The mortgage took a various course. It was designated to United States Bank Trust National Association, acting as owner trustee for VRMTG Property Trust, in 2021. US Bank filed a judicial foreclosure in June 2022 and won summary judgment in November 2023, a ruling in its favor without a full trial. A commissioner was appointed to run the sale, and the association stopped collecting rent.
Then came the expensive part. When United States Bank transferred to validate the foreclosure sale in April 2024, the high court informed the association to represent every dollar of lease it had gathered given that June 2013, when it initially took the system, and to pay out any excess. That extended back approximately a decade.
The trial court rested its order on two things: a state statute, HRS § 514B-146(n), and a 2023 Hawaii Supreme Court choice called Elima. Both govern what happens to rental income after a foreclosure. But the statute opens with a condition. By its own terms, it uses only after a judicial or nonjudicial foreclosure in which the association obtains title to the unit.
That condition was never ever satisfied. The association did not foreclose. It got the unit by quitclaim deed in a settlement. On that basis, the appeals court ruled the statute did not apply, and neither did Elima, which it checked out as governing associations that take title through their own foreclosure, not by deed.
For the home loan side, the signal is clear. What opens a clawback of an association’s rental income is how the association got title, not simply that a senior home loan is in play. If the association came over the unit through a deed rather than a foreclosure, § 514B-146(n) will not bring the argument.