Philadelphia’s Loan Diversion Program demonstrates pro-bono counsel is important in avoiding home foreclosures
Washington, D.C. — Senators Arlen Specter and Bob Casey today wrote to the Chairman of the Federal Reserve Ben Bernanke asking that he continue his efforts to keep families in their homes by making banks’ counsel available to individuals facing home foreclosure.
The Senators recently held field hearings in Philadelphia and Pittsburgh to examine home foreclosure prevention programs. During the hearings, the Senators heard testimony on a promising program in Philadelphia which requires lenders to meet with borrowers facing foreclosure in a court-ordered conciliation conference before a sheriff sale can occur. One key to the program’s success is the pro-bono attorneys who guide homeowners through the negotiation process.
“We request that you ask all banks involved in residential mortgage lending -- especially those receiving funds from the $700 billion economic rescue package -- to not only allow, but to encourage their outside counsel to participate in pro bono opportunities to negotiate mortgage loan work-outs nationwide, and particularly in the Philadelphia Diversion Program,” the Senators wrote.
By way of example, the Senators noted that the New York Federal Reserve recently encouraged banks to allow counsel to participate in the New York City Bar Association mortgage foreclosure pro bono project.
Inspired by the success of Philadelphia’s program, on Monday Senator Specter introduced the Foreclosure Diversion and Residential Mortgage Loan Modification Act of 2008. The legislation creates a foreclosure evaluation office within the Department of the Treasury that would coordinate and assist foreclosure prevention efforts at the federal, state and local level, and work with courts, government agencies and community-based nonprofit organizations. The new office would run public awareness programs to inform homeowners about free counseling and legal services available to them.
In August, Senator Casey hosted a roundtable discussion on foreclosure prevention programs in Philadelphia. At the event, Senator Casey highlighted the success of the Residential Mortgage Foreclosure Diversion Pilot Program in the City of Philadelphia and introduced the program to officials and advocates from Philadelphia, Allegheny, Lackawanna, Montgomery and Lehigh Counties.
A copy of the Senators’ letter is below. A pdf version is attached:
November 19, 2008
Ben S. Bernanke
Chairman, Board of Governors of the Federal Reserve System
Dear Chairman Bernanke:
On October 17 and 24, 2008, the Senate Judiciary Committee held field hearings in Pittsburgh and Philadelphia, respectively, to discuss foreclosure prevention. We heard testimony regarding a promising program in Philadelphia called the Residential Mortgage Foreclosure Pilot Diversion Program.
The Diversion Program requires lenders to meet with borrowers facing foreclosure in a court-ordered Conciliation Conference before a Sheriff Sale can occur. The Diversion Program has prevented or delayed foreclosure in nearly 80 percent of the 552 cases in this program between June and September.
Access to pro bono attorneys for homeowners is critical to the success of the Diversion Program. Philadelphia VIP, the nonprofit agency that recruits, trains and provides pro bono lawyers to represent low-income homeowners in the Diversion Program, testified that they need more volunteer attorneys due to the overwhelming demand for assistance. However, attorneys at many law firms are unable to participate because of their firms’ conflicts of interests with lenders.
The New York Federal Reserve recently asked ten banks to provide conflict waivers to their outside counsel to allow them to participate in a New York City Bar Association mortgage foreclosure pro bono project. Five of the banks agreed and sent their firms conflict waivers. Unfortunately, the waivers are only for the New York City pro bono project.
We request that you ask all banks involved in residential mortgage lending -- especially those receiving funds from the $700 billion economic rescue package -- to not only allow, but to encourage their outside counsel to participate in pro bono opportunities to negotiate mortgage loan work-outs nationwide, and particularly in the Philadelphia Diversion Program. We note that lenders attorneys testified in support of the program at the Senate Judiciary Committee hearings.
We look forward to your response to this request.
Sincerely,
Arlen Specter Bob Casey
