SB 155-REAL ESTATE APPRAISAL MNGMT. COMPANIES  1:53:43 PM CHAIR COSTELLO reconvened the meeting and announced the consideration of SB 155. SENATOR KEVIN MEYER, Alaska State Legislature, Juneau, Alaska, sponsor of SB 155, said he introduced SB 155 after it was brought to his attention that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 imposed a federal deadline for states to adopt comprehensive regulations regarding appraisal management companies. That deadline is August 2018. He explained that an appraisal management company (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. Unless this or similar legislation passes, these companies will not be able to do residential appraisals in Alaska after August 20, 2018. Alaska is one of four states that have not passed this legislation. SENATOR MEYER said SB 155 seeks to promote public trust and consumer protection and establish oversight and enforcement where there is none today. 1:55:55 PM EDRA MORLEDGE, Staff, Senator Kevin Meyer, Alaska State Legislature Juneau, Alaska, directed attention to a letter from Sara Chambers, Deputy Director of the Department of Commerce, Community and Economic Development (DCCED) requesting an extension of the implementation period to establish an appraisal management company (AMC) program until August 10, 2019. She said the federal government also established minimum standards for appraisal management companies and those are contained in the bill. 1:57:23 PM MS. MORLEDGE provided the following sectional analysis for SB 155: Section 1: Adds a new subsection (j) to allow the Department 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 management services on or after the effective date of this Act. 1:59:30 PM SENATOR STEVENS asked if there was any indication that the requested extension would be granted. MS. MORLEDGE deferred the question to Ms. Chambers. 2:00:12 PM SARAH CHAMBERS, Deputy Director, Division of Corporations, Business and Professional Licensing, Department of Commerce, Community and Economic Development (DCCED), Juneau, Alaska, said she sent the letter to Mr. Parks this morning and believes it is likely to be approved. The state meets the threshold for receiving an extension and the Alaska Board of Certified Real Estate Appraisers knows about the situation and agrees with the extension request. CHAIR COSTELLO asked if the extension would be needed if the bill were to pass. MS. CHAMBERS said yes. There isn't time to promulgate and implement the required regulations by August. SENATOR MEYER asked why the department or governor didn't bring the bill forward if the looming deadline was known. MS. CHAMBERS said she didn't know but it's fairly typically and healthy for boards to identify their own needs and seek their own legislation. She offered to follow up and provide a more definitive answer. SENATOR MEYER questioned whether it was healthy since Alaska is one of the last states to pass the enabling legislation. He referenced the fiscal note and questioned the need to hire a full time occupational licensing examiner. MS. CHAMBERS said she hoped that Mr. Derry, Chair of the Alaska Board of Certified Real Estate Appraisers was online and could speak to the timeliness. The department does not anticipate the need for a fulltime examiner but is unable to request half a person through a fiscal note. The request reflects the anticipated time needed and any work the examiner does outside this program will be billed to any of the other receipt- supported program they might work on. 2:04:56 PM SENATOR MEYER said he wouldn't quibble over the fiscal note. 2:05:17 PM CHAIR COSTELLO opened public testimony on SB 155. DAVID DERRY, Chair, Alaska Board of Certified Real Estate Appraisers, Kenai, Alaska, said the board supports SB 155 and is ready to assume oversight of appraisal management companies. Speaking to the timeline, he said that in 2014 the Alaska Chapter of the Appraisal Institute proposed legislation similar to SB 155 but was unable to get support from the legislature to introduce the bill. The matter died at that point but since 2016 the board has been working to get this legislation introduced. He said he recently became aware of the extension to 2019 and the legislation is important to show the state is working toward that deadline. He offered suggestions to change the bill in several areas. Page 5, lines [20-21] states that an appraisal management company will post a surety bond of not more than $25,000 as required by the board. He said the board recommends a surety bond of $150,000 because $25,000 is inadequate in light of the cost of appraisal reports, particularly in rural areas. Some states establish the bond at not less than 150 percent of the AMC's annual billings over the previous 12 months. This board believes that is more complex than necessary, thus the $150,000 proposal. The second suggestion relates to fingerprinting on page 6, lines 4-9. The board has received a determination from the federal Appraisal Subcommittee that the current process for background checks for appraisers is adequate without fingerprinting and background checks. That would carry over to appraisal management companies so that provision is not necessary. 2:11:22 PM SENATOR GARDNER said she didn't understand how the fingerprint and background check got in the bill if it's not required by Dodd-Frank or some other act. MR. DERRY said fingerprinting was originally part of the requirements under Dodd-Frank and subsequently became a state- by-state determination. The process the Alaska Board of Certified Real Estate Appraisers uses for appraiser qualifications is satisfactory without fingerprinting. SENATOR GARDNER asked if real estate appraisers are currently required to undergo background checks. MR. DERRY answered no; the process the board is using and had established in the application process for new certified appraisers is adequate to meet the requirement without doing a background check. SENATOR MEYER asked for confirmation that fingerprinting and the criminal history check were not required under Dodd-Frank. MR. DERRY clarified that there was a determination by the federal Appraisal Subcommittee that those were not required under Dodd-Frank SENATOR MEYER asked what other states require as a surety bond. MR. DERRY said he didn't know the fixed bond amounts for other states. 2:14:56 PM GREG DEAL, President, Wells Fargo Bank of Alaska, Anchorage, Alaska, stated support for SB 155. He agreed with the sponsor that if the state does not set up a regulatory system for Appraisal Management Companies by the deadline, home lenders like Wells Fargo will not be able to use AMCs for federally related mortgage loan transactions. This includes government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac. Wells Fargo values the services of AMCs to ensure that there is no direct contact between a loan officer and appraiser. This eliminates even the perception of a conflict of interest and ensures an independent evaluation process. Customers are also assured that they are receiving an accurate valuation on their homes. SENATOR MICCICHE asked for clarification that this is only for federally-regulated mortgage loan transactions. MR. DEAL said that's correct. SENATOR MICCICHE asked what percentage of Wells Fargo home loans that represents. MR. DEAL said in Alaska Wells Fargo has just 10 of 1,471 loans that do not fall under the government sponsored enterprise rule. 2:17:25 PM WILLIAM SCOGGIN, Counsel, Real Estate Valuation Advocacy Association (REVAA), Raleigh, North Carolina, stated strong support for SB 155. He described the legislation as important to everyone in the residential real estate industry. He advised that REVAA has worked carefully to get this legislation passed in all states. Just four states and Washington, D.C. have yet to pass the legislation. SENATOR MEYER asked if the $150,000 surety bond the Alaska board requested is standard. MR. SCOGGIN said he didn't recall the surety provisions in all other states but $150,000 would be on the high side. REVAA believes the current drafting is probably adequate. What is important is to pass the bill this legislative session. SENATOR MEYER asked if it's his understanding that criminal background checks and fingerprinting are unnecessary. MR. SCOGGIN said it depends on whether the licensing board in the state is able to satisfy the requirements of the federal Appraisal Subcommittee. REVAA is comfortable with whatever is established, he said. 2:19:39 PM CHAIR COSTELLO closed public testimony on SB 155 and voiced support for moving the bill. She said the finance committee could address the surety bond issue and she's comfortable with the fingerprinting as written in the bill. SENATOR MICCICHE asked Ms. Chambers about the possibility of managing the additional workload through contract instead of adding a new state position. MS. CHAMBERS said that would be precedent setting and may be opposed by employment unions. She explained that the protocol typically used is to request a receipt-supported position (no UGF involved) to fulfill the requirements of the bill and then allocate time to the other licensing programs. Because the component level is at the division and not each board, the appraisal board would not see the entire $80,000 plus increase listed in the fiscal note. It is her hope that the other half of the position could assist with applications for massage therapist licenses because the division has seen twice the number applications as anticipated since the program was added in 2015. CHAIR COSTELLO suggested that as a member of the finance committee Senator Micciche could look into the hurtle that prevents the department from asking for a part-time position. SENATOR MEYER agreed and expressed hope that the finance committee closely analyze the request for an additional position. 2:23:18 PM SENATOR MEYER moved to report SB 155 from committee with individual recommendations and attached fiscal note(s). 2:23:24 PM CHAIR COSTELLO found no objection and announced that SB 155 moves from the Senate Labor and Commerce Standing Committee.