NEW YORK - (Business Wire) Fitch assigns a rating of 'AA+' to Alaska Housing Finance Corp.'s (AHFC) $80.9 million home mortgage revenue bonds, 2008 series B. The bonds are expected to be sold during the week of Aug 4th as a negotiated transaction. Additionally, Fitch affirms the 'AA+' rating on the outstanding $810.1 million 2008 Series A, 2007 series A-D, 2006 series A-C and 2002 series A bonds.
The current offering is the eleventh series of bonds issued under a master trust indenture dated May 1, 2002, that pledges mortgage revenues, investment earnings, reserves and other funds to the bonds. The bonds' 'AA+' rating reflects the amounts on deposit in funds and accounts including a loan loss fund held under the indenture, the strong credit quality of the expected underlying collateral and related credit enhancements, the adequacy of projected pledged revenues to pay debt service, and strong management capabilities and financial strength of AHFC. Credit concerns include the geographic concentration of the loan portfolio and vulnerability of the state's real estate market to the limited, oil-dependent economy. The bonds are general obligations (rated 'AA+') of the corporation.
Bond proceeds will be used to purchase new qualified mortgage loans under this program. All loans purchased with tax exempt bonds are expected to be for qualified first-time homebuyer loans. The master indenture authorizes the purchase of insured or guaranteed (if necessary, see below) mortgages and mortgage-backed securities (MBS); other loan types are also allowed provided the bonds' rating is maintained. Each loan is required to be a first lien mortgage on a single-family residence within the state, bear a fixed rate of interest, and have a term of 15 to 30 years. Additionally, loans with original loan-to-value ratios (LTVs) of 80% or higher at origination are required to be insured by the Federal Housing Administration (FHA), guaranteed by the U.S. Department of Veterans Affairs (VA) or the U.S. Department of Agriculture through its Rural Development program (RD), or insured by private mortgage insurers (PMI).
The master indenture requires a debt service reserve account (DSRA) and loan loss fund (LLF) be funded at each bond issuance. The DSRA and LLF provide an important layer of credit support, mitigating concerns of potential cash flow disruptions and/or mortgage losses due to future delinquencies and foreclosures. The DSRA requirement is equal to a minimum of 2% of mortgage loans outstanding (excluding loans covered by pool insurance or underlying mortgage certificates) plus bond proceeds available to purchase mortgage loans. The aggregate LLF, equal to 6% of the total bonds outstanding to maintain the underlying rating on the bonds, initially must be in the form of cash and investments and, after the program reaches 103% parity, may also be in the form of MBS and/or qualified mortgage loans.
Approximately 35% of the loans by aggregate balance are covered by FHA insurance, 22% are covered by VA guarantees, 11% carry private mortgage insurance, 7% are Farmers Home Administration (formerly called RD) guaranteed, and 25% have LTV's equal to or less than 80%, and are therefore not required to have insurance or guarantees. Almost three-quarters (72%) of the mortgages (based on loan balance) are for detached single family homes, while one-quarter are condominiums and 5% are either 2-4 family homes or planned unit developments. Nearly two-thirds of the mortgages are located in Anchorage. Although the 60 day plus delinquencies are only 2.2% as of June 30, 2008, this is an increase from 1.6% back in January 2008.
AHFC's consolidated financial results for the fiscal year ended June 30, 2007 indicate a continued strong financial position. Transfers to the state over the previous five fiscal years total more than $600 million. AHFC's leverage ratios are among the lowest of all housing finance agencies with the Fitch adjusted debt-to-equity ratio at 1.9 times (x) in fiscal 2007, compared to 5.7x the aggregate for all 51 State Housing Finance Agencies. AHFC's net income before extraordinary items equaled $40.5 million during fiscal year 2007, decreasing from $46.7 million in fiscal 2006.. Net interest spread was flat at 42.3% in fiscal 2007 compared to 42.1% during fiscal 2006. Net operating margin decreased somewhat to 11.7% in fiscal 2007 from 14.6% during fiscal 2006.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings, New York
Charles Giordano, 1-212-908-0607
Kasia Reed, 1-212-908-0389
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