When the Philadelphia courts started a diversion program for mortgage foreclosures at the peak of the global financial crisis, Philadelphia Court of Common Pleas Judge Annette M. Rizzo said she hoped at one point that the program would close down and the court could put up a "gone fishing" sign.
But "not only are we still around five years later. It seems, in fact, it’s not even winding down," Rizzo said.
Even with the economy moving out of recession, there is still high unemployment, which is leading to mortgage foreclosures, Rizzo said.
The "nation is still not out of distress," and that’s why programs are needed to facilitate discussions between mortgage lenders and their borrowers, Rizzo said.
Rachel Gallegos, who is the court administrative officer managing the nationally renowned program overseen by Rizzo, said the mortgage foreclosures being listed in the court no longer involve high-interest rates as they did before. Now the foreclosures often are because people are defaulting in loans after losing their jobs, Gallegos said.
The program’s leaders estimate that 23,000 Philadelphia residents have been served by a program in which lenders meet face-to-face with residential homeowners in every owner-occupied residential property subject to foreclosure before foreclosures can proceed. Of those, 5,000 homes have been saved, Gallegos said.
In recent weeks, there have been 150 cases listed some weeks and over 300 cases listed other weeks, Gallegos said.
The five-year anniversary of the mortgage foreclosure prevention program is slated to be marked today with a press conference in City Hall. Scheduled speakers include Richard Cordray, director of the federal Consumer Financial Protection Bureau, and Philadelphia Mayor Michael A. Nutter.
The program has been replicated in some fashion in at least five other states, and both Rizzo and Gallegos have spoken about the program multiple times at events across the country and even internationally.
One huge change in the last five years is the creation of the CFPB, Rizzo said.
"The fact the agency even exists now … really shows that the world of consumer finance has changed," Rizzo said.
Mortgage companies also have changed the way that they look at their customers and are now more supportive of reaching out to consumers in financial trouble and to "support and fortify this housing market," Rizzo said.
Aspects of the program include a hotline, in-person outreach to homeowners, legal assistance for homeowners, and financial literacy for homeowners, according to organizers.
One up-and-coming issue for the program is homes owned by senior citizens, Gallegos said, including homes owned by senior citizens who have died or homes owned by senior citizens who are still alive but whose families were unaware of the financial trouble their relatives had fallen into.
The program has to "work very, very hard and very, very quick to make sure the estate situation is taken care of" through a dual-track process, Gallegos said.
Mortgage foreclosure cases made up 19 percent of the First Judicial District’s civil case inventory in 2011, The Legal previously reported.
In 2008, 95.3 percent of foreclosure cases were resolved in seven to 13 months; in 2009, 53.7 percent were resolved in seven to 13 months; in 2010, 88.6 percent were resolved in seven to 13 months; and in 2011, 67 percent were resolved in seven to 13 months, according to FJD statistics.
The event today is not a celebration, Rizzo said, because there are still many mortgage foreclosures in Philadelphia.
Court leaders still would rather be able to put up that "gone fishing" sign one day.