Treasury Denies Fannie Mae Tax-Credit Plan

(WASHINGTON) — Fannie Mae said Monday it may have to ask the government for more financial assistance because the company cannot sell $5.2 billion in tax credits.

The Treasury Department last week blocked the mortgage giant from selling about $2.6 billion in low-income housing tax credits to investors that included Goldman Sachs Group Inc. Because the investors could use the credits to reduce their own tax bills, Treasury said the sale would result in a loss of tax revenue greater than the savings to the government.

"We have said all along that we would make determinations based on what is in the taxpayers' interests," said Andrew Williams, a Treasury spokesman.

Fannie Mae requested $15 billion in financial aid last week after reporting a $19.8 billion quarterly loss, bringing the taxpayers' bill for the mortgage company's rescue to $60 billion.

Fannie said in a regulatory filing that it was evaluating whether it would have to take a charge in the current quarter to reflect the value of the now-worthless tax credits. If so, Fannie Mae's net worth would be reduced by that amount, and it would need more money to shore up its balance sheet.

The Washington-based company and its sibling Freddie Mac were seized by federal regulators 14 months ago. Fannie and Freddie play a vital role in the mortgage market by purchasing loans from banks and selling them to investors. Together, Fannie and Freddie own or guarantee almost 31 million home loans worth about $5.5 trillion. That's about half of all mortgages.

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AP Economics Writer Martin Crutsinger contributed to this report.

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