STAND. COM. REP. NO. 417

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 777
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which
was referred S.B. No. 777 entitled: 

     "A BILL FOR AN ACT RELATING TO FORECLOSURES,"

begs leave to report as follows:

     The purpose of this measure is to clarify certain provisions
of the alternate power of sale foreclosure law and to effect
substantive changes to other provisions of the law by removing
certain requirements.

     The Department of Commerce and Consumer Affairs presented
testimony in support of certain provisions of the measure and in
opposition to other provisions.  The AARP Hawaii State
Legislative Committee presented testimony in opposition to the
deletion of the public information requirement.  The Legal Aid
Society of Hawaii, though not present at the hearing, submitted
written testimony in opposition to the measure.

     The Hawaii Financial Services Association and the Community
Associations Institute presented testimony in support of the
measure.  The Hawaii Association of Realtors presented testimony
in support of the measure's intent.  The Hawaii Credit Union
League, Security Title Corporation, First American Long and
Melone Title Company, Ltd., the Hawaii Council of Associations of
Apartment Owners, and three law firms, though not present at the
hearing, submitted written testimony in support of the measure.
An individual, though not present at the hearing, submitted
written comments on the measure. 

 
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     This measure makes certain clarifying amendments to the
alternate power of sale foreclosure law by omitting the term
"guarantor" which is a redundancy because the term "borrower"
includes a guarantor, and by requiring that a public notice of a
public sale be mailed or delivered, rather than "sent".  Your
Committee finds, however, that other provisions in this measure
effect material changes to the law that remove certain consumer
protection features from the foreclosure process.

     This measure removes the requirements that a foreclosing
mortgagee conduct two open houses of the mortgaged property
before the public sale, that the mortgagor sign the document
conveying title to the purchaser at a foreclosure auction, and
that the foreclosing mortgagee develop public information
materials about the alternate power of sale foreclosure process.
The latter requirement is replaced by a requirement that the
mortgagee place a warning in the mortgage agreement regarding the
risk of foreclosure upon default. 

     Your Committee finds that an open house requirement ensures
that mortgagors with equity in their property have an opportunity
to show the property and maximize its sale potential.  Your
Committee further finds that the language proposed in lieu of the
public information requirement is inadequate to protect
consumers.  The language provides no specifics about the
alternate power of sale foreclosure process, and is not required
to be conspicuously placed or acknowledged.  Your Committee
further finds that the substantive changes to the foreclosure law
effected by this measure would create an imbalance in the
foreclosure process that favors the lender.

     Therefore, upon careful consideration of the testimony
presented, your Committee has amended this measure by:

     (1)  Deleting sections 3 and 4 which would have deleted the
          requirement of two open houses, and making conforming
          amendments to sections 2 and 6 in order to retain the
          open house requirement;

     (2)  Deleting section 5 in order to retain the requirement
          that the mortgagor or borrower sign the conveyance
          document;

     (3)  Deleting section 7 relating to power of sale, and
          retaining the public information requirement;

     (4)  Amending section 667-41, Hawaii Revised Statutes (HRS),
          to require that the Office of Consumer Protection (OCP)

 
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          approve any informational materials developed by a
          foreclosing mortgagee; 
 
     (5)  Amending section 667-22, HRS, to require that the
          foreclosing mortgagee provide informational materials
          with the first notice of default; provided that if the
          mortgagee has not yet developed informational materials
          that have been approved by the OCP, the mortgagee shall
          provide a copy of the alternate sale of foreclosure law
          with the notice of default; 

     (6)  Amending the purpose section of this measure to conform
          to the above amendments; and 

     (7)  Making technical, nonsubstantive amendments. 

     As affirmed by the record of votes of the members of your
Committee on Commerce and Consumer Protection that is attached to
this report, your Committee is in accord with the intent and
purpose of S.B. No. 777, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as S.B.
No. 777, S.D. 1, and be referred to the Committee on Judiciary.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Commerce and
                                   Consumer Protection,



                                   ______________________________
                                   BRIAN KANNO, Co-Chair



                                   ______________________________
                                   BRIAN T. TANIGUCHI, Co-Chair

 
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