New Bill Would Protect Against Mortgage Fraud

Stephen Levins
Stephen Levins

HONOLULU (KHNL) -- Home mortgages are risky these days. Now, in addition to the public's concern for a deepening mortgage crisis, is a new problem: scam artists looking to prey on vulnerable homeowners.

Homeowners facing foreclosure are susceptible to scams that promise to rescue their home. A new bill would provide some protection. But state officials are warning people the best protection is to stay alert and aware.

Experts predict there will be more home foreclosures if the US economy goes into a recession. Stephen Levins at the Department of Commerce and Consumer Affairs says, "There's a real problem in Hawaii with people trying to steal equity out of homeowners. They generally target people facing foreclosure."

The state says it's seen an increase in scams that prey off people about to lose their homes. Levins says these 'foreclosure rescue' consultants charge thousands of dollars in exchange for supposedly negotiating with the homeowners' creditors, but likely do little or no work. Levins says the pitch is usual, "Give us $2,500 and we can stop this. Generally they don't stop anything. They've succeeded in taking $2,500 from the homeowners."

In extreme cases, people have signed over their home! Levins says, "They have the homeowner convey title to the 'rescuer.' The homeowner becomes a tenant in his own home."

Lawmakers are hearing a bill (House Bill 3104 and Senate Bill 3026) that would help protect consumers. Distressed property consultants would have to give homeowners a written contract which lists the services provided. And, adds Levins, "It caps any kind of profit they make and equity they can take out."

Levins also wants people to be aware of scams like this. "People are vulnerable. They're looking for any way to prevent their house being taken from them."

If you're facing foreclosure, Levins says to talk to attorneys and even the bank. "What they shouldn't be doing is taking to snake oil salesmen who are telling them they're going to save their property if they turn title over to them." If you can't pay your mortgage, why should you pay a distressed property consultant?

The Department of Commerce and Consumer Affairs is currently investigating several Hawaii cases for mortgage fraud, and expects to file some lawsuits soon. If you feel you're the victim of mortgage fraud, call the DCCA's Office of Consumer Protection at 587-3222 or click on the DCCA's Office of Consumer Protection link.