The other day I ran into a friend who lives in a house that has been in foreclosure. I asked him what is happening. He said they had an auction scheduled. Then it was delayed and rescheduled. When it didn’t happen, he found out that the foreclosure was cancelled due to the new Hawaii Foreclosure Law. He had heard about the law and figured that the seller of the property would have to go through mediation.
Well that’s not quite true. We are finding that the banks want to hold the cards. We have always had 2 types of Foreclosure in Hawaii:
1. Non-judicial or Power of Sale – used to take the banks about 6 months to foreclose. Pretty simple process. Used to be about 85% of foreclosure proceedings.
2. Judicial – takes about 11 months. Was about 15% of foreclosures and usually was used on people who had multiple assets (properties and other assets) and the judge had to decide how to most fairly divide the assets.
We still have 2 methods. But now, if the property is owner-occupied and in the non-judicial process and the owner requests mediation, the banks must go through a 4+ month mediation process (still undefined by the state) to proceed with the process. 4 months of mediation + 6 months of foreclosure process + waiting for state to define mediation process = LONG TIME. And at the end, there is no guarantee that the bank will be legally able to foreclose.
Remember: BANKS WANT TO HOLD THE CARDS. They want control. They want assurance. They want to ensure the asset will get off their books. To date the big players (Fannie Mae and Freddie Mac) have cancelled their non-judicial foreclosures AND are in the process of moving them to the judicial process. We don’t know for sure, but I suspect that the number of non-judicial foreclosures will go to close to zero. IMHO, that would have been a much easier law to write if someone had thought through the consequences. But local politicians and support groups were totally committed to protecting homeowners in foreclosure and seemed to forget that the banks have an alternative.
So when he asked, how much longer can I live in my house? I said that it depends on the bank. The big banks have lots of foreclosures to transition and that will take time. Once the lawsuit has been filed, the judge controls the process. Shortest amount of time is about 7 months but often takes longer. Complaints are served, motion is filed for summary judgement, hearing occurs, decree the foreclosure, publish the notice, hold open houses, have the auction, file motion to confirm sale, hearing and possible reopening of bids, order confirming sale and closing period. Typically this will take over a year.
When and/or if tenants will be asked to vacate is anyone’s guess. Many banks LIKE having tenants in the property who are caring for it and paying utilities. Tenants should make sure to keep their leases current as their are laws protecting tenants that keep the banks from kicking them out at a moment’s notice.
So everyone waits. If you are a tenant in a property in foreclosure, keep informed but don’t panic! If you are a homeowner, keep informed but don’t panic. The process takes time and the banks take their time. Be persistent and don’t stick your head in the sand!
If you have a property that you no longer want and you don’t want to wait and go through foreclosure, consider a short sale. I do think this law will increase the number of short sales and banks will be more inclined to sell the property.
Talk to your favorite realtor. If you don’t have one, consider calling Kathy at 344-0469!