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HUD-approved counseling program puts homeowners at risk – opinion

While the federal government advises against any entity advising borrowers stop making payments in order to get a loan modification, one HUD-approved counseling program is doing just that.

Enter the crazy season on the North Coast

ESOP, Empowering and Strengthening Ohio’s People, is a HUD certified counseling agency focusing on foreclosure prevention program for homeowners. They also participate in neighborhood, and state-wide advocacy programs regarding predatory lending and foreclosures. Unlike other HUD-approved counseling agencies such as NID however, ESOP does not have any programs for buyers, homeownership in general, budgeting, rental assistance, or information on reverse mortgages. 

As of last week, ESOP is “encouraging” and “urging” homeowners in Ohio with negative equity to go on a “mortgage strike.”

ESOP would like the 39% of underwater homeowners in Cuyahoga County (their stats are from not individual appraisals) as well as those state-wide, to place their monthly mortgage payments with a lawyer, in an escrow account, instead of paying their lender/servicer directly. The monthly mortgage payments would be held by a lawyer of ESOP’s choosing, who has promised to verify the interest and principal to the servicer, but there is no mention of how PMI would be handled. Property taxes and homeowners insurance would become the owners’ responsibility to pay separately.

The basis for this bad idea

While, the basis for this (bad) idea is rooted (kind of) in the Ohio Revised Code, (ORC 5321) it is actually landlord/tenant law, not mortgagee/mortgagor law. It basically says both the landlord and tenant have certain obligations in addition to those set forth under the lease agreement. 

If said obligations are not being met, (tenants need to keep things safe & sanitary, operate electric & plumbing properly; landlords need to comply with health, building, and safety codes, etc) the tenant can give notice, in writing, specifying which acts aren’t being met and deliver the notice where rent is usually paid. If the landlord doesn’t fix things within a reasonable time frame, the tenant can begin to deposit rent with the county or municipal court in an escrow account, until a remedy is made, or the lease is broken. 

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During this process, tenants cannot be evicted while making payments to the escrow account. This is the short version of how it works; there isn’t anything in the ORC pertaining to mortgage payments, i.e. pissed off homeowners trying to retaliate because they haven’t gotten a principal reduction or a loan modification.

Why would a HUD-approved agency promote this?

HUD approved counseling agencies have done wonders for homeowners, for buyers, and for financial education. When it comes to foreclosure prevention, they are, and should be the link, the buffer, and trusted source for the homeowner. Never should a HUD approved counseling agency be giving crap advice, such as not paying a mortgage, or going on “mortgage strike,” a term and action that doesn’t even exist. 

The CFPB themselves recommends reporting anyone who tells a borrower to stop making their payment in order to get a loan modification. 

What ESOP is suggesting now, is total BS, and will only cause damage to homeowners. By not making their mortgage payments, owners will suffer negative marks to their credit, rack up late fees, and most likely launch them into the foreclosure process, and that usually doesn’t have a fairy tale ending.

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Written By

Katie Cosner, occasionally known as Kathleen, or KT, is a Realtor® with Cutler Real Estate and is active in her local Board of Realtors® on the Equal Opportunity & Professional Development Committee. She has been floating around online for a number of years, and is on facebook as well as twitter. While Katie has a few hardcore beliefs, three in the Real Estate World to live and die by are; education, ethics, and the law - insert random quote from “A Few Good Men” here. Katie is also an avid Cleveland Indians fan, which really explains quite a bit of her… quirks.



  1. PiedmontHousing

    October 8, 2012 at 4:48 pm

    @JimDuncan PHA adheres to the National Standards and would not advocate any rental programs to a homeowner!Our clients-extremely successful.

  2. PiedmontHousing

    October 8, 2012 at 4:53 pm

    @JimDuncan PHA 2011 Housing Counselors help preserve: Albemarle County $5,203.300! These residents did no lose their homes to foreclosure!

  3. PiedmontHousing

    October 8, 2012 at 4:55 pm

    @JimDuncan 2011 Housing Counselors helped preserve: Charlottesville $1.685,100. These residents did no lose their homes to foreclosure!.

  4. PiedmontHousing

    October 8, 2012 at 4:55 pm

    @JimDuncan 2011 Housing Counselors helped preserve: Fluvanna $2,533,500. These residents did no lose their homes to foreclosure!.

  5. PiedmontHousing

    October 8, 2012 at 4:57 pm

    @JimDuncan 2011 Housing Counselors helped preserve: Louisa $2,073,200. These residents did not lose their homes to foreclosure!.

  6. PiedmontHousing

    October 8, 2012 at 5:02 pm

    @JimDuncan 21 new first time homebuyers for 11/12. 17 of them received downpayment $! Our Counselors know how to get them in and to stay in.

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