The mandatory foreclosure-diversion program was established on a trial basis in April 2008, as the number of city foreclosure filings exceeded 8,000. The program has been copied around the country.
Pennsylvania is a judicial-foreclosure state. Lenders must sue borrowers in Common Pleas Court to take possession of their homes. Once foreclosure is approved, a house is auctioned at sheriff's sale.
The diversion program, made permanent in December 2009, requires a face-to-face conciliation conference for all new foreclosure actions. Eligible homeowners, with housing counselors or legal help, meet lenders' attorneys to reach agreements to try to avert foreclosure.
Goldstein collected court orders on nearly 16,000 foreclosure cases handled from the program's start to March 2011 and interviewed homeowners and experts to verify his findings.
Of the more than 8,000 foreclosure filings recorded in each year of the program, he concluded, "the diversion program addressed 60 percent to 70 percent of them."
Of the homeowners who availed themselves of the program, 35 percent ended up with agreements with their lenders, Goldstein found. About 16 percent of what are typically the oldest cases go to sheriff's sale.
In 2007, the year before the program began, 27 percent of homeowners in foreclosure lost their homes. That fell to 14.5 percent in the six months after the program began, then to 5.7 percent thereafter, Goldstein found.
In the first year of the program, 5,000 homeowners took advantage of it, according to data released in June 2009. Of agreements reached through June 2009, 733, or 84.6 percent of 866 homeowners, remained in their homes 18 months later, he found.
Among homeowners who had not appeared for a conference, 50 percent are no longer in their homes, he said.
(Philadelphians who have received notices of foreclosure under state Act 91 can contact the SaveYourHomePhilly hotline at 215-334-4663.)
One homeowner interviewed for the study adjusted the terms of his loan through the federal Home Affordable Modification Program after five conciliation conferences. The foreclosure-diversion program "forced" his lender to talk to him, he said.
But something else this homeowner told Goldstein put a spotlight on a serious matter experienced by some borrowers facing foreclosure.
After he had exhausted his savings trying to keep up with his loan payments, the homeowner told Goldstein, he paid "an organization" $1,300 to assist him. The agency took his money and did nothing, the homeowner said.
At his first conciliation meeting in the foreclosure-diversion program, however, the homeowner was assigned to an approved counseling agency that handled his case through the successful modification free of charge.
Mortgage-modification scams are so widespread, Goldstein said, that the Reinvestment Fund, the Fair Housing Council of Suburban Philadelphia, and the Consumer Credit Counseling Service of Delaware Valley are trying "to document situations where people have used foreclosure-rescue services and the outcomes that they achieved."
Goldstein said documents would be collected at a series of public events "to gather the specifics of these potential cases for analysis and referral to appropriate law enforcement."
Contact real estate writer Alan J. Heavens at 215-854-2472, firstname.lastname@example.org, or @alheavens on Twitter.