Hawaii law provides some protections so that homeowners facing foreclosure or struggling to make mortgage payments don't get scammed by foreclosure consultants. But the protections only go so far, you need to be hypervigilant if you are seeking help with a foreclosure, mortgage modification, forbearance, and the like.
Foreclosure consultants often claim they can save a home from foreclosure, for a price. Unfortunately, many homeowners have been duped by unscrupulous foreclosure consultants and end up losing not only the money paid to the consultant, but, in some cases, also their home.
In an effort to prevent foreclosure consultants from taking advantage of desperate homeowners, Hawaii passed the Mortgage Rescue Fraud Prevention Act (“MRFPA”). Read on to learn more about the MRFPA and how it can help stop foreclosure consultants from preying on you if you're facing foreclosure in Hawaii.
(To find out about common ways that some foreclosure consultants exploit homeowners in foreclosure, see our Foreclosure Rescue Scams topic area.)
The MRFPA applies to “distressed property consultants” (more commonly known as foreclosure consultants). It defines this type of consultant as any person who performs or makes any solicitation, representation, or offer to perform services such as:
Foreclosure consultants sometimes take upfront fees to assist homeowners in foreclosure, are not clear about what services they will perform, and then either disappear or do very little to earn the fee. The purpose of the MRFPA, which went into effect in 2008, is to protect vulnerable homeowners who are in distressed financial situations from dishonest foreclosure consultants.
The MRFPA requires foreclosure consultants to fully and completely describe their services in writing, prohibits foreclosure consultants from taking advance fees, and bans certain actions and misleading claims. Below are the details.
If you hire a foreclosure consultant, there must be a written contract that spells out exactly what services the consultant will perform. In addition, the contract must fully disclose:
The contract is not effective until all parties have signed it (Haw. Rev. Stat. § 480E-3(e)).
You can cancel a contract with a foreclosure consultant at any time (without any penalty or obligation) before the consultant has fully performed each and every service promised (Haw. Rev. Stat. § 480E-5(a)).
To cancel, you must mail or deliver a signed and dated copy of the notice of cancellation (which the consultant must provide to you along with the contract) to the address specified in the contract (Haw. Rev. Stat. § 480E-4(b), § 480E-5(b)).
Under the MRFPA, foreclosure consultants are not allowed to collect any fees until they have fully performed each and every service promised (Haw. Rev. Stat. § 480E-10(a)(6)).
Foreclosure consultants sometimes misrepresent their services or the results they can obtain to convince a homeowner to sign up with them. The MRFPA prohibits foreclosure consultants from (among other things):
Hawaii law also limits the fees that foreclosure consultants can charge and how they may secure payment of the fees. Under the MRFPA, foreclosure consultants cannot charge a fee that exceeds:
They also cannot take or ask for:
The MRFPA also provides certain rights to homeowners who agree to transfer the ownership of their home or lease their home through a foreclosure consultant. For example:
As originally enacted, licensed attorneys were exempt from the MRFPA. This opened the door to out-of-state attorneys to act as foreclosure consultants to Hawaii homeowners. However, it was difficult for state regulators to pursue out-of-state attorneys accused of defrauding Hawaii homeowners in foreclosure rescue scams.
To remedy this, Hawaii’s governor signed House Bill 2275 (Act 26), on April 23, 2014, which specifies that attorneys must be licensed by and engaged in the practice of law in Hawaii to be excepted from the requirements of the MRFPA. Out-of-state attorneys must comply with the requirements of the MRFPA.
If a foreclosure consultant in Hawaii that isn't complying with the MRFPA, this is a red flag that he or she is a scammer. Go elsewhere. (But even if a foreclosure consultant is in compliance with the MRFPA, that doesn't necessarily mean he or she's not scamming you.)
To protect yourself, avoid foreclosure consultants that:
If you believe you are the victim of a scammer foreclosure consultant, you can file a complaint with the Hawaii Office of Consumer Protection.
In Hawaii, you can get free advice about foreclosure from a certified housing counseling agency. To find a certified Hawaii housing counselor, go to the Hawaii Foreclosure Information Center’s website and click on “Homeowner Options.”
To read the text of Hawaii’s Mortgage Rescue Fraud Prevention Act, go to Chapter 480E of the Hawaii Revised Statutes.