Hearings on Statewide Foreclosure Conciliation Legislation Are Being Held By State House Committee.

Posted By Cliff Tuttle | August 24, 2009

Posted by Cliff Tuttle (c) 2009

The Pittsburgh Post Gazette reported that hearings are being conducted by the Pennsylvania House Commerce Committee on HB 1042, sponsored by Rep. Michael McGeehan of Philadelphia, which would mandate Courts of Common Pleas in every County to establish conciliation programs which would attempt to resolve mortgage foreclosures before they could proceed in court.

Called “mortgage foreclosure diversion programs”, Philadelphia introduced the first in the State in mid-2008. It created special masters to mediate cases and appointed volunteer attorneys to represent delinquent borrowers. Allegheny County followed suit with a similar program in early 2009, mediated by judges. Washington County adopted a much more limited diversion program, establishing an initial moratorium but without formal mediation by either special masters or judges.

There are good reasons why such mediations should take place. This recession is quite different than those of another generation where the sole wage earner lost a factory job that was never replaced. Today, with two income families and a volatile economy, temporary income interruptions are more common. However, by the time the full family income has been restored, foreclosure may have already begun, with the lender accepting no further payment but an amount to bring the loan current. A large percentage of homeowners in foreclosure have income sufficient to participate in an effective workout, one that would bring the mortgage current within a reasonable period of time. However, they are unable to bring the mortgage current in one payment. While programs such as the federally-sponsored “Hope” have led to some modifications, there is an obvious need for an independent mediator, due to the disparity of bargaining power.

Borrowers with substantial equity in their property, who may have paid regularly for many years, are frequently being given the same modification terms under lender plans as persons with no equity or negative equity. It is unjust for such borrowers to lose their life’s investment, as well as their long time home, when they are willing and able to make substantial payments over the mortgage amount which could cure the arrearage over a reasonable time. While Chapter 13 Bankruptcy has been the traditional way to address this problem, there are barriers to entering bankruptcy which may prevent or delay many from taking this avenue.

It make sense legal and economic to extend court-sponsored mediation to mortgage foreclosures.

CLT

Welcome

CLIFF TUTTLE has been a Pennsylvania lawyer for over 45 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

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