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Hawaii Enacts Foreclosure Mediation Law

Hawaii Gov. Neil Abercrombie has ""signed into law"":http://hawaii.gov/gov/newsroom/in-the-news/help-for-at-risk-homeowners a measure aimed at stemming foreclosures in the state by bringing homeowners and their lenders together to negotiate an alternative resolution.


Based on first-quarter foreclosure activity, ""RealtyTrac"":http://www.realtytrac.com reports that Hawaii had the 11th highest foreclosure rate in the nation, with one in every 201 homes in the state receiving a filing during the first three months of this year.

According to a statement from the governor's office, the new state law, ""Act 48/Senate Bill 651"":http://www.capitol.hawaii.gov/session2011/Bills/SB651_CD1_.HTM, implements a comprehensive strategy to reform the mortgage foreclosure process to protect homeowners who are in foreclosure or at risk of foreclosure.

The primary component established under this measure, the Mortgage Foreclosure Dispute Resolution Program, allows owner-occupants who are facing foreclosure to meet face-to-face with their lenders to reach an agreement that avoids foreclosure or mitigates damages in cases where foreclosure is unavoidable.


The law gives delinquent borrowers the opportunity to request such a meeting before a non-judicial foreclosure sale can be completed. The negotiations would be mediated by a third-party facilitator. The foreclosure process is suspended until the dispute resolution is completed.

Hawaii's ""Department of Commerce and Consumer Affairs"":http://hawaii.gov/dcca/ will administer the program, which will begin by October 1, 2011 and continue until September 30, 2014.

A special fund has been established in the state treasury to finance the Mortgage Foreclosure Dispute Resolution Program, with seed capital allocated by the state government. For every non-judicial foreclosure filed in the state, lenders must pay a $250 fee which will be deposited into this special fund.

In addition, both the homeowner electing dispute resolution and their lender are required to pay a $300 program fee prior to mediation, and each party could face a fine of up to $1,500 for what the legislation describes as ""unjustified noncompliance"" with the program requirements. All money collected as fees or fines will go into the special fund to help finance the program.

A lender who fails to comply with the mediation program may not proceed with non-judicial foreclosure.

The intent of the new law is to place a moratorium on new non-judicial foreclosure actions until the program is up and running.

It also gives owner-occupants who do not participate in the dispute resolution program the option of converting their non-judicial foreclosure to one that is heard by a judge if they feel the lender is not following the proper procedures.

Mortgage servicers with at least a 20 percent market share in the state must maintain a local office.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.

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