Nonjudicial Foreclosure Conversion Frequently Asked Questions

On May 5, 2011, Governor Neil Abercrombie signed into law Act 48, Session Laws of Hawaii 2011 (Act 48). Among other things, this legislation creates a process to convert a “nonjudicial” foreclosure to a “judicial” foreclosure. Act 48 also provides an opportunity for borrowers facing foreclosure to require the lender to participate in a dispute resolution program through the Department of Commerce and Consumer Affairs.

The information presented through the following questions and answers is intended to provide a brief overview of Act 48's provisions for the conversion process, and should not be construed as legal advice. It does not replace or modify the Hawaii Revised Statutes (HRS) or the Hawaii Rules of Court, and may not be cited as legal authority. For a complete version of the legislation, please refer to Act 48.

For a complete version of the related court rules and for sample court forms, please refer to the Temporary Rules for Implementation of the Conversion Proceeding Established by Act 48, § 5 of the 2011 Hawaii Session Laws (Temporary Rules), adopted by the Hawaii Supreme Court on May 18, 2011 (effective May 5, 2011 to December 31, 2012).

Judicial foreclosure auctions may be conducted on Judiciary properties; however you must first submit an Application for Use of Judiciary Facilities, and receive approval for such use, prior to conducting any public sale/auction. The completed form should be submitted to the Chief Court Administrator/Deputy Chief Court Administrator of the court building where the public sale/auction will take place.

Non-judicial foreclosures auctions are prohibited from taking place on Judiciary properties, per section 24 of Act 48.

You may also obtain information about the dispute resolution program by accessing the website of the Department of Commerce and Consumer Affairs at http://hawaii.gov/dcca/oah/mfdr/mortgage-foreclosure-dispute-resolution-mfdr-program.

1. How does the foreclosure process begin?
2. What is the difference been “judicial” and “nonjudicial” foreclosure?
3. What is a conversion?
4. I don't know if I should ask for a conversion. What are the advantages and disadvantages of doing so?
5. Can anyone facing foreclosure request a conversion?
6. My condominium association has liens against my apartment because of moneys I owe them and is foreclosing on my apartment. Can I convert?
7. How do I start the conversion process?
8. Is there a fee to file a conversion petition?
9. What if I can’t afford the filing fee?
10. Do I need an attorney to file a conversion petition?
11. Where can I find an attorney or get legal advice?
12. Where can I find the sample petition form and Temporary Rules?
13. Do I have to use the court's sample petition form?
14. Besides the filing fee, do I have to submit anything else with my petition?
15. Do I have to serve the petition on anyone?
16. What happens next?
17. If the case is dismissed because submission statements for all interested parties have not been filed, will the filing fund be refunded to me?
18. Can the lender proceed with the nonjudicial foreclosure after I file the conversion petition?
19. What issues will the judge decide in the conversion petition proceeding?
20. In the conversion petition proceeding, can the judge order the other party to pay my attorneys’ fees and/or costs?
21. Will there be a court hearing on my conversion petition?
22. Is there anything I can do to help with the processing of my case?
23. What are the possible outcomes of the conversion petition?
24. How long will it take for the court to make a decision on my conversion petition?
25. If the petition is denied, can I appeal the denial?
26. If my nonjudicial foreclosure was pending before Act 48 went into effect on May 5, 2011, can I still seek a conversion?
27. If I don’t want to convert my nonjudicial foreclosure to a judicial foreclosure, is there anything else I can do to resolve my foreclosure situation?
28. If I request a conversion and the request is denied, may I then participate in the Department of Commerce and Consumer Affairs' dispute resolution program?
29. Will I always be able to convert my nonjudicial foreclosure to a judicial foreclosure?

How does the foreclosure process begin?

When a borrower is not able to keep up with mortgage payments, the lender may choose to foreclose on the property by using a judicial foreclosure process or a nonjudicial foreclosure process.

What is the difference been “judicial” and “nonjudicial” foreclosure?

Under the judicial foreclosure process, a lender will initiate a lawsuit by filing a "complaint" with the court, naming the borrower as the defendant. Based on the documents and other evidence submitted in the case, the court determines whether the lender may foreclose on the property.

In a nonjudicial foreclosure, the lender forecloses on the property without going through the court system. The lender may foreclose without a lawsuit because the mortgage document contains a “power of sale” clause that authorizes the lender to proceed with foreclosure after serving the borrower with a notice of default and intention to foreclose or notice of intent to foreclose.

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What is a conversion?

Conversion is a new process created by Act 48, where the court, at the request of a borrower, orders a nonjudicial foreclosure to be converted to a judicial foreclosure if the borrower meets certain requirements.

I don't know if I should ask for a conversion. What are the advantages and disadvantages of doing so?

Whether you should convert your nonjudicial foreclosure to a judicial foreclosure depends on your particular situation. In a judicial foreclosure, your case is heard by a judge, who decides whether the foreclosure should be allowed. In a judicial foreclosure, however, the lender may try to obtain a deficiency judgment against you. A deficiency judgment may be obtained when the property is foreclosed, but is sold at a price that is below the amount owed on the mortgage. If the lender obtains a deficiency judgment, you are responsible for paying the amount ordered in the judgment. There are other considerations to take into account when making your decision whether to convert and you may wish to seek the advice of an attorney.

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Can anyone facing foreclosure request a conversion?

No. Conversion is available only to "owner-occupants" of residential real estate, as defined in Act 48.

My condominium association has liens against my apartment because of moneys I owe them and is foreclosing on my apartment. Can I convert?

No. The conversion law does not apply to foreclosures of association liens.

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How do I start the conversion process?

To convert, you must file a conversion petition in the circuit court of the circuit in which the residential property subject to foreclosure is located.

Is there a fee to file a conversion petition?

Yes. There is a non-refundable filing fee of $300.

What if I can’t afford the filing fee?

You may submit a request to the court for a reduction or waiver of the fee.  Please see this link for a sample Declaration in Support of Request to Proceed In Forma Pauperis for Mortgage Foreclosure Conversion Petition. A judge will review your request and approve or deny it.

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Do I need an attorney to file a conversion petition?

No. You may file the petition yourself. However, because the decision to convert your nonjudicial foreclosure case is an important one, you may wish to first consult an attorney. You may also want to review the sample conversion petition form and the Temporary Rules for Implementation of the Conversion Proceeding Established by Act 48, § 5 of the 2011 Hawaii Session Laws (Temporary Rules), which are the court rules governing the conversion proceeding.

Where can I find an attorney or get legal advice?

Attorney referrals or legal assistance may be available from:

• The Lawyer Referral Information Service of the Hawaii State Bar Association; (808) 537-9140.
• The Legal Aid Society of Hawaii; (808) 536-4302 (Oahu) or 1-800-499-4302 (Neighbor Islands).
• Volunteer Legal Services Hawaii; (808) 528-7046 (Oahu) or 1-800-839-5200 (Neighbor Islands).

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Where can I find the sample petition form and Temporary Rules?

The form and rules may be accessed at: http://www.courts.state.hi.us/docs/court_rules/pdf/2011_rcp_temp_adopt_ada.pdf

Do I have to use the court's sample petition form?

No, you may use any form that substantially conforms to Form A, the court's sample petition form.

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Besides the filing fee, do I have to submit anything else with my petition?

Yes. You must attach a copy of the foreclosure notice.

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Do I have to serve the petition on anyone?

Yes. Before filing the petition, you must serve a copy of the petition on all the people or entities named as respondents in the petition. The lender or other foreclosing party is a respondent. Other respondents may include people with an interest in the property, such as owner-occupants/mortgagors other than the petitioner, and people obligated on the loan, such as co-signers and guarantors. You may serve the lender through the attorney who is handling the foreclosure on the lender's behalf. For service requirements, please refer to Act 48 and the Temporary Rules.

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What happens next?

Any respondent who contests the allegations of the petition must file a response to the petition within 30 days after service. Additionally, the other owner-occupants or persons with an interest in the property, who were named as respondents, may sign and file a submission statement within 45 days after the filing of the petition. The 45-day filing deadline is waived for petitions filed during the phase-in period. By signing and filing the statement, a person submits to the judicial process and the jurisdiction of the circuit court. A sample submission statement (see Form B) is available at http://www.courts.state.hi.us/docs/court_rules/pdf/2011_rcp_temp_adopt_ada.pdf.

The court may dismiss the petition if all interested parties do not file a submission statement.

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If the case is dismissed because submission statements for all interested parties have not been filed, will the filing fund be refunded to me?

No. The filing fee is non-refundable.

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Can the lender proceed with the nonjudicial foreclosure after I file the conversion petition?

No. Filing the petition automatically “stays” or halts the nonjudicial foreclosure. If the court dismisses or denies the petition, however, the nonjudicial foreclosure may proceed.

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What issues will the judge decide in the conversion petition proceeding?

The judge's ruling will be limited to whether the nonjudicial foreclosure can be converted. The judge will not decide who wins or loses the foreclosure case, nor will the judge consider any other claims.

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In the conversion petition proceeding, can the judge order the other party to pay my attorneys’ fees and/or costs?

No. The judge can only decide whether to allow the nonjudicial foreclosure to be converted to a judicial foreclosure.

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Will there be a court hearing on my conversion petition?

The judge determines whether a hearing is necessary. The judge can issue a judgment granting or denying your petition based on a review of the documents, without a hearing.

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Is there anything I can do to help with the processing of my case?

Yes. Providing the judge assigned to your case with a courtesy copy of all documents filed after the conversion petition will help the judge to make timely decisions on your case.

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What are the possible outcomes of the conversion petition?

If the court determines that your petition satisfies the requirements for a conversion, it will issue an order ("judgment") converting the nonjudicial foreclosure to a judicial foreclosure, and requiring the lender to file a judicial foreclosure action within 30 days after entry of the judgment. If the court determines that the conversion requirements have not been met and denies the petition, it will order that the nonjudicial foreclosure may proceed.

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How long will it take for the court to make a decision on my conversion petition?

Once the petition has been filed, it may take approximately 70 days for the court to enter a judgment granting or denying your conversion petition. If your petition is granted, the lender has 30 days after entry of judgment to file a judicial foreclosure action against you. The judicial foreclosure action may take over a year to resolve.

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If the petition is denied, can I appeal the denial?

Yes. See HRS § 641-1.

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If my nonjudicial foreclosure was pending before Act 48 went into effect on May 5, 2011, can I still seek a conversion?

You may be able to convert under the "phase-in" provision of Act 48, which allows the conversion option for an owner-occupant undergoing a nonjudicial foreclosure, for which the lender's affidavit has not yet been filed. While you are not subject to the 45-day filing deadline for submission statements during the phase-in period, you should still file the submission statements as soon as possible. The last day you may file a petition under the phase-in period is August 15, 2011.

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If I don’t want to convert my nonjudicial foreclosure to a judicial foreclosure, is there anything else I can do to resolve my foreclosure situation?

Yes. You may choose to participate in a dispute resolution program run by the Department of Commerce and Consumer Affairs (DCCA) called the Mortgage Foreclosure Dispute Resolution Program. The Program will be in operation by October 1, 2011. You may obtain information about the dispute resolution program by calling DCCA at (808) 587-3222 for Oahu or 1-800 394-1902 (toll free) for Neighbor Islands or by visiting its website at http://hawaii.gov/dcca/oah/mfdr/mortgage-foreclosure-dispute-resolution-mfdr-program.

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If I request a conversion and the request is denied, may I then participate in the Department of Commerce and Consumer Affairs' dispute resolution program?

No. Once you file a conversion petition, you will not be allowed to participate in the Mortgage Foreclosure Dispute Resolution Program. There is a possibility, however, that the judge in a judicial foreclosure may order the parties to participate in dispute resolution.

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Will I always be able to convert my nonjudicial foreclosure to a judicial foreclosure?

No. Act 48 does not allow conversions after December 31, 2012.

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Since information may be periodically revised, please visit: http://www.courts.state.hi.us/self-help/foreclosure/foreclosure_conversion_faqs.html for the most updated information.