Current accounting guidance on fair value measurements establishes a framework for measuring fair value and provides for expanded disclosures about fair value measurements. The guidance:

Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. To increase consistency and comparability in fair value measurements and related disclosures, the fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are defined as follows:

The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value.

The fair value of the Partnership’s investments in MRBs and taxable MRBs as of December 31, 2019 and 2018 is based upon prices obtained from a third-party pricing service, which are estimates of market prices. There is no active trading market for the MRBs, and price quotes for the MRBs are not available. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each MRB as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, illiquidity, legal structure of the borrower, collateral, seniority to other obligations, operating results of the underlying property, geographic location, and property quality. These characteristics are used to estimate an effective yield for each MRB. The MRB fair value is estimated using a discounted cash flow and yield to maturity or call analysis by applying the effective yield to contractual cash flows. Significant increases (decreases) in the effective yield would have resulted in a significantly lower (higher) fair value estimate. Changes in fair value due to an increase or decrease in the effective yield do not impact the Partnership’s cash flows.

The Partnership evaluates pricing data received from the third-party pricing service by evaluating consistency with information from either the third-party pricing service or public sources. The fair value estimates of the MRBs and taxable MRBs are based largely on unobservable inputs believed to be used by market participants and requires the use of judgment on the part of the third-party pricing service and the Partnership. Due to the judgments involved, the fair value measurements of the Partnership’s investments in MRBs and taxable MRBs are categorized as a Level 3 input. As of December 31, 2019, the range of effective yields on the individual MRBs was 2.4% to 8.5% per annum, with a weighted average effective yield of 3.8% when weighted by the total principal outstanding of all MRBs as of the reporting date; and the range of effective yields on the individual taxable MRBs was 8.7% to 8.9% per annum, with a weighted average effective yield of 8.8% when weighted by the total principal outstanding of all taxable MRBs as of the reporting date. As of December 31, 2018, the range of effective yields on the individual MRBs was 3.3% to 9.1% per annum, with a weighted average effective yield of 4.6% when weighted by the total principal outstanding of all MRBs as of the reporting date; and the range of effective yields on the individual taxable MRBs was 8.3% to 9.3% per annum, with a weighted average effective yield of 9.1% when weighted by the total principal outstanding of all taxable MRBs as of the reporting date.

The fair value of the Partnership’s investment in PHC Certificates as of December 31, 2019 and 2018 is based upon prices obtained from a third-party pricing service, which are estimates of market prices. There is no active trading market for the PHC Certificates owned by the Partnership. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each PHC Certificate as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, illiquidity, security ratings from rating agencies, the impact of potential political and regulatory change, and other inputs.

The Partnership reviews the inputs used by the primary third-party pricing service by reviewing source information and reviews the methodology for reasonableness. The Partnership also engages a second third-party pricing service to confirm the values developed by the primary third-party pricing service. The valuation methodologies used by the third-party pricing services encompass the use of judgment in their application. Due to the judgments involved, the fair value measurement of the Partnership’s investment in PHC Certificates is categorized as a Level 3 input. As of December 31, 2019, the range of effective yields on the PHC Certificates was 4.4% to 5.3% per annum, with a weighted average effective yield of 5.2% when weighted by the principal outstanding of PHC Certificates as of the reporting date. As of December 31, 2018, the range of effective yields on the PHC Certificates was 5.3% to 6.0% per annum, with a weighted average effective yield of 5.5% when weighted by the principal outstanding of PHC Certificates as of that date.

The effect of the Partnership’s interest rate derivatives is to set a cap, or upper limit, subject to performance of the counterparty, on the base rate of interest paid on the Partnership’s variable rate debt financings equal to the notional amount of the derivative agreement. The effect of the Partnership’s interest rate swaps is to change a variable rate debt obligation to a fixed rate for that portion of the debt equal to the notional amount of the derivative agreement. The fair value of the interest rate derivatives and interest rate swaps is based on a model whose inputs are not observable and therefore is categorized as a Level 3 input. The inputs in the valuation model include three-month LIBOR rates, unobservable adjustments to account for the SIFMA index, as well as any recent interest rate cap trades with similar terms.

Assets measured at fair value on a recurring basis as of December 31, 2019 are summarized as follows:

	Fair Value Measurements as of December 31, 2019
Description	Assets at Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Mortgage revenue bonds, held in trust	$	743,587,715	$	-	$	-	$	743,587,715
Mortgage revenue bonds		30,009,750		-		-		30,009,750
PHC Certificates		43,349,357		-		-		43,349,357
Taxable mortgage revenue bonds (reported within other assets)		1,383,237		-		-		1,383,237
Derivative instruments (reported within other assets)		10,911		-		-		10,911
Total Assets at Fair Value, net	$	818,340,970	$	-	$	-	$	818,340,970

The following table summarizes the activity related to Level 3 assets and liabilities for the year ended December 31, 2019:

	For the Years Ended December 31, 2019
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Revenue Bonds⁽¹⁾			PHC Certificates			Taxable Mortgage Revenue Bonds			Interest Rate Derivatives			Total
Beginning Balance January 1, 2019	$	732,153,435		$	48,672,086		$	1,409,895		$	626,633		$	782,862,049
Total gains (losses) (realized/unrealized)
Included in earnings (interest income and interest expense)		142,356			(6,708	)		-			(499,835	)		(364,187	)
Included in other comprehensive income		39,320,186			984,021			26,428			-			40,330,635
Purchases		19,250,000			-			-			29,527			19,279,527
Settlements		(17,268,512	)		(6,300,042	)		(53,086	)		(145,414	)		(23,767,054	)
Ending Balance December 31, 2019	$	773,597,465		$	43,349,357		$	1,383,237		$	10,911		$	818,340,970
Total amount of losses for the period included in earnings attributable to the change in unrealized losses relating to assets or liabilities held on December 31, 2019	$	-		$	-		$	-		$	(499,835	)	$	(499,835	)

(1)	Mortgage revenue bonds include both bonds held in trust as well as those held by the Partnership.

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 are summarized as follows:

	Fair Value Measurements as of December 31, 2018
Description	Assets at Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Mortgage revenue bonds, held in trust	$	645,258,873	$	-	$	-	$	645,258,873
Mortgage revenue bonds		86,894,562		-		-		86,894,562
PHC Certificates		48,672,086		-		-		48,672,086
Taxable mortgage revenue bonds (reported within other assets)		1,409,895		-		-		1,409,895
Derivative instruments (reported within other assets)		626,633		-		-		626,633
Total Assets at Fair Value, net	$	782,862,049	$	-	$	-	$	782,862,049

The following table summarizes the activity related to Level 3 assets and liabilities for the year ended December 31, 2018:

	For the Years Ended December 31, 2018
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Revenue Bonds ⁽¹⁾			Bond Purchase Commitments			PHC Certificates			Taxable Mortgage Revenue Bonds			Interest Rate Derivatives ⁽²⁾			Total
Beginning Balance January 1, 2018	$	788,621,707		$	3,002,540		$	49,641,588		$	2,422,459		$	(229,631	)	$	843,458,663
Total gains (losses) (realized/unrealized)
Included in earnings (interest income and interest expense)		144,692			-			(77,096	)		-			724,579			792,175
Included in earnings (impairment of securities)		-			-			(1,141,020	)		-			-			(1,141,020	)
Included in other comprehensive (loss) income		(14,560,720	)		(3,002,540	)		950,228			(32,756	)		-			(16,645,788	)
Purchases		41,708,000			-			-			-			-			41,708,000
Settlements		(83,760,244	)		-			(701,614	)		(979,808	)		131,685			(85,309,981	)
Ending Balance December 31, 2018	$	732,153,435		$	-		$	48,672,086		$	1,409,895		$	626,633		$	782,862,049
Total amount of gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets or liabilities held on December 31, 2018	$	-		$	-		$	(1,141,020	)	$	-		$	724,579		$	(416,441	)

(1)	Mortgage revenue bonds include both bonds held in trust as well as those held by the Partnership. The beginning balance also includes the cumulative effect of accounting change related to the adoption of ASU 2017-08 effective January 1, 2018.

(2)	Interest rate derivatives include derivative contracts reported in other assets as well as derivative swap liabilities.

Total gains and loss included in earnings for the interest rate derivatives are reported within “Interest expense” on the Partnership’s consolidated statements of operations.

As of December 31, 2019 and 2018, the Partnership utilized a third-party pricing service to determine the fair value of the Partnership’s financial liabilities, which are estimates of market prices. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each financial liability as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, legal structure, seniority to other obligations, operating results of the underlying assets, and asset quality. The financial liability values are then estimated using a discounted cash flow and yield to maturity or call analysis.

The Partnership evaluates pricing data received from the third-party pricing service, including consideration of current market interest rates, quantitative and qualitative characteristics of the underlying collateral, and other information from either the third-party pricing service or public sources. The fair value estimates of these financial liabilities are based largely on unobservable inputs believed to be used by market participants and require the use of judgment on the part of the third-party pricing service and the Partnership. Due to the judgments involved, the fair value measurements of the Partnership’s financial liabilities are categorized as a Level 3 input. The TEBS Financings are credit enhanced by Freddie Mac. The TOB Trust financings are credit enhanced by either Deutsche Bank or Mizuho. The table below summarizes the fair value of the Partnership’s financial liabilities as of December 31, 2019 and 2018:

	December 31, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial Liabilities:
Debt financing and lines of credit	$	549,397,421	$	568,193,494	$	541,322,765	$	550,766,809
Mortgages payable and other secured financing		26,802,246		26,812,851		27,454,375		27,552,748