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November 18th, 2009

Philly’s Foreclosure Program Is Becoming A National Model

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Back in July we wrote about a foreclosure assistance program that was specific to the city of Philadelphia — a program that seemed to be generating far better results than other foreclosure-prevention efforts. Nearly some six months later, Philly’s “Residential Mortgage Foreclosure Diversion Pilot Program” is back in the news, and it’s gaining quite a bit of traction nationwide.

There were only a few details available this summer in regards to the Philly program and why it was as successful as it was. However, thanks to a recent article in the New York Times, we’re beginning to learn more:

Under the rules adopted by Philadelphia’s primary civil court, no owner-occupied house may be foreclosed on and sold by the sheriff’s office before a “conciliation conference,” a face-to-face meeting between the homeowner and the lender aimed at striking a workable compromise. Every homeowner facing a default filing is furnished with counseling, and sometimes legal representation.

But in Philadelphia there is one crucial difference: the mortgage companies have no choice but to participate. They have to attend the conferences and negotiate in good faith or they cannot proceed with a sheriff’s sale.

The Philadelphia program forces an outcome by bringing together all the principals in one room. If the mortgage company proves intractable, the homeowner has the right to request mediation in front of a volunteer lawyer serving as a provisional judge, who relays recommendations to the program’s supervising judge. If the judge finds that the mortgage company is not acting in good faith, she can hold the house in limbo by denying permission for a sheriff’s sale.

Faults Persist

As is the case with any foreclosure efforts, several critics are of the opinion that the pilot program merely postpones the inevitable:

“There’s no teeth to the conciliation program,” said Matthew B. Weisberg, a Philadelphia lawyer who represents homeowners in cases involving alleged mortgage fraud. “It’s a largely ineffective stopgap prolonging what appears to be the inevitable, which is the loss of homes.”

Still, Mr. Weisberg grudgingly praised the plan.

“It’s arbitrary and unpredictable,” he said, “but it’s better than what anybody else is doing.”

What about Costs

From the information we’ve read, the City of Philadelphia seems to be picking up the tab. Lawyers who represent the homeowners are volunteers, non-profit organizations canvas local neighbors to provide program information to defaulted borrowers, and every Thursday morning a courtroom in the city’s courthouse is “given over to the conciliation conferences.”

City Program, National Model

Many, including some homeowners, acknowledge that the program is far from perfect. Yet, what makes this pilot program unique is that it has been developed as a highly-localized response to address the specific issues in these neighborhoods. Cities like Pittsburgh and Chicago (who are interested in adopting the program) are looking to cater their efforts specifically to the needs of their city, and we’ll be interested in seeing how their efforts are constructed.

Would adopting a foreclosure-prevention effort like the one that’s taking place in Philadelphia, improve the housing situation in your city or town?

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2 Responses to “Philly’s Foreclosure Program Is Becoming A National Model”

  1. Larry Says: November 21st, 2009 at 1:22 pm

    What happened to following the contract provisions that all parties agreed to in the first place? What happened to “buyer beware” and personal responsibility? It seems our courts (as most of the goverment in our country) have become social welfare agencies and not followers of the law.

  2. Tim Manni Says: November 23rd, 2009 at 11:23 am

    Larry,

    You make valid points. We actually wrote a story not too long ago that suggested that some of the government’s solutions to the foreclosure crisis were actually ruining the mortgage industry b/c their solutions essentially threw contract law out the window.

    Here’s that post: http://blog.hsh.com/?p=6365 “Are Loan Mods Destroying the Mortgage Industry?”

    Thanks for the comment Larry, hope to hear from you again soon, thanks,
    Tim

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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