Mtge.-Foreclosure Program Keeps 85% In Their Homes

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Call it another first for the City! Its Residential Mortgage Foreclosure Diversion Program has enabled almost 85% of participating homeowners to remain in their homes.

The 1st Judicial Dist. for the first time this week released findings from an independent report on the results for participating Philadelphia homeowners facing foreclosure and whose homes were scheduled for Sheriff’s sale.

According to a study by the Reinvestment Fund, the program has enabled five out of six homeowners achieving agreements through the court to remain in their homes.

The FJD revealed the report on the program’s three-year anniversary. It was in June 2008 that the Philadelphia Court of Common Pleas – with the financial support from the City – inaugurated the Philadelphia Residential Mortgage Foreclosure Diversion Program. It instituted mandatory conciliation conferences, bringing together homeowners, lenders, pro bono attorneys and housing counselors in an attempt to reach resolutions on cases slated for Sheriff’s sale.

“While the Diversion Program has received national acclaim, this study provides an independent analysis that documents the efficacy of the program,” said Philadelphia Court of Common Pleas Judge Annette Rizzo, who has run the program on behalf of the FJD.

Other findings released from the report include:

Fifty percent of those homeowners in foreclosure, who did not use the program, are no longer in their homes. Since 2008, the city has averaged about 8,000 foreclosures a year, of which 60-70% were eligible for the Diversion Program.

About 70% of the eligible homeowners go through the Diversion Program. One-third of those homeowners end up with an agreement between the borrower and mortgage lender/servicer. Of these, 85% have remained in their homes for more than 18 months since that agreement.

The percent of homes sold at Sheriff’s sales immediately declined from 27.2% to 14.5%, and then to 5.7% once the program began. At the same time, the percent of homes sold at Sheriff’s sales that did not go through the Diversion Program increased.

With financial support from the Open Society Institute and the William Penn Foundation, The Reinvestment Fund evaluated the approximately 16,000 cases handled by the Court. The study for the first time provides an in-depth look at what led to the foreclosures and how many homes have been saved.

The housing collapse sparked the economic crisis on Wall Street that sent the country into the worst recession since the Great Depression. About six million homes have gone into foreclosure since 2007, and another 12 million are expected to face foreclosure over the next five years, according to the Center for Responsible Lending.

Former President Judge C. Darnell Jones II and Judge Rizzo of the Philadelphia Court of Common Pleas set up the Diversion Program as a pilot in response to the increase in foreclosures in the city sparked by the subprime lending crisis. The program temporarily stopped Sheriff’s sales and set up a case management system in the Court. The Diversion Program has a steering group that includes representatives of the consumer and plaintiff bar, as well as the city’s large group of housing and credit-counseling agencies.

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