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Business Law Today

Pro Bono in action
By William J. Woodward, Jr.
Fighting the foreclosure crisis in Philadelphia
City Hall Room 676, an enormous classical courtroom packed with housing counselors, lawyers, law clerks, and citizens facing sheriffs' sales, is ground zero in Philadelphia's "Residential Mortgage Foreclosure Diversion Pilot Program."

The program, designed to save residents' homes from foreclosure, is a unique collaboration of bench and bar begun in April 2008.

Those who created the program observed that, often, the mortgagor and mortgagee did not speak to one another prior to the sheriff's sale. Since foreclosure inevitably results in avoidable losses for both mortgagor and mortgagee, there were powerful economic incentives to negotiation. The goal, therefore, was to make a negotiation happen and, in the process, uncover various federal, state, and local programs that could help.

Using its case management powers, the Philadelphia Court of Common Pleas ordered that all mortgagees seeking foreclosure of owner-occupied residential mortgages participate in a conciliation conference before proceeding to a sheriff's sale. It was here that the pro bono bar stepped up and became the engine for this program.

First, they serve as court-appointed judges pro tem, experienced lawyers who understand mortgage foreclosure and finance, many of whom are trained as mediators. A judge pro tem acts as a mediator in the conciliation conferences that seem intractable. Volunteer lawyers also serve, through Philadelphia's Volunteers for Indigent Persons and the Philadelphia Bar Association, as lawyers representing homeowners attempting to negotiate with their lenders. Lawyers in this capacity volunteer a morning or an afternoon and are on call for qualifying clients who arrive in Room 676 for their conferences.

John Thomas and Vera Rivera (changed names) arrived in Room 676 at about 2:00 p.m. Their adjustable mortgage balance was approximately $40,000 more than the value of their modest house, and they had not made a payment on their mortgage in 16 months. Their efforts to contact the lender had been rebuffed and they were now facing a sheriff's sale shortly after the New Year. It turned out that they both had lost their jobs about 18 months ago and were out of work for over a year. Both were reemployed now, with income that, with some changes in their mortgage, might permit them to stay in their home.

Volunteer lawyers are trained to attempt a durable solution for mortgagors; this involves a focus on the client's ability to generate sufficient cash flow to permanently sustain the mortgage payments. Neither the lender nor the housing counselor (who works up the numbers with the clients) had the information for this couple—this was the first contact among these parties. The clients agreed to deliver the financial information the following day; volunteer lawyer, bank lawyer, and housing counselor agreed to attempt, later in December, to negotiate a settlement that the clients could sustain. It was unclear how flexible the lender would be. It was also unclear whether the clients should stay in their home. They were not in love with their house; whether it was sensible to stay or go would depend on the negotiations.

Thomas and Rivera are nearly ideal candidates for the program. A temporary income setback got them into trouble. They may have adequate income to get out of it. Without the program, it's virtually certain they would have lost their house in January; now they have a chance at a different outcome. At least as important, they have encountered a less-callous legal system than the one that existed before the program. This unique collaboration of the bench and bar is making a real difference in the foreclosure crisis, and in the regard that Philadelphia citizens have for lawyers and their legal system. It represents best traditions of pro bono publico.
Woodward is a professor of law at Temple University Beasley School of Law in Philadelphia. His e-mail is william.woodward@temple.edu.

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