Legislature(2003 - 2004)
05/06/2004 08:16 AM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
CSHB 421(JUD)-DEED OF TRUST RECONVEYANCE MR. JOSH APPLEBEE, staff to Representative Tom Anderson, sponsor of HB 421, told members this legislation was brought forward by the Alaska Land Title Association as a way to enable people to get clear title to their homes and mortgages. The intent and purpose of the bill is simple: once a loan is paid, the title must be cleared. He explained that most Alaska banks rarely hold a home loan for more than 30 days. Banks sell those mortgages to servicing companies, which collect the monthly payments over the life of the loan. Most mortgage service companies are located outside of Alaska. Under current law, service companies are not required to make sure loans are reconveyed and filed in the state recorder's office once they are paid off. Once a homeowner pays off his mortgage, the lien on the home held by the mortgage service company should be removed. During testimony in previous committees, a title insurance company in Anchorage stated that over 1400 deeds of trust were pending reconveyance, which illustrates that thousands of deeds across the state have not been reconveyed. MR. APPLEBEE noted that other states are experiencing this same problem. HB 421 is modeled after an Idaho statute that was adopted three years ago. The Idaho law has proved to speed up the reconveyance process there. HB 421 is supported by other sectors of the housing industry, including the Alaska Mortgage Bankers Association and the Alaska State Homebuilders Association, and it has been reviewed by realtors and bankers. HB 421 applies only to those deeds of trust held by title insurance companies. It does not provide opportunities to wipe out debt or other obligations established by deeds of trust. The bulk of HB 421 establishes a notification process and describes the form that notification should take. The notification process provides for quality control and uniformity. He indicated that Mr. Brian Merrell was available to answer specific questions. MR. BRIAN MERRELL, First American Title Insurance Company and immediate past president of the Alaska Land Title Association, affirmed that HB 421 was introduced at the request of the Alaska Land Title Association, in an effort to assist the Association's customers in clearing title to old deeds of trust when title insurers' have sufficient information from lenders to believe a mortgage has been paid off. The legislation additionally requires notification to be given to lenders and their servicers of the intention to reconvey trusts, which is normally done at their request. He noted a problem arises because out-of-state lenders often do not make those requests. SENATOR FRENCH commented that HB 421 appears to make perfect sense but questioned why a law is necessary and whether something in the law is prohibiting title companies from releasing deeds of trust. MR. MERRELL said the statutes say very little about how a deed of trust is to be released. He stated: It's just sort of a matter of common law how the whole process is set up anyway. But there certainly is a part of that common law requirement that the lender request that this reconveyance happen and, as I mentioned, so many times we find that a lot of particularly out-of-state lenders don't follow through on making that request or they send the information for the request to be made through their old borrower who may have sold the property and has no further interest in doing anything with it so it just ends up being thrown in the trash. So this would help us to help future owners of the property - the ones who own the property and come in later to do transactions that find that these deeds of trust haven't been released, to help them out, to make sure it gets done. But I do agree with you, it is sort of a common sense thing. The problem is that there isn't any common sense in the law right now so we need to put it there. CHAIR SEEKINS noted that with no further questions or persons wishing to testify, public testimony was closed. SENATOR OGAN moved CSHB 421(JUD) and its attached fiscal notes from committee with individual recommendations. CHAIR SEEKINS noted without objection, the motion carried. The committee took a brief at-ease.