Legislature(2007 - 2008)BELTZ 211
04/24/2007 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB120 | |
| HB118 | |
| SB124 | |
| SB102 | |
| SB140 | |
| SB155 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 155 | TELECONFERENCED | |
| + | SB 28 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 140 | TELECONFERENCED | |
| += | SB 102 | TELECONFERENCED | |
| += | SB 124 | TELECONFERENCED | |
| += | HB 118 | TELECONFERENCED | |
| = | SB 120 | ||
SB 102-MORTGAGE LENDING
1:56:13 PM
CHAIR ELLIS announced SB 102, version C, to be up for
consideration. He said they are in receipt of a second letter in
support of SB 102 from AARP that had worked through its concerns
with Mr. Davis.
MARK DAVIS, Director, Division of Banking and Securities,
Department of Commerce, Community & Economic Development
(DCCED), said he had conversations with the American Financial
Services Association (AFSA) and outside firms like Countrywide,
but they didn't come to an agreement that pleased all parties.
He explained that as division director, the difficulty he has is
if they exempt the originators who work for an affiliate of a
bank, that would include the state bank, and he didn't think
that would be in the consumers' best interest. Right now the
division regulates state bank mortgages, which is very
beneficial for consumers. If the change is adopted, the state
bank could adopt an affiliate and entirely avoid licensing as
originators.
He talked with them about carving out an exemption for federal
banks. But in looking at the state statutes, he is required to
preserve parity between the state and federal banks. However, he
said he understood their concerns more thoroughly now and had
made progress in one area - having to comply with different
education requirements in all 50 states - and a fellow regulator
said they were adopting Internet-based testing that is
standardized and adapted to each state - much like the multi-
state bar exam. He thought that would make it much easier for
out-of-state companies to comply.
On education, he does not want to discipline everyone, but he
also wants everyone to be educated. As an example he said he
gets complaints every month from young couples who have bought
their first home in Alaska and who have gone to a company that
is not familiar with Alaska law. That company does not tell them
about Alaska Housing Finance Corporation's first time homebuyer
program. Then they get told by a relative and realize they could
have saved one or two points. He gets called and he has to tell
them the company was not regulated. He also knows that certain
outside companies are writing mortgages that have prepayment
penalty clauses in them, which are not legal in this state. So,
he is a proponent of education. On the other hand, he can
understand AFSA not wanting to comply with 50 different
education requirements.
MR. DAVIS said it would cost $5,000 to license 20 originators in
Alaska per year. Some states have call center licensing where
all the originators meet all the other requirements. He thought
a lot things they are concerned with could be dealt by
regulation or perhaps some modification of the bill rather than
an exemption - if absolutely necessary. He reminded them that
the effective date is July 1, 2008 and the bill wouldn't apply
to the AFSA members until March 1, 2009.
1:59:51 PM
He also reported checking with the Department of Financing
Institutions in Washington State, which has adopted the AFSA
language allowing for exemptions. He was told they are
processing a couple thousand exemptions and it has become as
onerous as probably doing the licensing. Its statute also didn't
provide for payment of processing those exemptions. So it cost
Washington State money. So if you were going to process
exemptions, it might require another fiscal note.
MR. DAVIS said he thought the bill should be passed as is, but
they should be very careful not to target any part of the
industry. You don't want to discriminate against people from out
of state. He wanted everyone to have education and background
checks. Right now, people with felonies are mortgage originators
and last weekend a mortgage originator pled guilty to two counts
in federal court. This bill will correct that.
2:01:19 PM
SENATOR BUNDE said he had written testimony from the Alaska
Association of Realtors dated this weekend and it says the
Division of Banking receives as many as 50 complaints a week.
MR. DAVIS responded that he receives about 20 complaints, but he
is getting 5 or 6 inquiries from mortgage companies a week that
want to enter into the state. The people who answer the phone
tell him that they get two reactions when they say there is no
licensing. Some say great and others say they don't want to come
here. His experience with payday lending is that loans to the
public were substantially cut with that bill, but the state also
had 30 new companies enter because it's now legal to do so. Ten
companies have exited who couldn't comply with the statute. He
thought a similar thing would happen with mortgage companies.
SENATOR BUNDE asked the average number of complaints a week over
the last year.
MR. DAVIS replied about 4 or 5. The complaints include not
knowing about the programs like AHFC, switching fees, and tying
groups into a closing, which is illegal, but no one can enforce
that. He said the State of Maine recommended the best thing for
state mortgaging to do is to adopt federal standards into state
law. That's exactly what this bill does.
2:02:05 PM
SENATOR HOFFMAN joined the committee.
2:03:54 PM
SENATOR STEVENS asked how the exemptions would be applied.
MR. DAVIS explained that Southcentral Mortgaging would be exempt
from this program. Some complaints are people not getting what
they were promised and education so originators can tell people
what programs are out there to help them if they fall into a
certain category.
CHAIR ELLIS asked if he was recommending the original bill after
talking to AFSA folks.
MR. DAVIS replied yes with the understanding that the regulatory
burden is evenly applied.
CHAIR ELLIS asked if he had all of the statutory authority to
promulgate the regulations that would address some if not all of
the concerns of the AFSA under this bill.
MR. DAVIS answered that after checking with other states on the
education, he thought he could work with that and make sure the
test is similar to other tests in states with licensure; he
could also offer reciprocity.
CHAIR ELLIS asked him what other states do to regulate AFSA
members.
2:06:29 PM
MR. DAVIS replied there are differences. The States of
Washington and Idaho have language similar to what AFSA is
proposing and they process exemptions. That just took place in
Washington on January 1, 2007; Montana just passed a new statute
that licenses originators and does not exempt the AFSA members.
Georgia does not license originators; they make the mortgage
banker responsible for the originator.
His division favors originator licensing because that's the
person who meets with the consumer and sits down with them and
makes the representations. If that person is education, less
enforcement will be needed. If he has to go to court, the
Department of Law would charge $170,000 to $200,000 for that
representation. The best thing to do is have the originators be
educated and be sensitive to minorities.
2:07:39 PM
SENATOR STEVENS asked if he intends to return at some point to
talk more about a bill that would concern predatory lending.
MR. DAVIS replied very much so. If Alaska wants to get in line
with other states, it needs to have a predatory lending act. He
intended to find a sponsor for that bill next session and it
would have to include enforcement powers.
2:09:09 PM
CHAIR ELLIS asked him for the history of the mortgage lending
bill.
MR. DAVIS replied that last year SB 272 proposed licensing
mortgage brokers and mortgage bankers and it was his intention
to come back with an originator licensing bill this year. But
over the summer the industry decided to prepare a bill that
included all three.
2:09:38 PM
KEVIN BREELAND, President, Alaska State Mortgage Bankers
Association, said he is also a partner in Residential Mortgage
in Anchorage. They both supported CSSB 102(L&C). This bill
defines an originator, which is exactly what he does every day -
and every originator in the State of Alaska should be doing
exactly what the definition says. He said Alaska is the only
state with no licensing for mortgage companies and it is one of
the few states left that doesn't require any licensing for loan
originators. Currently 26 states do require it and that number
continues to grow on an annual basis. He said that mortgage
originator licensing has become such an important component
against predatory lending that at the federal level a bi-
partisan bill with 236 sponsors was introduced with a component
for a nationwide mortgage originator national registry so that
all originators in the United State would have to be registered
there. This is a key component in looking at predatory lending
practices.
2:13:31 PM
He said that currently, when a consumer has a complaint the only
recourse he has is to contact the attorney general's office that
has limited resources and there's only so much they can do.
Under this bill, the Division of Banking and Securities gets an
opportunity to look at what companies and originators are doing
and it can fend off predatory lending and other illegal acts
that may be going on.
MR. BREELAND said that Alaska has a dual banking system, which
makes state banks competitive with federal banks. The proposed
AFSA amendment adding the word "affiliate," would start
stripping away at the core of the dual banking system by
allowing state banks to take their mortgage operations, move
them out of the bank and put them into an affiliate where they
would be completely unregulated.
2:16:11 PM
MR. BREELAND said he is sensitive to the fact that some of
companies would have 200 or 300 originators they would have to
license, but out-of-state lenders should not receive privileges
that instate lenders don't. Residential Mortgage has 70
originators statewide; it will spend thousands of dollars
licensing all of them and they welcome the opportunity to do it.
He also drew their attention to language on page 36, lines 18 -
27, that does not require loan processors, loan underwriters,
shipping departments, and clerical staff to be licensed saying
it is not the intent to license all the support staff, only
originators. "If someone gains financially from the origination
of a loan, they should be licensed. It's that simple."
He said he gets up to 80 emails a day from out-of-state
mortgagers, which he doesn't respond to, but he knows that other
Alaskans do respond to them. He reminded them that SB 102 is a
collaboration effort between the Mortgage Bankers Association
and the Alaska Association of Mortgage Brokers; they are both
asking for regulation and this level of consumer protection.
2:18:10 PM
He said SB 102 [version C] is an industry friendly bill that
will promote competition and doesn't bar anybody from competing
in Alaska.
2:18:49 PM
SENATOR STEVENS asked if his employees would need additional
training to become licensed and if they are talking about a
major investment in education.
MR. BREELAND replied that continuing education would take a
sizeable investment from his company. He explained that one of
the components of the bill is an education committee consisting
of seven members. He said the Alaska Mortgage Bankers has an
association with the National Mortgage Bankers Association and
within that association they have what is called Campus NBA that
has a lot of training programs that can be submitted to this
education committee for approval. They would more than likely be
approved. The Alaska Association of Mortgage Brokers through
their national chapter has the same thing; Countrywide has in-
house training programs that can be submitted for approval and
on and on. That was the intent of this bill - to allow all of
these education programs that already exist to just be submitted
for approval so they can be used for continuing education.
MR. BREELAND said the competency test is going to be a test that
basically anyone who is an originator of mortgage loans in the
State of Alaska should be able to pass. The "Kevin provision"
will allow him or anyone else to take it more than once in case
he fails it the first time. It is not a difficult test, but it
gives some level of competency to the people who are talking to
families about the purchase of a home. He said money his company
spends on educating its people will at the very least enhance
their current understanding. The mortgage industry is extremely
technical and always changing and people need to keep abreast
through education.
2:22:09 PM
CHAIR ELLIS noted that Roger Prince with the State of Alaska,
John Martin with the Alaska Association of Mortgage Brokers and
Julia Koester from the Department of Law, were available to
answer questions. He asked the committee to have their questions
ready for next Thursday and held SB 102.
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