Philadelphia Mortgage Foreclosure Court

We’re a hit in Kentucky!

As the attached article sets forth, Philadelphia’s Mortgage Foreclosure Diversion Pilot Program - - of which I was a pioneer and in which I serve as Judge Pro Tem - - is being eyed by Kentucky, Maryland, New York, and New Jersey courts.

The Program provides for early court intervention in residential owner-occupied mortgage foreclosures to both facilitate loan work-outs and permit lenders to proceed freely to sheriff sales.

As always, if you have any question about litigation in Pennsylvania and New Jersey, please do not hesitate in calling.

Phila. Foreclosure Program Is Eyed by Kentucky Court
The Legal Intelligencer By Amaris Elliott-Engel January 16, 2009

Philadelphia's mortgage foreclosure diversion pilot program has garnered a lot of press coverage, but the true success of the mediation program might be measured in how many other jurisdictions want to copy the program to deal with their own foreclosure crises.

A group visiting from Louisville, Ky., last week was the fourth out-of-state contingent to visit City Hall in order to witness the program overseen by Philadelphia Common Pleas Judge Annette M. Rizzo.

Delegations from Maryland, New York and New Jersey already have visited, Rizzo said. A group from California is slated to come in the future, and officials from around Pennsylvania have visited, the judge said. Allegheny County has just started its mortgage foreclosure program, based partly on Philadelphia's program.

James Shake, the Kentucky chief judge in the Jefferson Circuit Court, Division 2, said during a working lunch over sandwiches that he and the other Kentucky visitors wanted to visit Philadelphia in order to be able to model their program after the parts of Philadelphia's program that are effective.

A similar program in Ohio was a "miserable failure," so the Kentuckians wanted to see what has made Philadelphia's program so successful, Shake said. Shake's determination is that "social work," or the direct outreach to homeowners, has made Philadelphia's program as successful as it has been.

Ian Phillips, legislative director for Pennsylvania ACORN, a community group with national reach, said during the lunch that conducting door-to-door outreach to borrowers whose homes are under foreclosure has increased the response of borrowers. On average, it takes 1.65 door knocks before outreach will connect with a homeowner or a relative, Phillips said.

ACORN, as well as 14 other organizations, including neighborhood advisory committees, has been conducting door-to-door outreach on behalf of the city. Carolyn Brown, of the city of Philadelphia's Office of Neighborhood and Business Services, distributes the list of homeowners whose residences are subject to foreclosure and that the community organizations contact.
Phillips said simply sending out mailings about the court program won't get a response from financially struggling homeowners deluged with mailings disguised as official matters.
Brown said it costs $25 to pay for three door-knockings in a dense neighborhood.

Dan Albers, a Jefferson Circuit Court Master Commissioner, said all foreclosure cases in his jurisdiction are first funneled through the commissioners. Because cases first come through the commissioners, Albers said the commissioners might conduct the foreclosure mediations. The commissioners review the cases and make recommendations to judges about the cases, Albers said.

There were 4,800 foreclosure filings last year in his jurisdiction, Albers said. Rizzo said Philadelphia's program handled 10,000 filings.

The Kentucky contingent included members of the lender bar, members of the public interest bar representing borrowers and community organizers.

Just as Philadelphia has a steering committee with municipal, judicial, lender and borrower stakeholders, the Louisville court project has similar buy-in, Shake said. Many of the members of the Philadelphia steering committee, chaired by Lesia Kuzma of the city's Law Department, came to the lunch with the Kentucky visitors.

Albers said he was amazed at the receptiveness of lenders and Louisville Mayor Jerry Abramson to the effort to build a mediation program for foreclosure cases.

"There was no one that refused," Albers said.

While Shake is the chief judge, he said that he is like an "elected queen" and has no authority over how his colleagues handle the foreclosure cases on their dockets. During an upcoming team meeting, Shake said he hopes that every judge will unanimously adopt a proposed order that will pause foreclosure cases to see if loan workouts are possible following mediations in those cases.
During the Kentucky visit last week, Philadelphia Common Pleas President Judge Pamela Pryor Dembe said that creating a program like Philadelphia's "gets a group of lawyers who chew on each other's ankles to work together."

The Kentucky group stayed for two days.

Paul Lewis, chief of staff to former Chief Judge of New York Judith Kaye, said in an interview last year that following a visit to Philadelphia, the New York contingent discovered that Philadelphia was getting a higher response rate from borrowers than New York was to the court's foreclosure conferences.

New York's program started in Queens County before rolling out to the rest of the state, Lewis said. Queens County had one of the highest foreclosure rates growing from 1,855 in 2004 to over 6,000 in 2008, Lewis said. The New York contingent visited last spring.
New York officials have been reaching out to plaintiffs' representatives to get contact information for the defendants in the cases, sending letters to the defendants informing them of their right to foreclosure conferences and then giving defendants' a telephone number to call the courthouse, as well as the phone numbers of local legal providers, Lewis said.
New Jersey made their foreclosure mediation program optional, so that is one way to make a foreclosure court program manageable in terms of the number of cases, Rizzo said. But she said that in Philadelphia she wants to reach every house that is subject to foreclosure.
Rachel K. Gallegos, Rizzo's law clerk, said that she has seen stakeholders have greater buy-in into the program because lenders' attorneys are meeting face-to-face with borrowers and their counsel, most of them pro bono volunteers.

The housing crisis, and the broader recession, has broken down the hierarchy stretching from the rich to the poor, Gallegos said.

"You either take part, or you watch everybody go down in flames," Gallegos said.