Hawaii Governor Neil Abercrombie recently signed a sweeping foreclosure bill into law that allows homeowners to move nonjudicial foreclosure actions into court as judicial proceedings.
It also enacts a face-to-face mediation program for homeowners facing foreclosure, ends dual tracking, requires mortgage servicers to be licensed and to maintain a physical presence in the state and reins in homeowners associations.
Senate Bill 651 is a comprehensive “extensively researched response” to the state’s housing crisis, Abercrombie said, upon signing the bill earlier this month.
The law provides details on everything from the licensing of servicers to what constitutes proper foreclosure notice or an appropriate auction of property.
Conversion of nonjudicial cases to judicial
In one of its more unusual provisions, the bill allows owner-occupants to petition the court to have their nonjudicial foreclosure case converted to a judicial foreclosure case. This must occur within 30 days of the homeowner getting notice of foreclosure proceedings. The law requires the party commencing the foreclosure action to let owner-occupants know of their right to petition to move the nonjudicial proceeding into court.
The law also stipulates the state’s new mediation program is open to homeowners electing the nonjudicial path and may not be open to those seeking a judicial proceeding unless ordered by a judge.
Lenders also have the right, under the law, to seek deficiency judgments if the case gets moved into court.
Face-to-face mediation
The Department of Commerce and Consumer Affairs will administer the mediation program, which will be self-funded via fees on both the homeowner and the lender. Owner-occupants and mortgagees are each charged $300 in a process that must wrap up within 60 days of the first scheduled meeting. The program will also be funded with a $100 fee on those who record a conveyance document on an owner-occupied property.
The mediation program will begin no later than Oct. 1 and continue until Sept. 30, 2014, according to the governor’s office.
The bill mandates face-to-face mediation although that may be changed via agreements in writing if there is “good cause” as to why the parties cannot meet in person.
Mortgagees who fail to comply with the mediation requirements face fines of up to $1,500 payable to the homeowner.
Foreclosure actions are stayed during the mediation process.
S.B. 651 also prohibits any dual tracking — the common practice in which a loan modification is considered at the same time that a foreclosure proceeding is under way — if the homeowner is under consideration for another modification program such as the federal Home Affordable Modification Program, or HAMP.
If the parties don’t come to an agreement during the mediation, the foreclosure may proceed “along the timeline as it existed on the date before the mortgagor elected dispute resolution, and may proceed as otherwise provided by law.”
Limits placed on homeowners associations
The bill also provides property owners governed by a homeowners association or condominium association 60 days to cure HOA defaults after being notified of the default in person or by certified mail before a foreclosure action could commence.
It also instructs HOAs “not to reject a reasonable payment plan,” described as at a minimum the current maintenance fee and some amount owed on the past due balance.
Write to Kerry Curry. Follow her on Twitter @communicatorKLC.
