WHAT IS THE PHILADELPHIA MODEL FOR SAVING MORTGAGES?

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How You Can Save Your Home
Based on Philadelphia’s Bailout Model

People who are in jeopardy of home foreclosure need to look no further than Philadelphia’s model for help. Based on Philadelphia’s Mortgage Foreclosure Protection Program (MFPP), the federal government has modeled a program within the recent mortgage bailout after the MFPP to allow the courts to step in and help negotiate mortgage solutions between lenders and homeowners.

How the Bailout Worked in Philadelphia

The MFPP was passed in 2008 with the help of Mayor Michael Nutter in the hopes of presenting initiative to prevent the mass of foreclosures that were being experienced in the city. It was a plan to use Philadelphia attorneys to promote discussions between lenders and homeowners in default. Ultimately, the goal was to have two parties stand before a local judge to determine whether a mortgage workout could be completed.

An important item in the MFPP was to require all residential homes in foreclosure and nearing a sheriff’s auction to stop immediate foreclosure and be considered for a loan modification. Using $2 million in funds earmarked for the program, over 100 Philadelphia attorneys offering their services pro bono were trained to find ways that could allow homeowners to keep their homes without foreclosure. With attorney and judicial mediation, either a mortgage modification or a “graceful exit” was determined to be the best course. A graceful exit was the last resort where a borrower agreed to walk away and allow a smooth foreclosure.

The Success of the Philadelphia Mortgage Plan

How did Philadelphia’s plan work? With the help of the judge and attorneys working on a case-by-case basis, 75% to 80% of homeowners were able to arrange new mortgage terms to allow them to keep their homes. About 20% of homeowners still were unable to find an ultimate solution due to income or credit issues, but the plan did allow for a smooth foreclosure process.

Obama’s Plan is Inspired by the City of Brotherly Love

The figures were successful enough to gain favor from then President-Elect Obama in December 2008 when Mayor Nutter approached him about their plan in a governor’s convention. The Obama economic team looked at the details of the plan and agreed that the courts were a cheap and reasonable solution for working out mortgage foreclosure issues and reducing the numbers of foreclosure in America. In addition to the federal judicial plan, other cities and states have modeled similar programs in Boston, Chicago, Pittsburgh, and New Jersey.

How You can Benefit from the New Bailout Plan

Using the mortgage bailout plan signed into law with the economic stimulus package in February 2009, President Obama hopes to reduce the percentage of American homes going into certain foreclosure. Homeowners can now contact the newly created federal mortgage help center and see if they qualify for judicial intervention. If a homeowner qualifies, representatives will set up meetings between lender and borrower to find a way to restructure the mortgage to prevent foreclosure. Through financial incentives, many lenders may find they are more receptive to restructuring a mortgage through judicial mediation.

If you are an American who is two and three months, or possibly even longer, behind on your mortgage payment and your lender is not working with you to prevent foreclosure, you may be eligible for federal help to keep your home.

This article is intended for general information. Always seek sound financial and legal advice before making any financial decision.

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