Home foreclosure can be a devastating process for a homeowner. With foreclosure comes stress, worry, and uncertainty. The first step is understanding the Hawaii foreclosure process, Hawaii foreclosure laws, and what help is available to buyers facing foreclosure on their homes.
Hawaii Foreclosure Laws
Foreclosure laws are applied at both federal and state levels. Federal foreclosure laws provide a basic framework of guidance, but many of the laws are applied at the state level. If you’re facing foreclosure, this brief outline of Hawaii’s foreclosure laws and the process will help you better understand what to expect.
Hawaii Foreclosure Notices
When a borrower misses one or several payments, the Hawaii foreclosure process requires lenders to provide a grace period for payment, and federal law requires lenders to provide notices at set intervals leading up to foreclosure.
Under federal mortgage servicing laws, the lender is required to contact the borrower by phone to discuss what options are available to avoid foreclosure. These foreclosure alternatives are formally called loss mitigation options. The lender is required to attempt to make contact with the borrowers no more than 36 days following a missed payment.
If more than one payment is missed, the lender is required to make a separate attempt to contact the borrower within 36 days of each subsequent missed payment. The lender is also required to notify the borrower, in writing within a period of 45 days from the missed payment, of loss mitigation options.
There is also a provision that requires lenders in Hawaii to send what is called a breach letter. The breach letter serves as a notice to the borrower of the default status of their loan. The letter is intended to notify the borrower and provide them with the opportunity to resolve the default. If the default is not remedied after the breach letter is sent, the loan can then be accelerated and moved toward foreclosure.
Foreclosure Auction Process
A foreclosure auction is a part of the Hawaii foreclosure process. Federal law requires that lenders wait until the borrower is 120 days past due on a loan before formally beginning the foreclosure process.
In the case of both non-judicial and judicial foreclosures in Hawaii, a foreclosed-upon home will eventually end up at a public foreclosure auction. Foreclosure auctions proceed the same way as any other type of auction, with potential buyers making bids and the home going to the buyer with the largest bid.
A home must be paid for with cash at a foreclosure auction. Aside from property investors who may be interested in purchasing the property for income purposes, the pool of potential buyers is often limited. The mortgage lender is allowed to make a credit bid rather than a cash bid on the property. This credit can be equal to the amount of the borrower’s remaining debt on the home.
If another buyer bids higher than the credit bid, they become the new owner of the home. If the lender is the highest bidder, the lender then buys the property outright, and the property is then considered to be real estate owned.
Hawaii Foreclosure Eviction Process
The Hawaii foreclosure process becomes a bit more complicated when the newly foreclosed-upon home is still occupied, either by the foreclosed-upon homeowner or tenants if it was a rental property. The new owner of the home will likely want the tenants to leave, except in the possible cause of a rental property where the new tenants have an established positive rental history and the new owner has no plans to occupy the home themselves.
The Hawaii foreclosure eviction process prevents new property owners from demanding that the current occupants vacate the premises without fair warning and sufficient time to acquire new housing arrangements.
If the previous owner is still living in the property, they are known as a tenant at sufferance. This is the technical term for someone who is evoking what is commonly referred to as squatter’s rights.
In Hawaii, unless they meet the specific requirements of Adverse Possession Laws, including residing at the property uninterrupted for at least 20 years, the person residing on the property is considered a trespasser and can be removed by local law enforcement. If the person meets the Adverse Possession qualification, the new owner can proceed with the eviction process.
New owners are required to give current tenants a 90-day notice to vacate. This applies to rental occupants who have both a defined lease term and month-to-month leases. After the 90 days is up, the new owner can proceed with the formal Hawaii foreclosure eviction process.
Borrowers Right to Reinstate
A borrower’s right to reinstate legally provides the borrower with the right to reinstate their payments and mortgage under certain conditions. In many cases, the mortgage lender will provide a right to reinstate as part of the mortgage contract. However, states may also legally provide borrowers with this right.
Hawaii’s foreclosure law does not provide the homeowner with the right to reinstate in a judicial foreclosure. If you’re facing foreclosure and interested in reinstatement, the best option is to review your mortgage agreement or speak to your mortgage lender.
Borrowers Right to Redeem
The right to redemption or the right to redeem allows the homeowner to stop a foreclosure sale. This is done by the borrower either paying off the mortgage in its entirety or repurchasing their property following the foreclosure sale. To do this, the borrower must pay a specified sum of money within a designated time period.
The borrower’s right to redeem is provided individually by the states. Currently, Hawaii doesn’t provide the right to redeem in either a judicial or non-judicial foreclosure process.
Hawaii Foreclosure Timeline
Each situation is different, but on average, the Hawaii foreclosure timeline is approximately two to four months long once the home is in foreclosure status, if everything goes smoothly. This timeline doesn’t include the pre-foreclosure process, which can take months or even up to a year or longer.
The foreclosure process involves many steps, most of them occurring behind the scenes with the courts, filing official documents/petitions, setting up home viewings for sale, etc.
A challenge at any one of these points will extend the timeline. In a judicial foreclosure, a judge may grant the borrower more time, which may potentially extend the foreclosure timeline by weeks or months.
Hawaii Deficiency Judgement
When a home is foreclosed on, the home is typically sold at a foreclosure sale or auction. Buyers then bid on the home, and the highest offer becomes the new owner of the foreclosed home. Lenders hope that the home will sell for at least the full amount of the loan that is still owed, but this isn’t always the case.
If the home sells for less than the amount owed, the remaining debt is called the deficiency balance. Hawaii foreclosure statute allows lenders to seek a deficiency judgment against the borrower for the remaining amount due on the loan after the sale.
There are some instances when a deficiency judgment isn’t allowed. For example, in the case of a non-judicial foreclosure, a deficiency judgment can’t be sought if the property is residential and owner-occupied. The exception to this is if the debt is secured by collateral that doesn’t include the home.
Covid 19 and Foreclosure
Currently, Hawaii has a statewide order to protect tenants against eviction due to hardships as a result of Covid-19. At this time, Hawaii doesn’t have a statewide order that pertains to Covid-19 foreclosures.
The Department of Commerce and Consumer Affairs of Hawaii has set up a Hawaii Foreclosure Information Center to help defaulted borrowers access assistance and relief needed to help them keep their homes. This includes Covid-19 Mortgage and Housing Assistance,
Borrowers whose home loans are backed by Fannie Mae, Freddie Mac, HUD/FHA, VA, or USDA have access to federal Covid-related mortgage protections, allowing them to either pause or temporarily reduce their monthly mortgage obligation.
Due to the continually changing situation with Covid-19 and new relief bills passed, it’s important to speak with your mortgage lender or a Hawaii foreclosure attorney to understand what mortgage protection options are currently available in your case.
FAQs
Depending on the individual situation, it can take months to nearly a year to move from pre-foreclosure to foreclosure. The pre-foreclosure process requires several notices of default to provide the borrower with the opportunity to make the mortgage current. Once the foreclosure process reaches the court, it can take 3-10 months, depending on various factors.
Hawaii allows for both judicial and non-judicial foreclosure processes.
The steps to foreclosure processing include payment default, the issuance of a notice of payment default, a notice of trustee sale, the event of the trustee’s sale, the property most likely becoming real estate owned unless another buyer purchases it, and finally eviction.
Generally speaking, you have approximately 30 days to vacate the property once it has been sold. If you fail to vacate, the new owner can proceed with an eviction lawsuit. It’s always best to begin looking for new housing arrangements once you know that a foreclosure is imminent.
The main difference between a judicial and non-judicial foreclosure is that in a judicial foreclosure, the lender seeks a court’s judgment of foreclosure against the tenant. A non-judicial foreclosure proceeds with the assistance of a neutral, third-party foreclosure trustee.
Bottom Line
The foreclosure process is always stressful, and understanding Hawaii’s foreclosure process is difficult. If you’re facing foreclosure, or are concerned it’s a possibility in the future, the best thing you can do is contact your mortgage lender or a Hawaii foreclosure attorney for advice, assistance, and peace of mind.
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