Testifying to the October 2010 Board meeting of Alaska Housing Finance Corporation, I objected again to the higher interest rates charged for apartment financing. Since October, nothing has changed. For the last three years, nothing has changed. AHFC continues to gouge Alaska small businesses - requiring 35% higher interest rates than comparable apartment lenders. If Wells Fargo did that, they would be charged with predatory lending and prosecuted. Excessive interest rates hurt the very housing AHFC’s mission is to help.
Higher interest direct result is Alaskans paying more rent. AHFC borrowers pay 43% more than a Fannie Mae or Freddie Mac loan. But, F & F are going away. President Obama announced the phasing out Fannie and Freddie after bailing out their failures. Fannie and Freddie didn’t like lending much in Alaska anyway. That’s why we created AHFC – to provide competitive mortgages for Alaskans.
Alaska’s economy is strong compared to when I grew up here in the fifties. My folks were bankers, owners of Alaska State Bank and worked hard to bring in capital for local small businesses especially apartment owners. Alaskans then paid a premium for loans. Outside bankers charged us more.
In the seventies, as Deputy Director of Alaska State Housing Authority, AHFC’s predecessor, we managed programs like the State Leased Building Program. We built buildings, leasing them to the State. We built and financed apartments. I was brought aboard ASHA as a banker to clean up their balance sheet and get them into national finance.
Today as a buyer, you might get a Fannie apartment loan …after ten pounds of paperwork and overcoming their risk adverse bias toward Alaska. Redlining Alaska was why the Alaska Laborer’s and Employers Retirement Trust funded a start up commercial mortgage banker in the nineties, Commercial Mortgage Corporation. Our $5 million mortgage pool proved Alaskans’ apartment lending quality. Thanks to long time Alaskans, Trustees Mano Frey and Derald Schoon, Alaskans were proven to be every good a risk as Outside apartment investors. We encouraged AHFC to adopt the apartment-lending program. AHFC’s Board agreed.
Today’s Alaskan investor might get a Fannie loan at say 5.50%. But, only if your brother in law is your banker and your sister denies Sunday dinner until you get the loan. All others stand in line at AHFC’s lenders to pay 7.88%.
Compare those interest rates to Alaska’s other institutional lender, the Alaska Industrial Development and Export Authority, AIDEA.
|Loan Amounts||30 year rate||15 year rate||25 year rate||20 year rate||15 year rate||10 year rate||5 year rate|
|Taxable Over $1M||7.63%||7.25%||5.76%||5.76%||5.76%||5.76%||5.76%|
|$500,000 to $1M||7.75%||7.38%||5.76%||5.76%||5.76%||5.76%||5.76%|
|Taxable Up to $500,000||7.88%||7.50%||5.76%||5.76%||5.76%||5.76%||5.76%|
|FHA Over $1M||7.13%||6.75%||5.76%||5.76%||5.76%||5.76%||5.76%|
|FHA $500,001 to $1M||7.25%||6.88%||5.76%||5.76%||5.76%||5.76%||5.76%|
|FHA UP to $500,000||7.38%||7.00%||5.76%||5.76%||5.76%||5.76%||5.76%|
|Rural Up to $250,000||6.88%||6.50%||5.76%||5.76%||5.76%||5.76%||5.76%|
Why are their interest rates so different? The Legislature set AIDEA rates in statute as quoted on www.aidea.org/programpartIR.html:
“AIDEA’s funding rates are indexed and set by 3AAC99.350 (e)
a. Fixed rate: The Federal Home Loan Bank of Seattle’s Fixed-Rate Advances Index that most closely matches the term of the loan plus AIDEA’s allocable cost of operations; OR the five year return on the investment funds of the authority plus AIDEA’s allocable cost of operation; which ever is greater.”
AIDEA mirrors national interest rates but AHFC’s are 35% higher. Gouging Alaskan apartment renters and owners with predatory pricing has been going on for years. Has AHFC lost its mission or commitment to housing?
With Legislative help, AHFC can turn back to their mission: “To provide Alaskans access to safe, quality, affordable housing.” By a simple amendment to their budget, this Legislature can direct AHFC to use AIDEA’s rate indexing and end this sorry practice.
If you agree, call your Legislator and AHFC’s Board Members today.