Legislature(2007 - 2008)CAPITOL 17
04/18/2007 03:00 PM LABOR & COMMERCE
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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.