By Kevin Chiu
Hawaii lawmakers followed hard hit Nevada to become only the second state in the nation to approve one of the toughest foreclosure consumer aid laws in the U.S., passing the bill as the legislature closed its latest session.
Senate Bill 651 is touted as a windfall for consumers, requiring mortgage lenders to conduct mitigation with loan borrowers who feel they are being dealt with unfairly. Roughly 30 legislative proposals were made during the session by state lawmakers trying to come up with a solution for the foreclosure crisis in Hawaii.
Community out-reach organizations, including Faith Action for Community Equity lobbied for the law to be adopted as banks and mortgage companies opposed the legislation, which affects mortgages that are handled through non-judicial foreclosure laws in the Aloha-state.
“Amazing job on this bill and your fight will inspire other groups across the country,” California Faith Action organizer Adam Kruggel told the Hawaii group. The new law, modeled after a similar state law in Nevada is intended to have lenders and homeowners work out a compromise on a mortgage modification.
Mitigation will be held in front of a court appointed mediator before any home or other real estate foreclosure can be finalized and officially repossessed by lenders. The law is a clear indication that the foreclosure crisis has impacted the state widely and came about after thousands of Hawaii homeowners complained to lawmakers and bankers that they are being dealt with unfairly by mortgage servicing companies and bankers.
The 101 page act effectively overhauls state laws on non-judicial foreclosures. The majority of real estate foreclosures are not handled through Hawaiian courts, but are directly handled by lenders servicing companies. Twenty-six other U.S. states abide by state judicial foreclosure procedures.
The Nevada program has been in effect for nearly 18 months. Consumer interest groups, who lobbied for the law, say that it has helped to keep more troubled Nevada mortgage holders in their homes than before mediation was required. Las Vegas has held the distinction of being the top foreclosure market in the U.S. for more than 30 months, according to Realty Trac.
Mortgage industry officials opposed the new laws, saying that the new requirements will make loans more expensive and harder to obtain But lawmakers labeled the comments as propaganda and approved the new laws after homeowners demonstrated against bankers, who they blame for the foreclosure crisis.