Bond would give $500 million to veterans buying homes

Editor's note: This is the first in a series of six stories relating to the ballot measures and propositions Alaska voters will find on the Nov. 5 general election ballot.

MAT-SU -- Proposition one, a measure that would allow the Alaska Housing Finance Authority to issue up to $500 million in state-guaranteed revenue bonds to finance mortgages for veterans, may be the last time voters are asked to approve bonds for the low-interest veteran mortgage loans.

Sherrie Simmonds, corporate communications officer with AHFC, said the proposal has garnered broad support on the ballot in the past. Similar proposals have been on the ballot four times during the past 20 years, and voters have approved issuing the bonds by a margin of between 64 and 75 percent. The most recent bond was approved by voters in 1986, Simmonds said, for $600 million.

Part of the reason voters have felt secure in approving the bonds, Simmonds said, is that there are protections in place through the program that mean Alaska risks little as a result of issuing the bonds.

"One of the things that is really key is, even though the bonds are issued under the guarantee of the state," Simmonds said, "we feel there is no concern about the funds of the state becoming in jeopardy through the program."

Simmonds explained that, although AHFC issues thousands of loans each year, its delinquency ratio is less than four percent across the board. When it comes to veterans' loans, Simmonds said, that rate drops to about 2.25 percent.

In the event of an irreparable delinquency, AHFC forecloses on the home and it goes back on the real estate market, Simmonds said, and the proceeds from the sale of the home are used to pay off the mortgage.

More than 12,000 veterans have used the low-interest loan option since its inception, she said, and 411 used it last year. Forty-nine of those homebuyers were Valley residents. But Simmonds said the pool of people able to take advantage of the home loan program is shrinking, and the appropriation requested in Proposition One may be the last one.

"It's questionable whether we'll ever be able to use that much," Simmonds said when asked how long it would take AHFC to issue bonds on the $500 million pot of money.

Simmonds explained that the number of veterans who qualify for the program -- who served in active duty prior to Jan. 30, 1977, and who have not been out of the armed forces for more than 30 years at the time of application -- is dwindling. She said AHFC has been working with Congress to change the qualifiers for entry into the program, but no change has been brought about yet.

It has taken more than 15 years for the last appropriation to be used -- not all the bonds have been issued, but a large chunk, $50 million, was issued April 1. Bonds are typically sold on an as-needed basis, Simmonds said, which gives the commission the ability to use market fluctuations to their advantage.

"It's just in everybody's best interest to [issue bonds] when the time is right," Simmonds said. "Over the last 15 years, we've been able to continue to issue bonds when the market is good."

Simmonds said if voters do not approve the requested appropriation, the consequences are simple -- the money remaining from the 1986 appropriation will be used, and the program will simply go away.

"We would not be able to offer those loans to veterans any longer," Simmonds said.