 Welcome and Aloha. I'm Mark Schlau, the host of Tatekawaii's Law Across the Sea program. Today we're going across the sea to Maui to talk with Attorney Lance Collins. Lance is a thoughtful, public-spirited Maui lawyer who grew up on Maui and who is now seeking a fair and appropriate solution for Lahaina homeowners who may face the foreclosure of mortgages on their homes that were lost in recent Maui wildfires. I've asked Lance to provide an update on what is happening to Lahaina homeowners facing foreclosure. Welcome Lance, how are you? Aloha, thank you very much for having me on today and I'm doing okay. Thank you for asking. Good, I'm glad to see you today and homes obviously may have mortgages and homeowners may own monthly mortgage payments to banks or lenders. I'd like to give an update, how many people are we talking about? How many people are homeowners in Lahaina specifically that are facing these problems with foreclosure and what are they facing and what relief is available right now? We estimate that there are over 1,500 homeowners or apartment owners that have their property burdened by a mortgage. It's an estimate, it's not an exact count, it's sort of a rough science but there are, we think, 15 or 1600 folks in the community that are homeowners or apartment owners and have a mortgage. If it's a total loss, which basically it's a total loss for almost everybody, what happens is that this month people have to make a mortgage payment even if they don't have a house or an apartment in which the mortgages is burdening. And so for folks who are out of work, for folks who don't have a permanent place to long-term living situation, it just adds another layer of complication to what's going on. And for, I think overwhelmingly, Danny Politico did a survey of folks who live in Lahaina and he was asked how many of you want to rebuild or how many of you are just basically going to eventually sell and get out. And over 70% said that they have a very strong desire to remain in Lahaina and to rebuild and to basically recreate the community that was destroyed on August 8th. So if you have folks who either don't have a job or they're displaced, they don't have permanent housing, having to deal with a mortgage while you're dealing with all of these other things is very complicated and for many people it's just difficult to understand why do I have to keep paying when there's nothing that it's basically you're paying a loan on something that no longer exists. And so that's the basis for why we're doing this. Well, and before we get there, I've heard something about deferral for 90 days. What is that about? And when does that come to an end? That's deferment on the mortgage payments for Lahaina? So I should clarify what's been discussed and what was put in the media and a number of local banks, which hold a very small percentage of all of the loans, of all of the mortgages, they have agreed to 90-day forbearance. And so a forbearance is different than a deferral because of a forbearance. What happens is the interest continues to accumulate and at the end of the forbearance period, you have to pay all of the payments that you didn't have to pay at that time. A deferment on the other hand stops the accrual of interest and you don't have to make the payments until the deferral period ends. And the idea typically is that the maturity date of the loan just gets pushed back by the amount of time that the loan was in deferment. So that's the difference between forbearance and deferrals. And so the local banks have agreed to 90-day forbearances. And what we're asking for is for a three-year deferment. The reason why is because forbearances are really good for very short-term cash flow issues. But if your problem isn't cash flow, forbearance is just sort of pushing back the inevitable for a short period of time. And for some people, it can make things worse because all of a sudden you're confronted with this huge payment that you totally can't make. And so, I mean, it is useful, forbearance is useful, but it's really for folks who just have a cash flow problem as opposed to a deferment which really addresses the situation that's confronting most line homeowners. Well, you know, and that has not been explained very well in the media at all, you know, forbearance and deferment. The way it's been explained is it's been called a deferment. That's what I've seen it all the time, but your explanation now sheds a lot of light on what is really happening. And now, in that respect, you indicated you're seeking deferment of mortgage payments. Please explain exactly what you're asking, who you're asking it of, and what you're asking them to do. Sure. So the first ask, we have asked the FHA, the FHFA, Ginny May, and the Veterans Affairs Benefits Administration to work with their mortgage lenders that they regulate to do a general three-year deferment of residential mortgages. And the reason why we're asking those individuals is because they basically regulate or supervise the overwhelming majority of residential mortgages. Those entities basically guarantee those mortgages and they can tell the lenders that you have to do this. Now, we're also asking them to do it also so that there's a standardized process and when lenders are working with borrowers, it's not like the lenders are doing specific favors to individual borrowers and that the negotiations between borrowers and lenders can be more uniform. And the scope of what really is subject to negotiation is focused on as opposed to, well, we're doing you this great favor of doing a three-year deferment. Well, when the supervising regulator basically says you have to do it, that's no longer part of the bargaining. So, you know, and some people said, well, why haven't you reached out to the office of the Comptroller of the Currency, which basically oversees the FDIC? And, you know, we very likely will be sending them a letter. But, you know, they would really only deal with the local banks who have already in different ways said that, you know, they're willing to work with local borrowers. Although now we're also starting to hear that that may not be as unequivocal as it sounded like last week. So that might be another another federal agency that we might be reaching out to soon. So that's the first part of it. The second part of it is to ask Governor Green to include a suspension of the foreclosure law as it relates to the two tax sections in Lahaina where all of the houses have burned down. And basically not allow foreclosures to be commenced or continued with in those areas to allow borrowers a better opportunity to work with lenders to work out some kind of agreement, a forward deferment, and also to allow the federal government sometime to work out a plan for a deferment. So those are the two big asks that we're asking for. And I can see you're trying to get a, well, let's say collegial response. You're trying to get it to cover everybody and avoid the necessity of individual borrowers having to negotiate or deal without very much power to do so. I can understand that. Now, have you received any meaningful responses from either the federal agency or the governor concerning your requests to hold off on foreclosures? So the governor's office is reviewing. We've been told that they're reviewing the request. At the very beginning of the wildfires, like every day the proclamation was being amended. Well, now that that's not happening anymore. So it's very likely, we're hoping that in the next amendment proclamation that the foreclosure suspension is in there. We have not heard back from anybody in the federal government yet. I was told that it might take a week or more before we hear anything, it'll take a week or more. So I did also separately reach out to our entire congressional delegation and I've asked them to assist in trying to get a response from these federal agencies. I was told that that might be helpful. So I'm hoping that that helps something. I haven't heard back from anybody in our congressional delegation yet. Is there a deadline that we're facing here? Well, you know, every month it becomes more stark and I should say maybe, you know, a lot of people I think are asking like, well, isn't the whole point of hazard insurance to be able to deal with these situations? And, you know, what, and yeah, that is actually one of the purposes of mortgage for insurance for houses that have a mortgage. But you also have to consider in natural disasters, this is what happens if the cost to rebuild it far exceeds whatever the payout is going to be from hazard insurance. What happens and there's a relationship, the bigger the gap, the more likely it is that a homeowner is just going to pay off their mortgage and sell the property and move somewhere else. And that, that's what the overwhelming majority of people in Lahaina do not want to have happen. They want, they want their community to remain intact. And the only way that that's going to be able to happen is if lenders gives borrowers a break. Because if they don't, then the consequence is going to be that you're going to have a lot of people who are just going to give up and they're going to pay off their mortgage, sell the land and disappear. Go to Vegas, go somewhere else, go to the big islands, you know, they're just going to go somewhere else. And I mean, it's, I think it's a natural human thing if you, you know, study refugees and displaced persons camp. One of the things happen is the longer you're in a refugee camp, the more likely you're willing to basically like return to where you came from and suffer the persecution. And so that's one of the things that a deferment tries to help is to give people hope and to give people, you know, the space to be able to make a free and informed choice about what they want to do with their future as opposed to just being forced by circumstances to just do whatever they can do. And you mentioned that this is something that has really affected other disasters also similar circumstances. Now, have any other states done what you're asking? I mean, has this, has this occurred? Is there a precedence in other states for deferment? Has this ever happened before? So, you know, each state, there's a, I'm sure as you know, there's a wide range of in each state about, you know, how consumer friendly or how lender friendly a foreclosure lie is. And so Hurricane Katrina is a great example of the difference that that can make. So in Louisiana, it's sort of considered one of the most lender friendly foreclosure statutes in the country. Whereas Mississippi actually right next door had provisions that allowed the governor to suspend the foreclosure law because of a natural disaster and in a similar way to the power that Governor Green has. And the consequence of that was was that there was a lot less sell-off of lands, people paying down their mortgages and basically leaving in Mississippi than there was in New Orleans and Louisiana. So that's that's one thing. One thing that did happen in Katrina also was that all of the federal agencies I've just mentioned FHA, FHFA, Ginny May, and Veterans Affairs, they were able to provide for a one-year deferment in the end. That wasn't that wasn't proposed right after Katrina, but I think it was a couple of months after they eventually did do a one-year situation. Of course, there's a lot of differences between Maui and Louisiana and Mississippi. One of them namely being is if you need more workers, you can people can just drive there. Whereas that's not possible here. And you know the whole getting supplies and you know it's the whole labor and materials market in that area is in no way in no way similar to to what Maui is facing. So you know it's it really will need more than just a year of of a deferment in order for it to work because I mean otherwise it's all the same number of contractors are going to have to build all these homes. And if they can't space a little bit out then you know the low supply huge demand that the price to build a home is just going to continue to be out of reach for most you know regular folks who own. Well, and you've talked about a three year deferment in your request. I mean, what I mean, I've heard talks of five years to rebuild behind now what if it mean what do you have any plans if that's the case. I mean, is three years what you think is reasonable and fair and you're going to see how it goes. Is that what is your plan. Well, I think based on the available information, it's going to take at least three years. And you know, I know for lenders that I know for federal regulators, I mean, the farther you go out, the more hesitant they are to do anything and so I think that the consensus was when we were thinking about how we were going to ask this was that three years is really a good start and then a year into this or a year and a half into this if it looks like it's going to be five years then we basically ask for further extensions. Because because I do understand that, you know, lenders and the regulators are not going to make commitments that are five or longer years out without knowing what the conditions are on the ground. So it's sort of a wait and see and are any banks or lenders reacting one way or the other to your requests. I mean, have they indicated willingness to work with you or opposite. So I have had clients who basically have been told by their local lender that they are going to get a forbearance and they're not going to get a deferral, at least at this moment, but in the media and I don't know if that means anything. Some of the local banks have said that they actually will provide forbearances at least for longer terms, not just 90 days but I guess some are saying that they'll do it up to a year and possibly would consider some kind of deferment but no specifics on details and the clients that I've had that have asked have been turned down. I'm not sure who that's available to or for but you know that's maybe why we're going to be writing the Office of the Control or the currency soon to try to tie up that loose end with the banks that are just being regulated by the FDIC. And that's why you see individual negotiations are not been successful and people that have lost everything including their livelihood can't afford to continue one way or the other then unless they get some larger help and they have no negotiation power in this situation right because the banks have a legal right to foreclose if they're not paid and so in this situation that's why you're going up. Am I reading that right? That's right and you know basically by standardizing this process by using the supervisors, the lenders you know regulatory supervisors and having a standardized process then you take 95% of the negotiation out of the process and then it just focuses on the actual things that you know homeowners and the lenders should be focusing on and it's not like the 95% that shouldn't be a negotiation is sort of taken off the table. So that's the benefit of having a uniform standardized process for all of these government backed mortgages. And I mean can banks and lenders take advantage of any insurance they may have in regards to payment of the mortgages. Is there an avenue for banks to get some relief from insurance? So you know I know in Hurricane Katrina this was a big problem in Louisiana was that a number of insurance companies were requiring that checks be cosigned by lenders and then the lenders were basically saying you have to pay off your mortgage even if you don't want to. But see if you're making your payments and the loan hasn't accelerated and you're not in default you're only required to make your monthly payment to your lender. Even if there's not even if I mean maybe there's something something if the collateral you know disappears and maybe you have to pay it off but you know if you're following the terms of your agreement and in Louisiana apparently there weren't these clauses about it accelerates if the house disappears. And so a lot of insurance companies and mortgage companies were investigated by the state of Louisiana for unfair trade practices because basically it was more out of state lenders than the local lenders that were trying to pressure people to just pay off their mortgages. And folks wanted to rebuild but as I mentioned earlier the bigger the gap is between what your payoff is and what the rebuild cost is the more likely you'll just pay off and move away. And so that was something that was investigated that it was a fairly systemic problem after Katrina where lenders were basically getting insurance companies to make checks payable to both and then trying to force lenders to just pay off their mortgages. So hopefully that doesn't happen here. I mean we have a pretty vibrant consumer protection apparatus when it comes to unfair trade practices and it seems like the governor's office you know has has shown a willingness to try to protect consumers during this disaster relief process. So hopefully that's something that will continue into the future. Are you you mentioned that you had some clients that have been dealing with banks are you actively representing any clients now in that type of situation with banks or foreclosures. So nobody's nobody's in foreclosure yet based on the wildfires. I am I'm not an attorney of record for my clients that are dealing with this at the moment and as primarily because I think everybody agrees that that might escalate things and might turn what's sort of an ambiguous not sure into an absolute no. So at this moment you know folks have tried to be in but they you know get advice and we've been giving them counsel on maybe try this or you know at a previous utility fire that this has worked with lenders and stuff and just try to do it that way to use sugar before we go to the stick. Right now well and you know let me take this a little bit into. Well a idea. Of what may happen in the future I'm retired. Law practice but in the past I have represented banks in collection cases. And let's say that there is a foreclosure and you're representing somebody and you're going to a settlement conference with the banks attorney what. I mean what can you say or what can you do or what would be your position in those negotiations with with the banks attorney and the bank. So you know I've actually represented a couple of debtors I have a foreclosure case that actually went up to the white Supreme Court very proud of. I have to say that it really depends on who the lender is because I have worked with predators and lenders who are recognized that it's you know they can take a haircut and they can walk away with money in hand. And then there are some lenders and back there some very large lenders here in the state who take the position that nope you have to pay every penny and if you want us to take a haircut you file bankruptcy. And that's very unfortunate and I have seen some cases that really could have easily settled and everybody move on with their life. And instead it's turned into protracted procedural struggle in circuit court and the appellate court. So I hope in this situation lenders really will take the opportunity to realize that you know losing a small bit of interest. But actually being able to recover the whole thing is much better than you know potentially. Not getting it or being trapped in litigation and I mean I know a lot of the terms of mortgages say that you know the lender gets to get attorney's fees and costs but you know there's no house so. You know that it's a situation where there's a risk that you may not get any of that you may have to pay a bunch of attorney's fees and other costs and stuff and in the end you still don't end up more than what you would have had. Except that now you have people who don't you know are remember oh you're this evil bad lender who's heartless. And so I hope that I hope that lenders you know that the humans that are representing the lenders you know consider all of those factors and try to be you know as generous as possible and understanding of what's going on. And taking that one step further you know what does the future look like for lending in Lahaina I mean our banks and lenders are they going to advance funds to homeowners and businesses to rebuild is that you see anything like that now or are we still in the at the stage where we wait and see. I think we're still at the stage of wait and see I mean I don't think that they're going to stop lending to you know and anybody north of the post office which is you know on a poly resort and then. I mean that that that that was unaffected by the fires in terms of buildings burning down, people were definitely affected by the loss of jobs and the fact that everybody who was in line. Basically move north. So they mean they were affected by the fires but not in terms of buildings actually burning down so I, you know, I suspect based on other natural disasters that there'll be a there's going to be a slow down in terms of the origination of new loans in the burnout area but I don't think that's going to be for too long. I would be would be very surprising and it would be counterfactual to all previous natural disasters. You know that have sophisticated credit markets like what you do does. Okay, so let's take a look here. If we don't get relief if if there is no relief. The future look like then for line and homeowners there what what what do you see happening and I mean are the banks going to end up owning all this property if there's all these foreclosures what where where are we going. So I suspect as things if that happens it's the worst case scenario and it's. It's a worst case scenario. I, you know, I suspect that what will happen is many people will just pay off their mortgages and then they'll move away. And you know I should know maybe a lot of folks don't know this because they think of Lahaina and so they think it's like oh it's a tourist town and then they see all of the gentlemen estates that are south of Lahina they think that like that's, you know, the town itself is almost entirely built of worker housing projects starting in the 1950s to the present. So you know their government projects Maui land and pine projects pioneer mill projects. You know just it's basically this town was was I mean it was built for the local working people. That's what got burnt out it's not the luxury homes the luxury homes were for the most part not touched me and some of the ones that are beachfront obviously or I guess people would be considered luxury homes but most of the homes were these working class things and so what happens is is it all of the working class people that live in Lahaina town. 10,000 of them suddenly disappear and move to Las Vegas. There's going to be a huge dislocation in the labor market in the minimum I mean that's going to be one issue and then the fact that there's like an entirely new community will be built out from from what used to be this working class neighborhood by enlarge and I think that's going to if that happens to be the worst case scenario. It will destroy what we know as the Lahaina community and I sure hope that doesn't happen. And to answer your direct question, there probably would be foreclosures but I think most people who are able to would probably just pay off their mortgages and and move away. So there's a greater potential problem for Lahidah and I assume Maui if this matter is not somehow resolved in a in a Pono or a reasonable and appropriate way that everybody can live with. Now, you know, there's been a lot of fundraising for Maui is there been any specific fundraising to pay mortgages or to help with that. I, well, I, you know, I think in a general sense like the, the People's Fund that Oprah and the rock put up I think the idea was give people cash and let them figure out how to best use it. You know, people, people have some people's insurance policies have loss of use. So cover things like that FEMA and the Red Cross I think together, I've been trying to provide I think either a year or 18 months worth of rental assistance. So that's very helpful. But, you know, if you have to rent a place because your home is burnt down and you still have to pay a mortgage payment, it's still an extra expense and, you know, people I think, and rightfully so, the mortgage is like one of the last things that's going to get paid. No one's going to want to, you know, unless there's some clear incentive, no one's going to want to pay money for something that doesn't exist anymore. And so that's that is an issue. But I don't think there's any specific any specific fundraising to help people with their mortgages. It's been mostly like, let's get cash into people's hands and let them figure out how to spend it. Yeah. Now, you're a Maui boy. How have you been personally affected by the Maui wildfires? So, you know, many of my clients and many of the cases that I do, it's primarily West Maui. I mean, I've co-edited, you know, over a dozen books about the history and culture of West Maui. It's sort of like I'm not from West Maui, but my heart is there. And so it has been very, very difficult. The first time that I did go to the West side, you know, you can, you can get to Chiave Street without actually having to look at anything that burns. But then when you make the turn to go down the hill, they're like, from there until you get to the post office, like, you can't, you can't safely drive a car and not be forced to look at the burnout. So, you know, that was very difficult. And I think for folks who live in the north side of the West side, you know, it's, it's just, you know, it's, it's just something that's very difficult because, you know, like your whole life and it's nothing's there anymore. It's just ash. So that's been very difficult. You know, it's, it's very sad. Many of the people who were consumed by the fires were seniors. There were also kids. And, you know, it's, it's just everything about people's evacuation stories. It's, it's just heartbreaking all the way around. And it's, it's frustrating that we can't basically give people more certainty while they try to rebuild their lives. But we're trying the best we can. And I know the biggest heartwarming thing about this whole thing is how quickly the West Maui community came together to set up basically non-government hubs, the resource hubs, while the Red Cross was figuring out what it was doing and when FEMA was figuring out what it was doing. And those hubs are still there. And they're still, you know, basically processing donations and, you know, making sure that people are fed and have clothing and medical supplies and other, you know, other household supplies that are needed. And so that's something that I, you know, if there's any place in Maui that a community is able to engage in mutual aid and self support, it's the West Maui community. And they've definitely demonstrated that, you know, that they can, they can do what is needed to try to help each other. And so that's something that I find to be heartwarming among all of the tragedy and the heavy sorrow that we all have to deal with every day. So there's, there's positive and negative all kind of combined and coming at you at one time. Now we have about one minute left in our program and I was wondering what words of advice would you give to a Lahina homeowner whose mortgage is in default and is looking at possible foreclosure in the future? Yeah, I think the best thing I can say is to not give up hope and to like, you know, reach out to your supports and possibly an attorney to try to figure out, let's try to figure out a solution. If you want to stay and live in Lahina, we will figure out a way to make it happen. I don't know how at this moment exactly based on whatever the personal circumstances are of that individual, but there is a very strong desire by the West Maui community to keep people in West Maui and so we'll try to figure out a way to make it work. So don't give up hope. That's that's what I would say. Well, thank you Lance for giving us the update today. It's, it's hopeful and I hope that we can see Lahina come back to where it was. I've spent many days there and would like to see it return to its prior existence. Thank you very much for sharing your thoughts today Lance. Thank you for having me.