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The North Central office of Community Legal Services (CLS) sits near the corner of Broad and Erie streets in Philadelphia, surrounded by thousands of row homes that were originally built for mill workers, and now house many of the city’s low-income families. The subprime foreclosure crisis is not news here. It has been devastating these neighborhoods for the past 10 years. In 1996, CLS lawyers litigated the first case under the federal antipredatory lending statute, the Homeownership and Equity Protection Act of 1994, against a subprime lender that eventually filed for Chapter 11 protection in 2000. They have been trying to stem the tide of subprime foreclosures in North Philly ever since. Long before Wall Street and suburban California homebuyers became aware of the risks of subprime mortgages, CLS began seeing this new style of lending among its predominantly African-American clients. Many became homeowners not through subprime loans, but with Federal Housing Administration and Veterans Administration mortgages from the 1970s and 1980s. They became targets for brokers selling refinancing and consolidation as the solution to every homeowner’s problems. By 1998, more than half of the foreclosures CLS was seeing were filed by subprime lenders, usually as a result of refinancing loans, not purchase mortgages. Of the mortgages made by subprime lenders in Philadelphia in 1998, fully 40 percent entered foreclosure in the subsequent five years. A single lender, EquiCredit, accounted for 1-in-10 foreclosures in 2003. The impact of subprime foreclosures has not been evenly spread. The inner cities have been especially hard-hit. While subprime lending is often described as making credit available to the previously underserved, that has not been the experience of CLS clients. For the most part, subprime mortgages are offered to homeowners who already have existing mortgages and often other forms of credit as well. In most cases, these homeowners are putting their homes at risk to borrow cash for repairs, to pay back taxes or to consolidate credit card debt. Nationally, only about 10 percent of subprime mortgages go to first-time homebuyers. On the other hand, 20 percent of subprime mortgages have or will end in foreclosure nationwide. The risks are even greater for Philadelphia homeowners. The impact of subprime foreclosure falls especially hard on minorities and has reached the point that the nation’s minority homeownership rate is now falling rather than rising. CLS has responded with a variety of strategies. CLS attorneys have represented hundreds of families in individual foreclosure cases, with consistent success. In 2001, CLS filed a class action lawsuit against EquiCredit and obtained a settlement that offered foreclosure relief for all EquiCredit borrowers in Pennsylvania. CLS attorneys advocated for a local ordinance enacted by City Council in 2001 that would have offered significant protections (but was reversed by the state General Assembly later that year). In 2004, CLS attorneys, along with Philadelphia Legal Assistance and the Philadelphia Unemployment Project, successfully petitioned for a stay of Philadelphia sheriff sales, in order to reach out to victims of predatory lending and poor mortgage servicing practices. CLS attorneys have also worked with the Pennsylvania Banking Department and the Pennsylvania Housing Finance Agency to study the foreclosure problem, to improve the regulation of mortgage lenders and brokers to curb predatory lending, and to improve the state’s emergency mortgage assistance program. CLS advocates have provided classes for homeowners; have trained and supported housing counselors helping to identify predatory loan victims; and have trained and supported a panel of private attorneys to take individual cases on a contingency fee basis. The wave of subprime foreclosures coming in the next two years will continue to test their creativity and skill. For more than 40 years, CLS has provided the highest quality, free legal assistance to low-income Philadelphians when they most need it. In the past year alone, CLS has helped more than 17,000 Philadelphians in civil matters relating to their families, homes, jobs, health and income. CLS advocates provide direct legal counsel to clients, conduct policy advocacy locally and nationally, and educate the local low-income community and the professionals who serve them. Created by the Philadelphia Bar Association in 1966, CLS comprises 106 staff members, including 46 lawyers, and is divided into nine legal units, each with a different legal expertise. The nine units are public benefits, housing, employment, family advocacy, energy, elder law, language access, consumer law and community economic development. The unparalleled range and quality of services provided by CLS enables the organization to meet the many individual legal needs of impoverished Philadelphians. In addition, CLS’ broad legal expertise enables it to have a profound impact on local and national policy as we help policy makers understand the ramifications of their policies on the most economically fragile members of our society. CLS has a national reputation for excellence, and is a leader in aggressively addressing new issues of importance to its client community, such as predatory lending, low-income employment issues, language access, and civil barriers faced by ex-offenders. Because CLS effectively represents so many people on so many different topics, CLS is routinely at the forefront of emerging legal issues. For more information, visit www.clsphila.org. ALAN M. WHITE is an attorney with Community Legal Services Inc. (CLS) in Philadelphia. For the past 40 years, CLS has provided free legal assistance to low-income Philadelphians when they most need it. In the past year alone, CLS has helped over 17,000 Philadelphians in civil matters relating to their families, homes, jobs, health and income. CLS advocates provide direct legal counsel to clients, conduct policy advocacy locally and nationally, and educate the local low-income community and the professionals who serve them.

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