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 under- lying mortgage loans will affect the rate of principal payments on your securities.    The rate at which you will receive principal payments will depend largely on the rate of principal pay- ments, including prepayments, on the mortgage loans underlying the related trust assets. We expect the rate of principal payments on the underlying mortgage loans will vary. Following any lockout period, and upon payment of any applicable prepayment penalty, borrowers may prepay their mortgage loans at any time. In addi- tion, in the case of FHA-insured Mortgage Loans, borrowers may also prepay their mortgage loans during a lockout period or without paying any applicable    prepayment    penalty    with    the approval of the FHA. Rates of principal payments can reduce your yield.    The yield on your securities prob- ably will be lower than you expect if: • you purchased your securities at a premium (interest only securities, for example) and principal   payments   are   faster   than   you expected, or • you purchased your securities at a discount 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 invest- ment 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 consent, 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 mort- gage loan to the extent that (i) in the case of a mortgage loan included in a pool of mortgage loans underlying a Ginnie Mae MBS Certificate issued on or before December 1, 2002, such mort- gage loan has been delinquent for four consecu- tive months, and at least one delinquent payment remains uncured or (ii) in the case of a mortgage loan included in a pool of mortgage loans under- lying a Ginnie Mae MBS Certificate issued on or after January 1, 2003, no payment has been made on such mortgage loan for three consecutive months. Any such repurchase will result in pre- payment of the principal balance or reduction in the notional balance of the securities ultimately backed by such mortgage loan. No assurances can be given as to the timing or frequency of any such repurchases. An investment in the securities is subject to significant reinvestment and extension risk. The rate of principal payments on your securities is uncertain. You may be unable to reinvest the payments on your securities at the same returns provided by the securities. Lower prevailing interest rates may result in an unexpected return of principal. In that interest rate climate, higher yielding reinvestment opportunities may be lim- ited. 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 pay- ment on your security may occur much earlier than the final distribution date. Defaults will increase the rate of prepay- ment.    Lending on multifamily properties and nursing facilities is generally viewed as exposing the lender to a greater risk of loss than single- family lending. If a mortgagor defaults on a mortgage loan and the loan is subsequently fore- closed upon or assigned to FHA for FHA insur- ance benefits or otherwise liquidated, the effect would be comparable to a prepayment of the mortgage loan; however, no prepayment penalty would be received. Similarly, mortgage loans as to which there is a material breach of a repre- sentation may be purchased out of the trust without the payment of a prepayment penalty. S-6