Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

We have been under conservatorship, with the Federal Housing Finance Agency (“FHFA”) acting as conservator, since September 6, 2008. As conservator, FHFA succeeded to all rights, titles, powers and privileges of the company, and of any shareholder, officer or director of the company with respect to the company and its assets. The conservator has since delegated specified authorities to our Board of Directors and has delegated to management the authority to conduct our day-to-day operations. Our directors do not have any fiduciary duties to any person or entity except to the conservator and, accordingly, are not obligated to consider the interests of the company, the holders of our equity or debt securities or the holders of Fannie Mae MBS unless specifically directed to do so by the conservator. We describe the rights and powers of the conservator, key provisions of our agreements with the U.S. Department of the Treasury (“Treasury”), and their impact on shareholders in our Annual Report on Form 10-K for the year ended December 31, 2013 (“2013 Form 10-K”) in “Business—Conservatorship and Treasury Agreements.”

You should read this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in conjunction with our unaudited condensed consolidated financial statements and related notes and the more detailed information in our 2013 Form 10-K.

This report contains forward-looking statements that are based on management’s current expectations and are subject to significant uncertainties and changes in circumstances. Please review “Forward-Looking Statements” for more information on the forward-looking statements in this report. Our actual results may differ materially from those reflected in our forward-looking statements due to a variety of factors including, but not limited to, those discussed in “Risk Factors” and elsewhere in this report and in “Risk Factors” in our 2013 Form 10-K.

You can find a “Glossary of Terms Used in This Report” in the “MD&A” of our 2013 Form 10-K.

Fannie Mae is a government-sponsored enterprise (“GSE”) that was chartered by Congress in 1938. We serve an essential role in the functioning of the U.S. housing market and are investing in improvements to the U.S. housing finance system. Our public mission is to support liquidity and stability in the secondary mortgage market, where existing mortgage-related assets are purchased and sold, and to increase the supply of affordable housing. Our charter does not permit us to originate loans or lend money directly to consumers in the primary mortgage market.

Our common stock is traded in the over-the-counter market and quoted on the OTC Bulletin Board under the symbol “FNMA.” Our debt securities are actively traded in the over-the-counter market.

We are focused on:

Our actions to accomplish these goals have had a positive impact:

Although we have improved our financial performance and the quality of our book of business since entering into conservatorship in 2008, we remain under conservatorship and subject to the restrictions of the senior preferred stock purchase agreement with Treasury. As a result of the senior preferred stock purchase agreement and directives from our conservator, we are not permitted to retain our net worth (other than a limited amount that will decrease to zero by 2018), rebuild our capital position or pay dividends or other distributions to stockholders other than Treasury. See “Business—Conservatorship and Treasury Agreements” in our 2013 Form 10-K for more information regarding our conservatorship and our senior preferred stock purchase agreement with Treasury. In addition, the future of our company remains uncertain. Congress continues to consider options for reform of the housing finance system, including the GSEs, and we cannot predict the prospects for the enactment, timing or final content of housing finance reform legislation. See “Legislative and Regulatory Developments” in this report, in our Second Quarter 2014 Form 10-Q and in our First Quarter 2014 Form 10-Q,

and “Business—Housing Finance Reform” in our 2013 Form 10-K for information on recent proposals for housing finance reform.

We also continued our efforts to help lay the foundation for a safer, transparent and sustainable housing finance system, including pursuing the strategic goals identified by our conservator, as well as investing in improvements to our business and infrastructure. We discuss these efforts, as well as FHFA’s 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac and FHFA’s related 2014 conservatorship scorecard, in “Helpingour Second Quarter 2014 Form 10-Q in “MD&A—Executive Summary—Helping to Build a Sustainable Housing Finance System” below.and in “MD&A—Legislative and Regulatory Developments—Housing Finance Reform and the Role of the GSEs—Conservator Developments.”

The decline in credit-related income was mainly attributable to home prices increasing at a slower pace in the third quarter of 2014 as compared with the third quarter of 2013. In addition, the third quarter of 2013 benefited from foreclosed property income primarily due to the recognition of income related to our compensatory fee agreement with Bank of America. We recognized fair value losses in the secondthird quarter of 2014.

We expect volatility from period to period in our financial results from a number of factors, particularly changes in market conditions that result in periodic fluctuations in the estimated fair value of the financial instruments that we mark to market through our earnings. These instruments include derivatives and securities. The estimated fair value of our derivatives and securities may fluctuate substantially from period to period because of changes in interest rates, creditthe yield curve, mortgage spreads and interest rateimplied volatility, as well as activity related to these financial instruments. While the estimated fair value of our

derivatives that serve to mitigate certain risk exposures may fluctuate, some of the financial instruments that generate these exposures are not recorded at fair value in our condensed consolidated financial statements. In addition, our credit-related income or expense can vary substantially from period to period primarily due to changes in home prices, borrower payment behavior and economic conditions.

Beginning in 2008, we took actions to significantly strengthen our underwriting and eligibility standards and change our pricing to promote sustainable homeownership and stability in the housing market. These actions have improved the credit quality of our book of business. Given their strong credit risk profile and based on their performance so far, we expect that in the aggregate the loans we have acquired since January 1, 2009, which comprised 79%80% of our single-family guaranty book of business as of JuneSeptember 30, 2014, will be profitable over their lifetime, by which we mean that we expect our guaranty fee income on these loans to exceed our credit losses and administrative costs for them. In contrast, we expect that the single-family loans we acquired from 2005 through 2008, in the aggregate, will not be profitable over their lifetime. See “Outlook—Factors that Could Cause Actual Results to be Materially Different from Our Estimates and Expectations” in this report and “Risk Factors” in both this report and our 2013 Form 10-K for a discussion of factors that could cause our expectations regarding the performance of the loans in our single-family book of business to change. For information on certain credit characteristics of our new single-family book of business as compared with our legacy book of business, see “Table 29: Selected Credit Characteristics of Single-Family Conventional Loans Held, by Acquisition Period.” For more information on the credit risk profile of our single-family guaranty book of business, see “Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management,” including “Table 30: Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business” in that section.

We expect refinancings to continue to constitute a smaller portion of our single-family business volume in 2014 than in 2013. As a result, we expect to continue to acquire a higher proportion of loans with higher LTV ratios in 2014 than in 2013. Overall mortgage originations also declined significantly in the first halfnine months of 2014 as compared with the first halfnine months of 2013, and we expect mortgage originations in 2014 to be lower overall than in 2013.

Whether the loans we acquire in the future will exhibit an overall credit profile and performance similar to our more recent acquisitions will depend on a number of factors, including our future pricing and eligibility standards and those of mortgage insurers, the Federal Housing Administration (“FHA”) and the Department of Veterans Affairs (“VA”), the percentage of loan originations representing refinancings, changes in interest rates, our future objectives and activities in support of those objectives, including actions we may take to reach additional underserved creditworthy borrowers, government policy, market and competitive conditions, and the volume and characteristics of HARP loans we acquire in the future. In addition, if our lender customers retain more of the higher-quality loans they originate, it could negatively affect the credit risk profile of our new single-family acquisitions.

We continue our efforts to improve the credit performance of our book of business. In addition to acquiring loans with strong credit profiles, as we discuss above in “Strengthening Our Book of Business,” we continue to execute on our strategies for reducing credit losses, on our legacy book of business, such as helping eligible Fannie Mae borrowers with high LTV ratio loans refinance into more sustainable loans through HARP, offering borrowers loan modifications that can significantly reduce their monthly payments, pursuing foreclosure alternatives and managing our real estate owned (“REO”) inventory to minimize costs and maximize sales proceeds. As we work to reduce credit losses, we also seek to assist struggling homeowners, help stabilize communities and support the housing market.

We provide additional information on our credit-related expense or income in “Consolidated Results of Operations—Credit-Related Income” and on the credit performance of mortgage loans in our single-family book of business in “Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management.”

We provide more information on our efforts to reduce our credit losses in “Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management” and “Risk Management—Credit Risk Management—Institutional Counterparty Credit Risk Management” in both this report and our 2013 Form 10-K. See also “Risk Factors” in our 2013 Form 10-K, where we describe factors that may adversely affect the success of our efforts, including our reliance on third parties to service our loans, conditions in the foreclosure environment, and risks relating to our mortgage insurer counterparties.

We cannot predict the prospects for the enactment, timing or final content of housing finance reform legislation. See “Legislative and Regulatory Developments” in this report, in our Second Quarter 2014 Form 10‑Q and in our First Quarter 2014 Form 10‑Q10-Q, and “Business—Housing Finance Reform” in our 2013 Form 10-K, for discussion of proposals for reform of the housing finance system, including the GSEs, that could materially affect our business, including proposed federal legislation that, among other things, would require the wind down of Fannie Mae and Freddie Mac. See “Risk Factors” in both this report and in our 2013 Form 10-K for a discussion of the risks to our business relating to the uncertain future of our company.

Home Prices. Based on our home price index, we estimate that home prices on a national basis increased by 2.7%1.2% in the secondthird quarter of 2014 and by 3.7%5.3% in the first halfnine months of 2014. Although weWe expect that home price growth to continue in 2014, we expect the rate of home price growthprices on a national basis in 2014 will be lower thanrelatively flat in 2013.the fourth quarter of 2014. Future home price changes may be very different from our expectations as a result of significant inherent uncertainty in the current market environment, including uncertainty about the effect of recent and future changes in mortgage rates; actions the federal government has taken and may take with respect to fiscal policies, mortgage finance programs and policies, and housing finance reform; the Federal Reserve’s purchases and sales of mortgage-relatedmortgage-backed securities; the impact of those actions on and changes generally in unemployment and the general economic and interest rate environment; and the impact on the U.S. economy of global economic and political conditions. We also expect significant regional variation in the timing and rate of home price growth.

2015 from what they otherwise would be. We expect our credit losses to resume their downward trend beginning in 2016. See “Legislative and Regulatory Developments—FHFA Advisory Bulletin Regarding Framework for Adversely Classifying Loans” for further information about this Advisory Bulletin.

Policymakers and others have focused significant attention in recent years on how to reform the nation’s housing finance system, including what role, if any, Fannie Mae and Freddie Mac should play in that system. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which was signed into law in July 2010, called for enactment of meaningful structural reforms of Fannie Mae and Freddie Mac. See “Business—Housing Finance Reform” in our 2013 Form 10-K and “MD&A—Legislative and Regulatory Developments” in our First Quarter 2014 Form 10-Q and in our Second Quarter 2014 Form 10-Q for a description of activities relating to GSE reform that occurred infrom 2011 through the firstsecond quarter of 2014, including descriptions of: the Administration’s housing policy priorities, which include winding down Fannie Mae and Freddie Mac through a responsible transition; the Administration’s February 2011 report on GSE reform, which discusses potential options for a new long-term structure for the housing finance system following the wind-down of Fannie Mae and Freddie Mac; and legislation considered in the current Congress relating to housing finance system reform and the terms of Fannie Mae’s and Freddie Mac’s senior preferred stock purchase agreements with Treasury.

Congress has continued to consider housing finance reform and the future of the GSEs this year. On May 15, 2014, the Senate Banking Committee approved the Housing Finance Reform and Taxpayer Protection Act of 2014, which is also known as the Johnson-Crapo bill. This bill, if enacted in its current form, would result in the wind-down and eventual liquidation of Fannie Mae and Freddie Mac and would materially affect our business prior to our eventual liquidation. Despite activity at the committee level, neither the full Senate nor the full House of Representatives has considered the Johnson-Crapo bill or any other housing finance reform bill in the current Congress.

We expect Congress to continue to consider housing finance reform legislation. We cannot predict the prospects for the enactment, timing or final content of housing finance reform legislation. As a result, there continues to be significant uncertainty regarding the future of our company. See “Risk Factors” in this report and our 2013 Form 10-K for discussions of the risks to our business relating to the uncertain future of our company and of how the uncertain future of our company may adversely affect our ability to retain and recruit well-qualified employees, including senior management.

In addition to the legislative debate, actions taken by our conservator have an impact on the role of the GSEs in the nation’s housing finance system now and in the future. On May 13,See “MD&A—Executive Summary—Helping to Build a Sustainable Housing Finance System” and “MD&A—Legislative and Regulatory Developments—Housing Finance Reform and the Role of the GSEs—Conservator Developments” in our Second Quarter 2014 FHFA released itsForm 10-Q for a discussion of FHFA’s 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac, along with theand FHFA’s related 2014 conservatorship scorecard. We discuss the reformulated strategic goals in the new strategic plan and the scorecard in “Executive Summary—Helping to Build a Sustainable Housing Finance System.” For a discussion of the prior formulation of

Potential ChangesLimited Liability Company Agreement with CSS that provides further detail regarding the rights, obligations and understandings between the companies with respect to Our Single-Family Guaranty Fee Pricing

In December 2013,September 2014, the Federal Reserve Board, the Federal Deposit Insurance Corporation (“FDIC”), FHFA, requested public inputthe Farm Credit Administration and the Office of the Comptroller of the Currency issued new proposed rules under the Dodd-Frank Act governing margin and capital requirements applicable to entities that are subject to their oversight. These proposed rules would require that, for all trades that have not been submitted to a derivatives clearing organization, we collect from and provide to our counterparties collateral in excess of the amounts we have historically collected or provided relative to our level of activity. We continue to evaluate the potential impact of this rule on our business.

In October 2014, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the FDIC, the Securities and Exchange Commission (“SEC”), FHFA and the Department of Housing and Urban Development issued a planfinal rule requiring securitizers to gradually reduceretain a portion of the conformingcredit risk in assets transferred, sold or conveyed through the issuance of asset-backed securities, with certain exceptions. This rule was mandated by Section 941 of the Dodd-Frank Act. The final rule requires securitizers to retain at least 5% of the credit risk of the assets they securitize. The rule offers

several compliance options, one of which is to have either Fannie Mae or Freddie Mac (so long as they are in conservatorship or receivership) securitize and fully guarantee the assets, in which case no further retention of credit risk is required. In addition, securities backed solely by mortgage loans meeting the definition of a “qualified residential mortgage” are exempt from the risk retention requirements of the rule. The rule defines qualified residential mortgage to have the same meaning as the term “qualified mortgage” as defined by the Consumer Financial Protection Bureau (“CFPB”) in connection with its “ability to repay” rule under Regulation Z. Generally, a loan limitswill be a qualified mortgage under the CFPB’s ability to repay rule if, among other things, (1) the points and fees paid in connection with the loan do not exceed 3% of the total loan amount, (2) the loan term does not exceed 30 years, (3) the loan is fully amortizing with no negative amortization, interest-only or balloon features and (4) the debt-to-income ratio on the loan does not exceed 43% at origination. The CFPB also defined a special class of conventional mortgage loans that will be qualified mortgages if they (1) meet the points and fees, term and amortization requirements of qualified mortgages generally and (2) are eligible for one-family residences. FHFA’s announcement noted that reducing loan limits furthered its goalsale to Fannie Mae or Freddie Mac. This class of contractingqualified mortgages expires on the market presenceearlier of January 10, 2021 or when the GSEs cease to be in conservatorship or receivership. The final risk retention rule will become effective one year after publication in the Federal Register for single-family mortgage loans and two years after publication in the Federal Register for multifamily mortgage loans. We continue to evaluate the potential impact of this rule on our business.

Under the final rule, U.S. banks subject to the standards are required to hold a minimum level of high-quality liquid assets based on projections of their short-term cash needs. The debt and mortgage-related securities of Fannie Mae and Freddie Mac gradually over time,are permitted to count toward only up to 40% of the banks’ high-quality liquid asset requirement, and wasthen only after applying a 15% discount to the market value of those securities. The final rule becomes effective January 1, 2015 and provides for a transition period. Banks subject to the rule are required to maintain a minimum liquidity coverage ratio of 80% beginning on January 1, 2015, 90% beginning on January 1, 2016 and 100% beginning on January 1, 2017.

In June 2011, FHFA issued a final rule establishing a framework for conservatorship and receivership operations for the GSEs, which became effective in line with President Obama’s August 2013 requestJuly 2011. The rule includes a provision that FHFA, reduce loan limits in order to reduceas conservator, will not pay securities litigation claims against us during conservatorship, unless the government’s footprintDirector of FHFA determines it is in the market.interest of the conservatorship. In areas whereAugust 2011, an action was brought in the statutory maximum loan limitU.S. District Court for one-family residences is currently $417,000,the District of Columbia against FHFA and FHFA’s plan would have reduced the loan limit to $400,000, a reduction of approximately 4%. The loan limit would be reducedDirector by the same percentage in areas with higher limits. On May 13,Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio challenging the rule’s provisions regarding nonpayment of securities litigation claims. In October 2014, Director Watt announced that FHFA will not use its authority as conservator to reduce current loan limits, indicating that the decision was motivated by concerns about how such a reduction could adversely impact the health of the current housing finance market.plaintiffs voluntarily dismissed this action without prejudice.

In April 2012, FHFA issued Advisory Bulletin AB 2012-02, “Framework for Adversely Classifying Loans, Other Real Estate Owned, and Other Assets and Listing Assets for Special Mention” (the “Advisory Bulletin”), which is applicable to Fannie Mae, Freddie Mac and the Federal Home Loan Banks.. The Advisory Bulletin establishes guidelines for adverse classification and identification of specified single-family and multifamily assets and off-balance sheet credit exposures. The Advisory Bulletin indicates that this guidance considers and is generally consistent with the Uniform Retail Credit Classification and Account Management Policy issued by the federal banking regulators in June 2000.

exceeds the fair value of the underlying property. Under our approach to adopting the charge-off provisions of the Advisory Bulletin in the first quarter of 2015, our allowance for loan losses on the impactedcharged-off loans will be eliminated and the corresponding recorded investment in the loanloans will be reduced by the amounts that are charged off. Under our existing accounting practices and upon adoption of the Advisory Bulletin, the ultimate amount of losses we realize on our

For information on the risks presented by our adoption of the Advisory Bulletin, see “Risk Factors” in our 2013 Form 10-K. See “Executive Summary—Outlook” for a discussion of the expected impact of our implementation of the charge-off provisions of the Advisory Bulletin on our credit losses and loss reserves.

The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and expenses in the condensed consolidated financial statements. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most significant accounting policies in “Note 1, Summary of Significant Accounting Policies” in this report and in our 2013 Form 10-K.

We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions. Management has discussed any significant changes in judgments and assumptions in applying our critical accounting policies with the Audit Committee of our Board of Directors. See “Risk Factors” in our 2013 Form 10-K for a discussion of the risks associated with the need for management to make judgments and estimates in applying our accounting policies and methods. We have identified four of our accounting policies as critical because they involve significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different estimates and assumptions could have a material impact on our reported results of operations or financial condition. These critical accounting policies and estimates are as follows:

See “MD&A—Critical Accounting Policies and Estimates” in our 2013 Form 10-K for a discussion of these critical accounting policies and estimates. We describe below significant changes we made in the third quarter of 2014 to the model and the assumptions used in estimating our allowance for loan losses, which is a component of our total loss reserves.

This section provides a discussion of our condensed consolidated results of operations for the periods indicated and should be read together with our condensed consolidated financial statements, including the accompanying notes.