Consumers need to be assured that their funds (which can be rather large amounts) will not be jeopardized and will be available when needed during the course of a residential real estate transaction. From the seller's viewpoint, the execution of a deed and the deposit of that deed will bring forth proceeds upon recording of the deed. Under current Alaskan business practices, a buyer deposits a cashier's check prior to recording a property deed; however, this is not the case if a lender provides the purchase funds. In the case of a lender, the deed is recorded along with the lender's lien and the funds are deposited after the deed and other documents have been recorded.

This procedure exposes sellers and settlement agents to potential liability. The seller's interest in the property has been transferred but no funds have been received. This bill requires that before a settlement agent records documents transferring residential property (not commercial property) or creating a security interest in the property that the money required under the escrow agreement must be "Good Funds" available for distribution.

An increasing number of incidents have occurred demonstrating the need for Alaska to join the large number of states having "Good Funds" legislation, including Washington, California, and Oregon. In the age of growing electronic commerce, people are shopping the Internet for mortgages and there is an increase in competition from "outside" mortgage companies caused by low interest rates. Problems have arisen from failure of these "outside" companies to properly fund these transactions in a timely fashion, or, in the case of a bankruptcy, at all.

In drafting this bill, we have worked with various interested citizens, business groups, and financial institutions throughout Alaska.

I would urge your support of this legislation.