[Congressional Record (Bound Edition), Volume 155 (2009), Part 21]
[Senate]
[Pages 28355-28357]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              FORECLOSURES

  Mr. SPECTER. Mr. President, while I have the floor, I wish to briefly 
address one other subject. I know my colleague is on the floor waiting 
for an opportunity to speak. This relates to a plan which is being 
carried on in the city of Philadelphia to stop foreclosures. We have 
seen a tremendous problem across America with the housing bubble, with 
so many people being in houses they could not afford and so many 
foreclosures. The Philadelphia program received front-page attention in 
the New York Times just yesterday as a model program. I call the 
Philadelphia program to the attention of my colleagues and to anyone 
who may be watching C-SPAN2, a program which is a model and which ought 
to be followed in other jurisdictions.
  In March of 2008, the Philadelphia City Council passed a resolution 
called the Residential Mortgage Foreclosure Diversion Pilot Program. 
Following the council resolution, Philadelphia's civil court adopted 
rules that no owner-occupied house could be foreclosed on or sold at 
sheriff's sale before a mandatory conciliation conference between the 
borrower and lender aimed at finding a workable compromise. This 
Philadelphia program has emerged as a model, enabling hundreds of 
troubled home buyers to retain their homes.
  In October of last year, a little more than a year ago, Senator Casey 
and I held field hearings in Philadelphia and Pittsburgh to explore 
ways to keep borrowers in their homes using the successful Philadelphia 
program model.
  I ask unanimous consent that at the conclusion of these remarks, a 
copy of the New York Times article be printed in full in the Record 
which details the Philadelphia program and is a suggestion for other 
cities as to how to follow that.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                [From the New York Times, Nov. 18, 2009]

            Philadelphia Gives Homeowners a Way To Stay Put

                         (By Peter S. Goodman)

       Philadelphia.--Christopher Hall stepped tentatively through 
     the entranceway of City Hall Courtroom 676 and took his place 
     among dozens of others confronting foreclosure purgatory. His 
     hopes all but extinguished, he fully expected the morning to 
     end with a final indignity: He would sign over the deed to 
     his house--his grandfather's two-story row house; the only 
     house in which he had ever lived; the house where he had 
     raised three children.
       ``This is devastating,'' he said last month as he sat in 
     the gallery awaiting his hearing. ``This is my childhood 
     home. I grew up there. My mother passed away there. My 
     grandfather passed away there. All of my memories are 
     there.''
       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 
     sheriffs office.
       In most American cities, that probably would have been the 
     end of the story: another home turned into distressed bank 
     inventory by the national foreclosure crisis. But in 
     Philadelphia, under a program begun last year to try to keep 
     people in their homes, Mr. Hall entered the courtroom with a 
     reasonable chance of hanging on.
       Under the rules adopted by Philadelphia's primary civil 
     court, no owner-occupied house may be foreclosed on and sold 
     by the sheriffs office before a ``conciliation conference,'' 
     a face-to-face meeting between the homeowner and the lender 
     aimed at striking a workable compromise. Every homeowner 
     facing a default filing is furnished with counseling, and 
     sometimes legal representation.
       So, as Mr. Hall stepped into the ornate courtroom just 
     after 9 o'clock, he was swiftly provided with a volunteer 
     lawyer, Kristine A. Phillips. She huddled briefly with a 
     lawyer for Bank of America and returned with a useful 
     promise. The bank would leave him alone for six more weeks 
     while his housing counselor pursued further negotiations in 
     an attempt to lower his payments permanently.
       ``You've got more time,'' Ms. Phillips told him. ``We'll 
     get this all worked out,'' she said.
       ``Thank you so much,'' Mr. Hall said softly, his body 
     shaking with pent-up anxiety now tinged with relief. ``It's a 
     lot of weight off of my shoulders.''
       In a nation confronting a still-gathering crisis of 
     foreclosure, Philadelphia's program has emerged as a model 
     that has enabled hundreds of troubled borrowers to retain 
     their homes. Other cities, from Pittsburgh to Chicago to 
     Louisville, have examined the program and adopted similar 
     efforts.
       ``It brings the mortgage holder and the lender to the 
     table,'' said City Councilor John M. Tobin Jr. of Boston, who 
     is planning to introduce legislation to enact a program in 
     his city modeled on Philadelphia's. ``When people are face to 
     face, it can be pretty disarming.''
       When homeowners in Philadelphia receive legal default 
     notices from their mortgage

[[Page 28356]]

     companies, the court system schedules a conciliation hearing. 
     Canvassers working for local nonprofit agencies visit 
     foreclosed homeowners, distributing fliers that inform them 
     of their rights to a conference, and urging them to call a 
     hot line that can direct them to free housing counselors.
       ``You can feel a certain sense of relief from their just 
     being able to speak to someone about the program,'' said Anna 
     Hargrove, who works as a canvasser in West Philadelphia.
       Every Thursday morning, the courtroom on the sixth floor of 
     the regal City Hall here is given over to the conciliation 
     conferences. It fills up with volunteer lawyers in jogging 
     shoes, who are representing homeowners; gray-suited corporate 
     lawyers working for mortgage companies; and all variety of 
     delinquent borrowers--elderly citizens leaning on canes, 
     construction workers in coveralls, parents with bored 
     children in tow. The lawyers exchange preliminary settlement 
     terms, while the homeowners fill out papers and wait.
       In some cases, deals are struck that lower monthly payments 
     for borrowers and allow them to retain their homes. When a 
     homeowner cannot afford the home even at modified terms, the 
     program helps to create a graceful exit, in which the 
     borrower accepts cash for vacating the property or signs over 
     the deed in lieu of further payment.
       Those outcomes are similar to the ones produced by the 
     Obama administration's $75 billion program aimed at stemming 
     foreclosures, which gives cash subsidies to mortgage 
     companies as an inducement to accept lower payments. But in 
     Philadelphia there is one crucial difference: the mortgage 
     companies have no choice but to participate. They have to 
     attend the conferences and negotiate in good faith or they 
     cannot proceed with a sheriffs sale.
       Since the administration's program was begun in March, it 
     has been plagued by complaints of bureaucratic confusion and 
     the indifference of mortgage companies. Many homeowners who 
     have applied for loan modifications complain that their 
     documents have been lost repeatedly or that they have been 
     rejected without explanation.


                           Right to Mediation

       The Philadelphia program forces an outcome 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 finds that the 
     mortgage company is not acting in good faith, she can hold 
     the house in limbo by denying permission for a sheriffs sale.
       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. The 
     remaining 21 cases were divided among bankruptcies, loan 
     forbearance and repayment arrangements, graceful exits and 
     straightforward sales.
       Some suggest the city's program is plagued by the same 
     basic defect as the Obama rescue plan: Nearly all the loans 
     that have been modified have been altered on a trial basis, 
     requiring homeowners to reapply for an extension of the terms 
     after only a few months--a process that appears rife with 
     obstacles, according to participants.
       ``There's no teeth to the conciliation program,'' said 
     Matthew B. Weisberg, a Philadelphia lawyer who represents 
     homeowners in cases involving alleged mortgage fraud. ``It's 
     a largely ineffective stopgap prolonging what appears to be 
     the inevitable, which is the loss of homes.''
       Still, Mr. Weisberg grudgingly praised the plan.
       ``It's arbitrary and unpredictable,'' he said, ``but it's 
     better than what anybody else is doing.''


                         Sheriff Delays Auction

       Philadelphia's Residential Mortgage Foreclosure Diversion 
     Pilot Program began with a resolution passed by the City 
     Council in March 2008, calling on Sheriff John D. Green to 
     scrap the sheriff's sale scheduled for April. Low-income 
     neighborhoods were already experiencing a surge of 
     foreclosures involving subprime loans given to people with 
     tainted credit. With unemployment growing, lost paychecks 
     were now pushing people into delinquency, reaching into 
     middle-class and even wealthy neighborhoods. In early 2008, 
     nearly 200 homes a month were being auctioned by the 
     sheriff's office, about one-third more than in 2006.
       In West Philadelphia, Councilman Curtis Jones Jr., one of 
     the sponsors of the resolution, watched his childhood 
     neighborhood consumed by foreclosure, as the homes of working 
     families--their porches once lined with flower pots--were 
     boarded up with plywood.
       ``It becomes a blight on your entire community,'' Mr. Jones 
     said. ``It creates an environment that fosters everything 
     bad, from prostitution to drug dealing to wildlife, like 
     raccoons taking over whole houses. One house becomes 10, and 
     10 becomes the whole block.''
       In response to the resolution, Sheriff Green canceled the 
     April sale. Meanwhile, Judge Annette M. Rizzo, who oversaw a 
     local task force on stemming foreclosures, joined with the 
     president judge of Philadelphia's Court of Common Pleas to 
     develop the program.
       For Judge Rizzo, a high-energy woman who has long taken an 
     interest in housing policy, the moratorium presented both a 
     crisis and an opportunity. The sheriff was effectively 
     refusing to fulfill his mandated responsibilities, leaving 
     his office vulnerable to legal challenge. But if the mortgage 
     companies could be persuaded to participate in an alternative 
     way of addressing foreclosures, more people could stay in 
     their homes.
       ``I realized we're either going to go down in flames or 
     we're going to be a national model,'' Judge Rizzo said. 
     ``We're going to look at these cases and see what we can work 
     out.''
       Mr. Hall knew none of this. What he knew was that his life 
     seemed to be unraveling.


                        Home to Four Generations

       Ever since he was a teenager, he had earned a middle-class 
     living with his hands. He had been raised by his grandfather 
     in his three-bedroom house on Akron Street, in a 
     predominantly Irish Catholic working-class neighborhood in 
     Northeast Philadelphia.
       He had attended St. Martin's, the Catholic school around 
     the corner, married his childhood sweetheart and still 
     remained in his grandfather's house, sending his own 
     children--two boys (now in their 20s) and a 12-year-old 
     girl--to the same school.
       Mr. Hall, a soft-spoken yet intense man with a silver-
     tinged goatee, had worked seven days a week for much of this 
     decade, bringing home weekly pay of about $1,000--enough to 
     build a deck in his backyard; enough to obtain a fixed-rate 
     mortgage and buy the house for $44,000 when his grandfather 
     succumbed to Alzheimer's disease in the mid-1990s; enough for 
     a motorcycle and a boat.
       But three years ago, Mr. Hall committed the sort of mistake 
     that has upended millions of households. At the 
     recommendation of a for-profit credit counselor, he took out 
     a new mortgage--a variable-rate loan from Countrywide 
     Financial, which is now owned by Bank of America. He paid off 
     some credit card debt, and he borrowed an extra $15,000 to 
     renovate his home, expanding his mortgage balance to $63,000.
       The loan began with manageable payments of about $500 a 
     month. But Mr. Hall's interest rate soon soared--something he 
     says was never explained to him--lifting his payments to $950 
     a month.
       ``When I got the mortgage, I didn't really understand it,'' 
     he said. ``They told me this would improve my credit and that 
     was it. It was just, `sign here,' and `initial here.'''


                       No More Construction Work

       He might still have managed had construction not come to a 
     halt. By 2007, Mr. Hall's employer was cutting work hours. In 
     August 2008, it shut down, turning his $1,000 weekly paycheck 
     into an $800 monthly unemployment check.
       Every day, he set the alarm clock and headed to the union 
     hall at 5 a.m., waiting and hoping for work. Every day, he 
     went home, still jobless and discouraged, now confronting the 
     displeasure of his wife, who worked as a nurse, and who he 
     said never came to terms with their diminished spending 
     power. After months of bickering, she left him last December, 
     taking their daughter.
       ``She was saying, `How are we going to have Christmas? How 
     are we going to go on vacation?''' he recalled. ``She just 
     seen it getting worse instead of better, and she got 
     depressed.''
       In January, his truck was repossessed, leaving him to walk 
     through the winter dawn to the union hall for his daily 
     ritual of defeat.
       He watched the For Sale signs proliferating on his block, 
     as mostly elderly neighbors found themselves unable to make 
     their mortgage payments. He saw their belongings piled up on 
     their front lawns as they abandoned their homes to 
     foreclosure.
       In September, the envelope finally landed with his default 
     notice. A canvasser knocked on his door, proffering a flier 
     urging him to call the city hot line. When he called, a 
     housing counselor helped him assemble the paperwork for a 
     loan modification and prepare for his conciliation 
     conference.
       When he arrived inside courtroom 676 in October, Mr. Hall 
     carried a sheaf of wrinkled papers in a white plastic grocery 
     bag. He occupied a solid wooden chair as an announcer called 
     off cases for hearing. ``Number 27, Wachovia Mortgage versus 
     . . ..'' A girl no older than 6, with flower-shaped plastic 
     barrettes in her hair, fidgeted as her mother applied for 
     legal representation.
       Mr. Hall was struggling to come to terms with what he 
     assumed was the end.
       ``I put my whole life into this house,'' he said. ``After I 
     do all this work, they want to take it from me. You've got to 
     regroup and move, but where? If I can't pay my mortgage, how 
     am I going to pay rent? And I have a whole house full of 
     furniture.''
       When he got the news that he had a few weeks' reprieve, 
     relief quickly gave way to the worry that had dominated his 
     thoughts for months.

[[Page 28357]]

       ``It's postponing the inevitable,'' he said.
       ``I'm a man,'' he kept saying, trying to make sense of how 
     a lifetime of working on other people's homes had put him 
     here, staring at the potential loss of his own home; still 
     hoping for relief.
       ``I don't want no handouts,'' he said. ``I just want a 
     reasonable loan that I can afford to pay so I can get on with 
     my life.''

  Mr. SPECTER. I thank the Chair and yield the floor.
  The PRESIDING OFFICER. The Senator from South Dakota is recognized.
  Mr. THUNE. Mr. President, I ask unanimous consent that at the 
conclusion of my remarks, the Senator from Michigan, Senator Stabenow, 
be recognized.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________