AHFC may alter loan qualifications

Legislative bill cuts rural program agency wants to expand

Posted: Sunday, March 12, 2000

KETCHIKAN - Lawmakers are considering axing a program that gives some rural residents a 1 percent break on home mortgage interest rates, but the Alaska Housing Finance Corp., which offers the reduction, wants to go in different direction.

AHFC wants to expand its program to make more people eligible, said AHFC legislative liaison John Bitney.

``Instead of throwing the baby out with the bath water, we need to amend the program,'' Bitney told the Ketchikan Daily News.

AHFC provides the lower interest rate to Alaska residents living in towns with populations of 6,500 or less that are not connected by road to Anchorage or Fairbanks. Communities linked to the two cities that have 1,600 or fewer people also qualify.

Urban lawmakers have been critical of the program because it does not include all Alaskans, Bitney said. A bill to eliminate the program is in the Senate Finance Committee.

AHFC's rural interest program also has drawn fire from communities such as Ketchikan, where nearly half of the population qualifies and the other half does not, said Bitney.

``The city of Ketchikan exceeds 6,500 people, so the way the program is now, if you live inside the city limits, you do not qualify for the program,'' Bitney said. ``If you live just one block out of city limits, then you qualify,'' he said.

As a result, AHFC has been dragged into a number of local boundary issues, including Ketchikan's, Bitney said. When the city of Kodiak looked at expanding its boundary, the people who would have been annexed based their objection on the loan rules, Bitney said.

The concerns prompted AHFC to consider expanding its $50 million interest rate program, he said. But first AHFC had to figure out how to fund the program without going to the state for more money.

``We didn't think it was realistic to ask the state to put more money into that . . . fund,'' Bitney said.

The new program AHFC is considering would:

Use the U.S. Department of Agriculture Rural Development's definition of ``rural.'' That definition would include all of Alaska, except Anchorage, Fairbanks and Juneau.

Increase the loan-to-value ratio requirement for mortgage insurance from 80 to 90 percent for towns with a road to Anchorage or Fairbanks. The loan-to-value ratio would remain at 90 percent for other areas. The loan-to-value ratio is based on what percentage of the property's value is financed.

Lower the interest rate break for towns connected to the two cities to 0.5 percent.

Keep the interest rate reduction for more remote areas at 1 percent.

The Ketchikan City Council passed a resolution supporting the expansion of AHFC's program last week. Kenai and Kodiak's city councils have approved similar resolutions.

The AHFC Board of Directors will review the proposal to expand the program at meeting March 29. The plan would need legislative approval.

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