310522--12/6/2006--FEDERAL_NATIONAL_MORTGAGE_ASSOCIATION_FANNIE

related topics

{condition, economic, financial}

{product, market, service}

{financial, litigation, operation}

{regulation, change, law}

{debt, indebtedness, cash}

{operation, natural, condition}

{capital, credit, financial}

{loss, insurance, financial}

{customer, product, revenue}

{system, service, information}

Competition in the mortgage and financial services industries, and the need to develop, enhance and implement strategies to adapt to changing trends in the mortgage industry and capital markets, may adversely affect our business and earnings. The restatement of our consolidated financial statements and related events, including the lack of current financial and operating information about the company, have had, and likely will continue to have, a material adverse effect on our business and reputation. Changes in interest rates could materially impact our financial condition and our earnings. We have several key lender customers and the loss of business volume from any one of these customers could adversely affect our business, market share and results of operations. We are subject to credit risk relating to the mortgage loans that we purchase or that back our Fannie Mae MBS, and any resulting delinquencies and credit losses could adversely affect our financial condition and results of operations. We depend on our institutional counterparties to provide services that are critical to our business, and our financial condition and results of operations may be adversely affected by defaults by our institutional counterparties. Our ability to operate our business, meet our obligations and generate net interest income depends primarily on our ability to issue substantial amounts of debt frequently and at attractive rates. A decrease in our current credit ratings would have an adverse effect on our ability to issue debt on acceptable terms, which could adversely affect our liquidity and our results of operations. Our business is subject to laws and regulations that may restrict our ability to compete optimally. In addition, legislation that would change the regulation of our business could, if enacted, reduce our competitiveness and adversely affect our results of operations and financial condition. The impact of existing regulation on our business is significant, and both existing and future regulation may adversely affect our business. To meet HUD s new housing goals and subgoals, we enter into transactions that may reduce our profitability. Our business faces significant operational risks and an operational failure could materially adversely affect our business. The occurrence of a major natural or other disaster in the United States could increase our delinquency rates and credit losses or disrupt our business operations and lead to financial losses. In many cases, our accounting policies and methods, which are fundamental to how we report our financial condition and results of operations, require management to make estimates and rely on the use of models about matters that are inherently uncertain. We are subject to pending civil litigation that, if decided against us, could require us to pay substantial judgments, settlements or other penalties. RISKS RELATING TO OUR INDUSTRY Changes in general market and economic conditions in the United States and abroad may adversely affect our financial condition and results of operations. A decline in U.S. housing prices or in activity in the U.S. housing market could negatively impact our earnings and financial condition.

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310522--12/6/2006--FEDERAL_NATIONAL_MORTGAGE_ASSOCIATION_FANNIE_MAE