Legislature(2009 - 2010)BELTZ 105 (TSBldg)

03/02/2010 01:30 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved SB 279 Out of Committee
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSSB 117(L&C) Out of Committee
                    SB 279-MORTGAGE LENDING                                                                                 
1:45:51 PM                                                                                                                    
CHAIR  PASKVAN announced  SB 279  to be up  for consideration.  He                                                              
related   that  this   committee   had  been   working  with   the                                                              
administration  for over one  year and this  bill is now  good for                                                              
LORIE  HOVANEC,  Director,  Division of  Banking  and  Securities,                                                              
Department   of  Commerce,   Community   &  Economic   Development                                                              
(DCCED),  said  her  division  administers   the  Alaska  Mortgage                                                              
Lending Regulation  Act. She said  the abuses in  mortgage lending                                                              
and securities led  to much of the financial crises  the US is now                                                              
experiencing. To  address some of  these problems, both  state and                                                              
federal  regulators  came up  with  regulatory  reform  and a  new                                                              
system  to license  both mortgage  loan  originators and  mortgage                                                              
lenders and  brokers. In 2003,  the state regulators,  through the                                                              
Conference   of  State   Banks   Supervisors   and  the   American                                                              
Association  of  Residential Mortgage  Regulators  (ARMOR),  began                                                              
developing a uniform  licensing registry similar to  what had been                                                              
done by  state agencies in  the securities and investment  advisor                                                              
She  said this  regulatory  system  for mortgage  loan  originator                                                              
licensing  is known as  the Nationwide  Mortgage Licensing  System                                                              
and  Registry; it  was  launched  in 2008  and  since then  nearly                                                              
every  state is  a  participant.  This system  increases  consumer                                                              
protection, enhances  state regulators' ability to  supervise, and                                                              
streamlines the licensing process.                                                                                              
MS.  HOVANEC continued  that  in  2008 the  federal  SAFE Act  was                                                              
passed   which   requires   states  to   license   mortgage   loan                                                              
originators  through this  nationwide registry.  It also  requires                                                              
states  to  amend their  mortgage  lending  laws to  meet  certain                                                              
minimum standards,  which they can exceed if they  want to. Alaska                                                              
began licensing  mortgage loan  originators through  this registry                                                              
on  August 1,  2009  and is,  therefore,  in  compliance with  the                                                              
first  part of  the federal  law. SB  279 will  bring Alaska  into                                                              
compliance with  the second part of  the SAFE Act by  amending its                                                              
statutes to meet the federal minimum standards.                                                                                 
She  said the  objectives  of  these  amendments are  to  increase                                                              
accountability  in  education  and tracking  of  mortgage  lending                                                              
professions  to  reduce fraud  in  the residential  mortgage  loan                                                              
origination  process  and  to  provide  consumers  with  free  and                                                              
easily accessible information through the national database.                                                                    
She explained  that if Alaska does  not comply with  these minimum                                                              
federal  licensing requirements  through  passage of  SB 279,  the                                                              
SAFE Act  requires  that the US  Department of  Housing and  Urban                                                              
Development begin  enforcing the standards. The effective  date of                                                              
this bill  is July 1,  2010 - also  to meet the state's  extension                                                              
1:50:55 PM                                                                                                                    
MS.  HOVANEC  said  she  would next  address  some  of  the  major                                                              
changes  to  Alaska's law.  Technical  changes  included  changing                                                              
"originator" to "mortgage loan originator" wherever it was used.                                                                
MS. HOVANEC  said the  first substantive change  was to  section 9                                                              
on  page  6,  line  8, where  license  renewal  was  changed  from                                                              
biennial to annual on the calendar year, December 31.                                                                           
1:53:34 PM                                                                                                                    
She said  section 85 on  page 41, line  20, repealed  AS 06.60.017                                                              
that exempts  small mortgage lenders  from licensing,  because the                                                              
SAFE  Act  does  not  allow exemptions  of  this  sort.  She  said                                                              
references to the  "small mortgage lender" exemption  were deleted                                                              
1:55:08 PM                                                                                                                    
MS.  HOVANEC said  the SAFE  Act requires  that fingerprint  cards                                                              
for criminal  background checks  be sent to  the registry  as well                                                              
as the Department  of Public Safety (DPS). Under  current statutes                                                              
fingerprint  cards must  be submitted  just to  the Department  of                                                              
Public Safety (DPS).                                                                                                            
Section 11 on page  6, line 23, says permit fees are  to be set in                                                              
regulation  for flexibility.  Currently they  are set in  statute.                                                              
They anticipate  potentially decreasing the fee for  mortgage loan                                                              
originators so that  originators and companies are  paying similar                                                              
renewal fees rather than originators paying a larger fee.                                                                       
Section  12  on  page  6, line  28,  requires  20  hours  of  pre-                                                              
licensing education  as per the  SAFE Act; three hours  in federal                                                              
statutes   and   regulations  to   mortgage   origination,   fraud                                                              
prevention,  consumer protection,  three hours  in ethics  and two                                                              
hours related  to lending  standards for non-traditional  mortgage                                                              
products  and  the  additional  hours  to  be  of  the  licensee's                                                              
choosing. Current law has no education requirements.                                                                            
Section 18 on page  10, line 21, authorizes the  division to issue                                                              
a  provisional  license  if the  fingerprint  card  processing  is                                                              
excessively  delayed  but  all other  requirements  for  licensing                                                              
have been  met. This  is to  prevent holding  up commerce  when it                                                              
appears a person is qualified.                                                                                                  
In section  22 on page 12, line  21, the references to  paper were                                                              
eliminated.  Because  the  national   database  is  accessible  to                                                              
consumers on the Internet, they will be going paperless.                                                                        
Section  29 on  page  14,  line 9,  is  a new  section  permitting                                                              
branch  office  registration,  something   the  national  database                                                              
requires, and  the department wants  the ability to track  all the                                                              
branches that mortgage lenders and originators are opening.                                                                     
Section  35 on  page  15, line  25, modifies  Alaska's  continuing                                                              
education  requirements from  24 hours  every 2  years to  8 hours                                                              
SENATOR  MEYER asked  if the US  Department of  Housing and  Urban                                                              
Development would take over without action on this bill.                                                                        
MR. HOVANEC  replied yes,  but they don't  really take  over. They                                                              
would  set  up their  own  licensing  system  in addition  to  the                                                              
state's system. So  industry would be required to  comply with two                                                              
regulatory schemes.                                                                                                             
SENATOR  DAVIS asked  if  the state  would  be a  penalized if  it                                                              
didn't meet the deadline.                                                                                                       
MS. HOVANEC replied not to her knowledge.                                                                                       
2:02:06 PM                                                                                                                    
CHAIR  PASKVAN said  they had  been working  on this  for a  whole                                                              
year and he is  comfortable with language in the  bill, but he has                                                              
been close to it for a while.                                                                                                   
MS. HOVANEC explained  that the fiscal note adds  $65,000/year for                                                              
a new  occupational licensing  position and  $3,000 for  materials                                                              
required for the  position. The amount of work  being generated by                                                              
participation  in the  national registry  is more  than their  one                                                              
occupational  licensing person  is  able to  handle, because  they                                                              
also  handle  their money  service  business  regulations.  Travel                                                              
would increase by  $20,000/yr. They have approximately  72 out-of-                                                              
state  lenders  and are  able  to  do some  examinations  of  them                                                              
through  a  joint  exam  with the  states  in  which  the  primary                                                              
location  of the  lender  is located,  but  they  are expected  to                                                              
participate in a  certain number of exams - as part  of this joint                                                              
protocol  they  have  joined.  This budget  would  allow  them  to                                                              
participate  in  approximately   three  to  four  exams  per  year                                                              
depending on  where they  are located. It  also adds  a membership                                                              
fee to  the National Mortgage  Regulatory Association  and funding                                                              
for the  division to "upfront" the  state background fee  which is                                                              
about $50-150/yr.                                                                                                               
They  expect  that  revenue will  increase  substantially  due  to                                                              
expansion  of the  definition of  "licensee" to  include the  loan                                                              
modification and  servicing companies as  well as changing  from a                                                              
biennial renewal to an annual renewal.                                                                                          
CHAIR  PASKVAN explained  that the  expenditures  for fiscal  year                                                              
(FY)  2011 are  about  $131,000,  but the  income  would be  about                                                              
$384,000.  So it has a positive impact on the state's treasury.                                                                 
MS. HOVANEC agreed.                                                                                                             
SENATOR DAVIS said  that she appreciated Ms. Hovanec's  review and                                                              
that she saved her a lot of work by visiting the office.                                                                        
2:06:07 PM                                                                                                                    
CHAIR PASKVAN closed public testimony.                                                                                          
SENATOR  MEYER  moved  to  report   SB  279  from  committee  with                                                              
individual  recommendations  and  attached fiscal  note(s).  There                                                              
were no objections and it was so ordered.                                                                                       
2:08:29 PM                                                                                                                    
At ease                                                                                                                         
2:11:16 PM                                                                                                                    
CHAIR PASKVAN called the meeting back to order at 2:11.                                                                         

Document Name Date/Time Subjects
CS SB 129 Bill Packet.pdf SL&C 3/2/2010 1:30:00 PM
SL&C 3/9/2010 1:30:00 PM
SB 129
SB 279 Bill Packet.pdf SL&C 3/2/2010 1:30:00 PM
SB 279
SB 258 Bill Packet.pdf SL&C 3/2/2010 1:30:00 PM
SB 258