UPDATE 1-Fannie Mae evaluating whether to sell tax credits
NEW YORK, Nov 9 (Reuters) - Fannie Mae (FNM.N) is evaluating whether it can proceed with a sale of tax credits after the Treasury said Friday it would block the sale of those investments to Goldman Sachs Group (GS.N).
The company on Monday said it could record additional other-than-temporary impairments in the fourth quarter if it is unable to sell or transfer these low income housing tax credits.
The carrying value of the investments was $5.2 billion as of Sept. 30, Fannie Mae said on Monday.
"Because we expect to have a net worth deficit in future periods, the impairment will increase the amount that would be requested from Treasury by FHFA on our behalf under the senior preferred stock purchase agreement," Fannie Mae said.
Fannie Mae last week reported that its conservator, the Federal Housing Finance Agency (FHFA), had advised the company that it had no objection to the tax credit transaction and that it was requesting the Treasury's approval.
On Thursday, in reporting a quarterly loss of about $19 billion, Fannie Mae said it was awaiting Treasury approval to transfer the credits to unnamed investors. Read more on the quarterly results at [ID:nL6650207].
Sale or transfer of the tax credits, which are incentives designed to bring more investment to low-income housing developments, will be difficult, Fannie Mae said.
"While our conservator has directed us to continue to explore options to sell or transfer these investments for value consistent with our mission, we believe this will be difficult given current constraints and market conditions," Fannie Mae said.
On Monday, Fannie Mae said the Treasury in a Nov. 6 letter said that "withholding approval of the proposed sale affords more protection of the taxpayers than does providing approval."
Fannie Mae was seized by regulators last year as the housing market slump produced massive losses, forcing the government to inject billions of dollars into the company.
Fannie Mae's loss stemmed from $22 billion in credit-related expenses. These included charges on mortgages it bought out of securities as it modified loans under President Barack Obama's foreclosure prevention plan. (Reporting by Lynn Adler; Editing by Theodore d'Afflisio)
