Bill Text: HI SB2538 | 2014 | Regular Session | Introduced
Bill Title: Hawaii Direct Home Loan Program; Special Fund; Program Requirements; Appropriation ($)
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Introduced - Dead) 2014-02-14 - Report adopted; Passed Second Reading, as amended (SD 1) and referred to WAM. [SB2538 Detail]
Download: Hawaii-2014-SB2538-Introduced.html
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THE SENATE |
S.B. NO. |
2538 |
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TWENTY-SEVENTH LEGISLATURE, 2014 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
Relating to home loans.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:
"Chapter
HAWAII HOME LOAN GUARANTEE PROGRAM
-1 Definitions. As used in this chapter:
"Corporation" means the Hawaii housing finance and development corporation.
"Director" means the executive director of the Hawaii housing finance and development corporation.
"Lender" means a private savings and loan institution, bank, or mortgage company that makes, holds, and services the loan which is guaranteed under this chapter. The lender is the party requesting the guarantee and includes an entity purchasing a guaranteed home loan. A purchasing lender acquires all of the privileges, duties, and responsibilities of the originating lender. The lender is primarily responsible for originating, underwriting, servicing, and where necessary, liquidating the loan and disposing of the property in a manner consistent with maximizing the government's interest.
"Qualified applicant" means an individual or family who:
(1) Has an adjusted annual income of up to one hundred fifteen per cent of the adjusted area median income;
(2) Has adequate and dependable income;
(3) Can afford the mortgage payments, requiring proof that:
(A) The burden of principal, interest, taxes, and insurance is twenty-nine per cent or less of gross monthly income; and
(B) The total of monthly debts is forty-one per cent or less of gross monthly income;
(4) Is unable to qualify for conventional mortgage credit; and
(5) Has a credit history that indicates a reasonable ability and willingness to meet obligations as they become due.
§ -2 Hawaii home loan guarantee program. There is created a Hawaii home loan guarantee program which shall be administered by the director in accordance with the spirit and intent of this chapter. The program objective is to assist eligible households in obtaining adequate but modest, decent, safe, and sanitary single family dwellings and related facilities for their own use by guaranteeing sound loans that would not be made without a guarantee.
§ -3 Home loan guarantee revolving fund. (a) There is established the Hawaii home loan guarantee revolving fund into which shall be deposited:
(1) Moneys appropriated to the fund by the legislature;
(2) Gifts, donations, and grants from public agencies and private persons;
(3) Interest earned or accrued on moneys deposited into the fund; and
(4) All moneys received pursuant to this chapter.
(b) The corporation shall use funds for the purposes of this chapter.
§ -4 Home loans guaranteed by the corporation; aggregate limit. (a) The corporation shall guarantee ninety per cent of the principal balance of a loan made to a qualified applicant by a private lender who is unable to otherwise lend the applicant sufficient funds at reasonable rates; provided that at no time shall the aggregate amount of the State's liability, contingent or otherwise, on loans guaranteed under this section exceed $ based on a reserve level established at one per cent of the loan guarantee amount. The reserve amount to be funded shall be calculated by determining the difference between the home loan guarantee revolving fund balance at the beginning of each fiscal year and its annual authorization ceiling.
(b) The maximum loss payment under the guarantee of the home loan shall be the lesser of:
(1) Any loss of an amount equal to ninety per cent of the principal amount advanced to the borrower; or
(2) Any loss sustained by the lender up to thirty-five per cent of the principal amount actually advanced to the borrower, plus eighty-five per cent of any additional loss sustained by the lender of an amount up to the remaining sixty-five per cent of the principal amount.
(c) Loans guaranteed under this section shall be subject to section -7. Loan guarantees shall be limited to qualified applicants for the purpose of acquiring a completed dwelling and related facilities or to purchase a new or existing dwelling to be used by the qualified applicant as a primary residence. The guaranteed loan may be for "take out" financing for a loan to construct a new dwelling or improve an existing dwelling when the construction financing is arranged in connection with the loan package. The loan may also include funds for the following purposes:
(1) The purchase and installation of necessary appliances and energy saving measures;
(2) The payment of incidental expenses for tax monitoring services, architectural, appraisal, survey, environmental, and other technical services;
(3) Necessary related facilities such as a garage, storage shed, walks, driveway, and water or sewage facilities including reasonable connection fees for utilities that the buyer is required to pay;
(4) Special design features or equipment necessary to accommodate a physically disabled member of the household;
(5) The cost of establishing an escrow or reserve account for payment of real estate taxes, insurance premiums, or annual fees when they come due;
(6) Title clearance, title insurance, and loan closing; stock in a cooperative lending agency necessary to obtain the loan; and, for low-income applicants only, loan discount points to reduce the note interest rate from the rate authorized in subsection (d) not exceeding the amount typical for the area; and
(7) Provide funds for seller equity or essential repairs when an existing guaranteed loan is to be assumed simultaneously.
(d) Interest charged on a guaranteed loan made under this section shall be determined by the corporation based on the market rate of interest charged by the private lender for a similar type of loan, unless waived by the director. Loans guaranteed under this chapter shall bear a fixed interest rate over the life of the loan. The lender shall document the rate and the date it was determined.
(e) When the application for a guaranteed loan has been approved by the corporation, the corporation shall issue to the lender a guaranty for that percentage of the loan on which it guarantees payment of principal and interest. The lender shall collect all payments from the borrower and otherwise service the loan.
(f) The lender shall pay an up-front guarantee fee and an annual fee to be determined by the corporation. The non-refundable up-front guarantee fee and the annual fee may be passed on to the borrower.
(g) Principal and interest shall be due and payable monthly. The term for final maturity shall not be less than thirty years from the date of the note and not more than thirty years from the date of the first scheduled payment.
(h) When any installment of principal and interest has been due for one hundred twenty days and has not been paid by the borrower, the corporation shall issue, on request of the lender, a check for the percentage of the overdue payment guaranteed, and shall acquire a division of interest in the collateral pledged by the borrower in proportion to the amount of the payment. The corporation shall be reimbursed for any amounts so paid plus the applicable interest rate, where payment is collected from the borrower.
(i) The lender may reduce the percentage of the principal balance guaranteed under this section at any time.
§ -5 Functions, powers, and duties of director. In the performance of, and with respect to, the functions, powers, and duties vested in the director by this chapter, the director may:
(1) Adopt rules pursuant to chapter 91 to carry out this chapter; and
(2) Perform all functions necessary to effectuate the purposes of this chapter.
§ -6 Rules and regulations. The rules adopted pursuant to section ‑5 shall:
(1) Establish preferences and priorities in determining eligibility for loans guaranteed under this chapter;
(2) Establish the conditions, consistent with the purposes of this chapter, for the granting or for the continuance of a grant of a loan guaranteed by this chapter;
(3) Prescribe the qualifications for eligibility of lenders for the home loan guarantee program and establish lender responsibilities;
(4) Establish the up-front guarantee fee and the annual fee owed by the lender;
(5) Provide for inspection, at reasonable hours, of the books and records of a private lender that has issued a loan guarantee under this chapter, and to require the submission of reports relating to loans guaranteed under this chapter, if necessary; and
(6) Provide for reasonable inspections of existing dwellings and construction sites.
§ -7 Hawaii home loans, terms, and restrictions. (a) Payments required under loans guaranteed under this section may be deferred, but no loans guaranteed under this subsection shall be forgiven.
(b) Prohibited loan purposes shall include:
(1) Payment of construction draws;
(2) Purchase of furniture or other personal property except for essential equipment and materials authorized in accordance with -4;
(3) Refinancing guaranteed debts, debts owed to the lender (other than construction or development financing incurred in conjunction with the proposed loan), or debts on a manufactured home;
(4) Purchase or improvement of income-producing land, or buildings to be used principally for income-producing purposes, or to buy or build buildings that are largely or in part specifically designed to accommodate a business or income-producing enterprise;
(5) Payment of fees, charges, or commissions, such as finder's fees for packaging the applications or placement fees for the referral of a prospective qualified applicant;
(6) Improving the entry of a homestead entryman or desert entryman prior to receipt of patent; and
(7) Purchase of a dwelling with an in-ground swimming pool.
(c) Housing units may be financed in existing subdivisions approved by local, regional, state, or federal government agencies. An existing subdivision is one in which the local government has accepted the subdivision plan, its principal development and rights-of-way, the construction of streets, water and water or waste disposal systems, and utilities; is at a point which precludes any major changes; and is one in which provisions are in place for continuous maintenance.
(d) The corporation may contract with any financial institution for administrative services related to loan guarantees provided under this chapter.
§ -8 Fair housing law to apply. Notwithstanding any law to the contrary, chapter 515 and any applicable federal law shall apply in administering this chapter.
§ -9 Reports. The corporation shall make a report as of December 31 of each year of operations under this chapter to the governor, the president of the senate, and the speaker of the house of representatives on the progress made under this chapter. These reports shall be submitted no later than February 1 immediately following the period covered by the report."
SECTION 2. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2014-2015 for deposit into the Hawaii home loan guarantee revolving fund established by this Act.
SECTION 3. There is appropriated out of the Hawaii home loan guarantee revolving fund the sum of $ or so much thereof as may be necessary for fiscal year 2014-2015 for the Hawaii home loan guarantee program.
The sum appropriated shall be expended by the Hawaii housing finance and development corporation for the purposes of this Act.
SECTION 4. This Act shall take effect on July 1, 2014.
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INTRODUCED BY: |
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Report Title:
Hawaii Home Loan Guarantee Program; Revolving Fund; Program Requirements; Appropriation
Description:
Establishes the Hawaii home loan guarantee program to assist residents who have a steady, low or modest income, and yet are unable to obtain conventional financing with obtaining a home loan from a commercial lender that is guaranteed by the Hawaii housing finance and development corporation. Appropriates funds for the Hawaii home loan guarantee revolving fund.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
