Legislature(2009 - 2010)BELTZ 105 (TSBldg)

03/09/2010 01:30 PM LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 129 RESIDENTIAL SPRINKLER SYSTEMS TELECONFERENCED
Heard & Held
*+ SB 302 MICROLOAN REVOLVING FUND TELECONFERENCED
Moved SB 302 Out of Committee
+= SB 153 MOBILE HOMES AS REAL PROPERTY TELECONFERENCED
Moved SB 153 Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
              SB 153-MOBILE HOMES AS REAL PROPERTY                                                                          
                                                                                                                                
1:36:30 PM                                                                                                                    
CHAIR PASKVAN announced SB 153 to be up for consideration. He                                                                   
said Senator Meyer had identified a concern and had already                                                                     
spoken to the bill's sponsor about it.                                                                                          
                                                                                                                                
SENATOR HOLLIS FRENCH, sponsor of SB 153, read the sponsor                                                                      
statement as follows:                                                                                                           
                                                                                                                                
     SB 129  establishes procedures to  convert manufactured                                                                    
     homes  to  real  property  through  a  defined  process                                                                    
     within  the  Division  of Motor  Vehicles  (DMV).  This                                                                    
     change  will  give  the owners  of  manufactured  homes                                                                    
     better access  to traditional mortgage  financing which                                                                    
     often features  lower interest rates, and  it will help                                                                    
     home  owners  increase  the value  of  their  house  by                                                                    
     allowing them  to convert their manufactured  home into                                                                    
     real  property.  The   legislation  will  also  prevent                                                                    
     clouded  titles that  often  hinder clean  transactions                                                                    
     involving manufactured homes.                                                                                              
                                                                                                                                
     Currently,  when a  manufactured home  is affixed  to a                                                                    
     permanent foundation  on land  owned by  an individual,                                                                    
     the   vaguely   defined   title   surrender   procedure                                                                    
     currently used by the Division  of Motor Vehicles lacks                                                                    
     a record  notice. Without a record  notice, a homeowner                                                                    
     is  often  left  with  an  unmarketable  title  and  an                                                                    
     unperfected  security interest  in their  house placing                                                                    
     all parties in  a real estate transaction  - the buyer,                                                                    
     the lender, and the seller - at risk.                                                                                      
                                                                                                                                
     Many   Alaskans  live   in  manufactured   homes.  This                                                                    
     legislation  will  treat   residents  that  permanently                                                                    
     affix a  manufactured home  to land  they own  the same                                                                    
     way  that traditional  homeowners  are  treated in  the                                                                    
     state. I urge you to support this fair legislation.                                                                        
                                                                                                                                
SENATOR FRENCH  pointed out that  Alaska is  one of the  very few                                                               
states  without a  process similar  to the  one presented  in his                                                               
bill.  While  it  is  a  simple concept,  SB  153  spans  several                                                               
different aspects of state law and requires significant changes.                                                                
                                                                                                                                
SENATOR BUNDE  said he could  think of two kinds  of manufactured                                                               
homes -  one was never  on wheels and  is placed on  a foundation                                                               
and those that  are "trailer houses." He asked  Senator French if                                                               
his definition of "manufactured" covers both types.                                                                             
                                                                                                                                
SENATOR FRENCH said this is meant for "mobile homes" on wheels.                                                                 
                                                                                                                                
SENATOR BUNDE asked  if SB 153 allows  traditional mortgages, but                                                               
does nothing  to compel  a lending agency  to provide  a mortgage                                                               
where it did not feel it was a best business practice.                                                                          
                                                                                                                                
1:39:46 PM                                                                                                                    
SENATOR DAVIS joined the committee.                                                                                             
                                                                                                                                
SENATOR FRENCH  answered, "Exactly, there is  absolutely no state                                                               
sort of arm twisting." SB  153 simply allows mobile homeowners to                                                               
stand on the same footing as  any other mortgagee who goes to the                                                               
bank and asks for financing.                                                                                                    
                                                                                                                                
SENATOR  MEYER  said he  was  still  confused by  the  difference                                                               
between a mobile home and  a manufactured home. He always thought                                                               
a mobile  home as  being something on  wheels and  a manufactured                                                               
home as  being attached to  a foundation.  He asked if  this bill                                                               
was saying they are one and the same.                                                                                           
                                                                                                                                
SENATOR FRENCH  responded that the  definition for both  is found                                                               
in AS 45.29.102.                                                                                                                
                                                                                                                                
1:41:36 PM                                                                                                                    
SENATOR MEYER asked  what kind of certification you  get from the                                                               
DMV if you have a mobile home or trailer.                                                                                       
                                                                                                                                
SENATOR FRENCH  replied that  the point  of the  bill is  to make                                                               
them the same.                                                                                                                  
                                                                                                                                
SENATOR MEYER  asked if this  process change costs  the homeowner                                                               
any more money to get a secure title.                                                                                           
                                                                                                                                
SENATOR FRENCH deferred that answer to Wells Fargo.                                                                             
                                                                                                                                
CHAIR PASKVAN  interjected that  "manufactured home"  was defined                                                               
in AS 45.29.102, subsection 65 as:                                                                                              
                                                                                                                                
     A structure transportable in one  or more sections that                                                                    
     is eight  body feet or  more in width, forty  body feet                                                                    
     or more  in length,  and that is  built on  a permanent                                                                    
     chassis and designed  to be used as a  dwelling with or                                                                    
     without a permanent foundation.                                                                                            
                                                                                                                                
1:43:31 PM                                                                                                                    
SENATOR FRENCH  said he lived  in a mobile  home when he  was 20,                                                               
and it had  wheels that had been placed  underneath the skirting.                                                               
He lived in it for 10 years and  then sold it to someone who took                                                               
it to Girdwood. It was still  able to move after all those years,                                                               
and he thought the chassis was the key aspect.                                                                                  
                                                                                                                                
SENATOR MEYER  said his  potential amendment has  to do  with the                                                               
concern that mobile  home transactions will still  not be covered                                                               
by the Real Estate Surety Fund.                                                                                                 
                                                                                                                                
SENATOR FRENCH said  it would make sense to him  to let consumers                                                               
have access to that Surety Fund.                                                                                                
                                                                                                                                
1:45:50 PM                                                                                                                    
GEORGE GINSBERG, McGlinchey & Stafford,  outside counsel to Wells                                                               
Fargo,  said he  didn't have  prepared testimony,  but wanted  to                                                               
answer one question - that  "mobile home" and "manufactured home"                                                               
refers to  the same  thing. He  explained that  it is  the common                                                               
terminology used particularly in  Department of Housing and Urban                                                               
Development  regulations.  They  are not  talking  about  modular                                                               
homes that are stick built,  prefabricated and assembled on site.                                                               
"These  are mobile  homes that  are made  at a  factory and  then                                                               
either installed  just on blocks  or permanently affixed  to real                                                               
estate."                                                                                                                        
                                                                                                                                
SENATOR BUNDE asked if financing  for the mobile home depended on                                                               
whether it remained on the  chassis or was permanently affixed to                                                               
a foundation.                                                                                                                   
                                                                                                                                
MR. GINSBERG answered  yes. He explained that the  whole point of                                                               
the  bill  is   that  Alaska  currently  has   no  procedure  for                                                               
converting  a mobile  home with  a certificate  of title  to real                                                               
property. A  car it is covered  by a certificate of  title, but a                                                               
home is financed by having the  lender's name listed as a secured                                                               
lien  holder  on  the  title.  Unlike   a  car,  a  home  can  be                                                               
permanently affixed to  the real property on which  it sits. Once                                                               
that  happens, it  is commonly  taxed  as real  property and  the                                                               
intent is to treat it  as real property, which means transferring                                                               
ownership by deed and financing it  by a mortgage. The problem is                                                               
that Alaska currently has no  reliable procedure for converting a                                                               
home covered  by a certificate of  title to real estate,  so that                                                               
it can,  in fact, be transferred  by deed and be  encumbered by a                                                               
mortgage.                                                                                                                       
                                                                                                                                
The bill is  designed to create a new section  of real estate law                                                               
which  sets  forth  procedures  for converting  a  home  to  real                                                               
property  and in  order for  that to  happen the  home has  to be                                                               
permanently  affixed  to land,  a  certain  affidavit has  to  be                                                               
recorded in the land records,  certain documents have to be filed                                                               
with the DMV,  and depending upon whether the home  is covered by                                                               
a certificate  of title, a manufacturer's  certificate of origin,                                                               
or neither,  procedures are set  forth to surrender the  title or                                                               
surrender  the  certificate  of  origin  and  have  the  division                                                               
confirm in its records that conversion had occurred.                                                                            
                                                                                                                                
MR. GINSBERG  said the  advantage is  that then  there will  be a                                                               
record,  not only  in the  DMV, but  in the  real estate  records                                                               
where  deeds and  mortgages  are recorded  that  people can  rely                                                               
upon.  After that,  the  home along  with the  rest  of the  real                                                               
estate can  be transferred  by deed  and encumbered  by mortgage.                                                               
Right  now, very  few people  are  willing to  extend credit  for                                                               
purchasing a  mobile home  based on a  mortgage because  there is                                                               
nothing that  establishes the  home as part  of the  real estate.                                                               
Likewise, it can't  be financed as personal  property because the                                                               
division will  not issue a title  to a mobile home  that has been                                                               
permanently affixed to property. The  result is that not only the                                                               
lender, but the owner of the home,  is "in no man's land." He has                                                               
a home  that he can't  sell because there  is no way  to document                                                               
ownership  and he  can't  encumber  because there  is  no way  to                                                               
secure  a   lien  against  it.   It's  really   unmarketable  for                                                               
everybody.                                                                                                                      
                                                                                                                                
SENATOR BUNDE asked  if a mobile home in a  trailer court where a                                                               
space  is  being  rented  and  not  owned  would  qualify  for  a                                                               
mortgage.                                                                                                                       
                                                                                                                                
MR. GINSBERG replied if the  owner had a long-term lease (defined                                                               
in statute  as 20  years or more),  the conversion  process would                                                               
apply to them as well.                                                                                                          
                                                                                                                                
SENATOR  BUNDE said  most mobile  home parks  have month-to-month                                                               
agreements and  not long-term  leases. He said  he had  heard all                                                               
too often  about a  park closing  and people  having no  place to                                                               
take their mobile homes.                                                                                                        
                                                                                                                                
SENATOR BUNDE asked if this  would apply to manufactured homes on                                                               
leased  land,   but  not  to   the  more   normal  month-to-month                                                               
arrangement.                                                                                                                    
                                                                                                                                
MR. GINSBERG replied that was  correct, and chances were that the                                                               
mobile  home park  owner wouldn't  permit it  anyway, because  he                                                               
owns  the real  estate and  doesn't want  anybody else  to own  a                                                               
small piece of it.                                                                                                              
                                                                                                                                
SENATOR  THOMAS  asked   if  these  types  of   homes  are  still                                                               
manufactured, because he had not seen any new ones lately.                                                                      
                                                                                                                                
MR.  GINSBERG replied  yes; in  the  1970s, manufactured  housing                                                               
accounted for 20-25 percent of  new housing starts, but demand is                                                               
way down now.                                                                                                                   
                                                                                                                                
SENATOR THOMAS asked if SB 153  covers everything that is 8 ft. X                                                               
40 ft. or larger.                                                                                                               
                                                                                                                                
MR. GINSBERG answered yes.                                                                                                      
                                                                                                                                
CHAIR  PASKVAN asked  how many  units  converted by  this law  in                                                               
Alaska would likely take advantage of the mortgage loans.                                                                       
                                                                                                                                
MR. GINSBREG said he didn't know.                                                                                               
                                                                                                                                
1:54:29 PM                                                                                                                    
CARL SPRINGER,  Division of Motor  Vehicles (DMV),  Department of                                                               
Administration (DOA), said he was available for questions.                                                                      
                                                                                                                                
1:54:46 PM                                                                                                                    
TIFFANY KALDOR,  Wells Fargo Home  Mortgage, Fairbanks,  said she                                                               
supported SB  153. She said it  would provide a formal  method in                                                               
Alaska   for  eliminating   the   certificate  of   title  to   a                                                               
manufactured home  in converting the  home to real  property when                                                               
the home is  or will be permanently affixed to  real property and                                                               
obtaining  a new  certificate  of title  when  a home  previously                                                               
affixed to real property is later physically severed from it.                                                                   
                                                                                                                                
MS. KALDOR said that Alaska,  unlike the vast majority of states,                                                               
has no  formal statutory procedure for  converting a manufactured                                                               
home to  real property. Under  current Alaska law,  including the                                                               
Alaska Uniform  Commercial Code (UCC),  a security interest  in a                                                               
manufactured home  permanently affixed  to land can  be perfected                                                               
only by noting it on the  home certificate of title and recording                                                               
a  deed  of trust  with  a  fixtures  clause and  an  appropriate                                                               
description of  the home.  The need  for legislation  arises from                                                               
the  fact that  the Alaska  DMV  would not  issue a  title for  a                                                               
manufactured home that  is affixed to a  permanent foundation. It                                                               
has created  an administratively  vaguely defined  procedure with                                                               
no notice  of record.  The result  for many  Alaskan manufactured                                                               
homeowners is  an unmarketable title  to their home and  for many                                                               
lenders an unperfected security interest in their collateral.                                                                   
                                                                                                                                
She said they feel the  bill will help manufactured homeowners in                                                               
the  state increase  the  value of  their  manufactured homes  by                                                               
allowing  them  to  convert  them   to  real  property  including                                                               
manufactured homes  not covered by  certificates of title  or for                                                               
which  the certificate  of title  cannot be  found but  permanent                                                               
affixed  to  real  property  before the  effective  date  of  the                                                               
legislation.  It  would  also  help  lenders  to  gain  perfected                                                               
security  interest in  manufactured  homes and  help  the DMV  by                                                               
putting a  formalized procedure  in place  for canceling  a title                                                               
when a  manufactured home is  put on a permanent  foundation. And                                                               
finally,  it   would  increase  property  tax   revenues  in  the                                                               
municipalities that levy property taxes.                                                                                        
                                                                                                                                
SENATOR  BUNDE asked  if  she  knew of  any  negative aspects  to                                                               
passing this bill.                                                                                                              
                                                                                                                                
MS. KALDOR answered no.                                                                                                         
                                                                                                                                
SENATOR MEYER said  one negative might be how the  owner would be                                                               
able pay  increased property taxes.  He asked on the  other hand,                                                               
if it would  assist people in getting a better  interest rate for                                                               
their mobile home,  since they would have to  pay higher interest                                                               
rate for raw land.                                                                                                              
                                                                                                                                
MS. KALDOR said that was not correct.                                                                                           
                                                                                                                                
SENATOR  MEYER asked  what kind  of loan  he would  get to  buy a                                                               
mobile home on a city lot  - the lower interest loan that someone                                                               
who was  buying a  single family  house would  get or  the higher                                                               
interest loan  that someone  would pay if  they were  just buying                                                               
raw land.                                                                                                                       
                                                                                                                                
MS. KALDOR  answered that  currently a  manufactured home  can be                                                               
financed by Freddie  Mac, Fannie May, FHA or VA,  and possibly by                                                               
AHFC depending  on the type of  foundation and if it  sits on its                                                               
own lot. They insure through  a certification process that a home                                                               
is permanently  affixed to a  foundation and that the  wheels and                                                               
tongue have been  removed. The buyer gets a better  rate and loan                                                               
program than for purchasing raw land.                                                                                           
                                                                                                                                
CHAIR  PASKVAN asked  how many  units might  be converted  in her                                                               
area or statewide under this program should it become law.                                                                      
                                                                                                                                
MS. KALDOR answered that she didn't know.                                                                                       
                                                                                                                                
CHAIR PASKVAN  asked the spread  in rates and terms  of financing                                                               
between mobile homes and conventional homes.                                                                                    
                                                                                                                                
MS. KALDOR  deferred that  answer to a  technical expert  who was                                                               
online.                                                                                                                         
                                                                                                                                
2:00:40 PM                                                                                                                    
MARC  LEFSET, McGlinchey  & Stafford,  outside counsel  for Wells                                                               
Fargo  Bank, said  he agreed  with Mr.  Ginsberg's comments.  The                                                               
only  point he  would  add is  that by  creating  a procedure  in                                                               
Alaska  that allows  lenders and  borrowers to  work together  to                                                               
formally convert  a manufactured  home from personal  property to                                                               
real property would make loans  secured by that property eligible                                                               
for sale  to Fannie Mae  and Freddie Mac  as well as  making them                                                               
eligible  for insurance  under FHA  and VA  programs. He  said it                                                               
would  open up  the market  for  better interest  rates that  are                                                               
available for onsite-built homes.                                                                                               
                                                                                                                                
CHAIR  PASKVAN asked  if he  saw any  downside if  this law  were                                                               
enacted.                                                                                                                        
                                                                                                                                
MR. LEFSET said he didn't see any downside.                                                                                     
                                                                                                                                
SENATOR MEYER asked  if he was currently buying a  mobile home on                                                               
a 7000 sq.  ft. lot, would the  loan be primarily for  the lot or                                                               
would  it be  the same  loan as  he would  get for  a residential                                                               
house on the same-sized lot.                                                                                                    
                                                                                                                                
MR. LEFSET  answered if  this bill is  enacted and  the homeowner                                                               
follows the  procedures under  the law to  make the  home legally                                                               
real estate, he would qualify for  the same rates as a site-built                                                               
home.  Now when  the  home  is not  considered  real estate  (not                                                               
affixed to  a permanent foundation)  it is subject to  rates that                                                               
are  typically 3  or  4  points higher  like  the  ones that  are                                                               
available to someone financing a home in a mobile home park.                                                                    
                                                                                                                                
SENATOR MEYER said he thought  this change would assist people in                                                               
his district in buying mobile homes.                                                                                            
                                                                                                                                
MR. LEFSET  offered that  manufactured homes  are often  the only                                                               
viable  form of  new housing  that  is workable  in rural  areas,                                                               
because it is  fully assembled in the factory  and transported to                                                               
the home site and installed  on the foundation. The materials and                                                               
labor are minimal.                                                                                                              
                                                                                                                                
CHAIR PASKVAN  asked Mr. Lefset  if he  did legal work  for other                                                               
financial institutions.                                                                                                         
                                                                                                                                
MR. LEFSET  answered yes,  many financial  institutions including                                                               
most  of the  major manufactured  home lenders  and several  park                                                               
operators.                                                                                                                      
                                                                                                                                
CHAIR PASKVAN  said he wanted  to make sure they  weren't missing                                                               
something that other institutions would find.                                                                                   
                                                                                                                                
MR. LEFSET responded that he is  the chair of the Finance Lawyers                                                               
Committee  of the  Manufactured Housing  Institute, the  national                                                               
trade  association  for manufactured  housing,  and  he has  been                                                               
authorized by them to support SB  153. He said he is also counsel                                                               
to  Vanderbuilt Mortgage  Clayton  Homes,  the country's  largest                                                               
manufacturer  of   manufactured  homes,  who  also   favors  this                                                               
legislation.                                                                                                                    
                                                                                                                                
CHAIR PASKVAN asked if he saw any downside.                                                                                     
                                                                                                                                
MR. LEFSET replied, "Only an upside."                                                                                           
                                                                                                                                
2:06:42 PM                                                                                                                    
CHAIR PASKVAN announced an at ease at 2:06 p.m. to 2:07 p.m.                                                                    
                                                                                                                                
JEFF  HARRIS, Wells  Fargo  Bank,  said he  agreed  with all  the                                                               
previous testimony on SB 153.                                                                                                   
                                                                                                                                
2:07:43 PM                                                                                                                    
PAT GREEN,  Wells Fargo Bank, added  to that SB 153  also has the                                                               
endorsement  of  the  Alaska   Bankers  Association  whose  other                                                               
members  include Alaska  Pacific Bank,  Denali State  Bank, First                                                               
Bank  Ketchikan,  First  National  Bank  Alaska,  Key  Bank,  Mt.                                                               
McKinley Bank, North Rim Bank as well as Wells Fargo.                                                                           
                                                                                                                                
MR. GREEN said from internal  conversations he has had with Wells                                                               
Fargo  people  and  Rod  Jackson, their  area  manager  for  home                                                               
mortgages, they  anticipate this  change affecting  2-3 customers                                                               
per month for  Wells Fargo. So that would translate  out to 24-36                                                               
per year.                                                                                                                       
                                                                                                                                
SENATOR MEYER said he didn't see  a fiscal note, but was ready to                                                               
move it on.                                                                                                                     
                                                                                                                                
Finding  no   further  comments,  Chair  Paskvan   closed  public                                                               
testimony.                                                                                                                      
                                                                                                                                
SENATOR  FRENCH  said  he  didn't  think a  fiscal  note  was  an                                                               
absolute requirement, but he pledged to  get one and to work with                                                               
Senator Meyer  to incorporate  his ideas into  the bill.  All the                                                               
members were present and agreed with this understanding.                                                                        
                                                                                                                                
SENATOR  MEYER  moved  to  report  SB  153  from  committee  with                                                               
individual  recommendations and  forthcoming  fiscal note.  There                                                               
were no objections and it was so ordered.                                                                                       
                                                                                                                                
2:13:03 PM                                                                                                                    
CHAIR PASKVAN announced an at ease from 2:13 p.m. to 2:15 p.m.                                                                  
                                                                                                                                

Document Name Date/Time Subjects
CS SB 129 Bill Packet.pdf SL&C 3/2/2010 1:30:00 PM
SL&C 3/9/2010 1:30:00 PM
SB 129
SB 153 Bill Packet.pdf SL&C 3/9/2010 1:30:00 PM
SB 153
SB 302 Bill Packet.pdf SFIN 3/23/2010 9:00:00 AM
SL&C 3/9/2010 1:30:00 PM
SB 302
CS for SB 129 Side-by-Side.pdf SL&C 3/9/2010 1:30:00 PM
SB 129