Legislature(2017 - 2018)BARNES 124
03/16/2018 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB329 | |
| HB374 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 329 | TELECONFERENCED | |
| + | HB 374 | TELECONFERENCED | |
| + | SB 4 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 329-REAL ESTATE APPRAISAL MNGMT. COMPANIES
3:26:14 PM
CHAIR KITO announced that the first order of business would be
HOUSE BILL NO. 329, "An Act relating to the registration and
regulation of real estate appraisal management companies;
relating to the establishment of fees by the Department of
Commerce, Community, and Economic Development; relating to the
Board of Certified Real Estate Appraisers; relating to real
estate appraisers; and providing for an effective date."
3:26:35 PM
THOMAS ATKINSON, Staff, Representative Andy Josephson, Alaska
State Legislature, presented HB 329 on behalf of Representative
Josephson, prime sponsor. He explained one of the causes of the
nationwide recession in 2008 was bad mortgages bundled with
stocks. He stated one of the things that was bad about the
mortgages was appraisals that were wrong. He indicated it has
been reported that this was due to lending institutions leaning
on appraisers, ending up with some appraisals that were way
above market value. He explained that Congress devised the
DoddFrank Wall Street Reform and Consumer Protection Act. The
act inserted another layer into the mortgage process, creating
an arm's length mortgage by using an appraisal management
company (AMC). The federal legislation set up an appraisal
subcommittee which promulgated federal regulations and gave all
the states a certain amount of time to set up their own
regulations. He underlined the states are not required to do
so; however, AMCs cannot handle federally related transactions
if the states do not. He explained federally related
transactions constitute about 10 percent of the market. He added
AMCs want the state to regulate them and the appraiser want the
state to regulate AMCs. He said the process helps "Joe and Jane
Alaskan" as well. He remarked that getting a mortgage is
complex and it happens in a hurry. Typically, a lending
institution doesn't hold a mortgage for the full period but
turns around and sells it to an underwriter. The mortgage
originator does not necessarily know whether the transaction is
federally related. He highlighted the process only relates to
residential property. He stated HB 329 has a companion bill in
the Senate. He added there is a federal deadline on 10 August
2018, but there may be an extension.
3:31:27 PM
CHAIR KITO asked for confirmation that AMCs are not currently
regulated by the state of Alaska.
MR. ATKINSON answered in the affirmative.
CHAIR KITO asked whether the proposed bill would be adding a
prevision under the Real Estate Commission.
MR. ATKINSON answered the federal regulations stipulate that
when a state regulates AMCs, it is done through the board of
certified real estate appraisers.
3:32:29 PM
REPRESENTATIVE STUTES said she thinks the proposed bill is
trying to solve a problem that doesn't really exist. She said
she does not see what the benefit is.
MR. ATKINSON answered that Congress, in the wake of the 2008
financial meltdown, thought it would be a good idea to add that
layer so that the lending institutions don't contact the
appraisers directly. Using a middleman avoids collusion between
appraiser and lender.
CHAIR KITO explained the proposed bill would be following up
from a situation from ten years ago. He said Dodd-Frank was the
result of what happened with the subprime mortgage market in
which the appraisers were working in collusion with real estate
agents or banks to acknowledge real estate values that may not
have been accurate because there was not an arm's length
relationship with the appraisers. He explained HB 329 would be
putting the structure in place so that when real estate
management companies do come into the state, they will be
required to work through an AMC.
3:35:56 PM
REPRESENTATIVE STUTES asked how many other states have
implemented similar legislation.
MR. ATKINSON shared his understanding that 46 other states have
implemented something similar.
3:36:28 PM
REPRESENTATIVE SULLIVAN-LEONARD asked Mr. Atkinson to review the
fiscal note (FN). She shared her concern that the state would
be adding a position specifically to process the legislation and
to collect funds that would go to the federal government.
MR. ATKINSON answered the department would need to write
regulations and therefore incur some costs. He said the
legislature has asked departments to pay for their own programs.
He indicated DCCED is particularly good at covering their own
programs and has board staff that would be paid for through
assessing fees. He added the federal government requires that
some of the fees are put towards the appraisal subcommittee.
3:37:52 PM
REPRESENTATIVE SULLIVAN-LEONARD asked for examples of issues
occurring in Alaska.
MR. ATKINSON deferred to Mr. Derry.
REPRESENTATIVE SULLIVAN-LEONARD asked what a private appraisal
business would have to pay annually to be covered.
MR. ATKINSON asked whether Representative Sullivan-Leonard
referred to an AMC or an appraiser.
REPRESENTATIVE SULLIVAN-LEONARD answered, "Both."
MR. ATKINSON said he understood it costs $1,100 every two years
to remain certified with the state. He said for an AMC it
depends on the state requirement for a surety bond. He surmised
with the current draft of the proposed bill, it would cost
around $2,400 per year to be certified and have a controlling
person who would be the single point of contact for the board.
3:40:31 PM
REPRESENTATIVE SULLIVAN-LEONARD asked whether the proposed bill
would mandate that a private appraiser would have to be under an
appraisal company.
MR. ATKINSON answered that it would not. He added the ultimate
responsibility for certifying the appraisal is on the lender.
He said they can skip the AMC. He mentioned that Mr. Derry can
list at least three lenders in Alaska that do not use AMCs.
3:41:26 PM
REPRESENTATIVE STUTES referenced a letter [included in committee
packet] dated February 12, 2019 [sic], from Wells Fargo which
reads, "If a state does not set up a compliant regulatory system
for AMCs by August of 2018, then home loan lenders cannot use
AMCs for federally related transactions." She asked whether
the proposed legislation is in response to a federal mandate.
MR. ATKINSON answered the mandate from the federal government
states that if states want to regulate AMCs, it has to be done
by a certain date and regulations must include certain items,
but states are not required to regulate AMCs. He said if they
are not regulated, mortgages will still be possible, but it
might be more difficult, and AMCs would not make money on
certain transactions.
REPRESENTATIVE STUTES shared her concern that the proposed bill
would be creating a niche for another small business at the
expense of a homeowner or an individual looking for a mortgage.
She added the appraiser would "jack up his price" to belong to
the organization that the state is not mandated to have.
MR. ATKINSON answered the state is not mandated by the federal
government to regulate AMCs. He stated the costs can be passed
on to the appraiser or the lending institution and appraiser can
split the cost. He said the proposed bill would not mandate any
shared costs.
REPRESENTATIVE STUTES asked what the other states that are
regulating AMCs charge.
MR. ATKINSON deferred to Mr. Derry.
3:46:05 PM
REPRESENTATIVE JOSEPHSON suggested if the state does not
regulate AMCs, it will not fully benefit from the effort to
insulate appraisals from lender/appraiser collusion.
MR. ATKINSON answered that the Dodd-Frank Act is about consumer
protection.
3:46:44 PM
REPRESENTATIVE SULLIVAN-LEONARD asked whether Representative
Josephson knows of any instances in Alaska of such a thing
occurring.
REPRESENTATIVE JOSEPHSON said he does not but that there is the
issue of federally related transactions as well.
MR. ATKINSON added that the term, "federally related
transactions" is a quagmire. He said it's a complex environment
and Alaska Housing Finance Corporation (AHFC) would seem to be a
federally related transaction, but he said he can't state with
any certainty that it is. He remarked there is a definition of
federally related transactions on BASIS, but it is very
difficult to understand.
3:48:23 PM
DAVID DERRY, Chair, Board of Certified Real Estate Appraisers,
testified in support of HB 329. He stated the board supports
the AMC legislation and oversight proposal. He added that while
the board is not looking for more work, oversight is an
important function that should happen in Alaska. He reiterated
some lenders use AMCs and some do not. He said the easiest way
to describe an AMC is as an entity used to find appraisers in
the process of a mortgage transaction. He explained this is for
people who are looking for mortgages. He mentioned Rocket
Mortgage in the Lower 48. He added there are no Alaska-based
AMCs. He said if someone applies for a loan in Anchorage,
Alaska, or Fairbanks, Alaska, using an AMC is an expeditious way
to comply with the requirement that there be a separation
between the entity making the loan and the appraiser. He added
one of the impetus to pass this legislation is to provide that
separation between loan officer and appraiser. He said he didn't
know of any cases brought to the board.
MR. DERRY said appraisers in Alaska are paid $1,050 and $80
dollars is paid to the federal appraisal subcommittee. He added
there would also be a fee for management companies which is $25
per appraiser. He said one of the criteria is that the AMC has
15 appraisers in 1 state or a total of 25 appraisers in 2
states. He spoke to fees and costs to the consumer and to the
state. He said there should not be any cost to the consumer.
He said some lenders use AMCs (Wells Fargo, Alaska USA Federal
Credit Union) and some do not (First National Bank of Alaska,
Northrim Bank, Mount McKinley Bank). He specified the lenders
can set up within the bank how to operate under Dodd-Frank
[Act].
3:56:45 PM
REPRESENTATIVE STUTES mentioned the appraiser's license is a
rigorous process. She asked whether the board would take action
against an appraiser who was seen to be colluding.
MR. DERRY answered the board would take action against the AMC
and the appraiser or, where there is no AMC, it would take
action against the appraiser. He said he agrees that it is an
onerous process to get licensed. He underlined the Alaska
requirements for certification mirror those of other states. He
said there is a nationwide effort to make it somewhat easier to
become certified as a residential appraiser. He stated it was
the result of a change in federal regulations established in
early March 2018.
REPRESENTATIVE STUTES suggested having an AMC would not preclude
the occurrence of collusion.
MR. DERRY answered the proposed bill would allow the board to go
after the AMC. He explained that without legislation, there
would be no oversight at all.
REPRESENTATIVE STUTES said she cannot believe that the AMC will
"eat that cost" and not pass it on to the consumer.
MR. DERRY reminded that the lender is the originator of the
loan. He stated most of the AMCs are fairly large entities and
$2,400 is not a big cost.
4:02:54 PM
MARK SCHIFFMAN, Executive Director, Real Estate Valuation
Advocacy Association (REVAA), testified in the hearing on HB
329. He said AMCs support being regulated in Alaska. He
clarified 46 states have passed similar legislation. He listed
Alaska, New York, Massachusetts, and Ohio as the final four and
informed there is legislation being proposed in all four states.
He asked on behalf of the AMCs to be regulated in Alaska. He
added it is a self-paid regulation and there would be no cost to
the state. He said AMCs are already working in the state, and
the difference would be there would be a revenue generator. He
said the primary role of an AMC is public safety and consumer
protection. He indicated the lender has the same
responsibilities. He added most American lenders have
outsourced appraisal services to AMCs.
4:06:20 PM
CHAIR KITO opened public testimony on HB 329. Upon ascertaining
that no one was available to testify, he closed public
testimony.
CHAIR KITO held over HB 329.