Legislature(2015 - 2016)BELTZ 105 (TSBldg)
01/28/2016 01:30 PM LABOR & COMMERCE
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HB 12-MORTGAGE LENDING AND LOAN ORIGINATORS 1:39:50 PM CHAIR COSTELLO reconvened the meeting and announced the consideration of HB 12. [This is the first hearing and CSHB 12(L&C) is before the committee.] 1:40:03 PM REPRESENTATIVE SHELLEY HUGHES, Alaska State Legislature, Juneau, Alaska, sponsor of HB 12, introduced the legislation speaking to the following sponsor statement: House Bill 12 improves the mortgage lending industry by equalizing the licensing requirements for mortgage loan originators and mortgage loan brokers according to the kind of work conducted rather than a business structure or anomaly in current statute. Licensing the level of professional duties and the level of liability in the lending process helps create a more equitable and friendly statutory environment for business in Alaska. The bill would also exempt Alaska Housing Finance Corporation and any government agency participating in the Federal HUD (Housing and Urban Development) program from the State mortgage lender/broker licensure requirement. The government agencies would be responsible to ensure that their mortgage loan originators meet standards equivalent to the federal SAFE Act requirements. HB 12 helps create a more level playing field in the mortgage lending industry by eliminating unnecessary layers of licensure and reduces the administrative burden and costs to these businesses. 1:43:38 PM SENATOR COSTELLO asked Ms. Blaisdell to walk through the sectional for the bill. 1:43:56 PM GINGER BLAISDELL, Staff to Representative Shelley Hughes, sponsor of HB 12, provided the following sectional analysis for HB 12: Section 1: Allows for an individual to be licensed as a mortgage loan originator if he/she works under "an exclusive contract for a registered depository institution" or "be sponsored by a registered depository institution under AS 06.60.014." Sponsored means to conduct business under the supervision of a mortgage licensee or registered depository. This section creates a supervisor to employee-type of relationship with contractors. Section 2: Adds a new section that outlines the requirements for a depository institution to be eligible to sponsor a mortgage loan originator. Section 3: Adds exemptions for "a federal, state, or local government agency, including an agency that arranges or provides financing for mortgage loans." In doing this the state of Alaska recognizes these agencies under the final rulings of the SAFE Act effective 8/30/2011. Agencies that will be affected are AHFC that offers HUD loans and the Anchorage HUD Program. MS. BLAISDELL stated that the section exempting non-profits from certain licensing requirements, but that section was removed because some non-profits are venturing into a competitive market place so oversight is warranted. 1:46:46 PM SENATOR COSTELLO pointed out that the fiscal note needed to be updated because it mentions an exemption for non-profits. MS. BLAISDELL continued the sectional analysis. Section 4 adds registered depository institutions to the banks that must have a surety bond. Section 5 adds registered depository institutions that cover more than one location are not required to file more than one bond. Section 6 adds registered depository institutions to the banks that must bond for three years. Section 7 adds registered depository institutions to the banks for which the department can determine that the bond is unsatisfactory. Section 8 requires a registered depository institution to follow the same reporting requirements as a mortgage licensee and be subject to the same penalties if the report is not filed as required. Sections 9-13 add registered depository institutions in the requirements for managing mortgage records. Section 14 references the availability of out-of-state records for registered depository institutions. If a bank is located outside Alaska, the Division of Banking and Securities can go to that other state to conduct an audit or review. Section 15 allows the department investigation and examination authority for registered depository institutions. Section 16 adds a new subsection that defines a "person" as a contractor who is working for the registered depository institution. Section 17 allows the department the authorization to censure, suspend or bar a depository institution in the same manner as a mortgage licensee. Section 18 adds the applicability of administrative procedures to hold administrative hearings and issue disciplinary orders on RDIs for registered depository institutions. Section 19 adds a new definition of a registered depository institution. That is a bank located outside the state of Alaska registering as the supervisor of these independent contractors. MS. BLAISDELL said the effective date will be corrected to reflect January 1, 2017. 1:50:29 PM SENATOR GIESSEL asked if the bill would affect any business other than State Farm Bank. MS. BLAISDELL replied State Farm Bank and its contractors are the primary businesses that would be affected, but there may be others with a similar business model. SENATOR GIESSEL asked if conducting fewer audits will have a positive fiscal impact on the division. MS. BLAISDELL said the fiscal note is zero and she didn't believe that the Division of Banking and Securities anticipated additional costs. The state will see efficiencies if it only audits State Farm Bank as opposed to the 19 audits it conducts now. 1:53:29 PM KEVIN ANSELM, Director, Division of Banking and Securities, Department of Commerce, Community and Economic Development (DCCED), Anchorage, Alaska, introduced herself. CHAIR COSTELLO asked if the administration has a positon on the bill. MS. ANSELM reported that the administration is neutral on HB 12. CHAIR COSTELLO asked if she wanted to comment on the potential efficiencies or any of Senator Giessel's questions. MS. ANSELM offered that the bill would have a zero fiscal impact to the division because they will conduct one larger examination of the employing depository as opposed to individual agents. CHAIR COSTELLO asked if there are any consumer protection issues related to the bill. 1:54:52 PM TRACY RENO, Financial Institutions Examiner, Division of Banking and Securities, Department of Commerce, Community and Economic Development (DCCED), Anchorage, Alaska, said the division will be able to discuss enforcement or supervisory issues with State Farm Bank directly. The division does not have access to those reports right now because they deal with the individual agents. 1:55:28 PM CHAIR COSTELLO opened public testimony for HB 12. 1:55:44 PM KRISTIE BABCOCK, Independent State Farm Agent, Kenai, Alaska, stated that she is an independent contractor State Farm agent. She has been an agent and small business owner in Kenai for the past 16 years and has eight employees. She markets insurance and bank products to Alaskans exclusively on behalf of State Farm Insurance companies and State Farm Bank. She stated that as an originator, she processes initial applications and is required to be licensed and follow all the regulations for mortgage loan originators (MLO). HB 12 doesn't change or reduce that requirement, but it will change the requirement for her to carry a mortgage broker license and serve as her own sponsor and supervisor. Instead, State Farm Bank will be able to step in and register with the State of Alaska as her sponsor and supervisor. The bank assumes all the liabilities, responsibilities and oversight of a mortgage broker. This makes sense because the bank is the lender and she is an originator. It also avoids the circumstance of sponsoring and supervising herself. MS. BABCOCK reported that 26 other states have passed legislation similar to HB 12 and several other states are considering it. She closed emphasizing that HB 12 does not result in any less regulation for MLOs. 2:00:01 PM SENATOR MEYER commented that is sounds as though other states have had this problem and passed similar laws to address the problem. MS. BABCOCK agreed. 2:01:11 PM ROGER BAINBRIDGE, In House Counsel, State Farm Bank (FSB), Bloomington, Illinois, spoke in support of HB 12. He said Ms. Babcock summarized the issues nicely and anything he added would be redundant. Addressing the question of whether this pertained only to State Farm Bank, he clarified that the bill addresses independent contractors who work exclusively in mortgage origination on behalf of a federally chartered bank. Thus, it would apply to anybody that has the same business model as State Farm Bank and meets the definitions that have been added to this legislation. 2:02:20 PM STEVE P. ASHMAN, Division Manager, Public Health Initiatives and Partnerships (PHIP), Health and Human Services Department, Municipality of Anchorage, stated that PHIP manages pass-through programs from the federal government such as Housing and Urban Development (HUD) and falls under both the federal and state SAFE acts. Due to 2011 clarifications of the SAFE Act, HUD determined that state employees are not required to obtain state licenses and registration for any loan origination under a government housing assistant program. As currently written, HB 12 will mirror the federal law and the department is in support of the exemption for government agencies, he said. 2:05:18 PM CHAIR COSTELLO closed public testimony and held HB 12 in committee awaiting updates to the fiscal note and effective date.