LIHUE — Distressed homeowners who turned to a mortgage refinancing scam during the height of the economic collapse are urged to file a reimbursement claim.
The state Department of Commerce and Consumer Affairs — Office of Consumer Protection stated in a press release that an estimated 500 or more victims in the state were likely misled by a loan modification program operated by Florida-based Homeowner Legal Assistance Association. The alleged scheme operated nationally, but was widespread locally, and is believed to have taken in more than $1.5 million from Hawaii consumers in 2009 and 2010.
The HLAA program was marketed in Hawaii by local affiliates that included 1st Choice Family Solutions, and Family 1st Solutions, both Nevada corporations. The local agents arranged for residents to retain and pay HLAA attorneys based in New York who then outsource the work back to Florida companies, who in turn outsourced the work back to local agents.
“All of the money that was paid by Hawaii consumers was paid under retainer agreements with these New York attorneys for legal services, and yet it does not appear as though the lawyers provided any legal services,” said OCP Executive Director Bruce Kim. “Neither of these out of state lawyers could legally provide the promised services here in Hawaii since both attorneys were not licensed to practice law in our state. The HLAA loan modification program was specifically structured to circumvent our laws, and hundreds of consumers were affected.”
New York attorney Marc Zirogiannis reportedly charged a standard retainer fee of $2,750. Fellow attorney David Galanter another New York attorney, who charged Hawaii homeowners a standard retainer fee of $2,950.
OCP pursued enforcement actions against the two lawyers and related entities both here in Hawaii and through New York’s legal disciplinary agencies. Zirogiannis has since been disbarred by the State of New York.
Galanter is the subject of a pending disciplinary action before the New York Departmental Disciplinary Committee, which is asking Hawaii residents who were clients of Galanter and sustained losses to submit claims for recovery as soon as possible by calling (808) 587-4272 or online at http://cca.hawaii.gov/ocp.
Linda Vass, managing attorney, Legal Aid Society of Hawaii-Lihue office, said that when people are scared they rush into an offer for help.
Scammers will pressure them to hurry up and so they react without thinking it through.
“There are always going to be people in trouble, even in a good economy,” Vass said. “They fall through the cracks, they get sick or lose their job.”
Legal Aid provides counseling and a comprehensive review of loan documents. They can help to negotiate and facilitate loan refinancing.
The Oahu office manages the Intake hotline and the Lihue office will work directly with Kauai clients.
“Taking time to read the paperwork closely before agreeing to anything is the most important thing that people can do,” Vass said.
Rob Palin, managing consumer attorney of Legal Aid’s Intake Hotline on Oahu, said mortgage scams were a much bigger issue 10 years ago.
“People got into trouble with their mortgage and someone calls to say they can save their house,” Palin said. “They would send them $3,000 and that would be the last they ever heard from them.”
Eric Hodnefield, vice president of the Mortgage Bankers Association of Hawaii, said the fraud situation was at its worst in 2010, but added it is still here today when people haven’t taken time to check out the advice they are hearing. A fraud situation arises when people cut corners and make transactions outside of professionals.
“If I could re-emphasize one thing it would be that if it sounds too good to be true, then it might be, and you should really take time to investigate,” Hodnefield said. “A lot of people jump in without investing the time talking to people and visiting the various resources.”
An Anahola native who is now senior vice president of Finance Factors in Honolulu, Hodnefield said neighbor island people tend to be more trusting than in the city. The challenges of homeownership are the same, he added, and it is important to be vigilant.
“Always work with professionals, he said.
• Tom LaVenture, staff writer, can be reached at 245-0424 or by emailing tlaventure@thegardenisland.com.
