Legislature(1995 - 1996)
01/23/1996 08:00 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE January 23, 1996 8:00 a.m. MEMBERS PRESENT Representative Jeannette James, Chair Representative Scott Ogan, Vice Chair Representative Joe Green Representative Ivan Ivan Representative Brian Porter Representative Caren Robinson Representative Ed Willis MEMBERS ABSENT All members present. OTHER MEMBERS PRESENT Speaker of the House of Representatives, Gail Phillips COMMITTEE CALENDAR * HOUSE BILL NO. 369 "An Act extending to certain partnerships and corporations the 10 percent procurement preference currently given to certain sole proprietorships who are Alaska bidders and owned by persons with disabilities." - PASSED OUT OF COMMITTEE * HOUSE BILL NO. 363 "An Act requiring banks to pay interest on money in reserve accounts held in connection with mortgage loans." - HEARD AND HELD * HOUSE BILL NO. 348 "An Act requiring that all official interviews with children who are alleged to have been abused or neglected be videotaped or audiotaped." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 369 SHORT TITLE: PROCUREMENT PREF FOR DISABLED SPONSOR(S): REPRESENTATIVE(S) JAMES JRN-DATE JRN-PG ACTION 12/29/95 2362 (H) PREFILE RELEASED 01/08/96 2362 (H) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2363 (H) STATE AFFAIRS, LABOR & COMMERCE 01/18/96 (H) STA AT 08:00 AM CAPITOL 102 01/18/96 (H) MINUTE(STA) 01/23/96 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 363 SHORT TITLE: INTEREST ON MORTGAGE ESCROW ACCTS SPONSOR(S): REPRESENTATIVE(S) BUNDE JRN-DATE JRN-PG ACTION 12/29/95 2361 (H) PREFILE RELEASED 01/08/96 2361 (H) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2361 (H) STATE AFFAIRS, L&C, FINANCE 01/18/96 (H) STA AT 08:00 AM CAPITOL 102 01/18/96 (H) MINUTE(STA) 01/23/96 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 348 SHORT TITLE: VIDEO/AUDIOTAPE INTERVIEW OF ABUSED MINOR SPONSOR(S): REPRESENTATIVE(S) JAMES, Therriault, Kelly, Toohey JRN-DATE JRN-PG ACTION 05/13/95 2173 (H) READ THE FIRST TIME - REFERRAL(S) 05/13/95 2174 (H) STATE AFFAIRS, HES, JUD, FINANCE 08/26/95 (H) STA AT 01:00 PM 08/26/95 (H) MINUTE(STA) 01/08/96 2383 (H) COSPONSOR(S): KELLY, TOOHEY 01/23/96 (H) STA AT 08:00 AM CAPITOL 102 WITNESS REGISTER WALTER WILCOX, Committee Aide House State Affairs Committee State Capitol, Room 102 Juneau, Alaska 99801-1182 Telephone: (907) 465-3743 POSITION STATEMENT: Provided information on HB 369. STAN RIDGEWAY, Deputy Director Division of Vocational Rehabilitation Department of Education 801 West 10th Street, Suite 200 Juneau, Alaska 99801-1894 Telephone: (907) 465-2856 POSITION STATEMENT: Provided testimony in support of HB 369. DUGAN PETTY, Director Division of General Services Department of Administration P.O. Box 110210 Juneau, Alaska 99811-0210 Telephone: (907) 465-2250 POSITION STATEMENT: Provided comments on HB 369. DAVE GERKE 1265 Norman Street Number 7 Anchorage, Alaska 99504 Telephone: (907) 337-4657 POSITION STATEMENT: Provided testimony in support of HB 369. REPRESENTATIVE CON BUNDE Alaska State Legislature State Capitol, Room 108 Juneau, Alaska 99801-1182 Telephone: (907) 465-4843 POSITION STATEMENT: Provided sponsor statement on HB 363. WILLIS KIRKPATRICK, Director Division of Banking, Securities and Corporations Department of Commerce and Economic Development P.O. Box 110807 Juneau, Alaska 99811-0907 Telephone: (907) 465-2521 POSITION STATEMENT: Provided comments on HB 363. ROBIN WARD, President Summit Title Insurance Agency Ltd. 341 West Tudor Road, Suite 102 Anchorage, Alaska 99503 Telephone: (907) 562-3770 POSITION STATEMENT: Provided comments on HB 363. BARBARA COTTING, Legislative Assistant to Representative Jeannette James State Capitol, Room 102 Juneau, Alaska 99801-1182 Telephone: (907) 465-3743 POSITION STATEMENT: Provided sponsor statement on HB 348. GENE OTTENSTROER P.O. Box 1059 Delta Junction, Alaska 99737 Telephone: (907) 895-4805 POSITION STATEMENT: Provided comments on HB 348. NANCY BUELL, Director Education Program Support Department of Education 801 West 10th Street, Suite 200 Juneau, Alaska 99801-1894 Telephone: (907) 465-8689 POSITION STATEMENT: Provided comments on HB 348. JAYNE ANDREEN, Executive Director Council on Domestic Violence and Sexual Assault Department of Public Safety P.O. Box 111200 Juneau, Alaska 99811-1200 Telephone: (907) 465-4356 POSITION STATEMENT: Provided comments on HB 348. DEL SMITH, Deputy Director Office of the Commissioner Department of Public Safety P.O. Box 111200 Juneau, Alaska 99811-1200 Telephone: (907) 465-4322 POSITION STATEMENT: Provided comments on HB 348. YVONNE CHASE, Deputy Commissioner Office of the Commissioner Department of Health and Social Services P.O. Box 110601 Juneau, Alaska 99811-0601 Telephone: (907) 465-3030 POSITION STATEMENT: Provided comments on HB 348. BETTY ROLLINS P.O. Box 55163 North Pole, Alaska 99705 Telephone: (907) 488-9030 POSITION STATEMENT: Provided testimony in support of HB 348. CHARLES ROLLINS P.O. Box 55163 North Pole, Alaska 99705 Telephone: (907) 488-9030 POSITION STATEMENT: Provided testimony in support of HB 348. LAUREE HUGONIN, Executive Director Alaska Network on Domestic Violence and Sexual Assault 130 Seward Street, Room 501 Juneau, Alaska 99801 Telephone: (907) 586-3650 POSITION STATEMENT: Provided comments on HB 348. JODI DELANEY 3200 Kris Kringle Drive North Pole, Alaska 99705 Telephone: (907) 488-0334 POSITION STATEMENT: Provided comments on HB 348. GENE ALTIG 4396 Al Cory Road North Pole, Alaska 99705 Telephone: (907) 488-4216 POSITION STATEMENT: Provided comments on HB 348. HARRY NIEHAUS P.O. Box 55455 North Pole, Alaska 99705 Telephone: (907) 488-9328 POSITION STATEMENT: Provided comments on HB 348. SCOTT CALDER P.O. Box 75011 Fairbanks, Alaska 99707 Telephone: (907) 474-0174 POSITION STATEMENT: Provided comments on HB 348. ACTION NARRATIVE TAPE 96-02, SIDE A Number 0000 The House State Affairs Committee was called to order by Chair Jeannette James at 8:00 a.m. Members present at the call to order were Representatives James, Ivan, Porter and Willis. Members absent were Representatives Ogan, Green and Robinson. HB 369 - PROCUREMENT PREF FOR DISABLED The first order of business to come before the House State Affairs Committee was HB 369. Number 0056 CHAIR JEANNETTE JAMES announced Walter Wilcox, Committee Aide, would present the sponsor statement for HB 369. WALTER WILCOX, Committee Aide, House State Affairs Committee, read the following sponsor statement into record. "This Bill allows 100% disabled owned corporations and partnerships to be eligible for a disabled bidder preference. "Current law allows disabled owned sole proprietorships to take advantage of the disabled bidder preference that excludes partnerships and corporations. This bill rectifies that." Number 0135 CHAIR JAMES asked if there were any questions or comments. She called on the first witness Stan Ridgeway, Deputy Director, Division of Vocational Rehabilitation. Number 0156 STAN RIDGEWAY, Deputy Director, Division of Vocational Rehabilitation, Department of Education, said the division supported HB 369. He stated it would allow persons with disabilities who were sole owners of corporations to qualify for state bidders preference. CHAIR JAMES asked if there were any further questions or comments. Number 0240 REPRESENTATIVE IVAN IVAN enquired to what extend a person needed to be disabled to qualify for HB 369. Number 0264 MR. RIDGEWAY responded the Department of Education defined an individual severely disabled if a major life function was restricted. For veterans, he stated, it was defined as 50 percent and above of a major life function restricted. Mr. Ridgeway further cited examples of individuals blind, deaf or in a wheelchair as severely disabled. Number 0308 CHAIR JAMES announced the presence of Representatives Robinson, Green and Ogan. CHAIR JAMES asked if there were any further questions or comments. REPRESENTATIVE JOE GREEN said there was a similar bill passed and modified in the Senate last year then vetoed. He asked, for the record if those differences had been discussed. Number 0340 CHAIR JAMES responded HB 369 was written the same way the Senate bill was written before modification, and declared the Administration agreed to support it. She further stated she hoped the bill would move forward without modifications. Chair James called on Dugan Petty, Director, Department of Administration. Number 0392 DUGAN PETTY, Director, Division of General Services, Department of Administration, said the department did not object to HB 288 last year. Mr. Petty said HB 288 corrected the inequity by adding the qualifying entities of partnership and corporation for those with disabilities. CHAIR JAMES asked if there were any further questions or comments. Number 0476 REPRESENTATIVE BRIAN PORTER moved that HB 369 move from committee. Hearing no objection, HB 369 was moved from the House State Affairs Committee with the attached fiscal note and individual recommendations. Number 0569 CHAIR JAMES agreed to take further testimony despite the bill had been moved and passed from the committee. She called on Dave Gerke via teleconference in Anchorage. DAVE GERKE sole proprietor of Sunshine General said he had been disabled due to a heart attack since 1983. He announced he completely supported HB 369 and especially the qualifying entity of corporation. He thanked the committee for their efforts. HB 363 - INTEREST ON MORTGAGE ESCROW ACCTS Number 0645 The next order of business to come before the House State Affairs Committee was HB 363. REPRESENTATIVE CON BUNDE read the following sponsor statement into record. "Congress found that many lenders were maintaining bloated escrow accounts with a year or more of excess escrow payment in them. Lenders called this excessive amount a "cushion," but are unable to justify the need for such an excess. In response, Congress has enacted the Real Estate Settlement Procedures Act (RESPA) which prohibits lenders and mortgage servicers from requiring consumers to maintain more than an extra two months' worth of the yearly amount necessary to pay taxes and insurance premiums. Some escrow accounts do not have more than two months' payment available. However, the accounting system used by the institutions holding the escrow account may cause the account to be seriously over the two month ceiling set by RESPA. "Lenders often invest these escrow accounts for the short term and use the profits as their institution sees fit. The consumer that pays into the escrow account gives the use of their money to the bank and gains nothing." Representative Bunde interjected and said it was considered previously in Alaska to pay interest on escrow accounts but was discovered it was only worth a few dollars. As a result, some felt it was not worth the effort. Collectively, however, the mortgages generated a great deal of money. He continued to read his sponsor statement into the record. "Therefore the institutions that hold escrow accounts have an incentive to ignore RESPA and bloat their accounts in order to maximize profits." He further stated some mortgages did not allow the two month cushion that RESPA supported. Most institutions, however, used the two month cushion even though the underlying mortgage prohibited any cushion or more than a one month cushion. He continued to read his sponsor statement into the record. "HB 363 would require lending institutions to pay interest on money in escrow in reserve accounts. The interest shall be credited to the principal balance of a mortgage or paid directly to the borrower. "It's certainly time lending institutions give the consumer a better deal and I urge the committee to careful consideration of passage of this legislation." Representative Bunde said he would be happy to answer any questions. Number 0897 REPRESENTATIVE GREEN commented he understood the concept of a two month pool built to pay insurance, but wondered about accounts paid semi-annually such as property taxes. Number 0929 REPRESENTATIVE BUNDE responded there was an accounting system that separated the items. Number 0965 REPRESENTATIVE GREEN stated it would be an additional safety if an account was above the amount due. Number 0975 REPRESENTATIVE PORTER enquired why a lending institution would not make up the difference in fees performed on the loans for the various costs they were reserving for the funds. They were actively involved in paying and receiving bills, he said. Number 1000 REPRESENTATIVE BUNDE responded there was a service and a cost attached. However, an accounting for that cost needed to be established rather than alluding to it as a "slush" fund, he asserted. Number 1037 REPRESENTATIVE SCOTT OGAN referred to the language "a bank" in HB 363, and questioned if there was a more generic term to cover other entities such as credit unions. He recommended the term "lending institution." Number 1066 REPRESENTATIVE BUNDE agreed the more appropriate term was "lending institution" and commented he did not attempt to single out banks. REPRESENTATIVE OGAN asked if it would be appropriate to make a motion to amend the language. REPRESENTATIVE BUNDE said it was an oversite on his part. He thought the language had already been corrected. Number 1109 REPRESENTATIVE GREEN suggested it be used in the definition of "bank" to cover everything. Number 1115 REPRESENTATIVE BUNDE said he was using the term "bank" generically and suggested Willis Kirkpatrick, Director, Division of Banking, Securities and Corporations, Department of Commerce and Economic Development respond to the dialogue for technical support. Number 1135 REPRESENTATIVE IVAN asked how Representative Bunde arrived at the 2 percent figure stated in HB 363. Number 1145 REPRESENTATIVE BUNDE responded it was an area of discussion and a starting point for negotiation. He announced he was willing to discuss the figure. Number 1185 CHAIR JAMES asked why it was not the same as a savings account interest rate. Number 1190 REPRESENTATAIVE BUNDE responded it was a good suggestion. Number 1195 REPRESENTATIVE GREEN said 2 percent mentioned in HB 363 narrowed the difference more than a savings account. He stated there was, more often than not, a larger gap than 2 percent between the lending and saving account. He said he understood why Representative Bunde wanted to close the gap. Number 1211 CHAIR JAMES responded institutions would be obliged to stay at the 2 percent rate rather than give an accelerated rate based on the overall banking theory. Therefore, paying extra money, for the use of money, in this case, challenged that concept. She asserted this would result in more service charges because it would cost the banks extra. Number 1258 REPRESENTATIVE GREEN further stated this created a tendency not to use the money. He alluded the bill was intended to reduce the number of banks using the reserve accounts for their own gain. Number 1266 CHAIR JAMES asked if Representative Bunde had any figures on the discrepancy in reserved accounts. She said she knew of a number of institutions where there were insufficient funds demanding adjustments the following year. She stated this was especially true when taxes were increased. She further questioned if the cushion was sufficient - too much or too little. Number 1300 REPRESENTATIVE BUNDE responded he had figures nationwide and reminded the committee members many Alaskans took their mortgages to banks outside. The purpose of the cushion, he further said, was so that lending institutions would not have to dip into their funds. He said institutions did not dip into their accounts nationwide. The cushion sometimes was several months up to a year in excess of what was needed to protect themselves. Representative Bunde again stated Willis Kirkpatrick was here to testify and to answer any technical questions. Number 1355 CHAIR JAMES replied the balance in escrow accounts were relatively small according to her experiences in tax preparation. Number 1372 REPRESENTATIVE BUNDE stated a similar bill had been introduced to the Alaska State Legislature several years ago. The impetus was based on a situation where a woman could not move her money from one mortgage to the next. CHAIR JAMES asked if there were any further questions or comments. Number 1425 WILLIS KIRKPATRICK, Director, Division of Banking, Securities and Corporations, Department of Commerce and Economic Development, said he was not here to testify but to answer any questions. Number 1465 REPRESENTATIVE GREEN referred to the question asked earlier, if it was customary for lending institutions to have a "cushy" amount or a modest amount in excess. Number 1480 MR. KIRKPATRICK responded according to RESPA, institutions were not allowed to have more than two months of cushion as far as taxes and hazardous insurance were concerned. In his situation, he shared, his escrow account was always short especially when taxes were paid in September, and his payments tended to increase every year due to the shortage. Mr. Kirkpatrick shared with the committee member his tax bill was around $2,000 which meant he would have around $2,000 in September in his escrow account. He further stated 90 institutions outside of Alaska regulated under Title VI - banks, credit unions and mutual savings banks - had a certificate of authority to do lending business in the state. He questioned how an escrow account outside of Alaska would be affected by HB 363. He also commented mortgage loans were accessed over the internet now and wondered how this would affect the bill. Number 1625 REPRESENTATIVE GREEN said there were many institutions not adhering to the federal law. He also asserted the law was not being enforced. He asked if there really was a problem, or was something needed to reassure the federal law. Number 1655 MR. KIRKPATRICK said he did not have the information available to answer Representative Green's question. He felt the commercial banks, credit unions and mutual savings banks were complying with the federal law. Number 1673 REPRESENTATIVE PORTER asked if HB 363 would put Alaska in an inferior position. Number 1693 MR. KIRKPATRICK responded financial institutions were targeted under the generic term "bank." He stated it was a highly competitive business and Congress was continually battling the over regulation of banks. There were other financial intermediaries that had no Congressional regulations, such as American Express. He divulged there were other states that had this law and were not put at a disadvantage. A financial institution would have to look at the law as the cost of conducting business, and it would increase their interest expense. He concluded, he really did not know if HB 363 would put Alaska at a disadvantage. CHAIR JAMES asked if there were any further questions or comments. Number 1765 REPRESENTATIVE CAREN ROBINSON asked if the committee was going to change the wording to read "financial institutions" rather than "banks." Number 1693 MR. KIRKPATRICK suggested to change the wording under Title VI, chapter one, the administrative title, would direct all institutions under the title. He was not sure how to include mortgage companies, but agreed the term "bank" needed to be broadened. Number 1765 REPRESENTATIVE ROBINSON suggested Mr. Kirkpatrick think about the wording further and return with a recommendation. Number 1828 MR. KIRKPATRICK agreed with Representative Robinson's statement. Number 1830 REPRESENTATIVE ROBINSON asked Mr. Kirkpatrick to respond to Representataive Ivan's earlier question regarding the 2 percent interest referenced in HB 363. Number 1840 MR. KIRKPATRICK cited if the mortgage loan interest rate was 10 percent, therefore, according to HB 363, the escrow interest would be 8 percent. That, he said, was a favorable rate. Mr. Kirkpatrick shared with the committee his account was only paying 2.3 percent interest. He suggested looking at the relationship between the deposit and the interest of a depository institution. If, however, it was not a depository institution he did not know what to recommend. Number 1893 REPRESENTATIVE ROBINSON said this discussion made her curious about her own mortgage account. Number 1906 CHAIR JAMES called on a banking industry representative to testify. ROBIN WARD, President, Summit Title Insurance Agency Ltd., said the Alaska Mortgage Bankers Association (AMBA) opposed HB 363. She said it would cause a problem with competitive mortgage rates within Alaska. There was a national law in effect that restricted institutions to a small escrow cushion account. Consequently, the institutions could no longer hold the excess needed to pay the taxes, insurance or any other items held in escrow. The important part, however, was that investors provided a free flow of competitive rates in Alaska. With this requirement came an administrative service cost to monitor each loan, she asserted. Right now, the servicers were providing the service at no charge. However, HB 363, would result in institutions charging a fee for that service. She alleged it was an administrative and an accounting nightmare to keep track of and pay interest. As a result, interest rates would increase to cover the fees. The greatest concern, she asserted, was the possibility companies would not want to do business in Alaska affecting the competitiveness of the interest rate and the attractiveness of the state to loan money to. Number 2071 REPRESENTATIVE GREEN enquired if Ms. Ward's banking institution was not complying with federal law. Number 2077 MS. WARD said as far as she knew the banking institutions were complying with federal law and were holding a very small cushion of two months in excess. Number 2090 REPRESENTATIVE GREEN remarked that HB 363 did the same thing. MS. WARD replied it did not. REPRESENTATIVE GREEN asked where it was different from the federal law. Number 2093 MS. WARD said HB 363 required the servicer to pay interest on the amount of money held to the buyer in reserve to pay their taxes and insurance. Number 2110 CHAIR JAMES commented escrow accounts were calculated at the beginning of the year based on an estimate of the amount of insurance and taxes due. Number 2126 MS. WARD responded that was exactly what happened. That was the only difference in a payment on a loan. She said they based it on the past years taxes for the coming year. Number 2138 CHAIR JAMES responded 1/6 of taxes and 1/6 in addition to the requirement for the taxes and insurance was held. Number 2146 MS. WARD said it was more complicated than the above description by Chair James. She cited in Anchorage taxes were paid in two separate installments and insurance was paid in one installment. Ms. Ward agreed, however, that was the general idea. Number 2159 REPRESENTATIVE BUNDE referred to a handout titled "Overcharging on Mortgages: Violations of Escrow Account Limits by the Mortgage Lending Industry" by the attorneys general of California, Florida, Iowa, Massachusetts, Minnesota, New York and Texas." The report found the banking industry was not as service oriented as prior testimony had indicated. He referred the committee members to page 8 of the report and called their attention to the individual item analysis verbiage. He alluded the accounting system allowed only a two month cushion the day the insurance payment was due and an equal amount due in taxes in six months. Therefore, the two month cushion sat for six months. Representative Bunde said there was a cost for this service. It was derived from the interest gained on the float. He stated it might be equal to the cost of doing business, but no one really knew. If interest were paid on the escrow, the state of Alaska would attract more money and mortgages, he suggested. Representative Bunde further said in response to a previous comment, this was not an accounting nightmare due to computer technology. He agreed with previous testimony the money belonged to the homeowner. Representative Bunde further stated the entire purpose of HB 363 was to make sure the bank complied with RESPA. He advised the bill was an encouragement to comply with federal law and further suggested banks should be required to pay interest on anything over the two month cushion. He said, he did not want the bank to use its own money nor charge a service fee. However, there was no assurance the banks were only using the amount of money they needed for the service charge now. Number 2324 CHAIR JAMES stated the mortgage owner needed to take individual responsibility. She questioned whether the mortgage escrow account was setup for the benefit of the bank or the individual. If it were setup for the individual they would have a choice where their money went until it was required to make their insurance and tax payments. Currently, individuals did not have a choice. She further voiced there was little argument to pay interest other than what was the standard passbook savings interest. Lastly, Chair James declared the individual needed to take more responsibility to ascertain if their account was being handled legally. REPRESENTATIVE BUNDE responded the market forces would respond if there was a lending institution acting unlawfully. He further stated the main issue was no one knew how much money was being made on servicing a loan. The difference between the interest and the charges, he asserted, was the problem. He agreed with Chair James that passbook savings was a logical interest amount. Number 2405 CHAIR JAMES stated we did not know the situation collectively, but each person would be able to ascertain their situation individually. Number 2425 REPRESENTATIVE BUNDE cited an example where an individual negotiated a mortgage with no escrow account so the individual was responsible for paying his own taxes and insurance. He further stated escrow accounts were a product of the 1930's when individuals could not pay their taxes and insurance. However, that was not the situation today. Representative Bunde lastly pointed out there were 14 states that passed similar legislation and mortgages were still being made. TAPE 96-2, SIDE B Number 0000 REPRESENTATIVE ROBINSON questioned why HB 363 was necessary when a federal law existed and suggested a resolution requiring the state financial lenders to follow the federal law. Number 0037 REPRESENTATIVE BUNDE responded a state resolution would not have an impact when they did not follow the federal law now. Number 0042 CHAIR JAMES questioned if there was evidence the banks were not following the federal law. Number 0047 REPRESENTATIVE BUNDE said there was evidence at a nationwide level. CHAIR JAMES asked about Alaska. REPRESENTATIVE BUNDE replied many mortgages went outside Alaska and on a national level there was evidence they were not following the federal law. Based on the individual item analysis accounting system, literally billions of dollars were in excess of actual expenses. He suggested billions of dollars was a lot of money when considering the cost of servicing a loan. Number 0071 REPRESENTATAIVE GREEN referred to page 9 of the report titled "Overcharging on Mortgages: Violations of Escrow Account Limits by the Mortgage Lending Industry" by the attorneys general of California, Florida, Iowa, Massachusetts, Minnesota, New York and Texas." He referred the committee members to the bar graph depicted which illustrated the escalation in the account before each payment. Representative Green questioned why passbook interest could not be paid to the amount above the RESPA ceiling. Number 0100 REPRESENTATIVE BUNDE replied that was his original idea. However, the individual item analysis accounting method calculated a two month cushion. The goal he reiterated was to forbid the individual accounting method, require a collective two month cushion, and mandate institutions to pay interest on anything collected over the two month cushion. The consumer, however, had no choice in the amount of money the bank required for their mortgage payments to service the loan without interest. He asserted, the question was how much was actually needed to service the loan. He commented he would prefer to see the bank charge a service fee and then pay interest. Number 0163 REPRESENTATIVE GREEN said he knew of lending institutions that paid interest on checking accounts without charging a service fee and it did not appear to be an accounting nightmare as previous testimony indicated. He suggested, the 1/4 to 1/2 percent additional loan fee to cover the cost was inflated. Representative Green further suggested there must be a method to discourage the banks from collecting beyond the two month cushion and perhaps charge a fraction of the amount of money they planned to make on the excess. He cited, if the banks were making 10 percent and paying 3 percent on the excess they were still making money as well as the customer. Number 0215 REPRESENTATIVE BUNDE responded it was not a huge amount of money. However, it was a forced participation as Chair James stated earlier. He suggested the comfort level would increase if the participants knew that only the amount of money necessary to service the loan was being used. Representative Bunde further said this was a highly competitive industry and when given the chance to make money institutions would. Number 0261 REPRESENTATIVE OGAN asked if Ms. Ward had any further comments. Number 0282 MS. WARD said, due to possible liens on mortgages, taxes and insurance, payments were necessary to protect the lender. Most of the loans made in Alaska, she stated, were high ratio requiring less than 10 percent down. Therefore, to protect the lender the property was used as collateral. Number 0319 CHAIR JAMES said she felt it was not an accounting nightmare if passbook savings interest was paid on the balance in the escrow account. She further alleged it was an advantage to the bank to pay interest to help ensure there was sufficient money in the account to pay the bills. Number 0338 MS. WARD said that was true, except currently, the mortgage rates were 7.5 to 8 percent and the majority of the interest rate went to the investor and not the servicer. Number 0366 CHAIR JAMES asked whether servicers, not banks, maintained escrows in an interest bearing or a trust account. Number 0382 MS. WARD replied it was held in an interest bearing account. She further commented the servicer was working for the investor. Number 0388 CHAIR JAMES said in this case the homeowner did not get any benefit from the interest bearing account. Number 0395 MS. WARD replied the impound account protected the loan and the collateral according to the servicer. She cited she recently received a refund from her impounded account. Number 0412 CHAIR JAMES asked if there were any further questions or comments. REPRESENTATIVE BUNDE informed the committee members the statues defined "bank" and "banking." CHAIR JAMES also reported the term "bank" was defined broadly and included all other financial institutions. Number 0430 CHAIR JAMES said she would like to work closely with the sponsor of HB 363 and address the interest dilemma. She proposed a possible committee substitute was necessary. Number 0461 REPRESENTATIVE BUNDE thanked the chair and quoted 3 percent as a fair amount or tie it to a passbook savings interest. Number 0472 CHAIR JAMES responded there were institutions that did not have passbook savings. Number 0480 REPRESENTATIVE BUNDE replied then an average of passbook savings paid in Alaska was fair. He further reiterated Ms. Ward's testimony that servicers made money on the interest in the escrow accounts. He suggested there existed the potential to pad the escrow and urged the committee members to require paying a predetermined percentage on the entire account to prevent dishonestly. Number 0509 REPRESENTATIVE PORTER suggested the subcommittee address other issues as well. He expressed he was not sure if a problem really existed. He commented there was the unknown cost factor added to the mortgage account based on the institution benefitting, but the borrower benefited as well by not having to pay for the services. Furthermore, the testimony today indicated the services were required. Representative Porter, in conclusion, stated, if we were to compensate the borrower for using the money then we should also compensate the institution for the service. He further said he was not comfortable passing a bill that could potentially cost people money. Number 0580 CHAIR JAMES disagreed with Representative Porter. She alleged the institutions were providing a service for themselves and not for the mortgage holder. Number 0629 REPRESENTATIVE ROBINSON appreciated the consumer right aspect of HB 363 but again questioned whether or not a bill was necessary. She stated the committee should enforce the banks to comply with the existing laws rather than produce another piece of legislation. Number 0670 CHAIR JAMES said the issues involved were putting money into an interest bearing account and not getting a return and taking away individual responsibility. Chair James expressed it was an individual's responsibility to comply with the escrow laws. She lastly asked for members who were interested in working on HB 363 further. Number 0743 REPRESENTATIVE BUNDE replied to Representative Porter's previous comment regarding the service fee. He said, the consumer was paying a service fee now, however, they did not know how much. CHAIR JAMES asked Ms. Ward if she would be available in the future to answer further questions. MS. WARD responded, "yes." Number 0788 CHAIR JAMES excused Representative Ogan due to an Oil and Gas Committee meeting. HB 348 - VIDEO/AUDIOTAPE INTERVIEW OF ABUSED MINOR Number 0797 The next order of business to come before the House State Affairs Committee was HB 348. CHAIR JAMES explained, Barbara Cotting, Legislative Assistant to Representative Jeannette James, was here to read the sponsor statement. BARBARA COTTING, Legislative Assistant to Representative Jeannette James, read the following statement into the record. "The intent of the bill is to have a video camera or an audiotape recorder turned on immediately at the start of the original, initial official interview with an allegedly abused or neglected child and top record the entire interview and all subsequent interviews with the child. "When dealing with emotion-lade situations, adults' perceptions and memories are not necessarily reliable; and children can be led to make imaginary happenings sound like fact and to finally believe these fantasies themselves. The credibility of all parties can become suspect and an accurate objective judgement is then impossible. This bill would held dispel incorrect perceptions and allow fairness to all parties involved. "I met with strong resistance from DFYS and other state agencies when I introduced a similar bill two years ago. This year the agencies should be much more receptive due to a recent Ombudsman's investigation, which found: "Arguments in favor of videotaping or at least audiotaping are as compelling as those against the practice.... "Administrative conveniences does not justify lack of agency accountability in this sensitive area.... "Where video and audio recorders might have intimidated children in the 1960's, the same likely cannot be said in the 1990's. (Sponsor's insert: I also believe that taping makes the child feel validated, not intimidated.) And finally.... "Social workers questioned by the ombudsman investigator either said that audio taping would not be a problem and might be easier than note taking, or said that a videotape would be the best way to review a case. "HB 348 will help implement sound public policy by requiring accountability of agency action in the sensitive area of state interference in private family life, and I strongly urge your support for this important piece of legislation." CHAIR JAMES asked if there were any questions or comments and called on Gene Ottenstroer via teleconference in Delta Junction. MS. COTTING said, for the record, Steve Grunstein, P.O. Box 32604, Juneau, Alaska 99803, (907) 789-2155, called and stated an important line needed to be drawn between abuse and discipline. GENE OTTENSTROER said HB 348 helped but was not the answer. He referred the committee members to line 13, "A school official shall be present during an interview at the school unless the child objects...." Mr. Ottenstroer asserted a parent needed to be present also. He alleged a child would be nervous without a parent present when faced with officials. He also referred the committee members to page 2, line 2, "The interview shall be videotaped or audiotaped as required by AS 47.17.035." He stated the interview should be done by a non-biased party. The police department, he said, had been known to tamper with tapes to their advantage. He further referred the committee members to line 6, "the department or agency shall make every reasonable effort to notify the child's parent, guardian, or custodian that the interview occurred unless it appears to the department or agency that notifying the child's parent, guardian, or custodian would endanger the child." Mr. Ottenstroer questioned, who, had the authority to make that decision. He stated, a social worker would cause problems. He also cited the case described in the State of Alaska Ombudsman report dated June 21, 1995. He said it had gotten to the point where parents could not touch their children. CHAIR JAMES called on the next testifier, Nancy Buell, Director, Education Program Support. NANCY BUELL, Director, Education Program Support, Department of Education, stated the protection of the child and the availability of technology were the two issues the department was concerned about. Ms. Buell alleged the factors that influenced children were trust, stress, and technology. She further alleged technology was not always reliable or available in rural areas potentially keeping the child in a dangerous situation. She stated the department did not oppose HB 348 but was concerned administrative convenience would interfere with the intent of the legislation. Number 1430 CHAIR JAMES asked the committee members if they wanted to hold questions until the end or after each testimony. Number 1444 REPRESENTATIVE ROBINSON replied it was best to ask questions after each testimony. CHAIR JAMES asked if there were any further questions or comments. Number 1456 MS. BUELL further stated she was concerned about the cultural protection of children. She cited for spiritual reasons some cultures did not allow video/audiotaping. CHAIR JAMES responded she was open to any suggestions. Number 1475 REPRESENTATIVE IVAN said he would like to absorb the information presented further before asking any questions. CHAIR JAMES called on the next testifier, Jayne Andreen, Executive Director, Council on Domestic Violence and Sexual Assault. Number 1503 JAYNE ANDREEN, Executive Director, Council on Domestic Violence and Sexual Assault, said she was concerned about the initial interview of children who had alleged abuse or neglect. She asserted it was important to look at the children's needs upon disclosure. Ms. Andreen cited the environment must be safe and supportive, and the children must be surrounded by someone they trust. She stated the majority of child abuse complaints did not go beyond the initial complaint and was concerned HB 348 would subject Alaskan children to a formal process potentially causing damage. Number 1675 REPRESENTATIVE ROBINSON asked Ms. Andreen what type of interviews were being conducted around the state. She stated at one point interview rooms were at the prosecutor's office and then at some point all parties involved were videotaped in an official interview. Number 1715 MS. ANDREEN responded the ideal situation was to use a one-way mirror with a camera in another room. The interview was usually conducted after a determination had been made that it was warranted by trained officials such as a police officer. The idea was to get it on tape for the court and to eliminate the number of times the child had to repeat his testimony. Number 1783 REPRESENTATIVE ROBINSON suggested to the committee members more information was needed statewide to ascertain exactly what was being done to eliminate repeated testimony. Number 1855 CHAIR JAMES called on the next testifier, Del Smith, Deputy Commissioner, Office of the Commissioner, Department of Public Safety. DEL SMITH, Deputy Commissioner, Office of the Commissioner, Department of Public Safety, stated the department had some practical concerns regarding HB 348. Mr. Smith expressed the logistical concerns of furnishing interview rooms throughout the state and was afraid someone would not be prosecuted because of technical problems. He suggested officials use a tape recorder in the field to eliminate repetition and interpretation mistakes. Number 1968 REPRESENTATIVE ROBINSON questioned if bringing all the parties concerned together for an initial interview was the direction the state should take. Number 1993 MR. SMITH replied it was the best direction to take. Repeated interviews were problematic and any way to capture the information needed in the initial interview was less intrusive. However, statutorily mandating this would cause problems, he alleged. Number 2044 REPRESENTATIVE ROBINSON asked Mr. Smith if children were reporting the incident to a teacher, for example, whereupon the teacher would contact the appropriate authorities. Number 2073 MR. SMITH responded he imagined a child would tell a teacher what happened and because it was not recorded he was concerned the information would be suppressed. CHAIR JAMES called on the next testifier, Yvonne Chase, Deputy Commissioner, Office of the Commissioner, Department of Health and Social Services. Number 2121 YVONNE CHASE, Deputy Commissioner, Office of the Commissioner, Department of Health and Social Services, said the department conducted a study to look at videotaping. The report in summary stated at this point no state had a mandatory videotaping policy. However, 35 states actively use audio/videotaping. The department did not oppose the use of videotaping, she asserted, when useful, but there were problems inherent when mandating such legislation. Ms. Chase further stated HB 348 clearly demonstrated what happened during an interview affected the outcome of a case. She informed the committee members staff at the Department of Health and Social Services indicated they would like to use audiotaping more widely for accountability and training reasons. She lastly asked the committee to consider the logistical and legal issues involved with this bill. TAPE 96-3, SIDE A Number 0000 CHAIR JAMES asked if there were any further questions or comments. Number 0070 REPRESENTATIVE PORTER said he was only familiar with Anchorage cases and commented it was unlikely a DFYS professional, for example, would be the initial contact person. He questioned if there were in fact times when a DFYS professional was the initial contact. Number 0123 MS. CHASE responded teenagers self-referred themselves to DFYS. CHAIR JAMES asked if there were any further questions or comments and called on Betty Rollins via teleconference in Fairbanks. Number 0140 BETTY ROLLINS said she could not imagine why a department such as DFYS would object to videotaping an interview for the protection of the child and the agency. Ms. Rollins asserted she supported the mandate for fear of agencies using technical reasons as excuses not to tape the interview. She further expressed parents should be notified of the interview but not necessarily present at the interview. Ms. Rollins also expressed her concerns of agencies writing the bill for fear of changing the intent. She suggested individuals carried the equipment with them as small cameras were available. She said she preferred a videotape over an audiotape for fear of tampering. In conclusion, she said, she supported HB 348 because it protected the agency, the child, and the parent. CHAIR JAMES called on the next testifier, Charles Rollins via teleconference in Fairbanks. Number 0330 CHARLES ROLLINS said he supported HB 348. Child abuse was a serious crime and the children were worth the expense of such a bill. CHAIR JAMES called on the next testifier, Lauree Hugonin, Executive Director, Alaska Network on Domestic Violence and Sexual Assault. Number 0388 LAUREE HUGONIN, Executive Director, Alaska Network on Domestic Violence and Sexual Assault, discussed the tenderness of child abuse as a topic. It was a difficult dialogue and she appreciated the legislature for addressing the issue. She stated it was a surprise to learn in Alaska only certain professionals were qualified to report child abuse. She asked the committee members to think about the mitigation of false reporting and suggested there needed to be an opportunity to check each report. Ms. Hugonin said we needed to look at what was best for children. She further suggested more training would be necessary to ensure accurate interviews. She reiterated earlier testimony that the fewer interviews the better for the children to lessen the trauma. She suggested a solution was to provide a room with a two-way mirror and video camera where the experienced personnel were present behind the mirror asking the needed questions. This, she hoped, would prevent repeated interviews. She also suggested different requirements and expectations for different ages. She said she was concerned about the storage of tapes in the event of an unfounded case, for example. In conclusion, she stated she was concerned about the good faith of people reporting cases and was concerned about creating an environment which would discourage reporting of abuse. CHAIR JAMES called on the next testifier, Jodi Delaneyvia telephone in North Pole. Number 0888 JODI DELANEY said she lost her family due to a child abuse allegation. Ms. Delaney asserted videotaping was a check and balance in the system. She inferred there was not a check and balance on the social workers and cited a case where her nephew was sexually abused in a specialized foster home. She further stated Alaska led the nation in false allegations of child abuse and no one was available to pick up the pieces. She cited 60 percent of allegations were false and 80 hours minimum were spent on investigating each case. Ms. Delaney felt a videotape of an interview would decrease false allegations, and all individuals involved would be working from the same report. She further stated all laws on child abuse were written as if the parent was the perpetrator. She declared a video camera was a very inexpensive tool to save the lives of families. She questioned the domino effect on the family in the event of a false allegation. Ms. Delaney declared she had designed a chart to illustrate how the state of Alaska could save money to help our social workers. She stated she requested for two years a grievance procedure after she was falsely accused. She cited there were hidden agendas in the system and they needed to be cleaned-up. She further asserted if there had been a videotape in her case she would not have been falsely accused. In conclusion, she cited her son was highly traumatized by the process. CHAIR JAMES introduced the next testifier, Gene Altig via teleconference in North Pole. Number 1444 GENE ALTIG suggested the teacher should be the interviewer. He referred the committee members to line 12, page 1 and line 6, page 2, and agreed parents needed to be notified. Mr. Altig responded to earlier testimony regarding the storage of tapes. He stated, technology already existed to conveniently store them. He expressed his desire for videotaping over audiotaping and cited the Rodney King court case. CHAIR JAMES called on the next testifier, Harry Niehaus via teleconference in North Pole. Number 1515 HARRY NIEHAUS said HB 348 needed work for the simple reason an audiotape could be turned off and manipulated. However, a videotape displayed the time and date therefore protecting the child. Mr. Niehaus also stated accountability and checks and balances were needed in the system. He referred the committee members to line 6, page 2 and suggested striking "make every reasonable effort" and replace it with "the department shall." He also referred the committee members to page 1, line 14, "A school official shall be present during an interview at the school unless the child objects." An official should be present even if a child objected due to accountability, he asserted. CHAIR JAMES called on the next testifier, Scott Calder via teleconference in Fairbanks. Number 1625 SCOTT CALDER said HB 348 moved in the right direction. He stated, however, the provision for audiotaping was not a good idea. Strong, empirical evidence was needed to prove or disprove the actions of the government to protect family integrity. The lack of public trust was the real issue, he alleged. Mr. Calder said he could not think of any reason to trust the individuals involved in an investigation. He expressed accountability was needed in the departments interfering with family life. He said there was an assumption the parents needed to be investigated on the part of the department. He said he knew of many parents who felt the departments needed to be investigated. He disagreed with earlier testimony regarding the age of children and the type of interview used. He felt it was a side issue. He also suggested the departments were accountable for the potential mis- use of information. He alleged there was an epidemic of hysteria regarding the reporting of child abuse. Lastly, he commented, a public review process was needed to address the foster care system as established within the Department of Administration. He cited for five years now Fairbanks wanted a review. In conclusion, he reiterated a strong, empirical document was needed in every situation where action was needed. Number 1861 CHAIR JAMES recognized the presence of Gail Phillips, Speaker of the House of Representatives. Number 1882 REPRESENTATIVE ROBINSON responded Ms. Hugonin did not have a problem regarding the storage of videotapes. Representative Robinson further stated the budget for the foster care review panel had been cut, and commented that was the reason Fairbanks was not involved. Number 1944 CHAIR JAMES said there was a problem and she would like to work with the Department of Health and Social Services, the Department of Public Safety, the Department of Law, and anyone on the committee who was interested to ensure HB 348 addressed the issues discussed today on a statewide basis. Number 1983 MS. DELANEY asked if the public would be allowed to participate. She further asked for someone to address the incident in Delta Junction mentioned in previous testimony. ADJOURNMENT Number 2008 CHAIR JAMES adjourned the House State Affairs Committee Meeting at 10:10 a.m.