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Philadelphia program fights mortgage foreclosure
PHILADELPHIA (Reuters) - The city of Philadelphia on Wednesday unveiled a plan to stop people losing their homes through mortgage foreclosure as more borrowers struggle to meet higher payments under adjustable-rate subprime loans.
The plan, which officials said is the first U.S. municipal program of its kind, requires houses put up for sheriff's sale to be referred to city officials who would work with lenders with the aim of restructuring the loan so the borrower can stay in the property.
City Sheriff John Green, whose office sells foreclosed properties, has delayed sales that had been scheduled for April and May until July to give borrowers time to negotiate with lenders. Of about 1,200 properties that were due for sale in April and May, 800 are owner-occupied, said Ian Phillips of the housing advocacy group Acorn.
The number of foreclosure filings in Philadelphia rose 18 percent to 6,237 in 2007, and is expected to increase further to about 8,500 this year, officials said.
Thousands of U.S. home owners with loans made to those with distressed credit histories have been hit with sharply higher mortgage payments in the last two years as low introductory rates expire, forcing some out of their homes.
In the fourth quarter of 2007, the proportion of mortgage loans in the foreclosure process was 2.04 percent, its highest-ever rate, according to the Mortgage Bankers Association, which is scheduled to release first-quarter 2008 figures on Thursday.
Adjustable-rate subprime loans accounted for 7 percent of all mortgages but 42 percent of foreclosures started in the fourth quarter, the MBA said.
Philadelphia Mayor Michael Nutter said the program, which has attracted $2 million in city funding, is designed to stop payment problems before they reach the point of foreclosure, and urged people to come forward before they get a foreclosure letter from their lender.
"The issue of mortgage foreclosure is a crisis not only in Philadelphia but across the country," Nutter said.
The Mortgage Bankers Association did not immediately return a phone call seeking comment.
(Editing by Daniel Trotta and Eric Walsh)
