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Testimony on DHCD's Year 43 Preliminary Consolidated Plan

Homeownership and Consumer

Testimony on DHCD's Year 43 Preliminary Consolidated Plan

Date Posted: 

The following testimony was delivered by CLS Managing Attorney Michael R. Froehlich to the Division of Housing and Community Development (DHCD) on February 7, 2017.

Community Legal Services (CLS) is pleased to continue our many years of partnership with the Division of Housing and Community Development (DHCD) to preserve homeownership for low-income Philadelphians.  As DHCD puts together its Year 43 Consolidated Plan, we urge the Department to renew its commitment to foreclosure prevention as a means to prevent homelessness and, in addition, expand its work into the critical need for eviction prevention.

Through its current contract with DHCD, CLS provides one-on-one consultation for housing counselors; accepts referrals of cases from housing counselors for legal representation; and provides training for counselors on a full range of foreclosure-related topics by legal advocates known nationally for their expertise.  The CLS foreclosure defense program is closely coordinated with the Save Your Home Philly Hotline and the Mortgage Foreclosure Diversion Program, as well as the DHCD housing counselor network.

The advanced ties between CLS lawyers and DHCD officials and housing counselors, built through years of joint advocacy, trainings, and legal representation, put Philadelphia at the forefront of this issue and was essential for the creation of the Court’s Mortgage Foreclosure Diversion Program.  Our partnership has helped save the homes of over 11,000 Philadelphia residents, and we are very grateful to continue this relationship.

While the number of residential mortgage foreclosures filed last year is down from the peak in 2009, approximately 350 residential mortgage foreclosures are still filed every month.  In addition, over 100 tax foreclosure cases are initiated each month against owner-occupied homes.

With a renewed foreclosure prevention contract, CLS expects to continue to represent over 250 homeowners each year referred by housing counselors, the Save Your Home Philly Hotline, and the Foreclosure Diversion Program.  CLS will also continue to train and advise housing counselors on the foreclosure diversion process, opportunities to modify delinquent mortgage loans to save homes, and on other issues in representing homeowners in foreclosure at formal training events and at meetings hosted by DHCD.

I wanted to take this opportunity to highlight a few of the issues that face homeowners in 2017-2018.

First, the federal Home Affordable Modification Program (HAMP) stopped accepting new applications at the end of 2016.  In the Philadelphia Metropolitan Statistical Area, HAMP was directly responsible for 32,895 permanent mortgage loan modifications as of the third quarter 2016 with a median mortgage payment reduction of $388 per month.  In 2017, mortgages ensured by the Federal Housing Agency (FHA) will continue to be eligible for FHA-HAMP, and mortgages owned by Fannie Mae and Freddie Mac will be eligible for a new loan modification program called Flex Mod.  Other mortgages may be eligible for other loan modifications under the industry’s proposed One Mod program.  CLS will continue to work with housing counsellors and others to ensure that new loan modification programs are effective and uniformly available to homeowners.

Second, CLS will continue to represent low-income homeowners facing tax foreclosure sales and advocate with the City and the Courts for improved procedures for homeowners to enter payment plans and save their homes.  Five years ago, delinquent property taxes were the ninth most common issue for which individuals came to our North Philadelphia office seeking legal representation.  In 2016, legal issues surrounding delinquent property taxes has become THE most common issue.  CLS has responded by hiring two additional attorney fellows to represent these individuals and meets frequently with the City, the Courts, and other stakeholders to collaborate on ways to help these homeowners.  As a result of these efforts, later this Spring, we anticipate the creation of a Court program to provide more individualized assistance to these homeowners facing the loss of their homes due to delinquent property taxes.

Third, CLS has seen a spike in the number of homeowners with reverse mortgages facing foreclosures.  In the coming year, CLS will continue to represent homeowners in court to obtain repayment agreements on delinquent taxes and insurance and file chapter 13 bankruptcy petitions to reorganize debts.  We will also work with our allies in other legal services programs, housing counselling agencies, and City Council to improve how delinquent taxes are treated by reverse mortgage servicers.

In addition to addressing the critical need for foreclosure prevention as a measure for preventing homelessness by keeping people in their homes, CLS urges DHCD to consider the equally critical need for eviction prevention in its Year 43 Consolidated Plan.  Forty-eight percent of homes in Philadelphia are occupied by renters. Each year, an average of 30,000 households face adverse actions related to their rental housing, including lockouts and other forms of illegal eviction.  Most of these tenants are low income and lack the resources to hire legal counsel, which can keep people in their homes, or at least buy them enough time to find somewhere else to live. Due to lack of resources and capacity, the 5-6 attorneys who do provide pro bono or low cost tenant representation to low-income Philadelphians are often unable to meet the volume of need. Of the average 30,000 eviction actions filed in Municipal court each year, about 90% of landlords have legal counsel, while only 8% of tenants are represented. Unrepresented tenants are often unable to navigate the complex legal system because of illiteracy, language barriers, disability, mental health, and other challenges. Philadelphia Municipal Court data indicate that tenants with attorneys are far less likely to be evicted. Attorneys help tenants navigate the court process, negotiate agreements to stay or time to move, and in some cases, can negotiate rental agreements that can fit a tenant’s budget.  

Investing in eviction prevention, including an increase in rental assistance funds and ensuring a right to counsel for tenants, is cost effective and is the one of the best measures to prevent evictions, housing instability, and homelessness. 

We seek DHCD support and funding support to expand innovative models of right to counsel such as the Philadelphia Landlord/Tenant Help Center Collaborative.  Landlord-Tenant Help Center is a partnership of leaders of the legal services community, pro bono leaders, and the judiciary formed to address the crisis of lack of access to counsel in landlord-tenant court, which has enormous impact on low-income individuals and families and their basic need of shelter. Members of the collaborative include Philadelphia Legal Assistance, Regional Housing Legal Services, SeniorLAW Center, TURN, VIP, Community Legal Services, pro bono leaders from Dechert LLP and other area law firms who volunteer their time. The collaborative has developed and launched the Legal Help Center, a unique court-based model of legal advice, education and referrals to limited representation services. Such efforts could benefit from funding that expands access to counsel and other legal services.  An expansion of access to counsel could include the creation of an eviction diversion program, which would create a mechanism that allows landlords and tenants to resolve back rent issues without a credit-damaging judgment.

We look forward to continuing the dynamic, productive foreclosure prevention partnership between DHCD and CLS in the year ahead.