Pre-foreclosure
The pre-foreclosure period is essentially the time when the lender notifies the home owner that they are in default of their loan and that foreclosure proceedings will begin. As already mentioned, in a non-judicial foreclosure, the lender must provide a notice of intent to foreclose.
Alternatively, with a judicial foreclosure, the lender must ask the court to rule that the borrower is in default. The appropriate documents are filed and the lender provides the borrower with notice of the court filing. Otherwise, if the lender is unable to establish contact with the borrower they may publish a notice of the court filings in a newspaper circulated in Maui.
From the time this notice is sent or published, the borrower has 20 days to respond. After 20 days they are automatically found to be in default and the lender is given the power to proceed with the sale of the property. If the borrower responds promptly to the notice, the court will hear both parties and determine if the borrower is in default. Once default has been established, the borrower may appeal the decision within 30 days.
Notice of Sale and Auction
In non-judicial foreclosures, the lender follows the agreed upon guidelines or the guidelines regarding power of sale as outlined above. If the borrower is unable to repay the debt, the property goes to auction and is sold to the highest bidder. From time to time the auctions are rescheduled at the convenience of the lender but this requires that notices be sent and published again.
In judicial foreclosures, the court appoints a commissioner to sell the property, also at an auction. A notice of sale is published by the commissioner in a local Maui newspaper indicating the date and time of the auction and any associated open houses. Anybody is free to bid on the property but the winning bidder must pay 10 per cent of the bid by cash or cashier’s check. Still, this does not ensure that the highest bidder will receive the property as continued bidding is allowed at a confirmation hearing. In fact, the sale is not final until confirmed by the court as a fair price and anybody may reopen the bidding before this point by offering 5 per cent more than the auction price.
Finally, while some states allow a property owner to redeem their property by paying off the outstanding debt, Hawaii does not offer any rights of redemption to borrowers after the court has confirmed the sale.
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Overview
The foreclosure process in Maui and Hawaii is not distinct from other states but there are some challenges that buyers face when they attempt to purchase this type of property. Understanding the Maui foreclosure process will not only help you to find an ideal property, it will also help you to prepare for the unique demands that are associated with foreclosures. Whether you are a mortgagor or a home buyer, it is beneficial to understand the stages of foreclosure and your rights therein. In addition, it’s important to understand that the current homeowner also has certain rights, and taking some time to learn about the process will only make it easier to manipulate.
Types of Foreclosure in Maui
The two main types of foreclosure in Hawaii are judicial foreclosure and non-judicial foreclosure. While both methods are commonly used, they are slightly different.
Judicial Foreclosure
Judicial foreclosure involves a lawsuit wherein the lender asks for a court order to foreclose. This type of foreclosure is used whenever there is no power of sale in the mortgage or deed of trust. When the court orders a foreclosure, the lender auctions the property to the highest bidder.
Non-judicial Foreclosure
With a non-judicial foreclosure, a power of sale clause is written into the mortgage or deed of trust. Power of sale clauses are essentially an agreement where the borrower has authorized the lender in advance to sell the property and pay off the remaining balance on a loan in default. Whenever a power of sale clause exists, the lender has the power to sell the property. Either the lender or their representative, the trustee, must follow specific power of sale foreclosure guidelines.
What are the Power of Sale Foreclosure Guidelines
As a home owner, you would probably be reluctant to agree to power of sale if you thought the bank could up and sell your house whenever they felt like it. In fact, where there is a power of sale agreement, the lender must follow specific guidelines. Sometimes the power of sale agreement includes the details of sale including the time, place and terms under which a sale can take place. However, when these details have not been provided, the following guidelines hold true.
First, the lender must publish a notice of intent to foreclose once weekly for a minimum of three consecutive weeks. The last announcement of notice of intent to foreclose must be published at least 14 days before the day of sale and it must be published in a newspaper with circulation in Maui.
This notice is copied and delivered to all interested parties including the borrower, prior and junior creditors, and the state director of taxation. Also, this notice must be posted on the property at least 21 days before the sale of the property.
This notice of intent of foreclosure must also include specific details. The date, time and place of the sale must be written in the notice along with the dates and times of two open houses for the relevant property. If there are no planned open houses, the notice must reflect this fact. In addition, the notice includes the unpaid balance on the mortgage, a description of the property including the address, the name of the borrower, the name of the lender, and the names of any prior or junior creditors with a lien on the property. Finally, the notice of intent must also include the name, address, and telephone number of the State representative conducting the sale as well as the terms and conditions of the sale.
The power of sale foreclosure guidelines also ensure that the borrower may avoid default and stop the sale of the property by paying the debt and associated costs (including lawyer fees) right up to 3 days before the sale.
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