HOUSE FINANCE COMMITTEE March 23, 1998 1:50 P.M. TAPE HFC 98 - 74, Side 1. TAPE HFC 98 - 74, Side 2. CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 1:50 P.M. PRESENT Co-Chair Therriault Representative Kelly Representative Kohring Representative Grussendorf Representative J. Davies Representative Martin Representative G. Davis Representative Moses Representative Foster Representatives Hanley and Mulder were not present for the meeting. ALSO PRESENT Jerry Burnett, Staff, Senator Randy Phillips. TESTIFIED VIA TELECONFERENCE: Amber Hutchens, President, Alaska Mortgage Bankers Association, Anchorage; Debra Joslin, District Chair- Republican Party, District #35, Delta Junction; Marla Willis, Delta Junction. SUMMARY HB 390 An Act relating to marriage; and amending Rules 54 and 56, Alaska Rules of Civil Procedure. HB 390 was HELD in Committee for further consideration. SB 221 An Act relating to negatively amortizing loans originated under a program approved or sponsored by the state or federal government. SB 221 was HELD in Committee for further consideration. HOUSE BILL NO. 390 "An Act relating to marriage; and amending Rules 54 and 56, Alaska Rules of Civil Procedure." REPRESENTATIVE PETE KELLY commented that HB 390 was written in an attempt to remedy some of the no-fault divorce decisions which were passed into law in 1969. Representative Kelly provided the Committee multiple statistics about divorce. Since 1970, the divorce rate in the country has increased 279%; children living with a divorced parent has increased to 352%; children living in a single parent family has gone up 108%; couples living outside of marriage has increased 533%. He advised that there have been numerous studies undertaken regarding how this has negatively impacted children. Representative Kelly commented that HB 390 would create a new option for persons seeking a marriage license from the State. Couples could receive a license for a "testament marriage", already provided for under existing statute, or they could apply to receive a license for a "charter marriage". Representative Kelly continued, each option offers each couple different rights and responsibilities. A charter marriage would be a union more difficult to enter into and more difficult to dissolve. Couples seeking a charter marriage would receive premarital counseling and would also sign a "declaration of intent" acknowledging that their marriage would be a lifelong commitment. The couple would agree to seek counseling in the event of marital difficulties. Representative Kelly noted that establishing two types of marriage contracts under State law would provoke useful discussions among engaged couples, and hopefully each couple would decide which option was best for them. He suggested that if couples make more educated decisions about their marriage, that would result in fewer failed marriages and broken homes. Alaska's divorce rate is higher than the national average, with 5.2 divorces per year for every one thousand people, compared to the national rate of 4.1. Representative Kelly pointed out that many social problems which the Legislature struggles to address are linked to broken marriages and separated families including domestic violence, teenage pregnancy, drug and alcohol abuse, and increased juvenile crime. If a charter marriage law could succeed in keeping some marriages intact or in preventing some marriages from occurring in the first place, this would do more to mitigate social pathologies than any government program could hope to accomplish. Representative Kelly stated that the original bill as structured relied on a conviction of a felony to encompass spousal or sexual abuse. He noted that Representative Caren Robinson suggested that language was unclear. The proposed amendment would address that concern. [Amendment Co-Chair Therriault proposed that through the legislation, an agreement to not enter into the marriage would be obvious earlier, rather than working through the system with an offense ending in a conviction. DEBRA JOSLIN, (TESTIFIED VIA TELECONFERENCE), DISTRICT CHAIR REPUBLICAN PARTY, DISTRICT #35, DELTA JUNCTION, spoke in support of the proposed legislation. In addition, she thought that the bill should include a specific amount of required counseling time. Ms. Joslin also recommended that "marriage" should be expressed as a "covenant" rather than a "charter". In conclusion, Ms. Joslin indicated concern that there was no mention included which would tie the division of property "to fault" if the marriage should fail. MARLA WILLIS, (TESTIFIED VIA TELECONFERENCE), DELTA JUNCTION, testified in support of the proposed legislation echoing sentiments voiced by Ms. Joslin. Representative J. Davies asked if in the proposed legislation, would suspension of a three-year felony charge affect the marriage contract. Representative Kelly replied that would not make a difference; the divorce intent would be based on actions previously listed. He continued, a felony conviction should not affect the marriage unless it was a crime against a person or sexual abuse. Representative J. Davies reiterated his question regarding a person in jail and how that would affect the grounds for a divorce. He inquired how the legislation would work if one of the parties had moved from State. Representative Kelly replied that the legislation would be in effect in the State of Alaska; marriages from other states are recognized, although, those couples would not be bound to the same contract. Representative J. Davies asked if a couple could continue to enter into a civil contract without the State changing statutes. Representative Kelly reiterated that the intent of the bill was to emphasize that the "contract of marriage" is a binding contract, as any other business agreement would be. Under current statutes, there is no binding force. Representative Grussendorf questioned the enforcement of the prenuptial agreement and how that would affect court change rules. Representative Kelly replied that the State would be the entity which recognizes the contract. Most people rely on that contract and the legislation would add additional steps to it. Co-Chair Therriault advised that the prenuptial agreement usually deals with the philosophical, emotional and practical similarities and differences the couples share, not necessarily with the breakup of the marriage. Representative Kelly spoke to Amendment #1. Language of the amendment would be added to Page 4, Section 7 to address concerns indicated by Representative Robinson. Representative J. Davies pointed out that language had been listed on Page 7. Representative Kelly agreed, although noted that it had inadvertently been excluded in Section 7, and by inserting it should provide further clarification. Representative Kelly MOVED to adopt conceptual Amendment Co-Chair Therriault asked if there was a reason why the "charter" rather than "covenant" had been chosen. Representative Kelly felt that a "covenant" marriage would appear to be more stringent. Representative J. Davies pointed out that current language added to the legislation stipulates that: "The spouse may obtain judgement only upon proof of one of the following:". He believed that concept would raise legal concerns when establishing the standard of proof; he asked if that language would create a double jeopardy. Representative Kelly advised that it is important that the language is different. The grounds for divorce criteria is contained in Section #6. For those couples who opt for a higher standard, they will then be held responsible to meet that standard. The contract, as specified, would be brought to court and the couple would have to prove that it did not work. He pointed out that nothing in the contract stops people from living apart. Representative J. Davies stated that this would create a new standard of proof. He asked if the legislation would support that standard. Representative Kelly advised that Section #6 lists criteria related to the standard of proof. He stressed that it would be voluntary. Representative J. Davies suggested that the requirement of proof proposed in the legislation could create something more harmful than exists in current law. (Tape Change HFC 98-74, Side 2.) Discussion followed between Representative Kelly and Representative J. Davies regarding current the statute addressing "incompatibility of commitment" and the waiting period associated with the decision for finalizing the divorce. Representative J. Davies ascertained that couples go into marriage fully intending to commit for life. There are circumstances, which arise, when regretfully, it becomes obvious that divorce is the best thing to do for the entire family. He stated that "no fault" marriages are not the "cause" but rather the "symptom" of marriages not working in our society. "No fault" divorces exist to alleviate the unintended consequences. Representative J. Davies reiterated that the vast majority of people getting married intend to stay married for the rest of their lives. Co-Chair Therriault spoke to the intention before entering into the marriage contract and the role of pre-marital counseling. Representative J. Davies noted that he would be more likely to support mandatory counseling for all people considering marriage than the current language of the bill. Representative Kelly reiterated that a charter marriage would not be mandatory, but instead would be strictly voluntary. Representative Grussendorf voiced concern that some churches or religious institutions might be willing to perform only charter marriages and that other options would not be available to them. Representative Kelly explained that situation currently does exist. Co-Chair Therriault requested that a work draft, including Amendment #1, be prepared for the Committee's final approval. He requested that the Committee note the fiscal impact. HB 390 was HELD in Committee for further consideration. SENATE BILL NO. 221 "An Act relating to negatively amortizing loans originated under a program approved or sponsored by the state or federal government." JERRY BURNETT, STAFF, SENATOR RANDY PHILLIPS, commented that many of Alaska's seniors are faced with the prospect of reduced income and the inability to keep their homes. One option for seniors is a "reverse annuity mortgage", a mortgage wherein the financial institution provides a stream of payments to the borrower in return for an equity position in the borrower's home. The senior would be able to stay in the home while receiving the financial benefits of home ownership. Mr. Burnett continued, Fannie Mae and Freddie Mac developed the "Homekeeper" loan program. The national program would allow seniors to extract equity without a payment plan or to purchase a home without high payments. The program has several options, one of which is an equity share agreement that would allow for a higher income allowance for the senior. The option cannot be utilized in Alaska because of a prohibition in current law. SB 21 would change State law, AS 45.45.010(f), to enable certain shared equity loans that are sponsored by the State of Alaska or the federal government. Mr. Burnett concluded that passage of SB 221 would benefit many Alaskan seniors by allowing them an additional tool to help retain their homes. Representative J. Davies asked the difference between a loan and a shared equity. AMBER HUTCHENS, (TESTIFIED VIA TELECONFERENCE), PRESIDENT, ALASKA MORTGAGE BANKERS ASSOCIATION, ANCHORAGE, stated that the reversed mortgage programs normally go by the appraised value of the property, and do not consider equity in the future. The Homekeepers Program will allow the seniors to extract more in estimating that the property will grow in value. Other programs do not take into consideration the growth of the property. Representative J. Davies asked if there were any reversed mortgage plans in the State of Alaska that were not offered through the nationally chartered organizations such as Fannie Mae. Ms. Hutchens replied that there are none offered by Alaskan lenders at this time. Representative J. Davies pointed out that the Homekeeper loan program contained protections so that there would be no eviction or forced sale prior to when the senior moves. It also contains provisions that there be no cost to the heirs in excess of the equity in the home. He asked if those protections should be written in statute. Co-Chair Therriault asked how the State would rate the program. Mr. Burnett understood that Alaska Housing Finance Corporation (AHFC) could approve such a program. Representative J. Davies pointed out that the section of statute being amended simply refers to bank, credit union, savings and loan institution, pension fund, insurance and mortgage companies and changing what they could do. He assumed that any bank could propose a reverse mortgage. Ms. Hutchens commented that section of the bill was well written, pointing out that the program would be approved or sponsored by the State. Normally, a bank does not go through the State to get their program approved unless it is a federally approved program. Representative J. Davies recommended removing language on Page 1, Line 11, "by the state". Representative Kelly voiced concern with the proposed program in that it removes money from the senior population and places it back in the government. Ms. Hutchens advised that there are few seniors who would need this option. Mr. Burnett commented that currently, there are no State sponsored programs and that the federal and national sponsored programs are sufficient. He advised that removal of the language would require a title change. Co-Chair Therriault recommended so as to avoid a title change, the Committee should specify items which any prospective State program should insure. CS SB 221 (FIN) was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 3:10 P.M. H.F.C. 8 3/23/98