Philadelphia Residential Mortgage Foreclosure
Diversion Pilot Program
Survey of outcomes for homeowners facing foreclosure who entered the Diversion program
between June 2008 and February 2009
December 1, 2009
Conducted by the Unemployment Information Center, 112 N. Broad Street, 11th Floor, Philadelphia, PA 19102 214-557-0822, www.Philaup.org
In April 2008 President Judge Darnell Jones and Judge Annette Rizzo of the Philadelphia Court of Common Pleas set up the Residential Mortgage Foreclosure Diversion Pilot Program in the City of Philadelphia. The program was set up in response to the subprime foreclosure crisis that was troubling Philadelphia and calls for action from housing advocates, Philadelphia City Council and the Sheriff of Philadelphia. It has been overseen by Judge Rizzo since its inception.
The program temporarily halted Sheriff Sales and set up a case management system in the Court for mortgage foreclosure cases. Under the system all homeowners already in foreclosure or who would be sued for foreclosure would be brought into the Diversion program to see if a conciliation process could lead to the prevention of the foreclosure. No foreclosure could occur until both sides took part in the process. Outreach to delinquent homeowners was provided by city agencies and community organizations. Homeowners were directed to call a City supported hotline and then to contact non-profit housing counseling agencies for assistance. They were then to appear in court to meet with attorneys for their mortgage company to see if a resolution could be reached. They were to provide basic information on their financial situations to their housing counselors. Volunteer lawyers were found to assist homeowners along with their housing counselors in negotiations with the mortgage company attorneys. In the event that a resolution was not forthcoming the two parties would then go before a Judge Pro Temps (JPT) for a Conciliation Conference to see if the JPT could help broker a solution to prevent the foreclosure.
The Mortgage Foreclosure Diversion program has now been in operation for 19 months. It has received extensive publicity and accolades from around the nation and the world. Other cities and states have set up programs based on the Philadelphia model. Many homes have been saved and many families have been able to maintain their stability. However, hard data on outcomes has not been available. A long term study is being launched to gauge the effectiveness of the Diversion program, but its results will not be available for some time. As the nation grapples with the severe foreclosure crisis the Philadelphia Unemployment Project (PUP), an organization of unemployed and low income Philadelphians, felt that a data driven assessment of the effectiveness of the program was needed in the near term.
As a result PUP’s sister agency, the Unemployment Information Center, a HUD approved housing counseling agency and research organization began to track clients that came to UIC for the Diversion program. PUP was an early advocate of helping homeowners facing foreclosure as part of the sub prime crisis and UIC housing counselors were among the first to step forward to assist homeowners when the Diversion program became operational in June of 2008. A universe of 154 homeowners/clients who came to UIC between June 2008 and February 2009 has been tracked through November 2009. We chose that period to be able to see if workouts succeeded over a period of time.
In the early days of the Diversion program homeowners brought into the program had already been scheduled for Sheriff’s Sale. These families were very far along in terms of the legal process and often were months or years behind on their mortgage payments. Later homeowners were notified of the program when the complaint in foreclosure was filed with the Court, thus brought into the process much earlier. Thus the homeowners studied are from a cross section of defaulting homeowners.
The outcomes for the survey were collected from a review of UIC case files for the clients, follow up phone calls to homeowners and checking court dockets to assess the status of any foreclosure proceedings.
The outcomes for the 154 homeowners who entered the Foreclosure Diversion program between June 2008 and February 2009 are quite impressive. Only 13 homes or 8% of the total ended up in Sheriff’s Sale. Another 6 sold their homes on their own. Thus, only 12% of the families facing foreclosure have left their homes to date. On the other hand 92 (60%) have reached positive resolutions to their mortgage problem. 70 of those (45%) have secured a successful modification to their mortgage loan. Others are in payment plans, forbearance agreements or the state Homeowners Emergency Mortgage Assistance Program. 43 (28%) other homeowners are still pending a final outcome to their foreclosure problem but are still in their homes. 15 have a resolution pending and 10 have attorney’s contesting the foreclosures at this time.
Thus, 88% of the families that came to the Unemployment Information Center and were handled as part of the Philadelphia Mortgage Foreclosure Diversion Program are still in their homes at least nine months and up to 17 months after they entered counseling. While results could clearly vary by adding homeowners assisted by other agencies, the tremendous success rate found in the UIC study indicates that the Diversion program is delivering impressive results to threatened homeowners in the City of Philadelphia.
Detailed outcomes (PDF) | This page in PDF