Homeowner, Meet Your Lender

The reconciliation that takes place Thursday mornings at Philadelphia City Hall is not some attempt to further prove that Philadelphia is the City of Brotherly Love, it’s part of a citywide program that allows homeowners in danger of defaulting on their mortgages to meet with their lender in an attempt to work things out.

The one thing we always have to ask, however, is “Is it enough?” The answer typically results in a resounding “It never is.”

The New York Times reported this week on another program mirroring similar efforts around the country where the courts arrange a conciliation hearing after homeowners received legal default notices from their mortgage lenders.

While the program does not always provide results that allow for the homeowner to retain their home,

“In some cases, deals are struck that lower monthly payments for borrowers and allow them to retain their homes. When a homeowner cannot afford the home even at modified terms, the program helps to create a graceful exit, in which the borrower accepts cash for vacating the property or signs over the deed in lieu of further payment.”

The Times report goes on to note that while the Obama administration’s Homeowner Affordability and Stability Plan offers cash subsidies to banks to help lower a homeowner’s monthly mortgage payment, the difference in places like Philly is that “the mortgage companies have no choice but to participate. They have to attend the conferences and negotiate in good faith or they cannot proceed with a sheriff’s sale.”

Further, the administration’s $75 billion effort has had a less-than-stellar effect, with CNN reporting that fewer than 5 percent of the trial modifications on loans owned or guaranteed by Freddie Mac were converted to long-term adjustments as of September 30.

In Philadelphia, while the program, officially known as the Residential Mortgage Foreclosure Diversion Pilot Program, is done in good faith and has good intentions, and, in some cases, serves up good results, only 309 foreclosure cases have been resolved through the program since October 2008. The city, according to RealtyTrac, has nearly 2,500 bank-owned properties, and over 4,000 properties in pre-foreclosure.

How do we take programs offered by the City of Philadelphia and bring them to scale?

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