profits, or the value of the
issuer's (or related party's) stock. That definition would include, in
addition to a rate that is based on one or more qualified floating rates or on
the yield of actively traded personal property, a rate that is based on changes
in a general inflation index. In addition, a rate would not fail to be an
objective rate merely because it is based on the credit quality of the issuer.

If a variable rate Regular Security provides for stated interest at a
single qualified floating rate or objective rate that is unconditionally
payable in cash or property at least annually, (i) all stated interest is
qualified stated interest, (ii) the amount of original issue discount, if any,
is determined as if the Regular Security had a fixed rate equal to (A) in the
case of a qualified floating rate or qualified inverse floating rate, the value
on the issue date of the qualified floating rate or qualified inverse floating
rate or (B) in the case of any other objective rate, a fixed rate that reflects
the yield that

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is reasonably expected for the Regular Security. If a variable rate Regular
Security is not described in the previous sentence, the Regular Security is
treated as a fixed rate Regular Security with a fixed rate substitute or
substitutes equal to the value of the qualified floating rates or qualified
inverse floating rate at the date of issue or, in the case of a Regular
Security having an objective rate at a fixed rate that reflects the yield
reasonably expected for the Regular Security. Qualified stated interest or
original issue discount allocable to an accrual period is adjusted to reflect
differences in the interest actually accrued or paid compared to the interest
accrued or paid at the fixed rate substitute. If a variable rate Regular
Security provides for stated interest either at one or more qualified floating
rates or at a qualified inverse floating rate and also provides for interest at
an initial fixed rate that is not intended to approximate the related floating
rate or is fixed for a period of one year or more, original issue discount is
determined as described in the previous two sentences except that the Regular
Security is treated as if it provided for a qualified floating rate or
qualified inverse floating rate, as applicable, rather than a fixed rate. The
substitute rate must be one such that the fair market value of the Regular
Security would be approximately the same as the fair market value of the
hypothetical security.

A variable rate Regular Security not qualifying for treatment under
the variable rate rules described above (a "Contingent Payment Obligation") is
subject to the contingent payment provisions of the OID Regulations (the
"Contingent Payment Regulations"). The Contingent Payment Regulations, by their
terms do not apply to REMIC regular interests and other instruments that are
subject to section 1272(a)(6) of the Code. However, in the absence of further
guidance, the Administrator will account for securities that are Contingent
Payment Obligations in accordance with Code section 1272(a)(6) and the
accounting methodology described in this paragraph. Income will be accrued on
such securities based on a constant yield that is derived from a projected
payment schedule as of the Closing Date. The projected payment schedule will
take into account the Prepayment Assumption and the interest payments that are
expected to be made based on the value of any relevant indices on the issue
date. To the extent that actual payments differ from projected payments for a
particular taxable year, appropriate adjustments to interest income and expense
accruals will be made for that year.

The method described in the foregoing paragraph for accounting for
Contingent Payment Obligations is consistent with Code section 1272(a)(6) and
the legislative history thereto. Because of the uncertainty with respect to
the treatment of such securities under the OID Regulations, however, there can
be no assurance that the Service will not assert successfully that a method
less favorable to Regular Securityholders should apply. In view of the
complexities and the current uncertainties as to income inclusions with respect
to Contingent Payment obligations, each investor should consult his or her own
tax advisor to determine the appropriate amount and method of income inclusion
on such securities for federal income tax purposes.

Market Discount

A purchaser of a Regular Security also may be subject to the market
discount rules of Code Sections 1276 through 1278. Under these sections and the
principles applied by the OID Regulations in the context of original issue
discount, "market discount" is the amount by which a subsequent purchaser's
initial basis in the Regular Security (i) is exceeded by the stated redemption
price at maturity of the Regular Security or (ii) in the case of a Regular
Security having original issue discount, is exceeded by the sum of the issue
price of such Regular Security plus any original issue discount that would have
previously accrued thereon if held by an original Regular Securityholder (who
purchased the Regular Security at its issue price), in either case less any
prior distributions included in the stated redemption price at maturity of such
Regular Security. Such purchaser generally will be required to recognize
accrued market discount as ordinary income as distributions includible in the
stated redemption price at maturity of such Regular Security are received, in
an amount not exceeding any such distribution. That recognition rule would
apply regardless of whether the purchaser is a cash-basis or accrual-basis
taxpayer. Such market discount would accrue in a manner to be provided in
Treasury regulations and should take into account the Prepayment Assumption.
The Committee Report provides that until such regulations are issued, such
market discount would accrue either (i) on the basis of a constant interest
rate or (ii) in the ratio of stated interest allocable to the relevant period
to the sum of the interest for such period plus the remaining interest as of
the end of such period, or in the case of a Regular Security issued with
original issue discount, in the ratio of original issue discount accrued for
the relevant period to the sum of the original issue discount accrued for such
period plus the remaining original issue discount as of the end of such period.
Such purchaser also generally will be required to treat a portion of any gain
on a sale or exchange of the Regular Security as ordinary income to the extent
of the market discount accrued to the date of disposition under one of the
foregoing methods, less any accrued

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market discount previously reported as ordinary income as partial distributions
in reduction of the stated redemption price at maturity were received. Such
purchaser will be required to defer deduction of a portion of the excess of the
interest paid or accrued on indebtedness incurred to purchase or carry a
Regular Security over the interest distributable thereon. The deferred portion
of such interest expense in any taxable year generally will not exceed the
accrued market discount on the Regular Security for such year. Any such
deferred interest expense is, in general, allowed as a deduction not later than
the year in which the related market discount income is recognized or the
Regular Security is disposed of. As an alternative to the inclusion of market
discount in income on the foregoing basis, the Regular Securityholder may elect
to include market discount in income currently as it accrues on all market
discount instruments acquired by such Regular Securityholder in that taxable
year or thereafter, in which case the interest deferral rule will not apply. In
Revenue Procedure 92-67, the IRS set forth the manner in which an election may
be made to accrue market discount on the basis of a constant interest rate.

By analogy to the OID Regulations, market discount with respect to a
Regular Security will be considered to be zero if such market discount is less
than 0.25% of the remaining stated redemption price at maturity of such Regular
Security multiplied by the weighted average maturity of the Regular Security
(determined as described above under "Original Issue Discount") remaining after
the date of purchase. Treasury regulations implementing the market discount
rules have not yet been issued, and therefore investors should consult their
own tax advisors regarding the application of these rules as well as the
advisability of making any of the elections with respect thereto.

Premium

A Regular Security purchased at a cost greater than its remaining
stated redemption price at maturity generally is considered to be purchased at
a premium. If the Regular Securityholder holds such Regular Security as a
"capital asset" within the meaning of Code Section 1221, the Regular
Securityholder may elect under Code Section 171 to amortize such premium under
a constant yield method that reflects compounding based on the interval between
payments on the Regular Securities. The Committee Report indicates a
Congressional intent that the same rules that apply to the accrual of market
discount on installment obligations will also apply to amortizing bond premium
under Code Section 171 on installment obligations such as the Regular
Securities, although it is unclear whether the alternatives to the constant
interest method described above under "Market Discount" are available. Under
Treasury regulations, such amortizable bond premium generally will be treated
as an offset to interest income on a Regular Security rather than as a separate
deduction item. This election, once made, applies to all taxable obligations
held by the taxpayer at the beginning of the first taxable year to which such
election applies and to all taxable debt obligations thereafter acquired and is
binding on such taxpayer in all subsequent years. Purchasers who pay a premium
for their Regular Securities should consult their tax advisors regarding the
election to amortize premium and the method to be employed.

Sale or Exchange of Regular Securities

If a Regular Securityholder sells or exchanges a Regular Security, the
Regular Securityholder will recognize gain or loss equal to the difference, if
any, between the amount received and his adjusted basis in the Regular
Security. The adjusted basis of a Regular Security generally will equal the
cost of the Regular Security to the seller, increased by any original issue
discount or market discount previously included in the seller's gross income
with respect to the Regular Security and reduced by amounts included in the
stated redemption price at maturity of the Regular Security that were
previously received by the seller and by any amortized premium.

Except as described in this paragraph, under "Original Issue Discount"
and under "Market Discount," any gain or loss on the sale or exchange of a
Regular Security realized by an investor who holds the Regular Security as a
capital asset will be capital gain or loss and will be long-term or short-term
depending on whether the Regular Security has been held for the applicable
long-term capital gain holding period. Gain from the disposition of a Regular
Security that might otherwise be capital gain will be treated as ordinary
income (i) if a Regular Security is held as part of a

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"conversion transaction" as defined in Code Section 1258(c), generally up to
the amount of interest that would have accrued on the Regular Securityholder's
net investment in the conversion transaction at 120% of the appropriate
applicable Federal rate under Code Section 1274(d) in effect at the time the
taxpayer entered into the transaction minus any amount previously treated as
ordinary income with respect to any prior disposition of property that was held
as part of such transaction, (ii) in the case of a non-corporate taxpayer, to
the extent such taxpayer has made an election under Code Section 163(d)(4) to
have net capital gains taxed as investment income at ordinary income rates, or
(iii) in the case of a Regular Security (issued by a REMIC) to the extent that
such gain does not exceed the excess, if any, of (a) the amount that would have
been includible in the gross income of the holder if his yield on such Regular
Security were 110% of the applicable Federal rate under Code Section 1274(d) as
of the date of purchase, over (b) the amount of income actually includible in
the gross income of such holder with respect to the Regular Security. Although
the legislative history to the 1986 Act indicates that the portion of the gain
from disposition of a Regular Security that will be recharacterized as ordinary
income under clause (iii) is limited to the amount of original issue discount
(if any) on the Regular Security that was not previously includible in income,
the applicable Code provision contains no such limitation. In addition, gain
or loss recognized from the sale of a Regular Security by certain banks or
thrift institutions will be treated as ordinary income or loss pursuant to Code
Section 582(c).

TAXATION OF RESIDUAL SECURITIES

Taxation of REMIC Income

Generally, the "daily portions" of REMIC taxable income or net loss
will be includible as ordinary income or loss in determining the federal
taxable income of holders of Residual Securities ("Residual Securityholders"),
and will not be taxed separately to the REMIC Pool. The daily portions of REMIC
taxable income or net loss of a Residual Securityholder are determined by
allocating the REMIC Pool's taxable income or net loss for each calendar
quarter ratably to each day in such quarter and by allocating such daily
portion among the Residual Securityholders in proportion to their respective
holdings of Residual Securities in the REMIC Pool on such day. REMIC taxable
income is generally determined in the same manner as the taxable income of an
individual using a calendar year and the accrual method of accounting, except
that (i) the limitation on deductibility of investment interest expense and
expenses for the production of income do not apply, (ii) all bad loans will be
deductible as business bad debts and (iii) the limitation on the deductibility
of interest and expenses related to tax-exempt income will apply. REMIC taxable
income generally means the REMIC Pool's gross income, including interest,
original issue discount income and market discount income, if any, on the
Mortgage Loans, plus income on reinvestment of cash flows and reserve assets,
minus deductions, including interest and original issue discount expense on the
Regular Securities, servicing fees on the Mortgage Loans and other
administrative expenses of the REMIC Pool, amortization of premium, if any,
with respect to the Mortgage Loans, and any tax imposed on the REMIC's income
from foreclosure property. The requirement that Residual Securityholders report
their pro rata share of taxable income or net loss of the REMIC Pool will
continue until there are no Securities of any Class of the related Series
outstanding.

The taxable income recognized by a Residual Securityholder in any
taxable year will be affected by, among other factors, the relationship between
the timing of recognition of interest and original issue discount or market
discount income or amortization of premium with respect to the Mortgage Loans,
on the one hand, and the timing of deductions for interest (including original
issue discount) on the Regular Securities, on the other hand. Because of the
way REMIC taxable income is calculated, a Residual Securityholder may recognize
"phantom" income (i.e., income recognized for tax purposes in excess of income
as determined under financial accounting or economic principles) which will be
matched in later years by a corresponding tax loss or reduction in taxable
income, but which could lower the yield to Residual Securityholders due to the
lower present value of such loss or reduction. For example, if an interest in
the Mortgage Loans is acquired by the REMIC Pool at a discount, and one or more
of such Mortgage Loans is prepaid, the Residual Securityholder may recognize
taxable income without being entitled to receive a corresponding amount of cash
because (i) the prepayment may be used in whole or in part to make
distributions in reduction of principal on the Regular Securities and (ii) the
discount income on the Mortgage Loans which is includible in the REMIC's
taxable income may exceed the interest and discount deduction allowed to the
REMIC upon such distributions on the Regular Securities. When there is more
than one class of Regular Securities that distribute principal sequentially,
this mismatching of income and deductions is particularly likely to occur in
the early years following issuance of the Regular Securities when distributions
in reduction of principal are being made in respect of earlier maturing classes
of Regular Securities to the

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extent that such classes are not issued with substantial discount. If taxable
income attributable to such a mismatching is realized, in general, losses would
be allowed in later years as distributions on the later classes of Regular
Securities are made. Taxable income may also be greater in earlier years than
in later years as a result of the fact that interest expense deductions,
expressed as a percentage of the outstanding principal amount of such a Series
of Regular Securities, may increase over time as distributions in reduction of
principal are made on the lower yielding classes of Regular Securities, whereas
interest income with respect to any given Mortgage Loan will remain constant
over time as a percentage of the outstanding principal amount of that loan.
Consequently, Residual Securityholders must have sufficient other sources of
cash to pay any federal, state or local income taxes due as a result of such
mismatching or unrelated deductions against which to offset such income.
Prospective investors should be aware, however, that a portion of such income
may be ineligible for offset by such investor's unrelated deductions. See the
discussion of "excess inclusions" below under "Limitations on Offset or
Exemption of REMIC Income; Excess Inclusions." The timing of such mismatching
of income and deductions described in this paragraph, if present with respect
to a Series of Securities, may have a significant adverse effect upon the
Residual Securityholder's after-tax rate of return. In addition, a Residual
Securityholder's taxable income during certain periods may exceed the income
reflected by such Residual Securityholder for such periods in accordance with
generally accepted accounting principles. Investors should consult their own
advisors concerning the proper tax and accounting treatment of their investment
in Residual Securities.

Basis and Losses

The amount of any net loss of the REMIC Pool that may be taken into
account by the Residual Securityholder is limited to the adjusted basis of the
Residual Security as of the close of the quarter (or time of disposition of the
Residual Security if earlier), determined without taking into account the net
loss for the quarter. The initial adjusted basis of a purchaser of a Residual
Security is the amount paid for such Residual Security. Such adjusted basis
will be increased by the amount of taxable income of the REMIC Pool reportable
by the Residual Securityholder and decreased by the amount of loss of the REMIC
Pool reportable by the Residual Securityholder. A cash distribution from the
REMIC Pool also will reduce such adjusted basis (but not below zero). Any loss
that is disallowed on account of this limitation may be carried over
indefinitely with respect to the Residual Securityholder as to whom such loss
was disallowed and may be used by such Residual Securityholder only to offset
any income generated by the same REMIC Pool. The ability of a Residual
Securityholder to deduct net losses with respect to a Residual Security may be
subject to additional limitations under the Code, as to which Residual
Securityholders should consult their tax advisors. Although the law is unclear
in certain respects, a Residual Securityholder effectively should be able to
recover some or all of the basis in his Residual Security as the related REMIC
recovers the basis of its assets through either the amortization of premium on
such assets or the allocation of basis to principal payments received on such
assets. A REMIC's initial aggregate basis in its assets generally will equal
the sum of the issue prices of its Regular Securities and Residual Securities.
In general, the issue price of a Regular Security of a particular Class is the
initial price at which a substantial amount of the securities of such Class is
sold to the public. In the case of a Regular Security of a Class not offered
to the public in substantial amounts, the issue price is either the price paid
by the first purchaser of such Securities or the fair market value of the
property received in exchange for such Security, as appropriate. The REMIC's
aggregate basis will be allocated among its assets in proportion to their
respective fair market values.

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Treatment of Certain Items of REMIC Income and Expense

Original Issue Discount. Generally, the REMIC Pool's deductions for
original issue discount will be determined in the same manner as original issue
discount income on Regular Securities as described above under "Taxation of
Regular Securities -- Original Issue Discount", without regard to the de
minimis rule described therein.

Market Discount. The REMIC Pool will have market discount income in
respect of Mortgage Loans if, in general, the basis of the REMIC Pool in such
Mortgage Loans is exceeded by their unpaid principal balances.

The REMIC Pool's basis in such Mortgage Loans is generally the fair market
value of the Mortgage Loans immediately after the transfer thereof to the REMIC
Pool. The REMIC Regulations provide that such basis is equal in the aggregate
to the issue prices of all regular and residual interests in the REMIC Pool. In
respect of Mortgage Loans that have market discount to which Code Section 1276
applies, the accrued portion of such market discount would be recognized
currently by the REMIC as an item of ordinary income. Market discount income
generally should accrue in the manner described above under "Taxation of
Regular Securities -- Market Discount."

Premium. Generally, if the basis of the REMIC Pool in the Mortgage
Loans exceeds the unpaid principal balances thereof, the REMIC Pool will be
considered to have acquired such Mortgage Loans at a premium equal to the
amount of such excess. As stated above, the REMIC Pool's basis in Mortgage
Loans is the fair market value of the Mortgage Loans, based on the aggregate of
the issue prices of the regular and residual interests in the REMIC Pool
immediately after the transfer thereof to the REMIC Pool. In a manner analogous
to the discussion above under "Taxation of Regular Securities -- Premium," a
person that holds a Mortgage Loan as a capital asset under Code Section 1221
may elect under Code Section 171 to amortize premium on Mortgage Loans
originated after September 27, 1985 under a constant yield method. Amortizable
bond premium will be treated as an offset to interest income on the Mortgage
Loans, rather than as a separate deduction item. Because substantially all of
the mortgagors with respect to the Mortgage Loans are expected to be
individuals, Code Section 171 will not be available for premium on Mortgage
Loans originated on or prior to September 27, 1985. Premium with respect to
such Mortgage Loans may be deductible in accordance with a reasonable method
regularly employed by the holder thereof. The allocation of such premium pro
rata among principal payments should be considered a reasonable method;
however, the IRS may argue that such premium should be allocated in a different
manner, such as allocating such premium entirely to the final payment of
principal.

Limitations on Offset or Exemption of REMIC Income; Excess Inclusions

A portion of the income allocable to a Residual Security (referred to
in the Code as an "excess inclusion") for any calendar quarter will be subject
to federal income tax in all events. Thus, for example, an excess inclusion (i)
cannot be offset by any unrelated losses or loss carryovers of a Residual
Securityholder, (ii) will be treated as "unrelated business taxable income"
within the meaning of Code Section 512 if the Residual Securityholder is a
pension fund or any other organization that is subject to tax only on its
unrelated business taxable income and (iii) is not eligible for any reduction
in the rate of withholding tax in the case of a Residual Securityholder that is
a foreign investor, as further discussed in "Taxation of Certain Foreign
Investors -- Residual Securities" below.

For any Residual Securityholder, the excess inclusion for any calendar
quarter is the excess, if any, of (i) the income of such Residual
Securityholder for that calendar quarter from its Residual Security, over (ii)
the sum of the "daily accruals" (as defined below) for all days during the
calendar quarter on which the Residual Securityholder holds such Residual
Security. For this purpose, the daily accruals with respect to a Residual
Security are determined by allocating to each day in the calendar quarter its
ratable portion of the product of the "adjusted issue price" (as defined below)
of the Residual Security at the beginning of the calendar quarter and 120
percent of the "Federal long-term rate"

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in effect at the time the Residual Security is issued. For this purpose, the
"adjusted issue price" of a Residual Security at the beginning of any calendar
quarter equals the issue price of the Residual Security (adjusted for
contributions), increased by the amount of daily accruals for all prior
quarters, and decreased (but not below zero) by the aggregate amount of
payments made on the Residual Security before the beginning of such quarter.

Under Treasury regulations to be promulgated, a portion of the
dividends paid by a REIT which owns a Residual Security are to be designated as
excess inclusions in an amount corresponding to the Residual Security's
allocable share of the excess inclusions. Similar rules apply in the case of
regulated investment companies, common trust funds and cooperatives. Thus,
investors in such entities which own a Residual Security will be subject to the
limitations on excess inclusions described above. The REMIC Regulations do not
provide guidance on this issue.

Mark to Market Rules

Residual Securityholders that are dealers in securities should be
aware that, under Treasury regulations (the "Mark-to-Market Regulations")
relating to the requirement under section 475 of the Code that dealers in
securities use mark-to-market accounting for federal income tax purposes,
dealers in securities are not permitted to mark to market any REMIC residual
interests acquired on or after January 4, 1995. Prospective purchasers of
Residual Certificates should consult with their tax advisors regarding the
possible application of the Mark-to-Market Regulations to such Certificates.

Tax-Related Restrictions on Transfer of Residual Securities

Disqualified Organizations. If legal title or beneficial interest in
a Residual Security is transferred to a Disqualified Organization (as defined
below), a tax would be imposed in an amount equal to the product of (i) the
present value of the total anticipated excess inclusions with respect to such
Residual Security for periods after the transfer and (ii) the highest marginal
federal income tax rate applicable to corporations. The REMIC Regulations
provide that the anticipated excess inclusions are based on actual prepayment
experience to the date of the transfer and projected payments based on the
Prepayment Assumption. The present value discount rate equals the applicable
Federal rate under Code Section 1274(d) that would apply to a debt instrument
that was issued on the date the Disqualified Organization acquired the Residual
Security and whose term ended on the close of the last quarter in which excess
inclusions were expected to accrue with respect to the Residual Security. Such
a tax generally would be imposed on the transferor of the Residual Security,
except that where such transfer is through an agent (including a broker,
nominee, or other middleman) for a Disqualified Organization, the tax would
instead be imposed on such agent. However, a transferor of a Residual Security
would in no event be liable for such tax with respect to a transfer if the
transferee furnishes to the transferor an affidavit that the transferee is not
a Disqualified Organization and, as of the time of the transfer, the transferor
does not have actual knowledge that such affidavit is false. The tax also may
be waived by the Treasury Department if the Disqualified Organization promptly
disposes of the Residual Security and the transferor pays income tax at the
highest corporate rate on the excess inclusions for the period the Residual
Security is actually held by the Disqualified Organization.

In addition, if a "Pass-Through Entity" (as defined below) has excess
inclusion income with respect to a Residual Security during a taxable year and
a Disqualified Organization is the record holder of an equity interest in such
entity, then a tax is imposed on such entity equal to the product of (i) the
amount of excess inclusions that are allocable to the interest in the
Pass-Through Entity during the period such interest is held by such
Disqualified Organization, and (ii) the highest marginal federal corporate
income tax rate. Such tax would be deductible from the ordinary gross income of
the Pass-Through Entity for the taxable year. The Pass-Through Entity would not
be liable for such tax if it has received an affidavit from such record holder
that (i) states under penalty of perjury that it is not a Disqualified
Organization or (ii) furnishes a social security number and states under
penalties of perjury that the social security number is that of the transferee,
provided that during the period such person is the record holder of the
Residual Security, the Pass-Through Entity does not have actual knowledge that
such affidavit is false.

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For these purposes, (i) "Disqualified Organization" means the United
States, any state or political subdivision thereof, any foreign government, any
international organization, any agency or instrumentality of any of the
foregoing (provided, that such term does not include an instrumentality if all
of its activities are subject to tax and a majority of its board of directors
is not selected by any such governmental entity), any cooperative organization
furnishing electric energy or providing telephone service to persons in rural
areas as described in Code Section 1381(a)(2)(C), and any organization (other
than a farmers' cooperative described in Code Section 521) that is exempt from
taxation under the Code unless such organization is subject to the tax on
unrelated business income imposed by Code Section 511, and (ii) "Pass-Through
Entity" means any regulated investment company, real estate investment trust,
common trust fund, partnership, trust or estate and certain corporations
operating on a cooperative basis. Except as may be provided in Treasury
regulations yet to be issued, any person holding an interest in a Pass-Through
Entity as a nominee for another will, with respect to such interest, be treated
as a Pass-Through Entity.

The Agreement or the Indenture, as applicable, with respect to a
Series of Securities will provide that neither legal title nor beneficial
interest in a Residual Security may be transferred or registered unless (i) the
proposed transferee provides to the Company and the Trustee an affidavit to the
effect that such transferee is not a Disqualified Organization, is not
purchasing such Residual Securities on behalf of a Disqualified Organization
(i.e., as a broker, nominee or middleman thereof) and is not an entity that
holds REMIC residual securities as nominee to facilitate the clearance and
settlement of such securities through electronic book-entry changes in accounts
of participating organizations and (ii) the transferor provides a statement in
writing to the Company and the Trustee that it has no actual knowledge that
such affidavit is false. Moreover, the Agreement or Indenture, as applicable,
will provide that any attempted or purported transfer in violation of these
transfer restrictions will be null and void and will vest no rights in any
purported transferee. Each Residual Security with respect to a Series will bear
a legend referring to such restrictions on transfer, and each Residual
Securityholder will be deemed to have agreed, as a condition of ownership
thereof, to any amendments to the related Agreement or Indenture, as
applicable, required under the Code or applicable Treasury regulations to
effectuate the foregoing restrictions. Information necessary to compute an
applicable excise tax must be furnished to the IRS and to the requesting party
within 60 days of the request, and the Company or the Trustee may charge a fee
for computing and providing such information.

Noneconomic Residual Interests. The REMIC Regulations would disregard
certain transfers of Residual Securities, in which case the transferor would
continue to be treated as the owner of the Residual Securities and thus would
continue to be subject to tax on its allocable portion of the net income of the
REMIC Pool. Under the REMIC Regulations, a transfer of a "noneconomic residual
interest" (defined below) to a Residual Securityholder (other than a Residual
Securityholder who is not a U.S. Person, as defined below under "Foreign
Investors") is disregarded for all federal income tax purposes unless no
significant purpose of the transfer is to enable the transferor to impede the
assessment or collection of tax. A residual interest in a REMIC (including a
residual interest with a positive value at issuance) is a "noneconomic residual
interest" unless, at the time of the transfer, (i) the present value of the
expected future distributions on the residual interest at least equals the
product of the present value of the anticipated excess inclusions and the
highest corporate income tax rate in effect for the year in which the transfer
occurs, and (ii) the transferor reasonably expects that the transferee will
receive distributions from the REMIC at or after the time at which taxes accrue
on the anticipated excess inclusions in an amount sufficient to satisfy the
accrued taxes. The anticipated excess inclusions and the present value rate are
determined in the same manner as set forth above under "Disqualified
Organizations." A significant purpose to impede the assessment or collection of
tax exists if the transferor, at the time of the transfer, either knew or
should have known (had "improper knowledge") that the transferee would be
unwilling or unable to pay taxes due on its share of the taxable income of the
REMIC. Under the REMIC Regulations, a transferor is presumed not to have
improper knowledge if (i) the transferor conducted, at the time of the
transfer, a reasonable investigation of the financial condition of the
transferee and, as a result of the investigation, the transferor found that the
transferee had historically paid its debts as they came due and found no
significant evidence to indicate that the transferee will not continue to pay
its debts as they come due in the future; and (ii) the transferee represents to
the transferor that it understands that, as the holder of the noneconomic
residual interest, the transferee may incur tax liabilities in excess of any
cash flows generated by the residual interest and that the transferee intends
to pay taxes associated with holding of residual interest as they become due.
The Agreement or Indenture, as applicable, will require the transferee of a
Residual Security to state as part of the affidavit described above under the
heading "Disqualified Organizations" that such transferee (i) has historically
paid its debts as they come due, (ii) intends to continue to pay its debts as
they come due in the future, (iii) understands that, as the holder of a
noneconomic Residual Security, it may

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incur tax liabilities in excess of any cash flows generated by the Residual
Security, and (iv) intends to pay any and all taxes associated with holding the
Residual Security as they become due. The transferor must have no reason to
believe that such statement is untrue.

Foreign Investors. The REMIC Regulations provide that the transfer of
a Residual Security that has "tax avoidance potential" to a "foreign person"
will be disregarded for all federal tax purposes. This rule appears intended to
apply to a transferee who is not a "U.S. Person" (as defined below), unless
such transferee's income is effectively connected with the conduct of a trade
or business within the United States. A Residual Security is deemed to have tax
avoidance potential unless, at the time of the transfer, the transferor
reasonably expects that, for each excess inclusion, (i) the REMIC Pool will
distribute to the transferee residual interest holder an amount that will equal
at least 30% of the excess inclusions and (ii) that each such amount will be
distributed at or after the time at which the excess inclusion accrues and not
later than the close of the calendar year following the calendar year of
accrual. If the non-U.S. Person transfers the Residual Security back to a U.S.
Person, the transfer will be disregarded and the foreign transferor will
continue to be treated as the owner unless arrangements are made so that the
transfer does not have the effect of allowing the transferor to avoid tax on
accrued excess inclusions.

The Prospectus Supplement relating to a Series of Securities may
provide that a Residual Security may not be purchased by or transferred to any
person that is not a U.S. Person or may describe the circumstances and
restrictions pursuant to which such a transfer may be made. The term "U.S.
Person" means a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof or an estate or trust that
is subject to U.S. federal income tax regardless of the source of its income.

Sale or Exchange of a Residual Security

Upon the sale or exchange of a Residual Security, the Residual
Securityholder will recognize gain or loss equal to the excess, if any, of the
amount realized over the adjusted basis (as described above under "Basis and
Losses") of such Residual Securityholder in such Residual Security at the time
of the sale or exchange. In addition to reporting the taxable income of the
REMIC Pool, a Residual Securityholder will have taxable income to the extent
that any cash distribution to him from the REMIC Pool exceeds such adjusted
basis on that Distribution Date or Payment Date. Such income will be treated as
gain from the sale or exchange of the Residual Security. It is possible that
the termination of the REMIC Pool may be treated as a sale or exchange of a
Residual Securityholder's Residual Security, in which case, if the Residual
Securityholder has an adjusted basis in his Residual Security remaining when
his interest in the REMIC Pool terminates, and if he holds such Residual
Security as a capital asset under Code Section 1221, then he will recognize a
capital loss at that time in the amount of such remaining adjusted basis. In
the case of banks, thrifts, and certain other financial institutions, however,
gain or loss on the disposition of a Residual Security generally will be
treated as ordinary gain or loss.

A special version of the wash sale rules of Code Section 1091 will
apply to dispositions of Residual Securities. Consequently, losses on
dispositions of Residual Securities will be disallowed where the seller of the
Residual Security, during the period beginning six months before the sale or
disposition of the Residual Security and ending six months after such sale or
disposition, acquires (or enters into any other transaction that results in the
application of Code Section 1091) any residual interest in any REMIC or any
interest in a "taxable mortgage pool" (such as a non-REMIC owner trust) that is
economically comparable to a Residual Security. In the event, any loss
realized by a Residual Securityholder on the sale will not be deductible, but,
instead, will increase such Residual Securityholder's adjusted basis in the
newly acquired assets.

Taxes That May Be Imposed on the REMIC Pool

Prohibited Transactions. Net income from certain transactions by the
REMIC Pool, called prohibited transactions, will not be part of the calculation
of income or loss includible in the federal income tax returns of Residual
Securityholders, but rather will be taxed directly to the REMIC Pool at a 100%
rate. Prohibited transactions generally include (i) the disposition of a
qualified mortgage other than for (a) substitution within two years of the
Startup Day for a defective (including a defaulted) obligation (or repurchase
in lieu of substitution of a defective (including a defaulted) obligation at
any time) or for any qualified mortgage within three months of the Startup Day,
(b) foreclosure, default

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or imminent default of a qualified mortgage, (c) bankruptcy or insolvency of
the REMIC Pool or (d) a qualified (complete) liquidation, (ii) the receipt of
income from assets that are not the type of mortgages or investments that the
REMIC Pool is permitted to hold, (iii) the receipt of compensation for services
or (iv) the receipt of gain from disposition of cash flow investments other
than pursuant to a qualified liquidation. Notwithstanding (i) and (iv), it is
not a prohibited transaction to sell REMIC Pool property to prevent a default
on Regular Securities as a result of a default on qualified mortgages or to
facilitate a clean-up call (generally, an optional termination to save
administrative costs when no more than a small percentage of the Securities is
outstanding). The REMIC Regulations indicate that the modification of a
Mortgage Loan generally will not be treated as a disposition if it is
occasioned by a default or reasonably foreseeable default, an assumption of the
Mortgage Loan, the waiver of a due-on-sale or encumbrance clause or the
conversion of an interest rate by a mortgagor pursuant to the terms of a
convertible adjustable rate Mortgage Loan.

Contributions to the REMIC Pool After the Startup Day. In general,
the REMIC Pool will be subject to a tax at a 100% rate on the value of any
property contributed to the REMIC Pool after the Startup Day. Exceptions are
provided for cash contributions to the REMIC Pool (i) during the three months
following the Startup Day, (ii) made to a qualified reserve fund by a Residual
Securityholder, (iii) in the nature of a guarantee, (iv) made to facilitate a
qualified liquidation or clean-up call and (v) as otherwise permitted in
Treasury regulations yet to be issued.

Net Income from Foreclosure Property. The REMIC Pool will be subject
to federal income tax at the highest corporate rate on "net income from
foreclosure property," determined by reference to the rules applicable to real
estate investment trusts. Generally, property acquired by the REMIC Pool
through foreclosure or deed in lieu of foreclosure would be treated as
"foreclosure property" for a period of two years, with possible extensions. Net
income from foreclosure property generally means (i) gain from the sale of a
foreclosure property that is inventory property and (ii) gross income from
foreclosure property other than qualifying rents and other qualifying income
for a real estate investment trust.

Liquidation of the REMIC Pool

If a REMIC Pool and the Trustee adopt a plan of complete liquidation,
within the meaning of Code Section 860F(a)(4)(A)(i) and sell all of the REMIC
Pool's assets (other than cash) within a 90-day period beginning on the date of
the adoption of the plan of liquidation, any gain on the sale of its assets
will not result in a prohibited transaction tax, provided that the REMIC Pool
credits or distributes in liquidation all of the sale proceeds plus its cash
(other than amounts retained to meet claims against the REMIC Pool) to holders
of Regular Securities and Residual Securityholders within the 90-day period.

Administrative Matters

The REMIC Pool will be required to maintain its books on a calendar
year basis and to file federal income tax returns for federal income tax
purposes in a manner similar to a partnership. The form for such income tax
return is Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax
Return. Treasury regulations provide that, except where there is a single
Residual Securityholder for an entire taxable year, the REMIC Pool generally
will be subject to the procedural and administrative rules of the Code
applicable to partnerships, including the determination by the IRS of any
adjustments to, among other things, items of REMIC income, gain, loss,
deduction or credit in a unified administrative proceeding. Generally, the
Company or the Trustee will be obligated to act as "tax matters person," as
defined in applicable Treasury regulations, with respect to the REMIC Pool, in
its capacity as either Residual Securityholder or agent of the Residual
Securityholders. If the Code or applicable Treasury regulations do not permit
the Company or the Trustee to act as tax matters person in its capacity as
agent of the Residual Securityholders, the Residual Securityholder chosen by
the Residual Securityholders or such other person specified pursuant to
Treasury regulations will be required to act as tax matters person.

Treasury regulations provide that a holder of a Residual Security is
not required to treat items on its return consistently with their treatment on
the REMIC Pool's return if a holder owns 100% of the Residual Securities for
the

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entire calendar year. Otherwise, each holder of a Residual Security is required
to treat items on its return consistently with their treatment on the REMIC
Pool's return, unless the holder of a Residual Security either files a
statement identifying the inconsistency or establishes that the inconsistency
resulted from incorrect information received from the REMIC Pool. The IRS may
assess a deficiency resulting from a failure to comply with the consistency
requirement without instituting an administrative proceeding at the REMIC Pool
level.

LIMITATIONS ON DEDUCTION OF CERTAIN EXPENSES

An investor who is an individual, estate or trust will be subject to
limitation with respect to certain itemized deductions described in Code
Section 67, to the extent that such itemized deductions, in the aggregate, do
not exceed 2% of the investor's adjusted gross income. In addition, Code
Section 68 provides that itemized deductions otherwise allowable for a taxable
year of an individual taxpayer will be reduced by the lesser of (i) 3% of the
excess, if any, of adjusted gross income over $121,200 for 1997 and adjusted
yearly for inflation ($60,600 for 1997 and adjusted yearly for inflation, in
the case of a married individual filing a separate return), or (ii) 80% of the
amount of itemized deductions otherwise allowable for such year. In the case of
a REMIC Pool, such deductions may include deductions under Code Section 212 for
servicing fees and all administrative and other expenses relating to the REMIC
Pool or any similar expenses allocated to the REMIC Pool with respect to a
regular interest it holds in another REMIC. Such investors who hold REMIC
Securities either directly or indirectly through certain pass-through entities
may have their pro rata share of such expenses allocated to them as additional
gross income, but may be subject to such limitation on deductions. In addition,
such expenses are not deductible at all for purposes of computing the
alternative minimum tax, and may cause such investors to be subject to
significant additional tax liability. Treasury regulations provide that the
additional gross income and corresponding amount of expenses generally are to
be allocated entirely to the holders of Residual Securities in the case of a
REMIC Pool that would not qualify as a fixed investment trust in the absence of
a REMIC election. However, such additional gross income and limitation on
deductions will apply to the allocable portion of such expenses to holders of
Regular Securities, as well as holders of Residual Securities, where such
Regular Securities are issued in a manner that is similar to pass-through
certificates in a fixed investment trust. In general, such allocable portion
will be determined based on the ratio that a REMIC Securityholder's income,
determined on a daily basis, bears to the income of all holders of Regular
Securities and Residual Securities with respect to a REMIC Pool. As a result,
individuals, estates or trusts holding REMIC Securities (either directly or
indirectly through a grantor trust, partnership, S corporation, REMIC, or
certain other pass-through entities described in the foregoing Treasury
regulations) may have taxable income in excess of the interest income at the
pass-through rate or Bond interest rate on Regular Securities that are issued
in a single class or otherwise consistently with fixed investment trust status
or in excess of cash distributions for the related period on Residual
Securities.

TAXATION OF CERTAIN FOREIGN INVESTORS

Regular Securities

Interest, including original issue discount, distributable to Regular
Securityholders who are nonresident aliens, foreign corporations, or other
Non-U.S. Persons (as defined below), will be considered "portfolio interest"
and therefore, generally will not be subject to 30% United States withholding
tax, provided that (i) such interest is not effectively connected with a trade
or business in the United States of the securityholder and (ii) such Non-U.S.
Person provides the Trustee, or the person who would otherwise be required to
withhold tax from such distributions under Code Section 1441 or 1442, with an
appropriate statement, signed under penalties of perjury, identifying the
beneficial owner and stating, among other things, that the beneficial owner of
the Regular Security is a Non-U.S. Person. If such statement, or any other
required statement, is not provided, 30% withholding will apply unless reduced
or eliminated pursuant to an applicable tax treaty or unless the interest on
the Regular Security is effectively connected with the conduct of a trade or
business within the United States by such Non-U.S. Person. In the latter case,
such Non-U.S. Person will be subject to United States federal income tax at
regular rates. Investors who are Non-U.S. Persons should consult their own tax
advisors regarding the specific tax consequences to them of owning a Regular
Security. The term "Non-U.S. Person" means any person who is not a U.S. Person.
Payments on Regular Securities may subject a Non-U.S. Person to U.S. federal
income and withholding tax where such foreign person also owns, actually or
constructively, Residual Securities issued by the same REMIC, notwithstanding
compliance with the certification requirements discussed above. Effective
January 1, 2000, any foreign investor that seeks the protection of an income
tax treaty with respect to the

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imposition of United States withholding tax generally will be required to
obtain a taxpayer identification number from the IRS in advance and provide
verification that such investor is entitled to the protection of the relevant
income tax treaty. Foreign tax-exempt investors generally will be required to
provide verification of their tax-exempt status. Foreign investors are urged
to consult with their tax advisors with respect to those new withholding rules.

Residual Securities

The Committee Report indicates that amounts paid to Residual
Securityholders who are Non-U.S. Persons are treated as interest for purposes
of the 30% (or lower treaty rate) United States withholding tax. Treasury
regulations provide that amounts distributed to Residual Securityholders
qualify as "portfolio interest," subject to the conditions described in
"Regular Securities" above, but only to the extent that (i) the Mortgage Loans
were issued after July 18, 1984 and (ii) the Trust Fund, Trust Estate or
segregated pool of assets therein (as to which a separate REMIC election will
be made), to which the Residual Security relates, consists of obligations
issued in "registered form" within the meaning of Code Section 163(f)(1).
Generally, Mortgage Loans will not be, but certificated regular interests in
another REMIC Pool will be, considered obligations issued in registered form.
Furthermore, a Residual Securityholder will not be entitled to any exemption
from the 30% withholding tax (or lower treaty rate) to the extent of that
portion of REMIC taxable income that constitutes an "excess inclusion." See
"Taxation of Residual Securities -- Limitations on Offset or Exemption of REMIC
Income; Excess Inclusions." If the amounts paid to Residual Securityholders who
are Non-U.S. Persons are effectively connected with the conduct of a trade or
business within the United States by such Non-U.S. Persons, 30% (or lower
treaty rate) withholding will not apply. Instead, the amounts paid to such
Non-U.S. Persons will be subject to United States federal income tax at regular
rates. If 30% (or lower treaty rate) withholding is applicable, such amounts
generally will be taken into account for purposes of withholding only when paid
or otherwise distributed (or when the Residual Security is disposed of) under
rules similar to withholding upon disposition of debt instruments that have
original issue discount. See "Taxation of Residual Securities -- Tax-Related
Restrictions on Transfer of Residual Securities -- Foreign Investors" above
concerning the disregard of certain transfers having "tax avoidance potential."
Investors who are Non-U.S. Persons should consult their own tax advisors
regarding the specific tax consequences to them of owning Residual Securities.

BACKUP WITHHOLDING

Distributions made on the Regular Securities, and proceeds from the
sale of the Regular Securities to or through certain brokers, may be subject to
a "backup" withholding tax under Code Section 3406 of 31% on "reportable
payments" (including interest distributions, original issue discount, and,
under certain circumstances, principal distributions) unless the Regular
Securityholder complies with certain reporting and/or certification procedures,
including the provision of its taxpayer identification number to the Trustee,
its agent or the broker who effected the sale of the Regular Security, or such
Securityholder is otherwise an exempt recipient under applicable provisions of
the Code. Any amounts to be withheld from distribution on the Regular
Securities would be refunded by the IRS or allowed as a credit against the
Regular Securityholder's federal income tax liability.

REPORTING REQUIREMENTS

Reports of accrued interest and original issue discount will be made
annually to the IRS and to individuals, estates, non-exempt and non-charitable
trusts, and partnerships who are either holders of record of Regular Securities
or beneficial owners who own Regular Securities through a broker or middleman
as nominee. All brokers, nominees and all other non-exempt holders of record of
Regular Securities (including corporations, non-calendar year taxpayers,
securities or commodities dealers, real estate investment trusts, investment
companies, common trust funds, thrift institutions and charitable trusts) may
request such information for any calendar quarter by telephone or in writing by
contacting the person designated in IRS Publication 938 with respect to a
particular Series of Regular Securities. Holders through nominees must request
such information from the nominee. Treasury regulations provide that
information necessary to compute the accrual of any market discount on the
Regular Securities must also be furnished.

The IRS's Form 1066 has an accompanying Schedule Q, Quarterly Notice
to Residual Interest Holders of REMIC Taxable Income or Net Loss Allocation.
Treasury regulations require that Schedule Q be furnished by the

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REMIC Pool to each Residual Securityholder by the end of the month following
the close of each calendar quarter (41 days after the end of a quarter under
proposed Treasury regulations) in which the REMIC Pool is in existence.

Treasury regulations require that, in addition to the foregoing
requirements, information must be furnished quarterly to Residual
Securityholders, furnished annually, if applicable, to holders of Regular
Securities, and filed annually with the IRS concerning Code Section 67 expenses
(see "Limitations on Deduction of Certain Expenses" above) allocable to such
holders. Furthermore, under such regulations, information must be furnished
quarterly to Residual Securityholders, furnished annually to holders of Regular
Securities, and filed annually with the IRS concerning the percentage of the
REMIC Pool's assets meeting the qualified asset tests described above under
"Status of REMIC Securities."

FEDERAL INCOME TAX CONSEQUENCES FOR SECURITIES AS TO
WHICH NO REMIC ELECTION IS MADE

NON-REMIC BONDS

With respect to each Series of Bonds for which the Issuer does not
make a REMIC election, ("Non-REMIC Bonds"), no regulations, published rulings,
or judicial decisions exist that discuss the characterization for federal
income tax purposes of securities with terms substantially the same as the
Non-REMIC Bonds. Counsel to the Company, however, will deliver their opinion
that the Non-REMIC Bonds will be treated for federal income tax purposes as
indebtedness, and not as an ownership interest in the Mortgage Assets, or as an
equity interest in the Issuer or in a separate association taxable as a
corporation. The following general discussion of the anticipated federal
income tax consequences of the purchase, ownership and disposition of Non-REMIC
Bonds, to the extent it relates to matters of law or legal conclusions with
respect thereto, represents the opinion of counsel to the Company, subject to
any qualifications set forth herein. In addition, counsel to the Company has
prepared or reviewed the statements in this Prospectus under the heading
"Certain Federal Income Tax Consequences - Federal Income Tax Consequences for
Securities as to Which No REMIC Election Is Made - Non-REMIC Bonds," and is of
the opinion that such statements are correct in all material respects. Such
statements do not purport to furnish information in the level of detail or with
the attention to an investor's specific tax circumstances that would be
provided by an investor's own tax advisor. Accordingly, each investor is
advised to consult its own tax advisors with regard to the tax consequences to
it of investing in Non-REMIC Bonds.

For federal income tax purposes, (i) Non-REMIC Bonds held by a thrift
institution taxed as a "mutual savings bank" or "domestic building and loan
association" will not represent interests in "qualifying real property loans"
within the meaning of Code Section 593(d)(1); (ii) Non-REMIC Bonds held by a
thrift institution taxed as a domestic building and loan association will not
constitute "loans . . . secured by an interest in real property" within the
meaning of Code Section 7701(a)(19)(C)(v); (iii) interest on Non-REMIC Bonds
held by a real estate investment trust will not be treated as "interest on
obligations secured by mortgages on real property or on interests in real
property" within the meaning of Code Section 856(c)(3)(B); (iv) Non-REMIC Bonds
held by a real estate investment trust will not constitute "real estate assets"
or "Government securities" within the meaning of Code Section 856(c)(4)(A); and
(v) Non- REMIC Bonds held by a regulated investment company will not constitute
"Government securities" within the meaning of Code Section 851(b)(4)(A)(i).

Non-REMIC Bonds will be subject to the same rules of taxation as
Regular Securities issued by a REMIC, as described above, except that (i)
income reportable on Non-REMIC Bonds is not required to be reported under the
accrual method unless the Holder otherwise uses the accrual method and (ii) the
special rule treating a portion of the gain on sale or exchange of a Regular
Security as ordinary income is not applicable to Non-REMIC Bonds.

STANDARD CERTIFICATES

General

With respect to a Series of Certificates issued under an Agreement for
which no election is made to treat the related Trust Fund (or a segregated pool
of assets therein) as a REMIC, counsel to the Company will deliver its opinion
to the effect that, assuming compliance with all provisions of the related
Agreement, the related Trust Fund will be

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classified as a grantor trust under subpart E, Part 1 of subchapter J of
Chapter 1 of Subtitle A of the Code and not as an association taxable as a
corporation. The following general discussion of the anticipated federal income
tax consequences of the purchase, ownership and disposition of Standard
Certificates, to the extent it relates to matters of law or legal conclusions
with respect thereto, represents the opinion of counsel to the Company, subject
to any qualifications set forth herein. In addition, counsel to the Company
has prepared or reviewed the statements in this Prospectus under the heading
"Certain Federal Income Tax Consequences - Federal Income Tax Consequences for
Securities as to Which No REMIC Election is Made - Standard Certificates," and
is of the opinion that such statements are correct in all material respects.
Such statements are intended as an explanatory discussion of the possible
effects of the classification of any Trust Fund as a grantor trust for federal
income tax purposes on investors generally and of related tax matters affecting
investors generally, but do not purport to furnish information in the level of
detail or with the attention to an investor's specific tax circumstances that
would be provided by an investor's own tax advisor. Accordingly, each investor
is advised to consult its own tax advisors with regard to the tax consequences
to it of investing in Standard Certificates. Where there is no fixed retained
yield with respect to the Mortgage Loans underlying the Certificates of such a
Series, and where such Certificates are not designated as "Stripped
Securities," the holder of each such Certificates in such Series will be
treated as the owner of a pro rata undivided interest in the ordinary income
and corpus portions of the Trust Fund represented by his Certificate and will
be considered the beneficial owner of a pro rata undivided interest in each of
the Mortgage Loans, subject to the discussion below under "Premium and Discount
- -- Recharacterization of Servicing Fees." Accordingly, the holder of a
Certificate of a particular Series will be required to report on its federal
income tax return its pro rata share of the entire income from the Mortgage
Loans represented by its Certificate, including interest at the coupon rate on
such Mortgage Loans, original issue discount (if any), prepayment fees,
assumption fees, and late payment charges received by the Company or another
service provider, in accordance with such Certificateholder's method of
accounting. A Certificateholder generally will be able to deduct its share of
servicing fees and all administrative and other expenses of the Trust Fund in
accordance with his method of accounting, provided that such amounts are
reasonable compensation for services rendered to that Trust Fund. However,
investors who are individuals, estates or trusts who own Certificates, either
directly or indirectly through certain pass-through entities, will be subject
to limitation with respect to certain itemized deductions described in Code
Section 67, including deductions under Code Section 212 for servicing fees and
all such administrative and other expenses of the Trust Fund, to the extent
that such deductions, in the aggregate, do not exceed two percent of an
investor's adjusted gross income. In addition, Code Section 68 provides that
itemized deductions otherwise allowable for a taxable year of an individual
taxpayer will be reduced by the lesser of (i) 3% of the excess, if any, of
adjusted gross income over $121,200 for 1997, adjusted yearly for inflation
($60,600 for 1997, adjusted yearly for inflation, in the case of a married
individual filing a separate return), or (ii) 80% of the amount of itemized
deductions otherwise allowable for such year. As a result such investors
holding Certificates, directly or indirectly through a pass-through entity, may
have aggregate taxable income in excess of the aggregate amount of cash
received on such Certificates with respect to interest at the pass-through rate
on such Certificates or discount thereon. In addition, such expenses are not
deductible at all for purposes of computing the alternative minimum tax, and
may cause such investors to be subject to significant additional tax liability.
Moreover, where there is fixed retained yield with respect to the Mortgage
Loans underlying a Series of Certificates or where the servicing fees are in
excess of reasonable servicing compensation, the transaction will be subject to
the application of the "stripped bond" and "stripped coupon" rules of the Code,
as described below under "Stripped Certificates" and "Premium and Discount --
Recharacterization of Servicing Fees," respectively.

Tax Status

Unless otherwise described in the related Prospectus Supplement,
Certificates described under this subsection "Standard Certificates" generally
will be treated as follows:

1. A Certificate owned by a "domestic building and loan
association" within the meaning of Code Section 7701(a)(19) will be considered
to represent "loans . . . secured by an interest in real property" within the
meaning of Code Section 7701(a)(19)(C)(v), provided that the real property
securing the Mortgage Loans represented by that Certificate is of the type
described in such section of the Code.

2. A Certificate owned by a real estate investment trust will be
considered to represent "real estate assets" within the meaning of Code Section
856(c)(4)(A) to the extent that the assets of the related Trust Fund

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consist of qualified assets, and interest income on such assets will be
considered "interest on obligations secured by mortgages on real property"
within the meaning of Code Section 856(c)(3)(B).

3. A Certificate owned by a REMIC will be considered to represent
an "obligation (including any participation or certificate of beneficial
ownership therein) which is principally secured by an interest in real
property" within the meaning of Code Section 860G(a)(3)(A) to the extent that
the assets of the related Trust Fund consist of "qualified mortgages" within
the meaning of Code Section 860G(a)(3).

Premium and Discount

Certificateholders are advised to consult with their tax advisors as
to the federal income tax treatment of premium and discount arising either upon
initial acquisition of Certificates or thereafter.

Premium. The treatment of premium incurred upon the purchase of a
Certificate will be determined generally as described above under "Federal
Income Tax Consequences for REMIC Securities -- Taxation of Residual Securities
- -- Treatment of Certain Items of REMIC Income and Expense -- Premium."

Original Issue Discount. The IRS has stated in published rulings
that, in circumstances similar to those described herein, the original issue
discount rules will be applicable to a Certificateholder's interest in those
Mortgage Loans as to which the conditions for the application of those sections
are met. Rules regarding periodic inclusion of original issue discount income
are applicable to mortgages of corporations originated after May 27, 1969,
mortgages of noncorporate mortgagors (other than individuals) originated after
July 1, 1982, and mortgages of individuals originated after March 2, 1984. Such
original issue discount could arise by the charging of points by the originator
of the mortgages in an amount greater than a statutory de minimis exception, to
the extent that the points are not for services provided by the lender. It is
generally not anticipated that adjustable rate Mortgage Loans will be treated
as issued with original issue discount. However, the application of the OID
Regulations to adjustable rate mortgage loans with incentive interest rates or
annual or lifetime interest rate caps may result in original issue discount.

Original issue discount must generally be reported as ordinary gross
income as it accrues under a constant yield method that takes into account the
compounding of interest, in advance of the cash attributable to such income.
However, Code Section 1272 provides for a reduction in the amount of original
issue discount includible in the income of a holder of an obligation that
acquires the obligation after its initial issuance at a price greater than the
sum of the original issue price and the previously accrued original issue
discount, less prior payments of principal. Accordingly, if such Mortgage Loans
acquired by a Certificateholder are purchased at a price equal to the then
unpaid principal amount of such Mortgage Loans, no original issue discount
attributable to the difference between the issue price and the original
principal amount of such Mortgage Loans (i.e., points) will be includible by
such holder.

Market Discount. Certificateholders also will be subject to the
market discount rules to the extent that the conditions for application of
those sections are met. Market discount on the Mortgage Loans will be
determined and will be reported as ordinary income generally in the manner
described above under "Federal Income Tax Consequences for REMIC Securities --
Taxation of Residual Securities -- Treatment of Certain Items of REMIC Income
and Expense -- Market Discount."

Recharacterization of Servicing Fees. If the servicing fees paid to
Servicers were deemed to exceed reasonable servicing compensation, the amount
of such excess would be nondeductible under Code Section 162 or 212. In this
regard, there are no authoritative guidelines for federal income tax purposes
as to either the maximum amount of servicing compensation that may be
considered reasonable in the context of this or similar transactions or
whether, in the case of the Certificates, the reasonableness of servicing
compensation should be determined on a weighted average or loan-by- loan basis.
If a loan-by-loan basis is appropriate, the likelihood that such amount would
exceed reasonable servicing compensation as to some of the Mortgage Loans would
be increased. Recently issued IRS guidance indicates that a servicing fee in
excess of reasonable compensation ("excess servicing") will cause the Mortgage
Loans to be treated under the "stripped bond" rules. Such guidance provides
safe harbors for servicing deemed to be reasonable and requires taxpayers to
demonstrate that the value of servicing fees in excess of such amounts is not
greater than the value of the services provided.

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Accordingly, if the IRS's approach is upheld, a servicer that receives
a servicing fee in excess of such amounts would be viewed as retaining an
ownership interest in a portion of the interest payments on the Mortgage Loans.
Under the rules of Code Section 1286, the separation of ownership of the right
to receive some or all of the interest payments on an obligation from the right
to receive some or all of the principal payments on the obligation would result
in treatment of such Mortgage Loans as "stripped coupons" and "stripped bonds."
While Certificateholders would still be treated as owners of beneficial
interests in a grantor trust for federal income tax purposes, the corpus of
such trust could be viewed as excluding the portion of the Mortgage Loans the
ownership of which is attributed to a servicer, or as including such portion as
a second class of equitable interest. Applicable Treasury regulations treat
such an arrangement as a fixed investment trust, since the multiple classes of
trust interests should be treated as merely facilitating direct investments in
the trust assets and the existence of multiple classes of ownership interests
is incidental to that purpose. In general, such a recharacterization should not
have any significant effect upon the timing or amount of income reported by a
Certificateholder, except that the income reported by a cash method holder may
be slightly accelerated. See "Stripped Certificates" below for a further
description of the federal income tax treatment of stripped bonds and stripped
coupons.

In the alternative, the amount, if any, by which the servicing fees
paid to the servicers are deemed to exceed reasonable compensation for
servicing could be treated as deferred payments of purchase price by the
Certificateholders to purchase an undivided interest in the Mortgage Loans. In
such event, the present value of such additional payments might be included in
the Certificateholder's basis in such undivided interests for purposes of
determining whether the Certificate was acquired at a discount, at par, or at a
premium. Under this alternative, Certificateholders may also be entitled to a
deduction for unstated interest with respect to each deferred payment. The
Internal Revenue Service may take the position that the specific statutory
provisions of Code Section 1286 described above override the alternative
described in this paragraph. Certificateholders are advised to consult their
tax advisors as to the proper treatment of the amounts paid to the servicers as
set forth herein as servicing compensation or under either of the alternatives
set forth above.

Sale or Exchange of Certificates

Upon sale or exchange of a Certificate, a Certificateholder will
recognize gain or loss equal to the difference between the amount realized on
the sale and its aggregate adjusted basis in the Mortgage Loans and other
assets represented by the Certificate. In general, the aggregate adjusted basis
will equal the Certificateholder's cost for the Certificate, increased by the
amount of any income previously reported with respect to the Certificate and
decreased by the amount of any losses previously reported with respect to the
Certificate and the amount of any distributions received thereon. Except as
provided above with respect to original issue discount and market discount on
any Mortgage Loans, and except for certain financial institutions subject to
the provisions of Code Section 582(c), any such gain or loss generally would be
capital gain or loss if the Certificate was held as a capital asset.

STRIPPED CERTIFICATES

General

The following general discussion of the anticipated federal income tax
consequences of the purchase, ownership and disposition of Stripped
Certificates, to the extent it relates to matters of law or legal conclusions
with respect thereto, represents the opinion of counsel to the Company, subject
to any qualifications set forth herein. In addition, counsel to the Company
has prepared or reviewed the statements in this Prospectus under the heading
"Certain Federal Income Tax Consequences - Federal Income Tax Consequences for
Securities as to Which No REMIC Election is Made - Stripped Certificates," and
is of the opinion that such statements are correct in all material respects.
Such statements are intended as an explanatory discussion of the possible
effects of the classification of any Trust Fund as a grantor trust for federal
income tax purposes on investors generally and of related tax matters affecting
investors generally, but do not purport to furnish information in the level of
detail or with the attention to an investor's specific tax circumstances that
would be provided by an investor's own tax advisor. Accordingly, each investor
is advised to consult its own tax advisors with regard to the tax consequences
to it of investing in Stripped Certificates.

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Pursuant to Code Section 1286, the separation of ownership of the
right to receive some or all of the principal payments on an obligation from
ownership of the right to receive some or all of the interest payments results
in the creation of "stripped bonds" with respect to principal payments and
"stripped coupons" with respect to interest payments. For purposes of this
discussion, Certificates for which no REMIC election is made and that are
subject to those rules will be referred to as "Stripped Certificates." The
Certificates will be subject to those rules if (i) the Company or any of its
affiliates retains (for its own account or for purposes of resale), in the form
of fixed retained yield or otherwise, an ownership interest in a portion of the
payments on the Mortgage Loans, (ii) the Company, any of its affiliates or a
servicer is treated as having an ownership interest in the Mortgage Loans to
the extent it is paid (or retains) servicing compensation in an amount greater
than reasonable consideration for servicing the Mortgage Loans (see "Standard
Certificates -- Premium and Discount -- Recharacterization of the Servicing
Fees" above) or (iii) Classes of Certificates are issued in two or more Classes
or subclasses representing the right to non-pro-rata percentages of the
interest and principal payments on the Mortgage Loans.

In general, a holder of a Stripped Certificate will be considered to
own "stripped bonds" with respect to its pro rata share of all or a portion of
the principal payments on each Mortgage Loan and/or "stripped coupons" with
respect to its pro rata share of all or a portion of the interest payments on
each Mortgage Loan, including the Stripped Certificate's allocable share of the
servicing fees paid, to the extent that such fees represent reasonable
compensation for services rendered. See discussion above under "Standard
Certificates -- Premium and Discount -- Recharacterization of Servicing Fees."
For this purpose the servicing fees will be allocated to the Stripped
Certificates in proportion to the respective offering price of each class (or
subclass) of Stripped Certificates. The holder of a Stripped Certificate
generally will be entitled to a deduction each year in respect of the servicing
fees, as described above under "Standard Certificates -- General," subject to
the limitation described therein.

Code Section 1286 treats a stripped bond or a stripped coupon
generally as a new obligation issued (i) on the date that the stripped interest
is purchased and (ii) at a price equal to its purchase price or, if more than
one stripped interest is purchased, the share of the purchase price allocable
to such stripped interest. Each stripped interest generally will have original
issue discount equal to the excess of its stated redemption price at maturity
(or, in the case of a stripped coupon, the amount payable on the due date of
such coupon) over its issue price. Although the treatment of Stripped
Certificates for federal income tax purposes is not clear in certain respects
at this time, particularly where such Stripped Certificates are issued with
respect to a Trust Fund containing variable-rate Mortgage Loans. Each Stripped
Certificate should be treated as a single installment obligation for purposes
of calculating original issue discount and gain or loss on disposition. This
treatment is based on the interrelationship of Code Section 1286 and the
regulations thereunder, Code Sections 1272 through 1275, and the OID
Regulations. While under Code Section 1286 computations with respect to
Stripped Certificates arguably should be made in one of the ways described
below under "Taxation of Stripped Certificates -- Possible Alternative
Characterizations," the OID Regulations state, in general, that all debt
instruments issued in connection with the same transaction must be treated as a
single debt instrument. The Trustee will make and report all computations
described below using this aggregate approach, unless substantial legal
authority requires otherwise.

Furthermore, Treasury regulations support the treatment of a Stripped
Certificate as a single debt instrument issued on the date it is originated for
purposes of calculating any original issue discount. The preamble to such
regulations states that such regulations are premised on the assumption that an
aggregation approach is appropriate in determining whether original issue
discount on a stripped bond or stripped coupon is de minimis. In addition,
under these regulations, a Stripped Certificate that represents a right to
payments of both interest and principal may be viewed either as issued with
original issue discount or market discount (as described below), at a de
minimis original issue discount, or, presumably, at a premium. The preamble to
such regulations also provide that such regulations are premised on the
assumption that generally the interest component of such a Stripped Certificate
would be treated as stated interest under the OID Regulations.

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Status of Stripped Certificates

Even if Strip Certificates evidence an interest in a Trust Fund
consisting of Mortgage Loans that are "real estate assets" within the meaning
of Code Section 856(c)(A), and "loans . . . secured by an interest in real
property" within the meaning of Code Section 7701(a)(19)(C)(v), and the
interest (including original issue discount) income on which is an "interest on
obligations secured by mortgages on real property" within the meaning of Code
Section 856(c)(3)(B), it is unclear whether the Strip Certificates, and the
income therefrom, will be so characterized. However, the policies underlying
such sections (namely, to encourage or require investments in mortgage loans by
thrift institutions and real estate investment trusts) may suggest that such
characterization is appropriate. Counsel to the Company will not deliver any
opinion on these questions. Prospective purchasers to which such
characterization of an investment in Strip Certificates in material should
consult their tax advisors regarding whether the Strip Certificates, and the
income therefrom, will be so characterized.

The Strip Certificates will be "obligation[s] (including any
participation or Certificate of beneficial ownership therein) which . . . [are]
principally secured by an interest in real property" within the meaning of
Section 860G(a)(3)(A) of the Code.

Taxation of Stripped Certificates

Original Issue Discount. Except as described above under "General,"
each Stripped Certificate will be considered to have been issued (i) on the
date that the stripped interest is purchased and (ii) at a price equal to its
purchase price or, if more than one stripped interest is purchased, the share
of the purchase price allocable to such stripped interest. Each stripped
interest generally will have original issue discount equal to the excess of its
stated redemption price at maturity (or, in the case of a stripped coupon, the
amount payable on the due date of such coupon) over its issue price. Original
issue discount with respect to a Stripped Certificate must be included in
ordinary income as it accrues, in accordance with a constant yield method that
takes into account the compounding of interest, which may be prior to the
receipt of the cash attributable to such income. Based in part on the OID
Regulations and the amendments to the original issue discount sections of the
Code made by the 1986 Act, it appears that the amount of original issue
discount required to be included in the income of a holder of a Stripped
Certificate (referred to in this discussion as a "Stripped Certificateholder")
in any taxable year likely will be computed generally as described above under
"Federal Income Tax Consequences for REMIC Securities -- Taxation of Regular
Securities -- Original Issue Discount." However, with the apparent exception of
a Stripped Certificate issued with de minimis original issue discount, as
described above under "General," the issue price of a Stripped Certificate will
be the purchase price paid by each holder thereof, and the stated redemption
price at maturity will include the aggregate amount of the payments to be made
on the Stripped Certificate to such Stripped Certificateholder, presumable
under the Prepayment Assumption, other than amounts treated as qualified stated
interest.

If the Mortgage Loans prepay at a rate either faster or slower than
that under the Prepayment Assumption, a Stripped Certificateholder's
recognition of original issue discount will be either accelerated or
decelerated and the amount of such original issue discount will be either
increased or decreased depending on the relative interests in principal and
interest on each Mortgage Loan represented by such Stripped Certificateholder's
Stripped Certificate. While the matter is not free from doubt, the holder of a
Stripped Certificate should be entitled in the year that it becomes certain
(assuming no further prepayments) that the holder will not recover a portion of
its adjusted basis in such Stripped Certificate to recognize an ordinary loss
equal to such portion of unrecoverable basis.

Possible Alternative Characterizations. As an alternative to the
method described above, the fact that some or all of the interest payments with
respect to the Stripped Certificates will not be made if the Mortgage Loans are
prepaid could lead to the interpretation that such interest payments are
"contingent" within the meaning of the OID Regulations. Under the rules of the
OID Regulations relating to contingent payments, a projected payment schedule
for the Stripped Certificates would be constructed by the Company. Interest
accrual and adjustments relating to the Stripped Certificates would be
determined under the general rules of the noncontingent bond method described
above.

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While not free from doubt, counsel for the Company believes that uncertainty as
to the payment of interest arising as a result of the possibility of prepayment
of the Mortgage Loans should not cause the contingent payment rules under the
OID Regulations to apply to interest with respect to the Stripped Certificates.

Sale or Exchange of Stripped Certificates. Sale or exchange of a
Stripped Certificate prior to its maturity will result in gain or loss equal to
the difference, if any, between the amount received and the Stripped
Certificateholder's adjusted basis in such Stripped Certificate, as described
above under "Federal Income Tax Consequences for REMIC Securities -- Taxation
of Regular Securities -- Sale or Exchange of Regular Securities." To the extent
that a subsequent purchaser's purchase price is exceeded by the remaining
payments on the Stripped Certificates, such subsequent purchaser will be
required for federal income tax purposes to accrue and report such excess as if
it were original issue discount in the manner described above. It is not clear
for this purpose whether the assumed prepayment rate that is to be used in the
case of a Stripped Certificateholder other than original Stripped
Certificateholder should be the Prepayment Assumption or a new rate based on
the circumstances at the date of subsequent purchase.

Purchase of More Than One Class of Stripped Certificates. Where an
investor purchases more than one class of Stripped Certificates, it is
currently unclear whether for federal income tax purposes such classes of
Stripped Certificates should be treated separately or aggregated for purposes
of the rules described above.

Because of these possible varying characterizations of Stripped
Certificates and the resultant differing treatment of income recognition,
Stripped Certificateholders are urged to consult their own tax advisors
regarding the proper treatment of Stripped Certificates for federal income tax
purposes.

REPORTING REQUIREMENTS AND BACKUP WITHHOLDING

The Trustee will furnish, within a reasonable time after the end of
each calendar year, to each Certificateholder or Stripped Certificateholder at
any time during such year, such information (prepared on the basis described
above) as the Trustee deems to be necessary or desirable to enable such
Certificateholders to prepare their federal income tax returns. Such
information will include the amount of original issue discount accrued on
Certificates held by persons other than Certificateholders exempted from the
reporting requirements. The amounts required to be reported by the Trustee may
not be equal to the proper amount of original issue discount required to be
reported as taxable income by a Certificateholder, other than an original
Certificateholder. The Trustee will also file such original issue discount
information with the IRS. If a Certificateholder fails to supply an accurate
taxpayer identification number or if the Secretary of the Treasury determines
that a Certificateholder has not reported all interest and dividend income
required to be shown on his federal income tax return, 31% backup withholding
may be required in respect of any reportable payments, as described above under
"Federal Income Tax Consequences for REMIC Securities -- Backup Withholding."

TAXATION OF CERTAIN FOREIGN INVESTORS

To the extent that a Certificate evidences ownership in Mortgage Loans
that are issued on or before July 18, 1984, interest or original issue discount
paid by the person required to withhold tax under Code Section 1441 or 1442 to
nonresident aliens, foreign corporations, or other Non-U.S. Persons generally
will be subject to 30% United States withholding tax, or such lower rate as may
be provided for interest by an applicable tax treaty. Accrued original issue
discount recognized by the Certificateholder on the sale or exchange of such a
Certificate also will be subject to federal income tax at the same rate.

Treasury regulations provide that interest or original issue discount
paid by the Trustee or other withholding agent to a Non-U.S. Person evidencing
ownership interest in Mortgage Loans issued after July 18, 1984 will be
"portfolio interest" and will be treated in the manner, and such persons will
be subject to the same certification requirements described above under
"Federal Income Tax Consequences for REMIC Securities -- Taxation of Certain
Foreign Investors -- Regular Securities."

- 117 -
<PAGE> 254
PLAN OF DISTRIBUTION

Certificates are being offered hereby in series through one or more
underwriters or groups of underwriters (the "Underwriters"). The related
Prospectus Supplement will set forth the terms of offering of a Series of
Securities, including the public offering or purchase price of each Class of
Securities of such Series being offered thereby or the method by which such
price will be determined and the net proceeds to the Issuer (in the case of a
Series of Bonds) or to the Company (in the case of a Series of Certificates)
from the sale of each such Class. Such Securities will be acquired by the
Underwriters for their own account and may be resold from time to time in one
or more transactions including negotiated transactions, at fixed public
offering prices or at varying prices to be determined at the time of sale or at
the time of commitment therefor. The managing Underwriter or Underwriters with
respect to the offer and sale of a particular Series of Securities will be set
forth on the cover of the Prospectus Supplement relating to such Series and the
members of the underwriting syndicate, if any, will be named in such Prospectus
Supplement.

In connection with the Sale of the Securities, Underwriters may
receive compensation from the related Issuer or the Company or from purchasers
of the Securities in the form of discounts, concessions or commissions.
Underwriters and dealers participating in the distribution of the Securities
may be deemed to be Underwriters in connection with such Certificates, and any
discounts or commissions received by them from the related Issuer or the
Company and any profit on the resale of Securities by them may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933, as
amended. The Prospectus Supplement will describe any such compensation paid by
the related Issuer or the Company.

It is anticipated that the underwriting agreement pertaining to the
sale of any Series of Securities will provide that the obligations of the
Underwriters will be subject to certain conditions precedent, that the
Underwriters will be obligated to purchase all such Securities if any are
purchased and that the related Issuer or the Company will indemnify the
underwriters against certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended.

LEGAL MATTERS

The legality of the Securities and certain federal income tax matters
will be passed upon for the Company by Counsel to the Company.

FINANCIAL INFORMATION AND ADDITIONAL INFORMATION

A new Trust Fund will be formed with respect to each Series of
Certificates and, unless otherwise specified in the Prospectus Supplement for a
Series of Bonds, a new Owner Trust will be formed with respect to each Series
of Bonds issued by an Owner Trust. No Trust Fund or, unless otherwise
specified in the Prospectus Supplement for a Series of Securities, Owner Trust
will engage in any business activities or have any assets or obligations prior
to the issuance of the related Series of Securities. Accordingly, no financial
statements with respect to any Trust Fund or Owner Trust will be included in
this Prospectus or in the related Prospectus Supplement.

Copies of the Registration Statement to which this Prospectus forms a
part and the exhibits thereto are on file at the offices of the Securities and
Exchange Commission in Washington, D.C., and may be obtained at rates
prescribed by the Commission upon request to the Commission and inspected,
without charge, at the offices of the Commission.

Copies of FHLMC's most recent Offering Circular for FHLMC
Certificates, FHLMC's Information Statement and most recent Supplement thereto
and any quarterly report made available by FHLMC can be obtained in writing or
calling FHLMC's Investor Relations Department at 8200 Jones Branch Drive,
McLean, Virginia 22102 (800-336-FMPC). The Company did not participate in the
preparation of FHLMC's Offering Circular, Information Statement or any
Supplement thereto or any such quarterly report.

Copies of FNMA's most recent Prospectus for FNMA Certificates and
FNMA's annual report and quarterly financial statements as well as other
financial information are available from the Vice President for Investor
Relations of FNMA, 3900 Wisconsin Avenue, N.W., Washington, D.C. 20016
(202-752-7585). The Company did not participate in the preparation of FNMA's
Prospectus or any such report, financial statement or other financial
information.

- 118 -
<PAGE> 255
EXPERTS

The financial statements incorporated in this prospectus by reference
from the Company's Annual Report (Form 10-K) for the year ended December 31,
1996, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report which is incorporated herein by reference and have been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

- 119 -
<PAGE> 256

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE> 257

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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND PROSPECTUS
SUPPLEMENT, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS AND PROSPECTUS
SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS OR
PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS OR PROSPECTUS SUPPLEMENT, NOR
ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.

------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Table of Contents.................................... S- 1
Summary of Terms..................................... S- 2
Risk Factors......................................... S-14
Description of the Certificates...................... S-15
Description of the Pooled Certificates............... S-19
The Reserve Fund..................................... S-27
Yield and Prepayment Considerations.................. S-28
Pooling Agreement.................................... S-38
Federal Income Tax Considerations.................... S-42
ERISA Considerations................................. S-43
Legal Investment..................................... S-44
Underwriting......................................... S-44
Legal Matters........................................ S-45
Ratings.............................................. S-45
Index of Terms....................................... S-47
Annex 1
Annex 2
PROSPECTUS
Prospectus Supplement and Current Report on Form
8-K................................................ 3
Available Information................................ 4
Incorporation of Certain Documents by Reference...... 4
Table of Contents.................................... 5
Index of Principal Terms............................. 8
Summary of Prospectus................................ 12
Risk Factors......................................... 26
Description of the Securities........................ 33
Assets Securing or Underlying the Securities......... 40
Credit Enhancement................................... 51
Servicing of the Mortgage Loans, Multifamily Loans
and Contracts...................................... 55
The Indenture........................................ 63
The Agreement........................................ 65
Use of Proceeds...................................... 73
The Issuer........................................... 73
The Trustee.......................................... 74
Certain Legal Aspects of the Mortgage Assets......... 75
Legal Investment Matters............................. 87
ERISA Considerations................................. 89
Certain Federal Income Tax Consequences.............. 90
Plan of Distribution................................. 113
Legal Matters........................................ 113
Financial Information and Additional Information..... 113
Experts.............................................. 114
</TABLE>

Until July 27, 1998, all dealers effecting transactions in the Certificates,
whether or not participating in this distribution, may be required to deliver a
Prospectus Supplement and the Prospectus to which it relates. This is an
addition to the obligation of dealers to deliver a Prospectus Supplement and
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

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$60,373,853
(APPROXIMATE)

FAIC II

PASS-THROUGH CERTIFICATES
SERIES 1998-A

FUND AMERICA
INVESTORS CORPORATION II
ISSUER
----------------------------------------------------

PROSPECTUS SUPPLEMENT
----------------------------------------------------
-------------------------
BEAR, STEARNS & CO. INC.
-------------------------
APRIL 28, 1998

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