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Hawaiian Alliance details legal issues surrounding foreclosures

By Staff | Nov 4, 2010


LAHAINA — Fear arrives in the mail at hundreds of Maui households each month.

In September in West Maui, for example, 71 homeowners received letters that their houses went into foreclosure.

RealtyTrac reported 338 Maui foreclosures in September and 1,617 new filings in the state that month.

Hawaii has a non-judicial foreclosure law (HRS 667) that gives mortgage companies the authority to foreclose on a property without court approval.

If an owner falls behind two months on house payments, the mortgage company can simply submit an affidavit to the state Bureau of Conveyances to be stamped, received and filed.

“Thirty days later, they can auction your house off,” said Kale Gumapac, CEO of the Hawaiian Alliance.

“It circumvents your rights… It’s crazy what’s going on around here.”

Gumapac spoke at a free seminar, “Keep The Dream Alive,” sponsored by Na Kupuna O Maui last week Thursday afternoon at Lahaina Civic Center.

Homeowners that go into foreclosure may give up and move out or try to negotiate new loan terms with the mortgage company.

Hawaiian Alliance offers a new option for a fee: going on the offensive.

The organization conducts a “forensic mortgage audit,” then turns the case over to Honolulu attorneys to work with the mortgage firm or file a complaint in federal court.

A forensic loan audit is a probe into all legal paperwork and transaction data pertaining to the real estate loan funded by the lender. The loan process is strictly governed by state and federal laws.

According to the Hawaiian Alliance, “Simply, loans must be legal to be enforceable. Loan violations are serious offenses. An audit will help to determine if you are a victim of predatory lending violations.”

“We build the legal case against the mortgage companies,” said Momi Glushekno, the Hawaiian Alliance’s operations vice president.

If mortgage violations are found, the attorneys can seek punitive damages, legal fees, delay or halt of a foreclosure sale and new loan terms, such as lower interest rates, smaller monthly payments and a principal reduction.

Federal court is backlogged with cases, Glushekno said, so judges require that homeowners and mortgage firms make an effort to settle out of court.

Gumapac explained several issues in the news today, including a legal hornet’s nest at Ally Financial, the country’s fourth-biggest home lender, whose clients include the Federal National Mortgage Association (Fannie Mae) and Federal Home Mortgage Corporation (Freddie Mac).

The Washington Post on Sept. 22 reported that homeowners across the country may have legal ammunition to challenge their foreclosure actions, because Ally Financial’s foreclosure document processing manager admitted approving cases without reading them and signing foreclosure documents without a notary present.

When the problems surfaced, Ally Financial promptly halted evictions of homeowners in 23 states.

In related news, Gumapac said that President Barack Obama last month pocket-vetoed a bill that would have required courts to honor notarizations across state lines, including electronic signatures.

Gumapac also detailed the process by which a loan for a home in Lahaina goes from a mortgage company to a seller, depositor, trust fund-issuing entity, trustee and ultimately to investors via securities sales on Wall Street.

He claims that the homeowner’s original mortgage documents with original signatures often become digital files and vanish during these many transfers, or when loans become part of the Mortgage Electronic Registration Systems (MERS).

“MERS was created by the mortgage banking industry to streamline the mortgage process by using electronic commerce to eliminate paper. Our mission is to register every mortgage loan in the United States on the MERS System,” the company states on its website.

“MERS acts as nominee in the county land records for the lender and servicer. Any loan registered on the MERS System is inoculated against future assignments because MERS remains the nominal mortgagee no matter how many times servicing is traded.”

Gumapac noted that MERS oversees some 80 million loans. Legal challenges concerning the validity of MERS and the computer system’s ability to initiate foreclosures are playing out in courts across the United States.

Rep. Mele Carroll (D-13th District) in this year’s legislative session introduced a bill that would have required mortgage companies to produce the original loan documents with original signatures prior to foreclosure actions.

Hawaii lawmakers instead watered down the measure and created a nine-member foreclosure task force to study the issue. Seven of the members are bankers and foreclosure attorneys, Gumapac said.

Prior to the seminar, Carroll said that in the 2011 session, she will call for a moratorium on Hawaii foreclosures until investigations into the mortgage industry have concluded.

Last month, State Attorney General Mark Bennett reported that Hawaii joined a 49-state effort to address practices by mortgage loan servicers that appear to be in violation of state laws.

Bennett cited “robo-signing” — mortgage loan servicers signing foreclosure documents without confirming their accuracy.

The state also learned that to initiate foreclosures, affidavits and other documents were signed by people lacking personal knowledge of the facts asserted in the documents, and affidavits were signed outside of the presence of a notary public contrary to state law.

What will become of homeowners subjected to defective foreclosures? If a home was wrongly foreclosed and then sold, is the title valid? Gumapac looks forward to these issues emerging in federal court.

“It’s about saving people’s homes, because we are aware of the problems,” Gumapac concluded.

To reach the Hawaiian Alliance, call (808) 281-1567 or e-mail kupuna@wisperhawaii.com.