E.  StateMortgage Guarantee Program

 

[§201H-151]  State mortgage guarantee. (a)  The corporation may guarantee:

(1)  Up to the top twenty-five per cent of theprincipal balance of real property mortgage loans for the purchase of qualifiedsingle-family or multifamily dwelling units;

(2)  Up to one hundred per cent of the principalbalance of real property mortgage loans of qualified single-family housingunder section 213 of the Hawaiian Homes Commission Act, 1920, as amended; or

(3)  Up to one hundred per cent of the principalbalance of real property mortgage loans of single-family or multifamily housingdeveloped under self-help or shell housing programs;

plus the interest due thereon, made to qualifiedborrowers by qualified private lenders; provided that at no time shall thecorporation's liability, contingent or otherwise, on these guarantees exceed$10,000,000.

For purposes of this section:

"Self-help housing program" meansdevelopment or preservation of housing in which prospective homeowners havecontributed labor, materials, or real property; provided that at leasttwo-thirds of the participating homeowners are qualified by income forassistance under this subpart and that the program is carried out under thesponsorship of a nonprofit community development organization.

"Shell housing program" meansdevelopment of housing which is habitable but unfinished and can be completedor expanded; provided that one hundred per cent of the participating homeownersare qualified by income for assistance under this subpart and that the programis carried out under the sponsorship of a public, nonprofit, or privateorganization.

(b)  The loans shall be secured by a dulyrecorded first mortgage upon the fee simple or leasehold interest of theborrower in the single-family or multifamily dwelling owned and occupied by theborrower and the borrower's permitted assigns.  Private lenders shall includeall banks, savings and loan associations, mortgage companies, and otherqualified companies and trust funds whose business includes the making of loansin the State.

(c)  Loans guaranteed under this section shallbe in accordance with rules adopted by the corporation.

(d)  To be eligible for loans under thissection, a qualified borrower shall be:

(1)  A citizen of the United States or a residentalien;

(2)  Qualified under the rules adopted by thecorporation; and

(3)  Willing to comply with the rules as may beadopted by the corporation.

The corporation may secure the services of a privatelender to process all applications and determine the qualification of borrowersunder this subpart.

(e)  When the application for an insured loanhas been approved by the corporation, the corporation shall issue to the lendera guarantee for that percentage of the loan on which it guarantees payment ofprincipal and interest.  The private lender shall collect all payments from theborrower and otherwise service the loan.

(f)  In return for the corporation's guarantee,the private lender shall remit out of monthly payments collected an insurancefee as established by the corporation.  The funds remitted shall be depositedto the credit of the state general fund.

(g)  When any installment of principal andinterest has been due for sixty days and has not been paid by the borrower, theprivate lender may file a claim for the guaranteed portion of the overduepayments with the corporation which may then authorize vouchers for thesepayments, thereby acquiring a division of interest in the collateral pledged bythe borrower in proportion to the amount of the payment.  The corporation shallbe reimbursed for any amounts so paid plus the applicable interest rate whenpayment is collected from the borrower.

(h)  If there is any default in any payment tobe made by the borrower, the lender shall notify the corporation within fifteendays.  Should the lender deem that foreclosure proceedings are necessary tocollect moneys due from the borrower, it shall notify the corporation.  Withinthirty days of either notification, the corporation may elect to request anassignment of the loan on payment in full to the lender of the principalbalance and interest due.  Foreclosure proceedings shall be held in abeyance inthe interim.

(i)  Every qualified borrower who is granted aloan under this section shall comply with the following conditions:

(1)  Expend no portion of the qualified borrower'sloan for purposes other than those sanctioned by the corporation;

(2)  Not sell or otherwise dispose of the mortgagedproperty except upon the prior written consent of the corporation and exceptupon any conditions that may be prescribed in writing by the privatelender;

(3)  Undertake to pay when due all taxes, liens,judgments, or assessments that may be lawfully assessed against the propertymortgaged, together with the costs and expenses of any foreclosure of themortgage;

(4)  Keep insured to the satisfaction of the privatelender all improvements and other insurable property covered by the mortgage. Insurance shall be made payable to the mortgagee as its interest may appear atthe time of the loss.  At the option of the private lender, subject to therules and standards of the corporation, sums so received may be used to pay forreconstruction of the improvements destroyed, or for decreasing the amount of theindebtedness;

(5)  Keep the improvements in good repair; and

(6)  The private lender may impose any otherconditions in its mortgage; provided the form of the mortgage has received theprior approval of the corporation.

All of the conditions in paragraphs (1) through (6)shall be held and construed to be provisions of any mortgage executed by virtueof this section regardless of whether or not the conditions are expresslyincorporated in the mortgage document.

(j)  Loans guaranteed and made under this subpartshall be repaid in accordance with a payment schedule specified by the privatelender with payments applied first to interest and then to principal. Additional payments in any sums and the payment of the entire principal may bemade at any time within the period of the loan.  The private lender forsatisfactory cause and at its discretion, may extend the time within which theinstallments of principal may be made for a period not to exceed two years.

(k)  All interest and fees collected under thissubpart by the corporation shall be deposited into the general fund.  Allmoneys necessary to guarantee payment of loans made under this subpart and tocarry on the operations of the corporation in administering and granting loansunder this subpart shall be appropriated by the legislature out of the proceedsof the general fund.  The corporation shall include in its legislativebudgetary request for the upcoming fiscal period, the amounts necessary toeffectuate the purposes of this section. [L 2006, c 180, pt of §4]