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 assets and liabilities measured at fair value on a recurring basis.

The fair value of the Partnership’s investments in MRBs, taxable MRBs and bond purchase commitments as of September 30, 2021 and December 31, 2020, is based upon prices obtained from a third-party pricing service, which are estimates of market prices. There is no active trading market for these securities, and price quotes for the securities are not available. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. The valuation methodology considers the underlying characteristics of each security 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 security. The security 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, taxable MRBs and bond purchase commitments 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, taxable MRBs and bond purchase commitments are categorized as Level 3 assets.

The range of effective yields and weighted average effective yields of the Partnership’s investments in MRBs, taxable MRBs and bond purchase commitments as of September 30, 2021 and December 31, 2020 are as follows:

The effect of the Partnership’s interest rate caps 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 inputs in the interest rate cap agreement 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. The effect of the Partnership’s total return swaps is to lower the net interest rate related to the Partnership’s Secured Notes equal to the notional amount of the derivative instruments. The inputs in the total return swap valuation model include changes in the value of the Secured Notes and the associated changes in value of the underlying assets securing the Secured Notes, accrued and unpaid interest, and any potential gain share amounts. The fair value of the interest rate cap agreements and total return swaps are based on models whose inputs are not observable and therefore the inputs are categorized as Level 3 assets or liabilities.

Assets measured at fair value on a recurring basis as of September 30, 2021 are summarized as follows:

	Fair Value Measurements as of September 30, 2021
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	$	727,826,133	$	-	$	-	$	727,826,133
Mortgage revenue bonds		15,812,184		-		-		15,812,184
Bond purchase commitments (reported within other assets)		401,223		-		-		401,223
Taxable mortgage revenue bonds (reported within other assets)		2,435,954		-		-		2,435,954
Derivative financial instruments (reported within other assets)		311,801		-		-		311,801
Total Assets at Fair Value, net	$	746,787,295	$	-	$	-	$	746,787,295

The following tables summarize the activity related to Level 3 assets for the three and nine months ended September 30, 2021:

	For the Three Months Ended September 30, 2021
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Revenue Bonds⁽¹⁾			Bond Purchase Commitments		Taxable Mortgage Revenue Bonds			Derivative Financial Instruments			Total
Beginning Balance July 1, 2021	$	777,990,096		$	392,515	$	1,462,862		$	321,372		$	780,166,845
Total gains (losses) (realized/unrealized)
Included in earnings (interest income and interest expense)		34,331			-		-			1,751,136			1,785,467
Included in other comprehensive income		(4,561,683	)		8,708		(24,463	)		-			(4,577,438	)
Purchases		3,995,000			-		1,000,000			-			4,995,000
Settlements		(33,819,427	)		-		(2,445	)		(1,760,707	)		(35,582,579	)
Ending Balance September 30, 2021	$	743,638,317		$	401,223	$	2,435,954		$	311,801		$	746,787,295
Total amount of losses for the period included in earnings attributable to the change in unrealized losses relating to assets or liabilities held on September 30, 2021	$	-		$	-	$	-		$	(9,261	)	$	(9,261	)

	For the Nine Months Ended September 30, 2021
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Revenue Bonds⁽¹⁾			Bond Purchase Commitments			Taxable Mortgage Revenue Bonds			Derivative Financial Instruments			Total
Beginning Balance January 1, 2021	$	794,432,485		$	431,879		$	1,510,437		$	321,503		$	796,696,304
Total gains (losses) (realized/unrealized)
Included in earnings (interest income and interest expense)		103,292			-			-			5,326,329			5,429,621
Included in earnings (provision for credit loss)		(900,080	)		-			-			-			(900,080	)
Included in other comprehensive income		(18,884,461	)		(30,656	)		(67,309	)		-			(18,982,426	)
Purchases		12,946,500			-			1,000,000			-			13,946,500
Settlements		(44,059,419	)		-			(7,174	)		(5,336,031	)		(49,402,624	)
Ending Balance September 30, 2021	$	743,638,317		$	401,223		$	2,435,954		$	311,801		$	746,787,295
Total amount of losses for the period included in earnings attributable to the change in unrealized losses relating to assets or liabilities held on September 30, 2021	$	(900,080	)	$	-		$	-		$	(11,304	)	$	(911,384	)

Assets measured at fair value on a recurring basis as of December 31, 2020 are summarized as follows:

	Fair Value Measurements as of December 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	$	768,468,644	$	-	$	-	$	768,468,644
Mortgage revenue bonds		25,963,841		-		-		25,963,841
Bond purchase commitments (reported within other assets)		431,879						431,879
Taxable mortgage revenue bonds (reported within other assets)		1,510,437		-		-		1,510,437
Derivative instruments (reported within other assets)		321,503		-		-		321,503
Total Assets at Fair Value, net	$	796,696,304	$	-	$	-	$	796,696,304

The following tables summarize the activity related to Level 3 assets and liabilities for the three and nine months ended September 30, 2020:

	For the Three Months Ended September 30, 2020
	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			Total
Beginning Balance July 1, 2020	$	787,624,971		$	-	$	-	$	1,456,279		$	29,826		$	789,111,076
Total gains (losses) (realized/unrealized)
Included in earnings (interest income and interest expense)		34,954			-		-		-			125,631			160,585
Included in earnings (impairment of securities and provision for credit loss)		(3,463,253	)		-		-		-			-			(3,463,253	)
Included in other comprehensive income		18,248,391			256,222		-		32,840			-			18,537,453
Purchases		2,023,500			-		-		-			-			2,023,500
Settlements		(7,931,962	)		-		-		(2,236	)		-			(7,934,198	)
Ending Balance September 30, 2020	$	796,536,601		$	256,222	$	-	$	1,486,883		$	155,457		$	798,435,163
Total amount of losses for the period included in earnings attributable to the change in unrealized losses relating to assets or liabilities held on September 30, 2020	$	(3,463,253	)	$	-	$	-	$	-		$	(14,569	)	$	(3,477,822	)

	For the Nine Months Ended September 30, 2020
	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			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)		90,194			-		(7,219	)		-			244,479			327,454
Included in earnings (impairment of securities and provision for credit loss)		(5,285,609	)		-		-			-			-			(5,285,609	)
Included in earnings (gain on sale of securities)		-			-		1,416,023			-			-			1,416,023
Included in other comprehensive income		32,457,107			256,222		(1,408,804	)		110,206			-			31,414,731
Purchases		9,513,450			-		-			-			-			9,513,450
Sale of securities		-			-		(43,349,357	)		-			-			(43,349,357	)
Settlements		(13,836,006	)		-		-			(6,560	)		(99,933	)		(13,942,499	)
Ending Balance September 30, 2020	$	796,536,601		$	256,222	$	-		$	1,486,883		$	155,457		$	798,435,163
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 September 30, 2020	$	(5,285,609	)	$	-	$	-		$	-		$	104,279		$	(5,181,330	)

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

Total gains and losses included in earnings for the derivative financial instruments are reported within “Interest expense” in the condensed consolidated statements of operations.

As of September 30, 2021 and December 31, 2020, the Partnership utilized a third-party pricing service to determine the fair value of the Partnership’s GILs and taxable GIL, which is an estimate of their market price. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. The valuation methodology considers the underlying characteristics of the GILs as well as other quantitative and qualitative characteristics including, but not limited to, the progress of construction and operations of the underlying properties, and the financial capacity of guarantors. The valuation methodology also considers the probability that conditions for the execution of forward commitments to purchase the GILs will be met. Due to the judgments involved, the fair value measurements of the Partnership’s GILs and taxable GILs are categorized as Level 3 assets. The fair value of the GILs and taxable GILs approximated amortized cost as of September 30, 2021 and December 31, 2020.

As of September 30, 2021 and December 31, 2020, 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. The valuation methodology 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 Level 3 liabilities. The TEBS financings are credit enhanced by Freddie Mac. The TOB Trust financings are credit enhanced by Mizuho. The table below summarizes the fair value of the Partnership’s financial liabilities as of September 30, 2021 and December 31, 2020:

	September 30, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial Liabilities:
Debt financing	$	760,632,414		794,828,424	$	673,957,640	$	709,760,933
Unsecured lines of credit		-		-		7,475,000		7,475,000
Secured lines of credit		6,500,000		6,500,000		-		-
Mortgages payable and other secured financing		25,429,450		25,430,834		25,984,872		25,986,514