Legislature(2017 - 2018)BARNES 124
04/02/2018 03:15 PM LABOR & COMMERCE
Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
Download Mp3. <- Right click and save file as
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 155-REAL ESTATE APPRAISAL MNGMT. COMPANIES 3:18:58 PM CHAIR KITO announced that the first order of business would be CS FOR SENATE BILL NO. 155(FIN), "An Act relating to the registration and regulation of real estate appraisal management companies; relating to the establishment of fees by the Department of Commerce, Community, and Economic Development; relating to the Board of Certified Real Estate Appraisers; relating to real estate appraisers; and providing for an effective date." 3:19:17 PM SENATOR KEVIN MEYER, Alaska State Legislature, presented SB 155 as prime sponsor. He paraphrased the sponsor statement [included in committee packet], which reads as follows [original punctuation provided]: An Appraisal Management Company, or AMC, is an independent entity through which mortgage lenders order residential real estate valuation services for properties on which they are considering extending loans to homebuyers. AMCs fulfill an administrative function in the appraisal process, including selecting an appraiser and delivering the appraisal report to the lender. Individual appraisers who work for AMCs provide the actual property valuation services. AMCs existed well before the 2008 global financial crisis, and today they play an increasingly important role as a third-party service provider in the consumer mortgage process. AMCs have become increasingly popular by lenders across the country to ensure federal and state regulatory compliance and independence between lenders and appraisers as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Dodd-Frank requires that states that choose to regulate this sector of industry enact comprehensive AMC oversight and registration programs with an August 10, 2018, deadline. SB 155 aims to promote public trust and consumer protection and establish oversight and enforcement where there is none today. SENATOR MEYER added that Alaska is one of only four states without the legislation in place. He said that states vary regarding the surety bond. He added that due to the deadline, the department requested a waiver. The original version of the proposed bill contains contingency language in the event that the waiver was not granted. He stated the version would establish a firm effective date on 1 January 2019, and a registration date of 1 March 2019. 3:24:11 PM REPRESENTATIVE STUTES stated there is confusion over whether the state will be able to transact with "Freddie May and Fannie Mac" without the proposed legislation in place. SENATOR MEYER said there is some concern that it would impact some of the loans. 3:25:00 PM CHAIR KITO stated the difference in the CS is only to update the effective date. 3:25:13 PM REPRESENTATIVE WOOL moved to adopt House committee substitute (HCS) for CSSB 155(FIN), Version R as the working document. There being no objection, Version R was adopted as the working document. 3:25:52 PM DAVID DERRY, Chair, Alaska Board of Real Estate Appraisers, testified in support of SB 155. He said the board thinks it is a key to have the maximum available mortgage for residents in Alaska, and it provides a basis for oversight of AMCs operating in Alaska. He said the board requests a change on page 5 line 25 about the control person is effectively established as the responsible person. The board requesting it be changed to a certified appraiser in the state of Alaska. He indicated the original bill version had contained the detail, but it had been changed. He said the objection to the change is that other states don't make that requirement. He suggested the mortgage meltdown 2010 had created problems in other states, while Alaska wasn't hit with the meltdown. He added it may be why there was no AMC legislation enacted in the state previously. REPRESENTATIVE JOSEPHSON asked whether the federal subcommittee expressed a preference that the designated controlling person be in Alaska. MR. DERRY answered that the term controlling person is not even addressed by the federal subcommittee, so there was no preference expressed. REPRESENTATIVE JOSEPHSON asked for confirmation that the federal subcommittee could not take a position on it in any case. MR DERRY answered that is correct. 3:32:18 PM MARK SCHIFFMAN, Real Estate Valuation Advocacy Association (REVAA), testified in support of SB 155. He stated that there is not a uniqueness to Alaska that would require that the designated person be in Alaska. REPRESENTATIVE WOOL mentioned hiring an extra person and asked for confirmation that the cost would be spread around programs. 3:34:47 PM SARA CHAMBERS, Deputy Director, Division of Insurance, Department of Commerce, Community & Economic Development (DCCED), answered questions in the hearing on SB 155. She stated there would be a new person required, but their time would be charged on a 15-minute increments to this program. She added that they may work part-time on another program, and that program would cover those costs. 3:35:42 PM CHAIR KITO opened public testimony on SB 155. Upon ascertaining that no one was available to testify, he closed public testimony. 3:36:20 PM REPRESENTATIVE STUTES asked whether not enacting the proposed legislation would prohibit all institution from giving FHA loans or prohibit only certain institutions from providing federal loans to Alaskans. MR. DERRY answered the loans could still be carried out by lenders. He named banks that don't use AMCs. He said there would be complications with handling federally related transactions. REPRESENTATIVE STUTES asked whether not enacting the proposed legislation would prohibit certain lending institutes from lending Freddie Mac, Fannie May, and FHA funds to buyers. MR. DERRY said the question is what a federally related transaction is. He said that without AMC legislation, a lender would not be prohibited from working through a federal loan. 3:40:08 PM REPRESENTATIVE WOOL asked whether it is up to the bank whether to use AMCs or not. He asked whether an appraiser can work independently and for an AMC at the same time. MR. DERRY answered in the affirmative. He said it is more a matter of convenience. He said an appraiser could sign up with an AMC and also serve as an independent appraiser. 3:41:46 PM REPRESENTATIVE JOSEPHSON moved Amendment 1. Page 5, line 25: Delete "a state" Insert "the state under this chapter" 3:42:45 PM THOMAS ATKINSON, Staff, Representative Andy Josephson, presented Amendment 1 on behalf of Representative Josephson. He stated there are no homegrown AMCs. He said the suggestion is to support small Alaska businesses rather than larger national businesses. CHAIR KITO asked whether the amendment would prohibit national businesses from using their AMC in Alaska. MR. ATKINSON answered that it would not. He underlined that the provision would not require that the designated person be in Alaska, only that they be certified as an appraiser in Alaska. He added this could be done through reciprocity. CHAIR KITO suggested if someone is working on a lending project and the appraiser does not meet the licensure requirements, the loan would be on hold until the appraiser met those requirements. MR. ATKINSON answered in the affirmative. He deferred to the invited testimony. 3:45:47 PM CHAIR KITO asked whether passing the amendment would impede the ability of the state to allow appraiser to provide services in the state. MS. CHAMBERS answered that the amendment would require the controlling person - the person the board would work with that is in a management roll - to have understanding and awareness of Alaska. She explained that person would have decision-making authority, but that person may or may not be the boots on the ground appraiser. She said the board stated it was important to them because of Alaska's unique geography. She clarified that, should this amendment be adopted, it wouldn't change anything for the boots on the ground appraiser. CHAIR KITO asked whether it is anticipated that a large number of individuals would want licensure through reciprocity. MS. CHAMBERS said it was estimated about 200 AMCs and it is expected the controlling person for each of them would be seeking licensure to operate in the state. 3:50:06 PM EDRA MORLEDGE, Staff, Senator Kevin Meyer, Alaska State Legislature, answered questions in the hearing on SB 155 on behalf of Senator Meyer, prime sponsor. She stated the sponsor was not supportive of the amendment. 3:51:10 PM A roll call vote was taken. Representatives Stutes, Josephson, and Knopp voted in favor of Amendment 1. Representatives Wool, Birch, Kito, and Sullivan-Leonard voted against it. Therefore, Amendment 1 failed by a vote of 4-3. 3:52:02 PM REPRESENTATIVE JOSEPHSON offered Amendment 2. Page 9, line 31: Delete "includes" Insert "means" Page 10, lines 2 - 3: Delete "or an officer or director of a real estate appraisal management company" Page 10, following line 3: Insert a new subparagraph to read: "(B) is an officer or director of a real estate appraisal management company;" Reletter the following subparagraphs accordingly. Page 10, line 7: Delete "and" Insert "or" 3:52:12 PM MR. ATKINSON explained Amendment 2 on behalf of Representative Josephson. He said without the amendment, a controlling person would have to meet all three definitions. He said, "It would be a strange arrangement to be both the owner and employee." 3:53:47 PM MS. MORLEGE stated the sponsor had no opposition to the proposed amendment. 3:53:58 PM CHAIR KITO removed his objection. There being no other objection, Amendment 2 was adopted. 3:54:09 PM REPRESENTATIVE JOSEPHSON moved to adopt Amendment 3. Page 3, line 29, following "chapter": Insert "; (4) conduct background investigations as provided in AS 08.87.135(c)" Page 5, line 21: Delete "and" Page 5, line 23, following "$50,000": Insert "; and (9) is owned by persons who meet the requirements under (c) of this section" Page 5, following line 31: Insert a new subsection to read: "(c) A person who owns at least 10 percent of a real estate appraisal management company required to be registered under this chapter must be of good moral character as determined by the board and shall submit to a background investigation conducted by the board." Reletter the following subsections accordingly. Page 6, line 5: Delete "of (a) and (b)" Insert "under (a) - (c)" 3:54:13 PM MR. ATKINSON explained Amendment 3 on behalf of Representative Josephson. He said it is clear that if a person owns more than ten percent of an AMC, they would need a state background check. He said he had confirmation that it is required in statute. REPRESENTATIVE WOOL asked about background investigations. MR. ATKINSON answered that the details of what constitutes background checks are not stipulated by the state. REPRESENTATIVE WOOL asked what the state would plan on doing if it were left to the states. MR. ATKINSON answered that he thinks they would run the same background check that they run on appraisers. 3:56:12 PM MS. MORLEDGE stated that the sponsor is in support of the amendment. 3:56:29 PM REPRESENTATIVE WOOL suggested if there were 200 AMCs who wanted to do business in Alaska, all would have to submit fingerprints to the state. MR. ATKINSON answered that he did not know the answer. 3:57:32 PM MS. CHAMBERS answered that currently for real estate appraisers the department does not have the authority to require fingerprints. She said the supposition that those owners of ten percent or more of an AMC would have to submit an application is correct. REPRESENTATIVE WOOL spoke to the fiscal note. He asked whether the one person to be hired would be able to handle 500 applications with background checks. MS. CHAMBERS answered that, should this amendment become a part of the bill, the department may allocate more of that person's time to the program. 3:59:32 PM REPRESENTATIVE WOOL objected to Amendment 3. A roll call vote was taken. Representatives Sullivan-Leonard, Stutes, Josephson, Birch, and Knopp voted in favor of Amendment 3. Representatives Wool and Kito voted against it. Therefore, Amendment 3 passed by a vote of 5-2. 4:00:27 PM REPRESENTATIVE STUTES expressed her concerns about increased costs as a result of the proposed bill. 4:01:23 PM REPRESENTATIVE BIRCH stated he supports the proposal. 4:01:53 PM REPRESENTATIVE WOOL moved to report HCS CSSB 155(FIN), Version R, as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, it was so ordered.