Legislature(1999 - 2000)
03/09/1999 01:45 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 13
"An Act relating to the characterization of, use of,
segregation of, deposit of, interest on, and
disbursement of escrow money; relating to the
recording, filing, and delivery of escrow documents;
relating to civil penalties for violations of certain
escrow provisions by escrow settlement agents; relating
to the supervision by the Department of Commerce and
Economic Development of escrow settlement agents;
authorizing the adoption of regulations to implement
certain escrow provisions; and providing for an
effective date."
REPRESENTATIVE NORMAN ROKEBERG explained that HB 13 was
submitted at the request of the Alaska State Escrow
Association and was reintroduced in an effort to assure
consumers that their money would be safely received in a
timely manner, and properly accounted for when delivered to
a settlement agent for a residential real property
transaction. Currently, there are no Alaskan laws
addressing that concern.
He continued, an increasing number of incidents have
occurred demonstrating the need for Alaska to join the large
number of states having "good funds" legislation. In the
age of growing electronic commerce, people are shopping the
Internet for mortgages and there is an increase in
competition from "outside" mortgage companies caused by low
interest rates. Problems have arisen from failure of these
companies to properly fund transactions in a timely fashion
or in some cases left with bankruptcy. Representative
Rokeberg summarized that when drafting the bill, he worked
with various interest groups and financial institutions
throughout Alaska.
Representative Rokeberg advised that the bill had been
rewritten, resulting from an attached fiscal note in a
previous Committee hearing. The new version would eliminate
the regulatory necessity of the Department of Commerce and
Economic Development to oversee that particular chapter of
law.
Representative Foster MOVED to adopt work draft 1-LS026\M,
Bannister, 2/19/99, as the version before the Committee.
There being NO OBJECTION, it was adopted.
Representative Rokeberg explained the changes to the work
draft:
? Amendment #1, addressed on Page 2, Line 5,
language after "transaction agreement" was
deleted.
? Amendment #2 was not addressed in the proposed
bill since that particular section "Civil Penalty"
was replaced by "Civil Action" on Page 3, Lines
22-27. That section removes all departments from
the legislation and makes the violation of the
"good funds act" a private right of action.
? Amendment #3 was withdrawn.
? Amendment #4 was addressed on Page 6, Lines 28-29;
however, the definition has also had the following
language added after "dwelling units", as "any
number of apartments are in a horizontal property
regime formed under AS 34.07 or any number of
unites if the unites are in a common interest
community created under AS 34.08".
? Amendment #5 deals with the "Civil Penalty"
section that has been changed to the "Civil
Action" section.
? Amendment #6 was pending, however, all references
to the Department of Commerce and Economic
Development, its supervisory authority,
investigative authority, and regulation making
authority are deleted from Version M. Also,
deleted is reference to the referral to the
attorney general's office if voluntary compliance
was not obtained.
? Amendment #7 deals with the "Civil Penalty"
section that is no longer in the legislation.
? Amendment #8 is not needed as the removal through
the Department of Commerce and Economic
Development since there are no provisions for an
audit.
Representative Bunde asked why the bill addresses only
residential property and not commercial property.
Representative Rokeberg explained that because of the large
amounts of money involved in commercial transactions and the
different funding mechanisms, those projects were excluded.
The primary focus of the legislation is consumer protection
issues related to residential properties.
Representative J. Davies requested further information
regarding exclusion of "punitive damages". Representative
Rokeberg replied that the intent was to provide a cure for
grievance by allowing a private right of action. If there
is a breech, then private right presides. Representative J.
Davies advised that the reality is that these situations
sometimes do get litigated and that there are circumstances
in which punitive damages make sense. Representative
Rokeberg replied that happens only in instances where the
money has been reserved in trust. The concern here is that
the money is available at the time of recording.
Representative Rokeberg pointed out that each time there is
a property closing, there are two contracts involved;
? The contract with the buyer and seller of the
property; and
? The contract between the buyer and the lender.
Co-Chair Therriault clarified that an escrow agent must have
the funds in hand and under control before the transaction
of the title can take place. Representative Rokeberg
explained that previously, they were recording before the
money was in hand and it was not determined who was in
charge of carrying the "float".
Representative J. Davies noted that when an agent violates
the proposed law, the resulting remedy is civil court.
Representative Rokeberg replied that in some cases, the
Title Company could be sued for not following the law. At
this time, there is no law, so there is no cause of action
before them. Co-Chair Therriault clarified that the
proposed legislation would make it easier to bring forward a
civil action. Representative J. Davies advised that either
the Department of Law would be paid to do the work or it
would rest upon the Alaska Court System. Representative
Rokeberg responded that is what the Courts are to be used
for. He suggested that this action would begin a mini
privatization.
Representative J. Davies referenced Page 2, Line 6, asking
what "segregation" of the money meant. Representative
Rokeberg explained the intent is that the funds are not
commingled. Representative J. Davies understood that it
meant having different bank accounts. He emphasized that
the two statements specify keeping separate bank accounts.
Representative Rokeberg stated that Subsection (a) provides
for the segregation and Subsection (b) provides for the
account. Co-Chair Therriault acknowledged the confusion
caused by the wording. Representative G. Davis suggested
that there must be a system within the banks, which
segregates or separates the accounts.
Co-Chair Therriault noted that the discussion before the
Committee was if there was one account or a separate escrow
account for each transaction. He suggested that a legal
drafter be consulted to clarify the language.
Representative Grussendorf additionally, voiced concern with
the language and recommended that someone from the Division
of Banking testify regarding these procedures.
Representative Rokeberg clarified if Committee members were
concerned if segregated meant separate accounts. Co-Chair
Therriault stated that the Committee needed clarification if
segregation would be a bookkeeping function rather than
separate account.
(Tape Change HFC 99 - 42, Side 2).
Co-Chair Therriault reiterated that the issue needs to be
clarified. He requested that legal counsel comment on the
concern. Co-Chair Therriault questioned if the House
Finance Committee would need to prepare a zero fiscal note
to accompany the legislation.
HB 13 was HELD in Committee for further consideration.
HOUSE BILL NO. 13
"An Act relating to the characterization of, use of,
segregation of, deposit of, interest on, and
disbursement of escrow money; relating to the
recording, filing, and delivery of escrow documents;
relating to civil penalties for violations of certain
escrow provisions by escrow settlement agents; relating
to the supervision by the Department of Commerce and
Economic Development of escrow settlement agents;
authorizing the adoption of regulations to implement
certain escrow provisions; and providing for an
effective date."
Representative J. Davies MOVED to adopt Amendment #1. [Copy
on File]. Representative Rokeberg noted that he would
accept the amendment in the spirit of clarification.
There being NO OBJECTION, Amendment #1 was adopted.
Representative Foster MOVED to report CS HB 13 (FIN) with
individual recommendations and with the fiscal note. Co-
Chair Therriault advised that the fiscal note would be the
front page only of the previous fiscal note. There being NO
OBJECTION, it was so ordered.
CS HB 13 (FIN) was reported out of Committee with "do pass"
recommendation and with a new House Finance Committee zero
fiscal note.
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