03/01/2006 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB416 | |
| HB402 | |
| HB439 | |
| HB424 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 402 | TELECONFERENCED | |
| *+ | HB 424 | TELECONFERENCED | |
| *+ | HB 439 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 416 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 1, 2006
3:42 p.m.
MEMBERS PRESENT
Representative Pete Kott
Representative Gabrielle LeDoux
Representative Bob Lynn
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
Representative Tom Anderson, Chair
COMMITTEE CALENDAR
HOUSE BILL NO. 416
"An Act relating to the amount of the state business license
fee."
- MOVED CSHB 416(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 402
"An Act relating to marriage brokers and advertisers and to
dating and social referral services."
- MOVED CSHB 402(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 439
"An Act relating to authorizing the state to join with other
states entering into the Interstate Insurance Product Regulation
Compact and authorizing the compact to supersede existing
statutes by approving standards, rules, or other action under
the terms of the compact."
- MOVED CSHB 439(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 424
"An Act relating to mortgage lenders and persons who engage in
activities relating to mortgage lending; and providing for an
effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 416
SHORT TITLE: BUSINESS LICENSE FEE
SPONSOR(s): REPRESENTATIVE(s) RAMRAS
02/01/06 (H) READ THE FIRST TIME - REFERRALS
02/01/06 (H) EDT, L&C, FIN
02/13/06 (H) EDT AT 6:00 PM CAPITOL 106
02/13/06 (H) Moved CSHB 416(EDT) Out of Committee
02/13/06 (H) MINUTE(EDT)
02/15/06 (H) EDT RPT(EDT) NT 3DP 2NR
02/15/06 (H) DP: LYNN, CRAWFORD, RAMRAS;
02/15/06 (H) NR: COGHILL, NEUMAN
02/27/06 (H) L&C AT 3:15 PM CAPITOL 17
02/27/06 (H) Heard & Held
02/27/06 (H) MINUTE(L&C)
03/01/06 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 402
SHORT TITLE: MARRIAGE BROKERS AND ADVERTISERS
SPONSOR(s): REPRESENTATIVE(s) KERTTULA
01/27/06 (H) READ THE FIRST TIME - REFERRALS
01/27/06 (H) L&C, JUD, FIN
02/15/06 (H) L&C AT 3:15 PM CAPITOL 17
02/15/06 (H) Heard & Held
02/15/06 (H) MINUTE(L&C)
03/01/06 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 439
SHORT TITLE: INSURANCE PRODUCT REGULATION COMPACT
SPONSOR(s): REPRESENTATIVE(s) COGHILL
02/10/06 (H) READ THE FIRST TIME - REFERRALS
02/10/06 (H) L&C, JUD
03/01/06 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 424
SHORT TITLE: MORTGAGE LENDING
SPONSOR(s): LABOR & COMMERCE
02/03/06 (H) READ THE FIRST TIME - REFERRALS
02/03/06 (H) L&C, JUD
03/01/06 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
JIM POUND, Staff
to Representative Jay Ramras
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Discussed HB 416.
RICK URION, Director
Juneau Office
Division of Corporations, Business, and Professional Licensing
Department of Commerce, Community, & Economic Development
Juneau, Alaska
POSITION STATEMENT: Discussed a proposed amendment from the
department.
HANNAH MCCARTY, Staff
to Representative Beth Kerttula
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented Version Y of HB 402 on behalf of
the sponsor, Representative Kerttula.
REPRESENTATIVE JOHN COGHILL
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of HB 439.
JOHN GEORGE
American Council of Life Insurers (ACLI)
Juneau, Alaska
POSITION STATEMENT: Testified in favor of HB 439.
LINDA HALL, Director
Division of Insurance
Department of Commerce, Community, & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Answered questions during hearing on HB
439.
JOSH APPLEBEE, Staff
to Representative Tom Anderson
House Labor and Commerce Standing Committee
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented the proposed committee substitute
for HB 424, on behalf of the House Labor and Commerce Standing
Committee.
JOHN CARMAN, Partner & President
HomeState Mortgage Company;
Chair, Legislative Committee
Alaska Mortgage Bankers Association
Anchorage, Alaska
POSITION STATEMENT: Testified in support of the proposed
committee substitute for HB 424.
MARK DAVIS, Director
Juneau Office, Division of Banking & Securities
Department of Commerce, Community, & Economic Development
Juneau, Alaska
POSITION STATEMENT: Testified in support of the proposed
committee substitute for HB 424.
KEVIN BREELAND, President
Alaska Mortgage Bankers Association;
Minority Partner, Residential Mortgage
Anchorage, Alaska
POSITION STATEMENT: Testified on HB 424.
DWIGHT DEELY, President
Evergreen Alaska Mortgage
Fairbanks, Alaska
POSITION STATEMENT: Related his agreement with the intent and
spirit of the legislation, but expressed concern regarding
whether the language will impact mortgage brokers more than
bankers and lenders.
CHRIS SKINNER, Broker, President
Kelstar Alaska Mortgage;
Member, Legislative Committee
Alaska Association of Mortgage Brokers
(No address provided)
POSITION STATEMENT: Testified that brokers do believe that
licensing is necessary, but the language of HB 424 needs work.
DOUG ISAACSON, President
Alaska Association of Mortgage Brokers;
President, Gold Coast Mortgage
Fairbanks, Alaska
POSITION STATEMENT: Expressed concerns with HB 424.
LOU KONETSKI, Senior Vice President
Gold Coast Mortgage
Fairbanks, Alaska
POSITION STATEMENT: Expressed concerns with HB 424.
LINDA PATRICK, Vice President
Evergreen Alaska Mortgage Corporation
Fairbanks, Alaska
POSITION STATEMENT: Expressed concerns with HB 424.
VERNON RUSH, President
Alaska Capital;
Partner, Equity Investors;
Managing Partner, Astoria Investments;
Chair, Alaska State Mortgage Brokers Association Legislative
Committee;
Independent Lender
Anchorage, Alaska
POSITION STATEMENT: Expressed concerns with HB 424.
JOHN MARTIN, Manager
Alaska Mortgage Solutions
Anchorage, Alaska
POSITION STATEMENT: Expressed concerns with HB 424.
JOE BRAMMER, Manager
First Metropolitan Mortgage
Anchorage, Alaska
POSITION STATEMENT: Expressed concerns with HB 424.
JAY WILCOX, Loan Executive
Long Beach Mortgage
Anchorage, Alaska
POSITION STATEMENT: Expressed concerns with HB 424.
DAN FAUSKE, CEO/Executive Director
Alaska Housing Finance Corporation
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Testified that AHFC does support of the
basic premise of HB 424, which is some type of regulation or
control to protect consumers.
ACTION NARRATIVE
REPRESENTATIVE KOTT, ACTING CHAIR, called the House Labor and
Commerce Standing Committee meeting to order at 3:42:05 PM.
Representatives Guttenberg, Rokeberg, Lynn, and Kott were
present at the call to order. Representatives Crawford and
LeDoux arrived as the meeting was in progress.
HB 416-BUSINESS LICENSE FEE
ACTING CHAIR KOTT announced that the first order of business
would be HOUSE BILL NO. 416, "An Act relating to the amount of
the state business license fee." [Before the committee is CSHB
416(EDT).]
3:42:52 PM
JIM POUND, Staff to Representative Jay Ramras, Alaska State
Legislature, speaking on behalf of the sponsor, reminded the
committee that at the prior hearing of HB 416 there were
questions regarding whether the misdemeanor language needed to
be changed. He explained that it doesn't because the
misdemeanor charge primarily is unsworn falsification, which is
used throughout the revenue and taxation classification. There
was also concern with regard to the receipts from the $100 fee.
He related that he has been advised by the subcommittee for the
Department of Commerce, Community, & Economic Development
(DCCED) that the receipts have been transferred so that the
agencies funded by this won't be as strongly impacted. Mr.
Pound highlighted that the committee should have before it an
amendment regarding the amount of the fee and a transitional
provision. He mentioned that the department has a request for
an amendment regarding the difference between a civil fine and
an infraction. An infraction is criminal while a civil fine
isn't. He related that he didn't believe the department had a
problem changing [the fine] from $50 to $100 if the license fee
is $50.
3:45:11 PM
RICK URION, Director, Juneau Office, Division of Corporations,
Business, and Professional Licensing, Department of Commerce,
Community, & Economic Development (DCCED), related that this
morning's national news reported that Alaska is one of the top
five states in the nation with business taxes that are
attractive to businesses. Mr. Urion then informed the committee
that under the current rules, approximately $7.1 million was
collected in fiscal year (FY) 06 and distributed in the
following amounts to the following agencies: $2.5 million to
the Alaska Travel Industry Association (ATIA); $1.1 million to
the Office of Trade and Economic Development; $85,000 to the
Division of Community Advocacy; $1.4 million to the Division of
Corporations, Business, and Professional Licensing; $400,000 to
legislative grants; $615,000 to the International Office within
the Office of the Governor; and $1.1 million to the Tax Division
within the Department of Revenue. Mr. Urion said that the
[Division of Corporations, Business, and Professional Licensing]
is a self-supporting agency and thus any decreases in revenue
generated from business licenses would have to be replaced by
general fund revenues. He then noted that he has a proposed
amendment for the committee's consideration.
3:48:20 PM
MR. URION explained that his proposed amendment addresses the
fine such that it changes it from an infraction to a civil
penalty. The desire, he explained, is to make it such that
those who are operating without a business license are written a
citation that they pay. In addition, if HB 416 is passed with a
decrease in the business license, an effective date of January
1, 2008, will be required because the division has sold business
licenses that will expire December 31, 2007, and rebates would
be more costly. Such an effective date will allow the division
to offer two-year business licenses next year at whatever price
determined.
REPRESENTATIVE LYNN inquired as to the purpose of a business
license.
MR. URION answered that a business license is a tax, a source of
revenue. The revenue is utilized to pay for services.
REPRESENTATIVE ROKEBERG recalled that the committee had
requested the sponsor speak with Mr. Urion in order to develop a
transition provision, which doesn't seem to have occurred. He
then turned to the $2.5 million in "tourism contract money" that
is taken from [the funds received by the division]. Since the
state doesn't allow dedicated funds, Representative Rokeberg
inquired as to the nexus in the budget for the aforementioned
source of revenue and on what it's spent.
MR. URION explained that the division merely generates the
revenue while the Office of Management & Budget (OMB) specifies
where the funds will be utilized. In further response to
Representative Rokeberg, Mr. Urion related his belief, with
regard to the requested change in the effective date, that the
division has adequate regulatory authority to change the
procedure in order to utilize a prorated reduction. However, he
did note that new regulations would have to be passed. He
pointed out that the division will be able to sell a license for
$100 plus the specified annual fee, all of which can be set in
regulation, for the business licenses that have already been
sold and will expire January 1, 2007.
3:53:11 PM
REPRESENTATIVE ROKEBERG suggested that unless the aforementioned
was done in regulation in advance, the division would be
breaking the law unless the language in the bill was changed to
provide for such.
MR. URION noted his agreement, adding that the legislation
should include transitional language allowing the division to
establish regulations to set the aforementioned fees.
REPRESENTATIVE LEDOUX suggested that the division could, on
January 1, 2007, sell a one-year license.
MR. URION pointed out that the current law specifies that the
division sells two-year licenses. In fact, the division has
already sold some two-year licenses. The division, he said,
doesn't want to be in a position of having to field requests for
rebates as it would cost more than would be saved.
3:54:40 PM
REPRESENTATIVE ROKEBERG moved that the committee adopt Amendment
1, labeled 24-LS1555\F.1, Bannister, 3/1/06, which read:
Page 1, line 7:
Delete "$50"
Insert "$100"
Page 1, line 10:
Delete "$25"
Insert "$50"
Page 2, following line 2:
Insert a new bill section to read:
"* Sec. 3. The uncodified law of the State of
Alaska is amended by adding a new section to read:
TRANSITIONAL PROVISION. The annual fee for a
business license that is paid in 2006 before July 1,
2006, or before the effective date of this Act,
whichever is later, is the rate established under
AS 43.70.030(a), as that subsection exists before
being amended by sec. 2 of this Act."
REPRESENTATIVE LYNN objected and opined that there shouldn't be
a tax unless there is a need for it. He further opined that
there isn't a need for this tax and when there is an opportunity
to reduce taxes it should be taken. Such action will send the
message to the small business community that Alaska wants them
to be in business.
3:57:36 PM
REPRESENTATIVE LYNN, in response to Acting Chair Kott, said that
he objected to increasing the business license fee from $25 to
$50.
REPRESENTATIVE LYNN offered Amendment 1 to Amendment 1 such that
the following portion of Amendment 1 would be deleted:
Page 1, line 10:
Delete "$25"
Insert "$50"
REPRESENTATIVE LYNN explained that the aforementioned returns
CSHB 416(EDT) to its original state in which it establishes a
$25 business license on an annual basis while maintaining the
fine.
There being no objection, Amendment 1 to Amendment 1 was
adopted.
3:59:50 PM
REPRESENTATIVE ROKEBERG moved that the committee adopt Amendment
2 to Amendment 1 such that the following portion of Amendment 1
would be deleted:
Page 1, line 7:
Delete "$50"
Insert"$100"
REPRESENTATIVE LYNN objected, but removed his objection upon
explanation that Amendment 2 to Amendment 1 and a further
amendment would be cleaner.
[There being no further objection, Amendment 2 to Amendment 1
was adopted.]
REPRESENTATIVE ROKEBERG moved that the committee adopt
Conceptual Amendment 3 [to Amendment 1], which would in the
transitional provision of Amendment 1, as amended, insert
language following "license" specifying that [the business
license] "shall be paid on a pro rata basis as determined by
department regulation before December 31, 2007". Additionally,
Conceptual Amendment 3 would insert language providing the
authority for the department to take up the regulations prior to
the effective date of the legislation and would specify an
effective date of July 1, 2006.
There being no objection, Conceptual Amendment 3 [to Amendment
1] was adopted.
ACTING CHAIR KOTT, upon determining there was no objection to
Amendment 1, as amended, announced that Amendment 1, as amended,
was adopted.
REPRESENTATIVE ROKEBERG moved that the committee adopt Amendment
2, a memorandum from the Division of Corporations, Business and
Professional Licensing, as follows [original punctuation
provided]:
*Section 1. AS 43.70.020 is amended by adding a new
subsection to read:
(e) If a person knowingly engages in a business in the
state without having a current license issued under
(a) of this section, the department may impose a civil
fine not to exceed $50. In this subsection,
"knowingly" has the meaning given AS 11.81.900.
REPRESENTATIVE LYNN objected. Representative Lynn moved that
the committee adopt an amendment to Amendment 2 such that the
civil fine may not to exceed $100.
There being no objection, the amendment to Amendment 2 was
adopted.
REPRESENTATIVE LYNN removed his objection to Amendment 2.
There being no further objection, Amendment 2, as amended, was
adopted.
REPRESENTATIVE ROKEBERG moved to report CSHB 416(EDT), as
amended, out of committee with individual recommendations and
the accompanying fiscal notes. There being no objection, CSHB
416(L&C) was reported from the House Labor and Commerce Standing
Committee.
4:06:06 PM
REPRESENTATIVE LYNN moved that the committee rescind its
previous action in reporting CSHB 416(L&C) from the House Labor
and Commerce Standing Committee. There being no objection, CSHB
416(EDT), as amended, was before the committee.
REPRESENTATIVE LYNN moved that the committee adopt a conforming
title change to reflect the changes of the earlier amendments.
REPRESENTATIVE LEDOUX objected and inquired as to the process of
rescinding action.
ACTING CHAIR KOTT explained that the committee had only
rescinded its action in passing CSHB 416(EDT), as amended, out
of committee.
REPRESENTATIVE LEDOUX withdrew her objection.
4:09:02 PM
REPRESENTATIVE LYNN moved to report CSHB 416(EDT), as amended,
out of committee with individual recommendations and the
accompanying fiscal notes [and the conforming title change].
There being no objection, CSHB 416(L&C) [and the conforming
title change] was reported from the House Labor and Commerce
Standing Committee.
4:09:45 PM
HB 402-MARRIAGE BROKERS AND ADVERTISERS
ACTING CHAIR KOTT announced that the next order of business
would be HOUSE BILL NO. 402, "An Act relating to marriage
brokers and advertisers and to dating and social referral
services."
4:10:41 PM
REPRESENTATIVE LYNN moved to adopt CSHB 402, Version 24-
LS1432\Y, Mischel, 2/21/06, as the working document. There
being no objection, Version Y was before the committee.
HANNAH MCCARTY, Staff to Representative Beth Kerttula, Alaska
State Legislature, speaking on behalf of the sponsor, said that
Version Y includes two changes, one of which is in reference to
Representative Rokeberg's concern that the definition of
"marriage broker" isn't tight enough. Therefore, the language
"with a person who resides outside of the United States" was
added on page 3, lines 29-30. Adding the aforementioned
language doesn't include businesses such as Match.com, which
provide marriage and dating services between U.S. citizens.
REPRESENTATIVE LYNN asked if that [language] would include
territories of the U.S.
MS. MCCARTY said she didn't know the answer to that. However,
she related that when the definition of "recruit" was developed,
the territory question wasn't considered. Ms. McCarty then
directed the committee's attention to the other [new] language
which is located on page 3, lines 19-21, which is taken from the
federal Violence Against Women Act. This language provides that
a traditional match-making service of a cultural or religious
nature that's not for profit and is consistent with
international, federal, state, and local laws is exempt from the
requirements in HB 402.
4:12:46 PM
REPRESENTATIVE ROKEBERG indicated that Version Y addresses his
concern.
4:13:39 PM
ACTING CHAIR KOTT, upon determining there were no questions or
witnesses, announced that public testimony was closed.
REPRESENTATIVE LEDOUX moved to report CSHB 402, Version 24-
LS1432\Y, Mischel, 2/21/06, out of committee with individual
recommendations and the accompanying zero fiscal note. There
being no objection, CSHB 402(L&C) was reported from the House
Labor and Commerce Standing Committee.
HB 439-INSURANCE PRODUCT REGULATION COMPACT
4:14:48 PM
ACTING CHAIR KOTT announced that the next order of business
would be HOUSE BILL NO. 439, "An Act relating to authorizing the
state to join with other states entering into the Interstate
Insurance Product Regulation Compact and authorizing the compact
to supersede existing statutes by approving standards, rules, or
other action under the terms of the compact."
4:15:22 PM
REPRESENTATIVE JOHN COGHILL, Alaska State Legislature, sponsor,
informed the committee that HB 439 was introduced by request.
He said that the National Association of Insurance Commissioners
(NAIC) has a model act which allows states to enter into a
compact for insurance products. He said that the different life
insurance products are diverse, as different states make
different laws which effect the sale and management of these
products. He stated that the industry is looking for areas in
which the regulations can be better aligned. He said that this
can be done by federal law or by creating compacts between
states. He said that there are currently 20 states in the
compact, and 26 are needed to create the compact. He offered
his understanding that there are 17 states considering joining
the compact. He explained that Section 1 of the bill adopts the
Interstate Insurance Product Regulation Compact. He referred to
Sections 2 and 3, stating that these sections are no longer
necessary, and suggested an amendment to remove these sections.
He explained that page 2 of the bill includes the reason for
joining the compact. This includes promoting and protecting the
interests of the consumer. He expressed that these are all
reasons for his promotion of the compact.
4:19:28 PM
REPRESENTATIVE COGHILL, in response to a question, said that he
would like to remove Sections 2 and 3 on page 23. He explained
that this is currently happening, and therefore is not
necessary. He said that the compact will not supersede the
state, and added that it is an agreement for the description of
insurance products.
4:21:10 PM
REPRESENTATIVE GUTTENBERG asked what types of insurance would be
included in the compact.
REPRESENTATIVE COGHILL referred to page 5, which specifies life
insurance and long-term insurance issues.
4:22:55 PM
ACTING CHAIR KOTT, referring to a memo from Legislative Legal
and Research Services, asked if the issue regarding the
unconstitutionality of the compact had been addressed.
REPRESENTATIVE COGHILL replied that the compact contains a
severability provision, which is very clear.
JOHN GEORGE, American Council of Life Insurers (ACLI), explained
that the state does relinquish some authority to the compact;
however, the state also retains the ability to take it back. He
said that the insurance companies have the option of filing with
the state rather than the compact. He said that if the Division
of Insurance does not agree with guidelines or rules that the
compact sets, the bill includes a provision that allows the
Division of Insurance to opt out. In addition, the legislature
has the ability to repeal membership in the compact. In regard
to the question of constitutionality, he said that a policy form
approved by the compact does not preclude an individual from
asking the division to hold a hearing. He said that the
statutes clearly state that any aggrieved party may ask for a
hearing and the director can call a hearing at any time. He
added that the compact gives notice before adoption of
standards, which allows time to hold hearings if they are
needed.
MR. GEORGE said that the products that would be covered under
the compact are those which have a long-term relationship with
the consumer. He explained that auto and homeowner's policies
are generally one year. He said that if a person is living in
Alaska, it is appropriate for Alaska to have jurisdiction;
however, for those people who have moved to the state from other
parts of the country, their life insurance policy may originate
from the previous state. He said that it is appropriate for
life insurance policies to be fairly consistent, regardless of
where it is purchased. He opined that when an insurance company
is creating a new product, it will first go to states with a
larger population and come to Alaska last, making residents of
the state wait for years before having access to the product.
4:26:29 PM
MR. GEORGE went on to say that the compact was formulated by
NAIC and has been studied and approved by the National
Conference of Insurance Legislators (NCOIL). He reiterated an
earlier comment that six more states are needed to make the
compact effective, and said "We would urge you to be the 21st
state."
REPRESENTATIVE ROKEBERG, referring to the sponsor statement,
asked if health insurance would be covered.
MR. GEORGE replied that it would not.
4:27:54 PM
LINDA HALL, Director, Division of Insurance, Department of
Commerce, Community, & Economic Development (DCCED), informed
the committee that she would not be taking a position on the
bill, but would provide comments. She said that the financial
service marketplace is changing and insurance companies are
forming banks, which are then selling insurance products. She
stated that Alaska has a very mobile population. She said that
the NAIC has attempted to do a "speed-to-market", in order to
get the products to the consumer as quickly as possible. In
regard to federal regulation, she opined that Alaska is more
likely to have accessibility on a state level.
MS. HALL explained that it has delegated the [Interstate
Insurance Product Regulation Commission] to develop uniform
standards. She said that these standards must be adopted by
two-thirds of the majority of the member states. She noted that
the legislature may decide to opt out if a standard does not
meet the needs of the state. She said that this can also be
done by regulation and opined that this process would be more
complicated. In regard to the number of states required to
create a compact, she said that it requires 26 states, or
sufficient states to have 40 percent of the premium of a
product. She said that the four products included in the
compact are: life insurance; annuities; disability income; and
long-term care insurance.
REPRESENTATIVE LEDOUX asked how the products included in the
compact is determined.
MS. HALL replied that it is her understanding that these
products are the most mobile policies. She opined that these
are most likely the easiest to regulate. In regard to
developing standards, she said that this is a process led by
state regulators. She stated that there was some concern that
the compact would adopt the regulations of the state with the
lowest standards. In regard to giving the insurance company the
ability to choose whether it files with the state or with the
compact, she said that there was some concern that the insurer
may choose the route with the lowest standards to comply with.
She stated that the compact appears to have higher standards
than the state, which include a 10-day free look and minimum
readability standards. She said that while Alaska currently has
general product standards, it does not have a readability
standard. She said that the standards that are being set have
potential to provide greater consumer protection than current
law.
MS. HALL went on to highlight that page 22, Section 1 points out
which areas would still be reserved to the states. She said
that while she did not request that the bill be introduced, she
believes that there is potential to provide benefits to Alaskan
consumers.
MS. HALL, in response to a question, said that the
interpretation of the standard is challenged more often than the
standard itself. She opined that the state still maintains the
ability to enforce this.
4:38:38 PM
REPRESENTATIVE GUTTENBERG asked what the state's course of
action would be if the compact takes up an issue that is outside
the state's policy and the state decides to opt out.
MS. HALL opined that the legislature would vote on the issue.
REPRESENTATIVE ROKEBERG asked if Ms. Hall [would agree with the
bill passing.]
MS. HALL replied that [she would.]
REPRESENTATIVE GUTTENBERG noted that Ms. Hall is a member of
NAIC and asked if she feels confident that the state would be
well represented [by the other members of the NAIC.]
MS. HALL replied that she does.
4:41:27 PM
REPRESENTATIVE ROKEBERG asked if the bill has a fiscal note.
MS. HALL offered her understanding that the original funding
will be provided by NAIC; however, the majority of the funding
will come from filing fees.
ACTING CHAIR KOTT closed public testimony. He noted that there
is a proposed amendment from the sponsor.
REPRESENTATIVE ROKEBERG made a motion to adopt Amendment 1,
which would remove Sections 2-3. There being no objection,
Amendment 1 was adopted.
4:44:21 PM
REPRESENTATIVE LYNN moved to report HB 439, as amended, out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSHB 439(L&C), was
reported from the House Labor and Commerce Standing Committee.
HB 424-MORTGAGE LENDING
4:46:06 PM
ACTING CHAIR KOTT announced that the final order of business
would be HOUSE BILL NO. 424, "An Act relating to mortgage
lenders and persons who engage in activities relating to
mortgage lending; and providing for an effective date."
JOSH APPLEBEE, Staff to Representative Tom Anderson, House Labor
and Commerce Standing Committee, Alaska State Legislature,
presented the proposed committee substitute (CS) to HB 424 on
behalf of the sponsor, the House Labor and Commerce Standing
Committee. He explained that industry and the Division of
Banking & Securities have been working closely to reach
[agreeable] language, which was provided this afternoon. The
aforementioned is embodied in CSSB 272, Version 24-LS1644\I,
Bannister, 3/1/06, which he said he hoped the committee would
adopt in order to begin the process.
REPRESENTATIVE ROKEBERG moved to adopt CSSB 272, Version 24-
LS1644\I, Bannister, 3/1/06, as the working document. There
being no objection, it was so ordered.
4:48:00 PM
ACTING CHAIR KOTT announced that due to the late receipt of this
version, it isn't the committee's intent to move the bill out of
committee today.
4:48:42 PM
JOHN CARMAN, Partner & President, HomeState Mortgage Company;
Chair, Legislative Committee, Alaska Mortgage Bankers
Association, stated that he is in favor of this legislation. He
informed the committee that he has been working for the past
five years to pass such legislation. Currently, there is no
legislation in Alaska for mortgage bankers or brokers, and
therefore anyone can present himself/herself as a mortgage
banker or broker. The aforementioned, he opined, is to the
detriment of the consumers in Alaska. He indicated that
[HomeState Mortgage] would like additional legislation next year
to license individual mortgage originators, although he
acknowledged that more compromise and discussion will be
required regarding education requirements and other things. In
response to Acting Chair Kott, Mr. Carman confirmed that Alaska
is the only state that does not have regulation or laws
governing the mortgage origination process.
REPRESENTATIVE CRAWFORD related his understanding that under
this legislation, the state would license Internet mortgage
brokers as well.
MR. CARMAN replied yes. In response to Representative Rokeberg,
Mr. Carman said the difference between brokers and bankers is a
bit murky. For instance, HomeState Mortgage performs brokering
and banking services. However, a broker basically facilitates
the loan, which will close in the name of whoever the individual
arranges the loan while a mortgage banker closes in its name and
sells to the secondary market after the loan is closed.
Therefore, brokers tend to be smaller because they don't have
the necessary lines of credit and capital to close in the
broker's name.
4:52:16 PM
REPRESENTATIVE ROKEBERG related his understanding that there is
some resistance to HB 424 from the originators.
MR. CARMAN explained that the brokers have said they want each
originator to be licensed rather than the company. Mr. Carman
opined that originator legislation is necessary and legislation
is being worked on with the Division of Banking & Securities
that would license originators. However, too many issues arise
when attempting to license every person in the process and would
slow the process too much this year. Therefore, the [Alaska
Mortgage Bankers Association] will work on that for next year.
ACTING CHAIR KOTT mentioned that the committee has been provided
a letter from the Alaska Mortgage Bankers Association that
appears to identify some problems with HB 424.
MR. CARMAN said he believes the problems noted in the letter
have been addressed in the proposed committee substitute adopted
earlier.
4:54:56 PM
MARK DAVIS, Director, Juneau Office, Division of Banking &
Securities, Department of Commerce, Community, & Economic
Development (DCCED), stated that [the department] is in favor of
legislation that will regulate mortgages. He related that the
division receives about 15 calls per week from consumers making
complaints against mortgage companies over which the division
has no jurisdiction. Additionally, the division receives about
25 calls a week from companies who want to do business and the
division informs them that they are unregulated. Therefore, one
of the tenets of HB 424 is to regulate these entities as is done
in the Lower 48. Another tenet of HB 424 is to cover interstate
mortgage companies doing business in Alaska. He explained that
the aforementioned would be very similar to jurisdiction used in
the pay day lending legislation last year. The division has had
a fairly positive experience with the pay day lending law. The
desire, he opined, is to achieve a balance between a healthy
industry and consumer protection. He mentioned that the
legislation will likely require further work at some point. The
legislation provides a licensing procedure, appropriate
regulatory authority to the state in order that it may
investigate, review, and resolve consumer complaints regarding
mortgage lenders and brokers. Furthermore, this legislation
will provide for a level playing field such that all companies
follow the same set of rules. Mr. Davis noted that the division
is in favor of defining [mortgage brokers and bankers] as being
financial institutions under Title 06 in order to bring them
into the banking community. He emphasized that a mortgage is
one of the largest transactions that many people perform whether
via a financial institution, bank, or some other lending
process.
4:58:00 PM
KEVIN BREELAND, President, Alaska Mortgage Bankers Association;
Minority Partner, Residential Mortgage, confirmed that his
letter dated March 1, 2006, to Chair Anderson was drafted prior
to review of the proposed CS. He said that he has been working
with the Division of Banking to resolve issues and will continue
to do so. The spirit of the legislation, he said, [the Alaska
Mortgage Bankers Association, does support. He opined that
licensing of lenders is necessary.
REPRESENTATIVE LEDOUX recalled that the letter relates concerns
with regard to paragraphs (10) and (11) on page 13 of the
proposed CS.
MR. BREELAND said that his letter brought attention to
paragraphs (10) and (11) in order to ensure the intent of those
provisions are interpreted by the court system in the same
manner [as specified in the letter]. In further response to
Representative LeDoux, Mr. Breeland said that he was no longer
concerned about the membership reviewing them because he has
spoken over the phone with members. He explained that he,
personally, was confused with the intent of these paragraphs.
However, he said he is more comfortable now with these
paragraphs and would be able to articulate the intent of these
provisions.
5:02:10 PM
DWIGHT DEELY, President, Evergreen Alaska Mortgage, said that he
and other [brokers] haven't had much time to review the proposed
CS. Mr. Deely related that he agreed with the intent and spirit
of the legislation. However, much of the concern is related to
the language and whether it will impact mortgage brokers more
than bankers and lenders.
ACTING CHAIR KOTT opined that the committee agrees with the
spirit of the legislation, but it wants to ensure that it
doesn't become problematic later.
MR. DEELY agreed. He informed the committee that he is licensed
in multiple states and performs most business via the Internet.
He mentioned that he has went through these licensing issues in
multiple states, which he characterized as a nightmare.
Although he agreed that without any state regulations, shady
businesses can do business in the state, he expressed the need
to take care and allow input from all the interested
organizations.
ACTING CHAIR KOTT reiterated that this legislation won't be
reported out of committee today.
5:05:07 PM
CHRIS SKINNER, Broker, President, Kelstar Alaska Mortgage;
Member, Legislative Committee, Alaska Association of Mortgage
Brokers, reiterated Mr. Deely's testimony that [brokers] haven't
had the opportunity to review the legislation as they should.
In fact, Ms. Skinner opined that the Alaska Association of
Mortgage Brokers has been left out of this process. She
recalled that at one point the Alaska Association of Mortgage
Brokers was working with the Alaska Mortgage Bankers Association
on legislation. However, legislation was introduced by another
party and language that was necessary to protect consumers
wasn't included in the legislation. Ms. Skinner said that upon
reading through the legislation she felt that mortgage brokers
would be the most affected by this legislation, and thus should
be able to be more involved in the process. She noted that
brokers do believe that licensing is necessary, but the language
of the legislation needs some work.
5:06:37 PM
DOUG ISAACSON, President, Alaska Association of Mortgage
Brokers; President, Gold Coast Mortgage, reiterated earlier
testimony that the proposed CS was just received today. The
language of the proposed CS is different than the prior version.
Mr. Isaacson then explained that there are many different
members involved in the mortgage conduit, although each is
working to the same end goal of helping more people enter into
home ownership. He indicated that all groups are working
together to develop language that promotes professionalism and
protects the consumer. Mr. Isaacson explained that the Alaska
Association of Mortgage Brokers is affiliated with the national
association, which has members in 49 states. He further
explained that brokers have members that are sometimes lenders,
pure brokers, and net branches. The concern, he said, is that
the membership hasn't had an opportunity to review the new
proposed legislation.
MR. ISAACSON went on to say that customer protection requires a
test of competency. Therefore, if the competency of the
licensee isn't being provided for, then consumer protection
isn't being encouraged. Furthermore, anyone can incorporate
themselves in a fashion to be excluded by this legislation, save
the small group of licensees who will face additional fees on
their loans. The aforementioned will be forwarded on to the
consumer. Moreover, if that additional fee isn't placed on all
mortgage loans in Alaska, a certain section of the industry will
be placed at a competitive disadvantage. The aforementioned has
nothing to do with competency. However, when one reviews a
competency requirement, education comes into play, even for the
companies. Mr. Isaacson said that he would like to see a
competency test in this legislation and not exclude nonprofit
agencies. He then discussed the exclusion of "quasi-
governmental" agencies. He went on to say, "When you have the
State of Alaska condoning a fiduciary assigned by the court, the
ability to not be licensed, you're defeating your own desire to
protect the public." For example, if a pension fund doesn't
have to be licensed or show competence and is able to perform
mortgages for the pension holders, the [consumers] who trust the
government to provide safeguards are placed at risk.
Furthermore, just because an individual has a securities license
or is a real estate agent or attorney doesn't mean that he/she
can keep up with the ever-changing requirements of mortgage
origination or lending functions.
MR. ISAACSON specified that he isn't speaking against the
legislation, but rather against the "vast gaping holes" in it.
On the other hand, [the legislation] specifies that the state's
agents should also have oversight over federal regulation, which
he opined goes too far. The state auditors who currently do not
regulate federally chartered banks will have to provide a test
of competency to audit federal regulations. Therefore, the
right to audit will become a requirement to audit. The
aforementioned, he opined, places a huge burden on the
department, which will have to train and supervise people.
These are usually the same auditors who will also be doing the
state banking. Mr. Isaacson then highlighted that there is no
cap on the amount charged. Therefore, he expressed the need for
there to be language included that specifies how much the
audit/examination can cost. He also expressed the need to
include language that specifies that the department has the
option to examine a mortgage broker, but can also decide that
such examination isn't warranted. Furthermore, this legislation
seems to specify that the state will be a collection agency for
mandating payments to appraisers, without stipulating that
appraisers have to have reasonable appraisals. Mr. Isaacson
expressed the need for there to be language specifying differing
levels of penalties for different prohibited practices. Lack of
payment to an appraiser shouldn't be taken on the same level of
discipline as say, theft of escrow funds, he opined. Mr.
Isaacson informed the committee that he will provide the
committee with written testimony, which suggests the
aforementioned. He concluded by expressing the need to review
the legislation line by line in order to provide consumers with
protection and professionalism in the industry.
5:21:01 PM
LOU KONETSKI, Senior Vice President, Gold Coast Mortgage, opined
that mortgage brokers are being discriminated against as
compared to the bank officers who perform the same functions as
the mortgage brokers. He highlighted that if one totals the
fees and taxes involved with this legislation, it amounts to
more than $1,000 per year. However, the mortgage officers
working with the banks won't have to pay anything. Mr. Konetski
opined that mortgage brokers are being treated worse than
criminals as they are forced to pay $75 an hour for their own
investigation. He then informed the committee of the committee
"Don't Borrow Trouble," which addresses predatory lending. The
aforementioned committee has found that most of the problems
with mortgage loans have to do with out-of-state lenders doing
business in Alaska, although the legislation doesn't address
that matter very well.
5:23:32 PM
LINDA PATRICK, Vice President, Evergreen Alaska Mortgage
Corporation, echoed earlier statements regarding only recently
receiving the proposed CS and not having the ability to review
the legislation. Ms. Patrick opined that regulation is
important, especially for predatory lenders. She explained the
difficulty with [out-of-state] lenders who offer cheaper loans,
although those lenders don't know the idiosyncrasies in Alaska.
She expressed the need to protect clients, while she hoped this
legislation will not micromanage brokers.
5:25:34 PM
VERNON RUSH, President, Alaska Capital; Partner, Equity
Investors; Managing Partner, Astoria Investments; Chair, Alaska
State Mortgage Brokers Association Legislative Committee;
Independent Lender, speaking as a lender, opined that HB 424, as
written, isn't onerous. However, it doesn't protect the public.
As a broker and a person who has contracted with banks to
originate mortgage loans, Mr. Rush interpreted the legislation,
as per the language on page 3, to mean that he is exempt from
this legislation. He explained that he is an independent
contractor [functioning] as a mortgage broker with written
agreements with exempt entities. Furthermore, he noted that he
doesn't issue mortgage loan commitments or set the rates, terms,
et cetera of the mortgage. Mr. Rush said he didn't believe the
drafters of HB 424 truly under the differences in mortgage
brokering. Moreover, the legislation doesn't protect the
public, he reiterated. He pointed out that DiTech is
technically a bank and would be exempt under this legislation.
Mr. Rush mentioned his agreement with the idea of licensing the
lender and the originator because the person dealing with the
client is the one representing what he/she can do. In
conclusion, Mr. Rush opined that the current proposed CS needs
much further scrutiny.
5:28:21 PM
JOHN MARTIN, Manager, Alaska Mortgage Solutions, began by
explaining that he is a net branch operation, which means that
he is a lender as well as a broker. He informed the committee
that he has been a resident of Alaska since 1959 and has seen
many changes over the years, especially in recent years, with
regard to mortgage loans. He also informed the committee that
he is a past president and founding member of the Alaska
Association of Mortgage Brokers. One of the reasons the Alaska
Association of Mortgage Brokers was founded was the belief in
licensing. Therefore, there is the desire for fair licensing
while there is also some consumer protection and the opportunity
for everyone to be able to effectively operate their business.
Mr. Martin cautioned against over regulation because Alaska is a
cash poor state, in regard to mortgage loans. Over regulation
of mortgage loans in Alaska may result in the loss of closing
loans and placing Alaskans in homes. Mr. Martin opined that the
proposed CS needs much amending to be effective because, as
stated earlier, this legislation is only part of [what is
necessary]. He specified that the legislation should include
originators and how they will be tested for competency, have a
background check, and require a specified amount of education to
be obtained on a biannual basis.
5:30:35 PM
JOE BRAMMER, Manager, First Metropolitan Mortgage, said that he
has some of the same concerns expressed by Mr. Isaacson. He
opined that with all exemptions under AS 06.60.020, this
legislation doesn't do much to protect consumers because most
will be exempt in one way or another. For instance, a mortgage
that is a bank, savings and loan, or credit union, or is a
subsidiary or affiliate of the aforementioned doesn't have to
comply with any provision of this legislation. He highlighted
the exemptions for quasi governmental agencies, attorneys, real
estate brokers and agents, fiduciary capacity, and persons
licensed by the U.S. Small Business Administration. Mr. Brammer
noted his wholehearted agreement with Mr. Carman in that the
lack of legislation regulating mortgage originators is of
detriment to the consumers of the state. He further agreed with
Mr. Martin that this legislation should be made whole by adding
the mortgage origination requirement that the originators of
this state need to be licensed. "Essentially, the way that this
bill reads it is big business trying to legislate small business
out of business," he opined.
5:32:53 PM
JAY WILCOX, Loan Executive, Long Beach Mortgage, noted his
agreement with much of the previous testimony. The current
proposed CS doesn't seem to protect the consumer. Mr. Wilcox
related that predatory lending is the thing to watch. He
further related that the problems he has seen in Alaska are in
relation to originators who don't know Alaska and its laws.
Without licensing mortgage originators, implementing education
and competency requirements, consumers aren't being provided any
benefit. Therefore, the aforementioned should be added to the
legislation.
5:35:13 PM
DAN FAUSKE, CEO/Executive Director, Alaska Housing Finance
Corporation (AHFC), Department of Revenue, related he, too,
hasn't had a chance to review the proposed CS, about which there
have been some good points raised. Mr. Fauske specified that
AHFC does support of the basic premise of the legislation, which
is some type of regulation or control to protect consumers.
5:36:13 PM
ACTING CHAIR KOTT announced that public testimony on HB 424 will
be held open until this measure is heard again.
5:36:38 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:36 p.m.
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