Last week I had the opportunity to attend a meeting on ACT 48, the new foreclosure law for Hawaii. The meeting was put on by the title and escrow company Title Guaranty. One of TG’s attorneys gave an overview of the law as well as some of the early implications and the initial fall out. The bill was signed into law in early May. The intent of the law was to protect residents facing foreclosures on their primary residences. Consumer advocates were arguing that non-judicial foreclosures were not giving owners adequate opportunity to renegotiate loan terms. They also argued that the banks were not providing adequate documentation establishing their right to foreclose. The law hoped to address these issues by subjecting non-judicial foreclosures to third party mediation.
Early returns are showing that the law may have some unintended consequences. Fannie Mae recently announced that it was shifting all of its pending foreclosures from non-judicial to judicial foreclosures. This circumvents the mediation process that was to be a part of non-judicial foreclosures. It also has the potential to put serious strains on the judicial foreclosure process. I have read anywhere between 4 out of 5 or 9 out of 10 foreclosures in Hawaii were non-judicial. If we see a marked shift to judicial foreclosures, it is clear that there will be a huge backlog. These issues have been generating quite a bit of press. Here are two articles that I encountered on Act 48 in the last week:
This article from Hawaii Reporter takes a more balanced look at the pros and cons of the law and the issues being encountered.
This article published in Forbes takes a more critical look at the law.
The good news is that the Hawaii State legislature is aware that there are issues with the law and appear to be open to changes. The attorney from TG was on his way to testify in front of state senators after our meeting. He was one of a number of industry experts including attorneys, Realtors and lenders who were going to be providing their feedback on the new law. We will continue to follow ACT 48 and its impacts on the Maui Real Estate Market on the Maui Real Estate Blog.