HCR77 HD1

WHEREAS, Hawaii has seen a dramatic increase in housing costs over the past few years; and

WHEREAS, with the combination of high housing costs and moderate incomes, many Hawaii residents purchasing homes have been induced to use methods of financing, including subprime lending and other lending programs, despite the well-publicized risks and warnings of the pros and cons of such lending programs by consumer advocates; and

WHEREAS, many of the lending practices engaged in by predatory mortgage brokers have included: stripping equity through exorbitant fees and/or pre-payment penalties, yield-spread premiums (kickbacks to brokers), balloon payments, steering borrowers to higher interest loans, loan flipping, and mandatory arbitration; and

WHEREAS, some Hawaii homeowners have been issued mortgages despite having inadequate resources to repay these mortgages and not understanding the ramifications of such predatory practices and, as such, are at risk of foreclosure; and

WHEREAS, Hawaii is among the 23 states that have no anti-predatory lending policies to curb these and other abuses in the mortgage industry, while 18 states have adopted state versions of the existing federal anti-predatory lending law, and the rest have even tougher standards; and

WHEREAS, over the last five years, there have been various attempts by the Legislature to regulate the mortgage lending industry through legislation and by the creation of task forces, with little or no success; and

WHEREAS, the State has a vital interest in ensuring that there are legal mechanisms available to protect its residents from predatory mortgage lending practices; now, therefore,

BE IT RESOLVED by the House of Representatives of the Twenty-fourth Legislature of the State of Hawaii, Regular Session of 2007, the Senate concurring, that the Auditor is requested to conduct a study of predatory mortgage lending practices in Hawaii; and

BE IT FURTHER RESOLVED that the study include:

(1) An overview and examination of Hawaii laws governing mortgage lending and housing mortgage lending practices that are predatory;

(2) An examination of federal laws protecting borrowers from mortgage lending, subprime lending, and housing mortgage lending practices that are predatory;

(3) An examination of other states' laws and a comparison thereof with Hawaii's laws governing mortgage lending and predatory housing mortgage lending practices;

(4) An assessment of the risk to Hawaii consumers through a review of complaints made relating to:

(A) Subprime loans issued despite qualifications to the contrary;

(B) Rate of foreclosure on loans executed utilizing programs or techniques that are allegedly predatory; and

and

(5) Any recommendations for legislation to protect Hawaii consumers from predatory lending practices;

and

BE IT FURTHER RESOLVED that the study should address the acts and practices of mortgage brokers who are required to be licensed under Chapter 454, Hawaii Revised Statutes; and

BE IT FURTHER RESOLVED that the Auditor is requested to consult with organizations and individuals, including but not limited to the Department of Commerce and Consumer Affairs, the Judiciary, banks, mortgage lenders, the Hawaii Alliance for Community-Based Economic Development, the Legal Aid Society of Hawaii, the Hawaii Homeownership Center, Consumer Credit Counseling, and attorneys specializing in predatory lending and foreclosure; and

BE IT FURTHER RESOLVED that the Auditor is requested to submit findings and recommendations to the Legislature no later than 20 prior to the convening of the Regular Session of 2008; and

BE IT FURTHER RESOLVED that a certified copy of this Concurrent Resolution be transmitted to the Auditor.

Report Title:

Predatory Mortgage Lending Practices; Auditor Study

HOUSE OF REPRESENTATIVES	H.C.R. NO.	77
TWENTY-FOURTH LEGISLATURE, 2007		H.D. 1
STATE OF HAWAII