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Foreclosure Prevention: Looking to Philly for "Graceful Exits"

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The city of Philadelphia has a new (some say innovative, some say ineffective) system to help homeowners on the verge of foreclosure, reports The New York Times. Philly's civil court adopted rules last year that declared that "no owner-occupied house may be foreclosed on and sold by the sheriff's office before a 'conciliation conference,' a face-to-face meeting between the homeowner and the lender aimed at striking a workable compromise." The law grants mortgage counseling to every homeowner in the nation's sixth largest city, and in some cases a volunteer attorney who will negotiate, one-on-one, with their lender's attorney—in some instances, leading to lowered payments, longer grace periods, and "graceful exits" should the homeowner not be able to come to the negotiated terms. Lenders' lawyers have to attend the in-person conferences and negotiate in good faith or the city will not allow a sheriff's sale to go forth. Critics say the loan modifications are usually altered on a trial basis, and in effect becomes just a delay in an inevitable foreclosure. But at least 35 Philly homeowners have already been saved from losing their homes since October 2008.

Casey Hernandez, Press Deputy for Mayor Villaraigosa, tells us in an email that Mr. V is a big fan of Philly's program and wants to bring it to LA. Hernandez says that in June Villaraigosa got on a call with other mayors to discuss mediation programs like the one in Philly. "Since that time, the Mayor's office has worked with Public Counsel, Speaker Karen Bass (as lead author) and Asms. Lieu and Nava to draft legislation. On September 10th, the legislation was introduced in the Assembly by the Speaker. In introducing the legislation, Speaker Bass also announced a series of field hearings about the legislation.This first hearing of the Assembly Banking Committee was hosted at City Hall in Oct. following a press announcement of the bill."

· Philadelphia Gives Homeowners a Chance to Stay Put [NY Times]