Judge Darnell Jones anounced an innovative plan to stem foreclosures in Philadelphia Wednesday. Philadelphia homeowners will have a chance to modify the terms of sub-prime and predatory loans so that they can again afford the payments. It's a modification, not a re-finance, which means that they don't have to reapply or accrue new settlement fees. The lender simply agrees to lower the interest rates and change the terms on the existing mortgage. The deal only applies to owner-occuppied residences. It also only applies if the owner-occupant takes advantage of the court-mandated opportunity to meet with attorneys for their lender within 45 days of the foreclosure filing. If they don't, foreclosure will proceed like it always does.

In Harold Brubaker's story on the deal in yesterday's Business Section of the Inquirer, Tobi Walker of the Pew Charitable Trusts said, "This is one of the more innovative approaches we've seen."

The situation for lenders has been bad enough that they have been willing to pursue modifications with homeowners, but the process has been so cumbersome that many homeowners have still lost their homes because the foreclosure moved faster than lenders' workout staff could get through the volume of cases. Philadelphia advocates had a key insight: we have a large workforce of housing counselors available and willing to manage the lion's share of the modification process, if only the lenders would agree to give them that authority. Now, the court is requiring it.

Common Please Court has made this happen procedurally. It now simply requires lenders to give homeowners the opportunity to modify loans before permitting a foreclosure to go forward in court. There's no case or decision to look up. The court has simply changed the way it conducts the business of foreclosure.

Here's how it happened: late last year The Philadelphia Unemployment Project began calling Philadelphians holding mortgages through Countrywide. We invited them to meet as a group with our housing counselors, discuss their options as individuals and ask them to join with us as a group to press for a better deal through our Foreclosure Crisis Committee. Then, in December, the Save Our Homes Coalition convened in the PUP offices. Community Legal Services, ACORN, Philadelphia Legal Assistance and various Housing Counseling Agencies from around the city.

Meanwhile, the whole economy began teetering badly as the collective misjudgement of America's housing market by the world financial industry became apparent. Click read more to find out the rest of the story.

The issue moved quickly from there. Councilman Curtis Jones held hearings on Foreclosures in City Council Chambers in February. In March, City Council moved a resolution by Councilwoman Tasco to call a halt to foreclosures in the city, which moved the Sheriff to declare a one month moratorium on serving foreclosures. Without the legal authority to do much more than that (and a spotty record on really committing to save people's homes), advocates moved quickly to find a more reliable means to stem the loss of homes in the city.

Advocates, industry representatives and their attorneys began meeting with Presiding Judge, Darnell Jones, who understood well that Philadelphia's working class neighborhoods didn't need any more empty and boarded up houses contributing to their decay.

The deal only works for homeowners willing to take action. Homeowners in foreclosure are notoriously passive. If the message doesn't get out that they have a real opportunity to cut a better deal with their lender, they won't come to the hearings and they won't enter the process. If owner-occupants don't take action they still lose their home. Each case will still have to be worked out individually and if a family has no income, there's no guarantee that they can still save their place. That said, for homeowners who only fell behind when an adjustable rate kicked in, the news couldn't be better.

The story also points to the critical role strong, strategic organizations play. This deal only applies in Philadelphia. It won't apply in other cities because they don't have advocates well organized enough to make the case where it needs to be made. The General Assembly has been decisively indecisve about stifling-predatory lending since the first tremors of the problem were recognized around Monroe County, all the way back in the early part of the decade. And Washington? Forget it. At least for now.

Hopefully, other municipalities will look to Philadelphia's example and emulate it. While national organizations are cutting deals with big lenders and praising the Hope Now Coalition's voluntary policies, Philadelphia's organizations have taken the initiative to force lenders to exercise good sense at last.