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.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           777
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 are made to reduce redundancy and clarify
 
 5 the operation of this part.  In section 667-22(a), in relation to
 
 6 notice of default, the term "guarantor" is omitted as it is
 
 7 already included in the definition of "borrower."  The
 
 8 requirement of open houses is deleted as the part only requires
 
 9 open houses if all mortgagors agree to do so.  If they do not do
 
10 so by the scheduled deadline, the public sale will continue
 
11 anyway.  The requirement, then, acts as an impediment to the
 
12 process as a mortgagor can create significant delay during this
 
13 period by stalling on the open house agreement, without
 
14 ultimately gaining anything other than a delay in the process.
 
15 It would be the better practice not to require an open house.  An
 
16 open house can still be held if the mortgagors agree, but failure
 
17 to do so will no longer slow down the process.
 
18      Another change is to replace the requirement that the
 
19 mortgagor/borrower sign the conveyance document conveying title
 

 
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 1 to the highest bidder at the foreclosure auction with the
 
 2 provision that the foreclosing mortgagee can sign the conveyance
 
 3 document as the attorney-in-fact for the mortgagor.  The
 
 4 rationale for this is that there is no requirement in the law to
 
 5 make the mortgagor/borrower, at the end of the five to six month
 
 6 non-judicial foreclosure process, sign the conveyance document.
 
 7 This failure to sign will throw the foreclosure into the judicial
 
 8 foreclosure process, adding another eight to twelve months to the
 
 9 process and essentially nullifying the non-judicial process.
 
10 Neither other state nor the federal government require the
 
11 signature of the mortgagor/borrower; the more common process is
 
12 to have the foreclosing mortgagee sign the document, and this is
 
13 the change made here.
 
14      One further change is to delete the requirement that lenders
 
15 develop informational materials about foreclosures, to be made
 
16 available to the public, including borrowers at the time of
 
17 application for a mortgage or loan.  Instead, this Act adds a
 
18 requirement that before a lender can use the power of sale
 
19 foreclosure process, the mortgage agreement must have a power of
 
20 sale provision.  The former situation starts the borrower-lender
 
21 relationship off on the wrong foot, requiring the lender to
 
22 notify the borrower at the time of the application about
 
23 foreclosure.  It is a better practice to have a specific
 

 
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 1 reference to the power of sale foreclosure in the mortgage
 
 2 agreement instead.
 
 3      SECTION 2.  Section 667-22, Hawaii Revised Statutes, is
 
 4 amended by amending subsections (a) and (b) to read as follows:
 
 5      "(a)  When the mortgagor or the borrower has breached the
 
 6 mortgage agreement, and when the foreclosing mortgagee intends to
 
 7 conduct a power of sale foreclosure under this part, the
 
 8 foreclosing mortgagee shall prepare a written notice of default
 
 9 addressed to the mortgagor[, the borrower, and any guarantor.]
 
10 and all borrowers.  The notice of default shall state:
 
11      (1)  The name and address of the current mortgagee;
 
12      (2)  The name and last known address of the mortgagor[, the
 
13           borrower, and any guarantor;] and all borrowers;
 
14      (3)  The address or a description of the location of the
 
15           mortgaged property, and the tax map key number of the
 
16           mortgaged property;
 
17      (4)  The description of the default, and if the default is a
 
18           monetary default, an itemization of the delinquent
 
19           amount shall be given;
 
20      (5)  The action that must be taken to cure the default,
 
21           including the amount to cure the default, together with
 
22           the estimated amount of the foreclosing mortgagee's
 
23           attorney's fees and costs, and all other fees and costs
 

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

 
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 1           YOU MAY HAVE CERTAIN LEGAL RIGHTS OR DEFENSES.  FOR
 
 2           ADVICE, YOU SHOULD CONSULT WITH AN ATTORNEY LICENSED IN
 
 3           THIS STATE.
 
 4           [AFTER THE DEADLINE DATE IN THIS NOTICE, TWO PUBLIC
 
 5           SHOWINGS (OPEN HOUSES) OF THE PROPERTY BY THE LENDER
 
 6           WILL BE HELD, BUT ONLY IF ALL MORTGAGORS (OWNERS) OF
 
 7           THE PROPERTY SO AGREE.  TO SHOW THAT ALL OWNERS AGREE
 
 8           TO ALLOW TWO OPEN HOUSES BY THE LENDER, ALL OWNERS MUST
 
 9           SIGN A LETTER SHOWING THEY AGREE.  ALL OWNERS MUST SEND
 
10           THE SIGNED LETTER TO THIS OFFICE AT THE ADDRESS GIVEN
 
11           IN THIS NOTICE.  
 
12           THIS OFFICE MUST ACTUALLY RECEIVE THE SIGNED LETTER BY
 
13           THE DEADLINE DATE IN THIS NOTICE.  THE SIGNED LETTER
 
14           MUST BE SENT TO THIS OFFICE BY CERTIFIED MAIL,
 
15           REGISTERED MAIL, OR EXPRESS MAIL, POSTAGE PREPAID AND
 
16           RETURN RECEIPT REQUESTED.
 
17           IF THE SIGNED LETTER IS NOT RECEIVED BY THIS OFFICE BY
 
18           THE DEADLINE DATE, THE PROPERTY WILL THEN BE SOLD
 
19           WITHOUT ANY OPEN HOUSES BEING HELD.
 
20           EVEN IF THIS OFFICE RECEIVES THE SIGNED LETTER TO ALLOW
 
21           THE LENDER TO HOLD TWO OPEN HOUSES OF THE PROPERTY, IF
 
22           ALL OWNERS LATER DO NOT COOPERATE TO ALLOW THE OPEN
 
23           HOUSES, THE PROPERTY WILL BE SOLD WITHOUT ANY OPEN
 

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

 
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 1 open houses, but there were no open houses because of the lack of
 
 2 cooperation by the mortgagor, the public sale may still be held
 
 3 as advertised, and the public notice of the public sale may not
 
 4 need to be republished."
 
 5      SECTION 4.  Section 667-27, Hawaii Revised Statutes, is
 
 6 amended by amending subsection (a) to read as follows:
 
 7      "(a)  The foreclosing mortgagee shall prepare the public
 
 8 notice of the public sale.  The public notice shall state:
 
 9      (1)  The date, time, and place of the public sale;
 
10      (2)  The dates and times of [the two] any open houses of the
 
11           mortgaged property, or if there will not to be any open
 
12           houses, the public notice shall so state; 
 
13      (3)  The unpaid balance of the moneys owed to the mortgagee
 
14           under the mortgage agreement;
 
15      (4)  A description of the mortgaged property, including the
 
16           address or description of the location of the mortgaged
 
17           property, and the tax map key number of the mortgaged
 
18           property;
 
19      (5)  The name of the mortgagor and the borrower;
 
20      (6)  The name of the foreclosing mortgagee;
 
21      (7)  The name of any prior or junior creditors having a
 
22           recorded lien on the mortgaged property before the
 
23           recordation of the notice of default under section
 

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

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

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

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

 
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 1                sixty days before the date of the public sale;
 
 2           (H)  [Two public showings (open houses)] Open houses of
 
 3                the mortgaged property were held (or were not held
 
 4                because the mortgagor did not cooperate);
 
 5           (I)  A public sale of the mortgaged property was held
 
 6                on a business day during business hours on:
 
 7                           (date), at            (time), at the
 
 8                following location:                      .  The
 
 9                highest successful bidder was                     
 
10                (name) with the highest successful bid price of
 
11                $          ; and
 
12           (J)  At the time the public sale was held, the default
 
13                was not cured and there was no circuit court
 
14                foreclosure action pending in the circuit where
 
15                the mortgaged property is located; and
 
16 [[](5)[]] This affidavit is signed under penalty of perjury.""
 
17      SECTION 7.  Section 667-41, Hawaii Revised Statutes, is
 
18 amended to read as follows:
 
19      "[[]667-41[]  Public information requirement.  All
 
20 financial institutions, mortgagees, lenders, business entities
 
21 and organizations without limitation, and persons, who intend to
 
22 use the power of sale foreclosure under this part, under the
 
23 conditions required by this part, shall also develop
 

 
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                                     S.B. NO.           777
                                                        
                                                        

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

 
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                                     S.B. NO.           777
                                                        
                                                        

 
 1      SECTION 9.  This Act shall take effect upon its approval.
 
 2 
 
 3                           INTRODUCED BY:_________________________
 
 4