Program Saved Many Homeowners From Repo Houses for Sale

The Mortgage Foreclosure Diversion Pilot Program in Philadelphia, Pennsylvania has successfully helped a great number of homeowners avoid turning their properties into repo houses for sale.

According to city officials, nearly 60 percent of troubled homeowners were helped by the program. Since its inception in June 2008 up to May 31, 2009, the program helped 2,776 properties avoid becoming repo houses for sale. These figures were out of the 4,690 distressed properties referred to the city’s residential mortgage foreclosure prevention program.

The program, handled by the Philadelphia Court of Common Pleas, gives opportunity to troubled borrowers to meet with their lenders, housing advocates, lawyers and judges to try to work out solutions that will allow them to remain in their properties.

Lending institutions and banks are required to refer repossession cases to the Mortgage Foreclosure Diversion program in an effort to find ways to allow distressed homeowners to make their accounts current by modifying their mortgage payments to make them affordable.

Attorney Christopher DeNardo pointed out that under the program, all parties involved are winners. Delinquent homeowners get to avoid repo houses for sale and lenders would be able to avoid the expensive and time-consuming foreclosure proceeding.

Meanwhile, Pennsylvania Senator Arlen Specter cited Philadelphia’s program and initiated a law to emulate the initiative nationwide. Earlier this month, during the U.S. Conference of Mayors, Specter called on various states to approve laws that will require mortgage lending institutions to negotiate with troubled homeowners first before making steps towards foreclosure.

Volunteer lawyer Kari Samuels said that many troubled borrowers are delayed on their payments for as long as two years, representing a mortgage of between $20,000 and $100,000. She explained that she usually tries to create a settlement by convincing lending institutions to accept lower arrears in late fees or interest charges or to totally drop attorneys’ fees.

She added that lending institutions may seek settlements by offering to extend the outstanding loan, reducing interest rate or the principal. She claimed that lenders are willing to work things out with troubled homeowners to avoid costly foreclosure proceedings.

Nationwide market data in May showed that there were about 321,480 homes in the brink of foreclosure or one out of 398 properties were in danger of becoming repo houses for sale.

By Cassiano Travareli