Hawaii House Rep. Angus McKelvey says there are few issues that get his Maui constituents more up in arms than mortgage foreclosures.

“I hear this all the time when I go door to the door in the community,” said McKelvey, a Democrat who represents House District 10 covering Lahaina, Kaanapali, Kapalua, Maalaea, Kihei and North Kihei. “I’m trying to get the government to address it.”

McKelvey also sits on the House Consumer Protection and Commerce Committee, where he gets first crack at housing foreclosure bills. There are several dozen at the 2011 Legislature, including several co-sponsored by KcKelvey.

Imagine, then, McKelvey’s surprise when the lawmaker himself received a nonjudicial foreclosure notice on a home he shares with his mother in Lahaina. McKelvey signed the promissory note on the property, which is owned by his mother. It’s nonjudicial foreclosures that have become the subject of scrutiny of attorneys general and consumer protection officials across the country.

Nonjudicial foreclosures allow lenders to foreclose on a property without getting a court order from a judge first.

The foreclosure notice to the McKelveys is dated Jan. 26 — a week after the Legislature began its session and the last day for bill introduction. He says the notice was not actually delivered to his mother’s house until Feb. 4.

McKelvey voted in favor of a bill calling for a moratorium on nonjudicial foreclosures, House Bill 894, in committee on Feb. 2 and as a member of House Judiciary that same day. HB 894 was approved by voice vote on second reading in the full House Feb. 8.

On Feb. 10, the full House passed the measure on third reading with six Republicans voting “yes with reservations” and another Republican voting “no.” All Democrats voted “yes” except for McKelvey, who told Civil Beat he was visiting the men’s room at the time of the vote.

“Had (HB 894) been on the floor, I would have asked about a conflict,” he told Civil Beat. “It was an omission on my part when the bill passed second reading. It passed by me so fast. It was not intentional.”

McKelvey says he now recognizes the appearance of conflict of interest on voting on that bill and, possibly, others, even though the moratorium bill wouldn’t have applied to him because it only applies to foreclosures after the bill is signed into law. He says he will seek House Speaker Calvin Say’s opinion on whether he should recuse himself on future votes.

But he also says the bigger issue is the growing problem of housing foreclosures that are targeting people unfairly, especially on the Valley Isle. Many other lawmakers agree, as does the state Office of Consumer Protection.

“It’s a big problem,” said director Steve Levins. “A lot of people are facing losing their homes and what we are focused in on are the bills to help people stay in their home if possible, perhaps with the help of meaningful mediation.”

Levins said he does not have exact figures on local home foreclosures.

“But it is quite alarming, actually,” he tells Civil Beat. “Homeowners have testified at the Legislature in various hearings, and these are not anecdotal stories. I get calls and complaints on a daily basis mirroring the same thing. They say they are eligible for loan (mediation), they send their documents in, then all of a sudden they get a notice of sale.”

That’s more or less what happened to McKelvey, who showed Civil Beat documents he says demonstrate there was ongoing mediation with his home’s lender when a third party triggered the foreclosure. He also says attorneys serving the foreclosure notices have made repeated visits to his mother and McKelvey’s office at the Capitol.

“We weren’t behind in mortgage payments,” he said.

Conflict Of Interest?

The moratorium bill, House Bill 894, was not KcKelvey’s bill.

It was co-introduced by another Maui representative, Mele Carroll, and four other Democrats. Carrol represents District 13 covering Lanai, Molokai, Keanae, Wailua, Nahiku, Hana and uninhabited Kahoolawe and Molokini.

“I campaigned on this bill,” said Carroll, who says her constituents are as upset as McKelvey’s over housing foreclosures.

There is also a second House bill that calls for a moratorium on nonjudicial foreclosures, HB 582, which was introduced by three other Democrats. It has been deferred in McKelvey’s Consumer Protection committee, but there has been no vote.

Disclosure Rules

State law requires annual financial disclosure by state legislators.

McKelvey’s latest filing with the State Ethics Commission does not list the Lahaina home owned by his mother, but it does note that he is the vice president and director of McKelvey Incorporated, which shares the same Lahaina address.

McKelvey Incorporated, according to the Department of Commerce and Consumer Affairs, is a retail and wholesale magazine consulting service started in 1963 by KcKelvey’s mother. McKelvey Incorporated has also done business as Maui retailer South Seas.

McKelvey’s compensation last year was “none.”

McKelvey told Civil Beat that, once he was served the foreclosure notice, he consulted with Speaker Say on House rules. He was told that he would not have to recuse himself on a committee vote but would on a floor vote.

When it comes to disclosure, here is what the House rules say:

If a legislative matter which affects a member’s interests arises before the member has made a disclosure to the Ethics Commission, the member shall orally disclose his or her interest to the House before voting. The member then shall immediately make the written disclosure required by law and these Rules.

Georgette Deemer, director of communications for the House, said, “He has a potential conflict but not one yet. He needs to ask for a ruling on this, but he is not the one benefitting from the bill.”

“I will ask for judgment on 894 and with any other bills with mortgage issues,” McKelvey said.

Meanwhile, McKelvey says he and his mother have retained legal counsel to help them with their foreclosure.

The Foreclosure Moratorium Bill

HB 894 would initiate a five-month moratorium on nonjudicial foreclosures on the date the bill becomes law. An earlier version of the bill, before it was amended, called for a moratorium to end “on the date that the federal government releases a final public report on any federal investigation into the securitization of mortgages.”

The bill is opposed by the DCCA, according to written testimony, stating that, while it is aware of law enforcement action across the country directed at lenders who have allegedly violated consumer protection statutes and foreclosure laws, it said it did know of any cases that resulted in mandatory foreclosure. DCCA said it also was unaware of and federal or state legislation addressing this issue.

HB 894 is also opposed by the Hawaii Bankers Association, the Mortgage Bankers Association of Hawaii, the Hawaii Credit Union League, Hawaii Financial Services Association and Hawaii Association of Realtors.

Testifying in support were ILWU Local 142 and several Maui homeowners.

HB 894 now awaits hearing in the Senate.

Foreclosures Big Issue at the Ledge

McKelvey has made addressing foreclosures a priority, but rewriting state law on mortgage foreclosures is not just an issue in the House.

In the Senate, a half-dozen or more measures address many of the same issues as House legislation. Most are co-sponsored by Sen. Rosalyn Baker, who represents Senate District 5, covering South and West Maui: Makena, Wailea, Kihei, Maalaea, Lahaina, Kaanapali, Napili and Kapalua.

McKelvey also co-introduced two bills that would adjust state law on nonjudicial foreclosures, which is covered in Hawaii Revised Statues 667.

House Bill 1410 would repeal regular and alternate nonjudicial foreclosure processes and implement a new nonjudicial foreclosure process based upon the California deed of trust system. McKelvey’s co-introducers include House Speaker Calvin Say, Majority Leader Blake Oshiro and Finance Chairman Marcus Oshiro.

HB 1410 was deferred Feb. 9.

McKelvey’s other bill, House Bill 1411, is alive and includes even broader support. HB 1411 would repeal the old nonjudicial foreclosure process, clarify the new nonjudicial foreclosure process, strengthen laws regarding mortgage servicers and broaden the duties of the Center for Alternative Dispute Resolution in the Hawaii Judiciary.

DCCA objected to HB 1411’s requirement that nonexempt mortgage services maintain a physical presence in Hawaii, arguing it would greatly increase the cost of doing business for mortgage services that are licensed by the state. It also said the Mortgage Foreclosure Task Force is looking at reviewing HR 667; lawmakers should thus hold off on repealing the law (which DCCA acknowledged has “deficiencies”).

As with Mele Carroll’s HB 894, several homeowners testified in support of HB 1411, as did an advocacy group, Faith Action for Community Equity; the labor union UNITE HERE! Local 5; and Hawaii Catholic Charities. Similarly, Hawaii Bankers Association and Hawaii Financial Services Association oppose HB 894, though the Hawaii Association of Realtors says it supports the intent of the measure.

McKelvey told Civil Beat he feels like he was intentionally singled out for foreclosure, as if to muzzle him.

“The timing seems odd,” he said.

Rep. Carroll agrees, noting that McKelvey has been outspoken on the issue.

Why isn’t Carroll a target, then?

“I don’t own a house and I sold my time share,” she says.

About the Author