Act 48 suspends nonjudicial foreclosures in Hawaii and creates a mortgage foreclosure dispute resolution program administered by the state Department of Commerce and Consumer Affairs' Office of Administrative Hearings.
The new law is for nonjudicial foreclosures, which is how lenders in most cases in Hawaii seize residences from homeowners who've defaulted on their loans. As the term implies, nonjudicial foreclosures are those handled outside the oversight of a judge.
According to a DCCA fact sheet on the new law:
The program would begin no later than Oct. 1 and continue through Sept. 30, 2014. As of Oct. 1, lenders seeking nonjudicial foreclosures would file notices with the DCCA and a $250 filing fee that would go toward a special dispute resolution fund.
Once established, it will give owner-occupants of residential property facing foreclosure an opportunity to meet with lenders and a trained, neutral third party to modify home loans or work out a payment plan within three months.
The program is limited to owner-occupants of residential property who have lived in their homes for at least 200 days.
Mortgagees and owner-occupants are required to participate in the program if the lender chooses to pursue a nonjudicial foreclosure. The foreclosure process is suspended until the dispute resolution is completed.
Homeowners facing nonjudicial foreclosure would receive a notice from the state notifying them of the opportunity to engage in dispute resolution with information about the program and paperwork for them to participate.
The owner-occupant would have 30 days after the mailing of the notice to take advantage of dispute resolution and pay a $300 program fee. If the owner chooses to participate, the lender also would need to pay the $300 fee.
If the owner does not seek dispute resolution, then the foreclosure process would proceed.
The dispute resolution process provides for a timetable for a dispute resolution session for the parties, including a neutral party to facilitate the process.
If the parties reach a resolution, the foreclosure would be terminated. If they can't agree, the foreclosure would be resumed.
A lender who fails to comply with the program will not be able to proceed with a nonjudicial foreclosure. Penalties for noncompliance include fines of as much as $1,500.
Other provisions of the law include:
* An owner-occupant subject to a nonjudicial foreclosure may convert to a judicial foreclosure by filing a petition with the Circuit Court within 30 days after receiving a foreclosure notice.
* A 45-day phase-in period after the filing of the petition to convert to a judicial foreclosure in which all owner-occupants, mortgagors and signers of the promissory note with interest in the residential property subject to foreclosure must file a statement with the Circuit Court that they agree to submit themselves to the judicial process. (This does not apply to owner-occupants participating in the dispute resolution program.)
* Condominium associations are authorized to collect past-due association assessments of up to $7,200.
* Lenders are prohibited from pursuing deficiency judgments against owner-occupants after a nonjudicial foreclosure when they do not have a fee simple or leasehold ownership interest in any other real property.
* Mortgage servicers with a 20 percent market share in the state must maintain a local office.
Act 48 was signed last week by Gov. Neil Abercrombie.