04/06/2011 01:30 PM Senate JUDICIARY

           SB 104-MANUFACTURED HOMES AS REAL PROPERTY                                                                       
                                                                                                                                
1:40:13 PM                                                                                                                    
CHAIR HOLLIS  FRENCH announced  the consideration  of SB  104 and                                                               
noted  that he  was the  sponsor. He  read the  following sponsor                                                               
statement into the record:                                                                                                      
                                                                                                                                
     Senate  Bill  104  establishes  procedures  to  convert                                                                    
     manufactured homes to real  property, through a defined                                                                    
     process  within the  Division of  Motor Vehicles.  This                                                                    
     change  will  give  the owners  of  manufactured  homes                                                                    
     better access to  traditional mortgage financing, which                                                                    
     often features lower interest rates.                                                                                       
                                                                                                                                
     Currently,  when a  manufactured home  is affixed  to a                                                                    
     permanent foundation  on land  owned by  an individual,                                                                    
     the vaguely  defined title surrender procedure  used by                                                                    
     the Division  of Motor Vehicles lacks  a record notice.                                                                    
     Without  a record  notice,  homeowners  are often  left                                                                    
     with unmarketable titles,  and lenders hold unperfected                                                                    
     security  interests   in  the  property,   placing  all                                                                    
     parties in a  real estate transaction -  the buyer, the                                                                    
     lender, and the seller - at risk.                                                                                          
                                                                                                                                
     Conversion   will  help   increase   home  values   for                                                                    
     consumers, give  security to lenders and  provide fixed                                                                    
     procedures for the DMV to  follow. Nothing requires the                                                                    
     conversion of  a manufactured home in  the legislation,                                                                    
     leaving that choice to consumers.                                                                                          
                                                                                                                                
     Many   Alaskans  live   in  manufactured   homes.  This                                                                    
     legislation treats  residents that permanently  affix a                                                                    
     manufactured  home to  land  they own  the  same as  if                                                                    
     their home was built on the property.                                                                                      
                                                                                                                                
CHAIR  FRENCH  noted  the  two  letters  of  support  from  First                                                               
American Title  and the  Alaska Land  Title Association.  He said                                                               
that since  the bill  was reported from  the last  committee, the                                                               
Department of Natural Resources  (DNR) Recorder's Office proposed                                                               
simple language  changes that will  better conform to  the actual                                                               
duties and  procedures of that  office. He added that  a detailed                                                               
sectional  analysis  will  be  provided  once  that  language  is                                                               
incorporated into a committee substitute (CS).                                                                                  
                                                                                                                                
The legislation  centers on bill  sections 16 and 26.  Section 16                                                               
establishes  clear procedures  within DMV  to allow  manufactured                                                               
homeowners to  convert their personal property  to real property,                                                               
if  desired, and  to  convert  it back  to  personal property  by                                                               
following certain severance procedures.                                                                                         
                                                                                                                                
Section 26  relates to the conditions  that must be met  before a                                                               
manufactured home can be characterized  as real property; it must                                                               
be permanently affixed to the  land, an affixation affidavit must                                                               
be recorded, and  the owner of the manufactured  home must either                                                               
own the land or have a 20 year or longer lease on the property.                                                                 
                                                                                                                                
CHAIR FRENCH  noted that  George Ginsberg  was online  to testify                                                               
and Jeff  Harris with  Wells Fargo, Vicky  Backus with  the State                                                               
Recorder's Office, Colleen Moore with  the Department of Law, and                                                               
Stacy Oates with DMV were available to answer questions.                                                                        
                                                                                                                                
1:44:16 PM                                                                                                                    
GEORGE  GINSBERG, outside  counsel to  Wells Fargo,  said SB  104                                                               
will help  consumers. He  explained that  Fannie Mae  and Freddie                                                               
Mac don't  treat a loan on  a manufactured home as  a real estate                                                               
loan  unless state  statutes make  it clear  that a  manufactured                                                               
home affixed to  land is in fact real estate.  To the extent that                                                               
financing  is  available  for a  manufactured  home  as  personal                                                               
property, it  is at a  higher rate than  a real estate  loan. Mr.                                                               
Ginsberg noted that he was involved  in the drafting of this bill                                                               
as well as similar legislation in other states.                                                                                 
                                                                                                                                
CHAIR FRENCH asked  how many states have passed and  how many are                                                               
considering similar legislation.                                                                                                
                                                                                                                                
MR.  GINSBERG said  he  didn't  have the  exact  number but  most                                                               
states have a  statutory procedure for converting a  home to real                                                               
property when  it is permanently  affixed to land. Alaska  is one                                                               
of  the  few  exceptions.  North Carolina,  Missouri,  and  other                                                               
states  have passed  similar legislation  and a  similar bill  is                                                               
pending in Illinois.                                                                                                            
                                                                                                                                
1:47:23 PM                                                                                                                    
SENATOR PASKVAN said  he supports the intent of the  bill, but he                                                               
wants  to know  what the  banking industry  intends. He  asked if                                                               
these  loans  will   be  sold  individually  or   bundled  as  an                                                               
investment tool  and if they're  bundled if they will  be clearly                                                               
identified  as  a   different  type  of  real   estate  than  has                                                               
previously been marketed out of Alaska.                                                                                         
                                                                                                                                
MR.  GINSBERG  said  he  knows  that  no  substantive  change  is                                                               
intended  in  changing  the terminology  from  "mobile  home"  to                                                               
"manufactured home."  Manufactured home  is the term  that's used                                                               
in  federal  statutes  and  regulations as  well  as  the  Alaska                                                               
Uniform Code. He deferred comment as  to how these loans would be                                                               
sold.                                                                                                                           
                                                                                                                                
1:49:41 PM                                                                                                                    
JEFF  HARRIS,  Loan  Administration  Manager,  Wells  Fargo  Home                                                               
Mortgage,  said   that  Wells   Fargo  has  been   holding  loans                                                               
internally,  but that  decision is  dependent on  interest rates.                                                               
When Wells  Fargo does  sell its  loans to  Fanny Mae  and Freddy                                                               
Mac,  it   abides  by   Fanny  and   Freddy  rules   to  identify                                                               
manufactured homes as such. The  conversion documentation is also                                                               
provided.                                                                                                                       
                                                                                                                                
SENATOR PASKVAN expressed  interest in knowing if  investors in a                                                               
collateralized  mortgage   obligation  would  be  aware   if  the                                                               
financial  instrument  included   manufactured  mobile  homes  as                                                               
opposed  to Lindal  Cedar  homes, for  example.  There's quite  a                                                               
distinction to an investor as to the underlying value, he said.                                                                 
                                                                                                                                
MR. HARRIS agreed  that the investor would want to  know if there                                                               
were manufactured  homes. He said  the conversion document  is an                                                               
important piece  of the collateral  to ensure that  the procedure                                                               
in a particular state has been  completed. At that point the home                                                               
is considered similar to a "stick built" home.                                                                                  
                                                                                                                                
SENATOR PASKVAN asked if it  would be possible to bundle packages                                                               
of these loans.                                                                                                                 
                                                                                                                                
MR. HARRIS  replied there  could be a  mix of  manufactured homes                                                               
and  "stick" housing  in a  pool, but  the lender  would need  to                                                               
identify which of the loans  were for manufactured housing. Right                                                               
now, he  said, there isn't  sufficient volume to bundle  loans of                                                               
just manufactured homes.                                                                                                        
                                                                                                                                
1:53:31 PM                                                                                                                    
CHAIR FRENCH announced he would hold SB 104 in committee.