Foreclosure reform law offers resolution opportunities, puts strain on underfunded Judiciary

HONOLULU—Gov. Neil Abercrombie signed into law yesterday Senate Bill 651, the Legislature’s comprehensive response to the foreclosure issue facing Hawaii families.

Senate Bill 651 aims to reform the foreclosure process by implementing additional protections to individuals facing foreclosure or at-risk of foreclosure. Among other things, the measure establishes a temporary Mortgage Foreclosure Dispute Resolution Program and authorizes conversion from nonjudicial to judicial foreclosure.

To see Senate Bill 651, click here

“We’re giving a time out to our consumers so that they can wait for the provisions of this measure to kick in,” said Senate Commerce and Consumer Protection Chair Roz Baker. “When it becomes law, they will have the opportunity to convert to a judicial foreclosure or beginning October 1 they can go through the dispute resolution process. ... In addition, no new nonjudicial foreclosures can commence once the bill is signed.”

The Mortgage Foreclosure Dispute Resolution Program seeks to provide the owner-occupants of residential property in Hawaii who are facing foreclosure the opportunity to meet face-to-face with the mortgagees to possibly resolve their differences.

The Department of Commerce and Consumer Affairs will administer the program, which will begin no later than October 1, 2011 and continue until September 30, 2014. 

“This is a wonderful way legislation should be crafted,” Baker said. “It was truly a collaborative effort with House Consumer Protection and Commerce Chair Rob Herkes and his staff, FACE (Faith Action for Community Equity Hawaii), Department of Commerce and Consumer Affairs, the Judiciary, the Senate and other organizations who helped craft this bill. Mahalo to Governor Abercrombie for his expeditious action to sign SB 651 as Act 48.”

In testimony about the judicial foreclosure conversion, the Judiciary’s administrative director Rod Maile warned that the State has not funded the required judges and staff to handle an influx of new cases.

“If about 50 percent of the 11,094 non-judicial foreclosure cases in 2010 were converted to judicial foreclosure actions pursuant to this bill, adding approximately 6,000 new cases (500 new cases per month), would constitute a significant, albeit temporary increase in the Judiciary’s caseload,” Maile said. “The Judiciary would not be able to timely process 6,000 new cases per year at the circuit court level, without additional resources and staffing.”

Maile estimated that it would cost the State $4.3 million for temporary additional judges and support staff to adequately handle 6,000 new circuit court cases per year. Still $1 million if the number of new circuit court cases were just 1,500.

The measure brings the number of bills enacted to 49. The Governor also vetoed two measures today:

Senate Bill 1416 would have exempted a new car owner from obtaining an inspection certificate for three years from the date of purchase. Abercrombie said the bill compromises road safety. New car owners currently have a two year exemption from the requirement for obtaining an inspection certificate.

House Bill 382 would have granted the State Auditor explicit authority to inspect confidential documents and financial affairs—including private personal information in tax returns – of the Department of Taxation. The bill had a number of legal concerns.

Abercrombie has until July 12 to sign into law all measures that are passed out of the Hawaii Senate and the House of Representatives.