(Source: co.lancaster.pa.us)
(Source: co.lancaster.pa.us)

The federal eviction moratorium isn't the only protection scheduled to expire this Saturday, July 31: A federal foreclosure moratorium is to expire as well.

That's expected to bring a wave of foreclosure filings, here and nationwide.

In response, Lancaster County's court system is launching a Residential Mortgage Foreclosure Diversion Program.

The goal is to bring lenders to the table, "to make sure that homeowners have every opportunity to work out foreclosure in a way that's beneficial to them," Matt Lazarus said.

Matt Lazarus

Lazarus, an experienced bankruptcy and foreclosure attorney, joined the county in mid-June as the diversion program's coordinator.

The plan is outlined in a June 1 administrative order signed by President Judge David Ashworth.

It's based on existing programs in other Pennsylvania counties, said Todd Capitao, director of financial empowerment at Tenfold. The nonprofit is a certified housing counseling agency and is working with the court system to implement the program.

"We've been doing this for quite a while," Capitao said.

Todd Capitao

Back in the late 1980s, Capitao said, Tenfold's predecessor organization, Tabor Community Services, was already helping homeowners work out payment plans as an alternative to foreclosure. The nonprofit was a "key part" of the response to the county's foreclosure crisis after the 2008 recession.

But homeowners' outcomes have varied dramatically depending on how willing mortgage holders were willing to make accommodations. The diversion program's structure should help to create a more level playing field, Capitao said.

Ashworth's order formalizes the process and sets clear, enforceable expectations on both parties, "which I think is helpful," he said.

Roughly 500 foreclosures were filed in Lancaster County in 2019, Lazarus said. Due to the moratorium, they dropped off dramatically in 2020 and 2021.

The coming surge "will require the expenditure of substantial Court resources and will have dire consequences for the homeowners" Ashworth said in his order — repercussions the diversion program is intended to ameliorate.

Here's how it will work. Foreclosures filed on or after Aug. 1 that meet certain criteria will automatically be enrolled in the program. Homeowners in ongoing foreclosure proceedings initiated before then who are otherwise eligible must be notified of that fact and can apply to be included.

Who's eligible?

Homeowners must meet the following criteria for Lancaster County's Residential Mortgage Foreclosure Diversion program:

  • Foreclosure filed on or after Aug. 1, 2021;
  • Property owner-occupied and is the homeowner's primary residence;
  • Property comprises no more than 4 dwelling units;
  • Remaining debt is less than $400,000.

The court will then place a hold on the foreclosure, schedule a "conciliation conference" and direct the homeowner to attend a housing counseling session with Tenfold in the meantime.

Tenfold will work with the homeowner to prepare a budget and proposed payment plan. Common options for easing the financial burden include lower interest rates and extended payment periods, Capitao said.

Some mortgage holders may be eligible for assistance through the Pennsylvania Housing Finance Authority, which operates the Homeowners' Emergency Mortgage Assistance Program.

The homeowner and lender then negotiate. If they can't reach agreement, the next step is the conciliation conference, at which the lender, homeowner and counselor meet in person, with a neutral third party as moderator.

Ordinarily, resolution should take no more than 160 days. If the mortgage holder delays without good cause, the court has the option of dismissing the foreclosure; if homeowners delay, they can be expelled from the program, returning them to the normal foreclosure litigation process.

In general, "sanctions may be imposed by the Court at any time for lack of good faith participation and/or noncompliance with any aspect of the Foreclosure Diversion Program by any party," Ashworth's order says.

The program should end up benefiting all parties, Capitao and Lazarus said. Primarily, it's a win for homeowners, who will have a better chance of keeping their homes. But mortgage holders benefit, too: They are more likely to be paid in full. If homeowners have no reasonable chance of paying and have to vacate, the parties can work to minimize the legal and financial repercussions.

And of course, every foreclosure resolved outside the conventional process reduces the burden on the court system.

Judge Jeffery Wright is overseeing the program. Lazarus has been collaborating with Wright and two members of his staff. The program had been in development for "months and months" before he came on board, Lazarus said.

Besides Tenfold, partners include the Lancaster Bar Association, Mid Penn Legal Services and BASE Inc., another local certified counseling service that will be assisting Tenfold.

For lenders, participation in the diversion program is mandatory. Homeowners can opt out, but Lazarus said he doesn't see why a homeowner would.  No matter what your desired outcome is, the program should be able to help, he said.

Tim Stuhldreher