Why the bill was a strange instrument for a real problem

Read the operative words again: associations “are required to comply with… mortgage lending requirements.”

Mortgage lending requirements are not law. They are underwriting standards set by two private secondary-market purchasers, published in a selling guide that changes by announcement and can change again next month. Writing a duty to comply with them into a state statute would have bound Hawaii associations to a standard no Hawaii institution controls, and would have made a Selling Guide update a change in state law.

That is a serious drafting objection, and it may well be why Judiciary deferred it rather than a judgment that the problem is unreal.

The problem is entirely real

The Insurance Division sets out the chain in its own consumer guidance: the GSEs require full building coverage; below 100% they will not purchase the mortgages; primary lenders sell about 70% of their mortgages to them; and “if units requiring a mortgage cannot be sold on the secondary market, the entire building may lose value as future sales may be limited to cash buyers.”²

The Division also explains why Hawaii buildings fall short: only three insurers in the admitted market write condominium master policies, and admitted carriers “often cover just 20-30% or less of a building’s hurricane exposure,” pushing associations into surplus lines whose rates the Division is not authorised to regulate.

What Hawaii did do, without SB 2294

The state’s actual response to the financing problem is not a compliance mandate. It is capacity and capital:

• Act 296 (2025) reactivated the Hawaii Hurricane Relief Fund to write hurricane excess for associations — the direct answer to the 100%-of-replacement-cost test — and expanded the Hawaii Property Insurance Association.
• The same Act created the Condominium Association Loan Program, which launched in May 2026 at 7% for up to 20 years and is, as of this writing, on hold.
• C-PACER financing was authorised in 2024 for associations, for resilience repairs including re-piping and fire sprinklers.

Those address the cause. A statutory duty to comply with lender requirements would have addressed the symptom, and would have created an enforcement question nobody wanted to answer: sued by whom, for what remedy, when a building cannot obtain conforming coverage at any price?

What the whole episode means for a board

Nobody is going to make this a legal duty, and it does not need to be one. The consequence of failing the lender tests is not a lawsuit; it is that units in the building stop selling. That is a sharper incentive than a statute.

Concretely:

• Test your master policy against the current guide, not against last year’s renewal — 100% of estimated replacement cost, deductibles at or under 5% per occurrence and $50,000 per unit, each peril’s deductible compliant independently, named-storm windstorm covered.
• Run the reserve and delinquency tests — 10% reserve funding, 15% delinquency ceilings — before a lender does.
• Do not wait for a resale to fail to find out your project’s status. Ask a lender or mortgage broker with Condo Project Manager access.

What to watch

Whether 2027 brings a differently drafted version — a disclosure duty, say, requiring a board to tell owners when the association’s coverage falls below the standard the secondary market requires. That would be enforceable, would not delegate Hawaii law to a private guide, and would put the information where it belongs.