• <div class="header-image" style="background-image: url(/live/image/gid/4/2756_V6N7Web_Header_small.rev.1533574420.jpg);">​</div><div class="header-background-color"/>

Philadelphia’s Mortgage Foreclosure Diversion Program Is A Local Policy Success.

August 26, 2017

We currently face innumerable policy challenges at the national level, but sometimes you just need to look close to home to see a policy success.

Every Thursday morning in Courtroom 676 at Philadelphia City Hall, stakeholders come together in an effort to prevent Philadelphians from losing their homes. Homeowners, housing counselors, representatives for lenders, and other experts come together to try and achieve a “work out,” or an agreement to save the home in some way rather than moving forward with the foreclosure action.

The Mortgage Foreclosure Diversion Program was initiated in 2008 in response to the national foreclosure crisis that grew out of the financial crash. The creation of this targeted, local program was situated in the context of many national forces that came together to create a problem in the community. In the Joint General Court Regulation that established the program, the Court system observed: “Mortgage Foreclosure actions recently filed in the Court of Common Pleas, as well as reliable data, establish that a mortgage foreclosure crisis, caused in part by “subprime” and “predatory lending” practices as well as rising interest rates, unemployment and underemployment, have negatively impacted a substantial number of homeowners causing an increasing number of residential mortgage foreclosures actions which are being filed and will be filed in the Court of Common Pleas requiring the expenditure of substantial judicial resources.” [1] In the wake of this national crisis, the city came together to institute a solution to relieve pressure on the local court system as well as to help homeowners stay in their homes.

Image: Diagram of the basic foreclosure process. The diversion program pauses the judicial process between steps 4A and 5A as shown here. Source: Flickr.

Image: Diagram of the basic foreclosure process. The diversion program pauses the judicial process between steps 4A and 5A as shown here. Source: Flickr.

The Mortgage Foreclosure Diversion Program essentially creates an alternative resolution to litigation for homeowners facing foreclosure and the lenders bringing the foreclosure actions. The Program is limited to owner-occupied residential properties within Philadelphia. [2] Under the directive, all mortgage foreclosures that meet that criteria are required to be scheduled for a conciliation conference before the process proceeds to a Sheriff sale. [3] The foreclosure action is effectively taken out of the normal mortgage foreclosure process and put on hold while it is in the Mortgage Foreclosure Diversion Program, as you can see in the chart below.

When a mortgage goes into foreclosure, a Case Management Order is issued by the court to the plaintiff, who must serve it on the defendant homeowner. The Case Management Order schedules a conciliation conference within 30 to 45 days of the initial filing, and requires both the plaintiff lender and the homeowner to attend the conference at the specified date and time. It also directs the homeowner to call the Save Your Home Philly hotline in order to be paired with a housing counselor, who they will work together with in advance of the conference. [4]

At the conference, the homeowner, their housing counselor, and the representative for the plaintiff lender all come together in the same room. They will discuss the assessment prepared by the housing counselor in partnership with the homeowner, and evaluate the homeowner’s qualifications for any available work-out programs. [5] The conference could end in one of three ways: no agreement is reached and the homeowner is scheduled for a new conciliation conference, the parties agree on a work-out and the case is taken out of conciliation and the foreclosure action is withdrawn, or it is determined that there is no amicable resolution and the case returns to foreclosure proceedings. Successful work-outs include payment plans, refinancing, or a loan modification, among others. [6]

The program has been enormously successful, saving over 10,000 homes since it began. [7] It is also a successful solution for all of the stakeholders involved. It is more efficient for the court system to run the Mortgage Foreclosure Diversion Program than to handle all of the mortgage foreclosure litigation. The program is also well-received by lenders, as they value the “certainty, predictability, and clear path to resolution” that the Program provides. [8] And obviously for homeowners facing foreclosure, an efficient and attainable solution that allows them to stay in their home is the optimum outcome.

The program was also borne out of collaboration as well. The Council of the City of Philadelphia adopted a resolution that was instrumental in getting the courts to establish the program. Additionally, the Philadelphia Bar Association secured pro bono representation when the program began. [9]

And now, the model is being replicated in order to address a similar problem. Many homeowners in Philadelphia are now facing foreclosure due to unpaid property taxes. In fact, the City of Philadelphia is now foreclosing on more homeowners in Philadelphia than any mortgage lender. [10]  In light of the successes of the mortgage foreclosure diversion program, the city is now seeking to replicate that success in the case of property tax foreclosure. The Philadelphia City Council recently passed a resolution calling on the First Judicial District to create a property tax foreclosure diversion program in the model of the Mortgage Foreclosure Diversion Program. Advocates say a diversion program would allow more homeowners to get into payment plans with the City and would save the City the expense of more litigation, while keeping residents in their homes and at the same time allowing the City to collect the tax revenue it needs. [11]

The property tax foreclosure problem is locally created, as opposed to the mortgage foreclosure problem almost ten years ago. But city leaders hope that they can replicate the successes of the Diversion Program to address this issue as well. As inaction in Washington continues, the Mortgage Foreclosure Diversion Program illustrates the positive change that can happen under local leadership.

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

References

 [1] Joint General Court Regulation No. 2008-01: Residential Mortgage Foreclosure Diversion Pilot Program. First Judicial District of Philadelphia Court of Common Pleas of Philadelphia County. Available at http://www.courts.phila.gov/pdf/regs/2008/cpjgcr-2008-01.pdf.

 [2] Joint General Court Regulation No. 2008-01: Residential Mortgage Foreclosure Diversion Pilot Program. First Judicial District of Philadelphia Court of Common Pleas of Philadelphia County. Available at http://www.courts.phila.gov/pdf/regs/2008/cpjgcr-2008-01.pdf.

 [3] Joint General Court Regulation No. 2008-01: Residential Mortgage Foreclosure Diversion Pilot Program. First Judicial District of Philadelphia Court of Common Pleas of Philadelphia County. Available at http://www.courts.phila.gov/pdf/regs/2008/cpjgcr-2008-01.pdf.

 [4] Joint General Court Regulation No. 2008-01: Residential Mortgage Foreclosure Diversion Pilot Program. First Judicial District of Philadelphia Court of Common Pleas of Philadelphia County. Available at http://www.courts.phila.gov/pdf/regs/2008/cpjgcr-2008-01.pdf.

 [5] Joint General Court Regulation No. 2008-01: Residential Mortgage Foreclosure Diversion Pilot Program. First Judicial District of Philadelphia Court of Common Pleas of Philadelphia County. Available at http://www.courts.phila.gov/pdf/regs/2008/cpjgcr-2008-01.pdf.

 [6] Mortgage Foreclosure Negotiation Training Manual for Pro Bono Counsel, Philadelphia VIP, available at https://www.phillyvip.org/wp-content/uploads/2016/07/Mortgage-Foreclosure-Negotiation-Manual.pdf.

 [7] Save Your Home Philly website, available at http://www.saveyourhomephilly.org/.

 [8] McKeever, Michael, Esq. “Pennsylvania Mortgage Foreclosure Diversion Program Benefits Servicers.” Housingwire. December 13, 2013. Available at https://www.housingwire.com/blogs/1-rewired/post/28293-pennsylvania-mortgage-foreclosure-diversion-program-benefits-servicers.

 [9] News Release: President Judge C. Darnell Jones announces adoption of Residential Mortgage Foreclosure Diversion Pilot Program. First Judicial District of Philadelphia Court of Common Pleas of Philadelphia County. April 16, 2008. Available at http://www.courts.phila.gov/pdf/notices/2008/notice-2008-Press-Release-Mortgage-Foreclosure-Pilot-Program.pdf.

 [10] Loeb, Pat. “Tax foreclosures far exceeding mortgage foreclosures in Philadelphia. CBS Philly. June 5, 2017. Available at http://philadelphia.cbslocal.com/2017/06/05/tax-foreclosures-far-exceeding-mortgage-foreclosures-in-philadelphia/.

 [11] “City Council Passes Property Tax Foreclosure ‘Diversion Program’ Resolution.” Community Legal Services. April 7, 2016. Available at https://clsphila.org/news/city-council-passes-property-tax-foreclosure-%E2%80%9Cdiversion-program%E2%80%9D-resolution.

 [12] “City Council Passes Property Tax Foreclosure ‘Diversion Program’ Resolution.” Community Legal Services. April 7, 2016. Available at https://clsphila.org/news/city-council-passes-property-tax-foreclosure-%E2%80%9Cdiversion-program%E2%80%9D-resolution

PENN WHARTON PPI
RESOURCE SPOTLIGHT:

  • <h3>The World Bank Data (U.S.)</h3><p><img width="130" height="118" alt="" src="/live/image/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg" class="lw_image lw_image484 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 2x, /live/image/scale/3x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 3x" data-max-w="1406" data-max-h="1275"/>The <strong>World Bank</strong> provides World Development Indicators, Surveys, and data on Finances and Climate Change.</p><p> Quick link: <a href="http://data.worldbank.org/country/united-states" target="_blank">http://data.worldbank.org/country/united-states</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Bureau of Economic Research (Public Use Data Archive)</h3><p><img width="180" height="43" alt="" src="/live/image/gid/4/width/180/height/43/478_nber.rev.1407530465.jpg" class="lw_image lw_image478 lw_align_right" data-max-w="329" data-max-h="79"/>Founded in 1920, the <strong>National Bureau of Economic Research</strong> is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. The NBER is committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community.</p><p> Quick Link to <strong>Public Use Data Archive</strong>: <a href="http://www.nber.org/data/" target="_blank">http://www.nber.org/data/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Internal Revenue Service: Tax Statistics</h3><p><img width="155" height="200" alt="" src="/live/image/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg" class="lw_image lw_image486 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg 2x" data-max-w="463" data-max-h="596"/>Find statistics on business tax, individual tax, charitable and exempt organizations, IRS operations and budget, and income (SOI), as well as statistics by form, products, publications, papers, and other IRS data.</p><p> Quick link to <strong>Tax Statistics, where you will find a wide range of tables, articles, and data</strong> that describe and measure elements of the U.S. tax system: <a href="http://www.irs.gov/uac/Tax-Stats-2" target="_blank">http://www.irs.gov/uac/Tax-Stats-2</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Reserve Economic Data (FRED®)</h3><p><strong><img width="180" height="79" alt="" src="/live/image/gid/4/width/180/height/79/481_fred-logo.rev.1407788243.jpg" class="lw_image lw_image481 lw_align_right" data-max-w="222" data-max-h="97"/>An online database consisting of more than 72,000 economic data time series from 54 national, international, public, and private sources.</strong> FRED®, created and maintained by Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data.</p><p> Quick link to data page: <a href="http://research.stlouisfed.org/fred2/tags/series" target="_blank">http://research.stlouisfed.org/fred2/tags/series</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The Penn World Table</h3><p> The Penn World Table provides purchasing power parity and national income accounts converted to international prices for 189 countries/territories for some or all of the years 1950-2010.</p><p><a href="https://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form.php" target="_blank">Quick link.</a> </p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Congressional Budget Office</h3><p><img width="180" height="180" alt="" src="/live/image/gid/4/width/180/height/180/380_cbo-logo.rev.1406822035.jpg" class="lw_image lw_image380 lw_align_right" data-max-w="180" data-max-h="180"/>Since its founding in 1974, the Congressional Budget Office (CBO) has produced independent analyses of budgetary and economic issues to support the Congressional budget process.</p><p> The agency is strictly nonpartisan and conducts objective, impartial analysis, which is evident in each of the dozens of reports and hundreds of cost estimates that its economists and policy analysts produce each year. CBO does not make policy recommendations, and each report and cost estimate discloses the agency’s assumptions and methodologies. <strong>CBO provides budgetary and economic information in a variety of ways and at various points in the legislative process.</strong> Products include baseline budget projections and economic forecasts, analysis of the President’s budget, cost estimates, analysis of federal mandates, working papers, and more.</p><p> Quick link to Products page: <a href="http://www.cbo.gov/about/our-products" target="_blank">http://www.cbo.gov/about/our-products</a></p><p> Quick link to Topics: <a href="http://www.cbo.gov/topics" target="_blank">http://www.cbo.gov/topics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Aviation Administration: Accident & Incident Data</h3><p><img width="100" height="100" alt="" src="/live/image/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg" class="lw_image lw_image80 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 2x, /live/image/scale/3x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 3x" data-max-w="550" data-max-h="550"/>The NTSB issues an accident report following each investigation. These reports are available online for reports issued since 1996, with older reports coming online soon. The reports listing is sortable by the event date, report date, city, and state.</p><p> Quick link: <a href="http://www.faa.gov/data_research/accident_incident/" target="_blank">http://www.faa.gov/data_research/accident_incident/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>NOAA National Climatic Data Center</h3><p><img width="200" height="198" alt="" src="/live/image/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg" class="lw_image lw_image483 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 3x" data-max-w="954" data-max-h="945"/>NOAA’s National Climatic Data Center (NCDC) is responsible for preserving, monitoring, assessing, and providing public access to the Nation’s treasure of <strong>climate and historical weather data and information</strong>.</p><p> Quick link to home page: <a href="http://www.ncdc.noaa.gov/" target="_blank">http://www.ncdc.noaa.gov/</a></p><p> Quick link to NCDC’s climate and weather datasets, products, and various web pages and resources: <a href="http://www.ncdc.noaa.gov/data-access/quick-links" target="_blank">http://www.ncdc.noaa.gov/data-access/quick-links</a></p><p> Quick link to Text & Map Search: <a href="http://www.ncdc.noaa.gov/cdo-web/" target="_blank">http://www.ncdc.noaa.gov/cdo-web/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>MapStats</h3><p> A feature of FedStats, MapStats allows users to search for <strong>state, county, city, congressional district, or Federal judicial district data</strong> (demographic, economic, and geographic).</p><p> Quick link: <a href="http://www.fedstats.gov/mapstats/" target="_blank">http://www.fedstats.gov/mapstats/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>HUD State of the Cities Data Systems</h3><p><strong><img width="200" height="200" alt="" src="/live/image/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg" class="lw_image lw_image482 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 3x" data-max-w="612" data-max-h="613"/>The SOCDS provides data for individual Metropolitan Areas, Central Cities, and Suburbs.</strong> It is a portal for non-national data made available through a number of outside institutions (e.g. Census, BLS, FBI and others).</p><p> Quick link: <a href="http://www.huduser.org/portal/datasets/socds.html" target="_blank">http://www.huduser.org/portal/datasets/socds.html</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Center for Education Statistics</h3><p><strong><img width="400" height="80" alt="" src="/live/image/gid/4/width/400/height/80/479_nces.rev.1407787656.jpg" class="lw_image lw_image479 lw_align_right" data-max-w="400" data-max-h="80"/>The National Center for Education Statistics (NCES) is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations.</strong> NCES is located within the U.S. Department of Education and the Institute of Education Sciences. NCES has an extensive Statistical Standards Program that consults and advises on methodological and statistical aspects involved in the design, collection, and analysis of data collections in the Center. To learn more about the NCES, <a href="http://nces.ed.gov/about/" target="_blank">click here</a>.</p><p> Quick link to NCES Data Tools: <a href="http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4" target="_blank">http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4</a></p><p> Quick link to Quick Tables and Figures: <a href="http://nces.ed.gov/quicktables/" target="_blank">http://nces.ed.gov/quicktables/</a></p><p> Quick link to NCES Fast Facts (Note: The primary purpose of the Fast Facts website is to provide users with concise information on a range of educational issues, from early childhood to adult learning.): <a href="http://nces.ed.gov/fastfacts/" target="_blank">http://nces.ed.gov/fastfacts/#</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>USDA Nutrition Assistance Data</h3><p><img width="180" height="124" alt="" src="/live/image/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg" class="lw_image lw_image485 lw_align_right" srcset="/live/image/scale/2x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 2x, /live/image/scale/3x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 3x" data-max-w="1233" data-max-h="850"/>Data and research regarding the following <strong>USDA Nutrition Assistance</strong> programs are available through this site:</p><ul><li>Supplemental Nutrition Assistance Program (SNAP) </li><li>Food Distribution Programs </li><li>School Meals </li><li>Women, Infants and Children </li></ul><p> Quick link: <a href="http://www.fns.usda.gov/data-and-statistics" target="_blank">http://www.fns.usda.gov/data-and-statistics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>