05/06/2004 08:16 AM Senate JUD

            CSHB 421(JUD)-DEED OF TRUST RECONVEYANCE                                                                        
                                                                                                                                
MR. JOSH APPLEBEE, staff to  Representative Tom Anderson, sponsor                                                               
of HB 421,  told members this legislation was  brought forward by                                                               
the Alaska  Land Title Association as  a way to enable  people to                                                               
get  clear title  to their  homes and  mortgages. The  intent and                                                               
purpose of  the bill is  simple: once a  loan is paid,  the title                                                               
must be cleared. He explained  that most Alaska banks rarely hold                                                               
a home loan for more than  30 days. Banks sell those mortgages to                                                               
servicing companies, which collect  the monthly payments over the                                                               
life of  the loan.  Most mortgage  service companies  are located                                                               
outside of Alaska.  Under current law, service  companies are not                                                               
required  to make  sure loans  are  reconveyed and  filed in  the                                                               
state recorder's office once they  are paid off. Once a homeowner                                                               
pays off his mortgage, the lien  on the home held by the mortgage                                                               
service company  should be removed. During  testimony in previous                                                               
committees, a  title insurance company  in Anchorage  stated that                                                               
over  1400  deeds  of  trust  were  pending  reconveyance,  which                                                               
illustrates that  thousands of  deeds across  the state  have not                                                               
been reconveyed.                                                                                                                
                                                                                                                                
MR. APPLEBEE noted  that other states are  experiencing this same                                                               
problem.  HB 421  is  modeled  after an  Idaho  statute that  was                                                               
adopted three  years ago. The  Idaho law  has proved to  speed up                                                               
the  reconveyance process  there. HB  421 is  supported by  other                                                               
sectors of  the housing industry,  including the  Alaska Mortgage                                                               
Bankers   Association   and   the   Alaska   State   Homebuilders                                                               
Association, and  it has been  reviewed by realtors  and bankers.                                                               
HB  421 applies  only  to  those deeds  of  trust  held by  title                                                               
insurance companies.  It does not  provide opportunities  to wipe                                                               
out debt or other obligations  established by deeds of trust. The                                                               
bulk of HB  421 establishes a notification  process and describes                                                               
the form that notification should  take. The notification process                                                               
provides for  quality control and  uniformity. He  indicated that                                                               
Mr. Brian Merrell was available to answer specific questions.                                                                   
                                                                                                                                
MR.  BRIAN MERRELL,  First American  Title Insurance  Company and                                                               
immediate past  president of the  Alaska Land  Title Association,                                                               
affirmed that HB 421 was introduced  at the request of the Alaska                                                               
Land Title Association, in an  effort to assist the Association's                                                               
customers  in clearing  title to  old deeds  of trust  when title                                                               
insurers' have  sufficient information from lenders  to believe a                                                               
mortgage  has   been  paid  off.  The   legislation  additionally                                                               
requires notification to be given  to lenders and their servicers                                                               
of the  intention to reconvey  trusts, which is normally  done at                                                               
their  request. He  noted a  problem arises  because out-of-state                                                               
lenders often do not make those requests.                                                                                       
                                                                                                                                
SENATOR  FRENCH commented  that HB  421 appears  to make  perfect                                                               
sense  but  questioned  why  a   law  is  necessary  and  whether                                                               
something  in  the  law  is   prohibiting  title  companies  from                                                               
releasing deeds of trust.                                                                                                       
                                                                                                                                
MR. MERRELL  said the statutes say  very little about how  a deed                                                               
of trust is to be released. He stated:                                                                                          
                                                                                                                                
     It's just sort of a matter  of common law how the whole                                                                    
     process  is set  up anyway.  But there  certainly is  a                                                                    
     part  of that  common law  requirement that  the lender                                                                    
     request  that  this  reconveyance   happen  and,  as  I                                                                    
     mentioned,  so  many  times  we  find  that  a  lot  of                                                                    
     particularly out-of-state lenders  don't follow through                                                                    
     on  making that  request or  they send  the information                                                                    
     for the request  to be made through  their old borrower                                                                    
     who  may have  sold  the property  and  has no  further                                                                    
     interest in doing  anything with it so it  just ends up                                                                    
     being thrown  in the  trash. So this  would help  us to                                                                    
     help future owners  of the property - the  ones who own                                                                    
     the property and come in  later to do transactions that                                                                    
     find that  these deeds of trust  haven't been released,                                                                    
     to help them  out, to make sure it gets  done. But I do                                                                    
     agree with  you, it  is sort of  a common  sense thing.                                                                    
     The problem  is that  there isn't  any common  sense in                                                                    
     the law right now so we need to put it there.                                                                              
                                                                                                                                
CHAIR SEEKINS  noted that  with no  further questions  or persons                                                               
wishing to testify, public testimony was closed.                                                                                
                                                                                                                                
SENATOR OGAN  moved CSHB 421(JUD)  and its attached  fiscal notes                                                               
from committee with individual recommendations.                                                                                 
                                                                                                                                
CHAIR SEEKINS  noted without objection,  the motion  carried. The                                                               
committee took a brief at-ease.