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LIHUE, Kauai — The Kauai County Council on Wednesday will consider a resolution sharply critical of the ways the Department of Hawaiian Home Lands handles its mortgage loan programs, which critics contend leave Native Hawaiians far more exposed to foreclosure and eviction than other Hawaii homeowners.

The resolution comes after the Maui County Council on Jan. 10 unanimously approved a resolution worded almost identically to the Kauai measure. Supporters say a similar resolution will be introduced soon before the Hawaii County Council. The Kauai County Council passed the resolution 6-0 on Wednesday, with one member absent.

The resolution contends that DHHL and the Hawaiian Homes Commission “do not provide adequate protection for Native Hawaiian families to access common loan loss motivation measures that have been historically available for all other citizens of Hawaii, including opportunities to apply for a permanent loan modification, a loan assumption or reasonable opportunities to sell a home prior to foreclosure.”

The resolution was introduced by Councilman KipuKai Kuali’i, who chairs the Housing Committee, and Councilwoman Felicia Cowden. Kuali’i is a DHHL beneficiary and lives on Hawaiian Homes Commission land in Anahola.

He said existing programs to advocate for more affordable housing and county programs to build government-funded workforce and homeless housing on Kauai fall short because they don’t “help people stay in the affordable housing they already have.”

Letting DHHL lessees fall into foreclosure or face staggering loan losses in the event of a family disaster only worsens the already acute housing shortage on the island.

“We’re now at the point where we can start pushing for legislation,” he said.

“I think we’re seeing a lot of the empowered Hawaiian community stand up,” Cowden said. “We believe it is right for the people who have loans on the land to be able to have the same due process that would be available to anyone else in foreclosure.”

Seeking Statewide Reform

Both resolutions are part of a coordinated campaign to push for broad statewide reform legislation. Three bills have been introduced in the state Senate that would require DHHL to implement a variety of changes in its mortgage practice.

The measures, which were all introduced by Sen. Kai Kahele and others, are , and . Senate Bill 2526 is the only one that has a hearing so far. The Senate Hawaiian Affairs Committee, chaired by Sen. Maile Shimabukuro, will hear the bill at 1:17 p.m. Thursday at the Capitol.

The main stated purpose of the county resolutions is to encourage the Legislature to act.

The campaign has been largely organized by Kauai resident Robin Puanani Danner, chair of the Sovereign Council of Hawaiian Homestead Associations and a longtime critic of DHHL and its leadership.

“Every time a Native Hawaiian family is evicted,” Danner said, “you add to the wait list, you add to homelessness and you add to the instability of the children in these families.”

DHHL did not respond to questions about whether it supports or opposes the county resolutions and the three bills. But the agency disputed assertions that its loan delinquency processes are biased against families that can no longer remain current on their mortgages.

DHHL has a five-person staff that oversees more than 1,200 mortgages, the agency said.

“The department’s staff work one-on-one with lessees who are experiencing challenges in paying their mortgages,” the agency said in a December news release. “These challenges may include job loss, a medical emergency or a family crisis.”

Danner contended that DHHL’s existing loan procedures largely ignore options of loan modification or forgiveness and are limited instead to repayment plans. The agency’s 34-page “Loan Policies and Procedures Manual” devotes only three pages in response to loan delinquencies.

Once a loan is 120 or more days past due, the manual says, the agency can schedule a contested case hearing — a cumbersome form of review — but the manual does not spell out what kinds of additional loan relief can be granted.

Figures released by DHHL suggest that the department’s loan delinquency rates are far higher than national averages for all residential home loans.

Danner contended that the rates may be higher than the Great Recession of 2008-2009.

National residential mortgage delinquency rate statistics released by the Mortgage Bankers Association put delinquencies across the country at an average of about 4.5%. Among federally insured mortgages, rates in 2019 were about 3% in Hawaii. Delinquency rates in Hawaii are generally slightly below national averages.

Figures provided by DHHL, on the other hand, show the delinquency rate for 966 loans carried by the agency directly at 26.9%. For 406 loans the agency guarantees, the rate is 21.9%. For 3,135 conventional mortgage loans carried by DHHL lessees, the rate is 10.6%.

Educating Lawmakers

The DHHL figures are for more than 4,700 loans carried on more than 9,900 leases, the agency said.

Danner said the three pending Senate bills largely make technical changes in how DHHL addresses mortgage delinquencies, as well as institute organizational reforms within the agency. Among the provisions, the bills would:

• Require DHHL to substantially revise its loan servicing manual and adopt “loan loss mitigation policies, procedures and methods, including financial counseling, mitigation analysis, forbearance, loan modification, loan assumption, sale or transfer.”
• Prohibit DHHL from canceling a lease “based solely on a loan delinquency or default,” unless it has followed all of the procedures set forth in its manual, which Danner contends are currently inadequate and vague.
• Mandate that DHHL emphasize procedures to “avoid default, cure delinquencies and avoid cancelation or foreclosure.”
• Require that a majority of the members of the Hawaiian Homes Commission actually be DHHL beneficiaries.
• Mandate “beneficiary consultations” whenever DHHL proposes to change its loan delinquency and foreclosure procedures.

Danner said she hoped the combination of county resolutions and proposed state legislation would also influence limitations on the abilities of Native Hawaiians to respond to personal financial disasters in the same ways non-native people often can.

“As a Hawaiian, I am proud of the county council members for not looking away,” she said. “They are claiming us and want to know what it means to be an invisible citizen.”

She declined to speculate on the eventual fates of the three new bills.

“It may be low, but we still win even if they don’t pass,” she said. “It educates legislators, but this issue should not be a debate.”