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NAME AND TITLE: Ann M. Kappler, senior vice president and general counsel, Fannie Mae AGE: 44 FANNIE’S FINANCES: According to Kappler, the corporate mission of Washington, D.C.-based Fannie Mae has remained unchanged since it was chartered by Congress during the New Deal — to help Americans realize their dreams of home ownership by financing mortgages offered by banks and other lenders. The corporation supports affordable loans by buying lower-interest mortgages from lenders and selling mortgage-backed securities to investors. This work has a big payoff. The Fortune 100 company, with 4,700 employees, reported 2001 net income of $5.89 billion. Fannie Mae and Freddie Mac, its much smaller competitor, also enjoy some big — and often controversial — benefits due to their status as government-sponsored enterprises — a line of credit to the U.S. Treasury, freedom from reporting to the Securities and Exchange Commission and exemption from state and local income taxes. KAPPLER’S CREW: Kappler supervises 105 lawyers, 77 at Fannie Mae’s D.C. headquarters and the others in regional offices. The two largest groups in Washington are the securitization practice group, which handles complex asset-backed securities, and the regulatory practice group, which deals with Fannie Mae’s legislative and executive-branch masters — including House and Senate oversight committees, the Housing and Urban Development Department, the Treasury Department and the Office of Federal Housing Enterprise Oversight. Kappler tracks major legal issues through membership on all key senior management committees, and relies on “strong deputies” in supervising her multitasking staff, she said. FANNIE’S FOE: In 1999, a coalition of banks, mortgage insurers, appraisers and other mortgage-industry groups formed FM Watch, a lobbying and public-relations campaign against the purportedly unfair, anti-competitive government benefits to Fannie Mae and Freddie Mac. FM Watch also charges that the two are positioning themselves to enter the direct-mortgage market. Kappler scoffs at FM Watch’s claim to be a consumer watchdog. She argues that FM Watch is simply a guise for competitors hoping to displace Fannie and Freddie in the secondary-mortgage market — without assuming their commitment to affordable mortgages. Things got ugly in March 2001, when the Wall Street Journal reported FM Watch’s allegations that Fannie Mae had threatened the CEOs of American International Group, Wells Fargo and GE Capital Services with a loss of underwriting business if they remained active in the group. The charge is “baseless and belied by the facts,” said Kappler, noting that Fannie is doing more business than ever with FM Watch supporters. In her nearly four years as Fannie Mae’s top lawyer, Kappler has helped chairman and CEO Franklin Delano Raines fend off politicians’ and competitors’ challenges to Fannie Mae’s special legal status. These critics claim that Fannie Mae acts like a big business — selling stocks, lobbying Congress, making risky investments and paying top dollar for its top managers (Raines received $6.9 million in cash compensation alone in 2001) — and should be regulated accordingly. In March, legislation was introduced to repeal Fannie Mae’s and Freddie Mac’s SEC exemption. According to Kappler, Fannie Mae strives to “stay ahead of the curve on transparency and disclosure.” She is now implementing Raines’ commitment, announced on July 12, to voluntarily register its common stock under the Securities Exchange Act, and thus subject Fannie Mae to SEC filing requirements. Kappler waves off criticism that Fannie Mae’s SEC registration is simply an effort to ride out the post-Enron corporate accountability storm. She noted that the stock registration is virtually irreversible, and that Raines and CFO J. Timothy Howard are putting their signatures — and careers — on the line by personally certifying Fannie Mae’s financial statements. AUTOMATED UNDERWRITING SUIT: Fannie Mae’s quasi-public status gives it no immunity from plaintiffs’ firms. In September, New York’s Milberg Weiss Bershad Hynes & Lerach filed a civil rights complaint in D.C. federal court, alleging that Fannie Mae’s automated underwriting system discriminates against minority loan applicants. The “desktop underwriter” allows banks and other lenders to submit a potential borrower’s financial information — including income, debts, credit history and home appraisal — and get immediate word on whether Fannie Mae would buy the mortgage, and at what interest rate. Plaintiff Safiyyah Rahmaan of Wilson, N.C., whose mortgage application was rejected by a local bank using the desktop underwriter, alleges that the system has a disparate impact on creditworthy minorities. Fannie Mae has “absolute confidence” in its automated underwriting system, said Kappler, who pledges a vigorous defense in the suit. According to Kappler, the system relies wholly on race-neutral factors and actually reduces the potential for discrimination by removing subjectivity from the loan-making process. FANNIE’S FIRMS: Kappler calls on Washington’s Wilmer, Cutler & Pickering for litigation, regulatory compliance, employment and securities work and interpreting Fannie Mae’s congressional charter. She turns to the Washington and California offices of O’Melveny & Myers for litigation, multifamily transactional work and general regulatory counseling. Washington’s ShawPittman picks up transactional, IP and banking matters. JERSEY GIRL TO GC: Kappler’s r�sum� is a litany of overachievement. The valedictorian of her high school class in Somerville, N.J., Kappler graduated magna cum laude from Dartmouth College in 1979 with a B.A. in drama and a minor in anthropology. She moved to New York, relaxing for four years as a paralegal at Skadden, Arps, Slate, Meagher & Flom before fulfilling her destiny at New York University School of Law, where she was elected editor-in-chief of the law review and graduated in 1986 as the highest-ranking female student. After clerkships with D.C. Circuit Judge Abner J. Mikva and U.S. Supreme Court Justice Harry A. Blackmun, Kappler was recruited in 1989 by Jenner & Block partners Bruce Ennis and David Ogden to join the firm’s Supreme Court and First Amendment practice in D.C. She became a partner in 1994. Kappler returned to the high court to argue two cases (both 9-0 losses) on behalf of a trade association of insurance brokerages and agencies — an experience that the former clerk likens to “performing for your father in front of his friends.” Kappler’s First Amendment clients at Jenner included the American Library Association, Playboy and Penthouse. She represented the library group and other free speech advocates in ACLU v. Reno, the successful challenge to Internet restrictions in the Communications Decency Act. Kappler became Fannie Mae’s GC in February 1999. PERSONAL: Kappler has been married for 18 years to Mark Herlihy, a solo practitioner. They have two young sons, Liam, 8, and Ciaran, 5, and she has three adult stepchildren who are Herlihy’s children, Michael, 29, Erin, 26, and Brian, 23. LAST BOOK READ: “Ahab’s Wife,” by Sena J. Naslund.

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