Sale of Fannie Mae's LIHTCs to Goldman Sachs Nixed

November 12, 2009
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Just one week after the Federal Housing Finance Agency’s (FHFA) Acting Director, Edward DeMarco, came out with a statement supporting Fannie Mae’s transfer of a portion of its low-income housing tax credit (LIHTC) investments to unrelated third-party investors, a U.S. Treasury official confirmed that the administration is blocking a bid from Goldman Sachs to purchase a portion of the credits.

In its report on third-quarter 2009 results, Fannie Mae noted that prior to September 30, 2009, it had entered into a nonbinding letter of intent to transfer equity interests in its LIHTC investments. Under the terms of the transaction it was contemplating, Fannie Mae said it would transfer approximately half of its LIHTC investments to unrelated third-party investors for a price that exceeds their current carrying value. Fannie Mae also noted that it was awaiting approval from the FHFA, as its conservator, to complete the transaction. As of September 30, the carrying value of Fannie Mae’s LIHTC investments was $5.2 billion.

In his statement, DeMarco said that the FHFA informed Fannie Mae that a transfer of LIHTC investments to a third-party would be consistent with FHFA’s ongoing efforts to converse Enterprise assets and with Enterprise’s multifamily housing mission.

Asked to comment why Treasury blocked the sale, an administration official told the Insider that: “It is our view that 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 Agreement. In short, withholding approval of the proposed sale affords more protection of the taxpayers than does providing approval.”