Senate OK's bill that would repeal registration fees

3/20/2014

By SCOTT AUST

By SCOTT AUST

saust@gctelegram.com

The state senate approved a bill Wednesday that would phase out mortgage registration fees, something county officials say will cost them millions of dollars, while supporters call the vote a matter of fairness to homebuyers.

The Senate voted 26-12 in favor of Senate Bill 298, which would phase out over five years the fees banks and other lenders pay to registers of deeds to record mortgages on residential or commercial property. According to the bill's supplemental note, the committee also increased other filing fees in an attempt to offset lost revenue to counties.

The Kansas Bankers Association and state realtors have been pushing for the change. Currently, lenders pay the fees to county governments based on the cost of a mortgage for a residential or commercial property.

"At the end of the day, it's a tax cut, and that's how we view it," Doug Wareham, vice president of the Kansas Bankers Association, told the Associated Press. "It is reducing the cost of borrowers that need a mortgage to buy a business, a home and land. And that's a tax cut."

State Sen. Larry Powell, who voted to eliminate the fees, called it a fairness issue. Sen. Garrett Love, R-Montezuma, also voted in favor of the bill.

Powell said banks can't compete with the Farm Service Agency or federal land bank for loans. Under federal law, farm credit service loans aren't taxed. Bankers have argued mortgage registration fees put them at an unfair disadvantage. It also discriminates against borrowers, he said.

"Some of those loans are huge," Powell said. "People have to pay the registration fees if they get a loan from a bank. People who don't have to get a loan to buy a house don't pay those fees. The people paying the fees are those who have to get a loan to buy a house, so I thought it was a fairness issue."

The bill phases out the mortgage registration tax over five years, while also phasing in over four years additional recording fees collected by county registers of deeds.

Mortgage registration fees have been around since the 1920s. Property purchased with a mortgage must be recorded by counties, and the fee is based on the amount of money borrowed in the mortgage.

According to the bill, the mortgage registration tax is currently 26 cents per $100 borrowed, with a penny of it going to the Heritage Trust Fund, a state program that provides matching funds for historical preservation projects.

The Senate bill would eliminate the portion going to the Heritage Trust Fund by Jan. 1, 2015, and reduce the amount going to counties incrementally each year before ending entirely by 2019.

Counties across the state stand to lose about $47 million a year in revenue from mortgage registration fees.

Missy Gerritzen, Kearny County register of deeds, said by 2019 the impact on her county will be about $25,000 per year. While it doesn't sound like a large amount, it's a big hit for a small county, representing 25 percent of annual fee collections by her office, she said.

"Overall, I think it's a really sad day for Kansans when legislators are willing to choose lobbyists and big business over their constituents because that's exactly what this bill does," she said.

Gerritzen is skeptical that the additional fees the committee included will be enough to offset the loss of mortgage registration fees. But she's also worried increasing the other recording fees could mean people won't record full documents.

If people only record one or two page memorandums of leases or assignments instead, the historical record will be lost, which is a detriment to public interest, she said.

Kearny County has full documentation and assignments on oil and gas leases going back to the 1920s, Gerritzen said, which are frequently reviewed by the public.

Over the years, oil and gas companies have merged, been bought out, gone out of business and whatever records those companies held themselves are likely lost.

"We're on the fourth and fifth generation of royalty owners, and they certainly don't have them. They come to our offices so they can get copies of what the full agreements were so they know what their rights are," Gerritzen said. "If those documents cease to be recorded in their entirety, a few generations from now they're going to pay the price."

The impact on larger counties could be greater. Last week, Finney County officials indicated $380,000 to $400,000 would be lost by eliminating mortgage fees.

Larry Jones, Finney County Commission chairman, hadn't heard about the senate action when contacted early Thursday afternoon, but he hoped the additions to the bill that increased other fees would lessen the hit to the county.

"We kind of knew this was coming. I can see the bankers' complaints about the people who use ... federal home loans that don't have to pay those fees. Too bad they couldn't figure a way to level the playing field without just doing away with them," he said. "I'm surprised Johnson County legislators didn't throw a shoe because that's millions of dollars to them. If it's over a five-year period, we can probably swallow it, but we'll have to wait and see."

Powell doesn't think Finney County's $380,000 number is accurate, primarily because of the changes to increase other fees charged by the register of deeds, which are designed to reduce the impact of the loss of mortgage fees.

According to Powell's figures, counties won't lose that much. He said in the first year, Finney County would lose $14,000, but Grant, Greeley, Haskell and Kearny counties would actually see more revenue, ranging anywhere from $1,000 to $6,000.

"The amendment on the bill stretches it out over five years to do away with it, but it also raises the fees paid to registers of deeds, and it gives the clerks a little money, and there was a floor amendment to give treasurers a little money," he said.

Powell said the committee also included an additional $1 fee to create new technology funds for county clerks and county treasurers that could be used to purchase improved technology for data storage. Money in the technology fund that exceeds $50,000 also could be used by county commissions to pay for improved technology needs in other county departments.

"Filing fees were meant to offset the tax that they were doing away with," he said.

Powell believes the impact won't be as severe as county officials think, and doubts it will cause counties to raise mill levies to compensate.

"Finney County loses $14,000 the first year. That's not very much," he said.

The Senate bill next goes to the House for debate. State Rep. John Doll isn't sure what the House will do, but he wouldn't be surprised if it passes. Doll said it won't come through any of the committees he's on.

"My crystal ball's a little cloudy," he said.

Doll is opposed to the bill, mostly because it might lead to a county property tax increase.

"If there's any way to keep property taxes from going up in the county is a good thing, so I'm disappointed with that," Doll said. "But I don't think it's going to be as harmful as people think it is because of how it's written."

Phasing it out over five years and the increases in other fees make the bill a little easier to swallow, Doll said.

"It's a bill that I'm probably against, but nonetheless, it isn't as harmful as it could be," he said.

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