Raising Cane
By Rob Perez
Foreclosure ruse
claims isle victimsThe homeowners were so desperate, they didn't heed the warning signs.
Until it was too late.
For the most part, these rural homeowners were unsophisticated in the ways of finance. They didn't understand the complexities of mortgage loans and refinancings and underwriting requirements.
What they understood was they were in deep trouble. They were on the verge of losing their homes through foreclosure and were desperately looking for relief.
So when someone told them of a woman who could come to their rescue, they seized the opportunity, paying thousands of dollars on the belief that their homes could be saved.
It hardly mattered that they had to make payments in cash or that the money had to be wired to a location thousands of miles away.
It hardly mattered that they got virtually no documentation detailing what they would get in exchange for their money. Sometimes, they didn't even get receipts. Usually, they received no contract.
And it hardly mattered that the woman who was going to be their savior didn't even live in Hawaii. She was based in Las Vegas.
The most telling sign, though, was one the homeowners were completely unaware of.
Until it was too late.
The state had fined Rosalinda Otholt nearly $1 million in 1996 for running an unlicensed mortgage brokerage operation. Some of her then-customers lost deposit money and never got their loans, according to the state.
Otholt, who moved to Las Vegas about 3 1/2 years ago, still hasn't paid the $912,000 fine.
Today the 56-year-old woman is at the center of a new controversy involving Hawaii customers who said they paid roughly $2,000 to $8,000 each to try to save their homes from foreclosure but got nothing in return. Some even lost their residences.
Otholt is under investigation by the state Department of Commerce and Consumer Affairs and the FBI, mostly over dealings with homeowners on the Hamakua Coast of the Big Island.
Otholt denies any wrongdoing. "I have nothing to hide," she said.
Otholt said she tried to help the homeowners but they weren't truthful with her or didn't disclose vital information. They didn't tell her, for instance, that they were so far into the foreclosure process or that their mortgage exceeded the value of their homes by so much that she could do little to bail them out, according to Otholt.
"They think I'm God and I can do anything," she said. "I cannot."
Those who have dealt with Otholt said she could be very persuasive, coming across as caring and understanding. She used her Filipino heritage to gain the trust of her customers, they said.
"She was very convincing," said Big Island resident Milagros Aguinaldo, who recalled that Otholt asked her to cook Filipino dishes for a visit Otholt planned earlier this year to introduce the Aguinaldos to a supposed investor in their home.
On the scheduled day of Otholt's visit, the family even killed a pig to roast, hoping the gathering would be a celebration marking the end of their foreclosure problems.
But Otholt never showed up.
Aguinaldo said she and her husband paid Otholt roughly $8,000 over several months late last year and early this year but received no benefits. They never got any paperwork from Otholt to explain what she was doing on their behalf, Aguinaldo said.
Juanita Wusstig, another Big Island resident, told of similar experiences. She said she and her husband were so desperate to save their home that they wired Otholt more than $2,000 and were willing to do things that in retrospect seemed ridiculous.
Otholt, for instance, advised Wusstig to file for bankruptcy to buy time, and Wusstig turned in the initial court paperwork before realizing that wasn't a good idea, she said.
"I can't believe how stupid I was," Wusstig said. "It was just ludicrous what she was telling us to do."
The Wusstigs and the Aguinaldos are still in their homes and are trying to retain ownership with the help of Big Island attorney George Zweibel, a former Federal Trade Commission staff member.
Zweibel said Otholt gave bad advice and made promises that were completely unrealistic. "The misrepresentations were just rampant," he said.
The fact that people lost their homes even after paying Otholt thousands of dollars is telling, according to Angela Lovitt, a Legal Aid Society of Hawaii attorney familiar with some of the cases.
"I think the end result is what speaks volumes," Lovitt said.
Otholt said she did all that she could for the homeowners, including contacting multiple lenders to see whether new loans were feasible.
But the lenders weren't interested, usually because the outstanding loans were in excess of the value of the homes, she said. "We tried our best, but there was nothing we could do."
Asked whether she had a mortgage broker's license, Otholt said she didn't need one because she wasn't running a brokerage business, only a referral one.
Regulators say the kind of service Otholt provided generally falls under the Hawaii law requiring a brokerage license.
Otholt said she has only 11 remaining clients in Hawaii. Zweibel, however, believes dozens of homeowners have hired her over the past few years.
Eddie Akana, a sheriff's deputy on the Big Island, said he has served eviction notices to nearly a dozen homeowners on the Hamakua Coast and "almost every one had dealings with Rosa."
Otholt said her Hawaii work is causing her so many headaches that she plans to issue refunds to her 11 remaining clients and get out of the business.
Asked about the state fine, Otholt said she had no money to pay that. "When I have the money, I'll pay them. Other than that, I don't have the money. What do they want me to do? Rob a bank?"
The most tragic part of the controversy, Zweibel said, is that most of the affected homeowners would have been able to afford their mortgages had they not been victims of predatory lending in the first place. The onerous terms of their loans all but assured foreclosure.
Once in foreclosure, the homeowners became victims again, he said.
"The sharks come in for one more meal," Zweibel said.
By the end of the feeding frenzy, any rescue attempt may be too late.
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: rperez@starbulletin.com.
