Court orders man who misled homeowners to pay them back
Luring dozens of Maui homeowners with the promise of cutting their mortgage debt in half, an Oahu man bilked them of tens of thousands of dollars that he had demanded upfront as fees for what turned out to be a worthless service, according to documents filed in U.S. Bankruptcy Court.
Wailuku resident Margarita Barut said Wednesday that she paid Henry Malinay $1,500 to process paperwork that he said would lead to a reduction of one half of what she owed on her home. Malinay didn’t specify how he’d accomplish the mortgage reduction, she said.
Barut said she became suspicious when he was evasive about following up on her paperwork. She said he told her: “I know what I’m doing.”
She later filed a complaint with the Hawaii Office of Consumer Protection, one of dozens of Maui residents to do so.
Last month, U.S. Bankruptcy Judge Robert Faris ordered Malinay to repay 26 Maui victims $74,000. He also ordered Malinay, an Aiea resident, to pay a $200,000 fine to the Office of Consumer Protection.
Malinay had taken his case to Bankruptcy Court to protect himself from creditors and the victims of his scheme.
Barut’s share of the restitution would be $1,500.
“I earned that money,” she told The Maui News. “I’m paying for nothing. He didn’t help me at all.”
Although bankruptcy court documents list more than two dozen victims, the total may be 70 or more, according to Barut and a second victim who asked not to be identified.
The second victim, who was cheated out of $4,500, put the total number of people bilked at 74, including some living on islands other than Maui.
Both victims said a third person introduced them to Malinay, who spoke with them in Ilocano as they sought help with paying their mortgages.
“A lot of people had problems paying (their) mortgages,” the second victim said.
According to a findings of fact in the bankruptcy case, Malinay faced foreclosure of his home in May 2012, and in early July 2013 tried to save his property by signing up for a service with Mortgage Enterprise, initially offered by Anthony Williams. Malinay was promised that the service would cut his mortgage loan balances in half by unilaterally recording a Uniform Commercial Code financing statement with the Bureau of Conveyances.
“In reality, this device had no effect on the consumer’s loan balances,” the court finding says.
Consumers became Mortgage Enterprise clients by completing a packet of forms and paying a fee in advance, but in Malinay’s case, Williams waived the fee because Malinay had agreed to refer prospective clients to Mortgage Enterprise in exchange for referral fees.
On July 15, 2013, Malinay and his wife attended a hearing on a foreclosure action on their lender’s request for a summary judgment, the finding says. Williams represented the Malinays at the hearing, calling himself a “private attorney general.”
After that hearing, Malinay “admittedly realized . . . that the Mortgage Enterprise mortgage reduction service was a fraud.
“He knew that Mr. Williams had misled them about the service, their mortgage balance had not been cut in half, the service had conferred no benefit upon them, and Mr. Williams was not even an attorney,” the finding says.
Nevertheless, Malinay “played a prominent role” in the fraudulent mortgage reduction scheme, targeting Ilocano-speaking members of the Filipino community, it says.
Williams spent nine months in prison beginning in September 2013, but Malinay continued working the scam, taking in referral fees, the finding says.
“Malinay represented orally and through the forms he delivered to consumers that the Mortgage Enterprises scheme was effective, legitimate and risk free and had a 100 percent success rate in cutting consumers’ mortgage debts in half,” the finding says. “Malinay knew, from personal experience, that these representations were false,” it says.
Efforts to contact Malinay’s Honolulu attorney, Peter Hsieh, were unsuccessful. Calls to his online phone listing could not be connected.
According to TV media reports, Hsieh said Malinay was a victim and not the main culprit in the case. Hsieh identified that person as Williams, who heads Mortgage Enterprises and is a member of a sovereign citizens movement on the Mainland. Williams refers to himself as a private attorney general for the Common Law Office of America. A message left with Williams’ office was unreturned Friday.
Stephen Levins, executive director of the state Office of Consumer Protection, said Malinay preyed on “a lot of unsophisticated and desperate people,” taking amounts ranging from $1,500 to $5,500.
“The service they were selling was really nonsense,” he said Wednesday.
The state Department of the Attorney General has filed a lawsuit against Williams for unauthorized practice of law, Levins said.
Levins said he wasn’t sure to what extent the victims speaking Ilocano with Malinay contributed to what happened, but he said the case was an example of “affinity fraud” in which a scam artist finds victims who have a shared ethnicity and background and uses those to build trust with them.
Malinay claimed to be a victim himself, Levins said, but later admitted in a deposition that he “understood the whole thing was fraudulent.”
When asked if Malinay was a “middle man,” Levins said that was unclear, but he supposedly was “taking a cut of the money.”
Levins said he could not comment on whether the FBI was investigating the case.
FBI Special Agent Tom Simon said: “The FBI does not comment on the existence of any ongoing investigation unless or until charges are filed.”
Confidence schemes involving homeowner loans have been an ongoing problem since the mortgage credit crisis struck several years ago, Levins said.
The state Department of Commerce and Consumer Affairs has produced a public service announcement to educate people about mortgage frauds. It can be found at cca.hawaii.gov/hfic.
People who are having trouble paying their mortgages should seek free help from U.S. Housing and Urban Development-certified housing counselors, he said. They may call (808) 587-3222.
Counselors who are knowledgeable about mortgage problems may help negotiate a loan modification with a lender or help find some other recourse, he said.
“It’s what they should hear, instead of what they want to hear,” he said.
A Hawaii law passed several years ago prohibits mortgage loan rescue operators from taking money upfront, Levins said.
Con artists insist on getting paid money upfront, “then the money’s gone,” he said. And, “nothing’s been done to help the homeowner.”
* Brian Perry can be reached at firstname.lastname@example.org.