The Housing Financing Fund planning to buy mortgage loans from financial institutions

Act no. 125/2008 allows the Housing Financing Fund (HFF) to buy loans secured
by mortgage in residential housing from financial institutions. Following the
legislation the Minister of Social Affairs implemented Regulation no. 1081/2008
regarding this proposed purchase. The regulation states that the loans shall,
in general, be paid by HFF bonds. Article 2 of the Regulation no. 1081/2008
states that the precondition for HFF to negotiate the purchase of mortgage
loans from financial institutions is that the financial institution in question
has sought such negotiation on its own initiative. On a board meeting held on 8
January of this year HFF's board adopted rules regarding the purchase of bonds
from financial institutions and the Minister of Social Affairs has confirmed
those rules, which have since been published in the Legal Gazette of Iceland. 

HFF has already received some applications in relation to such purchases but at
this moment the total amount of the purchase is not clear. Due to these planned
purchases the HFF, during the making of the government's budget for 2009, made
a proposal to allow the fund to issue HFF bonds to finance the purchase of
mortgage loans for up to ISK 100 billion. A memorandum accompanying HFF's
budget proposals made a reservation concerning this amount as there are some
uncertainties over the total worth of loans that may be offered to HFF to
purchase. Therefore the purchase may be worth less or more than the budget
presumes. 

HFF is now in the process of completing negotiations due to the applications
already submitted to the Fund and information on the conclusion of the matter
will be announced to market parties once it is available.