STAND. COM. REP. NO. 271

Honolulu, Hawaii

RE:    S.B. No. 940

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2007

State of Hawaii

Madam:

     Your Committee on Water, Land, Agriculture, and Hawaiian Affairs, to which was referred S.B. No. 940 entitled:

"A BILL FOR AN ACT RELATING TO HAWAIIAN HOMES COMMISSION ACT 1920, AS AMENDED,"

begs leave to report as follows:

     The purpose of this measure is to encourage and assist Native Hawaiian homestead beneficiaries to finance the purchase or construction of homes on Hawaiian Home Lands by amending the Hawaiian Homes Commission Act of 1920, as amended, to require the Department of Hawaiian Home Lands to consult the trust beneficiaries prior to implementing any policies and agreements that will lower the allowable loan limits for mortgage products designed for Hawaiian Home Lands Trust properties.

     Testimony in support of this measure was submitted by the State Council of Hawaiian Homestead Associations, the Council for Native Hawaiian Advancement, Hawaiian Community Assets, Waianae Kai Hawaiian Homestead Association, the Wai‘anae Valley Homestead Community Association, the Nanakuli Hawaiian Homestead Community Association and a private individual.  Testimony in opposition to this measure was submitted by the Department of Hawaiian Home Lands.

     The Department of Housing and Urban Development (HUD) administers Federal Housing Administration (FHA) loan guaranty programs to promote home ownership and increase access to capital to Americans.  HUD administers the FHA 247 program, which is a loan guaranty program for Native Hawaiian beneficiaries of the Hawaiian Home Lands Trust to promote home ownership on Hawaiian Home Lands properties.  The FHA 247 program allows borrowers to access their equity from the value of their homes, and requires borrowers to pay mortgage insurance fees into a reserve fund, which is used by the State to cover delinquent loans.  The FHA 247 program has resulted in successful home ownerships on Hawaiian Home Lands by making loans more readily available for lower and moderate income families through its mortgage insurance program.  Furthermore, the program has allowed families to access their equity through refinance options.

     In 2006, the State made a policy change at the administrative level to request from HUD a new FHA agreement that would lower the loan-to-value ratio from ninety-five per cent to seventy-five per cent on mortgage loans under the FHA 247 loan product program to lower the Hawaiian Home Lands Trust's loan loss risk of its FHA 247 portfolio.  Your Committee finds this policy change has a direct impact on the beneficiaries of the trust and reduces the availability of capital available to the Hawaiian Home Lands residents.  Requiring the Department of Hawaiian Home Lands to consult with the beneficiaries of the trust prior to agreeing to lower allowable loan amounts will allow the beneficiaries the opportunity to provide input in actions that directly impacts their ability to sustain home ownership.  Your Committee believes that amending the Hawaiian Homes Commission Act of 1920, as amended, fulfills the intent of this measure, which is to encourage and assist Native Hawaiian Home Lands beneficiaries to finance the purchase or construction of homes on Hawaiian Home Lands.

     Your Committee has amended this measure by:

     (1)  Adding language that declares any amendments made to the Hawaiian Homes Commission Act of 1920 be severable; and

     (2)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the record of votes of the members of your Committee on Water, Land, Agriculture, and Hawaiian Affairs that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 940, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 940, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Water, Land, Agriculture, and Hawaiian Affairs,

____________________________

RUSSELL S. KOKUBUN, Chair