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In Ohio, a fresh approach to help struggling homeowners

ESOP works by acting as a good-faith liaison between mortgage lenders and borrowers, helping people who are straining to pay their mortgages stay in their homes.

By Rachel Signer, Dowser.org / January 19, 2012

A house is reflected on the screen of a discarded television in Beach City, Ohio, south of Cleveland. ESOP, an Ohio foreclosure-prevention counseling agency, helps strike deals between mortgage lenders and struggling homeowners that benefits both parties.

Eric Thayer/Reuters/File

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In 2010, when Antonio Martin, a 36-year-old husband and father of three who lives in a suburb of Cleveland, was laid off from his job at a Verizon retail store, he could no longer afford his $1,132 monthly mortgage payments.

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This is no longer a unique position in the United States. “Home values have dropped so far, so fast, that nearly 25 percent of mortgage holders today owe more than their house is worth,” reported a recent episode of "60 Minutes."

Martin had previously struggled with his mortgage, years ago, when he found that the adjustable-rate loan he had taken on was making his payments skyrocket.

The organization ESOP (Empowering and Strengthening Ohio’s People) had helped Martin renegotiate that loan. Now, unemployed and in fear of losing his family’s home, he turned to ESOP again.

The result, after Martin enrolled in a principal reduction modification loan from Ocwen Financial Corporation, was that his mortgage payment went down to $640 per month. On top of that, the principal loan on the house – which is rapidly depreciating in value – will be reduced by $34,000 each year for three years, for a total reduction of $112,000.

“I went to ESOP and filled out the packet for the loan-modification program offered by the Obama administration – we had to try that first. But I didn’t get approved for that, for some reason. Then ESOP told me that they would approve me for a modification to my loan,” Martin explained to Dowser. “It was pretty simple because the relationship that ESOP has built with these loan companies – working with them on behalf of homeowners – makes the process easier. This is the easiest process I’ve gone through in dealing with the loan companies.”

The Obama administration created the Home Affordable Refinance Program (HARP) to help underwater homeowners, but not all who need assistance are eligible (such as Antonio Martin).

ESOP is charting a new path for helping underwater homeowners by striking a deal with the lenders that benefits all parties.

ESOP is an Ohio-based HUD-certified foreclosure-prevention counseling agency. It works by engaging loan servicers or lenders and borrowers, and acting as a good-faith intermediary between the parties.

There are two unique aspects to ESOP’s work: one is how it holds lenders accountable, using a “tough love” approach and having a strict policy regarding homeowners’ compliance to information requests. The other is getting large companies (including Bank of America, CitiMortgage, Ocwen Financial Corporation, and Litton Loan Servicing) to see the element of human experience behind all the paperwork of a mortgage.