Committee Hearing, February 17, 2011

COUNCIL OF THE CITY OF PHILADELPHIA2 COMMITTEE ON HOUSING, NEIGHBORHOOD3 DEVELOPMENT AND THE HOMELESS4 5 6 Room 400, City Hall7 Philadelphia, Pennsylvania Thursday, February 17, 20118 1:10 p.m. 9 10 PRESENT: COUNCILWOMAN JANNIE BLACKWELL, CHAIR11 COUNCILMAN FRANK DiCICCO COUNCILMAN WILLIAM K. GREENLEE12 COUNCILMAN CURTIS JONES, JR. COUNCILWOMAN DONNA REED MILLER13 COUNCILMAN BRIAN J. O'NEILL COUNCILWOMAN MARIA D. QUINONES-SANCHEZ14 15 RESOLUTION 100880 - Resolution authorizing16 Council's committee on Housing, Neighborhood Development, and Homelessness to hold hearings17 on the consequences of mass foreclosure in the Kensington and Port Richmond neighborhoods of18 rental properties owned by Landvest, LLP and related companies associated with Robert N.19 Coyle, Sr. 20 - - -21 22 23 24 25 2 1

Good2 afternoon. We are ready to convene the3 hearing for Resolution No. 10080 -- 880.4 That's 100880, and we're going to ask the5 Clerk to read the title of the6 resolution.7

Resolution 100880,8 authorizing Council's Committee on9 Housing, Neighborhood Development and the10 Homeless to hold hearings on the11 consequences of mass foreclosure in the12 Kensington and Port Richmond13 neighborhoods of rental properties owned14 by Landvest, LLP and related companies15 associated with Robert N. Coyle, Sr.16

Thank17 you very much.18 The Chair notes to my right the19 bill sponsor, Councilwoman Maria20 Sanchez-Quinones -- Quinones-Sanchez. I21 just unmarried her and remarried her and22 all that. Maria D. Quinones-Sanchez. To23 her right, Councilman Frank DiCicco. To24 my left, Vice-Chair of the Committee,25 3 2/17/11 - HOUSING - RES. 1008801 William K. Greenlee. To his left,2 Councilman Brian O'Neill.3 So having said that, we will4 ask the bill sponsor if she would like to5 make opening comments and anyone else who6 would like to comment before we bring our7 first panel forward.8

17 Neighbors and community groups in18 Kensington and Port Richmond have long19 known Robert Coyle, Sr. 22 These properties were often in poor23 condition to start with, and they weren't24 well maintained. With several Coyle25 4 2/17/11 - HOUSING - RES. 10 I want to take a moment to11 recognize the great investigative12 reporting of Barbara Laker and Wendy13 Ruderman, and later Isaiah Thompson of14 the City Paper. Before these articles,15 few knew that around 400 rental16 properties owned by Coyle had been17 heavily mortgaged. The mortgages were18 out of proportion with the values of the19 properties. In part, this reflected the20 inflated housing market of the mid21 2000's. However, there also seemed to be22 evidence of lending irregularities,23 including some banks issuing loans using24 appraisals done by Coyle's own title25 5 2/17/11 - HOUSING - RES. 1008801 company. Coyle's title reports inflated2 the home values and in some cases ignored3 mounting municipal debt. 7 Among those shocked by the8 defaulted mortgages were Coyle's tenants,9 a number which believe they, not Coyle,10 owned their homes. Coyle had long11 offered a variety of rent-to-own deals to12 prospective tenants, sometimes taking13 significant down payments and giving14 amortized schedules. These tenants were15 treated as owners and were left16 responsible for many of the necessary17 repairs in their properties. 22 Volunteer lawmakers working23 through Community Legal Services and VIP24 are fighting to protect these residents'25 6 2/17/11 - HOUSING - RES. 14 Two banks, Nova and First15 Republic, are still involved in pending16 sheriff's sales, leaving ownership of the17 properties in limbo. 21 Court-appointed receivers have begun to22 resign or fail to complete repairs given23 the little money to be had in managing24 the troubled portfolios. Meanwhile, the25 7 2/17/11 - HOUSING - RES. 2 Neighborhood developers3 interested in saving the properties have4 hit a wall. The banks panicked at having5 to register the lost cause by their6 massive bad loans, are looking for bulk7 buyers for entire portfolios of 60 or8 100-plus properties. Moreover, the9 banks' sale prices appear based on10 drive-by appraisals that ignore11 neighborhood quality and the interior12 condition of these properties. 16 Rumors spread of possible sales to New17 York-based LLCs. 23 Unrealized opportunities exist to24 preserve the Landvest properties. Banks25 8 2/17/11 - HOUSING - RES. 16 Although the Landvest crisis is17 concentrated in the 1st and 7th18 Councilmanic Districts, the risk posed by19 neglectful and absentee landlords is much20 broader. 25 9 2/17/11 - HOUSING - RES. 1008801 I want to take this opportunity2 to thank all of our partners, Community3 Legal Services, VIP, the City4 departments, the Pennsylvania Association5 of CDCs and all the folks who up to now6 we have been reacting, reacting to a7 situation that is unlike anything that8 the City has done. 17

Thank18 you very much.19 If there are no other comments,20 we're going to go right into our panels.21 First we want to call the Honorable Brad22 K. Moss, Municipal Court Judge.23 We want to thank him. I was24 just with him on Saturday in the courts25 10 2/17/11 - HOUSING - RES. 1008801 at CJC with some student groups from2 various schools who were trying cases in3 court. It was quite great. A school4 from my area, Boys of Latin, his son's5 school and many others.6 Thank you, Judge.7 (Witness approached witness8 table.)9 JUDGE MOSS: Thank you,10 Councilwoman, and thank all of you. I'm11 going to try to be brief, because I got12 to get back to court.13 I have regards from my14 President Judge, Marsha Neifield, and I15 just wanted to say thank you to City16 Council.17 My interest in this affair has18 to do with the fact that our19 Landlord-Tenant Court, in order to get20 into Landlord-Tenant Court, you need to21 have a license, and we found out -- and22 there's a book in front of the23 Councilwoman there. We found out that24 there may be as many as 300 instances in25 11 2/17/11 - HOUSING - RES. 1008801 which the people that City Council is2 investigating got into our court and took3 action in Landlord-Tenant Court without4 that license, and what was submitted to5 us -- and we're trying to find that6 out -- may have been fraudulent licenses.7 So with the assistance of City8 Council, what we're trying to do next is9 to find out whether those licenses were10 in fact fraudulent, with the assistance11 of the Department of Licenses and12 Inspection. And then it is -- I already13 have issued a Rule to Show Cause on the14 responsible parties, because from the15 court's standpoint, we have an interest16 in making sure that people do not commit17 fraud on the courts. And hopefully when18 we hear back from the Department of19 Licenses and Inspections either20 confirming or not confirming whether21 these licenses were in effect and22 appropriate, it is my court's intention23 to reconvene those hearings that we24 started and to take appropriate action,25 12 2/17/11 - HOUSING - RES. 1008801 which, at a minimum, would be if someone2 got a money judgment against a tenant and3 they should not have because of a fraud4 in the court, it would be my intention to5 vacate those money judgments, and there6 may be other remedies that the court7 would take.8 So, again, I want to thank City9 Council for its cooperation with the10 courts, and we, of course, will always be11 ready to report to City Council and in12 any way assist City Council with your13 investigation.14 If there are any questions, I'd15 be happy to answer them.16

Judge17 Moss, I want to thank you for your18 commitment. This is quite a binder, and19 I said to Maria, Is this citywide?20 She said, No, that's just this21 neighborhood.22 So we certainly want to thank23 you for your commitment and certainly24 Councilwoman Sanchez and Councilman25 13 2/17/11 - HOUSING - RES. 1008801 DiCicco who have brought this to light,2 because although it exists in your area,3 you know, Angela Davis said if they come4 for me in the morning, they'll come for5 you at night.6 I have a problem that I've been7 fighting with some eight years in my own8 district. So this certainly helps us9 all.10 Thank you, Your Honor.11 Councilwoman Sanchez.12

Thank13 you.14 What is it -- you gave me this15 binder. How many cases do you think came16 before you that may be questionable now?17 JUDGE MOSS: We have a computer18 system, and the way we took a look, tried19 to determine what cases were there was by20 putting into the computer system the21 various names of the entities associated22 with the people that you're23 investigating. That computer system goes24 back not to the beginning of time, but25 14 2/17/11 - HOUSING - RES. 1008801 goes back, I think it's, eight or ten2 years. So there may have been others3 before that, we don't know, and there may4 be names that we don't know about. But5 that's how we put it together, and I6 believe there were 313 cases in that7 binder. We did get a count on that and I8 provided it to your assistant, Ms. Kates,9 who has been of great assistance as well,10 if I can point that out.11

Well, we12 thank you, both you and President Judge13 Neifield, for your cooperation in working14 with us on this matter. Ultimately you15 are the judge and you have a lot more16 power sometimes than the legislative17 branch. So we thank you.18 JUDGE MOSS: Well, I appreciate19 you saying that. I hope that's true.20

Thank21 you, and please give Judge Neifield our22 best. She's absolutely a great judge as23 well.24 JUDGE MOSS: Well, it's nice of25 15 2/17/11 - HOUSING - RES. 1008801 you to say that, and I will do that.2

Thank3 you.4 The next panel we'll ask to5 come forward -- if a chair is not close,6 just pull a chair over from the gate --7 Charles Rowe with -- the resident panel,8 Charles Rowe with Charles Promer, Hangley9 Aronchick; Victor and Ana Reyes with10 Michael Hayes, Montgomery McCracken; and11 Stephen Kennedy.12 (Witnesses approached witness13 table.)14

So15 please come forward, and you may begin16 your panel in any order that you choose.17

Hi. Good18 afternoon. My name is Alan Promer. I'm19 an attorney at Hangley Aronchick Segal20 and Pudlin. I'm representing Charles21 Rowe on a pro bono basis in connection22 with the issues that you're addressing23 today regarding a foreclosure and24 sheriff's sale that occurred on his25 16 2/17/11 - HOUSING - RES. 1008801 property.2 I'm going to leave the rest to3 Mr. Rowe and let him tell you his story.4

Good afternoon.5

Good6 afternoon.7

13 Let me start by telling you a14 little bit about myself. I'm married to15 my wife, Sheila Rowe. We've lived for16 the last 11 years at 3009 Aramingo17 Avenue. I work as a contractor. 20 Around early 2000, I was21 looking for a place to live with my wife,22 Sheila, and our then teenage daughter. I23 met with Mr. Robert Coyle, and we talked24 about my renting the property on Aramingo25 17 2/17/11 - HOUSING - RES. 1008801 Avenue. 4 We entered into a written lease5 with an option to purchase. The payment6 was 300 per month, and in addition, as7 part of the arrangement as set forth in8 the lease, I paid up front an additional9 1,700 for the option to purchase. I made10 the payment every month, eventually11 paying approximately $24,000 to satisfy12 the terms of the purchase price. 16 The property had been vacant for nine17 years. It was a shell, with exposed18 floor joists, ceiling beams, it had no19 kitchen, no bathroom fixtures, the roof20 was damaged severely. There was no21 heating system and it had a damaged22 electrical system. There was issues with23 the hot water and sewer lines. The place24 had to be gutted. I put my own money and25 18 2/17/11 - HOUSING - RES. 4 I spent a few months working on5 it until it was suitable for my family to6 move in. We moved in, and I've lived7 there with my wife ever since. My8 daughter has grown and moved out and now9 lives in Frankford. 11 What I did not know, that12 Mr. Coyle had mortgaged the property,13 along with many others, apparently14 without disclosing my ownership interest15 in the property. He then defaulted on16 that mortgage and the bank foreclosed on17 my house. The bank bought it at a18 sheriff's sale. 22 One thing I learned that really23 irked me was the bank apparently was24 shown a piece of paper that was supposed25 19 2/17/11 - HOUSING - RES. 1008801 to be a lease. It's not. It has no2 option to purchase terms. So that's one3 way I know. 6 Someone faked her signature on the7 document. 10 Meanwhile, I don't even know if11 the house I live in is mine, even though12 it ought to be. Just over the Christmas13 season, my hot water heater failed. 17 Repair -- I did many repairs18 since that time that the bank foreclosed19 and bought the house at the sheriff's20 sale. 23 I need to be sure that I own it. 25 20 2/17/11 - HOUSING - RES. 16

Thank17 you very much. That's terrible.18 The Chair notes that19 Councilwoman Donna Reed Miller is present20 as well.21 Questions? Councilwoman22 Sanchez and then Councilman Bill23 Greenlee.24

Thank25 21 2/17/11 - HOUSING - RES. 1008801 you.2 I want to acknowledge the pro3 bono attorneys who have been working on4 these cases. We really do thank the law5 firms for their support in this. I'm6 sure that CLS and VIP would echo that7 they couldn't do this by themselves, with8 all their well intentions. So thank you9 very much.10 To the gentleman, when you11 entered into your rent-to-own piece, did12 you come before a notary when you settled13 up with Mr. Coyle?14

Everything was done15 at his office.16 COUNCILWOMAN SANCHEZ:17 Everything was done in his office. So18 you never went to a lawyer's office, no19 one else?20

No.21

Okay.22 Thank you. Thank you so much, and we're23 very sorry for your situation and we're24 going to work hard to get some justice.25 22 2/17/11 - HOUSING - RES. 1008801

Thank you so much,2 and thank you for allowing me to be here3 today.4

Thank5 you for coming.6

Hold on.7 Thank you, Madam Chair.8 Good afternoon, Mr. Rowe. I9 just had a question similar to the10 Councilwoman's as far as the agreement11 you had. In your statement, you said12 after paying approximately $24,000 to13 satisfy the term of the purchase option,14 the result was the house was mine.15 Now, did you do anything to try16 to attempt to get it in your name?17

Yes. Yes, sir, I18 have. Numerous occasions we have made19 appointments for me and Bob to get20 together and straighten it all out21 legally, and every time I did it, when I22 got to his office for this appointment,23 he couldn't make it that day, something24 came up. It was always something.25 23 2/17/11 - HOUSING - RES. 1008801 Several times I went, their office was2 shut down. So it was just he was3 avoiding. Now I see why he was avoiding4 me.5

Yeah.6 And how long did this go on? Like how7 long were you attempting to reach him?8

Maybe the last eight9 or nine months, before all this came to a10 head.11

Wow.12 Thank you.13 Thank you, Madam Chair.14

Thank15 you very much.16 Are there further questions?17 (No response.)18

Thank19 you. Thank you so much.20

Thank you.21

Victor22 and Ana Reyes with Michael Hayes,23 Montgomery McCracken.24 (Witnesses approached witness25 24 2/17/11 - HOUSING - RES. 1008801 table.)2

Councilpersons,3 thank you for having us here today.4 Standing to my left is Leslie Reyes. She5 is Victor Reyes and Ana Aponte's6 daughter, and we have written testimony7 that Leslie would like to read on behalf8 of her parents.9

Thank10 you.11 Good afternoon. Welcome, and12 feel free to begin your testimony.13

Yes. Hi. My name14 is Leslie Reyes.15

Would16 you pull the mike closer. It's hard to17 hear.18

Sorry.19

That's20 all right.21

Hi. I want -- my22 name is Leslie Reyes. I want to thank23 City Council for giving me an opportunity24 to come here today to tell a little bit25 25 2/17/11 - HOUSING - RES. 1008801 about the frustration that we had2 experienced over the last couple years --3 (Witness in tears.)4

I'm sorry.5 -- (continued) regarding my house, my6 parents' house and my sister house. A7 year ago, we was looking for a house to8 purchase to respond for rental9 opportunity through Robert Coyle like the10 one on Cambria we have. We bought these11 houses off like shelters from him, and my12 dad and my mom, they bought it for us,13 and I seen the hard work they have done14 to purchase these houses. And I've been15 living in one, and it's hard for us --16 for people to come to our house and17 knocking on our door and telling us that18 these are not our house. And we been19 paying rent on time, rental on time.20 I have kids that I live with,21 my own kids. I'm a single mom, and it's22 hard for me every day that people come to23 our houses and telling us that we don't24 live here or foreclosure is going to take25 26 2/17/11 - HOUSING - RES. 1008801 the house away from us. And it's hard2 for us to do. My mom and dad just bought3 these houses for us and for my other4 sister, and they've been struggling5 through all of this. It's hard for us,6 because they've been working hard for7 these houses for us, and now I'm working8 for these houses for my kids, and it's9 hard for me to struggle now. Every time10 I think -- we bought these houses of like11 shelter. They didn't have no windows, no12 roof, no walls or nothing, and I've been13 working hard day and night just to put14 everything into the house that I want as15 mine. And I know it's mine to the end,16 because I'm gonna still work hard till17 the end for this house to be mine.18 Like it's hard for us and19 everybody that is working hard for these20 properties that Coyle just told us rent21 to own. We have the papers and22 everything, but it's hard for us. Now23 people banks are coming to our house.24 People are coming knocking on our door25 27 2/17/11 - HOUSING - RES. 1008801 trying to check in, and it's hard for us.2 So I just want to thank you to3 give me an opportunity to come here.4

Thank5 you so much. We know this is very hard.6 I want to acknowledge Esther7 Lopez.8 You were going to translate for9 the other parents?10

Yes.11

For the12 parents for coming here today.13 The reason we're having these14 hearings and bringing this to the15 attention is because you are the victims16 in this, and we are committed to working17 through our City departments and with CLS18 and hopefully with these banks to do19 right by you and the work that your20 parents have done to purchase these21 homes.22

Thank you.23 COUNCILWOMAN BLACKWELL:24 Councilman Bill Greenlee.25 28 2/17/11 - HOUSING - RES. 1008801

Thank2 you, Madam Chair.3 Maybe Councilwoman Sanchez can4 answer this. I'm just trying to see,5 some of these agreements, are they on6 record? Do we have copies of those?7

Councilman, we'd be8 happy to provide them. Similar to the9 case that you just heard testimony on,10 Robert Coyle and his Landvest entities11 presented a forged lease agreement to the12 bank in this case -- in this case it was13 East River Bank -- that was dated four14 years before and clearly forged.15

No. I'd16 like to see that, but also like just the17 original lease-purchase agreements, I'd18 like to see how they were worded, if we19 could.20

We'd be happy to21 provide those to Council.22

Thank23 you. If you submit them to the Chair or24 to Councilwoman Sanchez, she'll make sure25 29 2/17/11 - HOUSING - RES. 1008801 everyone gets them.2 We certainly sympathize and3 empathize with you, and we're very, very4 sorry. But we're glad that you're here5 and that all of this has come out to be6 made public so that maybe we can do7 something about it. We're going to do8 our best, we promise you that.9 COUNCILWOMAN SANCHEZ:10 (Councilwoman Sanchez speaking in11 Spanish.)12 COUNCILWOMAN BLACKWELL:13 Question, Councilwoman Miller.14

Hi. How15 are you? This is just -- I heard a part16 of the testimony of the person prior to17 you and I hear some of yours. Is this18 person being charged criminally, this19 Robert Coyle?20

I'm not at liberty21 to disclose any inquiries that have been22 made by law enforcement authorities to23 our office, but I have heard in the media24 and I guess I can say on that side that25 30 2/17/11 - HOUSING - RES. 1008801 there is a criminal investigation that's2 ongoing into Mr. Coyle.3

Okay.4 Thank you.5

I don't6 want to put Esther on the spot, but I7 know you were one of the people that kind8 of uncovered this. Is there something9 that you want to add?10 She uncovered most of this, so11 we want to acknowledge her now.12

The way this got13 started with our first client, I mean,14 it's sad that she's not here, but it was15 so heart-wrecking to know that someone16 was taking advantage of the community. I17 mean, these people -- it's everyone's18 dream to own a home, and to see most of19 these people come through our office,20 some of them didn't understand, like they21 didn't understand what the letter was22 stating, and to find out that someone is23 taking the house from them after they24 invested so much money, I mean, I don't25 31 2/17/11 - HOUSING - RES. 1008801 think I would have left any of our2 lawyers in the office relaxed until, I3 mean, their voices were heard.4 So I feel that anything that5 Council can do for everyone that's here6 is great, and the opportunity that you7 have given them to come before you,8 Maria, thank you so much for allowing us9 to come.10

Thank11 you for the work you do at CLS. Thank12 you.13

Thank14 you very much. Thank you.15 Mr. Stephen Kennedy?16 (Witness approached witness17 table.)18

Good19 afternoon. Please identify yourself for20 the record and begin your testimony.21

Good afternoon.22 My name is Stephen Kennedy. Thank you23 for letting me share my story here today.24 I live at 615 East Wensley Street in the25 32 2/17/11 - HOUSING - RES. 1008801 Frankford section of Philadelphia. I2 live in a two-bedroom house with my son,3 7-year-old King Shakka Kennedy, who lives4 with me. We've lived there for the past5 three years.6 Before moving to Wensley7 Street, my son and I lived in a friend's8 basement. I knew I needed to get9 someplace better for my son to live, so10 Landvest told me that they help people in11 binds. They said that they would work12 with me to help me get a good deal on13 this property. They said they would give14 me a chance to own the home or be a15 homeowner. They told me that they would16 rent the property -- if I would rent the17 property for a year, they would give me a18 chance to buy the property, which they19 called it a rent-to-own lease. This is20 what they told me I was getting.21 The house was basically clean,22 but it needed a lot of repairs. I moved23 in, and I did most of the repairs myself,24 because they told me that if I did that,25 33 2/17/11 - HOUSING - RES. 1008801 I wouldn't have to give them a security2 deposit. Landvest told me since I was3 buying the house, that I had to do the4 repairs on the property myself.5 My rent was only $450. They6 stated to getting -- that letting for the7 different places telling me -- I started8 getting letters from different realtors9 telling me that I didn't need to pay10 Landvest anymore, I needed to pay them.11 And this went on for a few months, and12 finally Sherman Toppin came to me, and13 they demanded that I either pay them the14 rent or they was going to put me in the15 street. You know, and like I had been16 paying rent all the time. And they just17 started to tell me they were going to18 collect the rent or I was going to be put19 in the street. When this happened, I20 went to CLS.21 The people at CLS have been22 very great in helping me with keeping23 this place as long as I could, you know.24 They've been able to slow down sheriff's25 34 2/17/11 - HOUSING - RES. 1008801 sales and -- not really slow them down,2 but through the process, they showed me3 how to work so that I could keep this4 place.5 They explained to me6 unfortunately that I have no rights for7 real ownership of this place, that the8 Landvest made all these promises to me,9 they were just vogue enough to prevent10 from being legally binding. This meant11 that I was just a renter. All the extra12 time and money I put into the house was13 for nothing. I have no rights to buy the14 house. I am merely -- I am at the mercy15 of the mortgage companies and whoever16 buys the house from the sheriff's sale.17 Then the work that still needs18 to be done on the house, Sherman Toppin19 is still collecting rent, but they told20 me that they no longer can afford to do21 these repairs, and that basically if I22 got the repairs done myself, that I could23 deduct it from the rent.24 I went down and paid my rent25 35 2/17/11 - HOUSING - RES. 1008801 today, and like they tell me that maybe2 if I pay a couple of more payments, they3 could do repairs.4 I have a front window that's5 out. I put up the plastic sheet to keep6 the wind out. My front door has holes in7 it. I got them filled up with duct tape.8 There's holes and things in the wall that9 need to be repaired, which basically I10 could do it myself, but if I'm taking my11 money doing this this week, you come to12 me next week and tell me you're putting13 me in the street, you know, it's kind of14 hard.15 (Witness in tears.)16

The deception by17 the landlord is heart-breaking. This was18 my chance to take the next step forward19 in building my life. I want to be a20 homeowner. Everything I've done in this21 past has been with the goal of buying22 this house. I still want to buy the23 house, and I showed proper24 responsibilities that I would be able to25 36 2/17/11 - HOUSING - RES. 1008801 pay these bills on a mortgage. I have a2 stable income and I still show the3 ability to pay affordable -- excuse me.4 (Witness in tears.)5

Thank6 you very much. We are so sorry.7 Councilman Greenlee.8

Thank9 you, Madam Chair.10 Maybe the question -- I assume11 this is the attorney?12

Yes. My name is13 Jennifer Schultz. I'm with Community14 Legal Services and we represent15 Mr. Kennedy, among others.16

Just so17 I'm clear on this, Sherman Toppin,18 Mr. Kennedy says that in his statement,19 they said they were court appointed to20 collect the rent.21

Yes.22

Who did23 they represent? Are they the owners?24 I'm lost a little bit.25 37 2/17/11 - HOUSING - RES. 1008801

It's a2 receivership.3

You've4 got to talk into the microphone.5

Yes,6 please.7

Yes. Sherman8 Toppin is a receivership situation.9 Sherman Toppin Real Estate is a realty10 company, and they've been appointed by11 the court to manage these properties12 until the other matters and litigation13 are resolved. So their job is to conduct14 themselves like the landlord and collect15 the rents, perform repairs, and then any16 extra money would be distributed as the17 court instructs.18

Now, when19 you said "perform repairs," the gentleman20 is saying that they're refusing to do21 that. Are they any different from any22 other owners? Shouldn't they be then23 cited for not maintaining the property?24 I mean, if I'm a landlord and I don't25 38 2/17/11 - HOUSING - RES. 1008801 take care of his property, I get cited,2 right, or I should be?3

I'm not aware of4 the legal intricacies of whether or not5 they would be responsible for citations,6 but --7

I mean,8 you said receivership.9

Yes. Right.10 They're not a legal owner. Their job is11 just to conduct themselves and manage12 those properties until the litigation is13 resolved.14

I'm15 getting pointed. Maybe somebody else16 knows something about this. I'm not17 real -- Councilwoman.18 COUNCILWOMAN SANCHEZ:19 Councilman, once we take some of the20 testimony, we can have a discussion about21 what L&I has done and what they can do as22 we move forward in this process, because23 I think that's one of the strategies24 around are we citing them and25 39 2/17/11 - HOUSING - RES. 1008801 appropriately liening these properties to2 help facilitate potential future3 disposition.4

Because I5 would think someone is supposed to be6 responsible for the maintenance of the7 property, whether the gentleman is in the8 house or not.9

Well, I10 think some of the concerns around this11 and the reason why these hearings are12 important is, we don't want L&I doing13 code enforcement and then displacing14 people either.15

Right.16

So it's17 a double-edged sword around how we do18 this.19

Okay.20 Got you. Thank you.21

Thank you.22 COUNCILWOMAN BLACKWELL:23 Further questions?24

Yes. I25 40 2/17/11 - HOUSING - RES. 1008801 have one.2 COUNCILWOMAN BLACKWELL:3 Councilwoman Miller, then Councilman4 Jones.5 COUNCILWOMAN MILLER:6 Mr. Kennedy, in your testimony, you state7 that you heard that Chris is in jail. Is8 he actually -- do you know whether that's9 a fact or not?10

What happened11 was, I went to pay my rent one month.12 When I got there, the place was closed.13 It was boarded up, closed up. And I have14 a stepdaughter that introduced me to15 Chris, and she had told me that she had16 to move because they were -- that he was17 being locked up. At the time that she18 went to pay her rent, she found out that19 he was being locked up. So she avoided20 the foreclosure long before they could21 foreclose on her. She just moved.22

Okay.23 All right. Thank you.24 COUNCILWOMAN BLACKWELL:25 41 2/17/11 - HOUSING - RES. 1008801 Councilman Jones.2

Thank you,3 Madam Chair.4 I think after consulting with5 my colleague, it may be more appropriate6 for us -- I'll wait until the City7 question, because my question becomes8 have these properties been inspected, are9 they in fact up to standard, and, if not,10 are we in a position to do the work, lien11 the property, then hold the owners of12 record, not the stewards of the property,13 indeed responsible for those repairs. So14 I'll hold my question until that time,15 Madam Chair.16

Thank17 you, Councilman.18 Thank you very, very much,19 Mr. Kennedy. God bless you, and we'll be20 getting back in touch with you. Thank21 you, sir. Thank you both.22 The resident lawyers, Jennifer23 Schultz, CLS; Stephanie Seldin, VIP.24 (Witnesses approached witness25 42 2/17/11 - HOUSING - RES. 1008801 table.)2

Thank3 you very much for being here. Would you4 introduce yourself to the record and5 begin your testimony.6

7 I want to start by thanking City Council8 for taking on the challenges that this9 problem presents. My name is Jennifer10 Schultz. I am an attorney with Community11 Legal Services. 24 Our representation of clients25 43 2/17/11 - HOUSING - RES. 1008801 has focused to two goals: home2 preservation and home purchase. 7 Letters were mailed to 275 properties8 involved in these foreclosures. Then9 outreach workers went door to door to10 follow up with the clients. 13 In this process, we've14 identified three distinct groups of15 people: those who have ownership rights,16 those who thought they were buying the17 house but do not have legally enforceable18 ownership rights, and pure tenants. 21 First, we undertook to slow22 down the foreclosure process while we23 tried to work out a resolution. Thanks24 to the Residential Mortgage Foreclosure25 44 2/17/11 - HOUSING - RES. 1008801 Diversion Program and the strong2 leadership of Judge Rizzo, we have been3 able to go through the conciliation4 conference process. 13 The conciliation conferences14 have their limits. In many instances,15 the parties are too far apart on the16 numbers. 24 Presumably, an investor will attempt to25 45 2/17/11 - HOUSING - RES. 2 Unfortunately, one economically rational3 strategy would be to milk the properties;4 that is, to collect rent without making5 improvement to them. 10 We have tried to access11 existing City programs. Our biggest12 hurdle is that the programs are often13 tailored for renters or homeowners. They14 lack any provisions for rent-to-own15 situations where the person is in a16 quasi-legal status of being partly a17 tenant and partly a homeowner. 22 Although initially delays in23 the foreclosure process provided time to24 negotiate on behalf of our clients, there25 46 2/17/11 - HOUSING - RES. 1008801 are consequences with this continued2 insecurity. The receiver, Sherman Toppin3 Real Estate, is not collecting enough4 rent to cover the expenses. The result5 is that it does not have any money to pay6 for further repairs. The receivership7 for Republic Bank has been dissolved, and8 we're not sure what's happening right now9 with that. 12 Right now, the neighborhoods13 are benefiting from the people living in14 the properties. 17 They have put their time, money and18 dreams into these properties. They want19 to stay, and they have demonstrated an20 ability to afford the property and that21 they have the resources to improve those22 properties. What they lack is access to23 the traditional mortgage financing24 because they have poor credit. That's25 47 2/17/11 - HOUSING - RES. 3 There are some damages that4 cannot be fixed. 9 There is the stress that comes from this10 fear and uncertainty of not knowing what11 will happen to their home. 16 Let's keep people in the homes. To do17 this, we need partners. 25 48 2/17/11 - HOUSING - RES. )8

Thank9 you.10 Councilman Greenlee.11

Thank12 you, Madam Chair.13 Good afternoon again. Early in14 your testimony, you talked about the15 three different kind of problems,16 ownership, thought they had ownership,17 and renters. When you say "ownership,"18 could you define that a little bit? I19 mean, what do they have?20

Generally when we21 refer to ownership, we're referring to22 people like Mr. Rowe and the Reyes' who23 had rent-to-own agreements that give --24 that confer with them ownership rights25 49 2/17/11 - HOUSING - RES. 1008801 that they can enforce in court. And2 they're in litigation now, trying to3 protect those rights that they have.4

Okay.5 Just so I understand, like Mr. Rowe, when6 he explained that he paid what, according7 to the agreement, he had to pay --8

Yes.9

-- what10 had to be the next step to do? Did he11 have to get an agreement with Mr. Coyle?12 Like was Mr. Coyle supposed to sign off13 on something?14

Right.15

I mean,16 if he reached the agreement, why couldn't17 he just have gone ahead?18

Because -- I19 mean, I think the simple answer -- this20 is the problem with any rent-to-own21 transaction, that the conferring of title22 ownership, which is the deed, doesn't23 happen until the end of the transaction,24 but what's supposed to happen, when you25 50 2/17/11 - HOUSING - RES. 1008801 do a lease-purchase agreement, you have2 rights to purchase the property. They3 can't -- the seller is not supposed to be4 able to back out of the deal as long as5 the buyer fulfills their obligation. The6 seller then has a duty to execute that7 deed, and when they don't execute -- and8 I think that's what Mr. Rowe is speaking9 about, that he was trying to get that10 last step completed, but there was a11 breach of the contract by Mr. Coyle. So12 at that point, he has the right to go to13 court and say to a judge, Hey, he's14 refusing to sign the paper, so give me a15 court order saying that I'm the owner.16 And that's generally done through a quiet17 title action.18

I got19 you. And then the second part when you20 said about believing they were the owner,21 what does that mean?22

It seems that the23 sales pitch changed over time, and years24 ago there were these very expressed25 51 2/17/11 - HOUSING - RES. 1008801 rent-to-own agreements in writing that2 were done with people. What happened to3 people like Mr. Kennedy, the newer4 victims, was they were given these vague5 promises. They were told, Hi, you're6 buying this house, you're responsible for7 repairs, but you're going to be a renter8 for a year, then we'll work out the sales9 details.10

So it's11 verbal rather than anything written?12

Well, verbal13 alone could still be enforceable. We14 have some people in that group, but for15 these people, we don't believe that they16 had the clear terms of the agreement17 worked out. They were put in this limbo18 of rent for a year, then we'll do the --19

We'll20 talk about it kind of thing?21

Exactly.22

And last23 thing, just one more time on Sherman24 Toppin. You said in your statement25 52 2/17/11 - HOUSING - RES. 1008801 they're not collecting enough rent to be2 able to maintain. How was that rent3 determined?4

They are still5 abiding by the lease terms that were in6 existence by Coyle. So whatever amounts7 were there.8

So they9 just kind of picked up that agreement, if10 you will?11

Correct. Yes.12 Part of why they're not collecting enough13 rent is, when all this mess started, the14 banks started sending out notices and the15 sheriff's sale notices started appearing,16 and some people, like Mr. Kennedy's17 stepdaughter, they cut and ran and they18 just said, I'm out of here, I don't want19 to go through this. The people who were20 staying are the ones who were more21 invested in the houses, and they're the22 people who really would benefit the23 community to be able to stay.24

Sure. I25 53 2/17/11 - HOUSING - RES. 1008801 understand. Because they care about it.2

Absolutely.3

Makes4 sense. Thank you.5

Thank you.6

Thank7 you.8 Stephanie Seldin.9

Good afternoon.10 My name is Stephanie Seldin and I am11 Managing Attorney of Philadelphia VIP. I12 don't have very much to add to Jennifer13 Schultz's testimony, although she talked14 about partners, and I do want to talk a15 little bit about that.16 Our first partners in this17 endeavor are our clients, and I want to18 applaud Mr. Rowe and Ms. Aponte and the19 Reyes' for having the courage to come20 here today and tell their story.21 Philadelphia VIP became22 involved in this case with the outreach23 of Community Legal Services, because24 Philadelphia VIP provides free legal25 54 2/17/11 - HOUSING - RES. 1008801 services through pro bono attorneys, and2 you met two of them today, Alan Promer3 and Mike Hayes. They have spent tens of4 thousands of dollars of free legal5 services to try and resolve these cases,6 and I wanted to thank them and thank the7 Councilwoman for recognizing them. In8 addition to them, Leonard Busby and Ryan9 Anderson and Leona John from Montgomery10 McCracken Walker and Rhoads, and it was11 Alan Promer and his associate, Dylan12 Steinberg from Hangley Aronchick Segal13 and Pudlin. So we're ever grateful to14 our volunteers, as it takes a lot of15 partners to manage the quantity of folks16 who really need help. And the manager,17 the true manager of all this, was18 Jennifer Schultz, and we applauded her19 before, but I want to applaud her again20 for the tremendous amount of work that21 she's done.22 Another partner in this is --23 and I think Councilman Greenlee asked his24 question -- is the law enforcement. We25 55 2/17/11 - HOUSING - RES. 1008801 do know that there's investigations going2 on and they're hard at work, but some of3 the folks here we're not going to be able4 to help. They don't have a legal cause5 of action, and at least for partial6 justice, we're looking to the U.S.7 Attorney's Office and to the District8 Attorney's Office to make this case a9 priority so that Mr. Coyle is no longer10 walking the street and able to victimize11 even more and more people. So it's been12 a couple years, and we just hope that13 we're getting closer up on their priority14 list to have an indictment come down.15 You had asked earlier about16 L&I, and I really think that's an17 extraordinarily good question. The18 license ordinance allows L&I the19 discretion not to give a license when20 there are open violations, but they21 routinely don't, and I think that's an22 excellent question to ask of L&I. They23 also can revoke a rental license when24 there are violations.25 56 2/17/11 - HOUSING - RES. 1008801 I'm wondering if you all would2 like to have George Gould come up from3 Community Legal Services and talk about4 the receiver questions, because he is the5 expert in that if you had more questions6 about that. But thank you again. A7 shout-out also to Jennifer Kates, who has8 been fabulous.9 (Witness approached witness10 table.)11

That's12 my Jennifer from the Council office.13

It takes a14 quantity of Jennifers to get this done.15

Thank16 you.17

Good afternoon. My18 name is George Gould. I'm a Managing19 Attorney at the Housing Unit at Community20 Legal Services.21 I just wanted to briefly22 comment on the question you raised,23 Councilman Greenlee, about the receiver.24 It's our position that if a receiver25 57 2/17/11 - HOUSING - RES. 1008801 collects rent for the bank, they are2 responsible for repairs. It's really3 that simple. The law in Pennsylvania is4 that the payment of rent is contingent5 upon the person collecting the rent6 providing a fit and habitable unit, and7 if the bank has decided to collect the8 rent with or without a receiver, it's our9 position that they in fact have to make10 the repairs, and it's totally11 irresponsible for a bank and the banks12 involved here, including First Republic,13 to be collecting this money and taking14 the position that they don't have to do15 anything to the properties.16 COUNCILWOMAN BLACKWELL:17 Councilwoman Sanchez.18

Thank19 you.20 Jennifer, while I have you up21 there, I think to put it in context,22 we're talking about how many properties23 with how many banks? Because right now24 our focus obviously is on the banks who25 58 2/17/11 - HOUSING - RES. 1008801 have been more aggressive and have2 publicly stated that they intend to take3 this to sale as soon as our Sheriff's4 Office is able to do so, but I think it's5 important for my colleagues that we put6 this in the broader context of the7 universe we're dealing with.8

Sure. We have9 identified five different banks that have10 been involved in different -- at11 different levels, for a total of 27512 properties that are dealing with this13 particular problem. There may be other14 properties that had other relationships15 with Coyle, but they are not going16 through the foreclosures that these banks17 are. So it's 275 houses. Republic Bank18 has 117 of those properties.19 Pennsylvania Business Bank has 6520 properties. There's East River Bank,21 which is also Realty Capital Management.22 They had a portfolio of 65 properties,23 although at this point we've reached24 resolution and they completed the25 59 2/17/11 - HOUSING - RES. 1008801 sheriff's sale process and I believe have2 divested themselves of whatever3 properties were left, somewhere around4 50, and they're still being made5 available to rentals for the people who6 are living there.7 I'm sorry. There is one house8 that's still in litigation with that9 bank.10 Then there's Earthstar Bank.11 They have 22 properties, and there were12 five individual mortgages with IndyMac13 Bank, and those have also all gone14 through the sheriff's sale process and to15 resolution.16

It's17 important to note in the East River case,18 can you speak a little bit to how some of19 those folks were able to realize their20 mortgage? And I want to preface that by21 saying that not the most ideal, but22 definitely a step in the right direction.23 I don't want by any means for anybody to24 think that's the model we want to follow.25 60 2/17/11 - HOUSING - RES. 1008801 I think we want to get better, but I2 think it was a better solution than the3 others.4

Right. The bank5 came prepared to finance the people in6 these situations, and they did not look7 at credit scores. They understood the8 people in these homes were not going to9 meet a traditional test for credit10 worthiness. So instead, they used the11 proxy of history of payments on the12 rental property. And so they looked at13 the period that the bank was collecting14 the mortgage -- the rental amounts, and15 if people had a good history of that and16 could demonstrate that they still had17 income by submission of benefit18 statements or pay stubs, then they would19 qualify the person to get one of these20 mortgages directly through East River.21 And then what we did in representing the22 clients is try to negotiate sale prices.23 As you said, it may not have24 been ideal, but what we focused on in25 61 2/17/11 - HOUSING - RES. 1008801 those negotiations was monthly payments2 being close to the rental payments so3 that it would remain affordable for the4 clients going forward.5

In doing6 those transactions with the bank, in some7 cases it's been six or eight months,8 maybe even a year now. Are the folks9 still in those homes and are they making10 their payments?11

Yes. I have many12 happy people in that group who when they13 closed with the bank, they have a deed in14 their name recorded with the county15 recorder's office. They are the legal16 owners of that property. They're making17 the rent payments -- or the mortgage18 payments. The mortgage payments include19 the taxes and insurance. They have a20 fixed interest rate, so it's not like21 some predatory loan that's going to blow22 up on them in the future. And as far as23 I'm aware, everything is going smoothly24 and very well with those individuals.25 62 2/17/11 - HOUSING - RES. 1008801

I want2 to send a message to the banks: They are3 paying their mortgages, like they were4 paying their rent. And ultimately if5 they're in the business of their bottom6 line, they have to work with us, because7 we can make a lot more homeowners in this8 process.9

Yes.10

So thank11 you.12 Any other questions?13 (No response.)14

Thank15 you guys so much. I'm going to ask you16 guys to stick around in case we have some17 additional questions we may need to refer18 back to George, who has all of the19 knowledge on this matter.20 Our next panel, since our Chair21 has stepped away, is our CDC panel, which22 is Sandy Salzman from New Kensington CDC,23 Bill Salas from HACE and Steve Culbertson24 from Impact Services and Jeffrey25 63 2/17/11 - HOUSING - RES. 1008801 Allegretti, Innova.2 And as they walk up, again, I3 want to -- I know I said so in the4 beginning. I want to thank the CDCs5 again. When we started dealing with this6 situation, with the support of Deborah7 McColloch at OHCD, we were able to8 utilize your troops on the ground to help9 us get to folks so that they wouldn't10 leave their houses in the midst of all of11 this stuff, so I want to publicly thank12 you for that.13 (Witnesses approached witness14 table.)15

Do you16 want to start, Sandy?17

Sure. 21 New Kensington CDC has been22 working to improve our neighborhood for23 over 25 years. 25 64 2/17/11 - HOUSING - RES. 1008801 We have worked with the community to2 renovate houses, educate residents about3 the responsibilities of homeownership and4 have been there when they are in danger5 of losing their most precious asset,6 their home, to foreclosure. However,7 none of the work we have done around8 housing issues could prepare us for the9 devastation that was inflicted on our10 community by Mr. Bob Coyle and his11 company, Landvest. In fact, we learned12 of Mr. 15 As you all know, there are many16 obstacles in community development -17 dirty streets and lots, drugs, crime and18 poverty. However, we feel that we do a19 good job of finding creative ways to20 overcome some of them. There are some21 obstacles that are so great that we22 cannot find creative ways to fix. In23 fact, so big that it doesn't just impact24 our community, but it impacts the entire25 65 2/17/11 - HOUSING - RES. 1008801 City. That is when unscrupulous people2 take advantage of markets, purchase3 properties they can't or won't maintain,4 refuse to pay taxes and, in the end, just5 walk away from the property and the debt6 that they owe. Oh, and along the way,7 they defraud people by letting them think8 they are purchasing their dream home,9 only to find out that the property is10 mortgaged to the hilt and is in11 foreclosure. 13 This is just the problem we are14 facing in our community. Mr. 23 The devastation that one man has been24 able to inflict on a community is25 66 2/17/11 - HOUSING - RES. 1008801 incomprehensible. Mr. 3 And I just want to point out4 some of the pictures over there. These5 pictures are pictures of houses that are6 owned by Landvest and were taken this7 week. So it's not something that's been8 sitting around. These were taken just9 yesterday and on Tuesday. 11 He has left gaping holes of12 vacancy on decent blocks where people are13 striving for better but can't overcome14 the blight left by Landvest. 17 Of course, Mr. Coyle is not the18 only person to cause this type of19 destruction. There are many like him,20 people who are greedy, looking to make a21 quick buck and able to walk away from22 debt and destroy communities. 25 67 2/17/11 - HOUSING - RES. 7 Or another way is to have8 Licenses and Inspections be more vigilant9 in giving out licenses. And also maybe10 there could be a mechanism put in place11 to make sure that people who own multiple12 properties are paying their taxes. And I13 recognize that one of the problems that14 we have with people like Mr. Coyle is15 that he has these in numerous names. 18 However, right now we have a19 major problem that needs some creative20 solutions. New Kensington CDC is willing21 to work with the City to try to find22 some, but we can't do it alone. The23 other CDCs in this area are also willing24 to work to help. We recognize that funds25 68 2/17/11 - HOUSING - RES. 1008801 are tight, the City of Philadelphia2 doesn't own these properties and neither3 do the CDCs, but that has never stopped4 us before, and I hope it doesn't stop us5 now. We need to make a concentrated6 effort to make some positive change in7 this neighborhood. 10

Thank11 you very much.12 Any questions?13 (No response.)14

Bill15 Salas, HACE.16

Good afternoon,17 members of City Council. My name is18 Guillermo Salas, Jr. I'm the President19 of HACE, Hispanic Association of20 Contractors and Enterprises, a local21 non-profit in Eastern North Philadelphia22 for the last 25-plus years. I'm here23 today with many of my colleagues to plead24 for your support in avoiding what we25 69 2/17/11 - HOUSING - RES. 1008801 consider a major catastrophe in our2 neighborhoods and which will have a major3 impact in the City of Philadelphia.4 The potential foreclosure and5 business as usual of hundreds of6 properties located within a defined7 geographical area would cause further8 economic hardship to our neighborhoods9 that, after nearly 50 years of10 devastation, are making a comeback. The11 economic hardship will further impact12 thousands of families that reside in13 these neighborhoods through vacant14 properties, crime and homelessness. The15 impact to the City will be in the16 millions of dollars if we do not take17 control of this horrible situation today.18 In retrospect, the financial19 crisis in America is symbolic of the20 problems that we are facing here today21 with bank loans made to overvalued22 properties, among other factors, with an23 added component of fraud caused by24 Landvest. Believe it or not, Landvest25 70 2/17/11 - HOUSING - RES. 1008801 and many of its other companies have been2 doing this for the last since the early3 1980s. They just have not been caught.4 In the midst of this financial5 crisis in America, Philadelphia has been6 a leader in designing and implementing7 programs that address housing counseling8 and foreclosure services through9 thousands and thousands of families. We10 now have an opportunity to make an11 investment to avoid the foreclosure of12 hundreds of properties and the13 displacement of hundreds of families,14 which will undoubtedly increase the15 incidence of homelessness in16 Philadelphia. Your support will further17 protect the millions and millions of18 public and private investment made in19 these neighborhoods by many -- some of20 the CDCs here before you. For us in21 particular, within a two-block area,22 called the Caribe Zone, we've made a23 total of $36 million in public and24 private investment, and yet many of these25 71 2/17/11 - HOUSING - RES. 1008801 properties are adjacent to this Caribe2 Zone.3 The non-profit organization4 located in these neighborhoods, as we5 spoke earlier and other community6 stakeholders, including various City7 departments, OHCD, RDA and PHDC, are8 ready and willing and able to tackle this9 problem. Our team has offered a plan to10 acquire, rehabilitate and sell these11 properties to income-eligible families in12 our neighborhoods. We already have13 programs in place such as the HRP, NSP or14 THPP programs that non-profits and15 for-profit developers have used for many16 years to rehabilitate vacant and17 foreclosed properties and put them back18 into service and made available to19 homeownership for first-time homeowners20 and families. In order for such a21 program to be successful, however, we22 need the complete cooperation of the23 lenders. They simply cannot expect to24 fully recover their investment at the25 72 2/17/11 - HOUSING - RES. 1008801 expense of the families that are victims2 to Landvest. If they will not cooperate,3 then we as this committee and the4 Committee must take the leadership and5 exercise the powers to protect these6 families and avoid the foreclosures in7 assuring the continued stability of these8 neighborhoods.9 Thank you very much.10

Thank11 you very much.12 Questions for Mr. Salas?13 (No response.)14

Thank15 you.16 My friend Steve Culbertson,17 pleasure to see you.18

My name is19 Steve Culbertson. I'm the Director of20 Housing Development at Impact Services.21 It's a pleasure to see you as well,22 Councilwoman.23

Thank24 you.25 73 2/17/11 - HOUSING - RES. 1008801

I'm going to2 depart from my written testimony, and it3 will go into the record. The points have4 been made about Landvest and Bob Coyle5 related to all of these fine folks behind6 me. 12 Mr. Coyle came in to those blocks,13 purchased houses from people who passed14 away or who were elderly and were selling15 their homes and converted them to what16 you see before you, those homes. So he17 bought from people who were vulnerable or18 who had passed away. He invested nothing19 in the houses, which you've heard from20 the folks that were renting and leasing,21 and basically destroyed whole blocks in22 and around Kensington and Allegheny into23 Port Richmond. So that's point number24 one. So it's not just a tragedy of the25 74 2/17/11 - HOUSING - RES. 1008801 individuals. Our heart goes out to2 everyone, but it's also a tragedy for the3 neighborhood as a whole. 13 So the bank approached us. We14 worked with the bank for a year. Last15 year, we put into the Neighborhood16 Stabilization Program at the17 Redevelopment Authority, NSP-1, nine18 properties and were basically tentatively19 approved to get NSP money to improve the20 properties. 25 75 2/17/11 - HOUSING - RES. 1008801 They were on the books of the bank,2 loans, for $80,000. So in order for the3 bank to sell us the properties, they4 could only sell it at 20. There was a5 $60,000 difference. 11 And so my opinion is that the12 banks are complicit in the activities of13 Mr. Coyle. They made a lot of money on14 these loans, and then they have to pay15 the piper. They took and put these loans16 on their books for very high values based17 on Mr. Coyle's own appraisals, and then18 the market went bad. So now they've got19 to chip in. 22 I'm sure that a lot of the23 deals that they've worked out with the24 folks behind me are at a much higher25 76 2/17/11 - HOUSING - RES. 1008801 appraisal, and people have been willing2 to pay that because they've already got3 equity, their own sweat and their own4 money, put into the houses, so they're5 willing to take that deal. But they6 shouldn't have to take that deal, because7 the properties are not worth what they're8 listed with the banks. 10 Point number three is that11 Impact, with my other community partners,12 is willing to step up to the table and13 work with the City of Philadelphia. 15 We understand that CDBG is going to get16 cut. It's going to get cut at the17 federal level. Then we're going to see18 cuts at the state level. Then we're19 going to see an overall drop in the20 amount of money that's available to the21 neighborhoods. So we're not going to sit22 here and act like, Oh, yeah, there's23 millions of dollars out there to throw at24 this problem. There are not millions of25 77 2/17/11 - HOUSING - RES. 1008801 dollars. 9

Thank10 you very much, Mr. Culbertson.11 Any questions?12 Thank you all very much.13 Councilwoman Sanchez.14

I was15 not unaware of the initial attempt to try16 to get a proposal from the bank. Have17 any of the banks approached anybody since18 they've been aware that their portfolio19 is not worth their inflated value? Has20 anybody had a conversation with them?21

No.22

I agree23 with you, Steve. I think that they made24 their money already on this loan, so we25 78 2/17/11 - HOUSING - RES. 1008801 want this off their portfolio too. And2 while I understand that we have a3 shortage of funding, but this will be our4 problem on the front end or it's going to5 be our problem on the back end. And so6 while there is not an endless pool of7 money for this, whether it's through L&I8 and having to clean and seal or the9 Police Department who is going to have to10 police these vacant properties,11 ultimately the City owns this problem.12 So we have to make this a priority. But13 we're encouraged by your willingness to14 work with us and kind of think outside15 the box about how we're a little bit more16 proactive since we know what the problem17 is.18 So thank you again for your19 work on the ground. We really appreciate20 it.21

Thank22 you again, all of you. Thank you very23 much.24 Good to see you, Steve.25 79 2/17/11 - HOUSING - RES. 1008801 Is Jeffrey Allegretti here?2

Mr. Allegretti3 is not here today. I actually4 incorporated his testimony into what I5 submitted.6

Thank7 you. Thank you, Steve.8 Bank panel, Mark Poliski, Nova9 Bank; Harry Madonna, Republic Bank.10 Well, we have his testimony. I have11 Mr. Madonna's testimony, which we will12 make part of our record.13 (Witnesses approached witness14 table.)15

Thank16 you very much. Good afternoon.17 (Good afternoon.)18

Please19 introduce yourself and begin your20 testimony.21

My name is Mark22 Poliski. I'm with Nova Bank.23 MS. McKENNA: My name is Lauren24 McKenna. I'm counsel to Nova Bank.25 80 2/17/11 - HOUSING - RES. 1008801

I believe the2 Committee members have a copy. We did3 provide copies of my statement. 8 I appreciate the opportunity to9 address the Committee today. As I10 mentioned, I'm Senior Vice-President and11 Chief Credit Officer at Nova Bank, and12 I'm familiar with the actions of Robert13 Coyle and his companies. 19 I understand that Nova Bank is20 only one of many banks that were affected21 by Coyle. I cannot speak for the other22 banks, but I can say that Nova Bank has23 taken a proactive approach to dealing24 with tenants and others affected by25 81 2/17/11 - HOUSING - RES. 1008801 Coyle. Mr. 11 The loan was made and underwritten by12 Pennsylvania Business Bank in September13 2008. Pennsylvania Business Bank merged14 with Nova Bank in June of 2009. From15 what Nova Bank knows, the loan16 application was approved through normal17 standard underwriting processes. Coyle18 gave a personal guaranty and the loan was19 secured by a mortgage which was20 ultimately assigned through the merger to21 Nova Bank. The mortgage encumbered 6522 properties which were provided by Coyle23 and his entities to secure the mortgage24 loan. The loan went into default a few25 82 2/17/11 - HOUSING - RES. 2 As a result of the non-payment3 of the sums due under the loan, Nova Bank4 obtained a judgment against Coyle and his5 companies in March 2009. Nova Bank also6 filed a lawsuit against the appraiser7 that valued the properties in Kensington8 and Port Richmond that were security for9 the loan. 15 On March 31, 2009, Nova Bank16 petitioned the court to appoint a17 receiver to secure and manage the 6518 properties that were security for the19 loan. 23 Since then, the receiver has collected24 rent from the property tenants and25 83 2/17/11 - HOUSING - RES. 1008801 maintained the properties. To date, the2 receiver has invested over $96,000 in3 repairs and upkeep to the properties. I4 must note that some tenants of fully5 habitable properties have simply not paid6 rent. As a result, the amount of rent7 received from the properties has not been8 sufficient to maintain them. 15 Nova Bank and the receiver have worked16 with the City to address these issues,17 and continue to do so. 24 A handful of tenants have25 84 2/17/11 - HOUSING - RES. 1008801 claimed to have ownership interests in2 the properties. In those situations,3 Nova Bank sought from the tenants4 evidence of their ownership interest such5 as a lease-purchase agreement with6 Coyle's companies and evidence of7 payments. Nova Bank's attorneys have8 worked with both Community Legal Services9 and other attorneys representing various10 tenants on these issues. 15 Nova Bank recognizes that16 placing tenants in ownership positions17 benefits both the bank and the local18 community. 25 85 2/17/11 - HOUSING - RES. 1008801 With the exception of2 situations where tenants have3 substantiated ownership interests and4 compliance with lease-purchase5 agreements, Nova Bank has taken steps to6 foreclose on the properties. Nova Bank7 has discovered that many of the8 properties have title issues in addition9 to the municipal liens. Foreclosure is10 the only effective way to obtain clear11 title to the properties. While Nova Bank12 began the foreclosure process in November13 2010, its efforts to foreclose have been14 delayed due to the well-publicized15 situation with the Sheriff's Office. At16 the present time, Nova Bank is targeting17 the April 5th sheriff's sale, but it's18 unclear whether the sale will proceed on19 that date. Where reasonable agreements20 can be reached, Nova Bank is committed to21 selling the properties to interested22 buyers. 25 86 2/17/11 - HOUSING - RES. 7

Thank8 you very much.9 Councilman Greenlee.10

Thank11 you, Madam Chair.12 Good afternoon, sir. In your13 statement you say that the receiver has14 collected rent from property tenants and15 maintained the properties. You heard16 statements earlier -- I don't know if17 they were properties that your bank was18 involved with -- that the receiver has19 basically said the rent doesn't cover the20 cost of repairs and they're not making21 repairs.22 Are you aware -- before today23 have you heard that statement or are you24 aware of that?25 87 2/17/11 - HOUSING - RES. 1008801

No. My2 understanding is that the receiver, being3 responsible for the maintenance of the4 properties, my understanding is that the5 receiver is adhering to the order.6

Because7 obviously you heard earlier a statement8 was made to the contrary.9 When you talk about reasonable10 agreements can be reached, and I know you11 can't -- I'm not asking you to make12 specific numbers here, but have you13 tried -- in talking to people -- how many14 people have you -- owners -- I'm sorry;15 occupants of the properties, let's call16 them, have you talked to on this?17

Our interaction18 has been primarily through the receiver19 who is managing the properties. So20 they've actually been handling the21 outreach to the tenants, to the22 occupants.23

And I'm24 sorry. How many -- maybe you said it in25 88 2/17/11 - HOUSING - RES. 1008801 here and I missed it -- properties do you2 have of the Landvest, of the Coyle3 properties?4

There were5 originally 65. There are now 646 properties.7

And I8 mean as Councilwoman Sanchez said a9 little earlier, probably people are not10 going to be able to pay what originally11 you might expect them. Are you sort of12 operating under the assumption that you13 can take those prices down some to try to14 work with these people?15

We will look16 at -- as you mentioned, that each17 situation is different. We will look at18 it and be realistic given the19 circumstances in the market today.20

And,21 again, to say what Councilwoman said,22 there are people here paying rent, so23 they could pay a mortgage obviously if24 it's something that's reasonable that can25 89 2/17/11 - HOUSING - RES. 1008801 be worked out.2 All right. Thank you. Thank3 you, sir.4 Thank you, Madam Chair.5

Thank6 you.7 Councilwoman Sanchez, then8 Councilman DiCicco.9

Go ahead10 first.11 COUNCILMAN DiCICCO: Thank you.12 Just one question, sir. Has13 there been any discussion between your14 bank and any of the CDCs in the15 community?16

There was -- we17 did have discussion and it was over a18 year ago with a CDC, and I don't recall19 which CDC it was. Certainly none of the20 CDCs that were represented today, we've21 not had any interaction with them.22 COUNCILMAN DiCICCO: The reason23 I bring this up, I understand there are a24 number of properties you would like not25 90 2/17/11 - HOUSING - RES. 1008801 to have in your portfolio. How it got2 there and all that, we're going to hear3 testimony. We've been hearing it and4 we'll continue to hear it. But the CDCs5 I think are -- it would be a viable6 option to talk to, because that's what7 they do. They take properties, they8 rehabilitate properties, they find9 suitable tenants.10 So my point is, I don't think11 you have to really look too far but in12 the immediate community to talk to those13 folks and begin to at least have that14 conversation, not knowing what the end15 result will be, but at least begin that16 conversation, because this I see as going17 to be a very long, time-consuming process18 for everyone, and I think -- I'm not19 being too overly optimistic -- there may20 be a way of reducing your portfolio more21 quickly if you can come to some22 agreements with the CDCs, whether it's23 you continue to hold title until the24 property has been rehabbed and they get25 91 2/17/11 - HOUSING - RES. 1008801 the tenant and put all those other things2 in place, again, because that's what they3 do and they do it quite well. I think4 that for the other bankers as well,5 that's something you all might want to6 sit down and discuss.7 The Councilwoman has been way8 out more in front of this than I have9 been, but we'll work together on it and10 we can help you arrange those meetings or11 whatever. I'm sure Councilwoman and I12 would be more than happy to help you.13

Thank you.14 COUNCILMAN DiCICCO: You have15 an aegis, you have an outlet there I16 think that can get this thing moving a17 lot more quickly.18 Thank you.19

We20 certainly received information from one21 of our colleagues who said you were22 willing, your bank, with whom he has a23 lot of experience, and you're really24 willing to work with this community, and25 92 2/17/11 - HOUSING - RES. 1008801 we have no reason not to believe him, and2 we're going to count on you to do that.3 Councilwoman Sanchez.4

Thank5 you. And I want to thank you, because as6 you mentioned, we have met and we've7 talked a little bit about your portfolio.8 You talked about there were some title9 issues that also prompted you to be10 aggressive on this foreclosure. Can you11 say for the record what those issues are?12

There are a13 number of issues outside of municipal and14 utility liens, and I can't say with15 specifics what they are, but it's safe to16 say that there are significant title17 issues. And I think it's an important18 point to make that I know that the word19 "foreclosure" has such a negative20 connotation. In this case, because of21 the extent of those liens, foreclosure is22 really the only route we can take to pass23 clear title, and that includes passing24 title to current occupants of the25 93 2/17/11 - HOUSING - RES. 1008801 properties. We would not be able to pass2 clear title and I don't think any of the3 occupants would want to, quote/unquote,4 own a property that has these title5 issues. So the foreclosure process here6 is really a necessity to pass clear title7 to whomever.8

I'm9 going to be a little bit more aggressive10 than my colleague Greenlee in getting a11 public commitment from you, because we12 had talked about this before when you13 came to meet with me and we talked about14 East River working with us to try to15 create some sort of model outside their16 normal criteria to convert some of these17 tenants into homeowners, particularly18 those who thought they were going to19 become homeowners.20 You've seen what we've done21 with some of the cases. How far are you22 willing to say you're actually willing to23 work with us in terms of creating24 homeownership, real homeownership25 94 2/17/11 - HOUSING - RES. 1008801 opportunities with your 65 -- there's 642 that are in your portfolios, or are you3 also looking like some of the other banks4 is, which is to sell these in bulk?5

We're going to6 look at whatever options make sense for7 us, but I think to directly answer your8 question, we understand that we can't use9 a cookie-cutter residential mortgage10 program in cases like this, and I think11 where -- I think it was mentioned12 earlier, if there is a history of13 consistent rent payments being made on14 time and the opportunity to document15 income, the bank would look at that and16 would not have to -- and would look to17 consider those applicants for mortgage18 financing.19

How many20 of your 64 are currently occupied by21 folks who believe they have title or were22 on a path to homeownership?23

There are two24 claims that are asserted at this point.25 95 2/17/11 - HOUSING - RES. 1008801 There's been discussion on a number of2 others, but I don't know -- the number3 two that we know of for sure.4

How many5 are occupied?6

Approximately 25,7 between 25 and 30.8

Has9 anyone from the bank attempted to talk to10 those tenants currently there? Is there11 communication?12

Communication13 is --14

Other15 than collecting their rents.16

The communication17 is through the rent receiver.18

So the19 bank has not gone through a formal20 process of engaging their tenants for any21 discussions of potential homeownership22 for the 25 that are occupied?23

The bank -- the24 tough part here is, the bank doesn't own25 96 2/17/11 - HOUSING - RES. 1008801 the properties, and that's -- we're one2 step removed from that. So the bank3 doesn't own the properties, but certainly4 if information was provided to the bank5 that there was interest in owning the6 properties, certainly we would consider7 that.8

What9 criteria would you use? One of the10 issues we had in the first batch was the11 value of the properties that the bank12 insisted on giving for those that became13 homeowners in some cases exceeding the14 actual fair-market value of the property.15 How is Nova going to look at that?16

We would look at17 current value of the property.18

Would19 any considerations be given for the sweat20 equity or any history of the tenants that21 were in the properties? You have some22 cases and we heard Mr. Kennedy say he23 paid $24,000 before he thought he was24 going to settle up. Is the bank going to25 97 2/17/11 - HOUSING - RES. 1008801 make any consideration for those?2

The short answer3 to that is yes. I think that's part of4 as much the qualitative consideration to5 how committed the occupant or the tenant6 would be toward the property.7

So you8 would do -- and I hate to say this this9 way. You would do a current appraisal,10 not a drive-by appraisal, not a -- as11 we've been debating, these tabletop12 appraisals. A real appraisal for the13 current value of the property?14

We would look at15 a full appraisal of the property.16

Okay.17 Going back to the point my colleague18 Frank DiCicco made, I think that there19 are some opportunities for the bank to20 release some of these properties off of21 their portfolio through the Community22 Reinvestment Act, so that if you're not23 going to recoup your full value, which24 clearly I think after today's testimony25 98 2/17/11 - HOUSING - RES. 1008801 and based on the history, that's not2 going to happen, but there are other ways3 for you to capture some of those losses4 through Community Reinvestment Act,5 through the work of the CDCs. So I6 strongly encourage you.7 You mention that you're having8 some difficulties in obtaining some9 payoff numbers from the City. We will10 work with you with those with the City.11 And I understand since we've just come12 off an amnesty program, we have several13 different entities engaged in that, but14 our office will commit to facilitate some15 real payoff numbers for you for those16 properties, and we'll start off with the17 two where there's an explicit interest in18 a homeownership.19 As I expressed to you and I've20 expressed to any of the banks who have21 listened to us, I think the City is22 committed to use its lien position on23 some of these where there's a24 homeownership opportunity to work with25 99 2/17/11 - HOUSING - RES. 1008801 the banks, but clearly, we're not going2 to wipe off debt for the banks to recoup3 their money. We will if you're working4 with us on creating a homeownership5 opportunity, but not for your bottom6 line. So, I mean, I think we're willing7 to continue and are willing to do that.8 But our office will facilitate some of9 those payoffs for you.10

Thank you.11

Thank12 you.13

Any14 further questions?15 (No response.)16

Thank17 you both very much.18 (Thank you.)19

Thank20 you.21 Our final panel, Administration22 panel, Bridget Greenwald, Managing23 Director's Office; Deb McColloch, OHCD;24 Michael Koonce, RDA; Otis Haigler, L&I.25 100 2/17/11 - HOUSING - RES. 1008801 I see John Carpenter here. Thank you.2 We're happy to have you all, and3 certainly we invite you to come forward,4 introduce yourself for the record and5 then begin your testimony.6 Thank you very much.7 (Witnesses approached witness8 table.)9 MS. McCOLLOCH: Good afternoon.10 I'm Deborah McColloch, Director of11 Housing.12 I do not have prepared13 testimony for you today. We're really14 here to try to answer questions and have15 a dialogue about how we can help folks16 here. Clearly, I'm very sympathetic to17 everything we've heard here today. I18 have been working with the Councilwoman19 and her staff on this knotty problem for20 over a year now, and it's very difficult21 to see the path through which we can move22 to try to assist folks beyond some of the23 things we've already done, which have24 been mentioned here before in terms of25 101 2/17/11 - HOUSING - RES. 1008801 providing housing counseling services,2 working with the CDCs to reach out to3 folks so that we can try to assess what's4 the situation with each of the individual5 properties.6 This is fundamentally a7 private-market transaction that we're8 trying to figure out where's the9 appropriate intersection between that and10 the resources that we have, which are11 existing programs. As Steve Culbertson12 testified, we attempted to do that in one13 case. That didn't work because the bank14 was unwilling to accept the appraised15 value for the property, so we couldn't16 pay more than that. As Sandy Salzman17 testified, we've been working to18 providing housing counseling services19 through our housing counseling agencies.20 So we're trying to provide the21 assistance that we have and work with you22 to figure out what would be the23 appropriate next steps.24

We'll25 102 2/17/11 - HOUSING - RES. 1008801 take all your testimony first. Is there2 any other testimony you'd like to make?3

I'm Otis Haigler,4 Jr., Director of Legislative Affairs for5 the Department of Licenses and6 Inspections.7 I don't have any prepared8 testimony as well. I'm here to answer9 any questions. I've been listening to10 the testimony that's been given earlier,11 and we'll try our best to answer whatever12 questions we can.13

Thank14 you very much.15 Mr. Carpenter.16

My name is John17 Carpenter. I'm the Deputy Executive18 Director of the Redevelopment Authority19 of Philadelphia.20 I do not have prepared comments21 either, but I'm here -- I've been part of22 some conversations about this over the23 last year and a half. It seems like a24 very difficult problem. We have tried to25 103 2/17/11 - HOUSING - RES. 1008801 find a way to work with this through the2 Neighborhood Stabilization Program. Like3 Deborah said and Steve said, we haven't4 found an effective way to engage that5 program in this effort, but we're happy6 to engage in the conversation today.7

Thank8 you very much.9 Councilwoman Sanchez.10

Thank11 you.12 One of the issues for L&I, for13 Otis, that was brought up by Judge Moss14 was the issue of the potential15 verification of the worksheets and the16 renter's license. Is this a reasonable17 request for us to be able to ask L&I to18 work through these and verify these for19 the courts?20

Absolutely. I21 don't see that there's a problem there.22 An issue with license and falsifying23 documents, that's a serious issue, and we24 need to look into that, and I don't see a25 104 2/17/11 - HOUSING - RES. 1008801 problem for L&I to work through and look2 through their records to make sure that3 those licenses are in fact either valid4 or if they're not valid, we bring it to5 the attention of the appropriate6 authority.7

So8 there's 215 in question right here. What9 is a reasonable time period in light of10 the fact that some people may be facing11 eviction, and as the Judge alluded to, we12 want to make sure that no one is13 improperly being evicted from their14 homes. So what's a reasonable timeframe15 for you to verify these? There's 215 of16 them in here.17

Two hundred and18 fifteen. It's a computerized process, a19 computerized generated license process.20 I don't see a lengthy time period. I21 can't really -- because I'm here, and I22 don't know what the resources are of the23 unit that would have to look into this.24 I will bring it back to the Commissioner,25 105 2/17/11 - HOUSING - RES. 1008801 and I would suspect that this will be2 looked into expediently.3

Before I4 get to that one, because we do want to be5 able to report back, one of the things6 that concerns us -- and it came up, I7 think, at one of the attorney's8 testimony -- was the level of discretion9 L&I has around issuing some of these10 licenses where we're suspecting some of11 the issues with these licenses.12

Well, from what I13 understand, there were some issues as far14 as whether or not the validity of those15 licenses. There's questions about the16 validity. So I don't even know if L&I17 was even involved in any way --18

How19 about in terms of -- when we issue a20 renter's license, the inspection is21 conducted prior. L&I has to conduct22 inspections of when it issues some of23 these renters' licenses.24

No, we don't.25 106 2/17/11 - HOUSING - RES. 1008801 Licenses, when we issue a license, that2 is an inferred or implied agreement that3 you have with the City as the landlord4 that you will abide by whatever the code5 requirements are. We don't inspect every6 single -- there's 60,000 rental7 properties out there. We can't possibly8 inspect every single rental property9 prior to the issuance of a license. When10 we get complaints, we go out and11 investigate the complaints on a12 particular property, and we would cite13 the property owner accordingly in14 accordance with whatever violation of the15 code there is. We have to work that16 through the court process. If in fact17 the violations were so egregious, we18 would seek to revoke or suspend that19 license.20 But, as you know, even with the21 taking of a license doesn't mean that it22 will stay taken. The person would afford23 themselves the right to appeal that24 situation to either an administrative25 107 2/17/11 - HOUSING - RES. 1008801 board or they could appeal directly to2 the Common Pleas Court, in which case if3 there's a court order or an injunction,4 then we would have to abide by the court5 order or injunction.6

Because7 there were so many of these renters'8 licenses in a particular name, when you9 have massive complaints with a particular10 person who has a renter's license, at11 what point do you say, Wait a minute,12 there's a pattern?13

If we receive a14 complaint, especially if it's a systemic15 complaint about a particular person who16 owns several properties, we would17 institute whatever necessary procedure18 that we have in place to bring that19 person in. We have to conduct an20 administrative hearing first prior to21 taking that license. So, again, because22 once you take the license, the person can23 further go with whatever proceedings they24 have to go through to get that license25 108 2/17/11 - HOUSING - RES. 1008801 back. So we have to make sure that we do2 everything, cross our T's and dot our3 I's, because, again, there has to be a4 record as to what steps we took prior to5 taking that license. We would go through6 the administrative hearing process. If7 we find that the case is warranted, we8 would suspend, revoke the license. And,9 again, if the person afforded themselves10 the right to appeal that, we would wait11 for the judgment of either the courts or12 the board that will hear that appeal.13

And what14 triggers that? One of the things that15 we've been talking about today, there's16 been so many of these, and when we look17 at the cases, is that by policy? Who18 makes the determination that we have a19 bad landlord out there?20

Well, in this21 case, like I said, there's -- like I22 said, I've listened to all the testimony,23 and there seems to be some questionable24 issues related to whether or not there's25 109 2/17/11 - HOUSING - RES. 1008801 a landlord-tenant relationship here,2 there's an ownership relationship here.3 There's a lot of murkiness about whether4 or not there's really any -- a lot of5 these things have even come to our6 attention as part of a rental property7 issue as opposed to some other issue.8 There's a lot of questionable issues9 about who owns these properties and10 whether or not persons who thought they11 might have owned the property might have12 complained to us.13

Excuse14 me one moment.15 Rob Hess, who was head of our16 Office of Housing and Supportive17 Services, our homeless services, is18 certainly here. He's sneaking around in19 this hall, and we have to acknowledge20 him. He went to New York to head their21 Welfare Department, and now he's with22 Ready, Willing and Able.23 Always a pleasure to see you.24

Thank you,25 110 2/17/11 - HOUSING - RES. 1008801 Councilwoman.2

Thank3 you. Thank you.4 Excuse me.5

So, like I said,6 if the issues are brought to our7 attention, then we would address it8 immediately. We have a policy to inspect9 properties within a certain timeframe.10 It's not that long. It's within a week.11 We would cite the property owner for12 whatever the violations are. Then we13 would have to give them a reasonable time14 period to correct those violations. If15 they don't correct it, then we have16 another policy that we would do a17 reinspection. At the end of the final18 inspection that we would do on the19 property, if the property still hasn't20 been corrected after the third21 inspection, then we would send that case22 to court for prosecution.23

No, no.24 I'm aware of your process. I'm just25 111 2/17/11 - HOUSING - RES. 1008801 thinking from a policy perspective, at2 what point in L&I does something trigger3 there's a pattern here, if we have the4 capacity to do that? So, again, if you5 have five or six or seven properties and6 one name that are being inspected because7 of some of the same pattern of8 violations, is that too open-ended in9 terms of when L&I proceeds to --10

I believe it is.11

I want12 to acknowledge Bridget came in.13 (Witness approached witness14 table.)15

I'm16 trying to figure out, just because this17 particular caseload seems so egregious,18 that at what point is the pattern19 connected, other than someone openly20 saying, Robert Coyle is a slumlord in21 Kensington, can somebody do something22 about it?23

Hello. Sorry24 for being late. I was in another25 112 2/17/11 - HOUSING - RES. 1008801 meeting.2 Bridget Collins-Greenwald with3 the Managing Director's Office, but I was4 formerly the Deputy Commissioner of L&I5 in the Operations Division.6 I believe your question is when7 would we notice a pattern if there was a8 slumlord, quote/unquote? Is that what9 you said? The way the system is set up10 right now in the L&I database, actually11 there is no way to actually coordinate12 something with a unique identifier, such13 as a name. The way things that are put14 into the database now, it could be J.15 Coyle, Joe Coyle, Coyle, Coyle16 Incorporated. You know what I mean?17 Depending on how the data entry went in18 depends -- is how it went in. So there's19 actually no way to coordinate.20 Now, what L&I is doing going21 forward, though, is every license is22 going to be tied to the business23 privilege tax number. So this situation24 going forward should not happen. But,25 113 2/17/11 - HOUSING - RES. 1008801 unfortunately, it did happen in the past,2 because if you keep using these different3 names, it's kind of hard to hit a moving4 target type of deal. That's what5 happened in this case.6

That's7 what I wanted to get to, the fact that we8 didn't have a mechanism of tracking this,9 but moving forward, so we will be able to10 track this. What's the trigger point?11

The trigger12 point -- well, the unique identifier will13 be -- it's not in place yet, because this14 is a technology priority of Commissioner15 Burns -- is to have everything connected16 at a business privilege tax number. So17 once we get that and once L&I would get18 that and police, then if you would start19 to see patterns, you could do queries off20 of that tax number and you could see --21 which in turn would be off of that22 business privilege license, which in turn23 would go down to the housing inspection24 licenses and so on, and that could25 114 2/17/11 - HOUSING - RES. 1008801 trigger, Okay, this tax number has this2 many violations. What you could run the3 query on is, Give me all the tax4 identification numbers that have over a5 certain amount of violations, and then6 you could go from there.7 So I don't know exactly what8 the threshold would be right now, but I9 would assume that would be a good start,10 and that's exactly what we were talking11 about before when I was still in L&I. So12 I think that's definitely the way Fran13 would continue.14

Okay.15 Thank you.16 One last thing, and I know my17 colleague wants to ask some questions.18 How much does it cost us to conduct an19 inspection from L&I?20

I would have to21 say that depends on the type of22 inspection. An average inspection we23 would say takes approximately 30 minutes24 to an hour for a good inspection. A25 115 2/17/11 - HOUSING - RES. 1008801 property maintenance inspection, which2 would occur in this place, a housing3 inspector makes probably $35,000 a year.4 A few hundred dollars. I mean, I could5 definitely get you a better number on6 that, but a few hundred dollars, I would7 say, including fringe and all.8

How much9 does it cost us to do a clean and seal?10

About a11 thousand dollars.12

About a13 thousand dollars?14

Yeah.15

And then16 when we take someone to Equity Court,17 after we do the reinspect, the 30-day18 reinspect and then we go to Equity Court?19

We have to factor20 in whatever the Law Department's costs21 are, their attorneys that would represent22 us in Equity Court, and any other23 administrative costs we would add to24 that.25 116 2/17/11 - HOUSING - RES. 1008801

There's an2 administrative fee that's tacked right3 on, a 21 percent administrative fee that4 goes on automatically. And then whatever5 abatement costs or whatever, the cost of6 the equipment goes on there, whatever the7 actual personnel costs go on there, any8 supplies that were used go into that9 bill. And then if it's for a demolition,10 it's the contractor's costs, plus the 2111 percent.12

Which is13 about $19,000, right, 17 to --14

Seventeen.15 COUNCILWOMAN SANCHEZ:16 Seventeen to 19,000.17 My point with this is, it's18 fair to say we could easily spend $1,50019 on each one of these properties if we do20 nothing?21 Don't all of y'all speak at the22 same time.23

It's something to24 think about. I don't --25 117 2/17/11 - HOUSING - RES. 1008801

No, I2 don't want to think about it. I want to3 talk about it, Otis.4

I don't know if I5 could definitely say that on the record.6

Yeah. I don't7 know. I wouldn't want to commit to that,8 because actually we wouldn't -- not every9 property does need to be cleaned and10 sealed, as you know. Some of them would11 be in that situation. Some of them would12 remain vacant, but structurally sound and13 they would have their windows and doors,14 but they would just remain vacant. Not15 that I'm making light of it being vacant,16 but you may not have to take any kind of17 abatement action towards the property.18

Correct.19 Correct.20

Okay.21 And that's an important point, because I22 think when we talk about the seriousness23 and the impact -- and I think that's what24 the CDCs were alluding to -- is, we need25 118 2/17/11 - HOUSING - RES. 1008801 to make some investments now or later.2 As Chair of L&I, I hate for us to think3 about it as later, just because I know4 that that's one of the budgets that has5 continuously been cut, and these are the6 issues that impact them. But just I7 think it's an important figure to keep in8 mind if we do nothing and if the banks9 are not responsible partners in this. So10 I'll leave it at that.11 Councilman Greenlee.12

Thank13 you. Thank you, Councilwoman.14 I have a question along the15 same lines as far as the license, the16 rental license, if somebody applies for17 that. Is there a cross-check to see if18 there's violations on that property?19

Yes. Yes.20

There is?21

Yes.22

So a23 person should not get the rental license24 if they have violations?25 119 2/17/11 - HOUSING - RES. 1008801

No.2

They should3 not, no.4

Now, I5 know that may not pertain here, because,6 as you said, Otis --7

Especially for8 license renewals. I know that for a9 fact. If there's a license renewal that10 would come up, it would automatically11 kick out that license as a flag on it for12 violation. Now, you would have to look13 at the specific violation, because some14 issues are more egregious than others. I15 mean, would you hold up a person's16 license for something very minor,17 because --18

No. I19 understand.20

-- anything could21 be a violation on a property.22

But I'm23 particularly thinking when it comes to24 rental license, if there's housing25 120 2/17/11 - HOUSING - RES. 1008801 violations, that says something right2 there, should they be renting if there's3 already violations on the property. So4 there is that cross-check?5

It does flag it6 and it actually will not send you the7 renewal notice. You would have to come8 to L&I and remedy that violation, and9 then you could get your housing license.10

That's correct.11

Renewal12 license, but how about when you apply the13 first time?14

When you apply15 the first time --16

Nobody really17 does an inspection or pre-inspection18 prior to the issuance of the license,19 because, again --20

No, but21 there could be already housing violations22 on that property before they apply for23 the license, right?24

Well, there could25 121 2/17/11 - HOUSING - RES. 1008801 be, and if there is, I don't think that2 there's any particular --3

I thought4 that. That's where I was getting at. I5 thought there was a regulation on that.6

There used to7 be that Certificate of Rental Suitability8 that was out there when you went and9 applied for the first time, and then any10 time you changed tenants, you were11 supposed to come to the Department of12 Licenses and Inspections and get the13 certificate. That's held up in court14 somewhere. So now, believe it or not,15 it's on a voluntary basis. You could16 come in as a landlord and voluntarily get17 it.18

And that was19 self-certification. That wasn't20 something where there was anything that21 the Department had to affirmatively do22 prior to issuing the license. That was23 your certifying that your property was24 suitable to rent based on the fact that25 122 2/17/11 - HOUSING - RES. 1008801 you had no serious violations on the2 property.3

No. I4 was more referring to the rental license.5

Well, that is6 part of the rental license process.7

Okay.8 And I know in this case, it might not9 have saved a lot, because it sounds like10 a lot -- there's a real question on the11 validity of the license to start with,12 but I was just wondering general policy.13 Okay. Thank you.14 Thank you, Madam Chair.15

My16 question is, given the fact that you're17 coming here and given the fact that there18 is this community and this neighborhood19 problem, what then is the City's housing20 department plans going forward for this21 area?22 MS. McCOLLOCH: At the moment,23 we don't have a specific plan. We're24 continuing to work with the25 123 2/17/11 - HOUSING - RES. 1008801 Councilwoman's office to analyze what the2 situation is for these properties. As we3 say, the numbers even we've heard today,4 different people have given us different5 numbers of how many properties are6 included in this whole array, and we have7 to really analyze. As the attorneys from8 CLS testified, there's some folks who9 have some ownership interest, and then we10 have to figure out do those folks want to11 buy those properties, are they living in12 the properties. There's some folks who13 think they have ownership interest, but14 they may not. There's some people who15 are tenants. There's some set of16 properties that are vacant now.17 We need to work with the18 Councilwoman's office to do that analysis19 and see what's the situation with the20 properties and then try to figure out21 some strategy to help them. The biggest22 problem is that they're not in City23 ownership, and if folks don't have title24 to the properties, even those programs25 124 2/17/11 - HOUSING - RES. 1008801 that we have that could otherwise assist2 people, if they're not in title, those3 programs -- they're not eligible for4 those programs.5

Well,6 certainly going forward as we approach7 our housing agenda and our City agenda8 for housing, even though we don't know9 what those dollars will be, we certainly10 look forward to -- this afternoon we11 intend to recess this hearing, but we12 want to be available to at least when we13 have our housing hearings to get some14 kind of follow-up on just what's15 happening in this neighborhood from the16 Councilwoman and from Councilman DiCicco17 so that we know.18 It's our job to keep hope alive19 by having positive programs to help20 people who are victimized, as these21 people are, unfairly. And so it's our22 job to try to come up, as their City23 leaders, to come up with a plan. So24 we're committed to that, and we'll look25 125 2/17/11 - HOUSING - RES. 1008801 forward to the Councilwoman of this area2 letting us know where we are so that we3 can have some positive plan before our4 fiscal year is out.5 Is that satisfactory,6 Councilwoman?7

Yeah.8 Let me just --9 MS. McCOLLOCH: I think one of10 the keys is the example that was given, I11 can't stress enough, that if the bank is12 unwilling to sell the property for less13 than the value that it has, for less than14 its loan, we're not going to be able to15 solve this problem, because the City will16 pay the appraised -- may be able to, if17 we could figure out some strategy, the18 appraised value. But the example that19 was given that Steve Culbertson gave of20 having -- there were only nine in that21 case, but that would be nine more than we22 had before. We were prepared to invest23 in those nine, and the bank was unwilling24 to take the appraised value for the25 126 2/17/11 - HOUSING - RES. 1008801 properties. And so if we can't negotiate2 that kind of a deal, we're going to3 really be stuck.4

And I5 think, again, we didn't expect to come6 out with all the answers here today, but7 I think the lack of participation from8 the banks, it's evidence that we are9 going to have to get a little bit more10 aggressive as the City and our lien11 position, since these properties12 technically almost all are owned by us13 given their water, tax, PGW liens. I14 think the message today is, as a city,15 we're going to have to be more aggressive16 with them to take -- in some cases using17 our condemnation power -- to take some of18 these properties and do right by the19 people, because the banks may not be20 willing to. And I think up to now, we've21 been trying to work with the banks. We22 will continue to work with the banks, but23 clearly, the next steps -- and our office24 would be happy to lead the initial25 127 2/17/11 - HOUSING - RES. 1008801 discussions, but the City is going to2 have to look at its NTI potentially, City3 significance portion, but definitely our4 lien positioning to tell the banks,5 You're either going to do right by people6 or we're going to take these properties7 and do right by people. And I think8 that's where we are today, and that's why9 we're even having these hearings, because10 they have been reluctant, partly because11 they don't know what to do with this.12 This is unheard of, and I think Deborah13 has been very open and willing, and even14 with all her years of experience, she has15 never seen anything as drastic as this.16 But clearly, we're going to now have to17 play the lead role, because the banks are18 not going to.19 I think to the extent that Nova20 and others are willing to continue the21 discussion is one thing, but I would22 hope, Madam Chair, that as we recess23 these hearings, that we schedule a24 follow-up, and that in the interim, we25 128 2/17/11 - HOUSING - RES. 1008801 could probably reconvene the discussions2 between RDA, CLS, OHCD and our office to3 see if there is an opportunity in4 partnership with our CDCs through NTI to5 make some blocks whole and to keep some6 people in their homes. And we're not7 going to be able to wait anymore, and I8 think that's where we are now.9 I cannot even imagine what10 would happen in April if some of these go11 to foreclosure and these banks turn12 around and sell these properties to some13 New York investor or some holding14 company, who is even less interested in15 what happens in Kensington.16 So that is my ask for the17 Administration. That is my ask for my18 members of the Housing Committee, is that19 we provide leadership here. I mean, this20 is about providing leadership and taking21 this incredible monster -- it's like an22 octopus. It has a lot of legs. But I23 have all the faith that we have the24 ability to bring some resolutions to some25 129 2/17/11 - HOUSING - RES. 1008801 of these problems. And while we won't be2 able to take care of everybody, we should3 be able to take care of quite a few,4 again, in collaboration with our CDCs.5 So I am going to ask that we6 reconvene that discussion and we begin to7 work through some of these issues with8 our CDCs immediately and come up with a9 plan and try to pilot some things quickly10 to see if we can entice the banks into11 doing the right things.12 But I'm not going to sit around13 any longer and wait for the banks to do14 the right thing by my constituents and by15 the City of Philadelphia.16 Thank you, Madam Chair.17

Well,18 let me thank all of you. Unless there's19 someone else we haven't called on who20 would like to testify, let me thank all21 of you for your participation, for your22 patience, for being here, those on the23 panel as well as those who have come who24 are interested in this issue. Certainly25 130 2/17/11 - HOUSING - RES. 1008801 we commit, the Housing Committee, to2 doing everything we can to be part of the3 solution certainly in this massive4 problem.5 Thank you all, and this hearing6 is recessed subject to the call of the7 Chair.8 Thank you.9 (Applause.)10 (Committee on Housing,11 Neighborhood Development and the Homeless12 recessed at 3:05 p.m.)13 - - -14 15 16 17 18 19 20 21 22 23 24 25 131 1 CERTIFICATE2 I HEREBY CERTIFY that the3 proceedings, evidence and objections are4 contained fully and accurately in the5 stenographic notes taken by me upon the6 foregoing matter on February 17, 2011, and7 that this is a true and correct transcript of8 same.9 10 11 12 13 --------------------14 MICHELE L. MURPHY15 RPR-Notary Public16 17 18 19 (The foregoing certification of this20 transcript does not apply to any reproduction21 of the same by any means, unless under the22 direct control and/or supervision of the23 certifying reporter.)24 25