Case 1:05-cv-01483-JDB Document 33-19 Filed 06/21/2007 Page 1 of 17 EXHIBIT Q Case 1:05-cv-01463-JDB Document33-19 Filed 06/21/2007 Page 2 of 17 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA MARIALICE BATHRUS WILLIAMS, Plaintiff, Civil Action No. 1:05CV01483 VS. Judge John D. Bates FEDERAL NATIONAL MORTGAGE ASSOCIATION, et al. | DECLARATION OF KATHRYN Defendants. WESTOVER I, Kathryn “Kate” Westover, hereby declare as follows: 1, I am not a party to the above-captioned action. I am over eighteen years of age, and the statements made herein are based on my personal knowledge. I refreshed my recollection through the review of the documents attached hereto at Tab A. 2. In or about August 2001, plaintiff Marialice Williams and I had a meeting with representatives from Fannie Mae’s Multifamily Division to discuss the possible use of captive insurance companies by Fannie Mae. I do not remember any additional meetings with representatives from Fannie Mae on this or any other subject, although there may have been a telephone phone conference call before or after the meeting on this subject. I declare under penalty of perjury that the foregoing is true and correct. Executed on (DATE) at Colchester, Vermont. 3f/e7 fikr A Se lovee Kathryn Westover Case 1:05-cv-01463-JDB Document 33-19 Filed G6/21/2007 Page dof? Case 1:05-cv-01483-JDB Documentac-19 Filed 06/21/2007 Page 4oafi7 / Animemaindceeneon con ; Q ot a . a : - | 7 ~ kaye! _ ; t etn "Subject: J A few w questions 2 and an update from RMS, Co a pe "Date: Wed, 23 May 2001 10:16:10-0400 oe five we “From: "Marialice Williams" - | ; 7 | a - To: , . 4 A i: Update fom RMS a ‘First the good news--we have the interest af three i insurance companies, two ‘of whom are domestic Alle are erated At and above. ‘ However, Wwe need | to ‘know a conple of things to facilitate c our discussions with them: 7 4, is there 2 any. interest on Fannie: Mae's part in insuring her portion of the 5-20% mezzanine level of risk on the DUS Spot? a oe (This ¢ could fead toa lower premium for the lenders). . . ’ en 2. Does Fannie Mae have: any ny objection to the DUS lenders slaying off all or past of thee first.loss 5 obligation on the DUS joans to a- . ae "AA" or better rated credit enhancer? © 4, Is is there any j possibilty of obtaining data from Fannie Mae regarding the underwriting and performance of the DUS portfolio? ’ The Keen interest is in what percentage of the mortgage loans originated meet the various.tiers of the DUS program and has there : been a distinction in the’ performance based upon those tiers of Loans? . ' Sorry that we were unable to get Kate Westover i in to see you in June, We only need about. and hour. and a half. Isthereatimein July th that will work? Also, if yous find that there is room because of a cancellation | in June we would te happy to Bilin. SS . We. don't need all of ‘the answers to our questions. at one time. As soon as you have some idea about each question, tet us know. Thanks, Marialice , wine DUS portivi” Hanrand Be ire ‘oh —_ ; | - Fe | _ — 10496 ‘53/01 9:53 AN. FNMA.MBW.008031 CONFIDENTIAL a ‘ wo ot ot Case 1:05-cv-01483-JDB Document 33-19 Filed 06/21/2007, Page 5 of 17 to “> plvd: Captive Insurance, Cosnpany Update} » Siibjects [Fra Captive Insurance Companty Update], _Daté: Wed,-06 Jun 2001 12:21:05-0500 iE rom: Bob Jones Tor Awgroves@bellsouth net, chockrumsey eam financial. com : Bob. Jones weoke:" 1 ‘advised’ ‘Marialice to copy both Red ‘capital and Lend Lease on ‘this. : ‘“ .message to Richard and Grace, . just as if she never saw the Fannie. Mae. email. régarding Craig: Ott. “This reversal by IRS now offers Fannie Mae and/or each bUS Lender to , .. > form their’ own captive under the same "economic family” for balance: sheet ‘treatment: with the captive first loss premium now’ tax deductible, ao . “The IRS ruling also acknowledges. the shift of captive first loss from -* the the policy holder to the. insurer for risk transfer. Our copyrigtited ; “MCRI policy is acceptable for risk transfer and. could be used by AIG, © oe Gen Star. or Zurich to front the: captive. coverage. oc 7 “Subject: Captive h Insirance Conipany Upaate Date: Wed, 6 Jun 2001 12:13:44 -0400 - From: "Marialice Williams” To: , _- CC: , , > | . On June 4, 2001, the IRS issued 3 ‘ling that has the i insurance world reeling. The Jong standing pe position that premiuins 0s paid to captives are e not deductible under + the So-called." economic family” theory has been reversed. - The IRS, in 1977, took the f position that "in the case of related- -party risks, if such. risks are insured of reinsuréd by arelated _ insurance cosnmpany—one in the same ‘economic family, ‘the premiums involved cannot be deducted from federal taxes because risk -- '. :has not shifted from the. policyholder to, the insurer." : "Accordingly, the IRS will no longer invoke the economic family theory with respect to captive insurance transactions. ” ‘After this new ruling, iti is clear that the captive! is an ideal way to Jay off the first loss obligation of assetholders entering into © _*: secondary market transactions. This ruling can-enable Fannie Mae to set UP its own credit enhancement facility. Andi in light of Fannié ¢ Mae’ s credit, the capitalization costs would be minimal. =~ . The DUS lenders could set up such a fond with their DUS reserve accounts and obtain substantial economic benefit as well a as” reducing I Fannié Mae's exposure to the risk associated with this portfolio, That's because any policy issued by a DUS lender's lof2- captive insurance compariy: would be wrapped or fronted bya rated remsurer. oy My associate and I serve on the Captive Advisory Committee for the District of Columbia's Depariment of Insurance and Securities _ Regulation. Our new law was pattemed after the Vermont statute which is considered the best domestic jurisdiction in which to _ form a captive: Just one. captive has applied for and been approved | to operated i in D.C. This could have all kinds of positive - - ramifications for Fannie Mae. . . re a _ Our associate, Kate Westover, i in Vermont, is assisting us with our customers. She will be consulting with Larry Mirrel, the Commissioner for. DISR on 1 June 14 while you guys at F annie Mae will be out of town, We had hope to bring. her by. 7 Meanwhile, my aisociate, Harvey } Hartsfield continues to work with Rhoda on a time ‘for Kate. to make a presentation to Fannie ‘Mae. 7 10514 6/6/01 12:33 PM | FENMA.MBW. 008054 CONFIDENTIAL Case 1 O5-Cv-01483-JD8 _ Document 33-19 Filed 06/21/2007 . Page 6 Oba7 *ppoude Captive Insurance Company Update] © = 2 Ry: Feél free to call if you have questions. . Marialice uo i 2of2 © _ oO | . oe 7 oo a 10515 6/6/01 12:31 PM FNMA.MBW.008052 CONFIDENTIAL Case 1:05-ov-01483-JD8 Document 3o-19 Filed 06/21/2007 Page 7 of 17 * apiive ins unis : 7 7 7 ae | Subject: Captive Tasurance Companies. 7 Se a) Date: Mon, 18 Jun 2001 16:29:30 -0400 © UL Byoim: "Risk-Mit" ._ — “Tor , incbeisler@redcapitalgroup. com> : : OG ‘, "Bob I ones” - my “ Harvey and Is saw ‘the quoies ‘from Davidi in an attidle in ithe Multi-Housing ‘News for June 2001. Giad tos see that you guys a are - mo i. ‘anticipating another successful year in refinancing apartment b bullding mortgages. ee _ a We just ‘wanted to reinind you that 0 our captive insuranite company concept has just been given 2 boost by the new ‘Revenue Ruling | from IRS: Our associate, Kate Westover gave an excellent: Presentation at at the Department of Ir Insurance and. Securities Regulation _ last week, Several off our clients were in attendance. : “* Rate was able to confirm for Larry, Mire, the head of DISR that the new Reyeme Raiting by the IRS, 2001 31, provides for the’ -. deductibility of premiums paid to captive insurance comipanies by captive insurance company owners. And further bolsters the . -. ° ‘concept, that captive insurance companies, owned by a related company or parent, are true insurance companies, Therefore, oncéa - _ captive issues a policy to cover the risk ona portfolio of assets there is a true risk transfer from the related or parent company to : ‘the captive. Therefore, our clients who are concemed about risk-based capital i issués can now form a captive insurance company, : "transfer the risk of Joss of their loan n portfolio to the- captive. insurancé - company and get t the accounting and balance sheet relief that , _— they need. © a . s . _ _ And, if used j in connection with securitization, the captive insurance company policy is the credit enhancement necessary to . . eliminate the need to ISSUE SUBORDINATE SECURITIES. Also, D. C. has approved the first captive insurance ¢ company wy under the new D. C. captive insurancé law. We are on the captive _ _| “advisory committee for D.C, and are more committed than ever to bringing this innovative risk transfer concept to our customers. - - We are happy to be able to provide this innovative tool to our F customers ona local basis. ‘The off-shore jurisdictions have. dominated this busiriess for the past 30 years. - . oo Let'us know if you would like to see the documentation on the revenue e ruling or want to disess the use of the captive insurance as “18 Fisk-transfer credit enhancement facility i in your day to day operations, , noah ite are - - Marialice Williams were “Riki dhobe, shes 4 ) ES RHE Gombiate d cE WO OUP CuSstorhgiy * ibe WES bof} 10519 6/18/01 4:45 PM, FNMA.MBW.008054 - CONFIDENTIAL ete Case 1:05-cv-01480-JD8 Document 3o-19 Filed OG/e1/2007 Page of 17 oP eeONU Ue reese ta. a . * oe ‘iT : ee ~ Subj j ect: Presentation on + August aa Date: Mon, 6 Aug 2001 12:49:18 0400. ‘ “From: "mail risk-mitigation.com" “marialioe@ristomitigation com> -. To: "Rhoda E Newman” , ... CC: : | Sy We’ are’ looking fo forward to inectirig with you of Athe 21st of ‘August ‘However, we want to make certain that Kate ison '. ! “4arget-with her presentation. Gould you please let us. know if you are looking at the captive as a potential 6 credit os “enhancement tool for Fannie Mae or. as a tool that the DUS lenders could use. fr ~ J met with LendLease’ Chief Crédit Officer and the CFOi in Dallas last week. There. appears {fo be ir interest on their -.” part in using a captive insurance company as a risk transfer and credit enhancement vehicle but they were - . = concerned about Fannie Mae's reaction to the concept of captive. insurance companies. . Also, it appeared to “ LendLease that the captive could be-very effective if they could also lay off their 5% first loss obligation under the . , DUS program to the captive i insurance company. This, question was 5 raised i in my: e-ail to you back on: May 30. tof! , : Finally. could we spend a little time discussing the other iwo questions from the insurance companies that we 2 posed . to you at the end of May? . i My partner, Harvey Harsh eld will be working with Kate on her presentation sO pleat s@ 6C him. on your response. . Thanks. 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