HB 108 - PROPERTY FORECLOSURES AND EXECUTIONS 2:24:25 PM CHAIR RAMRAS announced that the final order of business would be HOUSE BILL NO. 108, "An Act relating to real property foreclosures, to the sale of property on execution, and to deeds of trust." [Before the committee was CSHB 108(L&C).] 2:24:39 PM REPRESENTATIVE COGHILL moved to adopt the proposed committee substitute (CS) for HB 108, Version 26-LS0318\P, Bannister, 3/26/09, as the work draft. REPRESENTATIVE GRUENBERG objected for the purpose of discussion. 2:25:10 PM JANE W. PIERSON, Staff, Representative Jay Ramras, Alaska State Legislature, explained on behalf of the sponsor, Representative Ramras, that proposed AS 09.35.140(b) in Section 2 of Version P now contains a requirement that the notice of execution of the sale of real property also be noticed on an Internet web site, and expands the list of qualified web sites to include newspapers of general circulation so long as they meet the requirements listed in Section 2's proposed AS 09.35.140(c). She surmised, therefore, that if a newspaper were qualified to run legal ads, it would also be qualified to run the Internet publication. Furthermore, proposed AS 09.35.140(c) also requires that any Internet web site used for this purpose be free to the viewing public. MS. PIERSON indicated that Section 4 - proposed AS 34.20.070(b) - now contains a reference to proposed AS 34.20.070(e) - found in Section 6 and requiring a description of conditions for curing the default - and requires among other things that the notice of default served on the trustor include language stating that the payment to cure the default must be made two days prior to the sale date stated in the notice of default, or two days prior to the date the sale is postponed to. Proposed AS 34.20.070(e) contains language conforming to that of proposed AS 34.20.070(b). She surmised that these provisions should provide adequate notice to the trustor regarding curing the default. Section 10's proposed AS 34.20.080(j), she relayed, now provides that if the sale is rescinded under proposed AS 34.20.080(g) that the deed of trust foreclosed in the rescinded sale is restored to the validity and priority it would have had had the sale not occurred. MS. PIERSON, in response to a question, clarified that Section 4 now also contains a reference to proposed AS 34.20.080(e), which is contained in Section 9 and which pertains to [postponing the sale]. REPRESENTATIVE GRUENBERG removed his objection. CHAIR RAMRAS stated that Version P was before the committee. REPRESENTATIVE HOLMES questioned whether the term, "(a)" ought to be added to Section 1's proposed AS 09.35.140. MS. PIERSON surmised that doing so might be cleaner. 2:31:05 PM ROBERT H. SCHMIDT, Attorney at Law, Groh Eggers, LLC, after relaying that his firm processes only about 100 foreclosures per year, expressed concern that the Internet publication provisions in Version P could prove problematic because the newspapers in some smaller communities don't have their own Internet web sites, thereby requiring those conducting a foreclosure sale in such communities to use his competitor's web site. He said that although the bill does several favorable things, Version P now also raises an issue regarding what he called the two-day cutoff. [Chair Ramras turned the gavel over to Representative Coghill.] MR. SCHMIDT offered his understanding that under the bill, a person could stop a foreclosure by paying what's due plus associated charges as long as that payment occurs at least two days prior to the [foreclosure] sale, but the person would be precluded from curing the default if payment is not made at least two days prior to the sale. He pointed out that the financial institution his firm represents would never turn down a cure and would rather the person keep the property. Version P appears to mandate that any attempt at curing the default be refused if it can't occur at least two days prior to the sale, thus requiring the bank to go forth with the sale. Surmising that that is not the intent of the bill, he indicated that he has some suggested language to address this problem. MR. SCHMIDT then offered his belief that there appears to be a typographical error on page 3, line 4, surmising that proposed AS 09.35.140(c)(2) is not meant to cover newspapers at all. In conclusion, he characterized HB 108 as a good bill that will do much to modernize Alaska's foreclosure laws. In response to a question, he reiterated his concern about what he'd called the two-day cutoff [as provided for in Sections 4 and 6], adding that most modern deeds of trust will conflict with "this" because they stipulate that a foreclosure sale can be stopped by curing the default before the sale, thus providing broader rights for cure than what the bill currently proposes. He acknowledged, though, that that's not necessarily a reason for not having the "two-day rule," and that various out-of-state lenders who operate substantially higher loan portfolios might benefit by such a rule. In response to a comment, he posited that local banks might not be interested in having such a rule, and would instead prefer to accept a payment cure rather than going through with the foreclosure sale. REPRESENTATIVE COGHILL suggested to Mr. Schmidt that he provide the committee with any suggested changes in writing. REPRESENTATIVE COGHILL returned the gavel to Chair Ramras. CHAIR RAMRAS opined that the benefits of the bill outweigh the potential problems with the [two-day cutoff], surmising that generally borrowers wouldn't be able to remedy a situation in those last two days anyway. 2:42:02 PM STEPHEN ROUTH, Attorney at Law, Routh Crabtree, apc, in response to a question, relayed that his firm processes substantially more than 100 foreclosures per month, and - with the full concurrence of its clients - does everything possible to keep borrowers in their homes. Referring to Version P, he offered his belief that its intent is to broaden the definition of Internet web sites suitable for publications, with the goal being to widen the publicity for sales, since any proceeds go back into the borrower's account. People are now shopping on the Internet for property, and so the bill would bring Alaska into that market; both Florida and Arkansas have passed similar legislation, and Alaska would be the third state [should HB 108 pass]. MR. ROUTH, referring to Mr. Schmidt's comment, opined that those newspapers that don't yet have a web site could simply set one up because it's easy to do. Referring to the bill's stipulation that a default must be cured at least two days prior to the foreclosure sale, he posited that the goal of that language is to ensure that enough notice is provided to the lending institution so that it doesn't proceed with an unnecessary foreclosure sale. He said he agrees that no bank is going to object to having the default cured even when it occurs at the last minute. REPRESENTATIVE HOLMES questioned whether the provisions in a deed of sale would supersede [state law]. MR. ROUTH offered his belief that the deed of trust provisions would prevail. REPRESENTATIVE HOLMES questioned whether that would create a problem given that in such a situation, the legal notice of the default sale would stipulate the two-day cutoff. MR. ROUTH acknowledged that that could create a problem and be confusing to the borrower. REPRESENTATIVE HOLMES indicated that that's of concern to her. REPRESENTATIVE GRUENBERG suggested that Mr. Schmidt and Mr. Routh work together and present the committee with any suggested changes. MR. SCHMIDT and MR. ROUTH agreed to do so. 2:51:53 PM BRYAN BUTCHER, Director, Government Affairs & Public Relations, Alaska Housing Finance Corporation (AHFC), Department of Revenue (DOR), in response to a question, explained that although he'd not yet received a copy of Version P, the AHFC was supportive of the prior version of HB 108, and surmised that the concern raised by Mr. Schmidt [regarding the two-day cutoff] could be resolved. [HB 108, Version P, was held over.]