Legislature(2005 - 2006)CAPITOL 17
03/01/2006 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB416 | |
| HB402 | |
| HB439 | |
| HB424 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 402 | TELECONFERENCED | |
| *+ | HB 424 | TELECONFERENCED | |
| *+ | HB 439 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 416 | TELECONFERENCED | |
HB 424-MORTGAGE LENDING 4:46:06 PM ACTING CHAIR KOTT announced that the final order of business would be HOUSE BILL NO. 424, "An Act relating to mortgage lenders and persons who engage in activities relating to mortgage lending; and providing for an effective date." JOSH APPLEBEE, Staff to Representative Tom Anderson, House Labor and Commerce Standing Committee, Alaska State Legislature, presented the proposed committee substitute (CS) to HB 424 on behalf of the sponsor, the House Labor and Commerce Standing Committee. He explained that industry and the Division of Banking & Securities have been working closely to reach [agreeable] language, which was provided this afternoon. The aforementioned is embodied in CSSB 272, Version 24-LS1644\I, Bannister, 3/1/06, which he said he hoped the committee would adopt in order to begin the process. REPRESENTATIVE ROKEBERG moved to adopt CSSB 272, Version 24- LS1644\I, Bannister, 3/1/06, as the working document. There being no objection, it was so ordered. 4:48:00 PM ACTING CHAIR KOTT announced that due to the late receipt of this version, it isn't the committee's intent to move the bill out of committee today. 4:48:42 PM JOHN CARMAN, Partner & President, HomeState Mortgage Company; Chair, Legislative Committee, Alaska Mortgage Bankers Association, stated that he is in favor of this legislation. He informed the committee that he has been working for the past five years to pass such legislation. Currently, there is no legislation in Alaska for mortgage bankers or brokers, and therefore anyone can present himself/herself as a mortgage banker or broker. The aforementioned, he opined, is to the detriment of the consumers in Alaska. He indicated that [HomeState Mortgage] would like additional legislation next year to license individual mortgage originators, although he acknowledged that more compromise and discussion will be required regarding education requirements and other things. In response to Acting Chair Kott, Mr. Carman confirmed that Alaska is the only state that does not have regulation or laws governing the mortgage origination process. REPRESENTATIVE CRAWFORD related his understanding that under this legislation, the state would license Internet mortgage brokers as well. MR. CARMAN replied yes. In response to Representative Rokeberg, Mr. Carman said the difference between brokers and bankers is a bit murky. For instance, HomeState Mortgage performs brokering and banking services. However, a broker basically facilitates the loan, which will close in the name of whoever the individual arranges the loan while a mortgage banker closes in its name and sells to the secondary market after the loan is closed. Therefore, brokers tend to be smaller because they don't have the necessary lines of credit and capital to close in the broker's name. 4:52:16 PM REPRESENTATIVE ROKEBERG related his understanding that there is some resistance to HB 424 from the originators. MR. CARMAN explained that the brokers have said they want each originator to be licensed rather than the company. Mr. Carman opined that originator legislation is necessary and legislation is being worked on with the Division of Banking & Securities that would license originators. However, too many issues arise when attempting to license every person in the process and would slow the process too much this year. Therefore, the [Alaska Mortgage Bankers Association] will work on that for next year. ACTING CHAIR KOTT mentioned that the committee has been provided a letter from the Alaska Mortgage Bankers Association that appears to identify some problems with HB 424. MR. CARMAN said he believes the problems noted in the letter have been addressed in the proposed committee substitute adopted earlier. 4:54:56 PM MARK DAVIS, Director, Juneau Office, Division of Banking & Securities, Department of Commerce, Community, & Economic Development (DCCED), stated that [the department] is in favor of legislation that will regulate mortgages. He related that the division receives about 15 calls per week from consumers making complaints against mortgage companies over which the division has no jurisdiction. Additionally, the division receives about 25 calls a week from companies who want to do business and the division informs them that they are unregulated. Therefore, one of the tenets of HB 424 is to regulate these entities as is done in the Lower 48. Another tenet of HB 424 is to cover interstate mortgage companies doing business in Alaska. He explained that the aforementioned would be very similar to jurisdiction used in the pay day lending legislation last year. The division has had a fairly positive experience with the pay day lending law. The desire, he opined, is to achieve a balance between a healthy industry and consumer protection. He mentioned that the legislation will likely require further work at some point. The legislation provides a licensing procedure, appropriate regulatory authority to the state in order that it may investigate, review, and resolve consumer complaints regarding mortgage lenders and brokers. Furthermore, this legislation will provide for a level playing field such that all companies follow the same set of rules. Mr. Davis noted that the division is in favor of defining [mortgage brokers and bankers] as being financial institutions under Title 06 in order to bring them into the banking community. He emphasized that a mortgage is one of the largest transactions that many people perform whether via a financial institution, bank, or some other lending process. 4:58:00 PM KEVIN BREELAND, President, Alaska Mortgage Bankers Association; Minority Partner, Residential Mortgage, confirmed that his letter dated March 1, 2006, to Chair Anderson was drafted prior to review of the proposed CS. He said that he has been working with the Division of Banking to resolve issues and will continue to do so. The spirit of the legislation, he said, [the Alaska Mortgage Bankers Association, does support. He opined that licensing of lenders is necessary. REPRESENTATIVE LEDOUX recalled that the letter relates concerns with regard to paragraphs (10) and (11) on page 13 of the proposed CS. MR. BREELAND said that his letter brought attention to paragraphs (10) and (11) in order to ensure the intent of those provisions are interpreted by the court system in the same manner [as specified in the letter]. In further response to Representative LeDoux, Mr. Breeland said that he was no longer concerned about the membership reviewing them because he has spoken over the phone with members. He explained that he, personally, was confused with the intent of these paragraphs. However, he said he is more comfortable now with these paragraphs and would be able to articulate the intent of these provisions. 5:02:10 PM DWIGHT DEELY, President, Evergreen Alaska Mortgage, said that he and other [brokers] haven't had much time to review the proposed CS. Mr. Deely related that he agreed with the intent and spirit of the legislation. However, much of the concern is related to the language and whether it will impact mortgage brokers more than bankers and lenders. ACTING CHAIR KOTT opined that the committee agrees with the spirit of the legislation, but it wants to ensure that it doesn't become problematic later. MR. DEELY agreed. He informed the committee that he is licensed in multiple states and performs most business via the Internet. He mentioned that he has went through these licensing issues in multiple states, which he characterized as a nightmare. Although he agreed that without any state regulations, shady businesses can do business in the state, he expressed the need to take care and allow input from all the interested organizations. ACTING CHAIR KOTT reiterated that this legislation won't be reported out of committee today. 5:05:07 PM CHRIS SKINNER, Broker, President, Kelstar Alaska Mortgage; Member, Legislative Committee, Alaska Association of Mortgage Brokers, reiterated Mr. Deely's testimony that [brokers] haven't had the opportunity to review the legislation as they should. In fact, Ms. Skinner opined that the Alaska Association of Mortgage Brokers has been left out of this process. She recalled that at one point the Alaska Association of Mortgage Brokers was working with the Alaska Mortgage Bankers Association on legislation. However, legislation was introduced by another party and language that was necessary to protect consumers wasn't included in the legislation. Ms. Skinner said that upon reading through the legislation she felt that mortgage brokers would be the most affected by this legislation, and thus should be able to be more involved in the process. She noted that brokers do believe that licensing is necessary, but the language of the legislation needs some work. 5:06:37 PM DOUG ISAACSON, President, Alaska Association of Mortgage Brokers; President, Gold Coast Mortgage, reiterated earlier testimony that the proposed CS was just received today. The language of the proposed CS is different than the prior version. Mr. Isaacson then explained that there are many different members involved in the mortgage conduit, although each is working to the same end goal of helping more people enter into home ownership. He indicated that all groups are working together to develop language that promotes professionalism and protects the consumer. Mr. Isaacson explained that the Alaska Association of Mortgage Brokers is affiliated with the national association, which has members in 49 states. He further explained that brokers have members that are sometimes lenders, pure brokers, and net branches. The concern, he said, is that the membership hasn't had an opportunity to review the new proposed legislation. MR. ISAACSON went on to say that customer protection requires a test of competency. Therefore, if the competency of the licensee isn't being provided for, then consumer protection isn't being encouraged. Furthermore, anyone can incorporate themselves in a fashion to be excluded by this legislation, save the small group of licensees who will face additional fees on their loans. The aforementioned will be forwarded on to the consumer. Moreover, if that additional fee isn't placed on all mortgage loans in Alaska, a certain section of the industry will be placed at a competitive disadvantage. The aforementioned has nothing to do with competency. However, when one reviews a competency requirement, education comes into play, even for the companies. Mr. Isaacson said that he would like to see a competency test in this legislation and not exclude nonprofit agencies. He then discussed the exclusion of "quasi- governmental" agencies. He went on to say, "When you have the State of Alaska condoning a fiduciary assigned by the court, the ability to not be licensed, you're defeating your own desire to protect the public." For example, if a pension fund doesn't have to be licensed or show competence and is able to perform mortgages for the pension holders, the [consumers] who trust the government to provide safeguards are placed at risk. Furthermore, just because an individual has a securities license or is a real estate agent or attorney doesn't mean that he/she can keep up with the ever-changing requirements of mortgage origination or lending functions. MR. ISAACSON specified that he isn't speaking against the legislation, but rather against the "vast gaping holes" in it. On the other hand, [the legislation] specifies that the state's agents should also have oversight over federal regulation, which he opined goes too far. The state auditors who currently do not regulate federally chartered banks will have to provide a test of competency to audit federal regulations. Therefore, the right to audit will become a requirement to audit. The aforementioned, he opined, places a huge burden on the department, which will have to train and supervise people. These are usually the same auditors who will also be doing the state banking. Mr. Isaacson then highlighted that there is no cap on the amount charged. Therefore, he expressed the need for there to be language included that specifies how much the audit/examination can cost. He also expressed the need to include language that specifies that the department has the option to examine a mortgage broker, but can also decide that such examination isn't warranted. Furthermore, this legislation seems to specify that the state will be a collection agency for mandating payments to appraisers, without stipulating that appraisers have to have reasonable appraisals. Mr. Isaacson expressed the need for there to be language specifying differing levels of penalties for different prohibited practices. Lack of payment to an appraiser shouldn't be taken on the same level of discipline as say, theft of escrow funds, he opined. Mr. Isaacson informed the committee that he will provide the committee with written testimony, which suggests the aforementioned. He concluded by expressing the need to review the legislation line by line in order to provide consumers with protection and professionalism in the industry. 5:21:01 PM LOU KONETSKI, Senior Vice President, Gold Coast Mortgage, opined that mortgage brokers are being discriminated against as compared to the bank officers who perform the same functions as the mortgage brokers. He highlighted that if one totals the fees and taxes involved with this legislation, it amounts to more than $1,000 per year. However, the mortgage officers working with the banks won't have to pay anything. Mr. Konetski opined that mortgage brokers are being treated worse than criminals as they are forced to pay $75 an hour for their own investigation. He then informed the committee of the committee "Don't Borrow Trouble," which addresses predatory lending. The aforementioned committee has found that most of the problems with mortgage loans have to do with out-of-state lenders doing business in Alaska, although the legislation doesn't address that matter very well. 5:23:32 PM LINDA PATRICK, Vice President, Evergreen Alaska Mortgage Corporation, echoed earlier statements regarding only recently receiving the proposed CS and not having the ability to review the legislation. Ms. Patrick opined that regulation is important, especially for predatory lenders. She explained the difficulty with [out-of-state] lenders who offer cheaper loans, although those lenders don't know the idiosyncrasies in Alaska. She expressed the need to protect clients, while she hoped this legislation will not micromanage brokers. 5:25:34 PM VERNON RUSH, President, Alaska Capital; Partner, Equity Investors; Managing Partner, Astoria Investments; Chair, Alaska State Mortgage Brokers Association Legislative Committee; Independent Lender, speaking as a lender, opined that HB 424, as written, isn't onerous. However, it doesn't protect the public. As a broker and a person who has contracted with banks to originate mortgage loans, Mr. Rush interpreted the legislation, as per the language on page 3, to mean that he is exempt from this legislation. He explained that he is an independent contractor [functioning] as a mortgage broker with written agreements with exempt entities. Furthermore, he noted that he doesn't issue mortgage loan commitments or set the rates, terms, et cetera of the mortgage. Mr. Rush said he didn't believe the drafters of HB 424 truly under the differences in mortgage brokering. Moreover, the legislation doesn't protect the public, he reiterated. He pointed out that DiTech is technically a bank and would be exempt under this legislation. Mr. Rush mentioned his agreement with the idea of licensing the lender and the originator because the person dealing with the client is the one representing what he/she can do. In conclusion, Mr. Rush opined that the current proposed CS needs much further scrutiny. 5:28:21 PM JOHN MARTIN, Manager, Alaska Mortgage Solutions, began by explaining that he is a net branch operation, which means that he is a lender as well as a broker. He informed the committee that he has been a resident of Alaska since 1959 and has seen many changes over the years, especially in recent years, with regard to mortgage loans. He also informed the committee that he is a past president and founding member of the Alaska Association of Mortgage Brokers. One of the reasons the Alaska Association of Mortgage Brokers was founded was the belief in licensing. Therefore, there is the desire for fair licensing while there is also some consumer protection and the opportunity for everyone to be able to effectively operate their business. Mr. Martin cautioned against over regulation because Alaska is a cash poor state, in regard to mortgage loans. Over regulation of mortgage loans in Alaska may result in the loss of closing loans and placing Alaskans in homes. Mr. Martin opined that the proposed CS needs much amending to be effective because, as stated earlier, this legislation is only part of [what is necessary]. He specified that the legislation should include originators and how they will be tested for competency, have a background check, and require a specified amount of education to be obtained on a biannual basis. 5:30:35 PM JOE BRAMMER, Manager, First Metropolitan Mortgage, said that he has some of the same concerns expressed by Mr. Isaacson. He opined that with all exemptions under AS 06.60.020, this legislation doesn't do much to protect consumers because most will be exempt in one way or another. For instance, a mortgage that is a bank, savings and loan, or credit union, or is a subsidiary or affiliate of the aforementioned doesn't have to comply with any provision of this legislation. He highlighted the exemptions for quasi governmental agencies, attorneys, real estate brokers and agents, fiduciary capacity, and persons licensed by the U.S. Small Business Administration. Mr. Brammer noted his wholehearted agreement with Mr. Carman in that the lack of legislation regulating mortgage originators is of detriment to the consumers of the state. He further agreed with Mr. Martin that this legislation should be made whole by adding the mortgage origination requirement that the originators of this state need to be licensed. "Essentially, the way that this bill reads it is big business trying to legislate small business out of business," he opined. 5:32:53 PM JAY WILCOX, Loan Executive, Long Beach Mortgage, noted his agreement with much of the previous testimony. The current proposed CS doesn't seem to protect the consumer. Mr. Wilcox related that predatory lending is the thing to watch. He further related that the problems he has seen in Alaska are in relation to originators who don't know Alaska and its laws. Without licensing mortgage originators, implementing education and competency requirements, consumers aren't being provided any benefit. Therefore, the aforementioned should be added to the legislation. 5:35:13 PM DAN FAUSKE, CEO/Executive Director, Alaska Housing Finance Corporation (AHFC), Department of Revenue, related he, too, hasn't had a chance to review the proposed CS, about which there have been some good points raised. Mr. Fauske specified that AHFC does support of the basic premise of the legislation, which is some type of regulation or control to protect consumers. 5:36:13 PM ACTING CHAIR KOTT announced that public testimony on HB 424 will be held open until this measure is heard again.
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