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Fitch Affirms Alaska HFC Veterans Collateralized Bonds at 'AAA'; Outlook Stable

NEW YORK--()--Fitch Ratings affirms the long-term rating on the following Alaska Housing Finance Corporation (AHFC) Collateralized Veteran Bonds:

--$92.8 million Collateralized Veterans Bonds, 2006 First Series at 'AAA';

--$29.8 million Collateralized Veterans Bonds, 2007 & 2008 First Series at 'AAA'.

The Rating Outlook on the bonds is Stable.

SECURITY

The bonds are primarily secured by the mortgage loans and assets within the program. Additionally, the bonds are general obligations of both the State of Alaska and AHFC.

KEY RATING DRIVERS

INSURED LOAN PORTFOLIO: The loan portfolio is 73% insured by the following insurance providers: VA (62%), FHA (7%), and HUD (4%). Additionally, the loan portfolio is performing adequately, with a 60+ day delinquency rate of approximately 3%.

OVER-COLLATERALIZATION: As of Dec. 31, 2012, the program had over-collateralization of 153%.

STRONG PROGRAM PROVISIONS: The debt service reserves are required to be funded at a minimum of 2% of outstanding mortgages with the exception of mortgage backed certificates secured by Ginnie Mae, Fannie Mae, or Freddie Mac. The program also has an OCR fund which is required to be maintained at 12.5% of outstanding mortgages.

MANAGEMENT OVERSIGHT: AHFC has a well-tenured management staff with a successful history of administering single-family programs.

STATE/AHFC GO PLEDGES: The bonds are general obligations of both the State of Alaska and AHFC; however, the rating on the bonds solely reflects the strength of the program.

GEOGRAPHIC CONCENTRATION: Approximately 67% of the loan portfolio lies in the three locations of: Fairbanks (30%), Anchorage (20%), and Wasilla/Palmer (17%).

RATING SENSITIVITY

REMOTE CREDIT RISKS: Credit risks to the veterans bonds are remote given the federal insurance on the loan portfolio, the over-collateralization within the program, and the combination of State and AHFC GO pledges on the bonds.

CREDIT PROFILE

The 'AAA' rating reflects the strength of the underlying loan portfolio, the high-overcollateralization on the bonds, and the strong indenture provisions. Additionally, the bonds are general obligations of both the State of Alaska (rated 'AAA', Stable Outlook) and AHFC (rated 'AA+', Stable Outlook). However, the rating on the bonds solely reflects the strength of the program. Credit concerns stem from the geographic concentration of the portfolio and the oil dependent Alaskan economy; however concerns are mitigated by the strength of the program and the additional GO pledges by the State and AFHC.

Additional information is available at 'www.fitchratings.com'.

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