PHILADELPHIA RESIDENTIAL MORTGAGE FORECLOSURE DIVERSION PROGRAM

Mortgage Foreclosure Negotiation Training for Pro Bono Counsel 

Friday, November 30, 2012

Philadelphia VIP  

With many thanks to our hostPepper Hamilton, LLP

WELCOME

• What is Philadelphia VIP?• Services offered• Mortgage Foreclosure Diversion Program

WAYS TO VOLUNTEER    MAKE THE DIFFERENCE BETWEEN HOME AND HOMELESSNESS

• Ongoing Volunteer:  VIP will refer mortgage foreclosure Diversion cases to volunteers on an ongoing basis until the matter is out of Diversion. VIP volunteers will obtain the client file in advance of the next conciliation conference, and that client will remain the volunteer’s client until the case is out of Diversion.  

• Temporary Solution Volunteer:  VIP will ask volunteers to help clients for a single conciliation conference until we can make a referral to a volunteer who is able to commit to the client until her case is out of Diversion.

• Emergency Volunteer: While we expect that most cases will be given a continuance to allow VIP to find an attorney -- as lawyers and courts do consistently for other civil cases that VIP handles -- we know that there will be cases that lenders will refuse to continue. In those cases, we hope to be able to utilize volunteer attorneys who work near City Hall and can be available for same day representation

FORECLOSURE OVERVIEW

• One in eleven mortgages are delinquent and one in twenty-one are in active foreclosure

• In Pennsylvania, foreclosures are concentrated in middle and low-income areas

• Most defaults occur because of unemployment or underemployment and resulting complications

PA FORECLOSURE PROCESS

• Civil procedure• Act 91• Act 6• Philadelphia’s Diversion Process

BASICS OF FORECLOSURE

• Originator• Servicer• Trustee• Loan Insurers or Guarantors• Loan Types– FHA– Conventional Prime– Conventional Subprime– Predatory

HOW DIVERSION WORKS

• Notification of homeowner• Housing counseling• Conciliation conferences• VIP Eligibility

VOLUNTEER RESPONSIBILITIES

• Client communication is KEY!– Fear and distrust– Lack of education– Multiple complicating factors

• Do not wait for the client to call you• Maintain regular contact with client AND

housing counselor

AVAILABLE RESOURCES

• VIP referral packet• On-site legal services attorney• Malpractice insurance• Document’s from lender’s counsel

REPRESENTATION TASKS

• Initial tasks– Obtain client signature on representation agreement and borrower

authorization– Discuss status with homeowner and housing counselor

• Case Analysis– Other debt?– How many conferences?– Savings?– Why delinquent?– How much is owed?– Taxes and homeowner’s insurance?– 2nd or 3rd mortgage?

REPRESENTATION TASKS

• Negotiation Tasks– Reach an agreement and review order– Ensure all parties understand next steps

• Troubleshooting– Discuss refusal of continuance with court administrator and, if

necessary, request JPT– Status conferences

• Concluding Tasks– Obtain copies of order– Exchange contact information with all parties

ONGOING COMMUNICATION

• Maintain regular contact with client and housing counselor

• Check docket regularly• Follow up with lender’s counsel• VIP status updates and supports

CLOSING A CASE

• Notify VIP of details• Send termination letter to client• Request SD&E for successfully negotiated

cases

HOUSING COUNSELORS

• Most clients referred through Save Your Home Philly Hotline

• Face to face meeting• Gather financial information• Complete required forms • Submit financial packets for workout options

TYPICAL DOCUMENTATION

• Authorization to speak with borrower• Income verification• Bank statements• Utility bills• Explanation of hardship• List of documents required by specific lender• Additional for HAMP:

– Request for Modification and Affidavit (RMA)– Request for transcript of tax returns (IRS Form 4506-T)– Income verification– Residency verification

CHALLENGES

• Proposal cannot be submitted 10 days before 1st or 14 days before 2nd conference

• Missing or unavailable documents• Communication challenges• Postponement refusals• Delays cause documents to become stale• Programs are constantly changing

 GENERAL RETENTION OPTIONS

• Refinance• State assistance programs– HEMAP or PHRP

• Repayment• Forbearance• Partial claim• Reverse mortgage• Loan modification

HAMP

• Making Home Affordable program• New Tier II program– Second bite at the apple– Default on TPP / permanent mod– Expanded eligibility for unemployment

FHA-SPECIFIC OPTIONS

• Lenders required to follow this waterfall of options:– Repayment– Forbearance– Special forbearance– Loan modification– Partial claim– FHA-HAMP

NON-RETENTION OPTIONS

• Straight sale• Short sale• Mortgage assumption• Deed-in-lieu• Sherriff’s sale• “Cash for Keys”

PROGRAM OUTCOMES

Retention Outcomes241 Loan Modifications46 Reinstatements19 Bankruptcies16 Forbearance Plans13 HEMAP loansTOTAL:  335

Non-Retention Outcomes86 Sheriff Sales31 Market sales, Short

sales, or Deed-in-LieuTOTAL:  117

For all VIP clients who had ongoing representation throughout the duration of the diversion process

and whose outcomes are known, 74% of homeowners were able to save their homes!

NEXT STEPS

• Sign up to volunteer today!• Six months to earn CLEs– Provide ongoing representation to two clients– Attend three separate conferences as temporary

solution or emergency volunteer• For questions, concerns, or to request a case,

please contact Homeownership Advocate Susan Wysor Nguema at swysor@phillyvip.org or 215.523.9569