Fannie Mae 2009 Annual Report Download - page 97

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 the
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. As a result, we recognized a loss of $5.0 billion during the fourth quarter of 2009 to
reduce the carrying value of our LIHTC “Partnership investments” to zero in our 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 on our LIHTC
investments. This obligation has been recorded as a component of “Partnership liabilities” in our consolidated
balance sheet.
Losses from partnership investments increased in 2009 compared with 2008 due to the recognition of higher
other-than-temporary impairment on our LIHTC investments, as discussed above.
The increase in losses from partnership investments from 2008 compared with 2007 was primarily due to
impairment charges on our LIHTC partnership investments that we recorded in 2008 partially offset by gains
from the sale of two portfolios of investments in LIHTC partnerships.
Administrative Expenses
Administrative expenses increased in 2009 driven by an increase in resources and third-party services related
to our foreclosure prevention efforts. The increase in these costs was partially offset by lower staffing levels
throughout the year in other areas of the company. The decrease in administrative expenses in 2008 from 2007
reflected significant reductions in restatement and related regulatory expenses and a reduction in our ongoing
operating costs due to efforts we undertook in 2007 to increase productivity and lower our administrative
costs.
Credit-Related Expenses
Credit-related expenses consist of the provision for credit losses and foreclosed property expense. We detail
the components of our credit-related expenses in Table 8.
Table 8: Credit-Related Expenses
2009 2008 2007
For the Year Ended
December 31,
(Dollars in millions)
Provision for credit losses attributable to guaranty book of business . . . . . . . . . . . . . . . . . $52,071 $25,522 $3,200
Provision for credit losses attributable to acquired credit-impaired loans and HomeSaver
Advance fair value losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,555 2,429 1,364
Total provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,626 27,951 4,564
Foreclosed property expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910 1,858 448
Credit-related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $73,536 $29,809 $5,012
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