The Treasury Department's denial of a proposed sale of Fannie Mae low-income housing tax credits (LIHTCs) to a group of investors that includes Goldman Sachs may cost the government-sponsored enterprise $5.2 billion.
In a filing with the Securities and Exchange Commission (SEC), Fannie Mae disclosed that while its conservator, the Federal Housing Finance Agency, has urged the company to explore other options for selling the tax credits, the company believes it will be difficult ‘given current constraints and market conditions.’
The Treasury denied the proposed sale on the basis that withholding approval of the sale affords more protection to taxpayers than does approving the sale.
"While we have not made any decision with respect to whether an impairment of these assets is required under generally accepted accounting principles, if we are unsuccessful in selling or otherwise transferring these investments for value, we are likely to record additional other-than-temporary impairment in the fourth quarter of 2009 that could reduce the carrying value of our LIHTC investments to zero," the SEC filing says.
As of Sept. 30, the carrying value of Fannie's LIHTC investments was $5.2 billion.