February 18th, 2009
01:00 PM ET
11 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.

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soundoff (39 Responses)
  1. JL

    What is funny is that this used to be a bankruptcy option...then Bush decided to "reform" bankruptcy laws. Shortly after that, the housing market began to crash.

    I doubt the Grand Obstructionist Party members and their paid bloggers on this site won't bother mentioning that in their inevitable smear campaign.

    February 18, 2009 04:32 pm at 4:32 pm |
  2. Willy Brown

    Yep getting something for sitting on your lazy duff's. Thanks #44!

    February 18, 2009 04:33 pm at 4:33 pm |
  3. Denise

    I called my lender today to see if I can qualify for a modified mortgage, since my husband has lost his job in December. I did not want to wait until I fell behind in my payments. I found out that HomEq, located in CA is a debt collector, and would not even discuss any options with me at all. You can even hear the tone change in the person's voice the minute I mentioned modification. The tone became short and rude. How can I close my mortgage with a bank, and now have to deal with a "group of investors" whose goal is to only accept my payments. Made me feel like no one cares, they just want to get more and more money.

    February 18, 2009 04:37 pm at 4:37 pm |
  4. Jerry

    No matter what the President will do for this country their is still so much hatered here. I wish someone could tell me why? Is it because the man is brillant and has his st togather. People if you don't believe you will not achieve.

    February 18, 2009 04:38 pm at 4:38 pm |
  5. albert from pennsylvania

    Obama hasn't been president for a month yet, and already the party of NO is compaining, sometimes about stuff he hasn't even done yet. The Philadelphia program is an ecxcellent approach, at least if the judges are honnest. We certainly shouldn't be helping the outrageous fools but we should certainly find some flexibility for honnest folk who have lost their jobs or had health disasters and are trying to make good on their mortgages.

    Somehow the losers have figured that working together means doing it their way, the same old tax cuts for the rich that got us into this mess. Maybe we should just be a little bit patient to see if something else might work before we just blindly condemn.

    February 18, 2009 04:39 pm at 4:39 pm |
  6. gt

    ya betcha... ole philly is how all american cities need to act.... great example if not for the worst muder ate in the world,,,,,,,,

    February 18, 2009 04:42 pm at 4:42 pm |
  7. CAL


    Why in the heck are you worried about President Obama flying around the country? Loser if you had any knowledge you would be able to see that the President is going out to the places where the economy has hit hard. Why didn't you worry when bush flew to different places, stop trying to find nick picky crap to whine about.

    February 18, 2009 04:47 pm at 4:47 pm |
  8. Soccer Nana


    President Obama will use Air Force One and Marine One whenever he needs to fly.

    Did you question any previous presidents about the cost to use Air Force One or Marine One?

    End of story.

    February 18, 2009 04:51 pm at 4:51 pm |
  9. virginia for obama

    Oh! . . shut up tom,

    Even if he walked. You would still have a problem with it. You're be complaining that he left the house and went down the street. . . . Please., get a grip and stop hating.

    February 18, 2009 04:57 pm at 4:57 pm |
  10. Sniffit

    @ albert from PA

    I think you're precisely correct. The GOP's definition of "bipartisanship" is that everyone should do what they say or they make sure nobody does anything. Typical "my way or the highway" approach. Too bad for them reality seems to have a real problem with conforming to the way they claim the world works.

    February 18, 2009 05:05 pm at 5:05 pm |
  11. lynn

    It seems to me President Obama is damned if he do and damned if he don't. He is not a failure and he is not doing a bad job. He is trying to fix the mess that this country is in. That is going to take time. He has done more in one month than the former did in eight long years. Give him a chance.

    February 18, 2009 05:07 pm at 5:07 pm |
  12. simonsays

    Nowhere in the constitution does it say that every citizen has a right to own a home. Most of these forclosures are by people that shouldn't have been given a home loan in the first place because they never would be able to pay it back. They are called renters. Everybody is given the opportunity to buy a home if they can afford it. Democracy is "equality of opportunity" not "equality of results".

    February 18, 2009 05:16 pm at 5:16 pm |
  13. peakarack

    Where's Barack Hussein Obama bounce?

    I think Hillary should have been President.

    February 18, 2009 05:23 pm at 5:23 pm |

    I can't believe what I hear when the GOP starts to talk. First, they wanted President Obama to consider the housing problem in the stimulus package. When he didn't they raised noise. Now that he has come up with a plan that could work, they want to tear that down. My question to the GOP, Where is your Plan? If you can do better, than come up with a plan or stop complaining and start working with your President. At least he is doing something. If you are so Conservative and Christian minded, I think you need to re-read your bible and see what God has to say about helping our fellow man. We all need each other. This is our country. Let's not be so self centered.

    February 18, 2009 05:26 pm at 5:26 pm |
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