Ph2007081001126_2Wplogo_250x42_2Housing Counselors Put Homeownership Within Reach on the Road to Financial Security

By Alejandro Lazo, Washington Post Staff Writer

Saturday, August 11, 2007; Page F01

Akilah S. Owens spoke in a measured cadence about the importance of homeownership. Establishing stakeholders in black communities would build wealth, the housing counselor told potential buyers gathered in a conference room in Southeast Washington. That in turn could help achieve racial equality, but there were pitfalls along the way.

"We want you to be knowledgeable of the process; we want you to know if somebody is taking advantage of you," Owens said, leaning in toward the men and women listening to her one recent Saturday at the nonprofit group Operation Hope’s local center. "We are trying to bridge the gap. There is a big gap between minorities and Caucasians."

Founded in South Central Los Angeles in the wake of the 1992 race riots, Operation Hope offers seminars in banking, personal finance, credit repair and small-business management to residents of low-income neighborhoods across the country and in South Africa.

Homeownership is a principal emphasis for the group, whose goal is to increase financial literacy as a means of doing away with urban poverty.

Operation Hope is one of thousands of organizations that make up the U.S. housing counseling industry. Many are small and local but are certified by the U.S. Department of Housing and Urban Development and are connected with national groups such as Fannie Mae, Freddie Mac and the Association of Community Organizations for Reform Now.

Climbing foreclosure rates have brought about a crisis in mortgage lending this year. That has prompted questions about whether too many people, especially those with shaky credit, have been pushed into homeownership. But at Operation Hope, owning is still the goal. The group says that since 1994, it has helped people get 1,569 home loans worth $324 million — and that none has gone into default. Since the organization began working in the D.C. area in 2004, it has had 70 homeowners approved for loans, for a total of $25 million. "If you meet us halfway and you follow the prescription, then eventually we will get you there," Lance W. Triggs, executive vice president and chief of the Hope Banking Network, said in a telephone interview from his office in Los Angeles.

Operation Hope began offering home counseling services in 1994, founding a home loan center in South Los Angeles with a grant of $25,000 from the Union Bank of California. Two years later, Hawthorne Financial, the parent company of Hawthorne Savings Bank, gave the organization a grant of $1 million, and the group opened the first of its Hope centers, which offered counseling, check cashing, utility-bill payment and limited access to traditional banking services.

The centers have evolved since then, focusing more on counseling services and referrals. Counselors at Operation Hope identify potential bank customers, whom they help to build or clean credit records — a process that can take years — then make referrals to the lenders the group works with.

Mortgage seminars and home-buying classes like the ones Owens delivers on Saturdays and Tuesdays are a staple of the centers. In Washington, the group’s director has put an emphasis on hiring locals with expertise in the market. Owens, who is from the District, holds D.C. and Maryland real estate agent licenses. "I am well qualified to help and assist you with your needs," Owens told her audience in her measured tone. "There are certain reasons why people should own homes. It gives you equity. It gives you credit. It is about a legacy." Homeownership in the Washington area is difficult for several reasons, she said. First, it is expensive, starting at $400,000 to $500,000 for "something decent," she said. "This puts you in a certain situation where you have to have your credit and your finances aligned," she told her audience of six. "You don’t want the house to be stressful; you want the house to be part of the American pie."

During the two-hour session, she covered many basics. Few questions were asked as the men and women in the quiet, air-conditioned room took notes on legal pads. The room was decorated with promotional photographs of the group’s clients: small-business owners, new homeowners and even a client meeting with President Bush.

Owens told the group how a mortgage loan works, explaining the difference between rates that are fixed and ones that are variable. "I am an advocate for fixed rates," she said. "Why? Because you know it is not going to change."

Owens said the loose credit standards of recent years have allowed people to get into houses using risky lending devices such as interest-only loans and little to no down payment. Yet many people were getting these loans without knowing what they were signing, she said. "Predatory lending is big in this area," Owens said. "That is why we are here: to help you. To make sure that it does not happen to you."

Bruce Hodges, 56, attended the seminar. He owns a house in the Trinidad neighborhood of Northeast Washington and wanted to learn about refinancing. He was also looking to improve his credit and perhaps buy a second house after remodeling the one he owns. Hodges said he appreciated that the organization’s services are free. It was encouraging, he added, to find a group dedicated to working with people who may not have spotless financial histories.

In a follow-up interview, he said he had scheduled an appointment with a counselor to discuss his ideas. "When I get this [house] in shape, maybe I could get more money out of renting it. I don’t know if selling it would be an option, either," Hodges said. "I have not really figured out what the next step is going to be."

Housing counseling grew out of the community-based nonprofit organizations of the 1960s that pushed for affordable housing as a form of urban renewal. When low-income residents began defaulting on mortgages in growing numbers, the groups developed programs in response, said Marva Williams, a senior program officer with the nonprofit Local Initiatives Support Corp. in Chicago.

The Community Reinvestment Act of 1977 required federally regulated banks to invest in low-income communities. As the act was changed and made more enforceable over the years, lenders increasingly became interested in partnering with housing counselors such as Operation Hope, as banks ha
d little experience in the neighborhoods they were now required to serve. These nonprofit groups provided banks with community outreach, market research and marketing. In turn, the home counseling industry focused on "pre-purchase counseling." Credit services were added, and new forms of establishing credit were developed. At the same time, social scientists began to consider differences in accumulated wealth, as opposed to income, as one of the main impediments to racial equality in America. A seminal work was the book "Black Wealth/White Wealth: A New Perspective on Racial Inequality," by two professors, Melvin L. Oliver and Thomas M. Shapiro. Operation Hope embraces much of the language of wealth-building and black empowerment related to these studies.

John Hope Bryant, the founder of Operation Hope, views his organization’s mission as proving that low-income communities are in fact "emerging markets." In 2002, the organization sold three of its centers in South Central Los Angeles to banks, which converted them to full-service branches. With the sale, Operation Hope paid off debt and established a new model for its centers. Now each new Hope center will open with enough money from banks to operate for five to seven years, Bryant said. The goal at the end of that time is to convert the centers to full-service bank branches through a sale.

Operation Hope opened its Anacostia center with a grant of $2.5 million from E-Trade but operated in Northern Virginia before that. Over the past five years, E-Trade has committed $5.5 million to the Anacostia center. "We are soft bankers for the poor," Bryant said in a telephone interview. "[Banks] provide the deposit accounts, the business loans, the home loans. We provide the underwriting, the customer support, the outreach, and then we vouch for the customer."

Operation Hope’s case management program, which was developed to help people who traditionally might be denied a home loan, is a key piece of Bryant’s vision. The program works one-on-one with people to help them through credit problems and to match them with financial assistance programs aimed at first-time buyers.

Tiffanie C. Brown, a Virginia native who recently moved to Silver Spring, went through both that program and a credit repair seminar. Brown began studying the home-buying process in 2005 and started searching for a place this year. With her income as a payroll accountant and with the cash she makes from a financial services business she founded, Brown felt she could take on a mortgage. However, she had little money for a down payment, high balances on her credit cards and several medical bills that had gone into collection. That meant her credit scores were weak. Brown’s real estate agent suggested that she contact the Operation Hope center in Anacostia after she put down $1,000 in good-faith money toward a condominium in Silver Spring. Although her first bid was not accepted, a second apartment a few doors down became available later, and Brown applied again. Brown met with Owens, the counselor, and on her advice paid down $4,000 worth of outstanding bills and improved her credit scores. She also opened a savings account with E-Trade, which offers dollar-for-dollar matching accounts for Operation Hope clients to use toward a down payment. She closed on the condo in June for $189,900. She said she is happy with it because she lives in a secure building; can take the bus to the District; and feels comfortable walking through the neighborhood, which has several small businesses and a variety of restaurants. Streaks of primer remained on her living room walls one recent Saturday, along with shades of the new color she was painting them: "Chatham green." A dresser stood in the middle of the living room. An eight-piece dining set she had found for a bargain price had yet to arrive. She looked around the room and said, "As long as you budget yourself and live within your means, buying a home is the greatest thing."

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