HB783 HD2

Report Title:

Nonjudicial Foreclosures; Repeal

Description:

Amends the 1998 alternate power of sale foreclosure process by requiring a foreclosing mortgagee or other creditors to provide information on the unpaid balance of moneys owed under a mortgage or lien as of the date of the public sale within three days of an inquiry, capping the public sale purchaser's downpayment to not more than 10 percent of the highest successful bid, clarifying that the new property owner may take possession no sooner than 40 days after the public sale, and extending the time period for filing appeals of foreclosure sales to no later than 60 days after recordation of the affidavit of public sale. Effective July 1, 2099. (HB783 HD2)

HOUSE OF REPRESENTATIVES	H.B. NO.	783
TWENTY-THIRD LEGISLATURE, 2005		H.D. 2
STATE OF HAWAII

A BILL FOR AN ACT

relating to mortgage foreclosures.

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

SECTION 1. 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) 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] a mortgage broker licensed under chapter 454, an institutional investor as defined in section 454-1[.] or a government-sponsored enterprise regulated by the Office of Federal Housing Enterprise Oversight.

"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[.] or nominee.

"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 2. Section 667-22, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The notice of default shall also contain wording substantially similar to the following in all capital letters:

"IF THE DEFAULT ON THE LOAN CONTINUES AFTER THE DEADLINE DATE IN THIS NOTICE, THE MORTGAGED PROPERTY MAY BE FORECLOSED AND SOLD WITHOUT ANY COURT ACTION AND WITHOUT GOING TO COURT.

YOU MAY HAVE CERTAIN LEGAL RIGHTS OR DEFENSES. FOR ADVICE, YOU SHOULD CONSULT WITH AN ATTORNEY LICENSED IN THIS STATE.

AFTER THE DEADLINE DATE IN THIS NOTICE, TWO PUBLIC SHOWINGS (OPEN HOUSES) OF THE PROPERTY BY THE LENDER WILL BE HELD, BUT ONLY IF ALL MORTGAGORS (OWNERS) OF THE PROPERTY SO AGREE. TO SHOW THAT ALL OWNERS AGREE TO ALLOW TWO OPEN HOUSES BY THE LENDER, ALL OWNERS MUST SIGN A LETTER SHOWING THEY AGREE. ALL OWNERS MUST SEND THE SIGNED LETTER TO THIS OFFICE AT THE ADDRESS GIVEN IN THIS NOTICE.

THIS OFFICE MUST ACTUALLY RECEIVE THE SIGNED LETTER BY [~~THE~~ ~~DEADLINE DATE IN THIS NOTICE.~~] . THE SIGNED LETTER MUST BE SENT TO THIS OFFICE BY CERTIFIED MAIL, REGISTERED MAIL, OR EXPRESS MAIL, POSTAGE PREPAID AND RETURN RECEIPT REQUESTED.

IF THE SIGNED LETTER IS NOT RECEIVED BY THIS OFFICE BY [~~THE~~ ~~DEADLINE DATE,~~] , THE PROPERTY WILL THEN BE SOLD WITHOUT ANY OPEN HOUSES BEING HELD.

EVEN IF THIS OFFICE RECEIVES THE SIGNED LETTER TO ALLOW THE LENDER TO HOLD TWO OPEN HOUSES OF THE PROPERTY, IF ALL OWNERS LATER DO NOT COOPERATE TO ALLOW THE OPEN HOUSES, THE PROPERTY WILL BE SOLD WITHOUT ANY OPEN HOUSES BEING HELD.

ALL FUTURE NOTICES AND CORRESPONDENCE WILL BE MAILED TO YOU AT THE ADDRESS AT WHICH YOU RECEIVED THIS NOTICE UNLESS YOU SEND WRITTEN INSTRUCTIONS TO THIS OFFICE INFORMING THIS OFFICE OF A DIFFERENT ADDRESS. THE WRITTEN INSTRUCTIONS MUST BE SENT TO THIS OFFICE BY CERTIFIED MAIL, REGISTERED MAIL, OR EXPRESS MAIL, POSTAGE PREPAID AND RETURN RECEIPT REQUESTED.""

SECTION 3. Section 667-26, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) If the default is not cured as stated in the notice of default, the foreclosing mortgagee shall conduct two open houses of the mortgaged property before the public sale; provided that the foreclosing mortgagee timely received the signed letter of agreement from the mortgagor as required by the notice of default. In the notice of default, the foreclosing mortgagee may require that the signed letter of agreement be received by the foreclosing mortgagee by a date which shall not be less than ten days from the date of the notice of default. In the notice of default, the foreclosing mortgagee shall propose four dates within a two-week period for the open houses, and at least two dates shall be on a Saturday or Sunday. The mortgagor shall select two of the four proposed dates for the open houses and shall timely notify the foreclosing mortgagee of such dates in the signed letter of agreement. Only two open houses shall be required even if the date of the public sale is postponed."

SECTION 4. Section 667-27, Hawaii Revised Statutes, is amended to read as follows:

"§667-27 Public notice of public sale; contents; distribution; publication. (a) The foreclosing mortgagee shall prepare the public notice of the public sale. The public notice shall state:

(1) The date, time, and place of the public sale;

(2) The dates and times of the two open houses of the mortgaged property, or if there will not [to] be any open houses, the public notice shall so state;

(3) The unpaid balance of the moneys owed to the mortgagee under the mortgage agreement;

(4) A description of the mortgaged property, including the address or description of the location of the mortgaged property, and the tax map key number of the mortgaged property;

(5) The name of the mortgagor and the borrower;

(6) The name of the foreclosing mortgagee;

(7) The name of any prior or junior creditors having a recorded lien on the mortgaged property before the recordation of the notice of default under section 667-23;

(8) The name, the address in the State, and the telephone number in the State of the person in the State conducting the public sale[;] and the telephone number and address of the foreclosing mortgagee; and

(9) The terms and conditions of the public sale.

(b) The public notice shall also contain wording substantially similar to the following in all capital letters:

"THE DEFAULT UNDER THE MORTGAGE AGREEMENT MAY BE CURED NO LATER THAN THREE BUSINESS DAYS BEFORE THE DATE OF THE PUBLIC SALE OF THE MORTGAGED PROPERTY BY PAYING THE ENTIRE AMOUNT WHICH WOULD BE OWED TO THE FORECLOSING MORTGAGEE IF THE PAYMENTS UNDER THE MORTGAGE AGREEMENT HAD NOT BEEN ACCELERATED, PLUS THE FORECLOSING MORTGAGEE'S ATTORNEY'S FEES AND COSTS, AND ALL OTHER FEES AND COSTS INCURRED BY THE FORECLOSING MORTGAGEE RELATED TO THE DEFAULT, UNLESS OTHERWISE AGREED TO BETWEEN THE FORECLOSING MORTGAGEE AND THE BORROWER. THERE IS NO RIGHT TO CURE THE DEFAULT OR ANY RIGHT OF REDEMPTION AFTER THAT TIME. IF THE DEFAULT IS SO CURED, THE PUBLIC SALE SHALL BE CANCELED."

(c) If the default is not cured as required by the notice of default, the foreclosing mortgagee shall have a copy of the public notice of the public sale of the mortgaged property:

(1) Mailed or delivered to the mortgagor and the borrower at their respective last known addresses;

(2) Mailed or delivered to any prior or junior creditors having a recorded lien on the mortgaged property before the recordation of the notice of default under section 667-23;

(3) Mailed or delivered to the state director of taxation;

(4) Mailed or delivered to the director of finance of the county where the mortgaged property is located;

(5) Posted on the mortgaged property or on such other real property of which the mortgaged property is a part; and

(6) Mailed or delivered to any other person entitled to receive notice under section 667-5.5.

(d) The foreclosing mortgagee shall have the public notice of the public sale published in the classified section of a daily newspaper of general circulation in the county where the mortgaged property is located. The public notice shall be published once each week for three consecutive weeks (three publications). The public sale shall take place no sooner than fourteen days after the date of the publication of the third public notice advertisement.

(e) The foreclosing mortgagee and any prior or junior creditors having a recorded lien on the mortgaged property before the recordation of the notice of default under section 667-23 shall notify any person who requests information on the unpaid balance of moneys that will be owed to the foreclosing mortgagee or prior or junior creditors under a mortgage agreement or lien as of the date of the public sale and the daily accrual of interest. The foreclosing mortgagee or prior or junior creditor shall provide the requested information within three days of an inquiry from any person."

SECTION 5. 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 6. 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:

(1) The sale of the mortgaged property is considered completed;

(2) All persons claiming by, through, or under the mortgagor and all other persons having liens on the mortgaged property junior to the lien of the foreclosing mortgagee shall be forever barred of and from any and all right, title, interest, and claims at law or in equity in and to the mortgaged property and every part of the mortgaged property, except as otherwise provided by law;

(3) The lien of the foreclosing mortgagee and all liens junior in priority to the lien of a foreclosing mortgagee shall be automatically extinguished from the mortgaged property; and

(4) The purchaser shall be entitled to immediate and exclusive possession of the mortgaged property[.] no sooner than forty days after the public sale is held."

SECTION 7. Section 667-35, Hawaii Revised Statutes, is amended to read as follows:

"[[]§667-35[]] Appeal to circuit court. The borrower, the mortgagor, and any creditor having a recorded lien on the mortgaged property before the recordation of the notice of default under section 667-23, shall have the right to file an appeal in the circuit court where the mortgaged property is located to contest the presumptions set forth in section 667-34, and the statements contained in the affidavit required by section 667-32. No appeal shall be filed later than [~~thirty~~] sixty days after the recordation of the affidavit. Failure to timely appeal shall result in the statements in the affidavit and the presumptions set forth in section 667-34 becoming conclusive in accordance with the terms of that section."

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; provided that this Act shall not affect or impair any rights accrued before the effective date of this Act.