310522--5/2/2007--FEDERAL_NATIONAL_MORTGAGE_ASSOCIATION_FANNIE

related topics

{condition, economic, financial}

{regulation, change, law}

{debt, indebtedness, cash}

{financial, litigation, operation}

{control, financial, internal}

{operation, natural, condition}

{product, market, service}

{capital, credit, financial}

{loss, insurance, financial}

{customer, product, revenue}

{system, service, information}

Material weaknesses and other control deficiencies relating to our internal controls 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. The lack of current financial and operating information about the company, along with the restatement of our consolidated financial statements and related events, have had, and likely will continue to have, a material adverse effect on our business and reputation. 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. Changes in interest rates could have a material adverse effect on our financial condition and our earnings. 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 would adversely affect our liquidity and our 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 business faces significant operational risks and an operational failure could materially adversely affect our business. 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. 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. 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. 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. 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--5/2/2007--FEDERAL_NATIONAL_MORTGAGE_ASSOCIATION_FANNIE_MAE