Fannie Mae 2009 Annual Report Download - page 299

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.
As of December 31, 2009 and 2008, we had LIHTC partnership investments, excluding restricted cash from
consolidation, of $44 million, which represents the consolidated assets attributable to non-controlling interest,
and $6.3 billion, respectively. As a result of our current tax position, we did not make any LIHTC investments
in 2009 other than pursuant to existing prior commitments and we are not currently recognizing the tax
benefits associated with the tax credits and net operating losses in our consolidated financial statements.
In 2009, 2008 and 2007 we recognized $5.9 billion, $795 million and $174 million, respectively, of other-
than-temporary impairment losses related to our limited partnerships in “Losses from partnership investments”
in our consolidated statements of operations.
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
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
federal government from a reduction in the capital contribution obligation of Treasury to Fannie Mae under
the senior preferred stock purchase agreement. Treasury further stated that withholding approval of the
proposed sale afforded more protection to the taxpayers than approval would have provided.
We have continued to explore options to sell or otherwise transfer our LIHTC investments for value consistent
with our mission; however, to date, we have not been successful. On February 18, 2010, FHFA informed us,
by letter, of its conclusion that any sale by us of our LIHTC assets would require Treasury’s consent under the
senior preferred stock purchase agreement, and that FHFA had presented other options for Treasury to
consider, including allowing us to pay senior preferred stock dividends by waiving the right to claim future tax
benefits of the LIHTC investments. FHFA’s letter further informed us that, after further consultation with
Treasury, we may not sell or transfer our LIHTC partnership interests and that FHFA sees no disposition
options. Therefore, we no longer have both the intent and ability to sell or otherwise transfer our LIHTC
investments for value. The carrying value of our LIHTC “Partnership investments” was reduced to zero in the
consolidated financial statements. We will no longer recognize net operating losses or impairment on our
LIHTC investments, which will significantly reduce “Losses from partnership investments” in the future.
As of December 31, 2009, we have an obligation to fund $541 million in capital contributions. This obligation
has been recorded as a component of “Partnership liabilities” on our consolidated balance sheet.
Consolidated VIEs
We consolidate Fannie Mae MBS trusts in our financial statements when we own 100% of the trust, which
gives us the unilateral ability to liquidate the trust. We also consolidate MBS trusts that are within the scope
of the applicable consolidation accounting standard when we are deemed to be the primary beneficiary. This
includes certain private-label, mortgage revenue bond, and Fannie Mae securitization trusts that meet 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 record third-party ownership in these consolidated MBS
trusts as a component of “Long-term debt” in our consolidated balance sheets. We also consolidate in our
financial statements the assets and liabilities of limited partnerships that are VIEs if we are deemed to be the
primary beneficiary. We record third-party ownership in these consolidated limited partnerships in
“Noncontrolling interest” in our consolidated balance sheets. 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 provide a guaranty to the VIE.
F-41
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)