Due to the substantial lack of regulatory guidance with respect to the market discount rules, it is unclear how those rules will affect any secondary market that develops for a given Class of Regular Securities.  Prospective investors in Regular Securities should consult their own tax advisors as to the application of the market discount rules to those Securities. Amortizable Premium A purchaser of a Regular Security who purchases the Security at a premium over the total of its Deemed Principal Payments may elect to amortize such premium under a constant yield method that reflects compounding based on the interval between payments on the Security.  The relevant legislative history indicates that premium is to be  accrued  in  the  same  manner  as  market  discount.    Accordingly,  it  appears  that  the  accrual  of  premium  on  a Regular  Security  will  be  calculated  using  the  Pricing  Prepayment  Assumptions.    Under  the  Code,  except  as otherwise provided in Treasury regulations to be issued, amortized premium would be treated as an offset to interest income  on  a  Regular  Security  and  not  as  a  separate  deduction  item.    If  a  Holder  makes  an  election  to  amortize premium  on  a  Regular  Security,  such  election  will  apply  to  all  taxable  debt  instruments  (including  all  REMIC regular interests) held by the Holder at the beginning of the taxable year in which the election is made, and to all taxable  debt  instruments  acquired  thereafter  by  such  Holder,  and  will  be  irrevocable  without  the  consent  of  the Service.  Purchasers who pay a premium for the Regular Securities should consult their tax advisors regarding the election to amortize premium and the method to be employed. Under the Contingent Payment Regulations, a secondary market purchaser of a Non-VRDI Security or an Interest Weighted Security at a premium generally would continue to accrue interest and determine adjustments on such Security based on the original projected payment schedule devised by the issuer of such Security.  See “Certain Federal  Income  Tax  Consequences  —  Original  Issue  Discount  —  Interest  Weighted  Securities  and  Non-VRDI Securities” herein.  The Holder of such a Security would allocate the difference between its basis in the Security and the adjusted issue price of the Security as negative adjustments to the accruals or projected payments on the Security over the remaining term of the Security in a reasonable manner (e.g., based on a constant yield to maturity). Gain or Loss on Disposition If a Regular Security is sold, the  Holder will recognize gain or loss  equal to the difference between the amount realized on the sale and his adjusted basis in the Security.  Similarly, a Holder who receives a scheduled or prepaid principal payment with respect to a Regular Security will recognize income or loss equal to the difference between the amount of the payment and the allocable portion of his adjusted basis in the Security.  Any such income will be treated as ordinary income, rather than capital gain, to the extent such income reflects OID that is not de minimis.    The  adjusted  basis  of  a  Regular  Security  generally  will  equal  the  cost  of  the  Security  to  the  Holder, increased by any OID or market discount previously includible in the Holder’s gross income with respect to the Security, and reduced by the portion of the basis of the Security allocable to payments on the Security previously received by the Holder and by any amortized premium.  Except to the extent that the market discount rules apply and except as provided below, any gain or loss on the sale or other disposition of a Regular Security generally will be capital gain or loss.  Such gain or loss will be long-term gain or loss if the Security is held as a capital asset for more than one year. If  the  Holder  of  a  Regular  Security  is  a  bank,  a  mutual  savings  bank,  a  DB&L,  or  a  similar  institution described in section 582 of the Code, any gain or loss on the sale or exchange of the Regular Security will be treated as ordinary income or loss.  In the case of other types of Holders, gain from the disposition of a Regular Security that  otherwise  would  be  capital  gain  will  be  treated  as  ordinary  income  to  the  extent  that  the  amount  actually includible in income with respect to the Security by the Holder during his holding period is less than the amount that would have been includible in income if the yield on that Security during the holding period had been 110% of a specified U.S. Treasury borrowing rate as of the date that the Holder acquired the Security.  Although the relevant legislative  history  indicates  that  the  portion  of  the  gain  from  disposition  of  a  Regular  Security  that  will  be recharacterized as ordinary income is limited to the amount of OID (if any) on the Security that was not previously includible in income, the applicable Code provision contains no such limitation. The  Code  contains  provisions  that  require  the  recognition  of  gain  upon  the  “constructive  sale  of  an appreciated  financial  position.”  These  provisions  do  not  apply  to  Classes  of  Certificates  other  than  the  Notional Base Offering Circular - Single Family 29 RICHMOND 649290v15