MANAGEMENT'S REPORT ON THE EFFECTIVENESS OF THE
     INTERNAL
               CONTROL STRUCTURE RELATIVE TO THE SERVICING OF
                                 HOME LOANS
     
     
     The management of the Bank is responsible for establishing and
     maintaining the internal control structure.  In fulfilling this
     responsibility, estimates and judgments by management are required to
     assess the expected benefits and related costs of control procedures. 
     The objectives of an internal control structure are to provide management
     with reasonable, but not absolute, assurance that assets are safeguarded
     against loss from unauthorized use or disposition, and that transactions
     are executed in accordance with management's authorization and recorded
     properly to permit the preparation of financial statements in accordance
     with generally accepted accounting principles.
     
     We have performed an evaluation of the effectiveness of the Bank's
     internal control structure based on the criteria established in Internal
     Control - Integrated Framework issued by the Committee of Sponsoring
     Organizations of the Treadway Commission ("COSO") relative to the
     servicing of home loans owned by Chevy Chase Home Loan Trust 1996-1 as
     of September 30, 1996, and we have determined that the Bank maintained
     an effective internal control structure over financial reporting relative
     to the servicing of home loans owned by Chevy Chase Home Loan Trust 1996-1
     as of
     September 30, 1996.
     
     However, there are inherent limitations in the effectiveness of any
     internal control structure, including the possibility of human error and
     the circumvention or overriding of controls.  Accordingly, even an
     effective internal control structure can provide only reasonable
     assurance with respect to reliability of financial statements and
     safeguarding and management of assets.  Furthermore, the effectiveness
     of any internal control structure can change with changes in
     circumstances.
     
     
     
     John C. Harley                          George P. Clancy            
     ______________                          ________________ 
     John C. Harley                          George P. Clancy
     Senior Vice President                   Executive Vice President
     
     
     
     Stephen R. Halpin, Jr.  
    _______________________ 
     Stephen R. Halpin, Jr.                            
     Executive Vice President
     Chief Financial Officer
     
           
  
     
     December 20, 1996
     

                                        Page 7
 <PAGE>


                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                                     
     
     To the Board of Directors of
     Chevy Chase Bank, F.S.B.:
     
     We have examined management's assertion, included in the accompanying
     Management's Report on the Effectiveness of the Internal Control Structure
     Relative to the Servicing of Home Loan Receivables, that Chevy Chase
     Bank, F.S.B. (the "Bank") maintained an effective internal control
     structure over financial reporting relative to the servicing of home loan
     receivables owned by the Bank's home loan trust 1996-1 (the "Trust") as
     of September 30, 1996.
     
     Our examination was made in accordance with standards established by the
     American Institute of Certified Public Accountants and, accordingly,
     included obtaining an understanding of the internal control structure
     over financial reporting, testing, and evaluating the design and
     operating effectiveness of the internal control structure, and such other
     procedures as we considered necessary in the circumstances.  We believe
     that our examination provides a reasonable basis for our opinion.
     
     Because of inherent limitations in any internal control structure, errors
     or irregularities may occur and not be detected.  Also, projections of
     any evaluation of the internal control structure over financial reporting
     to future periods are subject to the risk that the internal control
     structure may become inadequate because of changes in conditions, or that
     the degree of compliance with the policies or procedures may deteriorate.
     
     In our opinion, management's assertion that the Bank maintained an
     effective internal control structure over financial reporting relative
     to the servicing of home loan receivables owned by the Bank's home loan
     Trust as of September 30, 1996, is fairly stated, in all material
     respects, based upon criteria established in Internal Control -
     Integrated Framework issued by the Committee of Sponsoring Organizations
     of the Treadway Commission (COSO).
     
     This report is intended solely for the information and use of the board
     of directors and management of the Bank, Norwest Bank Minnesota, N.A.,
     and Capital Markets Assurance Corporation, and should not to be used for
     any other purpose.
     
     
     Arthur Andersen LLP
     
     
     
     Washington, D.C.
     December 20, 1996


                                    Page 8
 <PAGE>