Black Report on Iceland Housing Financing Fund


Black Report on Iceland Housing Financing Fund

A special investigative commission presented the results of its almost two-year investigation into the affairs of the state-run Housing Financing Fund (HFF) at a press conference yesterday.

centralrvk_psArchive photo: Páll Stefánsson/Iceland Review.

The HFF has lost ISK 270 billion (USD 2.17 billion, EUR 1.68 billion) since its establishment in 1999 and continues to operate at a loss, Fréttablaðið reports.

“We believe … that no criminal activities have taken place. We believe that everyone acted with the best intentions in mind,” stated one of the commission’s members, economist Kristín Flygenring, at the press conference, reports.

However, what led to the HFF’s massive loss were incompetence, shortsightedness and a series of costly mistakes, the commission concludes.

The four-volume report traces the origins of the HFF’s misfortunes to 2004 when the housing bond system was abolished and the loan-to-value ratio was increased from 65 to 90 percent, as promised by the Progressive Party in its campaign the year prior.

In 2004-2008 both the International Monetary Fund (IMF) and OECD repeatedly remarked—on 21 occasions in total—that the fund’s operations were flawed.

The IMF and OECD for example pointed out that it was unnatural for the HFF to be competing with banks on the mortgage market.

According to the report, all remarks were ignored by the HFF’s executives, whom its authors have deemed as unfit to manage what has essentially become a risk-seeking loan institute instead of providing social restraint on the real estate market.

As such, the HFF should rather be managed by the Ministry of Finance than the Ministry for Welfare and Social Affairs, the report concludes.

As reported on, some of the HFF’s employees were hired for political reasons rather than their competence.

The special investigative commission was appointed by the Icelandic parliament, Alþingi, in September 2011 specifically to investigate the affairs of the HFF.

In addition to Kristín, the commission comprises of former district court judge Sigurður Hallur Stefánsson and Jón Þorvaldur Heiðarsson, associate professor in business at the University of Akureyri.

The full report (in Icelandic) is available here.


Please consider supporting Iceland Review

IR Online



per month
IR Online



per month
IR Online



per month
IR Magazine


For 6 Issues

per year