Legislature(2009 - 2010)BELTZ 105 (TSBldg)
03/31/2010 01:30 PM JUDICIARY
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|Confirmation Hearing Legislative Ethics Committee|
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 108-PROP. FORECLOSURE/EXECUTION/TRUST DEEDS CHAIR FRENCH announced the consideration of HB 108 and asked for a motion to adopt the Senate committee substitute (CS). 2:24:46 PM SENATOR WIELECHOWSKI moved to adopt Senate CS for CS for HB 108, labeled 26-LS0318\M, as the working document. CHAIR FRENCH objected for discussion purposes. JANE PIERSON, Staff to Representative Jay Ramras, provided an explanation of the changes. Section 2 - language was deleted that required a newspaper to have circulation and distribution of at least 500 copies or 10 percent of the judicial district, whichever is less. The circulation requirements were deleted because it's covered by the second class mailing permit. The idea is to allow smaller newspapers to compete and drive down the high price of legal notice of publication. Section 7 - the word "escrow" was replaced with "trust account" to make it easier for trustees to understand. Section 10 - five days was changed to 10 days to allow more time to find and correct errors from a sale. This is borough friendly since boroughs are impacted when property goes to sale when it shouldn't. Section 13 - language relating to the bonding exemption for title providers was deleted from page 11, lines 24-27. The reasoning is that small title companies that have no special expertise warranting an exemption shouldn't be granted one. 2:27:20 PM A previous change expanded the list of qualified Internet sites to include newspapers of general circulation so any newspaper that qualifies to run legal ads will be qualified as an Internet site. Section 4 - the language requirement related to curing the default up to two days prior to the sale date was deleted because a default can now be cured up to the time of the sale. AS 34.20.070(e) adds language and provides an exception to deeds that were entered into before the effective date of the Act and provides for a different time period to cure. Section 6 - clarifies the time for the sale and curing the default. It also states that if the sale is rescinded under subsection (g), the deed of trust foreclosed in the rescinded sale is restored to the validity and priority it had before the sale. 2:30:38 PM STEPHEN ROUTH, Attorney representing himself, Routh Crabtree, APC, Anchorage, said he's worked on this bill for several years. He reported that the complex Alaska foreclosure statutes originally came from Oregon and have not been updated as the Internet has grown. Thus, much of the bill focuses on updating and cleaning up the statutes so that the court doesn't have to define the statute. He noted that many of the proposed changes are the result of expensive litigation. Probably the most far-reaching change that's been discussed relates to the Internet publication because that's where people today get their information as opposed to newspapers. If the bill were to pass, Alaska would be the sixth state to mandate Internet publication of foreclosures. The proposed statute includes information about how to do that so that people could actually find the ads. The current version also opens Internet advertisement to newspapers of general circulation. The only caveat is that the newspaper cannot charge a fee to look at these ads on the Internet. 2:33:26 PM MR. ROUTH said the overarching goal of the changes is to enhance fairness, much of which is geared to the auction process. This is important because the foreclosure process does violence to a property right - a person's property is being taken away outside the judicial process. That person would want to know that it would be a fair, open and, well-publicized auction without opportunity for back-door deals. Everybody wins when the auction attracts bidders, he said. The bank doesn't get the property back in its portfolio, which avoids losses; the borrower likely will get more for the property if there are more bidders; and title companies avoid litigation. The Internet is key to attracting bidders and this bill underscores that. Bids can be made on the Internet if the trustee is so equipped. "The idea being that somebody can sit in New York and buy property in Homer," he said. This helps the borrower by increasing the bidding pool. SENATOR WIELECHOWSKI referenced Section 5, page 5, and recalled that changing the notice requirement to a person who is in actual physical possession was a concern last time the bill was presented. He asked how that would work and why it's necessary. 2:36:04 PM MR. ROUTH said he doesn't recall that this was an issue, but it was borne of litigation. The issue is that you wouldn't know that there was a lien on a property by examining the record. The question is how to allow for a clean title in a foreclosure auction process when there's an unrecorded lien. SENATOR WIELECHOWSKI read the proposed amendment to AS 34.20.070(c), which talks about mailing a copy of the default notice within 10 days after recording the notice, and asked the necessity of adding that provision. MR. ROUTH replied whoever is in that house is entitled to know that possession is being disturbed. It could be a tenant who would need to make other living arrangements. Responding to a further question, he clarified that the owner gets notice separate from the actual physical possession. SENATOR WIELECHOWSKI asked the rationale for the proposed AS 34.20.070(f) in Section 6. MR. ROUTH said this goes to the point he made earlier about an unrecorded lien on a property. Typically these are mechanics liens. He explained that a number of statutes provide that people doing work on a house can record notice on the title so they're given notice if there is a foreclosure and they can act to protect their lien. If they don't do that it becomes a judgment call which leads to litigation. SENATOR WIELECHOWSKI asked if this is common in other states' statues. 2:39:53 PM MR. ROUTH said he's only aware of litigation on this in Alaska. SENATOR WIELECHOWSKI asked if the proposed amendment to AS 34.20.080(e) in Section 9, which says a foreclosure may not be postponed for more than 12 months unless a new notice of sale is given under (a)(2) of the section, addresses an existing problem. MR. ROUTH said that's right. Prior to this the timeframe was left to the discretion of the title insurance companies who insure the sale so there was no certainty about the time. SENATOR WIELECHOWSKI asked if the proposed change in Section 10 to the way cash proceeds of the sale are distributed is substantially different than current law. MR. ROUTH replied this is common practice, but this ensures that everyone is compliant. 2:42:12 PM DENNIS FENERTY, Attorney, Groh Eggers LLC, Anchorage, said he's been doing foreclosures on behalf of lenders for more than 25 years and he applauds Mr. Routh for the work he's done on the bill to make the process fair and to clarify uncertainties. He agreed with Mr. Routh that the [unrecorded lien issue] is problematic. It leaves lenders uncertain about whether they have to look for someone with an interest in the property and that creates a potential cloud. He observed that the notice provisions are also being clarified and made certain and said he agrees that the distribution of proceeds is common practice rather than following the law. Among other good things, the bill includes provisions for deceased borrowers. The current process burdens the lender with the requirement to go to court and open special probate whereas the bill addresses that fairly by requiring reasonable notice. MR. FENERTY said he didn't have a copy of the latest version of the bill and he wanted to make certain that it still included the Section 2 provision that Internet publication is available to any newspaper of general circulation that maintains a website. CHAIR FRENCH confirmed that the proposed new AS 09.35.140(c)(1) hadn't changed. MR. FENERTY asked if the change in the description requirements in Section 2 for a "newspaper of general circulation" had relaxed the standard. MS. PIERSON explained that the current version removed language from Section 2 that required a paid distribution of at least 500 copies, or 10 percent of the total population of the judicial district, whichever is less. The paid distribution of at least 500 copies is covered under the second class mailing permit in the proposed AS 09.35.140(c)(2)(F)(3) in Section 2. 2:46:23 PM MR. FENERTY expressed satisfaction that the current version provides that newspapers of general circulation can host foreclosure notifications. Previously he testified that for his business he needs an alternative website to conduct foreclosures and a place to post notifications. "This is a very good bill and I do believe it's long overdue," he concluded. MR. PIERSON summarized that HB 108 will modernize the non- judicial foreclosure process and do a lot of good for the state. MR. ROUTH added his belief that all the comments and concerns that were expressed over the last several years have been addressed to everyone's satisfaction. SENATOR WIELECHOWSKI asked how the notification requirements will fit rural Alaska. MR. ROUTH explained that this adds the Internet publication, but the requirement to advertize in a newspaper of general circulation won't change. SENATOR WIELECHOWSKI asked how foreclosure notification is currently done in rural Alaska. MR. ROUTH said it's by judicial district and every judicial district has at least one newspaper of general circulation so that's where foreclosures are advertized. That won't change. This adds the Internet publication, which will level the field in terms of getting the information to more people in the particular judicial district. Right now it's perfectly legal to advertize a foreclosure sale for a property in Anchorage in the Kodiak newspaper because they're in the same judicial district even though the information may be of little interest to people in Kodiak. When it's on the Internet, anyone who is looking will see it, he said. 2:50:12 PM MR. FENERTY reported that several Bush newspapers including the Arctic Sounder and Nome Nugget already put foreclosure notices on their website whenever they publish a notice in the newspaper. CHAIR FRENCH announced he would hold HB 108 in committee.