A mediation program established by the Legislature three years ago to help Hawaii homeowners avoid foreclosure may continue to sit idle after the latest effort to spur its use fell flat before a panel of lawmakers Monday.

House Bill 2356, which proposed to let homeowners engage mediators to resolve mortgage loan troubles before lenders can file foreclosure lawsuits in state court, drew support from the state Office of Consumer Protection and opposition from mortgage industry representatives.

Members of a joint Judiciary Committee and Consumer Protection and Commerce Committee in the state House deferred the bill indefinitely.

Rep. Angus McKelvey, chairman of the Consumer Protection and Commerce Committee, cited a disconnect in one part of the bill that sought to have foreclosure mediation apply to the state Department of Hawaiian Home Lands as a primary reason for the deferral.

Jobie Masagatani, DHHL director,testified that the agency doesn’t engage in foreclosure lawsuits in the same way as mainstream lenders, and suggested that the bill, if passed, wouldn’t apply.

Criticism about DHHLnot doing more to assist beneficiaries who have defaulted on loans for their homes on homestead land leased from DHHLgained widespread attention after a Honolulu Star-Advertiser story published in September. But the effort to help mainstream homeowners avoid foreclosure through mediation stretches back to 2011.

HB 2356 represents the fourth time in four years that Hawaii lawmakers attempted to give local homeowners the power to try to resolve mortgage troubles through mediation prior to foreclosure.

The initial attempt was part of an overhaul of state foreclosure law in 2011 that made mediation an option for homeowners before lenders could proceed with out-of-court, or nonjudicial, foreclosure cases that consumer advocates said left homeowners poorly protected from abusive lender practices.

In implementing the revised law, mediators were trained as part of a program set up with a $400,000 state appropriation. Lenders, however, sidestepped mediation by filing all foreclosure cases in court.

More changes were made to Hawaii foreclosure law in 2012 partly in an effort to make nonjudicial foreclosures with mediation more palatable, but lenders stuck to the more time-consuming and expensive judicial foreclosures.

The third attempt at putting the inactive mediation program into use came last year in a bill similar to HB 2356, which would allow mediation at the election of homeowners who live in their homes as opposed to investors or vacation-home owners.

Last year’s bill, Senate Bill 1370, drew strong support from the state Office of Consumer Protection and passed four legislative committees — two in the Senate and two in the House — before failing to get a hearing in the House Finance Committee chaired by Rep. Sylvia Luke.

Opposition to last year’s bill included arguments by mortgage industry representatives that were repeated at Monday’s hearing.

One industry argument is that borrowers would see little difference in case outcomes because lenders are required to explore loan modifications with delinquent borrowers before foreclosure is initiated.

New rules by the federal Consumer Financial Protection Bureau that took effect last month require loan servicers to provide borrowers with mitigation information including loan modification options within 36 days of a mortgage becoming delinquent, and preventing any foreclosure initiation until a delinquency is at least 120 days old.

"A required state mediation process would merely repeat the loan modification process with no different end result,"Neal Okabayashi, a Hawaii Bankers Association representative, said in written testimony.

Also testifying in opposition to HB2356 were the Hawaii Financial Services Association, the Mortgage Bankers Association of Hawaii, the Hawaii Credit Union League and Maui County Federal Credit Union.

Bruce Kim, executive director of the Office of Consumer Protection, said borrowers need an "honest assessment"that a mediator would provide following a required meeting with a certified housing counselor under the bill.

Consumer advocates have contended that lenders don’t always make good-faith efforts at loan modifications, and that in some cases loan servicers have financial incentives to foreclose instead of restructuring a loan.

A 2010 federal report by the Justice Department and Department of Housing and Urban Development that referred to more than 25 foreclosure mediation programs in at least 14 states said the most impressive programs had settlement rates resulting in about 60 percent of homeowners remaining in their homes.

"For millions of homeowners at risk of foreclosure, mediation programs offer an opportunity to evaluate their options and appraise possible alternatives to losing their homes," the report said.

Hawaii has had some experience with foreclosure mediation under a pilot program on Hawaii island.

During 2012, mediation was ordered by a judge in 140 cases out of 313 requested by borrowers under the program, according to the most recent report on the program by the state Judiciary.

Settlements were reached in 44 cases. Of the remaining 96 cases, mediation was still in progress for 71 cases, and mediation was canceled in 25 cases for reasons that included a lack of progress, borrowers withdrawing, and pending home sales approved by lenders.

The report said that just the prospect of mediation helped produce settlements between borrowers and lenders after pre-mediation conferences.

"It seems that the court’s involvement even at the inception is important and often results in positive results prior to ordering a case into mediation,"the report said.