Fitch Rates Alaska Housing Finance Corp's $193.1MM 2009A Mtge Revs 'AAA'; Outlook StableNEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'AAA' rating to the $193.1 million Alaska Housing Finance Corporation's (AHFC) mortgage revenue bonds, 2009 series A. Additionally, Fitch affirms the 'AAA' rating on AHFC's $235 million outstanding mortgage revenue bonds and assigns a Stable Outlook to the program. The 2009 bonds are expected to be sold this week.
The 2009 series A bonds are the eleventh series of bonds sold under the indenture. Proceeds of the bonds will initially be deposited in the escrow fund in the total amount of the bonds as the corporation will pay cost of issuance. AHFC may cause funds to be released from the escrow account up to three times during 2010. Any bonds with respect to which a release date has not occurred prior to Jan. 1, 2011 are subject to mandatory redemption. These bonds are being issued to facilitate a new issue bond program as detailed below.
The master indenture authorizes the purchase of insured or guaranteed (if necessary) 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 an owner-occupied residence within the state, bear a fixed rate of interest, and have a term of 15-30 years. Additionally, all loans with an original LTV exceeding 80% at origination are required to be insured or guaranteed by the FHA, VA, RD, or PMI. PMI coverage must be at least 20% for mortgages with an original LTV of 90% or below and 25% for mortgages with an original LTV of 95% or below.
The 'AAA' rating on the bonds reflects the quality of the pledged collateral (primarily the mortgage loan portfolio and debt service reserve fund), the sufficiency of projected revenues to meet debt service requirements, the credit support provided by a special reserve fund which significantly increases the level of available assets and/or revenues to support debt service requirements, and the corporation's strong management, as well as the general obligation pledge. As of the June 30, 2009 audited financial statement, the program maintains over 25% overcollateralization.
Additionally, all the bonds issued under this indenture are fixed-rate and are general obligations (GO) of AHFC. Fitch rates the corporation's general obligation debt pledge 'AA+'. While the program benefits from a GO pledge of the corporation, the program itself is self supporting and does not currently rely on the GO pledge for the 'AAA' rating. Pending complete review of AHFC's obligations, Fitch will assign an Outlook to the GO rating in the coming months.
The existing whole loan mortgage portfolio is a mix of seasoned loans. Almost all loans have original terms of 30 years. Approximately 80% of the loans carry mortgage insurance through private mortgage insurers, the Federal Housing Administration, or the Department of Veterans Affairs. The remaining loans have sufficient loan-to-value ratios so as not to require primary mortgage insurance. There are no significant pool mortgage insurance policies covering the portfolio. More than 73% of the loans are for single family homes, while another 22% is for condominiums. More than one half of the loans are for residences located in Anchorage.
The program's overall single-family portfolio continues to perform favorably. As of Oct. 31, 2009, the percentage of loans delinquent greater than 60 days was approximately 1.9%, which is well below state and national averages.
Consolidated financial results for the fiscal year ended June 30, 2009 indicated a continued strong financial position albiet a decrease in earnings despite combined capital transfers to and debt service payments on behalf of the state totaling more than $600 million during the previous four fiscal years. AHFC's leverage ratios are among the lowest of all housing finance agencies. The debt-to-equity ratio decreased to 1.8 times (x) in fiscal 2009, from 1.9x in fiscal 2008. At fiscal year-end 2009, AHFC had nearly $3 billion of total bonds and debt outstanding, down from $3.2 billion. Over the same two fiscal year-end periods, total fund equity remained approximately $1.7 billion.
The 2009 issuance under the mortgage revenue bond program indenture is being done in part so that Alaska HFC can take advantage of the New Issue Bond Program (NIBP) established by the United States Treasury with the assistance of Fannie Mae and Freddie Mac. Under the terms of the program, the Treasury will purchase up to 60% of the bonds sold by state and local housing finance agencies with the remaining 40% to be sold to private investors. The interest rate for bonds sold to the Treasury will be based on the investment earnings of the escrow fund for the pre-conversion period, and for the remainder of the period, will be based on the 10-year Constant Maturity Treasury (CMT) plus a defined spread based on the prevailing market at the time of pricing.
Because the Treasury's authority to complete these transactions under the Housing Economic Recovery Act of 2008 expires on Dec. 31, 2009, all NIBP related transactions must be completed prior to year end. As a result, the program allows issuers to close prior to the Dec. 31, 2009 deadline and place funds in escrow until they are converted to long-term bonds in conjunction with the sale of Market Bonds, over the course of 2010. The funds may be held in escrow up until Dec. 31, 2010 and can be drawn upon and converted to long-term bonds up to three times during 2010.
Additional information is available at www.fitchratings.com.
Posted: December 8, 2009
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