Bill Text: HI SB651 | 2011 | Regular Session | Amended

Hawaii Senate Bill 651 (Prior Session Legislation)

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: Mortgage Foreclosures; Appropriation

Spectrum: Partisan Bill (Democrat 13-0)

Status: (Passed) 2011-05-06 - (H) Act 048, on 5/5/2011 (Gov. Msg. No. 1150). [SB651 Detail]

Download: Hawaii-2011-SB651-Amended.html

THE SENATE	S.B. NO.	651
TWENTY-SIXTH LEGISLATURE, 2011		S.D. 2
STATE OF HAWAII		H.D. 1

A BILL FOR AN ACT

RELATING TO MORTGAGE FORECLOSURES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Chapter 454M, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§454M- Unlicensed foreclosure actions voided. Any action taken in connection with a mortgage foreclosure under chapter 667 by a person who engages in the business of mortgage servicing without a license as provided in this chapter shall be void for purposes of chapter 667."

SECTION 2. Chapter 667, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"Part . Mandatory mortgage FORECLOSURE dispute resolution

§667-A Definitions. As used in this part:

"Association" has the same meaning as in sections 421J-2 and 514B-3.

"Dispute resolution" means a facilitated negotiation between a mortgagor and mortgagee for the purpose of reaching an agreement for mortgage loan modification or other agreement in an attempt to avoid foreclosure or to mitigate damages if foreclosure is unavoidable.

"Neutral" means the person assigned to facilitate the dispute resolution process required by this part.

"Owner-occupant" has the same meaning as the term is defined in section 667-21.

§667-B Dispute resolution required before foreclosure. (a) Before a public sale may be conducted pursuant to section 667-25 for a residential property that is occupied by one or more mortgagors as a primary residence, the foreclosing mortgagee shall, at the election of the mortgagor, participate in dispute resolution pursuant to this part to attempt to reach a negotiated settlement agreement to avoid foreclosure or to mitigate damages if foreclosure is unavoidable.

(b) Dispute resolution required by this part shall be conducted through the center for alternative dispute resolution, as established by section 613-2, or its designee.

§667-C Notice of dispute resolution required. (a) Notice of default and intention to foreclose served pursuant to section 667-22(e) shall include notice that the foreclosing mortgagee is required, at the election of the mortgagor, to participate in dispute resolution pursuant to this part for the purpose of attempting to avoid foreclosure or to mitigate damages where foreclosure is unavoidable.

(b) The notice required by subsection (a) shall be printed in not less than fourteen-point font and include:

(1) The name and contact information of a person or entity with the authority to negotiate a loan modification on behalf of the mortgagee;

(2) Contact information for all the local housing counseling agencies approved by the United States Department of Housing and Urban Development;

(3) A form for the mortgagor to use to elect or to waive dispute resolution pursuant to this part that shall contain the mailing address of the center for alternative dispute resolution and instructions for the return of the form to the center for alternative dispute resolution;

(4) A description of the information that the mortgagor is required to provide to the mortgagee and the center for alternative dispute resolution;

(5) A statement that the mortgagor electing dispute resolution shall provide a certification under penalty of perjury that the mortgagor electing dispute resolution is an owner-occupant of the subject property, including supporting documentation;

(6) Contact information for an accredited consumer credit counseling agency in the State;

(7) A statement that the mortgagor shall elect dispute resolution pursuant to this part no later than thirty days after receipt of the notice or the right shall be waived; and

(8) A statement that the mortgagor shall consult with a housing counselor approved by the United States Department of Housing and Urban Development at least thirty days prior to the first day of a scheduled dispute resolution session.

§667-D Election of dispute resolution; stay of foreclosure proceedings. (a) No later than thirty days after receipt of notice of dispute resolution under section 667-C, a mortgagor shall notify the center for alternative dispute resolution and the mortgagee to indicate that the mortgagor elects to pursue dispute resolution pursuant to this part. This notice shall include the signed certification and supporting documentation that the mortgagor electing dispute resolution is an owner-occupant of the subject property pursuant to section 667-C(b)(5).

(b) Upon receipt of notice that a mortgagor has elected to pursue dispute resolution, the center for alternative dispute resolution shall process the notice, assign the matter to a neutral, and schedule the dispute resolution no later than seventy-five days after receipt of the mortgagor's election to pursue dispute resolution according to rules adopted by the supreme court. All foreclosure proceedings shall be stayed effective upon receipt by the center for alternative dispute resolution of the notice of election to pursue dispute resolution pending the outcome of the dispute resolution process.

(c) If a mortgagor elects to waive dispute resolution or fails to give notice within the time specified to the center for alternative dispute resolution of the mortgagor's election to pursue dispute resolution, the foreclosure process shall proceed as provided by law.

§667-E Dispute resolution process; requirements. (a) Parties to a dispute resolution process conducted pursuant to this part shall consist of the mortgagor or the mortgagor's representative and the mortgagee or the mortgagee's representative; provided that any representative of the mortgagee who participates in the dispute resolution shall be authorized to negotiate a loan modification on behalf of the mortgagee or shall have direct access by telephone or other immediately available communications medium at all times during the dispute resolution process to a person who is so authorized to approve a negotiated settlement agreement. All parties may be represented by counsel in the dispute resolution process; provided that the mortgagor may be represented by a housing counselor who is certified by the United States Department of Housing and Urban Development.

(b) Thirty days prior to participating in a scheduled dispute resolution session pursuant to this part, the mortgagor shall have consulted with a certified housing counselor with a local housing counseling agency approved by the United States Department of Housing and Urban Development.

(c) Prior to a dispute resolution session scheduled pursuant to this part, the mortgagor and the mortgagee shall provide the center for alternative dispute resolution and the other party with any information that the center for alternative dispute resolution may request. Information required by this subsection shall include financial and employment information to be provided by the mortgagor; and loan information to be provided by the mortgagee, including:

(1) Copies of the original mortgage agreement, and any subsequent mortgage agreements and assignments;

(2) A copy of the promissory note, signed by both the mortgagor and the mortgagee, including any endorsements and allonges on the note; and

(3) Copies of any other documents that amended or altered the terms of the original mortgage agreement that were signed by the mortgagor and the mortgagee or any successors or assigns of the mortgagor or the mortgagee.

(d) A dispute resolution session pursuant to this part shall take place at a site specified by the center for alternative dispute resolution and shall consist of one meeting of up to three hours in duration between the parties and the neutral during which the parties shall present the dispute and attempt to conclude the dispute resolution process. The neutral may extend the time allowed for the dispute resolution at the discretion of the neutral.

(e) If the mortgagee fails to attend the dispute resolution, fails to comply with the requirements of this part or the rules of the supreme court adopted pursuant to this part, or participates through a representative that does not meet the requirements of subsection (a), the neutral shall issue a report noting unjustifiable noncompliance with the program requirements. The mortgagor may file or record the report at the bureau of conveyances or the land court, as appropriate. Thereafter, neither the land court nor the bureau of conveyances shall record a notice of sale or other conveyance document for the subject property in connection with the related notice of default and intention to foreclose.

(f) If the mortgagor fails to attend the dispute resolution or fails to comply with the requirements of this part or the rules of the supreme court adopted pursuant to this part, the neutral shall issue a report noting unjustifiable noncompliance with the program requirements. The mortgagee may file or record the report at the bureau of conveyances or the land court, as appropriate. Thereafter, the foreclosure process shall resume along the timeline as it existed on the date before the mortgagor elected dispute resolution, and may proceed as otherwise provided by law. The mortgagee shall notify the mortgagor of the recording date and document number of this report and the new deadline date to cure default. The supreme court shall adopt rules for penalties against mortgagors for failure to comply with this part.

(g) If, despite the participation by both parties in the dispute resolution process and compliance with the requirements of this part and the rules of the supreme court adopted pursuant to this part, the parties are not able to come to an agreement, the neutral shall issue a report that the parties met the program requirements. The mortgagee may file or record the report at the bureau of conveyances or the land court, as appropriate. Upon recording of the report pursuant to this subsection, the foreclosure process shall resume along the timeline as it existed on the date before the mortgagor elected dispute resolution, and may proceed as otherwise provided by law. The mortgagee shall notify the mortgagor of the recording date and document number of this report and the new deadline date to cure default.

(h) If the parties to a dispute resolution come to an agreement to resolve the matters at issue in the dispute resolution before the dispute resolution scheduled pursuant to this section, the parties shall notify the neutral by the date of the scheduled dispute resolution session. The neutral shall thereafter issue a report that the parties have reached an agreement outside of dispute resolution. The parties may file or record the report at the bureau of conveyances or the land court, as appropriate. No fees shall be refunded if the parties come to an agreement prior to or outside of a dispute resolution conducted pursuant to this part.

(i) The dispute resolution process shall conclude within sixty days from the first scheduled meeting between the parties to the dispute resolution and the neutral; provided that the neutral shall have the authority to extend this period pursuant to the rules of the supreme court adopted under this part. Nothing in this part shall be construed to require the dispute resolution process to take the full sixty days allotted to reach a negotiated agreement.

§667-F Outcome of dispute resolution. (a) When the parties to dispute resolution have complied with the requirements of this part and the rules of the supreme court adopted pursuant to this part and have reached an agreement, the agreement shall be memorialized in a settlement agreement signed by the parties and the neutral. The parties shall file or record the settlement agreement with the land court or the bureau of conveyances, as appropriate. The settlement agreement shall be a contract between the parties and shall be enforceable in a private contract action in a court of appropriate jurisdiction in the event of breach by either party. If the resolution document allows for foreclosure or other transfer of the subject property, the land court or bureau of conveyances shall record a notice of sale or other conveyance document upon presentation by the mortgagee, as appropriate.

(b) The parties to a dispute resolution may enter into a temporary modification agreement as an outcome of a dispute resolution conducted pursuant to this part; provided that any temporary modification agreements shall include an expiration date, which shall be a date certain upon which the parties shall have complied with their respective obligations under the agreement. A temporary modification agreement shall be a private contract memorialized, filed, or recorded with the land court or the bureau of conveyances, as appropriate, and shall be enforceable according to subsection (a).

§667-G Confidentiality. Personal financial information and other sensitive personal information disclosed in the course of mandatory mortgage foreclosure dispute resolution pursuant to this part shall be confidential and shall not be subject to public disclosure.

§667-H Neutral qualifications. The supreme court shall adopt rules for qualifications and training of neutrals for mandatory mortgage foreclosure dispute resolution pursuant to this part; provided that neutrals shall possess sufficient knowledge in the areas of law, real estate, or finance and shall receive sufficient training to be able to effectuate the purposes of this part.

§667-I Fees. The center for alternative dispute resolution may charge a fee not to exceed $500 for dispute resolution services provided pursuant to this part. Any fee for dispute resolution services shall be divided equally between the mortgagee and the mortgagor. All fees collected pursuant to this section shall be deposited into the mortgage foreclosure dispute resolution special fund established by section 667-L. The supreme court shall adopt rules for the allocation of incidental costs, including but not limited to photocopying, faxing, and long distance telephone charges.

§667-J Applicability. This part shall apply to foreclosures conducted under part II by a power of sale of residential real property that is occupied by one or more mortgagors as a primary residence; provided that this part shall not apply to actions by an association to foreclose on a lien for amounts owed to the association that arise under a declaration filed pursuant to chapter 514A or 514B, or to a mortgagor who has previously participated in dispute resolution under this part for the same property on the same mortgage loan. §667-K Rules. In addition to the rules to be established pursuant to sections 667-D(b), 667-E(f), 667-H, 667-I, and 667-L, the supreme court may adopt rules for the administration of this part, including rules to:

(1) Ensure that dispute resolution occurs in an orderly and timely manner;

(2) Require each party to provide any information that the neutral deems necessary;

(3) Create, establish, or recommend any forms and informational materials to assist in the timely and accurate filing of the neutral reports with the bureau of conveyances or the land court, as appropriate;

(4) Require the use of any formula for determining whether any workable loan modification agreement may be reached between the parties;

(5) Protect the dispute resolution process from abuse and ensure that each party complies with this part and the rules adopted by the supreme court pursuant to this part;

(6) Establish qualifications and training requirements for neutrals;

(7) Protect from disclosure personal financial information and other sensitive personal information obtained in the course of foreclosure dispute resolution from disclosure;

(8) Establish a procedure for data collection and evaluation of the mandatory mortgage foreclosure dispute resolution program, the state's mortgage market, and the foreclosure process in general; and

(9) Establish a procedure for determining the interests of junior lienholders and whether they should be included as parties to the dispute resolution.

§667-L Mandatory mortgage foreclosure dispute resolution special fund. (a) There is established outside of the state treasury a special fund to be known as the mandatory mortgage foreclosure dispute resolution special fund to be administered by the supreme court to implement the mandatory dispute resolution in mortgage foreclosure proceedings required by this part. The fund shall consist of contributions from the sources identified in subsections (c) and (d). Interest earned from the balance of the fund shall become a part of the fund. The supreme court shall adopt rules regarding the distribution of moneys from the fund.

(b) The supreme court may allow expenditure of moneys from the fund directly by the center for alternative dispute resolution.

(c) All persons who bring an action in the circuit court for foreclosure pursuant to section 667-1, who record an affidavit in the land court pursuant to section 501-118, or who record a conveyance document in the bureau of conveyances for a property subject to a nonjudicial power of sale foreclosure shall pay an additional fee of $100 for deposit into the mortgage foreclosure dispute resolution special fund.

(d) Fees for mandatory mortgage foreclosure dispute resolution charged pursuant to section 667-I shall be deposited into the mandatory mortgage foreclosure dispute resolution special fund."

SECTION 3. Chapter 667, Hawaii Revised Statutes, is amended by adding three new sections to part II to be appropriately designated and to read as follows:

"§667-M Conversion; residential property; conditions. (a) An owner-occupant of a residential property that is being foreclosed nonjudicially under this part may convert the action to a judicial foreclosure under the following conditions:

(1) A complaint conforming to section 667-N shall be filed with the circuit court in the circuit where the residential property is located, stating that the owner-occupant of the property elects to convert the nonjudicial foreclosure to a judicial foreclosure proceeding;

(2) The complaint described in paragraph (1) shall be filed with the circuit court no later than thirty days after the notice of default and intention to foreclose is served on the owner-occupant as required by section 667-22;

(3) Within forty-five days of the filing of the complaint, all owner-occupants of an interest in the residential property whose interests are pledged or otherwise encumbered by the mortgage that is being foreclosed and all persons who have signed the promissory note or other instrument evidencing the debt secured by the mortgage that is being foreclosed, including without limitation co-obligors and guarantors, shall file a statement in the circuit court action that they agree to submit themselves to the judicial process and the jurisdiction of the circuit court. If this condition is not satisfied, the circuit court action may be dismissed with prejudice as to the right of any owner-occupant to convert the action to a judicial proceeding, and the mortgagee may proceed nonjudicially;

(4) The filing of the complaint shall automatically stay the nonjudicial foreclosure action unless and until the judicial proceeding has been dismissed;

(5) The person filing the complaint shall have an affirmative duty to promptly notify the Hawaii attorney who is handling the nonjudicial foreclosure about the filing of the conversion;

(6) All parties joined in the converted judicial proceeding may assert therein any claims and defenses that they could have asserted had the action originally been commenced as a judicial foreclosure action; and

(7) Notwithstanding chapter 607, the fee for filing the complaint shall be not more than $525; of which $250 shall be deposited into the mandatory mortgage foreclosure dispute resolution fund established under section 667-L.

(b) This section shall not apply to nonjudicial foreclosures of association liens that arise under a declaration filed pursuant to chapter 514A or 514B.

§667-N Complaint; residential property; required contents. The complaint authorized under section 667-M shall contain at a minimum the following:

(1) A caption setting forth the name of the court, the title of the action, and the file number. The title of the action shall include the names of the filing party as plaintiff and the foreclosing party as the defendant;

(2) The name, mailing address, and telephone number of the filing party;

(3) The address or tax map key number and the certificate of title or transfer certificate of title number if within the land court's jurisdiction, of the property subject to the foreclosure action;

(4) A statement identifying all other owner-occupants of the residential property whose interests are pledged or otherwise encumbered by the mortgage that is being foreclosed and all persons who have signed the promissory note or other instrument evidencing the debt secured by the mortgage that is being foreclosed, including without limitation co-obligors and guarantors;

(5) A certification under penalty of perjury that the filing party is an owner-occupant of the subject property and seeks to convert the nonjudicial foreclosure to a judicial proceeding;

(6) A statement certifying that the filing party served a copy of the complaint on the attorney identified in the notice of default and intention to foreclose either by personal delivery at, or by postage prepaid United States mail to, the address of the attorney as set forth in the notice of default and intention to foreclose; and

(7) A copy of the notice of default and intention to foreclose that was served on the filing party and for which the filing party is seeking to convert to a judicial proceeding.

§667-O Notice of default and intention to foreclose; residential property; required statement on conversion. (a) The notice of default and intention to foreclose that is served as required under section 667-22 shall include, in addition to the contents required under section 667-22, a statement printed in not less than fourteen-point font as follows:

"If the property being foreclosed is improved and used for residential purposes, an Owner-occupant of the property (defined under part Ii of chapter 667 of the Hawaii Revised Statutes, as a person who, at the time this notice is served, owns an interest in the residential property that is subject to the mortgage being foreclosed and the residential property has been the primary residence continuously for not less than one hundred eighty days) has the right to convert a nonjudicial foreclosure proceeding to a judicial foreclosure where claims and defenses may be considered by a court of law. To exercise this right, the owner-occupant shall complete and file the attached form with the circuit court in the circuit where the property is located within thirty days after service of this notice.

In addition, all owner-OCCUPANTs of the residential property whose interests have been pledged or otherwise encumbered by the mortgage that is being foreclosed and all persons who have signed the promissory note or other instrument evidencing the debt secured by the mortgage that is being foreclosed, including, without limitation, co-obligors and guarantors, shall file a statement in the circuit court action that they agree to submit themselves to the judicial process and the jurisdiction of the circuit court within FORTY-FIVE days of the filing of the attached form. Failure to satisfy this condition MAY result in dismissal of the circuit court action.

An owner-occupant shall promptly notify the Hawaii attorney listed in this notice about the filing of the conversion form.

a foreclosing lender who completes a nonjudicial foreclosure of residential property shall be prohibited under hawaii law from pursuing a deficiency judgment against an owner-occupant who does not own a fee simple or leasehold interest in any other real property, UNLESS THE DEBT IS SECURED BY OTHER COLLATERAL, OR AS OTHERWISE PROVIDED BY LAW. if this action is converted to a judicial proceeding, however, then all remedies available to a lender may be asserted, including the right to seek a deficiency judgment."

(b) The statement required by this section shall not be required to be included in the public notice of public sale published pursuant to section 667-27."

SECTION 4. Chapter 667, Hawaii Revised Statutes, is amended by adding four new sections to part II to be appropriately designated and to read as follows:

"§667-P Bar against deficiency judgments; owner-occupant of residential property. The mortgagee or other person who completes, pursuant to this part, the nonjudicial foreclosure of a mortgage or other lien on residential property shall not be entitled to pursue or obtain a deficiency judgment against an owner-occupant of the residential property who, at the time the notice of default and intention to foreclose is served, does not have a fee simple or leasehold ownership interest in any other real property unless the debt is secured by other collateral; provided, however, that nothing in this section shall prohibit any other mortgagee or person who holds a lien on the residential property subject to the nonjudicial foreclosure, whose lien is subordinate to the mortgage being foreclosed and is extinguished by the nonjudicial foreclosure sale, from pursuing a monetary judgment against that owner-occupant.

§667-Q Foreclosure notice. Notwithstanding any law or agreement to the contrary, any person who forecloses on a property under this part within a planned community, a condominium apartment or unit, or an apartment in a cooperative housing project shall notify, by way of registered or certified mail, the board of directors of the planned community association, the association of owners of the condominium project, or the cooperative housing project in which the property to be foreclosed is located, of the foreclosure at the time foreclosure proceedings are begun. The notice, at a minimum, shall identify the property, condominium apartment or unit, or cooperative apartment that is the subject of the foreclosure and identify the name or names of the person or persons bringing foreclosure proceedings. This section shall not apply when the planned community association, condominium association of owners, or cooperative housing corporation is a party in a foreclosure action. This section shall not affect civil proceedings against parties other than the planned community association, association of owners, or cooperative housing corporation.

§667-R Prohibited conduct. It shall be a prohibited practice for any foreclosing mortgagee to engage in any of the following practices:

(1) Holding a public sale on a date, at a time, or at a place other than that described in the public notice of the public sale or a properly noticed postponement;

(2) Specifying a fictitious place in the public notice of the public sale;

(3) Conducting a postponed public sale on a date other than the date described in the new public notice of the public sale;

(4) Delaying the conveyance of the conveyance document deed to a bona fide purchaser who purchases in good faith for more than forty-five days after the completion of the public sale;

(5) Completing nonjudicial foreclosure proceedings during "short sale" escrows for bid prices that are less than a purchaser's offer to purchase;

(6) Completing nonjudicial foreclosure proceedings during bona fide loan modification negotiations with the mortgagor; or

(7) Completing nonjudicial foreclosure proceedings against a mortgagor who has been accepted or is being evaluated for consideration into a federal loan modification program before obtaining a certificate or other documentation confirming that the mortgagor is no longer eligible or an active participant of that federal program.

§667-S Unfair or deceptive act or practice. Any foreclosing mortgagee who violates this part shall be guilty of an unfair or deceptive act or practice under section 480-2."

SECTION 5. Chapter 667, Hawaii Revised Statutes, is amended by adding three new sections to part III to be appropriately designated and to read as follows:

"§667-T Invalid notice. (a) Any notices made pursuant to this chapter may be issued only by persons authorized by a foreclosing mortgagee or lender pursuant to an affiliate statement signed by that foreclosing mortgagee or lender and recorded at the bureau of conveyances identifying the agency or affiliate relationship and the authority granted or conferred to that agent or representative.

(b) The bureau of conveyances document number for the affiliate statement required under subsection (a) shall be included in any notice required to be personally served upon the mortgagor or borrower under this chapter.

(c) Any notice provided by a mortgage servicer, including an agent, employee, or representative of that mortgage servicer, shall be issued only by a mortgage servicer that has been listed in the affiliate statement filed by the foreclosing mortgagee or lender under subsection (a); provided further that the mortgage servicer shall be licensed under or otherwise exempt from chapter 454M. The agency relationship or affiliation of the mortgage servicer and the foreclosing mortgagee or lender and any authority granted or conferred to that mortgage servicer shall be described in the affiliate statement filed under both subsection (a) and section 454M-5(a)(4)(F).

§667-U Actions and communications with the mortgagor in connection with a foreclosure. Once a foreclosure has been initiated under either part I or part II, a foreclosing mortgagee shall be estopped from denying liability for any action or communication respecting the subject property that is received by the mortgagor from a mortgage servicer, a lender, the foreclosing mortgagee, or the foreclosing mortgagee's affiliate as named in the affiliate statement filed with the bureau of conveyances pursuant to section 667-T. This section shall also apply to any actions and communications made by the agents, employees, or representatives of the lender, foreclosing mortgagee, mortgage servicer, or foreclosing mortgagee's affiliate.

§667-V Suspension of foreclosure actions by junior lienholders. Upon initiation of a foreclosure action in part I or part II by a foreclosing mortgagee as defined in section 667-21(b), no junior lienholder shall be permitted to initiate or continue with a foreclosure until the foreclosure initiated by the foreclosing mortgagee has been concluded by either a judgment issued by a court pursuant to section 667-1, the recording of an affidavit after public sale pursuant to section 667-33, or the filing of a settlement agreement under the mandatory mortgage foreclosure dispute resolution provisions of section 667-F; provided that a junior lienholder shall be permitted to initiate or continue with a foreclosure if the resolution document allows for foreclosure."

SECTION 6. Section 454M-2, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) [A] No person [is] shall be engaged in the business of mortgage servicing [~~if the person provides those services~~] in this State [~~even if~~] unless the person providing services has [no] a physical presence in the State[.] pursuant to section 454M-5(a)(5)."

SECTION 7. Section 454M-4, Hawaii Revised Statutes, is amended to read as follows:

"[[]§454M-4[]] License; fees; renewals[.]; voluntary surrender of license. (a) An applicant for licensure shall file an application on a form prescribed by the commissioner and shall pay an application fee of $500. Each license shall expire on June 30 of each calendar year. A license may be renewed by filing a renewal statement on a form prescribed by the commissioner and paying a renewal fee of $250, on or before July 1 for licensure for the following year.

(b) The applicant shall submit any other information that the commissioner may require, including:

(1) The applicant's form and place of organization;

(2) The applicant's tax identification number; and

(3) The applicant's proposed method of doing business.

The applicant shall disclose whether the applicant or any of its officers, directors, employees, managers, agents, partners, or members [~~has~~] have ever been issued or been the subject of an injunction or administrative order pertaining to any aspect of the lending business, [~~has~~] have ever been convicted of a misdemeanor involving the lending industry or any aspect of the lending business, or [~~has~~] have ever been convicted of any felony.

(c) A mortgage servicer licensed under this chapter may voluntarily cease business and surrender its license by giving written notice to the commissioner of its intent to surrender its mortgage servicer license. Written notice required by this subsection shall be given to the commissioner not fewer than thirty days before the surrender of the license and shall include:

(1) The date of surrender;

(2) The name, address, telephone number, facsimile number, and electronic address of a contact individual with the knowledge and authority required to communicate with the commissioner regarding all matters relating to the licensee during the period that it was licensed pursuant to this chapter;

(3) A statement of the reason or reasons for surrender;

(4) The original license issued to the mortgage servicer pursuant to this chapter; and

(5) If applicable, a copy of all notices to affected borrowers required by the Real Estate Settlement Procedures Act, Title 12 United States Code Section 2601 et seq., or by regulations adopted pursuant to the Real Estate Settlement Procedures Act, of the assignment, sale, or transfer of the servicing of all relevant loans that the licensee is currently servicing under the license being surrendered.

Voluntary surrender of a license shall be effective upon the date of surrender provided on the written notice to the commissioner required by this subsection; provided that if a mortgage servicer is required to assign, sell, or transfer the servicing of any loans, the voluntary surrender of the mortgage servicer's license shall be effective upon the effective date of the assignment, sale, or transfer of the servicing of all loans."

SECTION 8. Section 454M-5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) A mortgage servicer licensed or acting under this chapter, in addition to duties imposed by law, shall:

(1) Safeguard and account for any money handled for the borrower;

(2) Act with reasonable skill, care, timeliness, promptness, and diligence;

(3) Disclose to the commissioner in the application and yearly renewal a complete, current schedule of the ranges of costs and fees it charges borrowers for its servicing-related activities; [~~and~~]

(4) File with [~~the commissioner upon request~~] its yearly renewal statement a report in a form and format acceptable to the director detailing the servicer's activities in this State, including:

(A) The number of mortgage loans the servicer is servicing;

(B) The type and characteristics of such loans in this State;

(D) Information on loss mitigation activities, including details on workout arrangements undertaken;

(E) Information on foreclosures commenced in this State; [~~and~~]

(F) The affiliations of the mortgage servicer, including any lenders or mortgagees for which the mortgage servicer is providing service, any subsidiary or parent entities, and a description of the authority held by the mortgage servicer through its affiliations; and

[~~(F)~~] (G) Any other information that the commissioner may require[.]; and

(5) Maintain an office in the State that is staffed by at least one agent or employee for the purposes of addressing consumer inquiries or complaints and accepting service of process; provided that the mortgage servicer has actively serviced at least mortgage loans in the State within the previous calendar year; provided that nothing in this section shall prohibit a mortgagee as defined by section 667-21 or a mortgage servicer from contracting with a licensee that maintains an office in this State in conformity with this section for the purposes of addressing consumer inquiries or complaints and accepting service of process."

SECTION 9. Section 454M-10, Hawaii Revised Statutes, is amended to read as follows:

"[[]§454M-10[]] Penalty. Any person who violates any provision of this chapter may be subject to an administrative fine of at least $1,000 and not more than [~~$5,000~~] $7,000 for each violation[.]; provided that $1,000 of the fine shall be deposited into the mandatory mortgage foreclosure dispute resolution fund under section 667-L."

SECTION 10. Section 514A-90, Hawaii Revised Statutes, is amended by amending subsection (h) to read as follows:

"(h) The amount of the special assessment assessed under subsection (g) shall not exceed the total amount of unpaid regular monthly common assessments that were assessed during the [~~six~~] twelve months immediately preceding the completion of the judicial or nonjudicial power of sale foreclosure. In no event shall the amount of the special assessment exceed the sum of [~~$3,600.~~] $10,000."

SECTION 11. Section 514B-146, Hawaii Revised Statutes, is amended by amending subsection (h) to read as follows:

SECTION 12. Section 613-2, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) There is established within the judiciary the center for alternative dispute resolution. The center shall facilitate the effective, timely, and voluntary resolution of disputes. Through these resolutions, it shall help reduce public and private costs of litigation and increase satisfaction with the justice system. The center shall accomplish its purposes by:

(1) Providing, where feasible and agreed to by the parties, the consultative resources and technical assistance needed to achieve voluntary resolutions for cases that affect the public interest or the work of state and county agencies. These cases shall include but not be limited to:

(A) Public disputes involving actual or threatened court actions over the allocation or management of public resources or the siting of public facilities;

(B) Complex litigation cases in which a court or a regulatory or administrative agency has determined that the dispute involves multiple parties or formidable technical, procedural, or factual issues, or both;

(C) Policy roundtables in which the center, at the request of an executive, legislative, or judicial decisionmaker, convenes and chairs advisory discussions on matters pertaining to standards or rules; [~~and~~]

(D) Foreclosures subject to part of chapter 667; and

[~~(D)~~] (E) Other cases directly referred by judges, legislators, agency heads, or appointed government officials;

(2) Promoting in a systematic manner the appropriate use of alternative dispute resolution; and

(3) Disseminating to government agencies and to the community at large up-to-date information on the methods and applications of alternative dispute resolution."

SECTION 13. Chapter 667, Hawaii Revised Statutes, is amended by amending the title of part I to read as follows:

"PART I. FORECLOSURE BY ACTION [OR

~~FORECLOSURE BY POWER OF SALE~~]"

SECTION 14. Section 667-5.5, Hawaii Revised Statutes, is amended to read as follows:

"§667-5.5 Foreclosure notice. Notwithstanding any law or agreement to the contrary, any person who forecloses on a property under this part within a planned community, a condominium apartment or unit, or an apartment in a cooperative housing project shall notify, by way of registered or certified mail, the board of directors of the planned community association, the association of owners of the condominium project, or the cooperative housing project in which the property to be foreclosed is located, of the foreclosure at the time foreclosure proceedings are begun. The notice, at a minimum, shall identify the property, condominium apartment or unit, or cooperative apartment [~~which~~] that is the subject of the foreclosure and identify the name or names of the person or persons bringing foreclosure proceedings. This section shall not apply when the planned community association, condominium association of owners, or cooperative housing corporation is a party in a foreclosure action. This section shall not affect civil proceedings against parties other than the planned community association, association of owners, or cooperative housing corporation."

SECTION 15. Section 667-10, Hawaii Revised Statutes, is amended to read as follows:

"§667-10 Power unaffected by transfer; surplus after sale. No sale or transfer by the mortgagor shall impair or annul any right or power of attorney given in the mortgage to the mortgagee to sell or transfer the mortgaged property, as attorney or agent of the mortgagor, except as otherwise provided by chapters 501 and 502. When public sale is made of the mortgaged property under this [~~chapter,~~] part, the remainder of the proceeds, if any, shall be paid over to the owner of the mortgaged property, after deducting the amount of claim and all expenses attending the same."

SECTION 16. Chapter 667, Hawaii Revised Statutes, is amended by amending the title of part II to read as follows:

"[[]PART II.[~~] ALTERNATE~~] POWER OF SALE FORECLOSURE PROCESS"

SECTION 17. Section 667-21, Hawaii Revised Statutes, is amended to read as follows:

"[[]§667-21[~~] Alternate power~~] Power of sale foreclosure process; definitions. (a) The process in this part is [~~an alternative power of sale process to the foreclosure by action and the foreclosure by power of sale in part I.~~] a power of sale foreclosure process.

(b) As used in this part:

"Association" has the same meaning as the term is defined in section 514B-3.

"Borrower" means the borrower, maker, cosigner, or guarantor under a mortgage agreement.

"Foreclosing mortgagee" means the mortgagee that intends to conduct a power of sale foreclosure; provided that the mortgagee is a federally insured bank, a federally insured savings and loan association, a federally insured savings bank, a depository financial services loan company, a nondepository financial services loan company, a credit union insured by the National Credit Union Administration, a bank holding company, a foreign lender as defined in section 207-11, or an institutional investor as defined in section 454-1.

Unless the context clearly indicates otherwise, as used in this part, a "foreclosing mortgagee" shall encompass all of the following entities:

(1) The foreclosing mortgagee;

(2) Any person that has an ownership interest in the promissory note on the mortgage agreement or a security interest represented by the mortgage for the subject property;

(3) Any mortgage servicer, who services the mortgage loan of the mortgagor; and

(4) The agents, employees, trustees, and representatives of a lender, the foreclosing mortgagee, a mortgagee, and a mortgage servicer.

"Mailed" means to be sent by regular mail, postage prepaid, and by certified, registered, or express mail, postage prepaid and return receipt requested.

"Mortgage" means a mortgage, security agreement, or other document under which property is mortgaged, encumbered, pledged, or otherwise rendered subject to a lien for the purpose of securing the payment of money or the performance of an obligation.

"Mortgage agreement" includes the mortgage, the note or debt document, or any document amending any of the foregoing.

"Mortgaged property" means the property that is subject to the lien of the mortgage.

"Mortgagee" means the current holder of record of the mortgagee's or the lender's interest under the mortgage, or the current mortgagee's or lender's duly authorized agent.

"Mortgagor" means the mortgagor or borrower named in the mortgage and, unless the context otherwise indicates, includes the current owner of record of the mortgaged property whose interest is subject to the mortgage.

"Nonjudicial foreclosure" means foreclosure under the power of sale foreclosure process under part II.

"Open house" means a public showing of the mortgaged property during a scheduled time period.

"Owner-occupant" means a person who, at the time that a notice of default and intention to foreclose is served on the mortgagor under the power of sale:

(1) Owns an interest in the residential property, and the interest is encumbered by the mortgage being foreclosed; and

(2) The residential property is and has been the person's primary residence for a continuous period of not less than one hundred eighty days immediately preceding the date on which the notice is served.

"Power of sale" or "power of sale foreclosure" means a nonjudicial foreclosure under this part when the mortgage contains, authorizes, permits, or provides for a power of sale, a power of sale foreclosure, a power of sale remedy, or a nonjudicial foreclosure.

"Property" means property (real, personal, or mixed), an interest in property (including fee simple, leasehold, life estate, reversionary interest, and any other estate under applicable law), or other interests that can be subject to the lien of a mortgage.

"Record" or "recorded" means a document is recorded or filed with the office of the assistant registrar of the land court under chapter 501 or recorded with the registrar of conveyances under chapter 502, or both, as applicable.

"Residential property" means real property that is improved and used for residential purposes.

"Served" means to have service of the notice of default and intention to foreclose made in accordance with the service of process or the service of summons under the Hawaii rules of civil procedure, and under sections 634-35 and 634-36."

SECTION 18. Section 667-22, Hawaii Revised Statutes, is amended to read as follows:

"§667-22 Notice of default[;] and intention to foreclose; contents; distribution. (a) When the mortgagor or the borrower has breached the mortgage agreement, and when the foreclosing mortgagee intends to conduct a power of sale foreclosure under this part, the foreclosing mortgagee shall prepare a written notice of default and intention to foreclose addressed to the mortgagor, the borrower, and any guarantor. The notice of default and intention to foreclose shall state:

(1) The name and address of the current mortgagee;

(2) The name and last known address of the mortgagor, the borrower, and any guarantor;

(3) The address or a description of the location of the mortgaged property, [~~and~~] the tax map key number, and the certificate of title or transfer certificate of title number if within the jurisdiction of the land court, of the mortgaged property;

(4) The description of the default, and if the default is a monetary default, an itemization of the delinquent amount shall be given;

(5) The action that must be taken to cure the default, including the amount to cure the default, together with the estimated amount of the foreclosing mortgagee's attorney's fees and costs, and all other fees and costs estimated to be incurred by the foreclosing mortgagee related to the default by the deadline date;

(6) The date by which the default must be cured, which deadline date shall be at least [~~sixty~~] ninety days after the date of the notice of default[;] and intention to foreclose;

(7) That if the default is not cured by the deadline date stated in the notice of default[,] and intention to foreclose, the entire unpaid balance of the moneys owed to the mortgagee under the mortgage agreement will be due, that the mortgagee intends to conduct a power of sale foreclosure to sell the mortgaged property at a public sale without any court action and without going to court, and that the mortgagee or any other person may acquire the mortgaged property at the public sale; [~~and~~]

(8) The name, address, [~~including~~] electronic address, and telephone number of the attorney who is representing the foreclosing mortgagee; provided that the attorney shall be licensed to practice law in the State and physically located in the State[.]; and

(9) Notice of the right of the mortgagor to elect to participate in a dispute resolution process as required by part .

(b) The notice of default and intention to foreclose shall also contain wording substantially similar to the following in all capital letters[:] and printed in not less than fourteen-point font:

"IF THE DEFAULT ON THE LOAN CONTINUES AFTER THE DEADLINE DATE IN THIS NOTICE, THE MORTGAGED PROPERTY MAY BE FORECLOSED AND SOLD WITHOUT ANY COURT ACTION AND WITHOUT GOING TO COURT.

YOU MAY HAVE CERTAIN LEGAL RIGHTS OR DEFENSES. FOR ADVICE, YOU SHOULD CONSULT WITH AN ATTORNEY LICENSED IN THIS STATE.

AFTER THE DEADLINE DATE IN THIS NOTICE, TWO PUBLIC SHOWINGS (OPEN HOUSES) OF THE PROPERTY BY THE LENDER WILL BE HELD, BUT ONLY IF ALL MORTGAGORS (OWNERS) OF THE PROPERTY WHO ALSO CURRENTLY RESIDE AT THE PROPERTY SO AGREE. TO SHOW THAT ALL OWNERS RESIDING AT THE PROPERTY AGREE TO ALLOW TWO OPEN HOUSES BY THE LENDER, [~~ALL OWNERS~~] THEY MUST SIGN A LETTER SHOWING THEY AGREE. [~~ALL OWNERS MUST SEND~~] THE SIGNED LETTER MUST BE SENT TO THIS OFFICE AT THE ADDRESS GIVEN IN THIS NOTICE.

THIS OFFICE MUST ACTUALLY RECEIVE THE SIGNED LETTER BY THE DEADLINE DATE IN THIS NOTICE. THE SIGNED LETTER MUST BE SENT TO THIS OFFICE BY CERTIFIED MAIL, REGISTERED MAIL, OR EXPRESS MAIL, POSTAGE PREPAID AND RETURN RECEIPT REQUESTED.

IF THE SIGNED LETTER IS NOT RECEIVED BY THIS OFFICE BY THE DEADLINE DATE, THE PROPERTY WILL THEN BE SOLD WITHOUT ANY OPEN HOUSES BEING HELD.

EVEN IF THIS OFFICE RECEIVES THE SIGNED LETTER TO ALLOW THE LENDER TO HOLD TWO OPEN HOUSES OF THE PROPERTY, IF ALL OWNERS LATER DO NOT COOPERATE TO ALLOW THE OPEN HOUSES, THE PROPERTY WILL BE SOLD WITHOUT ANY OPEN HOUSES BEING HELD.

ALL FUTURE NOTICES AND CORRESPONDENCE WILL BE MAILED TO YOU AT THE ADDRESS AT WHICH YOU RECEIVED THIS NOTICE UNLESS YOU SEND WRITTEN INSTRUCTIONS TO THIS OFFICE INFORMING THIS OFFICE OF A DIFFERENT ADDRESS. THE WRITTEN INSTRUCTIONS MUST BE SENT TO THIS OFFICE BY CERTIFIED MAIL, REGISTERED MAIL, OR EXPRESS MAIL, POSTAGE PREPAID AND RETURN RECEIPT REQUESTED."

(1) A copy of the original mortgage agreement, and copies of any subsequent mortgage agreements and assignments;

(2) A copy of the promissory note, signed by both the mortgagor and the mortgagee, including any endorsements and allonges on the note; and

(3) A copy of any other documents that amended or altered the terms of the original mortgage agreement that were signed by the mortgagor and the mortgagee or any successors or assigns of the mortgagor or the mortgagee.

(d) The notice of default and intention to foreclose shall also include contact information for local housing counseling agencies approved by the United States Department of Housing and Urban Development.

[~~(c)~~] (e) The foreclosing mortgagee shall have the notice of default and intention to foreclose served on:

(1) The mortgagor and the borrower[;] in the same manner as service of a civil complaint under chapter 634 or the Hawaii rules of civil procedure, as they may be amended from time to time;

(2) Any prior or junior creditors having a recorded lien on the mortgaged property before the recordation of the notice of default and intention to foreclose under section 667-23;

(3) The state director of taxation;

(4) The director of finance of the county where the mortgaged property is located; and

(5) Any other person entitled to receive notice under [~~section 667-5.5.~~] this part."

SECTION 19. Section 667-23, Hawaii Revised Statutes, is amended to read as follows:

"[[]§667-23[]] Recordation of notice of default[.] and intention to foreclose. Before the deadline date in the notice of default[,] and intention to foreclose, the notice [~~of default~~] shall be recorded in a recordable form [~~shall be recorded~~] in a manner similar to recordation of notices of pendency of action under section 501-151 or section 634-51, or both, as applicable. The recorded notice of default and intention to foreclose shall have the same effect as a notice of pendency of action. From and after the recordation of the notice of default[,] and intention to foreclose, any person who becomes a purchaser or encumbrancer of the mortgaged property shall be deemed to have constructive notice of the power of sale foreclosure and shall be bound by the foreclosure."

SECTION 20. Section 667-24, Hawaii Revised Statutes, is amended to read as follows:

"[[]§667-24[]] Cure of default. (a) If the default is cured as required by the notice of default[,] and intention to foreclose, or if the parties have reached a settlement agreement, the foreclosing mortgagee shall rescind the notice of default[.] and intention to foreclose. Within fourteen days of the date of the cure[,] or a settlement agreement reached by the parties, the foreclosing mortgagee shall so notify any person who was served with the notice of default[.] and intention to foreclose. If the notice of default and intention to foreclose was recorded, a release of the notice of default and intention to foreclose shall be recorded.

(b) If the default is not cured, as required by the notice of default[,] and intention to foreclose or if the parties have not reached a settlement agreement pursuant to part , the foreclosing mortgagee, without filing a court action and without going to court, may foreclose the mortgage under power of sale to sell the mortgaged property at a public sale."

SECTION 21. Section 667-25, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The public sale of the mortgaged property shall be held only in the county where the mortgaged property is located[~~. However, if the borrower, the mortgagor, and the foreclosing mortgagee all agree in writing, the public sale may be held in a different county in the State.~~]; provided that the public sale shall be held only on grounds or at facilities under the administration of the State, as follows:

(1) At the state capitol, for a public sale of mortgaged property located in the city and county of Honolulu;

(2) At a state facility in Hilo, for a public sale of mortgaged property located in the eastern portion of the county of Hawaii;

(3) At a state facility in Kona, for a public sale of mortgaged property located in the western portion of the county of Hawaii;

(4) At a state facility in the county seat of Maui, for a public sale of mortgaged property located in the county of Maui; and

(5) At a state facility in the county seat of Kauai, for a public sale of mortgaged property located in the county of Kauai;

as designated by the department of accounting and general services; provided further that no public sale shall be held on grounds or at facilities under the administration of the judiciary. The public sale shall be held during business hours on a business day."

SECTION 22. Section 667-26, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) If the default is not cured as stated in the notice of default[,] and intention to foreclose, the foreclosing mortgagee shall conduct two open houses of the mortgaged property before the public sale; provided that the foreclosing mortgagee timely received the signed letter of agreement from the mortgagor as required by the notice of default[.] and intention to foreclose. Only two open houses shall be required even if the date of the public sale is postponed."

SECTION 23. Section 667-27, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) The foreclosing mortgagee shall prepare the public notice of the public sale. The public notice shall state:

(1) The date, time, and place of the public sale;

(2) The dates and times of the two open houses of the mortgaged property, or if there will not [to] be any open houses, the public notice shall so state;

(3) The unpaid balance of the moneys owed to the mortgagee under the mortgage agreement;

(4) A description of the mortgaged property, including the address [~~or description of the location of the mortgaged property,~~] and the tax map key number of the mortgaged property;

(5) The name of the mortgagor and the borrower;

(6) The name of the foreclosing mortgagee;

(7) The name of any prior or junior creditors having a recorded lien on the mortgaged property before the recordation of the notice of default and intention to foreclose under section 667-23;

(8) The name, the address in the State, and the telephone number in the State of the person in the State conducting the public sale; [~~and~~]

(9) The terms and conditions of the public sale[.]; and

(10) An estimate of the opening bid."

2. By amending subsections (c) and (d) to read:

"(c) If the default is not cured as required by the notice of default[,] and intention to foreclose, the foreclosing mortgagee shall have a copy of the public notice of the public sale of the mortgaged property:

(1) Mailed or delivered to the mortgagor and the borrower at their respective last known addresses;

(2) Mailed or delivered to any prior or junior creditors having a recorded lien on the mortgaged property before the recordation of the notice of default and intention to foreclose under section 667-23;

(3) Mailed or delivered to the state director of taxation;

(4) Mailed or delivered to the director of finance of the county where the mortgaged property is located;

(5) Posted on the mortgaged property or on such other real property of which the mortgaged property is a part; and

(6) Mailed or delivered to any other person entitled to receive notice under section [~~667-5.5.~~] 667-Q.

(d) The foreclosing mortgagee shall have the public notice of the public sale printed in not less than 7-point font and published in the classified section of a daily newspaper [of] having the largest general circulation expressly in the county where the mortgaged property is located[.]; provided that for property located in a county with a population of more than 100,000 but less than 200,000, the public notice shall be published in the newspaper having the largest general circulation expressly in the western or eastern half of the county, as the case may be, in which the property is located. The public notice shall be published once each week for three consecutive weeks (three publications). The public sale shall take place no sooner than fourteen days after the date of the publication of the third public notice advertisement."

SECTION 24. Section 667-28, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

"(a) The public sale may be either postponed or canceled by the foreclosing mortgagee. Notice of the postponement or the cancellation of the public sale shall be[:

~~(1)~~ ~~Announced~~] announced by the foreclosing mortgagee at the date, time, and place of the last scheduled public sale[~~; and~~

~~(2)~~ ~~Provided, upon request, to any other person who is entitled to receive the notice of default under section 667-22(c)~~].

(b) If there is a postponement of the public sale of the mortgaged property, a new public notice of the public sale shall be published once in the format described in section 667-27. The new public notice shall state that it is a notice of a postponed sale. The public sale shall take place no sooner than fourteen days after the date of the publication of the new public notice. [~~No sooner~~] Not less than fourteen days before the date of the public sale, a copy of the new public notice shall be posted on the mortgaged property or on such other real property of which the mortgaged property is a part, and it shall be mailed or delivered to the mortgagor, to the borrower, and to any other person entitled to receive notice under section [~~667-27.~~] 667-22(e). Notwithstanding the foregoing, upon the fourth postponement of every series of four consecutive postponements, the foreclosing mortgagee shall follow all of the public notice of public sale requirements of section 667-27, including the requirements of mailing and posting under section 667-27(c) and of publication under section 667-27(d)."

SECTION 25. Section 667-29, Hawaii Revised Statutes, is amended to read as follows:

"[[]§667-29[]] Authorized bidder; successful bidder. Any person, including the foreclosing mortgagee, shall be authorized to bid for the mortgaged property at the public sale and to purchase the mortgaged property. The highest bidder who meets the requirements of the terms and conditions of the public sale shall be the successful bidder. The public sale shall be considered as being held when the mortgaged property is declared by the foreclosing mortgagee as being sold to the successful bidder. When the public sale is held, the successful bidder at the public sale, as the purchaser, shall make a nonrefundable downpayment to the foreclosing mortgagee of not less than ten per cent of the highest successful bid price. If the successful bidder is the foreclosing mortgagee or any other mortgagee having a recorded lien on the mortgaged property before the recordation of the notice of default and intention to foreclose under section 667-23, the downpayment requirement may be satisfied by offset and a credit bid up to the amount of the mortgage debt."

SECTION 26. Section 667-31, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) After the purchaser completes the purchase by paying the full purchase price and the costs for the purchase, the mortgaged property shall be conveyed to the purchaser by a conveyance document. The conveyance document shall be in a recordable form and shall be signed by the foreclosing mortgagee in the foreclosing mortgagee's name. The mortgagor or borrower shall not be required to sign the conveyance document [~~on his or her own behalf~~]."

SECTION 27. Section 667-32, Hawaii Revised Statutes, is amended to read as follows:

"[[]§667-32[]] Affidavit after public sale; contents. (a) After the public sale is held, the foreclosing mortgagee shall sign an affidavit under penalty of perjury:

(1) Stating that the power of sale foreclosure was made pursuant to the power of sale provision in the mortgage;

(2) Stating that the power of sale foreclosure was conducted as required by this part;

(3) Summarizing what was done by the foreclosing mortgagee;

(4) Attaching a copy of the recorded notice of default[;] and intention to foreclose;

(5) Attaching a copy of the last public notice of the public sale[.];

(6) Referencing the document number of the affiliate statement filed at the bureau of conveyances as required under section 667-T; and

(7) Stating the date of filing and any relevant referencing information assigned by the division of financial institutions to the statement filed with the commissioner of financial institutions of the mortgage servicer affiliation statement as required under section 454M-5(a)(4)(F).

(b) The recitals in the affidavit required under subsection (a) may, but need not, be substantially in the following form:

"(1) I am duly authorized to represent or act on behalf of (name of mortgagee) ("foreclosing mortgagee") regarding the following power of sale foreclosure. I am signing this affidavit in accordance with the alternate power of sale foreclosure law (Chapter 667, Part II, Hawaii Revised Statutes);

(2) The foreclosing mortgagee is a "foreclosing mortgagee" as defined in the power of sale foreclosure law;

(3) The power of sale foreclosure is of a mortgage made by (name of mortgagor) ("mortgagor"), dated , and recorded in the (bureau of conveyances or office of the assistant registrar of the land court) as (recordation information). The mortgaged property is located at: (address or description of location) and is identified by tax map key number: . The legal description of the mortgaged property is attached as Exhibit "A". The name of the borrower, if different from the mortgagor, is ("borrower");

(4) Pursuant to the power of sale provision of the mortgage, the power of sale foreclosure was conducted as required by the power of sale foreclosure law. The following is a summary of what was done:

(A) A notice of default and intention to foreclose was served on the mortgagor, the borrower, and the following person: . The notice of default and intention to foreclose was served on the following date and in the following manner: ;

(B) The date of the notice of default and intention to foreclose was (date). The deadline in the notice for curing the default was (date), which deadline date was at least sixty days after the date of the notice;

(C) The notice of default and intention to foreclose was recorded before the deadline date in the (bureau of conveyances or office of the assistant registrar of the land court). The notice was recorded on (date) as document no. . A copy of the recorded notice is attached as Exhibit "1";

(D) The default was not cured by the deadline date in the notice of default[;] and intention to foreclose;

(E) A public notice of the public sale was initially published in the classified section of the , a daily newspaper of general circulation in the county where the mortgaged property is located, once each week for three consecutive weeks on the following dates: . A copy of the affidavit of publication for the last public notice of the public sale is attached as Exhibit "2". The date of the public sale was (date). The last publication was not less than fourteen days before the date of the public sale;

(F) The public notice of the public sale was sent to the mortgagor, to the borrower, to the state director of taxation, to the director of finance of the county where the mortgaged property is located, and to the following: . The public notice was sent on the following dates and in the following manner: . Those dates were after the deadline date in the notice of default[,] and intention to foreclose, and those dates were at least sixty days before the date of the public sale;

(G) The public notice of the public sale was posted on the mortgaged property or on such other real property of which the mortgaged property is a part on (date). That date was at least sixty days before the date of the public sale;

(H) Two public showings (open houses) of the mortgaged property were held (or were not held because the mortgagor did not cooperate);

(I) A public sale of the mortgaged property was held on a business day during business hours on: (date), at (time), at the following location: . The highest successful bidder was (name) with the highest successful bid price of $ ; and

(J) At the time the public sale was held, the default was not cured and there was no circuit court foreclosure action pending in the circuit where the mortgaged property is located; and

(5) This affidavit is signed under penalty of perjury.""

SECTION 28. Section 667-39, Hawaii Revised Statutes, is amended to read as follows:

"[[]§667-39[]] Right to enforce this part. (a) The foreclosing mortgagee, any other creditor having a recorded lien on the mortgaged property before the recordation of the notice of default and intention to foreclose under section 667-23, the borrower, and the mortgagor, may enforce this part by bringing an action in the circuit court of the circuit where the mortgaged property is located.

(b) The remedies provided in this part are cumulative and shall not abridge the right of a party to bring action under any other law, including but not limited to sections 454M-9 and 480-2."

SECTION 29. Section 667-41, Hawaii Revised Statutes, is amended to read as follows:

"[[]§667-41[]] Public information requirement. [~~All~~] Beginning on September 1, 2011, all financial institutions, mortgagees, lenders, business entities and organizations without limitation, and persons, who intend to use the power of sale foreclosure under this part, under the conditions required by this part, shall also develop informational materials to educate and inform borrowers and mortgagors. These materials shall be made available to the public[,] and provided to the mortgagors of all mortgage agreements entered into, including the borrowers at the time of application for a mortgage or loan, or other contract containing a power of sale foreclosure provision. These materials, among other things, shall inform the borrower that the financial institution and other business entities and persons who are authorized under this part to exercise the power of sale foreclosure, in the event of the borrower's default, have the option of pursuing either a judicial or nonjudicial foreclosure as provided by law. These informational materials shall fully and completely explain these remedies[.] in simple and understandable terms."

SECTION 30. Section 667-5, Hawaii Revised Statutes, is repealed.

["~~§667-5 Foreclosure under power of sale; notice; affidavit after sale.~~ (a) When a power of sale is contained in a mortgage, and where the mortgagee, the mortgagee's successor in interest, or any person authorized by the power to act in the premises, desires to foreclose under power of sale upon breach of a condition of the mortgage, the mortgagee, successor, or person shall be represented by an attorney who is licensed to practice law in the State and is physically located in the State. The attorney shall:

~~(1)~~ Give notice of the mortgagee's, successor's, or person's intention to foreclose the mortgage and of the sale of the mortgaged property, by publication of the notice once in each of three successive weeks (three publications), the last publication to be not less than fourteen days before the day of sale, in a newspaper having a general circulation in the county in which the mortgaged property lies; and

~~(2)~~ ~~Give any notices and do all acts as are authorized or required by the power contained in the mortgage.~~

~~(b) Copies of the notice required under subsection (a) shall be:~~

~~(1)~~ ~~Filed with the state director of taxation; and~~

~~(2)~~ ~~Posted on the premises not less than twenty-one days before the day of sale.~~

(c) Upon the request of any person entitled to notice pursuant to this section and sections 667-5.5 and 667-6, the attorney, the mortgagee, successor, or person represented by the attorney shall disclose to the requestor the following information:

~~(1)~~ The amount to cure the default, together with the estimated amount of the foreclosing mortgagee's attorneys' fees and costs, and all other fees and costs estimated to be incurred by the foreclosing mortgagee related to the default prior to the auction within five business days of the request; and

~~(2)~~ ~~The sale price of the mortgaged property once auctioned.~~

(d) Any sale, of which notice has been given as aforesaid, may be postponed from time to time by public announcement made by the mortgagee or by some person acting on the mortgagee's behalf. Upon request made by any person who is entitled to notice pursuant to section 667-5.5 or 667-6, or this section, the mortgagee or person acting on the mortgagee's behalf shall provide the date and time of a postponed auction, or if the auction is canceled, information that the auction was canceled. The mortgagee within thirty days after selling the property in pursuance of the power, shall file a copy of the notice of sale and the mortgagee's affidavit, setting forth the mortgagee's acts in the premises fully and particularly, in the bureau of conveyances.

~~(e) The affidavit and copy of the notice shall be recorded and indexed by the registrar, in the manner provided in chapter 501 or 502, as the case may be.~~

~~(f) This section is inapplicable if the mortgagee is foreclosing as to personal property only.~~"]

SECTION 31. Section 667-5.7, Hawaii Revised Statutes, is repealed.

["~~[§667-5.7] Public sale.~~ At any public sale pursuant to section 667-5, the successful bidder at the public sale, as the purchaser, shall not be required to make a downpayment to the foreclosing mortgagee of more than ten per cent of the highest successful bid price."]

SECTION 32. Section 667-6, Hawaii Revised Statutes, is repealed.

["~~§667-6 Notice to mortgage creditors.~~ Whenever a mortgage creditor having a mortgage lien on certain premises desires notice that another mortgage creditor having a mortgage lien on the same premises intends to foreclose the mortgage and sell the mortgaged property pursuant to a power of sale under section 667-5, the mortgage creditor may submit a written request to the mortgagee foreclosing or who may foreclose the mortgage by power of sale, to receive notice of the mortgagee's intention to foreclose the mortgage under power of sale. This request for notice may be submitted any time after the recordation or filing of the subject mortgage at the bureau of conveyances or the land court, but must be submitted prior to the completion of the publication of the mortgagee's notice of intention to foreclose the mortgage and of the sale of the mortgaged property. This request shall be signed by the mortgage creditor, or its authorized representative, desiring to receive notice, specifying the name and address of the person to whom the notice is to be mailed. The mortgagee receiving the request shall thereafter give notice to all mortgage creditors who have timely submitted their request. The notice shall be sent by mail or otherwise communicated to the mortgage creditors, not less than seven calendar days prior to the date of sale.

No request for copy of any notice pursuant to this section nor any statement or allegation in any such request nor any record thereof shall affect the title to real property or be deemed notice to any person that any party requesting copy of the notice has or claims any right, title, or interest in, or lien or charge upon the property described in the mortgage referred to therein."]

SECTION 33. Section 667-7, Hawaii Revised Statutes, is repealed.

["~~§667-7 Notice, contents; affidavit.~~ ~~(a) The notice of intention of foreclosure shall contain:~~

~~(1)~~ ~~A description of the mortgaged property; and~~

~~(2)~~ ~~A statement of the time and place proposed for the sale thereof at any time after the expiration of four weeks from the date when first advertised.~~

~~(b) The affidavit described under section 667-5 may lawfully be made by any person duly authorized to act for the mortgagee, and in such capacity conducting the foreclosure.~~"]

SECTION 34. Section 667-8, Hawaii Revised Statutes, is repealed.

["~~§667-8 Affidavit as evidence, when.~~ If it appears by the affidavit that the affiant has in all respects complied with the requirements of the power of sale and the statute, in relation to all things to be done by the affiant before selling the property, and has sold the same in the manner required by the power, the affidavit, or a duly certified copy of the record thereof, shall be admitted as evidence that the power of sale was duly executed."]

SECTION 35. Section 667-9, Hawaii Revised Statutes, is repealed.

["~~§667-9 Dower barred, when.~~ If the mortgage was executed by a man having at the time no lawful wife, or if the mortgagor being married, his wife joined in the deed in token of her release of dower, the sale of the property in the mode aforesaid shall be effectual to bar all claim and possibility of dower in the property."]

SECTION 36. Section 667-34, Hawaii Revised Statutes, is repealed.

["~~[§667-34] Foreclosure sale; conclusive presumptions.~~ Unless an appeal is taken as set forth in section 667-35, any foreclosure sale held in accordance with this part shall be conclusively presumed to have been conducted in a legal, fair, and reasonable manner. The sale price shall be conclusively presumed to be reasonable and equal to the fair market value of the property based on the circumstances and on the economic conditions at the time of the sale. The statements in the recorded affidavit shall be conclusive evidence as to the facts stated therein for any purpose, in any court and in any proceeding, and in favor of bona fide purchasers and encumbrancers for value without notice. The purchaser of the mortgaged property shall be conclusively presumed to be a bona fide purchaser. Encumbrancers for value include liens placed by lenders who provide the purchaser with purchase money in exchange for a mortgage or other security interest in the newly-conveyed property."]

SECTION 37. Section 667-35, Hawaii Revised Statutes, is repealed.

["~~[§667-35] Appeal to circuit court.~~ The borrower, the mortgagor, and any creditor having a recorded lien on the mortgaged property before the recordation of the notice of default under section 667-23, shall have the right to file an appeal in the circuit court where the mortgaged property is located to contest the presumptions set forth in section 667-34, and the statements contained in the affidavit required by section 667-32. No appeal shall be filed later than thirty days after the recordation of the affidavit. Failure to timely appeal shall result in the statements in the affidavit and the presumptions set forth in section 667-34 becoming conclusive in accordance with the terms of that section."]

SECTION 38. Section 667-37, Hawaii Revised Statutes, is repealed.

["~~[§667-37] Judicial action of foreclosure before public sale.~~ This part shall not prohibit the borrower, the foreclosing mortgagee, or any other creditor having a recorded lien on the mortgaged property before the recordation of the notice of default under section 667-23, from filing an action for the judicial foreclosure of the mortgaged property in the circuit court of the circuit where the mortgaged property is located; provided that the action is filed before the public sale is held. While that circuit court foreclosure action is pending, the power of sale foreclosure process shall be stayed."]

SECTION 39. Section 667-38, Hawaii Revised Statutes, is repealed.

["~~[§667-38] Recordation; full satisfaction of debt by borrower.~~ The recordation of both the conveyance document and the affidavit shall operate as full satisfaction of the debt owed by the borrower to the foreclosing mortgagee even if the foreclosing mortgagee receives nothing from the sale proceeds, unless the debt is secured by other collateral, or except as otherwise provided by law. The debts of other lien creditors are unaffected except as provided in this part."]

SECTION 40. Section 667-42, Hawaii Revised Statutes, is repealed.

["~~[§667-42]~~ Application of this part. The requirements of this part shall apply only to new mortgages, loans, agreements, and contracts containing power of sale foreclosure language executed by the borrowers or mortgagors after July 1, 1999."]

SECTION 41. Upon the effective date of this Act, the judiciary is requested to consider creating and adopting a form for the conversion complaint established under section 3 of this Act.

SECTION 42. On the effective date of this Act, there shall be a forty-five day phase-in period ending on August 14, 2050, in which any owner-occupant, as defined under section 667-21(b), Hawaii Revised Statutes, who is undergoing a nonjudicial foreclosure for which the mortgagee's affidavit has not yet been filed pursuant to sections 667-5 or 667-32, Hawaii Revised Statutes, may elect to convert to a judicial foreclosure under section 3 of this Act. An owner-occupant who elects to convert a nonjudicial foreclosure to a judicial foreclosure during the phase-in period:

(1) Shall submit with the complaint as required under section 667-N, Hawaii Revised Statutes, copies of any notices of default received from the mortgagee and published notices of the public sale made pursuant to section 667-5, Hawaii Revised Statutes, in lieu of the notice of default and intention to foreclose as provided by section 667-22, Hawaii Revised Statutes; and

(2) Shall not be subject to the deadline described in section 667-M(a)(2), Hawaii Revised Statutes;

provided further that the requirements of section 667-O, Hawaii Revised Statutes, shall not be applicable to the foreclosing mortgagee.

SECTION 43. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2011-2012 to be deposited into the mortgage foreclosure dispute resolution special fund established pursuant to section 667-L, Hawaii Revised Statutes, and used to pay for the initial costs associated with establishing a dispute resolution program at the center for alternative dispute resolution for use by mortgagors and mortgagees to avoid or mitigate the damages of foreclosure.

The sum appropriated shall be expended by the judiciary for the purposes of this Act; provided that upon receipt of sufficient moneys to accomplish its purpose, the mortgage foreclosure dispute resolution special fund shall reimburse the general fund for the appropriation made pursuant to this Act.

SECTION 44. In codifying the new sections added by sections 2, 3, 4, and 5 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 45. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 46. This Act shall take effect on July 1, 2050; provided that:

(1) Section 2 shall take effect upon the earlier of January 1, 2051 or the date that the chief justice of the supreme court issues a written declaration that the judiciary is implementing section 2 of this Act;

(2) Sections 2, 10, and 11 shall be repealed on July 1, 2053, and sections 514A-90 and 514B-146, Hawaii Revised Statutes, shall be reenacted in the form in which they read on June 30, 2053; and

(3) Section 3 shall be repealed on December 31, 2051.

Report Title:

Mortgage Foreclosures

Description:

Repeals the old nonjudicial foreclosure process. Clarifies the new nonjudicial foreclosure process. Strengthens laws regarding mortgage servicers. Broadens the duties of the Center for Alternative Dispute Resolution. Effective July 1, 2050. (SB651 HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

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Bill Text: HI SB651 | 2011 | Regular Session | Amended

Hawaii Senate Bill 651 (Prior Session Legislation)

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