Íbúðalánasjóður - Company Announcement

The HFF purchases a portfolio of asset-backed bonds for ISK 70bn and increases the balance between assets and liabilities.

The Housing Financing Fund (HFF) and the Central Banks subsidiary, ESÍ ehf.,
have signed an agreement to the effect that the HFF purchases asset-backed
bonds from ESÍ ehf. amounting to a total of ISK 70bn. The bonds in question are
secured by mortgage loans issued by Arion Bank hf. The agreement is, subject to
the final approval of the Board and the results of a due diligence. 

This purchase will have a yearly positive effect on the HFF's net interest
margin amounting to ISK 1,1bn. With this purchase a significant proportion of
the HFF´s liquid assets, which has accumulated due to prepayments and the
governments sponsored mortgage amendments of last year, will be invested in
indexed assets which carry a fixed interest rate. Also this purchase will
increase the balance between assets and liabilities both in cash flow and
indexation balance.