By Rob PerezSunday, November 18, 2001
Cyd Smith was desperate.
Wolfish companies prey on
Faced with losing her home through foreclosure, the Big Island resident hired American Financial Group Inc. in May to help her out of the bind.
She said she eventually paid the company $6,000 -- $4,000 upfront and $500 per month as called for in her American Financial contract -- until she realized something was amiss.
Something still is.
Smith and her children last week were ordered by a sheriff's deputy to vacate their Waimea home, a move that would bring the foreclosure process closer to completion.
What did Smith get for her $6,000?
Apparently not much.
About a week after signing her contract, someone filed a petition in federal court claiming the foreclosure action against Smith was invalid because U.S. laws don't apply in the Hawaiian Kingdom.
The petition, which Smith said she never saw even though it purports to have her signature, was dismissed by the court a few days later on grounds the petition failed to assert any viable factual or legal theory.
The foreclosure action was not slowed at all.
"They took advantage of me," Smith said.
Consumers advocates say the case reflects a growing problem of companies preying on traumatized Hawaii homeowners facing loss of their homes. The problem is expected to worsen as the state's economy sags and foreclosures continue to surge.
"This is a racket where everybody's feeding on these people in distress," said attorney Gary Dubin, who has sued American Financial and others involved in the case on behalf of Smith.
American Financial President Stuart Jones said his company has done nothing wrong but ran into problems when an individual who was supposed to service its foreclosure clients "fell short."
The individual, identified in a company letter to Smith as Ben Kahikina, wasn't employed by American Financial, but the company is taking responsibility for services not rendered under the contracts, Jones said.
"We just made a grave mistake," he said. "It tarnished our company."
Asked how American Financial could achieve its contractual guarantee of putting a client's foreclosure on hold for at least 18 months -- something Dubin called ridiculous -- Jones declined comment, referring such questions to Kahikina. Kahikina could not be reached for comment.
American Financial's activities have attracted the attention of the state.
The Department of Commerce and Consumer Affairs is investigating the company and has at least five pending complaints from former customers.
Stephen Levins, acting executive director of the department's Office of Consumer Protection, said he couldn't comment on the investigation.
But Levins acknowledged that over the years homeowners facing foreclosures have fallen victim to opportunists who promise more than they can deliver.
"There are people out there who unfortunately seek to exploit those in dire straits," he said.
Jones called the state's investigation illegal and noted that his company has allocated about $30,000 for refunds to customers who didn't get the promised services.
American Financial isn't the only company in the sights of consumer advocates.
At least six businesses are known to prey on distressed homeowners, often scanning the public foreclosure notices so the companies can send unsolicited letters offering their services, advocates say.
"People here in general are so trusting and think they're getting help, but it's just the opposite," said Ed Bringas, chief executive of First Nationwide Loan Workout & Default Management Services. Bringas' company has worked with Dubin and other consumer attorneys to help homeowners.
Though the opportunists may be persuasive, they often behave in ways that would make most consumers wary. But homeowners about to lose their homes sometimes are so distraught they overlook or dismiss any warning signs, convinced they've found a way out of their predicament.
That's exactly what Lisa Ah Nee said happened to her after she and her husband received an unsolicited pitch from 21st Century Management Inc. of Honolulu.
She said she gave little thought when a company representative asked her to meet at a Zippy's restaurant and wanted an $800 initial payment in cash.
She said she paid the money in March but her foreclosure case proceeded anyway.
"I was desperate," Ah Nee said. "I wanted somebody to help me."
A phone message left with the company was not returned.
While advocates say there are legitimate companies that help homeowners deal with foreclosure problems, the overall system provides little guidance for consumers, enabling the opportunists to flourish on the fringes, outside the radar of regulators and the courts.
"This is the low visibility stuff that goes on," Dubin said. "It's the system's fault. It doesn't provide help for the people."
Star-Bulletin columnist Rob Perez writes on issues
and events affecting Hawaii. Fax 529-4750, or write to
Honolulu Star-Bulletin, 500 Ala Moana Blvd., No. 7-210,
Honolulu 96813. He can also be reached
by e-mail at: email@example.com.