Fitch Rates Alaska HFC $50MM Collateralized Bonds 'AAA'.

Business Editors

NEW YORK--(BUSINESS WIRE)--March 21, 2002

Fitch Ratings assigns a rating of 'AAA' to Alaska Housing Finance Corp.'s (AHFC) $50 million collateralized bonds, 2002 first series (Veterans Mortgage Program). Fitch also affirms the 'AAA' rating on the $172.8 million outstanding collateralized bonds (Veterans Mortgage Program). The bonds are scheduled to sell competitively during the week of March 25.

The current offering is the third sale of bonds issued under a master trust indenture adopted by the corporation in October 1999; prior series of veterans mortgage program bonds were issued under stand-alone indentures and are separately secured. Bond proceeds from the 2002 series will be used to continue the corporation's homebuyer mortgage program for qualified veterans. The bonds are secured by a pledge of trust assets, mortgage revenues, investment earnings, and reserves created by the indenture. The bonds are general obligations of the corporation and the state.

The rating assigned to the bonds reflects the indenture's security provisions, strong credit quality of the existing and expected underlying collateral and related credit enhancements, adequacy of projected revenues to pay debt service, availability of a special reserve fund, and strong management capabilities and financial strength of the corporation. Although the bonds are general obligations of the corporation and the state (rated 'AA+' and 'AA', respectively, by Fitch), the primary credit factors in the 'AAA' rating assigned to the bonds center on the indenture's security provisions, existing and expected collateral pool (mortgage loans and/or guaranteed mortgage certificates), separately funded debt service reserve account, and the availability of funds in the overcollateralization (OCR) fund. Deposits to the reserve account and the OCR fund will be made by AHFC from its own funds.

This issuance will make available $50 million which will be used to purchase qualified veterans mortgage loans. The sale of prior bonds under the master indenture made available $180 million in lendable proceeds. Approximately $161.3 million of loans funded with prior proceeds were outstanding as of Dec. 31, 2001. Less than 1% of these outstanding loans were delinquent, while 1.5% of the entire veterans mortgage program loans were in delinquency or foreclosure. AHFC expects to purchase an initial portfolio of nearly $41 million in new qualified loans that are available for funding with a portion of the 2002 bond proceeds. The corporation expects to use the remaining bond proceeds to purchase additional qualified loans by Dec. 31, 2003. The loan program requires mortgages with loan-to-value ratios (LTVs) exceeding 80% to be guaranteed or insured by the Department of Veterans Affairs, the Federal Housing Administration, or private mortgage insurers. Approximately 76% of the existing and warehoused loan portfolio consists of mortgages with primary mortgage insurance. The remaining mortgages have initial LTVs of 80% or less.

The availability of the reserve account and OCR fund provides a significant layer of credit support, mitigating concerns of potential cash flow disruptions and/or mortgage losses due to future delinquencies and foreclosures. The overcollateralization requirements equal or exceed Fitch's 'AAA' rating requirements. The OCR fund may consist of investment securities and/or additional mortgages. The separate reserve account is required to be funded at 2% of mortgages outstanding and will provide a source of liquidity to the program. The reserve requirement does not apply to current or future mortgages that are pooled into mortgage certificates guaranteed by Ginnie Mae, Fannie Mae, or Freddie Mac.