Hawaii records lowest foreclosure rate since January 2009

Hawaii June 2011 foreclosures are down a whopping 66% compared to June 2010. One year ago, Hawaii was faced with 1000 foreclosures, but June 2011 saw only 344 filings for foreclosures, the lowest foreclosure rate in Hawaii since January 2009, a dramatic drop by any assessment.

January 2009 saw the paperwork filed for a total of 337 foreclosures, at a time when the hill of troubled mortgages was growing into a mountain. Well, it seems the mountain has peaked and, thanks largely to Hawaii’s new foreclosure law, Act 48, which was put into action this past May, lenders are now required to make every effort to negotiate loan modification plans with borrowers. Lenders and borrowers will be able to negotiate these loan modification plans with the state Department of Commerce and Consumer Affairs’ mediation program, a program that will be operational October 1st. Until then, the state Department of Commerce and Consumer Affairs will not be accepting any new out-of-court (non-judicial) filings. Being the majority of Hawaii foreclosures are routed through the faster and less-expensive non-judicial process (when compared to the cost and lack of speed through the court system), Act 48 has effectively stalled any more foreclosures from being filed through the non-judicial process. Instead, lenders have started to file more cases in Circuit Court. However, even with the filings in judicial foreclosures having increased, the total number of foreclosures in Hawaii is down by over 45% when compared to the same month last year.

Judicial foreclosures numbers are derived from new foreclosure filings. Due to the fact that the data numbers include residential and commercial property foreclosures, the numbers do not reflect the exact number of home foreclosures. Of the 344 foreclosures filings for June 2011, almost half were lender repossessions which occur when the property fails to secure a buyer at auction.

The drop in foreclosures have had the added benefit of moving Hawaii from a nationally “12th worst” (May) for foreclosures to the much more palatable “16th best” (June). Nationally, according to RealtyTrac, there is 1 foreclosure filing per 584 households. In Hawaii, the number is at 1 foreclosure per 1500 households, a significant difference against the national average. Also helping the foreclosure numbers is the processing and procedural delays that are causing delays of a year, or even more, against foreclosure filings. “Recovery is unlikely to happen until the current and forthcoming inventory of distressed properties can be whittled down to a manageable number.” James Saccacio, RealtyTrac chief executive officer, said. Thus, anything that can help space out foreclosure filings to allow the process to work through the pile is a good thing with respects to helping get the market back under control.

By facilitating more loan modifications to prevent foreclosures while still allowing lenders to repossess where there is no chance of payment at even with a reduced mortgage, Act 48 will go a long way with helping resolve the foreclosure mess that Hawaii is managing to get control of.