Fighting off foreclosure

Established in September 2009, Hawaii Island’s Foreclosure Mediation Program has so far helped 172 homeowners to stay in their homes.

The program began as residents statewide were wrestling with a “catastrophic foreclosure crisis” during the depths of the recession, according to the state Judiciary. By October 2010, one home in 317 received a foreclosure filing, giving Hawaii the ninth worst foreclosure rate in the country.

And at that time, Hawaii County had the worst foreclosure rate in the state.

“The full brunt of the national foreclosure crisis may have arrived late in Hawaii,” reads a Dec. 22, 2010, memo from Hawaii’s Committee on Initiatives to Enhance Civil Justice, “but it has done so with a vengeance and the crisis is unlikely to end any time soon. Thus, the need for facilitating loss mitigation to avoid the unnecessary loss of homes has never been greater.”

The goal of the mediation program was to provide an informal and private process to allow parties to discuss, define and resolve their disputes either before or in lieu of involving Hawaii’s Third District Court.

“The mediation process provides relief to homeowners within a process they can access and understand. When compared to the court process, mediation is more informal and parties have more time to negotiate and, hopefully, reach a joint agreement on the terms,” explained Third Circuit Judge Greg Nakamura.

Five nonprofit entities across the state were charged with providing these processes, including Hilo’s Ku‘ikahi Mediation Center and the West Hawaii Mediation Center, which together provide services for the Hawaii Island Foreclosure Mediation Program.

“Usually, when you look at this issue, you see that people have had something happen, somebody died in the family, somebody got sick or disabled, somebody got divorced,” said Ku‘ikahi Executive Director Julie Mitchell. “And you do have some of these people who did get sucked into those subprime loans. Or they’re waiting for VA (Veterans Administration) benefits to kick in. It’s very confusing and stressful, and now they’ve got debtors coming to their doors.”

Mediation provides a neutral mediator who can serve as a middleman between the lenders and the borrowers, to help cut down some of that stress and allow the parties to find mutually beneficial resolutions.

The ideal outcome is for residents to retain their houses. This solution also serves the lender, by keeping the mortgage solvent, and the greater community, by reducing the negative effects that foreclosures have on neighborhoods.

Aaron Masser agrees that the process can be mutually beneficial for both parties. As an attorney for mortgage lenders in East Hawaii, Masser says that when parties agree to a loan modification, it allows the homeowners to stay in the home, which is “the best option for them and the bank.”

“My clients are trying to recover as much as they can from the losses they’ve incurred, and if they’re not getting the loan repaid, a resolution … is in their interest,” he said.

He added, however, that the outcome from the process isn’t always what may have been expected.

“Some people have the idea, or hopes, that something will be available that will really drastically lower their payment. But most of the time that’s not a realistic option,” he said. “But, the program let’s them feel like their issues have been heard.”

Between the beginning of 2010 and May 2015, 3,770 judicial foreclosure cases have gone through the mediation process. The vast majority of them do end up with families losing their homes, but often the mediation process can allow them to “leave gracefully,” Mitchell said.

“They can leave on their own terms, in a way that works for everybody,” she said.

Consultants are available to help homeowners before they go into default, and mediation can even begin before the foreclosure process begins, she added.

“It doesn’t have to be at that point, that people take action,” she said.

“If they feel like they’re going to miss a payment, they’re having struggles financially, they can go see a financial counselor any time. They can contact us and arrange negotiations with a lender. … I would really like it if we could prevent (foreclosure) from happening. Local lenders are willing to work with residents.”

To learn more about the Foreclosure Mediation Program in East Hawaii, contact Ku‘ikahi Mediation Center at 935-7844, or visit www.hawaiimediation.org.

In West Hawaii, contact West Hawaii Mediation Center at 326-2666 or visit www.whmediation.org.

Email Colin M. Stewart at cstewart@hawaii tribune-herald.com.