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'. ~FanieMae • • 1. Is the housing market overheated? 2. Are consumer changes in preference for adjustable rate vs. fixed rate mortgages cyclical or secular? 3. Does Fannie Mae have a role/responsibility to stabilize the housing market? 4. Does Fannie Mae have an obligation to protect consumers? Confidential - Highly Restricted As of 6/22/2005 2

~FanieMae ~. ~ • • • The risk in the environment has accelerated dramatically. • Proliferation of higher risk alternative mortgage products "TI • Growing concern about housing bubbles • Growing concerns about borrowers taking on increased risks and higher debt • Aggressive risk layering Confidential - Highly Restricted As of 6/22/2005 3

~FanieMae ~. ~ • • • Growth in adjustable rate mortgages (ARMs) continues at an aggressive pace. • Extensive menu of alternatives / options "TI • Increasing affordability concerns • Emphasis on lowest possible payment • Home being utilized more like an ATM Our competitive advantages today are in fixed rate mortgages. Confidential - Highly Restricted As of 6/22/2005 4

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~ ~FanieMae • • • Alternatively, we could seek to .... Meet the Market Where the Market Is • Meet current consumer and customer demands • Participate in volume and revenue opportunity / current growth areas • Accept higher risk and higher volatility of earnings Confidential- Highly Restricted As of 6/22/2005 7

~ • • • Possible Implications Stay the Course Meet the Market • Higher volume / • Lower volumes / revenues revenues • Faster book growth • Slower book growth • Slow down decline in • Continued market share market share decline • Higher credit losses • Lower earnings • Increased exposure to • Impact on key customer unknown risks relationship • Potential increased earnings volatility Confidential- Highly Restricted As of 6/22/2005 FannieMae 8

~FanieMae • • • Significant obstacles block our ability to pursue a "Meet the Market" strategy- • Lack of capabilities and infrastructure • Lack of knowledge of the credit risks • Lack of willingness to compete with the market on price • Lack of a value proposition for subprime • Lack of a conduit capacity and Regulatory concerns Confidential- Highly Restricted As of 6/22/2005 9

~FanieMae • • .. • Realistically, we are not in a position to "Meet the Market" today_ Therefore, we recommend that we: Pursue a "Stay the Course" strategy and test whether current III market changes are cyclical vs. secular: Advocate public position - Be selectively opportunistic in pursuing business - See if consumer sentiment changes with flatter yield curve While we: Dedicate resources and funding to "underground" efforts to: III - Develop a subprime infrastructure - Develop modeling capabilities for alternative markets - Develop a conduit capability Is there an opportunity to drive the market back to the 3D-year FRM? Confidential- Highly Restricted As of 6/22/2005 10

~FanieMae • • " • , If we do not seriously invest in these "underground" type efforts and the market changes prove to be secular, we risk: • Becoming a niche player • Becoming less of a market leader • Becoming less relevant to the secondary market Confidential - Highly Restricted As of 6/22/2005 11

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~FanieMae • • • Single Family Performance Corporate Objective Goals Scorecard Monthly Progress Report - May 2005 III Satisfactory progress with customer Maintain leadership and retain \l retention. Holding our own against FRE or grow our key accounts • Leakage to subprime and private label Add ress key com petitive issues \l continues. We lack a value proposition to and maintain 300/0 MOO share stem the tide in today's market • Implement products and III Book growth negative year-to-date. Negative exceed target book growth of growth is expected for the full year 1.75% • III Continue to work on value proposition and I ncrease participation in proposal to enter the subprime flow market subprime • Use technology tools for III On track process improvement and delivery preference • III On track Achieve the HUO goals • III Loss of market share to subprime, interest Lead the market in minority only, option ARMS, attracting mission lending and achieve targets borrowers relative to our "core" products Confidential- Highly Restricted As of 6/22/2005 14

~FanieMae • • • Single Family Performance 2005 Divisional Goals ($Bil) • Volume through May totaled $188 billion and was $11 billion (5.5%) behind plan Lender Channel $383.2 - Full year estimate: $491 billion (Q2 forecast) Investor Channel 100.0 • YTD book growth (estimated): minus 1.7 percent Dedicated Channel 16.0 - Full year estimate: minus 0.6 percent Total Business Volume $499.2 • YTD gross charge fee vs. plan: 26.2 bps vs. 26.8 bps 1.75% Book Growth • YTD credit losses vs. plan: $95.5 million vs. $55.1 million Gross Charged Fee 27.3 bps - Current full year estimate (6/05): $253 million Credit Losses $198 mil Inclusive of eBusmess. MAY 2005 YTD 2005 HOUSING GOA LS ACTUAL 55.5% Low Mod (Affordable) 52.0% 26.7% Special Affordable 22.0% • On the housing goals front we 37.0% 41.3% Underserved remain ahead of targets against all 2005 SF PMM Sub Goal goal categories 45.48% 45.0% Low Mod (Affordable) • Our minority lending results through 17.0% 18.92% Special Affordable May are behind goal for Hispan.ic 32.49% Underserved 32.0% (10.99 % ) and total minority 2005 MINORITY LEN>ING GOA LS (23.78%) 5.4% 5.51 % African American 10.99% 11.6% Hispanic 24.7% 23.78% Total Minority Confidential- Highly Restricted As of 6/22/2005 15