SENATE BILL NO. 155 "An Act relating to the registration and regulation of real estate appraisal management companies; relating to the establishment of fees by the Department of Commerce, Community, and Economic Development; relating to the Board of Certified Real Estate Appraisers; and relating to real estate appraisers." 9:18:14 AM SENATOR KEVIN MEYER, SPONSOR, explained the legislation: An Appraisal Management Company, or AMC, is an independent entity through which mortgage lenders order residential real estate valuation services for properties on which they are considering extending loans to homebuyers. AMCs fulfill an administrative function in the appraisal process, including selecting an appraiser and delivering the appraisal report to the lender. Individual appraisers who work for AMCs provide the actual property valuation services. AMCs existed well before the 2008 global financial crisis, and today they play an increasingly important role as a third-party service provider in the consumer mortgage process. AMCs have become increasingly popular by lenders across the country to ensure federal and state regulatory compliance and independence between lenders and appraisers as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Dodd-Frank requires that states enact comprehensive AMC oversight and registration programs with an August 2018, deadline. Senator Meyer believed that the legislation would help to promote public trust, consumer protection, and establish oversight and enforcement. 9:20:32 AM Senator Olson asked whether commercial properties were affected by the appraisals. Senator Meyer thought that the appraisals applied only to residential property but deferred to his staff for a final answer. 9:21:14 AM EDRA MORLEDGE, STAFF, SENATOR KEVIN MEYER, affirmed that the bill applied only to residential real estate. She discussed the Sectional Analysis (copy on file): Section 1: Adds a new subsection 'j' to allow the Dept. of Commerce, Community and Economic Development to establish a fee for regulatory costs and a mechanism for reporting those fees. Section 2: Requires the department to establish a registry fee as required by the federal government and permits the department to remit those fees to the federal government. Section 3: Amends the powers and duties of the Board of Certified Real Estate Appraisers to require regulations for Appraisal Management Companies. Section 4: Authorizes the Board to examine records of AMCs, requires those companies to submit information to the Board, and allows investigations of alleged violations. Sections 5 and 6: Adds a new section to the statute regarding Appraisal Management Companies including provisions for registration, reporting records retention, and inspection requirements, exemptions, prohibited practices, and disciplinary proceedings. Section 7: Definitions "appraisal management services," "appraisal panel," "company, controlling person," and "principal dwelling." Section 8: Allows for fingerprinting of a controlling person of an Appraisal Management Company through the Department of Public Safety. Section 9: Allows real estate Appraisal Management Company registry fees to be included in the definition of program receipts and non-general fund program receipts. Section 10: Applicability clause this act applies to a person offering or providing appraisal. Co-Chair MacKinnon OPENED public testimony. 9:24:28 AM MARK SCHIFFMAN, EXECUTIVE DIRECTOR, REAL ESTATE EVALUATION ADVOCACY ASSOCIATION, (REEVA), MINNEAPOLIS (via teleconference), spoke in support of the legislation. He said that the association had supported similar legislation in other states. He believed that the bill supported consumer protections in the appraisal process; the independent third party created a valuable firewall and addressed undue influence. He said that AMCs were integrated into the mortgage lending process as well as secondary markets and the products provided by AMCs insured proper valuations for the investment marketplace. 9:27:58 AM Senator Stevens wondered whether a full-time new position would need to be established to carry out the legislation requirements. Mr. Schiffman replied that licensing fees paid for the program. He said that the need for additional staffing was not unusual and varied from state to state. 9:29:30 AM WILLIAM SCOGGIN, REAL ESTATE EVALUATION ADVOCACY ASSOCIATION, NORTH CAROLINA (via teleconference), introduced himself and indicated that he was available for questions. 9:29:56 AM DAVID DERRY, CHAIR, CERTIFIED REAL ESTATE APPRAISERS, KENAI (via teleconference), testified in support of the legislation and indicated that the board was ready to assume oversight of AMCs. He said that the appraisal board had been self-funded since 1991. He lamented that the fingerprinting requirement for AMCs was cumbersome and should be removed from the bill. He also recommended an increased bond amount of $150,000. He believed that this would provide a more fiduciary cushion for the state. 9:34:26 AM Co-Chair MacKinnon clarified that the board listed in Section 3 was an existing board; the powers and duties of that existing board would be modified by the legislation. Mr. Derry agreed. Co-Chair MacKinnon asked whether the legislation created another board in state government. Mr. Derry replied no. 9:36:49 AM SARA CHAMBERS, DEPUTY DIRECTOR, DIVISION OF CORPORATIONS, BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, testified in support of the legislation - with certain amendments. She felt that the federal deadline created a sense of urgency. She suggested that the authority to set fees in order to recoup costs should be granted in the legislation. She added that an extension to the effective date would allow the board and the department the ability to adopt regulations and set fees. She said that transitional language would be needed in advance of the effective date. She said that the department supported on PCN in the fiscal note and did not believe that a full-time person would need to be added to staff. She said that the PCN would be supporte4d by fees and not general funds. 9:40:20 AM Co-Chair MacKinnon requested that the department work with her office on any amendments to the legislation. 9:40:33 AM Senator Olson wondered about the self-regualtion of the appraisers and worried that an appraiser could "go rouge." Ms. Chambers replied that the program would be self-funded and regulated by the existing Board of Certified Real Estate Appraisers; self-regualtion was a misnomer, as the board would be governed by the existing board process. 9:41:27 AM Senator Stevens understood that the program would require a half-time position but that the PCN was for a full-time position. He wondered what the PCN would do for the other half of their duties. Ms. Chambers replied that the department would use the PCN to manage the licensing work of other boards that had produced more work than had been initially expected. 9:42:44 AM Senator Micciche wondered how many licensees were expected and the approximate cost of licensing. Ms. Chambers responded that the department was working on developing the licensing fee, 200 new licensees were expected. This would be the only federally regulated program for boards under the department and would require additional scrutiny. 9:43:57 AM Vice-Chair Bishop wondered what the economic loss to the state would be if the bill were not passed. Ms. Chambers thought that the appraisal management companies that were not federally regulated would not be able to operate in the state. She said that anything that required federal oversight would not be able to be regulated by a non-federally regulated AMC, which would slow the process in the state. Co-Chair MacKinnon queried Mr. Derry's thoughts on the matter. Mr. Derry shared that it could constrict potential for financing for home purchases, which would negatively affect the entire residential market. 9:47:16 AM Co-Chair MacKinnon understood that 10 to 15 percent of the mortgages in Alaska were processed through Fanny Mae or Freddy Mac. Mr. Derry replied that the mortgage funder was not the issue, whether the transaction was federally regulated would be what would impact AMCs under the Dodd-Frank Act. 9:49:00 AM Co-Chair MacKinnon CLOSED public testimony. Co-Chair MacKinnon stated that amendments would be due the following Friday at 5pm. SB 155 was HEARD and HELD in committee for further consideration.