REPORT TITLE:
Foreclosures, Housekeeping


DESCRIPTION:
Makes general amendments to the alternate power of sale
foreclosure process, including clarifying that public notices be
mailed and delivered rather than sent, and modifying the public
information requirement for lenders using the new process.
(HB1267 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1267
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1        
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO FORECLOSURES.
 


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

 1      SECTION 1.  The purpose of this Act is to make general
 
 2 amendments to the alternate power of sale foreclosure process in
 
 3 part II of chapter 667, Hawaii Revised Statutes.  The changes
 
 4 will streamline and simplify the foreclosure process, while
 
 5 maintaining the rights of defaulting mortgagors who are the
 
 6 subject of the foreclosure.  A foreclosure is generally the last
 
 7 option of a lender.  However, if there is to be a foreclosure by
 
 8 a lender, a streamlined and simplified process will benefit not
 
 9 only the lender, but also others who are affected when a mortgage
 
10 is in default.  For example, condominium associations and
 
11 community associations will benefit when there is not a lengthy,
 
12 drawn out foreclosure process.  If the defaulting mortgagor is
 
13 not paying the maintenance fee and other fees, all of the other
 
14 owners in the association end up subsidizing that default
 
15 throughout a lengthy foreclosure process.  That is not in the
 
16 best interest of those other owners.
 
17      SECTION 2.  Section 667-22, Hawaii Revised Statutes, is
 
18 amended by amending subsection (a) to read as follows:
 

 
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 1      "(a)  When the mortgagor or the borrower has breached the
 
 2 mortgage agreement, and when the foreclosing mortgagee intends to
 
 3 conduct a power of sale foreclosure under this part, the
 
 4 foreclosing mortgagee shall prepare a written notice of default
 
 5 addressed to the mortgagor[, the borrower, and any guarantor.]
 
 6 and all borrowers.  The notice of default shall state:
 
 7      (1)  The name and address of the current mortgagee;
 
 8      (2)  The name and last known address of the mortgagor[, the
 
 9           borrower, and any guarantor;] and all borrowers;
 
10      (3)  The address or a description of the location of the
 
11           mortgaged property, and the tax map key number of the
 
12           mortgaged property;
 
13      (4)  The description of the default, and if the default is a
 
14           monetary default, an itemization of the delinquent
 
15           amount shall be given;
 
16      (5)  The action that must be taken to cure the default,
 
17           including the amount to cure the default, together with
 
18           the estimated amount of the foreclosing mortgagee's
 
19           attorney's fees and costs, and all other fees and costs
 
20           estimated to be incurred by the foreclosing mortgagee
 
21           related to the default by the deadline date;
 

 
 
 
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 1      (6)  The date by which the default must be cured, which
 
 2           deadline date shall be at least sixty days after the
 
 3           date of the notice of default; 
 
 4      (7)  That if the default is not cured by the deadline date
 
 5           stated in the notice of default, the entire unpaid
 
 6           balance of the moneys owed to the mortgagee under the
 
 7           mortgage agreement will be due, that the mortgagee
 
 8           intends to conduct a power of sale foreclosure to sell
 
 9           the mortgaged property at a public sale without any
 
10           court action and without going to court, and that the
 
11           mortgagee or any other person may acquire the mortgaged
 
12           property at the public sale; and
 
13      (8)  The name, address in the State, and the telephone
 
14           number in the State of the person representing the
 
15           foreclosing mortgagee.
 
16 The foreclosing mortgagee shall include, with the first notice of
 
17 default, a copy of the public information material prepared
 
18 pursuant to section 667-41."
 
19      SECTION 3.  Section 667-31, Hawaii Revised Statutes, is
 
20 amended by amending subsection (a) to read as follows:
 
21      "(a)  After the purchaser completes the purchase by paying
 
22 the full purchase price and the costs for the purchase, the
 

 
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                                     H.B. NO.           H.D. 1        
                                                        
                                                        



 
 1 mortgaged property shall be conveyed to the purchaser by a
 
 2 conveyance document.  The conveyance document shall be in a
 
 3 recordable form and shall be signed by the foreclosing mortgagee
 
 4 in the foreclosing mortgagee's name[.  The mortgagor or borrower
 
 5 shall sign the conveyance document on his or her own behalf.] and
 
 6 as attorney-in-fact for the mortgagor.  The foreclosing mortgagee
 
 7 is appointed under this section as the attorney-in-fact for the
 
 8 mortgagor to sign the conveyance document."
 
 9      SECTION 4.  Section 667-32, Hawaii Revised Statutes, is
 
10 amended by amending subsection (b) to read as follows:
 
11      "(b)  The recitals in the affidavit required under
 
12 subsection (a) may, but need not, be substantially in the
 
13 following form:
 
14      "(1) I am duly authorized to represent or act on behalf of
 
15                                (name of mortgagee) ("foreclosing
 
16           mortgagee") regarding the following power of sale
 
17           foreclosure.  I am signing this affidavit in accordance
 
18           with the alternate power of sale foreclosure law
 
19           (Chapter 667, Part II, Hawaii Revised Statutes);
 
20      (2)  The foreclosing mortgagee is a "foreclosing mortgagee"
 
21           as defined in the power of sale foreclosure law;
 

 
 
 
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                                     H.B. NO.           H.D. 1        
                                                        
                                                        



 
 1      (3)  The power of sale foreclosure is of a mortgage made by
 
 2                                (name of mortgagor) ("mortgagor"),
 
 3           dated                      >       
 
 4           (bureau of conveyances or office of the assistant
 
 5           registrar of the land court) as                
 
 6           (recordation information).  The mortgaged property is
 
 7           located at:                       (address or
 
 8           description of location) and is identified by tax map
 
 9           key number:            .  The legal description of the
 
10           mortgaged property is attached as Exhibit "A".  The
 
11           name of the borrower, if different from the mortgagor,
 
12           is                      ("borrower");
 
13      (4)  Pursuant to the power of sale provision of the
 
14           mortgage, the power of sale foreclosure was conducted
 
15           as required by the power of sale foreclosure law.  The
 
16           following is a summary of what was done:
 
17           (A)  A notice of default was served on the mortgagor[,
 
18                the borrower, and the following person:
 
19                                    .] and all borrowers.  The
 
20                notice of default was served on the following date
 
21                and in the following manner:
 
22                                    ;
 

 
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 1           (B)  The date of the notice of default was           
 
 2                (date).  The deadline in the notice for curing the
 
 3                default was            (date), which deadline date
 
 4                was at least sixty days after the date of the
 
 5                notice;
 
 6           (C)  The notice of default was recorded before the
 
 7                deadline date in the                 (bureau of
 
 8                conveyances or office of the assistant registrar
 
 9                of the land court).  The notice was recorded on
 
10                                       .  A
 
11                copy of the recorded notice is attached as Exhibit
 
12                "1";
 
13           (D)  The default was not cured by the deadline date in
 
14                the notice of default;
 
15           (E)  A public notice of the public sale was initially
 
16                published in the classified section of the
 
17                                    , a daily newspaper of general
 
18                circulation in the county where the mortgaged
 
19                property is located, once each week for three
 
20                consecutive weeks on the following dates:
 
21                               .  A copy of the affidavit of
 
22                publication for the last public notice of the
 

 
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                                     H.B. NO.           H.D. 1        
                                                        
                                                        



 
 1                public sale is attached as Exhibit "2".  The date
 
 2                of the public sale was            (date).  The
 
 3                last publication was not less than fourteen days
 
 4                before the date of the public sale;
 
 5           (F)  The public notice of the public sale was [sent]
 
 6                mailed or delivered to the mortgagor, to the
 
 7                borrower, to the state director of taxation, to
 
 8                the director of finance of the county where the
 
 9                mortgaged property is located, and to the
 
10                following:                      .  The public
 
11                notice was sent on the following dates and in the
 
12                following manner:                      .  Those
 
13                dates were after the deadline date in the notice
 
14                of default, and those dates were at least sixty
 
15                days before the date of the public sale;
 
16           (G)  The public notice of the public sale was posted on
 
17                the mortgaged property or on such other real
 
18                property of which the mortgaged property is a part
 
19                on            (date).  That date was at least
 
20                sixty days before the date of the public sale;
 
21           (H)  Two public showings (open houses) of the mortgaged
 
22                property were held (or were not held because the
 
23                mortgagor did not cooperate);
 

 
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                                     H.B. NO.           H.D. 1        
                                                        
                                                        



 
 1           (I)  A public sale of the mortgaged property was held
 
 2                on a business day during business hours on:
 
 3                                      (time), at the
 
 4                following location:                      .  The
 
 5                highest successful bidder was                     
 
 6                (name) with the highest successful bid price of
 
 7                $          ; and
 
 8           (J)  At the time the public sale was held, the default
 
 9                was not cured and there was no circuit court
 
10                foreclosure action pending in the circuit where
 
11                the mortgaged property is located; and
 
12 [[](5)[]] This affidavit is signed under penalty of perjury.""
 
13      SECTION 5.  Section 667-41, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "[[]§667-41[]]  Public information requirement.  [All
 
16 financial institutions, mortgagees, lenders, business entities
 
17 and organizations without limitation, and persons, who intend to
 
18 use the power of sale foreclosure under this part, under the
 
19 conditions required by this part, shall also develop
 
20 informational materials to educate and inform borrowers and
 
21 mortgagors.  These materials shall be made available to the
 
22 public, including the borrowers at the time of application for a
 

 
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                                     H.B. NO.           H.D. 1        
                                                        
                                                        



 
 1 mortgage or loan, or other contract containing a power of sale
 
 2 foreclosure provision.  These materials, among other things,
 
 3 shall inform the borrower that the financial institution and
 
 4 other business entities and persons who are authorized under this
 
 5 part to exercise the power of sale foreclosure, in the event of
 
 6 the borrower's default, have the option of pursuing either a
 
 7 judicial or nonjudicial foreclosure as provided by law.  These
 
 8 informational materials shall fully and completely explain these
 
 9 remedies.]  A foreclosing mortgagee that intends to use the power
 
10 of sale foreclosure process under this part shall prepare public
 
11 information material.  The public information material shall
 
12 state that if there is a default under a mortgage agreement, the
 
13 foreclosing mortgagee has the option of pursuing either a
 
14 judicial foreclosure or a power of sale foreclosure as provided
 
15 by law and as provided in the mortgage agreement, and that the
 
16 foreclosing mortgagee has elected to proceed with a power of sale
 
17 foreclosure.  The public information material shall summarize the
 
18 power of sale foreclosure process under this part, including, but
 
19 not limited to:
 
20      (1)  The open house process;
 
21      (2)  The public sale process;
 
22      (3)  The deadlines to cure the defaults;
 

 
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                                     H.B. NO.           H.D. 1        
                                                        
                                                        



 
 1      (4)  The process and deadlines for appeal to the circuit
 
 2           court;
 
 3      (5)  The availability and deadlines for filing for judicial
 
 4           foreclosure;
 
 5      (6)  The presumptions that arise because of the sale;
 
 6      (7)  An explanation of the impact of the foreclosure on any
 
 7           deficiency owed to the foreclosed mortgagee; and
 
 8      (8)  An explanation of how the foreclosure affects other
 
 9           creditors having an interest in the property."
 
10      SECTION 6.  Section 667-42, Hawaii Revised Statutes, is
 
11 repealed:
 
12      ["[§667-42]  Application of this part.  The requirements of
 
13 this part shall apply only to new mortgages, loans, agreements,
 
14 and contracts containing power of sale foreclosure language
 
15 executed by the borrowers or mortgagors after July 1, 1999."]
 
16      SECTION 7.  Statutory material to be repealed is bracketed.
 
17 New statutory material is underscored.
 
18      SECTION 8.  This Act shall take effect upon its approval.