The Hawaii Legislature just passed Act 48, which was signed by Governor Abercrombie on May 8, 2011, thus becoming law.
The intent was to try to give owner occupants of Hawaii properties an opportunity to sit down with the lender in a non-judicial foreclosure to attempt to negotiate the terms of the loan. It also allows either the borrower or lender to convert the non-judicial foreclosure to the judicial process. For details read Maui News article from Associated Press on Act 48.
Temporary rules on how this process is to be implemented were put into place May 18, 2011 by the Hawaii Supreme Court. The process, the forms, and the filing rules are contained in the following, Hawaii Supreme Courts Rules for Act 48.
The problem really is that the courts are already buried with work, understaffed, underfunded, and Act 48 will just bring the circuit court system to a stop. Act 48 created no additional funding for the court system to be able to handle the additional work load that they will now be faced with. Furloughs and budget cuts negatively affect the court system.
Presently, it takes about a year for a lender in a judicial foreclosure in Hawaii to complete the process. The Stice Team has been working with several Hawaii banks that do only judicial foreclosures and we have seen through the experiences that the courts are already clogged up. Getting the hearing date for the foreclosure takes 4 or 5 months and the confirmation hearing that is supposed to follow 30 days later is taking over 60 days most of the time.
The following data comes from Realty Trac for May 21, 2011. By zip code, these are the numbers of either bank owned, or pending foreclosures on Maui:
- 96732 Kahului: 195 properties
- 96793 Wailuku: 332 properties
- 96761 Lahaina: 450 properties
- 96779 Paia: 17 properties
- 96753 Kihei: 581 properties
- 96708 Haiku: 75 properties
- 96790 Kula: 54 properties
- 96713 Hana: 8 properties
For a total of 1,712 properties.
Of these 1,712 properties, more than 80% represent non-judicial foreclosures that could possibly be added to the court docket under Act 48. Realtors Association of Maui April, 2011 Statistics show that for the entire past calendar year 832 homes have sold, 1,121 condos, and 121 vacant land parcels have sold for a total of 2,074 properties. Presently on the market are 3,068 properties, or a little more than a 10 month supply.
While well intended, this bill is going to have a detrimental long term effect on the real estate market. Considering the present backlog of 1,712 unsold properties (many of them presently not even on the market) stopping the process of non-judicial foreclosures, and throwing all of that inventory into an under-funded and under-staffed court system is a disaster. More and more owners are going to quit paying their mortgage, hoping that the judicial system will bail them out and that will just not happen.
The HAMP program has been a disaster for most homeowners because it was just not a logical program. The amount of paperwork and requirements buried most homeowners expecting to get a loan modification despite declining values. It gave them false hope, in most cases, and unrealistic expectations. Most homeowners applying owned a lot more than their homes are worth.
More programs and moratoriums is not what Hawaii, or the United States needs. We need lenders to sit down at the table, help work short sales with all borrowers, homeowners, or investors and expedite getting the properties sold. We need lenders to cooperate with people who want to keep paying, even if they are upside on their loans. Personal pride is huge in our community and many people just don’t want to lose their homes, at any price, if they can possibly hang on.
Social engineering may seem great and our democratic legislature certainly has given us a great taste of it with this bill, but obviously, we don’t have a whole lot of economists or business people in the legislature. Look out, because the train is just picking up steam.
Should you have any questions, contested points, or opinions, I welcome you to comment on this blog, or contact me for a private conversation.
Here are a couple of galleries with the Stice Team’s pics of the best bank owned/REO/foreclosed properties on the market right now: