One of the reasons why the Obama administration’s government foreclosure prevention program has not been helping as many distressed homeowners as expected is the voluntary nature of mortgage lenders’ participation.

Even if the Making Home Affordable program offers cash incentives to lenders and servicers to modify loans, the loans are not modified if the lenders or servicers choose not to participate in the program. There is no law that requires them to modify the loans.

So the mayors of Los Angeles, New York, Philadelphia, Miami, Saint Louis and other cities have been working with the national nonprofit Association of Community Organizations for Reform Now (ACORN) to learn from Philadelphia’s city mandatory settlement program.

According to Bertha Lewis, CEO of ACORN, Philadelphia’s government foreclosure prevention program, which uses mandatory mediation as its main armor, has helped save the houses of about 78 percent of distressed homeowners who participated in the program.

Lewis explained that Philadelphia’s government foreclosure prevention program works because it is mandatory in nature. Mortgage lenders are required to first participate in a court-supervised mediation session to work out an affordable repayment scheme with borrowers before filing a foreclosure action.

Aside from mandatory mediation, the program also uses community outreach, housing counselors and fair valuation methods to carry out the program. It is also supported by other local agencies such as the Philadelphia Unemployment Project, Community Legal Services and the office of Mayor Michael Nutter.

The program uses funds from the city and money raised from private donors.

Mayors wish that funds from the Neighborhood Stabilization Program could be used to help fund local government foreclosure prevention programs, but unfortunately, they are not allowed to divert NSP funds.

NSP funds were designed to help rehabilitate foreclosure-battered neighborhoods by buying foreclosure properties, fixing them and selling them to low-income families.

The Senate, through Senators Bob Casey and Kirsten Gillibrand, tried to amend the NSP rules so that cities can use NSP funds for their own government foreclosure prevention programs, but House legislators did not approve the amendment.

ACORN has been helping mayors to urge their state legislators to pass laws that require mortgage lenders to participate in mandatory settlement sessions with troubled homeowners. It has been promoting Philadelphia’s mandatory mediation program which it helped implement.

Next year and the following year, more foreclosures are expected because of the scheduled adjustment of adjustable-rate home loans. A mandatory government foreclosure prevention program is needed to help the federal program more effective in preventing foreclosures.