THE SENATE

S.B. NO.

576

TWENTY-SIXTH LEGISLATURE, 2011

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to foreclosure.

 

 

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

 


SECTION 1. Chapter 667, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"Part      . Mandatory foreclosure mediation

667-A Definitions. As used in this part:

"Mortgage mediation administrator" means the mortgage mediation administrator of the center for alternative dispute resolution established by section 613-2.

667-B Mediation required before foreclosure. (a) Before a circuit court may order a judgment of foreclosure pursuant to section 667-1 or before a public sale may be conducted pursuant to section 667-5 or 667-25 for a residential property that is occupied by the mortgagor as a primary residence, the foreclosing mortgagee shall, at the election of the mortgagor, participate in mediation pursuant to this part to attempt to avoid foreclosure.

(b) Mediation required by this part shall be conducted through the center for alternative dispute resolution established by section 613-2.

667-C Notice of mediation required. (a) Notice of a foreclosure action in circuit court pursuant to section 667-1, notice of a power of sale foreclosure filed or posted pursuant to section 667-5(b), or notice of default served pursuant to section 667-22(c) shall include notice that the foreclosing mortgagee is required, at the election of the mortgagor, to participate in mediation pursuant to this part for the purpose of attempting to avoid foreclosure.

(b) The notice required by subsection (a) shall include:

(1) The name and contact information of a person or entity with the authority to negotiate a loan modification on behalf of the mortgagee;

(2) Contact information for at least one local housing counseling agency approved by the United States Department of Housing and Urban Development; and

(3) A form for the mortgagor to use to indicate election to enter into or to waive mediation pursuant to this part which shall contain the mailing address of the mortgage mediation administrator and instructions for the return of the form to the mortgage mediation administrator.

667-D Election of mediation; stay of foreclosure proceedings. (a) No later than thirty days after receipt of notice of mediation under section 667-C, a mortgagor shall contact the mortgage mediation administrator to indicate whether or not the mortgagor elects to pursue mediation pursuant to this part.

(b) Upon receipt of notice that a mortgagor has elected to pursue mediation, the mortgage mediation administrator shall assign the matter to a mediator and schedule the matter for mediation through the center for alternative dispute resolution according to the rules and procedures of the center for alternative dispute resolution. All foreclosure proceedings shall be stayed effective upon the mortgage mediation administrator's receipt of notice of election to pursue mediation pending the outcome of the mediation process.

(c) If a mortgagor elects to waive mediation or fails to give notice within the time specified to the mortgage mediation administrator of the mortgagor's election to pursue mediation, the mortgage mediation administrator shall notify the court, the bureau of conveyances, or the land court, as appropriate, and the foreclosure process shall proceed pursuant to statute.

667-E Mediation process; requirements. (a) Parties to a mediation process conducted pursuant to this part shall consist of the mortgagor or the mortgagor's representative and the mortgagee or the mortgagee's representative; provided that any representative of the mortgagee who participates in the mediation shall be authorized to negotiate a loan modification on behalf of the mortgagee or shall have direct access at all times during the mediation process to a person who is so authorized. All parties may be represented by counsel at the mediation.

(b) The mortgagee or mortgagee's representative shall bring to the mediation the original or a certified copy of the mortgage instrument and each assignment of the mortgage instrument.

(c) If the mortgagee fails to attend the mediation, fails to bring the documentation required by subsection (b), fails to participate in the mediation in good faith as determined by the assigned mediator, or participates through a representative that does not meet the requirements of subsection (a), the mediator shall notify the court, the bureau of conveyances, or the land court, as appropriate. After receipt of notice pursuant to this subsection, the court shall not issue a judgment of foreclosure and neither the land court nor the bureau of conveyances shall record a notice of sale or other conveyance document for the subject property.

(d) If the mortgagor fails to attend the mediation, the mediator shall notify the court, the bureau of conveyances, or the land court, as appropriate, and the foreclosure process shall proceed pursuant to statute.

(e) If the mediator determines that, despite the good faith participation of the mortgagor and mortgagee in the mediation process, the parties are not able to come to an agreement, the mediator shall notify the court, the bureau of conveyances, or the land court, as appropriate, that the requirements of this part have been met. Upon receipt of notice pursuant to this subsection, the foreclosure process shall proceed pursuant to statute.

667-F Fee. The center for alternative dispute resolution may charge a fee, not to exceed $1,000, for mediation services provided pursuant to this part. Any fee for mediation services shall be divided equally between the mortgagee and the mortgagor.

667-G Applicability. This part shall apply to foreclosures, whether by action or by power of sale, of residential real property that is occupied by the mortgagor as a primary residence.

667-H Rules. The chief justice of the supreme court or chief justice's designee, in the capacity of administrative manager of the center for alternative dispute resolution pursuant to section 613-2, shall adopt rules pursuant to chapter 91 for the administration of this part including rules to:

(1) Ensure that mediations occur in an orderly and timely manner;

(2) Require each party to provide any information that the mediator deems necessary; and

(3) Protect the mediation process from abuse and ensure that each party to the mediation acts in good faith."

SECTION 2. Section 613-2, Hawaii Revised Statutes, is amended to read as follows:

"[[]613-2[]] Establishment of the center for alternative dispute resolution. (a) There is established within the judiciary the center for alternative dispute resolution. The center shall facilitate the effective, timely, and voluntary resolution of disputes[. Through these resolutions, it shall] in order to help reduce public and private costs of litigation and increase satisfaction with the justice system. The center shall accomplish its purposes by:

(1) Providing, where feasible and agreed to by the parties, the consultative resources and technical assistance needed to achieve voluntary resolutions for cases that affect the public interest or the work of state and county agencies[. These cases shall include but not be limited to:], including:

(A) Public disputes involving actual or threatened court actions over the allocation or management of public resources or the siting of public facilities;

(B) Complex litigation cases in which a court or a regulatory or administrative agency has determined that the dispute involves multiple parties [or], formidable technical, procedural, or factual issues, or both;

(C) Policy roundtables in which the center, at the request of an executive, legislative, or judicial decisionmaker, convenes and chairs advisory discussions on matters pertaining to standards or rules; [and]

(D) Other cases directly referred by judges, legislators, agency heads, or appointed government officials; and

(E) Foreclosures subject to part       of chapter 667;

(2) Promoting in a systematic manner the appropriate use of alternative dispute resolution; and

(3) Disseminating to government agencies and to the community at large up-to-date information on the methods and applications of alternative dispute resolution.

(b) The center shall be organized, guided, and administratively maintained by the chief justice or the chief justice's designee. The chief justice shall appoint a director of the center. The director may hire staff necessary to accomplish the purposes of this chapter, including but not limited to an assistant director [and], a program specialist[.], and a mortgage mediation administrator. The director, assistant director, [and] program specialist, and mortgage mediation administrator shall have substantial experience, training, and education in the methodologies of alternative dispute resolution. Employees of the center shall be exempt from chapter 76[,] and shall not be considered civil service employees, but shall be entitled to any employee benefit plan normally inuring to civil service employees."

SECTION 3. Section 667-1, Hawaii Revised Statutes, is amended to read as follows:

"667-1 Foreclosure by action. The circuit court may assess the amount due upon a mortgage, whether of real or personal property, without the intervention of a jury[,] and, subject to the requirements of part      , shall render judgment for the amount awarded[,] and the foreclosure of the mortgage. Execution may be issued on the judgment[,] as ordered by the court."

SECTION 4. Section 667-5, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) When a power of sale is contained in a mortgage[,] and where the mortgagee, the mortgagee's successor in interest, or any person authorized by the power to act in the premises[,] desires to foreclose under power of sale upon breach of a condition of the mortgage, the mortgagee, successor, or person shall be represented by an attorney who is licensed to practice law in the State and is physically located in the State. The attorney shall:

(1) Give notice of the mortgagee's, successor's, or person's intention to foreclose the mortgage, the notice of the mortgagor's right to elect mediation as required by section 667-C, and of the sale of the mortgaged property[,] by publication of the notice once in each of three successive weeks [(], constituting three publications[),] with the last publication to be not less than fourteen days before the day of sale, in a newspaper having a general circulation in the county in which the mortgaged property lies; and

(2) Give any notices and do all acts as are authorized or required by the power contained in the mortgage."

2. By amending subsection (e) to read:

"(e) [The] Subject to the requirements of part      , the affidavit and copy of the notice shall be recorded and indexed by the registrar, in the manner provided in chapter 501 or 502, as the case may be."

SECTION 5. Section 667-22, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) When the mortgagor or the borrower has breached the mortgage agreement, and when the foreclosing mortgagee intends to conduct a power of sale foreclosure under this part, the foreclosing mortgagee shall prepare a written notice of default addressed to the mortgagor, the borrower, and any guarantor. The notice of default shall state:

(1) The name and address of the current mortgagee;

(2) The name and last known address of the mortgagor, the borrower, and any guarantor;

(3) The address or a description of the location of the mortgaged property[,] and the tax map key number of the mortgaged property;

(4) The description of the default[, and]; provided that if the default is a monetary default, an itemization of the delinquent amount shall be given;

(5) The action [that must be taken] required to cure the default, including the delinquent amount [to cure the default], together with the estimated amount of the foreclosing mortgagee's attorney's fees and costs, and all other fees and costs estimated to be incurred by the foreclosing mortgagee related to the default by the deadline date;

(6) The date by which the default must be cured, which [deadline date] shall be at least sixty days after the date of the notice of default;

(7) [That] A statement that if the default is not cured by the [deadline] date stated in the notice of default, the entire unpaid balance of the moneys owed to the mortgagee under the mortgage agreement will [be] become due, that the mortgagee intends to conduct a power of sale foreclosure to sell the mortgaged property at a public sale without any court action and without going to court, and that the mortgagee or any other person may acquire the mortgaged property at the public sale; [and]

(8) The name, address, [including] electronic address, and telephone number of the attorney who is representing the foreclosing mortgagee; provided that the attorney shall be licensed to practice law in the State and physically located in the State[.]; and

(9) Notice of the mortgagor's right to elect mediation as required by section 667-C."

SECTION 6. Section 667-24, Hawaii Revised Statutes, is amended to read as follows:

"[[]667-24[]] Cure of default. (a) If the default is cured as required by the notice of default[,] or if the parties have reached a mediated agreement to avoid foreclosure, the foreclosing mortgagee shall rescind the notice of default. Within fourteen days of the date of the cure[,] or the mediated agreement, the foreclosing mortgagee shall [so] notify any person who was served with the notice of default. If the notice of default was recorded, a release of the notice of default shall be recorded.

(b) If the default is not cured as required by the notice of default[,] or if the parties have not reached a mediated agreement to avoid foreclosure, the foreclosing mortgagee, without filing a court action and without going to court, may foreclose the mortgage under power of sale to sell the mortgaged property at a public sale."

SECTION 7. Section 667-25, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) [The] Subject to the requirements of part      , public sale of the mortgaged property shall take place on the later of the following:

(1) At least sixty days after the public notice of the public sale is distributed under section 667-27; or

(2) At least fourteen days after the date of the publication of the third public notice advertisement under section 667-27."

SECTION 8. There is appropriated out of the general revenues of the State of Hawaii the sum of $          , or so much thereof as may be necessary for fiscal year 2011-2012, to establish the position of mortgage mediation administrator in the center for alternative dispute resolution.

The sum appropriated shall be expended by the judiciary.

SECTION 9. In codifying the new sections added by section 1 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 10. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 11. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.


SECTION 12. This Act shall take effect on July 1, 2011.

 

INTRODUCED BY:

_____________________________

 

 


 


 

Report Title:

Mortgage Foreclosure; Mandatory Mediation

 

Description:

Requires mediation for the purpose of attempting to avoid foreclosure before foreclosure by action or by power of sale may take place; makes conforming amendments; creates and funds the position of mortgage mediation administrator in the center for alternative dispute resolution.

 

 

 

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