Legislature(2007 - 2008)CAPITOL 17

03/23/2007 03:00 PM LABOR & COMMERCE

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* first hearing in first committee of referral
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Heard & Held
Heard & Held
HB 162-MORTGAGE LENDING                                                                                                       
CHAIR OLSON announced  that the final 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."                                                                                                                
3:42:01 PM                                                                                                                    
REPRESENTATIVE  BOB  LYNN,  Alaska  State  Legislature,  sponsor,                                                               
began by  stating that he is  a licensed real estate  broker, and                                                               
is  currently  in  referral  status.    He  said  that  for  most                                                               
individuals, a mortgage  loan is the largest loan he  or she will                                                               
receive.  Inability to find the  best loan and the best terms can                                                               
result in a "very expensive,  30-year mistake."  Most home-buyers                                                               
are  not  educated  in  the inner-workings  of  these  loans,  or                                                               
federal  mortgage laws.   He  explained  that his  first step  in                                                               
selling  a mortgage  loan would  be to  take the  homebuyer to  a                                                               
knowledgeable and  honest lender.   He opined that having  a good                                                               
lender is more  important than finding a buyer  the perfect house                                                               
and location.                                                                                                                   
REPRESENTATIVE LYNN  stated that he  sponsored HB 162  because it                                                               
is important to  have qualified lenders.  HB 162  has the support                                                               
of the  Alaska Mortgage Bankers Association,  Independent Lenders                                                               
of  Alaska,  and  various  realtors throughout  the  state.    He                                                               
pointed  out  that individuals  working  in  the Alaska  mortgage                                                               
industry  are not  licensed, nor  are they  required to  have any                                                               
training.   Additionally, the aforementioned individuals  are not                                                               
subject to  periodic examination  by the Division,  or background                                                               
checks.   He  stated that  HB 162  changes this.   He  noted that                                                               
state and  federal laws concerning mortgage  loan origination are                                                               
complex,  and representatives  from the  Department of  Commerce,                                                               
Community, & Economic Development  (DCCED), Division of Banking &                                                               
Securities and the  industry are prepared to explain  the bill in                                                               
further detail.   He said  that HB  162 is a  consumer protection                                                               
bill  of great  importance, and  respectfully requested  members'                                                               
3:46:11 PM                                                                                                                    
MARK  DAVIS, Director,  Division  of Banking  & Securities  ("the                                                               
Division"),  Department   of  Commerce,  Community,   &  Economic                                                               
Development (DCCED),  began by  stating that  the Division  is in                                                               
support of HB 162, which is  pro-consumer and will create a level                                                               
regulatory  environment for  mortgages in  Alaska.   He explained                                                               
that  currently,  mortgages  issued   by  a  state  or  federally                                                               
chartered  bank or  other institution  are  regulated.   However,                                                               
mortgages  offered   by  "stand  alone"  mortgage   companies  or                                                               
subsidiaries  of financial  institutions are  not regulated.   He                                                               
pointed out  that Alaska is  the only state  in the US  that does                                                               
not license  those in the  mortgage industry.  He  theorized that                                                               
those in  the mortgage industry  should be following  ten federal                                                               
statutes.   However, since  the state  does not  examine mortgage                                                               
companies, the  level of compliance  is unknown.  He  stated that                                                               
HB 162 would  allow the Division to examine  and license mortgage                                                               
brokers, lenders,  and originators.   Additionally,  the Division                                                               
would be  able to take  action against prohibited  practices, and                                                               
enforce compliance with federal mortgage  laws.  The Division has                                                               
a  "predatory lending  hotline"  which  receives many  complaints                                                               
from consumers regarding mortgage practices.                                                                                    
MR. DAVIS  went on to  say that the  Department of Law  (DOL) can                                                               
enforce consumer  protection statutes, and the  Federal Bureau of                                                               
Investigation  (FBI) is  currently investigating  mortgage fraud.                                                               
However, the  Division lacks the  regulatory authority  to ensure                                                               
that those in the mortgage  lending industry are fully qualified,                                                               
or to take action against those who  are not.  In addition to in-                                                               
state lenders, HB 162 would allow the Division to regulate out-                                                                 
of-state lenders  and brokers that are  offering mortgages within                                                               
the state.  He stated  that out-of-state companies in particular,                                                               
need to be regulated.  The goal  of HB 162 is to protect Alaskans                                                               
when shopping for  a home, which he agreed is  one of the largest                                                               
financial commitments  consumers make.   He reiterated  that this                                                               
would give the Division the  regulatory authority to investigate,                                                               
examine, and prevent consumer complaints.                                                                                       
3:50:16 PM                                                                                                                    
REPRESENTATIVE GATTO,  referring to the fiscal  note, pointed out                                                               
the $6 examination fee, and questioned whether this is correct.                                                                 
3:50:46 PM                                                                                                                    
ROGER  PRINCE,   Securities  Examiner,  Division  of   Banking  &                                                               
Securities,  Department   of  Commerce,  Community,   &  Economic                                                               
Development  (DCCED),  clarified  that  the  examination  fee  is                                                               
actually $600.   In response  to additional questions,  he agreed                                                               
that the  Division estimates the  need for two examiners  and one                                                               
business  registration  examiner,  with  an  additional  examiner                                                               
added in the third year.                                                                                                        
REPRESENTATIVE GATTO  noted that  the cost for  personal services                                                               
does not change, and questioned this.                                                                                           
MR.  DAVIS explained  that  the  Division was  told  to assume  a                                                               
static cost, and agreed that the  actual cost will be higher.  He                                                               
stated that  the cost of  personnel can  go up due  to retirement                                                               
costs or wage increases.                                                                                                        
MR. PRINCE, in response to  a question from Representative Gatto,                                                               
explained  that over  time,  the  goal is  for  increases in  the                                                               
number  of  licensees,   examinations  conducted,  and  mortgages                                                               
originated in-state,  to offset  the increased  operational fees.                                                               
Therefore, the program would remain at a "zero-cost."                                                                           
REPRESENTATIVE GATTO  questioned why  $50 thousand is  needed for                                                               
MR. PRINCE replied  that this includes both  in-state and out-of-                                                               
state  travel.   This would  allow staff  examiners to  travel to                                                               
conduct compliance  examinations for out-of-state  internet based                                                               
lenders that would need to  be licensed, in addition to wholesale                                                               
institutional lenders.                                                                                                          
3:55:12 PM                                                                                                                    
MR.  DAVIS added  that the  Division  currently examines  premium                                                               
finance  companies and  payday lending  companies.   The Division                                                               
has found  that, when attempting  to determine whether  a company                                                               
is complying  with statutory requirements,  it is more  useful to                                                               
examine the  out-of-state home office.   Therefore,  the Division                                                               
is anticipating  that it will  travel to these offices  to ensure                                                               
compliance with the law.                                                                                                        
REPRESENTATIVE GATTO  asked whether travel expenses  are added to                                                               
the cost [of the examination].                                                                                                  
MR.  DAVIS replied  that  this  is correct.    In  response to  a                                                               
question from Representative Neuman,  he stated that the Division                                                               
was not  involved in drafting  HB 162.   He explained  that while                                                               
the Division has looked over drafts  of the bill, the request for                                                               
regulations came  from the industry.   In response  to additional                                                               
questions,  he explained  that currently,  the  Division can  not                                                               
take regulatory  action against  misrepresentation.   He surmised                                                               
that  the Department  of  Law (DOL)  may be  able  to respond  to                                                               
consumer protection  concerns, and  reiterated that he  is unable                                                               
to  take  any  action,  such   as  license  revocation  or  other                                                               
disciplinary  actions,  against a  person  engaged  in acts  that                                                               
should be  prohibited or acts  that are prohibited  under federal                                                               
statutes.    He  pointed  out  that HB  162  contains  a  penalty                                                               
provision for  a fine  of up  to $10 thousand,  in addition  to a                                                               
provision which preserves  the ability of the DOL  to enforce the                                                               
Consumer Protection  Act.  In regard  to fees, he stated  that HB                                                               
162  proposes   to  license   mortgage  originators.     Mortgage                                                               
originators begin  the process  to obtain  a mortgage,  through a                                                               
mortgage lender  or a  mortgage broker.   Currently,  Alaska does                                                               
not  have  training  requirements  for  these  individuals.    He                                                               
explained that a mortgage  originator working independently would                                                               
pay the licensing fee, and if  working for a company, the company                                                               
may  choose to  cover this  cost.   He pointed  out that  this is                                                               
similar  to law  firms, where  the firm  may cover  dues for  the                                                               
associates.   He opined that  a mortgage originator working  as a                                                               
contractor for  a large  company will most  likely work  this out                                                               
with the  contracting company.   The Division has asked  those in                                                               
the  industry  whether  this fee  would  deter  individuals  from                                                               
engaging in business.  The industry  consensus is that the fee is                                                               
reasonable,  considering the  income of  mortgage originators  in                                                               
the state.                                                                                                                      
REPRESENTATIVE NEUMAN  asked for further explanation  of the work                                                               
done by a mortgage originator.                                                                                                  
MR. DAVIS  explained that  a mortgage  originator meets  with the                                                               
potential borrower  and executes  the necessary  documentation to                                                               
apply for  a mortgage.   The mortgage originator then  works with                                                               
the  mortgage lender  or mortgage  broker to  fund the  mortgage.                                                               
The realtor often  brings the potential borrower  to the mortgage                                                               
originator.   He  stated  that  the public  rarely  meets with  a                                                               
mortgage  broker, and  is likely  to never  meet with  a mortgage                                                               
banker.   He commented that  mortgage originators are  similar to                                                               
the loan  officer at a bank.   Mortgage originator is  defined in                                                               
HB 162  using the terms set  in federal statutes, which  are well                                                               
accepted throughout the industry.                                                                                               
REPRESENTATIVE NEUMAN  inquired as  to whether a  competency test                                                               
is required for mortgage originators.                                                                                           
MR.  DAVIS  reiterated that  currently,  there  are no  education                                                               
requirements  for mortgage  originators.   However, HB  162 would                                                               
require  that   these  individuals  pass  an   examination  prior                                                               
becoming   licensed,  in   addition   to  completing   continuing                                                               
education  courses.   An educational  board would  work with  the                                                               
Department  of   Commerce,  Community,  &   Economic  Development                                                               
(DCCED)  to set  reasonable  educational requirements.   He  said                                                               
that many other states have similar requirements.                                                                               
REPRESENTATIVE  NEUMAN asked  how this  would affect  a homeowner                                                               
selling his or her own home.                                                                                                    
4:04:46 PM                                                                                                                    
MR. DAVIS  replied that the  bill contains an exemption  for this                                                               
situation, adding that HB 162  is directed at commercial mortgage                                                               
transactions for  residential property.  Referring  to Section 2,                                                               
he explained  that AS 06.60.015  contains exemptions  for certain                                                               
organizations,  which are  driven  by the  federal banking  laws.                                                               
There are  two federal  regulating entities:   The Office  of the                                                               
Comptroller  of the  Currency  (OCC), and  the  Office of  Thrift                                                               
Supervision (OTS).  These institutions  take the position that if                                                               
a  bank  is regulated  by  either  these entities,  the  mortgage                                                               
department is  not subject to  state regulations.   This position                                                               
has  been  upheld in  court.    In  response  to a  request  from                                                               
Representative  Neuman,  he  detailed the  exemptions  listed  in                                                               
Section 2, noting that any  individual seeking an exemption under                                                               
this section would  still be required to file  a registration for                                                               
with the Division, in order to obtain the exemption.                                                                            
4:07:22 PM                                                                                                                    
CHAIR  OLSON  indicated   HB  162  would  be   held  for  further                                                               
REPRESENTATIVE LEDOUX shared her  understanding that the Division                                                               
would   need   to  travel   in   order   to  conduct   competency                                                               
MR.  DAVIS replied  no.   He  explained that  the Division  would                                                               
travel in  order to examine  the company's home office  to ensure                                                               
compliance with  statute.  He  stated that the company  would pay                                                               
for  this via  the hourly  rate charged  for the  examiner, along                                                               
with  the  per diem  rate  and  travel  costs.   In  response  to                                                               
additional questions,  he explained that the  Division would look                                                               
for any  complaints against the company,  compliance with federal                                                               
statutes,  whether   the  company   has  engaged   in  prohibited                                                               
activities set  forth by HB  162, and will examine  the company's                                                               
records  to  ensure  that  all  paperwork  is  in  order.    This                                                               
examination is to ensure that  the company should be re-licensed,                                                               
and would  be similar to  those currently done of  credit unions,                                                               
banks, and premium finance companies.                                                                                           
4:11:08 PM                                                                                                                    
JOHN CARMAN,  President, Home State Mortgage;  Chair, Legislative                                                               
Committee, Alaska  Mortgage Bankers  Association, stated  that he                                                               
has been  working on this  legislation for seven or  eight years,                                                               
in  an attempt  to come  up with  legislation that  regulates the                                                               
industry while  remaining as  non-invasive as  possible.   He has                                                               
been involved in the Alaska  banking industry since 1971, and has                                                               
seen  many  changes.    He noted  that  similar  legislation  was                                                               
introduced  during   the  previous  legislative  session.     The                                                               
aforementioned legislation  proposed a  company license,  and the                                                               
intent  was  to add  an  originator  license  to  the bill.    He                                                               
explained that  HB 162 combines company  licensing and originator                                                               
licensing.  Input  has been received from  the Alaska Association                                                               
of  Mortgage   Brokers  (AKAMB),  the  Alaska   Mortgage  Bankers                                                               
Association  (AKMBA),  and  the  Division.    He  said  that  the                                                               
aforementioned   organizations  are   in   agreement  that   this                                                               
legislation is  urgent and  necessary.  He  pointed out  that all                                                               
other industry  professionals are  regulated.   He then  shared a                                                               
story involving an  individual who lost her  real estate license,                                                               
yet was  able to work as  a mortgage broker, as  mortgage brokers                                                               
are not regulated.   He offered his understanding  that Alaska is                                                               
the only state that does  not regulate mortgage brokers, pointing                                                               
out that mortgage  fraud is becoming a  common concern throughout                                                               
the country.  He urged passage of HB 162.                                                                                       
4:14:29 PM                                                                                                                    
NAOMI LOUVIER,  Owner, Prudential  Jack White/Vista  Real Estate,                                                               
began by  stating the importance of  HB 162.  It  is not uncommon                                                               
for  homebuyers  to  be  given a  settlement  statement  that  is                                                               
different from what  they expected.  She  explained that realtors                                                               
attempt  to  avoid lenders  that  do  this  on a  regular  basis,                                                               
although it  is not always possible.   In response to  a question                                                               
from Representative  Neuman, she shared her  belief that realtors                                                               
are  in  support of  HB  162,  and  "will  be relieved"  to  have                                                               
regulations  in  place.   She  agreed  that  this is  a  consumer                                                               
protection issue.   She stated  that in Anchorage, the  public is                                                               
generally  protected,   with  the  exception   of  "questionable"                                                               
lending practices.                                                                                                              
4:19:10 PM                                                                                                                    
DANIELLE  FAGRE ARLOW,  Senior  Vice-President, State  Government                                                               
Affairs,  American Financial  Services Association  (AFSA), began                                                               
by  giving a  brief description  of AFSA  and its  members.   She                                                               
stated  that   there  are   concerns  regarding   the  unintended                                                               
consequences of HB 162.   She explained that originally, AFSA had                                                               
hoped to  amend HB 162 to  reflect the bill passed  by the Senate                                                               
during the  previous legislative  session, which  exempted large,                                                               
multi-state  entities from  individual employee  licensing.   She                                                               
stated that language  has been drafted which  AFSA believes meets                                                               
the   objective   of   enhancing   consumer   protection,   while                                                               
maintaining access  to credit.   This language was included  in a                                                               
letter recently sent  to Representative Lynn, with  the hope that                                                               
it  would be  adopted.    The AFSA  hopes  that  the debate  will                                                               
continue  with  the same  spirit  of  cooperation with  which  it                                                               
began,  and move  towards eliminating  potential problems  HB 162                                                               
would cause,  if enacted  in its  current form.   Ms.  Fagre then                                                               
stated that while AFSA has a  number of concerns with HB 162, she                                                               
would  be focusing  on the  requirement for  licensing individual                                                               
employees  and  excusive  agents   of  mortgage  lenders.    This                                                               
language, she  said, would significantly  increase the  burden on                                                               
lenders,  regulators,   and  consumers.     She   explained  that                                                               
licensing  individual employees  of  large, multi-state  mortgage                                                               
lenders can  impose substantial costs and  administrative burdens                                                               
for lenders  and regulators.   The lenders pass these  costs onto                                                               
the  borrowers, while  the negatively  affecting the  regulator's                                                               
compliance activities.  She stated  that sensible state licensing                                                               
of  the  lending  companies  makes   it  unnecessary  to  license                                                               
individual employees, such as  collections personnel, call center                                                               
employees, and  loan processors.   This is the  solution proposed                                                               
by  AFSA, and  takes into  account the  fact that  large mortgage                                                               
lenders operating in  multiple states have policies  in place for                                                               
pre-employment  screening, background  checks, and  extensive in-                                                               
house training programs, among others.   The AFSA does not oppose                                                               
licensing for  loan originators working on  behalf of independent                                                               
brokers, and  is aware that  Alaska is  the only state  that does                                                               
not  license independent  mortgage  brokers.   The AFSA  requests                                                               
substitute language  that would establish  licensing requirements                                                               
for  mortgage companies,  but not  for the  individual employees.                                                               
The AFSA believes that this is  the best way to protect consumers                                                               
in   Alaska    from   far-reaching   and    damaging   unintended                                                               
CHAIR  OLSON shared  his understanding  that amendments  would be                                                               
introduced to address these concerns.                                                                                           
4:24:27 PM                                                                                                                    
GREG HARSHA, Mortgage Broker, The  Mortgage Network, Inc., stated                                                               
that he has  several concerns with HB 162.   Referring to Page 2,                                                               
lines 9-16, stated that he  does not understand the intent behind                                                               
this language.                                                                                                                  
The committee took an at-ease from 4:26 PM to 4:27 PM.                                                                          
4:26:48 PM                                                                                                                    
MR.  DAVIS  explained  that  the  intent  of  the  aforementioned                                                               
language is  that both mortgage brokers  and mortgage originators                                                               
are licensed.   However, if an individual performs  both of these                                                               
functions,  he or  she would  not  need to  obtain two  licenses.                                                               
Instead, he or she would simply  need to inform the Division that                                                               
both activities would be performed.   He stated that the language                                                               
in  Section  2(b)(2) is  subject  to  revision,  and the  DOL  is                                                               
working on amending this language.                                                                                              
MR.  HARSHA  expressed  concern   with  the  requirements  for  a                                                               
mortgage license  versus an originator  license, and  pointed out                                                               
that a mortgage  license does not require  fingerprints, while an                                                               
originator  license does.    He stated  that  an individual  that                                                               
performs both  functions should be  subject to  all requirements.                                                               
He opined that mortgage licenses  should be given to individuals,                                                               
and  companies  should  not  be  licensed.    He  suggested  that                                                               
revision  of this  section be  considered.   He then  pointed out                                                               
that  the  mortgage  licensee  is  required  to  provide  written                                                               
consent  to  an  investigation,  while  the  mortgage  originator                                                               
licensee does not.   He then expressed concern with  the fees and                                                               
expenses, as  they relate to  small businesses versus banks.   In                                                               
regard  to  the investigation  fee,  he  suggested that  this  be                                                               
capped at $250.  In regard  to the competency test, he questioned                                                               
how  the testing  score was  chosen, as  it is  his understanding                                                               
that the test  has yet to be  created.  He then  pointed out that                                                               
there is no delineation between  a mortgage broker license versus                                                               
a mortgage lender license, and expressed concern with this.                                                                     
CHAIR  OLSON  requested  that   the  aforementioned  concerns  be                                                               
submitted in writing to his office.                                                                                             
4:33:55 PM                                                                                                                    
JOHN COURSON, President & Chief  Executive Officer (CEO), Central                                                               
Pacific Mortgage, said that he is  a former chair of the Mortgage                                                               
Bankers Association (MBA).   The MBA is  the national association                                                               
that  represents the  real estate  finance industry.   He  stated                                                               
that the  MBA supports the  state level corporate  licensing that                                                               
is proposed by  HB 162, adding that it is  important for mortgage                                                               
banking  companies  and other  mortgage  lending  entities to  be                                                               
approved and monitored  by the states in which  business is done.                                                               
He  said  that  state  regulation is  appropriate  for  financial                                                               
statements, review of operations,  recertification of the company                                                               
and its principles, and company  response to consumer complaints.                                                               
Additionally,  it is  important to  have the  ability to  enforce                                                               
federal statutes.  However, the MBA  does not support the bill as                                                               
it relates  to licensing  mortgage originators.   He  pointed out                                                               
that there  are many out-of-state companies  that are originating                                                               
loans in  Alaska, and  expressed concern  that the  provisions in                                                               
the bill may discourage new  business from coming into the state.                                                               
Individuals  currently  working  in  the  state  might  make  the                                                               
decision to exit the state, based upon these provisions.                                                                        
MR.  COURSON  went  on  to  say  that  the  individual  licensing                                                               
requirement included  in the bill  ignores the  accountability of                                                               
mortgage banking  companies.  He  explained that  these companies                                                               
have certain regulatory  and capital standards that  must be met,                                                               
in addition  to the  responsibility to  hire, screen,  train, and                                                               
manage loan  officers.  While  the MBA  supports the AFSA  in its                                                               
proposed  amendment,  the MBA  feels  that  this does  not  fully                                                               
address the  issue.   He stressed  the importance  of recognizing                                                               
that there is a distinct  difference between mortgage brokers and                                                               
mortgage bankers.  He explained  that mortgage bankers originate,                                                               
underwrite, and lend their own  funds, and are subject to capital                                                               
requirements from  investors and regulators  throughout different                                                               
regions  of  the  country.    Mortgage  bankers  are  corporately                                                               
responsible  for   loans  that   are  originated   by  employees.                                                               
Mortgage  brokers, he  said, are  commissioned sales  people, and                                                               
are typically  independent contractors  working with a  number of                                                               
different  mortgage  bankers.   Mortgage  brokers  work with  the                                                               
borrower to find a lender for the mortgage loan.                                                                                
MR. COURSON stated that the  MBA hopes the legislature would take                                                               
these  differences  into  consideration, and  consider  including                                                               
exemptions for mortgage bankers that  are approved by the Federal                                                               
Housing Association  (FHA) as  direct endorsement  lenders, those                                                               
approved by  Fannie Mae or  Freddie Mac, and those  maintaining a                                                               
minimum net worth of $5 million,  or total assets of $25 million.                                                               
He explained that the FHA endorsement,  as well as Fannie Mae and                                                               
Freddie Mac, require  a minimum net-worth of $1  million, and are                                                               
subject  to  government  auditing  standards,  are  part  of  the                                                               
consolidated  audit guide,  and  internal  control practices  are                                                               
audited  on an  annual basis.   He  stated that  mortgage bankers                                                               
that  meet  one  of  the   aforementioned  criteria  are  clearly                                                               
distinguished from  mortgage brokers,  adding that the  MBA feels                                                               
mortgage brokers should be licensed.   Amending language has been                                                               
sent to the sponsor's office.                                                                                                   
4:41:37 PM                                                                                                                    
MR.  COURSON,  in  response to  a  question  from  Representative                                                               
Neuman, stated  that the MBA  supports the licensing  of mortgage                                                               
lenders.   However the bill  has two components.   The MBA  is in                                                               
support  of  licensing  mortgage   lending  entities,  but  feels                                                               
careful  consideration   should  be   given  to   defining  which                                                               
individual mortgage  loan originators should be  required to have                                                               
an individual mortgage loan originator license.                                                                                 
4:42:38 PM                                                                                                                    
JOHN  MARTIN,  Mortgage   Broker,  stated  that  he   is  on  the                                                               
Legislative  Committee for  the  Alaska  Association of  Mortgage                                                               
Brokers.    He  agreed  that licensing  of  mortgage  brokers  is                                                               
needed, and  expressed concern with  the exemptions  suggested by                                                               
the  previous  speaker.   He  opined  that the  endorsements  are                                                               
important for  lenders to  have, but  questioned whether  this is                                                               
helpful  if  a  company  "goes   belly  up."    Mr.  Martin  then                                                               
paraphrased from the following written remarks [original                                                                        
punctuation provided]:                                                                                                          
     As some of you may  remember, there was bill introduced                                                                    
     last year  that would have licensed  mortgage companies                                                                    
     only.  That bill died in the House.                                                                                        
     So  in the  fall  of 2006,  the  Alaska Association  of                                                                    
     Mortgage   Brokers,   the   Alaska   Mortgage   Bankers                                                                    
     Association,   and   the   Division  of   Banking   and                                                                    
     Securities joined  forces and  decided to  get together                                                                    
     and  work  on  a   bill  that  would  license  mortgage                                                                    
     companies  and mortgage  originators.    The result  of                                                                  
     many hours  of hard  work was  the introduction  of HB-                                                                    
     162.   Thank you,  Representative Lynn,  for sponsoring                                                                    
     this  important bill.   We  are also  working with  the                                                                    
     Department of Law  on some technical issues  on some of                                                                    
     the verbage.                                                                                                               
     For your information, our state  is the last to license                                                                    
     mortgage operations in the country.                                                                                        
     One of  the most  important components  of the  bill is                                                                    
     the licensing of mortgage originators.                                                                                     
     They should  be subject to a  background check, testing                                                                    
     for  competency, and  subject  to continuing  education                                                                    
     requirements.     An Originator  must also  work for  a                                                                    
     licensed entity in order to perform their duties.                                                                          
     As far as  a client is concerned,  the mortgage conduit                                                                    
     looks all the same to them.   It makes no difference to                                                                    
     them  if  they are  with  a  mortgage lender,  bank  or                                                                    
     broker.  They want a loan  for their new home.  This is                                                                    
     arranged  by  talking  to  an  originator,  usually  in                                                                    
     person,   sometimes  by phone,  to get  the terms  they                                                                    
     want.    The  mortgage  loan  business  is  a  "people"                                                                    
     business.   The best  way to control  it is  to license                                                                    
     the "people" (originators) involved.                                                                                       
     By licensing the  industry, we are able  to protect the                                                                    
     public from unscrupulous operators.   If the originator                                                                    
     is subject  to licensure and does  not perform legally,                                                                    
     his/her license can be taken  away.  That affects their                                                                    
     ability to earn  a living.  That  is effective control.                                                                    
     Along  with that,  the mortgage  company they  work for                                                                    
     could also lose  their license if they  do not properly                                                                    
     monitor their originators.                                                                                                 
     Competency   testing   ensures    that   all   mortgage                                                                    
     originators have the knowledge  to perform their duties                                                                    
     and  not  injure  the  borrower.    The  testing  would                                                                    
     establish  minimum guidelines  for  knowledge that  all                                                                    
     originators  would be  required to  master in  order to                                                                    
     become  licensed.    Originators should  have  a  basic                                                                    
     knowledge  of  RESPA*,   TILA*,  FHA*,  Regulation  Z*,                                                                    
     title insurance, escrow, and credit issues.                                                                                
     Continuing  education  required   for  license  renewal                                                                    
     ensures   that  the   public  will   be  dealing   with                                                                    
     originators   who    obtain   and    maintain   current                                                                    
     information regarding the mortgage loan process.                                                                           
     Background checks  would protect  the residents  in the                                                                    
     State of  Alaska from  bad apples  moving to  our state                                                                    
     and going into the business.                                                                                               
     Just  last  year  it  was  disclosed  that  a  mortgage                                                                    
     originator for  a very large national  mortgage company                                                                    
     was indicted on federal  charges regarding his business                                                                    
     practices.    That  person  had  previously  had  their                                                                    
     license revoked  from the state  of Wisconsin  in March                                                                    
     of 2002.   If  our  licensing policy been in  effect at                                                                    
     the time this person came  to Alaska, this person would                                                                    
     never  had  the  opportunity   to  originate  loans  in                                                                    
     Alaska, and the public would have been protected.                                                                          
     The residents  of this state  deserve a bill  that will                                                                    
     to  protect   them  from  unscrupulous   companies  and                                                                    
     originators.    By  having   a  bill  that  effectively                                                                    
     addresses those issues, the residents  of our state for                                                                    
     the first  time will have the  protections they deserve                                                                    
     and avenues to pursue if damaged.                                                                                          
4:49:06 PM                                                                                                                    
KEVIN BREELAND, Partner & Senior Loan Officer, Residential                                                                      
Mortgage, LLC; President, Alaska Mortgage Bankers Association                                                                   
(AMBA), paraphrased from the following written remarks:                                                                         
     I  thank the  committee  for holding  this hearing  and                                                                    
     inviting  the Alaska  Mortgage  Bankers Association  to                                                                    
     share its views with this  committee on HB 162. My name                                                                    
     is  Kevin  Breeland  and  I am  Partner  and  Sr.  Loan                                                                    
     Officer  with  Residential  Mortgage,  LLC  located  in                                                                    
     Anchorage,   Alaska,  President   of  Alaska   Mortgage                                                                    
     Bankers   Association  (AMBA),   and  current   General                                                                    
     Members  Representative  of  the  Real  Estate  Service                                                                    
     Providers Council, Inc.  (RESPRO) representing the 270+                                                                    
     general  members  nationwide  on the  RESPRO  Board  of                                                                    
     Directors. Formerly  I was President of  Pacific Alaska                                                                    
     Mortgage  in Anchorage,  Alaska  till  our merger  with                                                                    
     Residential  Mortgage in  late  2005. I  am here  today                                                                    
     because AMBA believes the State  House must act on this                                                                    
     important piece of legislation know as HB 162.                                                                             
     I have been  in the mortgage business for  27 years, 21                                                                    
     years in Anchorage, Alaska. My  entire career in Alaska                                                                    
     I  have never  worked  for  a company  that  had to  be                                                                    
     licensed.  I  have seen  our  industry  grow since  the                                                                    
     repressed times of the mid  80's and early 90's. During                                                                    
     this  time   our  industry   had  available   for  home                                                                    
     mortgages Alaska Housing  Finance Corporation, FHA, VA,                                                                    
     and the  most common  conventional mortgage  loans were                                                                    
     sold to Fannie  Mae and Freddie Mac  however they would                                                                    
     not purchase 95% Loan to  Value Loans. During this time                                                                    
     Alaska suffered from an  "investor red lining' however,                                                                    
     as with  most things  in life, time  cures all.  In the                                                                    
     last ten years we have  seen markets open and home loan                                                                    
     opportunities  for Alaskan  grow uncontrollably.  While                                                                    
     Alaskan  have benefited  from  this  growth, they  have                                                                    
     also suffered as well.                                                                                                     
     In recent  weeks you have  heard about the woes  of the                                                                    
     Subprime  Market. Do  not be  fooled  in believing  the                                                                    
     problems  of  the  subprime markets  do  not  exist  in                                                                    
     Alaska. They do  and here is one  example. New Century,                                                                    
     and  their woes  are widely  published, was  trading on                                                                    
     the New  York Stock Exchange  about eight weeks  age at                                                                    
     over $40.00 a share. Today  that number is under $4.00.                                                                    
     They   continue   to    make   headlines,   are   under                                                                    
     investigation,  and  continue  to  do  everything  they                                                                    
     possibly  can to  avoid bankruptcy.  [Their net  worth]                                                                    
     has dwindled  to almost  nothing. New  Century operated                                                                    
     in  Alaska and  they  were very  aggressive with  their                                                                    
     products  and pricing.  Most  companies speaking  today                                                                    
     sold  loans to  New Century.  However, their  net worth                                                                    
     will do  nothing for  any of  the customers  that might                                                                    
     ultimately  be affected  by their  demise. The  same is                                                                    
     true for  Freemont Mortgage, Option  One (owned  by H&R                                                                    
     Block),  and  countless  other companies  current  with                                                                    
     their   own   struggles.    Alaska   Mortgage   Bankers                                                                    
     Association  does  not  support  the  position  of  the                                                                    
     National Mortgage  Bankers Association by  allowing net                                                                    
     worth  exemptions.  We  [feel] this  does  not  provide                                                                    
     adequate consumer protection.                                                                                              
     Licensing  would not  have prevented  the  fall of  New                                                                    
     Century or any  other company for the  matter, but what                                                                    
     it  would do  is allow  the  citizens of  Alaska ...  a                                                                    
     resource  of enforcement  they  currently  do not  have                                                                    
     available. It  affords the State  of Alaska a  level of                                                                    
     enforcement the State does not  have available as well.                                                                    
     The   licensing  and   bonding  requirements   are  not                                                                    
     difficult, expensive,  or overaggressive.  Licensing is                                                                    
     needed so everyone  that wants to operate  in the State                                                                    
     of Alaska operates by the  same rules. Although in most                                                                    
     cases Mortgage  Bankers have FHA,  VA, Fannie  Mae, and                                                                    
     Freddie Mac  approvals these annual  audit requirements                                                                    
     do  not   address  enforcement  actions   for  consumer                                                                    
     My  comments  today  will be  posted  on  AMBA  website                                                                    
     www.akmba.org. I  will email  my comments today  to the                                                                  
     members of this  committee as well. Again,  I thank the                                                                    
     committee for  holding this  hearing and  encourage the                                                                    
     committee  to move  the bill  forward and  passage this                                                                    
4:53:31 PM                                                                                                                    
JOE  BRAMMER,   Mortgage  Loan  Originator;   Chair,  Legislative                                                               
Committee,  Alaska  Association   of  Mortgage  Brokers  (AKAMB),                                                               
paraphrased   from  the   following  written   remarks  [original                                                               
punctuation provided]:                                                                                                          
     Thank  you,  Mr.  Chairman  and   the  members  of  the                                                                    
     committee for  affording me the opportunity  to present                                                                    
     my public testimony today on House Bill 162.                                                                               
     My  name  is Joe  Brammer  and  I  am a  Mortgage  Loan                                                                    
     Originator.  I also  chair the Legislative Committee on                                                                    
     behalf of the Alaska Association of Mortgage Brokers.                                                                      
     I  have been  working  with consumers  in Alaska  since                                                                    
     1992 by helping  them obtain financing for  the home of                                                                    
     their  dreams.   I  originated my  very first  mortgage                                                                    
     loan in 1980.                                                                                                              
     My purpose  before you  today is three  fold.   First I                                                                    
     would  like  to provide  you  with  a brief  amount  of                                                                    
     recent  history  surrounding  the development  of  this                                                                    
     legislation.   Secondly,  I would  like to  address the                                                                    
     issue of  competency testing, and finally  I would like                                                                    
     to   share    my   views   on    continuing   education                                                                    
     Nobody likes additional  regulations being imposed that                                                                    
     they must abide by.                                                                                                        
     This is especially true of  the mortgage industry as we                                                                    
     currently have no  state regulations.  As  one can pick                                                                    
     up the Anchorage Daily News  and easily ascertain, this                                                                    
     lack  of  regulation  has contributed  to  unscrupulous                                                                    
     operators preying on the consumers  of Alaska.  Nothing                                                                    
     can be done currently to stop these predators.                                                                             
     Enter House Bill 162.                                                                                                      
     This  piece  of  consumer  protection  legislation  was                                                                    
     drafter  in conjunction  with industry  representatives                                                                    
     from  the Alaska  Association of  Mortgage Brokers  and                                                                    
     the  Alaska Mortgage  Bankers  Association, along  with                                                                    
     various state departments.                                                                                                 
     This    consumer   protection    legislation   provides                                                                    
     safeguards  for the  public  and enforceable  penalties                                                                    
     for violators.                                                                                                             
     It  requires the  licensing of  mortgage companies  and                                                                    
     more importantly Mortgage Loan Originators.                                                                                
     The way  it is right  now is  that you can  be peddling                                                                    
     used cars  yesterday and be a  mortgage loan originator                                                                    
     today.      No   training.      No   education.      No                                                                    
     accountability.  No competency  requirements.  I say No                                                                    
     But  it's true.   These  mortgage loan  originators are                                                                    
     the  individuals  who  meet with  the  consumers,  your                                                                    
     constituents,  and advise  them on  the single  largest                                                                    
     purchase they will ever make…their family's home.                                                                          
     In addition,  they negotiate contracts that  commit the                                                                    
     consumer to  typically their families'  largest monthly                                                                    
     expense…their mortgage payment.                                                                                            
     Before a loan originator  can be eligible for licensing                                                                    
     under  HB  162,  they  will   be  required  to  pass  a                                                                    
     competency test  as you will see  on page 5, line  7 of                                                                    
     this  bill   under  06.60.040.     The  passing   of  a                                                                    
     competency test prior  to dealing with the  public is a                                                                    
     critical component of protecting the public.                                                                               
     In addition,  the Loan Originator  will be  required to                                                                    
     attend and  complete continuing  education requirements                                                                    
     as  outlines on  page 15,  line 12.   This  is a  vital                                                                    
     ingredient in  this consumer protection  legislation as                                                                    
     our industry is under constant change.                                                                                     
     If  we  look at  other  professions  such as  insurance                                                                    
     agents, or those  individuals offering securities, real                                                                    
     estate  brokers  or  licensees,   we  find  that  state                                                                    
     regulations  exist  for  pre-license  testing  and  the                                                                    
     completion  of continuing  education  prior to  license                                                                    
     renewal.  Mortgage Professionals are no different.                                                                         
     In  closing,  HB 162  is  a  consumer protection  bill,                                                                    
     designed to  level the playing  field in  the industry,                                                                    
     protect  consumers  from   unscrupulous  and  predatory                                                                    
     lenders,  and   provides  enforcement   mechanisms  and                                                                    
     penalties  for violators.   This  bill is  absolutely a                                                                    
     step in  the right direction.   I ask your  support for                                                                    
     HB 162.                                                                                                                    
CHAIR OLSON indicated that HB 162 would not be moved from                                                                       
committee at this time.                                                                                                         
4:57:42 PM                                                                                                                    

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