On Thursday, May 5, Gov. Abercrombie signed into law Senate Bill 651, a 101-page piece of legislation designed to assist struggling homeowners across the state. According to a statement issued by the Office of the Governor last week, the law, now known as Act 48, implements “a comprehensive strategy to reform the mortgage foreclosure process [and] to protect homeowners who are in foreclosure or at risk of foreclosure.”
At the heart of Act 48 is an effort to mitigate the foreclosure process through dispute resolution. Its key provision, the Mortgage Foreclosure Dispute Resolution Program, will assist owner-occupants of residential properties in Hawai‘i facing non-judicial foreclosure (non-judicial foreclosures occur when a lender pursues such action outside of court, which is the case for most foreclosures in the State of Hawai‘i). With the new program, homeowners facing foreclosure will be afforded a rather unique opportunity: a chance to sit down with their mortgagees, or lenders, in person—a face-to-face meeting that could possibly lead to a resolution.
There are a few stipulations, of course. To qualify, homeowners must be owner-occupants of the residential property under non-judicial foreclosure and must have lived on the property no less than 200 consecutive days. In addition, owners of timeshares, vacation homes and commercial properties are not eligible for the dispute resolution program.
Gov. Neil Abercrombie signed a new law that could make it harder for lenders to confiscate residents’ homes.
How does it work? Beginning in October, lender representatives and owner-occupants will be required to participate in the program if the mortgage lender chooses to pursue non-judicial foreclosure.
Subsequently, the non-judicial foreclosure process will be suspended until a resolution is reached, unless the homeowner elects not to participate dispute resolution. If this is the case, the foreclosure process is resumed.
To initiate the process, lenders must file a notice of non-judicial foreclosure with the state’s Department of Commerce and Consumer Affairs (lenders must pay a filing fee of $250, and all fees will go to the Mortgage Foreclosure Dispute Resolution Special Fund). Upon notification from the state, the homeowner will be given 30 days to dispute the resolution and pay a $300 program fee.
In a summary of the measure, lawmakers contend, “[Act 48] creates a mortgage foreclosure dispute resolution program, involving a trained neutral to facilitate communication between the parties to maximize the likelihood of a successful outcome.”
In addition, the new law is a direct response to residents in need, lawmakers said. “Hawai‘i’s citizens have spoken loudly and clearly that they would like a process which would at least give them an opportunity to meet with their lenders face-to-face to try and save their homes from foreclosure instead of the existing process which leaves them feeling ignored, neglected and even deceived.”
And this isn’t just a victory for struggling homeowners—it’s also history in the making, as many say that Hawai‘i now has one of the country’s toughest foreclosure laws.
Maui Weekly Real Estate Columnist Josh Jerman applauds the new law. In the past, he said, “The non-judicial foreclosure process in Hawai‘i has been criticized for being ‘skinny,’ but with SB 651, the non-judicial process is now more fair and offers a timely solution to navigating out of the foreclosure crisis.”
So, what happens next? The new dispute resolution program will soon be administered by the state’s Department of Commerce and Consumer Affairs Office of Administrative Hearings (DCCA-OAH), with assistance from the State Judiciary’s Center for Alternative Dispute Resolution. The department will begin accepting applications on Oct. 1 and the program will continue until Sept. 30, 2014.
“The new foreclosure law will hopefully deliver results to those individuals seeking loan modifications who have wholeheartedly attempted to work with their lenders but have been given the runaround,” said Jerman. “Ideally, more families will be able to remain in their homes and can move forward with their lives.”