Eight years in, this city program is still saving homes from foreclosure

Every Thursday morning, hundreds of Philadelphians flock to Room 676 on the sixth floor of City Hall, where they’ll sit in chairs in the middle of a large courtroom.

Despite the volume of people within it, there doesn’t seem to be much action going on in the room. But beneath that idle veil are dealings that will determine whether or not these citizens get to keep their homes.

To the far side of the room, dozens of folks in suits are gathered at tables along the wall. They’re all attorneys and representatives from legal aid nonprofits like Community Legal Services (CLS), Philadelphia Legal Assistance, SeniorLAW Center and Philadelphia Volunteers for the Indigent Program, to name a few.

They’re all there to help those hundreds of Philadelphians — approximately 250 per day — save their homes from mortgage foreclosure. To do it, they’ll work with both the Court of Common Pleas and attorneys representing lenders.

This is the city’s Residential Mortgage Foreclosure Diversion Program. Launched as a pilot  in the throes of the housing crisis in 2008, it’s a program that entices all parties to come to a civil agreement on how to make a mortgage payment work. The program was made a permanent fixture a year after launching when it undoubtedly proved its efficiency. It’s helped save well over 9,000 since its inception.

It was also the first of its kind in the U.S., and its success in the national spotlight has since inspired the adoption of similar programs in cities across the country. The hype has faded, but the program is just as strong.

Inside Room 676, all involved parties spend the day working out complicated cases — like one involving the transfer of a deed to a woman from her ex-husband. The two were married and divorced in the Caribbean, but when he transferred the deed, she didn’t realize he was months behind his mortgage payments. Now, she’s requesting that backlogged debt be capitalized and a new mortgage set up, but the lenders and the court want proof of the divorce — even though it happened outside the country.

On this January morning, CLS attorney Michael Froehlich is waiting for Ms. Smith to arrive. When Smith’s mother died in 2013, she inherited both the house and her debt. Smith’s mother was suffering from dementia in the later years of her life and consistently forgot to pay the mortgage. After using what money she did have to pay for her mother’s funeral, Smith now faces foreclosure.

She’s asking that her mother’s debt be capitalized and a new mortgage opened up in her own name. Froehlich is here to help make that happen.

“When you can save homes and neighborhoods and avoid blight and keep people in their homes, [lenders] recognize that as a good thing,” says Froehlich, eyes peering over the lethargic room as he seeks out Smith. “Occasionally, advocates and lenders disagree on things, but generally we can work it out.”

As Smith arrives, Froehlich pulls her into another room along the sixth floor corridor, where he provides her with personal legal counsel. Smith has received a letter from her lender saying they are missing documents that she’s certain she already submitted — holding her up further from settling the problem.

If she had indeed submitted it, is the missing letter a product of laziness on behalf of the lender?

“High volume,” Froehlich corrects. It’s a tough situation. “If this program didn’t exist, I would not know what to do [about] that letter” in this case.

In that room, Froehlich lays out a legal plan for Smith if the Court comes to an unfavorable decision next month. She accepts and leaves the building. Froehlich moves on to the next Philadelphian in need of counsel.