The government has nixed a plan for Fannie Mae to sell over $2.5 billion worth of low-income housing tax credits to Goldman Sachs and Warren Buffetts company Berkshire Hathaway.
The Treasury Department canceled the move, saying the loss in tax revenue to the government would exceed the savings (see
The federal government effectively took over the struggling mortgage holder last year during the financial crisis, and the companys prospects have not gotten much better of late. The Federal Housing Finance Administration had not objected to the sale of the tax credits, but the Treasury had a different opinion.
In an
Fannie Mae said its conservator has directed the company to continue to explore options for selling the investments, but it now believes that will be more difficult given the current constraints and market conditions. If it is unsuccessful at selling or otherwise transferring the tax credits, Fannie Mae will have to record additional other-than-temporary impairment in the fourth quarter that could reduce the carrying value of the LIHTC investments to zero. As of Sept. 30, the carrying value of the LIHTC investments was $5.2 billion.
Going from $5.2 billion to zero in a matter of a few months is not going to make for a pretty picture at Fannie Mae, or for the housing market.