On May 5, 2011, Hawaii Governor Neil Abercrombie signed into law SB 651 which is being called the nation’s toughest foreclosure bill on record, putting a supposed to end to robotic and other forms of unlawful or inappropriate foreclosures on Hawaii’s real estate property owners. Provisions of SB 651 enact a moratorium on all new non-judicial foreclosures through July 1, 2012 (owner-occupants only – does not apply to second homes). The new legislation gives owners the option to meet face to face with their lender before a foreclosure can occur.
“The credit for this today is, in fact, a reflection of what we try to be in Hawaii, which is good neighbors and good friends to one another,” said the Hawaii governor. “We want to try and avoid if we can, to put the consumer, the homeowner, in a position where they feel the entire institutional establishment is lined up against them.”
The primary objective of the mediated in-person meetings between mortgagor and mortgagee is that a compromise can hopefully be reached. This is a direct aim at the local notion that Hawaii’s high foreclosure rate (11th in the nation according to recent figures) can largely be attributed to a mental disconnect between Hawaii homeowners and mainland lenders.
However, residents currently in preforeclosure should not jump for joy just yet. This is not a free pass to avoid foreclosure in Hawaii. Homeowners will still be required to bring all documentation to mediation and prove that they can financially pay a modified loan, if that is their goal. At the other end of the table, the lender must show that it has the legal authority to foreclosure upon the mortgagee. This means demonstration of proof of chain of title.
How SB 651 Affects YOU
So what does this mean for the Hawaii homeowner currently in preforeclosure or in general trouble with their mortgage? Well, you might be able to take a deep breath and relax – a bit. You still need to do some legwork yourself to increase your odds of a successful loan modification, but you can also take some comfort under the umbrella of a new law designed for your protection.
If you’re a Hawaii real estate investor, then you may want to consider a change in your marketing strategy a bit since there may be fewer homeowners seeking a short sale and opting for loan mod’s instead. If you’re a foreclosure buyer, then it seems you’ll have to focus on judicial foreclosures instead – not the norm here in the Aloha State but they do happen.
And for the general resident, does this affect you? Do you expect to somehow share in the cost of this new program via new taxes? Is it worth it? How do you feel this will affect real estate prices in your neighborhood? Are you in favor of SB 651 or not?