Legislature(1997 - 1998)
04/29/1998 03:22 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
HB 247 - REGULATION OF ESCROW ACCOUNTS Number 0029 CHAIRMAN ROKEBERG announced the committee's next order of business was HB 247, "An Act relating to escrow accounts; and providing for an effective date." Number 0031 REPRESENTATIVE BILL HUDSON made a motion to adopt the proposed committee substitute for HB 247, Version K, labeled 0-LS0635\K, Bannister, dated 4/28/98, for discussion. There being no objections, Version K was adopted. CHAIRMAN ROKEBERG noted Representative Sanders is in attendance. CHAIRMAN ROKEBERG explained the minor changes in the proposed committee substitute, indicating the committee had previously heard HB 247 on January 21, 1998. He stated the title had been "tightened." On page 2, line 4, the chapter title had been changed from "Escrow Accounts" to "Escrow Transactions". Throughout the bill Chairman Rokeberg indicated the wording "escrow transaction" or "escrow transactions" had been substituted for "escrow account" or "escrow account" or "escrow accounts". On page 2, line 26, "escrow" was added between "depository account", to read "depository escrow account". On page 3, line 19, "prohibiting" was added before "customers"; the chairman noted this had to do with the clearance of checks. On page 4, line 14, he indicated subsection (2) was changed to reflect the change on page 2, line 26, to "depository escrow account". Subsection (2) now read, "(2) "depository escrow account" means an account that holds escrow money pending completion of an escrow transaction, and that is in a financial institution;" [subsection (2) previously read, "(2) "depository account" means an account with a financial institution to which items are deposited under AS 34.75.020(b) for the purposes of an escrow account;"]. Number 0050 CHAIRMAN ROKEBERG noted subsection (3) on page 4 now read, "(3) 'escrow transaction' means a transaction where, for the purpose of effecting and closing the sale, purchase, exchange, transfer, encumbrance, leasing, or other disposition of an interest in residential real property,' [subsection (3) previously read, '(3) 'escrow' means a transaction where, for the purpose of effecting the sale, transfer, encumbrance, leasing, or other disposition of real or personal property to another person,"]. Chairman Rokeberg commented this was one of the major substantive changes in the bill where they were (indisc.--coughing) limiting the good funds to residential and not all properties, noting this was a "good funds" bill. He stated this was in the interest of consumer protection and it was his belief they could allow commercial transactions to proceed without the protection of good funding because of the special peculiarities there. Number 0056 CHAIRMAN ROKEBERG stated, "Lines 30 and 31 on page 4; at the request of the Division of Banking Securities [Division of Banking, Securities and Corporations, Department of Commerce and Economic Development], we've consolidated the definition of a financial institution to an agency of the federal government, which is (indisc.) at the time.' Page 4, lines 29 through 31 now read, '(5) 'financial institution' means a financial institution (A) whose accounts are insured by an agency of the federal government;' [subsection (5) previously read, '(5) 'financial institution' means a financial institution (A) whose accounts are insured by the Federal Deposit Insurance Corporation, the Savings Association Insurance Fund, or the National Credit Union Administration Board;']. On page 5, lines 12 and 13, the subsections were renumbered and the definition of residential real property was added. This definition read, "(7) 'residential real property' means real property on which is located a building containing one to four dwelling units;". CHAIRMAN ROKEBERG stated the other substantive change was on page 5, line 15. The language, "but does not include a financial institution", was added to the definition of settlement agent at the request of the Alaska Bankers Association to exclude banking financial institutions from the provisions of settlement agent as it relates to their escrow collection-type businesses. Chairman Rokeberg indicated HB 247 only concerned an escrow settlement agent in a residential real estate transaction as defined. The definition of settlement agent now read, "(8) "settlement agent" means a person who engages in the business of handling escrow transactions, but does not include a financial institution or person who collects money for the sole purpose of applying the money to the payment of a loan during the term of the loan; "settlement agent" includes an employee of a person who engages in the business of handling escrow transaction when the employee is carrying out the employee's duties in the business." He commented the effective date had been changed to January 1, 1999. Number 0067 CHAIRMAN ROKEBERG stated those were the changes made in the proposed committee substitute, noting a letter agreeing to these bill changes in the bill packet from D.J. Webb, First American Title Company of Alaska [also Legislative Affairs Chair of the Alaska State Escrow Association]. The chairman referred to a letter from some folks in Anchorage who supported the current version of HB 247. The party negotiated the sale of their home and left the closing transaction in the hands of the settlement agent. After the buyer took possession of the property, he called the out- of-state lender and convinced them to stop payment on the transaction due to a leaking skylight. If this had gone to court, it would have taken up to two years to settle and would have cost them $30,000 in legal fees. If the funds were actually received prior to closing and recording, this situation would never have transpired. After a lengthy ordeal, the party got their house back after four months. Chairman Rokeberg indicated that was the reason for this legislation. CHAIRMAN ROKEBERG reminded the committee that HB 247 was the "good funds" bill. It meant the settlement agent must have the money in hand before recording the deed and conveying the title. He said Washington, California and Oregon, among many others, have "good funds" legislation, and Alaska did not. Number 0081 REPRESENTATIVE HUDSON made a motion to move the proposed committee substitute for HB 247, Version K, with the attached zero fiscal note and asked unanimous consent. There being no objections, CSHB 247(L&C) was moved out of the House Labor and Commerce Standing Committee.
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