Fannie Mae 2010 Annual Report Download - page 304

vehicles to allow loan originators to securitize assets. Securities are structured from the underlying pool of
assets to provide for varying degrees of risk. The originators of the financial assets or the underwriters of the
transaction create the trusts and typically own the residual interest in the trusts’ assets. Our involvement in
these entities is typically limited to our recorded investment in the beneficial interests that we have purchased.
We have invested in these vehicles since 1987.
Limited Partnerships
We have historically made equity investments in various limited partnerships that sponsor affordable housing
projects utilizing the low-income housing tax credit pursuant to Section 42 of the Internal Revenue Code. The
purpose of these investments is to increase the supply of affordable housing in the United States and to serve
communities in need. In addition, our investments in LIHTC partnerships generate both tax credits and net
operating losses that may reduce our federal income tax liability. Our LIHTC investments primarily represent
limited partnership interests in entities that have been organized by a fund manager who acts as the general
partner. These fund investments seek out equity investments in LIHTC operating partnerships that have been
established to identify, develop and operate multifamily housing that is leased to qualifying residential tenants.
During 2009, we explored options to sell or otherwise transfer our LIHTC investments for value consistent
with our mission. On February 18, 2010, FHFA informed us that after consultation with Treasury, we were not
authorized to sell or transfer our LIHTC partnership interests. The carrying value of our LIHTC “Partnership
investments” was reduced to zero in the consolidated financial statements as of December 31, 2009, as we no
longer had both the intent and ability to sell or otherwise transfer our LIHTC investments for value.
We recognized $145 million, $5.9 billion and $795 million for the years ended December 31, 2010, 2009 and
2008, respectively, of other-than-temporary impairment losses related to our limited partnerships in “Losses
from partnership investments” in our consolidated statements of operations. We no longer recognize net
operating losses or impairment on our LIHTC investments, since the carrying value was reduced to zero.
As of December 31, 2010, we have an obligation to fund $280 million in capital contributions. This obligation
has been recorded as a component of “Other liabilities” in our consolidated balance sheet. As a result of our
current tax position, we did not make any LIHTC investments in 2010 other than pursuant to existing prior
commitments. We are not currently recognizing the tax benefits associated with the tax credits and net
operating losses in our consolidated financial statements.
Consolidated VIEs
Upon adoption of the new accounting standards, if an entity is a VIE, we consider whether our variable
interest in that entity causes us to be the primary beneficiary. The primary beneficiary of the VIE is required
to consolidate and account for the assets, liabilities and noncontrolling interests of the VIE in its consolidated
financial statements. An enterprise is deemed to be the primary beneficiary when the enterprise has the power
to direct the activities of the VIE that most significantly impact the entity’s economic performance and
exposure to benefits and/or losses could potentially be significant to the entity.
The following table displays the assets and liabilities of consolidated VIEs in our consolidated balance sheets
as of December 31, 2010 and 2009. The difference between total assets of consolidated VIEs and total
liabilities of consolidated VIEs is primarily due to our investment in the debt securities of consolidated VIEs.
F-46
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)