Legislature(2017 - 2018)SENATE FINANCE 532

03/06/2018 09:00 AM FINANCE

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Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
SENATE BILL NO. 155                                                                                                           
     "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; and relating to real estate appraisers."                                                                         
9:02:52 AM                                                                                                                    
Vice-Chair Bishop MOVED to ADOPT proposed committee                                                                             
substitute for SB 155, Work Draft 30-LS1295\D (Radford,                                                                         
Co-Chair MacKinnon OBJECTED for discussion.                                                                                     
JULI  LUCKY, STAFF,  SENATOR ANNA  MACKINNON, discussed  the                                                                    
Committee Substitute (CS) for SB  155. She informed that the                                                                    
changes  to the  bill were  a result  of questions  that had                                                                    
arisen related to concerns about the legislation.                                                                               
Ms. Lucky read from the Explanation of Changes document                                                                         
(copy on file):                                                                                                                 
     ? Increases the  limit for the required  surety bond to                                                                    
     $50,000 (previous  bill limit was $25,000)  see page 5,                                                                    
     line 21.                                                                                                                   
     ?  Removes  the   fingerprinting  requirement  for  the                                                                    
     "controlling person"  - AS 08.87.135  (c) on page  5 of                                                                    
     the previous bill.                                                                                                         
     ? Allows the department to  collect fees to cover costs                                                                    
     by removing  the specific references to  subsection (j)                                                                    
     of AS 08.01.165 on page 4, line 18.                                                                                        
     ? Adds transition language  with an immediate effective                                                                    
     date to allow the  department to promulgate regulations                                                                    
     before  the   effective  date  of  the   act,  per  the                                                                    
     department's request.                                                                                                      
     ? Conforming amendments, as required, including                                                                            
     deletion of:                                                                                                               
     Previous Section 8      removed due to deletion of                                                                         
     fingerprinting requirement                                                                                                 
     Previous Section 9  duplicative of language already                                                                        
     appearing in statute is AS 37.05.146(c)(24).                                                                               
Co-Chair MacKinnon  WITHDREW her  OBJECTION. There  being NO                                                                    
OBJECTION, the proposed committee substitute was ADOPTED.                                                                       
9:06:13 AM                                                                                                                    
SENATOR KEVIN MEYER, SPONSOR, introduced himself.                                                                               
EDRA  MORLEDGE, STAFF,  SENATOR KEVIN  MEYER, discussed  the                                                                    
bill. She  shared that, due to  the Dodd Frank Act  of 2010,                                                                    
there   was  a   federal  deadline   for  states   to  enact                                                                    
comprehensive  regulations  regarding  appraisal  management                                                                    
companies. The  deadline was August 2018.  Subsequently, the                                                                    
department  requested a  one-year  waiver  to implement  the                                                                    
program,  but there  was no  notification whether  the state                                                                    
had  been granted  that waiver.  She  stated that  appraisal                                                                    
management   companies    were   business    entities   that                                                                    
administered networks  of independent appraisers  to fulfill                                                                    
real estate appraisal assignments  on behalf of lenders. She                                                                    
noted that the companies would  no longer be able to operate                                                                    
in  the state  without  the  comprehensive legislation.  She                                                                    
stated  that it  would cause  problems for  realtors, banks,                                                                    
and  other  lenders;  and  have an  adverse  effect  on  the                                                                    
economy. She noted  that Alaska was one of  four states plus                                                                    
the   District   of  Columbia   that   have   yet  to   pass                                                                    
comprehensive  legislation on  the subject.  Those locations                                                                    
were  currently in  the legislative  process to  address the                                                                    
Co-Chair  MacKinnon noted  that there  had been  significant                                                                    
changes to the  bill, and there were people  ready to answer                                                                    
Senator Olson  asked if  the sponsor  was in  agreement with                                                                    
the changes in the CS.                                                                                                          
Senator  Meyer answered  in  the  affirmative. He  continued                                                                    
that he had wanted an  immediate effective date, which would                                                                    
allow for compliance by August  2018 without the need for an                                                                    
extension.  He  thought  there  might  be  a  difference  of                                                                    
opinion  on the  effective date,  as well  as with  the bond                                                                    
9:10:31 AM                                                                                                                    
Co-Chair  MacKinnon  advised  that  the bill  would  not  be                                                                    
moving from committee in the  current meeting. The committee                                                                    
was  working with  the sponsor  to address  issues with  due                                                                    
Co-Chair MacKinnon  stated that  the meeting  would continue                                                                    
with invited testimony.                                                                                                         
DAVID  DERRY,   CHAIR,  BOARD   OF  CERTIFIED   REAL  ESTATE                                                                    
APPRAISERS, KENAI (via teleconference),  spoke in support of                                                                    
the bill. He stated that  the Board of Certified Real Estate                                                                    
Appraisers  was  ready  to  assume  oversight  of  appraisal                                                                    
management companies. He  appreciated the changes identified                                                                    
in  the committee  substitute. He  spoke in  support of  the                                                                    
amendments, except for the bond  amount. He recalled that he                                                                    
had originally  requested that the bond  amount be increased                                                                    
from  $25,000   to  $150,000.  He   pointed  out   that  the                                                                    
Washington  had a  bond  amount of  $100,000.  He felt  that                                                                    
since the appraisal management companies  were all lower 48-                                                                    
based   companies,  and   that  the   board  had   fiduciary                                                                    
responsibilities,  the   bond  amount  would   provide  some                                                                    
coverage  and  protection. He  reported  that  there was  an                                                                    
opinion  that  the $150,000  would  be  too costly,  and  he                                                                    
disagreed. He  remarked that, currently, Alaska  real estate                                                                    
appraisers currently  paid a recertification fee  of $1,130.                                                                    
He furthered that all appraisers  that worked for them, were                                                                    
usually  required  to  carry  insurance,  which  could  cost                                                                    
between  $1000  and  $2500  per year.  He  shared  that  the                                                                    
defense of  keeping the bond  amount low, was that  it would                                                                    
affect competition  and result  in higher consumer  fees. He                                                                    
disagreed with  that argument. He  pointed out that  some of                                                                    
the larger  Alaska-based lenders  did not use  a third-party                                                                    
mortgage initiator.  He felt  that it  would not  affect the                                                                    
9:15:02 AM                                                                                                                    
Co-Chair MacKinnon noted that she  had a list of states with                                                                    
bonding fees  of $25,000. She  queried a  nationwide average                                                                    
to consider.                                                                                                                    
Mr. Derry did not have an  average, but had a list of states                                                                    
that had  the legislation  enacted, but stated  other states                                                                    
had a $50,000 bonding amount.                                                                                                   
Senator von Imhof  wondered how the bill  sponsor had chosen                                                                    
the amount of $50,000.                                                                                                          
Senator Meyer was not sure  what the right amount should be.                                                                    
He used  the example of  Hawaii, which would have  a similar                                                                    
geographical circumstances.  He observed  that the  State of                                                                    
Washington  was  at  $100,000,  but of  the  states  he  had                                                                    
researched, most were lower than $100,000.                                                                                      
Co-Chair MacKinnon  asked if  there had  been an  average of                                                                    
surety bond rates.                                                                                                              
Ms.  Morledge had  found in  her initial  research that  the                                                                    
average was approximately $33,000.                                                                                              
9:19:14 AM                                                                                                                    
Senator Micciche  asked Mr.  Derry what  costs would  not be                                                                    
covered   by  a   $50,000  surety   bond,  and   what  other                                                                    
protections  would be  available  if there  was  a claim  or                                                                    
appraisal problem above that amount.                                                                                            
Mr. Derry replied  that there may be a  default payment from                                                                    
an out of business appraisal  company. He remarked that many                                                                    
appraisals  servicing rural  areas must  charge airfare,  in                                                                    
addition to  the appraisal fee,  which often exceed  the fee                                                                    
Senator  Micciche  asked if  Mr.  Derry  was more  concerned                                                                    
about  a  collective  cost  rather  than  a  single  company                                                                    
defaulting and having exposure on several appraisals.                                                                           
Mr. Derry answered in the affirmative.                                                                                          
Co-Chair MacKinnon  asked whether a  company had had  to use                                                                    
its share of surety bonds.                                                                                                      
Mr. Derry stated that he had no oversight                                                                                       
Co-Chair  MacKinnon  wondered  whether  there  was  anything                                                                    
prohibitive in the  bill that would restrict  a company from                                                                    
going above the $50,000 proposed limit.                                                                                         
Mr. Derry  replied in the  affirmative. He stated  that they                                                                    
could  set  any  appraisal  amount.   He  felt  that  normal                                                                    
business practices would at least push to meet the minimum.                                                                     
9:23:52 AM                                                                                                                    
Co-Chair Hoffman shared that he  had several appraisals done                                                                    
in rural  Alaska. He noted  that appraisers had not  come to                                                                    
the area unless there  were multiple appraisals to complete.                                                                    
He  thought  the  practice was  working  well  currently  in                                                                    
Western Alaska.                                                                                                                 
Co-Chair  MacKinnon asked  about  the amount  of the  surety                                                                    
Senator Meyer  thought the amount  of the surety bond  was a                                                                    
policy call by  the committee. He thought if  the amount was                                                                    
set too high, it might dissuade some appraisers                                                                                 
Ms. Morledge reminded  that the surety bond  was a recurring                                                                    
Co-Chair  MacKinnon had  no issue  with  the $50,000  surety                                                                    
limit. She noted that the  lending agencies were referred to                                                                    
within the bill.                                                                                                                
Ms.   Morledge  replied   that   the  appraisal   management                                                                    
companies  were  standalone   agencies.  She  stressed  that                                                                    
lending institutions would contact the individual agencies.                                                                     
Vice-Chair  Bishop  thought  the  bill sponsor  had  made  a                                                                    
reasonable compromise.                                                                                                          
9:27:07 AM                                                                                                                    
AT EASE                                                                                                                         
9:33:53 AM                                                                                                                    
Senator   Micciche   thought   there   may   have   been   a                                                                    
misunderstanding  about  the  need   for  surety  bonds.  He                                                                    
understood that  an appraisal management company  could hire                                                                    
the same  individual to do  multiple appraisals. He  did not                                                                    
know  that  $50,000  was  adequate.  He  thought  he  better                                                                    
understood Mr. Derry's concern.                                                                                                 
Co-Chair MacKinnon  asked Mr. Derry if  Senator Micciche had                                                                    
accurately reflected his concern.                                                                                               
Mr. Derry answered in the affirmative.                                                                                          
Co-Chair  MacKinnon  asked  Mr.  Derry  to  stay  online  to                                                                    
comment on further topics.                                                                                                      
Co-Chair  MacKinnon referenced  a letter  dated February  8,                                                                    
2018  (copy on  file).  She asked  for  comments about  that                                                                    
SARA  CHAMBERS, DEPUTY  DIRECTOR, DIVISION  OF CORPORATIONS,                                                                    
BUSINESS   AND   PROFESSIONAL   LICENSING,   DEPARTMENT   OF                                                                    
COMMERCE, COMMUNITY  AND ECONOMIC DEVELOPMENT,  relayed that                                                                    
she  had submitted  a letter  to the  appraisal subcommittee                                                                    
requesting an  extension from  the 2018  deadline to  a 2019                                                                    
deadline.  She  stated that  the  bulletin  issued from  the                                                                    
subcommittee   stated  that   draft  legislation   would  be                                                                    
considered a cause for an extension.                                                                                            
9:39:22 AM                                                                                                                    
Co-Chair  MacKinnon thought  the sponsor  had indicated  the                                                                    
bill needed to move forward with implementation.                                                                                
Ms. Chambers answered in the affirmative.                                                                                       
Co-Chair MacKinnon  thought the  sponsor was  concerned that                                                                    
without implementation, there would be consequences.                                                                            
Ms. Chambers understood  that there may be a  period of time                                                                    
(if  Alaska did  not  receive the  extension) that  business                                                                    
could   continue.   Without  state   oversight,   federally-                                                                    
regulated  companies would  still  be able  to operate.  Her                                                                    
assessment was  that there  could be a  period of  time that                                                                    
non-federally-regulation would be available.                                                                                    
Co-Chair  MacKinnon  asked  if   there  was  an  option  for                                                                    
emergency regulations.                                                                                                          
Ms. Chambers stated  that the Department of  Law had advised                                                                    
that emergency  regulations should  be reserved  for matters                                                                    
of   public   emergency,    and   not   for   administrative                                                                    
Co-Chair MacKinnon  asked why it  would take over a  year to                                                                    
implement regulations for an existing board.                                                                                    
Ms. Chambers informed without the  extension, the bill would                                                                    
take effect and licensure would  be required before the 3 to                                                                    
4 month time period necessary to complete regulations.                                                                          
Co-Chair MacKinnon surmised that the issue was complex.                                                                         
Senator  von Imhof  wondered  if the  extension  was for  an                                                                    
"all-in" scenario.                                                                                                              
Ms. Chambers answered in the affirmative.                                                                                       
Vice-Chair  Bishop thought  Ms.  Chambers  had provided  the                                                                    
worst  case  scenario.  He  asked  if  there  was  a  better                                                                    
scenario to consider.                                                                                                           
Ms. Chambers stated  that what she had  described was likely                                                                    
the best case scenario.                                                                                                         
Co-Chair  MacKinnon   asked  when  the   federal  compliance                                                                    
Ms.  Chambers stated  that the  federal compliance  deadline                                                                    
was  July  2018; unless  an  application  for extension  was                                                                    
Co-Chair MacKinnon felt that there  needed to be contingency                                                                    
9:46:30 AM                                                                                                                    
Vice-Chair Bishop referenced  Ms. Chambers comment regarding                                                                    
federal loans  being currently  processed within  the state,                                                                    
and asked for more information about that statement.                                                                            
Ms. Chambers understood  that there were federally-regulated                                                                    
appraisal   management   companies  currently   that   would                                                                    
continue to operate without the legislation.                                                                                    
Senator  Micciche wondered  why the  bill was  up against  a                                                                    
Ms.  Chambers  stated that  the  board  worked to  secure  a                                                                    
sponsor  to accomplish  the goal  of  legislation two  years                                                                    
previously. The board was unable to do so.                                                                                      
9:49:04 AM                                                                                                                    
Mr. Derry thought there was  a question of implementation of                                                                    
regulations, and  recalled that  there was  effectively only                                                                    
one or two AMCs that were federally regulated.                                                                                  
Co-Chair  MacKinnon asked  Mr. Derry  to help  elucidate the                                                                    
consequences if regulations were not put into place.                                                                            
Mr. Derry  supported Ms. Chambers.  was not aware  if either                                                                    
of the federally-regulated AMCs.                                                                                                
Co-Chair  MacKinnon stated  that  the  committee would  work                                                                    
with the sponsor  on this particular issue.  She stated that                                                                    
there was an  issue about a "controlling  person" within the                                                                    
bill. It  had been proposed  to remove the  requirement that                                                                    
the controlling person be within the state.                                                                                     
9:55:26 AM                                                                                                                    
WILLIAM   SCROGGINS,   REAL    ESTATE   VALUATION   ADVOCACY                                                                    
ASSOCIATION,    NORTH    CAROLINA   (via    teleconference),                                                                    
association  had worked  with  many states  to push  forward                                                                    
legislation  to  satisfy  Dodd-Frank  Act  requirements.  He                                                                    
viewed  $50,000  to be  excessive  but  did not  oppose  the                                                                    
provision. He  did not want  to limit the  certification. He                                                                    
thought it had been a drafting oversight.                                                                                       
Co-Chair MacKinnon  asked Mr. Scroggins to  be available for                                                                    
questions later in the meeting.                                                                                                 
Co-Chair MacKinnon  referenced page  4, lines 28  through 30                                                                    
of  the  bill,  which  talked  about  uniform  standards  of                                                                    
professional appraisal  practices. She wondered  whether the                                                                    
standards were "like" or "exact."                                                                                               
Mr.  Derry  queried  the requirement  that  the  controlling                                                                    
person be within the state.                                                                                                     
Co-Chair MacKinnon referenced page 5, line 22.                                                                                  
Mr. Derry supported the bill as it was currently written.                                                                       
Co-Chair  MacKinnon  stated  that the  committee  would  get                                                                    
legal clarification on the matter.                                                                                              
10:03:02 AM                                                                                                                   
Ms. Chambers  stated that the bill  section referenced being                                                                    
active  was the  same as  Mr. Derry's.  She agreed  that the                                                                    
person must be certified, but  did not have to be physically                                                                    
a resident of the state.                                                                                                        
Co-Chair MacKinnon  stated that  she had  a comment  from an                                                                    
individual who believed that was  a burden for larger out of                                                                    
state management firms.                                                                                                         
Senator   Stevens  asked   Ms.   Chambers   to  comment   on                                                                    
reciprocity with other states.                                                                                                  
Ms.    Chambers   stated    that   licenses    were   fairly                                                                    
transportable. She announced that  if a state's requirements                                                                    
were equal  to or greater  than Alaska's, there would  be an                                                                    
expedited process to recognize the standards.                                                                                   
Co-Chair MacKinnon relayed that  the committee still awaited                                                                    
a new fiscal  note for the bill. The committee  would have a                                                                    
new CS drafted for a future meeting.                                                                                            
SB  155  was  HEARD  and   HELD  in  committee  for  further                                                                    

Document Name Date/Time Subjects
HB131 Sectional Analysis.pdf SFIN 3/6/2018 9:00:00 AM
HB 131
HB131 Sponsor Statement .pdf SFIN 3/6/2018 9:00:00 AM
HB 131
HB131 Supporting Documents-Rellocation Assistance Program Q&A.pdf SFIN 3/6/2018 9:00:00 AM
HB 131
SB 155 CS v. D Explanation.pdf SFIN 3/6/2018 9:00:00 AM
SB 155
SB 155 CS work draft version D.pdf SFIN 3/6/2018 9:00:00 AM
SB 155
SB 155 Sectional Version D.pdf SFIN 3/6/2018 9:00:00 AM
SB 155
SB 155 AK Board AMC extension request - Bulletin 2017-02 Extension of Implementation Period.pdf SFIN 3/6/2018 9:00:00 AM
SB 155