03/23/1998 01:50 PM House FIN

SENATE BILL NO. 221                                                            
                                                                               
"An Act relating to negatively amortizing loans                                
originated under a program approved or sponsored by                            
the state or federal government."                                              
                                                                               
JERRY BURNETT, STAFF, SENATOR RANDY PHILLIPS, commented                        
that many of Alaska's seniors are faced with the prospect                      
of reduced income and the inability to keep their homes.                       
One option for seniors is a "reverse annuity mortgage", a                      
mortgage wherein the financial institution provides a                          
stream of payments to the borrower in return for an equity                     
position in the borrower's home.  The senior would be able                     
to stay in the home while receiving the financial benefits                     
of home ownership.                                                             
                                                                               
Mr. Burnett continued, Fannie Mae and Freddie Mac developed                    
the "Homekeeper" loan program.  The national program would                     
allow seniors to extract equity without a payment plan or                      
to purchase a home without high payments.  The program has                     
several options, one of which is an equity share agreement                     
that would allow for a higher income allowance for the                         
senior.  The option cannot be utilized in Alaska because of                    
a prohibition in current law.  SB 21 would change State                        
law, AS 45.45.010(f), to enable certain shared equity loans                    
that are sponsored by the State of Alaska or the federal                       
government.                                                                    
                                                                               
Mr. Burnett concluded that passage of SB 221 would benefit                     
many Alaskan seniors by allowing them an additional tool to                    
help retain their homes.                                                       
                                                                               
Representative J. Davies asked the difference between a                        
loan and a shared equity.                                                      
                                                                               
AMBER HUTCHENS, (TESTIFIED VIA TELECONFERENCE), PRESIDENT,                     
ALASKA MORTGAGE BANKERS ASSOCIATION, ANCHORAGE, stated that                    
the reversed mortgage programs normally go by the appraised                    
value of the property, and do not consider equity in the                       
future.  The Homekeepers Program will allow the seniors to                     
extract more in estimating that the property will grow in                      
value.  Other programs do not take into consideration the                      
growth of the property.                                                        
                                                                               
Representative J. Davies asked if there were any reversed                      
mortgage plans in the State of Alaska that were not offered                    
through the nationally chartered organizations such as                         
Fannie Mae.  Ms. Hutchens replied that there are none                          
offered by Alaskan lenders at this time.                                       
                                                                               
Representative J. Davies pointed out that the Homekeeper                       
loan program contained protections so that there would be                      
no eviction or forced sale prior to when the senior moves.                     
It also contains provisions that there be no cost to the                       
heirs in excess of the equity in the home.  He asked if                        
those protections should be written in statute.                                
                                                                               
Co-Chair Therriault asked how the State would rate the                         
program.  Mr. Burnett understood that Alaska Housing                           
Finance Corporation (AHFC) could approve such a program.                       
Representative J. Davies pointed out that the section of                       
statute being amended simply refers to bank, credit union,                     
savings and loan institution, pension fund, insurance and                      
mortgage companies and changing what they could do.  He                        
assumed that any bank could propose a reverse mortgage.                        
Ms. Hutchens commented that section of the bill was well                       
written, pointing out that the program would be approved or                    
sponsored by the State.  Normally, a bank does not go                          
through the State to get their program approved unless it                      
is a federally approved program.                                               
                                                                               
Representative J. Davies recommended removing language on                      
Page 1, Line 11, "by the state".  Representative Kelly                         
voiced concern with the proposed program in that it removes                    
money from the senior population and places it back in the                     
government.  Ms. Hutchens advised that there are few                           
seniors who would need this option.  Mr. Burnett commented                     
that currently, there are no State sponsored programs and                      
that the federal and national sponsored programs are                           
sufficient.  He advised that removal of the language would                     
require a title change.                                                        
                                                                               
Co-Chair Therriault recommended so as to avoid a title                         
change, the Committee should specify items which any                           
prospective State program should insure.                                       
                                                                               
CS SB 221 (FIN) was HELD in Committee for further                              
consideration.