MBS MODULE MODULE 7A

Creation of a GNMA Pass-Through Security A Three Stage Process Stage One Commercial Bank Promissory Note (Line of Credit) Cash Mortgage Banker Promissory Note (Mortgages) Cash Mortgages

Creation of a GNMA Pass-Through Security A Three Stage Process Stage Two Commercial Bank Cash (Line of Credit) Release Mortgage Banker Cash Pass-Through Investor Mortgages TrusteeGNMA Guarantee

Creation of a GNMA Pass-Through Security A Three Stage Process Stage Three Mortgagor Cash P, I, & Repay Reductions in Principal Obligations Mortgage Banker Cash P, I, & Repay Reductions in Principal Claims Investor

Changes in Interest Rates and Prepayment Behavior Effect of Prepayments on the Cash Flows of Pass-Throughs

Interest Rates and Mortgage Values $ Value 100 = Par Coupon RateInterest Rate Pure P.V.

Percent P.V. from Principal and Interest 80% 20% Interest Principal % PSA

Cash Various PSA Spreads 0% PSA 120% PSA 50% PSA 200% PSA  % Repay Time

I-O’s/ P-O’s TAC’s PAC’s