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earned on mortgage principal and interest payments held in our cash and investments portfolio pending

remittance to PC investors. See ""Table 37 Ì Changes in Guarantee Obligation for Participation CertiÑcates''

in ""CONSOLIDATED BALANCE SHEETS ANALYSIS Ì Guarantee Obligation for Participation Cer-

tiÑcates'' for additional information about the guarantee obligation.

Table 23 Ì Attribution of Change Ì Guarantee Obligation for 2002 (2004 and 2003 Income on Guarantee

Obligation is described in Table 22)

2002

Fair Value

(dollars in millions)

Total cash Öows paidÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $422

Portion of cash Öows paid related to imputed interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (64)

Cash paid representing reduction of guarantee obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 358

Changes in fair value of future cash Öows ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 234

Income on ""Guarantee obligation for Participation CertiÑcates''ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $592

Table 24 summarizes the 2004 and 2003 quarterly and annual income on guarantee obligation.

Table 24 Ì Quarterly and Annual Income on Guarantee Obligation for 2004 and 2003

Year Ended

1Q 2004 2Q 2004 3Q 2004 4Q 2004 December 31, 2004

(dollars in millions)

Amortization income related to:

Credit and buy-down fees received ÏÏÏÏÏÏÏÏÏ $ 23 $ 37 $ 28 $ 40 $ 128

Initial fair value of contractual guarantee fees 128 194 129 153 604

Income on ""Guarantee obligation for

Participation CertiÑcates'' ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 151 $ 231 $ 157 $ 193 $ 732

Guarantee obligation for Participation

CertiÑcates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3,241 $3,557 $3,727 $4,065 $4,065

Liquidation rate for Outstanding PCs and

Structured Securities(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30% 36% 22% 25% 29%

Year Ended

1Q 2003 2Q 2003 3Q 2003 4Q 2003 December 31, 2003

(dollars in millions)

Amortization income related to:

Credit and buy-down fees received ÏÏÏÏÏÏÏÏÏ $ Ì $ 10 $ 25 $ 22 $ 57

Initial fair value of contractual guarantee fees 235 255 276 102 868

Income on ""Guarantee obligation for

Participation CertiÑcates'' ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 235 $ 265 $ 301 $ 124 $ 925

Guarantee obligation for Participation

CertiÑcates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,655 $1,956 $2,385 $2,904 $2,904

Liquidation rate for Outstanding PCs and

Structured Securities(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 65% 81% 80% 31% 63%

(1) Related to Outstanding PCs and Structured Securities (including other PCs and Structured Securities held in our Cash and

investments portfolio.)

Quarterly Öuctuations in Guarantee obligation for Participation CertiÑcates during 2004 and 2003 are the

result of two factors: (a) the increase in the balance of our guarantee obligation subsequent to our adoption of

FIN 45 on January 1, 2003 and (b) Öuctuations in the rate of amortization under the Declining Unpaid

Principal Balance Method, which is driven by the liquidation rate for outstanding PCs and Structured

Securities. During this period, the annualized liquidation rate reached a high of 81 percent in the second

quarter of 2003 and fell to a low of 22 percent in the third quarter of 2004.

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