Business/Economy

Alaska Housing Finance Corp. reports another year of losses, though far better than 2013

JUNEAU -- The Alaska Housing Finance Corp. has ended another year with a financial loss, the state-sponsored company's board was told Wednesday at its annual meeting in Juneau.

It was the fourth year of losses in a row.

There are signs of a turnaround on the horizon, with the number of new loans and the total number of loans in AHFC's $2.5 billion mortgage portfolio growing, said Bryan Butcher, executive director.

But what's been making the biggest impact on the bottom line is a dramatic decline in payoffs of older loans, which were sometimes more profitable due to higher interest rates.

In the last four years, the size of the housing agency's portfolio declined by $1 billion.

In fiscal year 2014, according to the just-released numbers, AHFC's portfolio grew by 194 loans, to 14,835. That compares to 2013's net loss of 1,905 loans.

"The number of payoffs, meaning the number of folks who are going someplace and finding lower-cost capital and paying off their AHFC mortgages, is getting lower, so as a result things have been improving," Butcher said.

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Mike Strand, AHFC's chief financial officer, told the board AHFC saw "quite a huge improvement" with 2014's $3.3 million loss, compared to a $17 million loss in 2013.

The change, said Butcher, is largely due to rising interest rates.

That highlights the irony for the agency, which has a goal of reducing homeowner costs but which also benefits from higher interest rates.

"As long as interest rates stay low, that's great for Alaskans, and we're comfortable with that," Butcher said. "As things begin to ramp up interest rate-wise, in the next year or two, we think we'll see our numbers improve."

Butcher said he wasn't yet ready to predict profits for the coming year but thinks the Federal Reserve's decision to reduce the policy of quantitative easing that drove down interest rates to spur economic growth should begin to raise interest rates.

"The positive is that there is generally a healthy national economy that allows that to happen, but it also means that people are going to be paying a higher interest rate for their homes," Butcher said.

AHFC's business model involves selling bonds on Wall Street, then lending that money to Alaskans through local banks or mortgage lenders. To be profitable, it needs to get more from the loans than it costs to pay the interest on its bonds.

AHFC also operates a number of programs financed by the Legislature, such as home weatherization, as well as a network of public housing projects, and it issues housing vouchers for individuals.

While the national economy has struggled, the Alaska economy has remained strong for several years. That's one reason AHFC's foreclosure rate has long been among the nation's lowest, and remained very low in 2014, Butcher said.

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