Alaska Hsg Fin Corp. Collat Bnds Rtd 'AAA' by S&P.

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 10/14/97 -- Standard & Poor's today assigned its triple-'A' rating to Alaska Housing Finance Corp.'s (AHFC) $100 million collateralized bonds (Veterans Mortgage Program) 1997 first series.

The rating reflects:

-- The credit quality of the mortgage collateral backing the bonds;

-- Sufficient loan loss coverage protection and adequate liquidity;

-- Triple-'A' rated investments; and

-- Cash flow sufficiency. Bonds are additionally secured by the G.O. pledges of AHFC (single-'A'-plus, stable) and the state of Alaska (double-'A', stable).

Bond proceeds are used by AHFC to purchase single-family mortgage loans originated to qualified veterans of the state. Approximately $60 million of mortgages are funded at closing, while $40 million of loans are expected to be acquired prior to April 1, 2000. Existing mortgages have a weighted average life of 19 years and an average coupon of 6.86%. All mortgages purchased by AHFC under the program must represent first liens on owner-occupied residential property located in Alaska, have fixed-rate, 15- or 30-year original terms with level payment schedules, and be less than 60 days delinquent. Further, loans with loan-to-value (LTV) ratios of 80% or greater must have primary mortgage insurance (PMI) from FHA or conventional providers, or a guarantee from the Veterans Administration or rural development. Loans also may be guaranteed by GNMA, FNMA, or FHLMC mortgage-backed securities. AHFC has the option to recycle prepayments into new mortgages in lieu of redeeming bonds, subject to cash flow tests.

Loss coverage protection is provided by AHFC through an overcollateralization reserve funded with cash or mortgages sufficient to cover triple-'A' rating level loan loss depression scenarios. Coverage is funded on a loan-by-loan basis according to LTV, loan size, and quality of PMI coverage. Liquidity is provided by a debt service reserve equal to 2% of loans and allows AHFC to pay debt service between delinquency and foreclosure of mortgages. AHFC expects to secure investment agreements for all indenture funds with triple-'A' rated providers.

Cash flows are run on a 60-day lag and indicate the capacity of the collateral to pay full and timely debt service through bond maturity. Assuming no prepayments, asset-to-liability parity grows over time and is projected to be at 107% (exclusive of loss coverage reserves) by 2005.

OUTLOOK: STABLE

The credit quality of the collateral, in conjunction with appropriate credit and liquidity coverage, is expected to provide a high degree of bondholder security over the longer term, Standard & Poor's said. -- CreditWire

CONTACT: Peter Block, San Francisco (1) 415-765-5044

Thomas J Sheridan, New York (1) 212-208-1118

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