Foreclosures, Housekeeping

Makes general amendments to the alternate power of sale
foreclosure process, including clarifying that public notices be
mailed and delivered rather than sent; modifying the public
information requirement for lenders using the new process;
streamlining the power of sale foreclosure process; and repealing
current non-judicial foreclosure law as of 01/01/2001.  (SD2)

HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1        
TWENTIETH LEGISLATURE, 1999                                S.D. 2        
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



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

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

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 1      (7)  That if the default is not cured by the deadline date
 2           stated in the notice of default, the entire unpaid
 3           balance of the moneys owed to the mortgagee under the
 4           mortgage agreement will be due, that the mortgagee
 5           intends to conduct a power of sale foreclosure to sell
 6           the mortgaged property at a public sale without any
 7           court action and without going to court, and that the
 8           mortgagee or any other person may acquire the mortgaged
 9           property at the public sale; and
10      (8)  The name, address in the State, and the telephone
11           number in the State of the person representing the
12           foreclosing mortgagee.
13 The foreclosing mortgagee shall include, with the first notice of
14 default, a copy of the public information material prepared
15 pursuant to section 667-41.  Prior to January 1, 2001, if the
16 public information material has not yet been prepared by the
17 mortgagee pursuant to section 667-41, the mortgagee may include
18 with the first notice of default a copy of part II, chapter 667
19 in lieu of the public information."
20      SECTION 3.  Section 667-25, Hawaii Revised Statutes, is
21 amended by amending subsection (a) to read as follows:
22      "(a)  The public sale of the mortgaged property shall take
23 place on the later of the following:

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 1      (1)  At least [sixty] forty-five days after the public
 2           notice of the public sale is distributed under section
 3           667-27; or
 4      (2)  At least fourteen days after the date of the
 5           publication of the third public notice advertisement
 6           under section 667-27."
 7      SECTION 4.  Section 667-31, Hawaii Revised Statutes, is
 8 amended by amending subsection (a) to read as follows:
 9      "(a)  After the purchaser completes the purchase by paying
10 the full purchase price and the costs for the purchase, the
11 mortgaged property shall be conveyed to the purchaser by a
12 conveyance document.  The conveyance document shall be in a
13 recordable form and shall be signed by the foreclosing mortgagee
14 in the foreclosing mortgagee's name[.  The mortgagor or borrower
15 shall sign the conveyance document on his or her own behalf.] and
16 as attorney-in-fact for the mortgagor.  The foreclosing mortgagee
17 is appointed under this section as the attorney-in-fact for the
18 mortgagor to sign the conveyance document."
19      SECTION 5.  Section 667-32, Hawaii Revised Statutes, is
20 amended by amending subsection (b) to read as follows:
21      "(b)  The recitals in the affidavit required under
22 subsection (a) may, but need not, be substantially in the
23 following form:

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                                     H.B. NO.           H.D. 1
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 1      "(1) I am duly authorized to represent or act on behalf of
 2                                (name of mortgagee) ("foreclosing
 3           mortgagee") regarding the following power of sale
 4           foreclosure.  I am signing this affidavit in accordance
 5           with the alternate power of sale foreclosure law
 6           (Chapter 667, Part II, Hawaii Revised Statutes);
 7      (2)  The foreclosing mortgagee is a "foreclosing mortgagee"
 8           as defined in the power of sale foreclosure law;
 9      (3)  The power of sale foreclosure is of a mortgage made by
10                                (name of mortgagor) ("mortgagor"),
11           dated                      >       
12           (bureau of conveyances or office of the assistant
13           registrar of the land court) as                
14           (recordation information).  The mortgaged property is
15           located at:                       (address or
16           description of location) and is identified by tax map
17           key number:            .  The legal description of the
18           mortgaged property is attached as Exhibit "A".  The
19           name of the borrower, if different from the mortgagor,
20           is                      ("borrower");
21      (4)  Pursuant to the power of sale provision of the
22           mortgage, the power of sale foreclosure was conducted
23           as required by the power of sale foreclosure law.  The

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                                     H.B. NO.           H.D. 1
                                                        S.D. 2

 1           following is a summary of what was done:
 2           (A)  A notice of default was served on the mortgagor,
 3                [the borrower,] all borrowers, and the following
 4                person:                      .  The notice of
 5                default was served on the following date and in
 6                the following manner:                      ;
 7           (B)  The date of the notice of default was           
 8                (date).  The deadline in the notice for curing the
 9                default was            (date), which deadline date
10                was at least [sixty]            days after the
11                date of the notice;
12           (C)  The notice of default was recorded before the
13                deadline date in the                 (bureau of
14                conveyances or office of the assistant registrar
15                of the land court).  The notice was recorded on
16                                       .  A
17                copy of the recorded notice is attached as Exhibit
18                "1";
19           (D)  The default was not cured by the deadline date in
20                the notice of default;
21           (E)  A public notice of the public sale was initially
22                published in the classified section of the
23                                    , a daily newspaper of general

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                                     H.B. NO.           H.D. 1
                                                        S.D. 2

 1                circulation in the county where the mortgaged
 2                property is located, once each week for three
 3                consecutive weeks on the following dates:
 4                               .  A copy of the affidavit of
 5                publication for the last public notice of the
 6                public sale is attached as Exhibit "2".  The date
 7                of the public sale was            (date).  The
 8                last publication was not less than fourteen days
 9                before the date of the public sale;
10           (F)  The public notice of the public sale was [sent]
11                mailed or delivered to the mortgagor, to the
12                borrower, to the state director of taxation, to
13                the director of finance of the county where the
14                mortgaged property is located, and to the
15                following:                      .  The public
16                notice was sent on the following dates and in the
17                following manner:                      .  Those
18                dates were after the deadline date in the notice
19                of default, and those dates were at least [sixty]
20                forty-five days before the date of the public
21                sale;
22           (G)  The public notice of the public sale was posted on
23                the mortgaged property or on such other real

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                                                        S.D. 2

 1                property of which the mortgaged property is a part
 2                on            (date).  That date was at least
 3                [sixty] forty-five days before the date of the
 4                public sale;
 5           (H)  Two public showings (open houses) of the mortgaged
 6                property were held (or were not held because the
 7                mortgagor did not cooperate);
 8           (I)  A public sale of the mortgaged property was held
 9                on a business day during business hours on:
10                                      (time), at the
11                following location:                      .  The
12                highest successful bidder was                     
13                (name) with the highest successful bid price of
14                $          ; and
15           (J)  At the time the public sale was held, the default
16                was not cured and there was no circuit court
17                foreclosure action pending in the circuit where
18                the mortgaged property is located; and
19 [[](5)[]] This affidavit is signed under penalty of perjury.""
20      SECTION 6.  Section 667-41, Hawaii Revised Statutes, is
21 amended to read as follows:
22      "[[]667-41[]]  Public information requirement.  [All
23 financial institutions, mortgagees, lenders, business entities

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                                     H.B. NO.           H.D. 1
                                                        S.D. 2

 1 and organizations without limitation, and persons, who intend to
 2 use the power of sale foreclosure under this part, under the
 3 conditions required by this part, shall also develop
 4 informational materials to educate and inform borrowers and
 5 mortgagors.  These materials shall be made available to the
 6 public, including the borrowers at the time of application for a
 7 mortgage or loan, or other contract containing a power of sale
 8 foreclosure provision.  These materials, among other things,
 9 shall inform the borrower that the financial institution and
10 other business entities and persons who are authorized under this
11 part to exercise the power of sale foreclosure, in the event of
12 the borrower's default, have the option of pursuing either a
13 judicial or nonjudicial foreclosure as provided by law.  These
14 informational materials shall fully and completely explain these
15 remedies.]  A foreclosing mortgagee that intends to use the power
16 of sale foreclosure process under this part shall prepare public
17 information material.  The public information material shall
18 state that if there is a default under a mortgage agreement, the
19 foreclosing mortgagee has the option of pursuing either a
20 judicial foreclosure or a power of sale foreclosure as provided
21 by law and as provided in the mortgage agreement, and that the
22 foreclosing mortgagee has elected to proceed with a power of sale
23 foreclosure.  The public information material shall summarize the

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                                     H.B. NO.           H.D. 1
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 1 power of sale foreclosure process under this part, and shall
 2 include:
 3      (1)  The open house process;
 4      (2)  The public sale process;
 5      (3)  The deadlines to cure the defaults;
 6      (4)  The process and deadlines for appeal to the circuit
 7           court;
 8      (5)  The availability and deadlines for filing for judicial
 9           foreclosure;
10      (6)  The presumptions that arise because of the sale;
11      (7)  An explanation of the impact of the foreclosure on any
12           deficiency owed to the foreclosed mortgagee; and
13      (8)  An explanation of how the foreclosure affects other
14           creditors having an interest in the property.
15 The public information material shall be prepared by January 1,
16 2001."
17      SECTION 7.  Section 667-5, Hawaii Revised Statutes, is
18 repealed:
19      ["667-5 Foreclosure under power of sale; notice; affidavit
20 after sale.  When a power of sale is contained in a mortgage, the
21 mortgagee, or the mortgagee's successor in interest, or any
22 person authorized by the power to act in the premises, may, upon
23 a breach of the condition, give notice of the mortgagee's,

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 1 successor's, or person's intention to foreclose the mortgage and
 2 of the sale of the mortgaged property, by publication of the
 3 notice once in each of three successive weeks (three
 4 publications), the last publication to be not less than fourteen
 5 days before the day of sale, in a newspaper having a general
 6 circulation in the county in which the mortgaged property lies;
 7 and also give such notices and do all such acts as are authorized
 8 or required by the power contained in the mortgage.  Copies of
 9 the notice shall be filed with the state director of taxation and
10 shall be posted on the premises not less than twenty-one days
11 before the day of sale.
12      Any sale, of which notice has been given as aforesaid, may
13 be postponed from time to time by public announcement made by the
14 mortgagee or by some person acting on the mortgagee's behalf.
15 The mortgagee shall, within thirty days after selling the
16 property in pursuance of the power, file a copy of the notice of
17 sale and the mortgagee's affidavit, setting forth the mortgagee's
18 acts in the premises fully and particularly, in the bureau of
19 conveyances.
20      The affidavit and copy of the notice shall be recorded and
21 indexed by the registrar, in the manner provided in chapter 501
22 or 502, as the case may be.
23      This section is inapplicable if the mortgagee is foreclosing

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 1 as to personal property only."]
 2      SECTION 8.  Sections 667-6, 667-7, 667-8, Hawaii Revised
 3 Statutes, are repealed:
 4      ["667-6 Notice to mortgage creditors.  Whenever a mortgage
 5 creditor having a mortgage lien on certain premises desires
 6 notice that another mortgage creditor having a mortgage lien on
 7 the same premises intends to foreclose the mortgage and sell the
 8 mortgaged property pursuant to a power of sale under section
 9 667-5, the mortgage creditor may submit a written request to the
10 mortgagee foreclosing or who may foreclose the mortgage by power
11 of sale, to receive notice of the mortgagee's intention to
12 foreclose the mortgage under power of sale.  This request for
13 notice may be submitted any time after the recordation or filing
14 of the subject mortgage at the bureau of conveyances or the land
15 court, but must be submitted prior to the completion of the
16 publication of the mortgagee's notice of intention to foreclose
17 the mortgage and of the sale of the mortgaged property.  This
18 request shall be signed by the mortgage creditor, or its
19 authorized representative, desiring to receive notice, specifying
20 the name and address of the person to whom the notice is to be
21 mailed.  The mortgagee receiving the request shall thereafter
22 give notice to all mortgage creditors who have timely submitted
23 their request.  The notice shall be sent by mail or otherwise

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 1 communicated to the mortgage creditors, not less than seven
 2 calendar days prior to the date of sale.
 3      No request for copy of any notice pursuant to this section
 4 nor any statement or allegation in any such request nor any
 5 record thereof shall affect the title to real property or be
 6 deemed notice to any person that any party requesting copy of the
 7 notice has or claims any right, title, or interest in, or lien or
 8 charge upon the property described in the mortgage referred to
 9 therein.
10      667-7 Notice, construction, contents; affidavit.  The true
11 intent and meaning of section 667-5 is that the notice of
12 intention of foreclosure may also contain a description of the
13 mortgaged property and a statement of the time and place proposed
14 for the sale thereof at any time after the expiration of four
15 weeks from the date when first advertised; and also that the
16 affidavit contemplated by section 667-5 may lawfully be made by
17 any person duly authorized to act for the mortgagee, and in such
18 capacity conducting the foreclosure.
19      667-8 Affidavit as evidence, when.  If it appears by the
20 affidavit that the affiant has in all respects complied with the
21 requirements of the power of sale and the statute, in relation to
22 all things to be done by the affiant before selling the property,
23 and has sold the same in the manner required by the power, the

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                                     H.B. NO.           H.D. 1
                                                        S.D. 2

 1 affidavit, or a duly certified copy of the record thereof, shall
 2 be admitted as evidence that the power of sale was duly
 3 executed."]
 4      SECTION 9.  Section 667-42, Hawaii Revised Statutes, is
 5 repealed:
 6      ["[667-42]  Application of this part.  The requirements of
 7 this part shall apply only to new mortgages, loans, agreements,
 8 and contracts containing power of sale foreclosure language
 9 executed by the borrowers or mortgagors after July 1, 1999."]
10      SECTION 10.  This Act does not affect proceedings that were
11 begun before its effective date.
12      SECTION 11.  Statutory material to be repealed is bracketed.
13 New statutory material is underscored.
14      SECTION 12.  This Act shall take effect upon its approval,
15 provided that Section 7 and Section 8 shall take effect on
16 January 1, 2001.