Foreclosure mediation limited to the Big Isle

"Mediation. It works!"

That’s the message from a Hawaii Circuit Court system brochure promoting mediation of foreclosure lawsuits. But really, whether or not mediation works depends on where in Hawaii a homeowner facing foreclosure lives.

For the past five years, the state’s 3rd Circuit Court on Hawaii island has operated a mediation program that has diverted hundreds of foreclosure lawsuits from state court to mediators who have helped homeowners avoid foreclosure of their primary residence.

Yet on Oahu, Maui and Kauai, no such programs exist despite the work of a commission led by local judges and lawyers who recommend a statewide foreclosure mediation program.

The disparity comes down to judicial resources and priorities during a time when foreclosures are down from prior peaks but total about 200 new cases a month statewide.

On Hawaii island the foreclosure mediation program started as a pilot proj­ect in 2009 with two judges, and after a stuttering start it became a success that was indefinitely extended last year under all four 3rd Circuit judges.

"We see the difference that it makes in peoples’ lives," said Julie Mitchell, executive director of Ku‘i­kahi Mediation Center, a Hilo nonprofit that splits the foreclosure mediation caseload with West Hawaii Mediation Center in Kona. "The difference is huge."

Mitchell said homeowners at the outset of mediation often are in a state of despair that improves when they deal directly with mortgage company representatives who can make decisions about their delinquent loans.

"It gives them the confidence to engage and participate," said Janie Chandler-Edmondson, the West Hawaii Mediation Center’s executive director.

Local trade associations representing mortgage lenders generally have argued that mediation is unnecessary because it duplicates efforts that lenders make before filing a foreclosure lawsuit. However, Mitchell and Chandler-Edmondson said attorneys representing lenders have had positive responses to their work, which is less expensive and time-consuming than foreclosure.

"The lenders and the borrowers are equally our clients," Mitchell said.

Last year the 3rd Circuit foreclosure mediation program accepted 198 cases, up 41 percent from the 140 cases accepted the year before, according to a recent report from the court.

The mediation case volume represented 21 percent of 923 foreclosure lawsuits deemed eligible for mediation on Hawaii island.

Of the 198 mediation cases, 33 resulted in settlements, another 46 mediation attempts failed and 119 cases remain in prog­ress.

For cases that were resolved last year after being accepted into the program in 2011 and 2012, there were 46 settlements and 37 rejections.

Mitchell and Chandler-Edmondson said most settlements are loan modifications that keep borrowers in their home, followed by short sales and then giving the home back to the lender in lieu of foreclosure.

Some observers might not regard the settlement rate as high or good. The failed mediation attempts last year included situations in which borrowers failed to bring required documents or didn’t show up for status conferences, and a few instances in which lenders didn’t comply with court orders.

The court, however, said in its report that its practice of holding conferences prior to ordering mediation prompted lenders and borrowers to initiate talks that resulted in settlements outside mediation in 215 cases last year.

"It seems 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 from 3rd Circuit Chief Judge Ronald Ibarra said.

Expanding the program to other Hawaii counties is up to the Hawaii Supreme Court, which declined recommendations in 2010 and 2012 from the Hawaii Access to Justice Commission to expand the foreclosure mediation program statewide.

The Supreme Court acknowledged the mediation program’s benefits but is concerned that a statewide program might not fit the needs of each circuit.

The Access to Justice Commission said in its 2012 annual report that financial constraints on the state Judiciary’s budget inhibited significant resources from being redirected to support a statewide foreclosure mediation program.

Lester Oshiro, chief administrator for 3rd Circuit Court, said key support for the program on Hawaii island was the hiring of two lawyers last year as full-time foreclosure specialists who unburdened court clerks.

The hiring of specialists was made possible from litigation proceeds provided by the state Department of the Attorney General.

"These specialists have really been the spark to this (program) blossoming," Oshiro said.

Money collected from participants also helps support the program, which is limited to owner-occupant homeowners. The mediation centers charge the borrower and lender $200 each.

Tammy Mori, a Judiciary spokes­woman, said other options are available to resolve Hawaii foreclosure lawsuits out of court, such as individual judges ordering cases to mediation and each Circuit Court implementing its own program. However, these avenues haven’t been taken.

The Judiciary, through its Center for Alternative Dispute Resolution, produces a consumer brochure that promotes foreclosure lawsuit mediation. The brochure explains that borrowers may ask a judge for mediation and that a judge could require them to try mediation.

Yet Circuit Court judges on Oahu, Maui and Kauai aren’t referring foreclosure cases to mediation, according to Tracy Wiltgen, executive director of the Mediation Center of the Pacific.

"Our program has not been utilized," said Wiltgen, whose nonprofit is contracted to provide mediation services for the Judiciary.

The Mediation Center trained roughly two dozen volunteers specializing in real estate and finance to be foreclosure mediators a few years ago for a program mandated by the Legislature that was flawed and never used.

At the Legislature this year, House Bill 2356 proposed to let homeowners engage mediators to resolve mortgage loan troubles before lenders can file foreclosure lawsuits in state court, but the bill died despite an endorsement by the state Department of Commerce and Consumer Affairs.

Meanwhile, on Hawaii island, mediators Mitchell and Chandler-Edmondson said they each have about 100 foreclosure mediation cases pending, and they don’t foresee a slowdown.