03/30/2009 01:00 PM House JUDICIARY

HB 108 - PROPERTY FORECLOSURES AND EXECUTIONS                                                                                 
                                                                                                                                
2:24:25 PM                                                                                                                    
                                                                                                                                
CHAIR RAMRAS announced that the  final order of business would be                                                               
HOUSE  BILL   NO.  108,  "An   Act  relating  to   real  property                                                               
foreclosures, to the sale of  property on execution, and to deeds                                                               
of trust."  [Before the committee was CSHB 108(L&C).]                                                                           
                                                                                                                                
2:24:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COGHILL moved  to  adopt  the proposed  committee                                                               
substitute  (CS)  for  HB 108,  Version  26-LS0318\P,  Bannister,                                                               
3/26/09, as the work draft.                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG objected for the purpose of discussion.                                                                
                                                                                                                                
2:25:10 PM                                                                                                                    
                                                                                                                                
JANE W.  PIERSON, Staff, Representative Jay  Ramras, Alaska State                                                               
Legislature, explained  on behalf of the  sponsor, Representative                                                               
Ramras, that proposed  AS 09.35.140(b) in Section 2  of Version P                                                               
now contains  a requirement that  the notice of execution  of the                                                               
sale of  real property also be  noticed on an Internet  web site,                                                               
and  expands  the   list  of  qualified  web   sites  to  include                                                               
newspapers  of  general circulation  so  long  as they  meet  the                                                               
requirements  listed in  Section  2's  proposed AS  09.35.140(c).                                                               
She surmised,  therefore, that if  a newspaper were  qualified to                                                               
run legal  ads, it would  also be  qualified to run  the Internet                                                               
publication.     Furthermore,   proposed  AS   09.35.140(c)  also                                                               
requires  that any  Internet web  site used  for this  purpose be                                                               
free to the viewing public.                                                                                                     
                                                                                                                                
MS. PIERSON indicated  that Section 4 -  proposed AS 34.20.070(b)                                                               
- now  contains a reference  to proposed AS 34.20.070(e)  - found                                                               
in  Section  6 and  requiring  a  description of  conditions  for                                                               
curing the  default -  and requires among  other things  that the                                                               
notice of default served on  the trustor include language stating                                                               
that the payment to cure the  default must be made two days prior                                                               
to the  sale date stated  in the notice  of default, or  two days                                                               
prior  to  the date  the  sale  is  postponed  to.   Proposed  AS                                                               
34.20.070(e) contains language conforming  to that of proposed AS                                                               
34.20.070(b).  She surmised that  these provisions should provide                                                               
adequate  notice to  the trustor  regarding  curing the  default.                                                               
Section 10's proposed AS 34.20.080(j),  she relayed, now provides                                                               
that  if the  sale is  rescinded under  proposed AS  34.20.080(g)                                                               
that  the deed  of  trust  foreclosed in  the  rescinded sale  is                                                               
restored to the  validity and priority it would have  had had the                                                               
sale not occurred.                                                                                                              
                                                                                                                                
MS. PIERSON, in response to  a question, clarified that Section 4                                                               
now also contains a reference  to proposed AS 34.20.080(e), which                                                               
is contained in  Section 9 and which pertains  to [postponing the                                                               
sale].                                                                                                                          
                                                                                                                                
REPRESENTATIVE GRUENBERG removed his objection.                                                                                 
                                                                                                                                
CHAIR RAMRAS stated that Version P was before the committee.                                                                    
                                                                                                                                
REPRESENTATIVE HOLMES  questioned whether  the term,  "(a)" ought                                                               
to be added to Section 1's proposed AS 09.35.140.                                                                               
                                                                                                                                
MS. PIERSON surmised that doing so might be cleaner.                                                                            
                                                                                                                                
2:31:05 PM                                                                                                                    
                                                                                                                                
ROBERT  H. SCHMIDT,  Attorney  at Law,  Groh  Eggers, LLC,  after                                                               
relaying that his firm processes  only about 100 foreclosures per                                                               
year, expressed concern that  the Internet publication provisions                                                               
in Version  P could prove  problematic because the  newspapers in                                                               
some  smaller  communities  don't  have their  own  Internet  web                                                               
sites, thereby  requiring those conducting a  foreclosure sale in                                                               
such communities to use his competitor's  web site.  He said that                                                               
although the  bill does several  favorable things, Version  P now                                                               
also  raises  an  issue  regarding what  he  called  the  two-day                                                               
cutoff.                                                                                                                         
                                                                                                                                
[Chair Ramras turned the gavel over to Representative Coghill.]                                                                 
                                                                                                                                
MR.  SCHMIDT offered  his understanding  that under  the bill,  a                                                               
person  could  stop  a  foreclosure by  paying  what's  due  plus                                                               
associated charges  as long as  that payment occurs at  least two                                                               
days prior  to the  [foreclosure] sale, but  the person  would be                                                               
precluded  from curing  the default  if  payment is  not made  at                                                               
least  two days  prior to  the  sale.   He pointed  out that  the                                                               
financial institution  his firm represents would  never turn down                                                               
a cure and would rather the  person keep the property.  Version P                                                               
appears  to mandate  that any  attempt at  curing the  default be                                                               
refused if  it can't occur at  least two days prior  to the sale,                                                               
thus requiring  the bank to  go forth  with the sale.   Surmising                                                               
that that  is not the  intent of the  bill, he indicated  that he                                                               
has some suggested language to address this problem.                                                                            
                                                                                                                                
MR. SCHMIDT  then offered his belief  that there appears to  be a                                                               
typographical error  on page 3,  line 4, surmising  that proposed                                                               
AS 09.35.140(c)(2) is  not meant to cover newspapers at  all.  In                                                               
conclusion, he characterized  HB 108 as a good bill  that will do                                                               
much to  modernize Alaska's foreclosure  laws.  In response  to a                                                               
question, he  reiterated his concern  about what he'd  called the                                                               
two-day  cutoff [as  provided for  in Sections  4 and  6], adding                                                               
that  most  modern  deeds  of trust  will  conflict  with  "this"                                                               
because they stipulate that a  foreclosure sale can be stopped by                                                               
curing  the  default  before the  sale,  thus  providing  broader                                                               
rights  for cure  than  what  the bill  currently  proposes.   He                                                               
acknowledged, though,  that that's  not necessarily a  reason for                                                               
not  having the  "two-day  rule," and  that various  out-of-state                                                               
lenders who  operate substantially  higher loan  portfolios might                                                               
benefit by  such a rule.   In response  to a comment,  he posited                                                               
that local banks  might not be interested in having  such a rule,                                                               
and would  instead prefer  to accept a  payment cure  rather than                                                               
going through with the foreclosure sale.                                                                                        
                                                                                                                                
REPRESENTATIVE COGHILL  suggested to Mr. Schmidt  that he provide                                                               
the committee with any suggested changes in writing.                                                                            
                                                                                                                                
REPRESENTATIVE COGHILL returned the gavel to Chair Ramras.                                                                      
                                                                                                                                
CHAIR RAMRAS  opined that the  benefits of the bill  outweigh the                                                               
potential  problems with  the  [two-day  cutoff], surmising  that                                                               
generally borrowers  wouldn't be  able to  remedy a  situation in                                                               
those last two days anyway.                                                                                                     
                                                                                                                                
2:42:02 PM                                                                                                                    
                                                                                                                                
STEPHEN ROUTH, Attorney at Law,  Routh Crabtree, apc, in response                                                               
to  a question,  relayed  that his  firm processes  substantially                                                               
more  than  100 foreclosures  per  month,  and  - with  the  full                                                               
concurrence of  its clients  - does  everything possible  to keep                                                               
borrowers in  their homes.   Referring to  Version P,  he offered                                                               
his  belief that  its  intent  is to  broaden  the definition  of                                                               
Internet  web  sites suitable  for  publications,  with the  goal                                                               
being to  widen the  publicity for sales,  since any  proceeds go                                                               
back into  the borrower's  account.  People  are now  shopping on                                                               
the Internet  for property,  and so the  bill would  bring Alaska                                                               
into that market;  both Florida and Arkansas  have passed similar                                                               
legislation, and Alaska  would be the third state  [should HB 108                                                               
pass].                                                                                                                          
                                                                                                                                
MR. ROUTH, referring to Mr.  Schmidt's comment, opined that those                                                               
newspapers that  don't yet have a  web site could simply  set one                                                               
up because it's easy to do.   Referring to the bill's stipulation                                                               
that  a default  must be  cured at  least two  days prior  to the                                                               
foreclosure sale,  he posited that  the goal of that  language is                                                               
to  ensure  that  enough  notice   is  provided  to  the  lending                                                               
institution  so  that  it doesn't  proceed  with  an  unnecessary                                                               
foreclosure sale.   He said  he agrees that  no bank is  going to                                                               
object to  having the default  cured even  when it occurs  at the                                                               
last minute.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HOLMES questioned  whether  the  provisions in  a                                                               
deed of sale would supersede [state law].                                                                                       
                                                                                                                                
MR. ROUTH  offered his belief  that the deed of  trust provisions                                                               
would prevail.                                                                                                                  
                                                                                                                                
REPRESENTATIVE  HOLMES questioned  whether  that  would create  a                                                               
problem given that  in such a situation, the legal  notice of the                                                               
default sale would stipulate the two-day cutoff.                                                                                
                                                                                                                                
MR. ROUTH  acknowledged that that  could create a problem  and be                                                               
confusing to the borrower.                                                                                                      
                                                                                                                                
REPRESENTATIVE HOLMES indicated that that's of concern to her.                                                                  
                                                                                                                                
REPRESENTATIVE  GRUENBERG  suggested  that Mr.  Schmidt  and  Mr.                                                               
Routh work together and present  the committee with any suggested                                                               
changes.                                                                                                                        
                                                                                                                                
MR. SCHMIDT and MR. ROUTH agreed to do so.                                                                                      
                                                                                                                                
2:51:53 PM                                                                                                                    
                                                                                                                                
BRYAN BUTCHER,  Director, Government Affairs &  Public Relations,                                                               
Alaska Housing Finance Corporation  (AHFC), Department of Revenue                                                               
(DOR), in  response to a  question, explained that  although he'd                                                               
not yet received a copy of  Version P, the AHFC was supportive of                                                               
the  prior version  of  HB  108, and  surmised  that the  concern                                                               
raised by  Mr. Schmidt  [regarding the  two-day cutoff]  could be                                                               
resolved.                                                                                                                       
                                                                                                                                
[HB 108, Version P, was held over.]