February 18th, 2009
01:00 PM ET
5 years ago

Obama foreclosure plan draws inspiration from Philadelphia

A provision in Obama's foreclosure prevention plan would allow judges to mediate loan modifications.
A provision in Obama's foreclosure prevention plan would allow judges to mediate loan modifications.

PHILADELPHIA, Pennsylvania (CNN) - As President Barack Obama unveils his $75 billion plan aimed at preventing home foreclosures, the mayor of Philadelphia is proud the scheme contains an aspect that was first put to the test in the City of Brotherly Love.

Under President Obama's foreclosure fix, judges would able to intervene and mediate loan modifications between the servicer and homeowner.

Philadelphia introduced mandatory court interventions for homes entering into foreclosure in June of 2008. Since then, 600 homes have been saved from foreclosure and about 1,400 are in the process of rescue.

Philadelphia Mayor Michael Nutter first presented details of his city's Mortgage Foreclosure Protection Program to then President-elect Barack Obama at the National Governors Association meeting in early December.

Listen: How does Philadelphia's program work?


"What we're all committed to is helping to make sure that people stay in their homes, that they do not lose their homes because they did not have an opportunity to renegotiate whatever their rate was, whatever their term was," Nutter said.

Under Philadelphia's Mortgage Foreclosure Protection Program, the homeowner, the lender and a housing counselor from a community-based organization must appear before Judge Annette Rizzo in the Court of Common Pleas.

Rizzo aims to see if deals can be arranged to prevent people from losing their homes, she said.

"We're going to force that dynamic. We're going to create that stage where people have to come to court, have to come to the table to see if a deal can be worked out," she said.

In other cities, non-profit organizations and community groups have been playing the role of mediator between lenders and homeowners in foreclosure. But Rizzo believes the only way to have large-scale success in preventing foreclosures is to get government and the courts involved. "I really do think it does take the mandate. It takes the mandate of some government entity to say stop."

Philadelphia's interventions wouldn't work without the cooperation of the major lending institutions in the city.

Don Haskin, Pennsylvania Community Relations Director for Citigroup, believes this is a model that could work all over the country. "What's in it for the banks is seeing that families stay intact and communities stay intact."

But banks have been resistant to a nationwide program that would involve mandated court interventions. They're reluctant to have a mechanism in place that could alter every mortgage in the country.

Sandra Rodriguez is one of Philadelphia's success stories. The single mother of three children bought her home in 1992 when she was just 19 years old. "It was like a dream come true," she said.

Fifteen years later, she became unemployed and fell behind in her mortgage payments. She recently found a new job but by then, foreclosure proceedings had begun. "I was overwhelmed and I really needed some help."

Rodriguez went before Rizzo and the court was able to mediate between the homeowner and the bank. The terms of the mortgage were modified and since then, Rizzo has been able get caught up on her payments. Rodriguez said, "I'm more than happy to say I'm not losing my home. I'm there and I'm going to be there for the next 15 years."

Not every case that goes before the judge has a happy ending. So far, in 20 percent of the mandated foreclosure interventions, the parties agree to a "graceful exit" - that is, foreclosure.

The owner's personal situation is taken into account and those with special medical needs are allowed to stay in their homes until a suitable living situation can be found. In situations where children are in the home, the bank is encouraged to let the family stay in the house until the end of the school year.

According to RealtyTrac, the online marketer of foreclosed properties, approximately 860,000 properties were foreclosed on across the nation in 2008.


Filed under: Uncategorized
soundoff (39 Responses)
  1. Dutch/Hampton Roads, VA

    If it's working in Philly, why can't it work across the country?

    February 18, 2009 03:31 pm at 3:31 pm |
  2. Ray Fisher, Albuquerque, NM

    I truly admire the President taking the bull by the horns on all issues. We will always be plagued by those who are deadbeats or who have suffered hardships yet he is presenting the best plans possible. There is no perfect plan except one which is never attempted.

    February 18, 2009 03:33 pm at 3:33 pm |
  3. Sniffit

    Sooooo...he's basing the plan on methods that are proving effective and the GOP is still going to send him letters, grandstand, abuse his overtures of bipartisanship? It's time for America to foreclose on the GOP.

    February 18, 2009 03:35 pm at 3:35 pm |
  4. Aurora Cervantes

    My Brother, Joseph B. Gonzales is a Mortgage Banker in the Inland Empire. He has a proposal that can STOP 80% of foreclosures across the country. He has submitted his proposal to: President Obama, The Dept of Real Estate, Mortgage Association, Secty of HUD and to the Chairman of the Federal Reserve in WA.

    He was recently interviewed by The Sun newspaper (Inland Empire) and an article pertaining to his proposal was printed in that newspaper. Joseph has been in contact with the L.A. Times as is the process of being interviewed by the Los Angeles Times.

    I am helping my brother get the word out as his schedule is very busy. I am writing to you, Pres. Obama, Oprah Winfrey, The Washington Post & many others in an attempt to try and solve at least 80% of foreclosures around the country.

    Joseph would be more than pleased to mail a copy of his proposal to you upon request.

    I sincerely hope this email reaches you and I would very much appreciate a response if you do.
    Thank you for your consideration,
    Sincerely,
    Rori Cervantes

    February 18, 2009 03:38 pm at 3:38 pm |
  5. bernj

    Common sense would dictate that every state and the federal government allow judges to modify the loans of folks facing foreclosure. It is absolutely insane to, on the one hand, bailout these greedy financial institutions while they continue to wreck havoc on the very people who are suffering the most under the current economy.

    February 18, 2009 03:43 pm at 3:43 pm |
  6. Tom

    Can someone please report how much it cost tax payers for Obama to fly around to all these locations to sign bills? We gave the car makers a bad time for flying in corp jets but Obama seems like hes still running for POTUS...

    My Guess its around $300,000 per flight with all the people who go get paid and security, flight costs etc. Hes traveled to sign 3 bills across the US when this could have been done at the white house for free...

    February 18, 2009 03:47 pm at 3:47 pm |
  7. Rick

    Obama has turned out to be a complete disaster. We'll be lucky to survive his four year term.

    February 18, 2009 03:49 pm at 3:49 pm |
  8. Charlie in Maine

    At this time in history Secretary Clinton is uniquely qualified to lead the effort to rebuild our nation's standing in the world. One of the worst effects of the Bush Presidency was his arrogance toward other countries. It embarrassed us with our friends an emboldened our enemies. In many ways the economic mess that W left in the wake of his frat-boy style party he threw for his rich friends at Enron, Exxon and Haliburton will be easier to clean up than the diplomatic tragedy precipitated by the ugliest of "ugly Americans"

    February 18, 2009 03:55 pm at 3:55 pm |
  9. geraldine

    It's pretty tough to fault the Republicans for their 6 questions posed to Obama over his plan (e.g., how to ensure that the 90% of homeowners that pay judicially will also benefit?), but I'll be some folks on this board are about to...

    Becuase, heaven forbid someone ask Obama a tough question and distract him from distributing handouts.

    Does anyone else find it ironic that the government is trying to force lending behavior, to fix the problem caused by the Clinton and Bush administrations' encouraging of lending behaviors (i.e., pushing banks to offer subrimes)?

    February 18, 2009 03:59 pm at 3:59 pm |
  10. Luke

    Where's the help for renters who didn't buy homes they couldn't afford?

    Why am I paying for your house?

    February 18, 2009 03:59 pm at 3:59 pm |
  11. Ule is an idiot

    Tom calm down, I am sure its less that the numerous trips Bush took to Crawford.

    February 18, 2009 04:04 pm at 4:04 pm |
  12. Little too late????

    $8,000 for the 80 home owners in my community would have provided $640,000 to our local economy. For me, alone, I could have bought trees for my yard, installed a sprinkler system, redone my walkway from the drive to my back yard and been able to do some interior updates. The value of MY home would have increased, for sure!

    That would have let MY local 'shovel-ready' businesses to install the trees, sprinkler, concrete work...AND that is only from ONE responsible home owner. Imagine what the end result would be when ALL 80 of us do the same thing?!?! Building 'out buildings', resodding yards, investing in THEIR asset called their home. I believe it is called...Economic Stimulation. ...and that is only one living community.

    We, as a country, need to reward honest work and stop coddling irresponsibility!!!

    February 18, 2009 04:05 pm at 4:05 pm |
  13. Eric M

    What an absolute joke. Woman loses her job, doesn't make her mortgage payments, and goes into foreclosure. Tragic, right?

    Wrong. Unemployment pays enough that someone who has lost their job should still be able to make payments if they properly scaled their mortgage payment to their income.

    This program seeks to renegotiate rates during a period of historic lows, alter terms from an ARM to a fixed rate, and even in some cases to allow borrowers to rengotiate the principal owed on their mortgage!! That's right...I borrowed $150K but now I can't pay it back, so instead let's renegotiate it so that I only borrowed $100K.

    As someone who did the responsible thing and waited until I could afford to buy a house, I feel disgusted and betrayed by my government. I am now looking for a home, but due to this program I will have fewer homes to choose from, and will end up paying more money, or accepting less house because our President has decided to prop up values by refusing to let banks foreclose.

    People made bad decisions, Mister President. I didn't. Why am I the one being punished here?

    February 18, 2009 04:09 pm at 4:09 pm |
  14. Sniffit

    @ Rick

    Right, because under an article that talks about how Obama is using a successful program in one state to help guide his decision-making on how to address the foreclosure issue in all the states, it makes perfect sense to claim that, despite him basing his decisions on facts and evidence rather than solely on ideology that claims to know how the world works no matter what feedback reality provides, he's doing a bad job.

    February 18, 2009 04:11 pm at 4:11 pm |
  15. beevee

    Anthor reason for the GOP leaders to whine about. They have no idea waht the plan entails and the details of it. But even without knowing the full details they start complaining that it won't work. It looks to me the GOP leaders have no plans of their own but the only thing they seem to be united except for the three moderate ones is in wishing that the president's plan fail. I want to know which experts they are consulting before bad mouthing the president's plans/stimulus bills.

    February 18, 2009 04:13 pm at 4:13 pm |
  16. Deborah

    I'm sorry but I own a home and I'm current with my mortgage.

    I have survived divorce, several Layoffs and a 6 month stretch of unemployment and raised two children.

    At no time in my life did I expect to be "bailed out"!

    We the people do not deserve to be punished with Higher Taxes to bail these folks out!

    If you can't afford the payments sell and rent space you can afford!

    February 18, 2009 04:13 pm at 4:13 pm |
  17. naqib

    They are going to need to fund a couple billion to the ink companies to afford all the new money they are going to print.

    Inflation... it's change you can believe in

    February 18, 2009 04:20 pm at 4:20 pm |
  18. obama-mama

    Tom & Rick you are both incredibly depressing.

    February 18, 2009 04:21 pm at 4:21 pm |
  19. Anonymous

    I found it interesting that the lead story on CNN right now says that
    "even before the plan was revealed, Republicans were
    saying that the Obama plan was bad"

    OMG!!! If we are going to have four years of this stupid fight between the two parties we will certainly sink into the mire of hate and haves-and-have nots...........

    Come on!!! Give him a chance.....GWB had eight l-o-n-g years! Ombama hasn't even eight weeks!!!

    February 18, 2009 04:21 pm at 4:21 pm |
  20. Anonymous

    I found it interesting that the lead story on CNN right now says that
    "even before the plan was revealed, Republicans were
    saying that the Obama plan was bad"

    OMG!!! If we are going to have four years of this stupid fight between the two parties we will certainly sink into the mire of hate and haves-and-have nots...........

    Come on!!! Give him a chance.....GWB had eight l-o-n-g years! Obama hasn't even eight weeks!!!

    February 18, 2009 04:22 pm at 4:22 pm |
  21. Billy

    Tom – It costs the same as when Bush was going back and forth to Camp David every weekend!

    February 18, 2009 04:25 pm at 4:25 pm |
  22. hometowndemocrat

    Rick-

    After a month you can tell that Obama is a "total disaster"? Grow up! Bush was a total disaster and you brainiacs re-elected him anyway! Sorry, but I have very little faith in a republicans ability to judge anyone else's abilities!

    If you live in this country why would you not want our president to be successful? If he fails, we all fail. Of course the average republican is so set on being right that they are probably hoping for the collapse of the country just so they can say "I told you so".

    February 18, 2009 04:26 pm at 4:26 pm |
  23. BT

    If we don't keep people in their homes, where will they go?

    Homelessness, hunger and the resulting lack of dignity will bring nothing but civil unrest, crime and the demise of family unity.

    I thought Republicans were for family unity and Christian values.
    I thought Republicans put country first.

    I see by the conservatives who blog on here that is not the case.

    February 18, 2009 04:29 pm at 4:29 pm |
  24. C

    IT'S AMAZING HOW EVERYONE ALL OF A SUDDEN WANTS TO BE CONSERVATIVE ABOUT SPENDING, YOU GUYS ARE DRINKING TOO MUCH "PARTY OF NO" JUICE! WE HAD TO SPEND TONS OF MONEY DURING THE DEPRESSION, AND DURING MANY OTHER DIFFICULT TIMES AND OUR TAXES ARE STILL GETTING LOWER, AND BILL CLINTON JUST NOT TOO LONG AGO HAD A BALANCED BUDGET! STOP LETTING THE "PARTY OF NO" FILL YOUR HEAD UP WITH POLITICAL NONSENSE! IF WE DO NOT PUT THE BRAKES ON THIS TERRIBLE ECONOMY, WE WILL END UP LIKE RUSSIA, AND DEBT WILL BE THE LAST THING OUR GRANDCHILDREN WILL HAVE TO WORRY ABOUT!!!

    February 18, 2009 04:29 pm at 4:29 pm |
  25. Gary

    Wish we would stop spending money that we don't have. Maybe we should have used the TARP money to do this from the beginning. We need to weather this bad recession, not borrow from out children and grandchildren to lessen it. Very, very sad business as usually in Washington.

    February 18, 2009 04:31 pm at 4:31 pm |
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