Saturday, July 21, 2007

Hawaii Homeowner Suing To Get Back Home Lost In Foreclosure Rescue Deal; Reportedly Out $160K In Home Equity

(reprinted from The Home Equity Theft Reporter)

KITV Channel 4 in Honolulu reports:

  • "An Ewa Beach family is the victim of a spreading scam involving foreclosure rescue fraud, according to attorneys with the Legal Aid Society of Hawaii. As more people struggle with rising mortgage payments, attorneys for Legal Aid Society of Hawaii said there are groups promising hope that are actually out to steal homes."
When the homeowner fell behind on the mortgage payments, she reportedly turned to a company called USA Mortgage. What the homeowners thought was a refinance was a below-market sale, with a contemporaneous leaseback of the home requiring rent of hundreds of dollars higher than the old mortgage, and she paid thousands to people associated with Mortgage Alliance, according to the article. For more, see Legal Aid Says Ewa Beach Family Scammed By Mortgage Company (Mortgage Company's Attorney Says Client Did Nothing Wrong).

Go here for other posts on Hawaii foreclosure rescue.

Editorial Note:

Even if there is no fraud, deception, overreaching, etc. committed by the foreclosure rescue operator in this case, the transaction described in the story still smells like an equitable mortgage. If, in fact, a transaction like the one described in the story is treated by a court as an equitable mortgage, the foreclosure rescue operator would only be entitled to a repayment of any amounts advanced, plus interest, (subject to any applicable usury statutes), and the homeowner would be entitled to get back the title to the home, subject to the equitable mortgage.

The Hawaii Supreme Court decided the applicability of the equitable mortgage doctrine in the state (or at least I thought they did) over forty years ago (see Kawauchi v. Tabata, 49 Haw. 160, 413 P.2d 221 (1966)).

(In that case, a sale-leaseback arrangement involving a property owner facing foreclosure, where the property selling price was found to be inadequate relative to its true value, and where the financially strapped property owner retained possession of the realty after the transaction, was held to be a secured loan subject to the usury statutes, and not a sale. In so holding, the Hawaii high court observed, "Were we to hold otherwise our usury statute would be emasculated.") Hawaii Equitable Mortgage nutz