Philadelphia Foreclosure Prevention Program Serves as Model

Posted October 1, 2009, By the Annie E. Casey Foundation

By fall 2008, San­dra I. Rodriguez was des­per­ate. Unable to keep up with her mort­gage pay­ments when her income plum­met­ed after los­ing her full-time job and tak­ing a part-time one, Rodriguez was braced to lose her three-bed­room Philadel­phia house.
 
I had two lit­tle kids and was preg­nant, and I was pret­ty much one foot out­side my house and one foot inside,” says Rodriguez, a sin­gle par­ent who now has three sons. I was so afraid of los­ing my home.”

Thanks to Philadelphia’s inno­v­a­tive fore­clo­sure pre­ven­tion pro­gram, how­ev­er, Rodriguez was able to rene­go­ti­ate her loan, which low­ered her pay­ments and allowed her to keep her home.

The Res­i­den­tial Mort­gage Fore­clo­sure Diver­sion Pro­gram — which uses city resources to help home­own­ers and lenders reach agree­ments that pre­vent fore­clo­sure — has saved 1,200 homes dur­ing its first year of oper­a­tion, accord­ing to June 2009 city data. The pro­gram is serv­ing as a mod­el for oth­ers, includ­ing a pro­gram recent­ly pilot­ed in Louisville, Ken­tucky, through the Foundation’s Mak­ing Con­nec­tions ini­tia­tive, the local Legal Aid Soci­ety, the Jef­fer­son Coun­ty Cir­cuit Court and Kentucky’s hous­ing financ­ing agency.

Of the 3,400 home­own­ers who have used the Philadel­phia pro­gram, 35% have got­ten res­o­lu­tions, while over 1,500 are still being nego­ti­at­ed. That is a good sign,” says Hiram Car­mona, Philadelphia’s man­ag­er of hous­ing counseling.

The Philadel­phia effort, which has received Casey sup­port, pre­cedes the Oba­ma administration’s antifore­clo­sure plan, begun in March, which offers $75 bil­lion in incen­tives to lenders to reduce loan pay­ments for trou­bled borrowers.

While the fed­er­al plan is large­ly vol­un­tary for lenders, the Philadel­phia pro­gram requires lenders to meet with home­own­ers and their coun­selors before there can be a sheriff’s sale. It has earned praise as an exam­ple of the vital local efforts need­ed to accom­pa­ny the fed­er­al plan.

Louisville Fol­lows Suit

In fact, Casey spon­sored a site vis­it in Jan­u­ary to Philadel­phia for Louisville lead­ers inter­est­ed in repli­cat­ing the pro­gram. The vis­it was incred­i­bly impor­tant, help­ful and infor­ma­tive,” notes Jane Walsh, Fam­i­ly Eco­nom­ic Suc­cess Coor­di­na­tor of Mak­ing Con­nec­tions Louisville.

Pre­vent­ing fore­clo­sures dove­tails with one of the Foundation’s key pol­i­cy pri­or­i­ties: to help sta­bi­lize vul­ner­a­ble chil­dren and fam­i­lies. There’s a phys­i­cal sta­bil­i­ty that comes with remain­ing in the home and main­tain­ing a family’s con­nec­tions to social net­works and to schools and work­places,” says Bead­sie Woo, a Casey senior asso­ciate. From a finan­cial per­spec­tive, there’s the preser­va­tion of what is for most Amer­i­can fam­i­lies their largest asset. Instead of los­ing equi­ty and being dis­placed, peo­ple can remain in their home and safe­guard their investment.”

The Philadel­phia pro­gram reflects an unusu­al part­ner­ship between the city, the local court sys­tem, lenders and hous­ing advo­cates. Some of the fea­tures that have made it so suc­cess­ful include exten­sive door-to-door out­reach, an infor­ma­tion­al hot­line staffed by lawyers and para­le­gals, free coun­sel­ing ser­vices by neigh­bor­hood agen­cies, and court man­dat­ed meet­ings between lenders and bor­row­ers accom­pa­nied by their counselors.

Home­own­ers receive help from a city-fund­ed hous­ing coun­selor and, if need­ed, legal assis­tance from city-fund­ed pro­fes­sion­als or attor­neys work­ing pro bono. Rodriguez found the diver­sion pro­gram through Con­gre­so, a com­mu­ni­ty-based non­prof­it. I came in there seek­ing help with tears in my eyes,” says Rodriguez.

In Decem­ber 2006, she lost her $41,000-a-year job and found a new part-time $21,000-a-year job in June 2007. A few years ear­li­er, she had refi­nanced her home accord­ing to terms she didn’t ful­ly under­stand, and her inter­est rate end­ed up ris­ing from 5 to near­ly 12%, rais­ing her month­ly pay­ments from $215 to $800.

Falling behind on her bills, Rodriguez and her chil­dren went with­out water, heat and a phone. With­out elec­tric­i­ty, Rodriguez’s eight-year-old couldn’t get his machine-admin­is­tered asth­ma med­i­cine. Rodriguez couldn’t afford to pay for her sons’ school uni­forms. The fam­i­ly moved in with a friend for awhile. It became a real bad strug­gle,” says Rodriguez. I was ready to get evicted.”

Thanks to the diver­sion pro­gram, her home was saved. They were there with me through every­thing,” says Rodriguez. Her lender agreed to low­er her mort­gage to about 6%, mak­ing the home afford­able for her again. I don’t have any prob­lems pay­ing it,” says Rodriguez. I’m very grate­ful. It’s been a won­der­ful home.”

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