PolicyCast: HOPE for Brighter Financial Futures

Kirk Willison,Arch MI’s Vice President for Government and Industry Relations: When he was just 26 years old, John Hope Bryant and the rest of America saw firsthand the economic and social devastation of inner-city Los Angeles that became manifest during the 1992 Rodney King riots. What makes John notable was his determination to address the crisis. What was missing among the low-and moderate-income residents of LA, he thought, was financial literacy and a sense of economic empowerment to improve their lives. They lacked hope, too. So, John Hope Bryant set about to provide each of those things by establishing Operation Hope, a nonprofit to deliver quality financial education and personal empowerment counseling to his community. John would be the first to tell you it wasn’t an overnight success. But, today, Operation Hope operates in more than 20 states and has aided over 4 million people. You can find its outreach offices in banks, police stations and corporate headquarters.

The opportunity of homeownership is central to Operation Hope’s mission and one of John’s latest endeavors as well. With the backing of Wall Street investors, he’s created Promise Homes, which invests in single-family rental homes with the purpose of turning renters into homeowners. I first became acquainted with John in the fall of 2007 when we were both called to testify before the California State Assembly’s Committee on Banking and Finance about the foreclosure crisis then plaguing the state of California. He invited me into Operation Hope’s offices for lunch afterward, and I had the chance to see for myself the positive impact it was making in South Central Los Angeles. John has since relocated Operation Hope’s headquarters to Atlanta, and I spoke to him from his home in that city.

John, thank you very much and welcome to the Arch Mortgage Insurance PolicyCast where I have an opportunity pretty frequently to talk to people who are doing everything in their power to make the American dream of homeownership a reality for more families. And you certainly fit into that important group. I appreciate you taking the time and welcome to being here.

John Hope Bryant, Chairman and CEO, Operation Hope: My pleasure. Honored to be with you. It’s an important conversation.

Willison: Well, John, you’ve devoted 30 years or more to trying to improve the financial literacy of American families, and particularly people in underserved communities. Can  you share a little bit of your thoughts about what led to the creation of Operation Hope?

Bryant: Sure. I mean, technically, it was a Rodney King riots of 1992, April 29th, 1992 ,in South Central Los Angeles. We founded Operation Hope on May 5, 1992, with a banker’s bus tour through South Central Los Angeles. About $3 billion of 1992 money value, which is probably more like $8 billion today, of damage done is tied to the riots. Fifty-five people, I believe, lost their lives. At that time, it was the worst riot, urban riot in U.S. history. But, really, and by the way, none of them was a home. So, out of all that damage, it wasn’t a home. The only one that was technically registered as a home was tied by a single bearing wall to a commercial structure that had burned. You don’t burn that which is your own … If you pull up footage from the banker’s bus tours that Operation Hope did, circa 1992 to circa 2002, that 10-year period, you’ll see tree-lined, well-maintained, beautifully curated streets, because if we own anything in that neighborhood, it was the homes. We didn’t own the commercial thoroughfares and the buildings and businesses on them. We have a low level of homeownership, African-Americans, in comparison to our mainstream counterparts. But to the extent that we own, and I think it’s about 41% now … African-American homeownership, which is … below our mainstream counterparts at more like 70% homeownership, which of course is a central way you build wealth. But, even with that, even, and only 41%, there’s still this enormous pride in ownership.

So, that was basically social justice through an economic lens, which is what I’ve been saying now with what I call the third reconstruction. This period between 2020 and 2030 that I think we’re in right now. I think you can go back 100 years to the Freedman’s Bank of 1865 that Abraham Lincoln created after slavery to teach free slaves about money that was run by the abolitionist businessman, Frederick Douglass. Nobody knows about it, and you’ll see, I think, the same issues wrapped in a different texture. Back then, the issue was basic freedom and then trying to get a job. But, we went from physical freedom, African Americans, to, physical slavery to economic slavery. Because you had the Jim Crow laws, commercial slavery … and you had the farming system for freed Backs on their own land, which included my grandfather and great-grandfather, which were slavery under another criteria because you own the land by contract … Because people were financially illiterate, they could never pay off the debt. Miraculously, you could never pay off the debt to the plantation owner … So, I think this is just the same issue that’s 400 years old. We just never solved it. You know, slavery … wasn’t designed to oppress Black people. Slavery was designed to build a country for free.

Willison: That’s right.

Bryant: It was free labor, Right? You know, the very nature of this country in our bones supposedly is you work hard, you play by the rules, you work really hard with ease and you get the benefit of your labor. That’s like in our bones, more American than apple pie. No one mentions that for 240 years, African Americans were not paid for their labor. And as a result of that, we didn’t accumulate capital, which we could then invest in businesses or homes or whatever.

And then we had no relationship capital. You and I now know each other and what you know and who you know and what I know and who I know now are connected, and we can both benefit as a result of that. Well, there was none of that for those involved in slavery, for the enslaved. There was no financial capital, there was no education capital because educating a slave was illegal. You didn’t get the math on the money. You didn’t understand it. There was no capital, as I just mentioned … In 1930, as you know, the federal government, FHA, actually created redlining. I mean, they really would not insure a mortgage in a Black neighborhood. Which is why you have white homes that are worth multiples more than Black homes, even though it’s basically the same home separated by a few miles. So, we’re just, you know, this is a long journey that has met a moment.

Willison: What did you tend or try to offer to the clients of your first Operation Hope Center?

Bryant: Well, the first thing I tried to do was to create businesses. And then I realized that for all the hustle and all the well-meaning intent, we weren’t trained to be business people. So, I can give you the money, but you might still go broke because you didn’t have the intellectual capital, the training capital, the understanding of how a business worked. By no fault of your own, for the reasons I just mentioned. Why am I a businessman, because my father was a businessman, quite literally, Kirk. Why was my father a businessman? Well, his father was a farmer and a businessman in 1871, born in 1871. And his grandfather was probably a slave. My grandfather was probably a slave, but he has a history of business people. That is not the story of most of our people.

So I was training people into a vacuum. Sorry, I was funding people into a vacuum of no training. So, say back up from that, then I started dealing with homeownership. That was modestly successful … I thought, Okay, maybe I need to start with the basics. So, we start teaching financial literacy to young people, and that became our first decade of our work was going into 4,000 urban schools and teaching, checking, savings, credit investment and the history of banking, which I now know was the work of the Freedman’s Bank of 1865 … Coincidence. Andrew Young would say, “Coincidence as God’s way of staying anonymous.”

Willison: I first met you and visited the Los Angeles operations of Operation Hope after you and I had testified before the California State Assembly back November of 2007. We talked a lot about predatory lending and the foreclosure crisis.

Bryant: Oh, yeah. And your brother [Bruce Willison], if I’m not mistaken, is one of my heroes.

Willison: He’s a good guy. And he was on your board for a while.

Bryant: Oh my God. I love that dude, man. He was one of the first people who gave me credibility. I may get this wrong, but First Interstate Bank?

Willison: That’s right!

Bryant: My God. I mean there were a few banks, a half dozen — no more than half dozen — bankers that wrapped their hands around me and said, “This guy is okay.” And Bruce [Willison] was one of those guys for no good reason. He helped me out, and he pointed to me and he protected me. And yeah, please give him my love. I love that man.

Willison: Well, you’ve expanded your presence considerably since we last met. And I think you have now centers in 20-plus states. Tell us about both your growth and size as well as the type of products or services that you are offering now to your clients.

Bryant: Yeah, so we have now 1,200 locations under contract. We have a 100 … I can’t remember the exact number. … We have between 160 and 170 locations that are operating now in, let’s say, 26 or 27 states. We have another 40 locations on top of that that are ready to open, so call it 200 locations ready to be operational right now. And then we have 50 locations coming right after that. And then over four years, we’re going into 2,000 bank branches of Truist Bank alone. And we’ve got some other partners … Wells Fargo is coming with a big partnership, and that started around the same time as Bruce and I were working with that relationship with Wells Fargo. So, our goal is to become America’s financial coach, the private banker for the working class, the struggling middle class, folks with too much month at the end of their money.

And this is active financial literacy. It’s not financial literacy education, it’s financial coaching interaction and engagement intervention. So, it’s getting peoples’ credit score up. It’s getting errors off your credit report. It’s negotiating with your landlord, the debt holder, helping to create a budget, reset a budget, helping you to get every government benefit that you are rightly deserved. I’m not talking about handouts. I’m talking about the earned income tax credit, which is a bonus from working. I’m talking about all the stimulus money that you may not be aware that is your right. So, all of this work has really created a pretty unique niche for Operation Hope. And we have become the first nonprofit allowed to operate inside of a bank branch in U.S. history.

Willison: I was fascinated by this Hope Inside, because it’s not only financial centers that you’re putting in kind of educational sites, but public schools, police stations and corporate offices. This is really a new model. Talk a bit about that.

Bryant: Hope Inside emerged from Hope Centers … when we realized that we wanted to help banks get out of the “No” business and into the “Yes” business … at scale. And this was a beginning of a move. And then, so Hope Inside the Workplace was a next iteration of that, because it’s where people worked. It’s where you flock, shopped, stopped and worked — we wanted to meet you where you were. And this all, this became part of a drumbeat of moving from a philanthropy-only conversation, really to a business conversation through philanthropy. It’s almost like looking at these communities as research and development centers. That we want to prepare a new marketplace for the economy and get them into the game at scale. This is sort of crescendo. Kirk, into something we announced two weeks ago now called Financial Literacy for All, where me and the CEO of Walmart, Doug McMillon, brought together the CEOs of Disney, Delta Airlines, Bank of America, Walgreens … the Commissioner of the NFL, the Commissioner of the NBA and I’m missing somebody, excuse me. There’s a website called Financial Literacy for All. They can go to fl4a.org. And that’s in design really to embed financial literacy into the business plan of America … Our goal is to get half of the Fortune 500, ultimately, to be part of Financial Literacy for All. So, this is all a drumbeat to basically make this a civil rights issue of this generation. Like the right to vote was in Sixties. It’s like, you know, as far as an employer, Kirk, this is like health wellness was a decade ago, like healthcare was 20 years ago. Financial well-being and financial coaching, we think is the new norm because half of employees are stressed out on the job about money. That was before 2020, before the pandemic.

Willison: When we did meet and we testified and we talked about predatory lending, that was kind of the really, the number one reason that people of color were losing their homes. It was the abusive loans that they had. That’s changed a bit now because of regulations and laws. What now are the main obstacles that you’re finding that are keeping people from either becoming homeowners or remaining homeowners?

Bryant: It’s a great question. It’s like when we were hopeful, the structure was working against us. Now, people are hopeless and cynical, not skeptical. They’re cynical, and now they don’t believe the system works for them. So, they’re not even going to the counter to check. And then when they do go to the counter to check, Kirk, we’re fighting [the idea] that it’s what people don’t know that’s killing them, but they think they know. So now you have this massive lack of education in underserved neighborhoods around financial literacy. I mean, sorry, just mortgage homeownership basics. If you go on Twitter, you’ll see, and when you type in my name — John Bryant and home ownership — you’ll find this massive debate I had starting at two in the morning one night. It went for 24 hours with thousands of people, African-Americans, that was around a silly comment, I thought, which was that when you own a home, the bank owns a home.

Many people believe this. I thought it was a joke. What do you mean the bank owns a home? You don’t own the home. The bank owns a home. They own the debt. No, no, no, no, no, no, no, no. The bank owns the debt. You own the appreciation, right? And as long as you don’t default, the bank is just your lender, right? And you own the depreciation on your tax return. You own the appreciation in your balance sheet, you own the upside benefits. You own the pride of ownership. You own the mortgage deduction. I had to, like, literally go back to basics because no one’s taught us this. It’s not taught in schools. Home economics was taken out of schools. Financial literacy classes were taken out of schools. That’s where I learned it.

The class where, I guess it was home economics where they taught you how to create a budget and buy a home or how to run a family, build a family, all that stuff’s gone. So, in the mainstream in a family like yours, maybe it’s Mom and Dad, you just sort of paid attention to them what they were doing. But in minority neighborhoods, maybe Dad is not there and Mom’s working two jobs. Maybe Mom rents an apartment or worse, she lives in a housing project. Where are you getting the memo on wealth creation?

Willison: Let’s talk about one of your latest ventures, and that’s Promise Homes. It’s a company that acquires and owns single-family rental homes. In fact, as I understand it, John, it’s the largest minority organizer-run institutional investor for single-family properties in the country. You know, John, the nation between 2006 and 2016 lost 4 million homes that had been owner-occupied to the single family rental market. It really took an awful lot of homes off of the market for people to buy. What makes Promise Homes different than other institutional single-family, investor for-profit single-family rental companies?

Bryant:
What makes us different is that we have decided to become a social impact investment model for the country and prove that the discussion is not morals or money, it’s morals and money. [Prove] that you can do well and do good. To put it another way, you can be a capitalist and not be a jerk or you don’t have to be a jerk to be a capitalist. So, what do we do in practice? And this company was created in 2017 with no assets. Now, thanks to Tony Ressler, the billionaire owner of the Atlanta Hawks, and Michael Arougheti, who’s the CEO of Aries Management — these are my partners in this — we are now at $110 million worth of assets, 700 homes, give or take, between here and North Florida.

And we’re buying 50 more next month to add to that portfolio. So, we take the renters and treat them like residents, and we give them free financial counseling and coaching through a contract that I pay to Operation Hope. So, I wanted to have an arm’s-length relationship to my own nonprofit so no one said that I’m got some kind of a privilege, even though (Operation) Hope’s services are free to anybody. So, we pay Operation Hope … for its time to coach our residents. The residents, as they improve their financial literacy, we give them a reward. You raise your credit score 25 points, Kirk, we will give you $25, a certificate for $25, which comes in handy for groceries and things like that. You pay your rent on time and we, during the pandemic, gave you a $100 per month, and the average rent for me is about $1,200 a month.

So, this is a meaningful dollar amount. And my residents typically have three times revenue to rent. So, they’re making about $3,600 a month, and they are paying me about $1,200. So, we have a number of incentives. If you pay on time for 18 months, we give you a month of life-event credit. So, God forbid, you lose your job, you file bankruptcy because of a divorce or whatever, you need some, a moment to breathe. You can earn a credit where you don’t have to pay your rent between one and three months, and you’re not late. You’re renting from us or borrowing from us your own security deposit and using your credit, your credibility with us to borrow effectively one or two months’ rent with no penalty and no interest charge. I think we do charge 1% or something by law, but it’s nominal.

Then we take that experience of financial coaching and counseling and moving into the incentives for vendors. So, when I bought the homes, minority vendors were almost nonexistent. Now, 60%-plus of all of my vendors, plumbers, electricians, lighting, roofing, landscaping, et cetera, are minority-owned companies. So, that’s renewable philanthropy, because now every year, millions of dollars is going back in these neighborhoods of reinvestment because I control the company. And the third thing we do is give those who rent a chance to own the home that they are living in, if they see fit. And there’s an article in The Wall Street Journal that breaks down and illustrates some of our success stories in that regard.

Willison: So you aren’t restricting this to people who are buying the homes that you own, but they could actually become homeowners. You essentially are trying to educate your borrowers so they can pick up and leave you as a customer.

Bryant: Oh yeah. Exactly. You can abandon us.

Willison: Kind of a strange business proposition.

Bryant: There’s one other thing that is weird, Kirk, which is that we do. If you get your credit score to 700 or better, we will reduce your rent by 10% permanently as long as you [maintain] the credit score above 700. Now, that may seem weird again, like, aren’t you giving away money? No. If you have a resident who has a 580 credit score, you’re chasing them for rent, you’re calling them, you’re emailing them, you’re pinging them, you’re texting them. They hate you, you don’t like them and it’s an adversarial relationship. It’s expensive for them and for you. You’re hitting them with a late fee, but it’s not paying for your time. And your balance sheet has a lot of noise on it if you have a lot of that in your balance sheet. So, if we can get people to raise a credit score at 700, they pay like a coupon, Kirk, they pay every month on time. We don’t spend any time chasing them. That is worth you know, to me, $100.

Willison: Time is money, right?

Bryant: In reality, what’s the percentage of my residents who live from month to month, who are going to be able to get that credit score and sustain it above 700? Maybe 25% of my portfolio will be able to do that. You know, I hope it was be half the portfolio. My guess is, you know, 25%. Can I afford that? Sure, I can. What’s the percentage of people who are going to leave me and buy a home? Probably 20%, 25% at full tilt.

Willison: So that’s a success. Absolutely. John, you’ve recently written a new book, “Up From Nothing.” In it, you talk a lot about your own upbringing and  the importance of believing in yourself. Why did you write the book? And who’s your target audience?

Bryant: Great questions, by the way, Kirk. I wrote the book like I’ve written the other four books in the series. It’s “Banking on Our Future,” “Youth Financial Literacy,” “Love Leadership,” which is a philosophy on doing well and doing good, “How the Poor Can Save Capitalism,” which is my statistical case for GDP growth in America from the bottom of the pyramid. So “Up from Nothing” is a fifth installment in a series of books of, basically, social justice through an economic lens. It’s my primer for both mainstream white, mostly investors and business people, who want to see opportunity in doing well and doing good, but don’t know how. They  want to have a money case, not just a moral case for diversity, inclusion and uplift of those at the bottom of the pyramid. And then it’s a set of teaching tools for those at the bottom end of the economic strata, including poor whites, of how they can come up and become wealth creators in a capitalist system. I mean, essentially, we live in a free enterprise democracy. But there’s no training reels, there’s no economic financial literacy driver’s license that anybody issues you. I want to give people that primer. The biggest takeaway “Up from Nothing,” though, is mindset. It’s the five pillars of success.

Willison: Believing in yourself obviously is important, but that alone isn’t going to close this incredible racial wealth gap that we see. And you alluded to earlier, you know, whites have 10 times the family wealth of Black families because of the history that you talked a lot about. You have an interesting passage in your book. I wonder if I could just kind of read, and I’ll paraphrase a bit here, but you said, “The problem is we’re not working together to help people come up. Instead, the thrivers and winners are creating private communities so they don’t have to deal with the turmoil. We’re becoming increasingly polarized because we don’t want to deal with other people’s problems, but if we don’t solve them, we’ll all lose.” That point was really driven home not long ago by a McKinsey & Company study that said that if we had been able to close the racial wealth gap, that everybody in the country would be $6,000 to $8,000 richer. So, it’s not just minorities who are going to gain, but all of us.

Bryant: So that’s why I’m so excited about this moment we’re in right now. If this were just about trying to help poor people or help a Black people, forget about it. I just don’t think, I think people are just too selfish and self-centered, and we walked away from spirituality, unfortunately. So, to sort of do unto others as you have them do unto you has been lost a little bit in the modern age. So, you have to have enlightened self-interest to drive people. And when I say to somebody that racism is scientifically stupid, but it’s also an economic levy, an economic tax on all of us. Conversely, when you invest in Black businesses, even the racist wins because their GDP increases, as you just noted. It’s hard to argue with that.

Willison: How do we take that next step though and persuade people to work together to address racial inequity?

Bryant: I think that the phrase I would use, Kirk, is you can take no pleasure from the fact that there’s a hole in my end of our boat. If we keep doing what we’re doing now, you’re just rearranging the deck chairs on the Titanic. The ship is sinking and we’re picking drapes. I think that people are selfish enough and self-centered enough to actually do the right thing in this case. I actually think that this is about sort of manipulating people’s fundamental goodness. They want to be good, they need a reason to be good, and self-interest — personal pocketbook wealth — I think is the way to do it. The color here is green, Kirk, not red or blue or black or white or brown. It’s green. It’s economic. We’ve got to help those at the bottom of the pyramid if only because you want to live your life on Social Security with some decency … You want to know there is Social Security. When [you] want to retire, you better help those at the bottom of the pyramid, because folks making $30,000 a year with a high-school education … making, you know, can’t hook you up. They can’t let you play golf. We’re going to have anarchy and we’re going to have a devolving situation.

I’m not trying to fear people into the future, but, unfortunately, fear works really well to get people’s attention. Once I got your attention, now it’s about, Okay, let me give you a prosperity plan for the future where, actually, all boats rise. And the Citi Group report proved that discrimination against Blacks alone in the last 20 years alone resulted in $16 trillion of lost GDP in the last 20 years. Not 200 years — just since the year 2000. If we knocked it off right now, you’d pick up another $1 trillion a year in increased GDP. That’s enough to pay for all the stimulus, all of it. I love math because it does not have an opinion.

Willison: John, last question. It’s a massive undertaking to educate all these people and to finally move them up the economic ladder and hopefully into homeownership. How can viewers of PolicyCast actually help play a role in lifting the financial literacy of disadvantaged people and make them homeowners one day?

Bryant: First of all, make a Hope Commitment to our 1 Million Black Businesses [1MBB] initiative. It’s a $130 million commitment from Shopify to create a 1 million new Black businesses in America. These businesses are also supporting the homes that we talked about as plumbers, electricians, lighting, professional roofing, landscaping painting. So, support 1MBB through a Time Bank commitment. If you’re an accountant watching this, if you’re a mortgage professional or lending professional or have IT experience … Whatever your expertise, you can make a time commitment through the Time Bank at Operation Hope. Go to … operationhope.org and make a time commitment from your firm or individually to give two hours per client of expertise. Because capital comes from the Latin word “capitalis,” meaning “knowledge in the head.” Credit, comes from “credito,” the Latin word for credibility.

So, use your credibility to give people credit and give them knowledge, which gives them wealth. So that, because that rubber band once expanded never returns to his original size. It’s expanded forever. Wouldn’t that be beautiful — people watching or listening to your podcast to know they have left a legacy by helping somebody other than themselves? You die twice, Kirk, in this world. You die physically and then you die secondarily the last time somebody ever mentions your name. But, by giving the others in the way in which I just described, it is possible. Your name is indelibly etched into history forever because you helped somebody else other than yourself. Again, enlightened self-interest. So, I’m trying to make a case for morals and money, not morals or money. Make a commitment through Operation Hope, a Hope commitment to help financial literacy for all, which we just launched, to teach financial literacy, to give it as a benefit to your employees, to embed it to your experience with your customers … We’re making several announcements on the next few weeks in months that I think will give people instructions on what this looks like. Sign up at the Financial Literacy for All website is fl4a.org or go to [operationhope.org] and make a home commitment there. So, those are the two areas where I think the people could assist. And you’re indirectly helping with homeownership and wealth creation and [bridging the income inequality gap] in this country, and to heal, to help bring us together, which I know you and your brother are both committed to. Your parents really did it right, Kirk. I don’t know where that Willison blood came from. It runs for a really beautiful stream.

Willison: You’re very kind. John, thank you very much for the time today. I really appreciate it chatting with you.

Bryant: My pleasure. Call me any time.