Transfers administration of the teachers' housing program from the Housing and Community Development Corporation of Hawaii to the Department of Education. Requires the unexpended balances of the proceeds of general obligation bonds, rental payments for housing from teacher tenants, and repayment of downpayment loans to teachers be deposited in the Teachers' Housing Revolving Fund. Expands the uses of the Revolving Fund to include the financing and repair of teachers' housing. Authorizes DOE to make downpayment loans for the purchase of residential property to teachers. (SB2229 HD1)

A BILL FOR AN ACT

SECTION 1. The legislature finds that it is in the interest of the State of Hawaii to create incentives for individuals to become and remain classroom teachers in the public schools. A shortage of teachers compromises the quality of public education, particularly in areas of the state where it is difficult to attract and retain qualified personnel. Housing incentives can be an effective tool in the recruitment and retention of highly qualified teachers. Given the current shortage of available and affordable rental housing, second mortgage loan financing for down payment and closing cost expenses will assist new classroom teachers in purchasing a residence and remaining in Hawaii, thereby enabling the State to maintain and improve the quality of public education.

The purpose of this Act is to authorize second mortgage loans for downpayment and closing costs of teachers employed and assigned by the department of education.

SECTION 2. Act 204, Session Laws of Hawaii 2005, is amended by amending section 1 to read as follows:

"SECTION 1. Chapter 302A, Hawaii Revised Statutes, part III, is amended by adding a new subpart to be appropriately designated and to read as follows:

"    . Teachers' Housing

§302A-A Purpose. The purpose of this subpart is to transfer the administration of the teachers' housing program from the housing and community development corporation of Hawaii to the department of education. This subpart [also] establishes a revolving fund for the accounting and control of receipts and disbursements in connection with the department of education's functions of planning, constructing, financing, repairing, maintaining, and operating housing programs for teachers employed and assigned by the department of education.

§302A-B Definitions. The following terms, wherever used in this subpart, shall have the following meanings unless a different meaning clearly appears from the context:

"Downpayment loan" means a loan for the downpayment or closing costs for the purchase of residential property.

"Teacher" means a teacher assigned and employed by the department of education.

[[§302A-B]] §302A-C Teachers' housing program; administration. (a) The department shall administer the teachers' housing program under this subpart. The department shall:

(b) The department may adopt rules pursuant to chapter 91 to effectuate this subpart.

[[§302A-C]] §302A-D Teachers' housing revolving fund. (a) There is established in the state treasury a revolving fund to be known as the teachers' housing revolving fund to be administered by the department of education. The director of finance shall transfer any moneys appropriated for the purposes of teacher housing to the teachers' housing revolving fund. All unexpended balances of the proceeds of general obligation bonds or other appropriations, allocations, allotments, special revolving funds, or other funds heretofore created and made available for the purposes of developing or administering teachers' housing projects shall be transferred to the teachers' housing revolving fund. Notwithstanding any law to the contrary, all moneys, including refunds, reimbursements, [and rentals,] rental payments for housing from teacher tenants, and repayment of downpayment loans to teachers under this subpart, shall be deposited in the revolving fund and shall be used to carry out the purposes of this subpart.

(b) The revolving fund may be used by the department of education for any and all of the purposes of teachers' housing, including the planning, construction, financing, repair, maintenance, and operation of teachers' housing, as well as for the salaries of the necessary personnel in charge thereof.

(c) Whenever the governor determines that the amount in the teachers' housing revolving fund exceeds the requirements of the teacher housing program, the department shall transfer the excess to the state general fund.

[[§302A-D]] §302A-E Annual statements. The department of education shall annually prepare for the director of human services and the director of finance a full, detailed description and financial statement of the planning, construction, financing, repair, maintenance, and operation of teachers' housing.

[[§302A-E]] §302A-F Annual review; disposal of units. The department of education shall annually review the status of and necessity for subsidized teachers' housing throughout the [State] state and, upon determination that any particular housing unit is no longer necessary, shall dispose of that unit by sale, demolition, or otherwise. Any net proceeds from the disposal of a unit shall be paid to the governmental entity vested with fee title to the unit at the time of disposition, and any deficit incurred in the disposal shall be paid by the State.["]

§302A-G Downpayment loans. (a) The department may make downpayment loans for the purchase of residential property to teachers who qualify under section 302A-H. The interest rate on the loans may range from zero per cent to eight per cent, depending on the borrowers' incomes.

(b) To secure the downpayment loan, every borrower shall execute and duly record a second mortgage to the State on the property purchased with the loan proceeds.

(c) The principal of the downpayment loan, together with accrued interest, shall be due and payable upon the sale, transfer, or refinancing of the home, or upon the termination of the borrower's employment with the department, or shall be repaid by the borrower in installments as determined by the department; provided that the department may provide a period in which the payment may be waived. The period over which the principal and interest shall be paid need not coincide with the period during which the loan from the mortgage lender for the balance of the purchase price must be repaid. At any time, the borrower may repay, without penalty, the whole or any part of the unpaid balance of the downpayment loan plus accrued interest.

(d) The department may collect unpaid principal and interest and otherwise service the loan itself or, for a loan service fee not in excess of the market rate, through a contract with any mortgage lender or real estate collection servicing agent authorized to do business in the state, including the holder of the first mortgage on the property.

§302A-H Qualifications for downpayment loan. (a) No teacher shall be qualified for a downpayment loan under this subpart unless the teacher:

(b) No person who owns in fee simple or in leasehold any other residential property within the state shall be eligible to become a borrower under this subpart. A person shall be deemed to own a residential property if the person, the person's spouse, or both (unless separated and living apart under a decree of a court of competent jurisdiction), own a majority interest in a residential property.

§302A-I Restrictions on borrower. Every downpayment loan made under this subpart shall be subject to the following conditions:

All of the above conditions shall be a part of the downpayment loan executed under this subpart, whether or not they are expressly incorporated in the mortgage document.

§302A-J Default. If the borrower fails to pay the principal or interest on the downpayment loan when due, the department shall take all necessary actions permitted under state law to collect the delinquent amounts. Upon the borrower's material breach of the loan agreement, the State may exercise all the State's remedies as a mortgagee, including its right to foreclose. Upon foreclosure, the State may purchase the borrower's interest in the property, assume the borrower's obligations under the first mortgage, discharge other liens, improve the property, and with or without discharging the first mortgage or other liens, use, sell, lease, or rent the property as authorized by law.

§302A-K Contracting. The department may contract with other agencies or organizations to carry out the provisions of this subpart."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2050.