THE SENATE	S.B. NO.	1175
TWENTY-SIXTH LEGISLATURE, 2011
STATE OF HAWAII

A BILL FOR AN ACT

relating to nonjudicial foreclosure.

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

     SECTION 1.  Section 501-241, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  Without limiting the generality of subsection (a), the following instruments need not be registered pursuant to this chapter to be effective and shall be recorded in the bureau of conveyances pursuant to chapter 502:

     (1)  An assignment or other instrument transferring a leasehold time share interest;

     (2)  A mortgage or other instrument granting a lien on a leasehold time share interest;

     (3)  An agreement of sale for the sale of a leasehold time share interest[.  Any such agreement of sale], which shall be subject to section 502-85 and shall not be subject to section 501-101.5;

     (4)  A lien or notice of lien pertaining to a leasehold time share interest in favor of a time share owners association, an association of owners under chapter 514A or 514B, or a similar homeowner's association;

     (5)  A judgment, decree, order of court, attachment, writ, or other process against a leasehold time share interest;

     (6)  A mechanic's or materialman's lien or other lien upon a leasehold time share interest;

     (7)  A lis pendens or notice of pendency of action, notice, affidavit, demand, certificate, execution, copy of execution, officer's return, or other instrument relating to a leasehold time share interest and otherwise required or permitted to be recorded or registered in connection with the enforcement or foreclosure of any lien, whether by way of power of sale [pursuant to section 667-5,] or otherwise;

     (8)  A power of attorney given by the owner of a leasehold time share interest [or], by the vendor or vendee under an agreement of sale for the sale of a leasehold time share interest, by a mortgagee or other lienor having a mortgage or lien upon a leasehold time share interest, or by another party holding a claim or encumbrance against or an interest in a leasehold time share interest; or

     (9)  An instrument assigning, extending, continuing, dissolving, discharging, releasing in whole or in part, reducing, canceling, extinguishing, or otherwise modifying or amending any of the foregoing instruments."

     SECTION 2.  Section 501-263, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§501-263[]]  Effect of deregistration in specific cases. Notwithstanding section 501-262(a)(3), the following documents, instruments, and papers need not be registered pursuant to this chapter to be effective and shall be recorded in the bureau of conveyances pursuant to chapter 502:

     (1)  Any document, instrument, or paper assigning, extending, continuing, dissolving, discharging, releasing in whole or in part, reducing, canceling, extinguishing, or otherwise modifying or amending any of the following documents, instruments, or papers that have been registered pursuant to this chapter and that pertain to deregistered land:

         (A)  A mortgage;

         (B)  An agreement of sale for the sale of a fee time share interest or interest in other deregistered land[.  After the recordation of the certificate of title, any agreement of sale shall], which shall, after the recordation of the certificate of title, be subject to section 502-85 and shall not be subject to section 501-101.5;

         (C)  A correction deed, correction mortgage, or other document, instrument, or paper correcting a document, instrument, or paper registered pursuant to this chapter;

         (D)  A lien or claim of lien on a fee time share interest held or claimed by a time share owners association, an association of apartment owners, or other homeowners' association or a lien or claim on an interest in other deregistered land held by a lienor or person claiming a lien;

         (E)  A lease that demises a fee time share interest or interest in other deregistered land;

         (F)  An order of court, attachment, writ, or other process against a fee time share interest or interest in other deregistered land;

         (G)  A mechanic's or materialman's lien or other lien upon a fee time share interest or interest in other deregistered land;

         (H)  A lis pendens or notice of pendency of action, notice, affidavit, demand, certificate, execution, copy of execution, officer's return, or other instrument relating to a fee time share interest or interest in other deregistered land and otherwise required or permitted to be recorded or registered in connection with the enforcement or foreclosure of any lien, whether by way of power of sale [pursuant to a power of sale under section 667-5,] or otherwise; or

         (I)  A power of attorney given by the owner of a fee time share interest or interest in other deregistered land [or], by the vendor or vendee under an agreement of sale for the sale of a fee time share interest or interest in other deregistered land, by a mortgagee or other lienor having a mortgage or lien upon a fee time share interest or interest in other deregistered land, or by another party holding a claim or encumbrance against or an interest in a fee time share interest or interest in other deregistered land;

     (2)  A lis pendens or notice of pendency of action, notice, affidavit, demand, certificate, execution, copy of execution, officer's return, or other instrument relating to a fee time share interest or interest in other deregistered land and otherwise required or permitted to be recorded or registered in connection with the enforcement or foreclosure of any lien, whether by way of power of sale [pursuant to a power of sale under section 667-5,] or otherwise; and

     (3)  Any declaration annexing property to, any declaration deannexing property from, any amendment or supplement to, correction of, or release or termination of, any of the following documents, instruments, or papers that have been registered pursuant to this chapter and that pertain to deregistered land:

         (A)  A declaration of covenants, conditions, restrictions, or similar instrument, by whatever name denominated, establishing or governing a time share plan, or the bylaws of a time share owners association, notice of time share plan, or other time share instrument;

         (B)  A declaration of condominium property regime or similar declaration by whatever name denominated, the bylaws of the association of apartment owners, the condominium map, any declaration of merger and any instrument effecting a merger; provided that if only some of the condominium apartments are included in the time share plan, then it shall be necessary to register, and to note on the certificate of title for any apartment not included in the time share plan:

              (i)  Any declaration annexing property to the condominium property regime;

             (ii)  Any declaration deannexing property from the condominium property regime;

            (iii)  Any instrument effecting a merger of two or more condominium projects or two or more phases of a condominium project; and

             (iv)  Any document, instrument, or paper amending, supplementing, correcting, releasing, or terminating any of the documents listed in subparagraph (B)(i) through (iii), the declaration of condominium property regime, the bylaws of the association of apartment owners, the condominium map, or any declaration of merger; and

         (C)  A declaration of covenants, conditions,  restrictions, or similar instrument, by whatever name denominated, the bylaws of any homeowners association, any declaration of annexation or deannexation, any amendments and supplements thereto, and any cancellation or extinguishment thereof, any declaration of merger and any instrument effecting a merger; provided that if only some of the parcels of land covered by the declaration constitutes deregistered land, and if one or more of the remaining parcels constitute registered land, then it shall be necessary to register, and to note on the certificate of title for any registered land:

              (i)  Any declaration annexing property to the declaration;

             (ii)  Any declaration deannexing property from the operation of the declaration; and

            (iii)  Any document, instrument, or paper amending, supplementing, correcting, releasing, or terminating any of the documents listed in subparagraph (C)(i) or (ii), the declaration of covenants, conditions, restrictions, or the bylaws of the homeowners association."

     SECTION 3.  Section 514A-90, Hawaii Revised Statutes, is amended as follows:

     1.  By amending subsection (b) to read: 

     "(b)  Except as provided in subsection (g), when the mortgagee of a mortgage of record or other purchaser of an apartment obtains title to the apartment as a result of foreclosure of the mortgage, the acquirer of title and the acquirer's successors and assigns shall not be liable for the share of the common expenses or assessments by the association of apartment owners chargeable to the apartment which became due prior to the acquisition of title to the apartment by the acquirer.  The unpaid share of common expenses or assessments shall be deemed to be common expenses collectible from all of the apartment owners, including the acquirer and the acquirer's successors and assigns.  The mortgagee of record or other purchaser of the apartment shall be deemed to acquire title and shall be required to pay the apartment's share of common expenses and assessments beginning[:] at the earliest of:

     (1)  Thirty-six days after the order confirming the sale to the purchaser has been filed with the court;

     (2)  Sixty days after the hearing at which the court grants the motion to confirm the sale to the purchaser;

     (3)  Thirty days after the public sale in a nonjudicial power of sale foreclosure [pursuant to section 667-5]; or

     (4)  Upon the recording of the instrument of conveyance[,];

[whichever occurs first;] provided that the mortgagee of record or other purchaser of the apartment shall not be deemed to acquire title under paragraph (1), (2), or (3)[,] if transfer of title is delayed past the [thirty-six days specified in paragraph (1), the sixty days specified in paragraph (2), or the thirty days specified in paragraph (3), when a person who appears at the hearing on the motion or a party to the foreclosure action requests] relevant time period due to a request for reconsideration of the motion or order to confirm sale, [objects] objection to the form of the proposed order to confirm sale, [appeals] or appeal of the decision of the court to grant the motion to confirm sale[,] by a party to a foreclosure action; or the [debtor or mortgagor declares bankruptcy or is involuntarily placed into bankruptcy.] declaration of or involuntary placement into bankruptcy of a debtor or mortgagor.  In any such case, the mortgagee of record or other purchaser of the apartment shall be deemed to acquire title upon recordation of the instrument of conveyance."

     2.  By amending subsection (i) to read:

     "(i)  For purposes of subsections (g) and (h), the following definitions shall apply:

     "Completion" means:

          (1)  In a nonjudicial power of sale foreclosure, when the affidavit [required under section 667-5 is filed;] and conveyance document are recorded pursuant to section 667-33; and

          (2)  In a judicial foreclosure, when a purchaser is deemed to acquire title pursuant to subsection (b).

     "Regular monthly common assessments" shall not include:

          (1)  Any other special assessment, except for a special assessment imposed on all apartments as part of a budget adopted pursuant to section 514A-83.6;

          (2)  Late charges, fines, or penalties;

          (3)  Interest assessed by the association of apartment owners;

          (4)  Any lien arising out of the assessment; or

          (5)  Any fees or costs related to the collection or enforcement of the assessment, including attorneys' fees and court costs."

     SECTION 4.  Section 514B-146, Hawaii Revised Statutes, is amended as follows:

     1.  By amending subsection (b) to read:

"(b)  Except as provided in subsection (g), when the mortgagee of a mortgage of record or other purchaser of a unit obtains title to the unit as a result of foreclosure of the mortgage, the acquirer of title and the acquirer's successors and assigns shall not be liable for the share of the common expenses or assessments by the association chargeable to the unit which became due prior to the acquisition of title to the unit by the acquirer.  The unpaid share of common expenses or assessments shall be deemed to be common expenses collectible from all of the unit owners, including the acquirer and the acquirer's successors and assigns.  The mortgagee of record or other purchaser of the unit shall be deemed to acquire title and shall be required to pay the unit's share of common expenses and assessments beginning[:] at the earlier of:

(1) Thirty-six days after the order confirming the sale to the purchaser has been filed with the court;

(2) Sixty days after the hearing at which the court grants the motion to confirm the sale to the purchaser;

(3) Thirty days after the public sale in a nonjudicial power of sale foreclosure [pursuant to section 667‑5]; or

     (4)  Upon the recording of the instrument of conveyance;

[whichever occurs first;] provided that the mortgagee of record or other purchaser of the apartment shall not be deemed to acquire title under paragraph (1), (2), or (3)[,] if transfer of title is delayed past the [thirty-six days specified in paragraph (1), the sixty days specified in paragraph (2), or the thirty days specified in paragraph (3), when a person who appears at the hearing on the motion or a party to the foreclosure action requests] relevant time period due to a request for reconsideration of the motion or order to confirm sale, [objects] objection to the form of the proposed order to confirm sale, [appeals] or appeal of the decision of the court to grant the motion to confirm sale[,] by a party to a foreclosure action; or the [debtor or mortgagor declares bankruptcy or is involuntarily placed into bankruptcy.] declaration of or involuntary placement into bankruptcy of a debtor or mortgagor.  In any such case, the mortgagee of record or other purchaser of the apartment shall be deemed to acquire title upon recordation of the instrument of conveyance."

     2.  By amending subsection (i) to read:

     "(i)  For purposes of subsections (g) and (h), the following definitions shall apply, unless the context requires otherwise:

"Completion" means:

(1) In a nonjudicial power of sale foreclosure, when the affidavit [required under section 667-5 is filed;] and conveyance document are recorded pursuant to section 667-33; and

(2) In a judicial foreclosure, when a purchaser is deemed to acquire title pursuant to subsection (b).

"Regular monthly common assessments" does not include:

(1) Any other special assessment, except for a special assessment imposed on all units as part of a budget adopted pursuant to section 514B‑148;

(2) Late charges, fines, or penalties;

(3) Interest assessed by the association;

(4) Any lien arising out of the assessment; or

(5) Any fees or costs related to the collection or enforcement of the assessment, including attorneys' fees and court costs."

     SECTION 5.  Section 667-6, Hawaii Revised Statutes, is amended to read as follows:

     "§667-6  Notice to mortgage creditors. (a)  [Whenever a] A mortgage creditor [having] holding 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, the mortgage creditor] a property may submit a written request to [the mortgagee foreclosing or who may foreclose the mortgage by power of sale,] any other mortgage creditor that holds a lien on the same property to receive notice of the [mortgagee's] other mortgage creditor'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] and 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.

(b)  [This request] A request for notice pursuant to this section shall be signed by the [mortgage creditor, or its authorized representative, desiring to receive notice, specifying] requestor or its authorized representative and shall include 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] a request.  The requested 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.

(c)  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."

     SECTION 6.  Chapter 667, part II, Hawaii Revised Statutes, is amended by amending its title to read as follows:

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

FORECLOSURE PROCESS"

     SECTION 7.  Section 667-21, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§667-21[]  Alternate power of sale process; definitions.] 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:

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.] 485A-102.

     "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 8.  Section 667-32, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  The recitals in the affidavit required under subsection (a) may, but need not, be substantially in the following form:

    "(1)  I am duly authorized to represent or act on behalf of (name of mortgagee) ("foreclosing mortgagee") regarding the following power of sale foreclosure.  I am signing this affidavit in accordance with the [alternate] power of sale foreclosure law (Chapter 667, Part II, Hawaii Revised Statutes);

     (2)  The foreclosing mortgagee is a "foreclosing mortgagee" as defined in the power of sale foreclosure law;

     (3)  The power of sale foreclosure is of a mortgage made by (name of mortgagor) ("mortgagor"), dated           , and recorded in the (bureau of conveyances or office of the assistant registrar of the land court) as (recordation information).  The mortgaged property is located at:  (address or description of location) and is identified by tax map key number: .  The legal description of the mortgaged property is attached as Exhibit "A".  The name of the borrower, if different from the mortgagor, is ("borrower");

     (4)  Pursuant to the power of sale provision of the mortgage, the power of sale foreclosure was conducted as required by the power of sale foreclosure law.  The following is a summary of what was done:

         (A)  A notice of default was served on the mortgagor, the borrower, and the following person:  .  The notice of default was served on the following date and in the following manner:  ;

         (B)  The date of the notice of default was (date).  The deadline in the notice for curing the default was (date), which deadline date was at least sixty days after the date of the notice;

         (C)  The notice of default was recorded before the deadline date in the (bureau of conveyances or office of the assistant registrar of the land court).  The notice was recorded on (date) as document no. .  A copy of the recorded notice is attached as Exhibit "1";

         (D)  The default was not cured by the deadline date in the notice of default;

         (E)  A public notice of the public sale was initially published in the classified section of the , a daily newspaper of general circulation in the county where the mortgaged property is located, once each week for three consecutive weeks on the following dates:  .  A copy of the affidavit of publication for the last public notice of the public sale is attached as Exhibit "2".  The date of the public sale was (date).  The last publication was not less than fourteen days before the date of the public sale;

         (F)  The public notice of the public sale was sent to the mortgagor, to the borrower, to the state director of taxation, to the director of finance of the county where the mortgaged property is located, and to the following:  .  The public notice was sent on the following dates and in the following manner:  .  Those dates were after the deadline date in the notice of default, and those dates were at least sixty days before the date of the public sale;

         (G)  The public notice of the public sale was posted on the mortgaged property or on such other real property of which the mortgaged property is a part on (date).  That date was at least sixty days before the date of the public sale;

         (H)  Two public showings (open houses) of the mortgaged property were held (or were not held because the mortgagor did not cooperate);

         (I)  A public sale of the mortgaged property was held on a business day during business hours on:  (date), at (time), at the following location:  .  The highest successful bidder was                      (name) with the highest successful bid price of $          ; and

         (J)  At the time the public sale was held, the default was not cured and there was no circuit court foreclosure action pending in the circuit where the mortgaged property is located; and

     (5)  This affidavit is signed under penalty of perjury."

     SECTION 9.  Section 667-42, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§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 10.  Section 667-5, Hawaii Revised Statutes, is repealed.

     ["§667-5  Foreclosure under power of sale; notice; affidavit after sale.  (a)  When a power of sale is contained in a mortgage, and where the mortgagee, the mortgagee's successor in interest, or any person authorized by the power to act in the premises, desires to foreclose under power of sale upon breach of a condition of the mortgage, the mortgagee, successor, or person shall be represented by an attorney who is licensed to practice law in the State and is physically located in the State.  The attorney shall:

(1) 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

(2) Give any notices and do all acts as are authorized or required by the power contained in the mortgage.

(b)  Copies of the notice required under subsection (a) shall be:

(1) Filed with the state director of taxation; and

(2) Posted on the premises not less than twenty-one days before the day of sale.

(c)  Upon the request of any person entitled to notice pursuant to this section and sections 667-5.5 and 667-6, the attorney, the mortgagee, successor, or person represented by the attorney shall disclose to the requestor the following information:

(1) The amount to cure the default, together with the estimated amount of the foreclosing mortgagee's attorneys' fees and costs, and all other fees and costs estimated to be incurred by the foreclosing mortgagee related to the default prior to the auction within five business days of the request; and

(2) The sale price of the mortgaged property once auctioned.

(d)  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.  Upon request made by any person who is entitled to notice pursuant to section 667-5.5 or 667-6, or this section, the mortgagee or person acting on the mortgagee's behalf shall provide the date and time of a postponed auction, or if the auction is canceled, information that the auction was canceled.  The mortgagee within thirty days after selling the property in pursuance of the power, shall 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.

(e)  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.

(f)  This section is inapplicable if the mortgagee is foreclosing as to personal property only."]

     SECTION 11.  Section 667-5.7, Hawaii Revised Statutes, is repealed.

     ["[§667-5.7]  Public sale.  At any public sale pursuant to section 667-5, the successful bidder at the public sale, as the purchaser, shall not be required to make a downpayment to the foreclosing mortgagee of more than ten per cent of the highest successful bid price."]

     SECTION 12.  Section 667-7, Hawaii Revised Statutes, is repealed.

     ["§667-7  Notice, contents; affidavit.  (a)  The notice of intention of foreclosure shall contain:

(1) A description of the mortgaged property; and

(2) 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.

(b)  The affidavit described under section 667-5 may lawfully be made by any person duly authorized to act for the mortgagee, and in such capacity conducting the foreclosure."]

     SECTION 13.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 14.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 15.  This Act shall take effect upon its approval.

INTRODUCED BY:

_____________________________

Report Title:

Nonjudicial Power of Sale Foreclosure

Description:

Repeals authorization for nonjudicial power of sale foreclosure as contained in a mortgage instrument pursuant to section 667-5, HRS, and requires a foreclosing mortgagee to utilize either the judicial foreclosure process or the statutory power of sale foreclosure process containing additional consumer protections found in part II of chapter 667, HRS; makes conforming amendments.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.