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.”