4350.1 REV-1

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CHAPTER 14. PARTIAL PAYMENTS OF CLAIMS

SECTION 1. GENERAL INFORMATION

A large number of HUD Insured mortgages throughout the

country are nonperforming because of circumstances beyond the

control of the owner. When the owner has defaulted on an insured

mortgage, it may be in HUD\'s best interest to pay a Partial

Payment of Claim (PPC) and hold a second mortgage with terms that

allow the owner to pay the second mortgage in increasingly larger

stages as the project\'s cash flow improves.

The process starts when the mortgagee elects to assign an

insured mortgage under 24 CFR 207.258 to the Department. At this

point, the owner may request the Director of the Housing

Management Division in the HUD Field Office to request the

mortgagee to consider a PPC as an alternative to a full payment

of claim (see letter in appendix 1). The mortgagee must

voluntarily agree to accept a partial payment of the insurance

claim before the processing of the proposal may begin.

If the mortgagee agrees to accept a PPC, the owner must

submit a proposal in accordance with this handbook guidance to

the Field Office for review. All proposals, together with the

Field Office\'s recommendations, will be sent to HUD Headquarters.

The applicable regulation for PPC is 24 CFR Part 207.258b

titled: Partial Payment of Claim (see appendix 2).

14-1. PROJECTS THAT ARE ELIGIBLE

A. Section 207: Multifamily Housing Mortgage

Insurance

B. Section 213: Cooperative Housing Mortgage

Insurance

C. Section 220: Mortgage Insurance for Urban

Renewal

D. Section 221(d): Low cost and moderate income

mortgage insurance: Except for coinsured or

formerly coinsured

E. Section 223(f): Except for coinsured or formerly

coinsured

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14-1 9/92

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4350.1 REV-1

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14-2. PROJECTS THAT ARE NOT ELIGIBLE

A. 24 CFR Part 232: Nursing Homes, Intermediate Care

Facilities

B. 24 CFR Part 234: Condominium Ownership Mortgage

Insurance

C. 24 CFR Part 236: Mortgage Insurance and Interest

Reduction Payment for Rental Projects

D. 24 CFR Part 242: Hospitals

E. 24 CFR Part 244: Group Practice Facilities

F. 24 CFR Part 251: Coinsurance for the Construction

or Substantial Rehabilitation of Multifamily

Housing Projects

G. 24 CFR Part 255: Coinsurance for the Purchase or

Refinancing of Existing Multifamily Housing

Projects (i.e., projects coinsured under 223(f).

H. Formerly coinsured projects that have been

converted to full insurance under 207 including

221(d).

14-3. REGULATORY REQUIREMENTS

The Director of the Housing Management Division should

request the mortgagee to participate in a PPC in lieu

of assignment as soon as practicable. Normally this

request can be made when a default has occurred and a

reinstatement is unlikely. At the same time, the

Housing Management Division must discuss the

possibility of a PPC with the owner. In addition, the

following findings must be made:

1\. The mortgagee is entitled, after a default under

207.255, to assign the mortgage in exchange for

the payment of insurance benefits;

2\. The relief resulting from partial payment when

considered with other resources available to the

project would be sufficient to restore the

financial viability of the project;

3\. The project is or can (at reasonable cost) be made

structurally sound;

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9/92 14-2

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4350.1 REV-1

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4\. The management of the project is satisfactory as

demonstrated by a rating of at least satisfactory

on the most recent management review;

5\. The default under the insured mortgage was beyond

the control of the owner;

6\. The project is, or potentially could serve as a

low and moderate income housing resource;

7\. The property covered by the mortgage is free and

clear of all liens other than the insured first

mortgage and other liens approved by the

Commissioner;

8\. The mortgagee has voluntarily agreed to accept PPC

under the mortgage insurance contract and to

recast the remaining mortgage amount under terms

and conditions prescribed by the Commissioner;

9\. The owner has agreed to repay to the Commissioner

an amount equal to the partial payment, with the

obligation secured by a second mortgage on the

project containing terms and conditions prescribed

by the Commissioner. The terms of the second

mortgage will be determined on a case-by-case

basis to assure that the estimated project income

will be sufficient to cover estimated operating

expenses and debt service on the recast insured

mortgage. The Commissioner may provide for

postponed amortization of the second mortgage.

SECTION 2. OWNER\'S PROPOSAL.

14-4. REQUIREMENTS

A. The owner must demonstrate the regulatory

requirements in paragraph 14-3.

B. The owner made a net capital contribution equal to

5% or more of the original mortgage to fund

operating shortfalls since final endorsement (for

nonprofit its in-kind services acceptable to FO).

C. The owner has remitted all net cash to the

mortgagee between the date of default and the date

of closing of the PPC.

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14-3 9/92

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4350.1 REV-1

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14-5. PROPOSAL SUBMITTED BY THE OWNER

The owner in making a request shall provide to the

Field Office:

A. A cover letter stating the parameters and

conditions of the owner\'s request. The owner must

provide:

1\. The amount of the PPC desired (broken down

into the two amounts: principal and deferred

interest);

2\. An anticipated closing date;

3\. A discussion of the problem(s) causing the

default;

4\. Steps taken to overcome both past and present

problem(s).

B. Substantiate the amount of net capital

contributions, e.g., a certified statement by an

Independent Public Accountant (IPA) or a Certified

Public Accountant (CPA) showing advances and

repayments to the owner. This statement could

include, but is not limited to the following:

1\. Contributions/advances made since final

endorsement for the project\'s operating

expenses.

2\. Distributions made to the owner since final

endorsement.

3\. Repayment of advances since final

endorsement.

4\. The total net advances.

C. A current cash flow analysis and proforma

statement using Form HUD-92547-A, Budget Worksheet

Income and Expense Projections.

D. A cash flow projection and Net Operating Income

(NOI) for 10 years.

E. A review of the last HUD Management Review and

Physical Inspection Report. If the project

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9/92 14-4

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4350.1 REV-1

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received a less than satisfactory rating in any

section, the owner must provide written comments

regarding the status of corrective action in

progress, i.e., what repairs are completed and

target dates for completion of others.

F. Current rent roll showing units occupied and rents

charged for each unit.

G. A certification as to whether the owner is or will

be participating in Low Income Housing Tax Credits

(LIHTC). Refer to Notice H-91-18 and include HUD

Form 2880 (Applicant Recipient Update Report)

SECTION 3. FIELD OFFICE REVIEW

The Loan Management Branch (LMB) will review the owner\'s

proposal and request additional information to resolve any

questions prior to submission to Headquarters. All

recommendations, analysis and findings are sent to the Office of

multifamily Housing Management, Operations Division.

14-6. FIELD OFFICE ANALYSIS

The Director of Housing Management will recommend

either approval or rejection of the PPC to HUD

Headquarters based on the following:

A. Determine that the regulatory requirements are

met. The regulatory requirements are listed in

paragraph 14-3.

B. Determine the owner\'s contribution ratio. The

contribution ratio is calculated by dividing the

net capital contributions by the original mortgage

balance of the insured mortgage. The owner\'s

contribution ratio must equal or exceed 5%.

The owner\'s contributions must be verified by LMB

by reviewing the project\'s financial statements.

C. Determine base year expenses, income, vacancy rate

and Net Operating Income (NOI). The LMB must

review the project\'s base year income, expenses,

vacancy rate and NOI submitted by the owner and

make adjustments where necessary. The base year

NOI is a function of three variables.

Expenses: Review historical data and data

available on similar projects in the same market

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14-5 9/92

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4350.1 REV-1

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area. This process is similar to the review of an

owner\'s request for a budgeted rent increase.

Vacancy rate: Verify vacancy rate by reviewing

the current rent roll and comparing these rents to

the approved rent schedule.

Also, consider concessions and rent reductions the

owner may have employed to increase the physical

occupancy of the project. Due to these

concessions the project may have a reasonable

level of units occupied, but the actual rents may

be below the level necessary to pay all expenses

and debt service.

Income: Verify that income is appropriate for the

project considering the market conditions in the

area.

D. Determine validity of owner\'s assumptions and

projected performance (IO year projection

assumptions) The LMB staff may obtain estimates

from the Economic and Market Analysis Section

(EMAS) and Valuation Branch (VAL). It is

emphasized that the project will have problems

that are unique and may require fine tuning of

these estimates.

E. Determine the maximum PPC Principal The PPC

Principal amount equals the lesser result of the

two tests stated below. However, HUD will not

approve a PPC Principal greater than 50% of the

Unpaid Principal Balance (UPB). Use the worksheet

in Appendix 3 to calculate the PPC Principal.

Below is an explanation of the two tests:

1\. Test one: Three times the owner\'s net capital

contributions.

2\. Test two: The amount of the current mortgage

that is not supportable by the Net operating

Income.

F. Determine principal Ratio. This ratio is

determined by dividing the maximum PPC Principal

by the Unpaid Principal Balance (UPB).

G. Determine the amount of delinquent interest to be

paid by HUD. In general, HUD will pay a

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9/92 14-6

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4350.1 REV-1

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percentage of delinquent interest equal to the

Principal Ratio. The amount paid by HUD at the

closing will be added to the second mortgage.

HUD will pay more of the delinquent interest in

order to encourage a higher level of net capital

contributions. This occurs when the contribution

ratio falls within the following percentages:

Contribution Ratio HUD\'s share of

delinquent interest

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7%-9.99 HUD will pay

delinquent interest

equal to the

Principal Ratio plus

50% of the remaining

delinquent interest

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10%-15.99% HUD will pay 100% of

the delinquent

interest

16% and over HUD will pay 100% of

delinquent interest

and will reduce its

equity kicker by

15%. The equity

kicker will not be

reduced lower than

5%.

H. Determine estimated debt service deficit. The

owner must provide cash escrow or letter of credit

in the amount of the estimated deficit which may

result in the event the project and mortgage

expenses exceed project income. The calculation

of the escrow amount should take into

consideration the following:

1\. The total payment on the insured first

mortgage is not fully covered by NOI; or

2\. The total service charge on the second

mortgage is not covered by the remaining NOI;

or

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14-7 9/92

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4350.1 REV-1

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3\. The Minimum Monthly Payment (MMP) of interest

on the second (MMP is a condition of the

approval) is not covered by NOI available

after paying 1 and 2 above; or

4\. The debt service on the recast second

mortgage is not covered in full by available

NOI.

I. Determine Equity Kicker. Divide the amount of PPC

(principal) by the Unpaid Principal Balance (UPB)

of the delinquent mortgage.

14-7. Field Office Findings.

A. The project is or can (at reasonable cost be made

structurally sound, and the management of the

project is satisfactory. Provide copies of the

latest management review and physical inspection

report. If the rating on the management review or

the physical inspection report is below

satisfactory in any related section, provide a

copy of the owner\'s plan(s) for corrective action.

B. The default under the insured mortgage was beyond

the owner\'s control. Loan management may complete

a Failing Project Checklist (HUD 5815) to assist

them in making their decision.

C. The project covered by the mortgage is free and

clear of all liens other than the insured first

mortgage and such other liens as the Commissioner

may have approved. (An updated title policy must

be reviewed prior to closing.)

D. Other options for solving the project\'s problems

have been explored and have been found not to work

(e.g., refunding of tax exempt bonds, relief from

the local government agency, Section 8 assistance,

flexible subsidy, etc.)

E. The relief resulting from the partial payment when

considered with other resources available to the

project will be sufficient to restore the

financial viability of the project (provided the

projections materialize).

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9/92 14-8

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4350.1 REV-1

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F. The project is or potentially could serve as low

and moderate income housing.

SECTION 4. APPROVAL AND REJECTION LETTER

All decisions made by Headquarters are final.

14-8. APPROVAL LETTER

If the PPC meets the foregoing requirements,

Headquarters will forward an approval letter along with

a set of terms and conditions to the owner.

14-9. REJECTION LETTER

If the PPC does not meet the forgoing requirements,

Headquarters will forward a rejection letter to the

owner.

SECTION 5. CLOSING AND POST CLOSING REQUIREMENTS

14-10. REQUIRED CLOSING DOCUMENTATION AND REVIEW

Ten days prior to the closing date the owner is

required to submit two full sets of the legal

documentation (one set to HUD Headquarters and one set

to the appropriate Field Counsel). Failure to submit

the closing documents 10 days prior to the closing will

delay the closing. Legal documents must be submitted

in an acceptable format and must include all required

documents.

The Field Counsel will review the legal documents for

accuracy and submit to Headquarters, Office of

Multifamily Housing Management, for execution.

The following is a list of legal documents that are

generally required. The list is not limited to the

following:

a\. Modification of Mortgage Note and Mortgage

b\. Second Mortgage Note and Mortgage

c\. Second Mortgage with Rider

d\. Second Regulatory Agreement

e\. An Agreement to Share Proceeds (equity kicker)

f\. Certification of Current Mortgage

g\. Certification of Mortgage Balance

h\. Letter of credit custodial agreement, Letter of

credit and Sight Draft

i\. Updated Title Binder

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14-9 9/92

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4350.1 REV-1

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14-11. SCHEDULING THE CLOSING

Headquarters will determine the closing date. The

owner should request a specific date(s) for the

closing. However, Headquarters has the final authority

to set the closing date. The owner\'s requested dates

will be accommodated whenever possible.

14-12. OWNER\'S COMPLIANCE

The HUD-Held mortgage should be serviced in accordance

with Chapter 10 to Handbook 4350.1, titled HUD-Held

Servicing, e.g., Owners must submit net cash and

monthly accounting statements.

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9/92 14-10

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4350.1 REV-1

APPENDIX 1

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LETTER OFFERING PARTIAL PAYMENT OF CLAIM

Dear :

We have your letter of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ giving

notice of the mortgagee\'s election to assign the mortgage on

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (Project No.\_\_\_\_\_\_\_\_\_\_\_)
in\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

to the Secretary for payment of mortgage insurance benefits. The

mortgage on this project may be eligible for a partial payment of

claim in lieu of assignment.

If the mortgage is eligible, and the mortgagee agrees to

accept a partial payment, forms and instructions for processing

the claim will be sent to you by HUD\'s Office of General Counsel

and Office of Mortgage Insurance Accounting and Servicing. In

the event the mortgagee chooses not to accept the partial

payment, we will proceed with a full assignment of the mortgage.

In the interim, the mortgagee must continue to take whatever

actions are necessary to protect the Secretary\'s interest in the

mortgage and continue to bill for and accept all payments. (The

payments should not be applied to the indebtedness.)

The mortgagee\'s willingness to accept a partial payment of

claim should be indicated by the signature of an authorized

official in the space provided below. The letter should be

returned to this office to the attention of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

If further information is required,
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ should be

contacted on \_\_\_\_\_\_\_\_\_\_\_.

Sincerely,

Agrees, on behalf of mortgagee, to accept a partial payment

of claim if the mortgage is eligible.

Name: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Date:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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14-11 9/92

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4350.1 REV-1

APPENDIX 2

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207.258b Partial payment of claim,

\(a\) Whenever the Commissioner

receives notice under 207.258 of a

mortgagee\'s intention to file an insurance

claim and to assign the mortgage

to the Commissioner, the Commissioner

may request the mortgagee, in lieu

of assignment, to accept partial payment

of the claim under the mortgage

insurance contract and to recast the

mortgage, under such terms and conditions

as the Commissioner may determine.

\(b\) The Commissioner may request

the mortgagee to participate in a partial

payment of claim in lieu of assignment

only after a determination that

partial payment would be less costly

to the Federal government than other

reasonable alternatives for maintaining

the low- and moderate-income

character of the project. This determination

shall be based upon the findings

listed below and such other findings

as the Commissioner deems appropriate:

\(1\) The mortgagee is entitled, under

207.255, to assign the mortgage in exchange

for the payment of insurance

benefits;

\(2\) The relief resulting from partial

payment, when considered with other

resources available to the project,

would be sufficient to restore the

financial viability of the project;

\(3\) The project is, or can at reasonable

cost be made, structurally sound;

\(4\) The management of the project

is satisfactory to the Commissioner;

and

\(5\) The default under the insured

mortgage was beyond the control of

the mortgagor.

\(c\) Partial payment of a claim under

this section shall be made only when:

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9/92 14-12 (1 of 2)

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4350.1 REV-1

APPENDIX 2

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\(1\) The project is, or potentially

could serve as a low- and moderate-income

housing resource;

\(2\) The property covered by the

mortgage is free and clear of all liens

other than the insured first mortgage

and such other liens as the Commissioner

may have approved;

\(3\) The mortgagee has voluntarily

agreed to accept partial payment of

the insurance claim under the mortgage

insurance claim and to recast

the remaining mortgage amount under

terms and conditions prescribed by the

Commissioner; and

\(4\) The mortgagor has agreed to

repay to the Commissioner an amount

equal to the partial payment, with the

obligation secured by a second mortgage

on the project containing terms

and conditions prescribed by the

Commissioner. The terms of the second

mortgage will be determined on a case-by-case

basis to assure that the estimated

project income will be sufficient

to cover estimated operating expenses

and debt service on the recast insured

mortgage. The Commissioner may provide

for postponed amortization of the

second mortgage.

\(d\) Payment of insurance benefits

under this section shall be in cash.

The Commissioner shall waive the deduction

of one percent of the mortgage

funds advanced to the mortgagor,

provided for in 207.259(b)(2)(iv), with

respect to a partial payment of a claim

under this section. The items referred

to in 207.258(b)(4) shall either be

retained by the mortgagee or delivered

to the Commissioner in accordance

with instructions to be issued by the

Commissioner with respect to a partial

payment of claim under this section.

50 FR 38786, Sept. 25, 1985

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9/92 14-12 (2 of 2)

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4350.1 REV-1

APPENDIX 3

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PARTIAL PAYMENT OF CLAIM WORKSHEET

PROJECT
NAME:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PROJECT NO:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

I. DETERMINATION OF MAXIMUM ALLOWABLE PARTIAL PAYMENT OF CLAIM

Round all numbers to the nearest dollar.

The maximum allowable PPC is the lesser of test one or two

but not more than 50% of unpaid principal balance (UPB).

LIMITATION:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ X .5 =
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Current UPB PPC limit

Test one: Three times owner\'s contribution (since final

endorsement). See paragraph 14-5B of this handbook

guidance.

a\. total owner contributions\\ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

advances

b\. amount repaid \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

c\. net owner contributions\\

advances (a minus b)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Multiply net owners

contribution/advances X 3

by three

result of test one \_\_\_\_\_\_\_\_\_\_\_\_\_

Test two: Calculates the amount of current mortgage which

cannot be supported by current cash flow.

a\. Net Operating Income (NOI) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

See paragraph 14-6C of this

handbook for guidance

b\. enter MIP

(MIP is current UPB x .005) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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14-13 9/92

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4350.1 REV-1

APPENDIX 3

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c\. subtract MIP from NOI \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

d\. multiply \"c\" by 0.9 \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(this equals net NOI)

e\. divide result in \"d\" by

the \*debt services constant of the

interest rate. The result

is the mortgage amount

supportable by \"Net\" NOI \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\* The Debt Service constant may be obtained from the

Valuation Branch in Housing Development.

f\. current UPB of the delinquent

mortgage \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

g\. enter supportable mortgage

(supportable mortgage is \"e\"

above) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Subtract supportable mortgage

from the current UPB

(f minus g)

result of test two \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

II\. DEBENTURE RATE DETERMINATION

(USE THE FHA DEBENTURE RATE CHART)

The highest debenture rate below is used to calculate

delinquent interest.

1\. firm commitment date \_\_/\_\_/\_\_

debenture rate \_\_\_\_\_%

2\. initial Endorsement date \_\_/\_\_/\_\_

debenture rate \_\_\_\_\_%

III\. ESTIMATE THE DELINQUENT INTEREST TO BE PAID BY HUD

1\. unpaid principal balance \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

2\. debenture rate

(higher rate of 1 or 2 above) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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9/92 14-14

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4350.1 REV-1

APPENDIX 3

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3\. annual interest rate

(multiply line 1 by line 2) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4\. number of days in default year \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(365 or 366 days)

5\. daily interest \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(divide line 3 by line 4)

6\. number of days from date of

default to anticipated date

of closing minus 1

(HUD does not pay interest

for the day of closing) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

7\. total interest \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(multiply line 5 by line 6)

8\. contribution ratio \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(see paragraph 3-1B)

9\. principle ratio \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(see handbook paragraph 3-1 F)

10\. Delinquent interest paid by HUD

at the closing

(multiply line 7 by line 8) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

11\. plus additional interest paid by

HUD at the closing

(see handbook paragraph 3-1G)

a\. total delinquent \_\_\_\_\_\_\_\_\_\_\_\_\_

interest (line 7)

b\. interest paid by HUD \_\_\_\_\_\_\_\_\_\_\_\_\_

(line 10)

c\. remaining interest \_\_\_\_\_\_\_\_\_\_\_\_\_

d\. percentage of additional

interest paid by HUD

(see paragraph 3-lG) \_\_\_\_\_\_\_\_\_\_\_\_\_

e\. multiply c by d \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

12\. total interest payable by HUD

(add line 10 and line 11e) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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14-15 9/92

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4350.1 REV-1

APPENDIX 3

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IV\. ESTIMATE AMOUNT OF SECOND MORTGAGE

1\. Maximum allowable PPC \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Lowest amount of test one or

test two or the limitation)

2\. amount of delinquent

interest paid by

HUD at the closing \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

3\. total principal of second \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

mortgage

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9/92 14-16

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4350.1 REV-1

APPENDIX 4

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FHA DEBENTURE INTEREST RATE TABLE

The interest rate applicable to debentures issued under all

provisions of the National Housing Act, except Section 221

(g)(4), is the rate in effect on the date that the commitment to

insure the loan or mortgage was issued, or the date that the loan

or mortgage was initially endorsed for insurance, whichever rate

is higher. Following are the effective rates:

On or after On or After

July 1, 1966\-\-\-\-\--4/5/8 January 1,1985\-\-\-\-\--11 5/8

January 1, 1967\-\--4 3/4 July 1, 1985\-\-\-\-\-\-\--11 1/8

January 1, 1968\-\--5 3/8 January 1, 1986\-\-\-\--10 1/4

July 1, 1969\-\-\-\-\--5 7/8 July 1,1986\-\-\-\-\-\-\-\-\--8 1/4

January 1, 1970\-\--6 3/8 January 1, 1987\-\-\-\-\--8

July 1, 1970\-\-\-\-\--6 7/8 July 1, 1987\-\-\-\-\-\-\-\--9

January 1, 1971\-\--6 1/8 January 1, 1988\-\-\-\-\--9 1/8

July 1, 1971\-\-\-\-\--5 7/8 July 1, 1988\-\-\-\-\-\-\-\--9 3/8

January 1, 1972\-\--5 3/8 January 1, 1989\-\-\-\-\--9 1/4

July 1, 1972\-\-\-\-\--5 1/2 July 1,1989\-\-\-\-\-\-\-\-\--9

January 1, 1973\-\--5 1/4 January 1, 1990\-\-\-\-\--8 1/8

July 1, 1973\-\-\-\-\--6 July 1, 1990\-\-\-\-\-\-\-\--9

January 1, 1974\-\--6 1/4 January 1, 1991\-\-\-\-\--\*

July 1, 1974\-\-\-\-\--6 7/8

July 1,1975\-\-\-\-\-\--7

January 1, 1976\-\--7 1/8

July 1, 1976\-\-\-\-\--7

January 1, 1977\-\--6 5/8

July 1, 1977\-\-\-\-\--7 1/4

January 1, 1978\-\--7 1/8

July 1, 1978\-\-\-\-\--7 3/4

January 1, 1979\-\--8

July 1, 1979\-\-\-\-\--8 1/4

January 1, 1980\-\--9 1/2

July 1, 1980\-\-\-\-\--9 7/8

January 1, 1981\--11 3/4

July 1, 1981\-\-\-\--12 7/8

January 1, 1982\--12 3/4

January 1, 1983\--10 1/4

July 1, 1983\-\-\-\--10 3/8

January 1, 1984\--11 1/2

July 1, 1984\-\-\-\--13 3/8

\* After January 1, 1991, this debenture rates table should be

updated as the FO receives additional rates.

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14-17 9/92