The Philadelphia Story

1. The Philadelphia Story Philadelphia Court of Common Pleas Residential Mortgage Foreclosure Diversion Pilot Program Part of a Solution But no Panacea

2. OUTLINE • Where we are now (Brief Overview of the “Philadelphia Model”) • How we got here • Recent History • Ancient History • Details about the Model • What Works What Doesn’t • What it is, What it isn’t

3. WHAT IT IS(will get into details and questions later) • Really not One Thing – Brings together many elements • Court Program • Outreach* • Hotline* • Housing Counselors* • Volunteer private attorneys • Legal Services Attorneys * funded in part by the City

4. Pro Bono Judge’s Pro Tem (JPT) • Training for attorney volunteers and counselors • Court Sanctioned pro se petitions to stay sheriff sales • Media Campaign to make folks aware • (Missing – robust private mortgage foreclosure defense bar) • City contribution to State Sponsored Mortgage Rescue Loan

5. Mortgage Foreclosure Diversion Pilot Program In a Nutshell • For cases started before 9/8/2008 Sheriff sale postponed and conference scheduled at request of homeowner • For cases started after 9/8/2008 Judgment in foreclosure cannot be entered till conference concluded -conference automatically scheduled by Court about 60 days out

8. Notice of Program sent to Homeowner with complaint (day forward) or with Sheriff Sale notice (day backward) Notice Refers Homeowner to Hotline Hotline Staffed by Paralegals run by Philadelphia Legal Assistance Hotline sets up Appointment with Housing Counselor Housing Counselor Does Budget and Helps with affordable proposal for avoiding foreclosure

10. Counselor sends proposal to Lender and Lender’s Attorney; • Lender’s attorney provides counter proposal – prior to conference; • At conference if there is gap between proposal and counter – Judge Pro Tem (JPT) is available to help bridge the gap; • On day of conference eligible unrepresented homeowners assigned pro bono counsel;

11. Housing counselor participates in conference with attorney; • JPT makes recommendation; • If resolution not reached conference can be continued; • Sales can be further postponed; • Entry of default can be further delayed; • Legal Services Attorney available to provide advice guidance to counselors and pro bono counsel

12. Where conference fails to get a resolution order entered permitting sale to proceed or case to proceed to judgment – often after some interlude – though not always • Hotline monitors results and provides feed back loop • Counselors available to help homeowners with pro se petitions to prevent sale • For some eligible clients, legal services attorneys or pro bono attorneys available to litigate case

13. The Importance of the Community Organizer/Legal Aid Relationship in Creating Philadelphia’s Diversion Program The Development of the Campaign Direct Actions on Servicers  Formation of “Save Our Homes” Coalition  Engaging City Council  Pressuring the Sheriff  “Moratorium Won!”. . . Now What  Mortgage Foreclosure Steering Committee / Judge Rizzo Jump in Feet First The Importance of Outreach

14. Direct Actions on Servicers • ACORN and organizations nationwide have engaged in lender/servicer specific campaigns for years • Outcomes often organization specific • Impacts diffuse, did not stop “neighborhood spiraling”

15. Formation of “Save Our Homes” Coalition • Save Our Homes Coalition (SOHC) created in January ’08. • Coalition of Philadelphia Unemployment Project (PUP), ACORN, Community Legal Services, PLA, numerous housing counseling agencies; City Council members (through there representatives); City office of OHCD; Mayor’s Office through the City’s Consumer Advocate; Private Consumer Attorneys and homeowners facing foreclosure; • The goal being to “carve out” Philadelphia as a place where servicers would have to prove that they are actively engaged in loss mitigation, conforming to best practices, etc. • Unofficial motto: “We don’t want to end up like (Cleveland/Detroit).” • All organizations had long histories of both working together and working on the issue. PUP/CLS – Creation of HEMAP (1983), ACORN/CLS – Passage of Local Anti-Predatory Lending Law (2001), ACORN/PUP/CLS/PLA – Temporary Phila. Moratorium (2004); Many members of (SOHC) also part of Steering Group Court would later look to shape the program.

16. Engaging City Council • Lobbying of members of City Council began in Jan. ’08. • Councilman Curtis Jones held hearing February 22, 2008: Homeowners facing foreclosure testified about their ARM mortgages, unresponsive lenders, wide media coverage prompting Council to be using “m-word”. • Lobbying continues throughout month, ACORN hand delivers invites to Council for March event with Sheriff

17. Pressuring the Sheriff • 2004 Experience – Sheriff Green reluctantly joined a suit to halt foreclosure sales in response to a sharp spike, for one month. • After several canceled meetings with the Sheriff, the coalition asking members of Council and people with relationships to send him letters urging a postponement of sales; question his staff during budget hearings • On March 25th, 150 homeowners and 3 members of Council attended a meeting an Olney neighborhood church, one of the hardest hit by foreclosures • Sheriff Green, after confirming and reconfirming his attendance, called 5 minutes into the meeting to cancel • The meeting, led by 4 ACORN members facing foreclosure, leaving Councilman Jones to say, "Either we'll stop it with a moratorium voluntarily through court action or we'll stop it through the budget process and we just won't fund it anymore."

18. Moratorium Won! . . . Now What? • On March 27th, Councilman Jones and Majority Leader Tasco introduced resolution calling on Sheriff and President Judge Jones to postpone sales. • Sheriff staff who were attending the Council meeting announced 30 minutes after the resolutions passage that April sales would not take place. • “Moratorium” was catalyst for change, but would have been meaningless without what happened next.

19. Judge Rizzo/Mortgage Foreclosure Steering Group Jump in Feet First • Judge Rizzo, who heard advocate case in 2004, created a Steering Group of lender’s attys, advocates, the Sheriff’s office and other City agencies • This group, which had been meeting periodically since 2004, was mobilized to offer comment/revise on the Court’s draft of a Mortgage Foreclosure Diversion Pilot Program • The program was created in seven weeks by this group, based on “tried and tested case management tools” – initial conferences for homes scheduled for April and May sale took place in June.

20. The Importance of Outreach • Advocates argued early on for aggressive outreach to eligible homeowners, two main reasons: mailings known to be ineffective, “day backward” nature of early cases • Currently, NACs, ACORN and PUP together knock on every door of an eligible homeowner prior to conference, urge call to hotline, see a housing counselor • Current participation rate between 70-80%, compared to 5-25% in other mediation programs

21. Additional Ancient History • Article By Irv Ackelsberg in NCLC. • Did not arise out of nowhere – elements already existed could be brought together Quickly.

22. DOES IT WORK • YES AND NO – It is not a panacea • Important procedural break on the foreclosure train that usually runs folks over • People who have aggressive knowledgeable counselors and attorneys have opportunity to get good result not otherwise obtainable often without litigation • One great advantage for many clients is opportunity to get to counsel, either pro bono or legal services or advocate

23. RESULTS • Some things we know, some things we don’t’ • We know number of sales and judgments delayed – at least 3,380 • Number of cases reported resolved by agreements 1200 over past year out of 3,380 participants • Maybe 2000 still unresolved • Numbers preliminary may not be accurate

25. Don’t know • Overall quality of the agreements • Are they affordable and sustainable? • In most cases are they significantly different than what would occur without the program? • Likely – even if agreements less than ideal most of the 1200 probably would have lost home without program

26. Opportunity for Mediation Alone Does Not Create Incentive for Meaning for Agreements • Key to whatever success there has been in Philadelphia is Judge Rizzo • Mobilized City support and created expectation of meaningful results from lenders

27. Need external incentives – to reach Affordable Resolutions • Mediation does not eliminate servicers incentives to try to foreclose; • Greatest Success comes when there are forces outside the mediation process that puts pressure on Lender to reach affordable resolution; • Such as Making Homes Affordable Plan • Countrywide Settlement • Threat of Litigation

28. NEED ALTERNATIVES BESIDES LOAN MODIFICATIONS • HEMAP • HERO – Predatory Loan Rescue Loan • HELP – Rescue Loan for folks with good credit • FHA Loss Mitigation – Loan Mods, Partial Claim • Loan Modification in Bankruptcy (when it comes)

29. What It is What it isn’t • It is a significant procedural brake the slows things down and puts pressure on Lender to consider the options • It is not a panacea and is not a substitute for the creation of meaningful substantive options

30. DANGERS IN TRYING TO REPLICATE AT STATE WIDE OF FEDERAL LEVEL • The Story of Pa H.B. 1042 – • Know your legislative body