Stop Foreclosure Answer

In yesterday’s Blog Post, I wrote about how successful Philadelphia’s Residential Mortgage Foreclosure Diversion Pilot Program has been in modifying the mortgages of people facing foreclosure. This program started in May of 2008. At the end of 2008 over 78% of the people who had their mortgages modified through the program remained in their homes. Nationwide more than 50% of the people who have their mortgages modified through other means cannot consistently make their new mortgage payment and are facing foreclosure again.

One of the reasons the Philadelphia program is so successful is the counseling requirement. The Philadelphia program is mandatory. At the time a mortgage company notifies a person that they are starting the foreclosure process, a separate letter is sent to the person telling them about the Foreclosure Diversion Pilot Program.

This letter tells the person that the first step is for them to schedule an appointment with a housing counselor. The letter contains the phone number to call to schedule the appointment. There is no charge for the services of the housing counselor.

For the meeting with the housing counselor the person has to bring information on their income, assets and debt. The counselor reviews everything and does a financial assessment. From that assessment the counselor prepares a report. In that report they prepare a plan explaining how the monthly mortgage payment could be reduced to a level which the person can afford to make. That should enable the person to get back on track. They can save their home and the foreclosure process can stop.

The next step is for the person facing foreclosure to attend a conciliation conference with a representative from their mortgage company. At this conference the plan proposed by the housing counselor is reviewed. If it is acceptable to all parties, the person’s mortgage is modified in line with the plan.

When you think about the role of the housing counselor, you realize that this is one reason the Philadelphia program is so successful. The counselor is reviewing the person’s financial situation and putting a realistic plan together showing how much of a monthly payment the person can afford to make.

When requesting modifications in areas outside of Philadelphia frequently people facing foreclosure do not submit detailed and complete information on their finances to their mortgage company. They overlook some items. At times they fail to submit critical information because they don’t think that it is important.

No one from the mortgage company has a preliminary meeting with the person. So there is no chance for them to find out if the person has overlooked any crucial information. The mortgage company comes up with a monthly payment which they feel the person can easily make. Actually the person will have trouble making it because of the critical information that they have failed to reveal.

Now let’s turn back to Philadelphia. The next step is a conciliation conference. The person facing foreclosure and a representative from their mortgage company attend this. A case manager appointed by the court presides over this conference. At this conference the plan prepared by the housing counselor is reviewed. All that the person facing foreclosure and the representative from the mortgage company have to do is agree that the new monthly payment and the modification are acceptable to them. If they do, the case manager approves it.

In the majority of instances the housing counselor is the one formulating the loan modification. The parties merely agree to it.

This is one of the reasons for the high success rate of the Philadelphia program.

It would be great if housing counselors can be used to create plans like this throughout the country. The person facing foreclosure would want to make sure that the plan created did not favor the mortgage company and the monthly payment was one that they could pay every month. Mortgage companies would want to make sure that the plans were well thought out and that their interests were protected.

Much Success,

Mark Elkins