When Maui homesteader Linda Nahina faced losing her home last year, the Department of Hawaiian Home Lands offered no help to try to resolve the crisis, she said. The only “assistance” she received from the agency was a recommendation to attend a household budgeting class.

If Nahina had been a homeowner on non-DHHL land, she would have had access to multiple services designed to prevent foreclosure, financial counselors say. A state law enacted in 2011 also would have required a third-party mediator to intervene.

But DHHL, which manages a 203,000-acre trust for Native Hawaiian beneficiaries, does a poor job of providing similar protections to homesteaders who have defaulted on their mortgages and face losing their homes, counselors and homesteader advocates say.

The situation has become alarming enough that those attending a Native Hawaiian convention recently called for DHHL to impose a moratorium on lease cancellations, which is the agency’s version of a foreclosure.

At its 12th annual session, the Council for Native Hawaiian Advancement, which has more than 150 member organizations, adopted a recommendation urging DHHL to halt cancellations until the department has written collection policies that contain protections similar to what is in Act 48, the 2011 state law that the Legislature adopted as Hawaii’s foreclosure crisis rippled through the housing market.

The council’s recommendation also calls for the moratorium to remain in place until DHHL adopts a policy mandating that delinquent homeowners receive mediation help from a federally certified financial counselor and that they have access to the same foreclosure-prevention services generally available to other Hawaii homeowners.

“We’re being ‘brownlined’ in our own communities,” said Robin Danner, past president of the council and an advocate for DHHL beneficiaries, referring to the practice — usually called “redlining” — of lenders discriminating against minorities. “We don’t want more than everyone else gets. We just want parity.”

DHHL spokesman Puni­aloha Chee said the agency already offers assistance to beneficiaries who have defaulted on their loans or are at risk of default and gives them the names of nonprofit agencies that provide foreclosure-prevention services.

If a beneficiary falls behind on a mortgage and faces lease cancellation, the homeowner is offered ample opportunities during the lengthy cancellation process to work out a settlement, he added.

Beneficiaries, who must be at least 50 percent Hawaiian, typically take out mortgages — frequently from private lenders — to purchase homes on DHHL land. The homesteaders lease

the land for $1 a year for 99 years. If the beneficiary cannot qualify for a government-backed loan from a private lender, DHHL becomes a lender of last resort, taking on the higher-­risk loans.

Once a beneficiary defaults on a loan, a collection process begins that eventually can lead to cancellation of the land lease, resulting in the beneficiary losing the home.

Acknowledging the need to provide beneficiaries with tools for financial success, Chee noted that DHHL is developing a financial education program modeled after one terminated in 2011 and is implementing a lease-cancellation prevention program.

DHHL last month awarded contracts to two financial counseling providers, Helen N. Wai LLC on Oahu and Hale Mahaolu on Maui, to help beneficiaries, resuming a service last offered by the department in July 2011.

Chee also said Act 48 and Act 182, another foreclosure-prevention law, do not apply to DHHL’s lease cancellations because the agency’s lands are not subject to foreclosure. But DHHL is reviewing whether the two laws’ foreclosure prevention principles might be incorporated into DHHL’s already existing programs to assist homeowners, Chee added.

He dismissed the idea of a temporary halt to lease cancellations.

“A blanket moratorium on lease cancellations would be misguided and contrary to DHHL’s legal obligations to prudently manage its financial resources,” Chee wrote in response to Star-Advertiser questions.

Lease cancellations actually are uncommon.

Since 2011, only three have been canceled by the Hawaiian Homes Commission, the board that oversees DHHL, even though 143 cases were referred to the panel for possible cancellation, according to DHHL data. The rest of the cases, or 98 percent, resulted in settlements, according to DHHL.

The department has said it places a priority on trying to keep beneficiaries in their homes, rather than canceling leases.

The convention participants adopted the call for a moratorium as part of their discussions of a recent state audit that was highly critical of DHHL’s oversight of its lending programs.

Among other things, the auditors found that DHHL’s failure to sufficiently address a growing loan delinquency problem posed a risk to the agency’s solvency. About 14 percent of the department’s $588 million in loan accounts were delinquent as of June 2012, with dozens delinquent five years or more, according to the audit.

The auditors also noted that DHHL has vague policies and few standards for loans it makes directly to beneficiaries and the defaulted ones it gets back from private lenders. In addition, commissioners aren’t given sufficient information to make decisions, the auditors found.

For the private loans that DHHL guarantees, the department will repay the lender if the lender is unable to reach a workout plan with the borrower. The agency then takes back the loan and attempts to work out a collection plan on its own, similar to what it does with loans made directly to beneficiaries.

But because the private loans are made on leasehold properties, as opposed to fee simple, the foreclosure-prevention steps those lenders are required to take under federal regulations are limited, hurting the homesteaders, advocates say.

Rather than relying on DHHL to come up with ways to address the audit’s findings, beneficiaries at the convention adopted recommendations to pass along to the commission. They said they wanted to be part of the solution. A working group had spent about a month developing the proposals, including written policies for making direct loans.

Annelle Amaral, a member of the working group and a first vice president of the Association of Hawaiian Civic Clubs, said she was stunned at how little help DHHL provided to beneficiaries behind on their mortgages because of a job loss, major health crisis or other issues.

“The system is broken,” said Amaral, a former state legislator.

Blossom Feiteira, president of the Association of Hawaiians for Homestead Lands and co-founder of a nonprofit financial counseling agency, said she discovered the extent of the problem when she attended a January 2012 commission meeting to help her cousin, Nahina, the Maui homesteader.

At the meeting, Feiteira talked to five other families facing cancellations, and all told her they had received no help from the agency, she said. Feiteira ended up assisting all of them and, at the request of several commissioners, has continued helping other beneficiaries. She was able to work out a settlement for her cousin.

Since the January 2012 meeting, Feiteira said, she has helped dozens of families, and all told her they received little or no help from DHHL before their cases were referred to a contested-case hearing, the last step before the commission considers a lease cancellation.

After two or three months of doing the advocacy work on her own, Feiteira joined with Hawaiian Community Assets, a Native Hawaiian financial counseling agency that is approved by the U.S. Department of Housing and Urban Development. Feiteira was a co-founder of that organization.

Its executive director, Jeff Gilbreath, said none of the 143 cases referred for lease cancellations since 2011 should have gone that far if DHHL had adequate knowledge of and was willing to use the range of foreclosure prevention options available to all other homeowners in Hawaii and nationally. Such options include freezing loan payments temporarily, lowering interest rates and restructuring the loan.

The contested-case process not only is costly to DHHL but is stressful and embarrassing for beneficiaries, some of whom are reduced to tears as they plead their case to commissioners, according to Gilbreath.

Resolving these situations before they get to the hearings stage not only protects the families but the trust’s assets as well, Gilbreath and other advocates said.

“What is absolutely not acceptable is for DHHL to continue to recommend lease cancellations of the more than 750 lessee families currently delinquent on their mortgages when they have no process for the families, nor the commission, to be a part of the solutions,” Gilbreath wrote in an email to the Star-Advertiser. “The solutions exist. Now we need the will of all parties to exercise them in good faith.”

DHHL’s Chee said the vast majority of lease cancellations involve loans issued by private lenders. The agency can recover its payment to the lenders only by collecting from the lessee or canceling the lease and renting the property to the next person on the waiting list, he added.

“When DHHL does not cancel leases that are in default, it places financial resources at risk — resources that are sorely needed to develop homesteads for those on the waiting list,” Chee wrote.

More than 26,000 beneficiaries are waiting for homestead lots.

For state Sen. Clayton Hee, vice chairman of a Senate committee on Hawaiian affairs, the lending controversy boils down to one

fundamental issue: Homeowners on DHHL land don’t get the same protections from the state as homeowners on non-DHHL land.

“It causes one to conclude that there’s a double standard based on race,” said Hee (D, Heeia-Laie-Waialua).