THE SENATE	S.B. NO.	960
TWENTY-SEVENTH LEGISLATURE, 2013
STATE OF HAWAII

A BILL FOR AN ACT

relating to foreclosures.

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

SECTION 1.  The legislature finds that one little-known problem of the national foreclosure crisis occurs when banks or other mortgagees walk away from a foreclosure.  This problem, sometimes referred to as the "zombie title" problem, occurs when homeowners move out after receiving notice of a foreclosure sale.  Prior to a public sale, the bank, mortgagee, or other financial institution may walk away from the foreclosure process and cancel the sale without notifying the homeowners.

     The legislature further finds that homeowners legally own their property and the homeowners' names remain on the title until the date of public sale.  Without a public sale, the foreclosure process is left in limbo.  Homeowners may be left with all of the responsibilities for a property but none of the rights that existed prior to the start of the foreclosure process.  Unfortunately for homeowners, there are no regulations that require foreclosing mortgagees to inform a homeowner when a bank decides not to foreclose.  Unsuspecting homeowners may suffer severe financial penalties as a result of canceled foreclosure sales they knew nothing about.

     Therefore, the purpose of this Act is to specify that it shall be a prohibited practice for a foreclosing mortgagee or foreclosing association to cancel a public sale at any time before the date of the public sale without written notification of the cancellation delivered to the mortgagor, the borrower, and other specified persons.

SECTION 2.  Section 667-56, Hawaii Revised Statutes, is amended to read as follows:

"§667-56  Prohibited conduct.  It shall be a prohibited practice for any foreclosing mortgagee to engage in any of the following practices:

(1) Holding a public sale on a date, at a time, or at a place other than that described in the public notice of the public sale or a properly noticed postponement;

(2) Specifying a fictitious place in the public notice of the public sale;

(3) Conducting a postponed public sale on a date other than the date described in the new public notice of the public sale;

(4) Canceling a public sale at any time before the date of the public sale without written notification of the cancelation delivered to the mortgagor, the borrower, and any other person previously entitled to receive notice under section 667-22(e); provided that this paragraph shall not apply to a public sale canceled after cure of default under section 667-28(d);

    [(4)] (5) Delaying the delivery of the recorded, conformed copy of the conveyance document to a bona fide purchaser who purchases in good faith for more than sixty days after the completion of the public sale;

    [(5)] (6) Completing nonjudicial foreclosure proceedings during short sale escrows with a bona fide purchaser if the short sale offer is at least ten per cent greater than the public sale price; provided that escrow is opened within ten days and closed within forty-five days of the public sale; and provided further that a bona fide short sale purchaser shall have priority over any other purchaser;

    [(6)] (7) Completing nonjudicial foreclosure proceedings during bona fide loan modification negotiations with the mortgagor; or

    [(7)] (8) Completing nonjudicial foreclosure proceedings against a mortgagor who has been accepted or is being evaluated for consideration for entry into any federal loan modification program before obtaining a certificate or other documentation confirming that the mortgagor is no longer eligible for, or an active participant of, that federal program."

SECTION 3.  Section 667-104, Hawaii Revised Statutes, is amended to read as follows:

"[[]§667-104[]]  Prohibited conduct.  It shall be a prohibited practice for any association to engage in any of the following practices:

(1) Holding a public sale on a date, at a time, or at a place other than that described in the public notice of the public sale or a properly noticed postponement;

(2) Specifying a fictitious place in the public notice of the public sale;

(3) Conducting a postponed public sale on a date other than the date described in the new public notice of the public sale; [or]

(4) Canceling a public sale at any time before the date of the public sale without written notification of the cancelation delivered to the unit owner and any other person previously entitled to receive notice under section 667-92(e); provided that this paragraph shall not apply to a public sale canceled after cure of default under section 667-97(d); or

    [(4)] (5) Completing or attempting to complete nonjudicial foreclosure proceedings against a unit owner in violation of section 667-92(c)."

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect upon its approval.

INTRODUCED BY:

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Report Title:

Prohibited Conduct; Foreclosures; Public Sales; Zombie Title

Description:

Establishes that it is a prohibited practice for a foreclosing mortgagee or foreclosing association to cancel a public sale at any time before the date of the public sale without written notification of the cancelation delivered to the mortgagor, the borrower, and other specified persons.

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