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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 5, 2010

Federal National Mortgage Association

(Exact name of registrant as specified in its charter)


Federally chartered corporation	000-50231	52-0883107
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)


3900 Wisconsin Avenue, NW Washington, DC		20016
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 202-752-7000

(Former Name or Former Address, if Changed Since Last Report):

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):


	o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


	o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


	o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


	o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

The information in this report, including information in the exhibits submitted herewith, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall it be deemed incorporated by reference into any disclosure document relating to Fannie Mae (formally known as the Federal National Mortgage Association), except to the extent, if any, expressly incorporated by specific reference in that document.


*Item 2.02*		*Results of Operations and Financial Condition*

On November 5, 2010, Fannie Mae filed its quarterly report on Form 10-Q for the quarter ended September 30, 2010 and issued a news release reporting its financial results for the periods covered by the Form 10-Q. The news release, a copy of which is furnished as Exhibit 99.1 to this report, is incorporated herein by reference.


*Item 7.01*		*Regulation FD Disclosure*

On November 5, 2010, Fannie Mae posted to its Web site a 2010 Third-Quarter Credit Supplement presentation consisting primarily of information about Fannie Mae’s guaranty book of business. The presentation, a copy of which is furnished as Exhibit 99.2 to this report, is incorporated herein by reference. Fannie Mae’s Web site address is www.fanniemae.com. Information appearing on the company’s Web site is not incorporated into this report.


*Item 9.01*		*Financial Statements and Exhibits.*

(d) Exhibits. The exhibit index filed herewith is incorporated herein by reference.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.


	FEDERAL NATIONAL MORTGAGE ASSOCIATION
	By	/s/ David C. Hisey
		David C. Hisey
		Executive Vice President and Deputy Chief Financial Officer

Date: November 5, 2010

EXHIBIT INDEX

The following exhibits are submitted herewith:


Exhibit Number		Description of Exhibit
	99.1	News release, dated November 5, 2010
	99.2	2010 Third-Quarter Credit Supplement presentation, dated November 5, 2010

exv99w1

Exhibit 99.1

Resource Center: 1-800-732-6643


Contacts:		Todd Davenport
		202-752-5115

Number:		5214a

Date:		November 5, 2010

Fannie Mae Reports Third-Quarter 2010 Results

Net Loss of $1.3 Billion Reflects Stabilizing Credit-Related Expenses and Increased Revenue

Company Has Reserved for Substantial Majority of Expected Losses

Credit Profile of 2009 – 2010 Single-Family Loan Book Remains Strong

WASHINGTON DC – Fannie Mae (FNMA/OTC) today reported a net loss of $1.3 billion in the third quarter of 2010, compared to a net loss of $1.2 billion in the second quarter of the year. The company continues to focus on building a strong new book of business and returning to profitability (excluding Treasury dividend payments), and its operating results reflect stabilizing credit-related expenses and increasing revenues.

The company’s net loss attributable to common stockholders was $3.5 billion, including $2.1 billion in dividend payments to the U.S. Treasury. To eliminate the company’s net worth deficit of $2.4 billion as of September 30, 2010, more than 85 percent of which is the dividend payment to Treasury, the Federal Housing Finance Agency has requested $2.5 billion on the company’s behalf from Treasury. Upon receiving those funds, the company’s total obligation to Treasury for its senior preferred stock will be $88.6 billion. The company has paid a total of $8.1 billion in dividends to Treasury.

“Our operating results reflect our ongoing efforts to manage the credit-related expenses in our legacy business and build a new, profitable book of business,” said Fannie Mae President and CEO Michael J. Williams. “The loans we have acquired since the beginning of 2009 reflect our commitment to realistic, common-sense lending standards and sustainable homeownership. Their credit profile remains strong, and we expect these loans to be profitable over their lifecycle. We are building this new book of business while we continue to provide liquidity to America’s housing market as it struggles to recover, and to support programs to help families stay in their homes and avoid foreclosure whenever possible.”



Third-Quarter 2010 Results		1

•		2009 – 2010 Single-Family Book of Business: Single-family loans the company has acquired since the beginning of 2009 comprised more than 35 percent of its single-family guaranty book of business as of September 30, 2010, compared with 24 percent as of December 31, 2009. The company continues to expect that these loans will be profitable over their lifecycle, given their strong credit risk profile and performance to date. The rate at which loans become seriously delinquent within a short period of time after acquisition is an early predictor of the ultimate performance of loans, and the loans the company acquired in 2009 have experienced historically low levels of early-stage delinquencies.

•		2005 – 2008 Single-Family Book of Business: From the beginning of 2009 through the third quarter of 2010, the company has reserved for or realized approximately $110 billion of losses on its single-family loans, the vast majority of which are attributable to loans it purchased or guaranteed from 2005 through 2008. The company estimates that it has reserved for the substantial majority of the remaining losses on these loans. Single-family loans that the company purchased or guaranteed from 2005 through 2008 are becoming a smaller percentage of the company’s guaranty book of business, having decreased to 42 percent as of September 30, 2010 from 63 percent as of December 31, 2008. The company’s single-family serious delinquency rate, which has fallen for seven consecutive months, decreased to 4.56 percent as of September 30, 2010, from 4.99 percent as of June 30, 2010, and was the first year-over-year decline in the company’s serious delinquency rate since 2007. The company expects serious delinquency rates may be affected in the future by home price changes, changes in other macroeconomic conditions, and the extent to which borrowers with modified loans again become delinquent in their payments.

•		Providing Liquidity to the Market: During the first nine months of 2010, the company purchased or guaranteed an estimated $613 billion in loans, which includes approximately $195 billion in delinquent loans the company purchased from its single-family mortgage-backed securities trusts. Fannie Mae remained the largest single issuer of mortgage-related securities in the secondary market during the third quarter, with an estimated market share of new single-family mortgage-related securities of 44.5 percent, compared with 39.1 percent in the second quarter of 2010. Since January 2009, Fannie Mae has provided about $1.4 trillion in liquidity to the market through loan purchases and guarantees, including approximately $230 billion in delinquent loans the company purchased from its single-family MBS trusts, financing approximately 4,874,000 conventional single-family loans and approximately 571,000 multifamily units.

•		Avoiding Foreclosure: During the first nine months of 2010, the company completed more than 410,000 single-family loan workouts, including more than 350,000 home-retention workouts. In the third quarter of 2010, the company completed home-retention workouts (including modifications, repayment plans, and forbearances) for more than 113,000 loans with an aggregate unpaid principal balance of $23 billion. On a loan count basis, this represented a 14 percent decrease over home-retention workouts completed in the second quarter of 2010, which was due primarily to a decrease in loan modifications. Details of the company’s home-retention workouts, other foreclosure alternatives, and refinances include:



Third-Quarter 2010 Results		2

	o		Loan modifications, including permanent modifications under the Home Affordable Modification Program, of 106,365, compared with 121,693 in the second quarter of 2010. This figure does not include HAMP modifications in trial periods. Modifications decreased in the third quarter as the company began verifying borrower income prior to completing Fannie Mae modifications for borrowers who were ineligible under HAMP, which reduced the company’s modifications outside the program.

	o		Repayment plans/forbearances completed of 6,208, compared with 8,716 in the second quarter of 2010.

	o		Preforeclosure sales and deeds-in-lieu of foreclosure of 20,918, compared with 21,515 in the second quarter of 2010. The decrease was due primarily to weak market conditions affecting pre-foreclosure sales during the quarter.

	o		Fannie Mae acquired or guaranteed approximately 541,000 loans that were refinances during the third quarter of 2010, including approximately 159,000 loans through its Refi Plus^TM initiative. On average, borrowers who refinanced during the third quarter of 2010 through Refi Plus reduced their monthly mortgage payments by $141, or $1,692 annually. The company acquired or guaranteed approximately 354,000 loans that were refinances in the second quarter of 2010, including 126,000 through Refi Plus.

•

Homeowner and Borrower Initiatives: The company continues to develop programs and initiatives that are designed to help keep people in homes, help prospective homeowners, and support the mortgage and housing markets overall. During the third quarter, it:

	o		Launched KnowYourOptions.com, a Web site designed to give borrowers a one-stop shop to find out how to save their homes or choose other options to avoid foreclosure.

	o		Opened Mortgage Help Centers in Atlanta and Chicago. The company plans to open additional centers in 2010 and 2011.

	o		Announced that more than 29,000 owner-occupants purchased homes under its First Look^TM program in the past year, with public entities using Neighborhood Stabilization Program funds purchasing an additional 5,000 properties. Under First Look, the company only considers offers from owner occupants and participants in the Neighborhood Stabilization Program during the initial period that its foreclosed properties are on the market, which allows these purchasers to submit offers without competition from investors.

The ultimate performance of loans the company has acquired since the beginning of 2009 will be affected by macroeconomic trends, including unemployment, the economy, and home prices. For further discussion of the company’s credit performance, see the Executive Summary of its quarterly report on Form 10-Q for the quarter ended September 30, 2010, which was filed today with the Securities and Exchange Commission.



Third-Quarter 2010 Results		3

Summary of Third-Quarter Results

The company’s net loss attributable to common stockholders was $3.5 billion, or ($0.61) per diluted share, compared with a loss of $3.1 billion, or ($0.55) per diluted share, in the second quarter of 2010. The net worth deficit of $2.4 billion as of September 30, 2010 takes into account the company’s net loss, dividends paid on senior preferred stock held by Treasury, and a reduction in unrealized losses on available-for-sale securities during the third quarter.


(dollars in millions, except per share amounts) ⁽¹⁾	3Q10			2Q10			Variance			3Q10			3Q09 ⁽³⁾			Variance
Net interest income	$	4,776		$	4,207		$	569		$	4,776		$	3,830		$	946
Guaranty fee income		51			52			(1	)		51			1,923			(1,872	)
Fee and other income		253			242			11			253			194			59

Net revenues		5,080			4,501			579			5,080			5,947			(867	)
Investment gains (losses), net		82			23			59			82			785			(703	)
Net other-than-temporary impairments		(326	)		(137	)		(189	)		(326	)		(939	)		613
Fair value gains (losses), net		525			303			222			525			(1,536	)		2,061
Income (losses) from partnership investments		47			(26	)		73			47			(520	)		567
Administrative expenses		(730	)		(670	)		(60	)		(730	)		(562	)		(168	)
Credit-related expenses ⁽²⁾		(5,561	)		(4,851	)		(710	)		(5,561	)		(21,960	)		16,399
Other non-interest expenses		(457	)		(357	)		(100	)		(457	)		(242	)		(215	)

Net losses and expenses		(6,420	)		(5,715	)		(705	)		(6,420	)		(24,974	)		18,554

Loss before federal income taxes		(1,340	)		(1,214	)		(126	)		(1,340	)		(19,027	)		17,687
Benefit (provision) for federal income taxes		9			(9	)		18			9			143			(134	)

Net loss		(1,331	)		(1,223	)		(108	)		(1,331	)		(18,884	)		17,553
Less: Net (income) loss attributable to the noncontrolling interest		(8	)		5			(13	)		(8	)		12			(20	)

Net loss attributable to Fannie Mae	$	(1,339	)	$	(1,218	)	$	(121	)	$	(1,339	)	$	(18,872	)	$	17,533
Preferred stock dividends		(2,116	)		(1,907	)		(209	)		(2,116	)		(883	)		(1,233	)

Net loss attributable to common stockholders	$	(3,455	)	$	(3,125	)	$	(330	)	$	(3,455	)	$	(19,755	)	$	16,300


Loss per share — basic and diluted	$	(0.61	)	$	(0.55	)	$	(0.06	)	$	(0.61	)	$	(3.47	)	$	2.86


⁽¹⁾		Certain prior period amounts have been reclassified to conform to the current period presentation.

⁽²⁾		Consists of provision for loan losses, provision for guaranty losses and foreclosed property expense.

⁽³⁾		Third-quarter 2009 results do not reflect accounting standards for consolidation that the company adopted prospectively on January 1, 2010.

Net revenues were $5.1 billion in the third quarter of 2010, up 13 percent from $4.5 billion in the second quarter of 2010, due primarily to an increase in net interest income. Net interest income was $4.8 billion, up 14 percent from $4.2 billion in the second quarter of 2010. The increase was due primarily to lower debt funding costs and the purchase from MBS trusts of the substantial majority of the single-family loans that are four or more monthly payments delinquent, as the cost of purchasing these delinquent loans and holding them in the company’s portfolio is less than the cost of advancing delinquent payments to security holders.

For the third quarter of 2010, interest income that the company did not recognize for nonaccrual mortgage loans was $1.8 billion, compared with $2.2 billion in the second quarter of 2010.



Third-Quarter 2010 Results		4

Credit-related expenses, which are the total provision for credit losses plus foreclosed property expense, were $5.6 billion, up from $4.9 billion in the second quarter of 2010. The increase was driven in part by valuation adjustments that reduced the value of the company’s real-estate-owned inventory, as well as higher expenses due to increased acquisitions of foreclosed properties.

Credit losses, which the company defines generally as net charge-offs plus foreclosed property expense, excluding certain fair-value losses, were $8.2 billion in the third quarter of 2010, compared with $7.0 billion in the second quarter of 2010. The increase was attributable to an increase in defaults, particularly those due to the prolonged period of high unemployment and the decline in home prices.

Total loss reserves and fair value losses previously recognized on acquired credit-impaired loans were $84.6 billion as of September 30, 2010, or 2.8 percent of the company’s book of business, compared with $87.4 billion, or 2.9 percent of the company’s guaranty book of business, as of June 30, 2010. The company considers its $19.8 billion of total fair value losses previously recognized on loans purchased out of MBS trusts an “effective reserve” for credit losses because the mortgage loan balances were reduced by these fair value losses at acquisition. Total nonperforming loans in the company’s guaranty book of business were $213.3 billion, compared with $218.2 billion as of June 30, 2010.

Net fair value gains were $525 million in the third quarter, compared with gains of $303 million in the second quarter of 2010. The increase was attributable primarily to gains on the company’s trading mortgage securities due to rate declines and spread tightening.

Net other-than-temporary impairment was $326 million in the third quarter, compared with $137 million in the second quarter of 2010. The increase was due primarily to a decline in forecasted home prices for certain geographic regions that resulted in a decrease in projected cash flows on subprime and Alt-A securities.

The company provides further discussion of its financial results and condition, credit performance, fair value balance sheets, and other matters in its quarterly report on Form 10-Q for the quarter ended September 30, 2010, which was filed today with the Securities and Exchange Commission. Further information about the company’s credit performance, the characteristics of its guaranty book of business, the drivers of its credit losses, its calculation of credit losses, its foreclosure-prevention efforts, and other measures is contained in the “Third-Quarter 2010 Credit Supplement” on Fannie Mae’s Web site, www.fanniemae.com.



Third-Quarter 2010 Results		5

Net Worth and U.S. Treasury Funding

The Acting Director of FHFA has requested $2.5 billion of funds from Treasury on the company’s behalf under the terms of the senior preferred stock purchase agreement between Fannie Mae and Treasury to eliminate the company’s net worth deficit as of September 30, 2010. The company’s third quarter dividend of $2.1 billion on its senior preferred stock held by Treasury was declared by FHFA and paid by us on September 30, 2010.

On September 30, 2010, Treasury provided to the company $1.5 billion to cure its net worth deficit as of June 30, 2010. As a result of this draw, the aggregate liquidation preference of the senior preferred stock increased from $84.6 billion to $86.1 billion as of September 30, 2010, and will increase to $88.6 billion upon the receipt of funds from Treasury to eliminate the company’s third-quarter 2010 net worth deficit. Through September 30, 2010, the company has paid in aggregate $8.1 billion to Treasury in dividends on the senior preferred stock.

Although Treasury’s funds under the senior preferred stock purchase agreement permit the company to remain solvent and avoid receivership, the resulting dividend payments are substantial and the company does not expect to earn profits in excess of its annual dividend obligation to Treasury for the indefinite future. As draws from Treasury for credit losses abate, the company expects its draws to be driven increasingly by dividend payments to Treasury.

Fair Value Update

The fair value of the company’s net assets increased by $7.1 billion from June 30, 2010, which resulted in a fair value net deficit of $130.8 billion as of September 30, 2010. The increase was due to credit-related items that benefited from the decline in the level of interest rates, which shortened the expected life of the guaranty book of business and reduced expected losses; continued improvement in the spread between the company’s mortgage assets and associated debt and derivatives; and the receipt of $1.5 billion of capital from Treasury under the senior preferred stock purchase agreement.

As part of Fannie Mae’s disclosure requirements with FHFA, the company discloses on a quarterly basis supplemental non-GAAP consolidated fair value balance sheets, which reflect the company’s assets and liabilities at estimated fair value. The fair value of the company’s net assets is not a measure defined within generally accepted accounting principles and may not be comparable to similarly titled measures reported by other companies. The estimated fair value of the company’s net assets is calculated as of a particular point in time based on its existing assets and liabilities, and does not incorporate other factors that may have a significant impact on its long-term fair value. As a result, the estimated fair value of the company’s net assets presented in its non-GAAP consolidated fair value balance sheets does not represent an estimate of its net realizable value, liquidation value, or its market value as a whole. In addition, the fair value of the company’s net assets attributable to common stockholders presented in its fair value balance sheet does not represent an estimate of the value it expects to realize from operating the company, nor what it expects to draw from Treasury under the terms of the senior preferred stock purchase agreement.



Third-Quarter 2010 Results		6

For more information on the change in the company’s fair value net deficit, please refer to “Supplemental Non-GAAP Information—Fair Value Balance Sheets” in the company’s quarterly report on Form 10-Q for the period ended September 30, 2010, which was filed today with the SEC. See also “Supplemental Non-GAAP Consolidated Fair Value Balance Sheets” and “Explanation and Reconciliation of Non-GAAP Measures to GAAP Measures” later in this release for a reconciliation of the company’s fair value balance sheets to its GAAP condensed consolidated balance sheets.

Foreclosure Process Deficiencies

Recently, a number of the company’s single-family mortgage servicers temporarily halted foreclosures in some or all states after discovering deficiencies in their processes relating to the execution of affidavits in connection with the foreclosure process. These deficiencies have generated significant public concern and are currently being investigated by various government agencies and by the attorneys general of all 50 states, and have resulted in courts in at least two states issuing rules applying to the foreclosure process that the company anticipates will increase costs and may result in delays.

The company has directed its servicers to review their policies and procedures relating to the execution of affidavits, verifications, and other legal documents in connection with the foreclosure process. The company is also addressing concerns that have been raised regarding the practices of some law firms that handle the foreclosure process in Florida for the company’s mortgage servicers. In the case of one law firm under investigation by the Florida attorney general’s office, the company has instructed the firm to stop processing foreclosures for its mortgage loans and has stopped servicers from referring new matters to the firm.

The Acting Director of FHFA issued statements on October 1 and October 13, 2010 regarding servicers’ foreclosure processing issues. The company is currently coordinating with FHFA regarding appropriate corrective actions consistent with the four-point policy framework issued by FHFA on October 13, 2010. During the first nine months of 2010, 80 percent of the single-family properties the company acquired through foreclosures involved mortgages on which the borrowers had made three or fewer payments in the preceding 12 months.

Although the company expects the foreclosure pause will likely negatively affect its serious delinquency rates, credit-related expenses, credit losses, and foreclosure timelines, it cannot yet predict the extent of the impact.

Foreclosure Activity

The company acquired 85,349 single-family REO properties through foreclosure in the third quarter of 2010, compared with 68,838 in the second quarter of 2010. As of September 30, 2010, the company’s inventory of single-family REO properties was 166,787, compared with 129,310 as of June 30, 2010. The carrying value of the company’s single-family REO was $16.4 billion, compared with $13.0 billion as of June 30, 2010.



Third-Quarter 2010 Results		7

The company has seen an increase in the percentage of its properties that it is unable to market for sale in 2010 compared with 2009, in most cases because the properties are within redemption periods, are still occupied, or are being repaired. As of September 30, 2010, approximately 31 percent of the company’s properties that it is unable to market for sale were in redemption status, which lengthens the time a property is in REO inventory by an average of two to six months. Additionally, as of September 30, 2010, approximately 38 percent of the company’s properties that it is unable to market for sale were in occupied status, which lengthens the time a property is in REO inventory by an average of one to four months.

The company’s single-family foreclosure rate, which reflects the annualized number of single-family properties acquired through foreclosure as a percentage of the total number of loans in its conventional single-family guaranty book of business, was 1.91 percent on an annualized basis in the third quarter, compared with 1.52 percent in the second quarter of 2010.

Business Segment Results

Fannie Mae conducts its activities through three complementary businesses: Single-Family Credit Guaranty, Multifamily Credit Guaranty, and Capital Markets. The company’s Single-Family Credit Guaranty business works with its lender customers to securitize single-family mortgage loans into Fannie Mae MBS and to facilitate the purchase of single-family mortgage loans for its mortgage portfolio. Multifamily works with the company’s lender customers to securitize multifamily mortgage loans into Fannie Mae MBS and to facilitate the purchase of multifamily mortgage loans for its mortgage portfolio. The company’s Multifamily business also makes debt and equity investments to increase the supply of affordable housing. The company’s Capital Markets group manages its investment activity in mortgage loans, mortgage-related securities, and other investments.

Single-Family guaranty book of business was $2.85 trillion as of September 30, 2010, compared with $2.87 trillion as of June 30, 2010. Single-family guaranty fee income for the third quarter of 2010 was $1.8 billion, the same as the second quarter of 2010. The Single-Family business lost $5.5 billion in the third quarter of 2010 due primarily to credit-related expenses of $5.6 billion, almost all of which were attributable to loans purchased or guaranteed from 2005 through 2008. The Single-Family business lost $5.1 billion in the second quarter of 2010.

Multifamily guaranty book of business as of September 30, 2010 was $187.4 billion, compared with $186.1 billion as of June 30, 2010. Multifamily recorded credit-related expenses of $2 million in the third quarter of 2010, compared with a net benefit of $20 million in the second quarter of 2010. Multifamily earned $181 million in the third quarter of 2010, compared with $119 million in the second quarter of 2010.



Third-Quarter 2010 Results		8

Capital Markets’ net interest income was $4.1 billion in the third quarter of 2010, compared with $3.5 billion in the second quarter of 2010. Fair value gains were $436 million, compared with $631 million in the second quarter of 2010. Net other-than-temporary impairment was $323 million, compared with $137 million in the second quarter of 2010. The net mortgage investment portfolio balance was $802.9 billion on September 30, 2010, compared with $817.8 billion on June 30, 2010, resulting from purchases of $57.8 billion, liquidations of $47.2 billion, and sales of $25.6 billion during the quarter. Capital Markets earned $4.8 billion in the third quarter of 2010, compared with $4.4 billion in the second quarter of 2010.

# # #

In this release, the company has presented a number of estimates, forecasts, expectations, and other forward-looking statements regarding the company’s future financial results, the profitability of its loans, its future serious delinquency rates, credit losses and credit-related expenses, its draws from and dividends to be paid to Treasury, the performance and caliber of loans it has acquired and will acquire, its planned borrower initiatives, and the impact of the foreclosure pause on the company’s serious delinquency rates, credit-related expenses, credit losses, and foreclosure timelines. These estimates, forecasts, expectations, and statements are forward-looking statements and are based on the company’s current assumptions regarding numerous factors, including assumptions about future home prices and the future performance of its loans. The company’s future estimates of these amounts, as well as the actual amounts, may differ materially from its current estimates as a result of home price changes, interest rate changes, unemployment, other macroeconomic variables, government policy matters, changes in generally accepted accounting principles, credit availability, social behaviors, the volume of loans it modifies, the effectiveness of its loss mitigation strategies, management of its real estate owned inventory and pursuit of contractual remedies, changes in the fair value of its assets and liabilities, impairments of its assets, the adequacy of its loss reserves, its ability to maintain a positive net worth, effects from activities the company takes to support the mortgage market and help borrowers, the conservatorship and its effect on the company’s business, the investment by Treasury and its effect on the company’s business, changes in the structure and regulation of the financial services industry, the company’s ability to access the debt markets, disruptions in the housing, credit, and stock markets, government investigations and litigation, the extent of the servicer foreclosure process deficiencies and the duration of the related foreclosure pause, and many other factors. Changes in the company’s underlying assumptions and actual outcomes, which could be affected by the economic environment, government policy, and many other factors, including those discussed in the “Risk Factors” section of the company’s quarterly report on Form 10-Q for the period ended September 30, 2010 and its annual report on Form 10-K for the year ended December 31, 2009, and elsewhere in this release, could result in actual results being materially different from what is set forth in the forward-looking statements.

Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America’s secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.



Third-Quarter 2010 Results		9

ANNEX I
FANNIE MAE
(In conservatorship)

Condensed Consolidated Balance Sheets
(Dollars in millions, except share amounts)
(Unaudited)


	As of
	September 30,			December 31,
	2010			2009

ASSETS
Cash and cash equivalents (includes cash of consolidated trusts of $4 and $2,092, respectively)	$	11,382		$	6,812
Restricted cash (includes restricted cash of consolidated trusts of $52,796 and $-, respectively)		59,764			3,070
Federal funds sold and securities purchased under agreements to resell or similar arrangements		20,006			53,684
Investments in securities:
Trading, at fair value (includes securities of consolidated trusts of $22 and $5,599, respectively)		69,459			111,939
Available-for-sale, at fair value (includes securities of consolidated trusts of $591 and $10,513, respectively, and securities pledged as collateral that may be sold or repledged of $- and $1,148, respectively)		102,185			237,728

Total investments in securities		171,644			349,667

Mortgage loans:
Loans held for sale, at lower of cost or fair value		923			18,462
Loans held for investment, at amortized cost
Of Fannie Mae		410,019			256,434
Of consolidated trusts (includes loans at fair value of $707 and $-, respectively, and loans pledged as collateral that may be sold or repledged of $2,993 and $1,947, respectively)		2,559,629			129,590

Total loans held for investment		2,969,648			386,024
Allowance for loan losses		(59,740	)		(9,925	)

Total loans held for investment, net of allowance		2,909,908			376,099

Total mortgage loans		2,910,831			394,561
Advances to lenders		7,061			5,449
Accrued interest receivable:
Of Fannie Mae		5,754			3,774
Of consolidated trusts		10,029			519
Allowance for accrued interest receivable		(3,785	)		(536	)

Total accrued interest receivable, net of allowance		11,998			3,757

Acquired property, net		17,590			9,142
Derivative assets, at fair value		955			1,474
Guaranty assets		419			8,356
Deferred tax assets, net		528			909
Partnership investments		1,823			2,372
Servicer and MBS trust receivable		1,128			18,329
Other assets		14,493			11,559

Total assets	$	3,229,622		$	869,141


LIABILITIES AND EQUITY (DEFICIT)
Liabilities:
Accrued interest payable:
Of Fannie Mae	$	4,374		$	4,951
Of consolidated trusts		9,838			29
Federal funds purchased and securities sold under agreements to repurchase		185			—
Short-term debt:
Of Fannie Mae		219,166			200,437
Of consolidated trusts		5,969			—
Long-term debt:
Of Fannie Mae (includes debt at fair value of $2,950 and $3,274, respectively)		592,881			567,950
Of consolidated trusts (includes debt at fair value of $351 and $-, respectively)		2,385,446			6,167
Derivative liabilities, at fair value		1,641			1,029
Reserve for guaranty losses (includes $38 and $4,772, respectively, related to Fannie Mae MBS included in Investments in securities)		276			54,430
Guaranty obligations		747			13,996
Partnership liabilities		1,850			2,541
Servicer and MBS trust payable		3,173			25,872
Other liabilities		6,523			7,020

Total liabilities		3,232,069			884,422

Commitments and contingencies (Note 17)		—			—
Fannie Mae stockholders’ equity (deficit):
Senior preferred stock, 1,000,000 shares issued and outstanding		86,100			60,900
Preferred stock, 700,000,000 shares are authorized—577,206,010 and 579,735,457 shares both issued and outstanding, respectively		20,221			20,348
Common stock, no par value, no maximum authorization—1,269,572,119 and 1,265,674,761 shares issued, respectively; 1,117,978,432 and 1,113,358,051 shares outstanding, respectively		667			664
Additional paid-in capital		—			2,083
Accumulated deficit		(100,932	)		(90,237	)
Accumulated other comprehensive loss		(1,182	)		(1,732	)
Treasury stock, at cost, 151,593,687 and 152,316,710 shares, respectively		(7,401	)		(7,398	)

Total Fannie Mae stockholders’ deficit		(2,527	)		(15,372	)

Noncontrolling interest		80			91

Total deficit		(2,447	)		(15,281	)

Total liabilities and equity (deficit)	$	3,229,622		$	869,141

See Notes to Condensed Consolidated Financial Statements



Third-Quarter 2010 Results		10

FANNIE MAE
(In conservatorship)

Condensed Consolidated Statements of Operations
(Dollars and shares in millions, except per share amounts)
(Unaudited)


	For the Three						For the Nine
	Months Ended						Months Ended
	September 30,						September 30,
	2010			2009			2010			2009

Interest income:
Trading securities	$	310		$	862		$	955		$	2,775
Available-for-sale securities		1,313			3,475			4,175			10,503
Mortgage loans:
Of Fannie Mae		3,859			3,229			11,107			12,328
Of consolidated trusts		32,807			2,061			100,810			4,171
Other		31			48			111			314

Total interest income		38,320			9,675			117,158			30,091

Interest expense:
Short-term debt:
Of Fannie Mae		190			390			470			2,097
Of consolidated trusts		4			—			9			—
Long-term debt:
Of Fannie Mae		4,472			5,370			14,528			16,922
Of consolidated trusts		28,878			85			90,379			259

Total interest expense		33,544			5,845			105,386			19,278

Net interest income		4,776			3,830			11,772			10,813

Provision for loan losses		(4,696	)		(2,546	)		(20,930	)		(7,670	)

Net interest income (loss) after provision for loan losses		80			1,284			(9,158	)		3,143

Guaranty fee income (includes imputed interest of $27 and $461 for the three months ended September 30, 2010 and 2009, respectively, and $86 and $932 for the nine months ended September 30, 2010 and 2009, respectively)		51			1,923			157			5,334
Investment gains, net		82			785			271			963
Other-than-temporary impairments		(366	)		(1,018	)		(600	)		(7,768	)
Noncredit portion of other-than-temporary impairments recognized in other comprehensive loss		40			79			(99	)		423

Net other-than-temporary impairments		(326	)		(939	)		(699	)		(7,345	)
Fair value gains (losses), net		525			(1,536	)		(877	)		(2,173	)
Debt extinguishment losses, net (includes debt extinguishment losses related to consolidated trusts of $29 and $129 for the three months and nine months ended September 30, 2010, respectively)		(214	)		(11	)		(497	)		(280	)
Income (losses) from partnership investments		47			(520	)		(37	)		(1,448	)
Fee and other income		253			194			674			583

Non-interest income (loss)		418			(104	)		(1,008	)		(4,366	)

Administrative expenses:
Salaries and employee benefits		325			293			973			831
Professional services		305			178			759			501
Occupancy expenses		43			47			124			141
Other administrative expenses		57			44			149			122

Total administrative expenses		730			562			2,005			1,595
Provision for guaranty losses		78			19,350			111			52,785
Foreclosed property expense		787			64			1,255			1,161
Other expenses		243			231			613			828

Total expenses		1,838			20,207			3,984			56,369

Loss before federal income taxes		(1,340	)		(19,027	)		(14,150	)		(57,592	)
Benefit for federal income taxes		(9	)		(143	)		(67	)		(743	)

Net loss		(1,331	)		(18,884	)		(14,083	)		(56,849	)
Less: Net (income) loss attributable to the noncontrolling interest		(8	)		12			(4	)		55

Net loss attributable to Fannie Mae		(1,339	)		(18,872	)		(14,087	)		(56,794	)
Preferred stock dividends		(2,116	)		(883	)		(5,550	)		(1,323	)

Net loss attributable to common stockholders	$	(3,455	)	$	(19,755	)	$	(19,637	)	$	(58,117	)

Loss per share—Basic and Diluted	$	(0.61	)	$	(3.47	)	$	(3.45	)	$	(10.24	)
Weighted-average common shares outstanding—Basic and Diluted		5,695			5,685			5,694			5,677

See Notes to Condensed Consolidated Financial Statements



Third-Quarter 2010 Results		11

FANNIE MAE
(In conservatorship)

Condensed Consolidated Statements of Cash Flows
(Dollars in millions)
(Unaudited)


	For the Nine Months
	Ended September 30,
	2010			2009

Cash flows used in operating activities:
Net loss	$	(14,083	)	$	(56,849	)
Reconciliation of net loss to net cash used in operating activities
Amortization of debt of Fannie Mae cost basis adjustments		1,225			2,807
Amortization of debt of consolidated trusts cost basis adjustments		(721	)		(5	)
Provision for loan and guaranty losses		21,041			60,455
Valuation (gains) losses		(2,023	)		2,961
Current and deferred federal income taxes		272			(1,861	)
Derivatives fair value adjustments		910			(708	)
Purchases of loans held for sale		(61	)		(91,889	)
Proceeds from repayments of loans held for sale		43			1,991
Net change in trading securities, excluding non-cash transfers		(36,227	)		9,150
Other, net		(6,222	)		(4,575	)

Net cash used in operating activities		(35,846	)		(78,523	)
Cash flows provided by investing activities:
Purchases of trading securities held for investment		(7,984	)		(27,183	)
Proceeds from maturities of trading securities held for investment		1,997			9,413
Proceeds from sales of trading securities held for investment		21,488			7,395
Purchases of available-for-sale securities		(262	)		(158,893	)
Proceeds from maturities of available-for-sale securities		12,927			37,842
Proceeds from sales of available-for-sale securities		6,680			270,678
Purchases of loans held for investment		(59,145	)		(35,169	)
Proceeds from repayments of loans held for investment of Fannie Mae		15,025			26,576
Proceeds from repayments of loans held for investment of consolidated trusts		378,941			19,210
Net change in restricted cash		(11,111	)		—
Advances to lenders		(44,951	)		(66,017	)
Proceeds from disposition of acquired property and preforeclosure sales		28,079			15,791
Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements		33,219			23,101
Other, net		(476	)		(19,632	)

Net cash provided by investing activities		374,427			103,112
Cash flows used in financing activities:
Proceeds from issuance of short-term debt of Fannie Mae		555,422			1,118,028
Proceeds from issuance of short-term debt of consolidated trusts		10,067			—
Payments to redeem short-term debt of Fannie Mae		(537,181	)		(1,210,316	)
Payments to redeem short-term debt of consolidated trusts		(27,852	)		—
Proceeds from issuance of long-term debt of Fannie Mae		335,115			232,956
Proceeds from issuance of long-term debt of consolidated trusts		182,014			22
Payments to redeem long-term debt of Fannie Mae		(311,257	)		(211,063	)
Payments to redeem long-term debt of consolidated trusts		(560,170	)		(394	)
Payments of cash dividends on senior preferred stock to Treasury		(5,554	)		(1,320	)
Proceeds from senior preferred stock purchase agreement with Treasury		25,200			44,900
Net change in federal funds purchased and securities sold under agreements to repurchase		185			47

Net cash used in financing activities		(334,011	)		(27,140	)
Net increase (decrease) in cash and cash equivalents		4,570			(2,551	)
Cash and cash equivalents at beginning of period		6,812			17,933

Cash and cash equivalents at end of period	$	11,382		$	15,382

Cash paid during the period for:
Interest	$	107,324		$	21,403
Income taxes		—			876
Non-cash activities (excluding transition-related impacts—see Note 2):
Mortgage loans acquired by assuming debt	$	322,923		$	4
Net transfers from mortgage loans held for investment of consolidated trusts to mortgage loans held for investment of Fannie Mae		142,736			—
Transfers from advances to lenders to investments in securities		—			65,218
Transfers from advances to lenders to loans held for investment of consolidated trusts		40,795			—
Net transfers from mortgage loans to acquired property		49,305			3,744

See Notes to Condensed Consolidated Financial Statements



Third-Quarter 2010 Results		12

FANNIE MAE
(In conservatorship)

Condensed Consolidated Statements of Changes in Equity (Deficit)
(Dollars and shares in millions, except per share amounts)
(Unaudited)


	Fannie Mae Stockholders’ Equity (Deficit)
																		Retained			Accumulated
	Shares Outstanding														Additional			Earnings			Other						Non			Total
	Senior							Senior		Preferred			Common		Paid-In			(Accumulated			Comprehensive			Treasury			Controlling			Equity
	Preferred		Preferred			Common		Preferred		Stock			Stock		Capital			Deficit)			Loss			Stock			Interest			(Deficit)

Balance as of December 31, 2008		1		597			1,085	$	1,000	$	21,222		$	650	$	3,621		$	(26,790	)	$	(7,673	)	$	(7,344	)	$	157		$	(15,157	)
Cumulative effect from the adoption of a new accounting standard on other-than- temporary impairments, net of tax		—		—			—		—		—			—		—			8,520			(5,556	)		—			—			2,964
Change in investment in noncontrolling interest		—		—			—		—		—			—		—			—			—			—			3			3
Comprehensive loss:
Net loss		—		—			—		—		—			—		—			(56,794	)		—			—			(55	)		(56,849	)
Other comprehensive loss, net of tax effect:
Changes in net unrealized losses on available-for-sale securities (net of tax of $3,039)		—		—			—		—		—			—		—			—			5,644			—			—			5,644
Reclassification adjustment for other-than- temporary impairments recognized in net loss (net of tax of $2,536)		—		—			—		—		—			—		—			—			4,809			—			—			4,809
Reclassification adjustment for gains included in net loss (net of tax of $102)		—		—			—		—		—			—		—			—			(190	)		—			—			(190	)
Unrealized gains on guaranty assets and guaranty fee buy-ups		—		—			—		—		—			—		—			—			196			—			—			196
Amortization of net cash flow hedging gains		—		—			—		—		—			—		—			—			9			—			—			9
Prior service cost and actuarial gains, net of amortization for defined benefit plans		—		—			—		—		—			—		—			—			22			—			—			22

Total comprehensive loss																															(46,359	)
Senior preferred stock dividends		—		—			—		—		—			—		(1,320	)		—			—			—			—			(1,320	)
Increase to senior preferred liquidation preference		—		—			—		44,900		—			—		—			—			—			—			—			44,900
Conversion of convertible preferred stock into common stock		—		(15	)		24		—		(765	)		13		752			—			—			—			—			—
Other		—		—			1		—		—			—		58			1			—			(50	)		—			9

Balance as of September 30, 2009		1		582			1,110	$	45,900	$	20,457		$	663	$	3,111		$	(75,063	)	$	(2,739	)	$	(7,394	)	$	105		$	(14,960	)

Balance as of December 31, 2009		1		580			1,113	$	60,900	$	20,348		$	664	$	2,083		$	(90,237	)	$	(1,732	)	$	(7,398	)	$	91		$	(15,281	)
Cumulative effect from the adoption of the accounting standards on transfers of financial assets and consolidation		—		—			—		—		—			—		—			6,706			(3,394	)		—			(14	)		3,298

Balance as of January 1, 2010, adjusted		1		580			1,113		60,900		20,348			664		2,083			(83,531	)		(5,126	)		(7,398	)		77			(11,983	)
Change in investment in noncontrolling interest		—		—			—		—		—			—		—			—			—			—			(1	)		(1	)
Comprehensive loss:
Net loss		—		—			—		—		—			—		—			(14,087	)		—			—			4			(14,083	)
Other comprehensive loss, net of tax effect:
Changes in net unrealized losses on available-for-sale securities, (net of tax of $1,889)		—		—			—		—		—			—		—			—			3,507			—			—			3,507
Reclassification adjustment for other-than- temporary impairments recognized in net loss (net of tax of $239)		—		—			—		—		—			—		—			—			460			—			—			460
Reclassification adjustment for gains included in net loss (net of tax of $16)		—		—			—		—		—			—		—			—			(29	)		—			—			(29	)
Unrealized gains on guaranty assets and guaranty fee buy-ups		—		—			—		—		—			—		—			—			1			—			—			1
Prior service cost and actuarial gains, net of amortization for defined benefit plans		—		—			—		—		—			—		—			—			5			—			—			5

Total comprehensive loss																															(10,139	)
Senior preferred stock dividends		—		—			—		—		—			—		(2,240	)		(3,314	)		—			—			—			(5,554	)
Increase to senior preferred liquidation preference		—		—			—		25,200		—			—		—			—			—			—			—			25,200
Conversion of convertible preferred stock into common stock		—		(3	)		4		—		(127	)		3		124			—			—			—			—			—
Other		—		—			1		—		—			—		33			—			—			(3	)		—			30

Balance as of September 30, 2010		1		577			1,118	$	86,100	$	20,221		$	667	$	—		$	(100,932	)	$	(1,182	)	$	(7,401	)	$	80		$	(2,447	)

See Notes to Condensed Consolidated Financial Statements



Third-Quarter 2010 Results		13

Supplemental Non-GAAP Consolidated Fair Value Balance Sheets


	As of September 30, 2010									As of December 31, 2009⁽¹⁾
	GAAP									GAAP
	Carrying			Fair Value			Estimated			Carrying			Fair Value			Estimated
	Value			Adjustment⁽²⁾			Fair Value			Value			Adjustment⁽²⁾			Fair Value
	(Dollars in millions)

Assets:
Cash and cash equivalents	$	71,146		$	—		$	71,146	⁽³⁾	$	9,882		$	—		$	9,882	⁽³⁾
Federal funds sold and securities purchased under agreements to resell or similar arrangements		20,006			—			20,006	⁽³⁾		53,684			(28	)		53,656	⁽³⁾
Trading securities		69,459			—			69,459	⁽³⁾		111,939			—			111,939	⁽³⁾
Available-for-sale securities		102,185			—			102,185	⁽³⁾		237,728			—			237,728	⁽³⁾
Mortgage loans:
Mortgage loans held for sale		923			9			932	⁽³⁾		18,462			153			18,615	⁽³⁾
Mortgage loans held for investment, net of allowance for loan losses:
Of Fannie Mae		364,746			(36,151	)		328,595	⁽³⁾		246,509			(5,209	)		241,300	⁽³⁾
Of consolidated trusts		2,545,162			66,355	⁽⁴⁾		2,611,517	⁽³⁾⁽⁵⁾		129,590			(45	)		129,545	⁽³⁾⁽⁵⁾

Total mortgage loans		2,910,831			30,213			2,941,044	⁽⁶⁾		394,561			(5,101	)		389,460	⁽⁶⁾
Advances to lenders		7,061			(236	)		6,825	⁽³⁾		5,449			(305	)		5,144	⁽³⁾
Derivative assets at fair value		955			—			955	⁽³⁾		1,474			—			1,474	⁽³⁾
Guaranty assets and buy-ups, net		419			387			806	⁽³⁾⁽⁷⁾		9,520			5,104			14,624	⁽³⁾⁽⁷⁾

Total financial assets		3,182,062			30,364			3,212,426	⁽³⁾		824,237			(330	)		823,907	⁽³⁾
Master servicing assets and credit enhancements		491			3,539			4,030	⁽⁷⁾⁽⁸⁾		651			5,917			6,568	⁽⁷⁾⁽⁸⁾
Other assets		47,069			(251	)		46,818	⁽⁸⁾		44,253			373			44,626	⁽⁸⁾

Total assets	$	3,229,622		$	33,652		$	3,263,274		$	869,141		$	5,960		$	875,101

Liabilities:
Federal funds purchased and securities sold under agreements to repurchase	$	185		$	—		$	185	⁽³⁾	$	—		$	—		$	—	⁽³⁾
Short-term debt:
Of Fannie Mae		219,166			150			219,316	⁽³⁾		200,437			56			200,493	⁽³⁾
Of consolidated trusts		5,969			—			5,969	⁽³⁾		—			—			—	⁽³⁾
Long-term debt:
Of Fannie Mae		592,881	⁽⁹⁾		30,869			623,750	⁽³⁾		567,950	⁽⁹⁾		19,473			587,423	⁽³⁾
Of consolidated trusts		2,385,446	⁽⁹⁾		128,233	⁽⁴⁾		2,513,679	⁽³⁾		6,167	⁽⁹⁾		143			6,310	⁽³⁾
Derivative liabilities at fair value		1,641			—			1,641	⁽³⁾		1,029			—			1,029	⁽³⁾
Guaranty obligations		747			3,134			3,881	⁽³⁾		13,996			124,586			138,582	⁽³⁾

Total financial liabilities		3,206,035			162,386			3,368,421	⁽³⁾		789,579			144,258			933,837	⁽³⁾
Other liabilities		26,034			(415	)		25,619	⁽¹⁰⁾		94,843			(54,878	)		39,965	⁽¹⁰⁾

Total liabilities		3,232,069			161,971			3,394,040			884,422			89,380			973,802
Equity (deficit):
Fannie Mae stockholders’ equity (deficit):
Senior preferred⁽¹¹⁾		86,100			—			86,100			60,900			—			60,900
Preferred		20,221			(19,916	)		305			20,348			(19,629	)		719
Common		(108,848	)		(108,403	)		(217,251	)		(96,620	)		(63,791	)		(160,411	)

Total Fannie Mae stockholders’ deficit/non-GAAP fair value of net assets	$	(2,527	)	$	(128,319	)	$	(130,846	)	$	(15,372	)	$	(83,420	)	$	(98,792	)
Noncontrolling interests		80			—			80			91			—			91

Total deficit		(2,447	)		(128,319	)		(130,766	)		(15,281	)		(83,420	)		(98,701	)

Total liabilities and equity (deficit)	$	3,229,622		$	33,652		$	3,263,274		$	869,141		$	5,960		$	875,101



Third-Quarter 2010 Results		14

Explanation and Reconciliation of Non-GAAP Measures to GAAP Measures


⁽¹⁾		Certain prior period amounts have been reclassified to conform to the current period presentation.

⁽²⁾		Each of the amounts listed as a “fair value adjustment” represents the difference between the carrying value included in our GAAP condensed consolidated balance sheets and our best judgment of the estimated fair value of the listed item.

⁽³⁾		We determined the estimated fair value of these financial instruments in accordance with the fair value accounting standard as described in “Note 16, Fair Value.”

⁽⁴⁾		Fair value exceeds the carrying value of consolidated loans and debt of consolidated trusts due to the fact that the loans and debt were consolidated in our GAAP condensed consolidated balance sheet at unpaid principal balance at transition. Also impacting the difference between fair value and carrying value of the consolidated loans is the credit component of the loan. This credit component is reflected in the net guaranty obligation, which is included in the consolidated loan fair value, but was presented as a separate line item in our fair value balance sheet in prior periods.

⁽⁵⁾		Includes certain mortgage loans that we elected to report at fair value in our GAAP condensed consolidated balance sheet of $707 million as of September 30, 2010. We did not elect to report any mortgage loans at fair value in our consolidated balance sheet as of December 31, 2009.

⁽⁶⁾		Performing loans had a fair value of $2.8 trillion and an unpaid principal balance of $2.7 trillion as of September 30, 2010 compared to a fair value of $345.5 billion and an unpaid principal balance of $348.2 billion as of December 31, 2009. Nonperforming loans, which include loans that are delinquent by one or more payments, had a fair value of $178.7 billion and an unpaid principal balance of $301.5 billion as of September 30, 2010 compared to a fair value of $43.9 billion and an unpaid principal balance of $79.8 billion as of December 31, 2009. See “Note 16, Fair Value” for additional information on valuation techniques for performing and non performing loans.

⁽⁷⁾		In our GAAP condensed consolidated balance sheets, we report the guaranty assets as a separate line item. Other guaranty related assets are within the “Other assets” line items and they include buy-ups, master servicing assets and credit enhancements. On a GAAP basis, our guaranty assets totaled $419 million and $8.4 billion as of September 30, 2010 and December 31, 2009, respectively. The associated buy-ups totaled $1 million and $1.2 billion as of September 30, 2010 and December 31, 2009, respectively.

⁽⁸⁾		The line items “Master servicing assets and credit enhancements” and “Other assets” together consist of the assets presented on the following six line items in our GAAP condensed consolidated balance sheets: (a) Total accrued interest receivable, net of allowance; (b) Acquired property, net; (c) Deferred tax assets, net; (d) Partnership investments; (e) Servicer and MBS trust receivable and (f) Other assets. The carrying value of these items in our GAAP condensed consolidated balance sheets together totaled $47.6 billion and $46.1 billion as of September 30, 2010 and December 31, 2009, respectively. We deduct the carrying value of the buy-ups associated with our guaranty obligation, which totaled $1 million and $1.2 billion as of September 30, 2010 and December 31, 2009, respectively, from “Other assets” reported in our GAAP condensed consolidated balance sheets because buy-ups are a financial instrument that we combine with guaranty assets in our disclosure in “Note 16, Fair Value.” We have estimated the fair value of master servicing assets and credit enhancements based on our fair value methodologies described in Note 16.

⁽⁹⁾		Includes certain long-term debt instruments that we elected to report at fair value in our GAAP condensed consolidated balance sheets of $3.3 billion as of September 30, 2010 and December 31, 2009.

⁽¹⁰⁾		The line item “Other liabilities” consists of the liabilities presented on the following six line items in our GAAP condensed consolidated balance sheets: (a) Accrued interest payable of Fannie Mae; (b) Accrued interest payable of consolidated trusts; (c) Reserve for guaranty losses; (d) Partnership liabilities; (e) Servicer and MBS trust payable; and (f) Other liabilities. The carrying value of these items in our GAAP condensed consolidated balance sheets together totaled $26.0 billion and $94.8 billion as of September 30, 2010 and December 31, 2009, respectively. The GAAP carrying values of these other liabilities generally approximate fair value. We assume that certain other liabilities, such as deferred revenues, have no fair value. Although we report the “Reserve for guaranty losses” as a separate line item in our condensed consolidated balance sheets, it is incorporated into and reported as part of the fair value of our guaranty obligations in our non-GAAP supplemental consolidated fair value balance sheets.

⁽¹¹⁾		The amount included in “estimated fair value” of the senior preferred stock is the liquidation preference, which is the same as the GAAP carrying value, and does not reflect fair value.



Third-Quarter 2010 Results		15

exv99w2

Exhibit 99.2

August 5, 2010 Fannie Mae 2010 Second Quarter Credit Supplement

This presentation includes information about Fannie Mae, including information contained in Fannie Mae's Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, the "2010 Q3 Form 10-Q." Some of the terms used in these materials are defined and discussed more fully in the 2010 Q3 Form 10-Q and in Fannie Mae's Form 10-K for the year ended December 31, 2009, the "2009 Form 10-K." These materials should be reviewed together with the 2010 Q3 Form 10-Q and the 2009 Form 10-K, copies of which are available in the "Investor Information" section of Fannie Mae's Web site at www.fanniemae.com. Some of the information in this presentation is based upon information that we received from third-party sources such as sellers and servicers of mortgage loans. Although we generally consider this information reliable, we do not independently verify all reported information. This presentation includes forward-looking statements relating to future home price changes. These statements are based on our opinions, analyses, estimates, forecasts and other views on a variety of economic and other information, and changes in the assumptions and other information underlying these views could produce materially different results. The impact of future home price changes on our business, results or financial condition will depend on many other factors. Due to rounding, amounts reported in this presentation may not add to totals indicated (or 100%).

Table of Contents Slide Home Price Growth/Decline Rates in the U.S. 3 Home Price Declines Peak-to-Current (by State) as of 2010 Q3 4 Fannie Mae Acquisition Profile by Key Product Features 5 Fannie Mae Credit Profile by Key Product Features 6 Fannie Mae Credit Profile by Origination Year and Key Product Features 7 Fannie Mae Single-Family Cumulative Default Rates 8 Fannie Mae Credit Profile by State 9 Fannie Mae Single-Family Serious Delinquency Rates by State and Region 10 Home Price Growth/Decline and Fannie Mae Real Estate Owned (REO) in Selected States 11 Fannie Mae Alt-A Credit Profile by Key Product Features 12 Fannie Mae Alt-A Loans Versus Loans Underlying Private-Label Alt-A Securities 13 Fannie Mae Workouts by Type 14 Home Affordable Modification Program (HAMP) 15 Fannie Mae Modifications of Single-Family Delinquent Loans 16 Fannie Mae Multifamily Credit Profile by Loan Attributes 17 Fannie Mae Multifamily Credit Profile by Acquisition Year 18 Fannie Mae Multifamily Credit Profile by Region and State 19

Home Price Growth/Decline Rates in the U.S. We expect peak-to-trough declines in home prices to be in the 19% to 25% range (comparable to a decline of 32% to 40% range using the S&P/Case-Shiller index method). Note: Our estimates differ from the S&P/Case-Shiller index in two principal ways: (1) our estimates weight expectations for each individual property by number of properties, whereas the S&P/Case-Shiller index weights expectations of home price declines based on property value, causing declines in home prices on higher priced homes to have a greater effect on the overall result; and (2) our estimates do not include known sales of foreclosed homes because we believe that differing maintenance practices and the forced nature of the sales make foreclosed home prices less representative of market values, whereas the S&P/Case-Shiller index includes sales of foreclosed homes. The S&P/Case Shiller comparison numbers shown above for the peak-to-trough forecast are calculated using our models and assumptions, but modified to account for weighting of expectations based on property value and the inclusion of foreclosed property sales. In addition to these differences, our estimates are based on our own internally available data combined with publicly available data, and are therefore based on data collected nationwide, whereas the S&P/Case-Shiller index is based only on publicly available data, which may be limited in certain geographic areas of the country. Our comparative calculations to the S&P/Case-Shiller index provided above are not modified to account for this data pool difference. S&P/Case-Shiller Index 9.8% 7.7% 10.6% 10.7% 14.6% 14.7% -0.3% -8.4% -18.3% -2.4% Fannie Mae Home Price Index Growth rates are from period-end to period-end. * Initial estimate based on purchase transactions in Fannie-Freddie acquisition and public deed data available through the end of September 2010, supplemented by preliminary data available for purchase transactions to be closed in October and November 2010. Including subsequently available data may lead to materially different results.

0.8% HI - -21.1% United States -18.1% Top %: State/Region Home Price Decline Rate percentage from applicable peak in that state through September 30, 2010 Bottom %: Percent of Fannie Mae single-family conventional guaranty book of business by unpaid principal balance as of September 30, 2010 Note: Regional home price decline percentages are a housing stock unit-weighted average of home price decline percentages of states within each region. Initial estimate based on purchase transactions in Fannie-Freddie acquisition and public deed data available through the end of September 2010, supplemented by preliminary data available for purchase transactions to be closed in October and November 2010. Including subsequently available data may lead to materially different results. Home Price Declines Peak-to-Current (by State) as of 2010 Q3 State Home Price Change In excess of -15% - -15% to -10% - -5% to 0% - -10% to -5% Pacific - -36.0% 24.1% Mountain - -28.8% 8.7% West North Central - -6.9% 5.1% East North Central - -16.8% 12.4% New England - -14.0% 5.8% Middle Atlantic - -9.2% 12.4% East South Central - -5.8% 3.5% West South Central - -1.1% 6.9% South Atlantic - -25.9% 20.7%

Fannie Mae Acquisition Profile by Key Product Features Credit Characteristics of Single-Family Business Volume (1) Percentage calculated based on unpaid principal balance of loans at time of acquisition. Single-family business volume refers to both single-family mortgage loans we purchase for our mortgage portfolio and single-family mortgage loans we securitize into Fannie Mae MBS. The increase for 2010 is the result of HARP loans, which involve the refinance of existing Fannie Mae loans with loan-to-value ratios up to 125%. Refi Plus and Home Affordable Refinance Program (HARP) started in April 2009. (4) FICO Credit scores as reported by the seller of the mortgage loan at the time of delivery. Newly originated Alt-A loans acquired in 2009 and 2010 consist of the refinance of existing Alt-A loans. We've revised our reporting from prior quarters to reflect these as Alt-A loans. Represented as a percentage of total unpaid principal balance of loans at time of acquisition.

Fannie Mae Credit Profile by Key Product Features Credit Characteristics of Single-Family Conventional Guaranty Book of Business (1) Loans with multiple product features are included in all applicable categories. The subtotal is calculated by counting a loan only once even if it is included in multiple categories. (2) Excludes non-Fannie Mae securities held in portfolio and those Alt-A and subprime wraps for which Fannie Mae does not have loan-level information. Fannie Mae had access to detailed loan-level information for over 99% of its single-family conventional guaranty book of business as of September 30, 2010. (3) FICO Credit scores as reported by the seller of the mortgage loan at the time of delivery. (4) Unpaid principal balance of all loans with credit enhancement as a percentage of unpaid principal balance of single-family conventional guaranty book of business for which Fannie Mae had access to loan level information. Includes primary mortgage insurance, pool insurance, lender recourse and other credit enhancement. (5) Expressed as a percentage of credit losses for the single-family guaranty book of business. For information on total credit losses, refer to Fannie Mae's 2010 Q3 Form 10-Q.

Fannie Mae Credit Profile by Origination Year and Key Product Features (1) Excludes non-Fannie Mae securities held in portfolio and those Alt-A and subprime wraps for which Fannie Mae does not have loan-level information. Fannie Mae had access to detailed loan-level information for over 99% of its single-family conventional guaranty book of business as of September 30, 2010. (2) The increase for 2010 is the result of HARP loans, which started in April 2009 and can have loan-to-value ratios up to 125%. (3) FICO Credit scores as reported by the seller of the mortgage loan at the time of delivery. (4) Unpaid principal balance of all loans with credit enhancement as a percentage of unpaid principal balance of single-family conventional guaranty book of business for which Fannie Mae has access to loan-level information. Includes primary mortgage insurance, pool insurance, lender recourse and other credit enhancement. (5) Expressed as a percentage of credit losses for the single-family guaranty book of business. For information on total credit losses, refer to Fannie Mae's 2010 Q3 Form 10-Q. (6) Defaults include loan liquidations other than through voluntary pay-off or repurchase by lenders and includes loan foreclosures, preforeclosure sales, sales to third parties and deeds in lieu of foreclosure. Cumulative Default Rate is the total number of single-family conventional loans in the guaranty book of business originated in the identified year that have defaulted, divided by the total number of single-family conventional loans in the guaranty book of business originated in the identified year. For 2000 to 2004 cumulative default rates, refer to slide 8. Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Origination Year

Note: Defaults include loan liquidations other than through voluntary pay-off or repurchase by lenders and include loan foreclosures, preforeclosure sales, sales to third parties and deeds in lieu of foreclosure. Cumulative Default Rate is the total number of single-family conventional loans in the guaranty book of business originated in the identified year that have defaulted, divided by the total number of single-family conventional loans in the guaranty book of business originated in the identified year. Data as of September 30, 2010 are not necessarily indicative of the ultimate performance of the loans and performance is likely to change, perhaps materially, in future periods. Fannie Mae Single-Family Cumulative Default Rates Cumulative Default Rates of Single-Family Conventional Guaranty Book of Business by Origination Year

Fannie Mae Credit Profile by State Credit Characteristics of Single-Family Conventional Guaranty Book of Business by State (1) Excludes non-Fannie Mae securities held in portfolio and those Alt-A and subprime wraps for which Fannie Mae does not have loan-level information. Fannie Mae had access to detailed loan-level information for over 99% of its single-family conventional guaranty book of business as of September 30, 2010. (2) FICO Credit scores as reported by the seller of the mortgage loan at the time of delivery. (3) Unpaid principal balance of all loans with credit enhancement as a percentage of unpaid principal balance of single-family conventional guaranty book of business for which Fannie Mae has access to loan-level information. Includes primary mortgage insurance, pool insurance, lender recourse and other credit enhancement. (4) Expressed as a percentage of credit losses for the single-family guaranty book of business. For information on total credit losses, refer to Fannie Mae's 2010 Q3 Form 10-Q. (5) Select Midwest states are Illinois, Indiana, Michigan and Ohio.

Fannie Mae Single-Family Serious Delinquency Rates by State and Region (1) (1) Calculated based on the number of loans in Fannie Mae's single-family conventional guaranty book of business within each specified category. (2) Select Midwest states are Illinois, Indiana, Michigan and Ohio. (3) For information on which states are included in each region, refer to Fannie Mae's 2010 Q3 Form 10-Q. (2)

Home Price Growth/Decline and Fannie Mae Real Estate Owned (REO) in Selected States (1) Initial estimate based on purchase transactions in Fannie-Freddie acquisition and public deed data available through the end of September 2010, supplemented by preliminary data available for purchase transactions to be closed in October and November 2010. Including subsequently available data may lead to materially different results. (2) Select Midwest states are Illinois, Indiana, Michigan and Ohio.

Fannie Mae Alt-A Credit Profile by Key Product Features Credit Characteristics of Alt-A Single-Family Conventional Guaranty Book of Business by Origination Year (1) "Alt-A mortgage loan" generally refers to a mortgage loan that can be underwritten with reduced or alternative documentation than that required for a full documentation mortgage loan but may also include other alternative product features. In reporting our Alt-A exposure, we have classified mortgage loans as Alt-A if the lenders that deliver the mortgage loans to us have classified the loans as Alt-A based on documentation or other product features. We have classified private-label mortgage-related securities held in our investment portfolio as Alt-A if the securities were labeled as such when issued. (2) Alt-A loans originated in 2009 and 2010 consist of the refinance of existing Alt-A loans. We've revised our reporting from prior quarters to reflect these as Alt-A loans. (3) Excludes non-Fannie Mae securities held in portfolio and those Alt-A and subprime wraps for which Fannie Mae does not have loan-level information. Fannie Mae had access to detailed loan-level information for over 99% of its single-family conventional guaranty book of business as of September 30, 2010. (4) The increase for 2009 and 2010 is the result of HARP loans, which started in April 2009 and can have loan-to-value ratios up to 125%. (5) FICO Credit scores as reported by the seller of the mortgage loan at the time of delivery. (6) Defined as unpaid principal balance of Alt-A loans with credit enhancement as a percentage of unpaid principal balance of all Alt-A loans. At September 30, 2010,10.1% of unpaid principal balance of Alt-A loans carried only primary mortgage insurance (no deductible), 6.6% had only pool insurance (which is generally subject to a deductible), 1.3% had primary mortgage insurance and pool insurance, and 0.4% carried other credit enhancement such as lender recourse. (7) Expressed as a percentage of credit losses for the single-family guaranty book of business. For information on total credit losses, refer to Fannie Mae's 2010 Q3 Form 10-Q. (8) Defaults include loan liquidations other than through voluntary pay-off or repurchase by lenders and includes loan foreclosures, preforeclosure sales, sales to third parties and deeds in lieu of foreclosure. Cumulative Default Rate is the total number of single-family conventional loans in the guaranty book of business originated in the identified year that have defaulted, divided by the total number of single-family conventional loans in the guaranty book of business originated in the identified year.

Fannie Mae Alt-A Loans Versus Loans Underlying Private-Label Alt-A Securities Includes first liens and any subordinate liens present at origination. The Cumulative Default Rate is based upon the number of months between the loan origination month/year and default month/year. (3) Due to low amount of Alt-A loans originated in 2008, 2009 and 2010, no comparable data has been provided for these years. Data as of August 2010 are not necessarily indicative of the ultimate performance of the loans and performance is likely to change, perhaps materially, in future periods. Note: Private-label securities data source: First American CoreLogic, LoanPerformance data, which estimates it captures 97% of Alt-A private-label securities. as of August 2010 Fannie Mae Alt-A Private-Label Alt-A Outstanding Alt-A loans in Fannie Mae's Single-Family Guaranty as of August 2010 Outstanding loans backing non-agency Conforming Alt-A MBS FICO 717 709 Original Loan-to-Value Ratio 73% 75% Combined Loan-to-Value Ratio at Origination (1) 77% 81% Geography California 22% 27% Florida 12% 13% Product Type Fixed-Rate 70% 51% Adjustable-Rate 30% 49% Interest Only 20% 24% Negative Amortizing 3% 20% Investor 18% 21% Fannie Mae Alt-A Versus Private-Label Security Conforming Alt-A Book of Business Book of Business

Fannie Mae Workouts by Type Modifications involve changes to the original mortgage loan terms, which may include a change to the product type, interest rate, amortization term, maturity date and/or unpaid principal balance. Modifications include completed modifications made under the Administration's Home Affordable Modification Program, which was implemented beginning in March 2009, but do not reflect loans currently in trial modifications under that program. Information on Fannie Mae loans under the Home Affordable Modification Program is provided on Slide 15. Repayment plans involve plans to repay past due principal and interest over a reasonable period of time through temporarily higher monthly payments. Loans with completed repayment plans are included for loans that were at least 60 days delinquent at initiation. Forbearances involve an agreement to suspend or reduce borrower payments for a period of time. Loans with forbearance plans are included for loans that were at least 90 days delinquent at initiation. Deeds in lieu of foreclosure involve the borrower's voluntarily signing over title to the property without the added expense of a foreclosure proceeding. In a preforeclosure sale, the borrower, working with the servicer, sells the home prior to foreclosure to pay off all or part of the outstanding loan, accrued interest and other expenses from the sale proceeds. HomeSaver Advance TM are unsecured, personal loans designed to help qualified borrowers bring their delinquent mortgage loans current after a temporary financial difficulty. Number of Loans TM

Provides immediate payment relief to borrowers who are delinquent or in imminent risk of payment default. We require servicers to first evaluate all Fannie Mae problem loans for HAMP eligibility. If a borrower is not eligible for HAMP, our servicers are required to exhaust all other workout alternatives before proceeding to foreclosure. Home Affordable Modification Program (HAMP) (1) Active Permanent HAMP modifications exclude modifications on loans that subsequently canceled because the loans were 90+ days delinquent or have paid off. (2) Re-performance rates for modified single-family loans, including permanent HAMP modifications, are presented on Slide 16. Data Source: United States Treasury Department as reported by servicers to the system of record for the Home Affordable Modification Program. Fannie Mae Loans Under HAMP

Fannie Mae Modifications of Single-Family Delinquent Loans Change in Monthly Principal and Interest Payment of Modified Single-Family Loans(1)(2) Excludes loans that were classified as subprime adjustable rate mortgages that were modified into fixed rate mortgages and were current at the time of modification. Modifications include permanent modifications started under the Administration's Home Affordable Modification Program, which was implemented beginning in March 2009, but do not reflect loans currently in trial modifications under that program. Information on the Home Affordable Modification Program is provided on Slide 15. Represents the change in the monthly principal and interest payment at the effective date of the modification. The monthly principal and interest payment on modified loans may vary, and may increase, during the remaining life of the loan. Includes loans that paid off. Re-performance Rates of Modified Single-Family Loans(1) Single-Family Loans(1) Single-Family Loans(1)

Fannie Mae Multifamily Credit Profile by Loan Attributes Excludes loans that have been defeased. Defeasance is prepayment of a loan through substitution of collateral, such as Treasury securities. Consists of the portion of our multifamily guaranty book of business for which we have access to detailed loan level information, which constitutes over 99% of our total multifamily guaranty book of business as of September 30, 2010. Multifamily loans and securities that are two or more months past due. Under the Delegated Underwriting and Servicing, or DUS (r), product line, Fannie Mae purchases individual, newly originated mortgages from specially approved DUS lenders using DUS underwriting standards and/or DUS loan documents. Because DUS lenders generally share the risk of loss with Fannie Mae, they are able to originate, underwrite, close and service most loans without our pre-review. Numbers may not sum due to rounding.

Excludes loans that have been defeased. Defeasance is prepayment of a loan through substitution of collateral, such as Treasury securities. Consists of the portion of our multifamily guaranty book of business for which we have access to detailed loan level information, which constitutes over 99% of our total multifamily guaranty book of business as of September 30, 2010. Multifamily loans and securities that are two or more months past due. Includes only active loans. Numbers may not sum due to rounding. Fannie Mae Multifamily Credit Profile by Acquisition Year Cumulative Defaults by Acquisition Year Multifamily SDQ Rate by Acquisition Year

Fannie Mae Multifamily Credit Profile by Region and State Excludes loans that have been defeased. Defeasance is prepayment of a loan through substitution of collateral, such as Treasury securities. Consists of the portion of our multifamily guaranty book of business for which we have access to detailed loan level information, which constitutes over 99% of our total multifamily guaranty book of business as of September 30, 2010. Multifamily loans and securities that are two or more months past due. For information on which states are included in each region, refer to Fannie Mae's 2010 Q3 Form 10-Q. Numbers may not sum due to rounding.