Amends the Downpayment Loan Assistance Program by: removing the prohibition on combined loan-to-value ratios; clarifying the Hawaii Housing Finance and Development Corporation's authority to establish interest rates and , the official text

HOUSE OF REPRESENTATIVES

H.B. NO.

2270

THIRTY-THIRD LEGISLATURE, 2026

H.D. 1

STATE OF HAWAII

S.D. 1

C.D. 1

A BILL FOR AN ACT

RELATING TO THE DOWNPAYMENT
LOAN ASSISTANCE PROGRAM.

BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1.  Section 201H-161, Hawaii Revised Statutes, is
amended as follows:

1.  By amending subsection (a) to read:

"(a)  The corporation may make downpayment loans,
either directly or through a nonprofit organization as defined in section
454F-1, to eligible borrowers who qualify for loans under section 201H-162.  The downpayment loan to any one borrower
shall not exceed fifteen per cent of the purchase price or appraised value of
the residential property or $60,000, whichever is less.  [In no event shall the loan amount and
purchase money mortgage amount exceed one hundred per cent of combined
loan-to-value.]  The interest rate on
the loans [may range from one per cent to eight per cent, depending on the
buyer's income.] shall be established by the corporation based on
federal program requirements and market conditions."

2.  By amending subsections (c) and (d) to read:

"(c)  The principal of the downpayment loan,
together with accrued interest, shall be due and payable upon the sale,
transfer, or refinancing of the property, or shall be repaid by the borrower in
installments as determined by the corporation; provided that the corporation
may provide a period in which payments may be waived.  The corporation may also forgive all or a
portion of the accrued interest, subject to terms and conditions the
corporation may establish.  The
period over which the principal and interest shall be paid need not coincide
with the period over which the loan from the mortgage lender for the balance of
the purchase price must be repaid.  The
borrower may repay the whole or any part of the unpaid balance of the
downpayment loan, plus accrued interest, at any time without penalty.

(d)  The corporation may secure the services of
nonprofit organizations, as defined in section 454F-1, as well as financial
institutions, mortgage lenders, or other qualified loan originators, to
originate the downpayment loans on behalf of the State for an origination fee
not in excess of the prevailing loan origination fee amount, as determined by
the corporation."

SECTION
2.  Section 201H-162, Hawaii Revised
Statutes, is amended by amending subsection (a) to read as follows:

"(a)  No person shall be qualified for a
downpayment loan unless the person:

(1)  Is a citizen of the United States or a
resident alien;

(2)  Is at least eighteen years of age;

(3)  Is a bona fide resident of the State;

(4)  Will physically reside in the
residential property to be purchased for the term of the loan;

(5)  Is accepted by a mortgage lender as a
person to whom it is willing to lend money for the purchase of the residential
property provided the required downpayment is made;

(6)  Provides a portion of the downpayment,
which shall be equal to [at least five] three per cent of the
sales price[;] and may include any downpayment loan assistance made
available by the corporation under this chapter; and

(7)  Has successfully completed a
homeownership counseling program provided by a housing counseling agency
approved by the United States Department of Housing and Urban Development."

SECTION
3.  Section
201H-163, Hawaii Revised Statutes, is amended to read as follows:

"[[]§201H-163[]]  Restrictions on borrower.  Every loan made under this subpart shall be
subject to the following conditions:

(1)  The borrower shall expend no portion of
the borrower's downpayment loan for purposes other than to [make]:

(A)  Make a downpayment for the
purchase of a residential property; or

(B)  Pay for closing costs, prepaids, and
reserves pursuant to the purchase of the residential property for which the
downpayment loan is provided;

(2)  The residential property purchased with
the downpayment loan and mortgaged to the State to secure the repayment of the
loan shall not be sold or assigned without the prior approval in writing of the
corporation and the first mortgage lender;

(3)  The borrower shall pay when due all
taxes, liens, judgments, or assessments that may be lawfully levied against the
residential property and all costs and expenses of any foreclosure of the
mortgage made to the State;

(4)  The borrower shall maintain fire and
casualty insurance in amounts equal to the replacement value of all
improvements and insurable portions of the residential property with an
insurance company authorized to do business in the State.  All proceeds of that insurance shall be made
payable to the first mortgage lender and the corporation as their respective
interests may appear at the time of any loss or damage.  Subject to the rules of the corporation, in
the event of any loss or damage to the improvements or property covered by the
insurance, the proceeds receivable by the State shall be applied toward the
reconstruction of the improvements or property destroyed or damaged, unless
otherwise determined by the corporation on behalf of the State; and

(5)  The borrower shall maintain the
improvements in good repair.

All
of the conditions in paragraphs (1) through (5) shall be a part of any
downpayment mortgage executed under this subpart, regardless of whether or not
they are expressly incorporated in the mortgage document."

SECTION
4.  Statutory material to be repealed is
bracketed and stricken.  New statutory
material is underscored.

SECTION
5.  This Act shall take effect upon its
approval.