Legislature(2011 - 2012)BUTROVICH 205
03/29/2011 09:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB53 | |
| HCR6 | |
| SB104 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 53 | TELECONFERENCED | |
| *+ | SB 104 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HCR 6 | ||
SB 104-MANUFACTURED HOMES AS REAL PROPERTY
9:13:41 AM
CHAIR WIELECHOWSKI announced the next order of business would be
SB 104, relating to manufactured homes.
ANDY MODEROW, staff to Senator Hollis French, sponsor of SB 104,
said the senator apologizes for not being present but he has
another meeting. SB 104 establishes procedures to convert
manufactured homes to real property through a defined process
within the Division of Motor Vehicles (DMV). Currently, when a
manufactured home is affixed to a permanent foundation on land
owned by an individual, the title surrender procedure used by
the DMV lacks a record notice. Without this record notice,
homeowners are often left with unmarketable titles and lenders
hold unperfected security interest in the property, placing all
parties at risk. Conversion will help increase home values, give
security to lenders, and provide fixed procedures for the DMV to
follow. Nothing in this bill requires the conversion of a
manufactured home. Many Alaskans live in manufactured homes, and
this puts them into the same category as people having homes
built on their property.
9:15:42 AM
MR. MODEROW explained that Section 1 deals with findings and
purposes. The purpose is to establish a clear statutory
procedure for converting to real property manufactured homes
that are affixed to real property, and also for severing
manufactured homes from real property.
Sections 2 and 3 add manufactured homes that have been converted
to the definition of real property in banks and financial title.
Section 4 changes "mobile home" to "manufactured home," as a
conforming change throughout the bill.
CHAIR WIELECHOWSKI asked if anything was lost with that change.
MR. MODEROW said his understanding was no. The more modern term
for mobile home is manufactured home.
CHAIR WIELECHOWSKI asked if there was a definition of
"manufactured home."
MR. MODEROW responded a manufactured home is defined as "a
structure transportable in one or more sections that in the
traveling mode is eight body feet or more in width or forty body
feet or more in length or when erected on site is 320 or more
square feet. It is built on a chassis and designed to be used as
a dwelling with or without a permanent foundation when connected
to required utilities and includes plumbing, heating, air
conditioning, electrical systems contained in the structure."
9:17:26 AM
Continuing with the bill description, Section 5 on page 4
references the current definition of manufactured home in the
secured transactions title. Section 6 amends the current
definition of mortgage loan to include manufactured homes that
have become real property. Section 7 adds a definition to
include as real property manufactured homes that have become
real property.
9:18:41 AM
Section 8, page 4, deals with Title 28, the motor vehicle title.
It requires the Department of Administration (DOA) to file and
maintain and file an index of manufactured home documents
related to the conversions provided by this bill. Section 9 sets
out what DOA records must include. Section 10 changes "mobile
homes" to "manufactured homes." Section 11 prohibits the DMV
from issuing a title once a manufactured home has been converted
to real property.
Section 12 changes Manufactured Statement of Origin to
Manufactured Certificate of Origin (MCO). Section 13 allows the
holder of an MCO to deliver that certificate as necessary to
facilitate the conveyance or encumbrance of a manufactured home.
Sections 14 and 15 make the conversion process optional.
9:20:37 AM
Section 16 provides DMV procedures for the conversions. Proposed
section 28.10.262 sets out procedures for canceling an MCO and
making a conversion to real property. Section 263 sets out
similar procedures for canceling a certificate of title. Section
264 sets out procedures for conversion if a certificate of title
cannot be located. The owner must post a bond to protect any
interests of other parties.
9:21:47 AM
Section 28.10.265 sets procedures for severing a manufactured
home from real property and making it personal property.
Section 28.10.266 266 sets out application requirements for
affixation and severance of a manufactured home to and from real
property.
Section 28.10.267 sets out procedures that must be followed to
validate presence or absence of liens. Section 28.10.268
indicates the time frame when requirements outlined are
considered to be satisfied. If accepted by the department, then
it should be conveyed at that time.
9:23:31 AM
Section 28.10.269 defines terms used in the bill.
Section 17, page 12, relates to liens and encumbrances on
manufactured homes. Section 18 prohibits cancelling certificates
of title when a lien or encumbrance is still outstanding.
Section 19 says that a manufactured home which has been
converted is governed by real property laws.
Section 20, page 13, says that "mobile home" includes
"manufactured home."
Section 21, page 13, adds the definition of manufactured home to
the motor vehicle title. Sections 22 - 24 and 25 make conforming
changes to municipal taxation, landlord tenant, residential real
property transfer, and escrow transactions when mobile homes
have been converted to real property.
Section 26 outlines guidelines for the conversion of title.
Section 34.85.010 lists criteria necessary for a conversion. It
requires ownership interest in the land and ownership interest
in the home to be the same or for the owner of the home to have
a 20 year lease on the property. Section 34.85.020 describes the
effect of conversion. Section 34.85.040 relates to the 20 year
lease provision. Section 34.05.060 describes the affixation
affidavit. Section 34.85.070 describes the owner statement
required for the affixation affidavit. Section 34.85.080
clarifies that affixing a manufactured home to real property
doesn't affect the liens and encumbrances unless they are
released.
9:26:53 AM
Section 34.85.090 ties in with DMV portion of the process.
Section 34.85.100 states that an affixation affidavit is
relevant within the process described. Sections 34.85.110 - 130
relate to severance affidavits. Section 130 describes how this
is conveyed to DMV. Section 34.85.140 requires affidavits to be
acknowledged and to be in recordable form.
Section 34.85.220 describes when a manufactured home is
considered to be permanently affixed. Section 34.85.190, defines
some terms, and 34.84.195 provides the short title.
Page 20, section 27, directs the recorder to record affixation
or severance affidavits if they meet specified requirements.
Section 28 amends the definition of goods in the Alaska Real
Installment Sales Act to include manufactured homes. Section 29
allows the DOA to craft regulations to implement this act.
Section 30 provides a savings clause. Section 31 gives the DOA
the authority to create regulations immediately.
9:29:24 AM
CHAIR WIELECHOWSKI asked is this the same bill that came before
Judiciary last year.
MR. MODEROW answered yes.
CHAIR WIELECHOWSKI asked if there has been any opposition.
MR. MODEROW responded that several years ago DMV was worried the
procedure was too cumbersome but he thinks their concerns have
been addressed. Banks are in support.
CHAIR WIELECHOWSKI said this bill is complex but important and
will have a real impact on the lives of many Alaskans.
SENATOR PASKVAN agreed it is important and asked if the title
company industry has weighed in. Banks will rely on them.
MR. MODEROW responded that is a great question. Current
procedures lack that record notice, which is crucial. We do have
people on line from Wells Fargo who work very closely with the
title companies.
9:31:38 AM
SENATOR PASKVAN noted people file documents all the time that
don't necessarily accomplish what they think they might. A bank
needs a title company to say who owns the property.
9:32:15 AM
CHAIR WIELECHOWSKI suggested Mr. Moderow talk to title companies
before the next hearing and get some input or a statement of
support.
SENATOR MEYER said he needed to go back to the basics. So a
mobile home on a lot is currently titled as a vehicle, but the
land is real property.
MR. MODEROW answered he believed that was correct.
SENATOR MEYER said so this would allow the mobile home to be
affixed to the land and mortgage companies could then provide
financing. This would be good for banks and most importantly the
consumer. He asked if inspections were done.
9:33:45 AM
MR. MODEROW said he could get back with details on that. One
section relates to how affixation must occur, which includes
being affixed to a permanent foundation.
SENATOR MEYER noted that mobile homes are more likely to catch
fire. There have been several deaths in his district from mobile
home fires. He asked if the inspection would also include
working fire alarms.
9:35:04 AM
WHITNEY BREWSTER, Director, Division of Motor Vehicles (DMV),
Department of Administration (DOA), said her understanding is
that DMV would simply be putting in its records whether or not a
manufactured home as been affixed or severed. DMV would not be
responsible for inspections.
SENATOR MEYER asked if a mobile home is currently considered a
vehicle.
MS. BREWSTER said correct. Individuals are not required to title
a manufactured home, but can if they choose. It is titled as a
vehicle whether affixed or not.
9:37:03 AM
SENATOR MEYER asked what the advantages are of getting a title.
MS. BREWSTER answered it is an ownership document and lien
holders would want to have it. If you own the home free and
clear, there is no significant advantage.
SENATOR MEYER asked if a tax assessor would look at it as a
vehicle or as a house.
MS. BREWSTER said she did not know.
9:38:15 AM
CHAIR WIELECHOWSKI guessed they would not appraise a
manufactured home currently, but under this bill it would become
real property. This could potentially raise property taxes.
SENATOR PASKVAN asked if a mobile home remains a vehicle does it
need to be registered every two years.
MS. BREWSTER answered no.
SENATOR PASKVAN asked if the DMV only issues a title.
MS. BREWSTER replied that was correct.
CHAIR WIELECHOWSKI asked about insurance.
MS. BREWSTER said it is not required.
CHAIR WIELECHOWSKI asked if someone wants to take out a loan now
on a manufactured home, how would that work?
MR. MODEROW said the main purpose of the bill is to enable
owners of manufactured homes to get real property loans.
CHAIR WIELECHOWSKI asked about the property tax issue.
MR. MODEROW said he was not sure but could find out. Under this
legislation the manufactured home would be included in the value
of the land.
CHAIR WIELECHOWSKI noted that most mobile home parks are
actually owned by a single landowner and asked if they would be
affected by the bill.
MR. MODEROW said that some mobile home parks might be affected.
If the owner had less than a 20 year lease the home would not be
eligible for conversion.
9:41:57 AM
SENATOR PASKVAN asked does this affect the zoning issue of where
a mobile home may or may not be located.
MR. MODEROW said he was not aware of any zoning issues.
CHAIR WIELECHOWSKI said there were people signed up to testify.
GEORGE GINSBERG, attorney with McGlinchey Stafford, said he was
representing Wells Fargo. They asked him to testify because he
was involved in drafting this legislation in Alaska and other
states as well. The background is that in Alaska ownership
interest in a manufactured home is documented by a certificate
of title. It is optional, but needed if the owner wants to sell.
This is the only document to show who owns the home.
9:44:29 AM
Like a car, a manufactured home currently is financed by having
the owner's name listed as a secured party. Under this
legislation it can be permanently affixed to land. Then the
intent is to treat it as real property, which means transferring
ownership by deed and financing by mortgage or deed of trust. It
does make a difference, and it is critical. Fannie Mae and
Freddie Mac will not consider a manufactured home loan as a real
estate loan unless the state law has a statutory way of making
clear that a manufactured home affixed to real estate is
considered real estate legally.
In Alaska there is at the moment no formal statutory method for
doing this. Instead, we have a system where there is a vaguely
defined, almost informal, surrender procedure but no record
notice. This bill is designed to establish a procedure to make
clear this is real estate. Public records will be consistent.
This is a completely optional procedure.
9:47:00 AM
Even if the manufactured home is permanently affixed to land,
the homeowner does not have to convert. The downside would be
the home could not be financed by a real estate loan. Instead,
the loan would be secured by the home itself as personal
property. Few lenders do that, and interest rates charged are
much higher. A similar law was adopted last year in Missouri and
North Dakota, and prior to that in other states.
9:48:01 AM
ETHAN HORMAN, Branch Manager, Wells Fargo Home Mortgage, said he
appreciated the opportunity to speak on behalf of Wells Fargo in
support of SB 104. The bill would amend state law in Alaska to
provide a formal method to convert a mobile home to real
property. Current statutes do not meet the eligibility
requirements to sell mortgage loans for manufactured homes to
Fannie Mae or Freddie Mac. Wells Fargo has had to turn away
business from potential borrowers because there is no clear
method of verifying ownership, especially in the case of resale.
SB 104 would align the state definition of manufactured homes
with HUD definitions to create a system for title transfer and
property conversion. Wells Fargo feels the bill helps homeowners
be able to gain access to credit and easily sell their homes; it
allows homeowners to increase the value of their homes; helps
lenders gain perfected security interests; and helps the DMV by
putting in place a formalized procedure for canceling title when
a manufactured home is put on a permanent foundation.
9:51:21 AM
SENATOR MEYER asked if a mobile home is affixed to real
property, then it can be mortgaged and sold like a regular
structure.
MR. HORMAN answered correct. Once you affix the home to real
property and go through the process of having a structural
engineer certify that it is considered a permanent foundation
for the local area, then you can secure the property as real
property.
SENATOR MEYER said he could see the advantage and asked if when
it was sold it would be inspected like other real property.
MR. HORMAN answered correct. Once the property is secured, the
lender requires an actual inspection and also an appraisal. Real
Estate laws require working smoke detectors and CO2 sensors.
SENATOR MEYER said that was important. The downside potentially
could be this property is now more valuable, which would raise
property taxes.
9:54:01 AM
MR. HORMAN answered that is correct. But if you take the offset
it is a breakeven point. It would save on mortgage interest.
SENATOR PASKVAN asked if the federal tax benefits were
important.
MR. HORMAN said he was not familiar with exact tax benefits.
SENATOR PASKVAN said he meant the regular mortgage interest
deduction.
MR. HORMANN responded that was true. It would help remediate the
increased cost of property taxes and would give owners the
ability to claim a tax deduction as real property.
9:56:30 AM
SENATOR PASKVAN noted this would result in additional cash flow
to the home owner.
CHAIR WIELECHOWSKI noted Senator French had joined the meeting.
SENATOR HOLLIS FRENCH, sponsor of SB 104 said he was happy to
have the committee's attention on this bill. It is complicated,
but his staff has excellent working relationships with DMV, DOA
and Wells Fargo Bank.
9:57:49 AM
JEFF HARRIS, Loan Administration Manager, Wells Fargo Home
Mortgage, said they are seeing an increase in the volume of
manufactured home loan applications coming in from Alaska. Of 66
total applications in the last 12 months, they were only been
able to approve 21 loans.
9:58:44 AM
SENATOR GIESSEL asked why the loans were not funded.
MR. HARRIS responded because there is no formal procedure to
convert a manufactured home to real estate so the bank could not
secure collateral in those situations.
9:59:40 AM
CHAIR WIELECHOWSKI closed public testimony.
SENATOR HOLLIS FRENCH, sponsor of SB 104, said that manufactured
homes are affordable housing for thousands of Alaskans. It is
how many people, including him, are able to save up the money to
buy a home. He moved from a rented apartment to a mobile home
and eventually to owning half of a duplex. This bill is very
important to both individuals and to the banks.
SENATOR MEYER thanked the sponsor for bringing the bill forward.
He said he does not look at mobile homes as vehicles; they are
homes.
CHAIR WIELECHOWSKI said it is will affect the lives of thousands
of Alaskans. He noted he has many mobile homes in his district.
CHAIR WIELECHOWSKI asked members to please provide proposed
amendments to his staff by noon on Wednesday. He announced he
would hold SB 104 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 104 - Bill Version A.pdf |
SSTA 3/29/2011 9:00:00 AM |
SB 104 |
| SB 104 - Sponsor Statement.pdf |
SSTA 3/29/2011 9:00:00 AM |
SB 104 |
| SB 104 - Support Wells Fargo.pdf |
SSTA 3/29/2011 9:00:00 AM |
SB 104 |
| SB 104 - Support AK Bankers Assoc.pdf |
SSTA 3/29/2011 9:00:00 AM |
SB 104 |
| SB 104 - NCLC Report Real Property.pdf |
SSTA 3/29/2011 9:00:00 AM |
SB 104 |
| SB 104 - Fiscal Note DOA-DMV-03-25-11.pdf |
SSTA 3/29/2011 9:00:00 AM |
SB 104 |