REPORT TITLE:
Foreclosures, Housekeeping


DESCRIPTION:
Makes general housekeeping amendments to the alternate power of
sale foreclosure process, including deleting the requirement of
an open house, clarifying that public notices be mailed and
delivered rather than sent, and deleting the public information
requirement for lenders using the new process.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
HOUSE OF REPRESENTATIVES                H.B. NO.1267       
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO FORECLOSURES.
 


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

 1      SECTION 1.  The purpose of this Act is to make general
 
 2 housekeeping amendments to the alternate power of sale
 
 3 foreclosure process in part II of chapter 667, Hawaii Revised
 
 4 Statutes.  The changes will streamline and simplify the
 
 5 foreclosure process while at the same time maintaining the rights
 
 6 of defaulting mortgagors who are the subject of the foreclosure.
 
 7 A foreclosure is generally the last option of a lender.  But, if
 
 8 there is to be foreclosure by a lender, a streamlined and
 
 9 simplified process will benefit not only the lender, but also
 
10 others who are affected when a mortgage is in default.  For
 
11 example, condominium associations and community associations
 
12 would benefit when there is not a lengthy, drawn out foreclosure
 
13 process.  If the defaulting mortgagor is not paying the
 
14 maintenance fee and other fees, all of the other owners in the
 
15 association end up subsidizing that default throughout a lengthy
 
16 and drawn out foreclosure process.  That is not in the best
 
17 interest of those other owners.
 
18      SECTION 2.  Section 667-22, Hawaii Revised Statutes, is
 
19 amended by amending subsections (a) and (b) to read as follows:
 

 
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 1      "(a)  When the mortgagor or the borrower has breached the
 
 2 mortgage agreement, and when the foreclosing mortgagee intends to
 
 3 conduct a power of sale foreclosure under this part, the
 
 4 foreclosing mortgagee shall prepare a written notice of default
 
 5 addressed to the mortgagor[, the borrower, and any guarantor.]
 
 6 and all borrowers.  The notice of default shall state:
 
 7      (1)  The name and address of the current mortgagee;
 
 8      (2)  The name and last known address of the mortgagor[, the
 
 9           borrower, and any guarantor;] and all borrowers;
 
10      (3)  The address or a description of the location of the
 
11           mortgaged property, and the tax map key number of the
 
12           mortgaged property;
 
13      (4)  The description of the default, and if the default is a
 
14           monetary default, an itemization of the delinquent
 
15           amount shall be given;
 
16      (5)  The action that must be taken to cure the default,
 
17           including the amount to cure the default, together with
 
18           the estimated amount of the foreclosing mortgagee's
 
19           attorney's fees and costs, and all other fees and costs
 
20           estimated to be incurred by the foreclosing mortgagee
 
21           related to the default by the deadline date;
 
22      (6)  The date by which the default must be cured, which
 
23           deadline date shall be at least sixty days after the
 

 
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 1           date of the notice of default; 
 
 2      (7)  That if the default is not cured by the deadline date
 
 3           stated in the notice of default, the entire unpaid
 
 4           balance of the moneys owed to the mortgagee under the
 
 5           mortgage agreement will be due, that the mortgagee
 
 6           intends to conduct a power of sale foreclosure to sell
 
 7           the mortgaged property at a public sale without any
 
 8           court action and without going to court, and that the
 
 9           mortgagee or any other person may acquire the mortgaged
 
10           property at the public sale; and
 
11      (8)  The name, address in the State, and the telephone
 
12           number in the State of the person representing the
 
13           foreclosing mortgagee.
 
14      (b)  The notice of default shall also contain wording
 
15 substantially similar to the following in all capital letters:
 
16           "IF THE DEFAULT ON THE LOAN CONTINUES AFTER THE
 
17           DEADLINE DATE IN THIS NOTICE, THE MORTGAGED PROPERTY
 
18           MAY BE FORECLOSED AND SOLD WITHOUT ANY COURT ACTION AND
 
19           WITHOUT GOING TO COURT.  
 
20           YOU MAY HAVE CERTAIN LEGAL RIGHTS OR DEFENSES.  FOR
 
21           ADVICE, YOU SHOULD CONSULT WITH AN ATTORNEY LICENSED IN
 
22           THIS STATE.
 
23           [AFTER THE DEADLINE DATE IN THIS NOTICE, TWO PUBLIC
 

 
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 1           SHOWINGS (OPEN HOUSES) OF THE PROPERTY BY THE LENDER
 
 2           WILL BE HELD, BUT ONLY IF ALL MORTGAGORS (OWNERS) OF
 
 3           THE PROPERTY SO AGREE.  TO SHOW THAT ALL OWNERS AGREE
 
 4           TO ALLOW TWO OPEN HOUSES BY THE LENDER, ALL OWNERS MUST
 
 5           SIGN A LETTER SHOWING THEY AGREE.  ALL OWNERS MUST SEND
 
 6           THE SIGNED LETTER TO THIS OFFICE AT THE ADDRESS GIVEN
 
 7           IN THIS NOTICE.  
 
 8           THIS OFFICE MUST ACTUALLY RECEIVE THE SIGNED LETTER BY
 
 9           THE DEADLINE DATE IN THIS NOTICE.  THE SIGNED LETTER
 
10           MUST BE SENT TO THIS OFFICE BY CERTIFIED MAIL,
 
11           REGISTERED MAIL, OR EXPRESS MAIL, POSTAGE PREPAID AND
 
12           RETURN RECEIPT REQUESTED.
 
13           IF THE SIGNED LETTER IS NOT RECEIVED BY THIS OFFICE BY
 
14           THE DEADLINE DATE, THE PROPERTY WILL THEN BE SOLD
 
15           WITHOUT ANY OPEN HOUSES BEING HELD.
 
16           EVEN IF THIS OFFICE RECEIVES THE SIGNED LETTER TO ALLOW
 
17           THE LENDER TO HOLD TWO OPEN HOUSES OF THE PROPERTY, IF
 
18           ALL OWNERS LATER DO NOT COOPERATE TO ALLOW THE OPEN
 
19           HOUSES, THE PROPERTY WILL BE SOLD WITHOUT ANY OPEN
 
20           HOUSES BEING HELD.]
 
21           ALL FUTURE NOTICES AND CORRESPONDENCE WILL BE MAILED TO
 
22           YOU AT THE ADDRESS AT WHICH YOU RECEIVED THIS NOTICE
 
23           UNLESS YOU SEND WRITTEN INSTRUCTIONS TO THIS OFFICE
 

 
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 1           INFORMING THIS OFFICE OF A DIFFERENT ADDRESS.  THE
 
 2           WRITTEN INSTRUCTIONS MUST BE SENT TO THIS OFFICE BY
 
 3           CERTIFIED MAIL, REGISTERED MAIL, OR EXPRESS MAIL,
 
 4           POSTAGE PREPAID AND RETURN RECEIPT REQUESTED.""
 
 5      SECTION 3.  Section 667-26, Hawaii Revised Statutes, is
 
 6 amended to read as follows:
 
 7      "[[]667-26[]  Public showing] Open houses of mortgaged
 
 8 property.  [(a)  If the default is not cured as stated in the
 
 9 notice of default, the foreclosing mortgagee shall conduct two
 
10 open houses of the mortgaged property before the public sale;
 
11 provided that the foreclosing mortgagee timely received the
 
12 signed letter of agreement from the mortgagor as required by the
 
13 notice of default.  Only two open houses shall be required even
 
14 if the date of the public sale is postponed.
 
15      (b)  Even if the signed letter of agreement is timely
 
16 received, if there is no subsequent cooperation by the mortgagor
 
17 to allow two open houses, the] The public sale may be held
 
18 without any open houses of the mortgaged property.  If the public
 
19 notice of the public sale advertised the dates and times of the
 
20 open houses, but there were no open houses because of the lack of
 
21 cooperation by the mortgagor, the public sale may still be held
 
22 as advertised, and the public notice of the public sale may not
 
23 need to be republished."
 

 
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 1      SECTION 4.  Section 667-27, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  The foreclosing mortgagee shall prepare the public
 
 4 notice of the public sale.  The public notice shall state:
 
 5      (1)  The date, time, and place of the public sale;
 
 6      (2)  The dates and times of [the two] any open houses of the
 
 7           mortgaged property, or if there will not to be any open
 
 8           houses, the public notice shall so state; 
 
 9      (3)  The unpaid balance of the moneys owed to the mortgagee
 
10           under the mortgage agreement;
 
11      (4)  A description of the mortgaged property, including the
 
12           address or description of the location of the mortgaged
 
13           property, and the tax map key number of the mortgaged
 
14           property;
 
15      (5)  The name of the mortgagor and the borrower;
 
16      (6)  The name of the foreclosing mortgagee;
 
17      (7)  The name of any prior or junior creditors having a
 
18           recorded lien on the mortgaged property before the
 
19           recordation of the notice of default under section
 
20           667-23;
 
21      (8)  The name, the address in the State, and the telephone
 
22           number in the State of the person in the State
 
23           conducting the public sale; and
 

 
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 1      (9)  The terms and conditions of the public sale."
 
 2      SECTION 5.  Section 667-31, Hawaii Revised Statutes, is
 
 3 amended by amending subsection (a) to read as follows:
 
 4      "(a)  After the purchaser completes the purchase by paying
 
 5 the full purchase price and the costs for the purchase, the
 
 6 mortgaged property shall be conveyed to the purchaser by a
 
 7 conveyance document.  The conveyance document shall be in a
 
 8 recordable form and shall be signed by the foreclosing mortgagee
 
 9 in the foreclosing mortgagee's name[.  The mortgagor or borrower
 
10 shall sign the conveyance document on his or her own behalf.] and
 
11 as attorney-in-fact for the mortgagor.  The foreclosing mortgagee
 
12 is appointed under this section as the attorney-in-fact for the
 
13 mortgagor to sign the conveyance document."
 
14      SECTION 6.  Section 667-32, Hawaii Revised Statutes, is
 
15 amended by amending subsection (b) to read as follows:
 
16      "(b)  The recitals in the affidavit required under
 
17 subsection (a) may, but need not, be substantially in the
 
18 following form:
 
19      "(1) I am duly authorized to represent or act on behalf of
 
20                                (name of mortgagee) ("foreclosing
 
21           mortgagee") regarding the following power of sale
 
22           foreclosure.  I am signing this affidavit in accordance
 
23           with the alternate power of sale foreclosure law
 

 
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 1           (Chapter 667, Part II, Hawaii Revised Statutes);
 
 2      (2)  The foreclosing mortgagee is a "foreclosing mortgagee"
 
 3           as defined in the power of sale foreclosure law;
 
 4      (3)  The power of sale foreclosure is of a mortgage made by
 
 5                                (name of mortgagor) ("mortgagor"),
 
 6           dated           , and recorded in the                
 
 7           (bureau of conveyances or office of the assistant
 
 8           registrar of the land court) as                
 
 9           (recordation information).  The mortgaged property is
 
10           located at:                       (address or
 
11           description of location) and is identified by tax map
 
12           key number:            .  The legal description of the
 
13           mortgaged property is attached as Exhibit "A".  The
 
14           name of the borrower, if different from the mortgagor,
 
15           is                      ("borrower");
 
16      (4)  Pursuant to the power of sale provision of the
 
17           mortgage, the power of sale foreclosure was conducted
 
18           as required by the power of sale foreclosure law.  The
 
19           following is a summary of what was done:
 
20           (A)  A notice of default was served on the mortgagor,
 
21                the borrower, and the following person:
 
22                                    .  The notice of default was
 
23                served on the following date and in the following
 

 
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 1                manner:                      ;
 
 2           (B)  The date of the notice of default was           
 
 3                (date).  The deadline in the notice for curing the
 
 4                default was            (date), which deadline date
 
 5                was at least sixty days after the date of the
 
 6                notice;
 
 7           (C)  The notice of default was recorded before the
 
 8                deadline date in the                 (bureau of
 
 9                conveyances or office of the assistant registrar
 
10                of the land court).  The notice was recorded on
 
11                           (date) as document no.           .  A
 
12                copy of the recorded notice is attached as Exhibit
 
13                "1";
 
14           (D)  The default was not cured by the deadline date in
 
15                the notice of default;
 
16           (E)  A public notice of the public sale was initially
 
17                published in the classified section of the
 
18                                    , a daily newspaper of general
 
19                circulation in the county where the mortgaged
 
20                property is located, once each week for three
 
21                consecutive weeks on the following dates:
 
22                               .  A copy of the affidavit of
 
23                publication for the last public notice of the
 

 
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 1                public sale is attached as Exhibit "2".  The date
 
 2                of the public sale was            (date).  The
 
 3                last publication was not less than fourteen days
 
 4                before the date of the public sale;
 
 5           (F)  The public notice of the public sale was [sent]
 
 6                mailed or delivered to the mortgagor, to the
 
 7                borrower, to the state director of taxation, to
 
 8                the director of finance of the county where the
 
 9                mortgaged property is located, and to the
 
10                following:                      .  The public
 
11                notice was sent on the following dates and in the
 
12                following manner:                      .  Those
 
13                dates were after the deadline date in the notice
 
14                of default, and those dates were at least sixty
 
15                days before the date of the public sale;
 
16           (G)  The public notice of the public sale was posted on
 
17                the mortgaged property or on such other real
 
18                property of which the mortgaged property is a part
 
19                on            (date).  That date was at least
 
20                sixty days before the date of the public sale;
 
21           (H)  [Two public showings (open houses)] Open houses of
 
22                the mortgaged property were held (or were not held
 
23                because the mortgagor did not cooperate);
 

 
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 1           (I)  A public sale of the mortgaged property was held
 
 2                on a business day during business hours on:
 
 3                           (date), at            (time), at the
 
 4                following location:                      .  The
 
 5                highest successful bidder was                     
 
 6                (name) with the highest successful bid price of
 
 7                $          ; and
 
 8           (J)  At the time the public sale was held, the default
 
 9                was not cured and there was no circuit court
 
10                foreclosure action pending in the circuit where
 
11                the mortgaged property is located; and
 
12 [[](5)[]] This affidavit is signed under penalty of perjury.""
 
13      SECTION 7.  Section 667-41, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "[[]667-41[]  Public information requirement.  All
 
16 financial institutions, mortgagees, lenders, business entities
 
17 and organizations without limitation, and persons, who intend to
 
18 use the power of sale foreclosure under this part, under the
 
19 conditions required by this part, shall also develop
 
20 informational materials to educate and inform borrowers and
 
21 mortgagors.  These materials shall be made available to the
 
22 public, including the borrowers at the time of application for a
 
23 mortgage or loan, or other contract containing a power of sale
 

 
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 1 foreclosure provision.  These materials, among other things,
 
 2 shall inform the borrower that the financial institution and
 
 3 other business entities and persons who are authorized under this
 
 4 part to exercise the power of sale foreclosure, in the event of
 
 5 the borrower's default, have the option of pursuing either a
 
 6 judicial or nonjudicial foreclosure as provided by law.  These
 
 7 informational materials shall fully and completely explain these
 
 8 remedies.] Power of sale language in mortgage agreement.  Before
 
 9 a mortgagee can use the power of sale foreclosure process under
 
10 this part for a particular mortgage agreement, that mortgage
 
11 agreement must have a power of sale provision.  That provision
 
12 shall contain wording substantially similar to the following in
 
13 all capital letters:  "IF THERE IS A DEFAULT IN THIS MORTGAGE
 
14 AGREEMENT, THE MORTGAGED PROPERTY MAY BE FORECLOSED AND SOLD
 
15 UNDER POWER OF SALE WITHOUT ANY COURT ACTION AND WITHOUT GOING TO
 
16 COURT, AS PROVIDED IN CHAPTER 667 OF THE HAWAII REVISED STATUTES,
 
17 AS AMENDED.""
 
18      SECTION 8.  Statutory material to be repealed is bracketed.
 
19 New statutory material is underscored.
 
20      SECTION 9.  This Act shall take effect upon its approval.
 
21 
 
22                           INTRODUCED BY:_________________________