Under a de minimis rule, a Regular Security will be considered to have no OID if the amount of OID is less than 0.25% of the Security’s stated redemption price at maturity multiplied by its weighted average maturity (“WAM”).  For that purpose, the WAM of a Regular Security is the sum of the amounts obtained by multiplying the amount of each Deemed Principal Payment by a fraction, the numerator of which is the number of complete years from the Security’s issue date until the payment is made, and the denominator of which is the Security’s stated redemption price at maturity.  Although no guidance has been issued regarding the application of the de minimis rule to REMIC regular interests, it is expected that the WAM of a Regular Security will be computed using the Pricing Prepayment Assumptions.  A Regular Holder will include de minimis OID in income on a pro rata basis as stated principal payments on the Security are received or, if earlier, upon disposition of the Security, unless the Holder makes the “Constant Yield Election” (as defined below). Regular Securities may bear interest under terms that provide for a teaser rate period, interest holiday, or other period (a “Teaser Period”) during which the rate of interest payable on the Securities is lower than the rate payable during the remainder of the life of the Securities (“Teaser Securities”).  The OID Regulations provide an alternative test under which a Teaser Security may be considered to have a de minimis amount of OID (the “Alternative De Minimis Amount”) even though the amount of OID on such Security would be more than de minimis as determined under the regular test.  The Alternative De Minimis Amount applies only if the stated interest on a Teaser Security would be qualified stated interest but for the fact that the interest rate effective in the Teaser Period or Periods is below the rate applicable for the remainder of its term.  Under the alternative test, the amount of OID on a Teaser Security that is measured against the Alternative De Minimis Amount is the greater of (i) the excess of the stated principal amount of the Security over its issue price (“True Discount”) and (ii) the amount of interest that would be necessary to be payable on the Security in order for all stated interest to be qualified stated interest (the “Additional Interest Amount”).  If the amount of OID on a Teaser Security eligible for the alternative test exceeds the Alternative De Minimis Amount, the Security will be treated as issued with OID.  In that case, the stated redemption price at maturity of such Security would be deemed to include either (i) all of the stated interest on the Security or (ii) all stated interest on the Security in excess of the lowest effective interest rate on such Security in any Teaser Period.  Consequently, the Holder of such a Security would be required to recognize in the Teaser Period ordinary income arising from OID in addition to any qualified stated interest for such Period. If the period between the Closing Date and the first Distribution Date (the “Initial Distribution Period”) of a Current Interest Class is shorter than the interval between subsequent Distribution Dates, the effective rate of interest payable on a Security during the Initial Distribution Period will be higher than the stated rate of interest if a Holder receives interest on the first Distribution Date based on a full accrual period.  To the extent that the interest payment due on the first Distribution Date exceeds the amount that would have been payable had the effective rate for that Period been equal to the stated interest rate, that payment (an “Excess Interest Payment”) will be treated as a Deemed Principal Payment.  Consequently, a Security having an Excess Interest Payment may have OID, although the determination of whether such a Security has OID will also take into account (i) the fact that the Security’s issue price includes any interest accrued as of the Closing Date (which may equal or exceed the amount of the Excess Interest Payment) and (ii) the de minimis rules described above.  In the absence of further Base Offering Circular – Multifamily 26 RICHMOND 801041v3