Legislature(2009 - 2010)BELTZ 105 (TSBldg)
03/15/2010 01:30 PM JUDICIARY
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SB 153-MOBILE HOMES AS REAL PROPERTY 1:38:55 PM CHAIR FRENCH announced the consideration of SB 153. Speaking as the sponsor, he related that the intent is to give homeowners who have mobile homes that are located on real property the ability to convert their homes to real property. Currently mobile homes are titled through the Division of Motor Vehicles (DMV) like a motor vehicle. This change would give the homeowner access to traditional home financing, which often has lower interest rates. Converting the mobile home to real property would increase the value of the home and help to prevent "clouded" titles that often hinder clean transactions involving manufactured homes. KATE HERRING, Staff to Senator French, offered to answer questions about SB 153. SENATOR COGHILL asked for an explanation of the mechanism for combining a motor home title that's with DMV and a title guarantee that is tied to the property. MS. HERRING deferred to Mr. Ginsberg. 1:41:56 PM GEORGE S. GINSBERG, Attorney, McGlinchey Stafford, said his firm is outside council to Wells Fargo. Providing some background he explained that a manufactured home, like a car, is documented for ownership by a certificate of title. That ownership is transferred by a certificate of title, again like a car. Also like a car, financing of a manufactured home is secured by a lien, which is physically noted on the certificate of title. Unlike a car, a manufactured home can be permanently affixed to real property. In Alaska that creates problems. Currently, Alaska law says that the only way for a lender to perfect a security interest in a manufactured home that's been affixed to real property is both to note the lien on the certificate of title and to file a fixture filing under the Alaska Uniform Commercial Code (AUCC). The problem is that the Alaska DMV will not issue a certificate of title to a manufactured home that has been permanently affixed to real estate claiming that it is no longer a vehicle. This places a homeowner who has a manufactured home that is permanently affixed to real estate in no man's land. They cannot sell the manufactured home because there is no way to document the change of ownership and they can't finance it because there is no way to perfect a security interest in the public record. MR. GINSBERG explained that SB 153 is designed to establish a conversion procedure by which a manufactured home would be considered real estate for all legal purposes. This would involve a surrender and cancelation of the certificate of title after which an affidavit of affixation would be recorded on the real estate records. After the affidavit is recorded, a copy would be sent to DMV and any existing certificate of title would be canceled. If there isn't a certificate of title or it can't be found, there is a conversion procedure to accomplish the same purpose. After this happens the manufactured home is part of the real estate; it can be sold by a deed and can be financed by a real estate mortgage. The bill likewise has a procedure to follow in the event that a home is physically detached from the land. The homeowner would file an affidavit of severance and then apply for a title from DMV. It would then be treated as personal property just as it had been before the conversion. SENATOR EGAN asked if this would affect modular homes. MR. GINSBERG said no. 1:51:38 PM SENATOR WIELECHOWSKI asked if there is a downside to doing this with respect to increasing property taxes. MR. GINSBERG replied he believes the answer would be yes because it would increase the value of the real estate and presumably the real property tax, but that's not necessarily a downside. SENATOR WIELECHOWSKI said if this will increase property taxes for many of the people in his district he would have a problem with that. MR. GINSBERG reminded him that this bill will help the many people who may not pay real estate taxes, but they can't sell or finance their homes. So far we haven't run into opposition from consumer groups in Alaska or other states because it's to their advantage to do this, he said. 1:54:17 PM CHAIR FRENCH informed the members that this will not apply to mobile homes and trailers that are located in a trailer park on rented space. This applies to people who have put a mobile home on a piece of property he or she owns and now wants to affix it to a permanent foundation. The only exception would be to property on which there is a 20 year lease because that term is sufficiently long to qualify for the conversion to real property. MR. GINSBERG concurred. MS. HERRING added that this is voluntary process, it is not mandatory. 1:55:47 PM CARL SPRINGER, Registrar, Division of Motor Vehicles (DMV), Department of Administration, said DMV does not oppose SB 153, but it has concerns about the requirements it imposes on DMV. DMV has expertise in the area of driver licensing and titling and registering motor vehicles. It has no experience in real property law. Currently DMV is required to title a manufactured mobile home if the owner so requests, but the owner is not required to title a manufactured mobile home. Currently there are 8,291 manufactured mobile homes that are titled in this state. He surmised that a healthy percentage have had the wheels removed and been placed on a semi-permanent foundation with skirting. This would possibly qualify the manufactured mobile home as real property, but he imagines that many are located in trailer parks. MR. SPRINGER said SB 153 would have DMV duplicating the efforts of the recorder's office and real estate title insurance agencies. Currently DMV records the primary lien or encumbrance that the owner discloses and this bill would make DMV responsible for determining the existence or non existence of other liens or encumbrances. Essentially it would be performing real property title searches. He said that the attachment severance requirements are of little consequence if the owner can execute these affidavits even if they only intend to permanently affix or sever the manufactured mobile home from real property rather than actually doing it when the event occurs. He said that for these reasons DMV feels that SB 153 needs further clarification. He offered to work with the sponsor to address these concerns. CHAIR FRENCH asked him to let his office know with as much specificity as possible, which sections DMV seeks to amend. 1:58:28 PM BRENDA MIERNYK, Branch Manager, Wells Fargo Home Mortgage, said she is testifying in support of SB 153. She related that Alaska statutes do not meet eligibility requirements for lenders to sell a mortgage loan for a manufactured home to Fanny Mae or Freddy Mac, including the process to legally classify the home as real property and placing the lender in first lien position. Wells Fargo has had to turn away business because of this, she said. If SB 153 were to pass, state definitions of manufactured homes would be aligned with HUD definitions to create a system for title transfer and property conversion. Additionally, it would create a means for titling manufactured homes that have been affixed to property but the title cannot be found. MS. MIERNYK said stated that this bill would 1) help home owners whose manufactured home is already affixed to real property gain better access to credit and make it easier to sell their homes; 2) help increase manufactured home values by allowing the owners to convert them to real property including those not covered by certificates of title or for which a certificate of title cannot be found; 3) help lenders gain a perfected security interest in manufactured homes; 4) help DMV by establishing a formal procedure for cancelling a title when a manufactured home is affixed to a permanent foundation; and 5) increase property tax revenue as a result of manufactured homes being converted to and considered real property. 2:00:59 PM GEORGE CARNAHAN, representing himself, Nikiski, said he lives in a home that falls under AS 29.45.070. It is not hooked up to electricity, sewer or other utilities and it is not attached to the ground. Current law dictates that if a property has any of these three elements it is classified as real estate property. He questioned why the existing law should be tossed out the window. This will simply increase taxes and they are already too high, he said. 2:03:12 PM CHAIR FRENCH closed public testimony and held SB 153 in committee.