As Private Lenders, the money we lend to the developer is secured by a Mortgage. This means we can foreclose on the property if the Developer fails to repay all our money, plus interest, based on the terms agreed. But what does this mean?
Foreclosure is a legal process in which a lender recovers the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the property.
In Hawaii, if the Developer defaults on the Mortgage, the Lender may foreclose on the using either a judicial or non-judicial foreclosure process.
A "Judicial Foreclosure" simply means the lender must files a lawsuit to get a court-ordered foreclosure. Then the Lender can sell the property.
A "Non-Judicial Foreclosure" simply means the lender must publish the sale of the property in the paper for a certain number of weeks before selling the property.
There are no rights of redemption in Hawaii. The right of redemption means the Developer has right to re-claim the property, after it is foreclosed, if he can later come up with the money. In Hawaii, the developer has no such right.
As long as the total amount of money lent for the project is less then the After Repair Value (ARV), we can be confident that the Developer will either pay us back all our money plus interest or we can sell the property to recover all our money and interest.
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This blog is for information purposes only and is not intended to be legal advice.
Kevin T. Aubart, Legal Administrator
Aubart & Associates