Help for People Facing Foreclosure

WHILE TRYING TO SAVE his home from foreclosure, what was most difficult to handle for cattle rancher Jeffrey Medeiros was not knowing the person on the other end of the phone line.

“Every time I called the bank, I spoke to a different person,” he says. “They didn’t know me or my situation. They said they sent stuff, but I never got it, and I sent stuff they claimed they never got. It was all really stressful.”

With the help of a mediator, Medeiros was able to avoid foreclosure and lower his monthly mortgage payment by $400. He is among 172 homeowners who have been able to retain their homes since the Hawaii Supreme Court established the Foreclosure Mediation Pilot Project in Hawaii County in 2009. Since 2011, it has been run through a partnership between the Kuikahi Mediation Center and West Hawaii Mediation Center, and, since 2012, it has been funded through the state Department of the Attorney General.

“Mediation allows (homeowners) to participate in the justice system even if they don’t have the money to hire a lawyer.”

— Ronald Ibarra, Chief judge of the Third Circuit

“The mediator was someone I could go in and meet with one on one, who knew who I was, and had my file in front of them. We were always on the same page,” says Medeiros.

Foreclosure mediation, according to Kuikahi executive director Julie Mitchell, is a process in which a neutral third party helps both sides reach a mutually satisfactory agreement to prevent foreclosure. To achieve this, borrowers and lenders agree to only communicate through the mediator, so there is one point of contact to ensure a smooth flow of paperwork and a more level playing field for homeowners, who may feel intimidated by bank representatives or their lawyers. 

“We’re trying to encourage people to talk to one another, listen, explore possibilities and figure out a solution. It’s very different than the judicial process because mediators are not decision makers. The parties are. It’s about party self-determination, being in charge of their own lives and destinies, and finding an outcome that’s going to work for everyone,” says Mitchell.

To qualify for the program, which is currently only available in Hawaii County, a lawyer for the lender must provide notice of foreclosure action and a mediation request form. If the homeowner can certify that he is the borrower or co-borrower, and that the house is his principal residence, the court will review the request for mediation.

Ronald Ibarra, chief judge of the Third Circuit, which includes Hawaii Island, spearheaded this pilot program to ensure better access for all to the justice system. “Prior to the program, more than 90 percent of debtors who were unable to afford a lawyer would not file any legal documents, resulting in defaults being entered against these homeowners. Mediation allows them to participate in the justice system even if they don’t have the money to hire a lawyer,” Ibarra says.

“Before mediation, our mortgage was at $2,452, and now it’s dropped to $1,742. And the interest rate went from 6.75 percent to 2.3 percent.”

— Anne, Beneficiary of the Mediation program

While mediation can help borrowers, lenders also benefit by not having to deal with the costs of protecting, fixing, marketing and selling a foreclosed home. “Any time there’s a result other than a foreclosure judgment, it’s better for all sides,” says Aaron Masser, an attorney at RCO Hawaii LLLC, who regularly represents lenders in foreclosure cases. “The lender would rather have a loan modification or a quicker resolution through a short sale if that’s possible. Maybe they are not getting as much as they would have gotten, but they are minimizing their loss. Anything that can help reach those goals is good for the lender.”

Mediation is available to anyone at any stage as an alternative to court. “There are people who know they are missing payments and don’t know what to do. Pre-foreclosure, they can call our center and we can try to mediate between the homeowner and the bank before it ends up in court,” says Mitchell.

Anne, who asked that her last name not be used because foreclosures carry a stigma in some people’s minds, says she wishes more people in her community were aware that mediation is an option. She and her husband felt embarrassed and scared when they first got their foreclosure notice, and did not know what to do. Mediation made her aware of her options.

“Before mediation, our mortgage was at $2,452, and now it’s dropped to $1,742. And the interest rate went from 6.75 percent to 2.3 percent. All we could say was, ‘Why didn’t we do this sooner?’ ”

Melony Tavares, foreclosure program specialist at the West Hawaii Mediation Center, says that, while not all homeowners keep their homes, mediation does help people understand why things are happening, and that itself can be a benefit. “Sometimes it just takes someone to sit down and say, ‘These are the numbers, this is what you’re facing.’ They may want a loan modification, but once they realize their income isn’t enough, they may look into other options, like a short sale or cash for keys.”

For now, there are no specific plans to extend the pilot program beyond Hawaii Island. “The hope is that the program will stay and continue to receive funding from the attorney general’s office. No matter what happens, we’d like to support this program in any way we can and see it continue,” says Katie Woods, executive director of the West Hawaii Mediation Center.