How to Utilize Hawaii's Mortgage Foreclosure Dispute Resolution (MFDR) Program to Save Your Home
If your lender starts a non-judicial foreclosure in Hawaii, you have 30 days to opt into the Mortgage Foreclosure Dispute Resolution (MFDR) program. This legally forces the lender to pause the foreclosure and meet with you face-to-face to negotiate a modification.
Falling behind on mortgage payments is a terrifying experience, especially given the extraordinarily high cost of living in Hawaii. Fortunately, state lawmakers created a powerful tool to help struggling homeowners avoid losing their properties without a fair fight. Under Haw. Rev. Stat. § 667-78, eligible owner-occupants can demand face-to-face mediation with their lender. If you are facing the threat of losing your home in Honolulu, Hilo, or Wailuku, understanding this system is critical. We highly recommend browsing our directory to connect with a Hawaii foreclosure defense attorney to guide you through this process.
What is the MFDR Program in Hawaii?
The Mortgage Foreclosure Dispute Resolution (MFDR) program is administered by the Department of Commerce and Consumer Affairs, Honolulu. It was designed specifically to level the playing field between massive mainland banks and local homeowners. Historically, lenders would push through non-judicial foreclosures rapidly, often ignoring homeowners' attempts to modify their loans. The MFDR program changes the rules by mandating that a lender's representative-who must have the actual authority to modify the loan-sits down with you and a neutral mediator to discuss alternatives to foreclosure.
It is important to note that the MFDR program is exclusively for owner-occupants. This means the property facing foreclosure must be your primary residence, not an investment property or a vacation rental. Furthermore, the Hawaii Supreme Court clarified in cases like Hungate v. Law Office of David B. Rosen, 139 Haw. 394 (HI Supreme Court 2017) that lenders must strictly comply with non-judicial foreclosure statutes; if they fail to provide proper notice of the MFDR program, the foreclosure can be challenged or invalidated.
Deadlines to Opt-In After Receiving Notice of Default
Time is your biggest enemy when facing a non-judicial foreclosure. When your lender initiates the process, they must serve you with a Notice of Default and Intention to Foreclose and file a copy with the state. Under Haw. Rev. Stat. § 667-77, the department will then mail you an official notification packet detailing your rights.
Under Haw. Rev. Stat. § 667-78(a), you have 30 days from the date the DCCA mails this notification to opt into the program. To do this, you must submit the completed Program Election Form pursuant to Haw. Rev. Stat. § 667-78(a)(1) to the DCCA (or file electronically via the official portal at mfdr.ehawaii.gov), along with the required program fee. If you miss this strict 30-day window, you forfeit your right to demand dispute resolution under Haw. Rev. Stat. § 667-78(d), and the lender can proceed with the public auction of your home.
How MFDR Stops Non-Judicial Foreclosures Temporarily
The moment the DCCA accepts your timely application, the non-judicial foreclosure process comes to a grinding halt. The state issues a stay (a temporary legal pause) preventing the lender from scheduling an auction, publishing further notices, or taking any steps to seize your property. This stay remains in effect until the dispute resolution process concludes. This gives you and your attorney vital breathing room to organize your finances, submit loan modification applications, or arrange a short sale.
Important: MFDR Does Not Apply to Judicial Foreclosures
Lenders in Hawaii generally have two paths to take your home: non-judicial and judicial. The MFDR program *only* applies to non-judicial foreclosures (where the lender bypasses the court system). If your lender files a formal lawsuit against you in the Circuit Court of the First Circuit, Honolulu or another local state court, this is a judicial foreclosure. In a judicial foreclosure, you do not use the DCCA's MFDR program. Instead, you must answer the lawsuit and request mediation directly through the court's own foreclosure mediation program.
How Much Does the MFDR Process Cost?
Participating in the MFDR program requires an initial financial commitment.
- DCCA Filing Fee: Homeowners must pay a non-refundable $300 fee when submitting the election form.
- Attorney Fees: While you can represent yourself, hiring an attorney for foreclosure defense in Hawaii typically costs between $1,500 and $3,500 for mediation representation.
- HUD Counseling: You must consult with a HUD-approved housing counselor before the meeting, which is generally provided at no cost.
Frequently Asked Questions (FAQ)
What happens if the lender refuses to modify my loan during mediation?
The MFDR program forces the lender to negotiate in good faith, but it does not force them to accept a modification. If no agreement is reached, the stay is lifted, and the non-judicial foreclosure can proceed.
Can I use MFDR if I live on a different island than Honolulu?
Yes. The DCCA handles cases statewide. Mediations can often be scheduled locally on Maui, Kauai, or the Big Island, or conducted virtually depending on current state guidelines.
Does the MFDR program wipe out my missed payments?
No. A successful dispute resolution usually results in those missed payments being moved to the back of the loan or the interest rate being lowered, but the debt itself is rarely forgiven entirely.
Can the lender convert to a judicial foreclosure just to avoid MFDR?
Yes. Many lenders prefer judicial foreclosures precisely because it bypasses the DCCA's strict MFDR requirements, though they will then have to deal with court-ordered mediation instead.
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