(This article was originally published Friday)

WASHINGTON -- Fannie Mae (FNM) announced late Friday that it is rescinding all its April 4 mortgage-backed security (MBS) "cleanup calls," and said it won't exercise any further cleanup calls.

"Fannie Mae's exercise of a cleanup call on our older MBS was a business decision," said Timothy Howard, executive vice president and chief financial officer of Fannie Mae, a government-sponsored enterprise charged with assisting housing.

"However, the benefit arising from that decision has clearly been outweighed by concerns investors have raised and the market confusion that has been caused," Howard said. "Therefore, we are rescinding these cleanup calls, and will eliminate the cleanup-call provision on all our MBS."

Fannie Mae's Howard, saying the firm is in the business of issuing mortgage-backed securities, said, "We are always competing with others in the marketplace, and when customers say there is a concern, we listen to them and we respond."

Fannie May on April 4 announced a plan to exercise a cleanup call on MBS totaling about $1.5 billion of unpaid principal. The call was to be exercised on long-term and intermediate-term fixed-rate MBS, or on such MBS backing structured mortgage securities.

The average outstanding pool balance on the MBS that were called was approximately $59,000, compared with an average outstanding pool balance of close to $3.3 million on Fannie Mae's currently outstanding long-term and intermediate-term fixed-rate MBS backed by conventional loans, the firm said.

"The announcement today means revised factors will be released for all MBS covered by the April 4, 2002, cleanup call, and for all Megas, REMICS and Stripped MBS payable on the 25th day of the month that include, in whole or in part, any MBS that were included in the rescinded call," the firm said.

"We will be working with the Federal Reserve to ensure correct princiapl and interest remittances are distributed in the April 25 disbursement," the firm said. "The revised factors will be available at 4:30 p.m. on April 17."

Fannie Mae said the recision also will include MBS contained, in whole or in part, in REMICs payable on the 18th day of the month. It said the April 18 payments will be made based on the factors released April 4.

"However, furture payments on these REMICs will be adjusted in accordance with industry practice to fully reflect the cleanup-call recission," Fannie Mae said.

It said investors in Fannie Mae MBS should call the MBS Investor Help Line at 1-800-237-8627.

The recision represents a stunning about-face by Fannie Mae, spurred, according to Fannie Mae's Howard, by the concerns of customers.

It became abundantly clear to top Fannie Mae officials that the administrative efficiencies and savings associated with the cleanup call weren't worth the heat the company was taking on the call.

Until Friday afternoon, Fannie Mae was not only unapologetic about the April 4 cleanup call but was reserving the right to conduct additional MSB calls in the future.

"Going forward, out intent is exercise our cleanup-call provisions on outstanding mrotgage-backed securities...when it is economic for us to do so," said a now-inoperative Fannie Mae policy statement.

-By John Connor, Dow Jones Newswires; 202-862-9273; john.connor@dowjones.com

	URL for this article: http://online.wsj.com/article/0,,BT_CO_20020415_003255.djm,00.html

Updated April 15, 2002 8:00 a.m. EDT