Isle foreclosure filings continue steady climb

Lenders initiated 375 new foreclosure lawsuits against Hawaii property owners in February, a 9 percent increase over the same month last year, according to state Judiciary data released Thursday.

The volume of new foreclosure cases last month continued its gradually rising momentum since Hawaii’s foreclosure law was amended at the end of June and forced lenders to revise their practices for initiating new cases.

That change in the law was the second overhaul in two years, and the Legislature has advanced a bill this year that would amend the law again to have mediators help homeowners try to avoid foreclosure.

The two prior changes to state foreclosure law have made it difficult to infer whether Hawaii foreclosure troubles are getting worse or are on the mend.

Before mid-2011 most foreclosure cases were handled outside court. Reporting case volume was based on data from real estate research firm RealtyTrac Inc., which counted new cases as well as cases that were in later stages of the foreclosure process, including cases that were restarted after being stopped. That methodology provided less than a clear picture.

Then in June 2011, Hawaii’s relatively quick and unregulated out-of-court foreclosure process was changed to add strong new consumer protections.

As a result, all pending foreclosures were canceled, and lenders temporarily stopped filing new cases. Lenders then began filing all new cases in court in a more time-consuming process, and case volume rose from about 200 a month initially and peaked at 458 in June 2012 before the law was further amended.

The latest change added new provisions to the law, including one that makes attorneys responsible for affirming the accuracy of all case documents submitted by lenders.

As lenders and attorneys adjusted to the new requirements, new case volume sank to about 60 or 70 for a few months but has been steadily rising over the past five months, to about 200 in October and more than 300 since November.

Some observers believe fewer Hawaii homeowners are struggling with foreclosure now than when the economy and housing market stumbled a few years ago. The local economy is helping produce job growth, rising home prices and falling bankruptcies as tourism continues soaring after breaking an annual record last year.

Supporters of Hawaii’s stricter foreclosure rules say many homeowners have been spared from unfair lender practices and benefited from assistance or incentives to avoid foreclosure through loan modifications, short sales or giving up deeds in lieu of foreclosure.

But others believe the changes to Hawaii foreclosure law have delayed a large number of delinquent mortgages from being resolved, essentially setting back a recovery in foreclosures that in some cases have dragged on for three or four years.

The Legislature this year has advanced another bill that would further amend Hawaii foreclosure law by forcing lenders to engage in mediation, at the request of homeowners. The provision would apply to new and some pending foreclosure cases in court, but only for borrowers who live in homes facing foreclosure. Investors and vacation-home owners would not be eligible for the mediation option.

The bill, Senate Bill 1370, passed three committees in the Senate and two in the House. The House Finance Committee has yet to hear the bill.

The state Office of Consumer Protection strongly supports the mediation option, which was a major provision in the 2011 overhaul of Hawaii foreclosure law that lenders sidestepped by funneling all new cases through the courts. Lending-industry representatives oppose the bill.