Fannie Mae Projects Demand for Mortgage Capital to Double Over the Next Decade

March 15, 2002

European Investment in Fannie Mae Securities Remains Strong

LONDON -- Franklin D. Raines, Chairman and Chief Executive Officer of Fannie Mae (FNM/NYSE)reported that the U.S. housing market continues to outperform other sectors of the economy and that the company has excellent prospects for long-term growth. Speaking at a press briefing in conjunction with the company's 18th annual debt and equity investor visit to the United Kingdom and Europe, Raines said that Fannie Mae's ability to meet the surge in consumer demand for housing capital last year helped the housing sector perform better than the economy, lift consumer confidence, ease the recession, and speed recovery.

"In 2001, the world economic and interest rate environment was the most volatile and challenging in a decade, yet Fannie Mae posted its single best year in history," Raines said. "As a central player in the U.S. housing finance system, Fannie Mae continues to provide a steady flow of funding and liquidity to mortgage lenders as well as to investors worldwide. Furthermore, our prospects for market and earnings growth are strong." Raines said to keep pace with the demand for mortgage capital, Fannie Mae and others in the industry would need to provide $11 to $14 trillion in mortgage financing over the next decade. To support that demand, Fannie Mae issues high-quality, liquid fixed-income investment products throughout the global capital markets, Raines said. These include Benchmark Notes® and Benchmark Bonds® as well as Benchmark BillsSM.

The company launched its Benchmark SecuritiesSM initiative in January 1998. Since then, Fannie Mae has issued 46 long-term Benchmark Notes and Benchmark Bonds as well as 32 re-openings for a total of $268.75 billion. This issuance, together with $11.7 billion in Benchmark Securities issued concurrent with three debt exchanges, brings the total outstanding Benchmark Notes and Benchmark Bonds to $258.62 billion. "European investors have purchased 13.5 percent of our noncallable Benchmark Notes and Benchmark Bonds," Raines added. Since July 2001, Fannie Mae has issued $13 billion in Callable Benchmark Notes in 13 different issues, and many new institutional investors -- both domestic and international -- have participated. "Callable Benchmark Notes, included in all major domestic and international bond indexes, provide investors the opportunity to enhance performance without reduction in credit quality," Raines said.

Fannie Mae estimates that it will bring to market approximately $225 billion in long-term debt during 2002, including more than $70 billion in Noncallable Benchmark Notes and Benchmark Bonds. Raines noted that the company's strong performance is also a result of operating in a reliable, simple business. "The markets for our mortgage-backed securities and debt securities are among the broadest, deepest, most transparent liquid markets in the world, and we manage interest rate and credit risk on just one asset, residential mortgages, in just one country," Raines said.

Moreover, he said, Fannie Mae makes more detailed financial disclosures than any large financial institution in America. "Fannie Mae's long standing commitment to cutting-edge disclosure and transparency stand out as a best-in-class model for corporate America," Raines said. These include strong oversight by the U.S. Department of Housing and Urban Development and the Office of Federal Housing Enterprise Oversight; independent surveillance ratings; issuance of subordinated debt; as well as extensive monthly, quarterly, and annual disclosures on business activities.

Having established the standard for safety and soundness practices and support of the housing market and economy, Raines said that going forward Fannie Mae is well aligned with U.S. government priorities. "Our business is not only a consumer priority, it's also a national policy priority," Raines said. "President Bush's Administration considers housing as one of the top domestic issues."

Source: Fannie Mae

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