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; modifying the public
information requirement for lenders using the new process;
streamlining the power of sale foreclosure process; and repealing
current non-judicial foreclosure law as of 01/01/01.
(SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1267
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1        
TWENTIETH LEGISLATURE, 1999                                S.D. 1        
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;
 
22      (6)  The date by which the default must be cured, which
 
23           deadline date shall be at least [sixty] thirty days
 
24           after the date of the notice of default; 
 

 
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 1      (7)  That if the default is not cured by the deadline date
 
 2           stated in the notice of default, the entire unpaid
 
 3           balance of the moneys owed to the mortgagee under the
 
 4           mortgage agreement will be due, that the mortgagee
 
 5           intends to conduct a power of sale foreclosure to sell
 
 6           the mortgaged property at a public sale without any
 
 7           court action and without going to court, and that the
 
 8           mortgagee or any other person may acquire the mortgaged
 
 9           property at the public sale; and
 
10      (8)  The name, address in the State, and the telephone
 
11           number in the State of the person representing the
 
12           foreclosing mortgagee.
 
13 The foreclosing mortgagee shall include, with the first notice of
 
14 default, a copy of the public information material prepared
 
15 pursuant to section 667-41.  Prior to January 1, 2001, if the
 
16 public information material has not yet been prepared by the
 
17 mortgagee pursuant to section 667-41, the mortgagee may include
 
18 with the first notice of default a copy of part II, chapter 667
 
19 in lieu of the public information."
 
20      SECTION 3.  Section 667-25, Hawaii Revised Statutes, is
 
21 amended by amending subsection (a) to read as follows:
 

 
 
 
 
 
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 1      [[]§667-25[]]  Date, place of public sale of mortgaged
 
 2 property.  (a)  The public sale of the mortgaged property shall
 
 3 take place on the later of the following:
 
 4      (1)  At least [sixty] forty-five days after the public
 
 5           notice of the public sale is distributed under section
 
 6           667-27; or
 
 7      (2)  At least fourteen days after the date of the
 
 8           publication of the third public notice advertisement
 
 9           under section 667-27.
 
10      SECTION 4.  Section 667-31, Hawaii Revised Statutes, is
 
11 amended by amending subsection (a) to read as follows:
 
12      [[]§667-31[]]  Conveyance of property on payment of purchase
 
13 price; distribution of sale proceeds.(a)  After the purchaser
 
14 completes the purchase by paying the full purchase price and the
 
15 costs for the purchase, the mortgaged property shall be conveyed
 
16 to the purchaser by a conveyance document.  The conveyance
 
17 document shall be in a recordable form and shall be signed by the
 
18 foreclosing mortgagee in the foreclosing mortgagee's name[.  The
 
19 mortgagor or borrower shall sign the conveyance document on his
 
20 or her own behalf.] and as attorney-in-fact for the mortgagor.
 
21 The foreclosing mortgagee is appointed under this section as the
 
22 attorney-in-fact for the mortgagor to sign the conveyance
 
23 document."
 
24      SECTION 5.  Section 667-32, Hawaii Revised Statutes, is
 
25 amended by amending subsection (b) to read as follows:
 

 
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 1      "(b)  The recitals in the affidavit required under
 
 2 subsection (a) may, but need not, be substantially in the
 
 3 following form:
 
 4      "(1) I am duly authorized to represent or act on behalf of
 
 5                                (name of mortgagee) ("foreclosing
 
 6           mortgagee") regarding the following power of sale
 
 7           foreclosure.  I am signing this affidavit in accordance
 
 8           with the alternate power of sale foreclosure law
 
 9           (Chapter 667, Part II, Hawaii Revised Statutes);
 
10      (2)  The foreclosing mortgagee is a "foreclosing mortgagee"
 
11           as defined in the power of sale foreclosure law;
 
12      (3)  The power of sale foreclosure is of a mortgage made by
 
13                                (name of mortgagor) ("mortgagor"),
 
14           dated                      >       
 
15           (bureau of conveyances or office of the assistant
 
16           registrar of the land court) as                
 
17           (recordation information).  The mortgaged property is
 
18           located at:                       (address or
 
19           description of location) and is identified by tax map
 
20           key number:            .  The legal description of the
 
21           mortgaged property is attached as Exhibit "A".  The
 
22           name of the borrower, if different from the mortgagor,
 
23           is                      ("borrower");
 

 
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 1      (4)  Pursuant to the power of sale provision of the
 
 2           mortgage, the power of sale foreclosure was conducted
 
 3           as required by the power of sale foreclosure law.  The
 
 4           following is a summary of what was done:
 
 5           (A)  A notice of default was served on the mortgagor,
 
 6                [the borrower,] all borrowers, and the following
 
 7                person:                      .  The notice of
 
 8                default was served on the following date and in
 
 9                the following manner:                      ;
 
10           (B)  The date of the notice of default was           
 
11                (date).  The deadline in the notice for curing the
 
12                default was            (date), which deadline date
 
13                was at least [sixty] thirty days after the date of
 
14                the notice;
 
15           (C)  The notice of default was recorded before the
 
16                deadline date in the                 (bureau of
 
17                conveyances or office of the assistant registrar
 
18                of the land court).  The notice was recorded on
 
19                                       .  A
 
20                copy of the recorded notice is attached as Exhibit
 
21                "1";
 

 
 
 
 
 
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 1           (D)  The default was not cured by the deadline date in
 
 2                the notice of default;
 
 3           (E)  A public notice of the public sale was initially
 
 4                published in the classified section of the
 
 5                                    , a daily newspaper of general
 
 6                circulation in the county where the mortgaged
 
 7                property is located, once each week for three
 
 8                consecutive weeks on the following dates:
 
 9                               .  A copy of the affidavit of
 
10                publication for the last public notice of the
 
11                public sale is attached as Exhibit "2".  The date
 
12                of the public sale was            (date).  The
 
13                last publication was not less than fourteen days
 
14                before the date of the public sale;
 
15           (F)  The public notice of the public sale was [sent]
 
16                mailed or delivered to the mortgagor, to the
 
17                borrower, to the state director of taxation, to
 
18                the director of finance of the county where the
 
19                mortgaged property is located, and to the
 
20                following:                      .  The public
 
21                notice was sent on the following dates and in the
 
22                following manner:                      .  Those
 

 
 
 
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 1                dates were after the deadline date in the notice
 
 2                of default, and those dates were at least [sixty]
 
 3                forty-five days before the date of the public
 
 4                sale;
 
 5           (G)  The public notice of the public sale was posted on
 
 6                the mortgaged property or on such other real
 
 7                property of which the mortgaged property is a part
 
 8                on            (date).  That date was at least
 
 9                [sixty] forty-five days before the date of the
 
10                public sale;
 
11           (H)  Two public showings (open houses) of the mortgaged
 
12                property were held (or were not held because the
 
13                mortgagor did not cooperate);
 
14           (I)  A public sale of the mortgaged property was held
 
15                on a business day during business hours on:
 
16                                      (time), at the
 
17                following location:                      .  The
 
18                highest successful bidder was                     
 
19                (name) with the highest successful bid price of
 
20                $          ; and
 
21           (J)  At the time the public sale was held, the default
 
22                was not cured and there was no circuit court
 

 
 
 
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 1                foreclosure action pending in the circuit where
 
 2                the mortgaged property is located; and
 
 3 [[](5)[]] This affidavit is signed under penalty of perjury.""
 
 4      SECTION 6.  Section 667-41, Hawaii Revised Statutes, is
 
 5 amended to read as follows:
 
 6      "[[]§667-41[]]  Public information requirement.  [All
 
 7 financial institutions, mortgagees, lenders, business entities
 
 8 and organizations without limitation, and persons, who intend to
 
 9 use the power of sale foreclosure under this part, under the
 
10 conditions required by this part, shall also develop
 
11 informational materials to educate and inform borrowers and
 
12 mortgagors.  These materials shall be made available to the
 
13 public, including the borrowers at the time of application for a
 
14 mortgage or loan, or other contract containing a power of sale
 
15 foreclosure provision.  These materials, among other things,
 
16 shall inform the borrower that the financial institution and
 
17 other business entities and persons who are authorized under this
 
18 part to exercise the power of sale foreclosure, in the event of
 
19 the borrower's default, have the option of pursuing either a
 
20 judicial or nonjudicial foreclosure as provided by law.  These
 
21 informational materials shall fully and completely explain these
 
22 remedies.]  A foreclosing mortgagee that intends to use the power
 
23 of sale foreclosure process under this part shall prepare public
 

 
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 1 information material.  The public information material shall
 
 2 state that if there is a default under a mortgage agreement, the
 
 3 foreclosing mortgagee has the option of pursuing either a
 
 4 judicial foreclosure or a power of sale foreclosure as provided
 
 5 by law and as provided in the mortgage agreement, and that the
 
 6 foreclosing mortgagee has elected to proceed with a power of sale
 
 7 foreclosure.  The public information material shall summarize the
 
 8 power of sale foreclosure process under this part, and shall
 
 9 include:
 
10      (1)  The open house process;
 
11      (2)  The public sale process;
 
12      (3)  The deadlines to cure the defaults;
 
13      (4)  The process and deadlines for appeal to the circuit
 
14           court;
 
15      (5)  The availability and deadlines for filing for judicial
 
16           foreclosure;
 
17      (6)  The presumptions that arise because of the sale;
 
18      (7)  An explanation of the impact of the foreclosure on any
 
19           deficiency owed to the foreclosed mortgagee; and
 
20      (8)  An explanation of how the foreclosure affects other
 
21           creditors having an interest in the property.
 
22 The public information material shall be prepared by January 1,
 
23 2001."
 

 
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 1      SECTION 7.  Section 667-5, Hawaii Revised Statutes, is
 
 2 repealed:
 
 3      ["§667-5 Foreclosure under power of sale; notice; affidavit
 
 4 after sale.  When a power of sale is contained in a mortgage, the
 
 5 mortgagee, or the mortgagee's successor in interest, or any
 
 6 person authorized by the power to act in the premises, may, upon
 
 7 a breach of the condition, give notice of the mortgagee's,
 
 8 successor's, or person's intention to foreclose the mortgage and
 
 9 of the sale of the mortgaged property, by publication of the
 
10 notice once in each of three successive weeks (three
 
11 publications), the last publication to be not less than fourteen
 
12 days before the day of sale, in a newspaper having a general
 
13 circulation in the county in which the mortgaged property lies;
 
14 and also give such notices and do all such acts as are authorized
 
15 or required by the power contained in the mortgage.  Copies of
 
16 the notice shall be filed with the state director of taxation and
 
17 shall be posted on the premises not less than twenty-one days
 
18 before the day of sale.
 
19      Any sale, of which notice has been given as aforesaid, may
 
20 be postponed from time to time by public announcement made by the
 
21 mortgagee or by some person acting on the mortgagee's behalf.
 
22 The mortgagee shall, within thirty days after selling the
 
23 property in pursuance of the power, file a copy of the notice of
 

 
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 1 sale and the mortgagee's affidavit, setting forth the mortgagee's
 
 2 acts in the premises fully and particularly, in the bureau of
 
 3 conveyances.
 
 4      The affidavit and copy of the notice shall be recorded and
 
 5 indexed by the registrar, in the manner provided in chapter 501
 
 6 or 502, as the case may be.
 
 7      This section is inapplicable if the mortgagee is foreclosing
 
 8 as to personal property only."]
 
 9      SECTION 8.  Sections 667-6, 667-7, 667-8, Hawaii Revised
 
10 Statutes, are repealed:
 
11      ["§667-6 Notice to mortgage creditors.  Whenever a mortgage
 
12 creditor having a mortgage lien on certain premises desires
 
13 notice that another mortgage creditor having a mortgage lien on
 
14 the same premises intends to foreclose the mortgage and sell the
 
15 mortgaged property pursuant to a power of sale under section
 
16 667-5, the mortgage creditor may submit a written request to the
 
17 mortgagee foreclosing or who may foreclose the mortgage by power
 
18 of sale, to receive notice of the mortgagee's intention to
 
19 foreclose the mortgage under power of sale.  This request for
 
20 notice may be submitted any time after the recordation or filing
 
21 of the subject mortgage at the bureau of conveyances or the land
 
22 court, but must be submitted prior to the completion of the
 
23 publication of the mortgagee's notice of intention to foreclose
 

 
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 1 the mortgage and of the sale of the mortgaged property.  This
 
 2 request shall be signed by the mortgage creditor, or its
 
 3 authorized representative, desiring to receive notice, specifying
 
 4 the name and address of the person to whom the notice is to be
 
 5 mailed.  The mortgagee receiving the request shall thereafter
 
 6 give notice to all mortgage creditors who have timely submitted
 
 7 their request.  The notice shall be sent by mail or otherwise
 
 8 communicated to the mortgage creditors, not less than seven
 
 9 calendar days prior to the date of sale.
 
10      No request for copy of any notice pursuant to this section
 
11 nor any statement or allegation in any such request nor any
 
12 record thereof shall affect the title to real property or be
 
13 deemed notice to any person that any party requesting copy of the
 
14 notice has or claims any right, title, or interest in, or lien or
 
15 charge upon the property described in the mortgage referred to
 
16 therein.
 
17      §667-7 Notice, construction, contents; affidavit.  The true
 
18 intent and meaning of section 667-5 is that the notice of
 
19 intention of foreclosure may also contain a description of the
 
20 mortgaged property and a statement of the time and place proposed
 
21 for the sale thereof at any time after the expiration of four
 
22 weeks from the date when first advertised; and also that the
 
23 affidavit contemplated by section 667-5 may lawfully be made by
 

 
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 1 any person duly authorized to act for the mortgagee, and in such
 
 2 capacity conducting the foreclosure.
 
 3      §667-8 Affidavit as evidence, when.  If it appears by the
 
 4 affidavit that the affiant has in all respects complied with the
 
 5 requirements of the power of sale and the statute, in relation to
 
 6 all things to be done by the affiant before selling the property,
 
 7 and has sold the same in the manner required by the power, the
 
 8 affidavit, or a duly certified copy of the record thereof, shall
 
 9 be admitted as evidence that the power of sale was duly
 
10 executed."]
 
11      SECTION 9.  Section 667-42, Hawaii Revised Statutes, is
 
12 repealed:
 
13      ["[§667-42]  Application of this part.  The requirements of
 
14 this part shall apply only to new mortgages, loans, agreements,
 
15 and contracts containing power of sale foreclosure language
 
16 executed by the borrowers or mortgagors after July 1, 1999."]
 
17      SECTION 10.  This Act does not affect proceedings that were
 
18 begun before its effective date.
 
19      SECTION 11.  Statutory material to be repealed is bracketed.
 
20 New statutory material is underscored.
 
21      SECTION 12.  This Act shall take effect upon its approval,
 
22 provided that Section 7 and Section 8 shall take effect on
 
23 January 1, 2001.