Maui foreclosures & bank-owned REO real estate in Wailea and Makena Act 48 creates a mortgage foreclosure dispute resolution program.

 

Measure halts foreclosure process, creates dispute resolution program


reprinted courtesy Maui News 5/15/11
by Brian Perry, City Editor (citydesk@mauinews.com)

 

Act 48 suspends nonjudicial foreclosures in Hawaii and creates a mortgage foreclosure dispute resolution program administered by the state Department of Commerce and Consumer Affairs' Office of Administrative Hearings.

The new law is for nonjudicial foreclosures, which is how lenders in most cases in Hawaii seize residences from homeowners who've defaulted on their loans. As the term implies, nonjudicial foreclosures are those handled outside the oversight of a judge.

According to a DCCA fact sheet on the new law:

The program would begin no later than Oct. 1 and continue through Sept. 30, 2014. As of Oct. 1, lenders seeking nonjudicial foreclosures would file notices with the DCCA and a $250 filing fee that would go toward a special dispute resolution fund.

Once established, it will give owner-occupants of residential property facing foreclosure an opportunity to meet with lenders and a trained, neutral third party to modify home loans or work out a payment plan within three months.

The program is limited to owner-occupants of residential property who have lived in their homes for at least 200 days.

Mortgagees and owner-occupants are required to participate in the program if the lender chooses to pursue a nonjudicial foreclosure. The foreclosure process is suspended until the dispute resolution is completed.

Homeowners facing nonjudicial foreclosure would receive a notice from the state notifying them of the opportunity to engage in dispute resolution with information about the program and paperwork for them to participate.

The owner-occupant would have 30 days after the mailing of the notice to take advantage of dispute resolution and pay a $300 program fee. If the owner chooses to participate, the lender also would need to pay the $300 fee.

If the owner does not seek dispute resolution, then the foreclosure process would proceed.

The dispute resolution process provides for a timetable for a dispute resolution session for the parties, including a neutral party to facilitate the process.

If the parties reach a resolution, the foreclosure would be terminated. If they can't agree, the foreclosure would be resumed.

A lender who fails to comply with the program will not be able to proceed with a nonjudicial foreclosure. Penalties for noncompliance include fines of as much as $1,500.

Other provisions of the law include:

* An owner-occupant subject to a nonjudicial foreclosure may convert to a judicial foreclosure by filing a petition with the Circuit Court within 30 days after receiving a foreclosure notice.

* A 45-day phase-in period after the filing of the petition to convert to a judicial foreclosure in which all owner-occupants, mortgagors and signers of the promissory note with interest in the residential property subject to foreclosure must file a statement with the Circuit Court that they agree to submit themselves to the judicial process. (This does not apply to owner-occupants participating in the dispute resolution program.)

* Condominium associations are authorized to collect past-due association assessments of up to $7,200.

* Lenders are prohibited from pursuing deficiency judgments against owner-occupants after a nonjudicial foreclosure when they do not have a fee simple or leasehold ownership interest in any other real property.

* Mortgage servicers with a 20 percent market share in the state must maintain a local office.

Act 48 was signed last week by Gov. Neil Abercrombie

 

reprinted courtesy Maui News 5/15/11, original link www mauinews.com/page/content.detail/id/549446/Measure-halts-foreclosure-process--creates-dispute-resolution-program.html?nav=5031

 

Homeowners have a fighting chance with foreclosure law

Measure an opportunity to meet with third party, lenders

reprinted courtesy Maui News 5/15/11
by Brian Perry, City Editor (citydesk@mauinews.com)

WAILUKU - With the ailing economy, many people have lost income and have been unable to make monthly mortgage payments.

Some have given up, surrendering their homes in foreclosure. Others have fought back, trying to convince lenders to lower their monthly payments to something they can afford. In those cases, horror stories abound of people caught in seemingly endless loan-modification discussions - and many still lose their homes.

With Gov. Neil Abercrombie recently signing sweeping foreclosure reform into law, consumer advocates say homeowners seeking loan modifications will now have a fighting chance. The law stops most nonjudicial foreclosures, at least temporarily, and provides consumers the opportunity to work out a loan modification in a face-to-face meeting with lenders and a trained neutral third party.

Attorney Jim Fosbinder, who has represented numerous Maui homeowners in foreclosure disputes, said most problems stem from big, Mainland banks negotiating in bad faith with consumers.

The banks usually have no intention of actually modifying customers' loans, he said, but they claim they'll consider it and convince people that they'll get a loan modification if they just keep working on it.

One client, a woman whose husband was diagnosed with a terminal disease seven years ago, could not make full payments on a mortgage and believed she could get her loan modified, Fosbinder said.

Instead, she was "stuck in an endless loop of modification discussions for seven years."

The bank never provided an absolute yes or no, and required resubmissions of documents, Fosbinder said. Some people have resubmitted full loan applications more than 20 times, he said.

Wailuku attorney David Cain said his firm had a client who was trying to negotiate a loan modification with a major lender.

"When she received an auction date, she called the lender in a panic and demanded that the lender cancel the auction date," he said. "The lender allegedly complied and in fact sent her a written cancellation notice."

Nevertheless, the lender auctioned the property on the original auction date, Cain said.

"Hopefully, with this new legislation, stories like this will not happen again," he said. "Unfortunately, before this law change, our client's only option was to sue the bank, which for the typical consumer that comes into our office is not an option due to the prohibitive costs of litigation."

Realtor said she's hopeful the new law will help people who are struggling to make ends meet and frustrated by the process of trying to modify home loans.

said she had no foreclosure listings 10 years ago, but now 60 percent of her listings are foreclosures. The number of foreclosures began to grow two to three years ago, and now "I think it's increasing," she said.

That is unclear.

In April, the number of home foreclosures in Hawaii dropped for the fifth consecutive month, but that was attributed to several major lenders holding back on new filings after their loan documentation practices were called into question.

The real estate research firm RealtyTrac reported there was a 33 percent decrease in Hawaii filings from a year earlier, from 1,474 to 987. That was a rate of one foreclosure for every 593 households. The worst rate was on Maui, where there was one foreclosure per 282 households. The island had 236 total filings in April. South and West Maui were particularly hard hit, with 73 and 60 filings, respectively.

West and South Maui Sen. Roz Baker, who as chairwoman of the Senate Commerce and Consumer Protection Committee shepherded the foreclosure reform bill through the Senate, said she hopes the 101-page measure allows people "a little bit of a fresh start."

"It's an attempt to bring some order to a very chaotic process," she said.

Lawmakers heard "dozens and dozens of stories" from homeowners who believed they were going through a mortgage loan-modification process but later found out that lenders had foreclosed on their homes, Baker said.

The nonjudicial foreclosure process provides no oversight by a judge and is the way most lenders have seized property from homeowners who've defaulted on their loans. Baker said she has been told the new law is the "most progressive, comprehensive and pro-consumer mortgage reform legislation any state has enacted."

The measure addressed a situation in which there was "some scamming going on" and some cases in which "the right hand in a big institution was not knowing what the left hand was doing," she said.

West Maui state Rep. Angus McKelvey said he sees the problem as "Mainland lenders running amok."

Instead of dealing in good faith to work out a resolution with property owners who've fallen behind on their payments, Mainland mortgage lenders have been requiring people to submit and resubmit documents in an "endless request for information already sent," McKelvey said.

There have been cases in which Maui residents' homes have been foreclosed, and the only public notification was provided in Honolulu publications, he said.

"They're just jerking people around," he said.

But Hawaii Credit Union League President Dennis Tanimoto said his group opposed the new law.

He said there was a consensus that the state's problems with foreclosures were caused by Mainland lenders, not Hawaii financial institutions. But a proposal to "carve out" Hawaii lenders from the bill failed.

Tanimoto predicted that because the reform measure imposes a one-year moratorium on "Part 1" nonjudicial foreclosures and requires mandatory dispute resolution, it will lengthen an "already slow" process for mortgage foreclosures.

(The law also provides for so-called "Part 2" nonjudicial foreclosures, but Tanimoto said that provision requires certain things that make it "very difficult" to do a foreclosure. So, it is rarely used.)

He said most lenders would pursue judicial foreclosures under the new law, but "it's just going to mean that the courts are going to be backed up even more than they have been in the past."

Slowing the foreclosure process will likely delay the recovery of the state's real estate market and lead to a further decline in property values, Tanimoto said.

Gary Fujitani, executive vice president of the Hawaii Bankers Association, said his association was continuing to review the measure signed by the governor, and it was not immediately able to provide meaningful comment.

The association represents 11 banks in Hawaii, not out-of-state banks, he said.

Attorney Marvin Dang, lobbyist for the Hawaii Financial Services Association, said members of his association are reviewing the new law to determine how best to handle existing and future foreclosures.

Association members will need to determine how future loans will be underwritten and how much they will cost, he said.

Dang also said there could be further delays with judicial foreclosures.

"The courts could be overwhelmed," he said. "They're already overwhelmed now."

Attempts to get comment from representatives of Bank of America, a prominent bank doing business in Hawaii, were unsuccessful.

However, Wells Fargo spokeswoman Vickee Adams said Wells Fargo would review the new law, and "as always comply with all applicable laws and rules."

Rucynski said she's happy the new law will give some homeowners a chance to work out a loan modification with their banks. A trained neutral third party will help consumers not fully versed in foreclosure laws, she said.

Unfortunately, the new law won't help some homeowners whose foreclosures have gone too far or who now don't have enough income to make a loan modification feasible, Rucynski said.

Cain said the new law isn't perfect.

The mediation process costs consumers at least $300, he pointed out, and it doesn't guarantee loan modification success, only a fair review. Also, it makes the litigation option too easy, and "we are concerned that people will attempt to navigate the complicated circuit court system, which can result in counterclaims and end up losing their homes or having their wages garnished."

"If legislators want to keep owner/occupants in their home and provide a meaningful judicial review option, they may want to consider providing funding to help consumers in this situation get paid-for attorney representation," Cain said.

McKelvey said the state's problem with foreclosures goes beyond loan disputes between banks and their customers.

"It's killing our economy statewide," he said. "And it's driving the real estate market down, and it's also leading to many homes that are abandoned. . . . They are becoming blights in the neighborhood, an empty house. People start stripping it. Rats move in."

 

* Brian Perry can be reached at citydesk@mauinews.com

 

 

reprinted courtesy Maui News 5/15/11, original link www mauinews.com/page/content.detail/id/549446/Measure-halts-foreclosure-process--creates-dispute-resolution-program.html?nav=5031

 

 

reprinted courtesy Maui News 5/15/11

brought to you by Wailea Makena Real Estate Inc.

www.Wailea-Makena-real-estate.com

 

 

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