HB 467: RELATING TO FORECLOSURES.

A BILL FOR AN ACT

RELATING TO FORECLOSURES.

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

     SECTION 1.  The legislature finds that natural disasters and other economic crises can often lead homeowners to default on their mortgage payments, resulting in a wave of foreclosures.  Previous foreclosure crises have resulted in the replacement of owner-occupied homes with investor-owned rentals, prolonged vacancies, and unmaintained residential properties.  As climate related crises become more intense and frequent, and as housing cost burdens increase for low- to moderate-income homeowners, the legislature believes it is necessary to ensure that foreclosed homes are not lost to second homebuyers or residential investors.

     Accordingly, the purpose of this Act is to:

     (1)  Prohibit sellers of foreclosed homes in a nonjudicial foreclosure from bundling properties at a public sale for sale to a single buyer and require each foreclosed home to be sold separately; and

     (2)  Allow tenants, families, city and state government, affordable housing nonprofits, and community land trusts forty-five days to match or beat the best public sale bid to buy the property.

     SECTION 2.  Chapter 667, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

     "§667-A  Bundled properties; prohibition.  Notwithstanding any other law to the contrary, for the public sale of mortgaged property under the power of sale foreclosure or alternate power of sale foreclosure process under this chapter, no mortgagee shall bundle mortgaged properties for the purpose of public sale and each mortgaged property shall be bid on separately, unless the deed or mortgage otherwise requires.

     §667-B  Eligible bidder; subsequent bid.  (a)  Notwithstanding any other law to the contrary, the public sale of mortgaged property under a power of sale foreclosure or alternate power of sale process under this chapter shall not be deemed final until the earliest of the following:

     (1)  Fifteen days after the public sale, unless at least one or more eligible bidders submits a:

          (A)  Subsequent bid that is equal to or exceeds the amount of the latest and highest bid of the successful bidder under section 667-29 or 667-98; or

          (B)  Nonbinding written notice of intent to place a subsequent bid.

          The bid or written notice of intent to place a subsequent bid shall be sent to the mortgagee by certified mail, overnight delivery, or another method that allows for confirmation of the delivery date and shall be received by the mortgagee no later than fifteen days after the public sale; or

     (2)  Forty-five days after the public sale; provided that during the forty-five-day period, an eligible bidder may submit a subsequent bid in an amount that is equal to or exceeds the last and highest bid by the successful bidder under section 667-29 or 667-98.

     (b)  If an eligible bidder submits a subsequent bid that is equal to or exceeds the amount of the last and highest bid by the successful bidder under section 667-29 or 667-98, the eligible bidder shall be the final successful bidder and make the nonrefundable downpayment required under section 667-29 or 667-98.

     (c)  For purposes of this section:

     "Eligible bidder" means:

     (1)  An eligible tenant buyer;

     (2)  A prospective owner-occupant;

     (3)  A nonprofit corporation whose primary activity is the development and preservation of affordable housing;

     (4)  A community land trust; or

     (5)  A state or county government department or agency.

     "Eligible tenant buyer" means a natural person who at the time of a public sale is:

     (1)  Occupying the mortgaged property as their primary residence;

     (2)  Occupying the mortgaged property under a rental or lease agreement; and

     (3)  Not the mortgagor or the child, spouse, or parent of the mortgagor.

     "Prospective owner-occupant" means a natural person who presents to the mortgagee an affidavit stating that they:

     (1)  Will occupy the mortgaged property as their primary residence within sixty days of the deed being recorded;

     (2)  Will maintain their occupancy in the mortgaged property for at least one year;

     (3)  Are not the mortgagor or the child, spouse, or parent of the mortgagor; and

     (4)  Are not acting as the agent of any other person or entity in purchasing the mortgaged property."

     SECTION 3.  Section 667-29, Hawaii Revised Statutes, is amended to read as follows:

     "§667-29  Authorized bidder; successful bidder.  Any person, including the foreclosing mortgagee, [shall be authorized to] may bid for the mortgaged property at the public sale and to purchase the mortgaged property.  The highest bidder who meets the requirements of the terms and conditions of the public sale shall be the successful bidder.  The public sale shall be considered as being held when the mortgaged property is declared by the foreclosing mortgagee as being sold to the successful bidder.  When the public sale is held, the successful bidder at the public sale, as the purchaser, shall make a nonrefundable downpayment to the foreclosing mortgagee of [not] no less than ten per cent of the highest successful bid price[.]; provided that if the successful bidder loses the bid to an eligible bidder pursuant to section 667-B, the downpayment shall be refunded.  If the successful bidder is the foreclosing mortgagee or any other mortgagee having a recorded lien on the mortgaged property before the recordation of the notice of default and intention to foreclose under section 667-23, the downpayment requirement may be satisfied by offset and a credit bid up to the amount of the mortgage debt."

     SECTION 4.  Section 667-98, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§667-98[]]  Authorized bidder; successful bidder.  Any person, including the association, [shall be authorized to] may bid for the unit at the public sale and to purchase the unit.  The highest bidder who meets the requirements of the terms and conditions of the public sale shall be the successful bidder.  The public sale shall be considered as being held when the unit is declared by the association as being sold to the successful bidder.  When the public sale is held, the successful bidder at the public sale, as the purchaser, shall make a nonrefundable downpayment to the association of [not] no less than ten per cent of the highest successful bid price[.]; provided that if the successful bidder loses the bid to an eligible bidder pursuant to section 667-B, the downpayment shall be refunded.  If the successful bidder is the association, the downpayment requirement may be satisfied by offset and a credit bid up to the amount of the lien debt."

     SECTION 5.  In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

     SECTION 6.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 7.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 8.  This Act shall take effect on July 1, 3000.

Report Title:

Foreclosure; Nonjudicial Foreclosure; Bundled Properties; Public Sale; Prohibition; Eligible Bidders; Subsequent Bids

Description:

Prohibits sellers of foreclosed homes from bundling properties at a public sale and requires each foreclosed home to be sold separately.  Specifies that the sale of a foreclosed property is not final until either fifteen days after the public sale or forty-five days if an eligible bidder submits a subsequent bid or written notice of intent to submit a subsequent bid.  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 foreclosures.

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

     SECTION 1.  The legislature finds that natural disasters and other economic crises can often lead homeowners to default on their mortgage payments, resulting in a wave of foreclosures.  Previous foreclosure crises have resulted in the replacement of owner-occupied homes with investor-owned rentals, prolonged vacancies, and unmaintained residential properties.  As climate related crises become more intense and frequent, and as housing cost burdens increase for low- to moderate-income homeowners, the legislature believes it is necessary to ensure that foreclosed homes are not lost to second homebuyers or residential investors.

     Accordingly, the purpose of this Act is to:

     (1)  Prohibit sellers of foreclosed homes in a nonjudicial foreclosure from bundling properties at a public sale for sale to a single buyer and require each foreclosed home to be sold separately; and

     (2)  Allow tenants, families, city and state government, affordable housing nonprofits and community land trusts forty-five days to match or beat the best public sale bid to buy the property.

     SECTION 2.  Chapter 667, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

     "§667-A  Bundled properties; prohibition.  Notwithstanding any other law to the contrary, for the public sale of mortgaged property under the power of sale foreclosure or alternate power of sale foreclosure process under this chapter, no mortgagee shall bundle mortgaged properties for the purpose of public sale and each mortgaged property shall be bid on separately, unless the deed or mortgage otherwise requires.

     §667-B  Eligible bidder; subsequent bid.  (a)  Notwithstanding any other law to the contrary, the public sale of mortgaged property under a power of sale foreclosure or alternate power of sale process under this chapter shall not be deemed final until the earliest of the following:

     (1)  Fifteen days after the public sale, unless at least one or more eligible bidders submits a:

          (A)  Subsequent bid that is equal to or exceeds the amount of the latest and highest bid of the successful bidder under section 667-29 or 667-98; or

          (B)  Nonbinding written notice of intent to place a subsequent bid.

          The bid or written notice of intent to place a subsequent bid shall be sent to the mortgagee by certified mail, overnight delivery, or another method that allows for confirmation of the delivery date and shall be received by the mortgagee no later than fifteen days after the public sale; or

     (2)  Forty-five days after the public sale; provided that during the forty-five-day period, an eligible bidder may submit a subsequent bid in an amount that is equal to or exceeds the last and highest bid by the successful bidder under section 667-29 or 667-98.

     (b)  If an eligible bidder submits a subsequent bid that is equal to or exceeds the amount of the last and highest bid by the successful bidder under section 667-29 or 667-98, the eligible bidder shall be the final successful bidder and make the nonrefundable downpayment required under section 667-29 or 667-98.

     (c)  For purposes of this section:

     "Eligible bidder" means:

     (1)  An eligible tenant buyer;

     (2)  A prospective owner-occupant;

     (3)  A nonprofit corporation whose primary activity is the development and preservation of affordable housing;

     (4)  A community land trust; or

     (5)  A State or county government department or agency.

     "Eligible tenant buyer" means a natural person who at the time of a public sale is:

     (1)  Occupying the mortgaged property as their primary residence;

     (2)  Occupying the mortgaged property under a rental or lease agreement; and

     (3)  Not the mortgagor or the child, spouse, or parent of the mortgagor.

     "Prospective owner-occupant" means a natural person who presents to the mortgagee an affidavit stating that they:

     (1)  Will occupy the mortgaged property as their primary residence within sixty days of the deed being recorded;

     (2)  Will maintain their occupancy in the mortgaged property for at least one year;

     (3)  Are not the mortgagor or the child, spouse, or parent of the mortgagor; and

     (4)  Are not acting as the agent of any other person or entity in purchasing the mortgaged property."

     SECTION 3.  Section 667-29, Hawaii Revised Statutes, is amended to read as follows:

     "§667-29  Authorized bidder; successful bidder.  Any person, including the foreclosing mortgagee, [shall be authorized to] may bid for the mortgaged property at the public sale and to purchase the mortgaged property.  The highest bidder who meets the requirements of the terms and conditions of the public sale shall be the successful bidder.  The public sale shall be considered as being held when the mortgaged property is declared by the foreclosing mortgagee as being sold to the successful bidder.  When the public sale is held, the successful bidder at the public sale, as the purchaser, shall make a nonrefundable downpayment to the foreclosing mortgagee of [not] no less than ten per cent of the highest successful bid price[.]; provided that if the successful bidder loses the bid to an eligible bidder pursuant to section 667-B, the downpayment shall be refunded.  If the successful bidder is the foreclosing mortgagee or any other mortgagee having a recorded lien on the mortgaged property before the recordation of the notice of default and intention to foreclose under section 667-23, the downpayment requirement may be satisfied by offset and a credit bid up to the amount of the mortgage debt."

     SECTION 4.  Section 667-98, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§667-98[]]  Authorized bidder; successful bidder.  Any person, including the association, [shall be authorized to] may bid for the unit at the public sale and to purchase the unit.  The highest bidder who meets the requirements of the terms and conditions of the public sale shall be the successful bidder.  The public sale shall be considered as being held when the unit is declared by the association as being sold to the successful bidder.  When the public sale is held, the successful bidder at the public sale, as the purchaser, shall make a nonrefundable downpayment to the association of [not] no less than ten per cent of the highest successful bid price[.]; provided that if the successful bidder loses the bid to an eligible bidder pursuant to section 667-B, the downpayment shall be refunded.  If the successful bidder is the association, the downpayment requirement may be satisfied by offset and a credit bid up to the amount of the lien debt."

     SECTION 5.  In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

     SECTION 6.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 7.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 8.  This Act shall take effect upon its approval.

Report Title:

Foreclosure; Nonjudicial Foreclosure; Bundled Properties; Public Sale; Prohibition; Eligible Bidders; Subsequent Bids

Description:

Prohibit sellers of foreclosed homes from bundling properties at a public sale and requires each foreclosed home to be sold separately.  Specifies that the sale of a foreclosed property is not final until either fifteen days after the public sale or forty-five days if an eligible bidder submits a subsequent bid or written notice of intent to submit a subsequent bid.

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.  554

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 467

      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 Consumer Protection & Commerce, to which was referred H.B. No. 467, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO FORECLOSURES,"

begs leave to report as follows:

     The purpose of this measure is to:

     (1)  Prohibit sellers of foreclosed homes in a nonjudicial foreclosure from bundling properties at a public sale for sale to a single buyer and require each foreclosed home to be sold separately; and

     (2)  Allow tenants, families, state and county government, affordable housing nonprofits, and community land trusts forty-five days to match or beat the best public sale bid to buy the property.

     Your Committee received testimony in support of this measure from Lāhainā Strong; Lahaina Community Land Trust; Hawaii Workers Center; Maui Housing Hui; and numerous individuals.

     Your Committee finds that the devastating Maui wildfires on August 8, 2023, was one of the worst natural disasters in the State's history.  Your Committee further finds that as the foreclosure moratorium comes to an end, there are concerns Maui residents will face a wave of foreclosures that threatens their housing stability.  To address these concerns, this measure prohibits the mass purchasing of foreclosed properties and allows certain entities to match or beat a public sale bid.

     As affirmed by the record of votes of the members of your Committee on Consumer Protection & Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 467, H.D. 1, and recommends that it be referred to your Committee on Judiciary & Hawaiian Affairs.

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

STAND. COM. REP. NO.  212

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 467

      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 Housing, to which was referred H.B. No. 467 entitled:

"A BILL FOR AN ACT RELATING TO FORECLOSURES,"

begs leave to report as follows:

     The purpose of this measure is to:

     (1)  Prohibit sellers of foreclosed homes in a nonjudicial foreclosure from bundling properties at a public sale for sale to a single buyer and require each foreclosed home to be sold separately; and

     (2)  Allow tenants, families, city and state government, affordable housing nonprofits, and community land trusts forty-five days to match or beat the best public sale bid to buy the property.

     Your Committee received testimony in support of this measure from Lahaina Strong; Lahaina Community Land Trust; Northwest Community Land Trust Coalition; and numerous individuals.

     Your Committee finds that the foreclosure moratorium for borrowers with Federal Housing Administration-insured mortgages on Maui expired on January 1, 2025.  This measure ensures that foreclosed properties must have individual property auctions and cannot be bundled together, which allows residents to have a greater chance to submit competitive offers.

     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 clarity, consistency, and style.

     Your Committee notes that community development financial institutions are currently collaborating with affected resident homeowners to develop proposals to bid on their property.  Should your Committee on Consumer Protection & Commerce deliberate on this measure, your Committee respectfully requests that it consider whether to include community development financial institutions in the definition of an "eligible bidder" under this measure.

     As affirmed by the record of votes of the members of your Committee on Housing that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 467, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 467, H.D. 1, and be referred to your Committee on Consumer Protection & Commerce.

Respectfully submitted on behalf of the members of the Committee on Housing,