Foreclosure in Hawaii

How a Hawaii foreclosure works, step by step

This is the court route. If your lender goes the non-judicial way instead, those steps come next.

1. Generally, the legal foreclosure process can't start until you're at least 120 days behind.
2. Your lender usually sends you a written notice of default first, once you're past due on your mortgage.
3. In a judicial foreclosure, the lender sues you to get a court judgment for the balance you owe and an order to sell the home.
4. You must serve your answer within 20 days after you're served with the summons and complaint.
5. The court appoints a third-party commissioner to advertise and run the sale. The sale notice can run in a newspaper once a week for three weeks in a row, and the sale can't come sooner than 14 days after the third ad.
6. The sale is usually a public auction. The highest bidder who can put down a cash deposit of up to 10% of the bid can buy the home.
7. The court must approve the sale before it can be completed.

When your lender skips court

Under a power of sale, the lender can foreclose and sell your home without filing a lawsuit or court supervision.

1. The lender serves a notice of default and intention to foreclose. The deadline to cure must be at least 60 days after the date of that notice.
2. If you own an interest in the home, you may have the right to ask for mediation or to convert the case to a judicial foreclosure. Both are explained below. Decide early.
3. If you don't cure, the lender posts a notice of the public sale on the home, and the notice can run in a newspaper once a week for three weeks in a row.
4. The sale can't happen until the later of 60 days after the sale notice goes out or 14 days after the third newspaper ad.
5. The lender, not a court, advertises and runs the sale.
6. The sale isn't final for 15 days unless an eligible bidder steps in, and it's final no later than 45 days after the sale. Until then, an eligible bidder can match or beat the high bid.
7. The buyer is entitled to immediate and exclusive possession. If you're still in the home after the sale papers are recorded, you're treated as a tenant at sufferance and can be evicted.

Mediation for owners in a non-judicial case

Hawaii's Mortgage Foreclosure Dispute Resolution Program is open to you in a non-judicial foreclosure if you own an interest in the home. To join, the program office must get your completed form and a $300 program fee within 30 days after it mails you its notice.

You must meet with an approved housing counselor or budget and credit counselor at least 30 days before your first session. The non-judicial foreclosure can't move forward while mediation is going on.

If you choose mediation, you give up the right to convert the case to a court foreclosure. Mediation isn't a promise of a deal, but it gets you to the table. Call a counselor early.

Moving a non-judicial case into court

Act 48, signed in 2011, created a way to ask that a non-judicial foreclosure be converted into a judicial one. If you're an owner-occupant, you can file a petition to convert no later than 30 days after the foreclosure notice is served on you.

Within 45 days after the petition, every owner and everyone who signed the note, including co-signers and guarantors, must file a statement agreeing to go to court. Once the case is converted, the non-judicial foreclosure can't go forward.

There's a trade-off: in court, the lender can use all of its remedies, including asking for a deficiency judgment.

Catching up before the sale

In a non-judicial foreclosure, you have at least 60 days from the notice date to cure the default. After that, you can still cure up to three business days before the sale by paying what you'd owe if the loan hadn't been accelerated, plus the lender's attorney's fees and other costs from the default. If you do, the sale is canceled.

Even after either kind of foreclosure has started, you may be able to reinstate the loan by paying the past-due amount and the lender's foreclosure costs.

It's a prohibited practice for a lender to finish a non-judicial foreclosure during good-faith loan modification talks with you.

The auction itself

A non-judicial sale must be held in the county where the home is, on state grounds or at a state facility, never on judiciary grounds, and during business hours on a business day.

In both kinds of sale, the lender can bid using the balance owed on the loan, as long as its bid is higher than the others.

How long it takes

Foreclosure generally can't legally start until you're at least 120 days behind. Once it starts, how long you have until the sale depends on your state.

For FHA loans, HUD's time frame runs from the first legal action until the lender has clear title to the home and possession of it. In Hawaii, that's 30 months for a court foreclosure, where the first legal action is the complaint, and 6 months for a non-judicial one, where it's publishing the notice of intent to foreclose.

In court, you have 20 days to answer the complaint, and the sale can't come sooner than 14 days after the third weekly newspaper ad. Without court, you get at least 60 days to cure, and the sale can't come until at least 60 days after the sale notice goes out.

These are official markers, not a forecast. Your case can move faster or slower, so don't count on extra time.

If the sale falls short, or brings in extra

In a court foreclosure, if the home sells for less than your loan balance, the lender can ask the court for a deficiency judgment for the difference. After a non-judicial foreclosure, the lender can't get a deficiency judgment against an owner-occupant unless other collateral secures the debt. This limit doesn't apply to an association.

Sale money goes to lienholders, including the lender, in the order set by law, and then to you if any is left. If you think there could be money left over, ask about it in writing.

In a non-judicial foreclosure, once the cure deadline three business days before the sale has passed, there's no right to cure or redeem.

Rules for buyers, consultants and rent-back deals

• Hawaii's distressed property law covers a home that's in foreclosure, or at risk of it because the loan is more than 60 days behind.
• A distressed property consultant can't take any pay until they've fully done every service they promised. They also can't tell you that you can't or shouldn't talk to your lender or servicer.
• When a home changes hands in a distressed property deal, the written contract must fully describe any side deal that lets you stay, such as a rental, a buyback, a contract for deed or a lease with an option to buy. You can cancel that contract without penalty until the later of midnight on the 15th business day after the last party signs, or 5 p.m. on the last day you have to cure the default.
• If the buyer lets you stay or buy the home back, they must first verify that you can reasonably afford the payments. If you rent the home back, you keep all your rights under the state's landlord-tenant law.
• Breaking the law's list of banned practices is a class C felony with a $10,000 fine.
• An agreement of sale can also be foreclosed without court, under the power of sale process.

Hawaii's distressed property rules can touch any of my five ways when your loan is behind, most of all a deal where you stay on as a renter or buy the home back later, like a lease option or a cash offer with a rent-back. The agreement of sale rule touches seller financing. I put every term in writing and respect the cancel window. And don't stop talking to your lender while you weigh any offer, including mine.

Free help in Hawaii

• Hawaii DCCA: Foreclosure Information Center. The state consumer department's foreclosure help pages.
• Hawaii DCCA: Mortgage Foreclosure Dispute Resolution Program. Mediation for owners in a non-judicial foreclosure.
• Hawaii State Judiciary: mortgage foreclosures. Where to find the court's conversion rules and forms.
• Hawaii DCCA: foreclosure scams. The state warns that no homeowner should pay up-front fees for mortgage help.
• CFPB: find a housing counselor. Search HUD-approved counseling agencies in Hawaii.