Exhibit 10.1

September 17, 2004

Mr. Frank D. Raines
Chairman and Chief Executive Officer
Fannie Mae
3900 Wisconsin Avenue, NW
Washington, DC 20016

Dear Frank:

The Fannie Mae Board of Directors proposes that the following amendments be made
to your Employment Agreement, executed by Fannie Mae in April 2004 and
previously amended on June 30, 2004:

•   Amend Section 1.14 by adding the following last sentence:

Notwithstanding the foregoing, if OFHEO shall by regulation require, effective
on or after January 1, 2007, that the Chairman of the Corporation’s Board of
Directors may not also serve as the Chief Executive Officer of the Corporation,
elimination of Employee’s dual role to the extent necessary to comply with such
regulation shall not, in and of itself, constitute Good Reason.

•   Amend Section 2.1 by adding the following last sentence:

Notwithstanding the foregoing, if OFHEO shall by regulation require, effective
on or after January 1, 2007, that the Chairman of the Corporation’s Board of
Directors may not also serve as the Chief Executive Officer of the Corporation,
elimination of Employee’s dual role to the extent necessary to comply with such
regulation shall not, in and of itself, constitute a breach of this Section 2.1.

•  Amend Section 2.2 by adding the following last sentence:

Notwithstanding the foregoing, if OFHEO shall by regulation require, effective
on or after January 1, 2007, that the Chairman of the Corporation’s Board of
Directors may not also serve as the Chief Executive Officer of the Corporation,
elimination of Employee’s dual role to the extent necessary to comply with such
regulation shall not, in and of itself, constitute a breach of this Section 2.2.

 

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Franklin D. Raines
September 17, 2004
Page 2 of 3

•  Amended Section 4.1(b) to read as follows:

(b) For Cause: Notwithstanding any other provision hereunder, the Corporation
may terminate Employee’s employment for “Cause,” which shall mean that Employee
has (A) materially harmed the Corporation by, in connection with his service
under this Agreement, engaging in dishonest or fraudulent actions or willful
misconduct, or performing his duties in a grossly negligent manner, or (B) been
convicted of, or pleaded nolo contendere with respect to, a felony. The
Corporation by written notice may terminate Employee’s employment for Cause at
any time following the occurrence of an event described in (B). Employee shall
not be deemed to have been terminated for Cause following the occurrence of an
event described in (A) unless the Corporation shall have provided (i) reasonable
notice to Employee setting forth the Corporation’s intention to terminate for
Cause, (ii) where remedial action is feasible, a reasonable opportunity for such
action, (iii) an opportunity for Employee, together with his counsel, to be
heard before the Board and (iv) Employee with a notice of termination stating
that Employee was guilty of the conduct set forth in this Section 4.1(b)(A) and
specifying the particulars thereof in detail. No act or failure to act will be
considered “willful” unless it is done, or omitted to be done, by Employee in
bad faith or without reasonable belief that his action or omission was in the
best interests of the Corporation.

•  Amend Section 5.3 to read as follows:

Section 5.3. Termination for Cause. In the event of a Termination of Employment
for Cause, except as provided in Section 5.1 Employee shall not be entitled to
any payments or benefits except as follows: Employee shall be entitled to all of
Employee’s Base Salary which has accrued to the date of termination and any
benefits or awards (whether of options, stock or other property) which have
vested prior to such date. The Corporation shall have no further obligations to
Employee.

•  Add a New Section 6.15 to read as follows:

Section 6.15. Change in Position. If OFHEO shall by regulation require,
effective on or after January 1, 2007, that the Chairman of the Corporation’s
Board of Directors may

 

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Franklin D. Raines
September 17, 2004
Page 3 of 3

not also serve as the Chief Executive Officer of the Corporation and, in
consequence thereof, Employee’s dual role is required to be eliminated, Employee
shall be entitled to choose which of those positions to relinquish. Following
any such adjustment in his positions and notwithstanding Section 1.14(b) and
Section 3.1, Employee shall receive such future compensation, commensurate with
his continuing position and consistent with the Act, as the Compensation
Committee of the Board determines.

If you agree to the foregoing, please so indicate by signing the enclosed copy
of this letter in the space indicated below and returning a fully executed copy
of the letter to my attention, whereupon your Employment Agreement will be
amended.

 
Sincerely,
 
/s/ Anne Mulcahy
 
Anne Mulcahy
Chairman, Compensation Committee

AGREED TO AND ACCEPTED:

       
/s/ Franklin D. Raines
  September 17, 2004  

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Franklin D. Raines
  Date