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 the Partnership’s assets and liabilities measured at fair value.

The fair value of the Partnership’s investments in MRBs and taxable MRBs, as of March 31, 2020 and December 31, 2019, 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 March 31, 2020, the range of effective yields on the individual MRBs was 2.8% to 7.9% per annum, with a weighted average effective yield of 3.9% 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 8.4% to 8.5% per annum, with a weighted average effective yield of 8.4% when weighted by the total principal outstanding of all taxable MRBs as of the reporting date. 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.

The Partnership sold its investments in the PHC Certificates in January 2020. The fair value of the Partnership’s investment in PHC Certificates as of December 31, 2019 was based upon prices obtained from a third-party pricing service, which were estimates of market prices. There was no active trading market for the PHC Certificates owned by the Partnership. The valuation methodology of the Partnership’s third-party pricing service incorporated commonly used market pricing methods. It considered 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 reviewed the inputs used by the primary third-party pricing service by reviewing source information and reviewed the methodology for reasonableness. The Partnership also engaged 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 encompassed the use of judgment in their application. Due to the judgments involved, the fair value measurement of the Partnership’s investment in PHC Certificates was 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 all PHC Certificates as of the reporting 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 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 March 31, 2020 are summarized as follows:

	Fair Value Measurements as of March 31, 2020
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	$	734,245,836	$	-	$	-	$	734,245,836
Mortgage revenue bonds		26,836,439		-		-		26,836,439
Taxable mortgage revenue bonds (reported within other assets)		1,417,654		-		-		1,417,654
Derivative instruments (reported within other assets)		36,112		-		-		36,112
Total Assets at Fair Value, net	$	762,536,041	$	-	$	-	$	762,536,041

The following table summarizes the activity related to Level 3 assets for the three months ended March 31, 2020:

	For the Three Months Ended March 31, 2020
	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, 2020	$	773,597,465		$	43,349,357		$	1,383,237		$	10,911	$	818,340,970
Total gains (losses) (realized/unrealized)
Included in earnings (interest income and interest expense)		35,142			(7,219	)		-			25,201		53,124
Included in earnings (impairment of securities and provision for credit loss)		(1,357,681	)		-			-			-		(1,357,681	)
Included in earnings (gain on sale of securities)		-			1,416,023			-			-		1,416,023
Included in other comprehensive (loss) income		(6,722,122	)		(1,408,804	)		36,555			-		(8,094,371	)
Sale of securities		-			(43,349,357	)		-			-		(43,349,357	)
Settlements		(4,470,529	)		-			(2,138	)		-		(4,472,667	)
Ending Balance March 31, 2020	$	761,082,275		$	-		$	1,417,654		$	36,112	$	762,536,041
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 March 31, 2020	$	(1,357,681	)	$	-		$	-		$	25,201	$	(1,332,480	)

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

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 three months ended March 31, 2019:

	For the Three Months Ended March 31, 2019
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Revenue Bonds ⁽¹⁾			PHC Certificates			Taxable 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)		35,730			16,726			-			(306,591	)		(254,135	)
Included in other comprehensive (loss) income		7,639,913			485,222			18,792			-			8,143,927
Purchases		6,050,000			-			-			-			6,050,000
Settlements		(6,831,237	)		(2,767,166	)		(1,954	)		(46,536	)		(9,646,893	)
Ending Balance March 31, 2019	$	739,047,841		$	46,406,868		$	1,426,733		$	273,506		$	787,154,948
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 March 31, 2019	$	-		$	-		$	-		$	(306,591	)	$	(306,591	)

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

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

As of March 31, 2020 and December 31, 2019, 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 March 31, 2020 and December 31, 2019:

	March 31, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial Liabilities:
Debt financing and lines of credit	$	512,925,429	$	529,632,997	$	549,397,421	$	568,193,494
Mortgages payable and other secured financing		26,689,992		26,691,893		26,802,246		26,812,851