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.