The state Department of Hawaiian Home Lands has initiated a variety of measures intended to improve its lending program, including lowering interest rates for the first time in 17 years and launching a pilot program to address the most severely overdue loans on the east side of Hawaii island, an area with a particularly acute delinquency problem.
Jobie Masagatani, department director, briefed legislators Thursday on steps the agency has taken since a state audit was released in April criticizing DHHL for failing to adequately address growing loan delinquencies.
The steps range from implementing a detailed tracking system for loans at least 180 days overdue to developing new underwriting policies.
The department also has added services designed to prevent struggling homeowners from having their land leases canceled and is providing more comprehensive loan information to the Hawaiian Homes Commission, the nine-member board that oversees the agency. The commission ultimately decides whether to cancel a delinquent homesteader’s lease, a step rarely taken in recent years.
"It’s not easy to solve," Masagatani said of a delinquency problem that goes back decades.
She said the department must walk a fine line between helping delinquent homeowners get back on track financially without conveying the message that homesteaders don’t have to pay their mortgages because DHHL will refrain from taking any action.
DHHL, which oversees a 203,000-acre trust, provides 99-year leases to beneficiaries who are at least 50 percent Hawaiian. It has awarded more than 9,000 leases, most for residential use, but more than 26,000 beneficiaries are on a waiting list.
One area in which some Native Hawaiian advocates have been particularly critical of the department has been the assistance it offers to beneficiaries who face losing their homes because they have fallen so far behind on their mortgage.
The problem is especially severe on the Hilo side of Hawaii island, particularly for loans made directly by DHHL (as opposed to those made by private lenders but that end up with DHHL if the borrower defaults).
Of 114 direct loans that were identified in the audit as being at least 180 days overdue, 45 percent, or 51 loans, were in East Hawaii, according to department data.
For delinquent East Hawaii borrowers who meet certain eligibility criteria, including earning no more than 80 percent of the area median income, the department is offering three forms of assistance using federal funds:
» Paying past-due amounts up to $15,000, with the amount subject to reimbursement upon sale or transfer of the home or a subsequent refinancing that includes taking cash out.
» Refinancing at a reduced interest rate.
» Deferring partial repayment to the end of the mortgage term, resulting in lower monthly payments.
Masagatani said most East Hawaii homesteaders have equity in their homes.
The department in August also lowered the interest rate on its direct loans to 4.5 percent from 6 percent. That was the first time since 1996 that DHHL had lowered its lending rate, according to Masagatani.
State Sen. David Ige, who heads the Senate Ways and Means Committee, one of the legislative panels that called for Thursday’s briefing, told the Honolulu Star-Advertiser after the session that he is pleased with the steps DHHL has taken since the audit.
The ability to better monitor the delinquency problem will be helpful as the department looks for more ways to address it, according to Ige.
"It’s a good start," he said.
Robin Danner, who led a working group of beneficiaries that made recommendations earlier this year to DHHL to address the audit findings, said she is pleased that the East Hawaii pilot program incorporates aspects of the group’s suggestions.
But she said the program should be quickly expanded statewide.
"This isn’t new stuff," Danner said. "And there are beneficiaries hurting well beyond East Hawaii."
Part of Thursday’s session was devoted to discussing the upcoming end of the $30 million annual payments that DHHL has received from the state for the past 19 years. The final payment, which would bring the total to $600 million, is scheduled to be made next fiscal year.
The state in the early 1990s agreed to pay the $600 million to settle past claims of land misappropriations from the trust.
Ige said that one goal of the payments was for DHHL to invest the money in income-generating properties or initiatives, increasing its revenue base so the agency could become more self-reliant.
But data provided by DHHL at Thursday’s briefing showed only nominal annual growth between 2002 and 2012, roughly half the period the agency has received the payments.
"It’s disappointing," Ige said of the revenue growth.
DHHL is expected to request $27.1 million in state funds for its operating budget for the coming fiscal year.
