Lenders restrained by Hawaii’s new foreclosure law processed relatively few foreclosures in July, the second month of a temporary reprieve for many local homeowners with delinquent mortgages.
A report released today by real estate research firm RealtyTrac said 390 foreclosures were filed last month, a 58.1 percent reduction from 930 filings a year earlier.
Last month’s figure followed 344 filings in June, the lowest for any month since January 2009.
In May, a new foreclosure law, Act 48, took effect. The law was primarily intended to force lenders to make better efforts at negotiating loan modification plans with borrowers through an out-of-court mediation program overseen by the state Department of Commerce and Consumer Affairs.
The mediation program isn’t expected to be running until Oct. 1, and until then, most out-of-court foreclosures are not allowed. That leaves lenders with the option of pursuing foreclosures in court, which are more costly and time consuming. Filings could pick up after the program starts.
To keep at least some foreclosures moving forward, lenders have been initiating most new foreclosure cases in state courts since June.
The state Judiciary reported that 187 new judicial foreclosure cases were filed in July. Before the new foreclosure law, relatively few residential property foreclosures were conducted in court.
Hawaii is one of several states where new laws or regulations are constricting foreclosures, according to RealtyTrac, which said nationwide foreclosure activity in July fell 35 percent to its lowest monthly total since November 2007.
James Saccacio, RealtyTrac’s chief executive officer, said artificial decreases in foreclosure activity started in October 2010 when some lenders acknowledged improperly signing documents, and have proliferated since then.
"It appears that the foreclosure processing delays, combined with the smorgasbord of national and state-level foreclosure prevention efforts — including loan modifications, lender-borrower mediations and mortgage payment assistance for the unemployed — may be allowing more distressed homeowners to stave off foreclosure," he said.
The stymying of Hawaii foreclosure filings helped give the state the 20th best rate of foreclosure actions nationally last month compared with the 16th worst rate a year ago.
Hawaii’s rate was one foreclosure filing per 1,322 households. Vermont had the best rate with one filing per 28,568 households. Nevada had the worst rate with one filing per 115 households. Nationally there was one filing per 611 households.
Kauai had the next best rate at one filing per 1,205 households based on 25 total filings.
On Hawaii island, there were 119 foreclosure filings for a rate of one per 678 households.
Maui had the worst rate at one filing per 660 households based on 101 total filings.
There is one interesting footnote to the July foreclosure numbers.
A part of Hawaii’s new foreclosure law was intended to help homeowners more easily contest a lender’s "nonjudicial," or out-of-court, foreclosure by forcing the case before a judge without filing a separate lawsuit.
In July, two homeowners sought to have their nonjudicial foreclosure cases converted to judicial cases. The two cases are the first such conversion petitions filed, and are subject to a judge’s approval.
