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HB1306
HOUSE OF REPRESENTATIVES
H.B. NO.
1306
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII
A BILL FOR AN ACT
relating
to housing
.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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SECTION
1.
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The legislature finds that many
kupuna in Hawaii with limited retirement income who may have equity in their home
are facing challenges in meeting increased costs related to homeownership;
whether it's rising maintenance fees, community assessments, or insurance
costs.
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Establishing a state-administered
home equity conversion mortgage program, similar to the federal Department of
Housing and Urban Development program for eligible retirees, could provide
housing security and relief for some kupuna.
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Such a program would provide a pathway to
affordable rental housing for kupuna who have exhausted their home equity, helping
to prevent elder displacement and homelessness.
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Accordingly,
the purpose of this Act is to establish the kupuna home equity conversion
mortgage program.
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SECTION 2.
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Chapter 201H, Hawaii Revised Statutes, is
amended by adding a new subpart to part III to be appropriately designated and
to read as follows:
"
.
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Kupuna Home Equity Conversion Mortgage
Program
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201H-A
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Definitions.
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For purposes of this subpart:
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"First
mortgage" means such classes of first liens as are commonly given to secure
advances on, or the unpaid purchase price of, real estate or a first or
subordinate lien on all stock allocated to a dwelling unit in a residential
cooperative housing corporation, together with the credit instruments, if any,
secured thereby.
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"Home
equity conversion mortgage" means a first mortgage that provides for
future payments to the kupuna homeowner based on accumulated equity and which a
housing creditor is authorized to make:
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(1)
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Under any law of the United States or
applicable agency regulations thereafter; or
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(2)
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Under any law of the State.
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"Kupuna
homeowner" means any homeowner who is, or whose spouse is, at least
sixty-two years of age or older.
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"Mortgage"
means a:
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(1)
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First mortgage or first lien on real estate,
in fee simple;
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(2)
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First or subordinate mortgage or lien on all
stock allocated to a dwelling unit in a residential cooperative housing
corporation; or
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(3)
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First mortgage or first lien on a leasehold
under a lease:
���������
(A)
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For no less than ninety-nine years that is renewable;
or
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(B)
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That has a term that ends no earlier than the
minimum number of years, as specified by the corporation, beyond the actuarial
life expectancy of the mortgagor or co-mortgagor, whichever is the later date.
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201H-B
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Insurance authority.
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The corporation may, upon application by a
mortgagee, insure any home equity conversion mortgage eligible for insurance
under this subpart and, upon terms and conditions as the corporation may
prescribe, make commitments for the insurance of mortgages before the date of
their execution or disbursement to the extent that the corporation determines
that the mortgages:
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(1)
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Have promise for improving the financial
situation or otherwise meeting the special needs of kupuna homeowners;
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(2)
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Will include appropriate safeguards for
mortgagors to offset the special risks of the mortgage; and
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(3)
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Have a potential for acceptance in the
mortgage market.
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201H-C
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Eligibility requirements.
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To be eligible for insurance under this
subpart, a mortgage shall:
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(1)
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Have been originated by a mortgagee approved
by the corporation;
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(2)
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Have been executed by a mortgagor who:
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(A)
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Qualifies as a kupuna homeowner;
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(B)
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Has received adequate counseling, as provided
in section 201H-E by an independent third party that is not, either directly or
indirectly, associated with or compensated by a party involved in:
�������������
(i)
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Originating or servicing the mortgage;
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(ii)
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Funding the load underlying the mortgage; or
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(iii)
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The sale of annuities, investments, long-term
care insurance, or any other type of financial or insurance product;
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(C)
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Has received full disclosure, as prescribed by
the corporation, of all costs charged to the mortgagor, including costs of
estate planning, financial advice, and other services that are related to the
mortgage but are not required to obtain the mortgage.
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The disclosure shall clearly state which
charges are required to obtain the mortgage and which are not required to
obtain the mortgage; and
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(D)
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Meets any additional requirements prescribed
by the corporation;
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(3)
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Be secured by a dwelling in which the
mortgagor occupies one of the units;
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(4)
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Provide that prepayment, in whole or in part,
may be made without penalty at any time during the period of the mortgage;
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(5)
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Provide for a fixed or variable interest rate
or future sharing between the mortgagor and the mortgagee of the appreciation
in the value of the property, as agreed upon by the mortgagor and mortgagee;
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(6)
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Contain provisions for satisfaction of the
obligation satisfactory to the corporation;
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(7)
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Provide that the kupuna homeowner shall not be
liable for any difference between the net amount of the remaining indebtedness
of the kupuna homeowner under the mortgage and the amount recovered by the
mortgagee from:
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(A)
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The net sales proceeds from the dwelling that
are subject to the mortgage, based upon the amount of the accumulated equity
selected by the mortgagor to be subject to the mortgage, as agreed upon by the
mortgagor and mortgagee; or
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(B)
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The insurance benefits paid pursuant to
section 201H-H(a)(3);
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(8)
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Contain terms and provisions with respect to
insurance, repairs, alterations, payment of taxes, default reserve, delinquency
charges, foreclosure proceedings, anticipation of maturity, additional and
secondary liens, and other matters as the corporation may prescribe;
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(9)
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Provide for future payments to the mortgagor
based on accumulated equity, minus any applicable fees and charges, according
to the method that the mortgagor shall select from among the methods under this
paragraph, by payment of the amount:
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(A)
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Based upon a line of credit;
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(B)
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On a monthly basis over a term specified by
the mortgagor;
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(C)
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On a monthly basis over a term specified by
the mortgage and based upon a line of credit;
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(D)
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On a monthly basis over the tenure of the
mortgagor;
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(E)
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On a monthly basis over the tenure of the
mortgage and based upon a line of credit; or
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(F)
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On any other basis that the corporation
considers appropriate;
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(10)
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Provide that the mortgagor may convert the
method of payment under paragraph (9) to any other method during the term of
the mortgage, except that in the case of a fixed rate mortgage, the corporation
may, by rules adopted pursuant to chapter 91, limit such convertibility; and
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(11)
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Have been made with restrictions as the
corporation determines to be appropriate to ensure that the mortgagor does not
fund any unnecessary or excessive costs for obtaining the mortgage, including
any costs of estate planning, financial advice, or other related services.
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201H-D
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Disclosures by mortgagee.
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The corporation shall require each mortgagee
of a mortgage insured under this subpart to make available to the kupuna
homeowner:
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(1)
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At the time of the loan application, a written
list of the names and addresses of third-party information sources who are
approved by the corporation as responsible and able to provide the information
required by section 201H-E;
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(2)
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At least ten days before loan closing, a
statement informing the kupuna homeowner that the liability of the kupuna
homeowner under the mortgage is limited and explaining the kupuna homeowner's
rights, obligations, and remedies with respect to temporary absences from the
home, late payments, and payment default by the lender, all conditions
requiring satisfaction of the loan obligation, and any other information that
the corporation may require;
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(3)
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On an annual basis, but no later than January
31 of each year, a statement summarizing the:
���������
(A)
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Total principal amount paid to the kupuna
homeowner under the loan secured by the mortgage;
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(B)
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Total amount of deferred interest added to the
principal; and
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(C)
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Outstanding loan balance at the end of the
preceding year; and
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(4)
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Before loan closing, a statement of the
projected total cost of the mortgage to the kupuna homeowner based on the
projected total future loan balance, such cost expressed as a single average
annual interest rate for at least two different appreciation rates for the term
of the mortgage, for no less than two projected loan terms, as the corporation shall
determine, which shall include the cost for a:
���������
(A)
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Short-term mortgage; and
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(B)
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Loan term equaling the actuarial life
expectancy of the mortgagor.
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201H-E
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Counseling services and information for
mortgagors.
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(a)
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The corporation shall provide or cause to be
provided adequate counseling for the mortgagor.
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Counseling shall be provided by counselors that meet qualification
standards and follow uniform counseling protocols, as established by the
corporation.
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The protocols shall require,
at a minimum, a qualified counselor to discuss with each mortgagor information
that shall include:
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(1)
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Options other than a home equity conversion
mortgage that are available to the kupuna homeowner, including other housing,
social service, health, and financial options;
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(2)
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Other home equity conversion options that are
or may become available to the kupuna homeowner, including sale-leaseback
financing, deferred payment loans, and property tax deferral;
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(3)
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The financial implications of entering into a
home equity conversion mortgage;
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(4)
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A disclosure that a home equity conversion
mortgage may have tax consequences, affect eligibility for assistance under
federal and state programs, and have an impact on the estate and heirs of the
kupuna homeowner; and
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(5)
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Any other information the corporation may
require.
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(b)
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The corporation shall consult with consumer
groups, industry representatives, representatives of counseling organizations,
and other interested parties to identify alternative approaches to providing
consumer information required by this section that may be feasible and
desirable for home equity conversion mortgages insured under this subpart and
other types of reverse mortgages.
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The
corporation may, in lieu of providing the consumer education required by this
section, adopt alternative approaches to consumer education that may be
developed as a result of such consultations only if the alternative approaches
provide all of the information required under this section.
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201H-F
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Limitation on insurance authority.
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The aggregate number of mortgages insured
under this subpart shall not exceed 275,000.
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In no case shall the benefits of insurance under this subpart exceed $
for a one-family residence.
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201H-G
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Administrative authority.
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The corporation may:
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(1)
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Enter into contracts and agreements with
federal, state, and local agencies, public and private entities, and other
persons as the corporation deems necessary or desirable to carry out the
purposes of this subpart;
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(2)
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Make investigations and studies of data, and
publish and distribute such reports, as the corporation deems appropriate; and
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(3)
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Establish, by notice or mortgagee letter, any
additional or alternative requirements that the corporation determines are
necessary to improve the fiscal safety and soundness of the kupuna reverse
mortgage program.
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201H-H
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Protection of kupuna homeowner and lender.
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(a)
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Notwithstanding any other law to the contrary, the corporation may take
any action necessary to:
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(1)
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Provide any mortgagor under this subpart with
funds to which the mortgagor is entitled under the insured mortgage or
ancillary contracts but that the mortgagor has not received because of the
default of the party responsible for payment;
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(2)
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Obtain repayment of disbursements provided
under paragraph (1) from any source; and
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(3)
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Provide any mortgagee under this subpart with
funds not to exceed the limitations in section 201H-F to which the mortgagee is
entitled under the terms of the insured mortgage or ancillary contracts
authorized in this subpart.
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(b)
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Actions under subsection (a) may include:
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(1)
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Disbursing funds to the mortgagor or
mortgagee;
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(2)
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Accepting an assignment of the insured
mortgage notwithstanding that the mortgagor is not in default under its terms,
and calculating the amount and making the payment of the insurance claim on
such assigned mortgage;
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(3)
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Requiring a subordinate mortgage from the
mortgagor at any time in order to secure repayments of any funds advanced or to
be advanced to the mortgagor;
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(4)
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Requiring a subrogation to the corporation of
the rights of any parties to the transaction against any defaulting parties;
and
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(5)
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Imposing premium charges.
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201H-I
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Safeguard to prevent displacement of kupuna
homeowner.
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(a)
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The corporation shall not insure a home
equity conversion mortgage under this subpart unless the mortgage provides that
the kupuna homeowner's obligation to satisfy the loan obligation is deferred
until the kupuna homeowner's death, the sale of the home, or the occurrence of
other events specified in rules adopted by the corporation.
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(b)
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When equity in the dwelling unit owned by the
kupuna homeowner is exhausted, the corporation shall coordinate with and assist
the kupuna homeowner to relocate into an affordable rental housing unit under
the corporation and commence the sale of the dwelling unit.
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The kupuna homeowner shall not have any debt
after sale of the dwelling.
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The rent of
an affordable rental housing unit shall be similar to rent rates under
tenant-based housing choice voucher program under section 8 of the United
States Housing Act of 1973, as amended.
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201H-J
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Insurance authority for refinancing.
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(a)
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The corporation may, upon application by a mortgagee, insure under this
subpart any mortgage given to refinance an existing home equity conversion
mortgage insured under this subpart.
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(b)
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The corporation shall require, by rules
adopted pursuant to chapter 91, that the mortgagee of a mortgage insured under
this subpart provide to the mortgagor, within an appropriate time period and in
a manner prescribed by the corporation, a good faith estimate of the:
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(1)
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Total cost of refinancing; and
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(2)
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Increase in the mortgagor's principal limit as
measured by the estimated initial principal limit on the mortgage to be insured
under this subpart less the current principal limit on the home equity
conversion mortgage that is being refinanced and insured under this subpart.
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(c)
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The mortgagor under a mortgage insured
pursuant to this subpart may waive the applicability with respect to such
mortgage, of the counseling requirements under section 201H-C(2)(B) if the:
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(1)
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Mortgagor has received the disclosure required
under subsection (b);
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(2)
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Increase in the principal limit described in
subsection (b) exceeds the amount of the total cost of refinancing by an amount
to be determined by the corporation; and
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(3)
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Time between closing of the original home
equity conversion mortgage that is refinanced through the mortgage insured
under this subpart and the application for a refinancing mortgage insured under
this section does not exceed five years.
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(d)
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Notwithstanding any other law to the
contrary, the corporation may reduce the amount of the single premium payment
otherwise collected at the time of the insurance of a mortgage refinanced under
this section.
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The amount of the single
premium for mortgages refinanced under this section shall be determined by the
corporation based on the actuarial study required under subsection (e).
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(e)
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No later than one hundred eighty days after
the effective date of this Act, the corporation shall conduct an actuarial
analysis to determine the adequacy of the insurance premiums collected under
the program under this subpart with respect to:
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(1)
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A reduction in the single premium payment
collected at the time of the insurance of a mortgage refinanced and insured
under this section;
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(2)
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The establishment of a single limit on the
benefits of insurance under section 201H-F; and
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(3)
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The combined effect of reduced insurance
premiums and a single limitation on insurance authority.
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(f)
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The corporation may establish a limit on the
origination fee that may be charged to a mortgagor under a mortgage insured
under this subpart, except that such limitation shall provide that the
origination fee may be fully financed with the mortgage and shall include any
fees paid to correspondent mortgagees approved by the corporation.
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201H-K
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Funding for counseling.
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The corporation may use a portion of the
mortgage insurance premiums collected under this subpart to adequately fund the
counseling and disclosure activities required under section 201H-E, including
counseling for those kupuna homeowners who elect not to take out a home equity
conversion mortgage; provided that the use of the funds is based upon accepted
actuarial principles.
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201H-L
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Requirements on mortgage originators.
�
(a)
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The mortgagee and any other party that participates in the origination
of a mortgage to be insured under this subpart shall:
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(1)
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Not participate in, be associated with, or
employ any party that participates in or is associated with any other financial
or insurance activity; or
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(2)
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Demonstrates to the corporation that the
mortgagee or other party maintains, or will maintain, firewalls and other
safeguards designed to ensure that:
���������
(A)
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Individuals participating in the origination
of the mortgage shall have no involvement with, or incentive to provide the
mortgagor with, any other financial or insurance product; and
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(B)
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The mortgagor shall not be required, directly
or indirectly, as a condition of obtaining a mortgage under this subpart, to
purchase any other financial or insurance product.
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(b)
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All parties that participate in the
origination of a mortgage to be insured under this subpart shall be approved by
the corporation.
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201H-M
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Prohibition against requirements to purchase
additional products.
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The mortgagor
or any other party shall not be required by the mortgagee or any other party to
purchase an insurance, annuity, or other similar product as a requirement or
condition of eligibility for insurance under section 201H-B, except for title
insurance, hazard, flood, or other peril insurance, or other such products that
are customary and normal under section 201H-B, as determined by the
corporation.
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201H-N
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Study to determine consumer protections and
underwriting standards.
�
The
corporation shall conduct a study to examine and determine appropriate consumer
protections and underwriting standards to ensure that the purchase of products
in section 201H-M is appropriate for the consumer.
�
In conducting the study, the corporation
shall consult with consumer advocates, including recognized experts in consumer
protection, industry representatives, representatives of counseling
organizations, and other interested parties.
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201H-O
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Limitation on origination fees.
�
The corporation shall establish limits on the
origination fee that may be charged to a mortgagor under a mortgage insured
under this subpart, which limitations shall:
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(1)
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Be equal to two per cent of the maximum claim
amount of the mortgage, up to a maximum claim amount of $200,000 plus one per
cent of any portion of the maximum claim amount that is greater than $200,000,
unless adjusted thereafter on the basis of an analysis of:
���������
(A)
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The cost to mortgagors; and
���������
(B)
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The impact on the reverse mortgage market;
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(2)
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Be subject to a minimum allowable amount;
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(3)
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Provide that the origination fee may be fully
financed with the mortgage;
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(4)
�
Include any fees paid to correspondent
mortgagees approved by the corporation; and
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(5)
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Be subject to a maximum origination fee of
$6,000, except that the maximum limit shall be adjusted in accordance with the
annual percentage increase in the Consumer Price Index of the Bureau of Labor
Statistics of the United States Department of Labor in increments of $500 only
when the percentage increase in the index, when applied to the maximum
origination fee, produces dollar increases that exceed $500."
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SECTION 3.
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In codifying the new sections added by
section 1 of this Act, the revisor of statutes shall substitute appropriate
section numbers for the letters used in designating the new sections in this
Act.
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SECTION 4.
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This Act shall take effect upon its approval.
INTRODUCED BY:
_____________________________
Report Title:
HHFDC;
Kupuna Home Equity Conversion Mortgage Program
Description:
Establishes
the Kupuna Home Equity Conversion Mortgage Program under the Hawaii Housing
Finance and Development Corporation.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.