Section 6-27-15 - Sale or transfer of mortgaged property(a) Every mortgage shall contain a due-on-sale clause giving the system the right to require the borrower to make immediate payment in full of the entire indebtedness secured by the mortgage if the borrower sells or transfers all or a part of the mortgaged property, including any equitable or beneficial interest, without first obtaining the system's prior written consent.(b) The requirement for prior consent shall not apply to a transfer to an inter vivos trust in which the borrower is and remains the beneficiary and which does not relate to the transfer of the borrower's occupancy of the mortgaged property. The attorney preparing the inter vivos trust document shall issue a statement acknowledging that he or she has read the provisions of this section, and represents that the transfer of the interest in the mortgaged property into the inter vivos trust conforms to the limitations under this section. This statement shall be submitted to the participating financial institution. The due-on-sale clause shall be fully effective as to any sale or transfer of the mortgaged trust property by the trustee, or sale or transfer of the borrower's equitable or beneficial interest in the property, without the prior written consent of the system.(c) The system's consent shall be subject to the member home loan program policy in effect on the date a request for consent is received by the system.(d) The system's right to require the borrower or trustee to make payment in full with respect to the sale or transfer shall be subject to any applicable federal or state laws which restrict or prohibit the system's exercise of the right.(e) The system shall not unreasonably withhold its consent to the borrower's sale or transfer of the mortgaged property by agreement of sale, provided the system's mortgage priority is not affected by the sale or transfer, the borrower is not in default of the loan or has not broken any promises made in obtaining the loan, has notified the system within a reasonable time of the proposed transaction, and agrees to: (1) The shortening of the remaining loan term to the earlier of:(A) The term of the agreement of sale: or(B) Three years and to make immediate payment in full of all amounts due if the buyer under the agreement of sale is not an eligible member;(2) The increase of the interest rate for the loan to the lesser of either four per cent above the interest rate then in effect or the interest rate then in effect for the program; except if the result is less than the interest rate for the loan in effect there shall be no change in the interest rate;(3) Pay or reimburse the lender, servicer, or the system, as the case may be, for all costs or expenses, including reasonable attorney's fees and consent fees incurred to review the proposed transaction and draft documents;(4) Acknowledge that the system shall not consent to any assumption of the loan or to any further sale or transfer of the mortgaged property;(5) Acknowledge that as a condition for the system's consent, the buyer shall sign a certification of occupancy in which the buyer represents and agrees to occupy and use the mortgaged property as a principal home for at least one year after the closing of the agreement of sale;(6) Sign the documents as may be necessary, including a loan modification agreement; and(7) Give assurances as the lender or servicer may require to protect the system's lien priority in the mortgaged property. If any of the foregoing conditions require the borrower to pay an interest rate or finance charge which would exceed the highest rate permitted by law, then the borrower's obligation to pay interest or finance charge shall be reduced to the highest permitted by law, so that the borrower is not obligated to pay any interest or finance charge which would result in the payment of interest or finance charge in excess of the limit so permitted.
[Eff 2/9/89] (Auth: HRS §§ 88-28, 88-119.5) (Imp: HRS §§ 88-119, 88-119.5)