www.GreatHawaiianHomes.com
(808) 630-1828 & (808) 388-1485

Mike Ramsey Fujita & Gayle Fujita Ramsey
Realtor-Associates

Hawaii's Act 137

Michael Ramsey Fujita and Gayle Fujita Ramsey, Realtor-Associates, SFRs are Award Winning, Top Producers for the Hawaii Real Estate Online (HREO).

Mike is the past Vice President Real Estate Sales & Marketing for REO and Gayle, the Director of Training and Realtor Development, wrote Realty Executives Oahu's "Executive In Training" program, training manuals and teaching guide lines.

They have moved the Real Estate business to the HREO and are now Residential Property Specialists for HREO. This means that they are not only licensed by the State of Hawaii, but that they have far exceeded their set of Established Performance Criteria in the areas of Luxury Homes and Single Family Homes Marketing and Sales, Short Sales and Assisting property buyers in Hawaii. Basically, without all of the fancy words and professional terms, this means they can handle all of your Real Estate Needs whether you are looking to buy or sell property.

Governor Signs Bill Amending the Mortgage Rescue Fraud Prevention Act (Act 137)

This allows Licensed Real Estate Agents to Assist Homeowners in Distress to set up Short Sales.

May 21, 2009

On Wednesday, May 20, Governor Linda Lingle signed Senate Bill 34 into law, which exempts licensed real estate brokers and salespersons who act within the scope of their license from the definition of "distressed property consultant" under the Mortgage Rescue Fraud Prevention Act.

The bill also prohibits a licensed real estate broker or salesperson from acquiring an ownership interest in the distressed property, directly or indirectly, within 365 days after a listing agreement for the same distressed property has expired, or is terminated.

The new law will become Act 66 of the 2009 Legislative Session and takes effect immediately.

An advisory bulletin from HAR and frequently asked questions (FAQ) document will be available in the coming days.

The letter written to Gov. Linda Lingle in support of amending the law known as Act 137.

May 18, 2009

The Honorable Linda Lingle

Governor, State of Hawai`i

Executive Chambers

State Capitol

Honolulu, Hawai`i 96813

RE: S.B. 34, H.D. 1, S.D. 1, C.D. 1 Relating to the Mortgage Rescue Fraud Prevention Act

Dear Governor Lingle:

The Hawai‘i Association of REALTORS® (“HAR”) strongly supports S.B. 34, H.D. 1, S.D.

1, C.D. 1. The primary purpose of this measure is to undo the unintended consequences of

the Mortgage Rescue Fraud Prevention Act by excluding active licensed real estate brokers

and salespersons from the definition of distressed property consultants. The bill also places

a time limit on the acquisition of an ownership interest in distressed property by licensed

real estate brokers and salespersons.

In 2008 the Legislature passed the Mortgage Rescue Fraud Prevention Act, Act 137, Session

Laws of Hawai‘i 2008. This law was primarily intended to protect financially strapped

homeowners from equity skimming and foreclosure rescue scams.

After the passage of Act 137, HAR and others became aware of the broader implications of

the law for consumers and the real estate industry. Specifically, Act 137 has created very

real concerns for licensees engaged in bona fide real estate services by creating the potential

for licensees to unwittingly become distressed property consultants and face liability for

violating the law.

Prior to Act 137, real estate licensees could help homeowners avoid foreclosure by

contacting and negotiating with lenders and representing homeowners in short sale

transactions. The real estate licensees would negotiate with the lender, and, if a lender

agreed to accept a reduced payment for a property, the short sale of the property would

result. Short sales have been a great benefit to distressed property owners, because they

allow the homeowner to avoid the negative consequences of foreclosure.

The language of Act 137 made it uncertain whether real estate licensees could continue the

practice of representing owners in short sale transactions and negotiating with lenders on

behalf of distressed homeowners. Under Act 137, a licensee who assists a homeowner with a

distressed property would likely fall under the category of a “distressed property

consultant.” Once deemed a distressed property consultant, the licensee would be subject to

onerous requirements and penalties under the law.

Because of the ambiguity resulting from Act 137, real estate firms and licensees have shied

away from representing existing or potential distressed homeowners for fear of the potential

legal consequences. In these tough economic times, it has been the consumer who has

ultimately suffered by being denied the valuable services of real estate licensees.

HAR has worked with the Department of Commerce and Consumer Affairs (“DCCA”) since

the passage of the Act to assess its impact and develop a solution. Together, HAR and

DCCA have agreed upon amendments to Act 137 that will exempt real estate licensees from

the requirements of the Act, and impose additional requirements under the real estate

licensing regulations, Hawai‘i Revised Statutes Chapter 467.

We urge your support and prompt signature to allow real estate licensees to help

distressed homeowners during a time when that help is needed most.

Thank you for your consideration.

If you have any questions, please feel free to contact Myoung Oh at the HAR Government

Affairs Department at (808) 733-7060, extension 104.

Sincerely,

HAWAI‘I ASSOCIATION OF REALTORS®

Judith E. Kalbrener

2009 HAR President

Short Sales, Distressed Properties,

& Act 137

The number of Short Sales in Hawaii greatly increased over the first half of 2007 especially on Oahu. This was the first time after the fall out of the subprime market that Oahu really started to show signs that the fall out would have an impact in Hawaii.

There were a great deal of Short Sale Listings in our MLS as more and more homeowners have found that they would not be able to get as much for their homes as they paid for them. The home owners that were not able to simply stay put and had to move because of job relocation, military orders or other personal reasons found themselves facing a Short Sale situation.

Some homeowners bought their homes in the last couple of years when Real Estate prices were at their highest levels. Other homeowners had accumulated a great deal of equity in their homes and took out second mortgages or simply refinanced their homes and now that they need to sell, they are unable to get as much as they owe for the property.

Bottom line is that the sales price of the home will not cover the amount still owed to the Mortgage Company and thus a short sale may have to occur.

A Short Sale is when the homeowner participates in helping to sell the property for the lender. Without a short sale, these homeowners would be facing "Lender Sales", "Bank Owned Properties", "REOs", "Foreclosures" and possibly even bankruptcy.

The State of Hawaii has passed a law called Act 137. This act was put in place to protect homeowners from individuals who would take advantage of them by committing Mortgage Fraud. Act 137 clearly defines what a Distressed Property is and the obligations of any Real Estate Professional that is going to help homeowner of a Distressed Property sell their home.

Prior to the passing of Hawaii Act 137, Realtors helped homeowners in financial distress by arranging Short Sales for them with their Lenders and then helping them sell their homes. Today, after Act 137 has been established, the state has clearly defined the characteristics of a “Distressed Property” and who may assist a homeowner in need and what types of documentation they will have to provide the homeowner. Today, Attorneys and Real Estate Agents are the only two real estate professionals who are exempted from Act 137. Both Attorneys and Real Estate Agents have extensive training and are licensed to assist homeowners and home buyers with real estate transactions.

Please call us directly to discuss your situation or questions. We promise to always give you straight answers to your specific situation.

The term “Short Sale” is used to describe a sale where: (1) the liens against a property combined with the associated costs will exceed the purchase price of the property and (2) the Seller will be asking the lien holder for a release of the lien on the subject property without a complete payoff. (A property in a short sale may not be a Distressed Property.)

Simply put, a Short Sale is when a home is offered for sale and the expected sale price is less than what is owed for the property. You might be asking, "then what happens?". Very often, a bank will actually "Forgive" the differance between the Sales Price or Sale Proceeds and what was actually owed for the property. They do this because the foreclosure process is very expensive for the bank and a forclosure process can actually tie up the property for a long period of time resulting in a bigger financial loss for the bank. In a Short Sale, the homeowner is basically saying, "I'm in trouble and I want to work with you to help you get some of your money back" to the bank or lender.

One of the problems with Short Sales across the country, as well as here in Hawaii, is that every bank has their own set of proceedures and requirements to approve the Short Sale. Another problem is that the Short Sale Departments of many banks are so overwhelmed by the sheer number of Short Sale Transactions they are dealing with, they are becoming unorganized and unable to function. This accounts for the amount of time these transactions take to set up and close, 60 to 90 days or more. We have actually seen banks start foreclosure proceedings at the same time they are working through the Short Sale Process with an accepted offer! (Different departments in the same bank...) When this has happened in the past, we simply let our contact with the Lender know what is going on and they put off the foreclosure.

Definitions:

The term “Distressed Property” is defined by Hawaii’s Mortgage Rescue Fraud Prevention Act (“the Act”) as follows:

Any residential real property that:

(1) Is in foreclosure or at risk of foreclosure because payment of any loan that is secured by the residential real property is more than sixty days delinquent;

(2) Had a lien or encumbrance charged against it because of nonpayment of any taxes, lease assessments, association fees, or maintenance fees;

(3) Is at risk of having a lien or encumbrance charged against it because the payments of any taxes, lease assessments, association fees, or maintenance fees are more than ninety days delinquent?

(4) Secures a loan for which a notice of default has been given; or

(5) Secures a loan that has been accelerated.

The term “Distressed Property Consultant” is defined by the Act as follows:

Any person who performs or makes any solicitation, representation, or offer to perform any of the following relating to a Distressed Property:

(Other than a Licensed Realtor or Attorney)

(1) Stop or postpone the foreclosure sale or loss of any Distressed Property due to the nonpayment of any loan that is secured by the Distressed Property;

(2) Stop or postpone the charging of any lien or encumbrance against any Distressed Property or eliminate any lien or encumbrance charged against any Distressed Property for the nonpayment of any taxes, lease assessments, association fees, or maintenance fees;

(3) Obtain any forbearance from any beneficiary or mortgagee, or relief with respect to a tax sale of the property;

(4) Assist the owner to exercise any cure of default arising under Hawaii law;

(5) Obtain any extension of the period within which the owner may reinstate the owner’s rights with respect to the property;

(6) Obtain any waiver of an acceleration clause contained in any promissory note or contract secured by a mortgage on a Distressed Property or contained in the mortgage;

(7) Assist the owner in foreclosure, loan default, or post-tax sale redemption period to obtain a loan or advance of funds;

(8) Avoid or ameliorate the impairment of the owner’s credit resulting from the recording or filing of a notice of default or the conduct of a foreclosure sale or tax sale; or

(9) Save the owner’s residence from foreclosure or loss of home due to nonpayment of taxes.

The term “Distressed Property Conveyance” is defined by the Act as follows:

The transfer of any interest in a Distressed Property effected directly or indirectly by or through a Distressed Property Consultant.

The term “Distressed Property Conveyance Contract” is defined by the Act as follows:

Any agreement or obligation affecting a Distressed Property Conveyance.

The term “Distressed Property Purchaser” is defined by the Act as follows:

Any person who acquires any interest in a Distressed Property directly or indirectly through a

Distressed Property Conveyance or Distressed Property Conveyance Contract.

If you are a homeowner and need to sell your home now and can’t wait for the market to change so you will be able to cover what is owed, you may fall within the short sale category. Unless you are one of the fortunate ones and can pay the difference of what is owed.

For those unable to pay the difference, there are steps that you or your Realtor, Attorney or DPC will need to take immediately. (Of the three, only Realtors will not charge you for their services.)

1. Call your lender and let them know that you will need to request a loan modification or short sale approval. Your Lender will ask for specific documentation and you will need to get these to them in order for them to review your request and grant it.

2. If you had 100% financing you probably have a 2^nd mortgage, or if you have a Home Equity Line, you will need to contact the lender and ask what their procedures are for a short sale and what documents they need in order to consider granting your request. Please be aware that having a second mortgage will most likely cause delays in moving forward with a short sale. If you are lucky enough to have both loans with the same company you will be much luckier in moving forward.

3. Contact a realtor who is familiar with Short Sales and Act 137. They will be best able to help you with the process. Act 137 is an act that binds our hands as your realtor and really does not help you as the homeowner. Although written by our Hawaii legislature and signed into law last June by Governor Lingle in order to protect the consumer, i.e. the homeowner in financial distress, in the long run it doesn’t. Realtors are advised by legal counsel not to contact lenders of their clients for anything. Clients need to do it themselves or hire an attorney or hire a “Distressed Property Consultant”. We understand that this is nuts and we want to help; however, our hands are tied. Sometimes we have been able to obtain assistance from a Buyer’s Lender once in contract to assist us since Attorneys and Mortgage Officers are exempt from the law.

Once you have a hired a realtor, submitted the documents requested by your lender and received approval to move forward with the short sale, your realtor will aggressively try to sell your property for you. Once a contract is accepted by your mortgage company the transaction will move forward like any other, with exception to documents at closing being forwarded to your mortgage company along with all proceeds. Occasionally at closing you will be required to pay a sum. This varies depending on your situation.

We would love to speak with you and offer any help we can. We have actually had prospective clients call us to do a short sale for them and after we speak, they find that they don’t have to sell their home at all. We will always give you straight answers and work to protect your best interest at all times. When you pick a Realtor, we hope you will pick us.

Act 137 Prior to the Governor's Amendment to allow licensed Real Estate Agents to assist Hawaii Homeowners with Short Sales follows in it's entirety.

Report Title:

Real Property; Mortgage Foreclosure

Description:

Requires mortgage foreclosure rescuers to provide specific information and disclosures to distressed property owners and imposes specific prohibitions on mortgage foreclosure rescuers. (SD1)

HOUSE OF REPRESENTATIVES	H.B. NO.	2326
TWENTY-FOURTH LEGISLATURE, 2008		H.D. 2
STATE OF HAWAII		S.D. 1

A BILL FOR AN ACT

RELATING TO MORTGAGES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. This Act shall be known as the "Mortgage Rescue Fraud Prevention Act."

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to title 26 to be appropriately designated and to read as follows:

"CHAPTER

MORTGAGE RESCUE FRAUD PREVENTION ACT

§ -1 Purpose. The purpose of this chapter is to protect Hawaii consumers from persons who prey on homeowners who face property foreclosures, liens, or encumbrances. Consumers who face foreclosures, liens, or encumbrances are often in desperate financial situations that can have severe adverse consequences for individuals and families even if the consumers have significant equity in their residential real property. The consumers' desperation makes them vulnerable to persons who claim they can stop, prevent, or delay foreclosures, liens, or encumbrances. Persons who make these claims often use the consumers' desperation to foster unequal bargaining positions and withhold or misrepresent vital information and details. As a result, consumers may be convinced to give up their real property interests and valuable equity to these persons while receiving little in return. Requiring full and complete disclosure of vital information will better enable consumers to make informed decisions when dealing with persons claiming to be able to stop foreclosures, liens, or encumbrances. This Act addresses possible misrepresentations by compelling persons who offer assistance to fully and completely describe their services in written contracts and gives the homeowners the right to cancel at any time before a distressed property consultant has performed all services called for in a contract.

§ -2 Definitions. As used in this chapter, unless the context otherwise requires:

"Consideration" means any payment or thing of value provided to an owner of a distressed property, including reasonable costs paid to independent third parties necessary to complete the distressed property conveyance or payment of money to satisfy a debt or legal obligation of an owner of the distressed property. "Consideration" shall not include any amounts paid or to be paid directly or indirectly to the distressed property purchaser, including amounts identified as "gift equity," "fees," "escrow," or "down payment".

"Distressed property" means any residential real property that:

(1) Is in foreclosure or at risk of foreclosure because payment of any loan that is secured by the residential real property is more than sixty days delinquent;

(2) Had a lien or encumbrance charged against it because of nonpayment of any taxes, lease assessments, association fees, or maintenance fees;

(3) Is at risk of having a lien or encumbrance charged against it because the payments of any taxes, lease assessments, association fees, or maintenance fees are more than ninety days delinquent;

(4) Secures a loan for which a notice of default has been given; or

(5) Secures a loan that has been accelerated.

"Distressed property consultant" means any person who performs or makes any solicitation, representation, or offer to perform any of the following relating to a distressed property:

(1) Stop or postpone the foreclosure sale or loss of any distressed property due to the nonpayment of any loan that is secured by the distressed property;

(2) Stop or postpone the charging of any lien or encumbrance against any distressed property or eliminate any lien or encumbrance charged against any distressed property for the nonpayment of any taxes, lease assessments, association fees, or maintenance fees;

(3) Obtain any forbearance from any beneficiary or mortgagee, or relief with respect to a tax sale of the property;

(4) Assist the owner to exercise any cure of default arising under Hawaii law;

(5) Obtain any extension of the period within which the owner may reinstate the owner's rights with respect to the property;

(6) Obtain any waiver of an acceleration clause contained in any promissory note or contract secured by a mortgage on a distressed property or contained in the mortgage;

(7) Assist the owner in foreclosure, loan default, or post-tax sale redemption period to obtain a loan or advance of funds;

(8) Avoid or ameliorate the impairment of the owner's credit resulting from the recording or filing of a notice of default or the conduct of a foreclosure sale or tax sale; or

(9) Save the owner's residence from foreclosure or loss of home due to nonpayment of taxes.

"Distressed property consultant" shall not include any of the following:

(1) A person or the person's authorized agent acting under the express authority or written approval of the federal Department of Housing and Urban Development;

(2) A person who holds or is owed an obligation secured by a lien on any distressed property, or a person acting under the express authorization or written approval of such person, when the person performs services in connection with the obligation or lien, if the obligation or lien did not arise as the result of or as part of a proposed distressed property conveyance;

(3) Banks, savings banks, savings and loan associations, credit unions, trust companies, depository and nondepository financial service loan companies, and insurance companies organized, chartered, or holding a certificate of authority to do business under the laws of this State or any other state, or under the laws of the United States;

(4) Licensed attorneys engaged in the practice of law;

(5) A federal Department of Housing and Urban Development approved mortgagee and any subsidiary or affiliate of these persons or entities, and any agent or employee of these persons or entities, while engaged in the business of these persons or entities; or

(6) A nonprofit organization that, pursuant to chapter 446, offers counseling or advice to an owner of a distressed property, if the nonprofit organization has no contract or agreement for services with lenders, distressed property purchasers, or any person who effects loans or distressed property purchases.

"Distressed property consultant contract" means any agreement or obligation between an owner or agent of an owner of a distressed property and a distressed property consultant.

"Distressed property conveyance" means the transfer of any interest in a distressed property effected directly or indirectly by or through a distressed property consultant.

"Distressed property conveyance contract" means any agreement or obligation affecting a distressed property conveyance.

"Distressed property lease" means any agreement or obligation regarding the lease or rental of a distressed property effected directly or indirectly by or through a distressed property consultant or distressed property purchaser.

"Distressed property purchaser" means any person who acquires any interest in a distressed property directly or indirectly through a distressed property conveyance or distressed property conveyance contract.

"Material fact" means a fact that, if disclosed, might have influenced the distressed property owner to not enter into the agreement or obligation.

"Person" means any individual, partnership, corporation, limited liability company, association, or other group or entity, however organized.

§ -3 Distressed property consultant contract. (a) A distressed property consultant contract shall be in writing and shall fully disclose all services to be performed by the distressed property consultant and all terms of any agreements between the distressed property consultant and all owners of the distressed property, including the total amount and terms of compensation to be directly or indirectly received by the distressed property consultant.

(b) A distressed property consultant contract shall contain on its first page in a type size no smaller than fourteen-point boldface type:

(1) A description of the distressed property;

(2) The name, street address, and telephone number of the distressed property consultant; and

(3) The name and address of the distressed property consultant to which notice of cancellation is to be delivered.

(c) A distressed property consultant contract shall be dated and signed by the distressed property consultant. If the distressed property consultant is a person other than an individual, the individual executing the distressed property consultant contract on behalf of the distressed property consultant shall identify the title and office held by the individual.

(d) A distressed property consultant contract shall be dated and signed by all owners of the distressed property.

(e) The distressed property consultant shall provide each distressed property owner with a copy of the distressed property consultant contract and attached notice of cancellation immediately upon execution by all parties to the distressed property consultant contract. A distressed property consultant contract shall not be effective until all parties to the distressed property consultant contract have signed the contract.

§ -4 Right to cancel a distressed property consultant contract. (a) A distressed property consultant contract shall contain, immediately before the space reserved for all the distressed property owners' signatures, the following notice of right to cancel a distressed property consultant contract in a type size no smaller than fourteen-point boldface type, completed with the name of the distressed property consultant:

"YOU, THE OWNER, MAY CANCEL THIS TRANSACTION AT ANY TIME BEFORE THE DISTRESSED PROPERTY CONSULTANT HAS FULLY PERFORMED EACH AND EVERY SERVICE THE DISTRESSED PROPERTY CONSULTANT CONTRACTED TO PERFORM OR REPRESENTED WOULD BE PERFORMED. SEE THE ATTACHED NOTICE OF CANCELLATION FORM FOR AN EXPLANATION OF THIS RIGHT.

(Name of the distressed property consultant) (or anyone working for or with the distressed property consultant) CANNOT:

(1) Take any money from you or ask you for money until (Name of the distressed property consultant) has completely finished doing everything (Name of the distressed property consultant) said he or she would do; or

(2) Ask you to sign or have you sign any lien, encumbrance, mortgage, assignment, or deed unless the lien, encumbrance, mortgage, assignment, or deed is fully described including all disclosures required by law."

(b) A distressed property consultant contract shall be accompanied by the following notice of cancellation form, in duplicate, attached to the contract and easily detachable, in a type size no smaller than fourteen-point boldface type, completed with the date the contract was last signed, the name of the distressed property consultant, and the address where the notice of cancellation is to be delivered:
"NOTICE OF CANCELLATION

(Enter date contract last signed)

(Date)

YOU MAY CANCEL THIS TRANSACTION, WITHOUT ANY PENALTY OR OBLIGATION, AT ANY TIME BEFORE THE DISTRESSED PROPERTY CONSULTANT HAS FULLY PERFORMED EACH AND EVERY SERVICE THE DISTRESSED PROPERTY CONSULTANT CONTRACTED TO PERFORM OR REPRESENTED WOULD BE PERFORMED.

TO CANCEL THIS TRANSACTION, MAIL OR DELIVER A SIGNED AND DATED COPY OF THIS NOTICE OF CANCELLATION, OR ANY OTHER WRITTEN NOTICE OF CANCELLATION TO (Name of distressed property consultant) AT (Address where notice of cancellation is to be delivered).

I HEREBY CANCEL THIS TRANSACTION.

________________________________

(Date)

_____________________________

(Owner's signature)"

§ -5 Cancellation of a distressed property consultant contract. (a) In addition to any other legal right to rescind a contract, any distressed property owner has the right to cancel a distressed property consultant contract, without any penalty or obligation, at any time before the distressed property consultant has fully performed each and every service the distressed property consultant contracted to perform or represented would be performed.

(b) Cancellation occurs when any owner of a distressed property delivers, by any means, written notice of cancellation to the address specified in the distressed property consultant contract.

(c) Notice of cancellation, if given by mail, is effective when deposited in the mail with postage prepaid. Notice by certified mail, return receipt requested, addressed to the address specified in the distressed property consultant contract, shall be conclusive proof of notice of cancellation.

(d) Notice of cancellation given by any owner of a distressed property need not take the particular form as provided with the distressed property consultant contract and, however expressed, is effective if it indicates the intention of an owner not to be bound by the contract.

§ -6 Distressed property conveyance contract. (a) A distressed property conveyance contract shall be in writing and shall fully disclose all rights and obligations of the distressed property purchaser and all owners of the distressed property and all terms of any agreements between the distressed property purchaser and all owners of the distressed property.

(b) Every distressed property conveyance contract shall specifically include the following terms:

(1) The total consideration to be given by the distressed property purchaser or tax lien payor in connection with or incident to the distressed property conveyance;

(2) A complete description of the terms of payment or other consideration including any services of any nature that the distressed property purchaser represents will be performed for any owner of the distressed property before or after the distressed property conveyance;

(3) A complete description of the terms of any related agreement designed to allow any owner of the distressed property to remain in the distressed property, such as a rental agreement, repurchase agreement, contract for deed, or lease with option to buy;

(4) All notices as provided in this chapter;

(5) The following notice, in a type size no smaller than fourteen-point boldface type, completed with the name of the distressed property purchaser, shall appear immediately above the notice of right to cancel a distressed property conveyance contract required by section -7(a):

"NOTICE REQUIRED BY HAWAII LAW

UNTIL YOUR RIGHT TO CANCEL THIS CONTRACT HAS ENDED, (Name of distressed property purchaser) OR ANYONE WORKING FOR (Name of distressed property purchaser) CANNOT ASK YOU TO SIGN OR HAVE YOU SIGN ANY DEED OR ANY OTHER DOCUMENT. YOU ARE URGED TO HAVE THIS CONTRACT REVIEWED BY AN ATTORNEY OF YOUR CHOICE WITHIN FIFTEEN BUSINESS DAYS OF SIGNING IT.";

and

(6) If title to the distressed property will be transferred in the conveyance transaction, the following notice, in a type size no smaller than fourteen-point boldface type, completed with the name of the distressed property purchaser, shall appear immediately below the notice required by paragraph (5):

"NOTICE REQUIRED BY HAWAII LAW

AS PART OF THIS TRANSACTION, YOU ARE GIVING UP TITLE TO YOUR HOME."

(c) A distressed property conveyance contract shall contain on its first page in a type size no smaller than fourteen-point boldface type:

(1) A description of the distressed property;

(2) The name, street address, and telephone number of the distressed property purchaser; and

(3) The name and address of the distressed property purchaser to which notice of cancellation is to be delivered.

(d) A distressed property conveyance contract shall be dated and signed by the distressed property purchaser. If the distressed property purchaser is a person other than an individual, the individual executing the distressed property conveyance contract on behalf of the distressed property purchaser shall identify the title and office held by the individual.

(e) A distressed property conveyance contract shall be dated and signed by all owners of the distressed property.

(f) The distressed property purchaser shall provide each distressed property owner with a copy of the distressed property conveyance contract and attached notice of cancellation form immediately upon execution by all parties to the distressed property conveyance contract. A distressed property conveyance contract shall not be effective until all parties to the distressed property conveyance contract have signed the contract.

(g) Pursuant to chapter 501 or 502, the distressed property purchaser shall record the distressed property conveyance contract no earlier than fifteen days after its execution but no later than twenty days after its execution; provided that the contract has not been canceled, or no later than fifteen days after the last day any distressed property owner has the right to cure a default under state law, whichever is later.

§ -7 Right to cancel a distressed property conveyance contract. (a) A distressed property conveyance contract shall contain, immediately before the space reserved for all the distressed property owners' signatures, the following notice of right to cancel a distressed property conveyance contract in a type size no smaller than fourteen-point boldface type, completed with the correct date and time of day on which the cancellation right ends:

"YOU MAY CANCEL THIS CONTRACT FOR THE SALE OF YOUR HOUSE, WITHOUT ANY PENALTY OR OBLIGATION, AT ANY TIME BEFORE (Date and time of day). SEE THE ATTACHED NOTICE OF CANCELLATION FORM FOR AN EXPLANATION OF THIS RIGHT."

(b) A distressed property conveyance contract shall be accompanied by the following notice of cancellation form, in duplicate, attached to the contract and easily detachable, in a type size no smaller than fourteen-point boldface type, completed with the date the contract was last signed, the name of the distressed property purchaser, the address where notice of cancellation is to be delivered, and the correct date and time of day on which the cancellation right ends:

"NOTICE OF CANCELLATION

(Enter date contract last signed)

(Date)

YOU MAY CANCEL THIS CONTRACT FOR THE SALE OF YOUR HOME, WITHOUT ANY PENALTY OR OBLIGATION, AT ANY TIME BEFORE THE LATER OF MIDNIGHT OF THE FIFTEENTH BUSINESS DAY FOLLOWING THE DAY ON WHICH THE LAST PARTY TO A DISTRESSED PROPERTY CONVEYANCE CONTRACT SIGNS THE DISTRESSED PROPERTY CONVEYANCE CONTRACT OR 5:00 P.M. ON THE LAST DAY OF THE PERIOD DURING WHICH ANY OWNER OF A DISTRESSED PROPERTY HAS THE RIGHT TO CURE THE DEFAULT UNDER HAWAII LAW.

TO CANCEL THIS TRANSACTION, MAIL OR DELIVER A SIGNED AND DATED COPY OF THIS NOTICE OF CANCELLATION, OR ANY OTHER WRITTEN NOTICE OF CANCELLATION, TO (Name of distressed property purchaser) AT (Address where notice of cancellation is to be delivered) NOT LATER THAN (Enter date and time of day).

I HEREBY CANCEL THIS TRANSACTION.

_________________________

(DATE)

_____________________________

(Seller's signature)"

§ -8 Cancellation of a distressed property conveyance contract. (a) In addition to any other legal right to rescind a contract, any distressed property owner has the right to cancel a distressed property conveyance contract, without any penalty or obligation, at any time before the later of midnight of the fifteenth business day following the day on which the last party to a distressed property conveyance contract signs the distressed property conveyance contract or 5:00 p.m. on the last day of the period during which any owner of a distressed property has the right to cure a default under state law.

(b) The period of fifteen business days following the day on which the last party to a distressed property conveyance contract signs the contract during which any owner of the distressed property may cancel the contract shall not begin to run until all parties to the distressed property conveyance contract have executed the distressed property conveyance contract and the distressed property purchaser has complied with all the requirements of sections -6, -7, and this section.

(c) Cancellation occurs when any owner of a distressed property delivers, by any means, and within the time specified under subsection (a), written notice of cancellation to the address specified in the distressed property conveyance contract.

(d) Notice of cancellation, if given by mail, is effective when deposited in the mail with postage prepaid. Notice by certified mail, return receipt requested, addressed to the address specified in the distressed property conveyance contract, shall be conclusive proof of notice of cancellation.

(e) Notice of cancellation given by any owner of a distressed property need not take the particular form as provided with the distressed property conveyance contract and, however expressed, is effective if it indicates the intention of an owner not to be bound by the contract.

(f) Within fifteen days following receipt of a notice of cancellation given in accordance with this section, the distressed property purchaser shall return, without condition, any and all original contracts and documents signed by any owner of the distressed property.

§ -9 Distressed property lease. (a) A distressed property lease shall be in writing and shall fully disclose:

(1) All rights and obligations of the distressed property lessor and distressed property lessee;

(2) The exact terms of the agreement between the distressed property lessor and distressed property lessee;

(3) The exact period of time the distressed property lease is to be in effect; and

(4) The total amount and terms of compensation to be directly or indirectly received by the distressed property lessor.

(b) Distressed property lessees shall be afforded all rights under the landlord-tenant law of the State. No distressed property lease shall provide a distressed property lessee with rights less than those provided by the State's landlord-tenant law as set forth in chapters 521 and 666.

(c) The first page of a distressed property lease shall contain in a type size no smaller than fourteen-point boldface type:

(1) A description of the distressed property;

(2) The name, street address, and telephone number of the distressed property lessor; and

(3) The name and address of the distressed property lessor to which lease or rental payments, correspondence, and notices are to be mailed.

(d) A distressed property lease shall be dated and signed by the distressed property lessor. If the distressed property lessor is a person other than an individual, the individual executing the distressed property lease on behalf of the distressed property lessor shall identify the title and office held by the individual.

(e) A distressed property lease shall be dated and signed by all lessees of the distressed property.

(f) The distressed property lessor shall provide each distressed property lessee with a copy of the distressed property lease immediately upon execution by all parties to the distressed property lease. A distressed property lease shall not be effective until all parties to the distressed property lease have signed the lease.

§ -10 Prohibitions. (a) A distressed property consultant shall not:

(1) Misrepresent or conceal any material fact;

(2) Induce or attempt to induce a distressed property owner to waive any provision of this chapter;

(3) Make any promise or guarantee not fully disclosed in the distressed property consultant contract;

(4) Engage or attempt to engage in any activity or act concerning the distressed property not fully disclosed in the distressed property consultant contract;

(5) Induce or attempt to induce a distressed property owner to engage in any activity or act not fully disclosed in the distressed property consultant contract;

(6) Take, ask for, claim, demand, charge, collect, or receive any compensation until after the distressed property consultant has fully performed each service the distressed property consultant contracted to perform or represented would be performed;

(7) Take, ask for, claim, demand, charge, collect, or receive for any reason, any fee, interest, or any other compensation that exceeds the two most recent monthly mortgage installments of principal and interest due on the loan first secured by the distressed property or the most recent annual real property tax charged against the distressed property, whichever is less;

(8) Take or ask for a wage assignment, a lien of any type on real or personal property, or other security to secure the payment of compensation. This type of security is void and not enforceable;

(9) Receive any consideration from any third party in connection with services rendered to a distressed property owner unless the consideration is fully disclosed in the distressed property consultant contract;

(10) Acquire any interest, directly or indirectly, or by means of a subsidiary or affiliate, in a distressed property from a distressed property owner with whom the distressed property consultant has contracted;

(11) Require or ask a distressed property owner to sign any lien, encumbrance, mortgage, assignment, or deed unless the lien, encumbrance, mortgage, assignment, or deed is fully described in the distressed property consultant contract, including all disclosures required by this chapter; or

(12) Take any power of attorney from a distressed property owner for any purpose, except to inspect documents concerning the distressed property as allowed by law.

(b) A distressed property purchaser shall not:

(1) Misrepresent or conceal any material fact;

(2) Induce or attempt to induce a distressed property owner to waive this chapter;

(3) Make any promise or guarantee not fully disclosed in the distressed property conveyance contact;

(4) Engage or attempt to engage in any activity or act concerning the distressed property not fully disclosed in the distressed property conveyance contract;

(5) Induce or attempt to induce a distressed property owner to engage in any activity or act not fully disclosed in the distressed property conveyance contract;

(6) Enter into or attempt to enter into a distressed property conveyance unless the distressed property purchaser verifies and can demonstrate that an owner of the distressed property has a reasonable ability to pay any amounts due to reacquire an interest in the distressed property or to make monthly or any other payments due under a distressed property conveyance contract or distressed property lease, if the distressed property purchaser allows any owner of a distressed property to remain in, occupy, use, or repurchase the distressed property;

(7) Fail to make a payment to the owner of the distressed property at the time the title is conveyed so that the owner of the distressed property has received consideration in an amount of at least eighty-two per cent of the property's fair market value, or, in the alternative, fail to pay the owner of the distressed property no more than the costs necessary to extinguish all of the existing obligations on the distressed property, as set forth in this chapter; provided that the owner's costs to repurchase the distressed property pursuant to the terms of the distressed property conveyance contract do not exceed one hundred twenty-five per cent of the distressed property purchaser's costs to purchase the property. If an owner is unable to repurchase the property pursuant to the terms of the distressed property conveyance contract, the distressed property purchaser shall not fail to make a payment to the owner of the distressed property so that the owner of the distressed property has received consideration in an amount of at least eighty-two per cent of the property's fair market value at the time of conveyance or at the expiration of the owner's option to repurchase;

(8) Enter into any repurchase or lease agreement as part of a distressed property conveyance contract or subsequent conveyance of an interest in the distressed property back to a distressed property owner that is unfair or commercially unreasonable or engage in any other unfair conduct;

(9) Represent, directly or indirectly, that the distressed property purchaser is acting as an advisor or a consultant or is acting on behalf of or assisting an owner of a distressed property to "remain in the house," "save the house," "buy time," or "stop the foreclosure" or is doing anything other than purchasing the distressed property;

(10) Misrepresent the distressed property purchaser's status as to licensure or certification;

(11) Do any of the following until after the time during which an owner of a distressed property may cancel the distressed property conveyance contract:

(A) Accept from an owner of the distressed property execution of any instrument of conveyance of any interest in the distressed property;

(B) Execute an instrument of conveyance of any interest in the distressed property; or

(C) Pursuant to chapter 501 or 502, record any document signed by an owner of a distressed property, including any instrument of conveyance;

(12) Fail to re-convey title in a distressed property to the distressed property owner or owners when the terms of the distressed property conveyance contract have been fulfilled if the distressed property consultant or distressed property purchaser contracted or represented that title in the distressed property would be re-conveyed to the distressed property owner or owners when the terms of the distressed property conveyance contract have been fulfilled;

(13) Induce or attempt to induce an owner of the distressed property to execute a quitclaim deed concerning a distressed property;

(14) Enter into a distressed property conveyance contract where any party to the contract is represented by power of attorney;

(15) Immediately following the conveyance of the distressed property, fail to extinguish all liens encumbering the distressed property at the time of the distressed property conveyance or fail to assume all liability with respect to all liens encumbering the distressed property at the time of the distressed property conveyance, which assumption shall be accomplished without violations of the terms and conditions of the lien or liens being assumed. Nothing herein shall preclude a lender from enforcing any provision in a contract that is not otherwise prohibited by law;

(16) Fail to complete a distressed property conveyance through:

(A) An escrow depository licensed by the department of commerce and consumer affairs;

(B) A bank, trust company, or savings and loan association authorized under any law of this State or of the United States to do business in the State;

(C) A person licensed as a real estate broker in this State who is the broker for a party to the escrow; provided that the person does not charge any escrow fee; or

(D) A person licensed to practice law in this State who, in escrow, is not acting as the employee of a corporation; provided that the person does not charge any escrow fee; or

(17) Cause the property to be conveyed or encumbered without the knowledge or permission of all owners of a distressed property or in any way frustrate the ability of a distressed property owner to reacquire the distressed property.

(c) There shall be a rebuttable presumption that an appraisal by a person licensed or certified as a real property appraiser by the State or the federal government is an accurate determination of the fair market value of the property.

(d) An evaluation of "reasonable ability to pay" under this chapter shall include debt to income ratio, fair market value of the distressed property, and the distressed property owner's payment history.

§ -11 Violation, penalties. (a) Any person who violates any provision of this chapter shall be deemed to have engaged in an unfair or deceptive act or practice in the conduct of any trade or commerce within the meaning of section 480-2.

(b) The penalties provided in this section shall be cumulative to the remedies or penalties available under all other laws of this State."

SECTION 3. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 4. This Act shall take effect upon its approval.

Hawaii Real Estate Online

Act 137 Hawaii June 2008