Fannie Mae 2004 Annual Report Download - page 303

Consolidated VIEs
We consolidate in our financial statements Fannie Mae MBS trusts when we own 100% of the trust, which
gives us the unilateral ability to liquidate the trust. We also consolidate MBS trusts that do not meet the
definition of a QSPE when we are deemed to be the primary beneficiary. This includes certain private-label
and Fannie Mae securitization trusts that met the VIE criteria. As an active participant in the secondary
mortgage market, our ownership percentage in any given mortgage-related security will vary over time. We
consolidated $147.8 billion and $153.3 billion of assets from MBS trusts in the consolidated balance sheets as
of December 31, 2004 and 2003, respectively. Third-party ownership in the consolidated MBS trusts was
$9.7 billion and $8.1 billion as of December 31, 2004 and 2003, respectively, and is recorded as a component
of either “Short-term debt” or “Long-term debt” in the consolidated balance sheets.
We consolidate in our financial statements the assets and liabilities of limited partnerships that are VIEs if we
are deemed to be the primary beneficiary. Accordingly, we have consolidated the upper-tier partnerships for all
of our LIHTC investments in private-label funds and certain investments in multi-investor funds. As of
December 31, 2004 and 2003, we consolidated $3.8 billion and $223 million, respectively, of assets of limited
partnerships in the consolidated balance sheets. Third-party ownership in the consolidated limited partnerships
is recorded in “Minority interests in consolidated subsidiaries” in the consolidated balance sheets.
The following table displays the carrying amount and classification of consolidated assets of VIEs as of
December 31, 2004 and 2003.
2004 2003
As of December 31,
(Restated)
(Dollars in millions)
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $143,800 $151,731
Securities
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,139 1,693
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,795 223
Total assets of consolidated VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $151,734 $153,647
(1)
Includes consolidated MBS trusts and consolidated mortgage revenue bond trusts.
In general, the investors in the obligations of consolidated VIEs have recourse only to the assets of those VIEs
and do not have recourse to us, except where we are the counterparty to a guaranty transaction involving the
VIE.
Non-consolidated VIEs
We also have investments in VIEs that we did not consolidate because we were not deemed to be the primary
beneficiary. These VIEs include the securitization trusts and LIHTC partnerships described above where our
ownership represents a significant variable interest in the entity. This includes our investments in certain
Fannie Mae securitization trusts, private-label trusts, LIHTC partnerships, other tax partnerships and other
entities that meet the VIE criteria.
In the year ended December 31, 2004, we consolidated our investments in certain LIHTC funds that were
structured as limited partnerships. The consolidated funds invest in LIHTC operating partnerships that did not
require consolidation under the requirements of FIN 46R and are therefore accounted for using the equity
method. Such investments, which are generally funded through a combination of debt and equity, with equity
typically comprising 30% to 60% of the total project capital, have a recorded investment of $2.7 billion at
December 31, 2004. The funds that were consolidated own a majority of the limited partnership interests in
the LIHTC operating partnerships.
The total assets of unconsolidated VIEs where we have significant involvement was $33.8 billion and
$39.3 billion as of December 31, 2004 and 2003, respectively, including $25.0 billion and $28.5 billion in
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FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)