Thousands of Americans have lost their homes after defaulting on adjustable-rate mortgages. As their monthly payments rose, they were unable to make those payments. The U.S. Congress has intervened to help, but the crisis has shaken the credit industry, slowed U.S. home sales and hurt the economy. It has also highlighted the need for financial literacy. Mike O'Sullivan has more in this Searching for Solutions report on how a Los Angeles organization called Operation Hope is giving people the skills they need to buy a home or start a business.
Banks that made imprudent loans and buyers who overextended themselves to buy houses they could not afford are part of the reason behind the mortgage crisis. Consumers also lacked financial knowledge, experts say.
Residents of a minority neighborhood in Los Angeles are gaining financial insight through an organization called Operation Hope. It offers classes in buying a home and starting a business.
Fred Smith, who is with Operation Hope, says people must first make a budget.
"It's a three-column budget, where they can list where they are today, and all their income, all of their expenses, and all of their assets," Smith said. "And regardless of what your income is and what your expenses are, that really is the first step."
Operation Hope's instructors say many who lost their homes in the crisis failed to plan ahead. Here, people learn to do that. And they can test their new skills.
Robert Powell, a hospital nurse, hopes to buy a home in one neighborhood where housing complexes are being built, including one project with 172 condominiums.
He says the monthly mortgage payment will cost no more than what he currently pays in rent.
"It was like throwing money away when I could be owning something, especially paying the same amount for rent that I could be for a mortgage that I'm buying something," Powell said.
At Operation Hope, Oliver Unaka took one class on buying a home and another on starting a business. He now has his own public relations agency. And he's helping to publicize the housing project. Without the business class...
"Worst case scenario, I probably still would be working for someone else, dreaming about starting my own company," Unaka said. "And the beautiful thing is, that vision was given flight."
Smith says aspiring entrepreneurs receive step-by-step instruction.
"And we walk them through all of the things in terms of a marketing plan, a concept, how to do projections, how to do sales, how to do marketing, and how to really develop it," he said.
Operation Hope also offers classes in minority neighborhoods in New York, New Orleans, and in three cities of South Africa.