Legislature(2007 - 2008)SENATE FINANCE 532

05/10/2007 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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Moved CSSB 104(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
     CS FOR HOUSE BILL NO. 162(L&C)                                                                                             
     "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;  making                                                               
     certain  violations  unfair  trade  practices;  relating  to                                                               
     persons who are  licensed under the Alaska  Small Loans Act;                                                               
     and providing for an effective date."                                                                                      
This was  the first hearing for  this bill in the  Senate Finance                                                               
AT EASE 1:52:18 PM / 1:54:11 PM                                                                                             
Senator  Elton  moved  to   adopt  Finance  committee  substitute                                                               
Version  25-LS0070\N,  Bannister,  dated  May  8,  2007,  as  the                                                               
working document.                                                                                                               
There being  no objection, the  Version "N"  committee substitute                                                               
was ADOPTED as the working document.                                                                                            
1:54:38 PM                                                                                                                    
REPRESENTATIVE  BOB  LYNN,  the  bill's sponsor  and  a  licensed                                                               
Alaska  real  estate  broker, contended  that  the  largest  real                                                               
estate loan  typically committed to  by an individual is  the one                                                               
utilized to finance the purchase  of their home. Nonetheless, few                                                               
people understand  the "hidden mechanisms and  inner workings" of                                                               
mortgage  loans or  keep abreast  of "ever-changing"  federal and                                                               
state mortgage  laws. Not finding  the right loan with  the right                                                               
terms "could be a very expensive 30 year mistake."                                                                              
Representative  Lynn  became  aware  of the  intricacies  of  the                                                               
mortgage business  when he became  a licensed realtor.  "The most                                                               
important thing I know about mortgages is what I don't know."                                                                   
Representative Lynn  recounted that when  he made his  first home                                                               
real estate  sale, he  purposely arranged for  the home  buyer to                                                               
meet with an  experienced mortgage lender; one he  believed to be                                                               
honest,  knowledgeable about  the law,  and qualified  to arrange                                                               
the proper loan and address any problem that arose.                                                                             
Representative Lynn considered finding  the right mortgage lender                                                               
to be  as important as finding  the perfect home for  his client.                                                               
This is "exactly why" he sponsored this bill.                                                                                   
Representative  Lynn noted  that this  bill is  supported by  the                                                               
Alaska Mortgage Bankers Association,  the Alaska Mortgage Brokers                                                               
Association,   the   Alaska  Independent   Lenders   Association,                                                               
realtors from  across the  State, and the  Division of  Banking &                                                               
Securities in the Department of  Commerce, Community and Economic                                                               
Representative Lynn  pointed out  that Alaska  is the  only state                                                               
that does not  regulate the mortgage loan industry.  There are no                                                               
licensing  or training  requirements  for people  working in  the                                                               
mortgage  industry.  This  is nonsensical  since  the  State  has                                                               
licensing  and  training  requirements  for  tattoo  artists  and                                                               
hairdressers. No  background checks  or periodic  examinations by                                                               
the Division  of Banking  & Securities  are conducted.  This bill                                                               
would "fix that."                                                                                                               
1:57:29 PM                                                                                                                    
Representative  Lynn  favored  licensing  any  entity,  large  or                                                               
small, making  a home loan  in the State.  The goal should  be to                                                               
provide  "a   level  playing  field"  in   the  mortgage  lending                                                               
industry. This  is contrary  to the opinion  of those  wishing to                                                               
"exempt affiliates"  and companies that operate  via the internet                                                               
from outside Alaska.                                                                                                            
Representative   Lynn  characterized   state  and   federal  loan                                                               
origination laws  as complex and  ever-changing. "One must  be an                                                               
expert  to speak  with any  kind  of competence  on the  subject"                                                               
addressed in this legislation.                                                                                                  
1:58:13 PM                                                                                                                    
Representative Lynn  informed the Committee that  Mark Davis with                                                               
the Department  of Commerce,  Community and  Economic Development                                                               
and industry professionals were  available to further address the                                                               
intricacies of the subject and the bill before the Committee.                                                                   
1:58:35 PM                                                                                                                    
Representative  Lynn deemed  this a  consumer protection  bill of                                                               
"great importance". He asked the Committee to support the bill.                                                                 
1:58:51 PM                                                                                                                    
MARK  DAVIS,   Director,  Division   of  Banking   &  Securities,                                                               
Department  of  Commerce,   Community  and  Economic  Development                                                               
specified that this bill would  require the licensing of mortgage                                                               
bankers,   brokers,   and    originators.   No   such   licensing                                                               
requirements currently exist in Alaska.                                                                                         
Mr.  Davis  noted  that  even though  ten  federal  statutes  are                                                               
applicable  to this  industry, the  absent of  a State  licensing                                                               
requirement prevents the State from  ensuring "that the mortgages                                                               
being done in this State were in compliance with those laws."                                                                   
Mr.  Davis  explained  that  this  bill  would  allow  for  State                                                               
examination  and investigation  of licensees  and would  prohibit                                                               
certain  acts  such  as  deceptive  advertising.  It  would  also                                                               
require  licensees  to comply  with  federal  laws including  the                                                               
Truth in  Lending Act and  the Real Estate  Settlement Procedures                                                               
Act  of  1974   (RESPA).  In  addition,  the   bill  would  allow                                                               
disciplinary action  against any  licensee conducting  a mortgage                                                               
loan in violation of these laws.                                                                                                
Mr.  Davis  informed that  the  bill  would provide  a  mechanism                                                               
through which  the State could  examine licensees to  ensure they                                                               
followed  the law  and  met  educational requirements.  Predatory                                                               
practices, specifically  the practice referred to  as "flipping",                                                               
would be prohibited.  Flipping is a practice in  which a property                                                               
is refinanced within  a 12-month period. This practice  is not in                                                               
the best interest of the borrower.                                                                                              
Mr. Davis contended  that "the best deterrence was  not the force                                                               
of  the law",  it  was  education. "If  people  are educated  and                                                               
understand the laws then they are able to comply with them."                                                                    
2:00:42 PM                                                                                                                    
To that  point, Mr. Davis  specified that the bill  would mandate                                                               
continuing  education  to  ensure  that people  in  the  mortgage                                                               
industry  have "the  minimum standard  of education."  This is  a                                                               
requirement imposed on numerous professions.                                                                                    
Mr.   Davis  revealed   that  during   recent  Division-sponsored                                                               
investment  and  financial  education seminars  conducted  in  13                                                               
communities throughout  the State, numerous complaints  about the                                                               
mortgage lending industry surfaced.                                                                                             
Mr.  Davis  opined that  the  incorporation  of federal  mortgage                                                               
laws" into  this legislation  avoided the  creation of  "a second                                                               
layer  of regulation,"  as,  in essence,  the  licensee would  be                                                               
required "to follow  the laws they should  already be following."                                                               
The decision to incorporate federal  mortgage laws was based on a                                                               
report  compiled by  the State  of Maine.  That report  concluded                                                               
"that  the  best  reform  Maine could  make  for  their  mortgage                                                               
licensing would be to re-incorporate  those federal mortgage laws                                                               
in the State law."                                                                                                              
Mr.  Davis stated  that  the  deceptive advertising  prohibitions                                                               
would ensure  that accurate information on  loan percentage rates                                                               
and the  type of loan  qualifying for  a specified rate  would be                                                               
2:02:17 PM                                                                                                                    
Mr.  Davis recounted  that legislation  was adopted  a few  years                                                               
earlier  that  allowed  the  Division  to  license  and  regulate                                                               
deferred deposit lenders commonly  referred to as payday lenders.                                                               
Since  that time,  ten lenders  have left  the profession:  "some                                                               
voluntarily,  some by  order". However,  "30  new companies  have                                                               
entered the industry and rates have gone down."                                                                                 
Mr.  Davis   noted  that  the  payday   lender  legislation  also                                                               
contained  restitution language.  As a  result, the  Division has                                                               
been able  to collect in  excess of "$700,000 in  restitution for                                                               
people  who  took  out  loans  that  were  in  violation  of  the                                                               
Statute."  This bill  contains "similar  restitutions provision,"                                                               
which would  allow the State to  "make people whole who  had been                                                               
harmed by predatory lending practices."                                                                                         
2:03:01 PM                                                                                                                    
Mr. Davis noted that the  majority of the exemptions specified in                                                               
the  bill follow  federal  law. State  banks  and other  entities                                                               
currently  subject to  regulation would  not be  subject to  this                                                               
Mr. Davis agreed with Representative  Lynn's assessment that this                                                               
bill  would   create  "a  more  level   playing  field."  Lending                                                               
practices  of  banks  operating  in  the  State  are  subject  to                                                               
Division   supervision;  however,   there  are   mortgages  being                                                               
processed "by  other companies that  may be affiliated  with that                                                               
bank that are not being regulated."                                                                                             
Mr. Davis advised  that the Division was in support  of the bill,                                                               
"as  important financial  transactions should  be licensed."  The                                                               
education   requirements  and   criminal  background   checks  on                                                               
licensees are also important components.                                                                                        
Mr.   Davis   also  specified   that   the   Federal  Bureau   of                                                               
Investigations (FBI),  which is  currently conducting  a mortgage                                                               
investigation in  the State,  has issued  a favorable  opinion on                                                               
the bill, as documented in a [unspecified] newspaper article.                                                                   
Mr. Davis emphasized  that the adoption of this  bill would allow                                                               
the Division to respond to consumer complaints.                                                                                 
Mr. Davis  concluded by  stating that  the bill's  combination of                                                               
licensing  and continuing  education  requirements would  improve                                                               
mortgage lending industry operations in the State.                                                                              
2:04:26 PM                                                                                                                    
Senator Dyson inquired to the cost  and time required to obtain a                                                               
mortgage lender's license.                                                                                                      
Mr. Davis estimated that the  initial cost would be approximately                                                               
$1,000.  This would  include  a $250  one-time  licensing fee,  a                                                               
biannual licensing  fee of $500, and  annual continuing education                                                               
costs  of  approximately  $200.  Many states  allow  the  use  of                                                               
internet training  programs. There are also  companies that would                                                               
contract with the State to provide training.                                                                                    
Mr.  Davis advised  that the  bill would  create a  commission to                                                               
assist the  Department in developing the  training component. The                                                               
goal would be to keep costs to a minimum.                                                                                       
2:05:43 PM                                                                                                                    
Senator  Dyson  asked an  estimate  of  the  time that  would  be                                                               
required to complete the training requirements.                                                                                 
Mr.  Davis expressed  that a  specific number  of training  hours                                                               
would  be  required.  Internet   training  programs  are  favored                                                               
because a person  could do them at their  convenience. While this                                                               
would  be subject  to the  "honor system",  internet training  is                                                               
currently permitted  for other professions, including  Alaska Bar                                                               
Association training.                                                                                                           
2:06:25 PM                                                                                                                    
Senator Dyson cited the argument  that the enactment of this bill                                                               
could  limit competition.  That  would be  detrimental to  Alaska                                                               
consumers  as they  might not  be able  to access  the best  deal                                                               
Mr. Davis disagreed.  The Division receives calls  each week from                                                               
mortgage loan entities inquiring  to the State's mortgage lending                                                               
licensure  requirements. There  are two  reactions to  being told                                                               
there were none:  some say okay with it while  others say they'll                                                               
wait until some are established.                                                                                                
Mr. Davis  reminded the  Committee that  more payday  lenders are                                                               
operating  in  the State  now  than  before  the State  began  to                                                               
license and regulate that industry.                                                                                             
Mr. Davis also pointed out that  there is no shortage of mortgage                                                               
lending  companies   in  the  State.  Like   the  payday  lending                                                               
legislation,  this  bill  would also  require  internet  mortgage                                                               
lenders  to  abide by  Alaska  law.  Two internet  payday  lender                                                               
entities went  out of business  due to their inability  to comply                                                               
with State law.                                                                                                                 
2:07:36 PM                                                                                                                    
Senator Thomas, describing  this as a long and  difficult bill to                                                               
read,  asked whether  interest-only loans  were addressed  in the                                                               
Mr.  Davis  clarified  that  the  "bill  does  not  prohibit  any                                                               
particular type of  lending", with the exception  of flipping, as                                                               
addressed  earlier  in  the discussion.  The  bill  does  however                                                               
require  lenders  to  comply  with   federal  law,  refrain  from                                                               
deceptive practices, and fully disclose loan terms.                                                                             
Mr. Davis  allowed that even  thought certain types of  loans are                                                               
riskier than  others the  bill would  not curtail  loan products.                                                               
Thus, experienced borrowers  would continue to have  a variety of                                                               
loan products to choose from.                                                                                                   
Mr.  Davis  informed  the  Committee   that  while  the  Division                                                               
wholeheartedly supports  the State enacting a  predatory loan law                                                               
that  law  should   not  occur  until  after   the  State  enacts                                                               
legislation  requiring money  transmitters and  mortgages lenders                                                               
to be licensed.                                                                                                                 
Mr.  Davis communicated  that banning  interest-only loans  might                                                               
limit  some people's  ability to  utilize  a loan  that might  be                                                               
appropriate  for them.  Nonetheless,  certain  people should  not                                                               
consider interest-only loans. "That's  the reason RESPA and Truth                                                               
in Lending and other statutes require disclosure.                                                                               
Mr.   Davis  advised   that  testimony   before   the  House   of                                                               
Representatives  on this  topic indicated  "that there  have been                                                               
repeated  violations of  RESPA  at closings  in  Alaska and  they                                                               
often pertain to lack of disclosure."                                                                                           
2:09:15 PM                                                                                                                    
Senator Thomas clarified  his question. He was  not implying that                                                               
interest-only loans should  be banned, but rather  that some type                                                               
of warning ought to be provided.                                                                                                
Mr.   Davis  expressed   that   the   prohibition  of   deceptive                                                               
advertising  would  help  address this  concern.  Some  deceptive                                                               
advertising  does   not  disclose   the  mechanics   involved  in                                                               
establishing the  actual interest rates.  Thus, one of  the goals                                                               
of  this legislation  is to  educate consumers  about terminology                                                               
such as "a  reset rate" that might be referenced  in the terms of                                                               
a loan and how it might affect the loan they are agreeing to.                                                                   
2:10:07 PM                                                                                                                    
Senator Elton  asked for  clarification about  the $150  fee that                                                               
would be charged  for a person to retake the  competency test, as                                                               
specified  in Section  1 Section  06.60.040. Competency  testing.                                                               
(a), page 6  line 11 of Version "N". It  is unclear whether there                                                               
would be a fee for the initial test.                                                                                            
Mr.  Davis replied  that in  an  effort to  keep an  individual's                                                               
costs to  a minimal, the cost  of taking the competency  test the                                                               
first time  would be covered  in the fees collected  to establish                                                               
the  educational program.  A fee  would  only be  charged if  the                                                               
person failed the first test and had to retake it.                                                                              
Senator Elton suggested  that the language be  changed to clarify                                                               
no fee would be charged for the first test.                                                                                     
Mr. Davis agreed. Further discussion in this regard would occur.                                                                
Senator Huggins  commended Mr. Davis  on the effort  the Division                                                               
exerted on the bill. Legislation  considered the previous year on                                                               
this  issue recommended  exempting  people who  conducted six  or                                                               
less  loans annually  from the  licensing requirements.  He asked                                                               
whether that recommendation was included in this legislation.                                                                   
2:12:14 PM                                                                                                                    
Mr. Davis affirmed  the bill contained a  provision which allowed                                                               
for "a very small exemptions  for mortgage lenders" who conducted                                                               
six or  less loans a year.  However, they would still  be subject                                                               
to  the  enforcement  provisions  of  the  bill;  they  would  be                                                               
"required  to register,"  comply with  "all the  dictates of  the                                                               
bill and be subject to examination upon a complaint."                                                                           
2:12:39 PM                                                                                                                    
Senator  Dyson  understood  that   the  majority  of  "bad  loan"                                                               
problems could  be attributable to  an "organization  that offers                                                               
many  financial  products  and services"  and  hires  "part  time                                                               
employees to sell those services".  This might include insurance,                                                               
real estate sales, and investment services.                                                                                     
2:13:33 PM                                                                                                                    
Mr. Davis  affirmed that as  being part of the  problem. However,                                                               
the  Division has  received complaints  about loans  made through                                                               
larger  entities  including  federal  banks  and  large  mortgage                                                               
2:13:59 PM                                                                                                                    
Senator Olson surmised that the  process of licensing individuals                                                               
would be a  "cumbersome" task. He questioned  whether this impact                                                               
was  adequately reflected  in the  fiscal notes  accompanying the                                                               
Mr. Davis  agreed the  licensing task  would be  labor intensive.                                                               
Nonetheless,  it  would be  appropriate  action.  He agreed  with                                                               
Representative  Lynn that  buying  a  home is  one  of "the  most                                                               
important financial commitments" a  person could make. The person                                                               
offering  a  mortgage  loan  service should  have  "the  type  of                                                               
licensing required of an insurance  agent, a securities agent, or                                                               
an  investment advisor."  Requiring loan  originators to  undergo                                                               
background checks  and take education  courses will  help prevent                                                               
"a lot of the problems" that have been experienced.                                                                             
Mr. Davis disclosed  that four cases involving  the mortgage loan                                                               
industry  have  been filed  in  United  States Federal  Court  in                                                               
Anchorage in the  last month. This "is indicative  of the problem                                                               
we have in the State."                                                                                                          
Senator  Olson asked  whether having  the licensing  requirements                                                               
proposed in  this legislation in  place would have  prevented the                                                               
events depicted in  the articles [copies on file]  printed in the                                                               
Alaska Daily News newspaper on April 21 and May 3, 2007.                                                                        
Mr. Davis  hoped that would  be the case. Individuals  seeking to                                                               
acquire a  license would undergo  a background check  which would                                                               
likely  alert authorities  about  prior  suspect activities.  The                                                               
background check activity has been  helpful in other professions,                                                               
such as security broker dealers.                                                                                                
2:16:07 PM                                                                                                                    
Senator   Thomas  asked   whether  the   non-profit  organization                                                               
exemptions referenced  in paragraph (5) of  Section 1, subsection                                                               
Sec. 06.60.015.Exemptions; requirements  of registration., page 3                                                               
lines 9 through 12, referred  to exemptions allowed under federal                                                               
law  and  well as  non-profit  housing  authorities such  as  the                                                               
Alaska Housing  Finance Corporation (AHFC) and  the Tlingit Haida                                                               
Housing Authority.                                                                                                              
2:16:44 PM                                                                                                                    
Mr. Davis affirmed that to be correct.                                                                                          
Senator Thomas  acknowledged. He  then asked  whether individuals                                                               
who  work for  an exempted  institution such  as a  bank licensed                                                               
under   federal  law   would   be  exempt   from  the   licensing                                                               
requirements of this bill.                                                                                                      
2:17:15 PM                                                                                                                    
Mr. Davis  clarified that those  employees would not  be required                                                               
to  be  licensed,  however  "they would  be  subject  to  general                                                               
supervision". For  example, when  conducting an examination  of a                                                               
State bank, the  Division would review the  bank's loan portfolio                                                               
including  its  mortgage  loan  files, to  ensure  the  bank  was                                                               
compliant with  federal law,  the Truth  in Advertising  Act, and                                                               
RESPA regulations.                                                                                                              
Mr. Davis noted  that the rating given a bank  by the Division is                                                               
based  on its  compliance  record. That  rating  "has a  profound                                                               
affect on the  bank's ability to raise money."  Banks have reason                                                               
to maintain a high rating.                                                                                                      
Senator Thomas  deduced therefore  that a  loan officer  would be                                                               
responsible for individuals reporting to them.                                                                                  
Mr. Davis affirmed.                                                                                                             
2:18:21 PM                                                                                                                    
SIMON  KEYMER,  American  Financial Services  Association  (AFSA)                                                               
testified via teleconference  from an offnet location.  AFSA is a                                                               
financial trade  association based in Washington  DC. Its members                                                               
include mortgage lenders and  other "financial services companies                                                               
who provide credit to consumers and small businesses."                                                                          
Mr. Keymer  communicated AFSA's "grave  concern" about  the bill,                                                               
as written. He  encouraged the Committee to  review the amendment                                                               
language recommendations  [copy not on file]  the Association had                                                               
provided which mirror  language in the mortgage  lending bill, SB                                                               
272  that passed  the Senate  the previous  year. Else  wise, the                                                               
recommendation would be to hold  this bill in Committee until the                                                               
next Legislative session in order  to allow time for its "complex                                                               
technical and legal issues" to be further scrutinized.                                                                          
Mr. Keymer pointed  out that holding the bill  in Committee would                                                               
not be  detrimental since  the licensing  provisions in  the bill                                                               
would not be implemented until 2009.                                                                                            
Mr.  Keymer communicated  that AFSA  believes  the best  approach                                                               
would be  to license "large  multi-state lenders", but  provide a                                                               
licensing  exemption  to  their  employees.  This  would  balance                                                               
consumer protection  needs with a  wide array of  consumer credit                                                               
options. This bill, in its current  form, could lead to a "flawed                                                               
law" that  would require  it to be  re-addressed during  the next                                                               
Mr. Keymer  highlighted some of the  consumer protection language                                                               
proposed  by  AFSA:  a  company  would be  required  to  sign  an                                                               
agreement  with   the  Department  of  Commerce,   Community  and                                                               
Economic  Development  "stating  that   they  would  accept  full                                                               
responsibility  for  ensuring  that  the employee  acts  in  full                                                               
compliance with  this chapter." The agreement  might also require                                                               
a  company   to  conduct  employee  background   checks,  provide                                                               
continuing  education, and  other items  deemed important  by the                                                               
2:20:34 PM                                                                                                                    
Mr. Keyner  pointed out  that the  Department could  retain their                                                               
"ability to  examine the  company to  ensure compliance  with the                                                               
Act". Other  recommendations by AFSA include  requiring a company                                                               
to secure  a bond,  at a  level specified  by the  Department, to                                                               
address any  cost the  State or  a person  might experience  as a                                                               
result of a violation of this chapter.                                                                                          
Mr.  Keyner  stated  that,  in  its current  form,  the  bill  is                                                               
contrary  to  actions of  other  states.  Fewer than  ten  states                                                               
require  employees of  large  multi-State  mortgage companies  to                                                               
acquire  individual licenses.  Doing  so significantly  increases                                                               
the  administrative burden  on  lenders  and regulators;  lenders                                                               
would be forced to pass costs on to consumers.                                                                                  
Mr.  Keyner  urged the  Committee  to  recognize the  differences                                                               
between  small  and  large  interstate  and  intrastate  mortgage                                                               
lending companies. AFSA members  are typically big companies that                                                               
are  licensed  in  multiple  states and  have  large  numbers  of                                                               
employees.  They are  concerned  about their  reputation and  are                                                               
often affiliated with a company  regulated by the Federal Reserve                                                               
Board.  These   are  the  reasons  they   conduct  pre-employment                                                               
screening including background checks  and provide education, and                                                               
compliance training.                                                                                                            
Mr. Keyner  urged the Committee  to adopt the  amendment language                                                               
proposed by ASFA.                                                                                                               
2:22:56 PM                                                                                                                    
KEVIN  BREELAND, President,  Alaska Mortgage  Bankers Association                                                               
and Partner  and Mortgage  Loan Originator,  Residential Mortgage                                                               
Alaska,  shared his  extensive background  in  the mortgage  loan                                                               
profession.  Alaska  is the  only  state  that does  not  require                                                               
mortgage lender  licensing for companies. 26  states require some                                                               
form  of licensing  for mortgage  loan originators.  All that  is                                                               
currently required in Alaska is a business license.                                                                             
Mr.  Breeland stated  that except  for the  non-licensed mortgage                                                               
loan  originator,  a  typical real  estate  transaction  involves                                                               
numerous licensed individuals including,  for example, a licensed                                                               
real  estate  agent,  a  licensed   home  inspector,  a  licensed                                                               
engineer if such service is  required, and a licensed real estate                                                               
appraiser.  Any construction  work required  would be  done by  a                                                               
licensed and bonded  contractor and any new  construction must be                                                               
inspected by a licensed or  certified inspector or a municipal or                                                               
borough  inspector.   The  title  work  on   the  transaction  is                                                               
performed by a  licensed title company under  the jurisdiction of                                                               
the insurance commission.                                                                                                       
2:25:58 PM                                                                                                                    
Mr. Breeland  thought that everyone  in the  industry, regardless                                                               
of their length  of experience, should take  competency tests. He                                                               
also  contended that  the 2009  effective date  specified in  the                                                               
bill would provide  sufficient time for those in  the industry to                                                               
comply with its regulations.                                                                                                    
2:26:54 PM                                                                                                                    
Mr. Breeland characterized  this as "an industry  bill brought to                                                               
you by  industry. It  is a collaborated  effort," eight  years in                                                               
the  making, involving  the Alaska  Mortgage Bankers  Association                                                               
and the  Alaska Mortgage  Brokers Association.  The bill  has the                                                               
support of AARP,  the Alaska Association of  Realtors, the Alaska                                                               
Home  Builders Association,  the Alaska  Land Title  Association,                                                               
the Appraiser  Institute, Alaska Chapter, the  Anchorage Board of                                                               
Realtors,  the  Valley  Board  of  Realtors,  and  the  Anchorage                                                               
Homebuilders Association.  He urged the Committee  to support the                                                               
2:27:34 PM                                                                                                                    
PETER   EASAW,  Primerica   Financial   Services,  reviewed   his                                                               
background  in  the mortgage  industry.  This  bill would  be  "a                                                               
disservice  to" Primerica  and  its  customers. Primerica  offers                                                               
personalized "financial solutions" to  its customers and believes                                                               
in  educating  its customers  prior  to  selling or  proposing  a                                                               
product to them.                                                                                                                
Mr.  Easaw  considered  this legislation  a  duplication  of  the                                                               
efforts currently administered by  Primerica. The company already                                                               
strives to educate its clients,  provides continuing education to                                                               
its employees, and has a mission of doing "what's right".                                                                       
Mr. Easaw strongly  believed this bill would  prevent people from                                                               
having  the same  opportunity he  has  had with  his company.  He                                                               
urged a no vote on the bill in its current form.                                                                                
2:30:17 PM                                                                                                                    
Senator Dyson asked Mr. Easaw to  discuss what he would change in                                                               
the bill.                                                                                                                       
Mr.  Easaw  supported licensing  a  company  as opposed  to  each                                                               
individual working for it.                                                                                                      
2:30:51 PM                                                                                                                    
JULIE GRANGER, Primerica Financial Services, introduced herself.                                                                
Co-Chair Stedman asked  Ms. Granger to clarify  her capacity with                                                               
Ms.  Granger  worked  at Primerica's  corporate  head  office  in                                                               
Atlanta  Georgia  and  was  testifying today  on  behalf  of  the                                                               
company and its 150 Alaskan employees.                                                                                          
Co-Chair Stedman, observing that  the public testimony ledger for                                                               
this bill  included numerous  Primerica employees,  asked whether                                                               
the  company closed  its  offices  today in  order  to allow  its                                                               
employees to testify on the bill.                                                                                               
Ms. Granger responded no. Primerica  employees elected to testify                                                               
because they were  "passionate about the service  that we provide                                                               
to  Alaska borrowers."  They are  concerned  that their  services                                                               
might be  jeopardized by  some of the  requirements in  the bill.                                                               
The hope is that a workable  solution could be achieved; one that                                                               
would protect consumers  and allow the Department  to examine the                                                               
industry to  ensure there  were no problems  with the  company or                                                               
its services.                                                                                                                   
In  response to  a question  from Co-Chair  Stedman, Ms.  Granger                                                               
affirmed the company sent her to  testify on the bill and express                                                               
how important Alaska is to Primerica.                                                                                           
Co-Chair Stedman  specified that  his questions were  intended to                                                               
assist  him in  understanding the  nature of  the testimony  that                                                               
would be provided by other Primerica employees.                                                                                 
Ms.  Granger expressed  that the  number  of Primerica  employees                                                               
willing to  testify today  should be viewed  as an  indication of                                                               
the  importance of  the bill  and  concern about  its effects  on                                                               
their livelihood.                                                                                                               
2:32:51 PM                                                                                                                    
Senator Olson inquired to Primerica's position on the bill.                                                                     
Ms.  Granger  expressed  support   for  regulating  the  mortgage                                                               
industry in  the State;  however, the company  did not  favor the                                                               
bill as  written. She  was optimistic  that a  workable solution,                                                               
one  that  would  protect  consumers  and  allow  for  regulatory                                                               
oversight, was obtainable.                                                                                                      
2:33:30 PM                                                                                                                    
Senator Olson concluded from the  testimony that the changes made                                                               
in  the Version  "N"  committee substitute  did  not address  the                                                               
company's concern about the bill.                                                                                               
2:33:38 PM                                                                                                                    
Ms. Granger affirmed.                                                                                                           
Co-Chair  Stedman asked  that the  company provide  his office  a                                                               
list of concerns specific to Version "N".                                                                                       
Ms. Granger agreed.                                                                                                             
2:34:05 PM                                                                                                                    
Senator  Huggins  deduced  that  the company  had  been  actively                                                               
involved in legislation on this issue in other states.                                                                          
Ms.  Granger  confirmed that  to  be  the  case. 26  states  have                                                               
enacted legislation  in this regard.  While the recent  trend has                                                               
been  to require  individual licensing,  the majority  of the  26                                                               
states  that  have  enacted  mortgage  lending  legislation  have                                                               
recognized  the  company's  "good  compliance  history"  and  the                                                               
uniqueness of its  business model. They have  allowed the company                                                               
to  be licensed  and  accountable for  its  employees instead  of                                                               
requiring employees to hold individual licenses.                                                                                
Ms.  Granger   reiterated  that  the  company's   reputation  and                                                               
financial success are affected by its agents' actions.                                                                          
Senator  Huggins   asked  the  number  of   states  that  require                                                               
individual licensing.                                                                                                           
Ms.  Granger  stated  that  fewer than  ten  states  the  company                                                               
operates in  require individual licensing;  several of  those are                                                               
simply registrations wherein the  company just provides a listing                                                               
of its employees. This listing is  utilized by the state to track                                                               
where individuals  are employed. While a  multitude of approaches                                                               
have been taken, the majority  of states have endeavored to reach                                                               
a reasonable solution.                                                                                                          
Senator Huggins asked  Ms. Granger to identify  components of the                                                               
bill deemed particularly onerous.                                                                                               
2:35:47 PM                                                                                                                    
Ms. Granger responded that the  company's business model requires                                                               
them to screen  its agents. This would  include background checks                                                               
and internal  auditing. The  company is  also subject  to federal                                                               
law since  its loans involve federal  lenders. Insurance products                                                               
sold by the company must  also comply with insurance and security                                                               
Ms. Granger declared that this  legislation, in its current form,                                                               
would produce "another level of  regulation that does not provide                                                               
any additional benefit to consumers".                                                                                           
Ms. Granger declared  that Primerica "is stepping  up" in support                                                               
of  State  licensing  and  regulations.  The  money  raised  from                                                               
licensing  fees  will  support the  State's  mortgage  regulation                                                               
efforts. The amendment Primerica supports is "fiscally neutral".                                                                
2:36:49 PM                                                                                                                    
Senator Thomas  understood that Primerica, as  the owner company,                                                               
supported  having the  company, rather  than individuals,  assume                                                               
the  entirety of  licensing  responsibilities  specified in  this                                                               
bill. He  noted that the  only element missing from  the mortgage                                                               
lending  legislation   considered  the  previous  year   was  the                                                               
determination of who would be applying for the license.                                                                         
Senator Thomas asked for further  information about why Primerica                                                               
considered  individual  licensing   requirements  so  burdensome;                                                               
specifically whether  it was the cost  associated with individual                                                               
licensing  or whether  the employment  status of  the individuals                                                               
working  for  it would  change  from  being independent  contract                                                               
agents to being employees.                                                                                                      
2:37:37 PM                                                                                                                    
Ms. Granger  responded that  Primerica has  successfully utilized                                                               
the independent  contract agent business model  for approximately                                                               
30  years. The  company  sees it  as  "a way  to  cut costs"  and                                                               
thereby  support  its ability  "to  market  to middle  and  lower                                                               
income consumers who have very low transaction amounts".                                                                        
2:38:18 PM                                                                                                                    
Senator Elton  appreciated Ms.  Granger's testimony.  Rather than                                                               
protecting  consumers  from  companies such  as  Primerica  which                                                               
might have "all the controls  in place", the purpose of licensing                                                               
"is to protect  the consumer from bad actors".  Thus, his concern                                                               
is  that  implementing  something   that  helps  a  company  like                                                               
Primerica would "open the door  for companies that might not have                                                               
the same kind of controls".                                                                                                     
Ms.  Granger stated  that  this concern  had  been raised  during                                                               
deliberations on  the bill in  the House. There was  concern that                                                               
the amendment proposed  by Primerica was "not  narrow enough" and                                                               
that  other companies  would not  perform in  the same  manner as                                                               
Ms.  Granger advised  that  the amendment  has  been narrowed  in                                                               
scope  in that  it would  now  apply "to  exclusive agents".  The                                                               
company would be required to pay  licensing fees and also hold an                                                               
insurance license.  The amendment is now  significantly different                                                               
than the one offered in the House.                                                                                              
2:40:09 PM                                                                                                                    
Ms.  Granger emphasized  that "the  solution" being  proposed has                                                               
worked in other states.                                                                                                         
2:40:45 PM                                                                                                                    
Senator Elton  asked that, after  review, the  Department provide                                                               
its  recommendation  on  the  amendment   being  offered  by  the                                                               
2:41:03 PM                                                                                                                    
In response  to a question  from Senator Olson,  Co-Chair Stedman                                                               
clarified  that the  amendment  being discussed  "is  not on  the                                                               
2:41:15 PM                                                                                                                    
LYNNEA OLSEN,  Citigroup, informed  the Committee  that Citigroup                                                               
is  the  parent company  to  Primerica.  She traveled  here  from                                                               
California to  testify on  behalf of  Citigroup in  opposition to                                                               
the  bill  in  its  current  form.  Citigroup  strongly  supports                                                               
regulation   of   the   mortgage  industry   and   has   actively                                                               
participated in  establishing "high thresholds" for  the industry                                                               
in other states  in its desire to uphold  its reputation, enhance                                                               
its  economic  viability,  and provide  appropriate  products  to                                                               
Ms. Olsen cited Citigroup's willingness  to continue working with                                                               
the State  to reach a  solution that would benefit  the Primerica                                                               
business  model.   This  would  include  corporate   rather  than                                                               
individual  licensure.  She  reminded  the  Committee  that  that                                                               
concept  had been  included in  the mortgage  lending legislation                                                               
considered the previous year.                                                                                                   
Ms.  Olsen   stressed  that  corporate  licensure   would  ensure                                                               
consumer   protection.  The   company  would   commit  to   being                                                               
responsible for any  violation of State Statute and  would file a                                                               
surety  bond  with the  State.  In  addition, the  company  would                                                               
pledge "to make  any borrower whole" if they  suffered an injury.                                                               
They  would also  pledge that  the company  and its  agents would                                                               
comply  with  State  law.  The company  was  confident  that  its                                                               
business model,  which includes such things  as internal training                                                               
and auditing, would be able to uphold its commitments.                                                                          
2:43:34 PM                                                                                                                    
Ms.  Olsen also  considered  corporate  licensure an  appropriate                                                               
mechanism as  it would  allow the State  to review  the company's                                                               
operations through  routine, spot, or periodic  audits. She urged                                                               
that  the  bill  be  held  in  Committee  in  order  for  further                                                               
discussion to occur.  Primerica has a good business  model and it                                                               
would be  disappointing were its  Alaska operations  and consumer                                                               
services limited.                                                                                                               
Co-Chair  Stedman, noting  that a  number of  individuals working                                                               
with Primerica had signed up  to testify, asked, in consideration                                                               
of time  that those  individuals limit  their remarks  to whether                                                               
they support or  oppose the legislation. They  should only expand                                                               
their  remarks  if  they  had   something  "new  to  add  to  the                                                               
2:45:05 PM                                                                                                                    
JEFFREY  SMITH,   Primerica  Financial  Services   testified  via                                                               
teleconference from  Mat-Su in opposition  to the bill.  It would                                                               
place a  "huge financial  burden on my  small business".  This in                                                               
turn would be detrimental to his clients.                                                                                       
2:45:29 PM                                                                                                                    
PHYLISS  HOFFMAN,  Primerica  Financial Services,  testified  via                                                               
teleconference from  Mat-Su in opposition to  the bill. Primerica                                                               
agents are  internally monitored,  must meet  internal continuing                                                               
education  requirements, and  must  comply  with regulations.  "A                                                               
duplicate mortgage  loan originator  license makes  absolutely no                                                               
sense." The  services provided by  Primerica agents to  people in                                                               
this State are appreciated.                                                                                                     
Co-Chair Stedman repeated his request  that Primerica agents keep                                                               
their comments on point.                                                                                                        
2:48:02 PM                                                                                                                    
FRED  LAURION,   Primerica  Financial  Services,   testified  via                                                               
teleconference from  Anchorage and  elaborated on  the importance                                                               
the  company  places on  educating  the  consumer. Anything  that                                                               
might hamper the company's ability  to operate in the State would                                                               
be detrimental to  that effort. He opposed the  bill, as written,                                                               
and urged  the Committee  to either amend  or postpone  action on                                                               
2:49:37 PM                                                                                                                    
LAIRD  JENKINS,  Primerica   Financial  Services,  testified  via                                                               
teleconference  from  Anchorage in  opposition  to  the bill,  as                                                               
2:49:53 PM                                                                                                                    
CARL  MCINTYRE,  Primerica   Financial  Services,  testified  via                                                               
teleconference from Anchorage. He opposed the bill as written.                                                                  
2:50:12 PM                                                                                                                    
JOHN   PEEK,   Primerica   Financial  Services,   testified   via                                                               
teleconference  from Anchorage  and  spoke in  opposition to  the                                                               
bill,  as  written.  The  company provides  a  great  service  to                                                               
residents of the State.                                                                                                         
2:50:36 PM                                                                                                                    
MIKE  CLAYBORN,  Primerica   Financial  Services,  testified  via                                                               
teleconference from Anchorage. He opposed the bill as written.                                                                  
JULIA   COSTER,  Assistant   Attorney  General,   Commercial/Fair                                                               
Business Section,  Civil Division (Anchorage), Department  of Law                                                               
testified  via teleconference  from  Anchorage  and informed  the                                                               
Committee she was available to answer questions.                                                                                
2:51:00 PM                                                                                                                    
DUSTIN  SHANNON,  Primerica  Financial  Services,  testified  via                                                               
teleconference  from  Anchorage  in  opposition to  the  bill  as                                                               
written. While  receiving his economics degree  at the University                                                               
of  Alaska   Anchorage,  he  became  aware   of  the  "unintended                                                               
consequences" that  sometimes occur when the  government attempts                                                               
to protect the consumer. He was  opposed to the bill, as written.                                                               
Increasing overhead  expenses on individuals might  dissuade them                                                               
from participating in this business.                                                                                            
2:52:06 PM                                                                                                                    
JOHN  MARTIN,  Alaska  Mortgage  Solution,  and  Past  President,                                                               
Alaska    Mortgage    Brokers    Association,    testified    via                                                               
teleconference   from  Anchorage.   Recent  media   attention  on                                                               
mortgage loan  fraud in the  State has contributed to  the effort                                                               
behind  this   bill.  People  in   the  mortgage   loan  industry                                                               
"recognize  the  need  for  change"  and  have  assisted  in  the                                                               
development  of  "this  industry bill".  "This  bill  effectively                                                               
addresses  our concerns;"  particularly in  respect to  licensing                                                               
mortgage companies and, specifically, mortgage loan originators.                                                                
Mr. Martin clarified  that the bill would not  require people who                                                               
process or underwrite loans to be licensed.                                                                                     
Mr. Martin  asserted that  the bill  has broad  industry support.                                                               
Other  professional organizations  also recognize  the importance                                                               
of  this legislation  and the  protection  it can  afford to  our                                                               
Mr.  Martin   declared  that  the  bill   is  "revenue  neutral".                                                               
Furthermore,  this "straight  forward" bill  would "not  place an                                                               
undue burden or cost on business."                                                                                              
Mr. Martin  reiterated that  the bill  would license  an industry                                                               
that is currently unregulated.                                                                                                  
Mr. Martin  stated that  the licensing  fee being  proposed would                                                               
cost a  large multi-state lender, for  example, approximately $20                                                               
each  month. Those  entities would  save money  by not  having to                                                               
conduct  background   checks  or  provide   continuing  education                                                               
programs to their  associates, as that effort  would be conducted                                                               
under  State  oversight.  This savings  could  be  beneficial  to                                                               
Mr. Martin  also noted that  this legislation would  require each                                                               
mortgage  loan originator  to be  "responsible  for paying  their                                                               
very own  low fees" which  would amount  to less than  one dollar                                                               
per day.                                                                                                                        
Mr. Martin  considered the best features  of the bill to  be that                                                               
the State would conduct licensee  background checks and establish                                                               
industry  performance standards.  He  supported the  bill in  its                                                               
current form; it would protect the citizens of the State.                                                                       
2:55:04 PM                                                                                                                    
ROGER   PRINCE,  Securities   Examiner,   Division  of   Banking,                                                               
Securities  and Corporations,  Department of  Commerce, Community                                                               
and  Economic  Development   testified  via  teleconference  from                                                               
Anchorage and informed  the Committee he was  available to answer                                                               
2:55:28 PM                                                                                                                    
NICOLE  STRELTSOVA, Primerica  Financial Services,  testified via                                                               
teleconference from Fairbanks in opposition to the bill.                                                                        
2:56:00 PM                                                                                                                    
LAVADA CHRISTINASON, Primerica  Financial Services, testified via                                                               
teleconference from Fairbanks and opposed the bill as written.                                                                  
2:56:19 PM                                                                                                                    
ROSE   BAADE,  Primerica   Financial   Services,  testified   via                                                               
teleconference  from Fairbanks  and  spoke in  opposition to  the                                                               
bill  as written.  She  urged the  Committee  to either  postpone                                                               
action on the bill or amend it.                                                                                                 
2:56:33 PM                                                                                                                    
JENNIFER  MACOMBER, Primerica  Financial Services,  testified via                                                               
teleconference  from  Fairbanks in  opposition  to  the bill,  as                                                               
2:56:52 PM                                                                                                                    
RON   HUNT,   Primerica    Financial   Services   testified   via                                                               
teleconference from  Fairbanks and voiced opposition  to the bill                                                               
as written.                                                                                                                     
2:57:12 PM                                                                                                                    
DENNIS  SHINN,   Primerica  Financial  Services,   testified  via                                                               
teleconference  from  Fairbanks in  opposition  to  the bill,  as                                                               
2:57:37 PM                                                                                                                    
CURTIS  MACOMBER,  Primerica  Financial Services,  testified  via                                                               
teleconference from Fairbanks and opposed the bill, as written.                                                                 
2:58:08 PM                                                                                                                    
DAVID  MUELLER,  Primerica   Financial  Services,  testified  via                                                               
teleconference  from  Fairbanks  in  opposition to  the  bill  as                                                               
2:58:22 PM                                                                                                                    
BETTY   KETZLER  Primerica   Financial  Services   testified  via                                                               
teleconference from Fairbanks in opposition to the bill.                                                                        
2:58:39 PM                                                                                                                    
DOTHORTHY  JONES,  Primerica  Financial Services,  testified  via                                                               
teleconference  from Fairbanks  and  spoke in  opposition to  the                                                               
bill, as written.                                                                                                               
2:59:08 PM                                                                                                                    
MAUREEN  MISEWICZ, Primerica  Financial  Services, testified  via                                                               
teleconference  from Fairbanks  and  spoke in  opposition to  the                                                               
bill as written.  The bill should be amended  in consideration of                                                               
Primerica's business model.                                                                                                     
2:59:33 PM                                                                                                                    
JONATHAN  BOURNE,  Primerica  Financial Services,  testified  via                                                               
teleconference from Fairbanks and opposed the bill as written.                                                                  
3:00:30 PM                                                                                                                    
Senator  Olson asked  Roger Prince  whether the  Division was  in                                                               
support of the bill.                                                                                                            
Mr.  Prince deferred  to  Mr. Davis  to speak  on  behalf of  the                                                               
Department; however, Mr. Davis was no longer available.                                                                         
Co-Chair Stedman ordered the bill HELD in Committee.                                                                            
RECESS TO CALL OF THE CHAIR 3:01:30 PM / 6:23:56 PM                                                                         

Document Name Date/Time Subjects