§480E-10 Prohibitions. (a) A distressed property consultant shall not:

(1) Represent, expressly or by implication, in connection with the advertising, marketing, promotion, offering for sale, or performance of any mortgage assistance relief service, that a distressed property owner cannot or should not contact or communicate with the distressed property owner's lender or servicer;

(2) Misrepresent, expressly or by implication, any material aspect of any mortgage assistance relief service, including but not limited to:

(A) The likelihood of negotiating, obtaining, or arranging any represented service or result, such as those set forth in the definition of mortgage assistance relief service;

(B) The amount of time it will take the distressed property consultant to accomplish any represented service or result, such as those set forth in the definition of "mortgage assistance relief service";

(C) That a mortgage assistance relief service is affiliated with, endorsed or approved by, or otherwise associated with:

(i) The United States government;

(ii) Any governmental homeowner assistance plan;

(iii) Any federal, state, or local government agency, unit, or department;

(iv) Any nonprofit housing counselor agency or program;

(v) The maker, holder, or servicer of the consumer's residential loan; or

(vi) Any other individual, entity, or program;

(D) The distressed property owner's obligation to make scheduled periodic payments or any other payments pursuant to the terms of the distressed property owner's residential loan;

(E) The terms or conditions of the distressed property owner's residential loan, including but not limited to the amount of the debt owed;

(F) The terms or conditions of any refund, cancellation, exchange, or repurchase policy for any mortgage assistance relief service, including but not limited to the likelihood of obtaining a full or partial refund, or the circumstances in which a full or partial refund will be granted, for a mortgage assistance relief service;

(G) That the distressed property consultant has completed the represented services or has a right to claim, demand, charge, collect, or receive payment or other consideration;

(H) That the distressed property owner will receive legal representation;

(I) The availability, performance, cost, or characteristics of any alternative to for-profit mortgage assistance relief services through which the distressed property owner can obtain mortgage assistance relief, including negotiating directly with the residential loan holder or servicer, or using any nonprofit housing counselor agency or program;

(J) The amount of money or the percentage of the debt amount that a distressed property owner may save by using any mortgage assistance relief service;

(K) The total cost to purchase any mortgage assistance relief service; or

(L) The terms, conditions, or limitation of any offer of mortgage assistance relief the distressed property consultant obtains from the distressed property owner's residential loan holder or servicer, including the time period in which the distressed property owner must decide to accept the offer;

(3) Make any representation, expressly or by implication, about the benefits, performance, or efficacy of any mortgage assistance relief service unless, at the time such representation is made, the provider possesses and relies upon competent and reliable evidence that substantiates that the representation is true. For the purposes of this paragraph, "competent and reliable evidence" means tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by individuals qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results;

(4) Conceal any material fact;

(5) Induce or attempt to induce a distressed property owner to waive any provision of this chapter;

(6) Make any promise or guarantee not fully disclosed in the distressed property consultant contract;

(7) Engage or attempt to engage in any activity or act concerning the distressed property not fully disclosed in the distressed property consultant contract;

(8) Induce or attempt to induce a distressed property owner to engage in any activity or act not fully disclosed in the distressed property consultant contract;

(9) Take, ask for, claim, demand, charge, collect, or receive any compensation until after the distressed property consultant has fully performed each service the distressed property consultant contracted to perform or represented would be performed;

(10) Take, ask for, claim, demand, charge, collect, or receive for any reason, any fee, interest, or any other compensation that exceeds the two most recent monthly mortgage installments of principal and interest due on the loan first secured by the distressed property or the most recent annual real property tax charged against the distressed property, whichever is less;

(11) Take or ask for a wage assignment, a lien of any type on real or personal property, or other security to secure the payment of compensation. This type of security is void and not enforceable;

(12) Receive any consideration from any third party in connection with services rendered to a distressed property owner unless the consideration is fully disclosed in the distressed property consultant contract;

(13) Acquire any interest, directly or indirectly, or by means of a subsidiary or affiliate, in a distressed property from a distressed property owner with whom the distressed property consultant has contracted;

(14) Require or ask a distressed property owner to sign any lien, encumbrance, mortgage, assignment, or deed unless the lien, encumbrance, mortgage, assignment, or deed is fully described in the distressed property consultant contract, including all disclosures required by this chapter;

(15) Take any power of attorney from a distressed property owner for any purpose, except to inspect documents concerning the distressed property as allowed by law;

(16) Advise or instruct a distressed property owner to stop making payments to any lending party if that property owner is not in receipt of a written notice that the property owner's residential loan has been accelerated;

(17) Fail to disclose, at the time the distressed property consultant furnishes the distressed property owner with the lending party's written offer for mortgage assistance relief, the following information:

"This is an offer of mortgage assistance we obtained from your lender [or servicer]. You may accept or reject the offer. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [same amount as disclosed in the distressed property consultant contract] for our services."

The disclosure required by this paragraph shall be made in a clear and prominent manner, on a separate written page, and preceded by the heading:

"IMPORTANT NOTICE: Before buying this service, consider the following information."

The heading shall be in boldface type that is two-point type larger than the type size of the required disclosure;

(18) Fail to provide, at the time the distressed property consultant furnishes the distressed property owner with the written agreement specified in paragraph (17), a notice from the lending party that describes all material differences between the terms, conditions, and limitations associated with the distressed property owner's current residential loan and the terms, conditions, and limitations associated with the distressed property owner's residential loan if the owner accepts the lending party's offer, including but not limited to differences in the loan's:

(A) Principal balance;

(B) Contract interest rate, including the maximum rate and any adjustable rates, if applicable;

(C) Amount and number of the owner's scheduled periodic payments on the loan;

(D) Monthly amounts owed for principal, interest, taxes, and any mortgage insurance on the loan;

(E) Amount of any delinquent payments owing or outstanding;

(F) Assessed fees or penalties; and

(G) Term.

The notice required by this paragraph shall be made in a clear and prominent manner, on a separate written page, and preceded by the heading: "IMPORTANT INFORMATION FROM YOUR [name of lender or servicer] ABOUT THIS OFFER." The heading shall be in boldface type that is two-point type larger than the type size of the required disclosure;

(19) Fail to disclose in the notice specified in paragraph (18), in cases where the offer of mortgage assistance relief obtained by the distressed property consultant from the lending party is a trial residential loan modification, the terms, conditions, and limitations of the offer, including but not limited to:

(A) The fact that the distressed property owner may not qualify for a permanent loan modification; and

(B) The likely amount of the scheduled periodic payments and any arrears, payments, or fees that the distressed property owner would owe in failing to qualify; or

(20) File any document in the bureau of conveyances of the State of Hawaii that purports to modify, reduce, eliminate, discharge, contest, or otherwise affect any mortgage, lien, or encumbrance of record without either the express written consent of the lending party or lienholder or a court order permitting or directing the document to be filed, with the exception of a notice of pendency of action or lis pendens.

(b) A distressed property purchaser shall not:

(1) Misrepresent or conceal any material fact;

(2) Induce or attempt to induce a distressed property owner to waive any provision of this chapter;

(3) Make any promise or guarantee not fully disclosed in the distressed property conveyance contract;

(4) Engage or attempt to engage in any activity or act concerning the distressed property not fully disclosed in the distressed property conveyance contract;

(5) Induce or attempt to induce a distressed property owner to engage in any activity or act not fully disclosed in the distressed property conveyance contract;

(6) Enter into or attempt to enter into a distressed property conveyance unless the distressed property purchaser verifies and can demonstrate that the distressed property owner has a reasonable ability to pay any amounts due to reacquire an interest in the distressed property or to make monthly or any other payments due under a distressed property conveyance contract or distressed property lease, if the distressed property purchaser allows any distressed property owner to remain in, occupy, use, or repurchase the distressed property;

(7) Fail to make a payment to the distressed property owner at the time the title is conveyed so that the distressed property owner has received consideration in an amount of at least eighty-two per cent of the property's fair market value, or, in the alternative, fail to pay the distressed property owner no more than the costs necessary to extinguish all of the existing obligations on the distressed property, as set forth in this chapter; provided that the distressed property owner's costs to repurchase the distressed property pursuant to the terms of the distressed property conveyance contract do not exceed one hundred twenty-five per cent of the distressed property purchaser's costs to purchase the property. If a distressed property owner is unable to repurchase the property pursuant to the terms of the distressed property conveyance contract, the distressed property purchaser shall not fail to make a payment to the distressed property owner so that the distressed property owner has received consideration in an amount of at least eighty-two per cent of the property's fair market value at the time of conveyance or at the expiration of the distressed property owner's option to repurchase;

(8) Enter into any repurchase or lease agreement as part of a distressed property conveyance contract or subsequent conveyance of an interest in the distressed property back to a distressed property owner that is unfair or commercially unreasonable or engage in any other unfair conduct;

(9) Represent, directly or indirectly, that the distressed property purchaser is acting as an advisor or a consultant or is acting on behalf of or assisting a distressed property owner to "remain in the house", "save the house", "buy time", or "stop the foreclosure" or is doing anything other than purchasing the distressed property;

(10) Misrepresent the distressed property purchaser's status as to licensure or certification;

(11) Do any of the following until after the time during which a distressed property owner may cancel the distressed property conveyance contract:

(A) Accept from a distressed property owner execution of any instrument of conveyance of any interest in the distressed property;

(B) Execute an instrument of conveyance of any interest in the distressed property; or

(C) Pursuant to chapter 501 or 502, record any document signed by a distressed property owner, including any instrument of conveyance;

(12) Fail to re-convey title in a distressed property to the distressed property owner or owners when the terms of the distressed property conveyance contract have been fulfilled if the distressed property consultant or distressed property purchaser contracted or represented that title in the distressed property would be re-conveyed to the distressed property owner or owners when the terms of the distressed property conveyance contract have been fulfilled;

(13) Induce or attempt to induce a distressed property owner to execute a quitclaim deed concerning a distressed property;

(14) Enter into a distressed property conveyance contract where any party to the contract is represented by power of attorney;

(15) Immediately following the conveyance of the distressed property, fail to extinguish all liens encumbering the distressed property at the time of the distressed property conveyance or fail to assume all liability with respect to all liens encumbering the distressed property at the time of the distressed property conveyance, which assumption shall be accomplished without violations of the terms and conditions of the lien or liens being assumed. Nothing herein shall preclude a lender from enforcing any provision in a contract that is not otherwise prohibited by law;

(16) Fail to complete a distressed property conveyance through:

(A) An escrow depository licensed by the department of commerce and consumer affairs;

(B) A bank, trust company, or savings and loan association authorized under any law of this State or of the United States to do business in the State;

(C) A person licensed as a real estate broker in this State who is the broker for a party to the escrow; provided that the person does not charge any escrow fee; or

(D) A person licensed to practice law in this State who, in escrow, is not acting as the employee of a corporation; provided that the person does not charge any escrow fee; or

(17) Cause the property to be conveyed or encumbered without the knowledge or permission of all distressed property owners or in any way frustrate the ability of any distressed property owner to reacquire the distressed property.

(c) There shall be a rebuttable presumption that an appraisal by a person licensed or certified as a real property appraiser by the State or the federal government is an accurate determination of the fair market value of the property.

(d) An evaluation of "reasonable ability to pay" under this chapter shall include debt to income ratio, fair market value of the distressed property, and the distressed property owner's payment history. [L 2008, c 137, pt of §2; am L 2016, c 142, §9; am L 2019, c 111, §27]