Fannie Mae-No Politics (FNMA)

[FOFreddie]

The UST undervalues the warrants for the balance sheet items associated with the annual budget.

Option valuation includes the expected value of the net financing costs and is the "r" input in the Black Scholes model. The assumed volatility for valuation will determine the expected value of net financing costs.

The best valuation methodology for the warrants is to use the models set out in the CBO restructuring report.

In any event the warrant valuation by the UST is not relevant for determining a valuation except for the purposes of Budget since it is always an overly conservative valuation.