Though the current economic climate has shown meager signs of recovery, the foreclosure epidemic continues to plague states across the country and is forcing state legislators to implement dispute resolution programs. Unfortunately for Hawaiian homeowners, the Aloha state finds itself near the top of national rankings for foreclosure rates; and while many have petitioned for relief, until now, the state has offered little in the way of help. That is set to change by October 1, 2011, when fresh legislation is scheduled to become law.

Labeled the Mortgage Foreclosure Dispute Resolution (MFDR) Program, this measure is intended to provide potential relief for desperate homeowners by encouraging face-to-face meetings with lenders in hopes of promoting settlements meant to stave off foreclosures. The initiative establishes a mortgage foreclosure dispute resolution system headed by a trained mediator in charge of encouraging communication between lenders and borrowers to promote compromise and bolster the likelihood of a mutually beneficial outcome. Administered by Hawaii's Department of Commerce and Consumer Affairs, the MFDR will receive assistance from the State Judiciary’s Center for Alternative Dispute Resolution.

Notable Details of Interest  of MFDR

* The MFDR requires that each party negotiate in good faith and may assess fines of up to $1,500 for what it terms “unjustified noncompliance.”

* Lenders are required to pay a $250 foreclosure filing fee and a $300 nonrefundable program fee.

* All fees and fines will be added to the Mortgage Foreclosure Dispute Resolution Special Fund which will be used to pay for program expenses

How Does the Mortgage Foreclosure Dispute Resolution Work?

Once the Mortgage Foreclosure Dispute Resolution Program begins, lenders may start filing non-judicial foreclosure notices with the Department of Commerce and Consumer Affairs; however, upon receiving the notice, the DCCA will inform the homeowner of his or her right to participate in dispute resolution. The homeowner will also receive an MFDR participation form, detailed program information and appropriate instructions and contact information.

If the homeowner chooses to meet with the lender and mediator, he or she must post a $300 nonrefundable program fee within 30 days, or the foreclosure process will continue forward. Once the DCCA receives the fee and participation form, it will notify each party within 20 days of the location, date and time of the dispute resolution session. Each session will occur between 30 and 60 days after notification unless the lender and borrower are able to settle on an alternate date. The foreclosure process will be suspended until mediation is complete, and if each party is able to settle on an agreeable compromise, the foreclosure will be terminated.

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