Kona Kohala Blog

Hawaii recently passed Act 48 as a consumer protection law.  It was designed to overcome a problem in the numerous non-judicial foreclosures in Hawaii, the most common procedure for foreclosing on property.  In a non-judicial foreclosure, the property owner did not get a chance to talk to the foreclosing authority or even get proof that the authority had the authority to foreclose.

There have been far too many mistaken foreclosures in the recent past due to the robo-signing by the large banks, B of A, Wells Fargo and Chase to name a few.  These were foreclosures where no human had reviewed the files and in many cases were improper.  Some foreclosures were on owners who'd never had a mortgage or had already paid off their mortgage.

Well, instead of going along with this, Fannie Mae decided they would just pull all non-judicial foreclosures off the market and switch them to judicial foreclosures.  Not a big deal right?  Wrong!  Now, these hundreds, maybe thousands of foreclosures will be funneled through an already overloaded court system to be reviewed one by one.  This means years of back logs pushing foreclosure sales out 1, 2 or maybe even 3 or more years while they make their way through the courts.

What will this do to the market here in Hawaii since this is the only state this will effect?  Suddenly our number of properties for sale will drop.  Fewer properties for sale could mean higher prices, artificially higher since it's really a false decline in the number of properties for sale.  Once the properties begin coming back on the market having cleared the courts, we're going to be reintroduced to a bunch of foreclosures at a time when we should have already worked through that huge inventory.  Look for prices to drop again as banks once more load up the MLS with more property for sale, distressed property which does the resale market no good.

Thank the government once again for shooting any hopes of a recovery right in the foot.