'Flaws' in Act 48 are actually teeth to protect homeowners
On Wednesday, this paper reported on a meeting sponsored by collection lawyers to discuss Act 48 — Hawaii's mortgage foreclosure reform ("Attorneys say flaws mar new isle foreclosure law," Star-Advertiser).
It appears this meeting was a gripe session for those who previously enjoyed a free ride on a fast track through a giant loophole in Hawaii's foreclosure law.
Act 48 has taken the wind out of their sails because of its explicit moratorium on a law from the 1800s. That law allowed a bank to sell a home at a foreclosure auction in just four weeks — without requiring the homeowner's knowledge.
Until Act 48, these lawyers used that law to steamroll through the vast majority of Hawaii's foreclosures. That process had virtually no consumer protections, nor any third-party oversight.
With the fraud, deception, mismanagement and mistakes that have come to light during this national foreclosure fiasco, I feel no sympathy.
It's clear these lawyers are going judicial because they have little faith in their ability to follow the new non-judicial law and the integrity it requires.
One lawyer said he receives up to 100 referrals a month. If compensated at Fannie Mae's bargain rate of $1,100 per non-judicial foreclosure, that lawyer could still bring in $110,000 per month. However, Fannie Mae only pays $2,200 per judicial foreclosure — money they might not see for a couple years. Plus, these lawyers actually have to show up and plead their case to a judge. What a hassle! No wonder they're so upset.
They should look at the bright side. The Legislature could have taken the approach the New York courts have — require lawyers to affirm they actually verified the accuracy of the foreclosure papers submitted to the court.
Well, as we say here at the Capitol, "we can fix it next year."
I wonder if the collection lawyers gave any thought to why Act 48 was passed. Let me enlighten them.
This law wasn't passed for the banks who, with the help of Fannie Mae, seduced the unwary, concocted complex investment schemes to line their pockets, pass on the risk, and cheat the investors — the very banks that required the taxpayers to bail them out and keep our economy afloat.
Nor is Act 48 for the unscrupulous real estate agents and mortgage brokers who encouraged people to purchase homes they couldn't afford — whose greed contributed to the inflation of a market wherein the hard-working families of Hawaii can hardly afford a home. Their indulgences added to a housing bubble that was bound to burst.
Certainly, Act 48 was not passed for the collection lawyers, whose fast-track, fast-money non-judicial foreclosure binge is now over.
Let me be clear: Act 48 was passed to protect the consumer. It creates a level playing field for the beleaguered homeowner. It has helped many deserving homeowners, and will do so for many more.
Foreclosures breed foreclosures; and before Act 48, they were pouring right through that non-judicial loophole from the 1800s. To the lament of the collection lawyers, that loophole is now tightly sealed. As chairman of the House Committee on Consumer Protection and Commerce, I have no intention of reopening it.
It is plain to see that the biggest whiners in a post-Act 48 Hawaii are those who can no longer make big fast easy money.
What the collection lawyers are calling the "flaws" of Act 48 are actually "teeth." They are so sharp, the lawyers are running scared into the jaws of the courts.
The people of Hawaii have my pledge that I will do all in my power to support the other branches of government as we address this crisis together — for the consumer.