OFFERING CIRCULAR 

280,000,000 SHARES 

FIXED-TO-FLOATING RATE NON-CUMULATIVE PREFERRED STOCK 

SERIES S 

Dividend Rate:

From the issue date to but excluding 

December 31, 2010: 

For the period beginning December 31, 2010: 

8.25% per annum 

The greater of (i) 7.75% per annum and (ii) 3-Month LIBOR plus 

4.23% per annum; Dividend Rate will reset quarterly beginning on 

December 31, 2010 

Payment Dates: Quarterly; on each March 31, June 30, September 30, and 

December 31, beginning March 31, 2008, subject to the declaration 

of dividends by the Board of Directors in its discretion 

Optional Redemption by Fannie Mae: On December 31, 2010, and on each fifth anniversary thereafter, at 

$25 per share plus accrued dividends from the most recent payment 

date, whether or not the dividend was declared 

Stated Value: $25 per share 

Liquidation Preference: $25 per share plus accrued dividends from the most recent payment 

date, whether or not the dividend was declared 

Issue Date: December 11, 2007 

We will apply to list the Preferred Stock on the New York Stock Exchange (“NYSE”) under the symbol “FNMprS”. If approved for 

listing, we expect trading on the NYSE to commence by December 31, 2007. 

An investment in Preferred Stock involves risks for investors. It is important that you read the “Risk Factors” section beginning on page 

6 of this Offering Circular, beginning on page 22 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, and 

beginning on page 104 of our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007. 

The obligations related to this Preferred Stock, including any dividend payments, are solely the obligation of Fannie Mae. The Preferred 

Stock is not guaranteed by, and is not a debt or obligation of, the United States or of any of its agencies or instrumentalities. 

 Initial Public Underwriting Proceeds to 

 Offering Price(1) Discount Fannie Mae(1)(2)

Per Share................................................................... $25.00 $0.25 $24.75 

Total.......................................................................... $7,000,000,000 $70,000,000 $6,930,000,000 

(1) Plus accrued dividends, if any, from December 11, 2007. 

(2) Before deducting estimated expenses of $255,000 (exclusive of any underwriting discount and advisory fees). 

The Underwriters expect to deliver the Preferred Stock in book-entry only form through the facilities of The Depository Trust 

Company against payment in New York, New York, on or about December 11, 2007. 

________________ 

Joint Book-Running Managers 

LEHMAN BROTHERS MERRILL LYNCH & CO. ________________ 

Senior Co-Managers 

GOLDMAN, SACHS & CO. JPMORGAN 

________________ 

Co-Managers 

BANC OF AMERICA SECURITIES LLC 

BEAR, STEARNS & CO. INC. 

CITI

DEUTSCHE BANK SECURITIES

MORGAN STANLEY

UBS INVESTMENT BANK

The date of this Offering Circular is December 6, 2007. 
 2 

This Offering Circular relates to the offer of 280,000,000 shares of the Fixed-to-Floating Rate 

Non-Cumulative Preferred Stock, Series S (the “Preferred Stock”) of the Federal National Mortgage 

Association (“Fannie Mae”). 

We are not required to register the Preferred Stock with the U.S. Securities and Exchange 

Commission (the “SEC”) under the Securities Act of 1933, as amended. The shares of Preferred Stock are 

“exempted securities” within the meaning of the Securities Exchange Act of 1934, as amended (the 

“Exchange Act”). Neither the SEC nor any state securities commission has approved or disapproved of 

the Preferred Stock or determined if this Offering Circular is truthful or complete. Any representation to 

the contrary is a criminal offense. 

In some jurisdictions it may be unlawful to distribute this Offering Circular or offer, sell, or 

deliver the Preferred Stock. Persons who distribute or receive this Offering Circular should know about 

and observe these restrictions. 

Any dividends paid on the Preferred Stock will not be exempt from federal, state or local 

taxation. See “United States Taxation” beginning on page 30 of this Offering Circular. 

TABLE OF CONTENTS 

Page

Additional Information ................................................................................................................................. 3 

Summary of the Offering .............................................................................................................................. 4 

Risk Factors .................................................................................................................................................. 6 

Fannie Mae ................................................................................................................................................. 12 

Recent Developments ................................................................................................................................. 12 

Use of Proceeds........................................................................................................................................... 13 

Capitalization .............................................................................................................................................. 14 

Selected Financial Information ................................................................................................................... 16 

Previous Issuances of Preferred Stock........................................................................................................ 18 

Description of the Preferred Stock.............................................................................................................. 20 

Regulatory Capital Matters ......................................................................................................................... 25 

Legality of Investment ................................................................................................................................ 30 

United States Taxation................................................................................................................................ 30 

Underwriting............................................................................................................................................... 33 

Ratings ........................................................................................................................................................ 34 

Independent Registered Public Accounting Firm ....................................................................................... 34 

Validity of the Preferred Stock ................................................................................................................... 34 

Forward-Looking Statements...................................................................................................................... 35 

Certificate of Designation .........................................................................................................................A-1 
 3 

ADDITIONAL INFORMATION 

You should read this Offering Circular (including the Certificate of Designation of Terms of 

Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series S, attached hereto as Exhibit A) together 

with: 

• our Annual Report on Form 10-K for the year ended December 31, 2006, filed with the 

SEC on August 16, 2007 (the “2006 10-K”); 

• our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2007, June 30, 

2007, and September 30, 2007, filed with the SEC on November 9, 2007; and 

• proxy soliciting materials that we file with the SEC, and all documents that we file with 

the SEC pursuant to Section 13(a), 13(c) or 14 of the Exchange Act, after the date of this 

Offering Circular and prior to the termination of the offering of the Preferred Stock, 

excluding any information we “furnish” to the SEC on Form 8-K. 

This Offering Circular incorporates these documents by reference, which means that we are 

disclosing information to you by referring to them rather than by providing you with separate copies. 

They are considered part of this Offering Circular and you should read them before you consider an 

investment in the Preferred Stock. You should rely only on the most up-to-date information. 

Our common stock is registered with the SEC under the Exchange Act, and our SEC filings are 

available on our website at www.fanniemae.com and on the SEC’s website at www.sec.gov. We are 

referring these websites to you for your reference only, and we are not incorporating in this Offering 

Circular all of the information available on these websites. You should rely only on the information 

included or incorporated by reference or deemed to be incorporated by reference in this Offering Circular 

in deciding whether or not to invest in the Preferred Stock. We have not authorized anyone to provide you 

with any different or additional information. 

You can obtain paper copies of this Offering Circular and the documents incorporated by 

reference herein without charge by contacting our Office of Investor Relations, Fannie Mae, 3900 

Wisconsin Avenue, NW, Washington D.C. 20016, telephone: (202) 752-7115. You may also read and 

copy any document we file with or furnish to the SEC by visiting the SEC’s Public Reference Room at 

100 F Street, NE, Washington D.C. 20549; telephone 1-800-SEC-0330 for further information. In 

addition, you may read our SEC filings at the offices of the New York Stock Exchange (“NYSE”), which 

is located at 20 Broad Street, New York, NY 10005. 
 4 

SUMMARY OF THE OFFERING 

This summary highlights select information about the Preferred Stock. You also should refer to 

the more detailed information contained elsewhere in this Offering Circular and in the documents 

incorporated by reference for information about us and the Preferred Stock. 

Fannie Mae 

Fannie Mae is a federally chartered and stockholder-owned corporation organized and existing 

under the Federal National Mortgage Association Charter Act. We were established in 1938 as a United 

States government agency to provide supplemental liquidity to the mortgage market and were 

transformed into a stockholder-owned and privately managed corporation by legislation enacted in 1968. 

Description of the Preferred Stock 

Issuer............................................................... Fannie Mae 

 

Securities Offered ........................................... 280,000,000 shares of Fixed-to-Floating Rate NonCumulative Preferred Stock, Series S, no par value, with a 

stated value of $25 per share. 

 

Dividends: 

For the period from the issue date to but excluding December 31, 2010: 

Fixed Dividend Rate ............................ 8.25% per annum 

 

Day Count Convention......................... 30/360 

 

Payment Dates....................................... Quarterly; on each March 31, June 30, September 30, and 

December 31, beginning March 31, 2008, subject to the 

declaration of dividends by the Board of Directors in its 

sole discretion. 

 

For the period beginning December 31, 2010: 

Dividend Rate Formula: ...................... The greater of (i) 7.75% per annum and (ii) 3-Month 

LIBOR plus 4.23% per annum. The Dividend Rate will 

reset quarterly beginning on December 31, 2010. 

 

Dividend Reset Frequency:.................. Quarterly; on each March 31, June 30, September 30, and 

December 31, beginning December 31, 2010. 

 

Day Count Convention......................... Actual/360 

Payment Dates....................................... Quarterly; on each March 31, June 30, September 30, and 

December 31, beginning March 31, 2011, subject to the 

declaration of dividends by the Board of Directors in its 

sole discretion. 

 

Calculation Agent ............................................ Fannie Mae 

Preferences...................................................... The Preferred Stock will be entitled to a preference, both 

as to dividends and upon liquidation, over the common 

stock (and any other junior stock) of Fannie Mae. The 

Preferred Stock will rank equally, both as to dividends 
 5 

and upon liquidation, with all other currently outstanding 

series of Fannie Mae preferred stock. 

 

Maturity .......................................................... Perpetual 

Optional Redemption...................................... On December 31, 2010, and on each fifth anniversary 

thereafter, we may redeem the Preferred Stock, in whole 

or in part, at our option at the redemption price of $25 per 

share plus accrued dividends from the most recent 

Payment Date (whether or not declared but without 

accumulation of any undeclared dividends for prior 

periods). Holders of Preferred Stock will have no right to 

require the redemption of the Preferred Stock. 

 

Liquidation Rights .......................................... In the event of any dissolution, liquidation or winding up 

of Fannie Mae, holders of the Preferred Stock will be 

entitled to receive, out of any assets available for 

distribution to preferred stockholders, $25 per share plus 

accrued dividends from the most recent Payment Date 

(whether or not declared but without accumulation of any 

undeclared dividends for prior periods). 

 

Voting Rights................................................... None, except with respect to certain changes in the terms 

of the Preferred Stock. 

 

Preemptive and Conversion Rights.................. None 

Ratings ............................................................ We expect that the Preferred Stock will be rated “AA–” 

(negative) by Standard & Poor’s Ratings Services, a 

division of the McGraw-Hill Companies, “Aa3” (stable) 

by Moody’s Investors Service, Inc. and “AA–” by Fitch 

Ratings. 

 

Use of Proceeds............................................... The capital raised from the sale of the Preferred Stock 

will be used to increase our capital base and for general 

corporate purposes. See “Regulatory Capital Matters” 

beginning on page 25 of this Offering Circular. 

 

Transfer Agent, Dividend Disbursing Agent and 

Registrar.......................................................... Computershare Trust Company, N.A. 

 

NYSE Listing.................................................. We will apply to list the Preferred Stock on the NYSE 

under the symbol “FNMprS”. If approved for listing, we 

expect trading on the NYSE to commence by December 

31, 2007. 

 

CUSIP Number ............................................... 313586752 
 6 

RISK FACTORS 

Prospective investors in the Preferred Stock should carefully consider the risk factors set forth 

below, in our 2006 Form 10-K and in our Quarterly Report on Form 10-Q for the quarterly period ended 

September 30, 2007 (the “Third Quarter 10-Q”), as well as all other information contained or 

incorporated by reference in this Offering Circular, in evaluating an investment in the Preferred Stock. 

RISKS RELATED TO AN INVESTMENT IN THE PREFERRED STOCK 

Our Board may be restricted in declaring or decide not to declare dividends. 

Dividends on the Preferred Stock are not mandatory. Our Charter Act restricts the ability of our 

Board of Directors to declare dividends in certain circumstances, depending on whether or not we meet or 

exceed certain capital standards set by the Office of Federal Housing Enterprise Oversight (“OFHEO”), 

our current federal safety and soundness regulator. In addition, our Board of Directors has the sole 

discretion to decide whether or not to declare dividends on our preferred or common stock 

notwithstanding our compliance with capital standards. On December 4, 2007, we announced that our 

Board of Directors currently intends to reduce our common stock dividend for the first quarter of 2008 

from 50 cents per share to 35 cents per share. 

The Preferred Stock is subordinated to our debt securities. 

The Preferred Stock is subordinated to our debt securities. In particular, our outstanding 

subordinated debt securities provide that during any period where interest payments on those debt 

securities are deferred, dividend payments on our equity securities, including the Preferred Stock, may not 

be paid. See “Capitalization” beginning on page 14 of this Offering Circular. 

The terms of the Preferred Stock will not be adjusted for any change to the dividends-received 

deduction. 

No adjustment in respect of the amount of dividends payable on the Preferred Stock will be made 

in the event of a change to the dividends-received deduction under the Internal Revenue Code of 1986, as 

amended (the “Code”). 

There may be no active trading market for the Preferred Stock. 

Prior to this issuance, there has been no trading market for the Preferred Stock, and there can be 

no assurance that an active market for the Preferred Stock will develop or be sustained in the future. We 

will apply to list the Preferred Stock on the NYSE, but there is no assurance that the Preferred Stock will 

be accepted for listing. If accepted for listing by the NYSE, we anticipate that trading will commence on 

the NYSE by December 31, 2007. We cannot assure you regarding the liquidity of, or trading market for, 

the Preferred Stock, and, if such a market does develop, the trading price of the Preferred Stock could 

widely fluctuate in response to variations in our operating results, general market conditions, interest 

rates, and other events or factors. 

The market value of the Preferred Stock may be influenced by unpredictable factors. 

The market value of the Preferred Stock may fluctuate after the date of your purchase. Several 

factors, many of which are beyond the our control, could influence the market value of the Preferred 

Stock. Some factors that may influence the market value of the Preferred Stock include: (i) our 

creditworthiness and rating of our securities; (ii) whether dividends are likely to be paid on the Preferred 

Stock from time to time; (iii) supply and demand of corporate issuances of preferred stock generally, and 

(iv) economic, financial, political, regulatory or judicial events that affect us or the financial markets or 
 7 

mortgage markets generally. Accordingly, if you sell your Preferred Stock in the secondary market, you 

may not be able to obtain a price equal to the price that you paid for the Preferred Stock. 

COMPANY RISKS

Increased delinquencies and credit losses relating to our mortgage assets and the mortgage loans that 

back our Fannie Mae MBS continue to adversely affect our results of operations and could affect our 

financial condition. 

We are experiencing increasing mortgage loan delinquencies and credit losses. Weak economic 

conditions in the Midwest and home price declines on a national basis have increased our single-family 

serious delinquency rates and contributed to higher default rates and loan loss severities in the first nine 

months of 2007. We have experienced increases in serious delinquency rates across our conventional 

single-family mortgage credit book, including in higher risk loan categories, such as subprime loans, AltA loans, adjustable-rate loans, interest-only loans, loans made for the purchase of investment properties, 

negative-amortizing loans, loans to borrowers with lower credit scores and loans with high loan-to-value 

ratios. We have experienced particularly rapid increases in our conventional single-family serious 

delinquency rates in some higher risk loan categories, such as Alt-A loans, interest-only loans, loans with 

subordinate financing and loans made for the purchase of condominiums. If current housing market trends 

continue, we expect that we will continue to experience increased delinquencies and credit losses for 2007 

and 2008. Moreover, if a recession occurs that negatively impacts economic conditions in the United 

States as a whole or in specific regions of the country, we could experience significantly higher 

delinquencies and credit losses. An increase in our credit losses would reduce our earnings and adversely 

affect our financial condition. 

We are subject to increased credit risk exposures related to subprime and Alt-A mortgage loans that 

back our private-label mortgage-related securities investments, and any increased delinquency rates 

and credit losses could adversely affect the yield on or value of our investments, which could negatively 

affect our earnings and financial condition. 

We invest in private-label mortgage-related securities that are backed by Alt-A and subprime 

mortgage loans. In October 2007, Standard & Poor’s downgraded the credit ratings of a small number of 

private-label securities held in our portfolio that are backed by subprime mortgage loans, and Moody’s 

placed under review for possible downgrade several additional subprime-backed private-label securities 

held in our portfolio. In recent months, mortgage loan delinquencies and credit losses generally have 

increased, particularly in the subprime and Alt-A sectors. In addition, home prices in many states have 

declined, after extended periods during which home prices appreciated. If delinquency and loss rates on 

subprime and Alt-A mortgages continue to increase, or there is a further decline in home prices, we could 

experience reduced yields or losses on our investments in private-label mortgage-related securities backed 

by subprime or Alt-A loans. In addition, the fair value of these investments may be adversely affected. A 

reduction in the fair value of these investments could negatively affect our earnings and financial 

condition. 

Our potential exposure to the risks associated with our dependence on the institutional counterparties 

to provide services that are critical to our business has increased in recent months, and our earnings 

and liquidity may be reduced if one or more of our institutional counterparties defaults on its 

obligations to us. 

Our primary exposure to institutional counterparty risk is with our mortgage insurers, mortgage 

servicers, lender customers, depository institutions, dealers that commit to sell mortgage pools or loans to 

us, issuers of investments held in our liquid investment portfolio, and derivatives counterparties. Our 

business with many of these institutional counterparties is heavily concentrated. For example, seven 

mortgage insurance companies provided over 99% of our total coverage as of September 30, 2007. In 
 8 

addition, as of September 30, 2007, our ten largest single-family mortgage servicers and their affiliates 

serviced 78% of our single-family mortgage credit book of business, and Countrywide Financial 

Corporation and its affiliates, which is our largest single-family mortgage servicer, serviced 23% of our 

single-family mortgage credit book of business. 

The products or services that these counterparties provide are critical to our business operations, 

and a default by a counterparty with significant obligations to us could adversely affect our ability to 

conduct our operations efficiently and at cost-effective rates, which in turn could adversely affect our 

results of operations and our financial condition. 

Mortgage Insurers. In August and September 2007, two of our seven primary mortgage insurers 

had their external ratings for claims paying ability or insurer financial strength downgraded by Fitch from 

AA to AA-. Both have maintained their Standard & Poor’s and Moody’s ratings of AA and Aa3, 

respectively. As of September 30, 2007, these two mortgage insurers provided primary and pool mortgage 

insurance coverage on $59.1 billion and $27.8 billion, respectively, of single-family loans in our portfolio 

or underlying Fannie Mae MBS, which represented approximately 2% and 1%, respectively, of our 

single-family mortgage credit book of business. Ratings downgrades imply an increased risk that these 

mortgage insurers will fail to fulfill their obligations to reimburse us for claims under insurance policies. 

In addition, if a mortgage insurer were downgraded below AA-/Aa3 by any of the three national rating 

agencies, we would evaluate the insurer, the current market environment and our alternative sources of 

credit enhancement. Based on the outcome of our evaluation, we could restrict that insurer from 

conducting certain types of business with us and we may take actions that may include not purchasing 

loans insured by that mortgage insurer. Restricting our business activity with any of our mortgage insurer 

counterparties would increase our concentration risk with the remaining insurers in the industry. 

Lender Customers and Mortgage Servicers. Challenging market conditions in recent months 

have adversely affected, and may continue to adversely affect, the liquidity and financial condition of a 

number of our lender customers and mortgage servicers. Several of our lender customers and servicers 

have experienced ratings downgrades and liquidity constraints, including Countrywide Financial 

Corporation and its affiliates, our largest lender customer and servicer. These and other lender customers 

and mortgage servicers may become subject to serious liquidity problems that, either temporarily or 

permanently, negatively affect the viability of their business plans or reduce their access to funding 

sources. Our arrangements with our lender customers and mortgage servicers could result in significant 

exposure to us if any one of our significant lender customers or servicers were to default or experience a 

serious liquidity event. In addition, if current housing market trends continue or worsen, the number of 

delinquent mortgage loans serviced by our counterparties could continue to increase. Managing a 

substantially higher volume of non-performing loans could create operational difficulties for our 

servicers. The financial difficulties that a number of our lender customers and mortgage servicers are 

currently experiencing, coupled with growth in the number of delinquent loans on their books of business, 

may negatively affect the ability of these counterparties to meet their obligations to us and the amount or 

quality of the products or services they provide to us. The failure of any of our primary lender customers 

or mortgage servicers to meet their obligations to us could increase our credit-related expenses and credit 

losses, and have a material adverse effect on our results of operations and financial condition. 

Derivatives counterparties. As of September 30, 2007, we had outstanding transactions with 21 

interest rate and foreign currency derivatives counterparties, of which eight counterparties accounted for 

approximately 80% of the total outstanding notional amount of our derivatives contracts as of that date. 

Each of these eight counterparties accounted for between approximately 5% and 17% of the total 

outstanding notional amount of our derivatives contracts as of September 30, 2007. Downgrades in the 

credit ratings of any of our derivatives counterparties could increase the collateral we hold to reduce our 

exposure to that counterparty. If a counterparty’s credit rating is downgraded below A-, we may cease 

entering into new arrangements with that counterparty, which would further increase the concentration of 

our business with our remaining derivatives counterparties. In addition, a derivatives counterparty 
 9 

experiencing liquidity or financial constraints may not be able to meet their obligations to us, which could 

adversely affect our results of operations and our financial condition. 

We have several key lender customers, and the loss of business volume from any one of these 

customers could adversely affect our business and result in a decrease in our market share and 

earnings. 

Our ability to generate revenue from the purchase and securitization of mortgage loans depends 

on our ability to acquire a steady flow of mortgage loans from the originators of those loans. We acquire a 

significant portion of our mortgage loans from several large mortgage lenders. For the first nine months 

of 2007, our top five lender customers of single-family mortgage loans accounted for approximately 57% 

of our single-family business volume, and the top five lender customers of multifamily mortgage loans 

accounted for approximately 46% of our multifamily business volume during those periods. In addition, 

during the first nine months of 2007, Countrywide, which is our largest lender customer of single-family 

mortgage loans, accounted for approximately 29% of our single-family business volume, and our largest 

lender customer of multifamily mortgage loans accounted for approximately 14% of our multifamily 

business volume during those periods. Accordingly, maintaining our current business relationships and 

business volumes with our top lender customers is critical to our business. Some of our lender customers 

are experiencing, or may become subject to, liquidity problems that would affect the volume of business 

they are able to generate. If any of our key lender customers significantly reduces the volume or quality of 

mortgage loans that the lender delivers to us or that we are willing to buy from them, we could lose 

significant business volume that we might be unable to replace, which could adversely affect our business 

and result in a decrease in our market share and earnings. 

In reporting our financial condition, results of operations and liquidity position, and in providing 

forward-looking statements relating to our results of operations, management must make estimates and 

rely on the use of models about matters that are inherently uncertain, which may result in significant 

changes from previously reported information. 

Our accounting policies and methods are fundamental to how we record and report our financial 

condition and results of operations. Our management must exercise judgment in applying many of these 

accounting policies and methods so that these policies and methods comply with GAAP and reflect 

management’s judgment of the most appropriate manner to report our financial condition and results of 

operations. The recent market price volatility resulting from increased credit risk has raised issues of how 

to measure the fair value of mortgage-related assets in a volatile market. Due to the complexity of many 

of our accounting policies, our accounting methods relating to these policies involve substantial use of 

models. Models are inherently imperfect predictors of actual results because they are based on 

assumptions, including assumptions about future events. Our models may not include assumptions that 

reflect very positive or very negative market conditions and, accordingly, our actual results could differ 

significantly from those generated by our models. As a result, the estimates that we use to prepare our 

financial statements, as well as our estimates of our future results of operations, may be inaccurate, 

potentially significantly. 

Our results of operations are subject to uncertainty based upon continuing developments in the 

housing and mortgage markets, making it more difficult for us to operate our business and manage 

risk. 

The current disruption in the housing and mortgage markets may continue or worsen. The 

disruption may adversely impact the U.S. economy in general and the housing and mortgage markets in 

particular. In addition, a variety of legislative, regulatory and other proposals have been or may be 

introduced in an effort to address the disruption. Depending on the scope and nature of legislative, 

regulatory or other initiatives, if any, that are adopted to respond to this disruption and applied to us, our 
 10 

financial condition, results of operations or liquidity could, directly or indirectly, benefit or be adversely 

affected in a manner that could be material to our business. 

Material weaknesses and other control deficiencies relating to our internal control over financial 

reporting could result in errors in our reported results and could have a material adverse effect on our 

operations, investor confidence in our business and the trading prices of our securities. 

We have not yet remediated material weaknesses in our financial statement preparation and 

reporting or our disclosure controls and procedures, which may result in errors in our financial or other 

reporting, cause us to fail to meet our reporting obligations on a timely basis and decrease investor 

confidence in our reported information, leading to a decline in our stock price. 

In addition, we may identify additional material weaknesses or significant deficiencies in our 

internal control over financial reporting that we have not discovered to date or that we believed had been 

remediated and would not reoccur. In addition, we cannot be certain that we will be able to maintain 

effective disclosure controls and procedures in the future. 

Continued declines in our earnings could negatively impact our regulatory capital position. 

We are required to meet various capital standards, including a requirement that our core capital 

equal or exceed both our statutory minimum capital requirement and an OFHEO-directed minimum 

capital requirement. Our retained earnings are a component of our core capital. Accordingly, the level of 

our core capital may fluctuate significantly depending on our results of operations. Our net income 

declined in the first nine months of 2007 due to derivatives fair value losses, a significant reduction in net 

interest income, significantly higher losses on certain guaranty contracts and a substantial increase in 

credit-related expenses. If some or all of the market trends that contributed to these results continue to 

negatively affect our net income, they will continue to cause a reduction in our retained earnings and, as a 

result, in the amount of our core capital. In order to maintain our statutory and OFHEO-directed minimum 

capital surplus, we may be required to take actions, or refrain from taking actions, to ensure that we 

maintain or increase our core capital. These actions have included, and in the future may include, selling 

assets at a time when we believe that it would be economically advantageous to continue to hold the 

assets and issuing additional equity securities, which in general is a more expensive method of funding 

our operations than issuing debt securities. Either of these actions may further reduce our net income. In 

addition, in order to remain in compliance with our regulatory capital requirements, we may need to limit 

or forgo attractive opportunities to acquire assets, and we may lose market share as a result. 

Possible legislation could be introduced that could negatively impact our business. 

As a federally chartered corporation, we are subject to Congressional legislation and oversight 

and regulation by various government agencies. We expect that the U.S. Congress will consider various 

bills in the House of Representatives and the Senate that address our business and regulatory 

environment. We cannot predict whether any legislation will be approved by Congress and signed into 

law by the President and, if so, the final form or effective date of such legislation or impact on us and our 

operations. 
 11 

RISKS RELATING TO OUR INDUSTRY

A continuing, or broader, decline in home prices or in activity in the U.S. housing market could 

negatively impact our earnings and financial condition. 

The continued deterioration of the housing market and national decline in home prices in the first 

nine months of 2007, along with the expected continued decline, is likely to result in increased 

delinquencies or defaults on the mortgage assets we own or that back our guaranteed Fannie Mae MBS. 

In addition, home price declines reduce the fair value of our mortgage assets. Further, the features of a 

significant portion of mortgage loans made in recent years, including loans that reset to higher interest 

rates either once or throughout their term, and loans that were made based on limited or no credit or 

income documentation, also increase the likelihood of future increases in delinquencies or defaults on 

mortgage loans. An increase in delinquencies or defaults likely will result in a higher level of credit 

losses, which in turn will reduce our earnings. 

Our business volume is affected by the rate of growth in total U.S. residential mortgage debt 

outstanding and the size of the U.S. residential mortgage market. We expect total mortgage originations to 

decline by 12% in 2007, from $2.8 trillion in 2006 to $2.4 trillion in 2007, and by an additional 18% in 

2008 to $2.0 trillion. If we do not continue to increase our share of the secondary mortgage market, this 

decline in mortgage originations could reduce our guaranty fee income. 

Changes in general market and economic conditions in the U.S. and abroad may adversely affect our 

financial condition and results of operations. 

Our financial condition and results of operations may be adversely affected by changes in general 

market and economic conditions in the U.S. and abroad. These conditions are beyond our control, and 

may change suddenly and dramatically. Changes in market and economic conditions could adversely 

affect us in many ways, including the following: 

• fluctuations in the global debt and equity capital markets, including sudden and unexpected 

changes in short-term or long-term interest rates, could decrease the fair value of our mortgage 

assets, derivatives positions and other investments, negatively affect our ability to issue debt at 

attractive rates, and reduce our net interest income; 

• a recession or other economic downturn, or rising unemployment, in the United States as a whole 

or in specific regions of the country could decrease homeowner demand for mortgage loans and 

increase the number of homeowners who become delinquent or default on their mortgage loans. 

An increase in delinquencies or defaults would likely result in a higher level of credit losses, 

which would reduce our earnings. Also, decreased homeowner demand for mortgage loans could 

reduce our guaranty fee income, net interest income and the fair value of our mortgage assets. A 

recession or other economic downturn could also increase the risk that our counterparties will 

default on their obligations to us, resulting in an increase in our liabilities and a reduction in our 

earnings; and 

• general economic conditions may become exacerbated, and the state and local governmental 

solutions currently under development, including proposed funds to assist subprime borrowers in 

refinancing existing subprime loans, may not succeed in their stated objective of making more 

mortgage products available. We cannot assure you that these and other proposed federal, state 

and local governmental responses to the housing market downturn will achieve their purpose. If 

governmental solutions do not have a positive impact, our financial condition and results of 

operations could be harmed. 
 12 

FANNIE MAE 

Fannie Mae is a federally chartered and stockholder-owned corporation organized and existing 

under the Federal National Mortgage Association Charter Act, 12 U.S.C. § 1716 et seq. (the “Charter 

Act”). See “Our Charter and Regulation of Our Activities” in our 2006 10-K for further information. We 

were established in 1938 as a United States government agency to provide stability and liquidity to the 

mortgage market and were transformed into a stockholder-owned and privately managed corporation by 

legislation enacted in 1968. 

Our business operates within the U.S. residential mortgage market. The residential mortgage 

market comprises a major portion of the domestic capital markets and provides a vital source of financing 

for the housing segment of the U.S. economy, as well as one of the most important means for Americans 

to achieve their homeownership objectives. We operate an integrated business that contributes to 

providing liquidity to the U.S. residential mortgage market and increasing the availability and 

affordability of housing in the United States. See “Business” in our 2006 10-K for further information. 

Our principal customers are lenders that operate within the primary mortgage market by 

originating mortgage loans for homebuyers and for current homeowners refinancing their existing 

mortgage loans. Lenders originating mortgages in the primary market often sell them in the secondary 

market in the form of loans or mortgage-related securities. We operate in the secondary market, where we 

securitize mortgage loans originated by lenders into Fannie Mae mortgage-backed securities (“MBS”) and 

other mortgage-related securities and purchase mortgage loans (often referred to as “whole loans”) and 

mortgage related securities for our mortgage portfolio. By selling loans to us, lenders replenish their funds 

and, consequently, are able to make additional loans. Pursuant to the Charter Act, we do not lend money 

directly to consumers in the primary mortgage market. 

Our principal office is located at 3900 Wisconsin Avenue, NW, Washington, D.C. 20016 

(telephone: (202) 752-7000). 

RECENT DEVELOPMENTS 

Announcement of Reduction of Common Stock Dividend 

On December 4, 2007, we announced that, at its regularly scheduled meeting in January 2008, 

our Board of Directors currently intends to reduce our quarterly common stock dividend beginning with 

the first quarter of 2008 from 50 cents per share to 35 cents per share. We made this announcement as 

part of a capital-raising initiative that includes the issuance of the Preferred Stock. 

Announcement of Current View of Housing Market and Impact on Fannie Mae 

On December 4, 2007, we announced that we continue to believe that the worsening housing and 

credit markets, continued losses on certain guaranty contracts, substantial credit-related expenses and fair 

value losses on derivatives and securities will adversely affect in a material way our fourth quarter 2007 

results. We continue to believe that conditions in the housing and credit markets, including expected 

further declines in home prices, will negatively affect our financial condition and results of operations in 

2008. Overall economic conditions in 2008 could also materially affect our future performance. 
 13 

New Shareholder Derivative Actio Mae 

On November 26, 2007, a plaintiff filed a new derivative action in the U.S. District Court for the 

District of Columbia against certain of our current and former officers and directors on behalf of us. The 

complaint alleges that the named officers and directors wrongfully failed to disclose our exposure to the 

subprime mortgage market in sufficient detail. The plaintiff also alleges that this failure to disclose 

artificially inflated our stock price and allowed the officers and directors to profit by selling their shares 

based on material inside information, and that our Board of Directors improperly authorized us to buy 

back shares worth $100 million while in possession of such knowledge. The plaintiff asked the Court to 

award us damages from the named officers and directors, including restitution and disgorgement of all 

profits, benefits and compensation. In addition, the plaintiff seeks injunctive relief against us related to 

the adoption of certain corporate governance policies and related internal controls.

USE OF PROCEEDS 

The capital raised from the sale of the Preferred Stock will be used to increase our capital base 

and for general corporate purposes. See “Regulatory Capital Matters” beginning on page 25 of this 

Offering Circular.
 14 

CAPITALIZATION 

The following tables set forth our capitalization as of September 30, 2007, and our Stockholder’s 

Equity table is adjusted to reflect the issuance of the Preferred Stock (before giving effect to the payment 

of estimated offering expenses and any underwriting discount and advisory fees), the issuance of our 

6.75% Non-Cumulative Preferred Stock, Series Q in October 2007 and the issuance of our 7.625% NonCumulative Preferred Stock, Series R in November 2007. This information should be read together with 

our unaudited condensed consolidated financial statements and other financial information set forth in the 

Third Quarter 10-Q. 

 As of September 30, 2007 

Maturities 

Weighted 

Average Interest 

Rate(1) Outstanding 

 (Dollars in 

millions) 

Short-Term Borrowings 

Federal funds purchased and securities sold under 

agreements to repurchase....................................................... 5.60% $ 1,645

 

Fixed short-term debt: 

Discount notes ....................................................................... 5.06% $ 150,162 

Foreign exchange discount notes ........................................... 4.32 183 

Other short-term debt............................................................. 5.15 2,124

Total fixed short-term debt ................................................. 5.06 152,469 

 

Debt from consolidations......................................................... 5.35 677

Total short-term debt .......................................................... 5.06% $ 153,146

 

Long-Term Debt 

Senior fixed: 

Benchmark notes and bonds .................................................. 2007-2030 5.11% $ 261,539 

Medium-term notes................................................................ 2007-2017 5.11 241,693 

Foreign exchange notes and bonds ........................................ 2007-2028 3.38 3,459 

Other long-term debt.............................................................. 2007-2038 6.01 68,655

Total senior fixed................................................................ 5.20 575,346 

 

Senior floating: 

Medium-term notes................................................................ 2007-2017 5.81 14,727 

Other long-term debt ............................................................. 2022-2037 6.80 924

Total senior floating ............................................................ 5.87 15,651 

 

Subordinated fixed: 

Medium-term notes................................................................ 2008-2011 5.62 3,500 

Other subordinated debt......................................................... 2012-2019 6.37 7,480

Total subordinated fixed ..................................................... 6.13 10,980 

 

Debt from consolidations......................................................... 2007-2039 5.84 6,642

Total long-term debt(2)........................................................... 5.25% $ 608,619

 

Other liabilities....................................................................... 36,330 

Total liabilities......................................................................... $ 799,740

____________ 

(1) Includes discounts, premiums, and other cost basis adjustments. 

(2) Reported amounts include a net premium and cost basis adjustment of $12.4 billion as of September 30, 2007. 
 15 

Stockholders’ Equity 

 

Amount 

Issued and 

Outstanding 

as of 

September 30, 

2007 

As 

Adjusted 

Annual 

Dividend 

Rate as of 

September 30, 

2007 

Redeemable on or 

After 

 (Dollars in millions) 

Preferred Stock, 150,175,000 shares 

issued at September 30, 2007, 

465,175,000 shares issued As Adjusted 

Series D, 3,000,000 shares issued September 30, 1998....... $ 150 $ 150 5.250% September 30, 1999 

Series E, 3,000,000 shares issued April 15, 1999.............. 150 150 5.100 April 15, 2004 

Series F, 13,800,000 shares issued March 20, 2000........... 690 690 4.560(1) March 31, 2002(7)

Series G, 5,750,000 shares issued August 8, 2000............ 288 288 4.590(2) September 30, 2002(7)

Series H, 8,000,000 shares issued April 6, 2001............... 400 400 5.810 April 6, 2006 

Series I, 6,000,000 shares issued October 28, 2002........... 300 300 5.375 October 28, 2007 

Series L 6,900,000 shares issued April 29, 2003............... 345 345 5.125 April 29, 2008 

Series M, 9,200,000 shares issued June 10, 2003............. 460 460 4.750 June 10, 2008 

Series N, 4,500,000 shares issued September 25, 2003...... 225 225 5.500 September 25, 2008 

Series O, 50,000,000 shares issued December 30, 2004...... 2,500 2,500 7.000(3) December 31, 2007 

Series 2004-1, 25,000 shares issued December 30, 2004..... 2,500 2,500 5.375 January 5, 2008 

Series P, 40,000,000 shares issued September 28, 2007...... 1,000 1,000 5.948(4) September 30, 2012 

Series Q, 15,000,000 shares issued October 4, 2007.......... — 375 6.75(5) September 30, 2010 

Series R, 20,000,000 shares issued November 21, 2007...... — 500 7.625(5) November 21, 2012 

Series S, 280,000,000 shares issued December 11, 2007..... — 7,000 8.25(6) December 31, 2010(8)

Total $ 9,008 $ 16,883 

 

Common Stock, 973,750,241 shares 

outstanding at September 30, 2007................................ $ 593 $ 593

Additional paid-in capital ................................................ 1,888 1,888 

Retained earnings............................................................. 37,737 37,737 

Accumulated other comprehensive loss........................... (1,791) (1,791) 

Treasury stock, at cost, 155,340,179 shares at 

September 30, 2007 ....................................................... (7,513) (7,513)

Total stockholders’ equity ............................................... $ 39,922 $ 47,797 

Total liabilities and stockholders’ equity ......................... $ 839,783 $ 847,658 

____________ 

(1) Rate effective March 31, 2006. Variable dividend rate resets every two years at the two-year Constant Maturity U.S. 

Treasury Rate (“CMT”) minus 0.16% with a cap of 11% per year. As of December 31, 2005, the annual dividend rate was 

1.37%. 

(2) Rate effective September 30, 2006. Variable dividend rate resets every two years at the two-year CMT rate minus 0.18% 

with a cap of 11% per year. As of December 31, 2005, the annual dividend rate was 2.35%. 

(3) Rate effective December 31, 2006 and 2005. Variable dividend rate resets quarterly thereafter at the greater of 7.00% or 

the 10-year CMT rate plus 2.375%. As of September 30, 2007, the annual dividend rate was 7.00%. 

(4) Rate effective September 28, 2007 through December 31, 2007. Variable dividend rate resets quarterly thereafter at a per 

annum rate of 3-Month LIBOR plus 0.75%. 

(5) Reflects dividend rate at issuance. 

(6) Rate effective December 11, 2007 to but excluding December 31, 2010. Variable dividend rate resets quarterly thereafter 

at the greater of 7.75% and 3-month LIBOR plus 4.23%. 

(7) Represents initial call date. Redeemable every two years thereafter. 

(8) Represents initial call date. Redeemable every five years thereafter. 

We frequently issue debentures, notes, and other debt obligations, and from time to time we 

redeem such debt obligations. The amount of debentures, notes, other debt obligations outstanding, and 

stockholders’ equity on any date subsequent to September 30, 2007 may differ from that shown in the 

table above. 
 16 

SELECTED FINANCIAL INFORMATION 

The following selected financial information has been summarized or derived from our audited 

financial statements from the 2006 Form 10-K and our unaudited condensed consolidated financial 

statements from the Third Quarter 10-Q and other financial information for such periods. The data should 

be read in conjunction with the audited financial statements and notes to financial statements contained in 

the 2006 10-K and the unaudited condensed consolidated financial statements and notes to financial 

statements contained in the Third Quarter 10-Q. 

On any date after September 30, 2007, our financial information may differ from the data 

contained in this table. In conjunction with this financial information, you should also read the “Risk 

Factors” section of this Offering Circular, the 2006 10-K, and the Third Quarter 10-Q. 

 

For the Nine Months Ended For the Year Ended 

September 30, 

2007 

September 30, 

2006 

December 31, 

2006 

December 31,

2005 

December 31, 

2004 

(Dollars and shares in millions, except per share amounts) 

Income Statement Data: 

Net interest income.............................................................. $ 3,445 $ 5,407 $ 6,752 $ 11,505 $ 18,081 

Guaranty fee income(1) ........................................................ 3,450 2,968 4,174 3,925 3,715 

Derivative fair value losses, net........................................... (891) (854) (1,522) (4,196) (12,256) 

Other income (loss)(1)(2) ....................................................... 449 (612) (927) (871) (923) 

Credit-related expenses(3) .................................................... (2,039) (457) (783) (428) (363) 

Income before extraordinary gains (losses)......................... 1,512 3,444 4,047 6,294 4,975 

Extraordinary gains (losses), net of tax effect ..................... (3) 11 12 53 (8) 

Net income.......................................................................... 1,509 3,455 4,059 6,347 4,967 

Preferred stock dividends and issuance costs at 

redemption....................................................................... (372) (380) (511) (486) (165) 

Net income available to common stockholders................... 1,137 3,075 3,548 5,861 4,802 

Common Share Data: 

Earnings per share: 

Basic................................................................................ $1.17 $3.17 $3.65 $6.04 $4.95 

Diluted............................................................................. 1.17 3.16 3.65 6.01 4.94 

Weighted-average common shares outstanding: 

Basic................................................................................ 973 971 971 970 970 

Diluted............................................................................. 975 972 972 998 973 

Cash dividends declared per common share ....................... $1.40 $ 0.78 $1.18 $1.04 $2.08 

New Business Acquisition Data: 

Fannie Mae MBS issues acquired by third parties(4) ........... $ 407,962 $ 308,371 $ 417,471 $ 465,632 $ 462,542 

Mortgage portfolio purchases(5)........................................... 134,407 150,340 185,507 146,640 262,647 

New business acquisitions............................................... $ 542,369 $ 458,711 $ 602,978 $ 612,272 $ 725,189 
 17 

As of 

September 30,

2007 

December 31,

2006 

December 31, 

2005 

December 31,

2004 

(Dollars in millions) 

Balance Sheet Data: 

Investments in securities: 

Trading......................................................................... $ 48,683 $ 11,514 $ 15,110 $ 35,287 

Available-for-sale ........................................................ 315,012 378,598 390,964 532,095 

Mortgage loans: 

Loans held for sale....................................................... 5,053 4,868 5,064 11,721 

Loans held for investment, net of allowance ............... 394,550 378,687 362,479 389,651 

Total assets ....................................................................... 839,783 843,936 834,168 1,020,934 

Short-term debt................................................................. 153,146 165,810 173,186 320,280 

Long-term debt ................................................................. 608,619 601,236 590,824 632,831 

Total liabilities.................................................................. 799,740 802,294 794,745 981,956 

Preferred stock.................................................................. 9,008 9,108 9,108 9,108 

Total stockholders’ equity ................................................ 39,922 41,506 39,302 38,902 

As of 

September 30, 

2007 

December 31, 

2006 

December 31, 

2005 

December 31,

2004 

Regulatory Capital Data: (Dollars in millions) 

Core capital(6)........................................................... $ 41,713 $ 41,950 $ 39,433 $ 34,514 

Total capital(7) .......................................................... 43,798 42,703 40,091 35,196 

Mortgage Credit Book of Business Data: 

Mortgage portfolio(8) ............................................... $ 728,578 $ 728,932 $ 737,889 $ 917,209 

Fannie Mae MBS held by third parties(9)................. 2,003,382 1,777,550 1,598,918 1,408,047 

Other guarantees(10).................................................. 35,508 19,747 19,152 14,825 

Mortgage credit book of business ........................ $ 2,767,468 $ 2,526,229 $ 2,355,959 $2,340,081 

For the 

Nine Months Ended 

September 30, 

For the Year Ended 

December 31, 

Ratios: 2007 2006 2006 2005 2004 

Return on assets ratio(11)* ............................. 0.18% 0.49% 0.42% 0.63% 0.47% 

Return on equity ratio(12)*............................. 4.8 13.1 11.3 19.5 16.6 

Equity to assets ratio(13)*............................... 4.8 4.8 4.8 4.2 3.5 

Dividend payout ratio(14)*............................. 120.4 24.7 32.4 17.2 42.1 

Average effective guaranty fee rate 

(in basis points)(15)* .................................... 22.0 bp 20.9 bp 21.8 bp 21.8 bp 21.4 bp 

Credit loss ratio (in basis points)(16)*............ 4.0 bp 1.8 bp 2.7 bp 1.9 bp 1.0 bp 

____________ 

(1) Amounts for the nine months ended September 30, 2006 that previously were included as a component of “Fee and other 

income” have been reclassified to “Guaranty fee income” to conform to the current period presentation. 

 

(2) Consists of trust management income; investment gains (losses), net; debt extinguishment gains (losses), net; losses from 

partnership investments; and fee and other income. 

 

(3) Consists of provision for credit losses and foreclosed property expense. 

 

(4) Unpaid principal balance of Fannie Mae MBS issued and guaranteed by us and acquired by third party investors during the 

reporting period. Excludes securitizations of mortgage loans in our portfolio. 

 

(5) Unpaid principal balance of mortgage loans and mortgage-related securities we purchased for our investment portfolio 

during the reporting period. Includes advances to lenders and mortgage-related securities acquired through the 

extinguishment of debt. 

 

(6) The sum of (a) the stated value of outstanding common stock (common stock less treasury stock); (b) the stated value of 

outstanding non-cumulative perpetual preferred stock; (c) paid-in-capital; and (d) retained earnings. Core capital excludes 

accumulated other comprehensive income (loss). 
 18 

 

(7) The sum of (a) core capital and (b) the total allowance for loan losses and reserve for guaranty losses, less (c) the specific 

loss allowance (that is, the allowance required on individually-impaired loans). Total capital has been provided as of 

June 30, 2007 (the most recent date for which the statutory risk-based capital measure is available). 

 

(8) Unpaid principal balance of mortgage loans and mortgage-related securities held in our portfolio. 

 

(9) Unpaid principal balance of Fannie Mae MBS held by third-party investors. The principal balance of resecuritized Fannie 

Mae MBS is included only once in the reported amount. 

 

(10) Includes single family and multifamily credit enhancements that we provide and that are not otherwise reflected in the 

table. 

 

(11) Annualized net income available to common stockholders divided by average total assets during the period. 

 

(12) Annualized net income available to common stockholders divided by average outstanding common equity during the 

period. 

 

(13) Average stockholders’ equity divided by average total assets during the period. 

 

(14) Common dividend payments divided by net income available to common stockholders for the period. 

 

(15) Annualized guaranty fee income as a percentage of average outstanding Fannie Mae MBS and other guaranties during the 

period. 

 

(16) Annualized charge-offs, net of recoveries and annualized foreclosed property expense, as a percentage of the average total

mortgage credit book of business during the period. Effective January 1, 2007, we have excluded any initial losses 

recorded pursuant to Statement of Position No. 03-3, Accounting for Certain Loans or Debt Securities Acquired in a 

Transfer, on loans purchased from trusts from our credit losses when the purchase price of delinquent loans that we 

purchase from Fannie Mae MBS trusts exceeds the fair value of the loans at the time of purchase. We have revised our 

presentation of credit losses for the three and nine months ended September 30, 2006 to conform to the current period 

presentation. Refer to “Risk Management—Credit Risk Management—Mortgage Credit Risk Management—Credit 

Losses” in the Third Quarter 10-Q for more information regarding this change in presentation. 

 

Note: 

* Average balances for purposes of the ratio calculations are based on beginning and end of period balances, 

respectively. 

PREVIOUS ISSUANCES OF PREFERRED STOCK 

We are authorized by the Charter Act to have preferred stock on such terms and conditions as our 

Board of Directors may prescribe. Effective October 16, 2007, our Board of Directors amended our 

bylaws to authorize us to issue up to 700,000,000 shares of preferred stock. To date, we have issued the 

following: 

• on March 1, 1996, 7,500,000 shares of 6.41% Non-Cumulative Preferred Stock, Series A 

(stated value $50 per share) (the “Series A Preferred Stock”); 

• on April 12, 1996, 7,500,000 shares of 6.50% Non-Cumulative Preferred Stock, Series B 

(stated value $50 per share) (the “Series B Preferred Stock”); 

• on September 20, 1996, 5,000,000 shares of 6.45% Non-Cumulative Preferred Stock, Series 

C (stated value $50 per share) (the “Series C Preferred Stock”); 

• on September 30, 1998, 3,000,000 shares of 5.25% Non-Cumulative Preferred Stock, Series 

D (stated value $50 per share) (the “Series D Preferred Stock”); 
 19 

• on April 15, 1999, 3,000,000 shares of 5.10% Non-Cumulative Preferred Stock, Series E 

(stated value $50 per share) (the “Series E Preferred Stock”); 

• on March 20, 2000, 13,800,000 shares of Variable Rate Non-Cumulative Preferred Stock, 

Series F (stated value $50 per share) (the “Series F Preferred Stock”); 

• on August 8, 2000, 5,750,000 shares of Variable Rate Non-Cumulative Preferred Stock, 

Series G (stated value $50 per share) (the “Series G Preferred Stock”); 

• on April 6, 2001, 8,000,000 shares of 5.81% Non-Cumulative Preferred Stock, Series H 

(stated value $50 per share) (the “Series H Preferred Stock”); 

• on October 28, 2002, 6,000,000 shares of 5.375% Non-Cumulative Preferred Stock, Series I 

(stated value $50 per share) (the “Series I Preferred Stock”); 

• on November 26, 2002, 14,000,000 shares of Variable Rate Non-Cumulative Preferred 

Stock, Series J (stated value $50 per share) (the “Series J Preferred Stock”); 

• on March 18, 2003, 8,000,000 shares of Variable Rate Non-Cumulative Preferred Stock, 

Series K (stated value $50 per share) (the “Series K Preferred Stock”); 

• on April 29, 2003, 6,900,000 shares of 5.125% Non-Cumulative Preferred Stock, Series L 

(stated value $50 per share) (the “Series L Preferred Stock”); 

• on June 10, 2003, 9,200,000 shares of 4.75% Non-Cumulative Preferred Stock, Series M 

(stated value $50 per share) (the “Series M Preferred Stock”); 

• on September 25, 2003, 4,500,000 shares of 5.50% Non-Cumulative Preferred Stock, Series 

N (stated value $50 per share) (the “Series N Preferred Stock”); 

• on December 30, 2004, 25,000 shares of Non-Cumulative Convertible Preferred Stock, 

Series 2004-1 (stated value $100,000 per share) (the “Series 2004-1 Preferred Stock”); 

• on December 30, 2004, 50,000,000 shares of Non-Cumulative Preferred Stock, Series O 

(stated value $50 per share) (the “Series O Preferred Stock”); 

• on September 28, 2007, 40,000,000 shares of Variable Rate Non-Cumulative Preferred 

Stock, Series P (stated value $25 per share) (the “Series P Preferred Stock”); 

• on October 4, 2007, 15,000,000 shares of 6.75% Non-Cumulative Preferred Stock, Series Q 

(stated value $25 per share) (the “Series Q Preferred Stock”); and 

• on November 21, 2007, 20,000,000 shares of 7.625% Non-Cumulative Preferred Stock, 

Series R (stated value $25 per share) (the “Series R Preferred Stock”). 

We redeemed all of our outstanding Series A Preferred Stock on March 1, 2001, all of our 

outstanding Series B Preferred Stock on February 28, 2002, all of our outstanding Series C Preferred 

Stock on July 31, 2002, all of our outstanding Series J Preferred Stock on February 28, 2007, and all of 

our outstanding Series K Preferred Stock on April 2, 2007. In this Offering Circular, we collectively refer 

to the Series D Preferred Stock through Series I Preferred Stock, the Series L Preferred Stock through the 

Series R Preferred Stock and the 2004-1 Preferred Stock as the “Outstanding Preferred Stock.” 
 20 

DESCRIPTION OF THE PREFERRED STOCK 

General 

The Preferred Stock will have the terms set forth in the Certificate of Designation of Terms of 

Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series S (the “Certificate of Designation”) 

attached as Exhibit A to this Offering Circular. 

A duly authorized committee of our Board of Directors will authorize us to issue the Preferred 

Stock. Without the consent of the holders of the Preferred Stock, the Board may increase the authorized 

number of shares of Preferred Stock and “re-open” this series at any time by issuing additional shares of 

the Preferred Stock at prices to be determined at that time. 

Computershare Trust Company, N.A., will be the transfer agent, dividend disbursing agent, and 

registrar for the shares of Preferred Stock. 

The obligations of Fannie Mae under the terms of the Preferred Stock are obligations of 

Fannie Mae only and are not those of the United States or of any agency or instrumentality thereof. 

Dividends 

(a) General 

Dividends on shares of the Preferred Stock will not be mandatory. If you own shares of the 

Preferred Stock you will be entitled to receive non-cumulative, quarterly cash dividends that will accrue 

from and including December 11, 2007 and will be payable on March 31, June 30, September 30, and 

December 31 of each year (each a “Dividend Payment Date”), beginning March 31, 2008. However, 

dividends are payable only if declared by our Board of Directors (or a designated committee of the Board) 

in its sole discretion, out of funds legally available for dividend payments. Dividends that are not declared 

for a Dividend Payment Date will not accrue on the Preferred Stock. The ability of the Board of Directors 

to declare dividends may be restricted by OFHEO. 

If a Dividend Payment Date is not a Business Day, we will pay dividends (if declared) on the 

Preferred Stock on the next Business Day, without interest from that Dividend Payment Date to the date 

of actual payment. A “Business Day” is any day other than a Saturday, Sunday, or other day on which 

banking institutions in New York, New York are authorized or required by law to close. We will make 

dividend payments to holders of record on the record date established by our Board of Directors, which 

will be no earlier than 45 days or later than 10 days prior to the applicable Dividend Payment Date. 

No adjustment in respect of the amount of dividends payable on the Preferred Stock will be made 

in the event of a change to the dividends-received deduction under the Code. 

(b) Fixed Rate Period 

For each Dividend Period from December 11, 2007 to but excluding December 31, 2010 (each 

such Dividend Period, a “Fixed Rate Dividend Period”), dividends on shares of the Preferred Stock will 

accrue at a rate of 8.25% per annum. If declared, the initial dividend, which will be for the period from 

and including the date of issuance to but excluding March 31, 2008, will be $0.6302 per share and will be 

payable on March 31, 2008. Thereafter, the “Dividend Period” relating to a Dividend Payment Date will 

be the period from and including the preceding Dividend Payment Date to but excluding the related 

Dividend Payment Date. If declared, quarterly dividends for each full Fixed Rate Dividend Period will be 

$0.5156 per share. 
 21 

We will compute dividends payable on the Preferred Stock for any Fixed Rate Dividend Period 

less than a full Fixed Rate Dividend Period on the basis of a 360-day year consisting of twelve 30-day 

months, with the dividend for such partial Fixed Rate Dividend Period computed by dividing the per 

annum dividend rate by 360, and multiplying that amount by the number of days in such partial Fixed 

Rate Dividend Period (using the 30 day month, 360 day year convention) and the stated value of $25 per 

share, the product of which will be rounded to the fourth digit after the decimal point. (If the fifth digit to 

the right of the decimal point is five or greater, the fourth digit will be rounded up by one.) Dividends 

payable on the Preferred Stock for each full Fixed Rate Dividend Period will be computed by dividing the 

per annum dividend rate by four, and multiplying the result by the stated value per share of $25, the 

product of which will be rounded to the fourth digit after the decimal point (if the fifth digit to the right of 

the decimal point is five or greater, the fourth digit will be rounded up by one). 

(c) Floating Rate Period 

For the Dividend Period beginning on December 31, 2010 and for each Dividend Period 

thereafter (each such Dividend Period, a “Floating Rate Dividend Period”), quarterly dividends will 

accrue at a variable rate equal to the greater of (i) 7.75% per annum and (ii) 3-Month LIBOR plus 4.23% 

per annum and if declared, will be payable quarterly on each Dividend Payment Date commencing on 

March 31, 2011. We will determine 3-Month LIBOR for each Floating Rate Dividend Period two London 

Business Days prior to the first day of such Floating Rate Dividend Period (such date, a “LIBOR 

Determination Date”). A “London Business Day” is any day, other than a Saturday or Sunday, on which 

banks are open for business in London. 

We will compute dividends payable on the Preferred Stock for any full or partial Floating Rate 

Dividend Period on the basis of the actual number of days elapsed during that period and a 360-day year. 

The dividend for a Floating Rate Dividend Period will be computed by dividing the per annum dividend 

rate applicable to such period by 360, and multiplying that amount by the actual number of days elapsed 

in such Floating Rate Dividend Period and the stated value of $25 per share, the product of which will be 

rounded to the fourth digit after the decimal point. (If the fifth digit to the right of the decimal point is 

five or greater, the fourth digit will be rounded up by one.) 

“3-Month LIBOR” will be calculated as follows: 

(1) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a threemonth maturity that appears on Reuters Screen LIBOR01 as of 11:00 a.m. (London time) on the related 

LIBOR Determination Date. “Reuters Screen LIBOR01” means the display designated as “Reuters 

Screen LIBOR01 Page” or such other page as may replace Reuters Screen LIBOR01 Page on that service 

or such other service or services as may be nominated by the British Bankers’ Association as the 

information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits. 

If at least two rates appear on the Reuters Screen LIBOR01, the rate on the LIBOR Determination Date 

will be the arithmetic mean of such rates; 

(2) if the rate specified in clause (1) above cannot be identified on the related LIBOR 

Determination Date, then the Calculation Agent will request the principal London offices of five leading 

banks (which may include affiliates of the Underwriters) in the London interbank market selected by the 

Calculation Agent (after consultation with Fannie Mae, if Fannie Mae is not then acting as Calculation 

Agent) to provide those banks’ offered quotations (expressed as percentages per annum) to prime banks 

in the London interbank market for deposits in U.S. dollars having a three-month maturity as of 11:00 

a.m. (London time) on such LIBOR Determination Date. If at least two quotations are provided, then 3-

Month LIBOR will be the arithmetic mean determined by the Calculation Agent of the quotations 

obtained (and, if five quotations are provided, eliminating the highest quotation (or in the event of 

equality, one of the highest) and the lowest quotation (or in the event of equality, one of the lowest)); 
 22 

(3) if fewer than two quotations are provided as requested in clause (2) above, then the 

Calculation Agent will request five major banks (which may include affiliates of the Underwriters) in 

New York, New York selected by the Calculation Agent (after consultation with Fannie Mae, if Fannie 

Mae is not then acting as Calculation Agent) to provide those banks’ offered quotations (expressed as 

percentages per annum) to leading European banks for loans having a three-month maturity in U.S. 

dollars as of 11:00 a.m. (New York City time) on such LIBOR Determination Date. If at least two 

quotations are provided, then 3-Month LIBOR will be the arithmetic mean determined by the Calculation 

Agent of the quotations obtained (and, if five quotations are provided, eliminating the highest quotation 

(or in the event of equality, one of the highest) and the lowest quotation (or in the event of equality, one 

of the lowest)); and 

(4) if fewer than two quotations are so provided as requested in clause (3) above, then 3-

Month LIBOR as of such LIBOR Determination Date will be 3-Month LIBOR determined for the 

immediately preceding Dividend Period. If the applicable Dividend Period is the first Floating Rate 

Period beginning on December 31, 2010, then 3-Month LIBOR will be the rate for deposits in U.S. 

dollars having a three-month maturity that appeared, as of 11:00 a.m. (London time) on the most recent 

London Business Day preceding the LIBOR Determination Date for which the rate was displayed on 

Reuters Screen LIBOR01 with respect to deposits commencing on the second London Business Day 

following that date. 

The Calculation Agent’s determination of the 3-Month LIBOR and the dividend rate will be final 

and binding absent manifest error.

Preferences and Limitations 

The Preferred Stock will rank prior to our common stock with respect to the payment of 

dividends as set forth in the Certificate of Designation. As a result, unless dividends have been declared 

and paid or set apart on the Preferred Stock for the then-current quarterly Dividend Period, no dividend 

may be declared or paid or set apart for payment on our common stock (or on any other stock ranking 

junior to the Preferred Stock). The Preferred Stock will rank equally with respect to dividends with our 

Outstanding Preferred Stock. 

Dividends on the Preferred Stock will not be cumulative. If we do not pay a dividend on the 

Preferred Stock, you will have no claim in respect of such non-payment so long as no dividend is paid on 

our common stock, any of our other stock ranking junior to the Preferred Stock or any of the Outstanding 

Preferred Stock for the then-current quarterly Dividend Period. When dividends are not paid in full upon 

the Preferred Stock and our Outstanding Preferred Stock and any other stock of equal priority as to the 

payment of dividends, all dividends declared upon shares of the Preferred Stock and our Outstanding 

Preferred Stock and any other stock of equal priority as to the payment of dividends will be declared pro 

rata so that the amount of dividends declared thereon will in all cases bear to each other the same ratio 

that accrued dividends per share of Preferred Stock (but without accumulation of any undeclared 

dividends for prior periods) and such other stock bear to each other. 

Our Board of Directors may, in its discretion, choose to pay dividends on the Preferred Stock 

without the payment of any dividends on our common stock. 

No dividends may be declared or paid or set apart for payment on any shares of the Preferred 

Stock if at the same time any default exists in the payment of dividends on any outstanding class or series 

of our stock ranking prior to the Preferred Stock with respect to the payment of dividends. There is 

currently no class or series of our stock which ranks prior to the Preferred Stock with respect to the 

payment of dividends. Additionally, during periods when we defer payment of interest on our 

subordinated debt securities, we are not permitted to declare or pay dividends, or redeem, purchase, or 

acquire, any shares of the Preferred Stock or any of the Outstanding Preferred Stock. 
 23 

As a holder of Preferred Stock, you will not be entitled to any dividends, whether payable in cash 

or property, other than as described above and will not be entitled to interest, or any sum in lieu of 

interest, in respect of any dividend payment. 

See also “Regulatory Capital Matters” beginning on page 25 of this Offering Circular for a 

description of certain regulatory restrictions on our payment of dividends. 

Optional Redemption 

The Preferred Stock will not be redeemable prior to December 31, 2010. On that date, and on 

each fifth anniversary thereafter, we may redeem the Preferred Stock, in whole or in part, out of legally 

available funds. The redemption price will be $25 per share plus an amount equal to the dividend for the 

then-current quarterly Dividend Period (whether or not declared but without accumulation of any 

undeclared dividends for prior periods) accrued to but excluding the date of redemption. The amount of 

dividends per share payable at redemption will be calculated in accordance with the dividend calculation 

method. If we redeem less than all of the outstanding shares of the Preferred Stock, we will select shares 

to be redeemed by lot or pro rata (as nearly as possible) or by any other method that we deem equitable. 

We will give notice of any such redemption by written or electronic means to holders of Preferred 

Stock not less than 30 days before the redemption date. Each notice will state the number of shares of 

Preferred Stock to be redeemed, the redemption price, the redemption date and the place at which 

Preferred Stock certificates should be presented for redemption. 

On and after the redemption date, dividends on the Preferred Stock called for redemption will 

cease to accrue and the Preferred Stock called for redemption will no longer be deemed outstanding, and 

all rights of the holders of those shares shall cease, except for the right to receive the redemption amount. 

Holders of the Preferred Stock will have no right to require Fannie Mae to redeem the Preferred 

Stock. 

Liquidation Rights 

If we voluntarily or involuntarily dissolve, liquidate or wind-up our business, then, after payment 

or provision for our liabilities to creditors and the expenses of such dissolution, liquidation or winding up, 

the holders of the outstanding shares of the Preferred Stock will be entitled to receive, out of assets 

available for distribution to stockholders, the amount of $25 per share plus an amount equal to the 

dividend for the then-current quarterly Dividend Period (whether or not declared but without 

accumulation of any undeclared dividends for prior periods) accrued to but excluding the liquidation date 

before any payment or distribution of assets is made to holders of our common stock or any of our other 

stock ranking junior to the Preferred Stock. If our assets available for distribution in such event are 

insufficient to pay in full all of the holders of the Preferred Stock and our Outstanding Preferred Stock 

and any other stock of equal priority upon liquidation, then the assets will be distributed pro rata, based 

on the respective preferential amounts of such preferred stock. 

Notwithstanding the foregoing, holders of Preferred Stock will not be entitled to be paid any 

amount in respect of our dissolution, liquidation or winding up until holders of our debt securities and any 

class or series of our stock ranking prior to the Preferred Stock have been paid all amounts to which such 

classes or series are entitled. There is currently no class or series of our stock ranking prior to the 

Preferred Stock with respect to liquidation rights. 

Neither the sale of all or substantially all of our property and assets, nor our merger, consolidation 

or business combination into or with any other entity, shall be deemed to be a dissolution, liquidation or 

winding up of Fannie Mae for the purposes of these provisions on liquidation rights. 
 24 

Additional Preferred Stock 

We have the right to issue additional shares of Preferred Stock and to issue additional classes or 

series of preferred stock that rank prior to, on parity with, or junior to the Preferred Stock with respect to 

dividends, liquidation rights, or otherwise, without the consent of the holders of the Preferred Stock. 

No Voting Rights; Amendments 

Except as described below, holders of Preferred Stock will not have voting rights. 

Without the consent of the holders of the Preferred Stock, we will have the right to amend the 

Certificate of Designation to cure any ambiguity, correct or supplement any term which may be defective 

or inconsistent with any other term or to make any other provisions so long as the amendment does not 

materially and adversely affect the interest of the holders of the Preferred Stock. Increasing the authorized 

amount of the Preferred Stock or issuing a series of preferred stock ranking prior to, on parity with, or 

junior to the Preferred Stock will not be deemed to be materially and adversely affecting the interests of 

the holders of the Preferred Stock. 

Otherwise, we may only amend the Certificate of Designation with the consent of the holders of 

at least two-thirds of the outstanding shares of the Preferred Stock, with each holder being entitled to one 

vote per share. 

No Preemptive Rights and No Conversion 

Holders of Preferred Stock will not have any preemptive rights to purchase or subscribe for any 

other shares, rights, options or other securities of Fannie Mae, and will not have the right to convert or 

exchange their shares of Preferred Stock into any other Fannie Mae securities. 

New York Stock Exchange Listing 

We will apply to list the Preferred Stock on the NYSE under the symbol “FNMprS”. If approved 

for listing, we expect trading of the Preferred Stock on the NYSE to commence by December 31, 2007.
 25 

REGULATORY CAPITAL MATTERS 

General 

We are subject to capital adequacy requirements established by the Federal Housing Enterprises 

Financial Safety and Soundness Act of 1992 (the “1992 Act”). OFHEO monitors our performance with 

respect to our regulatory capital standards by classifying our capital adequacy not less than quarterly. 

The following are the relevant capital classification definitions and requirements: 

Core Capital 

“Core capital” is defined as the sum of the stated value of outstanding common stock (common 

stock less treasury stock), the stated value of our outstanding preferred stock, paid-in capital, and retained 

earnings. Core capital excludes accumulated other comprehensive income (loss). 

Total Capital 

“Total capital” is defined as the sum of our core capital and our total allowance for loan losses 

and reserve for guaranty losses, less the specific loan allowance (that is, the allowance required on 

individually-impaired loans). 

Minimum Capital Requirements 

OFHEO’s minimum capital standard ties our capital requirements to the size of our book of 

business. For purposes of the statutory minimum capital requirement, we are in compliance if our core 

capital equals or exceeds our minimum capital requirement. 

Our statutory minimum capital requirement is generally equal to the sum of: 

• 2.50% of on-balance sheet assets; 

• 0.45% of the unpaid principal balance of outstanding Fannie Mae MBS held by third parties; 

and 

• up to 0.45% of other off-balance sheet obligations, which may be adjusted by the Director of 

OFHEO under certain circumstances. 

Each quarter, as part of its capital classification announcement, OFHEO publishes our standing 

relative to the statutory minimum capital requirement and the OFHEO-directed minimum capital 

requirement, which is defined as a 30% surplus over the statutory minimum capital requirement. 

Critical Capital Requirement 

The critical capital standard requires us to hold an amount of core capital that is generally equal 

to the sum of (i) 1.25% of aggregate on-balance sheet assets, (ii) 0.25% of the sum of outstanding Fannie 

Mae MBS held by third parties, and (iii) up to 0.25% of other aggregate off-balance sheet obligations, 

which may be adjusted by the Director of OFHEO under certain circumstances. 

Risk-Based Capital Requirement 

OFHEO’s risk-based capital standard ties our capital requirements to the risk in our book of 

business, as measured by a stress test model. The stress test simulates our financial performance over a 

ten-year period of severe economic conditions characterized by both extreme interest rate movements and 
 26 

high mortgage default rates. Simulation results indicate the amount of capital required to survive this 

prolonged period of economic stress without new business or active risk management action. In addition 

to this model-based amount, the risk-based capital requirement includes a 30% surcharge to cover 

unspecified management and operations risks. Our total capital base is used to meet our risk-based capital 

requirement. 

Each quarter, OFHEO runs a detailed profile of our book of business through the stress test 

simulation model. The model generates cash flows and financial statements to evaluate our risk and 

measure our capital adequacy during the ten-year stress horizon. As part of its quarterly capital 

classification announcement, OFHEO makes these stress test results publicly available. 

Classification and Dividends 

The statutory capital framework incorporates two different assessments of capital- a minimum 

capital requirement and a risk based capital requirement. The 1992 Act requires us to maintain sufficient 

capital to meet both of these requirements in order to be classified as “adequately capitalized.” OFHEO is 

permitted or required to take remedial action if we fail to meet our capital requirements, depending on 

which requirement we fail to meet. Even if we meet our capital requirements, OFHEO has the ability to 

take certain actions if it determines that we are engaging in conduct that could result in a rapid depletion 

of our core capital, or if the value of the property securing mortgage loans we hold or have securitized has 

decreased significantly. In addition, under the OFHEO consent order, we are currently required to 

maintain a 30% capital surplus over our statutory minimum capital requirement. See “Capital Restoration 

Plan and OFHEO-Directed Minimum Capital Requirement” in our 2006 10-K. 

We are subject to continuous examination by OFHEO to ensure that we are operating in a safe 

and sound manner. If we fail to meet the risk-based capital standard but meet the minimum capital 

standard, we cannot be classified higher than “undercapitalized.” If we fail to meet the risk-based capital 

standard and the minimum capital requirement, but exceed the critical capital requirement, we cannot be 

classified higher than “significantly undercapitalized.” If we fail to meet the risk-based capital standard 

and the critical capital standard, we must be classified as “critically undercapitalized.” 

When we are classified as adequately capitalized, we generally can pay a dividend on our 

common or preferred stock or make other capital distributions (which includes common stock repurchases 

and preferred stock redemptions) without prior OFHEO approval, so long as the payment would not 

decrease total capital to an amount less than our risk-based capital requirement and would not decrease 

our core capital to an amount less than our minimum capital requirement. However, because we are 

currently subject to the OFHEO consent order, we are required to obtain OFHEO’s prior approval of 

certain capital transactions that could have the effect of reducing our capital surplus below an amount 

equal to 30% more than our statutory minimum capital requirement. Additionally, under the OFHEO 

consent order, we are required to submit a written report to OFHEO detailing the rationale and process for 

any proposed capital distribution prior to making such distribution. 

If we were classified as undercapitalized, we would be prohibited from making a capital 

distribution that would result in our being reclassified as significantly undercapitalized or critically 

undercapitalized. We also would be required to submit a capital restoration plan for OFHEO approval, 

which could adversely affect our ability to make capital distributions. 

If we were classified as significantly undercapitalized, we would be prohibited from making any 

capital distribution that would result in our being reclassified as critically undercapitalized. We would 

otherwise be able to make a capital distribution only if OFHEO determined that the distribution would: 

(a) enhance our ability to meet the risk-based capital standard and the minimum capital standard 

promptly; (b) contribute to our long-term financial safety and soundness; or (c) otherwise be in the public 

interest. Also under this classification, OFHEO could take action to limit our growth, require us to acquire 

new capital or restrict us from activities that create excessive risk. We also would be required to submit a 
 27 

capital restoration plan for OFHEO approval, which could adversely affect our ability to make capital 

distributions. 

If we were classified as critically undercapitalized, OFHEO would be required to appoint a 

conservator for us, unless OFHEO made a written finding that such appointment could have certain 

serious adverse effects and the public interest would be better served with other enforcement actions and 

the Secretary of the Treasury concurred in that determination. We would be able to make a capital 

distribution only if OFHEO determined that the distribution would: (a) enhance our ability to meet the 

risk-based capital standard and the minimum capital standard promptly; (b) contribute to our long-term 

financial safety and soundness; or (c) otherwise be in the public interest. 

Performance Against Capital Standards 

To ensure compliance with each of our regulatory capital requirements, we maintain different 

levels of capital surplus for each capital requirement. Quarterly changes in economic conditions (such as 

interest rates, spreads and home prices) can materially impact the calculated risk-based capital 

requirement, as was the case in 2006. As a consequence, we generally seek to maintain a larger surplus 

over the risk-based capital requirement to ensure continued compliance. 

While we are able to reasonably estimate the size of our book of business and therefore our 

minimum capital requirement, the amount of our reported core capital holdings at each period end is less 

certain. Changes in the fair value of our derivatives may result in significant fluctuations in our capital 

holdings from period to period. Accordingly, we target a surplus above the statutory minimum capital 

requirement and OFHEO-directed minimum capital requirement to accommodate a wide range of 

possible valuation changes that might adversely impact our core capital base. 
 28 

The following table displays our regulatory capital classification measures as of September 30, 

2007 and December 31, 2006. 

As of 

September 30, 

2007(1)

December 31, 

2006

(Dollars in millions) 

Core capital(2)........................................................................................................ $41,713 $41,950 

Statutory minimum capital(3) ................................................................................ 30,303 29,359 

Surplus of core capital over required minimum capital........................................ 11,410 12,591 

Surplus of core capital percentage over required minimum capital(4)................... 37.7% 42.9% 

 

Core capital(2)........................................................................................................ $41,713 $41,950 

OFHEO-directed minimum capital(5).................................................................... 39,393 38,166 

Surplus of core capital over OFHEO-directed minimum capital.......................... 2,319 3,784 

Surplus of core capital percentage over OFHEO-directed minimum capital(6)..... 5.9% 9.9% 

 

Total capital(7) ....................................................................................................... $43,798 $42,703 

Statutory risk-based capital(8)................................................................................ 10,225 26,870 

Surplus of total capital over required risk-based capital....................................... $33,573 $15,833 

Surplus of total capital percentage over required risk-based capital(9).................. 328.3% 58.9% 

 

Core capital(2)........................................................................................................ $41,713 $41,950 

Statutory critical capital(10).................................................................................... 15,682 15,149 

Surplus of core capital over required critical capital ............................................ $26,031 $26,801 

Surplus of core capital percentage over required critical capital(11)...................... 166.0% 176.9% 

____________ 

(1) Statutory risk-based capital and total capital measures have been provided as of June 30, 2007 (the most recent date for 

which the statutory risk-based capital measure is available) and December 31, 2006. The regulatory capital classification 

measures as of September 30, 2007 provided in this table represent amounts that have been submitted to OFHEO for their 

certification and are subject to their review and approval. They do not represent OFHEO’s announced capital classification 

measures. 

(2) The sum of (a) the stated value of our outstanding common stock (common stock less treasury stock); (b) the stated value 

of our outstanding non-cumulative perpetual preferred stock; (c) our paid-in capital; and (d) our retained earnings. Core 

capital excludes accumulated other comprehensive income (loss). 

(3) Generally, the sum of (a) 2.50% of on-balance sheet assets; (b) 0.45% of the unpaid principal balance of outstanding Fannie

Mae MBS held by third parties; and (c) up to 0.45% of other off-balance sheet obligations, which may be adjusted by the 

Director of OFHEO under certain circumstances (See 12 CFR 1750.4 for existing adjustments made by the Director of 

OFHEO). 

(4) Defined as the surplus of core capital over statutory minimum capital expressed as a percentage of statutory minimum 

capital. 

(5) This requirement was effective as of September 30, 2005, and is defined as a 30% surplus over the statutory minimum 

capital requirement. We are currently required to maintain this surplus under the OFHEO consent order until such time as 

the Director of OFHEO determines that the requirement should be modified or allowed to expire, taking into account 

factors such as the resolution of accounting and internal control issues. 

(6) Defined as the surplus of core capital over the OFHEO-directed minimum capital expressed as a percentage of the OFHEOdirected minimum capital. 

(7) The sum of (a) core capital and (b) the total allowance for loan losses and reserve for guaranty losses, less (c) the specific 

loss allowance (that is, the allowance required on individually-impaired loans). The specific loss allowance totaled $51 

million as of June 30, 2007 and $106 million as of December 31, 2006. 

(8) Defined as the amount of total capital required to be held to absorb projected losses flowing from future adverse interest 

rate and credit risk conditions specified by statute (see 12 CFR 1750.13 for conditions), plus 30% mandated by statute to 

cover management and operations risk. 

(9) Defined as the surplus of total capital over statutory risk-based capital expressed as a percentage of statutory risk based

capital. 

(10) Generally, the sum of (a) 1.25% of on-balance sheet assets; (b) 0.25% of the unpaid principal balance of outstanding Fannie 
 29 

Mae MBS held by third parties; and (c) up to 0.25% of other off-balance sheet obligations, which may be adjusted by the 

Director of OFHEO under certain circumstances. 

(11) Defined as the surplus of core capital over statutory critical capital, expressed as a percentage of statutory critical capital. 

For each quarter of 2005 and 2006, we have been classified by OFHEO as adequately capitalized. 

On September 27, 2007, OFHEO announced that we were classified as adequately capitalized as of June 

30, 2007 (the most recent quarter for which OFHEO has published its capital classification). Because we 

have not yet prepared audited consolidated financial statements for any periods after December 31, 2006, 

OFHEO’s capital classifications for periods after December 31, 2006 are based on our estimates of our 

financial condition as of those periods and remain subject to revision. 
 30 

LEGALITY OF INVESTMENT 

You should consult with your own legal advisors to determine whether the shares of Preferred 

Stock constitute legal investments for you, any investment limitations, and whether the Preferred Stock is 

eligible to be used as collateral for borrowings. In addition, financial institutions should consult their legal 

advisors or regulators in determining the appropriate treatment of the shares of Preferred Stock under 

risk-based capital or similar rules. An institution under the jurisdiction of the Comptroller of the 

Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance 

Corporation, the Office of Thrift Supervision, the National Credit Union Administration, or any other 

federal or state agency with similar authority should review any applicable regulations, policy statements 

and guidelines before purchasing or pledging shares of the Preferred Stock. 

UNITED STATES TAXATION 

The Preferred Stock and payments thereon generally are subject to taxation. Therefore, you 

should consider the tax consequences of owning Preferred Stock before acquiring it. 

In the opinion of Dewey & LeBoeuf LLP, our special tax counsel, the following discussion 

correctly describes the principal aspects of the U.S. federal income tax treatment of U.S. Persons (as 

defined below) that are beneficial holders of the Preferred Stock (“Shareholders”). This discussion does 

not address the U.S. federal income tax treatment of Shareholders that are not U.S. Persons. This 

discussion is based on the Code, its legislative history, existing and proposed Treasury regulations, 

revenue rulings and judicial decisions, changes to any of which subsequent to the date of this Offering 

Circular may affect, possibly on a retroactive basis, the tax consequences described herein. 

The discussion contained under this heading was not intended or written to be used, and cannot 

be used, for the purpose of avoiding United States federal tax penalties. This discussion was written to 

support the promotion or marketing of the transactions or matters addressed in this Offering Circular. 

You should seek advice based on your particular circumstances from an independent tax advisor. 

This summary discusses only the Preferred Stock purchased in this offering and held as a capital 

asset (within the meaning of federal tax law). This discussion does not purport to address all of the U.S. 

federal income tax consequences that may be applicable to particular investors in light of their individual 

circumstances or to Shareholders subject to special rules, such as dealers in securities, tax-exempt 

organizations, life insurance companies, persons liable for alternative minimum tax, persons that hold the 

Preferred Stock as part of a straddle or a hedging or conversion transaction, certain financial institutions 

and certain securities traders. In addition, this discussion does not address taxes imposed by any state, 

local or foreign taxing jurisdiction. In all cases, investors are advised to consult their own tax advisors 

regarding the U.S. federal tax consequences to them of holding, owning and disposing of Preferred Stock, 

as well as any tax consequences arising under the laws of any state or other taxing jurisdiction. 

For purposes of this discussion, “U.S. Person” generally means (1) a citizen or individual resident 

of the United States, (2) a corporation, or other entity treated as a corporation for United States federal 

income tax purposes organized in or under the laws of the United States, any State thereof or the District 

of Columbia, (3) an estate the income of which is includible in its gross income for U.S. federal income 

tax purposes without regard to its source, or (4) a trust if a court within the United States is able to 

exercise primary supervision over its administration and at least one U.S. Person has the authority to 

control all substantial decisions of the trust. If a partnership holds Preferred Stock, the tax treatment of a 

partner will generally depend upon the status of the partner and the activities of the partnership. 

Partnerships acquiring, holding or disposing of Preferred Stock, and partners in such partnerships, are 

encouraged to consult their own tax advisors. 
 31 

Dividends 

Dividends declared and paid on the Preferred Stock will be dividends for U.S. federal income tax 

purposes to the extent paid out of our current or accumulated earnings and profits, as determined for 

federal income tax purposes, and, except as described below, will be taxable as ordinary income. 

Although we expect that our current and accumulated earnings and profits will be such that all dividends 

paid with respect to the Preferred Stock will qualify as dividends for federal income tax purposes, we 

cannot guarantee that result. Our accumulated earnings and profits and our current earnings and profits in 

future years will depend in significant part on our future profits or losses, which we cannot accurately 

predict. To the extent that the amount of any dividend paid on a share of Preferred Stock exceeds our 

current or accumulated earnings and profits for federal income tax purposes attributable to that share, the 

dividend will be treated first as a return of capital (rather than as ordinary income) and will be applied 

against and reduce the Shareholder’s adjusted tax basis in that share of Preferred Stock. The amount of 

any such dividend in excess of the Shareholder’s adjusted tax basis will then be taxed as capital gain. For 

purposes of the remainder of this discussion, it is assumed that dividends paid with respect to the 

Preferred Stock will constitute dividends for U.S. federal income tax purposes. 

Dividends received by Shareholders that are corporations generally will be eligible for the 70-

percent dividends-received deduction under section 243 of the Code. The 70-percent dividends-received 

deduction will not be available with respect to a dividend received on Preferred Stock that a Shareholder 

has held for 45 days or less (including the day of disposition, but excluding the day of acquisition) during 

the 91-day period beginning on the day which is 45 days before the date on which the Preferred Stock 

becomes ex-dividend. The length of time that a corporate Shareholder is deemed to have held stock for 

these purposes is reduced by periods during which the Shareholder’s risk of loss with respect to the stock 

is diminished by reason of the existence of certain options, contracts to sell, short sales or other similar 

transactions. The aggregate dividends-received deduction allowed a corporate Shareholder cannot exceed 

70 percent of its taxable income (with certain adjustments). Moreover, the dividends-received deduction 

may be reduced if the stock is “debt financed.” Stock is “debt financed” if a corporate Shareholder incurs 

indebtedness “directly attributable” to a “portfolio stock” investment in another company, which would 

include an investment in the Preferred Stock. 

Individual U.S. Shareholders generally are subject to a reduced maximum tax rate of 15 percent 

on dividends received in taxable years beginning on or before December 31, 2010, after which date the 

rate applicable to dividends is scheduled to return to the rate generally applicable to ordinary income. The 

rate reduction does not apply to dividends received to the extent that the individual U.S. holder elects to 

treat the dividends as “investment income,” which may be offset against investment expense. 

Furthermore, the rate reduction does not apply to dividends that are paid to Shareholders with respect to 

Preferred Stock that is held by the Shareholder for 60 days or less during the 121-day period beginning on 

the date which is 60 days before the date on which the Preferred Stock becomes ex-dividend. The length 

of time that a Shareholder is deemed to have held stock for these purposes is reduced by periods during 

which the Shareholder’s risk of loss with respect to the stock is diminished by reason of the existence of 

certain options, contracts to sell, short sales or other similar transactions. Investors are advised to consult 

their own tax advisors regarding the implications of these rules in light of their particular circumstances. 

Dispositions, Including Redemptions 

Any sale, exchange, redemption (except as discussed below) or other disposition of the Preferred 

Stock generally will result in taxable gain or loss equal to the difference between the amount realized 

upon the disposition and the Shareholder’s adjusted tax basis in the Preferred Stock. Such gain or loss 

will be capital gain or loss and will be long-term capital gain or loss if the holding period for the Preferred 

Stock exceeds one year. Tax rates on capital gain for individual Shareholders vary depending on each 

Shareholder’s income and holding period for the Preferred Stock. Individual U.S. Shareholders are 

subject to a reduced maximum tax rate of 15 percent on long term capital gain realized in taxable years 
 32 

beginning on or before December 31, 2010, after which date the maximum rate is scheduled to return to 

the rate generally applicable to long term capital gains. Shareholders that are individuals should contact 

their own tax advisors for more information or for the capital gains tax rate applicable to specific shares 

of Preferred Stock. The deduction of capital losses is subject to certain limitations. 

A redemption of Preferred Stock may be treated as a dividend, rather than as payment in 

exchange for the Preferred Stock, unless the redemption (i) is “not essentially equivalent to a dividend” 

with respect to the Shareholder within the meaning of section 302(b)(1) of the Code; (ii) “is in complete 

redemption of all of the stock” of Fannie Mae held by the Shareholder as described in section 302(b)(3) of 

the Code; or (iii) otherwise meets the requirements of one of the other exceptions from dividend treatment 

provided in section 302(b) of the Code. In applying these rules, the Shareholder must take into account 

not only the Preferred Stock and our other stock that it owns directly, but also the Preferred Stock and our 

other stock that it constructively owns within the meaning of section 318 of the Code. Because of the 

complex nature of these rules, each Shareholder should consult its tax advisor to determine whether a 

redemption of Preferred Stock will be treated as a dividend or as payment in exchange for the Preferred 

Stock. If the redemption payment is treated as a dividend, the rules discussed above under “Dividends” 

apply. 

Information Reporting and Backup Withholding 

Payments of dividends on shares of Preferred Stock and payments of proceeds upon the sale or 

redemption of Preferred Stock generally are required to be reported to the Internal Revenue Service 

except in the case of a beneficial holder that is an “exempt recipient.” Individuals generally are not 

exempt recipients, whereas corporations and certain other entities generally are exempt recipients. 

Backup withholding of U.S. federal income tax may apply to payments made with respect to 

shares of Preferred Stock, as well as to payments of proceeds from the sale of shares of Preferred Stock, 

to Shareholders that are not exempt recipients and that fail to provide certain identifying information 

(such as the taxpayer identification number of the Shareholder) in the manner required. 

The U.S. federal income tax discussion set forth above is included for general information 

only and may not be applicable depending upon a Shareholder’s particular situation. Each 

Shareholder should consult its own tax advisor with respect to the tax consequences to it of the 

ownership and disposition of the Preferred Stock, including the tax consequences under the tax 

laws of the United States, states, localities, countries other than the United States and any other 

taxing jurisdiction and the possible effects of changes in such tax laws.
 33 

UNDERWRITING 

Under the terms set forth in the underwriting agreement (the “Underwriting Agreement”), we 

have agreed to sell to each of the underwriters named below, and the underwriters, for whom Lehman 

Brothers Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Representatives”) are acting 

as representatives, have severally agreed to purchase, the number of shares of Preferred Stock set forth 

below:

Underwriter Number of Shares

Lehman Brothers Inc. ............................................................................... 100,800,000 

Merrill Lynch, Pierce, Fenner & Smith 

Incorporated ......................................................................... 100,800,000 

Goldman, Sachs & Co. .............................................................................. 22,400,000 

J.P. Morgan Securities Inc......................................................................... 22,400,000 

Banc of America Securities LLC............................................................... 5,600,000 

Bear, Stearns & Co. Inc............................................................................. 5,600,000 

Citigroup Global Markets Inc.................................................................... 5,600,000 

Deutsche Bank Securities Inc.................................................................... 5,600,000 

Morgan Stanley & Co. Incorporated ......................................................... 5,600,000 

UBS Securities LLC .................................................................................. 5,600,000 

 Total .............................................................................................. 280,000,000 

The Underwriting Agreement requires the Underwriters to purchase all the Preferred Stock 

offered hereby if any is purchased. 

The Underwriters propose to offer the Preferred Stock to the public at the initial public offering 

price set forth on the cover page of this Offering Circular, and may reoffer the Preferred Stock to certain 

dealers at such price less a concession of not more than $0.15 per share. The Underwriters may allow, 

and the dealers may reallow, a discount not in excess of $0.075 per share on sales to certain other dealers. 

After the initial offering, the public offering price, concession and discount may be changed. 

Prior to this offering, there has been no public market for the Preferred Stock. We will apply to 

list the Preferred Stock on the NYSE under the symbol “FNMprS.” If accepted for listing, we expect that 

trading of the Preferred Stock on the NYSE will commence by December 31, 2007. The Representatives 

have advised us that they intend to make a market in the Preferred Stock prior to the commencement of 

trading on the NYSE, but they are not obligated to do so and may discontinue any such market making at 

any time without notice. There is no assurance that the Preferred Stock will be accepted for listing on the 

NYSE. 

In the Underwriting Agreement, we and the Underwriters have agreed to indemnify each other 

against and contribute toward certain liabilities. 

We have engaged Lehman Brothers to provide certain advisory services in connection with the 

offering of the Preferred Stock. 

The Underwriters and certain affiliates thereof engage in transactions with and perform services 

for us in the ordinary course of business. 

The Underwriters may engage in certain transactions that stabilize the price of the Preferred 

Stock. These transactions may include entering stabilizing bids, which means the placing of a bid or the 

effecting of a purchase for the purpose of pegging, fixing or maintaining the price of the Preferred Stock. 

Neither we nor the Underwriters make any representation or prediction as to the direction or magnitude of 
 34 

any effect that the transactions described above may have on the price of the Preferred Stock. The 

Underwriters are not required to engage in any of these transactions. When so doing, the Underwriters act 

on their own behalf and not as our representatives. Any such transactions, if commenced, may be 

discontinued at any time. 

The expenses of the offering that are payable by us are estimated to be approximately $255,000 

(exclusive of any underwriting discount and advisory fees). 

RATINGS 

We expect that Moody’s will assign the Preferred Stock a rating of Aa3 and a rating outlook of 

stable. An issue which is rated “Aa” is considered by Moody’s to be “of high quality” and “subject to 

very low credit risk.” The numerical modifier “3” indicates that the issue ranks in the lower end of the 

generic rating category of “Aa.” According to Moody’s a “rating outlook is an opinion regarding the 

likely direction of a rating over the medium term.” 

We expect that S&P will assign the Preferred Stock a rating of “AA–” and a rating outlook of 

negative. An issue which is rated “AA” is considered by S&P to differ “from the highest-rated obligations 

only to a small degree.” According to S&P, “the obligor’s capacity to meet its financial commitment on 

the obligation is very strong.” The modifier “–” indicates that the issue ranks in the lower end of the 

generic rating category “AA.” According to S&P, a “rating outlook assesses the potential direction of a 

long-term credit rating over the intermediate term (typically six months to two years).” 

We expect that Fitch will assign the Preferred Stock a rating of “AA–”. An issue which is rated 

“AA” is considered by Fitch to be of “very high credit quality.” According to Fitch, this rating indicates a 

“very strong capacity for payment of financial commitments.” The modifier “–” indicates that the issue 

ranks in the lower end of the generic rating category “AA.” 

A security rating is not a recommendation to buy, sell or hold securities and may be subject to 

revision or withdrawal at any time by the assigning rating organization. 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

The consolidated financial statements of Fannie Mae and consolidated entities and management's 

report on the effectiveness of internal control over financial reporting as of December 31, 2006 included 

in Fannie Mae's Annual Report on Form 10-K for the year ended December 31, 2006, incorporated by 

reference in this offering circular, have been audited by Deloitte & Touche LLP, an independent 

registered public accounting firm, as stated in their reports appearing therein. 

VALIDITY OF THE PREFERRED STOCK 

The validity of the Preferred Stock will be passed upon for us by Sidley Austin LLP, New York, 

New York, and for the Underwriters by Sullivan & Cromwell LLP, Washington, D.C. Certain U.S. 

federal income tax matters will be passed upon for us by Dewey & LeBoeuf LLP, Washington, D.C. 
 35 

FORWARD-LOOKING STATEMENTS 

This Offering Circular contains forward-looking statements, which are statements about matters 

that are not historical facts. In addition, our senior management may from time to time make forwardlooking statements orally to analysts, investors, the news media and others. Forward-looking statements 

often include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” 

“would,” “should,” “could,” “may,” or similar words. 

Forward-looking statements reflect our management’s expectations or predictions of future 

conditions, events or results based on various assumptions and management’s estimates of trends and 

economic factors in the markets in which we are active, as well as our business plans. They are not 

guarantees of future performance. By their nature, forward-looking statements are subject to risks and 

uncertainties. Our actual results and financial condition may differ, possibly materially, from the 

anticipated results and financial condition indicated in these forward-looking statements. There are a 

number of factors that could cause actual conditions, events or results to differ materially from those 

described in the forward-looking statements contained in this report, including those factors described in 

the “Risk Factors” section of this Offering Circular, the 2006 10-K, and the Third Quarter 10-Q. 

Factors that could cause actual conditions, events or results to differ materially from those 

expressed in any forward-looking statements include, among others: 

• our expectation that housing market weakness will continue in 2007 and 2008; 

• our projections for mortgage originations and mortgage debt outstanding (“MDO”) 

growth for 2007 and 2008; 

• our estimates regarding our 2007 business results and market share; 

• our expectations that our single-family guaranty book of business will grow at a faster 

rate than the rate of overall MDO growth, and our guaranty fee income will continue to 

increase; 

• our expectation that our net interest yield will remain relatively stable for the remainder 

of 2007; 

• our expectation that our accounting for changes in the fair value of our derivatives and 

our trading securities will continue to be a major driver of volatility in our earnings, in 

our stockholders’ equity and in our regulatory capital; 

• our expectation that our losses on certain guaranty contracts will increase significantly for 

2007 as compared with 2006; 

• our expectation that other-than-temporary impairment on investment securities will be 

significantly lower in 2007 as compared with 2006; 

• our expectation that we will reduce our administrative expenses by more than 

$200 million in 2007; 

• our expectation that our ongoing operations costs will be reduced to approximately 

$2 billion in 2008; 

• our expectation that our credit-related expenses and credit losses will significantly 

increase for 2007 and 2008; 
 36 

• our expectation that our credit loss ratio will be within our normal historical range of 4 to 

6 basis points in 2007, and will increase above this range in 2008; 

• our belief that our delinquencies and foreclosures will increase for the remainder of 2007 

and in 2008; 

• our belief that our sources of liquidity will remain adequate to meet both our short-term 

and long-term funding needs; 

• our estimate of the effect of hypothetical declines in home prices on our credit losses; 

• our estimate of the effect of hypothetical changes in interest rates on the fair value of our 

financial instruments; and 

• our belief that our remaining material weaknesses will be remediated by December 31, 

2007 and that we will have effective disclosure controls and procedures by December 31, 

2007. 

Investors are cautioned not to place undue reliance on forward-looking statements in this Offering 

Circular or that we make from time to time, and to consider carefully the factors discussed in the “Risk 

Factors” section of this Offering Circular, the 2006 10-K and the Third Quarter 10-Q in evaluating these 

forward-looking statements. These forward-looking statements are representative only as of the date they 

are made, and we undertake no obligation to update any forward-looking statement as a result of new 

information, future events or otherwise except as required under the federal securities laws. 
A-1 

Exhibit A 

Certificate of Designation of Terms of 

Fixed-to-Floating Rate Non-cumulative Preferred Stock, Series S 

CUSIP: 313586752 

1. Designation, Par Value and Number of Shares. 

The designation of the series of preferred stock of the Federal National Mortgage Association 

(“Fannie Mae”) created by this resolution shall be “Fixed-to-Floating Rate Non-Cumulative Preferred 

Stock, Series S” (the “Series S Preferred Stock”), and the number of shares initially constituting the Series 

S Preferred Stock is 280,000,000, which number of shares may be increased by the Board of Directors of 

Fannie Mae, or a duly authorized committee thereof, in accordance with Section 7 below. Shares of 

Series S Preferred Stock will have no par value and a stated value of $25 per share. Shares of Series S 

Preferred Stock will have no stated maturity date, and, subject to Section 3 below, will be perpetual. The 

Board of Directors of Fannie Mae, or a duly authorized committee thereof, in its sole discretion, may 

reduce the number of shares of Series S Preferred Stock, provided such reduction is not below the number 

of shares of Series S Preferred Stock then outstanding. 

2. Dividends. 

(a) For each Dividend Period from December 11, 2007 to but excluding December 31, 2010 

(each such Dividend Period, a “Fixed Rate Dividend Period”), holders of outstanding shares of Series S 

Preferred Stock (each individually a “Holder”, or collectively, the “Holders”) shall be entitled to receive, 

ratably, when, as and if declared by the Board of Directors, in its sole discretion, out of funds legally 

available therefor, non-cumulative cash dividends at a rate of 8.25% per annum per share of Series S 

Preferred Stock. Dividends on the Series S Preferred Stock shall accrue from and include December 11, 

2007 and will be payable when, as and if declared by the Board of Directors quarterly on March 31, June 

30, September 30 and December 31 of each year (each, a “Dividend Payment Date”), commencing on 

March 31, 2008. If a Dividend Payment Date is not a Business Day, the related dividend (if declared) 

will be paid on the next succeeding Business Day with the same force and effect as though paid on the 

Dividend Payment Date, without any increase to account for the period from such Dividend Payment 

Date through the date of actual payment. A “Business Day” shall mean any day other than a Saturday, 

Sunday, or a day on which banking institutions in New York, New York are authorized or required by law 

to close. Dividends will be paid to Holders on the record date fixed by the Board of Directors or a duly 

authorized committee thereof, which will be no earlier than 45 days or later than 10 days prior to the 

applicable Dividend Payment Date. 

If declared, the initial dividend, which will be for the period from and including the date of 

issuance to but excluding March 31, 2008, will be $0.6302 per share and will be payable on March 31, 

2008. Thereafter, if declared, quarterly dividends for each Fixed Rate Dividend Period will be $0.5156 

per share. The “Dividend Period” relating to a Dividend Payment Date will be the period from and 

including the preceding Dividend Payment Date (or, in the case of the initial dividend, December 11, 

2007) to but excluding such Dividend Payment Date. For each Fixed Rate Dividend Period that is less 

than a full Fixed Rate Dividend Period, dividends payable on the Series S Preferred Stock will be 

computed on the basis of a 360 day year consisting of twelve 30 day months, with the dividend for such 

partial Fixed Rate Dividend Period computed by dividing the per annum dividend rate by 360, and 

multiplying that amount by the number of days in such partial Fixed Rate Dividend Period (using the 30 

day month, 360 day year convention) and the stated value of $25 per share, the product of which will be 

rounded to the fourth digit after the decimal point. (If the fifth digit to the right of the decimal point is 
A-2 

five or greater, the fourth digit will be rounded up by one.) Dividends payable on the Series S Preferred 

Stock for each full Fixed Rate Dividend Period will be computed by dividing the per annum dividend rate 

by four, and multiplying the result by the stated value per share of $25, the product of which will be 

rounded to the fourth digit after the decimal point. (If the fifth digit to the right of the decimal point is five 

or greater, the fourth digit will be rounded up by one.) 

(b) For the Dividend Period beginning on December 31, 2010 and for each Dividend Period 

thereafter (each such Dividend Period, a “Floating Rate Dividend Period”), Holders of outstanding shares 

of Series S Preferred Stock shall be entitled to receive, ratably, when, as and if declared by the Board of 

Directors, in its sole discretion, out of funds legally available therefor, non-cumulative quarterly 

dividends which will accrue at a per annum rate equal to the greater of (i) 7.75% and (ii) the sum of 3-

Month LIBOR plus 4.23%. On December 31, 2010 and each March 31, June 30, September 30 and 

December 31 thereafter, the previously applicable dividend rate will be replaced and the dividend rate for 

the Floating Rate Dividend Period beginning on such date will be determined in accordance with the 

immediately preceding sentence. Dividends on the Series S Preferred Stock for Floating Rate Dividend 

Periods will be payable when, as and if declared by the Board of Directors on March 31, June 30, 

September 30 and December 31 of each year (each, a “Dividend Payment Date”), commencing on March 

31, 2011. If a Dividend Payment Date is not a Business Day, the related dividend (if declared) will be 

paid on the next succeeding Business Day with the same force and effect as though paid on the Dividend 

Payment Date, without any increase to account for the period from such Dividend Payment Date through 

the date of actual payment. Dividends will be paid to Holders on the record date fixed by the Board of 

Directors or a duly authorized committee thereof, which will be no earlier than 45 days or later than 10 

days prior to the applicable Dividend Payment Date. 

In determining the dividend rate for any Floating Rate Dividend Period, 3-Month LIBOR for such 

Floating Rate Dividend Period will be calculated by the Calculation Agent on the second London 

Business Day immediately preceding the first day of such Floating Rate Dividend Period (each a “LIBOR 

Determination Date”). A “London Business Day” is defined as any day on which commercial banks are 

open for business (including dealings in foreign exchange and deposits in U.S. dollars) in London, 

England. 

Dividends payable on the Series S Preferred Stock for any full or partial Floating Rate Dividend 

Period will be computed based on the actual number of days elapsed during that period and a 360 day 

year, with the dividend for such Floating Rate Dividend Period computed by dividing the per annum 

dividend rate applicable to that Floating Rate Dividend Period by 360, and multiplying that amount by the 

actual number of days elapsed in such Floating Rate Dividend Period and the stated value of $25 per 

share, the product of which will be rounded to the fourth digit after the decimal point. (If the fifth digit to 

the right of the decimal point is five or greater, the fourth digit will be rounded up by one.) If Fannie Mae 

redeems the Series S Preferred Stock during a Floating Rate Dividend Period, the dividend that would 

otherwise be payable for the then current quarterly Floating Rate Dividend Period will be included in the 

redemption price of the shares redeemed and will not be separately payable. 

“3-Month LIBOR” is as follows: 

(1) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a threemonth maturity that appears on Reuters Screen LIBOR01 as of 11:00 a.m. (London time) on the related 

LIBOR Determination Date. “Reuters Screen LIBOR01” means the display designated as “Reuters 

Screen LIBOR01 Page” or such other page as may replace Reuters Screen LIBOR01 Page on that service 

or such other service or services as may be nominated by the British Bankers’ Association as the 

information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits. 
A-3 

If at least two rates appear on the Reuters Screen LIBOR01, the rate on the LIBOR Determination Date 

will be the arithmetic mean of such rates; 

(2) if the rate specified in clause (1) above cannot be identified on the related LIBOR 

Determination Date, then the Calculation Agent will request the principal London offices of five leading 

banks (which may include affiliates of the Underwriters) in the London interbank market selected by the 

Calculation Agent (after consultation with Fannie Mae, if Fannie Mae is not then acting as Calculation 

Agent) to provide those banks’ offered quotations (expressed as percentages per annum) to prime banks 

in the London interbank market for deposits in U.S. dollars having a three-month maturity as of 11:00 

a.m. (London time) on such LIBOR Determination Date. If at least two quotations are provided, then 3-

Month LIBOR will be the arithmetic mean determined by the Calculation Agent of the quotations 

obtained (and, if five quotations are provided, eliminating the highest quotation (or in the event of 

equality, one of the highest) and the lowest quotation (or in the event of equality, one of the lowest)); 

(3) if fewer than two quotations are provided as requested in clause (2) above, then the 

Calculation Agent will request five major banks (which may include affiliates of the Underwriters) in 

New York, New York selected by the Calculation Agent (after consultation with Fannie Mae, if Fannie 

Mae is not then acting as Calculation Agent) to provide those banks’ offered quotations (expressed as 

percentages per annum) to leading European banks for loans having a three-month maturity in U.S. 

dollars as of 11:00 a.m. (New York City time) on such LIBOR Determination Date. If at least two 

quotations are provided, then 3-Month LIBOR will be the arithmetic mean determined by the Calculation 

Agent of the quotations obtained (and, if five quotations are provided, eliminating the highest quotation 

(or in the event of equality, one of the highest) and the lowest quotation (or in the event of equality, one 

of the lowest)); and 

(4) if fewer than two quotations are so provided as requested in clause (3) above, then 3-

Month LIBOR as of such LIBOR Determination Date will be 3-Month LIBOR determined for the 

immediately preceding Dividend Period. If the applicable Dividend Period is the first Floating Rate 

Period beginning on December 31, 2010, then 3-Month LIBOR will be the rate for deposits in U.S. 

dollars having a three-month maturity that appeared, as of 11:00 a.m. (London time) on the most recent 

London Business Day preceding the LIBOR Determination Date for which the rate was displayed on 

Reuters Screen LIBOR01 with respect to deposits commencing on the second London Business Day 

following that date. 

The Calculation Agent’s determination of the 3-Month LIBOR and the dividend rate will be final 

and binding absent manifest error.

(c) No dividend (other than dividends or distributions paid in shares of, or options, warrants 

or rights to subscribe for or purchase shares of, the common stock of Fannie Mae or any other stock of 

Fannie Mae ranking, as to the payment of dividends and the distribution of assets upon dissolution, 

liquidation or winding up of Fannie Mae, junior to the Series S Preferred Stock) may be declared or paid 

or set apart for payment on Fannie Mae’s common stock (or on any other stock of Fannie Mae ranking, as 

to the payment of dividends, junior to the Series S Preferred Stock) unless dividends have been declared 

and paid or set apart (or ordered to be set apart) on the Series S Preferred Stock for the then-current 

quarterly Dividend Period; provided, however, that the foregoing dividend preference shall not be 

cumulative and shall not in any way create any claim or right in favor of the Holders of Series S Preferred 

Stock in the event that dividends have not been declared or paid or set apart (or ordered to be set apart) on 

the Series S Preferred Stock in respect of any prior Dividend Period. If the full dividend on the Series S 

Preferred Stock is not paid for any quarterly Dividend Period (including a dividend that is not paid 

because regulatory approval is not granted), the Holders of Series S Preferred Stock will have no claim in 

respect of the unpaid amount so long as no dividend (other than those referred to above) is paid on Fannie 
A-4 

Mae’s common stock (or any other stock of Fannie Mae ranking, as to the payment of dividends, junior to 

the Series S Preferred Stock) for such Dividend Period. 

(d) The Board of Directors of Fannie Mae, or a duly authorized committee thereof, may, in 

its discretion, choose to pay dividends on the Series S Preferred Stock without the payment of any 

dividends on Fannie Mae’s common stock (or any other stock of Fannie Mae ranking, as to the payment 

of dividends, junior to the Series S Preferred Stock). 

(e) No full dividends shall be declared or paid or set apart for payment on any stock of 

Fannie Mae ranking, as to the payment of dividends, on a parity with the Series S Preferred Stock for any 

period unless full dividends have been declared and paid or set apart for payment on the Series S 

Preferred Stock for the then-current quarterly Dividend Period. When dividends are not paid in full upon 

the Series S Preferred Stock and all other classes or series of stock of Fannie Mae, if any, ranking, as to 

the payment of dividends, on a parity with the Series S Preferred Stock, all dividends declared upon 

shares of Series S Preferred Stock and all such other stock of Fannie Mae will be declared pro rata so that 

the amount of dividends declared per share of Series S Preferred Stock and all such other stock will in all 

cases bear to each other the same ratio that accrued dividends per share of Series S Preferred Stock (but 

without, in the case of any non-cumulative preferred stock, accumulation of unpaid dividends for prior 

Dividend Periods) and such other stock bear to each other. 

(f) No dividends may be declared or paid or set apart for payment on any shares of Series S 

Preferred Stock if at the same time any arrears exist or default exists in the payment of dividends on any 

outstanding class or series of stock of Fannie Mae ranking, as to the payment of dividends, prior to the 

Series S Preferred Stock. 

(g) Holders of Series S Preferred Stock will not be entitled to any dividends, whether payable 

in cash or property, other than as herein provided and will not be entitled to interest, or any sum in lieu of 

interest, in respect of any dividend payment. 

3. Optional Redemption. 

(a) The Series S Preferred Stock shall not be redeemable prior to December 31, 2010. On 

that date, and on each fifth anniversary thereafter, subject to (x) the notice provisions set forth in Section 

3(b) below, (y) the receipt of any required regulatory approvals and (z) any further limitations which may 

be imposed by law, Fannie Mae may redeem the Series S Preferred Stock, in whole or in part, out of 

funds legally available therefor, at the redemption price of $25 per share plus an amount equal to the 

amount of the dividend (whether or not declared) for the then-current quarterly Dividend Period accrued 

to but excluding the date of such redemption, but without accumulation of unpaid dividends on the Series 

S Preferred Stock for prior Dividend Periods. The amount of dividends per share payable at redemption 

will be calculated in accordance with Section 2(b) above. If less than all of the outstanding shares of 

Series S Preferred Stock are to be redeemed, Fannie Mae will select the shares to be redeemed from the 

outstanding shares not previously called for redemption by lot or pro rata (as nearly as possible) or by any 

other method that the Board of Directors of Fannie Mae, or a duly authorized committee thereof, in its 

sole discretion deems equitable. 

(b) In the event Fannie Mae shall redeem any or all of the Series S Preferred Stock as 

aforesaid, Fannie Mae will give written or electronic notice of any such redemption to Holders of Series S 

Preferred Stock not less than 30 days prior to the date fixed by the Board of Directors of Fannie Mae, or 

duly authorized committee thereof, for such redemption. Each such notice will state: (1) the number of 

shares of Series S Preferred Stock to be redeemed and, if fewer than all of the shares of Series S Preferred 

Stock held by a Holder are to be redeemed, the number of shares to be redeemed from such Holder; (2) 
A-5 

the redemption price; (3) the redemption date; and (4) the place at which a Holder’s certificate(s) 

representing shares of Series S Preferred Stock must be presented upon such redemption. Failure to give 

notice, or any defect in the notice, to any Holder of Series S Preferred Stock shall not affect the validity of 

the proceedings for the redemption of shares of any other Holder of Series S Preferred Stock being 

redeemed. 

(c) Notice having been given as herein provided, from and after the redemption date, 

dividends on the Series S Preferred Stock called for redemption shall cease to accrue and such Series S 

Preferred Stock called for redemption will no longer be deemed outstanding, and all rights of the Holders 

thereof as registered holders of such shares of Series S Preferred Stock will cease. Upon surrender in 

accordance with said notice of the certificate(s) representing shares of Series S Preferred Stock so 

redeemed (properly endorsed or assigned for transfer, if the Board of Directors of Fannie Mae, or a duly 

authorized committee thereof, shall so require and the notice shall so state), such shares shall be redeemed 

by Fannie Mae at the redemption price aforesaid. Any shares of Series S Preferred Stock that shall at any 

time have been redeemed shall, after such redemption, be cancelled and not reissued. In case fewer than 

all the shares represented by any such certificate are redeemed, a new certificate shall be issued 

representing the unredeemed shares without cost to the Holder thereof. 

(d) The Series S Preferred Stock will not be subject to any mandatory redemption, sinking 

fund or other similar provisions. In addition, Holders of Series S Preferred Stock will have no right to 

require redemption of any shares of Series S Preferred Stock. 

4. Liquidation Rights. 

(a) Upon any voluntary or involuntary dissolution, liquidation or winding up of Fannie Mae, 

after payment or provision for the liabilities of Fannie Mae and the expenses of such dissolution, 

liquidation or winding up, the Holders of outstanding shares of the Series S Preferred Stock will be 

entitled to receive out of the assets of Fannie Mae or proceeds thereof available for distribution to 

stockholders, before any payment or distribution of assets is made to holders of Fannie Mae’s common 

stock (or any other stock of Fannie Mae ranking, as to the distribution of assets upon dissolution, 

liquidation or winding up of Fannie Mae, junior to the Series S Preferred Stock), the amount of $25 per 

share plus an amount, determined in accordance with Section 2 above, equal to the dividend (whether or 

not declared) for the then-current quarterly Dividend Period accrued to but excluding the date of such 

liquidation payment, but without accumulation of unpaid dividends on the Series S Preferred Stock for 

prior Dividend Periods. 

(b) If the assets of Fannie Mae available for distribution in such event are insufficient to pay 

in full the aggregate amount payable to Holders of Series S Preferred Stock and holders of all other 

classes or series of stock of Fannie Mae, if any, ranking, as to the distribution of assets upon dissolution, 

liquidation or winding up of Fannie Mae, on a parity with the Series S Preferred Stock, the assets will be 

distributed to the Holders of Series S Preferred Stock and holders of all such other stock pro rata, based 

on the full respective preferential amounts to which they are entitled (but without, in the case of any 

noncumulative preferred stock, accumulation of unpaid dividends for prior Dividend Periods). 

(c) Notwithstanding the foregoing, Holders of Series S Preferred Stock will not be entitled to 

be paid any amount in respect of a dissolution, liquidation or winding up of Fannie Mae until holders of 

any classes or series of stock of Fannie Mae ranking, as to the distribution of assets upon dissolution, 

liquidation or winding up of Fannie Mae, prior to the Series S Preferred Stock have been paid all amounts 

to which such classes or series are entitled. 
A-6 

(d) Neither the sale, lease or exchange (for cash, shares of stock, securities or other 

consideration) of all or substantially all of the property and assets of Fannie Mae, nor the merger, 

consolidation or combination of Fannie Mae into or with any other entity or the merger, consolidation or 

combination of any other entity into or with Fannie Mae, shall be deemed to be a dissolution, liquidation 

or winding up, voluntary or involuntary, for the purposes of this Section 4. 

(e) After payment of the full amount of the distribution of assets upon dissolution, 

liquidation or winding up of Fannie Mae to which they are entitled pursuant to paragraphs (a), (b) and (c) 

of this Section 4, the Holders of Series S Preferred Stock will not be entitled to any further participation 

in any distribution of assets by Fannie Mae. 

5. No Conversion or Exchange Rights. 

The Holders of shares of Series S Preferred Stock will not have any rights to convert such shares 

into or exchange such shares for shares of any other class or classes, or of any other series of any class or 

classes, of stock or obligations of Fannie Mae. 

6. No Pre-Emptive Rights. 

No Holder of Series S Preferred Stock shall be entitled as a matter of right to subscribe for or 

purchase, or have any pre-emptive right with respect to, any part of any new or additional issue of stock 

of any class whatsoever, or of securities convertible into any stock of any class whatsoever, or any other 

shares, rights, options or other securities of any class whatsoever, whether now or hereafter authorized 

and whether issued for cash or other consideration or by way of dividend. 

7. Voting Rights; Amendments. 

(a) Except as provided below, the Holders of Series S Preferred Stock will not be entitled to 

any voting rights, either general or special. 

(b) Without the consent of the Holders of Series S Preferred Stock, Fannie Mae will have the 

right to amend, alter, supplement or repeal any terms of this Certificate or the Series S Preferred Stock (1) 

to cure any ambiguity, or to cure, correct or supplement any provision contained in this Certificate of 

Designation that may be defective or inconsistent with any other provision herein or (2) to make any other 

provision with respect to matters or questions arising with respect to the Series S Preferred Stock that is 

not inconsistent with the provisions of this Certificate of Designation so long as such action does not 

materially and adversely affect the interests of the Holders of Series S Preferred Stock; provided, 

however, that any increase in the amount of authorized or issued Series S Preferred Stock or the creation 

and issuance, or an increase in the authorized or issued amount, of any other class or series of stock of 

Fannie Mae, whether ranking prior to, on a parity with or junior to the Series S Preferred Stock, as to the 

payment of dividends or the distribution of assets upon dissolution, liquidation or winding up of Fannie 

Mae, or otherwise, will not be deemed to materially and adversely affect the interests of the Holders of 

Series S Preferred Stock. 

(c) Except as set forth in paragraph (b) of this Section 7, the terms of this Certificate or the 

Series S Preferred Stock may be amended, altered, supplemented, or repealed only with the consent of the 

Holders of at least two-thirds of the shares of Series S Preferred Stock then outstanding, given in person 

or by proxy, either in writing or at a meeting of stockholders at which the Holders of Series S Preferred 

Stock shall vote separately as a class. On matters requiring their consent, Holders of Series S Preferred 

Stock will be entitled to one vote per share. 
A-7 

(d) The rules and procedures for calling and conducting any meeting of Holders (including, 

without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies 

at such a meeting, the obtaining of written consents, and any other aspect or matter with regard to such a 

meeting or such consents shall be governed by any rules that the Board of Directors of Fannie Mae, or a 

duly authorized committee thereof, in its discretion, may adopt from time to time, which rules and 

procedures shall conform to the requirements of any national securities exchange on which the Series S 

Preferred Stock are listed at the time (if so listed). 

8. Additional Classes or Series of Stock. 

The Board of Directors of Fannie Mae, or a duly authorized committee thereof, shall have the 

right at any time in the future to authorize, create and issue, by resolution or resolutions, one or more 

additional classes or series of stock of Fannie Mae, and to determine and fix the distinguishing 

characteristics and the relative rights, preferences, privileges and other terms of the shares thereof. Any 

such class or series of stock may rank prior to, on a parity with or junior to the Series S Preferred Stock as 

to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up of 

Fannie Mae, or otherwise. 

9. Priority. 

For purposes of this Certificate of Designation, any stock of any class or series of Fannie Mae 

shall be deemed to rank: 

(a) Prior to the shares of Series S Preferred Stock, either as to the payment of dividends or 

the distribution of assets upon dissolution, liquidation or winding up of Fannie Mae, if the holders of such 

class or series shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, 

liquidation or winding up of Fannie Mae, as the case may be, in preference or priority to the Holders of 

shares of Series S Preferred Stock. 

(b) On a parity with shares of Series S Preferred Stock, either as to the payment of dividends 

or the distribution of assets upon dissolution, liquidation or winding up of Fannie Mae, whether or not the 

dividend rates or amounts, dividend payment dates or redemption or liquidation prices per share, if any, 

be different from those of the Series S Preferred Stock, if the holders of such class or series shall be 

entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up 

of Fannie Mae, as the case may be, in proportion to their respective dividend rates or amounts or 

liquidation prices, without preference or priority, one over the other, as between the holders of such class 

or series and the Holders of shares of Series S Preferred Stock. 

(c) Junior to shares of Series S Preferred Stock, either as to the payment of dividends or the 

distribution of assets upon dissolution, liquidation or winding up of Fannie Mae, if such class shall be 

common stock of Fannie Mae or if the Holders of shares of Series S Preferred Stock shall be entitled to 

the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of Fannie 

Mae, as the case may be, in preference or priority over the holders of such class or series. 

(d) The shares of Preferred Stock of Fannie Mae designated “5.25% Non-Cumulative 

Preferred Stock, Series D” (the “Series D Preferred Stock”), “5.10% Non-Cumulative Preferred Stock, 

Series E” (the “Series E Preferred Stock”), “Variable Rate Non-Cumulative Preferred Stock, Series F” 

(the “Series F Preferred Stock”), “Variable Rate Non-Cumulative Preferred Stock, Series G” (the “Series 

G Preferred Stock”), “5.81% Non-Cumulative Preferred Stock, Series H” (the “Series H Preferred 

Stock”), “5.375% Non-Cumulative Preferred Stock, Series I” (the “Series I Preferred Stock”), “5.125% 

Non-Cumulative Preferred Stock, Series L” (the “Series L Preferred Stock”), “4.75% Non-Cumulative 
A-8 

Preferred Stock, Series M” (the “Series M Preferred Stock”), “5.50% Non-Cumulative Preferred Stock, 

Series N” (the “Series N Preferred Stock”), “Non-Cumulative Preferred Stock, Series O” (the “Series O 

Preferred Stock”), “Non-Cumulative Convertible Series 2004-1 Preferred Stock” (the “Series 2004-1 

Preferred Stock”), “Variable Rate Non-Cumulative Preferred Stock, Series P” (the “Series P Preferred 

Stock”), “6.75% Non-Cumulative Preferred Stock, Series Q” (the “Series Q Preferred Stock”), and 

“7.625% Non-Cumulative Preferred Stock, Series R” (the “Series R Preferred Stock”) shall be deemed to 

rank on a parity with shares of Series S Preferred Stock as to the payment of dividends and the 

distribution of assets upon dissolution, liquidation or winding up of Fannie Mae. Accordingly, the holders 

of record of Series D Preferred Stock, the holders of record of Series E Preferred Stock, the holders of 

record of Series F Preferred Stock, the holders of record of Series G Preferred Stock, the holders of record 

of Series H Preferred Stock, the holders of record of Series I Preferred Stock, the holders of record of 

Series L Preferred Stock, the holders of record of Series M Preferred Stock, the holders of record of 

Series N Preferred Stock, the holders of record of Series 2004-1 Preferred Stock, the holders of record of 

Series O Preferred Stock, the holders of record of Series P Preferred Stock, the holders of record of Series 

Q Preferred Stock, the holders of record of Series R Preferred Stock, and the Holders of Series S 

Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon dissolution, 

liquidation or winding up of Fannie Mae, as the case may be, in proportion to their respective dividend 

rates or amounts or liquidation prices, without preference or priority, one over the other. 

10. Transfer Agent, Dividend Disbursing Agent and Registrar. 

Fannie Mae hereby appoints Computershare Trust Company, N.A., as its initial transfer agent, 

dividend disbursing agent and registrar for the Series S Preferred Stock. Fannie Mae may at any time 

designate an additional or substitute transfer agent, dividend disbursing agent and registrar for the Series 

S Preferred Stock. 

11. Notices. 

Any notice provided or permitted by this Certificate of Designation to be made upon, or given or 

furnished to, the Holders of Series S Preferred Stock by Fannie Mae shall be made by first-class mail, 

postage prepaid, to the addresses of such Holders as they appear on the books and records of Fannie Mae 

or by other written or electronic means to designated accounts of such Holders. Such notice shall be 

deemed to have been sufficiently made upon deposit thereof in the United States mail or electronic 

transmission to a designated account of the Holder. Notwithstanding anything to the contrary contained 

herein, in the case of the suspension of regular mail service or by reason of any other cause it shall be 

impracticable, in Fannie Mae’s judgment, to give notice by mail, or if Fannie Mae has reason to believe 

other notification means would be ineffective, then such notification may be made, in Fannie Mae’s 

discretion, by publication in a newspaper of general circulation in The City of New York or by hand 

delivery to the addresses of Holders as they appear on the books and records of Fannie Mae. 

Receipt and acceptance of a share or shares of the Series S Preferred Stock by or on behalf 

of a Holder shall constitute the unconditional acceptance by such Holder (and all others having 

beneficial ownership of such share or shares) of all of the terms and provisions of this Certificate of 

Designation. No signature or other further manifestation of assent to the terms and provisions of 

this Certificate of Designation shall be necessary for its operation or effect as between Fannie Mae 

and the Holder (and all such others). 
280,000,000 Shares 

Fixed-to-Floating Rate Non-Cumulative 

Preferred Stock, Series S 

(stated value $25 per share) 

________________ 

OFFERING CIRCULAR 

________________ 

LEHMAN BROTHERS 

MERRILL LYNCH & CO. 

________________ 

GOLDMAN, SACHS & CO. 

JPMORGAN 

________________ 

BANC OF AMERICA SECURITIES LLC 

BEAR, STEARNS & CO. INC. 

CITI

DEUTSCHE BANK SECURITIES

MORGAN STANLEY

UBS INVESTMENT BANK

December 6, 2007