The city of Philadelphia has a program that has been in operation since last year, which gives troubled homeowners an opportunity to save their homes.
According to the rules adopted by the primary civil court of
Philadelphia, no owner-occupied house may be foreclosed on and sold by the sheriff’s office before a face-to-face-meeting between the lender and homeowner (conciliation conference) is conducted. The goal is to strike a workable compromise between both parties. Every homeowner in the program is furnished with counseling and in most instances, legal representation.
Since its inception last year, Philadelphia’s program has become a model that has enabled hundreds of troubled homeowners to retain their homes. Officials in Pittsburg,
Chicago, and Louisville have examined Philadelphia’s success thus far and have adopted similar efforts.
In Boston, City Councilor, John M. Tobin, told the NY Times that “It brings the mortgage holder and lender to the table”. He plans to introduce legislation to enact a similar program in his city, citing “When people are face to face, it can be pretty disarming.”
The way the program works is that when a homeowner in Philadelphia receives a legal default notice from their mortgage company, the court system schedules a conciliation hearing. Then canvassers working for local nonprofits seek out homeowners who have been threatened with foreclosure, distributing fliers that inform them of their rights to a conference and to call a hot line that will direct them to free housing counselor.
The most cases, a borrowers monthly payment gets reduced, allowing them to retain their homes. If the homeowner will not be able to afford the home even at modified terms, then the program helps them have a graceful exit from their loan, in which they either accept cash for vacating the property, or signs over the deed in lieu of further payment.
While the outcomes are similar to ones from the $75 Billion anti-foreclosure program produced by the
Obama administration, there is one fundamental difference. Mortgage companies have no choice, other than to participate in the program. If they do not attend the conferences and negotiate in good faith, they cannot proceed with a sheriff’s sale.
The program in Philadelphia also forces an outcome by bringing together all the principals in one room. If the mortgage company proves to be difficult or intractable, then the homeowner has the right to request mediation. A volunteer lawyer serving as a provisional judge will relay the recommendation to the program’s supervising judge. If the judge determines they are not acting in good faith, they can hold the house in limbo.
So far, according to the
Philadelphia Volunteers for the Indigent Program, a legal aid group, out of the 61 cases it has complete information on, 5 resulted in sheriff’s sales, 35 resulted in loan modifications that lowered their monthly payment, and the remaining 21 cases were split up among bankruptcies, loan forbearance, graceful exits, or short sales.
The only disadvantage to the program is that all of the loans that have been modified were done so on a trial basis, requiring homeowners to reapply for an extension of terms, only after a few months.