Report Title:

PART I

SECTION 1. The legislature finds that members of the military and their dependents are increasingly vulnerable to unscrupulous and predatory lending practices. These practices create a cycle of debt, thus detracting from military members' financial well being and military readiness. The John Warner National Defense Authorization Act for Fiscal Year 2007 (Public Law No. 109-364) contains provisions that place limits on the terms of credit that may be extended to military members and their dependents. This federal act and the regulations that implement it are designed to protect military members and their families from unfair lending practices that are commonly used by issuers of payday loans, vehicle title loans, and tax refund anticipation loans. While federal regulations do not designate an enforcement agency within the federal government, they do not limit states from enforcing the federal law. Therefore, the legislature also finds that assistance from state regulators is essential to enforcing the law and protecting military service members and dependents from fraud, deception, and abusive practices. The legislature further finds that, in order to enforce the law, state authorities should be authorized to access the Federal Trade Commission's Consumer sentinel/military database, part of the Consumer Sentinel Network, which provides a secure database of allegations of fraud, deception, and abusive practices reported by military service members.

The purpose of this Act is to authorize the director of commerce and consumer affairs to enforce certain federal laws that protect military members and their families from abusive lending practices.

SECTION 2. Chapter 481B, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§481B- Protection of military; lending practices. (a) The director of commerce and consumer affairs may enforce Title 10 United States Code section 987, (section 670 of the John Warner National Defense Authorization Act for Fiscal Year 2007, Public Law No. 109-364), and federal regulations promulgated thereunder, including but not limited to Title 32 Code of Federal Regulations Part 232.

(b) The director of commerce and consumer affairs may enter into an agreement with the United States Federal Trade Commission to allow the director to access the Consumer sentinel/military database, part of the Consumer Sentinel Network, for the purpose of enforcing subsection (a)."

PART II

SECTION 3. The legislature finds that the foreclosure crisis in our State is far from over. The majority of mortgage lenders have halted nonjudicial foreclosure proceedings due to their perceived liability risk following the enactment of Act 48, Session Laws of Hawaii 2011. This has created a huge backlog of foreclosures in the State.

In comparison, the increase in judicial foreclosures is modest compared to the number of foreclosures anticipated to occur in the near future. A recent article by the Associated Press dated March 14, 2012, noted that RealtyTrac projects foreclosures to rise by 25 per cent this year.

The legislature asserts that the ongoing efforts to implement effective foreclosure mediation, or dispute resolution programs, in both judicial and nonjudicial foreclosures are critical in avoiding the unnecessary loss of homes as well as addressing the courts’ growing foreclosure backlog.
In addition, there is growing evidence that many of these pending foreclosures involve abuses and fraud committed by mortgage lenders. On February 15, 2012, the New York Times reported that an audit of four hundred recent foreclosures completed by the San Francisco County’s recording office showed that eighty-four per cent of the files contained what appeared to be clear violations of law. Fully two-thirds of these had at least four violations or irregularities. In fact, it was clear that many of the mortgage lenders proceeding with foreclosure actions might not be able to adequately demonstrate its right to collect on the borrower’s indebtedness, or prove that the mortgagee has legal authority to foreclose on a property.

The legislature further notes that while a recent multi-state settlement agreement with the five largest national loan services was intended to address foreclosure misconduct and direct “hard dollars” to states (including Hawaii), for counseling, public education, mediation, and the enforcement of laws protecting mortgage consumers, questions have been raised as to whether the settlement provides adequate protections and relief to Hawaii’s consumers. Moreover, this settlement does not even cover half the mortgage loans in the state.

Accordingly, this Act creates a mortgage loan purchase program intended to assist consumers who are able to pay a mortgage but are facing imminent foreclosure. The Hawaii housing finance and development corporation (corporation) would purchase the existing loan between a mortgage lender and a property occupant. The corporation would then enter into a loan agreement with the property occupant.

The mortgage lender would be required to respond to requests for proof of legal authority to foreclose on the property. The mortgage lender's responses and the documentation they provide would be recorded. This would enable the corporation to assess the value of defective loans, enhance transparency to the mortgage lending process, and allow for better resolution of previous bad actions by mortgage lenders through the courts.

The corporation would extend the full faith and credit of the State of Hawaii to guaranty payment on the existing loan to the mortgage lender. However, because this guaranty will undoubtedly raise the value of the indebtedness of the existing loan, the corporation would be able to further negotiate a lower purchase price with the mortgage lender on the existing loan.

In addition, the corporation would be authorized to aggregate the purchase of multiple existing loans with a single mortgage lender, allowing for even lower purchase prices to be negotiated because of economies of scale.

The savings on the corporation's purchase price of the loan could then be extended to the property occupant since the total indebtedness on the loan between the corporation and the property occupant would be less than the existing loan between the mortgage lender and the property occupant.

This Act serves multiple goals. Because the mortgage lender would deal directly with the corporation, a quasi-governmental agency, rather than the average “consumer”, the corporation would provide greater scrutiny of lender practices in implementing the purchase of the existing loan, thus protecting the interests of the general consuming public.

As a requirement under this Act, the property occupant must agree to assign a limited power of attorney to the corporation on matters pertaining to the existing loan between the property occupant and the mortgage lender. This will allow the corporation to represent the property occupant during all transactions involving the property while the agreement between the property occupant and the corporation is in effect.

Most importantly, the property occupant benefits by being able to continue to occupy the property so long as the property occupant can satisfy a reasonable loan with the corporation.

The mortgage lender would also benefit from this Act because the past indebtedness or an agreed upon portion thereof would be guaranteed by the full faith and credit of the State, even in cases where it is unclear whether the mortgage lender is able to show clear title and legal standing to collect on the mortgage loan.

And finally, the State will benefit by: ensuring clear title to residential property; reducing the hardships on families and communities resulting from wrongful or avoidable foreclosures; safeguarding our courts and recording systems from illegal, improper, or fraudulent filings; stabilizing the housing market; and preserving the existing stock of residential housing.

Should the property occupant subsequently default, the corporation would take possession of the property. The property can then be land banked, revitalized, rented or resold by the corporation, thus eliminating urban blight and deteriorating property values experienced in many communities throughout the United States because of the mortgage lending crisis.

This Act would also require program participants to consult with an approved housing counselor or approved budget and credit counselor.

The purpose of this Act is to create a distressed residential properties program to address the mortgage loan crisis in the State of Hawaii.

SECTION 4. Chapter 201H, Hawaii Revised Statutes, is amended by adding a new subpart to Part III, to be appropriately designated and to read as follows:

“K. DISTRESSED RESIDENTIAL PROPERTIES PROGRAM

§201H- A. Distressed residential properties program special fund; special recording fees; revenue bonds. (a) There is established the distressed residential properties program special fund within the treasury of the State to be administered by the corporation. The following may be deposited into the fund: the special recording fee established pursuant to this section; the assessment levied on financial institutions established pursuant to section 412:2-105; appropriations made by the legislature; private contributions; repayment of loans; interest; other returns; and money from other sources. The fund shall be used for the necessary expenses in administering programs authorized by this subpart.

(b) A special mortgage recording fee shall be imposed on each mortgage secured by residential property and each amendment to a mortgage secured by residential property which increases the principal amount of the secured debt which is recorded in the bureau of conveyances of the State under chapter 502 or filed with the assistant registrar of the land court of the State under chapter 501.

The special fee shall be in an amount equal to one-twentieth of one percent of the stated principal amount of the debt secured by the mortgage or, in the case of an amendment of a mortgage, an amount equal to one-twentieth of one percent of the amount of the increase of the stated principal debt.

The special fee shall be in addition to any applicable fees under chapter 501 or 502. The special fees shall be collected by escrow depositories licensed under chapter 449, or financial institutions authorized to engage in the escrow business, or persons and companies permitted to engage in limited escrow transactions under section 449-3. The special mortgage recording fees shall be collected prior to recordation of the mortgage with the bureau of conveyances or the assistant registrar of the land court of the State and shall be deposited into the distressed residential properties program special fund. The bureau of conveyances and the assistant registrar of the land court may also collect and transmit any special fees for deposit into the distressed residential properties program special fund.

(c) Notwithstanding any law to the contrary, the fund may be used to purchase, in whole or in part, existing loans, of distressed residential properties in accordance with this subpart. The corporation may contract with a mortgage lender to administer the purchase of existing loans. The contract may contain provisions as determined by the corporation to be necessary or appropriate to provide security for its bonds.

(d) Notwithstanding any law to the contrary, the corporation may issue revenue bonds in amounts not to exceed $25,000,000 for the purposes of this part. The revenue bonds shall not constitute indebtedness within the meaning of any constitutional or statutory provision limiting the incurring of indebtedness. Revenue bonds issued under this section and the income derived therefrom shall be exempt from all state and county taxation. Proceeds received from the issuance of any revenue bond shall be deposited into the distressed residential properties program special fund.

(e) At least twenty days prior to the convening of each regular session, the corporation shall report to the legislature on the number of loans purchased and the disposition of the loans by the corporation.

§201H- B. Program eligibility. (a) A mortgagor who has been using the subject property as a primary residence for a continuous period of not less than two hundred days immediately prior to the date when the mortgagor received a letter of default on the mortgage or notice that the mortgagor’s application for a mortgage modification under a federally sponsored program has been denied shall be entitled to apply for consideration in the distressed residential properties program; provided that no property subject to legislative approval of sale or gift of land in accordance with section 171-64.7, shall be eligible to participate in this program. The application shall conform to rules adopted by the corporation and shall include copies of:

(1) The three most recent billing statements for the mortgage loan;

(2) The mortgage document; and

(3) The letter of default or notice that the mortgagor’s application for a mortgage modification under a federally sponsored program has been denied.

(4) Documentation, pursuant to rules adopted by the corporation in accordance with chapter 91, by the corporation, detailing the mortgagor’s financial condition, including but not limited to any copies of pay stubs, W-2 forms, social security or disability income, retirement income, child support income, or any other income that the corporation deems relevant to the mortgagor’s ability to fulfill the terms of this subpart.

(b) Within forty-five days of receiving an application pursuant to subsection (a), the corporation shall review the application and determine whether the property shall be accepted for further evaluation.

If the corporation accepts the property for further evaluation, within the forty-five day review period, the corporation shall conduct an appraisal of the property in accordance with rules adopted pursuant to chapter 91, and notify the mortgagee and its agents on record at the bureau of conveyances, including all affiliates that may be reported pursuant to any affiliate statement recorded pursuant to sections 454M-5(a)(4) and 667-58(a), and any entities purporting to represent the mortgagee, as reflected in the mortgage statements provided in the application. The notice shall describe the program and include details about the program's requirements, as set forth by rules adopted by the corporation in accordance with chapter 91. The corporation shall either file a copy of the notice in the office of the assistant registrar of the land court under chapter 501, or record it in the bureau of conveyances under chapter 502, or both, as appropriate.

If the corporation declines to accept the property for further evaluation, the corporation shall provide written notification to the applicant stating the reasons for that determination within the forty-five day review period.

(c) Within thirty days of receiving notice under subsection (b), the mortgagee shall submit a written response to the corporation. The response shall include:

(1) A copy of the promissory note, signed by the mortgagor, including any endorsements, allonges, amendments, or riders to the note evidencing the mortgage debt and the mortgagee’s legal right to enforce the note under section 490:3-203(b) and articles 3 and 9 of the Uniform Commercial Code generally;

(2) A copy of the mortgage document and any amendments, riders, or other documentation evidencing the mortgagee's right to foreclose and interest in the property, including any interest as a successor, transferee, or assignee; and

(3) A certification under penalty of perjury describing the nature of the mortgagee's legal ownership of the mortgage loan that includes:

(A) Information about the chain of possession and the transfer between all holders in due course of the mortgage note from the origination of the mortgage loan to the present mortgagee; provided that descriptions of each transaction that effectuated a transfer of the mortgage note shall include:

(i) The names of the individuals involved;

(ii) The principal employers and the employers' state of incorporation for the individuals involved;

(iii) The authority conferred to the individuals;

(iv) The dates on which the mortgage note was negotiated; and

(v) The manner in which the note was endorsed;

(B) Information about the assignment or transfer of each mortgage agreement, including:

(i) The entities assigned the rights to enforce the mortgage agreement;

(ii) The individuals who signed documentation to effectuate the transfer and their titles, principal employers, and principal employers' state of incorporation;

(iii) A description of the authority conferred to the individuals;

(iv) The dates on which the mortgage agreements were assigned or transferred;

(v) The manner of the assignment or transfer; and

(vi) A description of the extent to which the mortgage agreement transfers or assignments coincided with the negotiations or transfers of the mortgage note; and

(C) The bureau of conveyances document number for every assignment or transfer of the mortgage note or mortgage agreement recorded and a copy of each filing.

The mortgagee's response shall provide an explanation for any failure to provide any of the items enumerated in this subsection. A copy of all documents received from the mortgage lender, including any response by the mortgage lender for failure to transmit required documentation shall be filed or recorded by the corporation in the office of the assistant registrar of the land court under chapter 501, or the bureau of conveyances under chapter 502, or both, as appropriate.

(d) The corporation, at any time, may contract with the mortgage lender to purchase, in whole or in part, the existing loan. The mortgagee’s response under subsection (c) shall be used to evaluate the value of the existing loan. The sale of the existing loan shall be executed by way of mortgage, agreement of sale, or other instrument to secure the indebtedness with the mortgage lender.

If the mortgage lender declines to contract for purchase of the existing loan, the corporation may acquire the existing loan by condemnation in accordance with part iv of chapter 101, and the title to the property in accordance with chapter 101. For purposes of this subsection, the requirements of section 201H-13, shall not apply.

(e) The purchase of the existing loan from the mortgage lender shall be construed as a loan with the property occupant, which shall be executed by way of mortgage, agreement of sale, or other instrument to secure the indebtedness with the corporation. The agreement of sale, mortgage, or other instrument executed between the property occupant and the corporation shall contain:

(1) A provision transferring title to the property to the corporation; provided that upon satisfactory completion of all terms and conditions of the agreement, the corporation shall transfer title back to the property occupant; and

(2) A provision assigning power of attorney to the corporation on matters pertaining to the existing loan between the property occupant and the mortgage lender; provided that the assignment of power of attorney shall be extinguished upon satisfactory completion of all terms and conditions of the agreement, or default on the agreement by the property occupant.

(f) If the property occupant defaults on the payment of any loan, the corporation shall take all necessary action to collect the delinquent principal and interest on the loan and may take all action allowed to holders of obligations, including the power to repossess, lease, rent, repair, renovate, modernize, and sell the property.

(g) The mortgages, agreements of sale, and other instruments of indebtedness, at the direction of the corporation, may be assigned to and serviced by commercial banks and other lending institutions doing business in the State at a fee of not more than one-half of one per cent of the amount loaned to the purchaser.

§201H- C. Terms and conditions of qualified mortgages. The terms and conditions for property occupants and qualified mortgagees participating in the distressed residential properties program shall be set forth by rules adopted by the corporation in accordance with chapter 91; provided that:

(1) The amount of the purchase price of the mortgage loan shall be paid to the qualified mortgagee and shall be deemed to fully satisfy the subject mortgage debt and release the lien held by the mortgagee at the time the mortgage, agreement of sale or other instrument to secure the indebtedness between the corporation and the mortgagee is executed;

(2) The property occupant shall be permitted to occupy the property for the duration of the loan period so long as the property occupant meets all requirements of the loan;

(3) The property occupant shall be required to consult with an approved housing counselor or an approved budget and credit counselor as defined under chapter 667, Hawaii Revised Statutes;

(4) The property occupant shall be prohibited from selling the property for a period of 60 months after the terms of the loan agreement have been satisfied; and

(5) Upon any resale of the property to a subsequent purchaser, the property occupant shall pay the corporation a share of the appreciation represented by the amount of the existing loan purchased by the corporation divided by the total amount of the mortgage loan agreed upon between the mortgage lender and the property occupant, rounded up to the nearest one-hundredth of one percentage point, multiplied by the difference between the resale price of the property minus the value of the property at the time the mortgage loan was executed between the mortgage lender and the property occupant; provided that the property is sold for fair market value at a price approved by the corporation.”

SECTION 5. Section 28-8.3, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

“(a) No department of the State other than the attorney general may employ or retain any attorney, by contract or otherwise, for the purpose of representing the State or the department in any litigation, rendering legal counsel to the department, or drafting legal documents for the department; provided that the foregoing provision shall not apply to the employment or retention of attorneys:

(1) By the public utilities commission, the labor and industrial relations appeals board, and the Hawaii labor relations board;

(2) By any court or judicial or legislative office of the State; provided that if the attorney general is requested to provide representation to a court or judicial office by the chief justice or the chief justice's designee, or to a legislative office by the speaker of the house of representatives and the president of the senate jointly, and the attorney general declines to provide such representation on the grounds of conflict of interest, the attorney general shall retain an attorney for the court, judicial, or legislative office, subject to approval by the court, judicial, or legislative office;

(3) By the legislative reference bureau;

(4) By any compilation commission that may be constituted from time to time;

(5) By the real estate commission for any action involving the real estate recovery fund;

(6) By the contractors license board for any action involving the contractors recovery fund;

(7) By the office of Hawaiian affairs;

(8) By the department of commerce and consumer affairs for the enforcement of violations of chapters 480 and 485A;

(9) As grand jury counsel;

(10) By the Hawaiian home lands trust individual claims review panel;

(11) By the Hawaii health systems corporation, or its regional system boards, or any of their facilities;

(12) By the auditor;

(13) By the office of ombudsman;

(14) By the insurance division;

(15) By the University of Hawaii;

(16) By the Kahoolawe island reserve commission;

(17) By the division of consumer advocacy;

(18) By the office of elections;

(19) By the campaign spending commission;

(20) By the Hawaii tourism authority, as provided in section 201B-2.5;

(21) By the division of financial institutions for any action involving the mortgage loan recovery fund; [or]

(22) By the Hawaii housing finance and development corporation for purposes of part III of chapter 201H; or

(23) By a department, in the event the attorney general, for reasons deemed by the attorney general to be good and sufficient, declines to employ or retain an attorney for a department; provided that the governor waives the provision of this section.

SECTION 6. Section 76-16, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

“(b) The civil service to which this chapter applies shall comprise all positions in the State now existing or hereafter established and embrace all personal services performed for the State, except the following:

(1) Commissioned and enlisted personnel of the Hawaii national guard as such, and positions in the Hawaii national guard that are required by state or federal laws or regulations or orders of the national guard to be filled from those commissioned or enlisted personnel;

(2) Positions filled by persons employed by contract where the director of human resources development has certified that the service is special or unique or is essential to the public interest and that, because of circumstances surrounding its fulfillment, personnel to perform the service cannot be obtained through normal civil service recruitment procedures. Any such contract may be for any period not exceeding one year;

(3) Positions that must be filled without delay to comply with a court order or decree if the director determines that recruitment through normal recruitment civil service procedures would result in delay or noncompliance, such as the Felix-Cayetano consent decree;

(4) Positions filled by the legislature or by either house or any committee thereof;

(5) Employees in the office of the governor and office of the lieutenant governor, and household employees at Washington Place;

(6) Positions filled by popular vote;

(7) Department heads, officers, and members of any board, commission, or other state agency whose appointments are made by the governor or are required by law to be confirmed by the senate;

(8) Judges, referees, receivers, masters, jurors, notaries public, land court examiners, court commissioners, and attorneys appointed by a state court for a special temporary service;

(9) One bailiff for the chief justice of the supreme court who shall have the powers and duties of a court officer and bailiff under section 606-14; one secretary or clerk for each justice of the supreme court, each judge of the intermediate appellate court, and each judge of the circuit court; one secretary for the judicial council; one deputy administrative director of the courts; three law clerks for the chief justice of the supreme court, two law clerks for each associate justice of the supreme court and each judge of the intermediate appellate court, one law clerk for each judge of the circuit court, two additional law clerks for the civil administrative judge of the circuit court of the first circuit, two additional law clerks for the criminal administrative judge of the circuit court of the first circuit, one additional law clerk for the senior judge of the family court of the first circuit, two additional law clerks for the civil motions judge of the circuit court of the first circuit, two additional law clerks for the criminal motions judge of the circuit court of the first circuit, and two law clerks for the administrative judge of the district court of the first circuit; and one private secretary for the administrative director of the courts, the deputy administrative director of the courts, each department head, each deputy or first assistant, and each additional deputy, or assistant deputy, or assistant defined in paragraph (16);

(10) First deputy and deputy attorneys general, the administrative services manager of the department of the attorney general, one secretary for the administrative services manager, an administrator and any support staff for the criminal and juvenile justice resources coordination functions, and law clerks;

(11) (A) Teachers, principals, vice-principals, complex area superintendents, deputy and assistant superintendents, other certificated personnel, not more than twenty noncertificated administrative, professional, and technical personnel not engaged in instructional work;

(B) Effective July 1, 2003, teaching assistants, educational assistants, bilingual/bicultural school-home assistants, school psychologists, psychological examiners, speech pathologists, athletic health care trainers, alternative school work study assistants, alternative school educational/supportive services specialists, alternative school project coordinators, and communications aides in the department of education;

(D) Members of the faculty of the University of Hawaii, including research workers, extension agents, personnel engaged in instructional work, and administrative, professional, and technical personnel of the university;

(12) Employees engaged in special, research, or demonstration projects approved by the governor;

(13) Positions filled by inmates, kokuas, patients of state institutions, persons with severe physical or mental handicaps participating in the work experience training programs, and students and positions filled through federally funded programs that provide temporary public service employment such as the federal Comprehensive Employment and Training Act of 1973;

(14) A custodian or guide at Iolani Palace, the Royal Mausoleum, and Hulihee Palace;

(15) Positions filled by persons employed on a fee, contract, or piecework basis, who may lawfully perform their duties concurrently with their private business or profession or other private employment and whose duties require only a portion of their time, if it is impracticable to ascertain or anticipate the portion of time to be devoted to the service of the State;

(16) Positions of first deputies or first assistants of each department head appointed under or in the manner provided in section 6, article V, of the Hawaii state constitution; three additional deputies or assistants either in charge of the highways, harbors, and airports divisions or other functions within the department of transportation as may be assigned by the director of transportation, with the approval of the governor; four additional deputies in the department of health, each in charge of one of the following: behavioral health, environmental health, hospitals, and health resources administration, including other functions within the department as may be assigned by the director of health, with the approval of the governor; an administrative assistant to the state librarian; and an administrative assistant to the superintendent of education;

(17) Positions specifically exempted from this part by any other law; provided that all of the positions defined by paragraph (9) shall be included in the position classification plan;

(18) Positions in the state foster grandparent program and positions for temporary employment of senior citizens in occupations in which there is a severe personnel shortage or in special projects;

(19) Household employees at the official residence of the president of the University of Hawaii;

(20) Employees in the department of education engaged in the supervision of students during meal periods in the distribution, collection, and counting of meal tickets, and in the cleaning of classrooms after school hours on a less than half-time basis;

(21) Employees hired under the tenant hire program of the Hawaii public housing authority; provided that not more than twenty-six per cent of the authority's work force in any housing project maintained or operated by the authority shall be hired under the tenant hire program;

(22) Positions of the federally funded expanded food and nutrition program of the University of Hawaii that require the hiring of nutrition program assistants who live in the areas they serve;

(23) Positions filled by severely handicapped persons who are certified by the state vocational rehabilitation office that they are able to perform safely the duties of the positions;

(24) The sheriff;

(25) A gender and other fairness coordinator hired by the judiciary; [~~and~~]

(26) Positions in the Hawaii housing finance and development corporation hired or retained to effectuate part III, subpart K of chapter 201H; and

(27) Positions in the Hawaii national guard youth and adult education programs.

The director shall determine the applicability of this section to specific positions.

Nothing in this section shall be deemed to affect the civil service status of any incumbent as it existed on July 1, 1955.”

SECTION 7. Section 201H-4, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

“(a) The corporation may:

(1) Sue and be sued;

(2) Have a seal and alter the same at pleasure;

(3) Make and execute contracts and other instruments necessary or convenient to the exercise of its powers;

(4) Employ or retain without regard to chapters 76 and 89, by contract or otherwise, attorneys, investigators, investigator assistants, auditors, accountants, paralegals, consultants, experts, and other professional, technical, and support staff as necessary to promote the effective and efficient implementation of part iii, subpart K;

(5) Adopt bylaws and rules in accordance with chapter 91 for its organization, internal management, and to carry into effect its purposes, powers and programs; and

[~~(5)~~](6) Notwithstanding any law to the contrary, establish and collect fees for administrative expenses incurred by the corporation to process applications for loans, grants, services, and real estate documents related to the corporation’s functions under this chapter.”

SECTION 8. Section 201H-12, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

“(e) The corporation may contract or sponsor with any county housing authority, or person, or establish pursuant to this chapter, subject to the availability of funds, an experimental or demonstration housing project designed to meet the needs of elders; the disabled; displaced or homeless persons; low- and moderate-income persons; the owners of distressed residential properties in accordance with part III of chapter 201H; teachers or other government employees; or university and college students and faculty.”

SECTION 9. Section 412:2-105, Hawaii Revised Statutes, is amended to read as follows:

“§412:2-105 Fees and assessments. (a) The commissioner may charge an examination fee based upon the cost per hour per examiner for all financial institutions examined by the commissioner or the commissioner’s staff. Effective July 1, 1995, the hourly fee shall be $40. After July 1, 1996, the commissioner may establish, increase, decrease, or repeal the hourly fee when necessary pursuant to rules adopted in accordance with chapter 91.

(b) In addition to the examination fee, the commissioner may charge any financial institution examined or investigated by the commissioner or the commissioner’s staff, additional amounts for travel, per diem, mileage and other reasonable expenses incurred in connection with the examination.

(c) The commissioner shall bill the affected financial institution for examination fees and expenses as soon feasible after the close of the examination or investigation. The affected financial institution shall pay the division of financial institutions within thirty days following the billing. All such payments shall be deposited to the compliance resolution fund established pursuant to 26-9(o). All disputes relating to these billings between the affected financial institutions and the commissioner shall be resolved in accordance with the procedures for contested cases under chapter 91.

(d) The commissioner, by rules adopted in accordance with chapter 91, may set reasonable fee amounts to be collected by the division in connection with its regulatory functions, including without limitation, any fees for renewals, applications, licenses, and charters. Unless otherwise provided by statute, all such fees shall be deposited into the compliance resolution fund established pursuant to section 26-9(o).

(e) Commencing on July 1, 2012, the commissioner shall collect from each affected financial institution an assessment equal to $100 for each mortgage loan secured by residential property in the State of Hawaii issued in accordance with this chapter during the previous fiscal year. The assessment shall be levied on the earnings of the financial institution. The collected surcharge shall be deposited into the distressed residential properties program special fund established pursuant to section 201H- A.

(f) A financial institution that fails to make a payment required by this section shall be subject to an administrative fine of not more than $250 per day for each day it is in violation of this section, which fine, together with the amount due under this section, may be recovered pursuant to section 412:2-611 and shall be deposited into the compliance resolution fund established pursuant to section 26-9(o)[.]; provided that any fine levied for the non-payment of the surcharge required pursuant to subsection (e) shall be deposited into the distressed residential properties program special fund established pursuant to section 201H- A.”

SECTION 10. The attorney general shall transfer $8,000,000 for fiscal year 2012-2013, in other funds received as part of the multi-state settlement agreement with mortgage lenders, to the distressed residential properties program special fund established pursuant to section 201H- A, Hawaii Revised Statutes.

SECTION 11. Notwithstanding any law to the contrary, the director of finance shall deposit into the distressed residential properties program special fund all federal moneys received by the State from the American Recovery and Reinvestment Act of 2009 that were not appropriated, expended, allotted, nor encumbered on July 2, 2012; provided that if the federal funds to be deposited includes the statutory authority to issue bonds, the director of finance shall sell the bonds at its earliest convenience and deposit the proceeds into the distressed residential properties special fund; and provided further that if the deposit of any funds may jeopardize the receipt of any other federal funds, those fund shall be exempted from this section.

PART III

SECTION 12. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 13. This Act shall take effect upon its approval; provided that part II of this Act shall take effect on July 1, 2012.

THE SENATE	S.B. NO.	2394
TWENTY-SIXTH LEGISLATURE, 2012		S.D. 1
STATE OF HAWAII		H.D. 2
		Proposed