AHFC's most popular program helps Alaskans buy first homes
In light of recent news stories, I want to assure Alaskans that Alaska Housing Finance Corporation's most popular program, the Tax-Exempt First-Time Home Buyer Program, is here to stay. Since the program began in 1993, AHFC has helped more than 11,000 Alaskans buy their first homes. We anticipate that this program will continue to serve Alaskans long into the future.
AHFC is in excellent financial shape. Fitch recently upgraded our bond ratings from AA to AA+, and Standard & Poor's affirmed the ratings for $735 million in outstanding debt from AA- to AAA for long-term bonds and A-1+ for short-term obligations.
However, AHFC did find it necessary to suspend the half-point interest rate reduction under the Taxable First-Time Home Buyer Program. We began this program in 1999 to offer home buyers an option without the income and acquisition-cost restrictions of the tax-exempt program. With fewer restrictions, more than 1,500 Alaskans took advantage of this program in that first year. However, the popularity of the program and the higher average home purchase price meant that AHFC used nearly $20 million of its subsidy funds -- also known as arbitrage -- for just this one program.
Arbitrage -- the difference between the rate at which AHFC borrows money through tax-exempt bond issues and the amount it earns when it lends to home buyers -- is limited by the IRS. Any excess arbitrage must be used for the same purpose as the original bonds -- in AHFC's case, for low-income home loans. In the early 1990s, AHFC was earning large sums of arbitrage since the majority of its outstanding mortgage loans were at high interest rates, while AHFC was able to refund its outstanding bonds at a much lower interest rate.
Now, most high interest-rate loans have been refinanced, and the arbitrage funds are being used much faster than they are being generated. Following weeks of discussions with the housing industry, our board of directors voted to eliminate this one program and adjust subsidy levels for several of the other programs.
To find out more about specific changes to our programs, log onto our Web site at www.ahfc.state.ak.us
AHFC truly is the envy of housing finance agencies across the country. We use no operating funds from the state's general fund. In fact, we contribute more than $103 million annually to the state through cash transfers and bond payments for school maintenance. We can be proud of AHFC's success in helping more than 130,000 Alaskans reach that dream of home ownership.
Dan Fauske, CEO/Executive director Alaska Housing Finance Corp.
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