Hawaii Legislative Update

Hawaii Legislative Update

The Hawaii legislature recently amended its laws governing mortgage servicers, effective May 28, 2015.

 

HAWAII SENATE BILL 1093

 

Loss Mitigation

Mortgage servicers must make reasonable and good faith efforts to engage in appropriate loss mitigation options, including loan modifications, to assist borrowers to avoid foreclosure. Mortgage servicers must provide timely and appropriate responses to borrower inquiries and complaints regarding available loss mitigation options and ensure that borrowers are not required to submit multiple copies of required documents during consideration for any loss mitigation option.  In the event of a delinquency or other act of default on the part of the borrower, or whenever a borrower who is at imminent risk of default contacts the mortgage servicer with respect to a loan modification or other loss mitigation option, the mortgage servicer must:

  • Inform the borrower of the facts concerning the loan, the nature and extent of the delinquency or default, the mortgage servicer’s loss mitigation option protocols, and the loss mitigation options and services offered by the mortgage servicer; and
  • Pursue loss mitigation options with the borrower, including a loan modification whenever possible, and, if the borrower replies, negotiate with the borrower, subject to the mortgage servicer’s lawful duties and obligations under the mortgage servicing contract, if any, to attempt a resolution or workout of the delinquency or to prevent the borrower’s default.

 

Mortgage servicers must consider a loan modification as an alternative to foreclosure when:

  • The borrower demonstrates that the borrower has experienced a financial hardship and is either unable to maintain the payment at the current amount required under the mortgage loan or is unable to make up the delinquent payments; and
  • The net present value of the income stream expected of the modified loan is greater than the net present value of the income stream that is expected to be recovered through the disposition of the property through a foreclosure sale.

 

Mortgage servicers that are participating in the Home Affordable Modification Program (“HAMP”) must offer loan modifications in compliance with HAMP guidance and directives, including using reasonable efforts to remove prohibitions or impediments to the mortgage servicer’s authority, and obtain third party consents and waivers that are required by contract or law to constitute a loan modification under HAMP.

Unless a longer time is permitted under the guidance or directives implementing HAMP, within 10 business days of receiving a request from a borrower or the borrower’s authorized representative for one or more loss mitigation options, the mortgage servicer must transmit a written acknowledgment of the request to the borrower and, if applicable, to the authorized representative.  The acknowledgment must identify with specificity any information needed from the borrower for the mortgage servicer to review the borrower’s loss mitigation option request.  The acknowledgment must also include an explanation of the loss mitigation option process, including the following, as appropriate:

  • The information that the borrower may be asked to provide and third party approvals that may be required for the mortgage servicer to evaluate and complete the request for a loan modification or other loss mitigation option;
  • The average length of time for a decision to be made regarding a loan modification or other loss mitigation option; and
  • A notification of the actions the mortgage servicer, lender, or owner of the mortgage may take during the loss mitigation option process, such as whether the borrower may continue to receive collection letters or foreclosure notices, whether the foreclosure process will continue, or whether and to what extent collection and foreclosure will be stayed.

 

Within 30 days of receiving all required documentation from the borrower and third parties, unless a shorter time is required under applicable state or federal rules or regulations pertaining to mortgage servicing or under guidance or directives implementing HAMP, a mortgage servicer must complete its evaluation of the borrower’s eligibility for a loan modification or any other loss mitigation option requested by the borrower and advise the borrower, and if applicable, the borrower’s authorized representative, in writing of the mortgage servicer’s determination.

 

If the mortgage servicer approves the borrower for a loan modification, including a trial loan modification, or other loss mitigation option, the written notice must provide the borrower with clear and understandable written information explaining the material terms, costs, and risks of the loss mitigation option offered.

 

If the mortgage servicer determines that the borrower cannot be approved for a loan modification or other requested loss mitigation option, the written notice must state with specificity:

  • The reasons for the determination;
  • Procedures, deadlines, and contact information for a person at the mortgage servicer for reconsideration, dispute, or appeal of the determination; and
  • Any other loss mitigation option for which the borrower may be considered.

 

In addition, the written notice must include the following statement, in boldface type and in print no smaller than the largest print used elsewhere in the main body of the written notice:“If you believe your loss mitigation option request has been wrongly denied, you may file a complaint with the State Division of Financial Institutions at [insert current division telephone number] or [insert current Division website address for consumer complaints]”.

A mortgage servicer must take reasonable steps to ensure that the mortgage servicer’s staff is aware of programs designed to assist borrowers to avoid foreclosure or resolve delinquency.  The mortgage servicer must make available to borrowers who are at least 60 days delinquent or who the mortgage servicer has reason to believe are experiencing a financial hardship and are in imminent risk of default, a list of government approved not-for-profit housing counselors in the borrower’s geographic area, as listed on the website of the United States Department of Housing and Urban Development.

 

A mortgage servicer must maintain and make available to borrowers and borrowers’ authorized representatives current contact information to communicate and negotiate with the mortgage servicer’s designated loss mitigation option staff who are authorized to discuss and negotiate loss mitigation options.  The contact information must include all toll-free telephone numbers for direct communication with a loss mitigation option staff person, fax numbers for receipt of documents, and electronic mail addresses.

 

The mortgage servicer must establish and maintain a process through which borrowers may bring disagreements to a supervisory level where a separate review of the borrower’s eligibility or qualification for a loss mitigation option can be performed.  A mortgage servicer must not require a borrower to waive legal claims and defenses as a condition of a loan modification, forbearance, or repayment plan.

 

Delay caused by the mortgage servicer must not be counted in calculating the passage of time where a HAMP, proprietary, or other loan modification program specifies:

  • A time limit for a borrower action or response, including appealing or disputing a denial of a request for a loss mitigation option or providing documents;
  • A time after which a document is considered stale or too old to use; or
  • A time during which a mortgage servicer is barred from taking certain adverse action to the borrower, including taking steps toward foreclosure or referring the borrower’s account to foreclosure.

 

Examples of delay caused by the mortgage servicer include the mortgage servicer’s failure to timely send a communication or request to the borrower, duplicative or piecemeal document requests delaying completion of a file, and failure to identify additional documents needed to complete a borrower’s loan modification application.  The mortgage servicer must reasonably extend the applicable period and promptly inform the borrower in writing of the specific extension period.

Nothing will be construed to prevent a mortgage servicer from offering or accepting alternative loss mitigation options, including other modification programs offered by the mortgage servicer, a short sale, a deed-in-lieu of foreclosure, or forbearance, if the borrower requests such an alternative, is not eligible for or does not qualify for a loan modification under HAMP, or rejects the mortgage servicer’s loss mitigation option proposal.

 

A mortgage servicer must avoid taking steps to foreclose or to refer a borrower to foreclosure if the borrower has requested and is being considered for a loss mitigation option or if the borrower is in a trial or permanent loan modification and is not more than 30 days in default under the loan modification agreement.

 

A mortgage servicer must ensure that the mortgage servicer and the mortgage servicer’s attorneys and agents comply with the requirements of Hawaii foreclosure law.

 

A mortgage servicer must establish and maintain a system for servicing delinquent loans.

 

Definitions

“Bankruptcy Code” refers to the United States Bankruptcy Code.

 

“Business day” means Monday through Friday, excluding state holidays.

 

“Consumer Financial Protection Bureau” means the agency of the United States government created pursuant to the Dodd-Frank Act.

 

“Division of Financial Institutions” or “Division” means the Division of Financial Institutions of the Department of Commerce and Consumer Affairs.

 

“Home Affordable Modification Program” or “HAMP” means the program established by the United States Department of the Treasury, pursuant to the Emergency Economic Stabilization Act of 2008.  HAMP is a component of the Making Home Affordable Program, also known as the MHA Program.

 

“Loan modification” means a temporary or permanent change to the terms of a borrower’s existing mortgage loan agreement, mutually agreed to between a borrower and a lender.

 

“Loss mitigation option” means an alternative to foreclosure, including loan modification, reinstatement, forbearance, deed-in-lieu, and short sale.

 

“Principal office” means the office location where the company’s core executive and administrative functions are primarily carried out.

 

“Received” means, in the context of the date of payment, the date that the payment instrument or other means of payment reaches the mortgage servicer, in accordance with federal regulations.

 

“Servicing” means the business activity of a mortgage servicer.

 

A “borrower” may also be referred to as a “consumer.”

 

A “mortgage servicer” now includes the person who collects and processes any scheduled periodic payments from a borrower pursuant to the terms of any residential mortgage loan.

 

License Fees, Renewals, Notices, Voluntary Surrender of License, Bonds

The Commissioner of the Department of Commerce and Consumer Affairs (the “Commissioner”) may approve a license or license renewal application upon receipt of a complete application; provided that an applicant for licensure files an application on a form prescribed by the Nationwide Mortgage Licensing System (“NMLS”) or by the Commissioner and pays an application fee of $675.

 

All license and renewal fees, including fees paid in connection with an application, will be nonrefundable.  License and renewal fees paid will not be prorated if the license is surrendered, revoked, or suspended prior to the expiration of the period for which it was approved.

 

A mortgage servicer license must not be transferable or assignable.  A licensee must not use any name other than the licensee’s legal name or a fictitious name approved by the Commissioner; provided that a licensee must not use the licensee’s legal name if the Commissioner disapproves of the use of the licensee’s legal name.

 

A mortgage servicer licensee may change the licensee’s name or the address of any of the licensee’s offices specified on the most recent filing with NMLS if:

  • The licensee files the change with NMLS and, in the case of the principal office or a branch office, provides directly to the Commissioner a bond rider or endorsement, or addendum, as applicable, to any bond on file with the Commissioner that reflects the new name or address of the principal office or branch office; and
  • The Commissioner approves the change in writing.

 

The mortgage servicer licensee must file with NMLS or, if the information cannot be filed with NMLS, directly notify the Commissioner in writing no later than 5 business days after the licensee has reason to know of the occurrence of any of the following events:

  • Filing for bankruptcy or the consummation of a corporate restructuring of the licensee;
  • Filing of a criminal indictment against the licensee or receiving notification of the filing of any criminal felony indictment or felony conviction of any of the licensee’s officers, directors, employees, managers, agents, members, partners, or shareholders owning 10% or more of the outstanding stock of the licensee;
  • Receiving notification of the initiation of license denial, cease and desist, suspension or revocation procedures, or other formal or informal regulatory action by any governmental agency against the licensee and the reasons for the action;
  •  Receiving notification of the initiation of any action against the licensee by the state attorney general or the attorney general of any other state and the reasons for the action;
  • Suspension or termination of the licensee’s status as an approved servicer by the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, or Government National Mortgage Association;
  • Receiving notification that certain servicing rights of the licensee will be rescinded or canceled, and the reasons provided therefore;
  • Receiving notification of filing for bankruptcy of any of the licensee’s officers, directors, members, managers, agents, partners, or shareholders owning 10% or more of the outstanding stock of the licensee; or
  • Receiving notification of the initiation of a class action lawsuit on behalf of consumers against the licensee that is related to the operation of the licensed business.

 

Before a mortgage servicer’s license becomes effective, the applicant or licensee must file with the Commissioner a surety bond written by a surety authorized to write surety bonds in Hawaii, covering the applicant or licensee’s principal office and any branch office from which the applicant or licensee acts as a mortgage servicer, in a penal sum of $100,000.  A mortgage servicer licensee must not act as a mortgage servicer in Hawaii without maintaining the required surety bond.

 

The surety bond must be:

  • In a form approved by the Hawaii attorney general; and
  • Conditioned upon the mortgage servicer licensee faithfully performing any and all written agreements or commitments with or for the benefit of borrowers and lenders, truly and faithfully accounting for all funds received from a borrower or lender in the person’s capacity as a mortgage servicer, and conducting the mortgage business consistent with the mortgage servicer laws to perform any written agreements or commitments.

 

The Commissioner, or any person claiming to have sustained damage by reason of the failure of the mortgage servicer to comply with the mortgage servicer’s bond, or by the wrongful conversion of funds paid by a borrower to the mortgage servicer, may bring an action on the bond to recover the damage therefrom.  The Commissioner may deposit with a court of competent jurisdiction all or any part of the sum of the bond.  The proceeds of the bond, even if mixed with other assets of the principal, will be deemed by operation of law to be held in trust for the benefit of claimants against the principal in the event of bankruptcy of the principal and will be immune from attachment by lenders and judgment creditors.  The surety bond will run concurrently with the period of the license for the principal office of the mortgage servicer and the aggregate liability under the bond will not exceed the penal sum of the bond.  The principal must notify the Commissioner of the commencement of an action on the bond.  When an action is commenced on a principal’s bond, the Commissioner may require the filing of a new bond and immediately on recovery on any action on the bond, the principal must file a new bond.

 

A surety may cancel the surety bond at any time by a written notice to the principal stating the date cancellation will take effect.  The notice must be sent by certified mail to the principal at least 30 days prior to the date of cancellation.  A surety bond will not be canceled unless the surety notifies the Commissioner, in writing, not less than 30 days prior to the effective date of cancellation.  After receipt of the notification from the surety, the Commissioner will give written notice to the principal of the date the cancellation will take effect.  The Commissioner will automatically suspend the license of a mortgage servicer on that date.  Automatic suspension or inactivation will not occur if, prior to the date that the bond cancellation will take effect:

  • The principal submits a letter of reinstatement of the bond or a new bond; or
  • The mortgage servicer licensee has ceased business in Hawaii and has surrendered all licenses.

 

Automatic suspension of a mortgage servicer license by the Commissioner, and subsequent orders and proceedings, if any, must be conducted pursuant to the mortgage servicer laws.

 

If the Commissioner finds that the financial condition of a mortgage servicer so requires, as evidenced by the reduction of tangible net worth, financial losses, or potential losses as a result of a violation of law or rule, the Commissioner may require one or more additional bonds that meet the above requirements.  The licensee must file any additional bonds no later than 10 days after receipt of the Commissioner’s written notice of the requirement for one or more additional bonds.  A mortgage servicer or mortgage lender licensee must file, as the Commissioner may require, any bond rider or endorsement or addendum, as applicable, to any bond on file with the Commissioner to reflect any changes necessary to maintain the surety bond.

 

“Principal” means, in the context of a surety bond requirement, the primary party who will perform the contractual obligation.

Additional Duties of a Mortgage Servicer

A mortgage servicer licensed or acting under the mortgage servicer laws has a duty of good faith and fair dealing in its communications, transactions, and course of dealings with each borrower in connection with the servicing of the borrower’s mortgage loan.

 

In addition to any other duties imposed by law, a mortgage servicer must now follow reasonable and lawful instructions from the borrower consistent with the underlying note and mortgage.

 

A mortgage servicer must comply with the following requirements concerning handling and processing of mortgage payments:

  • Except as with regard to late payments, all payments received by a mortgage servicer on a mortgage loan at the address where the borrower has been instructed in writing to make payments must be accepted and credited, or treated as credited, on the business day received, to the extent that the borrower has provided sufficient information to credit the account.  For all mortgage loans originated after July 1, 2015, except where inconsistent with federal law or regulation, payments must be credited to the principal and interest due on the home loan before crediting the payments to taxes, insurance, or fees;
  • Methods of payment and payment instruments must be reasonable;
  • If a mortgage servicer specifies in writing requirements for the borrower to follow in making payments, but accepts a payment that does not conform to the requirements, the mortgage servicer must credit the payment as soon as commercially practicable, but in no event later than 3 business days after receipt;
  • Late payments of principal and interest must be credited before any late charge is collected; and
  • If the mortgage servicer receives any payment on a mortgage loan and suspenses the payment, does not credit the payment, or does not treat the payment in accordance with the above requirements, the mortgage servicer, within 10 days of receipt, must send the borrower notice by mail at the borrower’s last known address indicating the reason the payment was suspensed or was not credited or treated as credited to the account, and specifying any actions by the borrower necessary to make the loan current.

 

A mortgage servicer must comply with the following requirements concerning escrows for the payment of taxes and insurance:

  • Any mortgage servicer who receives funds from a borrower to be held in escrow for payment of taxes and insurance premiums must pay the taxes and insurance premiums of the borrower to the appropriate taxing authority and insurance company in the amount required and at the time the taxes and insurance premiums are due, in accordance with the requirements of the Real Estate Settlement Procedures Act and Regulation X (collectively “RESPA”) and will be liable to the borrower as provided therein;
  • If the amount held in the escrow account as of the date the taxes and insurance premiums are due is insufficient to pay the taxes and insurance premiums, the mortgage servicer must pay the taxes and insurance premiums from the mortgage servicer’s own funds; provided that the borrower has paid to the mortgage servicer the amounts required to be paid into the escrow account, as determined by the mortgage servicer, for all amounts scheduled to be paid to the mortgage servicer prior to the date the taxes and insurance premiums are due; and
  • Where an escrow account has been established and a mortgage servicer advances funds in paying a disbursement that is not the result of a borrower’s payment default under the underlying mortgage document, the mortgage servicer must conduct an escrow account analysis to determine the reasons for and extent of the deficiency and must provide a written explanation to the borrower before seeking repayment of the funds from the borrower.  The mortgage servicer must then give the borrower the option of paying the shortage over a period of not less than one year.  The mortgage servicer must not charge or collect interest on any shortage during the payment period.

 

Any mortgage servicer who violates any provision with regard to escrow will be liable to the borrower: for any penalties, interest, or other charges levied by the taxing authority or insurance company as a result of any violation; any actual damages suffered by the borrower as a result of the violation, including any amount that would have been paid by an insurer for a casualty or liability claim had the insurance policy not been canceled for nonpayment by the mortgage servicer; and, in the case of any successful action to enforce the foregoing liability, the costs of the action together with reasonable attorney’s fees as determined by the court.

 

A mortgage servicer must comply with the following requirements concerning statements of account:

  • At least once annually, within 30 days of the end of the computation year, a mortgage servicer must deliver to the borrower a plain language statement of the borrower’s account showing the unpaid principal balance of the mortgage loan at the end of the immediately preceding 12-month period, the interest paid during that period, and the amounts deposited into escrow and disbursed from escrow during the period.  The annual escrow statement may be provided separately from the annual statement showing the unpaid principal and interest paid.  The format and content of the annual escrow statement must comply with RESPA;
  • A mortgage servicer must promptly provide a borrower with an accurate accounting in plain English of the debt owed when requested by the borrower or borrower’s authorized representative.  Within 30 days of receipt of a request from the borrower or the borrower’s authorized representative, a mortgage servicer must deliver to the borrower a payment history for the last 36 months of the borrower’s account, unless a different period is requested, showing the date and amount of all payments made or credited to the account and the total unpaid balance.  The mortgage servicer will have 60 days to deliver a payment history where the request is for a period longer than the last 36-months;
  • A fee must not be charged to the borrower for the annual escrow statement or for one payment history furnished to a borrower in a 12-month period; and
  • A shortage, surplus, or deficiency in the escrow account must be handled in accordance with RESPA.  Alternatively, with the consent of the borrower, an excess balance may be applied to the principal balance.

 

Except where inconsistent with the automatic stay provisions of the Bankruptcy Code with respect to a borrower in a pending bankruptcy proceeding, a mortgage servicer must send a payment reminder notice to a borrower at the borrower’s last known address no later than 17 days after the payment becomes due and remains unpaid; provided that a mortgage servicer is not required to send a separate payment reminder notice for each consecutive month in which the mortgage loan continues to remain unpaid.

A mortgage servicer must provide a clear, understandable, and accurate statement of the total amount that is required to pay off the mortgage loan as of a specified date, within a reasonable time, but in any event no more than 5 business days after receipt of a request from the borrower or borrower’s authorized representative.  A borrower must not be charged a fee for being informed or receiving a payoff statement or for being provided with a release upon full prepayment; provided that a mortgage servicer may charge a reasonable fee for providing a payoff statement after five or more requests in any calendar year.

A mortgage servicer must comply with the following requirements concerning handling consumer complaints and inquiries:

  • A mortgage servicer must follow the requirements of RESPA, including requests for error and information resolution procedures;
  • In addition to the requirements of RESPA, a mortgage servicer must establish and maintain a system to respond to and resolve borrower inquiries and complaints in a prompt and appropriate manner;
  • Within 10 business days of receiving a request in writing from a borrower or the borrower’s authorized representative, a mortgage servicer must provide the borrower with the name, address, phone number, or electronic mail address, if available, and other relevant contact information for the owner or assignee of the mortgage loan; and
  • In addition to the information required to be disclosed above, a mortgage servicer may, at its option, provide any other information regarding the servicing of the loan that the mortgage servicer believes would be helpful to a borrower; provided that any additional information does not contradict or obscure the required disclosures.

 

A mortgage must comply with the following requirements concerning fees:

  • A mortgage servicer must maintain and keep current a schedule of standard or common fees that the mortgage servicer charges borrowers for the servicer’s servicing-related activities, such as nonsufficient fund fees.  The schedule must identify each fee, provide a plain English explanation of the fee, and state the amount of the fee or range of amounts.  If there is no standard fee, the schedule must explain how the fee is calculated or determined.  A mortgage servicer must make its schedule available on the mortgage servicer’s website and to the borrower or the borrower’s authorized representative upon request;
  • A mortgage servicer may only collect a fee if the fee is for services actually rendered and one of the following conditions is met:
    • The fee is clearly and conspicuously disclosed by the loan instruments and not prohibited by law;
    • The fee is expressly permitted by law and not prohibited by the loan instruments; or
    • The fee is not prohibited by law or the loan instruments and is a reasonable fee for a specific service requested by the borrower that is assessed only after clear and conspicuous disclosure of the fee is provided to the borrower and the borrower expressly consents to pay the fee in exchange for the services;
  • In addition to the limitations above, attorneys’ fees charged in connection with a foreclosure action must not exceed reasonable and customary fees for the work.  If a foreclosure action or proceeding is terminated prior to the public sale because of a loss mitigation option, a reinstatement, or payment in full, the borrower will only be liable for reasonable and customary fees for work actually performed; and
  • A mortgage servicer must not impose any late fee or delinquency charge when the only delinquency is attributable to late fees or delinquency charges assessed on an earlier payment and the payment is otherwise a full payment for the applicable period and is paid on its due date or within any applicable grace period.  Late charges must not be:
    • Based on an amount greater than the past due amount;
    • Collected from the escrow account or from escrow surplus without the approval of the borrower; or
    • Deducted from any regular payment.

 

Each mortgage servicer licensee must maintain adequate records of each residential mortgage loan transaction at the office named in the mortgage servicer license.

 

 

Upon assignment of servicing rights on a residential mortgage loan, the mortgage servicer must disclose to the borrower:

  • Any notice required by RESPA; and
  • A schedule of the ranges and categories of the mortgage servicer’s costs and fees for the servicer’s  servicing-related activities, which must comply with state and federal law and, if the disclosure is made by a mortgage servicer licensee, must not exceed those reported to the Commissioner.

 

Where the mortgage servicer laws require compliance with RESPA, the required compliance applies to any person subject to such laws, whether or not RESPA applies to that person or transaction.

 

Prohibited Activities

It is a violation of the mortgage servicer laws for any mortgage servicer in the course of any mortgage loan transaction, or in connection with any mortgage servicing business, to:

  • Misrepresent or conceal material facts, make false promises, or pursue a course of misrepresentation through its agents or otherwise;
  • Engage in any transaction, practice, or course of business that is not in good faith, does not constitute fair dealing, or that constitutes fraud upon any person, in connection with the servicing, purchase, or sale of any mortgage loan;
  • Obtain property by fraud or misrepresentation;
  • Misapply residential mortgage loan payments;
  • Misapply payments to escrow accounts;
  • Require any amount of funds to be remitted by means more costly to the borrower than a bank or certified check or attorney’s check from an attorney’s account to be paid by the borrower;
  • Fail to timely pay taxes or insurance premiums of the borrower, if and as required;
  • Fail to follow procedures concerning escrows for the payment of taxes and insurance as required;
  • Place hazard, homeowner’s, or flood insurance on the mortgaged property when the mortgage servicer knows or has reason to know that the borrower has an effective policy for such insurance;
  • Fail to provide written notice to a borrower upon taking action to place hazard, homeowner’s, or flood insurance on the mortgaged property, including a clear and conspicuous statement of the procedures by which the borrower may demonstrate that the borrower has the required insurance coverage and by which the mortgage servicer will terminate the insurance coverage placed by the mortgage servicer and refund or cancel any insurance premiums and related fees paid by or charged to the borrower;
  • Place hazard, homeowner’s, or flood insurance on a mortgaged property, or require a borrower to obtain or maintain such insurance, in excess of the replacement cost of the improvements;
  • Fail to provide to the borrower a refund of unearned premiums paid by a borrower or charged to the borrower for hazard, homeowner’s, or flood insurance placed by a lender or the mortgage servicer if the borrower provides reasonable proof that the borrower has obtained coverage such that the forced placement insurance is no longer necessary and the property is insured.  If the borrower provides reasonable proof that no lapse in coverage occurred such that the forced placement was not necessary, the mortgage servicer must promptly refund the entire premium;
  • Collect private mortgage insurance beyond the date for which private mortgage insurance is required;
  • Collect, charge, attempt to collect or charge, or use or propose any agreement purporting to collect or charge, any fee not in compliance with, or prohibited by, the mortgage servicer laws;
  • Fail to provide a timely and accurate statement of account;
  • Fail to handle a consumer complaint or inquiry in accordance with the mortgage servicer laws;
  • Provide inaccurate information to a credit bureau, thereby harming a borrower’s creditworthiness;
  • Fail to report both the favorable and unfavorable payment history of the borrower to a nationally recognized consumer credit bureau at least annually if the mortgage servicer regularly reports information to a credit bureau;
  • Fail to provide or submit a timely, complete, and accurate notice, acknowledgment, statement, information, explanation, reminder, communication, or other information to any person as required;
  • Fail to comply with loss mitigation option requirements;
  • Fail to offer loan modifications in compliance with HAMP guidelines or directives, if the mortgage servicer is participating in HAMP;
  • Fail to comply with the requirements of Hawaii foreclosure laws and ensure that the mortgage servicer’s attorneys and agents comply with such laws;
  • Refuse to communicate with an authorized representative of the borrower who provides a written authorization signed by the borrower; provided that the mortgage servicer may adopt procedures reasonably related to verifying that the representative is in fact authorized to act on behalf of the borrower;
  • Fail to provide a timely payoff statement;
  • Fail to issue a release of mortgage;
  • Conduct any business for which a license is required without holding a valid license as required or assist or aid and abet any person in the conduct of business without a valid license as required;
  • Engage in the business of mortgage servicing without complying with bonding requirements;
  • Transfer or assign its mortgage servicer license;
  • Change its name or office address without complying with the requirements of the mortgage servicer laws;
  • Fail to maintain adequate records of each residential mortgage loan transaction at the office named in the mortgage servicer license; or
  • Make any false statement or omission of a material fact, in connection with any information or reports filed with a governmental agency or NMLS or in connection with any investigation conducted by the Commissioner or another governmental agency.

It will be a violation of the mortgage servicer laws for any mortgage servicer in the course of any mortgage loan transaction to fail to comply with any:

  • Applicable federal law or regulation related to mortgage servicing, including but not limited to:
    • RESPA, including the mortgage loan servicing transfer, escrow account administration, and borrower request for information and error resolution requirements;
    • The Truth in Lending Act and Regulation Z;
    • Rules and regulations issued or administered by the Consumer Financial Protection Bureau, and interpretations of the rules by the Consumer Financial Protection Bureau through interpretive rules, bulletins, statements of policy, and statements of guidance;
  • Agreement with a governmental entity, agency, agent, or regulator, or state attorney general that applies to the mortgage servicer, including:
    • A servicer participation agreement or other agreement to participate in HAMP or other MHA program;
    • HAMP rules, including guidance by the MHA program handbooks, and supplemental directives; or
    • The National Mortgage Settlement reached in 2012 by the federal government and 49 states, with the 5 largest servicers in the U.S., to address mortgage servicing, foreclosure, and bankruptcy abuses;
  • Order of a court or government regulator that applies to the mortgage servicer;
  • Provision of the mortgage servicer laws or any rule adopted pursuant to such laws; or
  • Federal or state law, rule, or regulation.

 

A mortgage servicer will not be in violation of the mortgage servicer laws if performance of a requirement under such laws would constitute a violation of federal law, rules, or regulations.