Giving Homeowners a Fighting Chance

Every once in a while, you come across some good news. It's bleak as hell for the homeless and soon-to-be, but some hope remains in Philadelphia.

On the heels of news that the foreclosure rate hit 19% last month, the New York Times covered the story of an innovative program in Philadelphia that requires banks to meet with homeowners before eviction. Though there's some doubt about the program's effectiveness, many believe it to be an improvement over President Obama's efforts to stymie the catastrophic scale of the housing crisis. Philadelphia's approach makes equitable outcomes more likely, "by bringing together all the principals in one room. If the mortgage company proves intractable, the homeowner has the right to request mediation in front of a volunteer lawyer serving as a provisional judge, who relays recommendations to the program's supervising judge." If the judge suspects wrongdoing on the part of the lender, then she can suspend sale of the house until a resolution is reached. Not bad.

How often do you hear about courts protecting homeowners from indignities at the hands of banks, right? By offering homeowners free credit counseling and mediation, this program offers new hope to people like Christopher Hall, whose plight the Times story outlined in detail:  "A union roofer, Mr. Hall, 42, had not worked since August 2008, when the contractor that employed him as a foreman went broke and laid off more than 40 people. He had not made a mortgage payment in more than a year, and his lender, Bank of America, was threatening to auction off his house through the sheriff's office." Mr. Hall and his family would otherwise be on the streets. Not now. This is a perfect example of a city taking responsibility for the creation of healthy neighborhoods and another link in homelessness prevention.

Not everyone agrees with this approach, however. Those against it argue that it merely delays the inevitable. Daniel Indviglio, a financial writer for the Atlantic's Business Channel, argues that there's really no point: banks will get their way whatever happens. "If foreclosure is a better alternative for the bank," he writes, "then meeting in person won't change that...It's a waste of time." Given that Indviglio is a Beltway-blogging money wonk, his self-assurance really doesn't surprise me. People like him are paid to be pompous. And no doubt, other Ivy League drones will be parroting the same on Fox and MSNBC. After all, what's better for banks than saying resistance is futile? But thought-killing sentiments like these don't really encourage a constructive debate. They ignore the real problem and do nothing for real people.

Besides, critics like Indviglio conveniently forget an important point. The new program seems to be working for homeowners. The Times points out that "while data is scant, a legal aid group, Philadelphia Volunteers for the Indigent Program, has complete information on 61 of the 309 cases it has resolved since October 2008 through the anti-foreclosure program. Only five resulted in sheriff's sales, while 35 ended with loan modifications that lowered payments, the group says." Not bad so far. This program clearly offers the possibility that communities blighted by widespread foreclosures can fight off certain death. Judge Annetto M. Rizzo, who spearheads this pilot program, believes this is a best and last attempt. "I realized we're either going to go down in flames or we're going to be a national model. We're going to look at these cases and see what we can work out."

This is exactly the point. Philadelphia's approach means that people can work together on this in a dignified way. No surprise that banks are less likely to drop the guillotine on someone they've met.