Senate committees study home-lending protections
By Walter Wright
Advertiser Staff Writer
Alfred Quitoriano, now 66, diabetic, on dialysis three times a week, and almost blind, thought it was a miracle when he was able to buy his Hamakua Plantation home from the bankrupt company for $1,100.
Bruce Asato • The Honolulu Advertiser
But then the lender arrived in the neighborhood in 1997, offering a $63,750 loan to fix up his 800-square foot home in Paahuhau Main Camp.
Crispina Quitoriano sobs as advocate George Zweibel testifies in a hearing on consumer loan protections.
Quitoriano kept refinancing, and four years and several new lenders later, his loan was at $110,500, with payments of $906, which could go up to $1,130 — not easy to pay from his pension and Social Security totalling $1,500 a month.
"I was not sure we could even afford to eat," Quitoriano's wife, Crispina, told a legislative committee yesterday. "Our house is now in foreclosure, and we have no way to keep it."
Scores of people like the Quitorianos — on plantations, and in cities and suburbs — have been encouraged and allowed to borrow more than they could hope to repay and have lost their homes, consumer advocate George Zweibel said, testifying in favor of strict new controls on all home-lending activity in Hawai'i.
But business, banking and finance industry leaders, pushing their own legislation, warned that Zweibel's approach would "strangle" non-conventional lending programs designed to help poor people, cut the amount of money available to lend here, and could tip the state's teetering economy into a financial abyss.
First Hawaiian Bank Vice President Corbett Kalama, who runs the bank's community reinvestment program under federal law to help low-income borrowers, said he sympathized with people like Quitoriano, but he warned that the proposed changes could hurt more consumers than they help.
Bill Ramsey, representing the Hawaii Association of Realtors, said borrowers ultimately "must protect themselves."
If consumer advocates counseled borrowers beforehand instead of in foreclosure, many could avoid harm, he said.
Zweibel countered that people are often ashamed to seek help from their own families, let alone lawyers or credit counselors, until it is too late.
State Sens. Brian Kanno and Ron Menor, who respectively chair the Senate's Judiciary Committee and the Committee on Commerce, Consumer Protection and Housing, told the lending lobby to try to work out a deal with the consumer advocates before the committees vote on Friday.
Both lawmakers faulted the financial community for waiting until last week to advance their own, less stringent, legislation and warned that if legislators who aren't experts in lending come up with language of their own, neither side may be pleased.
Kanno, D-20th ('Ewa Beach, Makakilo and Kapolei), said that if he doesn't see some movement from the bankers and mortgage brokers by week's end, he will rely most heavily on State Complaints and Enforcement Officer Jo Ann Uchida for advice.
Uchida, who represented the Department of Commerce and Consumer Affairs at the hearing, said the department believes House Bill 2642 is an important step in addressing abuses including "flipping" of mortgages, deception in loan marketing, and lending without regard to a borrower's ability to pay.
Asked why she had not earlier addressed the worries of the financial community, Uchida said the lenders' lobbyists advanced their own proposals in a Senate bill only days ago.
She said the tougher House bill would be a better vehicle for reforms, even if it needs to be changed from its present form.
She said the state is on record in favor of protecting consumers further from "packing" of credit insurance and other extra charges, harsh balloon pay-off requirements, and "abusive loans that strip ... equity from the homes of vulnerable citizens."
Both Kanno and Menor, D-18th District (Waipio Gentry, Wahiawa), told Zweibel that his Hawaii Coalition for Responsible Lending and its allies (Legal Aid, consumer groups, labor unions) should also be prepared to compromise.
Menor and Sen. Bob Hogue, R-24th (Kailua, Kane'ohe), warned against changes in the law which could have unintended results of cutting some residents off from loan money, and of endangering the economy.
The committee leaders suggested both sides consider some compromise proposals like those suggested yesterday by the Hawaii Credit Union League, which sought to strengthen the industry's Senate bill rather than weaken the consumers' House bill.
Reach Walter Wright at wwright@honoluluadvertiser.com or 525-8054.
