Fannie Mae 2009 Annual Report Download - page 147

We estimate the decrease to our total deficit to be between $2 billion and $4 billion as a result of adoption
effective January 1, 2010. The primary components of the cumulative transition adjustment recorded effective
January 1, 2010 include the following: (1) for all of our outstanding MBS trusts that we consolidate, the
reversal of the related guaranty assets and guaranty obligations; (2) for all of our outstanding MBS trusts that
we consolidate, the reversal of amounts previously recorded in the reserve for guaranty losses for future
interest payments on seriously delinquent loans; (3) for all of our investments in single-class Fannie Mae MBS
classified as available-for-sale, the reversal of the related unrealized gains and losses recorded in AOCI; and
(4) for all of our investments in single-class Fannie Mae MBS classified as trading, the reversal of the related
fair value gains and losses previously recorded in earnings. The adoption of these new accounting standards
will not significantly impact our required level of capital under existing minimum and critical capital
requirements, which have been suspended by our conservator. FHFA directed us to continue reporting our
minimum capital requirements based on 0.45%, and critical capital requirements based on 0.25%, of the
unpaid principal balance of loans backing MBS held by third parties, notwithstanding the new accounting
standards.
Because these new standards will have such a significant impact on our accounting and financial statements,
we made major operational and system changes to implement the new standards by the effective date. We
provide more detailed information on the impact of these new standards on our accounting and financial
statements in “Note 1, Summary of Significant Accounting Policies.”
Partnership Investment Interests
The carrying value of our partnership investments, which primarily include investments in affordable rental
and for-sale housing partnerships, totaled $2.4 billion as of December 31, 2009, compared with $9.3 billion as
of December 31, 2008. For additional information regarding our holdings in off-balance sheet limited
partnerships, refer to “Note 2, Consolidations.”
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 LIHTC partnership, rather than the full amount
of the LIHTC partnership’s assets and liabilities. For partnership investments where we have determined that
we are the primary beneficiary, we have consolidated these investments and recorded all of the LIHTC
partnership assets and liabilities in our consolidated balance sheets. The portion of these investments owned by
third parties is recorded in the consolidated balance sheets as an offsetting minority interest.
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 LIHTC 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 operations under “Losses from partnership investments.” Any tax credits or benefits associated
with the operating losses from our LIHTC partnerships are recognized in “Provision (benefit) for federal
income taxes” in our consolidated statements of operations. LIHTC partnership investments, excluding
restricted cash from consolidations, totaled $44 million, which represents the consolidated assets attributable to
non-controlling interest, as of December 31, 2009, compared with $6.3 billion as of December 31, 2008. As a
result of our current tax position, we currently are not making any new LIHTC investments, other than
pursuant to commitments existing prior to 2008, and are not recognizing any tax benefits in our consolidated
statements of operations associated with the tax credits and net operating losses.
Prior to September 30, 2009, we entered into a nonbinding letter of intent to transfer equity interests in our
LIHTC investments to third party investors at a price above carrying value. This transaction was subject to the
Treasury’s approval under the terms of our senior preferred stock purchase agreement. In November of 2009,
Treasury notified FHFA and us that it did not consent to the proposed transaction. Treasury stated the
proposed sale would result in a loss of aggregate tax revenues that would be greater than the savings to the
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