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| ## Comptroller of the Currency                                        |
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| > Administrator of National Banks                                     |
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New England Field Office

20 Winthrop Square, Suite 200

Boston, MA 02110-1229

#### Conditional Approval #603

August 7, 2003 **September 2003**

Linda R. Paisley

President and Chief Executive Officer

FBR National Bank & Trust

4922 Fairmont Avenue

Bethesda, MD 20814-6076

Re: Request from FBR National Bank & Trust, Bethesda, Maryland to
implement a material deviation from the operating plan and limit its
operations solely to fiduciary activities by divesting of its
non-fiduciary assets and deposit liabilities, thereby operating as a
limited purpose national trust bank.

Application Control Number: 2003-NE-12-0160

Dear Ms. Paisley:

The Office of the Comptroller of the Currency (OCC) has reviewed FBR
National Bank & Trust's (Bank), a full service national bank with
fiduciary powers, request to implement a material deviation from the
Bank's operating plan, submitted to the OCC in connection with the
initial conversion, by divesting of certain assets and deposit
liabilities, and operating as a limited purpose insured national trust
bank.

You have represented that the proposed deviation is being implemented in
order to accommodate a corporate restructuring by Friedman, Billings,
Ramsey Group, Inc., (FBR), a financial holding company pursuant to the
Bank Holding Company Act (BHCA). On March 31, 2003, FBR and FBR Asset
Investment Corporation, a publicly traded real estate investment trust,
merged with and into Forest Merger Corporation, with the latter as the
surviving corporation and with the title of Friedman, Billings, Ramsey
Group, Inc., (new FBRG). This merger received the prior approval of the
Federal Reserve on March 14, 2003, and as a part of the approval
process, FBR committed that within six months of the merger date, the
Bank would no longer be deemed a "bank" for purposes of the BHCA. A BHCA
exemption from the definition of the term "bank" is for an institution
that functions solely in a trust or fiduciary capacity. To satisfy and
implement this condition to the Federal Reserve, the Bank has entered
into a written agreement to sell approximately \$33 million in
non-fiduciary deposit liabilities and \$14.9 million in non-fiduciary
assets, consisting primarily of mortgage loans, to Chevy Chase Bank,
F.S.B., McLean, Virginia. We understand that the Office of Thrift
Supervision, Chevy Chase's primary federal regulator, approved this
transaction and it is expected to close on August 15, 2003.

Based upon a review of your application materials, including the
representations and commitments made in the application and by the
proposed Bank's representative, we have no objection to your request as
submitted.

Our no objection is subject to the following conditions:

1.  The Bank shall maintain, at a minimum, its current level of \$7.4
    million in Tier 1 capital at all times.

2.  The Bank and new FBRG must enter into a written binding agreement,
    prior to the conversion from a full service bank to a limited
    purpose trust bank, setting forth the new FBRG's obligations to
    provide capital maintenance and liquidity support to the Bank, if
    and when necessary. The terms and provisions of this capital and
    liquidity maintenance agreement must be acceptable to the Bank and
    the OCC, and shall include a provision for collateral to support
    those obligations, if required by the OCC.

3.  The Bank shall retain insured deposit(s) of at least \$500,000 in
    order to maintain its Federal Deposit Insurance Corporation insured
    institution status.

4.  The Bank shall develop a comprehensive business plan that reflects
    the business objectives included in the application. Items to be
    included, but not limited to, are plans to build personal trust and
    employee benefit relationships including pro-formas that estimate
    the anticipated new business lines and a description of how they
    plan to approach new business development.

5.  All other applicable conditions remain in force as contained in the
    OCC letter (dated March 15, 2001) approving the request to convert
    to a national banking association.

Please be advised that the above conditions of our no objection are
deemed to be conditions "imposed in writing by the agency in connection
with the granting of any application or other request" within the
meaning of 12 USC § 1818. These conditions are enforceable under 12 USC
§ 1818.

Please be advised that the OCC is currently reviewing its capital and
liquidity policy with respect to national trust banks. Should there be a
change to our policy as a result of the review, we will advise you
accordingly.

All correspondence regarding this application should reference the
application control number. If you have any questions concerning this
letter, please contact Portfolio Manager Roberta Ouimette or me at (617)
482-1643.

Sincerely,

/s/ Kathleen M. Cahill

Kathleen M. Cahill

Assistant Deputy Comptroller

Enclosures: OCC Bulletin 2000- 26

CC: Lawrence D. Kaplan, Esq., Sidley Austin Brown & Wood LLP

Board of Directors