Bill Text: HI SB756 | 2015 | Regular Session | Amended
Bill Title: Secure and Fair Enforcement for Mortgage Licensing Act; Seller Exemption
Spectrum: Partisan Bill (Democrat 8-0)
Status: (Passed) 2015-07-10 - Act 225, 07/09/2015 (Gov. Msg. No. 1326). [SB756 Detail]
Download: Hawaii-2015-SB756-Amended.html
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THE SENATE |
S.B. NO. |
756 |
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TWENTY-EIGHTH LEGISLATURE, 2015 |
S.D. 1 |
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STATE OF HAWAII |
H.D. 2 |
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A BILL FOR AN ACT
RELATING TO THE SECURE AND FAIR ENFORCEMENT FOR MORTGAGE LICENSING ACT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that seller financing is a useful tool in the credit market. It expands the pool of potential buyers for a seller and gives buyers the opportunity to make a purchase that would otherwise be out of reach, particularly in situations where the purchaser may qualify for traditional financing, but the traditional lender does not accept the property because of its location or condition.
The purpose of this Act is to establish a mortgage license exemption for sellers of real property who offer or negotiate terms of a residential mortgage loan secured by real property that is sold by the mortgagee. This measure provides a mortgagor with protections that would otherwise be available for regulated transactions conducted by licensed mortgage loan originators, attorneys, or real estate brokers.
Although this exemption was not originally included in Hawaii's Secure and Fair Enforcement for Mortgage Licensing Act, the legislature finds that with adequate consumer protection, seller financing is a key component in the Hawaii real estate market. Seller financing can assist intra-family transactions and transfers of property that may be subject to environmental and natural hazards that are unique to Hawaii.
SECTION 2. Section 454F-2, Hawaii Revised Statutes, is amended to read as follows:
"§454F-2 Exemptions. This chapter shall not apply to the following:
(1) An exempt registered mortgage loan originator when acting for an insured depository institution or an institution regulated by the Farm Credit Administration;
(2) A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney's representation of the client unless the attorney is compensated by a lender, a mortgage loan originator company, or other mortgage loan originator or by an agent of a lender, mortgage loan originator company, or other mortgage loan originator;
(3) A person or entity that only performs real estate brokerage activities and is licensed or registered by the State unless the person or entity is compensated by a lender, a mortgage loan originator company, or other mortgage loan originator or by an agent of the lender, mortgage loan originator company, or other mortgage loan originator;
(4) A person or entity solely involved in extensions of credit relating to timeshare plans, as the term is defined in title 11 United States Code section 101(53D);
(5) An exempt sponsoring mortgage loan originator company as defined by this chapter except as otherwise provided by this chapter;
(6) An insured depository institution;
(7) An institution regulated by the Farm Credit Administration;
(8) Employees of government agencies or of
housing finance agencies who act as mortgage loan originators; [or]
(9) A mortgage servicer company that is
exempt from chapter 454M, pursuant to section 454M-3[.]; or
(10) A seller of real property who offers or negotiates terms of a residential mortgage loan, agreement of sale, purchase money mortgage, rent-to-own agreement, or a loan by any other name that is secured by the seller's own real property and for which the seller is the mortgagee or lender and the buyer is the mortgagor or borrower; provided that:
(A) The seller is a person, estate, or trust that transacts three or fewer residential mortgage loans in one calendar year;
(B) The seller is not a loan originator for purposes of the loan originator qualification requirements in 12 Code of Federal Regulations section 1026.36(f) and (g);
(C) The seller has not constructed or acted as the construction contractor for the residence on the property in the ordinary course of the seller's business;
(D) The seller determines in good faith that the buyer has a reasonable ability to repay the loan;
(E) The interest rate for the loan does not exceed the State's usury limit; provided that the exemptions from usury specified in section 478-8 shall not apply to transactions subject to this paragraph;
(F) In the event of default, a deed in lieu of foreclosure shall not be available as a remedy and any action by the seller to regain the property shall be subject to chapter 667;
(G) The financing has a fully amortizing repayment schedule that does not result in negative amortization or balloon payments;
(H) The financing has a fixed interest rate or an adjustable interest rate that is adjustable after five or more years. An adjustable interest rate shall be determined by the addition of a margin to the LIBOR index rate and shall not increase by more than 2 per cent per annum or 6 per cent over the term of the loan, subject to usury limits under section 478-8;
(I) The seller shall disclose to the buyer the terms of the financing including:
(i) A current title search including any liens against the property;
(ii) The interest rate;
(iii) Monthly principal and interest payments;
(iv) Any prepayment penalty;
(v) The total amount of interest that the mortgagor will pay over the term of the loan expressed as a percentage of the loan amount;
(vi) A calculation of projected aggregate monthly payments including principal and interest, and estimated escrow costs, property taxes, assessments, and homeowner's insurance;
(vii) Estimated closing costs if closing costs are included in loan costs and estimated cash to close if closing costs are not included in loan costs. For purposes of this paragraph, closing costs shall include recording fees, transfer taxes, prepaid costs such as homeowner's insurance premiums or property taxes, and appraisal costs charged to the mortgagor;
(viii) Any late payment charges;
(ix) The lender's contact information including name, address, phone number, general excise tax license number, electronic mail address, and alternate contact information; and
(x) A statement that the lender will acquire a security interest in the borrower's dwelling and that the borrower may lose the dwelling in the event of a loan default;
(J) The seller shall make the disclosures required by subparagraph (I) clearly and conspicuously in writing and in a form that the borrower may keep. The required disclosures may be provided to the borrower in electronic form with the borrower's consent and subject to compliance with all applicable provisions of the Electronic Signatures in Global and National Commerce Act, E-Sign Act, 15 United States Code, section 7001, et seq.;
(K) A residential mortgage loan, agreement of sale, purchase money mortgage, rent-to-own agreement, or loan by any other name subject to this paragraph shall be recorded with the land court or bureau of conveyances as applicable; and
(L) The director may act on behalf of a buyer to enforce the requirements of this paragraph against any seller claiming an exemption from this chapter pursuant to this paragraph."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act shall take effect on March 15, 2038.
Report Title:
Secure and Fair Enforcement for Mortgage Licensing Act; Seller Exemption
Description:
Establishes a mortgage license exemption for seller-financed mortgage loans. Requires disclosures and establishes borrower protections that are similar to those applicable to mortgage transactions by a licensed mortgage loan originator, attorney, or real estate broker. (SB756 HD2)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
