Íbúðalánasjóður - Company Announcement

Proposed increase in the Housing Financing Fund´s equity.

Althingi´s Budget committee and the committee of Social Affairs and Social
Security are presently discussing proposed amendments to the supplementary
budget bill for 2010. The bill authorizes strengthening of the Housing
Financing Fund´s (HFF´s) equity by up to ISK 33 billion, the objective being to
have the Fund´s equity at 5% of its risk adjusted assets by the end of 2011.
This increase in the Fund´s equity is in accordance with a letter of intent
from September 2010, by the International Monetary Fund (IMF) and governmental
authorities where the Fund´s equity is projected to be increased by the end of
2010. 

The equity ratio according to the Fund´s 2010 interim account was positive by
ISK 8.4 billion, meaning that the ratio was 2.1%, but the long term goal of the
Fund according to regulation no. 544/2004 is to maintain the ratio above 5%. 

In order to reach the long term goal of a 5% equity ratio by the end of 2011,
the State must evidently increase the Fund´s equity. Presently, measures are
being taken to assist Iceland´s homes experiencing financial hardship.  These
measures will affect expected mortgage write-offs and therefore, the Fund´s
needed equity.