The Legal Intelligencer Blog

Report: Phila. Mortgage Foreclosure Program Helping Many Stay in Homes

By Amaris Elliott-Engel
Of the Legal Staff

A majority of homeowners who participated in Philadelphia's mortgage foreclosure diversion program and who struck an agreement with their lenders have been able to remain in their homes, according to an independent community development financial institution.

The Philadelphia Common Pleas Court Residential Mortgage Foreclosure Diversion Program, which recently marked its third year in existence, has helped 85 percent of participants who were able to reach agreements with lenders, said the study released by TRF today.

The study was silent on the statistical significance of the 85 percent figure. However, TRF  also found that 30 percent of those homeowners have seen subsequent foreclosure filings, even though they have not been forced out of their homes.

Philadelphia has an estimated 8,000 foreclosures every year since 2008, and 60 to 70 percent of them qualify for the diversion program, according to the report. Of the foreclosures that qualify, about 70 percent, or up to 3,920 the homeowners participate. Of the participating homeowners, one-third, or under a little over 1,300, reach an agreement with their mortgage lender or servicer. A little over 1,100 stay in their homes, but a little over 330 of those have a second mortgage foreclosure.

Court officials also say that, of those homeowners who do not strike an agreement to stay in their homes, the program allows for a "graceful," or more orderly exit from homes that will eventually end up in sheriff's sales, the report said.

According to the report, released today by community development financial institution TRF, 50 percent of homeowners who did not use the program are no longer in their homes. The number of sheriff's sales has declined from 27.2 percent to 5.7 percent, the report said. Nearly 16,000 cases have gone through the program since it began in the spring of 2008.

The program requires that the parties in mortgage foreclosure actions have a conciliation conference to try to settle the mortgage delinquency before sheriff’s sales occur.

A little over 30 percent of homeowners fail to appear for their conferences, the report said.

Despite the city's history as a "residentially segregated city along racial, ethnic and economic dimensions," the program is not showing a difference in outcomes for any demographic group in the city, except that whites who are not Hispanic are “slightly less likely to access the program,” the report said.

The report did not examine "whether justice for homeowners (and lender/services) is achieved through the diversion program," including whether homeowners' defenses to foreclosure are being pursued, if homeowners have a voice in the conciliation conferences and if lenders/servicers are being delayed in exercising their rights to reclaim collateral property.

Across the country, "about six million homes have gone into foreclosure since 2007, and another 12 million are expected to face foreclosure over the next five years," the report said.

Philadelphia Common Pleas Court Judge Annette M. Rizzo presides over the program.

Amaris Elliott-Engel is a reporter for The Legal. She can be contacted at 215-557-2354 or [email protected]. Follow her on Twitter: @AmarisTLI.

UPDATED: Philly's Mortgage Foreclosure Program Goes to the White House

By Amaris Elliott-Engel
Of the Legal Staff

A Philadelphia judge and law clerk are participating today in a White House event on access to justice, describing Philadelphia's efforts to improve outcomes for litigants in mortgage foreclosure cases.

Philadelphia Common Pleas Judge Annette M. Rizzo and law clark Rachel K. Gallegos, who works in Rizzo’s court, are part of the official agenda at the “Middle Class Task Force/Access to Justice" event at the White House. Vice President Joe Biden, who is leading the task force, and Laurence Tribe, a Harvard Law School professor now working in the U.S. Department of Justice on access to justice issues, are also scheduled to attend the event, along with Secretary of Labor Hilda Solis and Attorney General Eric Holder.

Rizzo said when Tribe was the headliner at Philadelphia's Community Legal Services's Breakfast of Champions earlier this year, he came to see Philadelphia's mortgage foreclosure diversion program in action. He was impressed with "the face-to-face, heartfelt negotiations that were going on that brought about solutions," Rizzo said.

Under the program, a conciliation conference for all owner-occupied residences must be held before a sheriff's sale can occur.

The legal complications arising from the bursting of the country's housing market bubble have risen to prominence recently. Some of the affidavits attesting to the ownership of delinquent mortgage loans have turned out to be false or deficient, and there is a widespread fear that mortgage foreclosures could grind to a halt.

Rizzo said there have been Philadelphia cases in which deficient financial paperwork has been raised as a defense, but the program has not seen a wholesale holdup on cases because of the issue.

The New York Times' Charlie Savage reported Thursday evening that Tribe is planning to leave his administration post in early December because of health issues.

UPDATED TO ADD: The American Bar Association announced this afternoon that the first-ever federal agency, private bar collaboration was unveiled at the White House event today. The Department of Labor-American Bar Association program will assist workers with legal complaints related to employment issues and stems out of the Middle Class Task Force. Workers will be referred to lawyers experienced in the Family Medical Leave Act and the Fair Labor Standards Act.

K&L Gates Starts Task Force to Deal With Foreclosure Saga

By Gina Passarella
Of the Legal Staff

Much of the discussion surrounding the dust-up over mortgage companies’ foreclosure practices in recent weeks has focused on how consumers have been affected by confusing or fraudulent paperwork and threats of foreclosure.

Now, K&L Gates is looking to help its mortgage and banking clients that are under the intense spotlight as they navigate potential lawsuits, hearings and foreclosure moratoriums.

The firm said Tuesday it has created a U.S. foreclosure task force to assist clients in addressing questions and responding to allegations regarding their foreclosure practices and procedures.

The news comes as some financial institutions are restarting their foreclosures as part of a counterattack over allegations they did anything wrong in the first place, the Wall Street Journal reported today.

K&L Gates’ task force will assist clients in formulating a coordinated defense to a wide range of allegations, from inadequate documentation and wrongful foreclosure to lack of standing to foreclose and failure to comply with affidavit and notarization requirements, among others, the firm said.

“Combined with the firm’s recognized capabilities in the compliance, policy, litigation, and government enforcement areas, K&L Gates’ leadership and experience on mortgage finance and loan servicing matters make us particularly well-suited to assist clients impacted by this most recent attack on foreclosure practices, with our task force providing yet another example of the firm’s unparalleled government solutions abilities,” Laurence E. Platt, a mortgage banking partner in the firm’s Washington, D.C., office and a leader of K&L Gates’ financial services practice area, said in a statement.

K&L Gates recently served as examiner in the New Century and WorldCom bankruptcy proceedings. The task force will draw from attorneys experienced in those types of matters, as well as in counseling residential mortgage loan servicers on compliance with state servicing laws; initiating and conducting internal investigations; defending lenders and loan servicers in federal and state government enforcement actions, class actions, loan-level litigation and commercial disputes; providing electronic discovery services; and serving as policy and government affairs counselors before Congress and government agencies.

Phila. Mortgage Foreclosure Program Receives City Livability Award

By Amaris Elliott-Engel
Of the Legal Staff

As Philadelphia leaders accepted another award in honor of a court program that requires a mediation conference between homeowners and lenders before foreclosure cases can go to sheriff's sale, program leaders are also reporting there are more borrowers who save their homes from foreclosure than there are homeowners that don't save their homes from foreclosure after going through the program.

Since the official inception of the mortgage foreclosure diversion program in Philadelphia Common Pleas Court in June 2008, 1,800 homeowners have had their homes saved from foreclosure, said Paul D. Chrystie, director of communications for the city Office of Housing and Community Development.

Nine hundred homes went through foreclosure through August 2009. Statistics from the Sheriff's Office aren't available after August, Chrystie said. So he extrapolated that another 200 or some homes have probably gone to foreclosure since August based on past experience. With those statistics, three out of every five homes going through the foreclosure program have been saved from foreclosure, Chrystie said.

There are 3,500 homeowners who are now going through the program, Mayor Michael Nutter said during a press conference Tuesday.

Nutter, Philadelphia Common Pleas Judge Annette M. Rizzo, who presides over the program, and other stakeholders in the program accepted an award from the U.S. Conference of Mayors. The group's city livability program honors mayors and their city governments for developing programs that enhance the quality of life in urban areas. Over 200 cities applied for the city livability award this year, according to a U.S. Conference of Mayors official.

For those homeowners who go through the program and can't avert foreclosure through a workout, the program allows them "a graceful exit with dignity," Rizzo said. The program also allows for foreclosure "postponement with purpose," Rizzo said.

Delco Initiates Mortgage Foreclosure Diversion Program

By Gina Passarella
Of the Legal Staff

Delaware County has become the latest jurisdiction in the five-county region to create a program aimed at curbing the high number of mortgage foreclosures in the recession.

The Mortgage Foreclosure Diversion Program offers homeowners facing foreclosure free financial counseling and assistance in dealing with lenders through the program’s Mortgage Foreclosure Hotline.

Launched earlier this month, the goal is to get homeowners to seek help when a foreclosure action is filed rather than waiting until a sheriff’s sale is scheduled.

The program is a joint effort between Delaware County Council and the Delaware County Sheriff’s Office. It was created with help from the Consumer Credit Counseling Service of Delaware Valley and the Delaware County Bar Association.

Common Pleas Court President Judge Joseph P. Cronin Jr. had to approve the program and accepted the sheriff’s petition to initiate the hotline program. It will apply only to residential real estate that is owner-occupied and is approved for use from Oct. 1 through July 30, 2010.

“The goal is to help people stay in their homes,” Sheriff Joseph F. McGinn said in a statement. “We are notifying homeowners that they can contact CCCSDV through the hotline when they first receive a complaint from their lender. This will give them both time and expert information to work out a solution.”

As part of the new program, the first complaint initiating the foreclosure action is accompanied with a written notice advising the homeowner to call the hotline. The call will delay the action in the case for 30 days and the CCCSDV will notify the lender that the homeowner is working on a solution.

Since the beginning of the month, McGinn’s office has issued 110 foreclosure notices that included the new letter. The number of foreclosure actions in the county had remained relatively static over the last five years until 2009. There were 330 properties listed for sheriff’s sale in September 2009 compared to 231 in September 2008. In October 2009, there were 302 properties listed compared to 235 the same month last year.

County Council gave the CCCSDV $50,000 to assist with the additional expenses in running the program.

“This pilot program is the result of many partners coming together to develop a course of action that can assist homeowners before they are in dire straits,” County Council Chair Linda Cartisano said in a statement. “The Sheriff’s Office and County Council have been working to address the mortgage foreclosure issue since the Sheriff noticed an uptick in the number of properties listed for sheriff’s sale in January and brought it to Council’s attention.”