Legislature(2011 - 2012)BARNES 124
04/09/2012 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB326 | |
| HB202 | |
| HB259 | |
| SB122 | |
| SB51 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 326 | TELECONFERENCED | |
| += | HB 202 | TELECONFERENCED | |
| += | HB 259 | TELECONFERENCED | |
| += | HB 266 | TELECONFERENCED | |
| += | SB 122 | TELECONFERENCED | |
| + | SB 51 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 122-REAL ESTATE TRANSFER FEES/TITLE INSURANCE
3:39:36 PM
CHAIR OLSON announced that the next order of business would be
the CS FOR SENATE BILL NO. 122(L&C), "An Act relating to
research on and examination of titles; relating to residency
requirements for title insurance limited producers; relating to
real estate transfer fees; and providing for an effective date."
[Before the committee was proposed HCS CSSB 122, labeled 27-
LS0789\D, Bailey, 3/19/12, adopted at the April 4, 2012
meeting.]
3:40:01 PM
DANA OWEN, Staff, Senate Labor & Commerce Committee, Alaska
State Legislature, on behalf of the Senate Labor & Commerce,
Senator Egan, Chair, stated that the bill provides two important
things. First, it provides that titles researched and issued in
Alaska will have some anchor to the state, including that the
people who perform the research have a physical presence in the
state. Second, it would prevent the use of transfer fee
covenants, which are fees that the original seller of a property
would reap for resale of the real property into perpetuity.
This practice would be outlawed under the bill.
3:42:01 PM
ROGER FLOERCHINGER, President and Owner, Yukon Title Company,
Inc., stated that he would like to focus on the residency
requirements in SB 122, which are an effort to prevent Alaska
jobs from being sent overseas. He said, "It is nothing more and
nothing less." He related that similar bills have passed in 13-
14 other state legislatures. He predicted that some other
companies, such as First American Title Insurance, which is a
multi-national title company, will oppose this portion of the
bill. He offered his belief that First American Title currently
examines a large percentage of their Washington state orders in
overseas countries. This company pays their overseas examiners
approximately 10 percent of the fees they would pay local
examiners. He reported that he receives letters weekly from
overseas companies in countries such as Pakistan, India, or the
Philippines, who offer to perform title examinations for a
fraction of what it costs to do the work locally. He remarked
that this offends him. He reported that his examiners receive
wages that far exceed the per capita wages in Fairbanks. These
examiners pay local property taxes and contribute to the economy
of the state. He offered his belief that examiners in the
Philippines receive "slave wages" and contribute to no one
except the shareholders of the multi-national corporations. He
stated that unlike his examiners, the overseas examiners are not
licensed by Alaska's Division of Insurance (DOI) and are not
within the department's reach for review. He also predicted the
committee would hear testimony from others that direct
operations, including those owned by regional national and
multi-national underwriters. These companies will state that
they cannot open offices in Alaska or cannot keep their current
offices open because of the requirement for a limited producer's
license. Further, these opponents will claim this bill would
restrict competition. However, those claims are simply "smoke
and mirrors." The direct operations that currently have offices
in Alaska also hold limited producer licenses, which will not
change under SB 122. He encouraged the committee to ask an
existing national underwriter whether this bill would impact
their ability to open offices in Alaska. He stated that the
Alaska Association of Realtors supports this bill as written
since this organization knows its clients will be better served
by local examiners as opposed to someone who resides in India or
Pakistan. He emphasized that realtors would fight a bill that
would restrict competition in the industry since such a bill
would adversely impact their clients; however, SB 122 is an
Alaska hire issue. He highlighted that he supports SB 122 since
he is in favor of keeping good paying Alaska jobs in Alaska.
3:45:19 PM
KIM GLISSON, Vice President and General Manager, Alaska Escrow &
Title Agency, Inc. stated that she has been in the title and
lending industry for 22 years. Alaska Escrow & Title Agency,
Inc. provides title insurance and escrow services to all seven
recording districts in Southeast Alaska. She asked to speak in
favor of SB 122, Sections 1 and 2 in order to keep local jobs.
She stated she is a second-generation title industry
professional, plus her daughter is working in her office. She
said that her company employs 14 fulltime people and two part-
time local employees. She highlighted that this is best for
Alaska's communities. She stated that she has an employee who
worked for a Washington state firm. When she started they had
seven examiners, but after two years they were all laid off
except for one, due to outsourcing. She referred to Section 3,
which she suggested is best for consumers since without this
provision developers could add additional funds to each
transaction each time property changes hands. She offered her
belief that overall this bill would help protect property owners
in the state.
3:47:26 PM
CHRIS NEWBILL, Manager, Ketchikan Title Agency, Inc. stated that
he is in agreement with SB 122 and the previous testimony by Mr.
Floerchinger and Ms. Glisson. She stated that she has three
employees, who are all residents of Ketchikan and the state.
She said she would hate to see the jobs go overseas.
3:48:10 PM
CRYSTAL PELTOLA, Vice President and General Manager, Alaska USA
Title Agency, stated that the company began in 2008 and now has
five branches located throughout the state. She has been
working in the title insurance business since 1982. She stated
that her organization has always supported the transfer fee
portion of SB 122, Section 3. She also thanked the Alaska
Realtors' Association for their support of the bill. She
emphasized that the company also supports legal competition and
remains a pro-consumer company. She pointed out that this bill
has gone through several changes since it was introduced last
year. Currently, the only remaining item from the original bill
is the transfer section. She said that Sections 1 and 2 are
being touted as Alaska hire, but nothing in the current language
does this. Section 2 of the bill seems to be unconstitutional,
according to the Legislative Legal opinion of March 15, 2012, by
Dennis Baily. She said that Alaska USA Title Agency cannot
support anything that could be deemed unconstitutional. She
related that Section 2 also seems to contradict itself, since on
the one hand it requires licensing provided for in Sections 21
and 27, which have provisions for resident and nonresident
licensing. The language states that one may not obtain a
license unless the individual is a resident of the state. She
predicted that no one today will testify against local hire, but
the language in SB 122 does not seem to provide local hire. She
referred to Section 1, which retains the current law to require
companies owned by national underwriters, such as Stewart Title
and First American Title to obtain their title work from
agencies instead of doing the work themselves. Although the
ownership of these two companies resides in Texas and
California, respectively, their local offices hire Alaskans,
which adds to the economy of the state. She said that one
company's legal counsel has stated the company will modify their
arrangements and become agencies if this bill passes. Thus this
bill would not change how businesses operate, even though the
bill appears to create another layer of paperwork for those
engaged in direct operations. She concluded by stating that she
personally does not see the value of creating this additional
paperwork, nor does she see how SB 122 addresses Alaska hire.
She reiterated her support for Section 3, but emphasized that
she cannot support Sections 1 and 2 at this time.
CHAIR OLSON mentioned the bill has a further referral to the
House Judiciary Standing Committee.
3:51:03 PM
TERRY BRYAN, Vice President and Manager, First American Title
Company, stated that he has 75 employees throughout the state in
ten separate offices. He related that First American Title
Company has been very involved with the evolution of SB 122. He
asked to withdraw his support for SB 122 since the company
cannot support the bill at this time.
3:52:05 PM
REPRESENTATIVE SADDLER asked whether he was withdrawing his
support for all sections of the bill.
MR. BRYAN answered that the primary support was initially for
portions of the bill that have subsequently been stripped from
the bill, which related to the number of years a title plant
would need to be in existence. He highlighted that the company
is currently evaluating issues with respect to Section 2 - the
Alaska hire segment of the bill. He concluded that the company
cannot support the bill in its current form.
REPRESENTATIVE SADDLER understood he opposed all three sections
of the current version of SB 122.
3:53:08 PM
CHAIR OLSON asked whether his company does any outsourcing.
MR. BRYAN answered no; that currently in Alaska, First American
Title Company does not do any outsourcing.
3:53:22 PM
CHAIR OLSON asked whether the company could outsource at some
point in future.
MR. BRYAN answered yes, that just as other companies can
outsource, First American Title would also have the capability
to do so.
3:53:43 PM
REPRESENTATIVE MILLER asked whether he knew how many title
sources for 100 title searches in Alaska how many are being done
outside of Alaska
MR. BRYAN anticipated that about 99 of 100 title searches are
currently being performed in Alaska.
3:54:26 PM
HOWARD HANCOCK, Chief Title Officer, Fidelity National Title
Insurance Company, stated that Fidelity National Title Insurance
Company is in support of SB 122. He stated that he has been in
business for 30 years and is also a board member of the Alaska
Land Title Association. He asked to testify in support of SB
122. He related that the practice to grant a license to
individual residents currently applies to all employed title
examiners in approximately 30 offices around the state. This
provision could also allow the division to grant a nonresident
license. He pointed out that Fidelity National Title Insurance
Company has seen a monthly increase in the number of
solicitations from the Philippines or Bangladesh asking if they
could perform title searches. He has also observed other title
companies in the Lower 48 having title examinations performed by
examiners in foreign countries. He related his company tested
an overseas company from India by giving them a property and
asking them to search the title. The overseas company initially
anticipated it would complete the title search in four days, but
after a week the company reported it was having difficulty
retrieving and interpreting the documents for the chain of
title. His company gave the company in India a few more days,
but the company still could not furnish the report and
eventually the company from India canceled since they could not
complete the job. He emphasized his point is that laws relating
to titles on real property are unique to the state in which the
property is located. He suggested that homebuyers or mortgage
lenders, who are probably the largest title insurance consumers,
should want their titles examined by local expert trained in
Alaska laws and title issues. He pointed out that Alaska has
unique laws and issues including the Alaska Native Claims
Settlement Act (ANCSA), the Native Allotment Act, the mechanic's
lien law, foreclosure laws, and others. He pointed out these
are laws that title insurance companies encounter on a daily
basis. He concluded that SB 122 provides corrections to give
guidance to the division with respect to the division's current
practices to keep jobs local and to require local resident title
examiners perform title searches.
3:57:38 PM
MICHAEL PRICE, President, Alaska Land Title Association; Owner,
Fidelity National Title Insurance Company, stated that he is
also the owner of the Mat-Su Title Agency in Wasilla. He
testified in support of SB 122 as it is currently written. He
said he supports testimony by previous testifiers who spoke in
support of SB 122. He related that his company employs 80-100
Alaskans throughout the state who earn from $50,000 to $100,000
annually as title examiners. He offered his belief that if SB
122 does not pass that those jobs are in jeopardy. He related
his understanding that his good friend, Terry Bryan's company,
First American Title Company, outsources - not in Alaska - but
in other states. He emphasized the importance to pass a local
hire law or it will only be a matter of time before the jobs
will go overseas. He suggested that the Division of Insurance's
director, Linda Hall, could confirm there is nothing in the two
sections of SB 122 that preclude a direct underwriter from
entering business in the state. He further highlighted that
First American Title Company and Stewart Title - as they
currently exist in Alaska - exist as local limited producers and
as Alaska corporations. He related his understanding that these
businesses do not operate as an underwriter from California or
Texas, but as corporations in Alaska. Additionally, in terms of
the constitutionality, he offered he has been an attorney for
over 40 years prior to working in the title insurance business.
He said he believes in the constitutionality of SB 122. He
pointed out that approximately 13 states have passed legislation
that demands the licensed title examiners for title insurance be
residents of the state in which the property is insured. He
recalled that Oregon was the last state to do so approximately
two years ago. He asked members to compare Oregon to the state
of Washington, which does not have such a law. He pointed out
that it is just too easy to consider outsourcing these types of
jobs. He concluded that as president of Alaska Land Title
Association and as owner of the two title companies in the
state, he fully supports SB 122 and urged members to pass SB 122
to protect Alaskans' jobs.
4:01:01 PM
REPRESENTATIVE JOHNSON asked whether there is any difference in
the cost of title insurance in Washington and Oregon.
MR. PRICE answered no. He explained that each state files its
rates with the Division of Insurance. He suggested that every
state in the western U.S. have filed rates, such as Alaska. He
pointed out that some rates are promulgated by the respective
director of insurance. He related his understanding that the
title insurance in Washington is less than in Oregon, but
comparable to Alaska. Additionally, Alaska has unique laws and
risks due to ANCSA and laws relating to public lands; however,
generally speaking title insurance in the Western U.S. have
filed rates, which means they are filed by national companies.
Thus the rates are set by companies such as Fidelity National
Title Insurance Company and not local agents. He concluded by
advising that filed rates are approved by various directors of
insurance and would be available to the legislators and staff
through an Internet search.
4:02:56 PM
REPRESENTATIVE JOHNSON remarked that when jobs are outsourced
and it affects companies that is one thing, but if it actually
results in less cost to consumer that is a different issue.
MR. PRICE answered that he was not aware of any empirical
evidence that an underwriter sending an order to Bangladesh
results in reductions to insurance costs. He offered his belief
that most of the costs of insurance is based on overhead,
administrative, and claims handling. He offered his belief that
states in the Lower 48 that outsource cannot provide evidence
that the cost of insurance has gone down. He highlighted that
the general rate schedule in Alaska has not changed since 1968.
4:04:17 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on SB 122.
4:04:35 PM
LINDA HALL, Director, Division of Insurance, Anchorage Office,
Department of Commerce, Community & Economic Development
(DCCED), provided a brief summary. She explained the DOI
regulates various aspects of the title insurance industry. She
pointed out that companies exist in the title insurance industry
as well as agencies. Thus two types of licenses exist. She
stated that there is not an Alaska domiciled insurance company
in Alaska and companies may be located in Texas or other states.
These companies are licensed in same way as other insurance
companies, such that application processes and deposits are
required.
4:06:10 PM
CHAIR OLSON related his understanding these companies would be
admitted companies.
MS. HALL answered yes. She explained that the company files
rates for the product sold by the agent. She further explained
that much of that product is based on overhead. It is much more
difficult for the division to examine specific information. The
overhead, the majority of the employees conducting title
research, the cost of running an office, and conducting
electronic research represents the bigger part of the rate,
which is not an expense of the insurance company. She further
explained that loss ratios in the title insurance industry are
very low. The division has seen historical losses in most lines
of insurance the division regulates, including the much smaller
piece of overhead and commissions. She explained that the title
world is different so the title insurance company receives a
small portion of the premium. The title agent, on the other
hand, called the limited lines title producer - the agency -
keeps a majority of the premium since they perform the majority
of the work and have the overhead. Thus if the overhead is less
expensive since some of the work is outsourced it will not
affect the rate that is filed by the title insurance company.
She hoped this helps.
4:07:56 PM
CHAIR OLSON agreed her explanation helps. He asked about
licensing aspects.
MS. HALL stated she referenced the licensure of the insurance
company. She explained that the agency is also licensed since
the division licenses title plants, noting two or more entities
can form together as a joint title plant. She indicated the
division inspects them and provides a test, similar to one Mr.
Hancock conducted when he tested a title search by someone in
India. She described the process, such that the division would
give the company a piece of property to determine how well they
can research and find anything wrong with the title that would
prevent it from being a clear title. Additionally, the division
licenses the limited title producers as agents, licensed under a
different section of statute than the insurance companies. She
highlighted that Title 21 specifically outlines specific
requirements for title agents, including that they must have a
place of business in the recording district in which they will
operate. She noted this does not require residency, but the
company must have a place of business in Alaska. She reiterated
that limited title producers as agents are licensed differently.
4:09:28 PM
REPRESENTATIVE SADDLER referred to page 2, to Section 2 of the
bill, which makes reference to title insurance limited
producers. He asked whether there is any distinction between
the term "licensed title insurance limited producer" on page 1,
and the "title insurance limited producer to be licensed" on
page 2.
MS. HALL responded that in Section 1 the licensed title
insurance limited producers are not required to be a resident,
but are required to be licensed under AS 21.27. She offered her
belief that the division has never issued a nonresident - to a
resident of another state - license, but that is not to say they
couldn't do so. She noted that some of reciprocity laws do not
apply to title insurance specifically, but if a title agent was
licensed in another state and applied for a nonresident license
that it is possible, but not likely the individual would be
licensed. She pointed out the agent would still need to have to
have a place of business in Alaska.
4:10:56 PM
REPRESENTATIVE SADDLER recalled that AS 21.27 does include a
provision for alien license. He asked whether the state has
ever issued an alien license.
MS. HALL answered that no, not in the title industry. She
explained that the division has issued 6 of 39,000 licensees as
alien licenses.
4:11:33 PM
CHAIR OLSON asked whether this is something the division used to
do routinely.
MS. HALL answered no.
4:11:40 PM
REPRESENTATIVE JOHNSON asked if this bill passes whether it will
drive up the cost of insurance.
MS. HALL answered that she did not know why it would drive up
costs. She stated that the division has issued a zero fiscal
note. She further stated that rates enforced should represent
the expenses and did not note anything in the bill that would
increase expenses.
4:12:22 PM
REPRESENTATIVE JOHNSON asked if the bill did not pass if rates
would be reduced.
MS. HALL answered that she doubted it.
4:12:30 PM
REPRESENTATIVE JOHNSON remarked that the consumer is the
ultimate payer. He did not have any issue with the bill since
Ms. Hall indicates the costs to consumers will not likely
change.
4:12:58 PM
CHAIR OLSON asked whether is it safe to assume that one reason
that issues on title policies is that there is not a frequency
in the number of claims against title policies.
MS. HALL answered yes; that would be accurate.
4:13:16 PM
CHAIR OLSON recalled only one issue in his community in 30
years, which was due to a surveying error.
4:13:37 PM
REPRESENTATIVE SADDLER pointed out that Ms. Peltola suggested
Section 2 may be self-contradictory. He said an owner producer
may not obtain a license unless they are a resident, however, AS
21.27 allows for alien or nonresident licenses. He asked
whether an inherent contradiction exists.
MS. HALL suggested that is probably a legal question she did not
think she was qualified to answer.
4:14:18 PM
REPRESENTATIVE JOHNSON moved to report the proposed House
Committee Substitute (HCS) for Senate Bill 122, labeled, 27-
LS0789\D, Bailey, 3/19/12, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no further objection, HCS CSSB 122(L&C) was reported from the
House Labor and Commerce Standing Committee.
4:15:09 PM
The committee took an at-ease from 4:15 p.m. to 4:17 p.m.