03/13/2007 01:30 PM Senate LABOR & COMMERCE

          SB  18-PROPERTY FORECLOSURES AND EXECUTIONS                                                                       
                                                                                                                                
CHAIR ELLIS announced SB 18 to be up for consideration.                                                                         
                                                                                                                                
SENATOR  BUNDE, sponsor  of SB 18,  said that  Alaska statutes  on                                                              
real  property  and  its  non-judicial   foreclosure  process  are                                                              
antiquated  and  sometimes  ambiguous   and  are  often  prone  to                                                              
litigation.  SB  18  proposes to  clarify  the  present  statutory                                                              
language, simplify it and modernized it.                                                                                        
                                                                                                                                
He said currently  the process for such a foreclosure  is to go to                                                              
the courthouse steps  auction. Some people in the  trade, known as                                                              
bottom feeders,  will buy a mortgage  for $1 more than  is owed to                                                              
the bank  with the idea  of churning the  property very  quickly -                                                              
not caring  for  the property  or using  it as a  home. This  bill                                                              
would allow  others who might  actually wish  to own the  home and                                                              
establish a residence there to bid up the price on the property.                                                                
                                                                                                                                
Passage of  SB 18  would streamline  and simplify the  foreclosure                                                              
language  and  provide  for  a  more  open,  accessible  and  fair                                                              
auction  process  that  would benefit  borrowers,  lenders,  title                                                              
insurers, individuals  and even  neighborhoods, as well  as reduce                                                              
unnecessary litigation.                                                                                                         
                                                                                                                                
1:46:13 PM                                                                                                                    
STEPHAN ROUTH,  Rough Crabtree,  Anchorage, said he  has practiced                                                              
law for 25  years focusing on  real estate matters. This  bill was                                                              
drafted to  address issues  he has  seen over  the years  and with                                                              
the knowledge  he has  gained about practices  in 11  other states                                                              
that are non-judicial  foreclosure states like Alaska.  The intent                                                              
was to  incorporate best practices  into Alaska law  and modernize                                                              
it.                                                                                                                             
                                                                                                                                
One change calls  for a three-month time period  between doing one                                                              
act and another and  that was changed to 90 days  to account for a                                                              
smaller  number of  days  in February.  The  posting language  was                                                              
clarified  to cover  situations  where there  is  no structure  by                                                              
stating you  can take reasonable  steps to  post if you  can't get                                                              
to a building. This was a "litigation-breeder."                                                                                 
                                                                                                                                
Third, SB  18 modernizes  the market  for the foreclosure  auction                                                              
by advertising  foreclosures  on the Internet.  Now a  foreclosure                                                              
auction takes  place at  the court  house steps. However,  because                                                              
it is  done by  judicial district,  it requires  advertising  in a                                                              
newspaper and  a courthouse in  the district, but  not necessarily                                                              
closest to  the property. He  emphasized that the  newspaper piece                                                              
is  not taken  away,  but  reasoned  that the  foreclosure  notice                                                              
section is  probably the least-read  part of any  newspaper people                                                              
use the Internet all the time.                                                                                                  
                                                                                                                                
MR.  ROUTH further  explained that  in his  experience having  two                                                              
bidders is  better than one because  he has found that  the second                                                              
bidder  is usually  someone who  wants to move  into the  property                                                              
and will  also get the  price up. You  get two bidders  by getting                                                              
information out  where it can  be seen. This  bill gets it  out on                                                              
the  Internet  and  makes  it  lawful  to  accept  an  offer  from                                                              
someplace other than the courthouse steps.                                                                                      
                                                                                                                                
CHAIR ELLIS said  this is the first hearing and he  would have the                                                              
bill back before the committee in the near future.                                                                              
                                                                                                                                
1:52:12 PM                                                                                                                    
BRYAN   BUTCHER,  Director,   Governmental   Affairs  and   Public                                                              
Relations,  Alaska Housing Finance  Corporation (AHFC),  supported                                                              
SB  18,  but  said  a  few  technical  issues  have  come  to  his                                                              
attention in talking to the Attorney General's Office.                                                                          
                                                                                                                                
MR. BUTCHER said  there were three issues. The first  is on page 1                                                              
regarding the  extra cost  of advertising.  According to  the AG's                                                              
office the publishing  of the notice of sale of  foreclosure on an                                                              
Internet website  would bring an  additional cost that  is unknown                                                              
at this time.  It would be borne  by the borrower or  possibly the                                                              
lender  if the  property cannot  be sold  for the  balance of  the                                                              
loan and  the cost  of foreclosure.  Also, there  may only  be one                                                              
Internet website  currently that would meet the  qualifications of                                                              
the proposed bill.                                                                                                              
                                                                                                                                
The second  change is  on page  2 -  the right  to cure a  default                                                              
arisen by failure  to make payments. Under current  law, a default                                                              
on a  loan that  has arisen  by failure  to make  payments may  be                                                              
cured at any time  before the sale. The new language  shortens the                                                              
time  period  to  cure  by  five  days,  which  would  reduce  the                                                              
borrowers' time to cure.                                                                                                        
                                                                                                                                
The  third  point  is  a  terminology  change  on  page  6  to  be                                                              
consistent with the  beginning of the bill where  the reference is                                                              
to "deed of trust  or trustor of the deed of  trust". In section 9                                                              
it changes  to use  of the  term "grantor  in the  trust deed"  or                                                              
"grantor". For  consistency purposes  the AG's office  pointed out                                                              
these  terms should  be changed  to reflect  what is  used in  the                                                              
beginning portion of the bill.                                                                                                  
                                                                                                                                
He  concluded  saying  the  changes  have  more  to  do  with  the                                                              
consumer  than the  corporation and  he also  noted a zero  fiscal                                                              
note from the corporation.                                                                                                      
                                                                                                                                
1:55:04 PM                                                                                                                    
BRYAN  MERRELL,  First  American  Title  Insurance  Co.,  said  he                                                              
practiced law  in Alaska,  but was transferred  by his  company to                                                              
Seattle. He  continues to oversee  his company's  underwriting and                                                              
claims for  the State  of Alaska and  he still visits  frequently.                                                              
He supported  SB 18  saying he  had been  involved with  Mr. Routh                                                              
since its  inception. He explained  that First American  and other                                                              
title  insurance  companies  are  involved  in  foreclosure  cases                                                              
because they are  named as the original trustee under  the deed of                                                              
trust  and  in  many  cases  continue  to  perform  that  function                                                              
through the foreclosure process.                                                                                                
                                                                                                                                
Second  he said  they issue  a product  called  "the trustee  sale                                                              
guarantee"  which is  a title  report to  the foreclosing  trustee                                                              
and the  lender beneficiary under  the deed of trust  that recites                                                              
what parties  are to  be provided  - what  notice is required  and                                                              
what the  status of title  of the property  is at the time  of the                                                              
foreclosure process beginning.                                                                                                  
                                                                                                                                
MR.  MERRELL  concluded  that  he   supported  SB  18  because  it                                                              
clarifies  foreclosure  problems  that have  arisen  because  some                                                              
Alaska  Supreme Court  rulings have  made the  current statute  so                                                              
unclear that  it is,  in fact, a  litigation breeding  ground that                                                              
needs to be cleaned up.                                                                                                         
                                                                                                                                
1:57:33 PM                                                                                                                    
SENATOR BUNDE  summed up  that he  would incorporate the  concerns                                                              
in a CS for another hearing.