MS FAQs

Chapter 454M, Hawaii Revised Statutes (“HRS”), entitled, “Mortgage Servicers”.  The chapter was most recently amended by Act 62 of the 2015 Hawaii Legislature, effective May 28, 2015.

The Mortgage Servicers law is administered by the Division of Financial Institutions (“DFI”) of the State of Hawaii Department of Commerce and Consumer Affairs (“DCCA”).  DFI is headed by the Commissioner of Financial Institutions (“Commissioner”).

DFI is charged with the overall supervision and regulation of all state-chartered and state-licensed financial institutions in the State of Hawaii (including banks, savings banks, foreign bank branches, agencies and representative offices, savings and loan associations, trust companies, depository and nondepository financial services loan companies, and credit unions), escrow depositories, money transmitters, mortgage servicers, mortgage loan originators, and mortgage loan originator companies.  DFI does not supervise or regulate national banks, federal savings banks or federal credit unions.

Under Chapter 454M, HRS, a mortgage servicer is the person responsible for collecting, receiving, and processing scheduled periodic payments from a borrower under terms of a residential mortgage loan, including amounts for escrow accounts, and making the payments to the owner of the loan or other third parties in accordance with terms of the mortgage servicing loan documents or servicing contract.  In the case of a home equity conversion mortgage or reverse mortgage as referenced in Chapter 454M, HRS, servicing includes making payments to the borrower.   Section 454M-1, HRS.

Some mortgage lenders make mortgage loans and also service them.  Others make mortgage loans and sell the servicing rights to some or all of those loans.

A person meeting the definition of a mortgage servicer, but assigns the responsibility of collecting, receiving, and processing scheduled periodic payments from a borrower must also be licensed.

“Person” means an individual, partnership, corporation, association, or other organization.  Section 454M-1, HRS.

“Residential mortgage loan” means a mortgage loan, home equity loan, or reverse mortgage loan, that is secured by a first or subordinate a lien residential real property located in Hawaii.  This includes a refinance of a loan on Hawaii residential real property upon which housing for one to four families is or will be constructed, or a manufactured home is or will be placed on the property using loan proceeds.  Section 454M-1, HRS.

Section 454M-5(c), HRS, requires a mortgage servicer to comply with specific requirements concerning handling and processing of mortgage payments, as follows:

1. Except as provided in paragraph (4) below, all payments received by a mortgage servicer on a mortgage loan at the address where the borrower has been instructed in writing to make payments shall be accepted and credited, or treated as credited, on the business day received, to the extent that the borrower has provided sufficient information to credit the account.  For all mortgage loans originated after July 1, 2015, except where inconsistent with federal law or regulation,  payments shall be credited to the principal and interest due on the home loan before crediting the payments to taxes, insurance, or fees;
2. Methods of payment and payment instruments shall be reasonable;
3. If a mortgage servicer specifies in writing requirements for the borrower to follow in making payments, but accepts a payment that does not conform to the requirements, the mortgage servicer shall credit the payment as soon as commercially practicable, but in no event later than three business days after receipt;
4. Late payments of principal and interest shall be credited before any late charge is collected; and
5. If the mortgage servicer receives any payment on a mortgage loan and suspenses the payment, does not credit the payment, or does not treat the payment in accordance with Section 454M-, HRS, the mortgage servicer, within ten days of receipt, shall send the borrower notice by mail at the borrower’s last known address indicating the reason the payment was suspensed or was not credited or treated as credited to the account, and specifying any actions by the borrower necessary to make the loan current

Section 454M-5(d), HRS, requires a mortgage servicer to comply with specific requirements concerning escrows for the payment of taxes and insurance, as follows:

1. A mortgage servicer who receives funds from a borrower to be held in escrow for payment of taxes and insurance premiums shall pay the taxes and insurance premiums of the borrower to the appropriate taxing authority and insurance company in the amount required and at the time the taxes and insurance premiums are due, in accordance with the requirements of RESPA, including title 12 C.F.R. section 17 , and shall be liable to the borrower as provided therein;
2. If the amount held in the escrow account as of the date the taxes and insurance premiums are due is insufficient to pay the taxes and insurance premiums, the mortgage servicer shall pay the taxes and insurance premiums from the mortgage servicer’s own funds; provided that the borrower has paid to the mortgage servicer the amounts required to be paid into the escrow account, as determined by the mortgage servicer, for all amounts scheduled to be paid to the mortgage servicer prior to the date the taxes and insurance premiums are due; and
3. Where an escrow account has been established and a mortgage servicer advances funds  in paying a disbursement that is not the result of a borrower’s payment default under the underlying mortgage document, the mortgage servicer shall conduct an escrow account analysis to determine the reasons for and extent of the deficiency and shall provide a written explanation to the borrower before seeking repayment of the funds from the borrower.  The mortgage servicer shall then give the borrower the option of paying the shortage over a period of not less than one year.  The mortgage servicer shall not charge or collect interest on any shortage during the payment period.

Yes.  Any mortgage servicer who violates any provision of subsection (d) of Section 454M-5, HRS (see above), is liable to the borrower:  for any penalties, interest, or other charges levied by the taxing authority or insurance company as a result of any violation; any actual damages suffered by the borrower as a result of the violation, including any amount that would have been paid by an insurer for a casualty or liability claim had the insurance policy not been canceled for nonpayment by the mortgage servicer; and, in the case of any successful action to enforce the foregoing liability, the costs of the action together with reasonable attorney’s fees as determined by the court.   Section 454M-5(d), HRS.

Section 454M-5(e), HRS, requires a mortgage servicer to comply with specific requirements concerning statements of account, as follows:

1. At least once annually, within thirty days of the end of the computation year, a mortgage servicer shall deliver to the borrower a plain language statement of the borrower’s account showing the unpaid principal balance of the mortgage loan at the end of the immediately preceding twelve-month period, the interest paid during that period, and the amounts deposited into escrow and disbursed from escrow during the period.  The annual escrow statement may be provided separately from the annual statement showing the unpaid principal and interest paid.  The format and content of the annual escrow statement shall comply with RESPA, including title 12 C.F.R. section 17;
2. A mortgage servicer shall promptly provide a borrower with an accurate accounting in plain English of the debt owed when requested by the borrower or borrower’s authorized representative.  Within thirty days of receipt of a request from the borrower or the borrower’s authorized representative, a mortgage servicer shall deliver to the borrower a payment history for the last thirty-six months of the borrower’s account, unless a different period is requested, showing the date and amount of all payments made or credited to the account and the total unpaid balance.  The mortgage servicer shall have sixty days to deliver a payment history where the request is for a period longer than the last thirty-six months;
3. A fee shall not be charged to the borrower for the annual escrow statement or for one payment history furnished to a borrower in a twelve-month period; and
4. A shortage, surplus, or deficiency in the escrow account shall be handled in accordance with RESPA, including title 12 C.F.R. section 1024.17. Alternatively, with the consent of the borrower, an excess balance may be applied to the principal balance.

Under Section 454M-5(f), HRS, except where inconsistent with the automatic stay provisions of the Bankruptcy Code with respect to a borrower in a pending bankruptcy proceeding, a mortgage servicer shall send a payment reminder notice to a borrower at the borrower’s last known address no later than seventeen days after the payment becomes due and remains unpaid; provided that a mortgage servicer is not required to send a separate payment reminder notice for each consecutive month in which the mortgage loan continues to remain unpaid.

Section 454M-5(g), HRS, requires a mortgage servicer to comply with specific requirements concerning loan pay-offs, as follows.   A mortgage servicer shall provide a clear, understandable, and accurate statement of the total amount that is required to pay off the mortgage loan as of a specified date, within a reasonable time, but in any event no more than five business days after receipt of a request from the borrower or borrower’s authorized representative.  No borrower shall be charged a fee for being informed or receiving a payoff statement or for being provided with a release upon full prepayment; provided that a mortgage servicer may charge a reasonable fee for providing a payoff statement after five or more requests in any calendar year.

Section 454M-5(i), HRS, requires a mortgage servicer to comply with specific requirements concerning fees, as follows:

(1)  A mortgage servicer shall maintain and keep current a schedule of standard or common fees that the mortgage servicer charges borrowers for the servicer’s servicing-related activities, such as nonsufficient fund fees.  The schedule shall identify each fee, provide a plain English explanation of the fee, and state the amount of the fee or range of amounts.  If there is no standard fee, the schedule shall explain how the fee is calculated or determined.  A mortgage servicer shall make its schedule available on the mortgage servicer’s website and to the borrower or the borrower’s authorized representative upon request;

(2)  A mortgage servicer may only collect a fee if the fee is for services actually rendered and one of the following conditions is met:
(A) The fee is clearly and conspicuously disclosed by the loan instruments and not prohibited by law;
(B)  The fee is expressly permitted by law and not prohibited by the loan instruments; or
(C) The fee is not prohibited by law or the loan instruments and is a reasonable fee for a specific service requested by the borrower that is assessed only after clear and conspicuous disclosure of the fee is provided to the borrower and the borrower expressly consents to pay the fee in exchange for the services;

(3) In addition to the limitations in paragraph (2), attorneys’ fees charged in connection with a foreclosure action shall not exceed reasonable and customary fees for the work.  If a foreclosure action or proceeding is terminated prior to the public sale because of a loss mitigation option, a reinstatement, or payment in full, the borrower shall only be liable for reasonable and customary fees for work actually performed; and

(4) A mortgage servicer shall not impose any late fee or delinquency charge when the only delinquency is attributable to late fees or delinquency charges assessed on an earlier payment and the payment is otherwise a full payment for the applicable period and is paid on its due date or within any applicable grace period.  Late charges shall not be:
(A) Based on an amount greater than the past due amount;
(B)  Collected from the escrow account or from escrow surplus without the approval   of the borrower; or
(C)  Deducted from any regular payment.

Section 454M-5(j), HRS, requires each mortgage servicer licensee to maintain adequate records of each residential mortgage loan transaction at the office named in the mortgage servicer license.

Chapter 454M, HRS, provides that a mortgage servicer:

• Has a duty of good faith and fair dealing in its communications, transactions, and course of dealings with each borrower in connection with the servicing of the borrower’s mortgage loan, Section 454M-5(a), HRS;
• Shall safeguard and account for any money handled for the borrower, Section 454M-5(b), HRS;
• Shall follow reasonable and lawful instructions from the borrower consistent with the underlying note and mortgage, Section 454M-5(b), HRS; and
• Shall act with reasonable skill, care, timeliness, promptness, and diligence, Section 454M-5(b), HRS.

Other specific duties of a mortgage servicer in its dealings with borrowers are discussed below.

A mortgage servicer must comply with the following requirements concerning handling consumer complaints and inquiries:

1. Follow the requirements of the Real Estate Settlement Procedures Act  (“RESPA”), including requests for error and information resolution procedures under title 12 C.F.R. sections 1024.35 and 1024.36 ;
2. In addition to RESPA requirements, establish and maintain a system to respond to and resolve borrower inquiries and complaints in a prompt and appropriate manner;
3. Within ten business days of receiving a request in writing from a borrower or the borrower’s authorized representative, provide the borrower with the name, address, phone number or electronic mail address, if available, and other relevant contact information for the owner or assignee of the mortgage loan; and
4. In addition to the information required to be disclosed under Section 454M-5(h), HRS , at its option, provide any other information regarding the servicing of the loan that the mortgage servicer believes would be helpful to a borrower; provided that any additional information does not contradict or obscure the required disclosures.  Section 454M-5(h), HRS.

“Loss mitigation option” means an alternative to foreclosure, including loan modification, reinstatement, forbearance, deed-in-lieu, and short sale.   Section 454M-1, HRS.   Requirements of mortgage servicers in connection with loan delinquencies and loss mitigation efforts are set out in Section 454M-5.5, HRS, including:

• Reasonable and good faith effort – Section 454M-5.5(a), HRS, requires mortgage servicers to make reasonable and good faith efforts consistent with Chapter 454M to engage in appropriate loss mitigation options, including loan modifications, to assist borrowers to avoid foreclosure.  Mortgage servicers shall provide timely and appropriate responses to borrower inquiries and complaints regarding available loss mitigation options and ensure that borrowers are not required to submit multiple copies of required documents during consideration for any loss mitigation option.  In the event of a delinquency or other act of default on the part of the borrower, or whenever a borrower who is at imminent risk of default contacts the mortgage servicer with respect to a loan modification or other loss mitigation option, the mortgage servicer shall:

1.  Inform the borrower of the facts concerning the loan, the nature and extent of the delinquency or default, the mortgage servicer’s loss mitigation option protocols, and the loss mitigation options and services offered by the mortgage servicer in accordance with Chapter 454M, HRS; and
2. Pursue loss mitigation options with the borrower, including a loan modification whenever possible, in accordance with Chapter 454M, HRS , and, if the borrower replies, negotiate with the borrower, subject to the mortgage servicer’s lawful duties and obligations under the mortgage servicing contract, if any, to attempt a resolution or workout of the delinquency or to prevent the borrower’s default.  (454M-5.5(a)(2), HRS.)

• When a loan modification must be considered – Section 454M-5.5(b), HRS, requires mortgage servicers to consider a loan modification as an alternative to foreclosure when:

1. The borrower demonstrates that the borrower has experienced a financial hardship and is either unable to maintain the payment at the current amount required under the mortgage loan or is unable to make up the delinquent payments; and
2. The net present value of the income stream expected of the modified loan is greater than the net present value of the income stream that is expected to be recovered through the disposition of the property through a foreclosure sale.

• Mortgage servicers participating in “HAMP” must comply with HAMP – Section 454M-5.5(c), HRS, requires mortgage servicers that are participating in the Home Affordable Modification Program Home Affordable Modification Program (“HAMP”) to offer loan modifications in compliance with HAMP guidance and directives including using reasonable efforts to remove prohibitions or impediments to the mortgage servicer’s authority, and obtain third party consents and waivers that are required by contract or law to effectuate a loan modification under HAMP.

• Acknowledgement of a borrower’s loss mitigation request – Section 454M-5.5(d), HRS, provides that unless a longer time is permitted under the guidance or directives implementing HAMP, within ten business days of receiving a request from a borrower or the borrower’s authorized representative for one or more loss mitigation options, the mortgage servicer shall transmit a written acknowledgment of the request to the borrower and, if applicable, to the authorized representative.  The acknowledgment shall identify with specificity any information needed from the borrower for the mortgage servicer to review the borrower’s loss mitigation option request.  The acknowledgment shall also include an explanation of the loss mitigation option process, including the following, as appropriate:

1. The information that the borrower may be asked to provide and third party approvals that may be required for the mortgage servicer to evaluate and complete the request for a loan modification or other loss mitigation option;
2. The average length of time for a decision to be made regarding a loan modification or other loss mitigation option; and
3. A notification of the actions the mortgage servicer, lender, or owner of the mortgage may take during the loss mitigation option process, such as whether the borrower may continue to receive collection letters or foreclosure notices, whether the foreclosure process will continue, or whether and to what extent collection and foreclosure will be stayed.

• Notice of determination of borrower’s loss mitigation request – Section 454M-5.5(e), HRS, provides that within thirty days of receiving all required documentation from the borrower and third parties, unless a shorter time is required under state or federal rules or regulations pertaining to mortgage servicing or under HAMP guidance or directives, a mortgage servicer shall complete its evaluation of the borrower’s eligibility for a loan modification or any other loss mitigation option requested by the borrower and advise the borrower, and if applicable, the borrower’s authorized representative, in writing of the mortgage servicer’s determination.
• If the mortgage servicer determines that the borrower cannot be approved for a loan modification or other requested loss mitigation option, the written notice shall state with specificity:

1. The reasons for the determination;
2. Procedures, deadlines, and contact information for a person at the mortgage servicer for reconsideration, dispute, or appeal of the determination; and
3. Any other loss mitigation option for which the borrower may be considered.

• In addition, the written notice shall include the following statement, in boldface type and in print no smaller than the largest print used elsewhere in the main body of the written notice:  “If you believe your loss mitigation option request has been wrongly denied, you may file a complaint with the state division of financial institutions at [insert current division telephone number] or [insert current division website address for consumer complaints]“.
• Staff awareness of loss mitigation programs, HUD approved counselors – Section 454M-5.5(f), HRS, provides that a mortgage servicer shall take reasonable steps to ensure that the mortgage servicer’s staff is aware of programs designed to assist borrowers to avoid foreclosure or resolve delinquency.  The mortgage servicer shall make available to borrowers who are at least sixty days delinquent or who the mortgage servicer has reason to believe are experiencing a financial hardship and are in imminent risk of default, a list of government approved not-for-profit housing counselors in the borrower’s geographic area, as listed on the website of the United States Department of Housing and Urban Development.
• Borrower access to loss mitigation staff – Section 454M-5.5(g), HRS, provides that a mortgage servicer shall maintain and make available to borrowers and borrowers’ authorized representatives current contact information to communicate and negotiate with the mortgage servicer’s designated loss mitigation option staff who are authorized to discuss and negotiate loss mitigation options.  The contact information shall include all toll-free telephone numbers for direct communication with a loss mitigation option staff person, fax numbers for receipt of documents, and electronic mail addresses.

• Borrower access to loss mitigation supervisor – Section 454M-5.5(h), HRS, provides that the mortgage servicer shall establish and maintain a process through which borrowers may bring disagreements to a supervisory level where a separate review of the borrower’s eligibility or qualification for a loss mitigation option can be performed.

• Borrower waiver of legal claims and defenses prohibited – Section 454M-5.5(h), HRS, provides that a mortgage servicer shall not require a borrower to waive legal claims and defenses as a condition of a loan modification, forbearance, or repayment plan.

• Servicer delay does not count against borrower time limits – Section 454M-5.5(i), HRS, provides that delay caused by the mortgage servicer shall not be counted in calculating the passage of time where a HAMP, proprietary, or other loan modification program specifies:

1. A time limit for a borrower action or response, including appealing or disputing a denial of a request for a loss mitigation option under Section 454M-5.5(e), HRS, or providing documents;
2. A time after which a document is considered stale or too old to use; or
3. A time during which a mortgage servicer is barred from taking certain action adverse to the borrower, including taking steps toward foreclosure or referring the borrower’s account to foreclosure.

Examples of delay caused by the mortgage servicer include the mortgage servicer’s failure to timely send a communication or request to the borrower, duplicative or piecemeal document requests delaying completion of a file, and failure to identify additional documents needed to complete a borrower’s loan modification application.  The mortgage servicer shall reasonably extend the applicable period and promptly inform the borrower in writing of the specific extension period.  Section 454M-5.5(i), HRS.

• Servicer may offer or accept an alternative loss mitigation option – Section 454M-5.5(j), HRS, clarifies that Section 454M-5.5, HRS, does not prevent a mortgage servicer from offering or accepting alternative loss mitigation options, including other modification programs offered by the mortgage servicer, a short sale, a deed-in-lieu of foreclosure, or forbearance, if the borrower requests such an alternative, is not eligible for or does not qualify for a loan modification under HAMP, or rejects the mortgage servicer’s loss mitigation option proposal.
• Servicer shall avoid double tracking – Section 454M-5.5(k), HRS, provides that a mortgage servicer shall avoid taking steps to foreclose or to refer a borrower to foreclosure if the borrower has requested and is being considered for a loss mitigation option or if the borrower is in a trial or permanent loan modification and is not more than thirty days in default under the loan modification agreement.
• Servicer to ensure attorney and agent compliance with Hawaii foreclosure law – Section 454M-5.5(l), HRS, provides that a mortgage servicer shall ensure that the mortgage servicer and the mortgage servicer’s attorneys and agents comply with the requirements of Chapter 667, HRS , on Foreclosures.

[1] *The section within Chapter 454M, HRS, will be determined by the Revisor of Statutes.

Section 454M-5(k), HRS, provides that upon assignment of servicing rights on a residential mortgage loan, the mortgage servicer shall disclose to the borrower:

1. Any notice required by RESPA, including title 12 C.F.R. section 1024.33 (mortgage servicing transfers), within the time periods prescribed therein; and
2. A schedule of the ranges and categories of the mortgage servicer’s costs and fees for the servicer’s servicing-related activities, which shall comply with state and federal law and, if the disclosure is made by a mortgage servicer licensee, shall not exceed those reported to the Commissioner in accordance with Chapter 454M, HRS.

Section 454M-5(l), HRS, provides that at the time a servicer accepts assignment of servicing rights for a mortgage loan, the servicer shall disclose to the borrower all of the following:

1. Any notice required by RESPA;
2. A schedule of the ranges and categories of its costs and fees for its servicing-related activities, which shall comply with Chapter 454M, HRS, and which shall not exceed those reported to the Commissioner; and
3. A notice in a form and content acceptable to the Commissioner that the servicer is licensed by the Commissioner and that complaints about the servicer may be submitted to the Commissioner.

As a general matter, no person subject to Chapter 454M, HRS, may engage in the business of mortgage servicing without a license as provided in that chapter, and without a physical presence in Hawaii, if required.  Section 454M-2(a), (b), HRS.

It is a violation of Chapter 454M for any mortgage servicer in the course of any mortgage loan transaction to fail to comply with any provision of Chapter 454M or any rule adopted pursuant to that chapter.  454M-6(b)(4).

It is a violation of Chapter 454M, HRS for any mortgage servicer to provide any mortgage loan modifications or other services that would require licensing pursuant to Chapter 454F, HRS, unless the mortgage servicer is licensed under Chapter 454F, HRS.  Section 454M-6(c), HRS.

Additionally, Section 454M-6(a), HRS, makes it a violation of Chapter 454M, HRS, for any mortgage servicer in the course of any mortgage loan transaction, or in connection with any mortgage servicing business, to:

1. Misrepresent or conceal material facts, make false promises, or pursue a course of misrepresentation through its agents or otherwise;
2. Engage in any transaction, practice, or course of business that is not in good faith, does   not constitute fair dealing, or that constitutes a fraud upon any person, in connection with the servicing, purchase, or sale of any mortgage loan;
3. Obtain property by fraud or misrepresentation;
4. Misapply residential mortgage loan payments;
5. Misapply payments to escrow accounts;
6. Require any amount of funds to be remitted by means more costly to the borrower than a  bank or certified check or attorney’s check from an attorney’s account to be paid by the borrower;
7. Fail to timely pay taxes or insurance premiums of the borrower, if and as required by Chapter 454M, HRS;
8. Fail to follow procedures concerning escrows for the payment of taxes and insurance as required by Chapter 454M, HRS;
9. Place hazard, homeowner’s, or flood insurance on the mortgaged property when the mortgage servicer knows or has reason to know that the borrower has an effective policy for such insurance;
10. Fail to provide written notice to a borrower upon taking action to place hazard, homeowner’s, or flood insurance on the mortgaged property, including a clear and conspicuous statement of the procedures by which the borrower may demonstrate that the borrower has the required insurance coverage and by which the mortgage servicer shall terminate the insurance coverage placed by the mortgage servicer and refund or cancel any insurance premiums and related fees paid by or charged to the borrower;
11. Place hazard, homeowner’s, or flood insurance on a mortgaged property, or require a borrower to obtain or maintain such insurance, in excess of the replacement cost of the improvements;
12. Fail to provide to the borrower a refund of unearned premiums paid by a borrower or charged to the borrower for hazard, homeowner’s, or flood insurance placed by a mortgagee or the mortgage servicer if the borrower provides reasonable proof that the borrower has obtained coverage such that the forced placement insurance is no longer necessary and the property is insured.  If the borrower provides reasonable proof that no lapse in coverage occurred such that the forced placement was not necessary, the mortgage servicer shall promptly refund the entire premium;
13. Collect private mortgage insurance beyond the date for which private mortgage insurance is required;
14. Collect, charge, attempt to collect or charge, or use or propose any agreement purporting to collect or charge, any fee not in compliance with, or prohibited by, Chapter 454M, HRS;
15. Fail to provide a timely and accurate statement of account, as required by Chapter 454M, HRS ;
16. Fail to handle a consumer complaint or inquiry in accordance with Chapter 454M, HRS;
17. Provide inaccurate information to a credit bureau, thereby harming a borrower’s creditworthiness;
18. Fail to report both the favorable and unfavorable payment history of the borrower to a nationally recognized consumer credit bureau at least annually if the mortgage servicer regularly reports information to a credit bureau;
19. Fail to provide or submit a timely, complete, and accurate notice, acknowledgment, statement, information, explanation, reminder, communication, or other information to any person as required by Chapter 454M, HRS;
20. Fail to comply with loss mitigation option requirements of Chapter 454M, HRS;
21. Fail to offer loan modifications in compliance with HAMP guidelines or directives, if the mortgage servicer is participating in HAMP;
22. Fail to comply with the requirements of Chapter 667, HRS (Foreclosures) and ensure that the mortgage servicer’s attorneys and agents comply with Chapter 667, HRS;
23. Refuse to communicate with an authorized representative of the borrower who provides a written authorization signed by the borrower; provided that the mortgage servicer may adopt procedures reasonably related to verifying that the representative is in fact authorized to act on behalf of the borrower;
    Fail to provide a timely payoff statement as required by Chapter 454M, HRS;
    Fail to issue a release of mortgage in accordance with section 506-8;
24. Conduct any business for which Chapter 454M, HRS, requires a license without holding a valid license as required under Chapter 454M, HRS, or assist or aid and abet any person in the conduct of business without a valid license as required under Chapter 454M, HRS;
25. Engage in the business of mortgage servicing without complying with bonding requirements of Chapter 454M, HRS;
26. Transfer or assign its mortgage servicer license;
27. Change its name or office address without complying with the requirements of Chapter 454M, HRS;
28. Fail to maintain adequate records of each residential mortgage loan transaction at the office named in the mortgage servicer license; or
    Make any false statement or omission of a material fact, in connection with any information or reports filed with a governmental agency or NMLS or in connection with any investigation conducted by the Commissioner or another governmental agency.

Yes.  Section 454M-6(b), HRS, makes it a violation of Chapter 454M, HRS, for any mortgage servicer in the course of any mortgage loan transaction to fail to comply with any:

• Applicable federal law or regulation related to mortgage servicing, including but not limited to:

1. RESPA, including the mortgage loan servicing transfer, escrow account administration, and borrower request for information and error resolution requirements;
2. The Truth in Lending Act, title 15 United States Code sections 1601 through 1667f, as amended, and Regulation Z  adopted thereunder, title 12 C.F.R. part 226, as amended; or
3. Rules and regulations  issued or administered by Consumer Financial Protection Bureau (“CFPB”), and interpretations of the rules by the CFPB through interpretive rules, bulletins, statements of policy, and statements of guidance ;

• Agreement with a governmental entity, agency, agent, or regulator, or state  attorney general that applies to the mortgage servicer, including:

1. A servicer participation agreement or other agreement to participate in HAMP or other Making Home Affordable program;
2. HAMP rules, including guidance provided by Making Home Affordable program handbooks, and supplemental directives; or
3. The National Mortgage Settlement  reached in 2012 by the federal government and forty-nine states, with the five largest mortgage servicers in the United States, to address mortgage servicing, foreclosure, and bankruptcy abuses;

• Order of a court or government regulator that applies to the mortgage servicer;
• Provision of Chapter 454M or any rule adopted pursuant to that chapter; or
  Federal or state law, rule, or regulation.

Notwithstanding any other provision of Chapter 454M, HRS, a mortgage servicer shall not be in violation of Chapter 454M, HRS, if performance of a requirement under that chapter would constitute a violation of federal law, rules, or regulations.  Section 454M-6(d), HRS.

DFI can investigate and take certain actions only against those persons (including entities) within DFI’s regulatory jurisdiction.  For Mortgage Servicers, DFI has regulatory jurisdiction over Chapter 454M licensees (see the Mortgage Servicer Company List), and persons whom the law requires to be licensed under that chapter.

For details concerning the action that DFI and the Commissioner can take against a person in violation of Chapter 454M, HRS, please refer to the Investigation, and Enforcement Powers sections below.

DFI cannot litigate or seek monetary redress on behalf of individual complainants. DFI cannot serve as an arbitrator of private disputes and cannot determine contractual rights and obligations between an institution and an individual.  DFI also cannot render opinions or interpretations to individuals so as to determine an individual’s rights against an institution.

While DFI will make every effort to help address consumer complaints, there are situations and transactions that are beyond the jurisdiction of DFI.  For some complaints, a consumer may need to consult an attorney about pursuing civil remedies.  Section 454M-9, HRS, expressly states that nothing in Chapter 454M, HRS shall be construed to preclude any individual or entity that suffers loss as a result of a violation of Chapter 454M, HRS, from maintaining a civil action to recover damages and, as provided by statute, attorney’s fees.

If you have reason to believe that Chapter454M, HRS (or any rules adopted pursuant thereto) has been violated, or that a license issued under Chapter 454M, HRS should be suspended or revoked, you may file a written complaint with the Commissioner setting forth the details of the alleged violation or grounds for suspension or revocation.  Section 454M-8.5(j), HRS.

For a complaint form and instructions for submission, please see the File a Complaint page of the DFI website.

Before submitting your complaint, please determine to the best of your ability that the person or entity complained of is within DFI’s regulatory jurisdiction (see the first FAQ in this “Complaints” section).

You may need to contact a qualified private attorney qualified to handle your complaint.  Please note that actions may be barred if too much time passes.

Mortgage Foreclosure Information is available on the DCCA Office of Consumer Protection website.

Additionally, these government agency websites may provide some guidance, although DFI is unable to verify the website content:
Consumer Financial Protection Bureau
HUD Approved Housing Counseling Agencies

Specific investigative powers of the Commissioner are listed below, as set out in Section 454M-8.5, HRS.   The authority of that section remains in effect whether a licensee or person subject to Chapter 454M, HRS, acts or claims to act under any licensing or registration law of this State, or claims to act without such authority.  Section 454M-8.5(g), HRS.

In addition to any other authority under this chapter, the commissioner shall have the authority to conduct examinations.  The commissioner may access, receive, and use any books, accounts, records, files, documents, information, or evidence that the commissioner deems relevant to the inquiry or investigation, regardless of the location, possession, control, or custody of the documents, information, or evidence.  The commissioner may review, investigate, or examine any licensee or person subject to this chapter, as often as necessary to carry out the purposes of this chapter.  Section 454M-8.5(a), HRS

The Commissioner has the power to:
Broadly access and use documents, information and evidence – In addition to any other authority under Chapter 454M, HRS, the Commissioner shall have the authority to conduct investigations and examinations in accordance with Section 454M-8.5, HRS.  The Commissioner may access, receive, and use any books, accounts, records, files, documents, information, or evidence that the Commissioner deems relevant to the inquiry or investigation, regardless of the location, possession, control, or custody of the documents, information, or evidence.   Section 454M-8.5(a), HRS.  Section 454M-8.5(h), HRS, provides that no licensee or person subject to investigation or examination under Section 454M-8.5, HRS may knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, computer records, or other information.
Subpoena witnesses and documents – For the purposes of investigating violations or complaints arising under Chapter 454M, HRS, or for the purposes of examination, the Commissioner may review, investigate, or examine any licensee or person subject to Chapter 454M, HRS, as often as necessary to carry out the purposes of Chapter 454M, HRS.  The commissioner may direct, subpoena, or order the attendance of, and examine under oath, all persons whose testimony may be required about loans or the business or subject matter of any examination or investigation and may direct, subpoena, or order the person to produce books, accounts, records, files, and any other documents the Commissioner deems relevant to the inquiry. Section 454M-8.5(b), HRS.
Access to books, records, and personnel of persons subject to Chapter 454M, HRS – Each licensee or person subject to Chapter 454M shall provide to the Commissioner upon request the books and records relating to the operations of the licensee or person subject to Chapter 454M, HRS.  The Commissioner shall have access to the books and records and shall be permitted to interview the officers, principals, mortgage loan originators, employees, independent contractors, agents, and customers of the licensed mortgage loan originator or person subject to Chapter 454M, HRS, concerning their business. Section 454M-8.5(c), HRS.
Require preparation of information – Each licensee or person subject to Chapter 454M, HRS, shall make or compile reports or prepare other information as directed by the Commissioner in order to carry out the purposes of Section 454M-8.5, HRS, including:

1. Accounting compilations;
2. Information lists and data concerning loan transactions in a
3. Other information that the Commissioner deems necessary to carry out the purposes of Section 454M-8.5, HRS.  Section 454M-8.5(d), HRS.

Possession and control of documents and records – In conducting any examination or investigation authorized by Chapter 454M, the Commissioner may control access to any documents and records of the licensee or person under examination or investigation.  The Commissioner may take possession of the documents and records or place a person in exclusive charge of the documents and records.  During the period of control, no person shall remove or attempt to remove any of the documents and records except pursuant to a court order or with the consent of the Commissioner.  Unless the Commissioner has reasonable grounds to believe the documents or records of the licensee or person under examination or investigation have been, or are at risk of being, altered or destroyed for purposes of concealing a violation of Chapter 454M, HRS, the licensee or owner of the documents and records shall have access to the documents or records as necessary to conduct its ordinary business affairs. Section 454M-8.5(e), HRS.
Take action necessary to carry out Chapter 454M, HRS – To carry out the purposes of Chapter 454M, HRS, the Commissioner may:
(1)        Retain accountants or other professionals and specialists, who may be exempt from chapter 76, as examiners, auditors, or investigators to conduct or assist in the conduct of examinations or investigations;
(2)  Enter into agreements or relationships with other government officials or regulatory associations in order to improve efficiencies and reduce regulatory burden by sharing resources, standardized or uniform methods or procedures, and documents, records, information, or evidence obtained under Section 454M-8.5, HRS;
(3) Use, hire, contract, or employ public or privately available analytical systems, methods, or software to examine or investigate the licensee or person subject to Chapter 454M, HRS;
(4) Accept and rely on examination or investigation reports made by other government officials, within or without this State; and
(5) Accept audit reports made by an independent certified public accountant for the licensee or person subject to Chapter 454M, HRS, in the course of that part of the examination covering the same general subject matter as the audit and may incorporate the audit report in the report of the examination, report of investigation, or other writing of the Commissioner.      Section 454M-8.5(f), HRS.
Charge an examination or investigation fee – The Commissioner may charge an examination or investigation fee, payable to the Commissioner, based upon the cost per hour per examiner for all licensees and persons subject to Chapter 454M, HRS, examined or investigated by the Commissioner or the Commissioner’s staff.  The hourly fee shall be $60 or an amount as the commissioner shall establish by rule pursuant to Chapter 91, HRS (Administrative Procedure).  In addition to the examination or investigation fee, the Commissioner may charge any person who is examined or investigated by the Commissioner or the Commissioner’s staff pursuant to Section 454M-8.5, HRS, additional amounts for travel, per diem, mileage, and other reasonable expenses incurred in connection with the examination or investigation, payable to the Commissioner. Section 454M-8.5(i), HRS.

Basically, the Commissioner has the power to make administrative rules, issue interpretations, investigate and act on complaints, conduct hearings, revoke licenses, issue fines,  report violations of Chapter 454M, HRS to federal agencies, and to do all things incidental to the exercise of the Commissioner’s powers.

Investigative powers are set out in Section 454M-8.5, HRS, discussed in the “Investigation” section of this FAQ, above.

Specifically, Section 454M-7, HRS, provides that the Commissioner may suspend, revoke, deny, condition in any manner, or refuse to renew, reinstate, or restore, any license issued under Chapter 454M, HRS, or fine any person holding a license issued under that chapter for any chapter violation.   All such orders shall be made pursuant to Chapter 91, HRS (Administrative Procedure).

Section 454M-8, HRS, provides that the Commissioner may:
(1)  Adopt, amend, or repeal rules, issue declaratory rulings or informal nonbinding interpretations, and investigate and act upon written consumer complaints;
(2) Grant, deny, forfeit, renew, reinstate, or restore the license of any mortgage servicer;
(3) Revoke, suspend, or otherwise limit the license of any mortgage servicer for any violation of the provisions in Chapter 454M, HRS, or any rule or order of, or agreement with the Commissioner;
(4) Report any violation of Chapter 454M, HRS, or violation of federal or state law to the Consumer Financial Protection Bureau or other federal agency having jurisdiction over the licensee;
(5) Investigate and conduct hearings regarding any violation of Chapter 454M, HRS, or any rule or order of or agreement with the Commissioner; and
(6) Do any and all things necessary or incidental to the exercise of the Commissioner’s power and duties, including the authority to conduct contested case proceedings under Chapter 91, HRS.

Administrative fine – Any person who violates any provision of Chapter 454M, HRS, may be subject to an administrative fine of not more than $7,000 for each violation. Section 454M-10, HRS.
Unlicensed foreclosure actions are voided – Any action taken in connection with a mortgage foreclosure under Chapter 667, HRS (Foreclosures), by a nonexempt person who engages in the business of mortgage servicing without a license as provided in Chapter 454M, HRS, shall be void for purposes of Chapter 667, HRS. Section 454M-2.5, HRS.
Liability to borrower for charges due to violation of payment of taxes and insurance requirements – Any mortgage servicer who violates any provision Section 454M-5(d), HRS pertaining to payment of taxes and insurance (discussed above), is liable to the borrower:   for any penalties, interest, or other charges levied by the taxing authority or insurance company as a result of any violation; any actual damages suffered by the borrower as a result of the violation, including any amount that would have been paid by an insurer for a casualty or liability claim had the insurance policy not been canceled for nonpayment by the mortgage servicer; and, in the case of any successful action to enforce the foregoing liability, the costs of the action together with reasonable attorney’s fees as determined by the court. Section 454M-5(d), HRS.

Compliance resolution fund – Fees and fines collected by the Commissioner shall be deposited into the compliance resolution fund established pursuant to Section 26-9(o), HRS. Section 454M-11, HRS.
Administrative fine – $1,000 of the aggregate fine amount for violation of Chapter 454M, HRS, will be deposited into the mortgage foreclosure dispute resolution special fund established pursuant to Section 667-86, HRS. Section 454M-10, HRS.