Notes may have various terms, which include:

Notes may not be suitable investments for all investors. Certain Notes are complex financial instruments. You should not purchase Notes unless you understand, can evaluate and are able to bear all risks of an investment in the Notes. It is important that you read the "Risk Factors" section beginning on page 6, which discusses certain risks you should consider.

We primarily will sell Notes to one or more Dealers as principal. A Dealer may resell Notes to investors at fixed or varying prices as the Dealer determines. We also may sell Notes through certain Dealers on a non- underwritten basis, or directly to investors. The Dealers are named on page 38, and we may add other Dealers from time to time. The Notes are not expected to be listed on any securities exchange. We cannot assure you that there will be a secondary market for the Notes or how liquid the market will be if one develops.

We may withdraw, cancel or modify the offer of any Notes without notice.

We will supplement, supersede or replace all or a portion of the description of the Notes in this Offering Circular with a Pricing Supplement for each issue of Notes or with additional supplements or amendments. You should read the Pricing Supplement and any other supplement or amendment together with this Offering Circular.

We are not required to register the Notes under the Securities Act of 1933. Accordingly, we have not filed a registration statement with the U.S. Securities and Exchange Commission. The Notes are "exempted securities" within the meaning of the Securities Exchange Act of 1934. Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these Notes or determined if this Offering Circular, any Pricing Supplement or any other supplement or amendment is truthful or complete. Any representation to the contrary is a criminal offense.

This Offering Circular relates to the Notes and not to any other Fannie Mae securities that we have offered or will offer by a separate offering document. This Offering Circular replaces and supersedes the Offering Circular dated June 24, 1997 for issues of Notes settling upon original issuance on or after October 1, 1998.

* We often use capitalized terms in this Offering Circular. The index contained under "Location of Defined Terms" provides the page locations of the definitions of these terms.

We are "incorporating by reference" in this Offering Circular certain documents we publish from time to time. This means that we are disclosing information to you by referring you to those documents. Those documents are considered part of this Offering Circular, so you should read this Offering Circular, and any applicable supplements or amendments, together with those documents.

You should rely only on the information provided or incorporated by reference in this Offering Circular and any applicable supplement or amendment, and you should rely only on the most current information.

The following documents are incorporated by reference in this Offering Circular:

• the Information Statement dated March 31, 1998

• the Supplements dated May 15, 1998 and August 13, 1998 to that Information Statement

• any additional supplements to the current Information Statement, any subsequent Information Statement and supplements and any proxy statement published prior to the termination of this offering of the Notes

The Information Statement contains important financial and other information about Fannie Mae. We publish the Information Statement annually and update it from time to time to reflect quarterly and annual financial results and as we otherwise determine. The term "Information Statement" as used in this Offering Circular means the most recent Information Statement published while offers are being made under this Offering Circular, together with any supplements to that Information Statement.

You can read the Information Statement, proxy statements and other information about Fannie Mae at the offices of the New York Stock Exchange, the Chicago Stock Exchange and the Pacific Exchange. Since we are not subject to the periodic reporting requirements of the Securities Exchange Act of 1934, we do not file reports or other information with the U.S. Securities and Exchange Commission.

You can obtain copies of the Information Statement, all documents incorporated in this Offering Circular by reference and other information about us without charge from our Office of Investor Relations, Fannie Mae, 3900 Wisconsin Avenue, N.W., Washington, D.C. 20016 (telephone: (202) 752-7115).

You can obtain copies of this Offering Circular and any supplements or amendments from the Dealers where lawful to do so. In connection with the initial distribution of an issue of Notes, you also should obtain the applicable Pricing Supplement from the Dealers for the issue.

The following information is available from Fannie Mae by accessing our World Wide Web site at http://www.fanniemae.com or calling us at (800) 701-4791. We supply the information only for informational purposes. We may discontinue providing it at any time without notice. You should contact a Dealer or other appropriate securities dealer or bank to obtain the appropriate Offering Circular, Pricing Supplement and other information.

• The Offering Circular

• The Information Statement

• Pricing Supplements

• The current interest rate on Floating Rate Notes, Fixed/Floating Rates Notes and Indexed Notes (see also "Description of the Notes—Interest")

This summary highlights information contained elsewhere in this Offering Circular. It does not contain all of the information you should consider before investing in the Notes. You also should read the more detailed information in this Offering Circular and any applicable supplement or amendment, including the applicable Pricing Supplement for a particular issue of Notes.

Fannie Mae is a federally chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. §1716 et seq. (the "Charter Act"). See "Government Regulation and Charter Act" in the Information Statement. We are the largest investor in home mortgage loans in the United States. We were established in 1938 as a United States government agency to provide supplemental liquidity to the mortgage market and were transformed into a stockholder-owned and privately managed corporation by legislation enacted in 1968.

Fannie Mae provides funds to the mortgage market by purchasing mortgage loans from lenders, thereby replenishing their funds for additional lending. We acquire funds to purchase these loans by issuing debt securities to capital market investors, many of whom ordinarily would not invest in mortgages. In this manner, we are able to expand the total amount of funds available for housing.

Fannie Mae also issues mortgage-backed securities ("MBS"), receiving guaranty fees for our guarantee of timely payment of principal and interest on MBS certificates. We issue MBS primarily in exchange for pools of mortgage loans from lenders. The issuance of MBS enables us to further our statutory purpose of increasing the liquidity of residential mortgage loans.

In addition, Fannie Mae offers various services to lenders and others for a fee. These services include issuing certain types of MBS and providing technology services for originating and underwriting mortgage loans. See "Business" in the Information Statement.

Fannie Mae's principal office is located at 3900 Wisconsin Avenue, N.W., Washington, D.C. 20016 (telephone: (202) 752-7000).

Ratio of Earnings to Fixed Charges

This section describes certain risks with respect to the Notes.

• There may be additional risks and other ramifications not described below that relate to your investment in an issue of Notes.

• You should consult your own financial and legal advisors about:

• the risks of an investment in the Notes;

• the appropriate tools to analyze a possible investment in the Notes;

• the suitability of your investing in the Notes in light of your particular circumstances; and

• possible scenarios for economic, interest rate and other factors that may affect your investment.

 

• The risks described below depend on a number of factors. These factors may include financial, economic and political events that are beyond our control.

Fannie Mae and the Dealers disclaim any responsibility to advise you of any additional risks and investment considerations as they now exist or as they may change from time to time.

Suitability

Every Note is not a suitable investment for every investor.

• You should have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Offering Circular or an applicable supplement or amendment.

• You should have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of your particular financial situation, an investment in the Notes and the impact the Notes will have on your overall investment portfolio.

• You should have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes.

• You should understand thoroughly the terms of the Notes and be familiar with the behavior of relevant indices and financial markets.

• You should be able to evaluate (either alone or with the help of a financial advisor) possible scenarios for economic, interest rate and other factors that may affect your investment and your ability to bear the applicable risks.

• You should investigate whether there are any legal restrictions that may apply to your investment in the Notes.

Certain Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase complex Notes as stand-alone investments. They purchase complex Notes as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. You should not invest in complex Notes unless you have the expertise (either alone or with a financial advisor) to evaluate how the Notes will perform under changing conditions, the resulting effects on their value and the impact such an investment will have on your overall investment portfolio.

Structure Risks

We may issue Notes with a variety of structures that have significant risks not found with investments in conventional fixed rate, non-redeemable securities. The following information highlights some of these risks.

Notes with Principal or Interest Linked to an Index or Formula

We may issue Notes with principal or interest determined by reference to one or more interest rate indices, currencies or currency units (including exchange rates and swap indices between currencies or currency units) or other indices or formulas (collectively, an "Applicable Index"). You should be aware that:

• an Applicable Index may be subject to significant fluctuations;

• changes in an Applicable Index may not correlate with changes in interest rates, currencies or other indices;

• two or more indices or formulas that you expect will move in tandem or in some other relation to each other may not move the way you expect;

• an applicable currency may be devalued, revalued or replaced;

• exchange controls on an applicable currency may be imposed or modified;

• if an Applicable Index contains a Multiplier greater than one or contains some other leverage factor, the effect of changes in the Applicable Index on principal or interest payable likely will be magnified;

• an Applicable Index may be subject to maximum ("cap") or minimum ("floor") interest rate limitations; and

• the timing of changes in an Applicable Index may affect your actual yield, even if the average level is consistent with your expectations. (In general, the earlier the change in the Applicable Index, the greater the effect on yield.)

As a result of these and other factors:

• the market price of a Note may be very volatile;

• the resulting interest or principal payable may be less than that payable on a conventional debt security we issue at the same time;

• a Note that uses the same Applicable Index as a Note you purchase may perform better if the frequency of interest rate adjustments is different;

• you may receive no interest;

• payment of principal may occur at a different time than you expect; and

• you may lose all or a substantial portion of your principal.

Step Rate Notes bear interest at specified rates for specified periods. Although the interest rate on Step Rate Notes may increase on specified dates, the increased rate may be below the interest rate payable on a comparable debt security we issue at that time. On the other hand, if we may elect to redeem a Step Rate Note you own and the increased rate is higher than our cost of borrowing, there is a greater likelihood that we will redeem the Note.

Notes Subject to Optional Redemption by Fannie Mae

An optional redemption feature of Notes is likely to limit their market value. During any period when we can elect to redeem Notes, the Notes' market value generally will not rise substantially above the price at which we can redeem the Notes. This also may be true prior to any such period.

We may be expected to redeem Notes when our cost of borrowing is lower than the interest rate on the Notes. At such times, you generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed. The reinvestment may be at a significantly lower rate. You should consider reinvestment risk in light of other available investments.

Market, Liquidity and Yield Considerations

The Secondary Market Generally

Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be very liquid. Therefore, you may not be able to sell your Notes easily or at prices that will provide you with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that (1) are especially sensitive to interest rate, currency or market risks, (2) are designed for specific investment objectives or strategies or (3) have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities. Illiquidity may have a severely adverse effect on the market value of Notes.

A number of other factors (independent of our creditworthiness and the value of an Applicable Index) may affect the secondary market, and the market value, for an issue of Notes. These may include:

• the complexity and volatility of the Applicable Index;

• the method of calculating principal or interest;

• the time remaining until maturity;

• the outstanding principal amount;

• any redemption features;

• the amount of other securities linked to the same Applicable Index;

• the amount of Notes being sold in the secondary market from time to time;

• any legal restrictions limiting demand for the Notes;

• the availability of comparable securities; and

• the level, direction and volatility of interest rates generally.

You should not purchase Notes unless you understand and are able to bear the risk that (1) Notes may not be easy to sell, (2) the value of Notes will fluctuate over time and (3) fluctuations in value may be significant and could result in significant losses to you. This is particularly the case if your circumstances do not permit you to hold the Notes until maturity.

Notes Subject to Partial Redemption by Fannie Mae

If we redeem a portion of an issue of Notes, the market for the Notes left outstanding may not be very liquid.

Notes with Caps and Floors

The market values of Floating Rate Notes with caps or floors generally are more volatile than those of Floating Rate Notes linked to the same Applicable Index without caps or floors, especially when the Applicable Index approaches or passes the cap or floor.

Notes with a Multiplier or Other Leverage Factor

The market values of Floating Rate Notes with an Applicable Index containing a Multiplier greater than one or containing some other leverage factor generally are more volatile than market values for Floating Rate Notes linked to the same Applicable Index without such a Multiplier or other leverage factor.

Inverse Floating Rate Notes

Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upon an Applicable Index. The market values of inverse Floating Rate Notes typically are more volatile than market values of our conventional floating rate debt securities based on the same Applicable Index (and with otherwise comparable terms). Inverse Floating Rate Notes are more volatile because an increase in the Applicable Index not only decreases the interest rate of the Note, but also reflects an increase in prevailing interest rates, which further adversely affects the market value of the Notes.

Fixed/Floating Rate Notes

Some Fixed/Floating Rate Notes may bear interest at a rate that we may elect to convert from a fixed rate to a floating rate, or from a floating rate to a fixed rate. Our ability to convert the interest rate will affect the secondary market and the market value of the Notes since we may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If we convert from a fixed rate to a floating rate, the Spread may be less favorable than then prevailing spreads on our comparable floating rate debt securities tied to the same Applicable Index. In addition, the new floating interest rate at any time may be lower than the rates on our other debt securities. If we convert from a floating rate to a fixed rate, the fixed rate may be lower than then prevailing rates on our other debt securities.

Notes Eligible for Stripping

Some issues of Fixed Rate Notes and Step Rate Notes will be eligible to be separated ("stripped") into Interest Components and Principal Components. The secondary market, if any, for the Components may be more limited and have less liquidity than the secondary market for Notes of the same issue that have not been stripped. The liquidity of an issue of Notes also may be reduced if a significant portion of the Notes are stripped. See "Description of the Notes—Eligibility for Stripping" for more information on stripping.

Notes Issued at a Substantial Discount or Premium

The market values of securities issued at a substantial discount or premium from their principal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing securities. Generally, the longer the remaining term of such securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities. The market values of Zero-Coupon Notes, Interest Components and certain Principal Components would be expected to behave this way.

Exchange Rate Risks and Exchange Controls

As mentioned above, principal or interest on Notes may be determined by reference to one or more currencies or currency units (including exchange rates and swap indices between currencies or currency units). Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, you may receive less interest or principal than you expected, or no interest or principal.

Principal and interest on the Notes will be payable in U.S. dollars. This presents certain risks relating to currency conversions if your financial activities are denominated principally in another currency or currency unit ("Your Currency"). These include the risk that exchange rates may significantly change (including changes due to devaluation of the U.S. dollar or revaluation of Your Currency) and the risk that authorities with jurisdiction over Your Currency may impose or modify exchange controls. An appreciation in the value of Your Currency relative to the U.S. dollar would decrease (1) Your Currency-equivalent yield on the Note, (2) Your Currency-equivalent value of the principal payable on the Note, and (3) Your Currency-equivalent market value of the Note.

Legal Investment Considerations

The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. You should consult your legal advisors to determine whether and to what extent (1) Notes are legal investments for you, (2) Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to your purchase or pledge of any Note. Financial institutions should consult their legal advisors or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules.

If you are subject to the jurisdiction of any of the following agencies or a governmental agency with similar authority, you should review and consider that regulator's rules, guidelines, regulations and policy statements prior to purchasing or pledging Notes:

• The Comptroller of the Currency

• The Board of Governors of the Federal Reserve System

• The Federal Deposit Insurance Corporation

• The Office of Thrift Supervision

• The National Credit Union Administration

Certain independent credit rating agencies may assign credit ratings to Notes. The ratings may not reflect the potential impact of all risks related to structure, market, and additional factors discussed above, and other factors that may affect the value of the Notes.

We will prepare a Pricing Supplement to this Offering Circular for each issue of Notes (each a "Pricing Supplement"). The Pricing Supplement will describe specific terms, pricing information and other information for the issue of Notes. The applicable Pricing Supplement (or other supplement or amendment to this Offering Circular) may supersede or modify parts of the following description.

General

We may issue an unlimited amount of Medium-Term Notes, Series B (the "Notes") from time to time.

We will sell the Notes in one or more issues consisting of Notes having the same CUSIP number and (as applicable) the same interest rate or formula, Interest Payment Dates, Maturity Date, redemption provisions, amortization provisions, denominations and other variable terms referred to below.

We will issue the Notes in book-entry form on the book-entry system of the U.S. Federal Reserve Banks under a Fiscal Agency Agreement between us and the U.S. Federal Reserve Banks (collectively, the "Fiscal Agent"). We will establish the terms of certain issues of Notes pursuant to a Statement of Terms (each a "Statement of Terms").

Statements under this heading and in Pricing Supplements are subject to the detailed provisions of any applicable Statement of Terms or other document establishing the terms of an issue of Notes, and the Fiscal Agency Agreement. You can review copies of any applicable Statement of Terms or other document establishing the terms of an issue of Notes and the Fiscal Agency Agreement at our principal office in Washington, D.C. You also can review a copy of the Fiscal Agency Agreement at the Federal Reserve Bank of New York, 33 Liberty Street, New York, New York 10045.

Currency

The Notes will be denominated and payable only in U.S. dollars.

Denomination

We will issue Notes in minimum denominations of U.S. $10,000 original principal amount and additional increments of U.S. $1,000 original principal amount, or other denominations we specify in the applicable Pricing Supplement. (Denominations of Zero-Coupon Notes will be expressed in terms of the principal amount payable on the Maturity Date.)

Status

The Notes will be unsecured general obligations of Fannie Mae issued under Section 304(b) of the Charter Act. The Notes will not limit other indebtedness or securities that we may incur or issue. The Notes will not contain any financial or similar restrictions on us or any restrictions on our ability to secure other indebtedness.

The Notes, together with interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or of any agency or instrumentality thereof other than Fannie Mae.

Notes will not be issued under an indenture. There will be no trustee with respect to the Notes.

No Rights of Acceleration

The Notes will not contain any provisions permitting Holders to accelerate maturity of the Notes on the occurrence of any default or other event.

Maturity

Each Note will mature on a date (the "Maturity Date") one day or longer from its issue date, unless redeemed or unless the principal of an Amortizing Note is fully paid prior to such date. We will specify the Maturity Date in the applicable Pricing Supplement.

Except in the case of Amortizing Notes, the principal amount payable on the Maturity Date of a Note will be either:

• a fixed amount (the "Fixed Principal Repayment Amount") equal to 100% of the outstanding principal amount, or a specified amount above or below such principal amount; or

• an amount (the "Variable Principal Repayment Amount") determined by reference to one or more interest rate or exchange rate indices, or otherwise.

We may not redeem Notes prior to maturity, unless we specify otherwise in the applicable Pricing Supplement.

The most common form of redemption is redemption at our option. If we specify redemption at our option in the applicable Pricing Supplement, we may redeem all the Notes or a portion of the Notes from time to time. We may have the option to redeem the Notes on one or more specified dates, at any time on or after a specified date, or during one or more specified periods of time. The applicable Pricing Supplement will contain the redemption price, or describe the method of determining the redemption price. Holders will receive accrued and unpaid interest on the principal amount redeemed to the date fixed for redemption.

If we elect to redeem an issue of Notes, we will give notice to Holders of the Notes not less than 10 days prior to the date of redemption in the manner described under "Description of the Notes— Notices."

We may specify in the applicable Pricing Supplement that an issue of Notes will be subject to mandatory redemption by us, in whole or from time to time in part, upon terms and at prices described in the Pricing Supplement. We will give no notice to Holders of mandatory redemption.

If we redeem a portion of an issue of Notes, we will redeem a pro rata portion of the then outstanding principal amount of each Note of the issue.

In certain circumstances and if so specified in the applicable Pricing Supplement, we may issue Notes that are redeemable at the option of the Holders, upon terms and procedures described in the applicable Pricing Supplement.

Interest

Notes may bear interest at one or more fixed rates or floating rates or may not bear interest. We will specify in the applicable Pricing Supplement whether a Note is a Fixed Rate Note, a Step Rate Note, a Floating Rate Note, a Fixed/Floating Rate Note or a Zero-Coupon Note.

• "Fixed Rate Notes" are Notes that bear interest at a fixed rate.

• "Step Rate Notes" are Notes that bear interest at specified fixed rates for specified periods.

• "Floating Rate Notes" are Notes that bear interest at a floating rate determined by reference to one or more interest rate indices, or otherwise.

• "Fixed/Floating Rate Notes" are Notes that bear interest at a fixed rate for one or more periods and at a floating rate for one or more other periods or Notes that bear interest at a rate that we may elect to convert from a fixed rate to a floating rate or from a floating rate to a fixed rate.

• "Zero-Coupon Notes" are Notes that do not bear interest and are issued at a discount to their principal amount.

We will specify in the applicable Pricing Supplement when interest will be paid on the related Notes. We will pay interest in arrears on the Interest Payment Dates specified in the applicable Pricing Supplement (each an "Interest Payment Date") and on the Principal Payment Date. Zero-Coupon Notes will not bear interest.

Each issue of interest-bearing Notes will bear interest from and including the most recent Interest Payment Date or, if no interest has been paid or made available for payment on such issue of Notes, from and including the issue date of such issue of Notes (or such other date specified in the applicable Pricing Supplement) to but excluding the applicable Interest Payment Date or the applicable Principal Payment Date. In this Offering Circular, we refer to each such period as an "Interest Period."

In this Offering Circular, we refer to the Maturity Date or any earlier date of redemption or principal repayment of an issue of Notes as the "Principal Payment Date" with respect to the principal repayable on such date. No interest on the principal of any Note will accrue on or after the Principal Payment Date.

Interest on any Note accrues on the then outstanding principal amount. Payments on Notes will be rounded to the nearest cent (with one-half cent rounded upwards).

If any jurisdiction imposes a withholding or other tax on a payment on any Note, we will not be obligated to pay additional interest or other amounts, or to redeem the Notes prior to maturity.

Interest rates or yields with respect to Notes may differ depending upon, among other things, the principal amount of Notes the applicable Dealer expects to sell to an investor in a single transaction and the price at which the Dealer purchases the Notes from us (or, in connection with sales on a non- underwritten basis, the Dealer's commission). We may offer Notes with similar terms but different interest rates, or Notes with different variable terms, concurrently to different investors.

Fixed Rate Notes

We will specify in the applicable Pricing Supplement the fixed interest rate per annum payable on Fixed Rate Notes. Interest on a Fixed Rate Note will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

Step Rate Notes

We will specify in the applicable Pricing Supplement the fixed interest rate per annum payable on Step Rate Notes for each period. Interest on a Step Rate Note will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

Floating Rate Notes

Floating Rate Notes may bear interest at a floating rate determined by reference to one or more interest rate indices, or otherwise, (1) plus or minus a Spread, if any, or (2) multiplied by a Multiplier, if any, in each case as specified in the applicable Pricing Supplement. Floating Rate Notes also may bear interest in any other manner described in the applicable Pricing Supplement.

"Spread" means a constant or variable amount to be added to or subtracted from the relevant index. "Multiplier" means a constant or variable number (which may be greater or less than 1) by which the relevant index will be multiplied. "Index Maturity" means the period to maturity of the instrument or obligation as to which the relevant index will be calculated.

Floating Rate Notes also may have either or both of the following:

• a maximum interest rate limitation, or "cap," on the rate at which interest may accrue during any Interest Reset Period; and

• a minimum interest rate limitation, or "floor," on the rate at which interest may accrue during any Interest Reset Period.

We will specify in the applicable Pricing Supplement the accrual method (i.e., the day count convention) for calculating interest or any other relevant accrual factor on the related Floating Rate Notes, which may incorporate one or more of the following defined terms. (The numbers in the denominators of the following terms refer to the number of days in a year or an assumed year, as applicable.)

• "Actual/360" means a calculation on the basis of the actual number of days elapsed divided by 360.

• "Actual/365 (Fixed)" means a calculation on the basis of the actual number of days elapsed divided by 365, regardless of whether accrual or payment occurs during a leap year.

• "Actual/Actual (Accrual Basis)" means a calculation on the basis of the actual number of days elapsed divided by 365, or 366 if the day for which interest is being calculated falls in a leap year.

• "Actual/Actual (Payment Basis)" means a calculation on the basis of the actual number of days elapsed divided by 365, or 366 if the applicable Interest Payment Date falls in a leap year.

• the interest rate in effect on the sixth Business Day preceding an Interest Payment Date or the Principal Payment Date will be the interest rate for the remainder of that Interest Period; and

• the first day of each Interest Period also will be a "Reset Date." (Floating Rate Notes may bear interest prior to the initial Reset Date at an initial interest rate specified in the applicable Pricing Supplement. If so, then the first day of the initial Interest Period will not be a Reset Date.)

• If the Federal Funds Rate (Weekly Average) is an applicable interest rate index for a Note, the rate of interest for each day in an Interest Reset Period will be determined as of a date indicated under "Description of the Notes—Interest—Floating Rate Notes—Indices—Federal Funds Rates—Federal Funds Rate (Weekly Average)."

• If the Treasury Bill Rate is an applicable interest rate index for a Note, the rate of interest for each day in an Interest Reset Period will be determined as of a date indicated under "Description of the Notes—Interest—Floating Rate Notes—Indices—Treasury Bill Rate."

• For all other interest rate indices, the rate of interest for each day in an Interest Reset Period will be determined as of the applicable Determination Date. The "Determination Date" will be:

• for the Federal Funds Rate (Daily), the applicable Reset Date;

• for LIBOR, the LIBOR Determination Date; and

• for the Prime Rate, the Prime Rate Determination Date.

Example. An interest rate of 3.12345% would be expressed in decimal format as .0312345. Assuming a year of 360 days, the applicable interest rate would be calculated by dividing .0312345 by 360 resulting in an accrual factor of .0000868 for one day.

Example. 3.123445% would be expressed as 0.03123445, which would be rounded to 0.0312345 (which is equivalent to 3.12345%).

If the format of a page, screen, display, press release or other source related to an index to be used in determining the rate of interest on a Note changes but, in the discretion of the Calculation Agent, the source continues to disclose the information necessary to determine such rate substantially as described under "Description of the Notes—Interest—Floating Rate Notes—Indices" or in the applicable Pricing Supplement, the procedure for obtaining information from the source shall be deemed to be amended as determined by the Calculation Agent. See also "Description of the Notes—Corrections."

The Calculation Agent's determination of the interest rate on Floating Rate Notes will be final and binding on all parties, absent manifest error. The "Calculation Agent" will be Fannie Mae or a bank or broker-dealer that we designate. We will be the initial Calculation Agent unless specified otherwise in the applicable Pricing Supplement.

Indices

General

The interest rate on Floating Rate Notes may be determined by reference to the following indices. We will specify the applicable interest rate index in the Pricing Supplement for an issue of Notes. Only the provisions contained in this "Indices" section under the heading of the applicable interest rate index so specified will apply to the related Notes.

• With respect to each index, the primary source for determining the rate is listed first. The remaining sources are "back-ups" to the primary source and are listed in descending order of priority.

• All rates referenced under the headings "Federal Funds Rates" and "LIBOR" will be obtained from sources expressed as a percentage rate per annum. All other rates will be obtained from sources expressed as described in the respective sections.

• All times, other than those referenced under the heading "LIBOR," refer to New York City time. The times referenced under the heading "LIBOR" refer to London time, except as otherwise specified.

• Several sources for indices are pages or screens provided by Bridge Information Systems, Inc. ("Bridge") and Reuter Monitor Money Rates Service ("Reuters"). If a page or screen, or its provider, is replaced, the Calculation Agent will select the appropriate successor page, screen or provider, if any.

Federal Funds Rates

Federal Funds Rate (Daily)

The "Federal Funds Rate (Daily)" means, with respect to any Reset Date:

(1) the rate that appears, at 11:00 a.m. on the Reset Date, on Telerate Page 120 under the caption "FED FUNDS EFFECTIVE" and the column heading "EFF" for the Business Day preceding the Reset Date;

(2) if a rate does not so appear, then the Federal Funds Rate (Daily) will be the rate that appears, at 11:00 a.m. on the Reset Date, on Reuters NYAA Page for the Business Day preceding the Reset Date;

(3) if a rate does not so appear, the Calculation Agent will request five leading brokers of federal funds transactions in The City of New York selected by the Calculation Agent (after consultation with Fannie Mae, if Fannie Mae is not then acting as Calculation Agent) to provide a quotation of such broker's effective rate for transactions in overnight federal funds arranged by such broker settling on the Business Day preceding the Reset Date. If at least three quotations are provided, then the Federal Funds Rate (Daily) will be the arithmetic mean determined by the Calculation Agent of the quotations obtained (and, if five quotations are provided, eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or in the event of equality, one of the lowest));

(4) if fewer than three quotations are so provided, then the Calculation Agent will request five leading brokers of federal funds transactions in The City of New York selected by the Calculation Agent (after consultation with Fannie Mae, if Fannie Mae is not then acting as Calculation Agent) to provide a quotation of such broker's rate for the last transaction in overnight federal funds arranged by such broker as of 11:00 a.m. on the Business Day preceding the Reset Date. If at least three quotations are provided, then the Federal Funds Rate (Daily) will be the arithmetic mean determined by the Calculation Agent of the quotations obtained (and, if five quotations are provided, eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or in the event of equality, one of the lowest)); and

(5) if fewer than three quotations are so provided, then the Federal Funds Rate (Daily) will be the Federal Funds Rate (Daily) determined for the immediately preceding Reset Date. If the applicable Reset Date is the first Reset Date, then the Federal Funds Rate (Daily) will be the daily federal funds rate that appeared, at 11:00 a.m. on the most recent Business Day preceding the Reset Date for which such rate was displayed, on either Telerate Page 120 under the caption "FED FUNDS EFFECTIVE" and the column heading "EFF" or Reuters Screen NYAA Page (and, if such rate appears on both screens on such Business Day, using Telerate Page 120).

Federal Funds Rate (Weekly Average)

The "Federal Funds Rate (Weekly Average)" means, with respect to any Reset Date:

(1) the rate published in the latest H.15(519) available at 11:00 a.m. on the Reset Date, opposite the caption "Federal funds (effective)" and under the caption "Week Ending" for the Friday immediately preceding the Reset Date. (As described in the footnotes to the H.15(519), the rate shown for the week ending on a Friday preceding a Reset Date actually will be the rate for the week ending on (and including) the Wednesday preceding the Reset Date (the "Seven-Day Period").);

(2) if a rate is not so published, then the Federal Funds Rate (Weekly Average) will be the arithmetic mean determined by the Calculation Agent of the rate, determined in the manner described in subclauses (y) and (z) below (as applicable), for each day in the Seven-Day Period (each a "Day Rate"), provided that the Calculation Agent determines a Day Rate for each day in the Seven-Day Period;

(y) The Day Rate for a Business Day will be the rate that appears, at 11:00 a.m. on the Reset Date, on Telerate Page 120 under the caption "FED FUNDS EFFECTIVE" and the column heading "EFF" for such Business Day. If a rate for such Business Day does not appear on Telerate Page 120 at 11:00 a.m. on the Reset Date, the Calculation Agent will request five leading brokers of federal funds transactions in The City of New York selected by the Calculation Agent (after consultation with Fannie Mae, if Fannie Mae is not then acting as Calculation Agent) to provide a quotation of such broker's rate for the last transaction in overnight federal funds arranged by such broker as of 11:00 a.m. on such Business Day. If at least three quotations are provided, then the Day Rate will be the arithmetic mean determined by the Calculation Agent of the quotations obtained (and, if five quotations are provided, eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or in the event of equality, one of the lowest)); and

(z) The Day Rate for a day other than a Business Day will be the rate for the preceding Business Day, whether or not the Business Day falls within such Seven-Day Period, determined in accordance with the provisions of subclause (y) above; and

(3) if the Day Rate for each day in the Seven Day Period is not so determined, then the Federal Funds Rate (Weekly Average) will be the Federal Funds Rate (Weekly Average) determined for the immediately preceding Reset Date. If the applicable Reset Date is the first Reset Date, then the Federal Funds Rate (Weekly Average) will be the rate published in the latest H.15(519) available at 11:00 a.m. on the Reset Date, opposite the caption "Federal funds (effective)" and under the caption "Week Ending" for the Friday most recently preceding the Reset Date.

Please note that the Federal Funds Rate (Weekly Average) as published in the H.15(519) is a weekly average, while the Federal Funds Rate (Weekly Average) as calculated under clause (2) is based on an average of daily rates.
Federal Funds Rate Definitions

• "H.15(519)" means the official weekly statistical release designated as the H.15(519), published by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). We understand that the Federal Reserve Board's current method of official publication is by hard copy release, although the Federal Reserve Board does provide unofficial rates through its World Wide Web site and possibly other means.

• "Reuters NYAA Page" means the display designated as page "NYAA" on Reuters.

• "Telerate Page 120" means the display designated as "Page 120" provided by Bridge.

LIBOR

"LIBOR" means, with respect to any Reset Date:

(1) the rate that appears, at 11:00 a.m. on the LIBOR Determination Date, on Telerate Page 3750 under the caption "USD" for Deposits in U.S. dollars having the Index Maturity;

(2) if a rate does not so appear, then LIBOR will be the rate that appears, at 11:00 a.m. on the LIBOR Determination Date, on Reuters ISDA Page under the caption "USD LONDON" for Deposits in U.S. dollars having the Index Maturity;

(3) if a rate does not so appear, then the Calculation Agent will request the principal London offices of five leading banks in the London interbank market selected by the Calculation Agent (after consultation with Fannie Mae, if Fannie Mae is not then acting as Calculation Agent) to provide such bank's offered quotation to prime banks in the London interbank market for Deposits in U.S. dollars having the Index Maturity as of 11:00 a.m. on the LIBOR Determination Date and in a Representative Amount. If at least three quotations are provided, then LIBOR will be the arithmetic mean determined by the Calculation Agent of the quotations obtained (and, if five quotations are provided, eliminating the highest quotation (or in the event of equality, one of the highest) and the lowest quotation (or in the event of equality, one of the lowest));

(4) if fewer than three quotations are so provided, then the Calculation Agent will request five major banks in The City of New York selected by the Calculation Agent (after consultation with Fannie Mae, if Fannie Mae is not then acting as Calculation Agent) to provide such bank's offered quotation to leading European banks for loans, commencing on the applicable Reset Date, in U.S. dollars having the Index Maturity as of approximately 11:00 a.m. (New York City time) on the LIBOR Determination Date and in a Representative Amount. If at least three quotations are provided, then LIBOR will be the arithmetic mean determined by the Calculation Agent of the quotations obtained (and, if five quotations are provided, eliminating the highest quotation (or in the event of equality, one of the highest) and the lowest quotation (or in the event of equality, one of the lowest)); and

(5) if fewer than three quotations are so provided, then LIBOR will be LIBOR determined for the immediately preceding Reset Date. If the applicable Reset Date is the first Reset Date, then LIBOR will be the rate for deposits in U.S. dollars having the Index Maturity that appeared, as of 11:00 a.m. on the most recent London Banking Day preceding the LIBOR Determination Date for which such rate was displayed, on either Telerate Page 3750 or Reuters ISDA Page with respect to deposits commencing on the second London Banking Day following such date (and, if such rate appears on both screens on such London Banking Day, using Telerate Page 3750).

LIBOR Definitions

• "Deposits" means deposits commencing on the applicable Reset Date.

• "Reuters ISDA Page" means the display designated as page "ISDA" on Reuters.

• "Telerate Page 3750" means the display designated as "Page 3750" provided by Bridge.

• "LIBOR Determination Date" means the second London Banking Day preceding the applicable Reset Date.

• "London Banking Day" means any day on which commercial banks are open for business (including dealings in foreign exchange and deposits in U.S. dollars) in London.

• "Representative Amount" means a principal amount of not less than U.S. $1,000,000.

Prime Rate

The "Prime Rate" means, with respect to any Reset Date:

(1) the arithmetic mean determined by the Calculation Agent of the rates (after eliminating certain rates, as described below in this clause (1)) that appear, at 11:00 a.m. on the Prime Rate Determination Date, on Reuters USPRIME1 Page as the U.S. dollar prime rate or base lending rate of each bank appearing thereon, provided that at least three rates appear. In determining the arithmetic mean:

• if 20 or more rates appear, the highest five rates (or in the event of equality, five of the highest) and the lowest five rates (or in the event of equality, five of the lowest) will be eliminated,

• if fewer than 20 but 10 or more rates appear, the highest two rates (or in the event of equality, two of the highest) and the lowest two rates (or in the event of equality, two of the lowest) will be eliminated, or

• if fewer than 10 but five or more rates appear, the highest rate (or in the event of equality, one of the highest) and the lowest rate (or in the event of equality, one of the lowest) will be eliminated;

(2) if fewer than three rates so appear, then the Prime Rate will be the arithmetic mean determined by the Calculation Agent of the rates (after eliminating certain rates, as described below in this clause (2)) that appear, at 11:00 a.m. on the Prime Rate Determination Date, on Telerate Page 38 as the U.S. dollar prime rate or base lending rate of each bank appearing thereon, provided that at least three rates appear. In determining such arithmetic mean:
• if 20 or more rates appear, the highest five rates (or in the event of equality, five of the highest) and the lowest five rates (or in the event of equality, five of the lowest) will be eliminated,

• if fewer than 20 but 10 or more rates appear, the highest two rates (or in the event of equality, two of the highest) and the lowest two rates (or in the event of equality, two of the lowest) will be eliminated, or

• if fewer than 10 but five or more rates appear, the highest rate (or in the event of equality, one of the highest) and the lowest rate (or in the event of equality, one of the lowest) will be eliminated;

(3) if fewer than three rates so appear, then the Calculation Agent will request five major banks in The City of New York selected by the Calculation Agent (after consultation with Fannie Mae, if Fannie Mae is not then acting as Calculation Agent) to provide a quotation of such bank's U.S. dollar prime rate or base lending rate on the basis of the actual number of days in the year divided by 360 as of the close of business on the Prime Rate Determination Date. If at least three quotations are provided, then the Prime Rate will be the arithmetic mean determined by the Calculation Agent of the quotations obtained (and, if five quotations are provided, eliminating the highest quotation (or in the event of equality, one of the highest) and the lowest quotation (or in the event of equality, one of the lowest));

(4) if fewer than three quotations are so provided, the Calculation Agent will request five banks or trust companies organized and doing business under the laws of the United States or any state thereof, each having total equity capital of at least U.S. $500,000,000 and being subject to supervision or examination by federal or state authority, selected by the Calculation Agent (after consultation with Fannie Mae, if Fannie Mae is not then acting as Calculation Agent), to provide a quotation of such bank's or trust company's U.S. dollar prime rate or base lending rate on the basis of the actual number of days in the year divided by 360 as of the close of business on the Prime Rate Determination Date. (In making such selection of five banks or trust companies, the Calculation Agent will include each bank, if any, that provided a quotation as requested in clause (3) above and exclude each bank that failed to provide a quotation as requested in clause (3).) If at least three quotations are provided, then the Prime Rate will be the arithmetic mean determined by the Calculation Agent of the quotations obtained (and, if five quotations are provided, eliminating the highest quotation (or in the event of equality, one of the highest) and the lowest quotation (or in the event of equality, one of the lowest)); and

(5) if fewer than three quotations are so provided, then the Prime Rate will be the Prime Rate determined for the immediately preceding Reset Date. If the applicable Reset Date is the first Reset Date, then the Prime Rate will be the rate calculated pursuant to clause (1) or (2) for the most recent New York Banking Day preceding the Reset Date for which at least three rates appeared at 11:00 a.m. on either Reuters USPRIME1 Page or Telerate Page 38 (and, if rates appear on both screens on such New York Banking Day, using Reuters USPRIME1 Page).

Prime Rate Definitions

• "New York Banking Day" means any day other than (a) a Saturday, (b) a Sunday, (c) a day on which banking institutions in The City of New York are required or permitted by law or executive order to close or (d) a day on which the Federal Reserve Bank of New York is closed.

• "Prime Rate Determination Date" means the New York Banking Day preceding the applicable Reset Date.

• "Reuters USPRIME1 Page" means the display designated as page "USPRIME1" on Reuters.

• "Telerate Page 38" means the display designated as "Page 38" provided by Bridge.

Treasury Bill Rate

The "Treasury Bill Rate" means, with respect to any Reset Date:

(1) the auction average rate for direct obligations of the United States ("Treasury Bills") having the Index Maturity obtained from the most recent auction of Treasury Bills prior to the Reset Date (the "Reference T-Bill Auction") as announced by the United States Department of the Treasury in the form of a press release under the heading "Investment Rate" by 3:00 p.m. on such Reset Date;

(2) if such rate is not so announced, then the Treasury Bill Rate will be the auction average rate for Treasury Bills having the Index Maturity obtained from the Reference T-Bill Auction as otherwise announced by the United States Department of the Treasury by 3:00 p.m. on the Reset Date as determined by the Calculation Agent;

(3) if such rate is not so announced, the Calculation Agent will request five leading primary United States government securities dealers in The City of New York selected by the Calculation Agent (after consultation with Fannie Mae, if Fannie Mae is not then acting as Calculation Agent) to provide a quotation of such dealer's secondary market bid yield, as of 3:00 p.m. on such Reset Date, for Treasury Bills with a remaining maturity closest to the Index Maturity (or, in the event that the remaining maturity is equally close, the longer remaining maturity). If at least three quotations are provided, then the Treasury Bill Rate will be the arithmetic mean determined by the Calculation Agent of the quotations obtained (and, if five such quotations are provided, eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one of the lowest)); and

(4) if fewer than three quotations are so provided, the Treasury Bill Rate will be the Treasury Bill Rate for the immediately preceding Reset Date. If the applicable Reset Date is the first Reset Date, the Treasury Bill Rate will be the auction average rate for Treasury Bills having the Index Maturity from the most recent auction of Treasury Bills prior to the Reset Date for which such rate was announced by the United States Department of the Treasury in the form of a press release under the heading "Investment Rate".

The auction average rate for Treasury Bills and the secondary market bid yield for Treasury Bills will be obtained expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable (or, if not so expressed, will be converted by the Calculation Agent to such a bond equivalent yield).

Fixed/Floating Rate Notes

Fixed/Floating Rate Notes will bear interest at a fixed rate for one or more periods and at a floating rate for one or more other periods. Fixed/Floating Rate Notes also may bear interest at a rate that we may elect to convert from a fixed rate to a floating rate or from a floating rate to a fixed rate, as further described in the applicable Pricing Supplement. Except as provided in the following paragraph, see "Description of the Notes—Interest—Fixed Rate Notes" as to such fixed rates and "Description of the Notes—Interest—Floating Rate Notes" as to such floating rates.

If we can convert the interest rate on a Fixed/Floating Rate Note from a fixed rate to a floating rate, or from a floating rate to a fixed rate, accrued interest for each Interest Period generally will be calculated using an accrued interest factor in the manner described under "Description of the Notes— Interest—Floating Rate Notes."

Zero-Coupon Notes

Zero-Coupon Notes will not bear interest and will be issued at a price that is less than the principal amount payable on the Maturity Date. See also "United States Taxation—U.S. Persons—Notes Issued for Less Than Their Principal Amount."

Amortizing Notes

We may issue Notes on which there are periodic payments of principal during the term of the Notes ("Amortizing Notes"). The applicable Pricing Supplement for an Amortizing Note or other applicable supplement to this Offering Circular will describe how principal will be paid.

Amortizing Notes may bear interest at fixed or floating rates as described in the applicable Pricing Supplement, in an additional supplement to this Offering Circular or under "Description of the Notes— Interest" above.

Indexed Notes

We may issue Notes on which the amount of principal or interest (or both) payable will be determined by reference to the price or prices of specified commodities or stocks, to the exchange rate of one or more currencies or currency units (including swap indices between currencies or currency units) relative to one or more other currencies or currency units, to other prices or exchange rates, or in any other manner described in the applicable Pricing Supplement ("Indexed Notes"). The applicable Pricing Supplement will describe the method for determining the amount of principal and interest, if any, payable on Indexed Notes. In no event, however, will the effective rate of interest (determined on the basis of the actual number of days in the period and in the year) on an Indexed Note that bears interest at a floating rate exceed 24% per annum for any Interest Reset Period, regardless of the accrual method used to compute interest on the Indexed Note.

Corrections

All value inputs into indexing formulas, intermediate calculations, numbers resulting from any calculation, interest rates, interest factors, accrued interest factors, principal amounts or components used to determine principal or interest payable on an issue of Notes are subject to correction within 30 days from the applicable Interest Payment Date or Principal Payment Date. The source of a corrected value input must be the same page, screen, display, press release or other source from which the previously-used value input was obtained. A correction might result in an adjustment to an amount paid to a Holder.

Example. Assume that the applicable Pricing Supplement for a Floating Rate Note specifies the Federal Funds Rate (Daily) as the applicable interest rate index for determining the rate of interest payable on the Note. If the Federal Funds Rate (Daily) for a Reset Date is obtained from the Reuters NYAA Page in accordance with provision (2) on page 16, the rate may be superseded only by a corrected rate for such Reset Date obtained from the Reuters NYAA Page. The corrected rate would be used to determine the rate of interest payable in respect of such Floating Rate Note as of the applicable Interest Payment Date.
Business Day Convention

If an Interest Payment Date or Principal Payment Date is not a Business Day, we will pay the interest or principal on the next Business Day. In such a case, you will receive no interest on the delayed interest or principal payment for the period from and after the scheduled Interest Payment Date or Principal Payment Date to the actual date of payment.

"Business Day" means any day other than (1) a Saturday, (2) a Sunday, (3) a day on which the Federal Reserve Bank of New York is closed or (4) with respect to any payment on a Note, a day on which the U.S. Federal Reserve Bank maintaining the book-entry account relating to the Note is closed.

Further Issues

We may issue additional Notes with the same terms as previously issued Notes (other than the date of issuance, interest commencement date and offering price, which may vary) that will form a single issue with the previously issued Notes. We may issue such Notes from time to time and without the consent of any Holder of a Note.

Repurchases

We may purchase Notes at any price or prices in the open market or otherwise at any time. We may hold, sell or cancel such Notes.

Fed Book-Entry System

The Notes will be issued and maintained only on the book-entry system of the U.S. Federal Reserve Banks (the "Fed Book-Entry System").

The U.S. Federal Reserve Banks, as fiscal agents for Fannie Mae, will issue Notes in book-entry form, maintain book-entry accounts with respect to the Notes and make payments, on our behalf, of principal and interest on the Notes in U.S. dollars on the applicable payment dates by crediting Holders' accounts at the U.S. Federal Reserve Banks.

Regulations that currently govern the use of the Fed Book-Entry System for our securities issued in book-entry form and the pledging and transfer of interests in the securities are contained in 24 CFR Part 81, Subpart H, as amended from time to time (the "HUD Book-Entry Regulations"). The HUD Book-Entry Regulations apply to all Notes issued or maintained on the Fed Book-Entry System. The HUD Book-Entry Regulations may be modified, amended, supplemented, superseded, eliminated or otherwise altered without the consent of any Holder of Notes.

The accounts of Holders of Notes on the Fed Book-Entry System also are governed by applicable operating circulars and letters of the U.S. Federal Reserve Banks.

Title

The Notes may be held of record only by entities eligible to maintain book-entry accounts with a U.S. Federal Reserve Bank (the "Holding Institutions"). The entities whose names appear on the book-entry records of a U.S. Federal Reserve Bank as the entities to whose accounts Notes have been deposited are referred to as "Holders" of the Notes. A Holder is not necessarily the beneficial owner of the Note. Beneficial owners ordinarily hold Notes through one or more financial intermediaries, such as banks, brokerage firms and securities clearing organizations. A Holder that is not the beneficial owner, and each other financial intermediary holding one or more Notes directly or indirectly on behalf of the beneficial owner, will have the responsibility of establishing and maintaining accounts for their respective customers.

Beneficial owners of Notes may exercise their rights with respect to Fannie Mae and the U.S. Federal Reserve Banks only through the Holders of the Notes. Fannie Mae and the U.S. Federal Reserve Banks will have no obligation to a beneficial owner of a Note (unless the beneficial owner is also the Holder). The U.S. Federal Reserve Banks will act only upon the instructions of Holders in recording transfers of interests in Notes and will effect transfers of interests in Notes only to Holding Institutions. Fannie Mae and the U.S. Federal Reserve Banks may treat the Holders as the absolute owners of Notes for the purpose of making payments on the Notes and for all other purposes, whether or not the Notes are overdue and notwithstanding any notice to the contrary.

Payments

We will make payments of principal and interest on the Notes in U.S. dollars on the applicable payment dates to Holders as of the end of the day preceding the payment dates. See also "Description of the Notes—Business Day Convention." Payments on the Notes will be made by credit of the payment amount to the Holders' accounts at the U.S. Federal Reserve Banks. All payments to or upon the order of a Holder will be valid and effective to discharge the liability of Fannie Mae and the Fiscal Agent. The Holders and each other financial intermediary holding Notes directly or indirectly on behalf of beneficial owners will have the responsibility of remitting payments for the accounts of their customers. All payments on the Notes are subject to any applicable law or regulation.

Modification and Amendment

We may modify, amend or supplement the Statement of Terms of an issue of Notes (which would modify, amend or supplement the terms of the Notes), without the consent of Holders of any Notes, for any of the following purposes:

• to cure any ambiguity, or to cure, correct or supplement any defective provision in the Statement of Terms or, on matters or questions arising with respect to the issue of Notes, to make any other provision that is not inconsistent with the provisions of the Statement of Terms;

• to conform the Statement of Terms to, or to cure any ambiguity or discrepancy due to changes in, the Book-Entry Regulations or the Fiscal Agency Agreement or any regulation or document that the Book-Entry Regulations or the Fiscal Agency Agreement make applicable to our book-entry securities;

• to increase the amount of the issue of Notes; or

• in any manner that we may determine that will not adversely affect in any material way the interests of the Holders at the time of the modification, amendment or supplement.

In addition, either (1) with the written consent of the Holders of at least a majority of the aggregate then outstanding principal amount of an issue of Notes, excluding any Notes we own, or (2) by a resolution adopted at a meeting of Holders by the Holders of at least a majority of the aggregate then outstanding principal amount of an issue of Notes represented at such meeting, excluding any Notes we own, we may modify, amend or supplement the Statement of Terms of an issue of Notes to add any provisions or change in any manner or eliminate any provisions of the Notes or modify in any manner the rights of the Holders. However, without the written consent or affirmative vote of the Holder of the principal amount of a Note, no such modification, amendment or supplement may:
• change the Maturity Date of, or the due date of any installment of interest on, the Note;

• materially modify any redemption provisions relating to the redemption price of, or any redemption date or period for, the Note;

• reduce the principal amount of, or materially modify the rate of interest or the calculation of the rate of interest on, the Note; or

• reduce the percentage of the then outstanding principal amount of the issue of Notes of which the Note forms a part, the consent or affirmative vote of the Holders of which is necessary to modify, amend or supplement the related Statement of Terms.

A quorum at any meeting of Holders will be Holders entitled to vote a majority of the then outstanding aggregate principal amount of an issue of Notes, excluding any Notes we own. Holders need not approve the particular form of any proposed amendment. It will be sufficient if the consent or resolution approves the substance of the change.

Any instrument given by or on behalf of any Holder of a Note in connection with any consent to a modification, amendment or supplement will be irrevocable once given and will be conclusive and binding on all subsequent Holders of that Note. Except as set forth above, any modification, amendment or supplement of the terms of Notes will be conclusive and binding on all Holders of Notes, whether or not they have given consent or were present at any meeting.

Notices

We will give notices to Holders of Notes by broadcast through the communication system of the U.S. Federal Reserve Banks. Notice by broadcast will be considered given on the date of broadcast or, if broadcasted more than once, on the date of first broadcast. Instead of notice by broadcast, we may give notices to Holders in any reasonable manner that we determine. Notice by such other manner will be considered given on the date of dissemination or, if disseminated more than once, on the date of first dissemination. Failure to give notice or a defect in a notice to one Holder will not affect the validity of notice to other Holders.

Governing Law

The Notes (including our rights and obligations with respect to the Notes) will be governed by, and construed in accordance with, (i) regulations adopted by the U.S. Department of Housing and Urban Development or any other U.S. governmental body or agency, as from time to time in effect, that apply to our book-entry securities (the "Book-Entry Regulations"), currently the HUD Book-Entry Regulations, and (ii) to the extent the Book-Entry Regulations do not apply, the laws of the State of New York, U.S.A.

Fiscal Agent

The U.S. Federal Reserve Banks will be the fiscal agents for the Notes. The U.S. Federal Reserve Banks currently act as Fiscal Agent under an agreement with Fannie Mae, dated as of April 23, 1974, as amended and supplemented. Fannie Mae and the U.S. Federal Reserve Banks may amend, modify or supplement in any respect, or may terminate, substitute or replace, the Fiscal Agency Agreement without the consent of any Holder of Notes. Where we refer in this Offering Circular to the "Fiscal Agency Agreement," we mean the agreement in effect from time to time under which the U.S. Federal Reserve Banks act as the Fiscal Agent for the Notes. The U.S. Federal Reserve Banks act as fiscal agents for other debt securities issued by Fannie Mae. We have engaged in, and in the future may engage in, other business relationships with the U.S. Federal Reserve Banks.

In acting under the Fiscal Agency Agreement, the Fiscal Agent acts solely as our fiscal agent and does not assume any obligation or relationship of agency or trust for or with any Holder.

Eligibility for Stripping

We may designate certain issues of Fixed Rate Notes or Step Rate Notes (the "Eligible Notes") as eligible to be separated ("stripped") into their separate Interest Components and Principal Components on the book-entry records of the Federal Reserve Bank of New York (the "FRBNY"). We may designate Notes as Eligible Notes either at the time of original issuance or at any time thereafter until the Cut-off Date. We have no obligation, however, to designate any issue of Notes as eligible to be stripped into Components.

The components of an Eligible Note are:

• each future interest payment due on or prior to the Maturity Date or, if the Eligible Note is subject to redemption or principal repayment prior to the Maturity Date, the first date on which the Eligible Note is subject to redemption or repayment (in either case, the "Cut-off Date") (each an "Interest Component"); and

• the principal payment plus any interest payments due after the Cut-off Date (the "Principal Component").

The initial or final interest payment on a Note, however, will not be an Interest Component if the applicable Interest Period is shorter or longer than other Interest Periods, based on a 360-day year consisting of twelve 30-day months. In such case, the initial or final interest payment will remain with the Principal Component. Each Interest Component and Principal Component (each a "Component") will receive a CUSIP number.

To be stripped into Components, the principal amount of the Eligible Note must be in an amount that, based on the stated interest rate of the Eligible Note, will produce an interest payment of $1,000 or an integral multiple thereof on each Interest Payment Date for the Note. You currently may obtain the minimum principal amount required to strip an Eligible Note by calling our Treasurer's Office at (202) 752-7916. If a Note is eligible to be stripped upon original issuance, we generally will disclose in the applicable Pricing Supplement the minimum principal amount required to strip the Notes.

In some cases, Interest Components of two or more issues of Notes may be due on the same day. Such Interest Components may have the same or different CUSIP numbers. We currently expect that most Interest Components due on the same day (regardless of Note issue) will have the same CUSIP number. However, we may designate them to receive different CUSIP numbers. We also may designate at any time that Interest Components of issues of Notes originally issued on or after a specified time receive CUSIP numbers different than Interest Components of issues of Notes originally issued prior to such time.

A Holder of an Eligible Note currently may request that the Note be separated into its Components at any time from the date it becomes eligible to be stripped until the Cut-off Date. The Holder must make a request for separation to the FRBNY and comply with any requirements and procedures, including payment of applicable fees, if any, of the FRBNY then in effect.

The Components may be maintained and transferred on the book-entry system of the Federal Reserve Banks in integral multiples of $1,000. Payments on Components will be made in U.S. dollars on the applicable payment dates (or the following Business Day if payment on the related Note is made on the following Business Day as described under "Description of the Notes—Business Day Convention") by credit to the account at a U.S. Federal Reserve Bank of the Holding Institutions whose names appear on the book-entry records of U.S. Federal Reserve Banks as the entities to whose account such Components have been deposited ("Component Holders").

If any modification, amendment or supplement of the terms of an issue of Notes requires any consent of Holders, the consent for Notes that have been stripped will be provided by the Component Holders of Principal Components. Component Holders of Interest Components will have no right to give or withhold consent. See "Description of the Notes—Modification and Amendment."

Currently, at the request of a Component Holder holding a Principal Component and all applicable unmatured Interest Components, the FRBNY will restore ("reconstitute") the Principal Components of a stripped Note and the applicable unmatured Interest Components (all in appropriate amounts) to the Note in fully constituted form. The FRBNY charges a fee to reconstitute Notes. Generally, for purposes of reconstituting a Note, the Principal Component of an issue of Notes may be combined with either Interest Components of such issue or Interest Components, if any, with the same CUSIP numbers from other issues of Notes. Component Holders wishing to reconstitute Components into a Note also must comply with all applicable requirements and procedures of the FRBNY relating to the stripping and reconstitution of securities.

The preceding discussion is based on our understanding of the way the FRBNY currently strips and reconstitutes eligible securities on the Fed Book-Entry System. The FRBNY may cease stripping or reconstituting Eligible Notes or may change the way this is done or the applicable requirements, procedures or charges at any time without notice.

UNITED STATES TAXATION

The Notes and payments thereon generally are subject to taxation. Therefore, you should consider the tax consequences of owning and receiving payments on the Notes before acquiring them.

We have engaged Arnold & Porter as special tax counsel to review the following discussion. They have given us their written legal opinion that the discussion correctly describes the principal aspects of the U.S. federal tax treatment of beneficial owners ("Owners") of Notes.

The following discussion is general and may not apply to your particular circumstances for any of the following (or other) reasons:

• This summary is based on federal tax laws in effect as of the date of this Offering Circular. Changes to any of these laws after this date may affect the tax consequences described below.

• This summary discusses only Notes acquired by Owners at original issuance and held as capital assets (within the meaning of federal tax law). It does not discuss all of the tax consequences that may be relevant to Owners subject to special rules, such as banks, thrift institutions, real estate investment trusts, regulated investment companies, brokers and dealers in securities or currencies, certain securities traders and certain other financial institutions. This discussion also does not discuss tax consequences that may be relevant to an Owner in light of the Owner's particular circumstances, such as an Owner holding a Note as a position in a straddle, hedging, conversion or other integrated investment.

• The tax consequences of owning any Notes with special characteristics may be set forth in a Pricing Supplement.

• The Notes also are subject to taxes imposed by states and possessions of the United States and by local taxing authorities. If you reside in a state of the United States that imposes intangible property or income taxes, you should consult your own tax advisors as to the consequences of such laws.

Because the following discussion may not apply to you, we advise you to consult your own tax advisors regarding the tax consequences of purchasing, owning and disposing of Notes (or Interest or Principal Components), including the advisability of making any of the elections described below.

We sell many different types of Notes, and the federal income tax rules that will apply to a Note will depend both on the terms of that Note and who owns it. The following discussion first addresses an Owner who is a U.S. Person and some of the general rules applicable to the Notes we sell. This first section then discusses specific rules that apply to particular Notes. These rules are grouped under the following headings, which describe a particular term a Note may have or the circumstances under which it was acquired:

• Notes issued for less than their principal amount;

• Notes that we may redeem before maturity;

• Notes with a term of one year or less;

• Notes purchased for more than their issue price; and

• Notes purchased for less than their issue price.

Our discussion addressed to Owners who are U.S. Persons concludes with descriptions of an elective method of determining income on the Notes, the federal income tax consequences of selling or otherwise disposing of a Note and the rules that apply to Notes that have been stripped into Interest and Principal Components.

The final two sections of the following discussion describe some of the federal tax rules of particular interest to Owners that are not U.S. Persons and rules concerning our reporting to the U.S. Internal Revenue Service (the "IRS") income that Owners earn on a Note.

U.S. Persons

In General

For purposes of the following discussion, a "U.S. Person" means:

• a citizen or individual resident of the United States;

• a corporation or partnership created or organized in or under the laws of the United States or any political subdivision thereof;

• an estate the income of which is includible in its gross income for U.S. federal income tax purposes without regard to its source; or

• a trust if a court within the United States is able to exercise primary supervision over its administration and at least one United States person has the authority to control all substantial decisions of the trust.

If you are a U.S. Person and own a Note, income from that Note is subject to U.S. federal income taxation, and if you own the Note when you die, the Note will be included in your estate subject to U.S. federal estate tax.

Tax Status of Notes for Building and Loans, Savings Banks and REITs

The IRS has ruled that Fannie Mae is an instrumentality of the United States for purposes of section 7701(a)(19) of the federal income tax code. Therefore, domestic building and loan associations and savings banks may treat investments in our securities as part of the percentage of total assets they must invest in specified assets, which includes "stock or obligations of a corporation which is an instrumentality of the United States." Further, the IRS permits real estate investment trusts (REITs) to treat holdings of Fannie Mae securities as "government securities" for purposes of the requirement that 75 percent of the value of their total assets consists of real estate assets, cash and cash items (including receivables), and government securities.

Payments of Interest

Interest paid on a Note generally is taxable as ordinary interest income. You must report this income when it accrues or you receive it, depending on your method of accounting for U.S. federal income tax purposes. You may have to follow special reporting rules, however, if your Note has "original issue discount" ("OID"), as described in the following paragraphs.

Notes Issued for Less Than Their Principal Amount

If you purchase a Note at original issuance at a price below its principal amount, the federal tax laws generally treat the difference between the amount you paid and the Note's principal amount as OID. In addition, if you purchase at original issuance a Note that matures one year or less from its issuance date, that Note has OID as described below under "United States Taxation—U.S. Persons—Notes with a Term of One Year or Less." Rules in the federal tax laws (the "OID Regulations") define OID as the excess of the "stated redemption price at maturity" (defined below) of each such Note over its "issue price" (defined below) if such excess equals or exceeds a de minimis amount. If all of the principal to be paid on a Note is to be paid in a single payment, de minimis OID is defined as one-quarter of one percent of such Note's stated redemption price at maturity multiplied by the number of complete years to its maturity. The "stated redemption price at maturity" of a Note is the sum of all payments on the Note other than interest based on a fixed rate (or a variable rate, unless an applicable Pricing Supplement states otherwise) and payable unconditionally at least annually. The "issue price" of a Note is the first price at which a substantial amount of that issue of Notes is sold to the public for cash (ignoring sales to bond houses, underwriters, placement agents and other wholesalers).

If you own a Note with a de minimis amount of OID you must include any de minimis OID in income, as capital gain, on a pro rata basis as principal payments are made on the Note.

If your Note has more than de minimis OID, you must include the OID in income as it accrues, which may be before you receive cash attributable to such income. You must include OID in income using the yield to maturity of the Note (as defined in the OID Regulations), which is computed based on a constant annual rate of interest and compounding at the end of each accrual period. The OID Regulations permit you to use accrual periods of any length from one day to one year to compute accruals of OID, provided each scheduled payment of principal or interest occurs either on the first or the last day of an accrual period. Under these rules, you must include in income increasingly greater amounts of OID in successive accrual periods, unless payments that are part of the stated redemption price at maturity of a Note are made before its final maturity.

Different specific rules may apply to Floating Rate Notes that are subject to a maximum or minimum interest rate, Notes with a zero or reduced interest rate for an initial period, and certain other situations. Unless we describe these rules in an applicable Pricing Supplement, these other special rules will not apply to you.

Notes That We May Redeem Before Maturity

The OID Regulations contain additional rules that apply to Notes that we may redeem ("call") prior to their final maturity date. Under these rules, we will be presumed to exercise a call right if doing so would lower the yield to maturity of the callable Note. If we do not exercise the call right, the Note will be deemed reissued at the call price for purposes of determining subsequent accruals of interest and OID.

The rules concerning callable Notes are especially important for determining the treatment of "Step-Up Notes." Step-Up Notes are Step Rate Notes that are issued at par, have an initial fixed interest rate that increases to a higher fixed rate on a specified date, and are redeemable at par on the date the rate changes (including Notes that also may be redeemable prior to that date or that may increase to a higher fixed rate at a later date). Because the yield to maturity on Step-Up Notes would be lower if they were called prior to an increase in the stated interest rate, each issue of Step-Up Notes will be treated as maturing on the first permissible call date. If an issue of Step-Up Notes is not in fact called on that date, or is called only in part, the Step-Up Notes (to the extent of their remaining outstanding principal amount) will be deemed to be called and reissued at 100% of the then outstanding principal amount. The above rules also apply to any deemed reissued Note that would be a Step-Up Note if issued on the deemed reissue date. As a result of these special rules, Step-Up Notes do not have any OID solely as a result of the structure of their interest rates. Thus, if you own Step-Up Notes you should take stated interest on such Notes into account under your regular method of accounting.

Notes with a Term of One Year or Less

All stated interest payments on a Note that matures one year or less from the date it is issued (a "Short-Term Obligation") are included in the stated redemption price at maturity of the Note and, therefore, are treated as OID.

If you use the cash method of accounting, which most individual taxpayers do (a "cash method Owner"), you must report OID on a Short-Term Obligation as follows, unless you either are required or elect (as described below) to include OID on a Short-Term Obligation in income currently:

• include OID in income when received;

• include in ordinary income any gain realized upon the sale, exchange or retirement of a Short-Term Obligation to the extent of accrued OID (determined on a straightline basis, unless you make an irrevocable election to determine such accrued OID on the basis of the Note's yield to maturity and daily compounding); and

• defer deductions for interest expense on any indebtedness you incurred or continued to purchase or carry the Short-Term Obligation, in an amount not exceeding the deferred interest income, until you recognize the deferred interest income.

A cash method Owner of a Short-Term Obligation that is not otherwise required to account for interest or OID on a Short-Term Obligation as it accrues may elect to include in income OID as it accrues (as if the Owner used the accrual method of accounting, under the rules described in the following paragraph). This election will apply to all debt obligations having a maturity of one year or less that the Owner holds in the taxable year of the election and in all subsequent years. An Owner may revoke the election described in this paragraph only with the consent of the IRS.

If you use the accrual method of accounting ("accrual method Owners"), or if you are a bank, regulated investment company or are described in section 1281(b) of the federal income tax code you are required to include OID on a Short-Term Obligation in income as it accrues on a straightline basis, regardless of your method of accounting. Alternatively, you may make an irrevocable election to accrue such OID on the basis of the Note's yield to maturity and daily compounding.

In addition, any Owner may make the election described below under "United States Taxation—U.S. Persons—Accrual Method Election" for a Short-Term Obligation. That election is independent of the elections described in the preceding paragraphs.

In certain cases, Step-Up Notes may provide for a fixed interest rate that increases to a higher fixed interest rate exactly one year (or less) after the date of issuance. In such cases, the Step-Up Notes would not be characterized as Short-Term Obligations under the OID Regulations, even though it is presumed for purposes of computing accruals of interest and OID that we will call the Step-Up Notes one year or less after they are issued.

The federal income tax laws are unclear concerning how to determine the amount of interest or OID income accruing on a Floating Rate Note with a term of one year or less. One method would be to treat the stated interest on such a Note as interest that is taxable as ordinary interest income. Alternatively, the stated interest on a Floating Rate Note that is also a Short-Term Obligation could be treated as OID under the rules described above for Short-Term Obligations. Generally, the two methods will not produce materially different results.

Notes Purchased for More Than Their Issue Price

If you purchase a Note for more than its principal amount (or, in the case of a Note with OID, its stated redemption price at maturity) you will have premium ("Premium") with respect to such Note in the amount of such excess. See "—Notes Purchased at a Premium" below.

If you purchase a Note with OID at a price above its adjusted issue price (as defined below) but less than its stated redemption price at maturity, you will have acquisition premium ("Acquisition Premium") with respect to such Note in the amount of such excess over the adjusted issue price. The "adjusted issue price" of a Note is defined as the sum of the issue price of the Note and the aggregate amount of previously accrued OID, if any, less any prior payments of amounts included in its stated redemption price at maturity. See "—OID Notes Purchased at an Acquisition Premium" below.

Notes Purchased at a Premium

Owners who purchase a Note at a Premium may elect to treat such Premium as "amortizable bond premium." If you make this election, the amount of interest that you must include in income for each accrual period (where such Note is not optionally redeemable prior to its Maturity Date) is reduced by the portion of the Premium allocable to such period based on the Note's yield to maturity. If the amortizable bond premium allocable to an accrual period exceeds the interest allocable to the accrual period, you treat the excess as a bond premium deduction for the accrual period. However, the amount treated as a bond premium deduction is limited to the amount by which your total interest income on the Note in prior accrual periods exceeds the total amount treated by you as a bond premium deduction on the Note in prior accrual periods. If a Note may be called prior to maturity, but after you acquired it, you generally may not assume that the call will be exercised and must amortize Premium to the Maturity Date. If the Note is in fact called, you may deduct any unamortized Premium in the year of the call. If you make the election described above, the election will apply to all debt securities the interest on which is not excludible from gross income ("Fully Taxable Bonds") that you hold at the beginning of the first taxable year to which the election applies and to all Fully Taxable Bonds you later acquire. You may revoke this election only with the consent of the IRS.

If you do not make this election, you must include the full amount of each interest payment in income in accordance with your regular method of accounting and you will receive a tax benefit from the Premium only in computing your gain or loss upon the sale or other disposition or retirement of the Note. In the case of a Short-Term Obligation, the election is available only to those cash-method Owners that neither are required nor have elected to account for interest or OID on the Short-Term Obligation as it accrues.

If you purchase a Note with OID at a Premium, you are not required to include in income any OID with respect to such Note.

OID Notes Purchased at an Acquisition Premium

If you purchase a Note with OID at an Acquisition Premium, the amount of OID you will include in income in each taxable year will be reduced by that portion of the Acquisition Premium properly allocable to such year. Unless you make the accrual method election described below in "United States Taxation—U.S. Persons—Accrual Method Election," Acquisition Premium is allocated on a pro rata basis to each accrual of OID, so that you are allowed to reduce each accrual of OID by a constant fraction.

Notes Purchased for Less than Their Issue Price

If you purchase a Note (other than a Short-Term Obligation) at a price less than its stated redemption price at maturity (or, in the case of a Note with OID, its adjusted issue price) you will have market discount ("Market Discount") with respect to such Note in the amount of such shortfall. If you purchase a Note (other than a Short-Term Obligation) at a Market Discount you are required (unless such Market Discount is less than a de minimis amount) to treat any principal payments on, or any gain realized upon the disposition or retirement of such Note, as interest income to the extent of the Market Discount that accrued while you held such Note, unless you elect to include such Market Discount in income on a current basis. Market Discount is considered to be de minimis if it is less than one-quarter of one percent of a Note's stated redemption price at maturity multiplied by the number of complete years to maturity after the Owner acquired such Note. If you dispose of a Note with more than a de minimis amount of Market Discount in a nontaxable transaction (other than a nonrecognition transaction described in section 1276(d) of the federal income tax code), accrued Market Discount is includible as ordinary income as if you had sold the Note at its then fair market value.

If you acquire a Note at a Market Discount and you do not elect to include Market Discount in income on a current basis, you may be required to defer the deduction of a portion of the interest expense on any indebtedness you incurred or continued to purchase or carry the Note until the deferred income is realized.

Accrual Method Election

You may elect to include in gross income your entire return on a Note (i.e., the excess of all remaining payments to be received on the Note over the amount you paid for the Note) based on the compounding of interest at a constant rate. Such an election for a Note with amortizable bond premium (or Market Discount) will result in a deemed election for all your debt instruments with amortizable bond premium to amortize the premium (or currently include the Market Discount). You may revoke the accrual method election only with the permission of the IRS.

Disposition or Retirement of Notes

When you sell, exchange or otherwise dispose of a Note, or when we retire a Note (including by redemption), you will recognize gain or loss equal to the difference, if any, between the amount you realize upon the disposition or retirement and your tax basis in the Note. Your tax basis for determining gain or loss on the disposition or retirement of a Note generally is your U.S. dollar cost of such Note, increased by the amount of OID and any Market Discount includible in your gross income with respect to such Note, and decreased by the amount of any payments under the Note that are part of its stated redemption price at maturity and by the portion of any Premium previously taken into account.

Gain or loss you realize on a disposition or retirement of a Note is capital gain or loss (except to the extent the gain represents accrued OID or Market Discount on the Note not previously included in gross income, to which extent such gain or loss would be treated as ordinary income). Any capital gain or loss is long-term capital gain or loss if at the time of disposition or retirement you held the Note for more than one year. The deductibility of capital losses is subject to limitations. Tax rates on capital gain for individual Owners vary depending on each Owner's income and holding period for the Note. Owners that are individuals should contact their own tax advisors for more information or for the capital gains tax rate applicable to a specific Note.

If you own redeemable Notes, such as Step-Up Notes, and if a call right that is presumed exercised is not in fact exercised, the deemed reissuance of the Notes for purposes of computing subsequent accruals of interest and OID will not result in a deemed disposition or retirement of the Step-Up Notes.

Interest and Principal Components of Eligible Notes

Owners of Interest and Principal Components

Under federal tax law, each time an Interest or Principal Component of an Eligible Note is bought, that Component will be treated as if it had been issued to the new Owner on the date of the ownership change for an issue price equal to the purchase price paid by the new Owner for the Component. Accordingly, the tax consequences to an Owner of an Interest or Principal Component are determined as if the Component were a Note issued on the date of acquisition or, in the case of a Component maturing one year or less from the date of acquisition, a Short-Term Obligation issued on that date. The stated redemption price at maturity of an Interest or Principal Component is the amount payable on that Component (or the sum of all amounts payable, in the case of certain Principal Components calling for more than one payment).

Special rules apply to Principal Components of Eligible Notes, such as Step-Up Notes, that we may redeem before they mature ("Callable Principal Components"). As described above in "United States Taxation—U.S. Persons—Notes That We May Redeem Before Maturity," if a debt instrument may be called prior to its maturity, a presumption is made that the call will be exercised if the yield to the call date is less than the yield to maturity. In applying this rule to a Callable Principal Component, it is not clear whether this determination is to be made separately for the Callable Principal Component or with respect to the underlying Eligible Notes. If the call is presumed to be exercised, but is not exercised in fact, the Callable Principal Component is treated, solely for purposes of accruing OID, as if the call had been exercised and a new Eligible Note issued on the presumed exercise date for an amount equal to the call price. In such event, the interest payments on the new Note should be treated as interest in accordance with the Owner's normal method of accounting. If, conversely, the call is presumed not exercised and in fact is exercised, then the Callable Principal Component is considered to have been redeemed prior to maturity.

Tax Consequences of Stripping an Eligible Note

An Owner of an Eligible Note is taxed on income from the Note as if the ability to "strip" the Note did not exist, unless and until both the Eligible Note is stripped and the Owner disposes of some or all of the resulting Components. The mere exchange of an Eligible Note for Interest and Principal Components, without the disposition of any of those Components, should not be treated as a taxable event. If you exchange an Eligible Note for Interest and Principal Components and dispose of all of those Components, you effectively will be treated as if you had disposed of the Eligible Note. See "United States Taxation—U.S. Persons—Disposition or Retirement of Notes." If you dispose of less than all the Components resulting from the stripping transaction, you will be required to take the following steps:

• include as income all interest and Market Discount accrued on the Eligible Note not previously included as income;

• increase your basis in the Note by the same amount;

• allocate your adjusted basis in the Note among the Components in proportion to the respective fair market values of those Components; and

• recognize gain or loss with respect to each disposition of a Component equal to the difference between the amount realized and the basis allocated to that Component.

Generally, any gain or loss on the disposition of an Interest or Principal Component is capital gain or loss.

You will be taxed on each retained Component as if you had purchased the retained Component for an amount equal to the basis allocated to that Component.

Ownership of Pro Rata Share of Outstanding Interest and Principal Components

If you purchase the same pro rata share of Principal Components and the related unmatured Interest Components, while the matter is not free from doubt, it appears that you should treat each Component separately, rather than as a combined Eligible Note. You may purchase the same pro rata share of Principal Components and the applicable Interest Components and request the FRBNY to reconstitute such Components as an Eligible Note. While the matter again is not free from doubt, it appears that you should not treat the reconstitution as a taxable exchange and you should continue to treat each Component separately. The IRS could assert, however, that combined treatment as an Eligible Note should apply to an investor owning a pro rata share of all outstanding Components or that combined treatment applies once there has been a reconstitution.

Non-U.S. Persons

Interest and OID

If you own a Note and are a non-U.S. Person, each payment of interest (including OID, if any) on the Note will be subject to a 30 percent U.S. federal income and withholding tax, unless one of the three following exemptions applies:

• Exemption for Non-U.S. Persons Who Provide IRS Form W-8. Payments of interest on a Note to any non-U.S. Person are exempt from U.S. federal income and withholding taxes if you satisfy the following conditions:

(1) the last U.S. payor in the chain of payment prior to payment to a non-U.S. Person (the "Withholding Agent") has received in the year in which such payment occurs, or in either of the two preceding years, a statement signed by you under penalties of perjury that certifies that you are not a U.S. Person and provides your name, address and taxpayer identification number, if any;

(2) the Withholding Agent and all intermediaries between you and the Withholding Agent do not have actual knowledge that your non-U.S. beneficial ownership statement is false; and

(3) you are not an "excluded person" (i.e., (a) a bank that receives payments on the Notes that are described in section 881(c)(3)(A) of the federal income tax code, (b) a 10 percent shareholder of Fannie Mae within the meaning of section 871(h)(3)(B) of the federal income tax code, or (c) a "controlled foreign corporation" related to Fannie Mae within the meaning of section 881(c)(3)© of the federal income tax code).

You may make the non-U.S. beneficial ownership statement on an IRS Form W-8 or a substantially similar substitute form. You must inform the Withholding Agent (or the last intermediary in the chain between you and the Withholding Agent) of any change in the information on the statement within 30 days of the change. If you hold a Note through a securities clearing organization or certain other financial institutions, the organization or institution may provide a signed statement to the Withholding Agent on your behalf. In such case, however, the signed statement must be accompanied by a copy of a Form W-8 or substitute form provided by you to the organization or institution. In all cases, the Form W-8 or substitute form must be filed by the Withholding Agent with the IRS. The U.S. Treasury Department is empowered to publish a determination that a beneficial ownership statement from any person or class of persons will not be sufficient to preclude the imposition of U.S. federal withholding tax with respect to payments of interest made at least one month after the publication of such determination.

• Exemption or Reduced Withholding Rate for Non-U.S. Persons Entitled to the Benefits of a Treaty. If you are entitled to the benefit of an income tax treaty to which the United States is a party you can obtain an exemption from or reduction of income and withholding tax (depending on the terms of the treaty) by providing to the Withholding Agent a properly completed IRS Form 1001, or any successor form, before interest is paid. However, neither exemption nor reduced withholding will be available if the Withholding Agent has actual knowledge that the form is false.

• Exemption for Non-U.S. Persons with Effectively Connected Income. If the interest you earn on a Note is "effectively connected" to a business you conduct in the United States, you can obtain an exemption from withholding tax by providing to the Withholding Agent a properly completed IRS Form 4224, or any successor form, prior to the payment of interest, unless the Withholding Agent has actual knowledge that the form is false. Payments of interest on a Note exempt from the withholding tax as effectively-connected income nevertheless may be subject to graduated U.S. federal income tax as if such amounts were earned by a U.S. Person.

In certain circumstances, you may be able to claim amounts that are withheld as a refund or as a credit against your U.S. federal income tax.

In October 1997, the IRS issued final regulations relating to withholding, backup withholding and information reporting with respect to payments made to non-U.S. Persons. In March 1998, the IRS announced a delay in the effective date of the regulations. The regulations generally are effective for payments made after December 31, 1999. However, withholding certificates that are valid under the present rules and that are held by a Withholding Agent on December 31, 1999, remain valid until the earlier of December 31, 2000 or the expiration date of the certificate under the present rules (unless otherwise invalidated due to changes in your circumstances.

When effective, the new regulations will streamline and, in some cases, alter the types of statements and information that must be furnished to a Withholding Agent to claim a reduced rate of withholding. While various IRS forms (such as IRS Forms 1001 and 4224) currently are used to claim exemption from withholding or a reduced withholding rate, the preamble to the regulations states that the IRS intends most certifications to be made on revised Forms W-8 and the IRS has released draft revised forms for public comment. The regulations also clarify the duties of Withholding Agents and modify the rules concerning withholding on payments made to non-U.S. Persons through foreign intermediaries. With some exceptions, the new regulations treat a payment to a foreign partnership as a payment directly to the partners.

Disposition or Retirement of Notes

Except as provided in "United States Taxation—Information Reporting and Backup Withholding," if you are a non-U.S. Person (other than certain nonresident alien individuals present in the United States for a total of 183 days or more during his or her taxable year) you will not be subject to U.S. federal income tax, and no withholding of such tax will be required, with respect to any gain that you realize on the disposition or retirement of a Note.

Federal Estate Tax

If you are a non-U.S. Person and are not domiciled in the U.S., the Notes will not be includible in your estate if interest paid (including OID, if any) on the Notes to you at the time of your death would have been exempt from U.S. federal income and withholding tax as described under "United States Taxation—Non-U.S. Persons—Interest and OID—Exemption for Non-U.S. Persons Who Provide IRS Form W-8" (without regard to the requirement that a non-U.S. beneficial ownership statement has been received).

Information Reporting and Backup Withholding

Payments of interest (including OID, if any) on Notes held by U.S. Persons other than corporations and other exempt holders are required to be reported to the IRS.

Backup withholding of U.S. federal income tax at a rate of 31 percent may apply to payments made in respect of the Notes, as well as payments of proceeds from the sale of Notes. Backup withholding will apply on such payments to holders or Owners that are not "exempt recipients" and that fail to provide certain identifying information (such as their taxpayer identification numbers) in the manner required. Individuals generally are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients.

If a Note is sold before its Maturity Date to (or through) a "broker," the broker may be required to withhold 31 percent of the entire sale price. The broker will not withhold if either the broker determines that the seller is a corporation or other exempt recipient or the seller provides, in the required manner, certain identifying information and, in the case of a non-U.S. Person, certifies that such seller is a non-U.S. Person (and certain other conditions are met). The broker must report such a sale to the IRS unless the broker determines that the seller is an exempt recipient or the seller certifies its non-U.S. status (and certain other conditions are met). Certification of the Owner's non-U.S. status normally would be made on IRS Form W-8 under penalties of perjury, although in certain cases it may be possible to submit certain other signed forms. The term "broker," as defined by Treasury regulations, includes all persons who, in the ordinary course of business, stand ready to effect sales made by others. This information reporting requirement generally will apply to a U.S. office of a broker and to a foreign office of a U.S. broker, as well as to a foreign office of a foreign broker (i) that is a "controlled foreign corporation" within the meaning of section 957(a) of the federal income tax code, (ii) 50 percent or more of whose gross income from all sources for the three-year period ending with the close of its taxable year preceding the payment (or for such part of the period that the foreign broker has been in existence) was effectively connected with the conduct of a trade or business within the United States, or (iii) (in the case of payments made after December 31, 1999) that is a foreign partnership with certain connections to the U.S., unless such foreign office has documentary evidence that the seller is a non-U.S. Person and has no actual knowledge that such evidence is false.

An Owner may claim any amounts withheld under the backup withholding rules as a refund or a credit against the Owner's U.S. federal income tax, provided that the required information is furnished to the IRS. Furthermore, the IRS may impose certain penalties on a holder or Owner who is required to supply information but who does not do so in the proper manner.

Payments of interest (including payments of OID, if any) on a Note that is beneficially owned by a non-U.S. Person will be reported annually on IRS Form 1042S, which the Withholding Agent must file with the IRS and furnish to the Owner.

General Information

The U.S. federal tax discussion set forth above is included for your general information only and may not apply in your particular situation. You should consult your own tax advisors with respect to the tax consequences of your ownership and disposition of the Notes, including the tax consequences under the tax laws of the United States, states, localities, countries other than the United States and any other taxing jurisdictions and the possible effects of changes in such tax laws.

USE OF PROCEEDS

We will use the net proceeds from the sale of the Notes to retire outstanding debt securities or add the proceeds to working capital and use them for general corporate purposes. We anticipate the need for additional financing from time to time, including financing through various types of debt securities. The amount and nature of additional financing depends upon numerous factors, including the volume of our maturing debt obligations, the volume of mortgage loan prepayments, the volume and type of mortgage loans we purchase, and general market conditions.

PLAN OF DISTRIBUTION

Distribution

We will offer Notes from time to time primarily to Dealers as principal, either individually or as part of a syndicate. We also will offer Notes through Dealers on a non-underwritten basis, or directly to investors. "Dealers" are securities dealers or banks purchasing Notes from us as principal or through whom we sell Notes on a non-underwritten basis. Dealers will not act as agents of Fannie Mae with respect to any sales of Notes. We will name the applicable Dealer or Dealers for an issue of Notes in the applicable Pricing Supplement.

Sales to Dealers as Principal

Dealers may purchase Notes as principal from us at a negotiated price specified in the applicable Pricing Supplement. The Notes may be resold to investors at a fixed offering price or at varying offering prices related to market prices prevailing at the time of resale or otherwise as determined by the applicable Dealer or Dealers. Dealers may sell Notes to other dealers at a concession, in the form of a discount, to be received by the Dealers. The concession may be all or a portion of the Dealers' underwriting compensation. Dealers will advise us whether an offering is on a fixed price or variable price basis and of any concessions or reallowances that will be provided to other dealers. We will include such information, as provided by the Dealers, in the applicable Pricing Supplement. After an initial offering of Notes, the offering price (in the case of a fixed price offering), the concession and the reallowance may change.

Non-Underwritten Sales

We may authorize certain Dealers to solicit offers to purchase certain Notes on a non-underwritten basis on terms we determine. Dealers have agreed to use their best efforts when soliciting non-underwritten sales. Dealers also may approach us on behalf of investors and other purchasers with offers to purchase Notes on a non-underwritten basis. We will sell Notes on a non-underwritten basis at 100% of the principal amount, unless we specify otherwise in the applicable Pricing Supplement. We will pay the applicable Dealer a commission in the amount specified in the applicable Pricing Supplement. The commission will be expressed as a percentage of the principal amount of the Notes (or the initial offering price for Zero-Coupon Notes and certain other Notes sold at a discount). We will have the sole right to accept offers to purchase Notes and may reject all or a portion of any offer. Each Dealer will have the right, using reasonable discretion, to reject all or a portion of any offer to purchase Notes solicited on a non-underwritten basis.

Sales Directly to Investors

We also may sell Notes directly to investors on our own behalf. We will not pay a commission to any Dealer on a direct sale.

Selling Restrictions

The Notes may be offered or sold only where it is legal to do so. The Dealers have represented and agreed that they will comply with all applicable laws and regulations in each jurisdiction in which they may purchase, offer, sell or deliver Notes or distribute this Offering Circular, any Pricing Supplement or any other offering material. The Dealers also have agreed to comply with certain selling restrictions relating to certain countries. We and the Dealers may modify selling restrictions at any time.

Trading Markets and Secondary Market Information

There may be no established trading market for Notes when issued. The Notes are not expected to be listed on any securities exchange. Dealers have agreed to use their best efforts to facilitate secondary market transactions in each issue of Notes for which they were an applicable Dealer, but a secondary market may never develop. If a secondary market develops, it may not be very liquid. See "Certain Risk Factors—Market, Liquidity and Yield Considerations."

Stabilization and Other Transactions

When Dealers purchase Notes as principal for resale on a fixed-price basis, they may engage in transactions that stabilize the price of the Notes. These transactions may include entering stabilizing bids or effecting syndicate covering transactions. A stabilizing bid means the placing of a bid or the effecting of a purchase for the purpose of pegging, fixing or maintaining the price of Notes. A syndicate covering transaction means placing a bid on behalf of a dealer or dealer syndicate or making a purchase to reduce a short position (i.e., a position resulting from the sale of Notes in an aggregate principal amount in excess of that specified in the applicable Pricing Supplement) created in connection with an offering of Notes. Neither we nor the Dealers make any representation or prediction as to the direction or magnitude of any effect that these transactions may have on the price of Notes. Dealers are not required to engage in any of these transactions. When they do, Dealers do so on their own behalf and not as our representatives. If Dealers commence these transactions, Dealers may discontinue them at any time.

Additional Information

You must pay the purchase price of Notes to us in immediately available funds. Your payment will be effective only upon our receipt of the funds. In a non-underwritten sale, the Dealer will act on behalf of the purchaser of Notes in transmitting the purchaser's funds to us.

We and the Dealers have agreed to indemnify each other against, and contribute toward, certain liabilities.

The Dealers and their affiliates engage in transactions with us and perform services for us in the ordinary course of business. In connection with any particular issue of Notes, we may enter into swaps or other hedging transactions with, or arranged by, the applicable Dealer or its affiliate. The Dealer or other parties may receive compensation, trading gain or other benefits from these transactions.

Dealers

The following securities dealers and banks currently may act as Dealers under the Facility. Other securities dealers and banks may be added from time to time in connection with the distribution of the Notes or any particular issue of Notes. As noted above, the applicable Pricing Supplement will identify the applicable Dealer or Dealers for an issue of Notes.

BancAmerica Securities, Inc.  Bear, Stearns & Co. Inc.  Blaylock & Partners, L.P.  Credit Suisse First Boston Corporation  Deutsche Bank Securities Inc.  Donaldson, Lufkin & Jenrette Securities      Corporation  First Tennessee Bank National Association  Fuji Securities Inc.  Goldman, Sachs & Co.  HSBC Securities, Inc.

Lehman Brothers Inc.  Merrill Lynch Government Securities, Inc.  Merrill Lynch, Pierce, Fenner & Smith                    Incorporated  J.P. Morgan Securities Inc.  Morgan Stanley & Co. Incorporated  NationsBanc Montgomery Securities LLC  PaineWebber Incorporated  Prudential Securities Incorporated  Salomon Smith Barney Inc.  Warburg Dillon Read LLC

VALIDITY OF THE NOTES

Anastasia D. Kelly, Esq., Senior Vice President and General Counsel of Fannie Mae, or a Deputy General Counsel of Fannie Mae, will pass upon the validity of the Notes for Fannie Mae. Sullivan & Cromwell, Washington, D.C., will pass upon the validity of the Notes for the Dealers. Arnold & Porter, Washington, D.C., will pass upon certain U.S. federal income tax matters for Fannie Mae.

LOCATION OF DEFINED TERMS

Each term listed below is defined or explained in the Offering Circular on the page indicated. This reference guide is just a convenience and may not be complete. The list does not include certain noncapitalized terms defined and used in "Description of the Notes—Eligibility for Stripping" and "United States Taxation." Other terms not listed below may be defined in the Offering Circular.

Terms	Page
Acquisition Premium	30
Actual/360	14
Actual/365 (Fixed)	14
Actual/Actual (Accrual Basis)	14
Actual/Actual (Payment Basis)	15
Amortizing Notes	22
Applicable Index	7
Book-Entry Regulations	25
Bridge	16
Business Day	22
Calculation Agent	16
Callable Principal Components	32
Charter Act	6
Component	26
Component Holders	26
Cut-off Date	25
Day Rate	17
Dealers	36
Deposits	19
Determination Date	15
Eligible Notes	25
Fannie Mae	1
Fed Book-Entry System	23
Federal Funds Rate (Daily)	16
Federal Funds Rate (Weekly Average)	17
Federal Reserve Board	18
Fiscal Agency Agreement	25
Fiscal Agent	11
Fixed Principal Repayment Amount	12
Fixed Rate Notes	13
Fixed/Floating Rate Notes	13
Floating Rate Notes	13
FRBNY	25
Fully Taxable Bonds	31
H.15(519)	18
Holders	23
Holding Institutions	23
HUD Book-Entry Regulations	23
Index Maturity	14
Indexed Notes	22
Information Statement	3
Interest Component	25
Interest Payment Date	13
Interest Period	13
Interest Reset Period	15
IRS	28
LIBOR	18
LIBOR Determination Date	19
London Banking Day	19
Market Discount	31
Maturity Date	12
MBS	6
Multiplier	14
New York Banking Day	20
Notes	11
OID	28
OID Regulations	28
Owners	27
Premium	30
Pricing Supplement	11
Prime Rate	19
Prime Rate Determination Date	20
Principal Component	25
Principal Payment Date	13
Reference T-Bill Auction	21
Representative Amount	19
Reset Date	15
Reuters	16
Reuters ISDA Page	19
Reuters NYAA Page	18
Reuters USPRIME1 Page	20
Seven-Day Period	17
Short-Term Obligation	29
Spread	14
Statement of Terms	11
Step Rate Notes	13
Step-Up Notes	29
Telerate Page 38	20
Telerate Page 120	18
Telerate Page 3750	19
Treasury Bill Rate	21
Treasury Bills	21
U.S. Person	28
Variable Principal Repayment Amount	12
Withholding Agent	34
Your Currency	10
Zero-Coupon Notes	13

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Neither Fannie Mae nor the Dealers have authorized anyone to give you any information or to make any representation not contained in this Offering Circular or an applicable Pricing Supplement or other applicable supplement or amendment. Neither delivery of this Offering Circular, any Pricing Supplement or any other supplement or amendment nor any sale of Notes shall imply that there has been no change in the affairs of Fannie Mae since the dates of those documents. Information in those documents may not be correct as of any time subsequent to the date of the information.

The distribution of this Offering Circular, any Pricing Supplement or any other supplement or amendment and the offer, sale, and delivery of Notes in certain jurisdictions may be restricted by law. Persons who come into possession of this Offering Circular, any Pricing Supplement or any other supplement or amendment must inform themselves about and observe any such restrictions.

This Offering Circular, any Pricing Supplement or any other supplement or amendment is not an offer to sell or a solicitation of an offer to buy any securities other than the Notes or an offer to sell or a solicitation of an offer to buy Notes in any jurisdiction or in any other circumstance in which such offer or solicitation would be unlawful or not authorized.

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Medium-Term Notes, Series B
OFFERING CIRCULAR Arranger Merrill Lynch & Co.
September 15, 1998

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