Legislature(2011 - 2012)BELTZ 105 (TSBldg)
01/24/2012 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB154 | |
| SB122 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 154 | TELECONFERENCED | |
| *+ | SB 122 | TELECONFERENCED | |
SB 122-REAL ESTATE TRANSFER FEES/TITLE PLANTS
4:11:15 PM
CHAIR OLSON announced the consideration of SB 122.
4:11:25 PM
DANA OWEN, staff to SB 122 sponsor, said the bill's second
section bans the use of transfer fee covenants that are
contractual obligations imposed upon any subsequent sale of the
land. He noted that more than half of the states currently ban
transfer fee covenants; the earliest was New York in 1852 when
the courts noted the practice as a "vestige of feudalism." He
said the second section of SB 122 has no opposition from the
title insurance industry.
MR. OWEN said the first section of SB 122 extends the length of
time spanned by a "title plant," which comprises of a record for
all transactions or conditions that affect titles to land
located in a specific area. He said the length of time would be
extended from 25 years to 50 years. He said the proposed change
is controversial within the title insurance industry and work
was being done to find new language to satisfy all parties via a
committee substitute.
4:14:02 PM
CHAIR OLSON asked when the committee substitute would be
presented.
MR. OWEN replied by the next meeting.
CHAIR OLSON asked how substantially different the committee
substitute would be.
MR. OWEN answered that minor changes would be made. He said the
focus was on protecting customers from title insurance companies
located outside of Alaska without limiting competition.
4:15:37 PM
CHAIR OLSON asked why there was opposition to allow more people
into the title insurance market. He noted that buying real
estate was one of the biggest expenditures an individual would
have and allowing competition should bring down prices.
MR. OWEN answered that the idea was not to limit people from
getting into the title insurance market; the intent was to keep
out companies that are not able to give the kind of service that
Alaskan-based title insurance companies could provide.
CHAIR OLSON commented that upcoming testimony would be from
companies with a financial interest rather than a public
interest. He said it is important to keep what is in the best
interest of Alaskan residents first.
4:17:29 PM
MR. OWEN said that the committee was very concerned that public
interest be protected. He said the first step was to make sure
there was agreement within the title insurance industry without
taking sides.
CHAIR OLSON asked if Mr. Owen was suspicious from the infighting
within the title insurance industry.
MR. OWEN answered yes.
4:19:42 PM
CRYSTAL PELTOLA, Vice President/General Manager, Alaska USA
Title Agency, said the current title plant law has worked well
for decades and there was no value to the industry or consumers
by changing something that was not broken. She said the title
search process was dictated by underwriters, not by the number
of years title plant documents were statutorily required to be
on record. She said SB 122 would be anticompetitive by limiting
the number of title agencies, doubling startup costs and adding
time to acquire additional years of records.
She said increasing the title plant requirement would only
benefit a few agencies, most of which were the main proponents
of SB 122. She said the length of records retained in title
plants had no bearing on claims or loses. She said technological
change has provided broader access to electronic records and
allowed more competition to keep down costs for consumers, and
that SB 122 would mandate a step back in time by requiring
older, outdated title plants to be expanded.
4:23:14 PM
CHAIR OLSON asked about mortgages that go longer than 25 years.
MS. PELTOLA answered that the length of any claim of lien
mechanics, mortgage or judgment, had no bearing on how far back
a search was done. She said there was no correlation between
length of mortgage and title record search and that title
insurance underwriters are the ones who dictate the length of
time.
CHAIR OLSON asked how the consumer would be protected if
hazardous materials were found from WWII when a 25 year title
plant was used.
4:24:22 PM
MS. PELTOLA answered that underwriting contracts dictated
searches, there was no bearing on the search process by the
amount of records statutorily required to have in a title plant.
4:25:19 PM
RAYMOND DAVIS, Vice President, Old Republic Title Insurance
Company, said he was Alaska USA Title Agency's underwriter and
provided the financial backing behind the title policies that
were issued in Alaska.
He said SB 122 would give unfair advantage to two companies in
Anchorage that have 50-year title plants; it would affectively
give them a monopoly on all future business in Anchorage.
He said in anticipation of SB 122 passing, the two Anchorage
title companies have considered charging subscription fees to
the other title companies at $7500 per month, $90,000 per year.
MR. DAVIS said technology allowed title insurance companies to
go directly to government records and search titles without old
title plant mandates. He said the goal should not be to limit
competition; the goal should be to expand competition without
allowing "fly by night" operators. He said the real threat was
to companies that had big investments in old title plants.
4:29:36 PM
CHAIR OLSON asked about Old Republic Title being located in
Seattle and the impact on the consumer having to legally deal
with an out-of-state company.
MR. DAVIS answered that Old Republic Title only issues policies
through Alaska-based companies. He said the majority of title
policies in Alaska are underwritten by out-of-state insurance
companies.
4:31:01 PM
MICHAEL PRICE, President, Alaska Land Title Association (ALTA)
said he owned several title insurance companies in the Anchorage
area and was a real estate lawyer. He said ALTA supports banning
transferring covenant fees but he disagreed with prior testimony
regarding title plants.
He said the title plant change in SB 122 addressed out-of-state
examiners who are not licensed in Alaska. He noted that 13
states within the past four years had adopted similar changes.
He said the title plant section of SB 122 would require an
Alaskan resident and licensed title examiner to examine and sign
preliminary commitments for policies being issued.
He said the SB 122 controversy comes down to two things,
changing plant law from 25 years and allowing two types of title
insurance companies to operate in Alaska.
He said changing plant law from 25 to 40 or 50 years was
recommended due to Alaska not having curative title provisions.
He said adding years to the title plant does not put unnecessary
burden on title insurance companies and was not anticompetitive;
records can be downloaded directly from the Recorder's Office at
a relatively small fee.
4:36:49 PM
MR. PRICE said the second issue addressed a legislative decision
from 2002 that designated two types of title companies; a single
company required to have a title plant and a joint-plant of two
or more companies that was not required to have a title plant,
e.g., Old Republic Title and Alaska USA Title's arrangement.
He said ALTA, not for anticompetitive reasons, believes Alaska
should return to a "title plant state." He said as far as he
knew, Alaska was the only state which allowed two different
types of title companies where one was required to have a title
plant. He noted that Old Republic Title was based in a "title
plant state" and the company's president told him that he
believed in title plants.
He said he disagreed with prior testimony which indicated
consumer costs would increase. He noted that prices were set by
the Division of Insurance.
He said Alaska should protect the public and not allow the
limited underwriters in the US to dictate search policy. He
referenced Countrywide Home Loans as an example of a large
mortgage lender which no longer existed and it was the largest
in the country five years ago. He noted that it only takes $1
million to become an underwriter in Alaska and one claim could
wipe that out.
4:41:49 PM
CHAIR OLSON asked if it was true what Mr. Davis brought up
regarding a possible monopoly with only two land plant companies
in the state of Alaska.
MR. PRICE said there were over 20 title plant companies in the
state and Mr. Davis may have referred to the two companies in
the Anchorage Recording District. He said there were actually
more than two companies in the Anchorage area.
CHAIR OLSON asked what the normal subscription rates were for
title plant information.
MR. PRICE answered that the monthly subscription was $7000 to
$8000 for a joint-plant company and $10,000 to $12,000 for a
single owned company.
4:43:02 PM
CHAIR OLSON asked if Mr. Davis's claim was accurate that his
subscription fees were in the $7,500 per month range.
MR. PRICE answered yes for a joint-plant organization.
4:43:26 PM
CHAIR OLSON expressed interest in protecting the public. He said
real estate market suspicion was justified after the economic
problems caused by the 2008 housing crisis.
4:43:55 PM
MR. PRICE responded that the title industry only insures loans
and has nothing to do with making loans. He said anti
competition is not the issue when title companies have
relatively low entrance and startup costs. He said the public
would be better served by title agencies that have more invested
into their industry and access to every document.
4:45:31 PM
TERRY BRYAN, Vice President, First American Title Company, said
he operated as a title and underwriting company in approximately
10 Alaskan communities. He said Alaska is a "file and approve"
state; title insurance prices are not set by the state, prices
are submitted to the Department of Insurance for approval.
4:47:15 PM
MR. BRYAN referenced Oregon and Washington as states with
mandatory title plant laws between 40 and 50 years. He said he
was not aware of title insurance underwriting contract language
that required a specific age of title plant. He said most
underwriting contracts identified certain reasonable search
criteria and standards, but no chronological identification due
to unique differences in each state. He said ALTA recommends 40
years as a required title plant based upon Alaska's history.
He noted that the title insurance industry was probably the only
part of the real estate industry that came through the mortgage
crisis unscathed and was portrayed as the good guy in the media.
4:49:10 PM
CHAIR OLSON asked if the reason for the positive media coverage
was due to having better legal representation.
MR. BRYAN replied that the title insurance industry facilitates
the transaction and does not negotiate or barter the
transaction. He confirmed that $7500 was the correct monthly
subscription rate for a joint-plant organization.
4:50:23 PM
CHAIR OLSON asked how many claims against title companies occur.
MR. BRYAN answered that he did not know. He said when compared
to other types of insurance, title insurance claims occur at a
very low percentage.
4:51:34 PM
CHAIR OLSON asked him to explain prior testimony regarding $1
million required for underwriters.
MR. BRYAN answered that the state required a $1 million bond for
licensing. He added that dramatic obligations through civil and
legal courts provided added coverage for consumers who dealt
with Alaska based companies.
4:52:32 PM
ROGER FLOERCHINGER, President/Owner, Yukon Title Company, said
his company insured conveyances in the most northern 11
recording districts and dealt directly with buyers of real
estate in villages and small communities. He said contrary to
Mr. Davis' testimony, his company was not solely a distribution
system for title underwriting companies. He disagreed with
testimony that consumer prices would increase from a change in
title plant law by requiring all companies to have title plants.
He said he believed it was in his customer's best interest to
operate his company with a title plant. He noted that a proposed
committee substitute included a grandfather clause for current
companies that operate without a title plant.
4:55:41 PM
CHAIR OLSON asked what was wrong with companies consolidating
subscription on identical services to save money.
MR. FLOERCHINGER answered that consolidating was fine. He said
the issue was allowing companies to operate without a title
plant.
4:56:39 PM
CHAIR OLSON asked if SB 122 was a good bill for his rural
constituents in Shishmaref or Shaktoolik, for instance.
MR. FLOERCHINGER answered that he does insure titles in
Shishmaref and Nome.
CHAIR OLSON commented that there was a big difference between
Nome and Shishmaref; Nome has been incorporated for over 100
years while Shishmaref was eroding away. He asked if he was
indeed insuring titles in Shishmaref and if he did not know a
customer's name, what the difference was between him and Mr.
Davis in Seattle.
4:57:37 PM
MR. FLOERCHINGER answered that he does have insurance title
plants in Shishmaref and would have to review his title order
book.
4:58:15 PM
CHAIR OLSON announced he would hold SB 122 for the next Senate
Community and Regional Affairs Standing Committee meeting.
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