Correction: Fitch: No Premiums, No Difference To U.S. Issuers of Freddie Mac Carve-Out Bonds.

Business Editors

NEW YORK--(BUSINESS WIRE)--March 29, 2004

(This is an amended version of a press release issued earlier today, containing revised information in the first and third paragraphs.)

Even though Freddie Mac may no longer pay a premium on 'AAA' rated bonds, it will not detract U.S. issuers from continuing to structure carve-out bonds, according to Fitch Ratings. Investors and issuers have become comfortable with the usage of carve-out bonds, rendering the premiums unnecessary. Although issuers may no longer receive a premium from Freddie Mac, the structure still allows issuers to place a significant amount of bonds with one investor.

Freddie Mac has been purchasing carve-out bonds from investors in order to satisfy its affordable housing investment requirement set by the U.S. Department Housing and Urban Development (HUD). Issuers were able to offset the cost of creating the carve-out bond by garnering a premium from the government sponsored entity (GSE). Fitch predicts that Freddie Mac carve-out bonds will continue to be created even with Freddie Mac now paying market prices.

'Issuers will still be able to sell a large chunk of the 'AAA' bonds to one buyer thereby helping to ensure their profits and reduce their selling risk,' said Eileen McDonald, Director, Fitch Ratings. 'Further, initial concerns of having the non-carve-out class A bonds being secured by more riskier property types have been mitigated by the allocation of principal and interest and losses in the waterfall. As such, Fitch deems the carve-out bonds to be credit neutral to the transaction.'

The carve-out certificates are specifically backed by loans secured by multifamily or manufactured housing properties, created when the combined multifamily and manufactured housing portion of a deal represents between 20%-30% of the transaction pool. Freddie Mac is able to purchase the 'AAA' rated bonds in the transaction without a specific carve-out class if the manufactured housing and multifamily pool percentage exceeds 30%.