04/18/2007 03:00 PM House LABOR & COMMERCE

HB 162-MORTGAGE LENDING                                                                                                       
                                                                                                                                
3:28:07 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON announced  that the first order of  business would be                                                               
HOUSE  BILL  NO.  162,  "An Act  relating  to  mortgage  lenders,                                                               
mortgage brokers, mortgage originators,  state agents who collect                                                               
program  administration fees,  and  other persons  who engage  in                                                               
activities  relating to  mortgage lending;  relating to  mortgage                                                               
loan  activities; relating  to an  originator  fund; relating  to                                                               
fees  for  mortgage  loan  transactions;  and  providing  for  an                                                               
effective date."                                                                                                                
                                                                                                                                
REPRESENTATIVE  RAMRAS  moved  to  adopt CSHB  162,  Version  25-                                                               
LS0070\O,  Bannister, 4/14/07,  as the  working document.   There                                                               
being no objection, Version O was before the committee.                                                                         
                                                                                                                                
3:29:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS requested  an explanation  of the  changes                                                               
made by Version O.                                                                                                              
                                                                                                                                
3:29:50 PM                                                                                                                    
                                                                                                                                
MARK  DAVIS,   Director,  Division   of  Banking   &  Securities,                                                               
Department  of   Commerce,  Community,  &   Economic  Development                                                               
(DCCED), detailed  the major changes  embodied in Version O.   He                                                               
pointed  out that  Version O  exempts companies  already licensed                                                               
under Alaska's  Small Loan Act  [on page 1,  line 4].   Version O                                                               
also includes a modification of  exemption language for federally                                                               
regulated  financial  institutions.     Mr.  Davis  informed  the                                                               
committee that yesterday the U.S.  Supreme Court decided the case                                                               
Waters  v. Wachovia  Bank  and determined  that  a subsidiary  or                                                             
operating subsidiary  of a  national bank  was exempt  from state                                                               
examination  powers.   The language  of Version  O would  allow a                                                               
national bank or national bank  holding company to certify to the                                                               
Division  of Banking  & Securities  that they  are exempt,  based                                                               
upon  a letter  or  other documentation  from  the three  federal                                                               
regulatory  agencies.   The  aforementioned  doesn't address  the                                                               
matter  of affiliates.   Pages  14-15 of  the U.S.  Supreme Court                                                               
[decision]  specify  that  affiliates  of a  national  bank  that                                                               
engage  in   "nonbanking"  activities,  such  as   securities  or                                                               
insurance, would  need state licensure.   However, [the decision]                                                               
didn't address a situation in  which an affiliate engages in bank                                                               
activities  and nonbanking  activities.   For example,  the state                                                               
currently  has  the  right to  examine  Wachovia  Securities,  an                                                               
affiliate of Wachovia Bank.                                                                                                     
                                                                                                                                
MR.  DAVIS  then pointed  out  that  Version O  includes  changes                                                               
[regarding the  notification] where  there's a change  in control                                                               
of  a   corporation  or  limited  liability   corporation  (LLC).                                                               
Version O includes language in  AS 06.60.065(3)(E) that clarifies                                                               
that the  basis for  denial of an  originator license  includes a                                                               
violation of a  regulation adopted under the chapter  or an order                                                               
of the  department under  the chapter.   The work  draft includes                                                               
proposed  AS 06.60.157  and  .159  in order  to  ensure that  all                                                               
licensees  perform origination  services  through an  originator.                                                               
Version O also  specifies that a licensee may  not represent that                                                               
he/she  has  a  professional certification  that  he/she  doesn't                                                               
actually have.                                                                                                                  
                                                                                                                                
MR. DAVIS noted that the  change in proposed AS 06.60.370(b)-(d),                                                               
in  order  to  ensure  that  all the  misdemeanors  are  class  A                                                               
misdemeanors,  was  requested by  the  Department  of Law  (DOL).                                                               
Version  O also  changes the  definition of  "escrow account"  in                                                               
proposed  AS  06.60.990(5)(D)  in  order to  clarify  that  money                                                               
disbursed from  an escrow  account must be  in accordance  with a                                                               
written  agreement.    Mr. Davis  mentioned  that  the  remaining                                                               
changes in Version  O were largely requested by DOL  and were due                                                               
to  drafting differences  between DOL  and Legislative  Legal and                                                               
Research Services.                                                                                                              
                                                                                                                                
REPRESENTATIVE RAMRAS  expressed appreciation  for the  work done                                                               
by Mr. Davis.                                                                                                                   
                                                                                                                                
3:34:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER asked if the  division has had a chance to                                                               
respond to the statement by AARP.                                                                                               
                                                                                                                                
MR.  DAVIS replied  that  the division,  through  Version O,  has                                                               
responded to some  of the [concerns] stated by  AARP, including a                                                               
provision  that provides  for restitution  as  a requirement  for                                                               
relicensing.   He pointed  out that AARP  is also  concerned with                                                               
predatory lending practices, which he  feels is best handled with                                                               
a predatory lending statute.  The  way such statutes work in most                                                               
states is that  there is a series of licensing  and the predatory                                                               
lending law  applies to  all who aren't  licensed.   Until Alaska                                                               
has  more licensing  it will  be difficult  to draft  a predatory                                                               
lending law that makes sense, he opined.                                                                                        
                                                                                                                                
REPRESENTATIVE GARDNER drew attention  to AARP's concern with the                                                               
"express private right of action".                                                                                              
                                                                                                                                
MR. DAVIS  said that he  disagrees with AARP's legal  analysis of                                                               
the  aforementioned.    He  pointed   out  that  the  legislation                                                               
specifies that in addition to all  of the remedies one may make a                                                               
claim  on the  surety fund.   The  aforementioned means  that one                                                               
doesn't have  to go to the  surety fund.  As  a former practicing                                                               
attorney,  Mr. Davis  related his  belief  that a  client with  a                                                               
substantial  loss will  sue if  the  person making  the loss  has                                                               
money, but  will go for  the surety  fund if that  person doesn't                                                               
have many assets or the case is small.                                                                                          
                                                                                                                                
REPRESENTATIVE GARDNER highlighted  that AARP [expressed concern]                                                               
with the statute  of limitations of two years  since the standard                                                               
in most states is three years from discovery.                                                                                   
                                                                                                                                
MR. DAVIS replied that [the  statute of limitations] is two years                                                               
from  discovery.    He  opined  that two  years  will  work,  but                                                               
deferred to DOL, which hasn't suggested such a change.                                                                          
                                                                                                                                
REPRESENTATIVE  GARDNER  turned  to   AARP's  desire  for  making                                                               
stronger the  capping of  claims against  a single  originator at                                                               
$50,000 irrespective  of the actual  damages to the  borrower and                                                               
the apportionment among the borrowers.                                                                                          
                                                                                                                                
MR. DAVIS clarified  that is correct if one is  going through the                                                               
surety fund.   Again, if one has  a major loss, he  said he would                                                               
assume that individual wouldn't go  through the surety fund.  The                                                               
surety fund, he pointed  out, has to have a cap  so that it won't                                                               
run out of money.                                                                                                               
                                                                                                                                
3:38:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER moved  to  report CSHB  162, Version  25-                                                               
LS0070\O, Bannister,  4/14/07, out  of committee  with individual                                                               
recommendations and  the accompanying fiscal notes.   There being                                                               
no objection,  CSHB 162(L&C)  was reported  from the  House Labor                                                               
and Commerce Standing Committee.