HI Bankers Association (oral testimony): This bill doesn’t make sense. This distressed residential properties program is a wholesale bailout of lenders who made bad loans. It creates a State of Hawaii portfolio of toxic mortgages. The State will is basically becoming the mortgagor. The full faith and credit of the state is what will make the lenders whole. This could adversely impact state’s credit and bond rating. The bill allows state to issue $25 million revenue bonds (Note: HD3 now says $10 million). This will just repeat what brought the mortgage crisis upon us in the first place—toxic mortgages were bundled up and sold to unsuspecting bondholders. Future borrowers will have more difficulty qualifying for a mortgage; banks will pass onto them the costs by requiring a high down payment, and by being more conservative in the underwriting. We also question the legality of the provision allowing condemnation of private personal property for public use provision.