Hawaii Adopts Nation's 'Strongest' Foreclosure Law

RJ Brown

Updated 5/5/11 6:18 p.m.

Gov. Neil Abercrombie signed a bill into law Thursday that forces lenders to meet face-to-face with homeowners before foreclosing on a property.

"The credit for this today is, in fact, a reflection of what we try to be in Hawaii, which is good neighbors and good friends to one another," Abercrombie said moments before signing the measure. "We want to try and avoid if we can, to put the consumer, the homeowner, in a position where they feel the entire institutional establishment is lined up against them. Quite the opposite... We're trying to move from the consumer, up."

Proponents say Hawaii will now have one of the nation's toughest foreclosure laws.

"It is definitely one of the strongest laws in the country," Kim Harman, policy director for Faith Action for Community Equity (FACE), an organization that pushed for the bill, said in an email. She said some experts consider it the strongest.

One of those experts is Martin Andelman, operator of the mortgage blog "Mandelman Matters". Andelman has covered the mortgage foreclosure crisis extensively, writing over 400 articles on the issue.

"By far, this bill is the strongest in the country," Andelman said. "It's the strongest thing imaginable."

The goal of the bill, which is based on a similar 2009 Nevada law, is to have lenders and homeowners come up with a compromise for a modified mortgage. Its strength lies in the details.

In short, SB 651 requires lenders to have at least one meeting, which can last up to three hours, with a homeowner in a setting mediated by a neutral third party before the lender can enforce a foreclosure. The meetings are important because, according to Harman and some lawmakers, mainland banks are the culprits behind an uptick in Hawaii foreclosures.

Update In addition to mediation, the bill places a moratorium on all "new non-judicial foreclosure actions," until July 1, 2012, for foreclosures covered under Part 1 of the state statute governing foreclosures. (For residents who are currently in a foreclosure process, they would have to convert their non-judicial foreclosure to a judicial foreclosure, and then a judge would determine when a foreclosure could take place.) Homeowners dealing with foreclosure on a second home, however, will not be able to take advantage of the moratorium.

Have feedback? Suggestions?