Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committees on Commerce, Consumer Protection and Housing and Transportation, Military Affairs, and Government Operations, to which was referred S.B. No. 2927 entitled:

beg leave to report as follows:

The purpose of this measure is to strengthen foreclosure notification requirements for government-assisted affordable housing properties subject to buyback restrictions, clarify the priority of a housing agency's liens in a foreclosure, and authorize a housing agency to purchase a foreclosed property by credit bid at public auction.

Testimony in support of this measure was submitted by the Housing and Community Development Corporation of Hawaii (HCDCH), Maui County Department of Housing and Human Concerns, Kauai County Housing Agency, and Department of Budget and Fiscal Services of the City and County of Honolulu. The Mortgage Bankers Association of Hawaii submitted comments on the measure.

Affordable housing properties sponsored or assisted by the HCDCH and county housing agencies are subject to buyback restrictions that provide the agencies with the first option to purchase the property if title to the property is to be transferred from the original purchaser. Your Committees find that in recent foreclosures initiated by predatory lenders, the agencies have not been provided with prior notice of impending nonjudicial foreclosure sales, thereby precluding them from determining whether a buyback is warranted in order to preserve the stock of affordable housing. This measure clarifies that any intent of the mortgagee to foreclose the mortgage requires thirty-day prior written notice to the housing agencies.

In addition to buyback restrictions, government-assisted properties are subject to liens in favor of the agencies for shared appreciation equity, excess proceeds in lieu of buyback, and deferred sales price. In order to protect the housing agencies' rights to recover the value of these liens in a nonjudicial foreclosure, this measure clarifies that the above liens are priority liens.

Finally, this measure authorizes the housing agencies to offer a credit bid at auction in instances where an agency's shared appreciation equity lien is in second position and the mortgagee who is in first position files a nonjudicial foreclosure. Your Committees find that this measure will enable the housing agencies to better fulfill their mission to provide affordable housing for low and moderate income families in the State.

Your Committees have amended this measure by making technical amendments to reflect preferred drafting style and to insert missing statutory language.

As affirmed by the records of votes of the members of your Committees on Commerce, Consumer Protection and Housing and Transportation, Military Affairs, and Government Operations that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2927, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2927, S.D. 1, and be referred to the Committee on Ways and Means.