What is a Foreclosure?
A foreclosure is a legal process by which a homeowner’s right to the property is terminated, usually due to default. It typically involves a forced sale of the property at public auction with the proceeds applied toward the mortgage debt.
In Hawaii, mortgage lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure.
In judicial foreclosure or “foreclosure by action”, the mortgage lender files the appropriate documents with the court to rule that the homeowner is in default.
The mortgage lender then delivers the notice of default to the homeowner, or publishes the notice if they have trouble contacting the homeowner.
The homeowner has 20 days to respond. If the homeowner does not respond in 20 days, the court would find the homeowner in default and the mortgage lender can proceed with scheduling the foreclosure sale.
However, the homeowner has 30 days after the notice of default to file a notice of appeal.
A commissioner is usually appointed to sell the property at the public auction, which are usually held at the court house steps. The commissioner publishes the notice of foreclosure sale in the local paper showing the auction dates and open house dates, if any.
Any party may bid at the auction and the winning bidder is required to pay 10 percent of the bid cash or cashier’s check.
Unfortunately, the highest bidder does not automatically get the property. Additional bidding may continue at a confirmation hearing. If the court find the price fair at the confirmation hearing, then the sale is confirmed.
Non-judicial foreclosure or “foreclosure by sale”, does not involve any court action.
The mortgage promissory note usually contain a provision called a “power of sale” clause, which allows the mortgage lender to foreclose on the property upon default to satisfy the unpaid mortgage loan.
In a non-judicial foreclosure, the mortgage lender’s attorney would publish a notice of foreclosure sale once a week for three (3) consecutive weeks in a local newspaper in the county the property is located.
The last publication cannot be less than fourteen (14) days before the sale.
The copy of notice must be posted on the property and mailed or delivered to the homeowner no less than 21 days prior to the foreclosure sale.
The foreclosed property is auctioned off to the highest bidder. The auction maybe rescheduled, which happens frequently. And the notices of sale must be re-sent and re-published.
The homeowner has up to the three (3) days prior to the foreclosure sale to save the default by paying the defaulted debt along with any costs and reasonable attorney’s fee.
Hawaii offers no right of redemption for homeowners once the sale of the property is confirmed. However, homeowners in Hawaii do have up to one (1) year to redeem a tax lien foreclosure.
After the foreclosure sale, a homeowner may still face deficiency judgement if the proceeds from the foreclosure is not enough to pay off the mortgage promissory note IN FULL, meaning the property was sold SHORT.
A foreclosing mortgage lender who completed a non-judicial foreclosure of residential property is prohibited from pursuing a deficiency judgement against the homeowner unless the debt is secured by other collateral.