We have been under guardianship, with the Federal Housing Finance Agency (“FHFA”) acting

as a curator, since September 6, 2008. As a curator, the FHFA succeeded to all rights,

titles, powers and privileges of the company and of any shareholder, officer or director of

society vis-à-vis society and its heritage. The curator has since provided

for the exercise of certain functions and powers by our Board of Directors. Our

directors owe their fiduciary duties of care and loyalty solely to the custodian. Thereby,

while we are in trusteeship, the Board of Directors owes no fiduciary duty to the Company or its

shareholders.

We don’t know when or how the conservatorship will end, what other changes will be made to our

business will be done during or after guardianship, what form we will have and what

interest, if any, that our current common and preferred shareholders will hold in us

after the conservatorship ends or if we will continue to exist after

guardianship. Members of Congress and the Administration continue to express the

the importance of reforming the housing finance system.

We are currently not permitted to pay dividends or other distributions to shareholders. Our

agreements with the US Department of Treasury (“Cash”) include a commitment of

Treasury to provide us with funds to maintain a positive net worth under specified conditions

conditions; However, the WE government does not guarantee our securities or other

obligations. Our agreements with Treasury also include clauses that significantly restrict

our business activities. For more information on guardianship, uncertainty

of our future, and our agreements with Treasurysee “Company-Conservation, Treasury

Housing Finance Agreements and Reform” and “Risk Factors-GSE and Guardianship Risk” in

our Form 10-K for the fiscal year ended December 31, 2021 (“Form 10-K 2021”).


You should read this Management's Discussion and Analysis of Financial Condition
and Results of Operations ("MD&A") in conjunction with our unaudited condensed
consolidated financial statements and related notes in this report and the more
detailed information in our 2021 Form 10-K. You can find a "Glossary of Terms
Used in This Report" in our 2021 Form 10-K.

The forward-looking statements contained in this report are based on management’s current expectations and are subject to important uncertainties and changes in circumstances, as described in the “Forward-Looking Statements” section. Future events and our future results may differ materially from those reflected in our forward-looking statements due to a variety of factors, including those discussed in the “Risk Factors” section and elsewhere in this report and in our 2021 Form 10-K.

Introduction


Fannie Mae is a leading source of financing for mortgages in the United States,
with $4.3 trillion in assets as of September 30, 2022. Organized as a
government-sponsored entity, Fannie Mae is a shareholder-owned corporation. Our
charter is an act of Congress, which establishes that our purposes are to
provide liquidity and stability to the residential mortgage market and to
promote access to mortgage credit. We were initially established in 1938.

Our revenues are primarily driven by guaranty fees we receive for assuming the
credit risk on loans underlying the mortgage-backed securities we issue. We do
not originate loans or lend money directly to borrowers. Rather, we work
primarily with lenders who originate loans to borrowers. We securitize those
loans into Fannie Mae mortgage-backed securities that we guarantee (which we
refer to as Fannie Mae MBS or our MBS).

Effectively managing credit risk is key to our business. In exchange for
assuming credit risk on the loans we acquire, we receive guaranty fees. These
fees take into account the credit risk characteristics of the loans we acquire.
Guaranty fees are set at the time we acquire loans and do not change over the
life of the loan. How long a loan remains in our guaranty book is heavily
dependent on interest rates. When interest rates decrease, a larger portion of
our book of business turns over as more loans refinance. On the other hand, as
interest rates increase, fewer loans refinance and our book turns over more
slowly. Since guaranty fees are set at the time a loan is originated, the impact
of any change in guaranty fees on future revenues depends on the rates at which
loans in our book of business turn over and new loans are added.

                  Fannie Mae Third Quarter 2022 Form 10-Q           1


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                                    MD&A | Executive Summary


Executive Summary

Summary of our financial performance

                    [[Image Removed: fnm-20220930_g1.jpg]]

• Net income increased $146 million in the third quarter of 2022 compared to the third quarter of 2021, mainly due to:

•higher portfolio income, primarily due to higher returns on assets in our Other Investments portfolio due to higher interest rates; and

•Higher base guarantee fee income due to an increase in the size of our guarantee portfolio and higher average guarantee fees billed.

These increases were partially offset by lower net amortization income as a
result of a higher interest rate environment in the third quarter of 2022, which
slowed refinancing activity driving lower prepayment volumes compared with the
third quarter of 2021.

•Net income decreased $2.4 billion for the third quarter of 2022 compared with
the third quarter of 2021, driven primarily by shifts to credit-related expense
and investment losses in the third quarter of 2022 from credit-related income
and investment gains in the third quarter of 2021.

• Credit-related spending in the third quarter of 2022 was driven primarily by lower actual and forecast home prices.

•The shift from investment gains in the third quarter of 2021 to investment
losses in the third quarter of 2022 was primarily driven by a significant
decrease in the volume of single-family loan sales coupled with lower loan sale
prices in the third quarter of 2022.

• Net worth increased to $58.8 billion of the September 30, 2022 of $56.4 billion of the June 30, 2022. The increase is attributable to $2.4 billion comprehensive income for the third quarter of 2022.

                  Fannie Mae Third Quarter 2022 Form 10-Q           2


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                                    MD&A | Executive Summary


                    [[Image Removed: fnm-20220930_g2.jpg]]

• Net income increased $299 million in the first nine months of 2022 compared to the first nine months of 2021, mainly due to:

•an increase in base guarantee fee income due to an increase in the size of our guarantee portfolio and higher average guarantee fees billed; and

•higher income from portfolios, primarily due to higher yields on assets in our
other investments portfolio as a result of increases in interest rates as well
as a decrease in interest expense on our funding debt due to a decrease in the
average outstanding balance.

These increases were partially offset by lower net amortization income as a
result of a higher interest rate environment in the first nine months of 2022,
which slowed refinancing activity driving lower prepayment volumes compared with
the first nine months of 2021.

•Net income decreased $5.5 billion in the first nine months of 2022 compared
with the first nine months of 2021, primarily driven by shifts to credit-related
expense and investment losses in the first nine months of 2022 from
credit-related income and investment gains in the first nine months of 2021,
partially offset by higher fair value gains.

•Credit-related expense in the first nine months of 2022 was primarily driven by
decreases in actual and forecasted home prices in the third quarter of 2022,
higher actual and projected interest rates, and provision relating to newly
acquired loans. These factors were partially offset by the benefit from actual
and forecasted home price growth in the first and second quarters of 2022.

•The shift from investment gains in the first nine months of 2021 to investment
losses in the first nine months of 2022 was primarily driven by a significant
decrease in the volume of single-family loan sales coupled with lower loan sale
prices in 2022.

•Fair value gains in the first nine months of 2022 were primarily driven by the
impact of rising interest rates and widening of the secondary spread on the fair
value of our mortgage commitment derivatives and long-term debt of consolidated
trusts held at fair value, partially offset by fair value losses on fixed-rate
trading securities.

• Net worth increased to $58.8 billion of the September 30, 2022 of $47.4 billion of the December 31, 2021. The increase is due to $11.5 billion
comprehensive income for the first nine months of 2022.

See "Consolidated Results of Operations" for more information on our financial
results for the third quarter and first nine months of 2022 compared with the
third quarter and first nine months of 2021.

                  Fannie Mae Third Quarter 2022 Form 10-Q           3


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                                    MD&A | Executive Summary


Financial Performance Outlook

Given the amount of credit-related expense we recognized in the first nine
months of 2022, we expect significant credit-related expense in 2022 compared
with significant credit-related income in 2021. We also expect much lower
amortization income in 2022 compared with 2021, driven by significantly less
refinancing activity in 2022 due to a higher mortgage interest-rate environment;
however, we expect this decline in amortization income to be largely offset by
increases in interest income from portfolios and base guaranty fee income. We
expect these factors to result in lower net income in 2022 compared with 2021.
See "Key Market Economic Indicators" for a discussion of how home prices,
interest rates and other macroeconomic factors can affect our financial results.

Liquidity provided in the first nine months of 2022

Through our single-family and multifamily business segments, we provided $580
billion in liquidity to the mortgage market in the first nine months of 2022,
enabling the financing of 2.2 million home purchases, refinancings and rental
units.

 Fannie Mae Provided $580 Billion in Liquidity in the First Nine Months of 2022

               Unpaid Principal Balance                      Units

                         $307B                               931K
                                                 Single-Family Home Purchases

                         $222B                               826K
                                                  Single-Family Refinancings

                         $51B                                435K
                                                   Multifamily Rental Units



We continued our commitment to green financing in the first nine months of 2022,
issuing a total of $7.3 billion in multifamily green MBS, $1.1 billion in
single-family green MBS, and $781 million in multifamily green
resecuritizations. We also issued $8.1 billion in multifamily social MBS and
$381 million in multifamily social resecuritizations in the first nine months of
2022. These green and social bonds were issued in alignment with our Sustainable
Bond Framework, which guides our issuances of green and social bonds that
support energy and water efficiency and housing affordability.

Legislation and regulations


The information in this section updates and supplements information regarding
legislative, regulatory, conservatorship and other developments affecting our
business set forth in "Business-Conservatorship, Treasury Agreements and Housing
Finance Reform" and "Business-Legislation and Regulation" in our 2021 Form 10-K,
as well as in "MD&A-Legislation and Regulation" in our Form 10-Q for the quarter
ended March 31, 2022 ("First Quarter 2022 Form 10-Q") and our Form 10-Q for the
quarter ended June 30, 2022 ("Second Quarter 2022 Form 10-Q"). Also see "Risk
Factors" in our 2021 Form 10-K and in this report for discussions of risks
relating to legislative and regulatory matters.

Proposed multi-family housing targets for 2023 and 2024

On August 18, 2022, FHFA published a proposed rule on the multifamily housing
goals for Fannie Mae and Freddie Mac for 2023 and 2024. The proposed rule would
establish a new methodology for measuring our multifamily housing goals. Rather
than measuring the multifamily housing goals based on a fixed number of units as
our 2022 goals require, the proposed rule for our 2023 and 2024 multifamily
housing goals would be based on the percentage share of the goal-eligible units
in our annual multifamily loan acquisitions that are affordable to each income
category. The proposed rule did not include any changes to the underlying
criteria that determine which multifamily units qualify for credit under the
housing goals.

                  Fannie Mae Third Quarter 2022 Form 10-Q           4

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                                 MD&A | Legislation and Regulation


The chart below sets forth the multifamily housing goals applicable to Fannie
Mae for 2022, as compared with FHFA's proposed multifamily housing goals for
2023 and 2024.

Multifamily Housing Goals
                                                                 Current Goals                                         Proposed Goals
                                                                      2022                                              2023 and 2024
                                                               (Number of units)                          (Percentage share of goal-eligible units)
Low-Income Goal (? 80% of area median income)(1)                      415,000                                                          61 %
Very Low-Income Subgoal (? 50% of area median                          88,000                                                          12

income)(2)

Small Multifamily (5-50 Units) Low-Income                              17,000                                                           2

Sub-objective(3)

(1) Affordable to low-income families, defined as families whose income is less than or equal to 80% of the region’s median income.

(2) Affordable to very low-income families, defined as families whose income is less than or equal to 50% of the region’s median income.

(3) Units in small multifamily properties (defined as properties with 5 to 50
units) affordable to low-income families, defined as families with incomes less
than or equal to 80% of area median income.

The proposed rule indicates that these benchmarks may be adjusted as needed in the final rule based on comments received and new information that becomes available before the final rule is published.

Comments on the proposed rule were due October 17, 2022. We submitted a comment
letter to FHFA relating to the proposed multifamily housing goals on October 14,
2022. As noted in our comment letter, we believe the new percentage share-based
methodology of the proposed rule will allow us to provide liquidity that
reflects the variable nature of the multifamily mortgage market, and that the
proposed benchmarks provide challenging, yet attainable, goals for us to support
affordable multifamily housing while maintaining safety and soundness.

As described in “Risk Factors – GSE and Custody Risk” in our 2021 Form 10-K, actions we may take to achieve our housing goals may increase our credit losses and credit-related expenses.

2021 Housing Goals and Duty to Serve Performance

In August 2022, FHFA notified us that it had preliminarily determined that we
met all of our single-family and multifamily housing goals for 2021. In October
2022, FHFA reported its determination that we complied with our 2021 duty to
serve requirements. See "Business-Legislation and Regulation-GSE-Focused
Matters" in our 2021 Form 10-K for more information regarding our 2021 housing
goals and duty to serve underserved markets.

Stress tests

Pursuant to an FHFA rule implementing a provision of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, each year we are required to conduct a
stress test, based on our data as of the prior December 31, using two different
scenarios of financial conditions provided by FHFA-baseline and severely
adverse-and to publish a summary of our stress test results for the severely
adverse scenario by August 15. We publish our stress test results on our
website. On August 11, 2022, we and FHFA published our 2022 stress test results
for the severely adverse scenario. Refer to our website and the FHFA website for
updated stress test information.

                  Fannie Mae Third Quarter 2022 Form 10-Q           5


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                                MD&A | Key Market Economic Indicators


Key market Economic indicators


Below we discuss how varying macroeconomic conditions can influence our
financial results across different business and economic environments. Our
forecasts and expectations are based on many assumptions, subject to many
uncertainties and may change, perhaps substantially, from our current forecasts
and expectations. For further discussion on housing activity, see "Single-Family
Business-Single-Family Mortgage Market" and "Multifamily Business-Multifamily
Mortgage Market."

                       Selected Benchmark Interest Rates
                     [[Image Removed: fnm-20220930_g3.jpg]]

(1) Refers to the WE Average weekly fixed rate mortgage rate based on the Freddie Mac® Primary Mortgage Market Survey. These rates are reported using the latest data available for a given period.

(2)According to Bloomberg.

(3) Refers to the daily rate according to Federal Reserve Bank of New York.

How interest rates can affect our financial results

•Net interest income. In a rising interest-rate environment, our mortgage loans
tend to prepay more slowly as borrowers are less incentivized or unable to
refinance. We amortize various cost basis adjustments over the life of the
mortgage loan, including those relating to loan-level price adjustments we
receive as upfront fees at the time we acquire single-family loans. As a result,
any prepayment of a loan results in an accelerated realization of those upfront
fees as income. Therefore, as loan prepayments slow, the accelerated realization
of amortization income also slows. Conversely, in a declining interest-rate
environment, our mortgage loans tend to prepay faster as borrowers are more
likely to refinance, typically resulting in the opposite trend of higher net
amortization income from cost basis adjustments on mortgage loans and related
debt. Interest rates also affect the amount of interest income we earn on our
assets. Our other investments portfolio and certain mortgage-related assets earn
more interest income in a higher interest-rate environment and less interest
income in a lower interest-rate environment. See "Consolidated Results of
Operations-Net Interest Income" for a discussion of how interest rate changes
impacted our financial results.

•Fair value gains (losses). We have exposure to fair value gains and losses
resulting from changes in interest rates, primarily through our mortgage
commitment derivatives and risk management derivatives, which we mark to market
through earnings. Fair value gains and losses on our mortgage commitment
derivatives fluctuate depending on how interest rates and prices move between
the time a commitment is opened and

                  Fannie Mae Third Quarter 2022 Form 10-Q           6


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                                MD&A | Key Market Economic Indicators


when it settles. The net position and composition across the yield curve of our
risk management derivatives changes over time. As a result, interest rate
changes (increases or decreases) and yield curve changes (parallel, steepening
or flattening shifts) will generate varying amounts of fair value gains or
losses in a given period.

•Credit-related income (expense). Increases in mortgage interest rates tend to
lengthen the expected lives of our loans as borrowers are less likely or unable
to refinance, which generally increases the expected impairment and provision
for credit losses on loans, particularly those modified in troubled debt
restructuring ("TDR") arrangements. Decreases in mortgage interest rates tend to
shorten the expected lives of our loans as borrowers are more likely to
refinance, which generally reduces the impairment and provision for credit
losses on such loans. See "Consolidated Results of Operations-Credit-Related
Income (Expense)" and "Note 1, Summary of Significant Accounting Policies" for
additional information on our adoption of Accounting Standards Update ("ASU")
2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt
Restructurings and Vintage Disclosures ("ASU 2022-02") on January 1, 2022,
resulting in the prospective discontinuation of TDR accounting, and its impact
on our financial results.

          Single-Family Quarterly Home Price Growth (Decline) Rate (1)

                     [[Image Removed: fnm-20220930_g4.jpg]]

(1)Calculated internally using property data on loans purchased by Fannie Mae,
Freddie Mac and other third-party home sales data. Fannie Mae's home price index
is a weighted repeat-transactions index, measuring average price changes in
repeat sales on the same properties. Fannie Mae's home price index excludes
prices on properties sold in foreclosure. Fannie Mae's home price estimates are
based on non-seasonally adjusted preliminary data and are subject to change as
additional data becomes available.

How home prices can affect our bottom line

•Actual and expected real estate prices affect our allowance or earnings for credit losses as well as the growth and size of our collateral portfolio.

•Changes in home prices affect the amount of equity that borrowers have in their
homes. Borrowers with less equity typically have higher delinquency and default
rates.

•As home prices increase, the severity of losses we incur on defaulted loans
that we hold or guarantee decreases because the amount we can recover from the
properties securing the loans increases. Declines in home prices increase the
losses we incur on defaulted loans.

•As home prices rise, the principal balance of loans associated with newly
acquired purchase money mortgages may increase, causing growth in the size of
our guaranty book. Additionally, rising home prices can increase the amount of
equity borrowers have in their home, which may lead to an increase in
origination volumes for cash-out refinance loans with higher principal balances
than the existing loan. Replacing existing loans with newly acquired cash-out
refinances can affect the growth and size of our guaranty book.

•Following a period of significant home price growth in 2021 and the first half
of 2022, home prices declined on a national basis in the third quarter of 2022,
driven by elevated mortgage interest rates which reduced affordability.

•We expect additional home price declines in the fourth quarter of 2022. As a
result, we expect home price growth on a national basis to moderate to 9.0% for
full year 2022, compared with 18.7% growth in 2021. We expect home price
declines on a national basis of 1.5% for full year 2023 driven by elevated
mortgage interest rates, a weakening economy and labor market, and affordability
constraints. We also expect regional variation in the timing and rate of home
price changes.

                  Fannie Mae Third Quarter 2022 Form 10-Q           7

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                                MD&A | Key Market Economic Indicators


                             New Housing Starts(1)
                     [[Image Removed: fnm-20220930_g5.jpg]]

(1) According to United States Census Bureau and subject to review.

How the housing business can affect our financial results

•Housing is among the most interest-rate sensitive sectors of the economy. In
addition to interest rates, two key aspects of economic activity that can impact
supply and demand for housing, and thus our business and financial results, are
the rates of household formation and housing construction.

•Household formation is a key driver of demand for both single-family and
multifamily housing as a newly formed household will either rent or purchase a
home. Thus, changes in the pace of household formation can affect home prices
and credit performance as well as the degree of loss on defaulted loans.

•Growth of household formation stimulates homebuilding. Homebuilding has
typically been a cyclical leader, weakening prior to a slowdown in U.S. economic
activity and accelerating prior to a recovery, which contributes to the growth
of gross domestic product ("GDP") and employment. However, the housing sector's
performance may vary from its historical precedent due to the many uncertainties
surrounding future economic or housing policy as well as the impact of labor and
material availability and cost on the economy and the housing market.

•A decline in housing starts results in fewer new homes being available for
purchase and potentially a lower volume of mortgage originations. Construction
activity can also affect credit losses through its impact on home prices. If the
growth of demand exceeds the growth of supply, prices will appreciate and impact
the risk profile of newly originated home purchase mortgages, depending on where
in the housing cycle the market is. A reduced pace of construction is often
associated with a broader economic slowdown and may signal expected increases in
delinquency and losses on defaulted loans.

•We expect home sales and single-family housing starts through the remainder of
2022 will continue to decline in response to elevated mortgage rates, diminished
home purchase affordability, and a stalling economy. Single-family housing
starts in the third quarter of 2022 fell in response to anticipated decreases in
demand. In 2023, we expect single-family and multifamily housing starts to
decline compared with 2022 due to the economic constraints of continued high
interest rates and an expected modest recession.

                  Fannie Mae Third Quarter 2022 Form 10-Q           8


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                                MD&A | Key Market Economic Indicators


                GDP, Unemployment Rate and Personal Consumption
                     [[Image Removed: fnm-20220930_g6.jpg]]

(1)Real GDP growth (decline) and personal consumption growth (decline) are based
on the quarterly series calculated by the Bureau of Economic Analysis and are
subject to revision.

(2)According to US Bureau of Labor Statistics and subject to review.

How GDP, unemployment rate and personal consumption can affect our bottom line

•Changes in GDP, the unemployment rate and personal consumption can affect
several mortgage market factors, including the demand for both single-family and
multifamily housing and the level of loan delinquencies, which impacts credit
losses.

•Economic growth is a key factor for the performance of mortgage-related assets.
In a growing economy, employment and income are typically rising, thus allowing
borrowers to meet payment requirements, existing homeowners to consider
purchasing and moving to another home, and renters to consider becoming
homeowners. Homebuilding typically increases to meet the rise in demand.
Mortgage delinquencies typically fall in an expanding economy, thereby
decreasing credit losses.

•In a slowing economy, income growth and housing activity typically slow as an
early indicator of reduced economic activity, followed by slowing employment.
Typically, as an economic slowdown intensifies, households reduce their
spending. This reduction in consumption then accelerates the slowdown. An
economic slowdown can lead to employment losses, impairing the ability of
borrowers and renters to meet mortgage and rental payments, thus causing loan
delinquencies to rise. Home sales and mortgage originations also typically fall
in a slowing economy.

•While GDP declined in the first half of 2022, GDP grew moderately in the third
quarter of 2022. We currently expect a GDP contraction in the fourth quarter of
2022, resulting in essentially flat GDP growth for 2022. We expect that a modest
recession is likely to occur beginning in the first quarter of 2023, resulting
in an increase in the unemployment rate. We expect our economic outlook will be
influenced by a number of factors that are subject to change, such as the
persistence of inflationary pressures, the speed at which expected monetary
policy tightening is adjusted and the increasing risk of international financial
market disruptions.

See "Risk Factors" in this report and "Risk Factors-Market and Industry Risk" in
our 2021 Form 10-K for further discussion of risks to our business and financial
results associated with interest rates, home prices, housing activity and
economic conditions.

                  Fannie Mae Third Quarter 2022 Form 10-Q           9


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                            MD&A | Consolidated Results of Operations


Consolidated operating results

This section discusses our condensed consolidated results of operations and should be read in conjunction with our condensed consolidated financial statements and accompanying notes.

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