(This should not constitute a substitute for your own research and is based solely on our general knowledge. Please consult an attorney for specific law and procedures for Foreclosure)
- Judicial Foreclosure Available: Yes
- Non-Judicial Foreclosure
- Available: Yes
- Right of Redemption: None
- Deficiency Judgments allowed: Yes
The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, the property will be auctioned off to the highest bidder. In Maui Auctions occur in Wailuku at noon on the Courthouse entry. Notices for that day’s auction will be posted on site.
The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A “power of sale” clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the “Power of Sale Foreclosure Guidelines”.
Power of Sale Foreclosure Guidelines
If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as follows:
The notice of intent to foreclose must be published once a week for three (3) successive weeks, the last publication to be not less than fourteen (14) days before the day of sale, in a newspaper having a general circulation in the county in which the mortgaged property is located. Copies of the notice must be mailed or delivered to the mortgagor, the borrower, any prior or junior creditors, the state director of taxation and any other person entitled to receive notice. Additionally, the notice must be posted on the premises not less than twenty-one (21) days before the day of sale. Said notice must state: 1) The date, time, and place of the public sale; 2) The dates and times of the two (2) open houses of the mortgaged property, or if there will not to be any open houses, the public notice shall so state; 3) The unpaid balance of the moneys owed to the mortgagee under the mortgage agreement; 4) A description of the mortgaged property, including the address or description of the location of the mortgaged property, and the tax map key number of the mortgaged property; 5) The name of the mortgagor and the borrower; 6) the name of the lender; 7) The name of any prior or junior creditors having a recorded lien on the mortgaged property before the recording of the notice of default; 8) The name, the address in the State, and the telephone number in the State of the person in the State conducting the public sale; and 9) The terms and conditions of the public sale.
Up until three (3) days before the sale, the borrower may cure the default and stop the sale by paying the lien debt, costs and reasonable attorney’s fees, unless otherwise agreed to between the lender and the borrower.
The sale, which may be held no earlier than fourteen (14) days after the last ad is published, is to be made at auction to the highest bidder.
Any sale, in which notice has been given, may be postponed from time to time by public announcement made by the lender or their representative. Lenders in some cases of pending short sale may extend the auction of a property. There are no rights of redemption in Hawaii. State Law information provided by Foreclosurelaw.org
What can you do
There are many options to workout a plan with your lender to avoid foreclosure. The first step is to contact the lender and let them know your situation or hardship that has prevented you from making your payments. The lender can offer you some of the following options and if the lender recommends a short sale of the property we are experienced short sale agents and can assist you with the process. In NO WAY can we hold up a foreclosure that the lender has ordered. A lenders actions are entirely their own and we can’t guarantee even if they have approved a short sale of the property that they will not continue with foreclosure proceedings.
One of these strategies or perhaps a combination of workout plans to develop your personalized strategy to stop foreclosure can be arranged with your lender:
The Reinstatement amount is total amount that is past due amount including late fees and Attorney costs. This amount will get your Mortgage caught up immediately. Because of your financial circumstances in the past, you may be facing a sizable amount of past-due fees, including back payments, late fees and legal expenses. If you are able to promise a lump-sum to bring your payments to a current status by a specific date, you may be eligible for a Reinstatement. In some instances a lender may waive late fees if full payment is made.
Consider what funds are at your disposal. Many clients have retirement funds, credit cards or insurance policies that can provide the much-needed funds to stay secure in their home. Other clients will seek private loans from family or friends or co-workers.
A Reinstatement will offer you the quickest method for resolving your mortgage foreclosure. With your foreclosure resolved you can enjoy the security of your home.
The most common way of resolving a loan default is to work out a plan (Repayment Plan) which will let you repay part of the delinquency each month, along with you regular monthly installment.
Most borrowers will be eligible for a Repayment Plan for the amount they are delinquent if their financial circumstances have stabilized. Most borrowers have realized a short term financial hardship that has caused them to become delinquent. They are now financially back on their feet and need help getting caught up. If this is your case you can negotiate with your lender to distribute your past-due amount over a set period of time, usually 18-24 months, depending on your circumstances. Your lender will usually ask for 25-50% of the arrearage down and the remainder will be paid out over a period of months. You will need to provide financial information to prove that you are now capable of making this responsibility. Remember, this monthly amount is in addition to your usual mortgage payment.
Loan Modifications or Loan Restructuring
A large number of clients will find themselves using a Loan Modification Plan to stop foreclosure. If you can currently make your regular payment, but you can’t catch up with the past-due amount, you may be able to negotiate with your lender to fold any past-due amounts, including interest and escrow, into the unpaid principal balance. This new amount will be re-amortized over a new period of time. (Putting the new amount on to the back end of the loan)
Or, if you are unable to make payments at this rate, negotiate with your lender to extend your loan for a longer period of time, modifying the loan amount to a more affordable level.
A Loan Modification will change your existing mortgage note and give you a fresh new start in managing your home. Your account will be brought up to date immediately.
New financing will depend on your income, credit report, the value of your home, the amount of your equity and your current financial position. Although it might be difficult to secure new financing with a default on your existing mortgage, it is not impossible.
Do you think you can’t get refinanced because of your bad credit? Most people don’t realize that even if their credit is bad they can still get refinanced. Lenders look at other things like Equity, the reason your credit is bad, how your current financial situation has changed and your last 12 months of credit history. These criteria can out weigh any credit score. The overall credit score sometimes does not give a true picture of your financial stability and it needs to be amended. There are ways to improve your credit by disputing inaccurate items in your report. We can refer you to reputable lenders that will assist you to obtain your report and go over the details with you.
When is the time to refinance? You need to look seriously at refinancing when you need to lower your payment, when you need some cash, when you are in Foreclosure and have no other options and if you have an Adjustable Rate Mortgage and it is nearing maturity. These scenarios are examples of when and why to refinance.
Partial Claim (for FHA Loans only)
If you have an FHA Loan, start discussions with your lender for a Partial Claim. This strategy is only available on FHA loans. Working together with The Department of Housing and Urban Development (HUD), your lender will agree to help you with a one-time payment from the FHA Insurance Fund. You may qualify if your loan is:
At least 4 months but no more than 12 months delinquent
You are able to begin making full mortgage payments
You have resolved the hardship that caused you to fall behind
You may or may not be in Foreclosure
The mortgagor has the long-term financial stability to support the mortgage debt or make the payment
The home owner does not have the ability to repay the past due amount through a special forbearance or modification
The property is your primary residence
If you have filed for Bankruptcy you may still qualify for a partial claim, the Bankruptcy Court must give approval
You will be required to sign a promissory note with HUD and they will place a lien on your property. This HUD loan is interest-free and will bring your account up to date immediately, but it is due when you pay off the loan or when you sell or leave the property.
Here are the terms for the Partial Claim?:
The note will be interest free.
You will not be required to make monthly or periodic payments
The note will be due when the Mortgage is paid off or when the home owner sells the property
There will be no repayment penalty
The Home Owner can apply for a refund in the mortgage insurance premium when the note is paid in full
The note is payable to HUD
You can make partial payments but they must be by cashiers check or certified funds
From the HUD Website:
If a loan has been modified or reinstated using a partial claim within the past three years, re-default risk is presumed to increase following a subsequent partial claim. Prior to allowing a partial claim in this circumstance, the mortgagee must prepare a written justification, and retain a copy along with supporting documents in the claim review file. It is anticipated that this will be a highly unusual occurrence, and that the cause of the second default will be unrelated to the original problem. There is a lifetime limitation of 12 monthly installments of PITI.
The Partial Claim may be combined with another plan or stand alone. In some cases a special forbearance may be combined to give the home owner some additional options.
If you are willing to sell your home or currently have your house on the market, some lenders might agree to put your foreclosure on hold while you attempt to sell your home through traditional real estate methods. You may be able to qualify if your mortgage is at least 2 months delinquent, you are able to sell your home within 3-5 months and your new appraisal shows that the value of your home meets HUD program guidelines. You will be able to pay off your mortgage loan to avoid foreclosure and prevent any damage to your credit rating.
For some clients, selling their home is actually the relief that they need. After reviewing your financial portfolio, it may become obvious that you can no longer afford your home. Many owners have often realized this and tried unsuccessfully for months to sell their home through traditional real estate methods.
But, because of market fluctuations and changes beyond your control, sometimes your home may not sell at the anticipated full price of your loan. A Short Sale allows you to sell your home to a third party at a price which is less than the total amount that you owe.
What is a Short Sale?
A short sale is when a lender accepts a discount on a mortgage to avoid a possible foreclosure auction or bankruptcy. Instead of buying from a seller, you are purchasing the property directly from the lender for a discount. For example: A homeowner, who is facing foreclosure, has an existing first mortgage of $300,000. You write an offer to the lender for $220,000, which is accepted as full payment for the loan. This is a short sale. Why are they willing to take such a discount? Several reasons. First of all, banks do not like excess inventory and bad loans on their books; therefore, if they see an opportunity where they can sell the property without a huge loss, they will do it. Secondly, lenders know they could lose a lot more money if the property goes to auction. There are so many fees involved if the property goes to auction, that they would be better off taking the discount beforehand and be finished with the headache of it all. A lender will cover all costs associated with the sale including anyback property taxes, and HOA dues in arrears. They will not cover personal type liens that have been placed on the home. It is imperative you work with a Realtor who has Short Sale experience. We have a proven track record for successful short sales and will guide you through the process so you have a smooth successful transaction.
Your lender will use the proceeds from the sale to pay off the mortgage and the remaining balance will be negotiated or perhaps even forgiven. This avenue is open for homeowners who are willing to part with their property but keep their credit rating with the least amount of negative reports. As a seller you will be able to accept or reject the terms a lender has offered prior to selling the home.
Deed-in-lieu of Foreclosure
The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principle advantage to the borrower is that it immediately releases him from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than he would in a formal foreclosure.
If you have been unable to make your monthly mortgage payments and have also been unsuccessful trying to sell your home at the market value, this form of foreclosure may be what is necessary to get you back on track. This procedure allows you to transfer your property voluntarily to your lender or Mortgage Company and your debt or deficiency is often forgiven. This will not save your home, but it will help you with your chances of getting another mortgage loan in the future and it will help you avoid the lengthy legal process of foreclosure. Although it is a negative strike on your credit rating, it is less harmful than a mortgage foreclosure.
Typically your Mortgage Company will require that your home has been listed with a Real Estate Agent for at least 30 days and there are no other liens on the property for them to approve you. Some Companies may also require that the property be vacant, an interior appraisal of the property and a minimum of 60 days prior to a Foreclosure sale.
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