Lawmakers Considering New Foreclosure Bill

A bill passed by a State Senate committee Tuesday would require mortgage lenders to enter into mediation before filing foreclosures in state court if requested by homeowners.

Senate Bill 1370 only applies to those homeowners facing foreclosure who live in their homes and not vacation-home owners or investors.

The Honolulu Star-Advertiser reported that while the measure passed, both consumer advocates and banking industry executives disagreed about the effective use of mediation.

Lenders have largely bypassed a previous state law that gave homeowners the option of having a neutral third party help resolve mortgage delinquencies.

In 2011, state lawmakers passed Act 48, which allowed owner-occupant Hawaii homeowners to bring a mediator to foreclosure cases initiated out of court.

Although the state provided $400,000 in funding to get the program started, lending companies and banks balked at the process and began filing foreclosures in court.

The newspaper reported that Edward Pei, executive director of the Hawaii Bankers Association, and Linda Nakamura, president of the Mortgage Bankers Association of Hawaii, both opposed the bill, saying it would draw out the foreclosure process.

“This would be duplicating the efforts that mortgage servicers make,” Nakamura said.

Bruce Kim, executive director of the state Office of Consumer Protection, and Jeff Gilbreath, executive director of Hawaiian Community Assets, both support mediation efforts.

“The need for our Hawaii families to have the option to request mediation of judicial foreclosures could not be greater,” Gilbreath said in written testimony submitted to the state Senate.

Hawaii County is the only island with a successful mediation program. Kim noted that Circuit Court judges don’t appear to be directing foreclosures to mediation except on the Big Island.

The Hawaii Access to Justice Commission has recommended expansion of Hawaii Island’s program to other counties, but that has not occurred.