STAND. COM. REP. NO. 654-04

Honolulu, Hawaii

, 2004

RE: H.B. No. 2788

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committees on Consumer Protection and Commerce and Judiciary, to which was referred H.B. No. 2788 entitled:

"A BILL FOR AN ACT RELATING TO MORTGAGE BROKERS AND SOLICITORS,"

beg leave to report as follows:

The purpose of this bill is to protect home buyers from predatory lending practices of mortgage brokers and solicitors licensed under chapter 454, Hawaii Revised Statutes (chapter 454), by:

(1) Providing that no mortgage is valid unless a broker provides a written summary of a borrower's rights;

(2) Allowing license suspension if a licensee pursues a course of misrepresentation that targets a specific group of borrowers;

(3) Increasing the licensure bond amount from $15,000 to $50,000;

(4) Authorizing the Department of Commerce and Consumer Affairs (DCCA) to adopt rules requiring disclosure of marketing strategies and investments;

(5) Requiring notice and a hearing for licensees to be sanctioned under chapter 454, and providing the Director of Commerce and Consumer Affairs with adjudicatory powers to implement the requirement; and

(6) Increasing the fine for violations from $1,000 to $2,000 per occurrence.

The Legal Aid Society of Hawaii supported the intent of this measure. Hawaii Credit Union League, Hawaii Financial Services Association, Hawaii Bankers Association, Mortgage Bankers Association of Hawaii, and Ameriquest Mortgage Company opposed this bill. DCCA's Regulated Industries Complaints Office and Hawaii Association of Mortgage Brokers offered comments.

Your Committees have amended this bill by replacing its substance with the contents of H.B. No. 2973, which contains provisions similar to this bill. The amended bill differs in that it:

(1) Requires that a written summary of borrowers rights be provided to the consumer, but no longer conditions the validity of a mortgage on provision of the summary;

(2) Amends the specific list of activities subject to license revocation to:

(A) Remove pursuit of a course of misrepresentation targeting a particular category of borrowers; and

(B) Add door-to-door soliciting of mortgages and knowingly counseling a borrower to accept a loan at a higher cost;

(3) Adds provisions that among other things permit the commissioner to impose fines and order forfeiture of the license for failure to maintain the $50,000 bond;

(4) Specifies the hours of continuing education required for license renewal, and provides that the licenses of those in noncompliance will be placed on "inactive" status;

(5) Specifies the conditions under which a mortgage broker or solicitor may advertise and provides penalties;

(6) In cases where a mortgage broker or solicitor violates advertising restrictions, exempts from liability:

(A) A public utility from regulatory action for disconnecting the broker or solicitor's telephone service; and

(B) A publisher or producer of a print or broadcast advertising medium for refusing the broker or solicitor's advertisement;

(7) Adds a new definition for "designated solicitor in charge" and amends the definitions of "mortgage broker" and "mortgage solicitor";

(8) Exempts credit union service organizations from the laws applicable to mortgage brokers and solicitors;

(9) Provides an exception from the licensure requirement of two years of experience in financial transactions, for licensed insurance producers, under specific conditions;

(10) Changes the effective date to January 1, 2020, to permit further discussion on this measure; and

(11) Makes technical, nonsubstantive changes for clarity, style, and consistency.

As affirmed by the records of votes of the members of your Committees on Consumer Protection and Commerce and Judiciary that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 2788, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 2788, H.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committees on Consumer Protection and Commerce and Judiciary,

 

____________________________

ERIC G. HAMAKAWA, Chair

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KENNETH T. HIRAKI, Chair