Hawaii homeowners have had their residences sold in foreclosure even though the sales were supposed to be halted while their applications for federal mortgage relief were processed, attorneys and advocacy groups say.

Exact numbers are hard to come by, but officials who help distressed homeowners say it appears to be happening more and more here, an indication that nationwide problems with the federal Home Affordable Modification Program have reached isle shores. The program has been widely criticized as ineffective, mired in bureaucratic bungling, and bringing many homeowners closer to financial ruin than financial stability.

One Makakilo woman said she was told in January by her lender that the upcoming foreclosure sale of her home would be stopped—as federal regulations require—because she was eligible for a loan modification and her application was in the pipeline.

Yet four days later, unbeknownst to the woman, her home was sold at a nonjudicial foreclosure auction, according to court documents. She now faces imminent eviction.

"Unfortunately, that story has a very familiar ring to it," said Hawaii HomeOwnership Center Executive Director Dennis Oshiro, who noted that such cases seem to be on the rise. Several other officials whose organizations or law firms assist homeowners agree.

The Makakilo woman, who asked that her name not be used for privacy reasons and because of the stigma associated with foreclosures, is fighting her eviction in court. But her chances of success are uncertain, and she soon could be forced to vacate the residence she has owned since 2001.

Her experience underscores the many problems distressed Hawaii homeowners have encountered as they attempted to seek relief under the federal program launched in early 2009 with great fanfare.

While the so-called HAMP program, designed to alleviate a growing foreclosure crisis, provides substantial savings to financially strapped homeowners who are able to get their mortgages modified, it has been beset by processing problems across the country, partly because of the huge volume of applications.

"There are so many things wrong with the system," said Kevin Stein, associate director of the California Reinvestment Coalition, whose members help homeowners.

A half-dozen Hawaii homeowners told the Star-Advertiser that they have encountered numerous roadblocks, including repeatedly receiving inconsistent or inaccurate information from their lenders, having to fax or mail the same documents again and again, not being able to deal with the same person each time they call, spending hours on the phone with few results and frequently being given conflicting instructions. All their lenders are mainland banks with no local offices.

For some of the homeowners, the problem-plagued process has meant ruined finances, uncertain futures and overwhelming stress. Some said they still don’t have their loans restructured after applying more than a year ago.

Big Island homeowner Denise Houghtaling said she has been getting the runaround for months and several times broke down on the phone from sheer frustration, sobbing as she spoke to a lender representative about yet another snag.

"It’s been a nightmare," said Houghtaling, whose three other neighbors lost their homes through foreclosure while attempting to modify their loans. "You can’t imagine what we’ve gone through."

Laura Motta, another Big Island homeowner, echoed those sentiments. Even though she has been in a temporary modification plan for more than a year and has been making regular payments, she said she recently got a notice claiming she wasn’t in any plan and hasn’t been making any payments.

The process, she said, is "cruel. It’s really, really wrong. It makes you feel like you’re a criminal, when you’re not."

Those involved in the program acknowledge that problems still exist—especially involving communication—but that much has improved in recent months, particularly given the size and complexity of the federal initiative.

New rules recently took effect, for instance, requiring lenders to make eligibility decisions within 30 days of getting a completed application. Initial applications often are submitted incomplete.

HOPE NOW, an alliance that includes housing counselors, mortgage companies and their loan servicers, has started a web-based resource that streamlines the submission of documents, enhancing communication between counselors who assist homeowners and the lenders.

"We’ve made a lot of progress," said Faith Schwartz, senior adviser to the HOPE alliance. "But clearly, the industry has room to improve" in the communication area.

While many problems result in delays and add to customer frustrations, the most serious seems to be people losing their homes despite lender assurances to the contrary or in apparent breach of the program rules.

Maui resident Michelle Vogele said she had been receiving monthly notices from her lender that her home’s foreclosure sale would not happen as long as she continued making her modified trial mortgage payments. Vogele said she has made those payments regularly for the past eight months.

Recently, however, she learned that her home was sold—unbeknownst to her—at a foreclosure auction June 2.

"I was traumatized," Vogele said, adding that her lender, Bank of America, had erroneously determined she was late with her initial trial payment, putting her into default.

A Bank of America spokeswoman reached late Friday in California said there wasn’t sufficient time to research the case to provide comment.

Local consumer lawyers and nonprofit groups contacted by the Star-Advertiser had no estimate on how many Hawaii residents have lost their residences while their modification applications were being reviewed.

But several said they are hearing about more instances of the servicers not telling the Hawaii attorneys handling the foreclosures to stop the upcoming sales pending modification decisions.

"There’s a huge disconnect right now in that line of communication," said Legal Aid Society of Hawaii attorney Ryker Wada, who supervises that group’s consumer unit.

Recently enacted HAMP regulations prohibit the servicers from conducting foreclosure sales until a decision is made that the applicant is ineligible, the applicant enters a trial period and fails to make a payment on time, or for several other specific reasons.

But the lenders suffer no penalties if they don’t follow the rules, and homeowners who aren’t treated fairly have no clear recourse, according to Stein, the California nonprofit executive.

Stein’s coalition recently surveyed more than 50 California housing counselors whose agencies see about 10,000 clients monthly, and most respondents indicated that they have seen the same problem as encountered by the Makakilo woman, according to Stein, citing preliminary survey results.

In the Makakilo case, the homeowner learned of the foreclosure sale several months later when the new buyer posted an eviction notice on her front gate, she said.

The woman took the news particularly hard because she had turned down a $250,000 offer from another buyer earlier this year, according to attorney Gary Dubin, whose law firm represents the woman. She turned down the offer because of the assurance by CitiMortgage, her lender, that the foreclosure auction was halted, she said.

The private sale would have netted the woman about $100,000, she said.

CitiMortgage could not be reached for comment.

The various problems reported by homeowners across the country have triggered multiple mainland lawsuits against lenders, the federal government and others. Some are seeking class-action status.

Despite the HAMP problems, roughly 1,300 Hawaii homeowners through May have been able to get their loans permanently modified, resulting in a median savings of about $870 on their monthly payments, according to federal data.

Oshiro, of the HomeOwnership Center, said one of his agency’s clients, who had been resigned to losing his home before entering HAMP, ended up getting nearly 50 percent cut from the monthly payments.

Oshiro cites such examples when proffering this advice: "The process can be frustrating and overwhelming at times, but hang in there. Be persistent."

Such advice is of little consolation to those who already have lost their homes or the Makakilo woman who soon could lose hers.

"How come they didn’t let me know that they were going to go ahead with the foreclosure?" the woman asked. "This has wiped me out economically."