SB 104-MANUFACTURED HOMES AS REAL PROPERTY    3:36:57 PM CHAIR OLSON announced that the next order of business would be CS FOR SENATE BILL NO. 104(JUD), "An Act relating to manufactured homes, including manufactured homes permanently affixed to land, to the conversion of manufactured homes to real property, to the severance of manufactured homes from real property, to the titling, conveyance, and encumbrance of manufactured homes, and to manufacturers' certificates of origin for vehicles; and providing for an effective date." 3:37:16 PM SENATOR HOLLIS FRENCH, Alaska State Legislature, summarized that SB 104 is designed to allow individual Alaskans who own their manufactured or mobile home and the land upon which the mobile home sits the ability to title their mobile home as real property. He explained that it takes many, many pages to get there. He pointed out that Alaska statutes relating to mobile homes consist of a series of statutes that treat mobile homes as vehicles and these statutes need to be moved to the real estate provisions in statute and to do so results in the lengthy bill currently before the committee. 3:38:53 PM SENATOR FRENCH explained that SB 104 establishes a formal method to eliminate the certificate of title for a manufactured home - a mobile home - and converts the home to real property when the home is or will be permanently affixed to real property. He further explained that the bill helps manufactured homeowners - who own a manufactured home on a permanent foundation and also own the land beneath it - gain access to title the mobile home as real property. He clarified that this conversion is purely voluntary since nothing in SB 104 compels mobile homeowners to do so; however, this bill would allow mobile homeowners to gain access to better interest rates on borrowing and selling. He reiterated that there is not any compulsion to convert a mobile home to real property since it is all voluntary. He stated that Alaska, unlike the vast majority of other states, has no formal statutory procedure for converting a manufactured home to real property. The bill would also bring state definitions of manufactured homes in accordance with the U.S. Department of Housing and Urban Development (HUD) definitions for property conversion. He stated that the bill is intended to meet eligibility requirements for a bank or other lender to sell a mortgage or manufactured home to Federal National Mortgage Association (Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie Mac). The bill would create a means for titling manufactured homes which were fixed real property if the title has been misplaced or lost. He stated that the bill has considerable support, including support of the Alaska Land Title Association, First American Title, Wells Fargo, and the Alaska Bankers Association (ABA). He listed the ABA's members as the Alaska Pacific Bank, Denali State Bank, KeyBank, First Bank of Ketchikan, First National Bank of Alaska, Mt. McKinley Bank, Northrim Bank, and Wells Fargo. The letter from the ABA is signed by Joe Beedle. He recapped that this list indicates deep support for SB 104 within the business community in the state. He concluded by acknowledging this subject area is not an area in which he is an expert. He indicated the Senate spent considerable time reviewing SB 104 and there is not any known opposition to the bill. 3:42:29 PM REPRESENTATIVE SADDLER asked for any revenue implications for an owner of a manufactured home and the associated land. He clarified he is interested in any fees, tax consequences, and mortgage implications for converting manufactured homes to real property under the bill. SENATOR FRENCH deferred the fee portion to the state's witnesses. He answered, with respect to the financial implications for the individual, by relating a scenario in which a party holds a loan on the mobile home with "used car rates", titled by Division of Motor Vehicles, (DMV), with an interest rate of approximately 10-12 percent. He estimated using this scenario the party could reduce his/her rates dramatically since real estate loan interest rates are much lower. He pointed out it would depend on the size of the loan, but some manufactured homes are very nice, ranging from $50,000 to $100,000, plus the land value. He recapped that it is hard to quantify, but the savings is potentially substantial. 3:43:48 PM REPRESENTATIVE SADDLER remarked that he has friends engaged in the real estate business and his family has been involved in that business, too. He offered his belief that there is always a way to recover costs from any transaction. He expressed interest in having any associated costs identified for the record. SENATOR FRENCH deferred to the experts. 3:44:14 PM REPRESENTATIVE SADDLER asked whether there would be any implications for property taxes on conversions. SENATOR FRENCH pointed out that question has not been raised before, but he, too, is interested in the answer. 3:44:41 PM CHAIR OLSON asked whether the property would qualify for the Alaska Housing Energy Program. SENATOR FRENCH answered yes. He commented he moved to Anchorage in 1978 and bought a trailer on Piper Street, a 12 by 65-foot Astro Home that he winterized himself. He has since sold it, but he says he was quite attached to it as many homeowners are about their first homes. 3:45:39 PM REPRESENTATIVE SADDLER asked Mr. Ginsberg what would be changed in financing terms to convert the mobile home to real property. 3:46:26 PM GEORGE GINSBERG, Attorney, McGlinchey Stafford, PLLC, Legal Counsel to Wells Fargo asked for clarification on the question. REPRESENTATIVE SADDLER asked whether there would be any underlying requirements if a person were to convert his/her property from a vehicle to real property. He recognized the party would not have a home mortgage. 3:47:12 PM MR. GINSBERG answered that part of the problem is the situation can occur, in which an Alaskan owns a mobile home without the certificate and title, but the mobile home is already permanently affixed to land. He characterized the aforementioned situation as the worst case scenario since legally the mobile home may be neither personal or real property since currently the Alaska DMV will not issue a certificate of title to a manufactured home that is permanently affixed. He emphasized the party does not have any way to finance or sell the home, yet, legally it is not clear that the property is real property. This bill would create a procedure to make the manufactured home either personal property or real property. It is advantageous for the most part for a homeowner to have the mobile home and associated land treated as real property to allow for financing. He agreed with Senator French's comments that financing a mobile home as real property would likely allow the owner to obtain lower interest rates, especially given that there is not a clear loan market on manufactured homes. 3:49:13 PM MR. GINSBERG related that certainly the loan could not be sold to Fannie Mae or Freddie Mac unless clear procedures exist in state law to identify the mobile home and associated land as real estate. He turned to costs. He suggested that first, the owner would be subject to filing fees to file an application with the department to cancel the title or certificate of origin, or to apply for a confirmation of conversion if neither record exists. Second, the owner would need to file recording fees with the recorder's office. He stated that nothing in statutes pertains to taxes, but once the procedure set forth in statute has been completed, the manufactured home is considered real estate for all purposes. He said he assumes the property would be considered real estate for tax purposes and be re- assessed. He emphasized, as Senator French indicated earlier, this procedure is entirely optional. He highlighted that for those who do want to take advantage of converting their mobile home and associated land to real property that this bill provides a means and a public record for the lender or buyer to research the real estate records. 3:51:46 PM REPRESENTATIVE SADDLER asked which department the provision refers to in the bill. MR. GINSBERG answered the [Division] of Motor Vehicles would be the entity. He emphasized unless the manufactured home is converted that it is considered a vehicle covered by a certificate of title. He pointed out the vehicle doesn't move since it is already affixed to land. . 3:52:22 PM REPRESENTATIVE SADDLER asked whether the municipality would automatically be notified of the conversion. MR. GINSBERG answered that the statute does not address this. He indicated that the recorded affidavit of affixation that identifies the home is permanently affixed to real property. He was unsure of the communication between the recorder's office and tax office. 3:53:08 PM REPRESENTATIVE SADDLER related his understanding that the assessor's office would likely contact the owner. 3:53:19 PM REPRESENTATIVE JOHNSON asked for a definition of permanently affixed and if that mean wheels off or on blocks. MR. GINSBERG answered no. He said the statute addresses this. He referred to page 20, lines 3-21, read: is permanently affixed when it is (1), (2), or (3). 3:55:13 PM SENATOR FRENCH referred to page 20, lines 3-11. He read: Sec. 34.85.150. Permanently affixed. A manufactured home is permanently affixed when it is (1) anchored to real property by attachment to a permanent foundation; (2) constructed in accordance with applicable state and local building codes and manufacturer's specifications as provided in ... the federal Department of Housing and Urban Development (24 C.F.R. 3285): and (3) connected to a residential utility, including water, gas, electricity, sewer, or septic service. 3:55:27 PM SHELLY MELLOTT, Deputy Director, Director's Office, Division of Motor Vehicles (DMV), introduced herself. 3:56:20 PM REPRESENTATIVE SADDLER how many motor homes are titled under DMV's laws. MS. MELLOTT answered 8,200 mobile homes are registered. In further response to a question, she restated 8,200. REPRESENTATIVE SADDLER asked for any estimation on the number of anticipated conversions to real property. MS. MELLOTT answered she could not say. 3:57:07 PM REPRESENTATIVE THOMPSON asked whether 8,200 referred to the number of titles. MS. MELLOTT answered yes, current the DMV has 8,287 mobile homes titled in its system. 3:57:29 PM REPRESENTATIVE SADDLER asked how many mobile homes are permanently affixed. MS. MELLOTT answered that she did not know. 3:58:03 PM CHAIR OLSON, after first determining no one else wished to testify, closed public testimony on SB 104. 3:58:16 PM REPRESENTATIVE THOMPSON remarked that the bill is 21 pages long. 3:58:30 PM REPRESENTATIVE HOLMES remarked that she has not had many comments, but the ones she has received are positive as some mobile homeowners would like to sell but cannot currently do so. 3:59:00 PM CHAIR OLSON commented that he has not received any negative comments on the bill. 3:59:06 PM REPRESENTATIVE JOHNSON moved to report CSSB 104(JUD) out of committee with individual recommendations and the accompanying fiscal notes. There being no further objection, the CSSB 104(JUD) was reported from the House Labor and Commerce Standing Committee.