FAIRBANKS -- A bill in the Legislature would require state-chartered banks to pay interest on escrow accounts, but bank officials say that would unfairly change Alaska's mortgage marketplace.
The bill's sponsor, Rep. Jay Ramras, R-Fairbanks, contends it would give millions of dollars back to Alaska homeowners.
House Bill 33 would require "covered institutions" to pay interest on reserve or escrow accounts created to pay property taxes, insurance and other payments related to mortgage loans.
Only four banks in the state would have to implement the conditions of the bill -- Mt. McKinley Bank and Denali State Bank, based in Fairbanks; Northrim Bank of Anchorage; and First Bank, based in Ketchikan.
The state cannot regulate the 12 credit unions or the five federally chartered banks with Alaska branches.
The bill was referred to the Labor and Commerce Committee last month and has not progressed. Ramras said he does not have much hope for the legislation.
"It's written. It's ready to go. But we've not yet tried to marshal support or ask for a hearing until we get some of the pressing legislation that is more significant for the constituents that I serve and has better chance of not being blocked by a powerful lobby like the banking lobby," Ramras said.
Ramras commissioned a survey from Yukon Title Co. Inc. that found $600 million was spent on residential loans originating in the Fairbanks Recording District. The survey indicated that 60 percent to 70 percent of those loans came from financial institutions that would be covered by the bill, which likely would cover loans from the Alaska Housing Finance Corp., a wide range of independent mortgage originators based in Alaska, and the four state-chartered banks.
Craig Ingham of Mt. McKinley Bank and Jo Heckman of Denali State Bank said the bill would pay little to borrowers each year but would create large administrative costs, forcing state-chartered banks to raise mortgage rates.
