In 2010, Hawaii had the 11th highest foreclosure rate in the nation. It became widely known that fraudulent advertisers were conning the trusting, desperate and elderly into contracts that would bleed homeowners dry and ultimately lead to debt and foreclosure. The state responded by signing Act 48: a law intended to help protect home owners by ensuring that lenders were putting effort into negotiating proper loan modifications. The process would be mediated by Hawaii’s Department of Commerce and Consumer Affairs (DCCA). A Mortgage Foreclosure Dispute Resolution mediation process became part of the non-judicial foreclosure process and a Mortgage Foreclosure Task Force was assembled to investigate judicial and non-judicial foreclosures.
Some were skeptical of the new law’s ability to protect home owners as there seemed to be one rather substantial loophole. Hawaii has two types of non-judicial foreclosures, both of which fall under the umbrella of Act 48. If a bank were to avoid both of these non-judicial foreclosures and choose to proceed with a judicial foreclosure, no mediation would be enforced. Many mainland banks would rather file a judicial foreclosure and bypass Act 48 altogether. The Mortgage Foreclosure Task Force attempted to convince legislators that banks may use this route to avoid Act 48.
Despite these valid concerns, 2011 saw positive results. Hawaii foreclosures dropped by 53 percent in 2011, post legislature. The vigilance of the Task Force seems to have helped turn the tide in foreclosures last year. The goal for 2012 is continued analysis of foreclosure rules and regulations, as well as informing all stakeholders of possible refinements to the foreclosure process and protecting at-risk homeowners. The Task Force has suggested taking steps to better educate home owners and borrowers about how to avoid financial traps set by predatory lenders.
The protection against unfair foreclosures is certainly a work in progress, but it’s great to see positive developments for our state as a whole. Weeding corruption from the foreclosure system may be a gradual task, but it’s one that home owners here on Maui and throughout the state will be infinitely grateful for.
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