REPORT TITLE:
Mortgages; Foreclosure


DESCRIPTION:
Requires court to order a condominium sold free and clear of
recorded mortgages where the market value of a condominium is
less than the outstanding amount due and payable on a recorded
mortgage that is superior to the lien of the movant homeowners'
association, in a case of a foreclosure by action of a
homeowners' association, partnership, or planned community
association.  Specifies the manner of the application of
proceeds.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2138 
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO MORTGAGE FORECLOSURES.
 


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

 1      SECTION 1.  Section 667-3, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "§667-3 Proceeds, how applied.  (a)  Mortgage creditors
 
 4 shall be entitled to payment according to the priority of their
 
 5 liens, and not pro rata; and judgments of foreclosure shall
 
 6 operate to extinguish the liens of subsequent mortgages of the
 
 7 same property, without forcing prior mortgagees to their right of
 
 8 recovery.  The surplus after payment of the mortgage foreclosed,
 
 9 shall be applied pro tanto to the next junior mortgage, and so on
 
10 to the payment, wholly or in part, of mortgages junior to the one
 
11 assessed.
 
12      (b)  Notwithstanding the foregoing, in the case of
 
13 foreclosure by action and upon the motion of a homeowners'
 
14 association or corporation organized and existing under chapter
 
15 514A, chapter 421I or chapter 421J, that is pursuing a claim for
 
16 a debt or foreclosure in the action, where the court finds that
 
17 the market value of the property is less than the outstanding
 
18 amount due and payable on a recorded mortgage which is superior
 

 
Page 2                                                     2138 
                                     H.B. NO.           
                                                        
                                                        


 1 to the lien of the movant homeowners' association or corporation,
 
 2 the court shall order the property sold free and clear of
 
 3 recorded mortgages and other encumbrances superior to the lien of
 
 4 the movant association or corporation.  In such case, the surplus
 
 5 after payment of the first mortgage, shall be applied pro tanto
 
 6 to the next junior mortgage or lien, and so on to the payment,
 
 7 wholly or in part, of mortgages and liens junior to the first
 
 8 mortgage, including the lien of the movant association or
 
 9 corporation."
 
10      SECTION 2.  New statutory material is underscored.
 
11      SECTION 3.  This Act shall take effect upon its approval.
 
12 
 
13                              INTRODUCED BY:______________________