Controversy Over Non-Judicial Foreclosures In Hawaii Leaves Title Insurers Wary About Insuring Title On Homes That Have Been Through Non-Court Supervised Process

In Kailua-Kona, Hawaii, West Hawaii Today reports:

• Foreclosed properties bought at auction often afford buyers a chance at a lucrative deal.
  
  But if you’ve purchased a property anywhere in Hawaii that’s been through a non-judicial foreclosure, you may have acquired considerably less than you bargained for — or potentially nothing at all.
  
  That’s because of several class action and individual action lawsuits that have been filed across every county in the state. The lawsuits allege the banks that administered mass foreclosures during and after the 2008 housing crisis using the non-judicial foreclosure process — meaning without the supervision of the court — did so without following proper procedure.
  
  If a judge rules that a lender didn’t follow the highly specific power of sale outlined in the mortgage contract and supplemented by Hawaii’s non-judicial foreclosure statute part 1, then the sale is void and the property is returned to its original owner.
  
  Such a determination by a judge doesn’t necessarily leave the current title holder on the street absent compensation, particularly if he or she holds title insurance. But it does place on the title company the burden of reimbursing the current holder the monetary value of the property outlined in the title insurance policy.
  
  Because the number of lawsuits challenging the legitimacy of non-judicial foreclosures conducted in Hawaii over the last several years has recently skyrocketed and yet continues to climb, title insurers are wary of insuring future sales of any property that’s gone through the process, whether it was bought firsthand from the bank or secondhand from a private citizen.
  
  When they are willing to insure, it’s not necessarily at fair market value.
  
  “If the sale is void, that means when the bank sold the property to the new owner, the new owner got nothing,” said James Bickerton, an Oahu attorney who to date has filed nearly 60 lawsuits against financial institutions contesting the legitimacy of their foreclosure procedures. “So there are dozens and dozens of people sitting on property they thought was good because they bought it from a bank. That’s where the title insurance comes in. Title insurance companies have to step up and take care of it.”

For more, see Homeowners losing money in legal snarls surrounding non-judicial foreclosures.