Legislature(2009 - 2010)CAPITOL 106

04/09/2010 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Location Change from Rm. 124 --
Moved Out of Committee
Moved CSHCR 21(L&C) Out of Committee
Moved HCS CSSB 279(L&C) Out of Committee
                    SB 279-MORTGAGE LENDING                                                                                 
3:48:47 PM                                                                                                                    
CHAIR OLSON announced that the final order of business would be                                                                 
CS FOR SENATE  BILL NO. 279(FIN), "An Act  relating to regulation                                                               
of  residential  mortgage  lending, including  the  licensing  of                                                               
mortgage   lenders,   mortgage   brokers,   and   mortgage   loan                                                               
originators, and  compliance with  certain federal  laws relating                                                               
to residential  mortgage lending; and providing  for an effective                                                               
date."  [Before the committee was CSSB 279(FIN).]                                                                               
3:48:54 PM                                                                                                                    
SENATOR JOE  PASKVAN, Alaska State Legislature,  as prime sponsor                                                               
of the bill,  paraphrased from his sponsor  statement, which read                                                               
[original punctuation provided]:                                                                                                
     Senate Bill 279, along with regulations promulgated                                                                        
     when the bill becomes law, will bring Alaska's                                                                             
     mortgage lending law into compliance with the new                                                                          
     federal law and national licensing system.                                                                                 
     Alaska's current mortgage lending law, the Alaska                                                                          
     Mortgage Lending Regulation Act ("AMLRA"), became                                                                          
     effective July 1, 2008. The law requires that mortgage                                                                     
     lenders, brokers, and originators apply for and obtain                                                                     
     a mortgage license in order to do business in Alaska.                                                                      
     The purpose of this law is to protect consumers and                                                                        
     hinder predatory lending and fraudulent behavior.                                                                          
     On July 30, 2008, a new federal law called the Secure                                                                      
     and Fair Enforcement for Mortgage Licensing Act of                                                                         
     2008 (the SAFE Act) became effective. The SAFE Act                                                                         
     requires that all states (1) implement mortgage laws                                                                       
     which conform to its requirements by July 30, 2009,                                                                        
     and (2) join and use a national database called the                                                                        
     National Mortgage Licensing System and Registry                                                                            
     (Registry) to license mortgage loan originators.                                                                           
     States may implement more comprehensive mortgage                                                                           
     lending laws than are provided under the federal SAFE                                                                      
     Act, which provides minimum standards and                                                                                  
     Alaska was able to join and begin licensing through                                                                        
     the Registry on August 1, 2009, as the result of the                                                                       
     passage of HB 221 last legislative session, which                                                                          
     authorized participation in the Registry, enabling the                                                                     
     state to comply with that part of the SAFE Act.                                                                            
     Under the SAFE Act, a state which is unable to meet                                                                        
     the July 30, 2009 compliance deadline and whose                                                                            
     legislature meets annually, may apply for a one·year                                                                       
     extension to the U.S. Department of Housing and Urban                                                                      
     Development (HUD), the federal agency tasked with                                                                          
     compliance oversight. Alaska requested an extension on                                                                     
     August 25, 2009.                                                                                                           
     If a state does not comply with the federal law by the                                                                     
     deadline, then HUD is required under the SAFE Act to                                                                       
     license loan originators in the state. While a state                                                                       
     may maintain authority under its existing law, the                                                                         
     authority will be subordinate to HUD. This structure                                                                       
     would increase the regulatory burden and cost on the                                                                       
     industry. HUD is not required to coordinate with the                                                                       
     A few examples of revisions and requirements under the                                                                     
     SAFE Act include (a) changing our current license                                                                          
     renewal from a biennial to an annual renewal and (b)                                                                       
     requiring 20 hours of pre-licensing education.                                                                             
     For consumers and state regulators, one of the primary                                                                     
     advantages to joining the Registry is the sharing of                                                                       
     information about mortgage lenders and loan                                                                                
     originators among states, as well as the ability to                                                                        
     conduct joint exams with other states for out-of-state                                                                     
     mortgage lenders doing business in Alaska, including                                                                       
     those which operate via the Internet. The Registry                                                                         
     also increases and centralizes information available                                                                       
     to state regulators, the industry and consumer about                                                                       
     the mortgage lending companies and professionals. The                                                                      
     use of a national licensing database is also                                                                               
     beneficial to the mortgage lending industry, making it                                                                     
     easier to track mortgage loan originators and creating                                                                     
     a uniform, electronic application process for                                                                              
3:52:45 PM                                                                                                                    
SENATOR PASKVAN  briefly outlined the  changes that were  made to                                                               
the  original  bill  contained in  the  CSSB  279(FIN)  currently                                                               
before the  committee.  On page  6, lines 8-18, the  license fees                                                               
were changed  from biennial fees  to annual license fees,  and on                                                               
page 6, lines 23-27, the permit  fees are designated to be set by                                                               
regulation.  On page 6, lines  28-31, and page 7, lines 1-19, the                                                               
bill  sets out  the  requirement for  20  hours of  pre-licensing                                                               
education.   On page 10,  lines 18-31, and  page 11, line  1, the                                                               
bill  provides  the  division  with  the  authority  to  issue  a                                                               
provisional license if the fingerprinting  card is delayed due to                                                               
any agency backlog.                                                                                                             
SENATOR PASKVAN referred to page  12, line 20-27, to changes made                                                               
to omit  the reference to paper  in the event that  in the future                                                               
the on-line  registry data is adopted.   On page 14,  lines 8-14,                                                               
would  establish  regulations  and  application  for  a  mortgage                                                               
licensee to  register with  his/her branch office.   On  page 15,                                                               
lines  24-31 through  page  17,  line 2,  the  bill modifies  the                                                               
continuing education  requirements from 24 hours  every two years                                                               
to 8  hours annually.   On page  41, lines 14-18,  this provision                                                               
would allow fingerprint  cards to be sent to  the branch registry                                                               
instead  of submittal  to  the Department  of  Public Safety  for                                                               
submittal to  the FBI for background  checks.  On page  42, lines                                                               
19-21,  the  bill  would  eliminate  the  small  mortgage  lender                                                               
originator  exemption as  well  as repeal  other  statutes in  AS                                                               
SENATOR  PASKVAN referred  to the  fiscal note.   One  additional                                                               
occupational  licensing position  would  be added  at  a cost  of                                                               
$65,000,  with an  additional $3,000  for  costs associated  with                                                               
this position.   He  related that some  increased travel  will be                                                               
necessary since  out of state  exams are required to  license out                                                               
of state mortgage  lending companies.  The  annual membership fee                                                               
for the  American Association of Residential  Mortgage Regulators                                                               
(AAMR)  is $750  annually.   The  state background  check fee  of                                                               
$5,000   must   be   paid  up-front   and   subsequent   licensee                                                               
reimbursement will be  made.  It is anticipated  that the revenue                                                               
will  increase  by  including  the  loan  modification  servicing                                                               
provisions and the change from  biennial to annual licensing fees                                                               
for licensees.                                                                                                                  
3:54:18 PM                                                                                                                    
CHAIR OLSON  reported that this  bill came to the  committee last                                                               
year  and the  committee passed  out the  time sensitive  portion                                                               
last session.                                                                                                                   
3:55:49 PM                                                                                                                    
REPRESENTATIVE  T.  WILSON  asked whether  the  additional  staff                                                               
person would be paid from revenues generated by the program.                                                                    
SENATOR  PASKVAN explained  that  the revenue  is anticipated  to                                                               
increase substantially.   He suggested the  department could more                                                               
fully answer the question.                                                                                                      
3:56:21 PM                                                                                                                    
REPRESENTATIVE  CHENAULT  made a  motion  to  adopt Amendment  1,                                                               
labeled 26-LS1295\P.1, Bannister, 4/9/10, which read as follows:                                                                
     Page 1, following line 5:                                                                                                  
     Insert a new bill section to read:                                                                                         
        "* Section 1. The uncodified law of the State of                                                                    
     Alaska is amended by adding a new section to read:                                                                         
          LEGISLATIVE      INTENT     FOR      REPEAL     OF                                                                    
       AS 45.50.471(b)(52). With regard to the repeal of                                                                        
     AS 45.50.471(b)(52) by sec.  86 of this Act,  it is the                                                                    
     intent of the legislature that                                                                                             
               (1)  the repeal is to prevent liability                                                                          
     under  AS 45.50.471   -  45.50.561  for   conduct  that                                                                    
     violates  AS 06.60, as  amended by  this Act,  but that                                                                    
     does not affect borrowers or potential borrowers;                                                                          
               (2)  a person, including existing licensees                                                                      
     under  sec. 87  of  this  Act, who  is  required to  be                                                                    
     licensed under  AS 06.60, as amended  by this  Act, and                                                                    
     who  engages in  conduct prohibited  by AS 45.50.471  -                                                                    
     45.50.561   remain  subject   to   the  provisions   of                                                                    
     AS 45.50.471 - 45.50.561,  including the provisions for                                                                    
     private and class actions under AS 45.50.531; and                                                                          
               (3)  the repeal not limit or prevent an                                                                          
     action by  the attorney  general, or by  another person                                                                    
     or class of persons, based on AS 45.50.471."                                                                               
     Page 1, line 6:                                                                                                            
          Delete "Section 1"                                                                                                  
          Insert "Sec. 2"                                                                                                     
     Renumber the following bill sections accordingly.                                                                          
     Page 41, lines 20 - 21:                                                                                                    
          Delete "and 06.60.870"                                                                                                
          Insert "06.60.870; and AS 45.50.471(b)(52)"                                                                           
     Page 42, line 2:                                                                                                           
          Delete "sec. 8"                                                                                                       
          Insert "sec. 9"                                                                                                       
     Page 42, line 11:                                                                                                          
          Delete "sec. 88"                                                                                                      
          Insert "sec. 89"                                                                                                      
     Page 42, line 12:                                                                                                          
          Delete "sec. 88"                                                                                                      
          Insert "sec. 89"                                                                                                      
     Page 42, line 13:                                                                                                          
          Delete "sec. 9"                                                                                                       
          Insert "sec. 10"                                                                                                      
     Page 42, line 14:                                                                                                          
          Delete "sec. 9"                                                                                                       
          Insert "sec. 10"                                                                                                      
     Page 42, line 15:                                                                                                          
          Delete "sec. 9"                                                                                                       
          Insert "sec. 10"                                                                                                      
     Page 42, line 16:                                                                                                          
          Delete "sec. 14"                                                                                                      
          Insert "sec. 15"                                                                                                      
     Page 42, line 17:                                                                                                          
          Delete "sec. 14"                                                                                                      
          Insert "sec. 15"                                                                                                      
     Page 42, line 19:                                                                                                          
          Delete "sec. 58"                                                                                                      
          Insert "sec. 59"                                                                                                      
     Page 42, line 20:                                                                                                          
          Delete "sec. 58"                                                                                                      
          Insert "sec. 59"                                                                                                      
     Page 42, line 22:                                                                                                          
          Delete "sec. 59"                                                                                                      
          Insert "sec. 60"                                                                                                      
     Page 42, line 23:                                                                                                          
          Delete "sec. 59"                                                                                                      
          Insert "sec. 60"                                                                                                      
     Page 43, line 2:                                                                                                           
          Delete "sec. 88"                                                                                                      
          Insert "sec. 89"                                                                                                      
     Page 43, line 3:                                                                                                           
          Delete "sec. 89"                                                                                                      
          Insert "sec. 90"                                                                                                      
3:56:36 PM                                                                                                                    
CHAIR OLSON objected for the purpose of discussion.                                                                             
SENATOR PASKVAN explained  that a question arose as  to whether a                                                               
person  could   be  subject  to  treble   damages  and  potential                                                               
liability from a technical violation  such as a licensing matter.                                                               
Amendment 1  would eliminate the  licensee from being  subject to                                                               
AS 45.50.471(b)(2).   The  purpose of the  intent language  is to                                                               
ensure  that  that  the licensees  understood  they  would  still                                                               
subject  to  other  provisions   in  AS  45.50.471  -  45.50.561,                                                               
including the provisions  for private and class  actions under AS                                                               
45.50.531.    He  characterized   Amendment  1  as  a  reasonable                                                               
compromise between industry and the administration.                                                                             
3:58:47 PM                                                                                                                    
CHAIR  OLSON  removed his  objection.    There being  no  further                                                               
objection, Amendment 1 was adopted.                                                                                             
REPRESENTATIVE BUCH  asked to hear testimony  from the department                                                               
about the bill and on Amendment 1.                                                                                              
4:00:01 PM                                                                                                                    
LORI  HOVANEC,  Director,  Division of  Banking  and  Securities,                                                               
Department  of   Commerce,  Community,  &   Economic  Development                                                               
(DCCED), stated that the division  does not have any objection to                                                               
Amendment 1.                                                                                                                    
4:00:43 PM                                                                                                                    
CYNTHIA DRINKWATER,  Assistant Attorney  General, Commercial/Fair                                                               
Business Section,  Department of Law  (DOL), stated that  she did                                                               
not  have any  comments  on the  bill but  asked  to speak  about                                                               
Amendment 1.   One effect of Amendment 1 might  be to create some                                                               
ambiguity regarding the applicability  of the Consumer Protection                                                               
Act to violations  of the Mortgage Lending Act.   The legislative                                                               
intent language  states the private  right of action  remains and                                                               
that  the attorney  general's authority  remains.   However,  the                                                               
concern is that  the statute on its face will  show the provision                                                               
of the  Consumer Protection Act  under AS 45.54.471 (b)  (52) was                                                               
repealed.   Thus,  it  could  be reasonable  to  assume that  the                                                               
legislature  intended  to  restrict the  options  for  consumers,                                                               
which is  the opposite of  the intent  expressed today.   This is                                                               
less of  an issue for  the enforcement by the  Attorney General's                                                               
office since  other provisions  of AS 06.60  and in  the Consumer                                                               
Protection Act that make it  clear the Attorney General does have                                                               
consumer protection jurisdiction.   Still, the legislative intent                                                               
behind the  repeal may not  be apparent  and there well  could be                                                               
confusion  about   consumer  remedies   under  the  act   and  in                                                               
particular, private  rights of action.   She was not  certain how                                                               
the legislative  intent would appear  in the bound volume  of the                                                               
statutes.    If  the  legislative  intent  is  contained  in  the                                                               
annotations it  could reduce  the confusion,  but she  was unsure                                                               
whether  the  legislative  intent  would appear  in  the  on-line                                                               
version of the statutes that people increasingly use.                                                                           
4:03:12 PM                                                                                                                    
CHAIR OLSON  asked whether  this is the  first time  the Attorney                                                               
General's office has expressed concern on the bill.                                                                             
MS. DRINKWATER  clarified her  concern is  with Amendment  1 that                                                               
was adopted and not the bill.                                                                                                   
CHAIR OLSON acknowledged her concern.                                                                                           
4:03:32 PM                                                                                                                    
REPRESENTATIVE BUCH asked whether  she had any recommendations to                                                               
remedy the matter.                                                                                                              
MS. DRINKWATER stated  that she did not have  any further comment                                                               
or any concerns with the bill.                                                                                                  
REPRESENTATIVE BUCH  related that  if the  Department of  Law was                                                               
uncomfortable with the statute perhaps  some adjustments could be                                                               
made  "down the  road."   He expressed  interest in  any specific                                                               
language  to amend  the bill  to  remove the  ambiguity; such  an                                                               
amendment could be presented in the next committee of referral.                                                                 
MS. DRINKWATER suggested one alternative  could be to consider an                                                               
amendment  to  AS  45.50.471  (b)(52),  that  would  address  the                                                               
concern  rather than  to rely  on the  legislative intent,  which                                                               
would be separate from the statute.                                                                                             
CHAIR  OLSON  inquired as  to  whether  Ms. Drinkwater  would  be                                                               
willing to work  with the bill sponsor on  suggested language for                                                               
the next committee of referral.                                                                                                 
MS. DRINKWATER agreed to do so.                                                                                                 
CHAIR OLSON, after  first determining that no one  else wished to                                                               
testify, closed the public hearing on SB 279.                                                                                   
4:05:33 PM                                                                                                                    
REPRESENTATIVE T.  WILSON moved to  report the CSSB  279(FIN), as                                                               
amended,  out of  committee with  individual recommendations  and                                                               
the accompanying  fiscal notes.   There  being no  objection, HCS                                                               
CSSB  279(L&C) was  reported from  the House  Labor and  Commerce                                                               
Standing Committee.                                                                                                             

Document Name Date/Time Subjects
CSHCR21(EDT) Draft Amendment P.3 (members).PDF HL&C 4/9/2010 3:15:00 PM
HCR 21
CSSB279(FIN) ver P.pdf HL&C 4/9/2010 3:15:00 PM
SB 279
SB279 Explanation of Changes CS SB 279(FIN).pdf HL&C 4/9/2010 3:15:00 PM
SB 279
SB279 Fiscal Note-CED-BSS 2-23-10.pdf HL&C 4/9/2010 3:15:00 PM
SB 279
SB279 Sponsor Statement.pdf HL&C 4/9/2010 3:15:00 PM
SB 279
SB279 Supporting Documents About the SAFE Act by HUD.pdf HL&C 4/9/2010 3:15:00 PM
SB 279
SB279 Supporting Documents Back-Up.pdf HL&C 4/9/2010 3:15:00 PM
SB 279
SB279 Supporting Documents Letters of Support.pdf HL&C 4/9/2010 3:15:00 PM
SB 279
SB159 Sponsor Statement ver R.pdf HL&C 4/9/2010 3:15:00 PM
SB 159
SB159 ver R.pdf HL&C 4/9/2010 3:15:00 PM
SB 159
SB279 Draft Amendment P.1.pdf HL&C 4/9/2010 3:15:00 PM
SB 279
SB159 Fiscal Note_DOL-WD-WC_03-26-09.pdf HL&C 4/9/2010 3:15:00 PM
SB 159
SB159 Supporting Documents - Letter NFIB.pdf HL&C 4/9/2010 3:15:00 PM
SB 159
SB159 Supporting Documents Commissioner Bishop Letter.pdf HL&C 4/9/2010 3:15:00 PM
SB 159
SB159 Supporting Documents NCCI Analysis.pdf HL&C 4/9/2010 3:15:00 PM
SB 159
CSHCR21 Letter - AK State Chamber.pdf HL&C 4/9/2010 3:15:00 PM
HCR 21