Legislature(2003 - 2004)

03/24/2004 03:28 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 421-DEED OF TRUST RECONVEYANCE                                                                                             
                                                                                                                                
Number 1123                                                                                                                     
                                                                                                                                
CHAIR ANDERSON  announced that the  next order of  business would                                                               
be  HOUSE BILL  NO. 421,  "An  Act relating  to reconveyances  of                                                               
deeds of trust."                                                                                                                
                                                                                                                                
CHAIR ANDERSON, sponsor, explained that  HB 421 was introduced at                                                               
the request  of the  Alaska Land Title  Association (ALTA).   The                                                               
intent  is  to   provide  a  process  in  state   law  whereby  a                                                               
reconveyance  of  deeds  of  trust   can  be  recorded  within  a                                                               
reasonable timeframe.   Noting  the presence  of people  from the                                                               
title insurance  industry to answer technical  questions, he said                                                               
the  bill's language  may  appear complex,  but  the concept  and                                                               
purpose are intended to be simple.                                                                                              
                                                                                                                                
CHAIR  ANDERSON  offered  details,  saying  in  a  home  purchase                                                               
through a standard  mortgage there is a deed of  trust.  Once the                                                               
homeowner pays  off the mortgage, the  mortgage-servicing company                                                               
isn't required by law to  record the reconveyance of the mortgage                                                               
with  the  State  Recorder's  Office,  under  the  Department  of                                                               
Natural  Resources (DNR),  within  any timeframe;  it could  take                                                               
years  to  get  the  reconveyance   recorded.    These  mortgage-                                                               
servicing companies often are out  of state, a practice likely to                                                               
continue,  and  often find  it  difficult  to  take care  of  the                                                               
reconveyances  with the  recorder's office  in Alaska.   Problems                                                               
arise  when the  homes or  properties are  resold and  additional                                                               
time and complications impede the new sale.                                                                                     
                                                                                                                                
CHAIR  ANDERSON   reported  that   since  introduction   of  this                                                               
legislation,  Representative Berkowitz  and Senator  Stedman have                                                               
identified  this issue  in recent  property purchases.   Pointing                                                               
out that deeds of trust covered  under HB 421 are only those held                                                               
by a  title insurance company, he  said the heart of  the bill is                                                               
on page 1, lines 9-10,  relating to the title insurance company's                                                               
receipt of  satisfactory evidence of  the payment in  full before                                                               
beginning  the  reconveyance.    Much  of  the  bill  focuses  on                                                               
ensuring a  full and proper  notification process,  and standards                                                               
are  established for  the  notification forms  in  order to  help                                                               
ensure quality control.  He  noted that these sections were taken                                                               
from Idaho's law on this matter.                                                                                                
                                                                                                                                
Number 1000                                                                                                                     
                                                                                                                                
MICHAEL  PRICE,  Owner,  Mat-Su   Title  Insurance  Agency,  Inc.                                                               
(Wasilla),  and  Fidelity  Title (Anchorage);  Member,  Board  of                                                               
Directors, Alaska Land Title Association,  offered to be the main                                                               
person  to  answer  technical questions.    Stating  support  for                                                               
HB 421,  he said  20 years  ago perhaps  99 percent  of deeds  of                                                               
trust in  Alaska were  done by  in-state lenders;  when mortgages                                                               
were  paid off,  there  was no  significant  problem with  timely                                                               
recording of releases.  Increasingly,  however, those are done by                                                               
out-of-state companies that may even  sell the mortgages to other                                                               
companies.   Whereas few deeds of  trust experienced reconveyance                                                               
problems  previously, Mr.  Price said  he has  been told  several                                                               
thousands  now are  known  to  have been  satisfied  and yet  the                                                               
reconveyance  has become  seemingly impossible.   He  agreed this                                                               
situation isn't unique to Alaska.                                                                                               
                                                                                                                                
MR. PRICE explained that with  this bill, upon satisfactory proof                                                               
of  evidence of  payment -  which  companies like  his will  have                                                               
because  they'll have  a  negotiated check  or  wire transfer  of                                                               
funds  - there  will  be  a vehicle  and  method  to provide  the                                                               
release.   This  will  benefit  the stream  of  commerce and  all                                                               
Alaskans, he predicted.  He  requested favorable consideration of                                                               
this much-needed bill.                                                                                                          
                                                                                                                                
Number 0801                                                                                                                     
                                                                                                                                
REPRESENTATIVE  LYNN disclosed  that he  is a  licensed associate                                                               
real estate  broker with a  major company that  gets peripherally                                                               
involved with reconveyances.                                                                                                    
                                                                                                                                
CHAIR  ANDERSON  told  members he'd  been  advised  that  members                                                               
didn't need to  disclose conflicts unless they were  on the House                                                               
floor voting.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  ROKEBERG said  that's not  necessarily true.   He                                                               
noted there  is an advisory  opinion before the  Select Committee                                                               
on  Legislative Ethics  [which he's  a  member of]  on that  very                                                               
question.                                                                                                                       
                                                                                                                                
CHAIR  ANDERSON thanked  Representative Lynn  for the  disclosure                                                               
and requested that he vote on the bill if there is a vote.                                                                      
                                                                                                                                
Number 0766                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked Mr.  Price why  it was  decided to                                                               
put the  form itself  in statute  and whether there  is a  way to                                                               
avoid that.                                                                                                                     
                                                                                                                                
MR. PRICE  said he presumes  and believes the form  was generated                                                               
as a  result of  having a  specific amount  of information  to be                                                               
provided and to make sure  the notification is uniform, no matter                                                               
where in  the state it occurs.   He surmised that  members of the                                                               
industry  won't  find it  objectionable  because  they deal  with                                                               
statutory  forms such  as  the  general power  of  attorney on  a                                                               
regular basis.                                                                                                                  
                                                                                                                                
Number 0684                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  mentioned,   "Receipt  of  satisfactory                                                               
payment" and  asked whether the  canceled check, if that  was all                                                               
the company had, would be adequate for the record.                                                                              
                                                                                                                                
MR. PRICE  answered affirmatively,  saying 9 times  out of  10 it                                                               
will be  a combination  of the  payoff information  received from                                                               
the outside  lender and  evidence that a  check or  wire transfer                                                               
was sent  to [that  lender].   He added,  "On some  occasions, we                                                               
will accept  the evidence of  the payoff amount ...  and evidence                                                               
that, let's say, a local bank did  the closing ... as a result of                                                               
a construction loan and that they  sent the money."  Thus he said                                                               
he  could  foresee  taking  the  representation  of  a  reputable                                                               
Alaskan business, principally a bank,  that the payment was made.                                                               
"But most  of the time, I  would say, it's going  to be ourselves                                                               
making the payment," he concluded.                                                                                              
                                                                                                                                
Number 0615                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG asked  how it  works, expressed  concern                                                               
about what  the current  law is regarding  this issue,  and asked                                                               
whether the  lender has  to formally  acknowledge receipt  of the                                                               
payoff of the  note in order for [the title  insurance agency] to                                                               
issue the reconveyance.                                                                                                         
                                                                                                                                
MR. PRICE replied:                                                                                                              
                                                                                                                                
     We receive  a ... request for  reconveyance executed by                                                                    
     the lender,  saying that  it was ...  paid off  in full                                                                    
     and  to release  the  deed of  trust  or mortgage.  ...                                                                    
     However, there is no state  statute, at least that I am                                                                    
     aware of,  that requires the  lender to do that.   Now,                                                                    
     local  lenders  have  always done  it  because  ...  it                                                                    
     serves our stream of commerce. ...                                                                                         
                                                                                                                                
     Where  we're  having  problems ...  are  those  outside                                                                    
     lenders  ...  who know  ...  they  have refinanced  ...                                                                    
     200,000 loans in  the last year, and maybe  in the next                                                                    
     two  or three  years they'll  get around  to doing  the                                                                    
     request for  reconveyance, but they're certainly  in no                                                                    
     hurry  to add  to their  staff to  do so.   So  there's                                                                    
     currently no  law that I'm  aware of ...  that requires                                                                    
     them  to provide  us evidence  that the  loan has  been                                                                    
     paid ... and to release it.                                                                                                
                                                                                                                                
Number 0486                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  pointed out  that Mr.  Price is  a long-                                                               
practicing attorney  in this  area, and  suggested if  he doesn't                                                               
know about  a law,  there isn't one.   He  requested confirmation                                                               
that there's  no statutory mandate  for notification  or delivery                                                               
of the request for reconveyance.                                                                                                
                                                                                                                                
MR. PRICE answered:                                                                                                             
                                                                                                                                
     Believe it or  not, ... we do  not.  It is  a matter of                                                                    
     contract.   And, of course,  those companies  that wish                                                                    
     to do  business in Alaska  are more inclined to  do so.                                                                    
     However, as I  indicated earlier and as  you are aware,                                                                    
     a lot of these deeds of  trust go through three or four                                                                    
     different  assignments that  we have  to chase  down to                                                                    
     get the  payoff, and those  people are not  licensed to                                                                    
     do business in the state  - they're not required to be,                                                                    
     by the way  - and ... they really have  very little, if                                                                    
     any, nexus to the state.  ... Therefore, our ability to                                                                    
     force them to do what is right is somewhat limited.                                                                        
                                                                                                                                
     This puts  the burden on  the title industry.   But, on                                                                    
     the other  hand, it  is our burden  to clear  title and                                                                    
     therefore it is ... the  most responsible group to sort                                                                    
     of require  the release of  these deeds of  trust upon.                                                                    
     ... And  we are, by  the way,  ... an industry  that is                                                                    
     regulated  heavily by  ... the  Division of  Insurance.                                                                    
     ... We  are required  to have  fiduciary bonds.  ... We                                                                    
     are used  to dealing  with people's  monies, and  ... I                                                                    
     think,  are a  trustworthy  group to  release deeds  of                                                                    
     trust when they've been paid.                                                                                              
                                                                                                                                
Number 0300                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD asked whether  this bill would change the                                                               
process of  sending the owner a  deed of trust to  record after a                                                               
property was  paid off.   He cited an  example of his  own rental                                                               
properties [in Louisiana].                                                                                                      
                                                                                                                                
MR. PRICE  said no.   What happens to  perhaps 95 percent  of all                                                               
deeds of trust  won't change.  When one is  paid off, the request                                                               
for  reconveyance and  the note  are sent  to the  title company,                                                               
which releases  and reconveys  it almost  immediately.   Once the                                                               
mortgage  is  paid  off,  the  collection  agent  would  send  it                                                               
automatically  to the  title company,  or  would send  it to  the                                                               
owner with advice to send it to  the title company.  He said this                                                               
bill would only affect the approximately  4 to 5 percent of deeds                                                               
of trust that "we cannot  get the lending institution to release,                                                               
though we know they have received their payment."                                                                               
                                                                                                                                
Number 0205                                                                                                                     
                                                                                                                                
REPRESENTATIVE  CRAWFORD said  he  didn't recall  ever sending  a                                                               
deed to a title company.                                                                                                        
                                                                                                                                
REPRESENTATIVE ROKEBERG  explained that  the title  company holds                                                               
the deed  until it's satisfied;  the request for  reconveyance is                                                               
the request  "to send  you the deed  when you paid  it off."   He                                                               
said  that's it  in a  nutshell:   these  outside lenders  aren't                                                               
sending  the  verification or  the  request  for reconveyance  to                                                               
allow the title  company, which holds the deed, to  provide it to                                                               
[the owner].                                                                                                                    
                                                                                                                                
REPRESENTATIVE CRAWFORD  noted that Louisiana doesn't  have title                                                               
companies.                                                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG  said Louisiana  has French  codified law                                                               
and contract  real estate.  However,  Alaska is a "deed  of trust                                                               
state" where a trustee holds the deed until it is paid off.                                                                     
                                                                                                                                
MR. PRICE affirmed the last  statement and said in most instances                                                               
the  local title  company  is named  the trustee.    In order  to                                                               
release  the mortgage,  [the title  company] executes  a document                                                               
called a  "deed of  reconveyance."   He remarked,  "It's somewhat                                                               
fictional in the sense that  we're not deeding back the property,                                                               
we're simply releasing the mortgage."                                                                                           
                                                                                                                                
Number 0051                                                                                                                     
                                                                                                                                
JEFF BLAKE,  Stewart Title of Alaska,  noted that he has  been in                                                               
the  title insurance  business  since 1960  and  in Alaska  since                                                               
1975.   Agreeing  this  problem  has only  appeared  in the  last                                                               
decade  because  of  dealing  with  outside  lenders,  Mr.  Blake                                                               
thanked Chair Anderson for sponsoring  the bill and requested the                                                               
committee's support.   He  said this speaks  to the  consumer who                                                               
doesn't  quite understand  "how  come we  spent  their money  and                                                               
documents  still show  there's an  encumbrance on  their property                                                               
and, at  this point,  we can't effectively  get that  cleared for                                                               
him."  He said he'd like to be able to resolve this problem.                                                                    
                                                                                                                                
TAPE 04-33, SIDE A                                                                                                            
Number 0006                                                                                                                     
                                                                                                                              
TERRY  BRYAN, President,  First American  Title of  Alaska, noted                                                               
that  his company  operates in  10 Alaskan  communities and  does                                                               
business in 20 recording districts.   Concurring with Mr. Price's                                                               
testimony, he  said liability for ensuring  the transaction moves                                                               
forward with this new reconveyance  process "stays with a heavily                                                               
regulated  industry."    Agreeing  with Mr. Blake  that  this  is                                                               
consumer-oriented, Mr.  Bryan described having to  sit across the                                                               
table from  a single  mother or an  elderly couple  and apologize                                                               
that the house cannot be refinanced  or sold because the title is                                                               
clouded,  since  on  the  last   transaction  the  lender  hadn't                                                               
provided what was  needed, despite proof that  the obligation had                                                               
been  satisfied.   Mentioning one  Anchorage  company with  1,485                                                               
transactions  [pending]  from  1993   from  outside  lenders,  he                                                               
surmised that at  least 6,000 consumers now have  this problem of                                                               
transactions  where lenders  haven't  given  the instructions  to                                                               
reconvey after [the terms] have been satisfied.                                                                                 
                                                                                                                                
Number 0160                                                                                                                     
                                                                                                                                
CHAIR  ANDERSON  called attention  to  Amendment  1, labeled  23-                                                               
LS1315\D.1, Bannister, 3/18/04, which read:                                                                                     
                                                                                                                                
     Page 4, line 12:                                                                                                           
          Delete "title insurer's"                                                                                              
          Insert "title insurance company's"                                                                                    
                                                                                                                                
     Page 4, line 27, following "section,":                                                                                     
          Insert                                                                                                                
               "(1)"                                                                                                            
                                                                                                                                
     Page 4, line 28, following "under the trust deed":                                                                         
          Insert ";                                                                                                             
               (2) "title insurance company" means a title                                                                      
     insurance   company  or   a  title   insurance  limited                                                                    
     producer; in this  paragraph, "title insurance company"                                                                    
     and  "title   insurance  limited  producer"   have  the                                                                    
     meanings given in AS 21.66.480"                                                                                            
                                                                                                                                
CHAIR ANDERSON asked Mr. Bitney to explain it.                                                                                  
                                                                                                                                
Number 0178                                                                                                                     
                                                                                                                                
JOHN  BITNEY,   Lobbyist  for  Alaska  Land   Title  Association,                                                               
explained that  Amendment 1  was put  forth at  the association's                                                               
request to clarify those locations  within the bill where it says                                                               
"title insurance  company".  He  said in other  states, insurance                                                               
industries are  brokers, agents,  and carriers.   However, Alaska                                                               
doesn't have carriers; all companies  here have an underwriter or                                                               
a carrier outside the state.   Thus this amendment clarifies that                                                               
this law applies to Alaskan companies.                                                                                          
                                                                                                                                
CHAIR ANDERSON asked whether it  is title insurance companies and                                                               
only changes lines  12, 27, and 28  [of page 4] to  be uniform in                                                               
the bill.                                                                                                                       
                                                                                                                                
MR. BITNEY affirmed that.                                                                                                       
                                                                                                                                
CHAIR ANDERSON closed public testimony.                                                                                         
                                                                                                                                
Number 0297                                                                                                                     
                                                                                                                                
CHAIR  ANDERSON  [moved  to adopt]  Amendment  1  [text  provided                                                               
previously].  There being no objection, it was so ordered.                                                                      
                                                                                                                                
REPRESENTATIVE LYNN  remarked that he  was shocked to  hear there                                                               
were 6,000 of these [pending cases related to this bill].                                                                       
                                                                                                                                
Number 0315                                                                                                                     
                                                                                                                                
REPRESENTATIVE LYNN  moved to report  HB 421, as amended,  out of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal notes.                                                                                                                   
                                                                                                                                
REPRESENTATIVE GUTTENBERG commented that  as someone who isn't in                                                               
the business  but has  bought and sold  real estate,  he'd always                                                               
had the  impression that one  reason for using a  title insurance                                                               
company   is   to   ensure    that   transactions   are   handled                                                               
"instantaneously."  He said it  amazes him to discover one aspect                                                               
of the  industry hasn't been  playing at  the same table,  and if                                                               
this helps, he'll certainly support.                                                                                            
                                                                                                                                
CHAIR  ANDERSON  announced  that  Representative  Guttenberg  had                                                               
removed his objection.                                                                                                          
                                                                                                                                
Number 0415                                                                                                                     
                                                                                                                                
CHAIR  ANDERSON asked  whether there  was any  further objection.                                                               
There being  no objection,  CSHB 421(L&C)  was reported  from the                                                               
House Labor and Commerce Standing Committee.                                                                                    
                                                                                                                                

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