Fannie Mae Introduces Investment Notes for the Individual Investor

May 10, 2001

WASHINGTON, DC - Fannie Mae (FNM/NYSE), the largest source of financing for home mortgages, today announced it will begin offering senior debt securities directed at the individual investor. The first issue of Fannie Mae Investment Notes will commence on May 14.

Fannie Mae expects to offer several issues of Investment Notes on a weekly basis, with original maturities of between 1 and 30 years and with various interest rates, interest payment dates, maturity dates and redemption provisions. The Notes will be offered at par with no accrued interest, and will be sold in minimum denominations of US$1,000, with US$1,000 multiples thereafter.

Timothy Howard, Fannie Mae's Executive Vice President and Chief Financial Officer, said "With the introduction of Investment Notes, Fannie Mae will provide the individual investor with a high credit-quality investment alternative."

According to Howard, Fannie Mae Investment Notes most often will have a call feature, which gives Fannie Mae the option of redeeming the Notes during a specified period prior to maturity. The Notes will not be redeemable at the option of holders of the Notes.

The offering period will start at the beginning of each week and close at the end of the week. The Notes will typically settle on the following Friday. Coupon rate and price are set at the beginning of the offering period.

As with Fannie Mae's other senior unsecured debt, the Investment Notes will carry a Aaa rating by Moody's and AAA rating by Standard and Poor's. When evaluating Investment Notes, it is important to recognize that, as in the case of other securities issued by Fannie Mae, Investment Notes are not guaranteed by the United States government. Investors should consult the Offering Circular, Offering Circular Supplement and applicable Pricing Supplement for a full description of the risk factors involved in purchasing the Notes.

Merrill Lynch & Co. is the lead manager for the offerings of Fannie Mae Investment Notes. Notes purchased from Merrill Lynch by the selling group may be resold to individual investors or to other dealers. The following securities dealers and dealer banks are currently authorized to sell Fannie Mae Investment Notes: A.G. Edwards & Sons, Inc.; Banc of America Securities LLC; Charles Schwab & Co., Inc.; Countrywide Securities Corporation; Dain Rauscher Inc.; Edward D. Jones & Co. L.P.; Fidelity Capital Markets; First Union Securities; Gruntal & Co., L.L.C.; Legg Mason Wood Walker, Inc.; McDonald Investments Inc.; Morgan Keegan & Co.; Pershing Division of DLJ Co.; Prudential Securities, Inc.; Quick & Reilly, Inc.; Raymond James & Associates, Inc.; UBS PaineWebber Inc.; and U.S. Bancorp Piper Jaffray. The selling group for Fannie Mae Investment Notes could expand in the future. Additional dealers and dealer banks added to the selling group will be listed on Fannie Mae's Web site.

General information about Investment Notes and Fannie Mae's Universal Debt Facility is also available on the company's Web site. Investors should contact Merrill Lynch or members of the selling group for additional information about Fannie Mae Investment Notes.

Source: Fannie Mae

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