Well, it’s been 32 days since I published a blog post with my initial thoughts about Act 48, the 101 page billÂ (formerly Senate Bill 651) which was signed into law by Governor Neil Abercrombie on May 5th, 2011.
How is this new legislation going to effect homeowners (the act’s intention is to help Hawaiian homeowners stay in their homes if at all possible), effect how the banks deal with foreclosure on a go-forward basis, and effect the overall Hawaii real estate market?
For those homeowners already in the foreclosure process, and with court sale dates already published, these homeowners will be getting more time. More time to complete a loan mod in progress, complete a short sale, or stay in the home if they are choosing to be foreclosed on. How much time? Nobody can really say.
Since May 5th on Kauai, every non-judicial auction has been either postponed or canceled. In fact, there seem to be a higher rate of cancellations than usual. Perhaps this notice in the graphic below from Fannie Mae, one of the largest investors of home loans, indicates the direction things are going to go.
So, some foreclosures will be canceled and restarted as judicial proceedings. While Act 48 provides a process of dispute mediation meant to facilitate successful dialogue to give homeowners a chance to stay in their homes, this is not required in the judicial proceeding, according to my understanding.
The switch to the judicial foreclosure process may prove to burden our judiciary where we have a limited supply of judges to hear these cases as well. I’ll be at an update on Oahu at month’s end where presentations will be given by the Hawaii Foreclosure Task Force, the DCCA, the Judiciary, and many others. This notice to servicers from Fannie Mae from Friday is the first indication of how the lenders may respond to Act 48.
The combination of stretching out the foreclosure process and redoing the foreclosure on properties that the lenders already own, will allow future inventory to buildup, but how will the buildup of distressed properties ultimately effect values of property on Kauai? I believe the trend of market contraction will continue knowing that these short sold, or foreclosed properties will eventually be put up for sale, just with some delays in the process.
If a homeowner is not able to modify their mortgage, a short sale is a much more dignified exit than going through a judicial foreclosure. Remember, in the judicial proceeding the lien holder has a right to pursue a deficiency judgment. Got further questions or thoughts on the matter? Please let me know…
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