A Cleveland Charity’s Fighting Spirit Helps Stem a Tide of Foreclosures

Mount Pleasant hasn’t lived up to its name in decades. The once-vibrant neighborhood of hulking wood-frame homes in this city’s southeastern corner has long been ravaged by blight, drugs, and joblessness.

But it’s been hit especially hard in just the past few years by crime and by foreclosures. About 15,000 people a year have left the Cleveland metropolitan area in the past decade—a rate of abandonment that nationally ranks second only to parts of post-Katrina New Orleans.

Anita Gardner nearly joined the exodus. But three years ago, she made her way from her Mount Pleasant home to a local charity for help dealing with her subprime mortgage, which was about to go into foreclosure. After getting her loan modified, organizers at the nonprofit that assisted her—Empowering and Strengthening Ohio’s People, best known by its acronym, ESOP—encouraged her to get out and meet her neighbors.

The result is Mount Pleasant Concerned Citizens, a group of activist volunteers who knock on doors, talk to residents about the problems they’re facing, and work on solutions. The neighbors have persuaded police to shutter a drug house in the neighborhood and increase foot patrols. They won the commitment of a housing-court judge to look at ways to get rid of long-vacant homes and to curtail the “flipping” of decaying properties from one out-of-town speculator to another. And they have fought an outpatient mental-health facility that they say would get most of its patients from outside Mount Pleasant.

ESOP “helped me help myself and my neighbors,” says Ms. Gardner, who recently became its treasurer. The organization’s founder, Inez Killingsworth, says Ms. Gardner, “taught me how to find my voice and to use it to speak for myself.”

A Scrappy Approach

Under Ms. Killingsworth’s leadership, ESOP has hatched a method for connecting neighbors who are tired of watching their neighborhoods wither. The organization persuades people who seek the help of its foreclosure-relief program to work to save not only their homes but also their neighborhoods.

That method is resolutely confrontational, scaring off some grant makers and other potential supporters.

Yet the implosion of the economy has not only increased the number of households that need ESOP’s help, say some observers, but also vindicated its scrappy approach.

The group’s work here and in other distressed parts of Ohio has earned Ms. Killingsworth a 2010 Purpose Prize, an award given by Civic Ventures, a think tank in San Francisco that encourages older Americans to do good works. A former janitor in Cleveland schools, Ms. Killingsworth, 72, was one of 10 winners over age 60 who were recognized for bringing innovation to bear on solving social problems. She was also one of five winners this year to receive the top prize of $100,000.

Her organization is thriving: In the past three years, ESOP has opened 10 more offices throughout Ohio, allowing the group to aid 8,000 tenuous mortgage holders statewide. In four out of five cases the charity takes up, lenders reduce interest rates and eliminate or lower penalties for getting behind on mortgages.

“It’s unfortunate to say, but we’re doing better now because of others’ misery,” says Ms. Killingsworth. “We’ve hired people who have been foreclosed on.”

ESOP now has a staff of 50—up from only a handful a mere five years ago—and will likely hire 15 more within the next year. Its budget sits at $2.4-million, much of it from grants from the very banks ESOP has cajoled and harassed into cleaning up their messes.

‘Where Are the People?’

Ms. Killingsworth formed ESOP in 1993 after winning some battles against stray dogs and long-vacant housing in Union-Miles, the Cleveland neighborhood where she and her husband raised five children. Started as the Education/Safety Organizing Project, and then morphing into the East Side Organizing Project, ESOP initially fought to relieve overcrowding in public schools and address neighborhood safety issues.

But the organization struggled. For years, ESOP lacked financial support, employing only one organizer. Because of its in-your-face tactics—angry protesters once staked out the home of the girlfriend of Cleveland’s mayor, for example—ESOP lost grant makers that had supported it early on, including the Rockefeller Foundation, in New York, and the George Gund Foundation, in Cleveland.

During much of the 1990s, the group’s tiny staff fought redlining, the practice of limiting services, including banking, in low-income areas. African-American neighborhoods have been hit especially hard, Ms. Killingsworth says, preventing many creditworthy people from buying homes. “You couldn’t buy a house if you were black,” she says. “You’d go to the bank and they’d tell you that you had enough credit to buy a Cadillac.”

But by redlining neighborhoods, banks created a vacuum that was eventually filled by predatory lenders and mortgage brokers. Bigger banks, eager to bundle the resulting shaky home loans together to sell to investors, tacitly encouraged bad practices that tore apart many lives—and neighborhoods.

“We started to see it in around 2000, when people stopped coming to community meetings,” says Ms. Killingsworth. “We’d ask, ‘Where are the people?’ We knocked on doors and saw that people were having a hard time with their mortgages.”

Ms. Killingsworth and Mark Seifert, ESOP’s longtime executive director, began to devise ways to help them. First, the group organized aggressive protests at the homes of lawyers who worked for lenders that it considered predatory, such as Fairbanks Capital. ESOP activists would throw plastic toy sharks on lawyers’ lawns to symbolize what they thought of the loans.

ESOP also gave tours to some banks or loan-servicing companies to show them what their practices were doing to neighborhoods. In 2007 the group took executives from Countrywide Financial Corporation through streets pockmarked by abandoned homes and successfully persuaded them to sign a memorandum saying the company would stop pushing subprime loans in the area.

Two years ago, Ms. Killingsworth testified before Congress about banks and the fissures they were tearing open in communities. Cuyahoga County, where Cleveland and its suburbs are situated, served as Exhibit A. More than 60,000 homes have been foreclosed in the county since 2005.

Despite all of its activity on behalf of borrowers, ESOP was teetering financially in 2005, as the mortgage crisis roiled.

“We were running on $100,000 a year, and we probably had three people on staff,” Ms. Killingsworth says. “And I don’t get paid.”

Winning Over Banks

But the organization won over some important people. Bankers, who responded to ESOP’s sometimes-dramatic methods, coupled with Ms. Killingsworth’s calmer requests that they participate, decided to work with ESOP clients to modify their loans. Many banks agreed to donate the clients’ $200 in fees to ESOP; in turn, the charity helped devise new mortgage terms.

In addition, several county and state officials used federal dollars designed to stem foreclosures to help ESOP grow. Officials laud the group’s methods for dealing with the borrowers who have inundated its Cleveland office, where a large, smiling plastic shark hangs from the center of the ceiling. “I have few heroes in life, but Inez is one of them,” says Jim Rokakis, the longtime treasurer of Cuyahoga County. “She saw what was happening a decade ago. Together, we confronted the Federal Reserve Bank here about these out-of-whack loans. They didn’t do anything about them. But she has been airing her voice ever since and has been getting in banks’ faces, urging them to make things right.”

Some bank officials say ESOP provides a valuable service to them—keeping people in homes and paying at least some money toward their mortgages.

“ESOP has been the most successful group helping homeowners,” says Ronald M. Faris, president of Ocwen Loan Servicing, in West Palm Beach, Fla., which services tens of thousands of mostly subprime mortgages owned by other banks. “Customers who receive a loan modification from us who were helped by ESOP have a much better success rate in remaining current on their mortgage.”

He adds, “I think the world of Inez and what she is doing. She is one of those quiet leaders, much like Ben Franklin was in his later years. She doesn’t say a lot, but when she speaks up, people listen.”

‘Let’s Hit ’Em’

For all its success, ESOP isn’t popular with everyone—and doesn’t care to be. The clashing styles of Ms. Killingsworth and Mr. Seifert almost resemble the good cop/bad cop cliché from television dramas.

“Inez has always thought we should bring the banks to the table,” says Mr. Seifert. “My thought is: ‘Let’s hit ’em.’”

Such aggressiveness has made the organization some enemies, something that Mr. Seifert doesn’t mind.

“We’re dealing with banks that often don’t care what happens to the people they’ve goaded into buying houses,” he says. Although the organization readily accepts grants from banks, and features paid ads from them in its annual report, Mr. Seifert isn’t easily mollified.

ESOP gives its enemies no quarter. Last year, employees from each of the group’s offices performed a simultaneous protest against local Chase branches of J.P. Morgan Chase, a mortgage lender that has been slow to warm to ESOP. Once inside the banks’ offices, many protesters began chanting “Chase sucks.”

The confrontation had an effect, Mr. Seifert says: “We had done three workouts involving Chase loans in the previous six months. In the three to four days after the [protest] action, we did 163 of them.”

Chase, with headquarters in New York, says it has been anything but slow in modifying loans nationwide, offering nearly one million workout plans last year out of the 10 million loans it services or owns. The company argues that ESOP’s tactics keep it at arm’s length.

“We think it’s always best to work in respectful and collaborative ways,” says Thomas Kelly, a Chase spokesman. “We have been frustrated when ESOP has been disrespectful to employees at some of our branches.”

Second Chances

Partly because of its protesting tactics, ESOP still has a hard time garnering foundation money. But some grant makers who were frightened away earlier have returned. The George Gund Foundation, impressed with ESOP’s approach to foreclosure relief, has given a total of $85,000 to the group since 2006. Some of that money may also be used for activism.

“We were scared off in the ’90s by some of their tactics, but we recognize that ESOP has done excellent work in preventing foreclosures and attacking predatory lending,” says Robert B. Jaquay, an associate director at Gund. “We also recognize that the organizing they do is important for our neighborhoods.”

Meanwhile, Ms. Killingsworth has some plans for the next arena for her activism. Though she says she hopes to spend a small part of her $100,000 Purpose Prize windfall on herself, the bulk of it will go to help another disadvantaged group in Cleveland: people who have been in prison and who have a hard time finding jobs once they have been freed.

“When you look at the roots of the mortgage crisis, you’ll see unemployment,” she says, adding that ESOP will soon start a program that trains ex-convicts for jobs. “Homeowners aren’t the only people who deserve another chance.”