RESOLUTION

WHEREAS, the home is the most important financial asset of Hawaii's families through which the family pays for college and retirement, and passes a lifetime of earnings on to future generations; and

WHEREAS, homeowners may fall victim to the abusive and often fraudulent loan practices of a predatory lender and be sold a loan providing minimal benefit and containing onerous and unfair terms resulting in the loss of the family home and all its equity; and

WHEREAS, many former homeowners in Hawaii, particularly and most recently on the island of Hawaii, have experienced the devastating loss of their homes due to predatory lenders; and

WHEREAS, mortgage brokers have been involved in cases of predatory lending in Hawaii and are also significant players in the local and national residential mortgage lending industry; and

WHEREAS, mortgage brokers, unlike lenders, do not risk their funds in the loan transaction and are compensated for originating the loan, which provides an incentive to solicit the refinancing of loans regardless of whether this benefits the homeowner, and regardless of the homeowner's ability to fulfill loan terms; and

WHEREAS, unlike other loan originators such as banks, thrifts, and financial services loan companies who are heavily regulated by the federal and state government, mortgage brokers remain relatively free of any government regulation that would provide incentives protecting the interests of loan consumers in a home loan transaction; and

WHEREAS, a regulatory approach under H.B. No. 1438, H.D. 1, 2003, that narrowly applies to high cost loans by mortgage brokers and solicitors has been criticized as providing insufficient protection to consumers; and

WHEREAS, a regulatory approach exemplified by H.B. No. 1438, H.D. 2, 2003, that broadly regulates home loans and is not restricted to mortgage brokers and solicitors provokes strong concerns that the approach will make sorely-needed loans unavailable, and will have a severe negative impact on the legitimate loan market, the secondary loan market, and ultimately on Hawaii's real estate industry; and

WHEREAS, those raising these concerns have pointed to negative experiences with, and negative evaluations of, laws enacted in the District of Columbia, North Carolina, and Georgia, although it is unclear how these laws are structured, and whether experience with these laws may be generalized to Hawaii; and

WHEREAS, concerns have also been raised that there are existing state and federal laws that already apply to the problem of predatory lending, that federal legislation may be enacted to preempt state law, and that an additional state law will not provide a solution; and

WHEREAS, more information and thoughtful analysis is needed to narrow the issues and develop a useful approach that protects Hawaii's consumers from predatory lenders while preserving the vitality of Hawaii's real estate market; now, therefore,

BE IT RESOLVED by the House of Representatives of the Twenty-second Legislature of the State of Hawaii, Regular Session of 2003, the Senate concurring, that the Legislative Reference Bureau is requested to conduct a study of predatory home lending practices and consumer protections in Hawaii and elsewhere; and to recommend actions to protect Hawaii's homeowners from predatory lenders; and

BE IT FURTHER RESOLVED that the study:

and

BE IT FURTHER RESOLVED that the study be submitted to the Legislature no later than 20 days before the Regular Session of 2004; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Legislative Reference Bureau, Director of Commerce and Consumer Affairs, President of the Hawaii Association of Mortgage Brokers, Chairperson of the Hawaii Bankers Association, Hawaii Coalition for Responsible Lending, Hawaii Credit Union League, and Legal Aid Society of Hawaii.

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