SENATOR KELLY introduced HB 180 AM (ALASKA HOUSING FINANCE CORPORATION HOUSING INSPECTION REQUIREMENTS) sponsored by REPRESENTATIVE EILEEN MACLEAN, and he called on her aide, DAVID HARDING, to review the bill. MR. HARDING reviewed some previous action by explaining, "When, in 1992 the legislature merged the Department of Regional Affairs Rural Housing Loan Program (DCRA) into AHFC, the rural loans became subject to certain housing inspection requirements as listed in AS 18.56.300(b). These requirements were never intended to apply to rural housing loan programs; in fact, AHFC's primary rural loan program, non-conforming housing, is specifically exempted in the status. Rural housing loans have been subject to AHFC inspection requirements since July 1, 1992." MR. HARDING cited problems with inspection requirements that were not originally intended to affect rural loans, but has caused an unfair burden on rural homeowners, which was not the legislative intent. Rather than exempting the rural housing loan program from these requirements, REPRESENTATIVE MACLEAN felt the rural home owners and rural lenders would benefit from some form of an inspection program. MR. HARDING quoted REPRESENTATIVE MACLEAN's Sponsor Statement to provide flexibility in the program in HB 180. "It broadens the pool of eligible inspectors in rural areas by allowing licensed architects and engineers to conduct the inspections. These professionals are clearly qualified to accomplish the task, and they often travel to rural areas to monitor construction projects. Number 450 It allows AHFC to identify other qualified individuals in rural communities. A local contractor or journeymen in a trade might be obvious candidates to carry out part or all of a remote inspection. It authorizes inspection methods other than a physical site visit by an inspector. For example, AHFC could approve an inspection of footings and foundations based on video tape or photographs." In addition, MR. HARDING explained HB 180 would allow AHFC to accept building methods or materials that may not meet state building codes if the corporation is satisfied that the code variation does not sacrifice health or safety. If a building material is available that may not meet code but would stand up to an engineering review, then AHFC would be allowed to accept such equivalent substitution. He said this would save on building costs and make use of available materials in remote locations. MR. HARDING explained the International Conference of Building Officials (IBCO) inspection requirements were originally put into law in order to address the concerns of some builders in the Railbelt, and he promised the proposed changes would not affect any builders on the road system, but would only address problems in rural Alaska loan programs. SENATOR KELLY asked if this would include Sitka, and MR. HARDING answered it would exempt both Sitka and Juneau, because any place that has a municipal building code is already exempt. SENATOR KELLY led a general discussion of this provision which is in current law. SENATOR KELLY said he agreed with the thrust of SB 180, but he wanted to be sure there was an adequate definition of rural. MR. HARDING reviewed the list of exempt communities that have their own codes, including a number in Southeast. SENATOR SHARP had some questions because he didn't think the definition was inclusive, but MR. HARDING clarified the list. Number 499 SENATOR KELLY asked whether Cordova was on the list, and SENATOR SALO asked about Soldotna. MR. HARDING explained Cordova would come under the provisions of HB 180, but Soldotna was not included in the exemption because it is on the road system. SENATOR SALO questioned the video tape method of inspecting footings and foundations, and MR. HARDING answered it would be up to the discretion of AHFC to allow this method. SENATOR KELLY asked who was on teleconference in Anchorage from AHFC, and he was told ROBERT BREAN, who introduce two other persons. SENATOR KELLY questioned whether any of the three had any objections to the bill, and MR. BREAN indicated they had worked with the sponsor in suggesting the amendments, in order to provide the flexibility for rural Alaska. SENATOR KELLY asked if they had any proposed amendments to HB 180, and MR. BREAN indicated they did not. SENATOR KELLY clarified they supported HB 180 as amended by the House and now before the Judiciary Committee. SENATOR SHARP asked the AHFC members if they were able to determine any trends in losses or lack of quality due to less stringent inspections than on other AHFC financed houses. MR. BREAM described a period when they were exempt until after the merger with AHFC in 1992, and he further explained the present flexibility presently used in the inspections. He assured the committee their goal is an improvement in the quality of housing all over the State of Alaska, rural Alaska included. SENATOR SHARP asked if AHFC specifically got complaints from buyers about the quality of the homes, or lack of quality after they buy them. MR. BREAM explained in many cases, these were owner built houses, with the owner acting as their own contractor. He further explained foreclosed properties were sold "as is," and the foremost concern in the rural areas is the availability of housing. SENATOR KELLY clarified that the AHFC would not allow an owner- builder to inspect their own house. MR. BREAN said he was correct, and he described their procedures. SENATOR RIEGER questioned AHFC about title insurance for rural housing loans, and DUANE WISE answered that they do. TAPE 94-3 SIDE A Number 001 SENATOR KELLY took an informal poll of the persons in the committee audience and found there was support for the bill. He then ask for the will of the committee. SENATOR RIEGER said that in reading AS 18.56.300(b), he didn't think it was clear the stated exemption for some communities applies in Subsection (b) the way it does in Subsection (a). He wanted to check on the provisions before voting. SENATOR KELLY asked about the next committee of referral, and MR. FINK said there was no Finance Committee referral. SENATOR RIEGER explained the differences in Subsections (a) and (b) claiming Subsection (b) did not give the same exemption. SENATOR KELLY said, since Labor & Commerce was the last committee of referral, the committee would hang on to the bill just long enough to straighten out the subsections. He said the bill would be returned to committee as soon as possible.