STAND. COM. REP. NO. 494

Honolulu, Hawaii

RE:    S.B. No. 646

       S.D. 1

Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2011

State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which was referred S.B. No. 646 entitled:

"A BILL FOR AN ACT RELATING TO ESCROW DEPOSITORIES,"

begs leave to report as follows:

     The purpose and intent of this measure is to require every person subject to licensure as a mortgage loan originator to include the person's unique identifier on every document submitted to an escrow depository in a real estate transaction and to require escrow depositories to report invalid unique identifiers to the Commissioner of Financial Institutions.

     Your Committee received testimony in support of this measure from Hawaii Mortgage Company, Inc.  Your Committee received testimony in opposition to this measure from the Commissioner of Financial Institutions of the Department of Commerce and Consumer Affairs and Title Guarantee Escrow Services, Inc.

     Your Committee finds that this measure allows the Division of Financial Institutions of the Department of Commerce and Consumer Affairs to be proactive in its enforcement of the Secure and Fair Enforcement of Mortgage Licensing Act (SAFE Act), chapter 454F, Hawaii Revised Statutes.  Your Committee notes that the Division of Financial Institutions' enforcement powers under the SAFE Act are currently dependent on the filing of a complaint which triggers an investigation into purported violations.  Your Committee finds that this measure clarifies the ability of the Division of Financial Institutions to take immediate action against a person who violates the SAFE Act before harm to a consumer occurs.  Finally, your Committee notes that this measure, as amended, is a product of collaboration among the stakeholders on this issue.  Your Committee acknowledges that the parties have not yet been able to come to full agreement on this measure.  However, your Committee encourages the parties to continue their discussions throughout the legislative process in order to reach consensus on this important measure.

     Your Committee has amended this measure by:

     (1)  Clarifying that a licensee under chapter 454F, Hawaii Revised Statutes, shall include the licensee's unique identifier on all residential mortgage loan applications submitted to an escrow depository;

     (2)  Clarifying that the reporting requirements of this measure apply to escrow depositories licensed pursuant to chapter 449, Hawaii Revised Statutes;

     (3)  Specifying that the grounds for revocation or suspension of a license issued pursuant to chapter 449, Hawaii Revised Statutes, include the knowing failure to verify a unique identifier included on a residential mortgage loan application or to report an invalid unique identifier;

     (4)  Specifying that the Commissioner of Financial Institutions' authority to enforce chapter 449, Hawaii Revised Statutes, includes the authority to issue orders and directives to cease doing business, cease specified activities, or any other affirmative action that the Commissioner of Financial Institutions deems necessary; and

     (5)  Inserting an effective date of July 1, 2050, to allow for further discussion.

     As affirmed by the record of votes of the members of your Committee on Commerce and Consumer Protection that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 646, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 646, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Commerce and Consumer Protection,

____________________________

ROSALYN H. BAKER, Chair