Rep Marumoto Address HB 2103 – State Bank

Stand. Comm. Rep. No. 924-12 H.B. No. 2103, H.D. 2 RELATING TO THE BANK OF THE STATE OF HAWAII.(Financial Institutions; State Bank; Hawaii Housing Finance and Development Corporation; Mortgage Foreclosure; Appropriation) AS AMENDED, PASS THIRD READING

Contact Excerpt from Capitol TV

The purpose of the bill is to require the DCCA, along with other departments and entities, to conduct a comprehensive review of state laws in order to develop legislation to establish a bank of the State of Hawaii. The bill requires semi-annual status reports of the review to the Legislature. The final report shall contain a schedule of state funds to be transferred to the state bank from other financial institutions that currently serve as depositories for the state and proposed legislation to establish a program designed to purchase distressed properties encumbered by problematic mortgages. In the meantime, the Hawaii Housing Finance and Development Corporation shall establish an identical interim program to purchase the same distressed properties encumbered by problematic mortgages until the state bank is established. These two programs share the intent and purpose of the HD1 draft. The bill provides the process and procedures for the purchasing program (including the ability for former owners to buy back their former property). The bill includes a section that would deem the bank of the State of Hawaii licensed to engage in business on ________. Lastly, the bill requires that $________ of state funds currently held in private institutions be transferred into the bank on ________ with 50% of all state funds required to be held in depositories be held deposited into the bank by ________, and 75% of those funds by ________. Bill appropriates an unspecified amount on money from the compliance resolution fund for the purpose of conducting the review.


Rep. Riviere addresses HB 2019 – MORTGAGES

HB 2019 HD1 – – The purpose of the bill is to strengthen protections for consumers, by prohibiting lenders from pursuing a “deficiency judgment” — the shortfall resulting from a sale that does not pay off the remaining balance on a mortgage loan for certain residential property sold in a judicial foreclosure auction or short sale.
Due to recent changes in mortgage foreclosure law, and lenders not wanting to participate in the dispute resolution program that was established as an alternative to judicial foreclosures, the courts are handling a lot more judicial foreclosure cases. Thus, lenders are often in court trying to collect deficiency judgments from borrowers.
HD1, the current draft, amends the original bill by:
• Deleting the uninterrupted occupancy and the absence of refinancing as conditions to barring a deficiency judgment in a foreclosure action, short sale, or deed in lieu of foreclosure; and
• Extending the prohibition against deficiency judgments for remaining balances on mortgage loans to certain residential property conveyed through deeds in lieu of foreclosure as well as property sold in judicial foreclosures or short sales.
DCCA’s Commissioner of Financial Institutions warned that this bill would jeopardize the health of our financial institutions. If banks cannot recoup the losses incurred through short sales, their underwriters would see this as a negative and give them a lower rating.
She also warned of unintended consequences:
• If banks are barred from seeking deficiency judgments, they would be less agreeable to short sales altogether as a means to mitigate losses (therefore fewer distressed borrowers would be able to benefit from short sales, which force banks to accept a discounted payoff).
• We can’t always assume the borrower doesn’t have assets elsewhere that they can use to satisfy a deficiency judgment. Banks already decide on a case-by-case basis whether to enter into a short sale and pursue a deficiency judgment; they don’t go to the trouble of pursuing it in court if they don’t think they can ultimately recoup their losses.
DCCA’s Office of Consumer Protection agrees with the Commissioner of Financial Institutions that it may not be fair to grant a homeowner blanket forgiveness of the entire deficiency judgment if the homeowner holds an interest in other real property, including investment properties.
Hawaii Bankers Association says most Hawaii banks use the judicial foreclosure process to preserve their right to obtain a deficiency judgment, in order to limit their potential loss. Whether or not a deficiency judgment can be recovered should not depend on a blanket policy, but should be decided on a case-by-case basis that takes into account the troubled borrower’s financial condition and any other circumstances.

Contact: excerpt from Capitol TV

Rep. Ward addresses HB304 – State Finances

HB 304 HD1 – The purpose of the bill is to allow the Department of Budget and Finance to enter into agreements with other bond issuers to pool bond allocations The total pool of allocations may exceed the state ceiling provided that the collaborating entity is authorized to issue bonds in accordance with the laws of any state of the US and the state’s allocation to the pool does not exceed the state ceiling. Bill amends chapter 39C, Hawaii Revised Statutes, HRS, by adding a new section.
Currently, chapter 39C, HRS, allows for and provides for the state to pool bond allocations with local municipalities.
The bill does not mention the process for deciding on allocation pool partners. Who would become a partner and why would they be chosen?
HD1 (current draft) is an adopted proposed HD1 draft. It is quite different from the original bill that related to technical amendments to state budget laws on transfer of non-general funds to the general fund.

The Department of Budget and Finance testified that according to the State’s bond counsel, there are federal tax regulations that would prohibit the State from pooling bond allocations with other states. Any inter-state pooling of bond allocations made possible in this bill would be a violation of federal tax regulations.

By partnering with other entities, the state may expose itself to more risk and will be dealing with larger amounts of allocations not previously experienced. The other entity may not be credit worthy or cause a higher interest rate to be applied hurting the State.

Excerpt by Capitol TV Contact: