Uncertainty Rattles Financial Markets According to Fannie Mae's Economics & Mortgage Market Analysis Group

By Fannie Mae, PRNE
Wednesday, June 16, 2010

Despite Increased Risks, Economic Growth Expected to Continue; Housing Still Faces Headwinds

WASHINGTON, June 17, 2010 - Concerns about European sovereign debt and ensuing international
financial market volatility are pushing capital markets to a flight to
quality according to the June 2010 Economic Outlook released today by Fannie
Mae's (NYSE: FNM) Economics & Mortgage Market Analysis Group. A resulting
decline in U.S. Treasury yields has helped bring mortgage rates to historic
lows and opened a window for mortgage refinancing activity, however rates
will need to move closer to 4.5 percent in order to sustain the recent surge.
Consumer spending slowed recently but is expected to remain healthy and serve
as the biggest driver of continued economic growth, buoyed by an increase in
personal income and falling oil prices which should free up cash for
consumers and contribute to sustainable consumer consumption.

"We continue to project modest economic growth for 2010, despite various
risks," said Fannie Mae Chief Economist Doug Duncan. "On the downside,
private sector payrolls disappointed and our housing outlook was clouded by a
precipitous drop in purchase applications. Clearly, housing still faces
headwinds but housing starts are expected to increase slightly by year end,"
said Duncan. "On the upside, employment is growing, which is a key indicator
of economic growth and stability. The average workweek lengthened to 34.2
hours, increased corporate profits point to strength in near-term hiring, and
small businesses' confidence rose in May with indications of positive plans
for hiring during the next three months."

For an audio synopsis of the June 2010 Economic Outlook, listen to the
new Economic Outlook podcast on the Economics & Mortgage Market Analysis
site at www.fanniemae.com. Visit the site to read the full June 2010
Economic Outlook, including the Economic Developments commentary, Economic
Forecast, and Housing Forecast.

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's
Economics & Mortgage Market Analysis (EMMA) group included in these materials
should not be construed as indicating Fannie Mae's business prospects or
expected results, are based on a number of assumptions, and are subject to
change without notice. How this information affects Fannie Mae will depend on
many factors. Although the EMMA group bases its opinions, analyses,
estimates, forecasts, and other views on information it considers reliable,
it does not guarantee that the information provided in these materials is
accurate, current, or suitable for any particular purpose. Changes in the
assumptions or the information underlying these views could produce
materially different results. The analyses, opinions, estimates, forecasts,
and other views published by the EMMA group represent the views of that group
as of the date indicated and do not necessarily represent the views of Fannie
Mae or its management.

Fannie Mae exists to expand affordable housing and bring global capital
to local communities in order to serve the U.S. housing market. Fannie Mae
has a federal charter and operates in America's secondary mortgage market to
enhance the liquidity of the mortgage market by providing funds to mortgage
bankers and other lenders so that they may lend to home buyers. Our job is to
help those who house America.

Pete Bakel, Fannie Mae, +1-202-752-2034

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