Íbúðalánasjóður - Financial Statement Release

HFF´s Annual Accounts 2009

The Housing Financing Fund´s loss for the year amounted to ISK 3,202 million
according to the income statement. Equity at year-end amounted to ISK 10,083
million according to the balance sheet.  The Fund´s solvency ratio, which is
calculated on the basis of regulation no. 544/2004 for the Housing Financing
Fund, is 3.0%.  The ratio is calculated on the basis of the same method as for
financial institutions. The Fund´s long term goal is to maintain an solvency
ratio exceeding 5.0%. The Fund, in accordance with article 7 of the regulation
mentioned above, notified the Minister of Social Affairs and Social Security
that the Fund's solvency ratio was heading under 4%. The Fund's management is
working on ways to improve the solvency ratio so as to reach the long term goal
and have already raised the interest premium on new loans. 

At year-end loans amounted to ISK 756,634 million and increased by ISK 76,228 
million during the year. The Fund's borrowings amounted to ISK 784,570 million
and increased by ISK 71,901 million during the year. 

The Fund's operations were significantly adversely affected by the crisis in
the financial market prevailing since the last several months 2008. The Fund
had approximately ISK 16,620 million in claims against Iceland's three biggest
banks by the time they collapsed in early October 2008, resulting from bonds
and derivative contracts entered into with the banks. At the same time, the
Fund owed to these banks ISK 5,342 million due to derivatives and HFF bonds.
In2009, the Icelandic Financial Supervisory Authority suspended the Board of
Directors of SPRON and Straumur-Burðarás Investment Bank hf. and appointed
Resolution Committees for the banks. According to the decision of the
Resolution  Committees, the Fund´s deposits amounting to ISK 5,254 million were
withheld in closed accounts. 

During 2009 an impairment loss amounting to ISK 2,914 million was expensed in
the income statement due to these claims. This impairment is an addition to the
ISK 7,875 million recognized in the 2008 income statement as an estimate of the
loss. A total of ISK 10,789 million has therefore been recognized as impairment
relating to these claims. ISK 2,352 million is recognized in the line item
loans to banks in the balance sheet (see note 5). In the financial statements
it is presumed that the Fund has the right to off-set these balances.
Uncertainty prevails regarding the settlement of claims and derivatives and the
Fund's right to off-set these balances. During the year 2010 the Fund reached
an agreement with SPRON, but there is still a dispute regarding the Fund´s
deposits in Straumur-Burðarás Investment bank hf. The Fund´s actual loss may
therefore differ from this estimation. 

Impairment of loans amounted to ISK 3,127 million at year-end 2009 an increase
of ISK 1,462 million from the previous year. The number of loans where payments
are past due has increased from the previous year and around 5.3%  of the
Fund's borrowers have one or more payment past due at year-end 2009. 

During 2009 the Fund repossessed 251 apartments on foreclosed mortgages. At
year-end 2009 the Fund owned 347 apartments, an increase of 151 from year-end
2008. 

In 2009 around 50% of the Fund´s borrowers took advantage of their right to
adjust their payments in accordance with the mortgage payment adjustment index
rather than the consumer price index. This means that their payments decrease
temporarily and the difference of payments goes into an adjustment account of
the loan. According to the newly adjusted law regarding adjustments of mortgage
payments for individuals no. 63/1985, the repayment of the adjustment debt,
after the original maturity period of the loan, shall not exceed 3 years. Any
debt left on the adjustment account after those 3 years shall be written off.
The Fund has not evaluated possible effects of these write-offs after the
extended loan period. 

For further information please phone Guðmundur Bjarnason, General Manager and 
Ásta H. Bragadóttir, Assistand Manager and the number is +354 569 6900.

Attachments:

hff annual account 2009.pdf

hffpressrelannacc2009.docx