Texas Judicial and Hawaii Legislative Update

Texas Judicial and Hawaii Legislative Update

On June 26, 2013, the U.S. Court of Appeals for the Fifth Circuit decided a case which was appealed from the Southern District Court of Texas.  The Hawaii legislature amended the Hawaii SAFE Act (the “Act”) and its laws governing foreclosures and the postponement or cancellation of foreclosure sales.  The Act now applies to mortgage servicer companies.  Senate Bill 1069 and Senate Bill 970 are effective June 26, 2013.  Hawaii House Bill 25 amends Hawaii’s foreclosure laws, effective July 1, 2013.

Martins v. BAC Home Loans Servicing (2013 U.S. App. LEXIS 13108)

 

 

In Martins v. BAC Home Loans Servicing, which was appealed from the U.S. District Court for the Southern District of Texas, a borrower refinanced a mortgage and named Mortgage Electronic Registration Systems (“MERS”) as the beneficiary and nominee.  The borrower stopped making payments and MERS assigned the mortgage to the servicer, who pursued foreclosure.

 

 

The borrower challenged the foreclosure, arguing that the servicer cannot foreclose because it was assigned the mortgage and not the note, and must possess both the note and mortgage assignment to foreclose.  The borrower contended that a transfer of a deed of trust through MERS “splits” the note from the deed of trust, rendering both null.  The Fifth Circuit disagreed with the borrower and ruled that servicers have a right to foreclose without possession of the note as long as the mortgage was properly assigned.

 

 

Further, servicers are not required to produce the original note when trying to foreclose as long as the servicer files a photocopy of the promissory note along with a supporting affidavit.

HAWAII SENATE BILL 1069

 

 

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

 

 

“Mortgage call report” means a single report of condition that each licensee may be required to submit to the Nationwide Mortgage Licensing System and Registry (“NMLS”).

 

 

“NMLS” means a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the state licensing and registration of state-licensed loan originators and other financial services providers, or any system provided by the Consumer Financial Protection Bureau.

 

 

“Principal place of business” means a mortgage loan originator company’s main office location unless the branch office is specified as the principal place of business by a mortgage loan originator company headquartered out-of-state and identified by any means to borrowers as a location at which the licensee holds itself out as a mortgage loan originator company.

 

 

An “exempt registered mortgage loan originator” no longer includes a subsidiary that is owned and controlled by an insured depository institution and regulated by a federal banking agency.

 

 

A licensee under the Act now includes a mortgage servicer company, unless exempt from licensing under the mortgage servicers laws.  A licensee under the Act does not include a nonprofit organization.

 

 

A “mortgage loan originator” now includes any individual who offers or negotiates the terms of a residential mortgage loan secured by a dwelling that served as the individual’s residence, including a vacation home, or inherited property that served as the deceased’s dwelling; provided that the individual does not act as a mortgage loan originator or provide financing for such sales more than 3 times in a calendar year.

 

 

“Mortgage servicer company” means a mortgage servicer company licensed under the mortgage servicers laws that employs one or more individuals who conduct mortgage loan origination activity.

 

 

An individual is presumed to control a mortgage loan originator company or a mortgage servicer company if that individual is a director, general partner, managing member, or executive officer who directly or indirectly has the right to vote 10% or more of a class of voting securities or has the power to sell or direct the sale of 10% or more of a class of voting securities of that mortgage loan originator company or mortgage servicer company.

 

 

Each licensed mortgage servicer company must register with and maintain a valid unique identifier issued by the NMLS.

 

 

The pre-licensing education requirement under the Act now includes 3 hours of state law and rules.

 

 

Upon completion of the pre-licensing education, an individual has up to 12 months to submit an application for licensure as a mortgage loan originator.  An individual who submits an application after the 12 months have expired will be required to repeat the pre-licensing education requirements.

 

 

A mortgage loan originator must satisfy the annual continuing education requirements prior to requesting renewal of a license.

 

 

The minimum standards for license renewal for a mortgage servicer company will include the following:

  • The mortgage servicer company continues to meet the minimum standards for licensure; and
  • The mortgage servicer company has paid all required fees for renewal of the license.

 

The license of a mortgage servicer company that fails to satisfy the minimum standards for license renewal will expire.

 

 

The continuing education requirement under the Act now includes one hour of state law and rules.

 

 

A mortgage loan originator company must designate a branch manager for each branch officer who is physically present in the branch officer to oversee that branch office.

 

 

An application to relocate a branch office must be submitted to the Commissioner of Financial Institutions (the “Commissioner”) at least 30 days prior to relocating.

 

 

A mortgage loan originator company that maintains its headquarters in Hawaii must designate a qualified individual who is physically present in the principal place of business office as its branch manager to oversee and manage that principal place of business office.

 

 

Each licensed mortgage loan originator must submit quarterly to the NMLS reports of condition using the form entitled “REPORT OF CONDITION,” which must be in the form and contain information required by the NMLS.

 

 

The mortgage loan originator application fee is now $600 (previously $500) and the annual license renewal fee is now $350 (previously $300).

 

 

A sole proprietor mortgage loan originator must pay the following fees to obtain and maintain a valid sole proprietor mortgage loan originator license:

  • Initial application fee of $35;
  • Annual license renewal fee of $35;
  • Reinstatement fee of $100;
  • Late fee of $25 per day; and
  • Criminal background check fee of $35, or of an amount determined by the Commissioner by rule.

 

A mortgage loan originator company must now pay a processing fee of $35 for each control person.

 

 

A mortgage servicer company must pay for a principal office the following fees to maintain a valid mortgage loan originator company license:

  • Initial application fee of $600;
  • Annual license renewal fee of $600;
  • Reinstatement fee of $100;
  • Late fee of $25 per day; and
  • Criminal background check fee of $35, or of an amount determined by the Commissioner by rule, for each control person, executive officer, director, general partner, and managing member.

 

The fee to amend information in the NMLS is now $100 (previously $50).

 

 

A licensee must pay $300 to the Division of Financial Institutions for deposit in the mortgage recovery fund for each principal office location of a mortgage servicer company at the time of initial licensure and $200 at the time of license renewal.

 

HAWAII SENATE BILL 960

 

 

A public sale may be either postponed or canceled by a court appointed commissioner.

 

 

Notice of the postponement or the cancellation of the public sale must be:

  • Announced by the court-appointed commissioner at the date, time, and place of the last scheduled public sale; and
  • Provided to:
    • The borrower and the foreclosing lender;
    • Any prior or junior lenders who have a recorded lien on the mortgaged property before the commencement of the foreclosure action; and
    • Any party named in the foreclosure action and any prospective bidder who requested notice of the public sale date or any change in the public sale date.

 

If there is a postponement of the public sale of the mortgaged property, the court-appointed commissioner must have a new public notice of the public sale published once in the proper format.  The new public notice must state that it is a notice of a postponed sale.  The public sale must take place no sooner than 14 days after the date of the publication of the new public notice.

 

 

Not less than 14 days before the rescheduled date of the public sale, a copy of the new public notice of the rescheduled public sale must be posted on the mortgaged property or on another real property of which the mortgaged property is a part, and it must be mailed or delivered to the borrower, the foreclosing lender, and any other person entitled to receive notification of the foreclosure action.

 

 

Upon the fourth postponement of every series of 4 consecutive postponements, the court-appointed commissioner will follow all of the public notice of public sale requirements.

 

HAWAII HOUSE BILL 25

 

 

Upon initiation of a foreclosure action by a foreclosing lender, no junior lienholder, except for an association, will be permitted to initiate or continue a nonjudicial foreclosure until the foreclosure initiated by the foreclosing lender has been concluded by a judgment issued by a court, the recording of an affidavit after public sale, or the filing of an agreement pursuant to mortgage foreclosure dispute resolution procedures, provided that:

  • An association forecloses on a unit occupied by one or more borrowers for whom the unit is and has been the person’s primary residence for a continuous period of not less than 200 days immediately preceding the date on which the notice is served; and
  • The lender subsequently forecloses its lien on the same property.

 

Upon initiation of a foreclosure action by a foreclosing lender, no junior lienholder, except for an association, will be permitted to initiate or continue a nonjudicial foreclosure during the pendency of a stay, provided that:

  • A junior lienholder may initiate or continue with a nonjudicial foreclosure if the junior lien foreclosure was initiated before the foreclosure action by the foreclosing lender;
  • An association forecloses on a unit occupied by one or more borrowers for whom the unit is and has been the person’s primary residence for a continuous period of not less than 200 days immediately preceding the date on which the notice is served; and
  • The lender subsequently forecloses its lien on the same property.

 

If the lender subsequently forecloses its lien on the same property for purposes above, the borrowers will be considered owner-occupants and will retain their right to require the foreclosing lender to participate in mortgage foreclosure dispute resolution procedures.

 

 

A junior lienholder no longer may initiate or continue with a nonjudicial foreclosure if the junior lienholder is an association and has not been given notice of the foreclosure action or has not received written notification of a case opening.

 

 

The following provision has been deleted from the foreclosure laws:

 

 

The power of sale foreclosure process will be stayed during the pendency of a circuit court foreclosure action.