Hawaii’s Act 48 and Act 182 were passed to overhaul foreclosure laws in the state, which competes with Florida, New York and New Jersey for having the longest foreclosure time. Act 48 was passed to improve Hawaii’s consumer protections, whereas the prior law allowed lenders to auction off a home with little oversight and often completing the foreclosure and auction sale within a month. What are the short term and long term effects of these laws?
Short Term Effects
The short term affect of the law, enacted in May 2011, was to put existing foreclosures in a holding pattern as lenders attempted to determine how the law affected their proceedings. Many lenders are having trouble getting into court in the first place because of the rush of filings entered before Act 48 went into place. Then came a rush after Act 182 went into effect on June 28, 2012.
The number of new foreclosure filings then fell 61% year over year in January of 2013 before rising a modest 7% to 375 new foreclosure filings in February. The changes to Hawaii foreclosure law also permit debtors to convert non-judicial mortgages to judicial ones; while this protects the consumers’ rights via court oversight, the conversion itself takes time.
Longer Term Effects
Act 48 was intended to push non-judicial foreclosures into mediation, though this is rarely happening. Lenders have responded to the law by moving to judicial foreclosures instead of non-judicial ones. In contrast, before the middle of 2011, almost all foreclosures were non-judicial.
Act 182 altered the penalties for lenders violating foreclosure law. While the penalties are now more acceptable to lenders, the ongoing changes to foreclosure law create further delays for existing foreclosure cases.
It is hoped that Act 182 will speed up the foreclosure time in Hawaii, where non-judicial foreclosures often take two to three years to complete. However, the shift to judicial foreclosures could have the opposite effect, since the courts were expecting an increased caseload.
On the Horizon
Legislators put the mediation provision in the revised foreclosure law in an effort to help families stay in their homes on revised terms. Since this hasn’t happened, there is already a bill to amend the foreclosure law a third time to strengthen the mediation requirement.
Chapter 13 Bankruptcy and Foreclosure
Many of our clients choose to take advantage of the protections afforded by Chapter 13 bankruptcy to save their homes from foreclosure. If you are interested in determining how this might apply to you, please contact us immediately.