In Philly, A Meeting Before Foreclosure
ANDREA SEABROOK, host:
Paul Carlozzi's job is to clean out foreclosed homes. The city of Philadelphia is focusing on keeping people in theirs. How? From member station WHYY, Alex Schmidt reports.
ALEX SCHIMDT: Back in April, Mark Jackson (ph) was in danger of losing his house in north Philadelphia. He had fallen behind on his mortgage payments, and his house was scheduled to be auctioned off.
Unidentified Man: Hey, Mark. How are you?
SCHIMDT: But this spring, community organizers and city workers knocked on his door. Today, they are back to see whether he's been able to work with his lender to keep his house.
Mr. MARK JACKSON: And then you guys showed up. You all really gave me more courage and more hope. Don't want to lose my home, and it really encouraged me to start another process. So really, you know, it really inspires me a lot.
SCHMIDT: Every owner of a home listed for foreclosure in Philadelphia gets the same kind of visit Mark Jackson got. These visits are the first step in a program the city has developed to deal with foreclosures. The courts here mandate that lenders must meet with troubled borrowers before the foreclosure process goes through to see if they can find a way for homeowners to keep making payments and stay in their homes.
Each month, hundreds of borrowers like Mark Jackson eventually make it here to a court room in Philadelphia's City Hall. They meet with their lenders and city appointed representation. But not everybody takes the city up on its offer for a mediation meeting. Judge Annette Rizzo is one of the masterminds behind the plan.
Judge ANETTE RIZZO (City Hall, Philadelphia): We did anticipate that some of the outrage, though excellent, would reach people who really felt helpless, that they're really right at the end of the run. My hope is that that was a very small percentage, and that those who did have outreach at least had hope to come in and try to see what we can do to either how them retain their home or, as I always say, graceful exit.
SCHMIDT: It has turned out to be a small percentage. Early numbers suggest over 70 percent of people who received outreach were able to resume making mortgage payments. Going forward, Philadelphia System will apply the same process to all borrowers that receive a foreclosure notification. And that should be good for all city stakeholders, including lenders.
University of Pennsylvania Professor Dennis Culhane says lenders have often acted against their own interests that's in the foreclosure process.
Dr. DENNIS CULHANE (Psychology, University of Pennsylvania): A lot of these loan services, especially those who were not from the area, may not appreciate that, indeed, keeping the families who were in these homes, keeping them in them may be as good a deal as they're going to get if they do go through with the foreclosure.
SCHMIDT: Culhane says the new system will force lenders to consider that.
Dr. CULHANE: Up until now, they've been able to force a foreclosure without actually sitting down, and meeting the family, having a chance to hear from the mediator. What is the likely market value of this property if it does go to foreclosure?
SCHMIDT: Not everyone in the program was a victim of predatory lending. Mark Jackson's interest rate was reasonable. Instead, he got injured and lost his job. In August, Jackson showed up for the second of his conciliation conferences with his lender. For $6,400 in lawyer's fees, which he saved up for with two jobs, he was able to work out a payment scheduled that the bank believed he could manage.
Mr. JACKSON: Although I have been through a lot of processes like this is one, like losing your home, you know, it hurts the most because it's something I sacrifice and work hard for, and it means more to me. My kids raised up in it and just to lose it, But then, just, I don't know where I was at. I really don't and don't where I was going. But, yeah, I'm ready just - where to sign at - just send the money.
SCHMIDT: With the success level the program is having so far, other municipalities are watching. For NPR News, I'm Alex Schmidt in Philadelphia.
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