Counseling project offers financial tools for Hawaiians

A few months ago, Yolanda Tanielu and her family were in danger of losing their car and the house that they had built through the Department of Hawaiian Home Lands self-help program.

Though Yolanda has a job and her family has no credit-card debt, they had gotten behind financially after her husband lost his job in 2005 and were having trouble catching up.

The couple, who were the first in their family to own a home, were only another late payment or two from foreclosure when a new partnership between the Consumer Credit Counseling Service of Hawaii and the Department of Hawaiian Home Lands gave them a second chance and a new lease on life.

"We feel very blessed that we get to keep our home," said Tanielu, who has two special-needs children. "We were trying to make all the payments, but we didn't have enough money after our income changed. They could have thrown us out."

Tanielu is one of 50 DHHL homeowners who are participating in a pilot program with Consumer Credit Counseling Service of Hawaii to help turn the department's loan-default ratio. In recent years the lack of balance between Hawaii's high cost of living and wages has resulted in a high loan-default ratio for DHHL. While most lenders hit the panic button when 4 percent of their loans fall behind, DHHL was battling default rates about 10 times higher.

During the last few years, DHHL cut its 40 percent loan-default ratio in half, dropping the number of lessees who are in arrears to about 1,600, said Kamana'o Mills, DHHL special assistant.

But while DHHL's statistics have been steadily improving, the number of homeowners in arrears was still too large, especially given the department's aggressive strategic plan that seeks to place 6,000 more people in homes by 2008, Mills said.

"When we looked at the numbers, it was clear that we needed more education and family support," Mills said. "We looked at some of the social issues facing our lessees and discovered that most of those who were in default had credit problems."

Last year, DHHL started the Home Ownership Assistance Program (HOAP) to bring financial resources to the communities. The goal of the program, which has gotten an assist from the Hawaii HomeOwnership Center, is to increase homeownership in native Hawaiian communities by providing prospective applicants with financial literacy training.

Since HOAP began, about 1,500 prospective homeowners have used it to help them repair credit and reduce debt so that they can qualify for a home loan, said Sam Moku, director of HOAP for DHHL.

Hopefully, an improved level of consumer education will keep the new batch of applicants from defaulting, Moku said.

"We want to put them in homes and keep them in homes," he said.

While HOAP addresses potential challenges among DHHL applicants, the program stopped short of clearing the slate for current leaseholders, Mills said. Three months ago, DHHL contracted with the nonprofit Consumer Credit Counseling Service of Hawaii to help clean up debt for clients like Tanielu, who were most in danger of losing their homes, he said.

The partnership has given loan holders who are in jeopardy of losing their homes another chance to make their dreams work, said Wendy Burkholder, executive director of Consumer Credit Counseling Service of Hawaii.

"If a person is delinquent in their mortgage, it's obvious that their entire financial life is in chaos," Burkholder said. "If you put pressure on them, you'll probably get them to make a payment, but you won't get consistent results if they are getting hammered by other creditors."

Getting a more savvy financial education helps those going through the program stay current, as has DHHL's flexibility, she said. In some seemingly hopeless cases, DHHL has rewritten or extended loan terms so that homeowners can bring their mortgages out of default, Burkholder said.

"DHHL has been much more flexible than most lenders," she said. "It's really clear to me that their goal is to educate the next generation of buyers so that they can hold on to their land."