Fannie Mae Announces Third Subordinated Benchmark Notes--R-- Offering; Reopening of 6.25 Percent 10-Year Subordinated Benchmark Notes Due February 1, 2011.

Business Editors

WASHINGTON--(BUSINESS WIRE)--July 30, 2001

Fannie Mae 

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                                        10-Year
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Pricing Date                          August 1, 2001
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Settlement Date                       August 3, 2001 (with accrued
                                      interest from August 1, 2001)
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Original Settlement Date              February 1, 2001
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Original Term                         10 years
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Maturity Date                         February 1, 2011
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Current Outstanding Size              $1.5 Billion USD
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Reopening Amount                      $1.0-$1.5 Billion
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Payment Dates                         Each February 1st and August
                                      1st; February 1, 2002
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CUSIP                                 31359MGT4
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Listing                               Luxembourg Stock Exchange
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Credit Rating                         Moody's Aa2/
                                      Standard & Poor's AA-
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Bear Stearns & Co., Inc.; Goldman Sachs & Co.; and Merrill Lynch & Co. are the joint-lead managers. The co-managers are: Credit Suisse First Boston; First Tennessee Bank National Association; J.P. Morgan Securities, Inc.; Morgan Stanley & Co.; Redwood Securities Group, and Salomon Smith Barney.

There is a designated selling group comprised of the following: ABN AMRO Incorporated; Deutsche Banc Alex Brown, Inc., Lehman Brothers, Inc., UBS Warburg, and Williams Capital Group.

Fannie Mae expects to issue $12-15 billion in Subordinated Benchmark Notes(R) over the three year period ending at the close of 2003. Fannie Mae made a firm commitment to bring at least one new issue or reopening of Subordinated Benchmark Notes to market in each quarter during 2001. Thereafter, the company will issue at least semi-annually.

Subordinated debt will be issued in an amount that, together with core capital, equals or exceeds 4 percent of on-balance-sheet assets, after adjusting for capital required to support the off-balance-sheet mortgage securities business and adding back the allowance for losses. This level of outstanding subordinated debt is to be achieved by the end of a three-year phase in period.

Fannie Mae's Subordinated Benchmark Notes are distinguished from other types of subordinated debt by the existence of triggers for the deferral of interest payments. The terms of Fannie Mae's Subordinated Benchmark Notes call for interest deferral for up to five years, not to exceed the maturity of the issue, if either of two specific conditions of financial stress occur:

        Fannie Mae's core capital is below 125 percent of its critical
        capital requirement; or Fannie Mae's core capital is below its
        minimum capital requirement and, pursuant to the company's
        request, the U.S. Secretary of the Treasury exercises his or
        her discretionary authority under Section 304(c) of the
        company's Charter Act to purchase the company's debt
        obligations.

On March 31, 2001, Fannie Mae's core capital totaled $21.482 billion. Fannie Mae's critical capital on March 31, 2001, was $10.712 billion, so that on that date the company's core capital exceeded the first trigger of 125 percent of critical capital by $8.092 billion. Fannie Mae's minimum capital on March 31, 2001, was $21.033 billion, which was also below the company's core capital.

Capital levels as of March 31, 2001, are the latest capital numbers to be announced by the Office of the Federal Housing Enterprise Oversight (OFHEO). One of several conditions of the second trigger is a request by Fannie Mae that the Treasury purchases its securities. Such a request has never been made in the company's history.

Subordinated Benchmark Notes are unsecured subordinated obligations of Fannie Mae. The notes will rank junior in priority of payment to certain defined senior liabilities, which include senior debt securities and liabilities in respect of guarantees on mortgage-backed securities.

When evaluating Subordinated Benchmark Notes, it is important to recognize that, as in the case of other securities issued by Fannie Mae, Subordinated Benchmark Notes are not guaranteed by the United States government.

This announcement is neither an offer to sell nor a solicitation of offers to buy any of these securities. Any such offering will be made only by an offering circular and supplement thereto.

Fannie Mae's Universal Debt Facility Offering Circular is used for all of our debt securities settling upon original issuance on or after January 23, 2001. This offering document may be accessed via Fannie Mae's Web site at http:/www.fanniemae.com/markets/debt/offering_circulars.html.

The offering circular supplement for this offering of Subordinated Benchmark Notes can be obtained from any member of the underwriting syndicate.

Fannie Mae is a New York Stock Exchange company and the largest non-bank financial services company in the world. It operates pursuant to a federal charter and is the nation's largest source of financing for home mortgages.

Fannie Mae is working to shrink the nation's "homeownership gaps" through a $2 trillion "American Dream Commitment" to increase homeownership rates and serve 18 million targeted American families by the end of the decade. Since 1968, Fannie Mae has provided more than $3.0 trillion of mortgage financing for 38 million families.

More information about Fannie Mae can be found on the Internet at http://www.fanniemae.com.

Benchmark Securities is a service mark and Benchmark Notes is a registered mark of Fannie Mae. Unauthorized use of these marks is prohibited.

Style Usage: Fannie Mae's Board of Directors has authorized the company to operate as "Fannie Mae," and the company's stock is now listed on the NYSE as "Fannie Mae." In order to facilitate clarity and avoid confusion, news organizations are asked to refer to the company exclusively as "Fannie Mae."