Philadelphia Plans To Blocks Foreclosures With Slight Of Hand

June 7, 2008

The power of the government is a wonder to behold, especially when the actions of said government invokes the law of unintended consequences.

The city of Philadelphia is about to launch a new plan to help those facing foreclosure. Instead of the sheriff auctioning off the properties as charged to by law, the city sheriff will refer the homes to local bureaucrats to renegotiate the terms with the lenders for a few more months.

Can you imagine working in a mortgage office as a highly motivated city employee calls you to tell you the auction of the foreclosed home is on hold and they want new terms for the borrowers who is already in a default position? What do you do?

Obviously this official has no standing in the matter nor can you divulge private information to them without breaking a myriad of privacy laws. So if you do negotiate with them you will need releases. And then any agreement reached with the nameless bureaucrat would need to be signed off with their boss and then the homeowner (not to mention your boss and bosses boss).

So what we do have is a government meddling to look good, cause more trouble for lenders in the city, and potentially raise rates for other borrowers to cover the hassle factor added by the city.

You have got to love the mind of a politician. Of course, Councilman Smith’s cousin Eddie just got hired to make the phone calls to the mortgage companies, so it is not all bad.

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. via Reuters.