FNM » Topics » SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities and FIN No. 46R, Consolidation of Variable Interest Entities

This excerpt taken from the FNM 10-K filed Feb 26, 2009.
SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities and FIN No. 46R, Consolidation of Variable Interest Entities
 
On September 15, 2008, the FASB issued an exposure draft of a proposed statement of financial accounting standards, Amendments to FASB Interpretation No. 46(R), and an exposure draft of a proposed statement of financial accounting standards, Accounting for Transfer of Financial Assets-an amendment of SFAS Statement No. 140. The proposed amendments to SFAS 140 would eliminate qualifying special purpose entities (“QSPEs”). Additionally, the amendments to FIN 46R would replace the current consolidation model with a qualitative evaluation that requires consolidation of an entity when the reporting enterprise both (a) has the power to direct matters which significantly impact the activities and success of the entity, and (b) has exposure to benefits and/or losses that could potentially be significant to the entity. If an enterprise is not able to reach a conclusion through the qualitative analysis, it would then proceed to a quantitative evaluation. The proposed statements would be effective for new transfers of financial assets and to all variable interest entities on or after January 1, 2010.
 
If we are required to consolidate the incremental assets and liabilities under the FASB’s currently proposed rules, these assets and liabilities would initially be reported at fair value. If the fair value of the consolidated assets is substantially less than the fair value of the consolidated liabilities, we could experience a material increase in our stockholders’ deficit. However, at the FASB’s January 28, 2009 board meeting, a tentative decision was reached that the incremental assets and liabilities to be consolidated upon adoption should be recognized at their carrying values as if they had been consolidated at the inception of the entity or a subsequent reconsideration date. The FASB board members indicated that fair value at consolidation would only be permitted if determining the carrying value is not practicable. As a result of this tentative decision, we could also experience an increase in our stockholders’ deficit. In addition, the amount of capital we would be required to maintain could increase if we consolidate incremental assets and liabilities. Under certain circumstances, these changes could have a material adverse impact on our earnings, financial condition and net worth. Since the proposed amendments to SFAS 140 and FIN 46R are not final, we are unable to predict the impact that the amendments may have on our consolidated financial statements.
 
This excerpt taken from the FNM 10-Q filed Nov 10, 2008.
SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities and FIN No. 46R, Consolidation of Variable Interest Entities
 
On September 15, 2008, the FASB issued an exposure draft of a proposed statement of financial accounting standards, Amendments to FASB Interpretation No. 46(R) and an exposure draft of a proposed statement of financial accounting standards, Accounting for Transfer of Financial Assets-an amendment of SFAS Statement No. 140. The proposed amendments to SFAS 140 eliminate qualifying special purpose entities (“QSPEs”). Additionally, the amendments to FIN 46R would replace the current consolidation model with a qualitative evaluation that requires consolidation of an entity when the reporting enterprise both (a) has the power to direct matters which significantly impact the activities and success of the entity, and (b) has exposure to benefits and/or losses that could potentially be significant to the entity. If an enterprise is not able to reach a conclusion through the qualitative analysis, it would then proceed to a quantitative evaluation. The proposed statements would be effective for new transfers of financial assets and to all variable interest entities on or after January 1, 2010.
 
If we are required to consolidate incremental assets and liabilities and the fair value of those assets is less than the fair value of the corresponding liabilities, the amount of our stockholders’ equity would decrease. In addition, the amount of capital we would be required to maintain could increase if we consolidate incremental assets and liabilities. Under certain circumstances, these changes could have a material adverse impact on our earnings, financial condition and net worth. Since the amendments to SFAS 140 and FIN 46R are not final and the FASB’s proposals are subject to a public comment period, we are unable to predict the impact that the amendments may have on our consolidated financial statements.
 
On September 15, 2008, the FASB also issued proposed FSP No. FAS 140-e and FIN 46(R)-e, Disclosures about Transfers of Financial Assets and Interests in Variable Interest Entities. The proposed FSP is intended to


153


Table of Contents

 
FANNIE MAE
(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)
 
enhance disclosures about transfers of financial assets and interests in variable interest entities. The disclosures are similar to those in the exposure drafts to amend SFAS 140 and FIN 46R, but would be effective sooner. As proposed, we would be required to provide the disclosures included in this FSP beginning with our December 31, 2008 financial statements. The proposed FSP only requires additional disclosures and, therefore, will not have an impact on our consolidated financial statements.
 
This excerpt taken from the FNM 10-Q filed Aug 8, 2008.
SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities and FIN No. 46R, Consolidation of Variable Interest Entities
 
The FASB is considering amendments to SFAS 140 to eliminate qualifying special purpose entities (“QSPEs”). Additionally, the FASB is considering amendments to FIN 46R that would replace the current consolidation model with a qualitative evaluation that requires consolidation of an entity when the reporting enterprise both (a) has the power to direct matters which significantly impact the activities and success of the entity, and (b) has exposure to benefits and/or losses that could potentially be significant to the entity. If an enterprise is not able to reach a conclusion through the qualitative analysis, it would then proceed to a quantitative evaluation. As of August 7, 2008, the FASB had not formally issued proposed amendments to SFAS 140 or FIN 46R.
 
If we are required to consolidate incremental assets and liabilities, the amount of capital we would be required to maintain could increase. Under certain circumstances, these changes could have a material adverse impact on our earnings, financial condition and capital position. Since the amendments to SFAS 140 and FIN 46R are not final and the FASB’s proposals will be subject to a public comment period, we are unable to predict the impact that the amendments may have on our consolidated financial statements.
 
This excerpt taken from the FNM 10-Q filed May 6, 2008.
SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities and FIN No. 46R, Consolidation of Variable Interest Entities
 
The FASB voted to eliminate Qualifying Special Purpose Entities (“QSPEs”) from the guidance in SFAS 140 in April 2008, and is considering changes to the consolidation model prescribed by FIN 46R. While revised standards have not been finalized and the FASB’s proposals will be subject to a public comment period, these changes may result in our consolidating more assets and liabilities onto our consolidated balance sheet in connection with trusts that currently meet the QSPE criteria.
 
2.   Consolidations
 
We have interests in various entities that are considered to be VIEs, as defined by FIN 46R. These interests include investments in securities issued by VIEs, such as Fannie Mae MBS created pursuant to our securitization transactions, mortgage- and asset-backed trusts that were not created by us, limited partnership interests in LIHTC partnerships that are established to finance the construction or development of low-income affordable multifamily housing and other non-LIHTC limited partnership investments in affordable rental and for-sale housing. These interests may also include our guaranty to the entity.
 
As of March 31, 2008 and December 31, 2007, we had $10.6 billion and $11.0 billion of partnership investments, respectively. Of our total partnership investments, LIHTC investments represent $7.7 billion and $8.1 billion as of March 31, 2008 and December 31, 2007, respectively. We consolidated our investments in certain LIHTC funds. The consolidated funds, in turn, own a majority of the limited partnership interests in


87


Table of Contents

 
FANNIE MAE
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)
 
other LIHTC operating partnerships, which did not require consolidation under FIN 46R and are therefore accounted for using the equity method. Such investments, which are generally funded through a combination of debt and equity, have a recorded investment of $3.6 billion and $3.5 billion as of March 31, 2008 and December 31, 2007, respectively.
 
In March 2008, we sold for cash a portfolio of investments in LIHTC partnerships reflecting approximately $392 million in future LIHTC tax credits and the release of future capital obligations relating to the investments. The portfolio for which these credits were applicable consisted of investments in 7 funds. In March 2007, we sold for cash a portfolio of investments in LIHTC partnerships reflecting approximately $676 million in future LIHTC tax credits and the release of future capital obligations relating to the investments. The portfolio for which these credits were applicable consisted of investments in 12 funds.
 
3.   Mortgage Loans
 
The following table displays the held-for-sale and held-for-investment loans in our mortgage portfolio as of March 31, 2008 and December 31, 2007, and does not include loans underlying securities that are not consolidated, since in those instances the mortgage loans are not included in the condensed consolidated balance sheets.
 
                 
    As of  
    March 31,
    December 31,
 
    2008     2007  
    (Dollars in millions)  
 
Single-family
  $ 313,458     $ 311,831  
Multifamily
    98,380       91,746  
                 
Total unpaid principal balance of mortgage loans(1)(2)
    411,838       403,577  
Unamortized premiums, discounts and other cost basis adjustments, net
    216       726  
Lower of cost or market adjustments on loans held for sale
    (126 )     (81 )
Allowance for loan losses for loans held for investment
    (993 )     (698 )
                 
Total mortgage loans
  $ 410,935     $ 403,524  
                 
 
 
(1) Includes construction to permanent loans with an unpaid principal balance of $135 million and $149 million as of March 31, 2008 and December 31, 2007, respectively.
 
(2) Includes unpaid principal balance totaling $80.0 billion and $81.8 billion as of March 31, 2008 and December 31, 2007, respectively, related to mortgage-related securities that were consolidated under FIN 46R and mortgage-related securities created from securitization transactions that did not meet the sales criteria under SFAS 140, which effectively resulted in mortgage-related securities being accounted for as loans.
 
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki