Legislature(2017 - 2018)ADAMS ROOM 519
04/13/2018 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB155 | |
| HB399 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 78 | TELECONFERENCED | |
| += | HB 399 | TELECONFERENCED | |
| += | SB 155 | TELECONFERENCED | |
CS FOR SENATE BILL NO. 155(FIN)
"An Act relating to the registration and regulation of
real estate appraisal management companies; relating
to the establishment of fees by the Department of
Commerce, Community, and Economic Development;
relating to the Board of Certified Real Estate
Appraisers; relating to real estate appraisers; and
providing for an effective date."
9:11:17 AM
EDRA MORLEDGE, STAFF, SENATOR KEVIN MEYER, indicated that
SB 155 related to the regulation of real estate appraisal
management companies. She detailed that an Appraisal
Management Company (AMC) was an independent entity through
which mortgage lenders order residential real estate
valuation services. The Senator discovered that the federal
government required states that chose to regulate the
sector of industry enact comprehensive AMC oversight and
registration programs by the deadline of August 10, 2018.
The companies fulfilled an administrative function in the
appraisal process that included selecting an appraiser and
delivering the appraisal report to the lender. The bill
accomplished 2 things. First the bill required that the
Board of Certified Real Estate Appraisers manage AMCs
according to the minimum standards of the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010.
Secondly, the bill established an annual registration fee
to be collected and transmitted to the federal appraisal
subcommittee to support the maintenance of the national
registry. She reported that if the legislation was not
adopted appraisal management companies would be prohibited
to provide its services for federally regulated
transactions in Alaska after the deadline. The issue could
pose an economic hardship for Alaskans that wanted to
purchase or sell a home. Lending institutions would likely
choose AMCs that could deal with federally regulated
transactions. The bill offered a broader set of options for
appraisals in Alaska. Currently, Alaska was only one of
four states that had not adopted the federal regulations
and the other three states were in the process of doing so.
The legislation established the regulatory framework and
minimum standards for the Department of Commerce, Community
and Economic Development (DCCED). She relayed that the
minimum standards required that an AMC choose a certified
real estate appraiser to interact with the board that
complied with the uniform standards of professional
appraisal practice and other professional and legal
standards set by the state, and to obtain a surety bond of
$50 thousand. The department requested a one year waiver
but was uncertain it would be granted. However, her
understanding was that if the state was actively passing
legislation the waiver would be approved. The bill
established an effective date of January 1, 2019 and all
AMCs were required to register by March 1, 2019.
9:16:56 AM
Representative Wilson asked what federal transactions the
bill was speaking of. Ms. Morledge answered that federally
related transactions were complex. She deferred to Mr.
Schiffman (Mark Schiffman, Real Estate Valuation
Association) for a complete answer. Representative Wilson
clarified that she was thinking of Veteran Affairs (VA)
loans.
9:18:30 AM
MARK SCHIFFMAN, REAL ESTATE VALUATION ASSOCIATION (EVAA),
MINNEAPOLIS (via teleconference), explained that a
federally related transaction made up about 10 percent of
all transactions. A loan could change back and forth from
being a federally related transaction or not. He concurred
that the issue was complex. The bill was not related to VA
transactions and dealt with traditional mortgage
originations.
Representative Wilson asked whether the board was new or
under the existing real estate appraiser board. Ms.
Morledge answered that the bill applied to the existing
board.
9:20:35 AM
SENATOR KEVIN MEYER thought Ms. Morledge's presentation was
informative. He reemphasized the need to pass the bill
before the deadline of August 10, 2018. He indicated that
the bill would take effect on January 1, 2019 but was
concerned with the date. He reported that the original bill
had an effective date of August 10, 2018 but included a
transition period for the regulatory process.
DAVID DERRY, CHAIR BOARD OF CERTIFIED REAL ESTATE
APPRAISERS, HOMER (via teleconference), related that that
Ms. Sara Chambers [Deputy Director, Division of
Corporations, Business and Professional Licensing] deduced
that the division would not likely be able to generate all
the needed regulations even by January 2019. He believed
that the regulation process could be completed within the
one year waiver period that DCCED was requesting through
the board's federal oversight entity.
9:23:28 AM
Representative Guttenberg asked about the purpose of the
legislation. He asked for clarity regarding what the bill
was asking the board to do. He also wondered what function
AMCs performed. Ms. Morledge responded that AMCs had
operated for decades. The idea behind the bill was consumer
protection. She delineated that the Dodd-Frank Act through
the federal appraisal subcommittee instituted rules of
conduct that added an extra layer between lending
institutions and consumers and required states to implement
standards of conduct for AMCs. Any state where AMCs
operated were required to adopt the federal standards of
conduct. The intention of the regulations was to protect
consumers from allowing lending institutions to have undue
influence over appraisals. Representative Guttenberg asked
what actual functions the bill was requiring the board to
perform. Ms. Morledge deferred to Mr. Derry.
9:28:05 AM
Mr. Derry ascertained that Representative Guttenberg's
question related more to what AMCs do. He explained that
the function of AMCs was to maintain a roster of appraisers
and selected an appraiser to generate an appraisal report
for a lender by request of the lender. The report was
reviewed by the AMC then relayed to the lending institution
that contracted its services. He delineated that not all
lenders used AMCs. He noted that Northrim Bank and the
First National Bank of Alaska did not use AMCs. Lower 48
state lenders such as Rocket Mortgage and Quicken Loans
used AMCs because of their unfamiliarity with Alaskan
appraisal services. The board supported AMC oversight to
provide the maximum available mortgage credit to the
Alaskan consumer. The use of an AMC meant the lender
charged more for the cost of the loan. The cost could be
paid by the lender or sometimes the appraiser offered their
services to the AMC for a reduced fee.
9:31:17 AM
Representative Guttenberg believed that all costs were
passed on to the buyer. He understood that an AMC was a
referral service and the legislature was setting up a board
of oversight. He asked how many AMCs operated in Alaska. He
wanted to better understand the structure. Mr. Derry
responded that no new board was being established; the
function was being absorbed by the existing board. The
issue evolved out of the subprime mortgage crisis of 2008.
Alaska was largely insulated from the crisis. He noted that
problems with the lending institutions trying to influence
appraisers spurred the regulation. He announced that there
were no Alaska based AMCs. He provided the high numbers of
AMC's registered in several other states and stated that
there were a significant number of AMCs nationwide; most
were large corporate entities. AMC costs were competitive,
and he did not anticipate an increase in mortgage costs in
Alaska. He reminded the committee that the drop-dead date
was August 10th, 2018 and AMCs were currently operating in
Alaska.
9:34:11 AM
Mr. Schiffman interjected that one of the most important
issue from the Dodd-Frank bill was the notion of appraiser
independence; the buffer between the appraiser and the
lender. The roll of the AMC was to provide and verify the
layer of independence as a safeguard for the process. He
noted that some lending institutions did not use AMCs but
had to abide by the same standards of safeguarding
appraisal independence. Representative Guttenberg clarified
that the only reason the legislature was adopting the bill
was to allow AMCs to operate in the state. Mr. Schiffman
answered in the affirmative and observed that the AMCs were
in the "odd position" to ask the state to regulate them.
The association supported the legislation. He reminded the
committee that the bill did not mandate use of AMCs. The
disruption would occur if the state did not adopt the bill.
Representative Guttenberg asked if AMCs could still provide
services in Alaska without the legislation. Mr. Schiffman
responded that they would be able to provide services for
appraisals that did not involve federal transactions. Some
lenders were using AMCs for all their transactions and were
reticent to bifurcate their system. He reasoned that the
real hardship fell on the lender.
9:38:01 AM
Representative Guttenberg was trying to understand what was
broken in the Alaska real estate climate. He deduced that
the legislation was necessary to allow AMCs to handle
federal transactions but wondered what was currently
"broken" in the Alaskan chain between the lenders, the
appraisal, and the home buyer or seller. Mr. Schiffman
responded that he was unsure that anything was broken in
Alaska and did not believe that was the issue. The issue
stemmed from the nationwide financial crisis in 2008 and
the residual effect to manage AMCs. He offered that the
issue was about uniformity and bringing Alaska into
compliance with the federal regulation. Representative
Guttenberg wondered whether someone from the Alaska Housing
Finance Corporation (AHFC)was available to testify on the
bill. Co-Chair Foster answered in the negative.
Mr. Schiffman appreciated SB 155 and supported the
legislation.
9:41:02 AM
Mr. Derry commented that the board supported the
legislation. He relayed that the board attempted to adopt
similar legislation in 2009 but was unable to find a
sponsor. The purpose in supporting the bill was to maximize
the availability of credit for Alaskans. He stated that he
was unable to determine whether AHFC fell under the
legislation. The question of federally related transactions
and what it entailed was "fuzzy." He offered that
essentially lenders did not know at the beginning of a
mortgage process whether it would end as a federally
related transaction. The bill allowed the maximum
availability of credit for Alaskans. He did not think
anything was actually broken. He believed that by not
adopting SB 155 some out of state lenders would choose not
to operate in Alaska, which would limit the amount of
available mortgage credit. The bill benefitted the Alaskan
consumer.
9:44:38 AM
Representative Wilson wanted clarification that Alaska was
not creating a new board and that the state was being
mandated by the federal government to adopt the regulations
or else Alaskan's mortgages would be affected. Senator
Meyer responded in the affirmative. He added that by not
passing the bill the state would have limited access to
some federal loans.
9:46:13 AM
Representative Tilton asked whether the bill affected the
process that the consumer had to engage in to obtain a
mortgage. Senator Meyer responded that the bill would not
impact the consumer other than they would have more
protections. The bill allowed the bank to have access to
more funds. Representative Tilton stated that a lending
institution was not forced to use an AMC and could choose
not to. Co-Chair Meyer responded that Representative Tilton
was correct. Representative Tilton reported that the Dodd-
Frank rules might undergo some changes and surmised that
the changes wouldn't affect the bill because using AMCs was
a voluntary act. Co-Chair Meyer responded that it was
uncertain when or if the Dodd-Frank rules were changing and
whether the changes would impact the bill. He deferred the
answer to Mr. Schiffman.
Mr. Schiffman relayed that currently there were no
proposals in Congress that would have an impact on the AMC
regulations.
Representative Tilton referred to testimony that
approximately 10 percent of mortgage loans would be
affected. She asked if the issue was more about how loans
were packaged and sold in the secondary market. Mr. Derry
responded that the bill affected the origination process
for a mortgage loan. The lender would go through the AMC
for the appraisal that was sent back to the lender; after
providing the loan to the consumer the lender sold the loan
to the investor. He reiterated that a lending institution
might be uncertain whether a loan would end up part of a
federally related transaction or not as they worked through
processing the loan and until the loan was final it could
switch back and forth as different loan programs were
considered. The bill would simplify the process.
9:53:24 AM
Mr. Schiffman added that one of the primary roles that the
AMC provided the lender in addition to the appraisal was
the quality control that the appraisal met the standards.
The fact that that appraisal met the standards provided
confidence in the secondary market when purchasing loans.
Representative Guttenberg asked that if the legislature did
not pass the bill would more business be driven to Alaska
banks. He wondered how the bill affected federal credit
unions in Alaska. Mr. Derry responded that if AMC
legislation was not enacted, it would not make it easier
for Alaska banks to operate. However, passage broadened the
home loan market for consumers. He reiterated that some
Alaskan banks use AMCs and some did not. He reported that
credit unions fell under the same regulation as the banks.
He reported that the AlaskaUSA Credit Union did use AMCs.
He informed the committee that banks that did not use AMCs
set up their own internal organization that ensured the
appraisal met the underwriting standards. He concluded that
using AMCs was not necessary but restated that not passing
the bill did not make it easier for banks to operate in the
state and limited other lending sources.
9:58:03 AM
Co-Chair Foster OPENED public testimony.
Co-Chair Foster CLOSED public testimony.
Co-Chair Meyer thanked the committee for hearing the bill.
He wanted to further address the impacts of not passing the
bill. He pointed to the supportive letters in members
packets from Wells Fargo, Alaska Chamber of Commerce, and
Alaska Bankers Association (copy on file).
Co-Chair Foster indicated that there were no anticipated
amendments.
10:00:13 AM
Co-Chair Seaton reviewed the previously published fiscal
impact note from DCCED, FN2 (CED), appropriated to the
Division of Corporations, Business and Professional
Licensing in the amount of $111.9 thousand in receipt
services in FY 19 and $97.5 thousand in the out years.
Representative Wilson asked if the fiscal note was paying
for an additional staff specifically for the Certified Real
Estate Appraisers Board. Co-Chair Meyer deferred to Ms.
Chambers for an answer.
10:01:34 AM
SARA CHAMBERS, DEPUTY DIRECTOR, DIVISION OF CORPORATIONS,
BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, concurred
that the division was requesting an additional junior
licensing examiner that helped process applications. She
explained that the division was at maximum capacity and the
position would be necessary due to the expansion of many
licensing programs. The position would work on the
appraiser program and help with other licensing programs
that experienced diminished service levels because of
insufficient staff. The division would employ positive
time-keeping measures.
Co-Chair Seaton MOVED to report HCSCSSB 155 (FIN) out of
Committee with individual recommendations and the
accompanying fiscal note
Representative Guttenberg OBJECTED for discussion.
Representative Guttenberg spoke to his objection. He stated
that there was no person or entity that represented a
neutral voice on behalf of consumers. He emphasized the
lack of a consumer advocacy voice in the state.
Representative Guttenberg WITHDREW his OBJECTION.
Vice-Chair Gara added to Representative Guttenberg's point
and observed that Alaska was the only state without a
consumer protection agency. The state only had one and one
half attorney positions in the Department of Law (DOL) that
did their best to provide consumer protection but was a
"fraction" of the prior amount. The only other agency that
offered a consumer voice was the Regulatory Commission of
Alaska. He advocated for more consumer protection in the
state.
Vice-Chair Gara WITHDREW his OBJECTION
There being NO OBJECTION, it was so ordered.
HCSCSSB 155 (FIN) was REPORTED out of committee with a "do
pass" recommendation and with a "no recommendation"
recommendation and with a previously published fiscal
impact note: FN2(CED).
10:06:27 AM
AT EASE
10:07:44 AM
RECONVENED
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 78 - Amendment #1.pdf |
HFIN 4/13/2018 9:00:00 AM |
SB 78 |
| HB 399 - Amendment #1.pdf |
HFIN 4/13/2018 9:00:00 AM |
HB 399 |