Legislature(2007 - 2008)BELTZ 211
03/28/2007 01:30 PM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB18 | |
| SB132 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 18 | TELECONFERENCED | |
| *+ | SB 132 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 18-PROPERTY FORECLOSURES AND EXECUTIONS
1:35:49 PM
CHAIR FRENCH announced the consideration of SB 18 and solicited
a motion to adopt the committee substitute (CS).
SENATOR McGUIRE motioned to adopt Version \V CS for SB 18
labeled, 25-LS0153\V. There being no objection it was so
ordered.
SENATOR BUNDE, Sponsor of SB 18, described the bill as simple in
principle. He read from the sponsor statement as follows:
Alaska's statutes on the real property, non judicial
foreclosure process are antiquated, sometimes
ambiguous and unclear, and therefore, prone to
litigation. Senate Bill 18 proposes to clarify the
present statutory language, simplify and modernize the
foreclosure process. The suggested changes benefit
lenders, borrowers and title insurers by bringing
clarity, certainty and modernity to the process.
SB 18 would improve many aspects of Title 34 that
govern the foreclosure process.
SENATOR BUNDE continued to say that the intent of the bill is to
encourage higher bids and greater participation in the process.
In his view the court house step auction encourages speculators
and he hopes this will encourage those who might actually want
to buy a home at a reasonable price. Passing SB 18 would
streamline the foreclosure language in statute and provide a
more open and fair auction process that would benefit borrowers,
lenders, title insurers, individuals, and neighborhoods, he
stated. It would also reduce unnecessary litigation.
1:39:42 PM
Senator Huggins joined the meeting.
STEPHEN ROUTH, Attorney, Routh Crabtree, APC, Anchorage, said he
practices in the area of real estate law, specifically with
respect to mortgage issues.
MR. ROUTH summarized the bill sections as follows:
Section 1 is a new section that eliminates the public posting
requirement at the post office. Title 34 referred to Title 9 on
the process of getting property qualified to sell at foreclosure
auction. Title 9 requires posting at public places one of which
is the post office closest to the place of sale. For decades
that's worked well, but the problem now is that some postmasters
in Alaska are refusing to let notices get posted. The proposed
fix is to delete that posting requirement.
Sections 2 and 3 deal with wider publication of sales by
Internet publication. It's intended to ensure that foreclosure
auctions come to the attention of potential bidders. The greater
exposure an auction receives, the more bidders there will be.
That increases the likelihood that the price will be higher and
that the property will be sold to a third party rather than
reverting to the bank. This makes it more likely that the
borrower will realize funds from the sale as well. Overall the
process is more efficient and everyone stands to benefit.
CHAIR FRENCH asked if there are services currently operating in
Alaska that would qualify under the provision in Section 2.
Also, is there a requirement that the system have an office in
the state with staff including a senior management person.
MR. ROUTH explained that the intent is to track the requirements
for being "of general circulation" for newspapers and bring in
the Internet Age with safeguards. If there's a mistake in an ad
in the Anchorage Daily News you know were to get it corrected.
The same should apply for an Internet publication. That's why
there's a management person to effect change in a local office,
he stated.
CHAIR FRENCH said he likes the idea of having a human being to
speak to. He was simply wondering if there is a current service
that could meet that requirement. He asked if a service like
Craigslist would qualify.
MR. ROUTH said it would clearly qualify under some of the
requirements and he isn't sure on others.
CHAIR FRENCH asked that he or the sponsor find out if an entity
in the state would satisfy the requirements. If so that's great
and if not then more thought would need to go into the
requirements.
MR. ROUTH stated that in one of the bill drafts there's an
escape clause so that if there isn't a qualified Internet site
then publication in just the newspaper is allowed. In reality
the regulators will be the title insurance companies, he said.
CHAIR FRENCH asked about the bolded language in Section 3 on
page 3, lines 10-13 and asked if the action would be brought in
superior court and who the defendant would be.
MR. ROUTH said the existing language talks about how to
establish a newspaper as a legal publication. The court looks at
that and then would have requirements for serving folks who
might be interested, but it's freeform at that point and the
discretion of the superior court, he stated.
1:50:03 PM
Senator Therriault joined the meeting.
MR. ROUTH continued the sectional analysis.
Section 4 deals with time limits for reinstatement. The 3-month
reference was revised to 90 days because it is easier to
calculate. The other change rolls the clock back for
reinstatement of the loan to five days before the sale. If
someone intends to reinstate their loan this provides more time
and it might avert litigation.
CHAIR FRENCH asked if there's a convention in state law with
respect to counting weekends in the five-day count.
MR. ROUTH said he believes the five days could end up being
seven or eight days under the civil rules, but he'd research
that point and get back to the committee.
CHAIR FRENCH said he flagged it.
MR. ROUTH continued the sectional analysis.
Section 5 clarifies mailing requirements. The term "grantor" is
deleted and "trustor" is inserted, which conforms to the
foreclosure statutes. It also states that notice must be sent to
a person who is in actual physical possession of the property.
This clarifies who gets notice of the foreclosure action.
Section 6 clarifies who gets notice of the foreclosure; the
posting requirements; what happens if the borrower is deceased;
and who can restrain a foreclosure sale. The changes are
technical, he said. For example, subsection (e) talks about how
to get notice if the possessory interest can only be inferred
from an inspection of the property. Subsection (f) deals with
posting of the property and allows for posting at a reasonable
distance if it's not possible to post right on the property
itself.
CHAIR FRENCH asked if the section is based on a model act.
MR. ROUTH said no; his office picked best practices among seven
different states.
SENATOR McGUIRE asked why "or occupying" is removed from Section
5 on page 4, line 9.
MR. ROUTH explained that physical possession is broader.
SENATOR McGUIRE said she wants to make sure that all affected
parties are notified. If one spouse is still living in the house
and is operating under the assumption that the other is paying,
both should be notified of the foreclosure.
MR. ROUTH said as long as the person is listed on the deed of
trust there is a great deal of effort to get the person noticed.
SENATOR McGUIRE clarified that she wants to make sure that the
person who is occupying the property is notified even if she/he
isn't on the deed. At what point does a wife who is occupying
the property with her kids learn that her estranged husband is
no longer paying the mortgage?
MR. ROUTH said there are a couple of ways. The bank's agent will
conduct drive-bys which will result in a visit to find out who
has an interest in the party. Also, when the property is posted
notice of occupancy will be noted and that will trigger the
requirement to give notice. If we can learn somebody is there,
they're going to get notice, he stated. On the other hand, if
there's no evidence of somebody being there they're not going to
get notice.
1:58:30 PM
SENATOR WIELECHOWSKI asked for examples of liens or
nonpossessory interest that could be inferred from inspection of
the real property in Section 6(e).
MR. ROUTH said you could infer that something is going on if
nobody's home and the house is empty, but a bunch of
construction lumber is sitting in the front yard.
SENATOR WIELECHOWSKI asked if Alaska still has adverse
possession.
MR. ROUTH said yes.
SENATOR WIELECHOWSKI asked if this section would apply to
someone who mistakenly believes they have rights to the property
because of an incorrect survey.
MR. ROUTH said yes. Under Section 5(c), a person who is in
actual physical possession would get a notice mailed or
personally delivered. If they are in possession then Section 5
covers them. Problems arise if they aren't there and there is no
evidence that they are occupying the property or if there's some
inference of possession or occupancy, but it's not possible to
figure out who it is.
SENATOR McGUIRE asked if furniture in a house and a bad
housekeeper fit the definition.
MR. ROUTH said that person wouldn't be entitled to notice under
Section 6(e) unless there's some way to ascertain who the person
is so he/she can be given notice. Furniture and tracks in the
snow evidence would trigger Section 5(c), which means extra
steps to get notice to the occupant.
SENATOR McGUIRE said she gets the point of the bill and agrees
with it but she doesn't want people to get their home taken away
through some set of random circumstances. By virtue of not
meeting Section 6(e), they don't get notified under Section
5(c). I want to be as careful as I can, she said.
MR. ROUTH said generally when a person has an interest in a
property there will be a record so before any foreclosure is
undertaken there would be a title report. Most folks will show
up on that search. If you haven't gone through the normal
process of putting your name on the public record, this is the
safety net, he said.
2:04:38 PM
SENATOR WIELECHOWSKI said he shares some of the same concerns as
Senator McGuire. Hundreds and hundreds of years of common law-
easement by prescription and adverse possession-is being wiped
that out by this section so we need to think about the
implications very carefully, he stated.
MR. ROUTH responded that one of the requirements for adverse
possession is open, notorious, and hostile possession so someone
who qualifies under that would also qualify for notice under one
of the sections in the bill because of the open notice.
SENATOR McGUIRE pointed out that there are all sorts of property
arrangements that Alaskans have come up with their cabins and
houses and a lot of these folks haven't recorded their property
ownership in the usual and customary way. She encouraged him to
think about the odd circumstances not leading to somebody losing
their home. "I flagged it and I want to really hone in on that
and try and think about all the circumstances that we may not be
thinking about," she stated.
MR. ROUTH agreed that losing your home is "the worst thing on
earth" and it should never be undertaken lightly.
MR. ROUTH recapped that Section 6(f) relates to difficulty
posting the property.
CHAIR FRENCH asked if there's any minimum distance for posting
the property. Could you post a property a mile away or at the
nearest airport if it's a remote parcel?
MR. ROUTH explained that the subsection requires that notice is
placed on the property or as close as practicable. The burden is
high to post on the property so clear documentation of any
impediment is necessary. If the poster does it wrong there is
going to be litigation, he said.
MR. ROUTH continued with Section 6(g). It establishes that the
poster signs an affidavit, which is prima facie evidence that
he/she did in fact post the property. It's presumed to apply for
one year and that is designed to reduce dispute and litigation.
SENATOR McGUIRE asked how it is treated now because she would
presume that an affidavit is treated the same as in any other
proceeding. That is it's not prima facie evidence, but just one
of the many things a court considers as evidence before making a
decision. This seems to bump the affidavit higher, she said.
MR. ROUTH agreed it is one of the changes, but he isn't sure
whether or not the affidavit is discussed in the prior statute.
"I don't have that in front of me, but I'm not sure there was a
process for an affidavit beforehand."
SENATOR McGUIRE said she wants to think about that a little
more; she would feel more comfortable with the affidavit being
just one of the pieces of evidence rather than prima facie
evidence.
MR. ROUTH asked if the language "conclusively presumed" causes
her discomfort.
SENATOR McGUIRE said yes.
MR. ROUTH explained that it was included in the hope of reducing
litigation in this area. "It would be fine with us if it said
"presumed" as opposed to "conclusively presumed" to leave the
door open for someone to attack the presumption, he stated.
MR. ROUTH continued the sectional analysis.
Sections 6(h) and (i) relate to the deceased borrower. Currently
if a borrower is deceased and the property goes into
foreclosure, the practice for getting notice to the heirs is to
go to court to open a limited purpose probate. Generally a
special master is appointed to track down the heirs and provide
notice. In practice this delays things for up to a year and
costs up to $8 thousand and the added time and expense makes it
less likely that the loan will be reinstated. The proposed
change sets up a mechanism to publish the notice and provide a
time limit for the heirs to declare an interest in the property
and begin reinstatement if they wish.
SENATOR McGUIRE commented that the probate process is designed
to be cumbersome and slow to allow all interested parties to
come forward and make a plea. She wants to think about this a
little more because it is so completely different. For example,
page 5, lines 14-16 talk about mailing notice to heirs and
devisees that are known. What if they aren't known? You
ascertain it though telephone books?
MR. ROUTH explained that best practices now involve looking in
telephone books, doing Internet searches and using any other
commonly known public resource. "Keep in mind, the financial
institution has already gone through its records to see if there
is any reference to any children…" This all presupposes there is
no probate open.
MR. ROUTH noted that probate is addressed through subsection
(j).
2:16:46 PM
SENATOR BUNDE explained that Section 6(k) describes persons who
may bring a court action to enjoin a foreclosure sale, including
the attorney general.
SENATOR McGUIRE asked why subsection (j) says 3 months when the
committee already agreed to say 90 days to reduce confusion.
CHAIR FRENCH asked Mr. Routh to comment.
MR. ROUTH said it should say 90 days.
CHAIR FRENCH stated that Senator McGuire made Amendment 1. On
page 5, line 27, delete "three months" and insert "90 days".
CHAIR FRENCH announced that without objection, Amendment 1 is
adopted.
2:18:10 PM
MR. ROUTH continued the sectional analysis.
Section 6(k) names the list of potential plaintiffs to enjoin a
foreclosure. At the state's request, the attorney general was
added to the list. Section 6(l) states that if you're bringing
an action to stop because of lack of payments, the court may
impose conditions to protect the beneficiary. Section 6(m)
defines "devisee," "heir," and "personal representative" as
given in other sections in statute.
2:19:21 PM
Section 7 talks about placing the funds from a sale in escrow to
protect all parties. The second part confirms that the trustee
can accept bids in ways other than at court house steps
including: telephone, Internet, and electronic mail. The bidding
must result in cleared funds. This goes along with the Internet
publication, which makes it a more efficient market and will
enhance the chance for higher bids and more bidders.
CHAIR FRENCH asked if the court house sales are done by custom
or by rule and statute.
MR. ROUTH replied they're done by statute.
SENATOR McGUIRE asked how a telephone bid would be documented.
MR. ROUTH said the auctioneer would have a cell phone at the
courthouse steps to accept bids from anyone who had made
appropriate accommodation to transfer the money after the sale.
SENATOR McGUIRE commented this will literally change an entire
market place.
MR. ROUTH agreed adding that it will make it more efficient and
accessible to more folks. "Somebody who wants to buy a nice
piece of land in Homer can be sitting in New York," he stated.
SENATOR McGUIRE commented that she didn't particularly care for
that example.
2:22:02 PM
MR. ROUTH continued the sectional analysis.
Section 8 establishes who can sell the property. This confirms
what is happening now, which is that an agent sells the property
as an auctioneer.
Section 9 clarifies how long an auction can be postponed and
establishes that if it's longer than 12 months then new notices
are required.
CHAIR FRENCH announced that he would hold SB 18 in committee and
that that the committee would hear the remainder of the analysis
at a future meeting.
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