Fannie Mae 2006 Annual Report Download - page 121

The table below presents a summary of our on- and off-balance sheet Fannie Mae MBS and other guaranty
obligations as of December 31, 2006 and 2005.
Table 28: On- and Off-Balance Sheet MBS and Other Guaranty Arrangements
2006 2005
As of December 31,
(Dollars in millions)
Fannie Mae MBS and other guaranties outstanding
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,996,941 $1,852,521
Less: Fannie Mae MBS held in portfolio
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199,644 234,451
Fannie Mae MBS held by third parties and other guaranties . . . . . . . . . . . . . . . . . . . . . . . . . $1,797,297 $1,618,070
(1)
Includes $19.7 billion and $19.2 billion in unpaid principal balance of other guaranties as of December 31, 2006 and
2005, respectively. Excludes $105.6 billion and $111.3 billion in unpaid principal balance of consolidated Fannie Mae
MBS as of December 31, 2006 and 2005, respectively.
(2)
Amounts represent unpaid principal balance and are recorded in “Investments in securities” in the consolidated balance
sheets.
For more information on our securitization transactions, including the interests we retain in these transactions,
cash flows from these transactions, and our accounting for these transactions, see “Notes to Consolidated
Financial Statements—Note 6, Portfolio Securitizations,” “Notes to Consolidated Financial Statements—Note 8,
Financial Guaranties and Master Servicing” and “Notes to Consolidated Financial Statements—Note 18,
Concentrations of Credit Risk.” For information on the revenues and expenses associated with our Single-
Family and HCD businesses, refer to “Business Segment Results.”
LIHTC Partnership Interests
In most instances, we are not the primary beneficiary of our LIHTC partnership investments, and therefore our
consolidated balance sheets reflect only our investment in the partnership, rather than the full amount of the
partnership’s assets and liabilities. In certain instances, we have been determined to be the primary beneficiary
of the investments, and therefore all of the partnership assets and liabilities have been recorded in the
consolidated balance sheets, and the portion of these investments owned by third parties is recorded in the
consolidated balance sheets as an offsetting minority interest. Our investments in LIHTC partnerships are
recorded in the consolidated balance sheets as “Partnership investments.”
In cases where we are not the primary beneficiary of these investments, we account for our investments in
LIHTC partnerships by using the equity method of accounting or the effective yield method of accounting, as
appropriate. In each case, we record in the consolidated financial statements our share of the income and
losses of the partnerships, as well as our share of the tax credits and tax benefits of the partnerships. Our share
of the operating losses generated by our LIHTC partnerships is recorded in the consolidated statements of
income under “Loss from partnership investments.” The tax credits and benefits associated with any operating
losses incurred by these LIHTC partnerships are recorded in the consolidated statements of income within our
“Provision for federal income taxes.”
As of December 31, 2006, we had a recorded investment in these LIHTC partnerships of $8.8 billion. Our risk
exposure relating to these LIHTC partnerships is limited to the amount of our investment and the possible
recapture of the tax benefits we have received from the partnership. Neither creditors of, nor equity investors
in, these partnerships have any recourse to our general credit. To manage the risks associated with a
partnership, we track compliance with the LIHTC requirements, as well as the property condition and financial
performance of the underlying investment throughout the life of the investment. In addition, we evaluate the
strength of the partnership’s sponsor through periodic financial and operating assessments. Further, in some of
our LIHTC partnership investments, our exposure to loss is further mitigated by our having a guaranteed
economic return from an investment grade counterparty.
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