Recapture Tax Notice

RECAPTURE TAX NOTICE

“EXHIBIT N”

IMPORTANT NOTICE: REFER TO NHD POLICY OF REMIBURSEMENT FOR ANY RECAPTURE TAX LIABILITY PAID AS A RESULT OF PROCEDURE DESCRIBED HEREIN

(TO BE SIGNED AT TIME OF LOAN CLOSINGBY ALL PERSONS OBTAINING MORTGAGE LOANSMADE BY THE NEVADA HOUSING DIVISION)

Your mortgage loan (the "Mortgage Loan") is financed with funds made available to the Nevada Housing Division by issuing tax exempt bonds (the "Bonds").

You need to be aware, of a federal tax law provision which affects loans made by the Division on or after January 1, 1991, and which are funded with the proceeds of tax exempt bonds. This federal tax law is set forth in §143(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and generally provides that if you sell or otherwise dispose of all or any part of your interest in your Residence within nine (9) years from the closing date of your Mortgage Loan, you may be required to pay federal income taxes for the taxable year in which you dispose of your interest in your Residence in addition to the federal income taxes normally attributable to any gain recognized on the sale or disposition of your residence. For purposes of this Notice, the additional federal income taxes, which you may be subject to upon the disposition of your interest in your Residence, shall hereafter be referred to as the "Recapture Tax."

This Notice is being furnished to you to explain when the Recapture Tax applies and to aid you in calculating the amount of the Recapture Tax.

A. APPLICATION OF RECAPTURE TAX.

Subject to certain exceptions described below, the Code provides that you may be required to pay a Recapture Tax if all of the following apply to you:

1. The closing date of your Mortgage Loan occurs on or after January1,1991;

2. You were originally or currently are liable in whole or in part for the payment of your Mortgage Loan; and

3. You dispose of all or part of your interest in your Residence within nine (9) years from the closing date of your Mortgage Loan.

NOTE: If the disposition of all or part of your interest in your Residence occurs after nine (9) years from the closing date of your Mortgage Loan, you will not be subject to the Recapture Tax on the disposition.

The Code provides that the following types of dispositions will not subject you to the Recapture Tax even though you dispose of your interest within nine (9) years from the closing date of your Mortgage Loan:

1. Disposition on death.

If your interest in your Residence is disposed of as a result of your death, neither you nor your estate will be subject to the Recapture Tax. Accordingly, a transfer in accordance with the terms of your will, a transfer under the intestate laws of the State of Nevada, or a transfer by operation of law on your death, such as a residence held in joint tenancy, will not subject you or your estate to any liability under the Recapture Tax.

2. Section 1041 transfer.

If your interest in your Residence is disposed of in a transaction in which no gain or loss is recognized under §1041 of the Code you will not be subject to the Recapture Tax. Generally, a transaction in which no gain or loss is recognized under §1041 of the Code is one which is limited to a lifetime transfer to or for the benefit of your spouse, or a lifetime transfer to or for the benefit of your former spouse where the transfer is incident to your divorce. However, the Internal Revenue Service will treat your spouse or former spouse as if he or she had been the owner of your Residence from the closing date of your Mortgage Loan, and your spouse or former spouse may be subject to the Recapture Tax if he or she then disposes of the interest acquired from you within nine (9) years from the original closing date of your Mortgage Loan.

3. Casualty.

If 1) your Residence is destroyed in whole or in part by fire, storm, or other casualty which causes a compulsory or involuntary disposition of your Residence, 2) you receive insurance proceeds or other amounts as a result of the casualty and 3) within two (2) years after the end of the taxable year in which the casualty occurred you purchase another principal residence on the same site, you will not be subject to the Recapture Tax. If you utilize the insurance proceeds or other amounts received to purchase a Residence at a different location within the two (2) year period, however, the payment of the proceeds or other amount shall be treated as a disposition of your interest in your Residence to which the Recapture Tax will be applicable.

If you dispose of all or a portion of your interest in your Residence within nine (9) years from the closing date of your Mortgage Loan and the disposition is not one which is described above as being exempt from the Recapture Tax, you will then need to calculate the amount of Recapture Tax, if any, for the taxable year in which you disposed of all or a part of your interest in your Residence.

B.CALCULATION OF RECAPTURE TAX.

The Code provides that the amount of the Recapture Tax shall be equal to the lesser of the following amounts:

1. The "Recapture Amount" with respect to your Mortgage Loan; or

2. Fifty percent (50%) of the gain realized on the disposition of your interest in your Residence.

Accordingly, in order to determine the amount of your Recapture Tax, you will need to calculate both the "Recapture Amount" and the "Gain Realized" and then compare the two (2) figures. The lesser of the "Recapture Amount" or the amount equal to fifty percent (50%) of your "Gain Realized" will be the amount of your actual Recapture Tax.

The following six (6) steps are intended to aid you in calculating the amount of your Recapture Tax. Steps 1 through 4 explain how to calculate your "Recapture Amount." Step 5 explains how to calculate fifty percent (50%) of your "Gain Realized," and Step 6 explains how to calculate your actual Recapture Tax.

Calculation of "Recapture Amount" (see Steps 1 through Step 4).

The Code provides that your "Recapture Amount" is to be computed by using the following formula:

("Federally Subsidized Amount") x ("Holding Period Percentage") x ("Income Percentage") = "Recapture Amount"

To compute the "Recapture Amount," follow Steps 1 through 4 below:

STEP 1 -- CALCULATE THE "FEDERALLY SUBSIDIZED AMOUNT":

Enter the "Federally Subsidized Amount" here: $

The Code provides that the "Federally Subsidized Amount" is equal to the highest principal amount of your Mortgage Loan multiplied by (.0625). Generally, the highest principal amount of your Mortgage Loan will be the principal amount of your Mortgage Loan as of the closing date of your Mortgage Loan.

STEP 2 -- CALCULATE THE "HOLDING PERIOD PERCENTAGE":

Enter Holding Period Percentage here:%

The "Holding Period Percentage" is the percentage specified in the following table for the year in which your interest in your Residence is disposed of:

If the disposition occursYour holding period

during a year after thepercentage is equal

closing date which is:to:

The 1st such year...... 20

The 2nd such year...... 40

The 3rd such year...... 60

The 4th such year...... 80

The 5th such year...... 100

The 6th such year...... 80

The 7th such year...... 60

The 8th such year...... 40

The 9th such year...... 20

The above table should be utilized for determining your "Holding Period Percentage" in all cases except for those cases where your Mortgage Loan is completely repaid (i.e., prepayment or refinancing) prior to the disposition of your interest in your Residence. In cases where your Mortgage Loan is completely repaid prior to the disposition of your interest in your Residence, §143(m)(4)(C)(ii) of the Code provides the method for determining your Holding Period Percentage.

STEP 3 -- CALCULATE THE "INCOME PERCENTAGE":

Enter the "Income Percentage" here: %

The Code provides that your "Income Percentage" is to be calculated by utilizing the following formula:

"Income Percentage" = ("Modified Adjusted Gross Income" - "Adjusted Qualifying Income")

$5,000

Based upon the above formula, in order to calculate your "Income Percentage" you will subtract the applicable "Adjusted Qualifying Income" (shown in Tables I and II below) from your "Modified Adjusted Gross Income" (as defined below) and then divide this result by $5,000. The resulting percentage obtained by utilizing the above formula will be your "Income Percentage." In calculating your "Income Percentage," round to the nearest whole percentage point (i.e., 46.25% would be rounded to 46% and 46.81% would be rounded to 47%). If your "Income Percentage" determined under the preceding formula includes a half of a percentage point, the Code provides that the percentage shall be increased to the nearest whole percentage point (i.e., 46.50% would be rounded to 47%). If your "Income Percentage" is in excess of 100%, the Code provides that you are to use 100% as your "Income Percentage."

NOTE: If your "Modified Adjusted Gross Income" is less than or equal to your "Adjusted Qualifying Income," you will not be subject to the Recapture Tax.

MODIFIED ADJUSTED GROSS INCOME:

Your "Modified Adjusted Gross Income" will be equal to your (i) "Adjusted Gross Income" which is reported on your federal income tax return (Form 1040) for the taxable year in which you dispose of all or part of your interest in your Residence, plus (ii) any interest income received or accrued during such taxable year excluded from your gross income under §103 of the Code, minus (iii) any gain required to be included in your gross income by reason of the disposition of all or part of your interest in your Residence.

ADJUSTED QUALIFYING INCOME:

"Adjusted Qualifying Income" means the amount shown in Table I or Table II below opposite the year in which a disposition of all or part of your interest in your Residence occurs. If your Residence is located in a Non-Targeted Area, use the column in Table I under the applicable heading for the location of your residence which describes your family status on the date of the disposition of your interest in your Residence. If your Residence is located in a Targeted Area, use the column in Table II under the applicable heading for the location of your residence which describes your family status on the date of the disposition of your interest in your Residence.

Table I

*( Esmeralda, Lincoln, Mineral, Pershing, &
White Pine Counties-Non-Targeted Area
1 or 2 / 3 or more
person family / person family
Disposition Occurs:
Before 1 year after closing date / $64,700 / $74,405
After 1 year, but less than 2 years after closing date / $67,935 / $78,125
After 2 years, but less than 3 years after closing date / $71,332 / $82,031
After 3 years, but less than 4 years after closing date / $74,899 / $86,133
After 4 years, but less than 5 years after closing date / $78,643 / $90,440
After 5 years, but less than 6 years after closing date / $82,576 / $94,962
After 6 years, but less than 7 years after closing date / $86,704 / $99,710
After 7 years, but less than 8 years after closing date / $91,040 / $104,695
After 8 years, but less than 9 years after closing date / $95,592 / $109,930
*(Carson City - Non-Target Area)
1 or 2 / 3 or more
person family / person family
Disposition Occurs:
Before 1 year after closing date / $69,500 / $79,925
After 1 year, but less than 2 years after closing date / $72,975 / $88,117
After 2 years, but less than 3 years after closing date / $76,624 / $92,523
After 3 years, but less than 4 years after closing date / $80,455 / $97,149
After 4 years, but less than 5 years after closing date / $84,478 / $102,006
After 5 years, but less than 6 years after closing date / $88,702 / $107,107
After 6 years, but less than 7 years after closing date / $93,137 / $112,462
After 7 years, but less than 8 years after closing date / $97,793 / $118,085
After 8 years, but less than 9 years after closing date / $102,683 / $123,990
*(Churchill County - Non-Target Area)
1 or 2 / 3 or more
person family / person family
Disposition Occurs:
Before 1 year after closing date / $67,600 / $77,740
After 1 year, but less than 2 years after closing date / $70,980 / $81,627
After 2 years, but less than 3 years after closing date / $74,529 / $85,708
After 3 years, but less than 4 years after closing date / $78,255 / $89,994
After 4 years, but less than 5 years after closing date / $82,168 / $89,994
After 5 years, but less than 6 years after closing date / $86,277 / $94,493
After 6 years, but less than 7 years after closing date / $90,590 / $99,218
After 7 years, but less than 8 years after closing date / $95,120 / $104,179
After 8 years, but less than 9 years after closing date / $99,876 / $109,388
*(Clark County - Non-Target Area)
1 or 2 / 3 or more
person family / person family
Disposition Occurs:
Before 1 year after closing date / $69,035 / $79,390
After 1 year, but less than 2 years after closing date / $72,487 / $83,360
After 2 years, but less than 3 years after closing date / $76,111 / $87,527
After 3 years, but less than 4 years after closing date / $79,917 / $91,904
After 4 years, but less than 5 years after closing date / $83,912 / $96,499
After 5 years, but less than 6 years after closing date / $88,108 / $101,324
After 6 years, but less than 7 years after closing date / $92,513 / $106,390
After 7 years, but less than 8 years after closing date / $97,139 / $111,710
After 8 years, but less than 9 years after closing date / $101,996 / $117,295
*(Douglas County - Non-Target Area)
1 or 2 / 3 or more
person family / person family
Disposition Occurs:
Before 1 year after closing date / $84,370 / $97,025
After 1 year, but less than 2 years after closing date / $84,375 / $101,876
After 2 years, but less than 3 years after closing date / $88,594 / $106,970
After 3 years, but less than 4 years after closing date / $93,023 / $112,319
After 4 years, but less than 5 years after closing date / $97,675 / $117,934
After 5 years, but less than 6 years after closing date / $102,558 / $123,831
After 6 years, but less than 7 years after closing date / $107,686 / $130,023
After 7 years, but less than 8 years after closing date / $113,070 / $136,524
After 8 years, but less than 9 years after closing date / $118,724 / $143,350
*(Elko County - Non-Target Area)
1 or 2 / 3 or more
person family / person family
Disposition Occurs:
Before 1 year after closing date / $79,900 / $91,885
After 1 year, but less than 2 years after closing date / $83,895 / $96,480
After 2 years, but less than 3 years after closing date / $88,090 / $101,304
After 3 years, but less than 4 years after closing date / $92,495 / $106,369
After 4 years, but less than 5 years after closing date / $97,119 / $111,687
After 5 years, but less than 6 years after closing date / $101,975 / $117,271
After 6 years, but less than 7 years after closing date / $107,074 / $123,135
After 7 years, but less than 8 years after closing date / $112,428 / $129,292
After 8 years, but less than 9 years after closing date / $118,049 / $135,756
*(Eureka County - Non-Target Area)
1 or 2 / 3 or more
person family / person family
Disposition Occurs:
Before 1 year after closing date / $74,500 / $85,675
After 1 year, but less than 2 years after closing date / $78,225 / $89,959
After 2 years, but less than 3 years after closing date / $82,136 / $94,457
After 3 years, but less than 4 years after closing date / $86,243 / $99,180
After 4 years, but less than 5 years after closing date / $90,555 / $104,139
After 5 years, but less than 6 years after closing date / $95,083 / $109,345
After 6 years, but less than 7 years after closing date / $99,837 / $114,813
After 7 years, but less than 8 years after closing date / $104829 / $120,553
After 8 years, but less than 9 years after closing date / $110,070 / $126,581
*(Humboldt County - Non-Target Area)
1 or 2 / 3 or more
person family / person family
Disposition Occurs:
Before 1 year after closing date / $73,400 / $84,410
After 1 year, but less than 2 years after closing date / $77,070 / $88,631
After 2 years, but less than 3 years after closing date / $80,924 / $93,062
After 3 years, but less than 4 years after closing date / $84,970 / $97,715
After 4 years, but less than 5 years after closing date / $89,219 / $102,601
After 5 years, but less than 6 years after closing date / $93,680 / $107,731
After 6 years, but less than 7 years after closing date / $98,364 / $113,118
After 7 years, but less than 8 years after closing date / $103,282 / $118,774
After 8 years, but less than 9 years after closing date / $108,446 / $124,712
*(Lander County - Non-Target Area)
1 or 2 / 3 or more
person family / person family
Disposition Occurs:
Before 1 year after closing date / $69,300 / $79,695
After 1 year, but less than 2 years after closing date / $72,765 / $83,680
After 2 years, but less than 3 years after closing date / $76,403 / $87,864
After 3 years, but less than 4 years after closing date / $80,223 / $92,257
After 4 years, but less than 5 years after closing date / $84,235 / $96,870
After 5 years, but less than 6 years after closing date / $88,446 / $101,713
After 6 years, but less than 7 years after closing date / $92,869 / $106,799
After 7 years, but less than 8 years after closing date / $97,512 / $112,139
After 8 years, but less than 9 years after closing date / $102,389 / $117,746
*(Lyon & Nye County - Non-Target Area)
1 or 2 / 3 or more
person family / person family
Disposition Occurs:
Before 1 year after closing date / $64,700 / $74,405
After 1 year, but less than 2 years after closing date / $67,935 / $78,125
After 2 years, but less than 3 years after closing date / $71,332 / $82,031
After 3 years, but less than 4 years after closing date / $74,898 / $86,133
After 4 years, but less than 5 years after closing date / $78,643 / $90,440
After 5 years, but less than 6 years after closing date / $82,575 / $94,962
After 6 years, but less than 7 years after closing date / $86,704 / $99,710
After 7 years, but less than 8 years after closing date / $91,039 / $104,695
After 8 years, but less than 9 years after closing date / $95,591 / $109,930
*( Storey, Washoe County - Non-Target Area)
1 or 2 / 3 or more
person family / person family
Disposition Occurs:
Before 1 year after closing date / $79,216 / $91,098
After 1 year, but less than 2 years after closing date / $83,177 / $95,653
After 2 years, but less than 3 years after closing date / $87,336 / $100,436
After 3 years, but less than 4 years after closing date / $91,702 / $105,457
After 4 years, but less than 5 years after closing date / $96,288 / $110,730
After 5 years, but less than 6 years after closing date / $101,102 / $116,267
After 6 years, but less than 7 years after closing date / $106,157 / $122,080
After 7 years, but less than 8 years after closing date / $111,465 / $128,184
After 8 years, but less than 9 years after closing date / $117,038 / $134,593
TABLE II
*(Clark & Mineral County - Target Area)
1 or 2 / 3 or more
person family / person family
Disposition Occurs:
Before 1 year after closing date / $77,640 / $90,580
After 1 year, but less than 2 years after closing date / $81,522 / $95,109
After 2 years, but less than 3 years after closing date / $85,598 / $99,865
After 3 years, but less than 4 years after closing date / $89,878 / $104,858
After 4 years, but less than 5 years after closing date / $94,372 / $110,101
After 5 years, but less than 6 years after closing date / $99,091 / $115,606
After 6 years, but less than 7 years after closing date / $104,045 / $121,386
After 7 years, but less than 8 years after closing date / $109,247 / $127,455
After 8 years, but less than 9 years after closing date / $114,710 / $133,828
*(Washoe County - Target Area)
1 or 2 / 3 or more
person family / person family
Disposition Occurs:
Before 1 year after closing date / $81,480 / $95,060
After 1 year, but less than 2 years after closing date / $85,554 / $99,813
After 2 years, but less than 3 years after closing date / $89,832 / $104,804
After 3 years, but less than 4 years after closing date / $94,324 / $110,044
After 4 years, but less than 5 years after closing date / $99,040 / $115,546
After 5 years, but less than 6 years after closing date / $103,992 / $121,324
After 6 years, but less than 7 years after closing date / $109,191 / $127,390
After 7 years, but less than 8 years after closing date / $114,651 / $133,759
After 8 years, but less than 9 years after closing date / $120,383 / $140,447
*(Churchill - Target Area)
1 or 2 / 3 or more
person family / person family
Disposition Occurs:
Before 1 year after closing date / $81,120 / $94,640
After 1 year, but less than 2 years after closing date / $85,176 / $99,372
After 2 years, but less than 3 years after closing date / $89,435 / $104,341
After 3 years, but less than 4 years after closing date / $93,907 / $109,558
After 4 years, but less than 5 years after closing date / $98,602 / $115,036
After 5 years, but less than 6 years after closing date / $103,532 / $120,788
After 6 years, but less than 7 years after closing date / $108,709 / $126,827
After 7 years, but less than 8 years after closing date / $114,144 / $133,169
After 8 years, but less than 9 years after closing date / $119,851 / $139,827

STEP 4 -- CALCULATE "RECAPTURE AMOUNT":