Mortgage deliquents in Philadelphia get reprieves -- and may get more

For those falling behind in their mortgage payments and other home bills, Philadelphia looks like the place to be, at least on the surface.

A special program requiring banks to sit down face-to-face with delinquent borrowers at the courthouse before they foreclose on their homes recently reached its one-year anniversary with an estimated 5,700 homeowners helped, 1,400 of whom were temporarily saved from foreclosure.

And now the city council is considering an amnesty for penalties related to past-due property taxes and perhaps water bills, to give low-income residents some temporary relief.

Philadelphia's mortgage conciliation program has received widespread media coverage, including a recent New York Times story that reported cities across the country are beginning or considering similar approaches.

But critics of the program -- and the potential tax-relief add-on -- note that the recurring use of the word "temporary" is exactly the problem. As goes the federal Home Affordable Modification Program (HAMP) , which this week announced that only 4% of recipients have received a permanent adjustment, so goes the Philadelphia story.

"What has been the most common outcome is that the sheriff's sales are delayed but ultimately go through anyway," Delaware County attorney Matthew Weisberg told WalletPop.

Because the program relies largely on housing counselors to represent the homeowners at their conciliation conferences, Weisberg added, many come without adequate documentation to show the attorneys who represent the banks. And those conferences tend to be more like cattle calls, with 100 or more showing up at once.

Weisberg called it "a zoo."

"People are engaged in a legal process that they are trying to talk their way out of," he added. "My problem with the program is that it effectively bribes borrowers away from attorneys and relies on a program that has no enforcement mechanism."

As to the current council debate about offering amnesty for property and business tax payments, which would forgive penalties and half of the interest on tax bills unpaid as of June 30, 2009, Weisberg considers that more political than helpful.

"I wouldn't call it amnesty, I would just call it a postponement," he said. "At the holidays, you don't want to kick people out of their homes; it's unsavory."
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