Hawaii foreclosure filings in May fell to their lowest level for any month in nearly four years, according to a report released Wednesday by RealtyTrac.
There were 267 filings last month, which was down 70 percent from 900 in the same month last year and was the lowest for any month since 229 filings in July 2008, before the last economic downturn got much of a hold on Hawaii.
Local foreclosure attorneys, economists and government leaders peg the drastic falloff in statewide foreclosure filings mostly to continued effects from an overhaul of Hawaii’s foreclosure law passed in May 2011.
The law, Act 48, led lenders to stop filing cases out of court, where they were relatively easy and fast to process. Instead, a backlog of unfiled cases has mounted as lenders began filing cases in state court where it takes more time and preparation, according to foreclosure attorneys handling cases.
Lawmakers passed Act 48 because homeowners and consumer advocates complained that lenders were improperly foreclosing on homes or not giving homeowners a fair chance to avoid foreclosure. The new law contains strong consumer protections including a mediation program and harsh penalties for violating procedures governing out-of-court, or nonjudicial, foreclosures.
The Legislature passed a bill this year to revise the law and make it more palatable to lenders. But some foreclosure attorneys predict that lenders will still avoid nonjudicial foreclosures. They also predict that a new provision requiring that attorneys attest to the validity of foreclosure documents for cases filed in court will further bog down or stop the flow of foreclosures.
The bill, House Bill 1875, is pending before Gov. Neil Abercrombie.
In the two years before Act 48, lenders were typically making 900 to 1,600 foreclosure filings a month. One type of filing, auction notices, had been running between 400 and 1,200 per month before the law, and fell to 14 the month after Act 48 was enacted. Last month there were 21 auction notices.
Some observers fear the pullback in foreclosures has created a shadow inventory of delinquent mortgages that will prolong recovery in the housing market. But others say the law, while not working as intended, is providing relief for homeowners who can’t pay their mortgages in the aftermath of the economic downturn.
Hawaii’s foreclosure volume in May represented the 40th lowest rate among states, at one filing for every 1,946 households. For more than a year until Act 48, Hawaii was typically among the third of states with the highest rates.
The national rate in May was one filing per 639 households based on 205,990 filings that represented a 4 percent decrease from May 2011.
Vermont had the lowest rate at one foreclosure filing per 15,359 homes. The highest rate was in Georgia, which RealtyTrac said had one filing per 300 households.
In Hawaii by county, Honolulu had the most filings at 111 but the lowest rate at one filing per 3,035 households.
Kauai had the next lowest rate at one filing per 1,419 households based on 21 filings.
On Maui, the rate was one filing per 1,173 households based on 60 filings. And Hawaii island’s rate was one filing per 1,098 households based on 75 filings.
