RISK FACTORS You should purchase securities only if you understand and are able to bear the associated risks. The risks applicable to your investment depend on the principal and interest type of your securities. This section highlights certain of these risks. The rate of principal payments on the un- derlying mortgage loans will affect the rate of principal payments on your securi- ties. The rate at which you will receive prin- cipal payments will depend largely on the rate of principal payments, including prepay- ments, on the mortgage loans underlying the related trust assets. We expect the rate of principal payments on the underlying mort- gage loans to vary. Borrowers generally may prepay their mortgage loans at any time with- out penalty. Rates of principal payments can reduce your yield. The yield on your securities probably will be lower than you expect if: •   you bought your securities at a premium (interest only securities, for example) and principal payments are faster than you ex- pected, or •   you bought your securities at a discount (principal only securities, for example) and principal payments are slower than you expected. In addition, if your securities are interest only securities or securities purchased at a significant premium, you could lose money on your investment if prepayments occur at a rapid rate. Under certain circumstances, a Ginnie Mae issuer has the right to repurchase a defaulted mortgage loan from the related pool of mortgage loans underlying a par- ticular Ginnie Mae MBS Certificate, the effect of which would be comparable to a prepayment of such mortgage loan. At its option and without Ginnie Mae's prior con- sent, a Ginnie Mae issuer may repurchase any mortgage loan at an amount equal to par less any amounts previously advanced by such issuer in connection with its responsibilities as servicer of such mortgage loan to the extent that (i) in the case of a mortgage loan included in a pool of mortgage loans under- lying a Ginnie Mae MBS Certificate issued on or before December 1, 2002, such mortgage loan has been delinquent for four consecu- tive months, and at least one delinquent pay- ment remains uncured or (ii) in the case of a mortgage loan included in a pool of mort- gage loans underlying a Ginnie Mae MBS Certificate issued on or after January 1, 2003, no payment has been made on such mort- gage loan for three consecutive months. Any such repurchase will result in prepayment of the principal balance or reduction in the notional balance of the securities ultimately backed by such mortgage loan. No assur- ances can be given as to the timing or fre- quency of any such repurchases. The level of LIBOR will affect the yields on floating rate and inverse floating rate se- curities. If LIBOR performs differently from what you expect, the yield on your securities may be lower than you expect. Lower levels of LIBOR will generally reduce the yield on floating rate securities; higher levels of LI- BOR will generally reduce the yield on in- verse floating rate securities. You should bear in mind that the timing of changes in the level of LIBOR may affect your yield: generally, the earlier a change, the greater the effect on your yield. It is doubtful that LIBOR will remain constant. An investment in the securities is subject to significant reinvestment risk. The rate of principal payments on your securities is un- certain. You may be unable to reinvest the payments on your securities at the same re- turns provided by the securities. Lower pre- vailing  interest  rates  may  result  in  an unexpected return of principal. In that inter- est rate climate, higher yielding reinvestment opportunities may be limited. Conversely, higher prevailing interest rates may result in slower returns of principal and you may not be able to take advantage of higher yielding investment opportunities. The final payment S-10