HB 1351: RELATING TO THE HAWAIIAN HOMES COMMISSION ACT, 1920, AS AMENDED.

A BILL FOR AN ACT

RELATING TO THE HAWAIIAN HOMES COMMISSION ACT, 1920, AS AMENDED.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that Act 279, Session Laws of Hawaii 2022 (Act 279), appropriated out of the general revenues of the State of Hawaii the sum of $600,000,000 or so much thereof as may be necessary for fiscal year 2021-2022 to provide a multi-pronged approach to reducing the over twenty-eight thousand applicants on the department of Hawaiian home lands waitlist.  Since this historic investment, mortgage interest rates have increased and continue to rise, while construction costs are ever-increasing, due in large part to global inflation and the 2023 Maui wildfires.  These market conditions have created a situation in which Hawaiian home lands lessees are unable to qualify for a mortgage at the amount needed to afford the home prices being offered through the department's turnkey offering, nor can lessees afford contractor costs for vacant lot home builds.  In response, subsidy and affordable mortgage programs have been developed and expanded by government agencies and private institutions to assist homebuyers in addressing this situation.  Nevertheless, these programs require collateral to ensure repayment during their recapture periods or loan terms.  On Hawaiian home lands, the department guarantees the loan since the land is held in trust.  The significantly increased projected number of housing units that are expected over the next several years as a result of Act 279 will necessitate an increase in the department's guarantee limit.

     Accordingly, the purpose of this Act is to increase the limit of the State's liability from $100,000,000 to $500,000,000 for moneys borrowed by the department of Hawaiian home lands or loans made to lessees that are guaranteed by the department.

     SECTION 2.  Section 214, Hawaiian Homes Commission Act, 1920, as amended, is amended by amending subsection (b) to read as follows:

     "(b)  In addition the department may:

     (1)  Use moneys in the Hawaiian home operating fund, with the prior approval of the governor, to match federal, state, or county funds available for the same purposes and to that end, enter into an undertaking, agree to conditions, transfer funds therein available for expenditure, and do and perform other acts and things, as may be necessary or required, as a condition to securing matching funds for the department's projects or works;

     (2)  Loan or guarantee the repayment of or otherwise underwrite any authorized loan or portion thereof to lessees in accordance with section 215;

     (3)  Loan or guarantee the repayment of or otherwise underwrite any authorized loan or portion thereof to a cooperative association in accordance with section 215;

     (4)  Permit and approve loans made to lessees by government agencies or private lending institutions, where the department assures the payment of these loans; provided that upon receipt of notice of default in the payment of the assured loans, the department may, upon failure of the lessee to cure the default within sixty days, cancel the lease and pay the outstanding balance in full or may permit the new lessee to assume the outstanding debt; [and] provided further that the department shall reserve the following rights:

          (A)  The right of succession to the lessee's interest and assumption of the contract of loan;

          (B)  The right to require that written notice be given to the department immediately upon default or delinquency of the lessee; and

          (C)  Any other rights enumerated at the time of assurance necessary to protect the monetary and other interests of the department;

     (5)  Secure, pledge, or otherwise guarantee the repayment of moneys borrowed by the department from government agencies or private lending institutions and pay the interim interest or advances required for loans; provided that the State's liability, contingent or otherwise, either on moneys borrowed by the department or on departmental guarantees of loans made to lessees under this paragraph and paragraphs (2), (3), and (4) of this subsection, shall at no time exceed [$100,000,000;] $500,000,000; the department's guarantee of repayment shall be adequate security for a loan under any state law prescribing the nature, amount, or form of security or requiring security upon which loans may be made;

     (6)  Use available loan fund moneys or other funds specifically available for guarantee purposes as cash guarantees when required by lending agencies;

     (7)  Exercise the functions and reserved rights of a lender of money or mortgagee of residential property in all direct loans made by government agencies or by private lending institutions to lessees, the repayment of which is assured by the department.  The functions and reserved rights shall include but not be limited to, the purchasing, repurchasing, servicing, selling, foreclosing, buying upon foreclosure, guaranteeing the repayment, or otherwise underwriting, of any loan, the protecting of security interest, and after foreclosures, the repairing, renovating, or modernization and sale of property covered by the loan and mortgage;

     (8)  Pledge receivables of loan accounts outstanding as collateral to secure loans made by government agencies or private lending institutions to the department, the proceeds of which shall be used by the department to make new loans to lessees or to finance the development of available lands for purposes permitted by this Act; provided that any loan agreement entered into under this paragraph by the department shall include a provision that the money borrowed by the department is not secured directly or indirectly by the full faith and credit or the general credit of the State or by any revenues or taxes of the State other than the receivables specifically pledged to repay the loan; provided further that in making loans or developing available lands out of money borrowed under this paragraph, the department may establish, revise, charge, and collect fees, premiums, and charges as necessary, reasonable, or convenient, to assure repayment of the funds borrowed, and the fees, premiums, and charges shall be deposited into the Hawaiian home trust fund; [and] provided further that no moneys of the Hawaiian home loan fund may be pledged as security under this paragraph; and

     (9)  Notwithstanding any other provisions of this Act to the contrary, transfer into the Hawaiian home trust fund any available and unpledged moneys from any loan funds, the Hawaiian loan guarantee fund, or any fund or account succeeding thereto, except the Hawaiian home loan fund, for use as cash guarantees or reserves when required by a federal agency authorized to insure or guarantee loans to lessees."

     SECTION 3.  The provisions of the amendments made by this Act to the Hawaiian Homes Commission Act, 1920, as amended, are declared to be severable, and if any section, sentence, clause, or phrase, or the application thereof to any person or circumstances is held ineffective because there is a requirement of having the consent of the United States to take effect, then that portion only shall take effect upon the granting of consent by the United States and effectiveness of the remainder of these amendments or the application thereof shall not be affected.

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on July 1, 3000; provided that it shall take effect on the earlier of the date of the Secretary of the Interior's notification letter to the Congressional Committee Chairpersons that this Act meets none of the criteria in title 43 Code of Federal Regulations section 48.20 necessitating congressional approval, or on the date that the United States Congress' approval becomes law.

Report Title:

DHHL; Hawaiian Home Lands Lessees; Loans

Description:

Increases the limit of the State's liability for moneys borrowed by the Department of Hawaiian Home Lands or loans made to lessees that are guaranteed by the Department from $100,000,000 to $500,000,000.  Effective 7/1/3000.  (HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

relating to the hawaiian homes commission act, 1920, as amended.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that Act 279, Session Laws of Hawaii 2022 (Act 279), appropriated out of the general revenues of the State of Hawaii the sum of $600,000,000 or so much thereof as may be necessary for fiscal year 2021-2022 to provide a multi-pronged approach to reducing the over twenty-eight thousand applicants on the department of Hawaiian home lands waitlist.  Since this historic investment, mortgage interest rates have increased and continue to rise, while construction costs are ever-increasing, due in large part to global inflation and the 2023 Maui wildfires.  These market conditions have created a situation in which Hawaiian home lands lessees are unable to qualify for a mortgage at the amount needed to afford the home prices being offered through the department's turnkey offering, nor can lessees afford contractor costs for vacant lot home builds.  In response, subsidy and affordable mortgage programs have been developed and expanded by government agencies and private institutions to assist homebuyers in addressing this situation.  Nevertheless, these programs require collateral to ensure repayment during their recapture periods or loan terms.  On Hawaiian home lands, the department guarantees the loan since the land is held in trust.  The significantly increased projected number of housing units that are expected over the next several years as a result of Act 279 will necessitate an increase in the department's guarantee limit.

     Accordingly, the purpose of this Act is to increase the limit of the State's liability from $100,000,000 to $500,000,000 for moneys borrowed by the department of Hawaiian home lands or loans made to lessees that are guaranteed by the department.

     SECTION 2.  Section 214, Hawaiian Homes Commission Act, 1920, as amended, is amended by amending subsection (b) to read as follows:

     "(b)  In addition the department may:

     (1)  Use moneys in the Hawaiian home operating fund, with the prior approval of the governor, to match federal, state, or county funds available for the same purposes and to that end, enter into an undertaking, agree to conditions, transfer funds therein available for expenditure, and do and perform other acts and things, as may be necessary or required, as a condition to securing matching funds for the department's projects or works;

     (2)  Loan or guarantee the repayment of or otherwise underwrite any authorized loan or portion thereof to lessees in accordance with section 215;

     (3)  Loan or guarantee the repayment of or otherwise underwrite any authorized loan or portion thereof to a cooperative association in accordance with section 215;

     (4)  Permit and approve loans made to lessees by government agencies or private lending institutions, where the department assures the payment of these loans; provided that upon receipt of notice of default in the payment of the assured loans, the department may, upon failure of the lessee to cure the default within sixty days, cancel the lease and pay the outstanding balance in full or may permit the new lessee to assume the outstanding debt; and provided further that the department shall reserve the following rights:

          (A)  The right of succession to the lessee's interest and assumption of the contract of loan;

          (B)  The right to require that written notice be given to the department immediately upon default or delinquency of the lessee; and

          (C)  Any other rights enumerated at the time of assurance necessary to protect the monetary and other interests of the department;

     (5)  Secure, pledge, or otherwise guarantee the repayment of moneys borrowed by the department from government agencies or private lending institutions and pay the interim interest or advances required for loans; provided that the State's liability, contingent or otherwise, either on moneys borrowed by the department or on departmental guarantees of loans made to lessees under this paragraph and paragraphs (2), (3), and (4) of this subsection, shall at no time exceed [$100,000,000;] $500,000,000; the department's guarantee of repayment shall be adequate security for a loan under any state law prescribing the nature, amount, or form of security or requiring security upon which loans may be made;

     (6)  Use available loan fund moneys or other funds specifically available for guarantee purposes as cash guarantees when required by lending agencies;

     (7)  Exercise the functions and reserved rights of a lender of money or mortgagee of residential property in all direct loans made by government agencies or by private lending institutions to lessees the repayment of which is assured by the department.  The functions and reserved rights shall include but not be limited to, the purchasing, repurchasing, servicing, selling, foreclosing, buying upon foreclosure, guaranteeing the repayment, or otherwise underwriting, of any loan, the protecting of security interest, and after foreclosures, the repairing, renovating, or modernization and sale of property covered by the loan and mortgage;

     (8)  Pledge receivables of loan accounts outstanding as collateral to secure loans made by government agencies or private lending institutions to the department, the proceeds of which shall be used by the department to make new loans to lessees or to finance the development of available lands for purposes permitted by this Act; provided that any loan agreement entered into under this paragraph by the department shall include a provision that the money borrowed by the department is not secured directly or indirectly by the full faith and credit or the general credit of the State or by any revenues or taxes of the State other than the receivables specifically pledged to repay the loan; provided further that in making loans or developing available lands out of money borrowed under this paragraph, the department may establish, revise, charge, and collect fees, premiums, and charges as necessary, reasonable, or convenient, to assure repayment of the funds borrowed, and the fees, premiums, and charges shall be deposited into the Hawaiian home trust fund; and provided further that no moneys of the Hawaiian home loan fund may be pledged as security under this paragraph; and

     (9)  Notwithstanding any other provisions of this Act to the contrary, transfer into the Hawaiian home trust fund any available and unpledged moneys from any loan funds, the Hawaiian loan guarantee fund, or any fund or account succeeding thereto, except the Hawaiian home loan fund, for use as cash guarantees or reserves when required by a federal agency authorized to insure or guarantee loans to lessees."

     SECTION 3.  The provisions of the amendments made by this Act to the Hawaiian Homes Commission Act, 1920, as amended, are declared to be severable, and if any section, sentence, clause, or phrase, or the application thereof to any person or circumstances is held ineffective because there is a requirement of having the consent of the United States to take effect, then that portion only shall take effect upon the granting of consent by the United States and effectiveness of the remainder of these amendments or the application thereof shall not be affected.

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on either the date of the Secretary of the Interior's notification letter to the Congressional Committee Chairpersons that this Act meets none of the criteria in title 43 Code of Federal Regulations section 48.20 necessitating congressional approval, or on the date that the United States Congress' approval becomes law.

Report Title:

DHHL; Hawaiian Home Lands Lessees; Loans

Description:

Increases the limit of the State's liability from $100,000,000 to $500,000,000 for moneys borrowed by the Department of Hawaiian Home Lands or loans made to lessees that are guaranteed by the Department.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO.  282

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 1351

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Judiciary & Hawaiian Affairs, to which was referred H.B. No. 1351 entitled:

"A BILL FOR AN ACT RELATING TO THE HAWAIIAN HOMES COMMISSION ACT, 1920, AS AMENDED,"

begs leave to report as follows:

     The purpose of this measure is to increase the limit of the State's liability for monies borrowed by the Department of Hawaiian Home Lands or loans made to lessees that are guaranteed by the Department from $100,000,000 to $500,000,000.

     Your Committee received testimony in support of this measure from the Department of Hawaiian Home Lands and two individuals.  Your Committee received comments on this measure from the Department of Budget and Finance.

     Your Committee finds that, despite the historic $600,000,000 investment by the State into Hawaiian home lands in 2022, various factors have increased the cost of housing, including higher mortgage interest rates, increasing construction costs, and inflation.  As a result, the Department of Hawaiian Home Lands has faced rising expenses in the construction of housing.  This measure raises the liability cap, which will allow the Department to secure, pledge, or guarantee loan repayments up to $500,000,000.

     Your Committee has amended this measure by:

     (1)  Changing the effective date to July 1, 3000, to encourage further discussion; and

     (2)  Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

     Your Committee notes that the Department of Budget and Finance, in its written testimony, raised concerns that the increase in the liability limit will affect the amount of general obligation bonds the State may issue within the debt limit.  As such, the Department stated that the State will need to appropriate general funds to cover the liability if the guarantee is called.  Your Committee respectfully requests your Committee on Finance, should it deliberate on this measure, to give due consideration to the concerns raised by the Department of Budget and Finance.

     As affirmed by the record of votes of the members of your Committee on Judiciary & Hawaiian Affairs that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1351, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1351, H.D. 1, and be referred to your Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Judiciary & Hawaiian Affairs,