OREANDA-NEWS. Fitch Ratings affirms the long-term rating on the following Alaska Housing Finance Corporation (AHFC) collateralized veteran bonds:

--\$46 million collateralized veterans bonds, 2006 first series at 'AAA';
--\$15.6 million collateralized veterans bonds, 2007 & 2008 first series at 'AAA'.

The Rating Outlook on the bonds is Stable.

SECURITY

The bonds are primarily secured by the mortgage loans and other assets within the program. Additionally, the bonds are general obligations (GO) of both the State of Alaska and AHFC.

KEY RATING DRIVERS

INSURED LOAN PORTFOLIO: The loan portfolio is 77% insured by the following insurance providers: VA (67%), FHA (5%), and HUD (5%). Additionally, the loan portfolio is performing adequately, with a 60+ day delinquency rate of approximately 3.3%. The other 23% is made up of uninsured loans (18%) with loan to value ratios of less than 80% and private mortgage insurers (5%).

STRONG ASSET PARITY: As of Dec. 31, 2014, the veterans program had total mortgage loans (\$85 million) of over 31% more than total bonds outstanding (\$65 million). Adding investments brings the asset parity ratio to 150% of bonds outstanding.

STRONG PROGRAM PROVISIONS: The debt service reserves are required to be funded at a minimum of 2% of outstanding mortgages, with the exception of mortgage certificates secured by Ginnie Mae, Fannie Mae, or Freddie Mac. The program also has a reserve fund (OCR) which has an indenture requirement minimum set at 12.5% of outstanding mortgages.

MANAGEMENT OVERSIGHT: AHFC has a well-tenured management staff with a successful history of administering single family programs.

GEOGRAPHIC CONCENTRATION: Approximately 68% of the loan portfolio lies in the three locations of: Fairbanks (30%), Anchorage (19%), and Wasilla/Palmer (19%).

RATING SENSITIVITIES

REMOTE CREDIT RISKS: Credit risks to the veterans bonds are remote given the federal insurance on the loan portfolio, the asset parity within the program, and the combination of State and AHFC GO pledges on the bonds.

CREDIT PROFILE

The 'AAA' rating reflects the strength of the underlying loan portfolio, the asset parity on the bonds, and the strong indenture provisions. Additionally, the bonds are general obligations of both the State of Alaska (rated 'AAA', Stable Outlook) and AHFC (rated 'AA+', Stable Outlook). However, the rating on the bonds reflects the strength of the program. Credit concerns stem from the geographic concentration of the portfolio and the oil dependent Alaskan economy. Those concerns are mitigated by the financial strength of the program and the additional GO pledges by the State and AFHC.