Repeals the 1874 nonjudicial (power of sale) foreclosure law. Amends the 1998 alternate power of sale foreclosure process by allowing all mortgages to be foreclosed through the process, capping the public sale purchaser's downpayment to not more than 10 percent of the highest successful bid, removing the requirement that the borrower sign the conveyance document, and clarifying that the new property owner may take possession no sooner than 45 days after the public sale. Effective July 1, 2099. (HB783 HD1)

A BILL FOR AN ACT

SECTION 1. Chapter 667, Hawaii Revised Statutes, is amended by amending the title of part II to read as follows:

"[[]PART II.[] ALTERNATE] POWER OF SALE FORECLOSURE PROCESS"

SECTION 2. Section 667-21, Hawaii Revised Statutes, is amended to read as follows:

"[[]§667-21[] Alternate power of sale process; definitions. (a) The process in this part is an alternative power of sale process to the foreclosure by action and the foreclosure by power of sale in part I.

(b)] Definitions. As used in this part:

"Borrower" means the borrower, maker, cosigner, or guarantor under a mortgage agreement.

"Foreclosing mortgagee" means the mortgagee that intends to conduct a power of sale foreclosure; provided that the mortgagee is a federally insured bank, a federally insured savings and loan association, a federally insured savings bank, a depository financial services loan company, a nondepository financial services loan company, a credit union insured by the National Credit Union Administration, a bank holding company, a foreign lender as defined in section 207-11, or an institutional investor as defined in section 454-1.

"Mailed" means to be sent by regular mail, postage prepaid, and by certified, registered, or express mail, postage prepaid and return receipt requested.

"Mortgage" means a mortgage, security agreement, or other document under which property is mortgaged, encumbered, pledged, or otherwise rendered subject to a lien for the purpose of securing the payment of money or the performance of an obligation.

"Mortgage agreement" includes the mortgage, the note or debt document, or any document amending any of the foregoing.

"Mortgaged property" means the property that is subject to the lien of the mortgage.

"Mortgagee" means the current holder of record of the mortgagee's or the lender's interest under the mortgage, or the current mortgagee's or lender's duly authorized agent.

"Mortgagor" means the mortgagor or borrower named in the mortgage and, unless the context otherwise indicates, includes the current owner of record of the mortgaged property whose interest is subject to the mortgage.

"Open house" means a public showing of the mortgaged property during a scheduled time period.

"Power of sale" or "power of sale foreclosure" means a nonjudicial foreclosure under this part when the mortgage contains, authorizes, permits, or provides for a power of sale, a power of sale foreclosure, a power of sale remedy, or a nonjudicial foreclosure.

"Property" means property (real, personal, or mixed), an interest in property (including fee simple, leasehold, life estate, reversionary interest, and any other estate under applicable law), or other interests that can be subject to the lien of a mortgage.

"Record" or "recorded" means a document is recorded or filed with the office of the assistant registrar of the land court under chapter 501 or recorded with the registrar of conveyances under chapter 502, or both, as applicable.

"Served" means to have service of the notice of default made in accordance with the service of process or the service of summons under the Hawaii rules of civil procedure, and under sections 634-35 and 634-36."

SECTION 3. Section 667-29, Hawaii Revised Statutes, is amended to read as follows:

"[[]§667-29[]] Authorized bidder; successful bidder. Any person, including the foreclosing mortgagee, shall be authorized to bid for the mortgaged property at the public sale and to purchase the mortgaged property. The highest bidder who meets the requirements of the terms and conditions of the public sale shall be the successful bidder. The public sale shall be considered as being held when the mortgaged property is declared by the foreclosing mortgagee as being sold to the successful bidder. When the public sale is held, the successful bidder at the public sale, as the purchaser, shall make a nonrefundable downpayment to the foreclosing mortgagee of not [less] more than ten per cent of the highest successful bid price. If the successful bidder is the foreclosing mortgagee or any other mortgagee having a recorded lien on the mortgaged property before the recordation of the notice of default under section 667-23, the downpayment requirement may be satisfied by offset and a credit bid up to the amount of the mortgage debt."

SECTION 4. Section 667-31, Hawaii Revised Statutes, is amended to read as follows:

"[[]§667-31[]] Conveyance of property on payment of purchase price; distribution of sale proceeds. [(a) After the purchaser completes the purchase by paying the full purchase price and the costs for the purchase, the mortgaged property shall be conveyed to the purchaser by a conveyance document. The conveyance document shall be in a recordable form and shall be signed by the foreclosing mortgagee in the foreclosing mortgagee's name. The mortgagor or borrower shall sign the conveyance document on his or her own behalf.

(b)] (a) From the sale proceeds, after paying all liens and encumbrances in the order of priority as a matter of law, the foreclosing mortgagee's attorney's fees and costs, after paying the fees and costs of the power of sale foreclosure, and after paying the moneys owed to the foreclosing mortgagee, the balance of the sale proceeds shall be distributed by the foreclosing mortgagee to junior creditors having valid liens on the mortgaged property in the order of their priority and not pro rata. Any remaining surplus after payment in full of all valid lien creditors shall be distributed to the mortgagor.

[(c)] (b) Lien creditors prior to the foreclosing mortgagee shall not be forced to their right of recovery. However, the foreclosing mortgagee and any prior lien creditor may agree in writing that the proceeds from the sale will be distributed by the foreclosing mortgagee to the prior lien creditor towards the payment of moneys owed to the prior lien creditor before any moneys are paid to the foreclosing mortgagee."

SECTION 5. Section 667-33, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) When both the affidavit and the conveyance document are recorded:

SECTION 6. Sections 667-5, 667-6, 667-7, and 667-8, Hawaii Revised Statutes, are repealed.

["§667-5 Foreclosure under power of sale; notice; affidavit after sale. When a power of sale is contained in a mortgage, the mortgagee, or the mortgagee's successor in interest, or any person authorized by the power to act in the premises, may, upon a breach of the condition, give notice of the mortgagee's, successor's, or person's intention to foreclose the mortgage and of the sale of the mortgaged property, by publication of the notice once in each of three successive weeks (three publications), the last publication to be not less than fourteen days before the day of sale, in a newspaper having a general circulation in the county in which the mortgaged property lies; and also give such notices and do all such acts as are authorized or required by the power contained in the mortgage. Copies of the notice shall be filed with the state director of taxation and shall be posted on the premises not less than twenty-one days before the day of sale.

Any sale, of which notice has been given as aforesaid, may be postponed from time to time by public announcement made by the mortgagee or by some person acting on the mortgagee's behalf. The mortgagee shall, within thirty days after selling the property in pursuance of the power, file a copy of the notice of sale and the mortgagee's affidavit, setting forth the mortgagee's acts in the premises fully and particularly, in the bureau of conveyances.

The affidavit and copy of the notice shall be recorded and indexed by the registrar, in the manner provided in chapter 501 or 502, as the case may be.

This section is inapplicable if the mortgagee is foreclosing as to personal property only.

§667-6 Notice to mortgage creditors. Whenever a mortgage creditor having a mortgage lien on certain premises desires notice that another mortgage creditor having a mortgage lien on the same premises intends to foreclose the mortgage and sell the mortgaged property pursuant to a power of sale under section 667-5, the mortgage creditor may submit a written request to the mortgagee foreclosing or who may foreclose the mortgage by power of sale, to receive notice of the mortgagee's intention to foreclose the mortgage under power of sale. This request for notice may be submitted any time after the recordation or filing of the subject mortgage at the bureau of conveyances or the land court, but must be submitted prior to the completion of the publication of the mortgagee's notice of intention to foreclose the mortgage and of the sale of the mortgaged property. This request shall be signed by the mortgage creditor, or its authorized representative, desiring to receive notice, specifying the name and address of the person to whom the notice is to be mailed. The mortgagee receiving the request shall thereafter give notice to all mortgage creditors who have timely submitted their request. The notice shall be sent by mail or otherwise communicated to the mortgage creditors, not less than seven calendar days prior to the date of sale.

No request for copy of any notice pursuant to this section nor any statement or allegation in any such request nor any record thereof shall affect the title to real property or be deemed notice to any person that any party requesting copy of the notice has or claims any right, title, or interest in, or lien or charge upon the property described in the mortgage referred to therein.

§667-7 Notice, construction, contents; affidavit. The true intent and meaning of section 667-5 is that the notice of intention of foreclosure may also contain a description of the mortgaged property and a statement of the time and place proposed for the sale thereof at any time after the expiration of four weeks from the date when first advertised; and also that the affidavit contemplated by section 667-5 may lawfully be made by any person duly authorized to act for the mortgagee, and in such capacity conducting the foreclosure.

§667-8 Affidavit as evidence, when. If it appears by the affidavit that the affiant has in all respects complied with the requirements of the power of sale and the statute, in relation to all things to be done by the affiant before selling the property, and has sold the same in the manner required by the power, the affidavit, or a duly certified copy of the record thereof, shall be admitted as evidence that the power of sale was duly executed."]

SECTION 7. Section 667-42, Hawaii Revised Statutes, is repealed:

["[§667-42] Application of this part. The requirements of this part shall apply only to new mortgages, loans, agreements, and contracts containing power of sale foreclosure language executed by the borrowers or mortgagors after July 1, 1999."]

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on July 1, 2099.