The First Judicial District is launching a mortgage foreclosure diversion program with the help of a committee composed of stakeholders representing the lender, homeowner, nonprofit advocate and municipal viewpoints on the foreclosure crisis.

Court leaders believe that the Residential Mortgage Foreclosure Diversion Pilot Program is needed because some homeowners have been the victims of predatory lending practices and because homeowners in general are impacted by adjustable rate mortgages scheduled to balloon and rising unemployment.

There were a total of 5,670 foreclosures in the city in 2007.

Following a City Council resolution last month calling for a moratorium on housing foreclosures, President Judge C. Darnell Jones II said the court system decided to develop a program for homeowners facing foreclosures that addressed both the legal reality of contracts and the economic reality of homeowners.

“While I thought it was a matter of utmost importance, I did not think it was either wise or legal to impose a blanket moratorium for several reasons: First and foremost, it’s a contract. You can’t take away the right of people who are parties to a contract to claim damages,” Jones said.

But, considering the economic climes, Jones said, mortgage lenders can’t have “winner-take-all attitudes in a situation like this.”

Under the program, a conciliation conference for all owner-occupied residences must be held before a sheriff’s sale can occur. The conciliation conferences will evaluate if property owners are eligible for any federal, state or local initiatives to facilitate a loan renegotiation or another solution to avert foreclosure.

The pilot program will help the court system “take a little bit of a pause, given we’re experiencing a crisis. I think we’re at the beginning of one locally,” said Judge Annette M. Rizzo, under whose jurisdiction the aforementioned panel, the Mortgage Foreclosure Steering Committee, has been functioning for four years.

The pilot program also should bring to homeowners “some sense and predictability, a method by which they could come into a decision list in motions court to be heard . . . in a regular fashion, that’s easily read, that pro se can fill out themselves with some housing counsel involvement,” Rizzo said.

The current number of properties up for sheriff’s sales is approaching 1,000, but 20 to 25 percent of those properties are commercial or non-owner, unoccupied residences, Rizzo said. The sheriff’s sale of non-residential and non-owner occupied properties will go ahead as scheduled.

It’s not the first time the Philadelphia courts have undertaken temporary stays and postponements in the sheriff’s sales of foreclosed residential properties. Both in 1983 and 2004, such relief was undertaken.

In 2004, the Mortgage Foreclosure Steering Committee was created because of the then-foreclosure housing problem, in order to address problems and to develop a process allowing petitions to postpone sheriff’s sales in order to work out refinancing of mortgages or payment plans with the lenders, Rizzo said.

The committee has remained under Rizzo’s jurisdiction and played a key part in developing the guidelines for the conciliation program at the request of Jones, said Lesia C. Kuzma, a senior attorney with the city of Philadelphia Law Department and the chair of the committee.

“The foreclosure committee provided valuable input in designing and implementing the program,” including providing suggestions from all the committee members on the language used in the court’s order and regulations, Kuzma said. The committee of over 20 undertook its role during meetings held over the last two weeks.

“We have all these representatives, lender representatives, housing advocates and the Philadelphia Bar Association, coming together,” Kuzma said.

The exact shape of the conciliation conference is still being crafted, and the committee is still working on additional protocols, Kuzma and Rizzo said. The court is also working with the Philadelphia Bar Association to recruit pro bono counsel for litigants going through the program.

Jones said that the most important part of the program going forward will be for lawyers well-versed in real estate law to volunteer to represent homeowners in the program.

Case management techniques developed for the FJD civil division, including for the Day Forward teams, will help in the pilot program because there will be court-enforced deadlines and notices will be aligned to be launched with the civil e-filing system, which should be brought online by July, Rizzo said.

Because the protocols were developed within the steering committee and the committee involves representatives from all sides of the foreclosure crisis, Rizzo hopes that such collaboration will continue in the steering committee.

“My hope, notwithstanding everyone is from both sides of the issue, that the collaborative effort remains, that everyone see this as a very local problem in terms of Philadelphia and outlying areas . . . while interests are protected, that everyone comes together,” Rizzo said.