The legislature’s rewrite of Hawaii’s foreclosure law is having an immediate impact. Gov. Abercrombie signed SB 651, SD2, HD2, CD1 into law as Act 48.

The Department of Commerce & Consumer Affairs, which will administer a new mortgage foreclosure dispute resolution program, has posted a summary of the new law.

Mortgage Foreclosure Dispute Resolution (MFDR) Program:

• The Mortgage Foreclosure Dispute Resolution Program provides an opportunity for owner-occupants of residential property in non-judicial foreclosure to meet face-to-face with the lenders to modify their loans or to work out a payment plan within three months.

• The program is established and administered by the Department of Commerce and Consumer Affairs – Office of Administrative Hearings (DCCA-OAH) with assistance from the Judiciary.

• The program is limited to owner-occupants of residential property who have resided at the property for a minimum of 200 consecutive days.

• Mortgagees and owner-occupants are required to participate in MFDR if the mortgagee chooses to pursue non-judicial foreclosure.

• The non-judicial foreclosure process is suspended until the dispute resolution is completed.

•The Mortgage Foreclosure Dispute Resolution Special Fund is established and funded by fees collected from the parties who choose to participate in the program, and by filing fees from notices of non-judicial foreclosures which are filed in the Bureau of Conveyances and the Land Court.

• The program will begin no later than October 1, 2011 and will continue until September 30, 2014.

The State Judiciary has also rushed temporary rules for converting nonjudicial foreclosures into judicial foreclosures. This is another key provision of the new foreclosure law.

I sit on a condominium board of directors, and condo associations are still catching up with the practical meaning of the new law. Condominiums will now have clear access to nonjudicial foreclosures, but will not be able to reject a payment plan proposed by a delinquent unit that includes making all current payments plus any payment on past-due amounts.

This will continue to put pressure on condominium budgets. An apartment owner could owe thousands of dollars and, under this new restriction, apparently pay a token $10 per month towards those past-due amounts as long as they stay current on the current month’s amount. Previously, condo associations were able to demand substantial payments that would cover past-due amounts in a reasonable period of time. Just how the loss of leverage will play out is still unclear.