Low interest rates have been a boon for consumers and the economy but not for public housing finance corporations in many parts of the nation.
Most have been unable to compete during the recent boom in refinancings and have lost a lot of business to competitors, some as much as 40 to 50 percent of their portfolio of mortgage loans.
Across the nation, public housing corporations lost on average about 20 percent of their business.
Alaska is a happy exception. As the home mortgage refinancing flood hit, Alaska Housing Finance Corp. was able to do $1.1 billion in refinancings in 2003 and lost only about 3 percent of its loan portfolio, according to AHFC Chief Executive Officer Dan Fauske.
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AHFC was able to retain loans because it has a larger capital base than do most other public housing corporations, which allowed the Alaska corporation to be more flexible and keep up with competitors in offering low refinancing rates. This helped retain customers, Fauske said.
Keeping a strong market share for AHFC is important because it helps the corporation remain strong financially. That enables AHFC to offer innovations like its taxable First-Time Homebuyers program. Most other housing corporations can't do those kinds of things.
As a secondary lender (AHFC purchases mortgages originated by local lending institutions) the corporation also requires that the home loans it finances be serviced in the state.
Other lenders in the Alaska home mortgage market allow loans to be serviced from out of state. AHFC requires the lenders it works with to have someone local borrowers can talk to when there's a problem with their loan instead of having to call a loan center in the Lower 48, Fauske said.
The requirement keeps jobs in Alaska and resulted in $13 million in payroll and other business being retained in the state during 2003, Fauske said.
AHFC's financial strength has allowed it to pay $50 million per year to the state treasury and $53 million for state capital projects, and to help the state fulfill a growing list of other financial needs, some not related to housing at all, Fauske said.
For example, for years AHFC has been selling bonds to finance village safe water projects and other state capital needs. This year $25 million in bonds for village water projects will be sold.
The latest call for financial help is a request by Gov. Frank Murkowski for the corporation to buy $40 million in state buildings this year, and lease them back to the state for 20 years, Fauske said.
"The advantages of this are that not only will it provide $40 million to the state for funding of critical capital projects, but it will also give AHFC an opportunity to address some of the deferred maintenance needs of these buildings that have not been funded over these years of tight fiscal times," Fauske said in a Jan. 12 talk to the Anchorage Chamber of Commerce.
"When the state gets the buildings back after 20 years they will be in better condition than when they owned them. It is a creative way of both providing funds and updating buildings," he said.
AHFC is working out details of the program with the governor's office, Fauske told the Anchorage audience. Since the building acquisitions will be financed with the sale of tax-exempt bonds by AHFC, the bond proceeds must be to fund capital projects, not state operating expenses.
The proposal is drawing questions from legislators, some of whom question why the state should sell and lease back assets it now owns, Fauske said.
The arrangement amounts to the state transferring assets to another arm of state government, AHFC, and is more like a refinancing than an actual sale. People commonly take second or even third mortgages on their homes to get cash for some of their equity and this is not dissimilar, Fauske said.
AHFC now owns and leases buildings to the state, he said. The Atwood Building in downtown Anchorage, which houses many state agencies including the governor's office, is an example. One difference is that the Atwood Building was acquired from a private owner, not the state itself, Fauske said.
The big benefit is that the leaseback arrangement will provide for deferred maintenance, something that is not now being done, he said.
