Helping homeowners avoid foreclosure

This story was originally reported by PRI’s Here and Now. For more, listen to the audio above.

The Federal Government tried to stem the tide of foreclosures with a $75 billion Home Affordable Modification Program, designed to help 3 to 4 million homeowners by 2012. That program is now dying, according to the blog Calculated Risk. Only about 300,000 people have been helped, while about 4 million people still risk losing their homes.

A program in Philadelphia is trying to stop some of those foreclosure proceedings by forcing negotiations. The Residential Mortgage Diversion Pilot is like a foreclosure bazaar, where homeowners, banks, housing advocates, lawyers and court officials come together to try to strike deals that benefit everyone involved.

Every Thursday, about 300 homeowners file into court for negotiations. The scene is like the floor of the original stock exchange, Judge Annette Rizzo told PRI’s Here and Now. “It’s a mandatory program,” according to Rizzo, that includes counseling from housing coordinators and community outreach.

Banks have found that it’s often cheaper to renegotiate contracts than it is to foreclose. And of the 9,000 homeowners who have come through the program, 2,500 have found resolutions, and 3,500 are still in the cue.

Other states, including Florida and New York, have also passed mandatory mediation laws to avoid foreclosures. The Center for American Progress, a progressive think tank, has advocated such laws throughout the country (pdf).

The judges in Philadelphia aren’t able to avoid every foreclosure, however. Rizzo told Here and Now, “I can force you to talk, I can’t force a deal.”

That may be enough, in many situations. And the Federal efforts to keep people in their homes may depend on Rizzo’s success.

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