SB2441

SECTION 1. Chapter 321, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"Part . HEALTH CARE PROVIDER LOAN GUARANTEES

§321- definitions. As used in this part

"Borrower" means a qualified health care provider that is an obligor, maker, or cosigner under a loan agreement with a private lender.

"Department" means the department of health.

"Director" means the director of health.

"Fund" means the health care provider loan guarantee special fund.

"Private lender" includes banks, savings and loan associations, credit unions, mortgage companies, and other qualified companies whose business includes the making of loans in the State.

"Qualified health care provider" means:

(1) A physician licensed under chapter 453;

(2) A physician assistant licensed under chapter 453;

(3) A nurse licensed under chapter 457; or

(4) A legal entity registered to do business in the State to provide health care services, and which is controlled by a person licensed under chapter 453 or 457 who owns a majority ownership interest in such entity.

§321- Health care provider loan guarantee special fund; established. (a) There is established in the state treasury a special fund to be known as the health care provider loan guarantee special fund to be administered and expended by the department. The moneys in the fund shall be used to provide guarantees from private lenders to qualified health care provider borrowers in the State.

(b) The fund shall not exceed $5,000,000 and shall consist of:

(1) All fees collected or received by the department under this part;

(2) Repayments from loans including principal and interest collected or received by the department under this part; and

(3) All other funds received by the department and legally available for the purpose of the fund.

§321- Loans guaranteed by the department. (a) The department may guarantee up to ninety per cent of the principal balance of a secured loan made to a qualified health care provider by a private lender who is unable to otherwise lend the qualified health care provider sufficient funds at reasonable rates and terms; provided that at no time shall the aggregate amount of the State's liability, contingent or otherwise, on loans guaranteed under this section exceed $5,000,000 based on a reserve level established at twenty-five per cent of the loan guarantee amount, with the reserve amount to be funded being calculated by determining the difference between the fund balance at the beginning of each fiscal year and its annual authorization ceiling.

(b) Interest charged on a guaranteed loan made under this section shall be determined by the department based on the market rate of interest charged by the private lender for a similar type of loan unless waived by the director.

(c) When the application for a guaranteed loan has been approved by the department, the department shall issue to the private lender a guaranty for that percentage of the loan on which it guarantees payment of principal and interest. The private lender shall collect all payments and fees from the borrower and shall otherwise service the loan.

(d) In return for the department's guaranty, the private lender shall remit a one-time fee of two per cent on the principal amount of the guaranteed portion of the loan at the time the loan is booked, except for the following:

(1) On loans of $75,000 or less with a maturity exceeding twelve months, a reduced fee of one per cent; and

(2) On loans with a maturity of twelve months or less, a reduced fee of one per cent shall be paid.

This fee may be paid by the borrower as a cost for the loan.

(e) When any installment of principal and interest has been due for sixty days and has not been paid by the borrower, the department shall issue, on request of the private lender, a check for the percentage of the overdue payment guaranteed, thereby acquiring a division of interest in the collateral pledged by the borrower in proportion to the amount of the payment. The department shall be reimbursed for any amounts so paid plus the applicable interest rate, where payment is collected from the borrower.

(f) Upon request by the private lender, and under conditions specified in rules adopted by the department, the department may agree to convert a portion or all of the guaranteed percentage of the principal balance of the loan to a participating share held by the department.

(g) Should the private lender deem that foreclosure proceedings are necessary to collect moneys due from the borrower, it shall so notify the department in writing. Within thirty days of the department's receipt of the notification, the department may elect to request an assignment of the loan on payment in full to the private lender of the principal and interest due. Foreclosure proceedings, to the extent permitted by law, shall be held in abeyance in the interim.

(h) The private lender may reduce the percentage of the principal balance guaranteed under this section at any time.

(i) The department shall prescribe forms and adopt administrative rules pursuant to chapter 91 to carry out the purpose of this part, which may include the following:

(1) Prioritization of loan guarantees to promote access to health care services in under-served areas of the State;

(2) Conditions under which the State may become a co-guarantor or a subordinate guarantor to a loan guarantee offered by a federal government program;

(3) Conditions under which the guaranteed percentage of the principal balance of a loan may be converted to a participating share held by the department; and

(4) Specific types of loans that may be guaranteed pursuant to this part, including term loans, hard money loans, line of credit loans, equipment loans, personal loans, and other types of loans that can help directly or indirectly alleviate health care service shortages in the State."

SECTION 2. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2441
THIRTIETH LEGISLATURE, 2020
STATE OF HAWAII