I commend the Star-Advertiser’s Andrew Gomes for his coverage of Act 48, Hawaii’s foreclosure reform. However, his article last Sunday, especially its headline, misses the mark ("New law flounders," Star-Advertiser, Oct. 23).
Criticism from lenders’ attorneys shows this law is hitting them right in the pocketbook. Clearly, the loudest complainers are those who once profited from Hawaii’s weak foreclosure laws.
Economist Paul Brewbaker and others have stated that Act 48 is a "failure" because banks are avoiding the dispute resolution program by refusing to foreclose non-judicially.
I disagree with such a narrow definition of "failure." On Oct. 13, Gomes reported that the overall foreclosure rate dropped 74 percent from a year ago. On Oct. 4, this paper reported that bankruptcies also plummeted, citing Act 48 as the likely cause.
The purpose of Act 48 is to level the playing field between lenders and borrowers in foreclosure. Act 48 has achieved that purpose.
Before Act 48, a home could be sold at auction in less than a month without the borrower’s knowledge. Lender abuse was so rampant, the bill exploded to 100 pages so that we could address all the abuses. One bank was even so bold as to threaten a Hawaii legislator.
Because of Act 48, the old no-integrity-fast-track, non-judicial process is no longer available. Banks now seem to be either pursuing their foreclosures in court, where third-party oversight is ensured; or, they’re actually working with homeowners without resorting to foreclosure.
Critics say the new non-judicial process is too onerous with too many details and requirements. Given the abuses, it’s clear these details are necessary to protect homeowners.
One deterrent to going non-judicial is Act 48’s Unfair or Deceptive Act or Practice (UDAP) provision that could put banks and their lawyers on the hook for triple damages for violations of the law. They say they can’t handle the liability for a missed deadline or wrong font size. If the lawyers can’t read a calendar or use a word processor, maybe they shouldn’t have the privilege of taking someone’s home without court oversight.
But I don’t think it’s the font or deadlines they’re really worried about. What they’re afraid to mention — but is unique to Act 48’s non-judicial process — is the requirement that the banks provide documentation showing they have the legal authority to foreclose. I suspect the lawyers know full well that in many, if not most cases, the off-shore banks can’t do this.
In their haste to profit from the loose lending, multiple transfers and the creation and sale of mortgage-backed securities, the banks have lost their paperwork. The media has exposed this. Emerging case law across the country shows that judges are aware of this, too. It is the liability for the banks’ greed, carelessness, incompetence and outright fraud that the lawyers really fear.
Brewbaker thinks Act 48 is hurting the housing market, but has no data to back this up. Someone needs to explain to me how holding banks accountable, keeping families in their homes, and not flooding the market with homes repossessed through fraud and deception is not in the best interest of the people in Hawaii.
Rep. Robert Herkes (Kau, South Kona) chairs the House Consumer Protection and Commerce Committee.
