Back in May, Hawaii passed a new foreclosure law that is one of the toughest in the nation.
The law requires lenders seeking a non-judicial foreclosure to meet borrowers in a mediated face-to-face meeting prior to foreclosure (if the borrower so requests). It also requires mortgage servicers to submit proof of an intact chain-of-title and promissory note to mediators at least two weeks before the meeting. The law also bars banks from seeking deficiency judgments against distressed borrowers in nonjudicial foreclosures.
The idea behind the law was to prevent lenders from quickly ramming non-judicial foreclosures through the system. At the time, Governor Neil Abercrombie commented:
“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.”
According to an AP story that was published over the weekend, the law has prompted lenders, including Fannie Mae, to move their foreclosures into the court system, bypassing the mediation system. This is creating a backlog of foreclosure cases. Fannie Mae spokeswoman Amy Bonitatibus commented:
“Currently, nonjudicial foreclosure cannot be pursued in Hawaii. The judicial foreclosure process allows homeowners to raise any challenges to the foreclosure in court.”
Last year Hawaii had over 12,000 foreclosures, and only about ten percent of those were of the judicial variety. Opponents of the new law say that it will lengthen foreclosure times, delaying the healing of the housing market in Hawaii. While this may be true to a degree, it is well worth noting that this situation is a direct result of sloppiness and oversight on the part of lenders. It is also worth noting that this is the same exact argument that is used against nearly every measure that requires lenders to actually prove that they have standing to foreclose on a mortgage. Frankly, it’s starting to get a little stale.
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