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Education Resources

Teaching about mortgages as part of economics and personal finance curriculums

photo of loan officer and customersIn a recent research paper, Federal Reserve Bank of Atlanta economist Kristopher Gerardi and two university professors found that certain aspects of financial literacy played an important role in the subprime mortgage crisis. In an effort to increase financial literacy, teaching about mortgages can be incorporated into the curriculum as part of the economics, personal finance, business, and other related curriculums. Teachers from the Southeast share ways that they teach about mortgages as part of their courses.

Hands-on practice
Cindy Hasty, a business teacher at Coffee County Central High School in Manchester, Tenn., draws on her experience as a mortgage lender, a position she held for 10 years prior to becoming a teacher.

Hasty focuses primarily on what lenders look for in terms of qualifying for the payment and having other existing debt. She lets students know that having too much consumer debt, whether car loans or credit cards, can cause an otherwise qualified applicant to be rejected for a home loan. She also discusses types of housing and types of homeowner's insurance with her class.

The most successful way to teach mortgage-related concepts, Hasty has found, is through hands-on calculations and practice. Students also calculate loan-to-value ratios, property taxes, and mortgage payments of PITI (principal, interest, taxes, and insurance). Hasty created a workshop that includes the loan-to-value ratios and loan qualifications determinants. Students draw "careers and incomes" early in the year, and these are used for exercises related to applying for home and car loans as well as for filing tax returns.

Input from experts
Aubrey Harris, a business teacher at Cheatham County Adult High School in Ashland City, Tenn., also draws on her industry experience in teaching about mortgages. Harris worked as a paralegal responsible for real estate closings.

She uses her industry contacts in the classroom and brings in guest speakers from the legal community, banking industry, title companies, and mortgage brokers. She has found that representatives of these groups are always willing to speak to the class. This outreach also helps in making the businesses in the community aware of the practical lessons being taught in her classroom.

Another tool that Harris uses in her classroom is a series of online videos related to mortgages. She says, "These short videos are very helpful. I use these with chapters in the textbook relating to mortgages, and this gives the students good insight into what a mortgage is and how to apply for one.” Additionally, Harris has students complete the various mortgage-related applications and forms to simulate a mortgage application process.

Resources from the Fed
Federal Reserve print and electronic resources related to mortgages include

  • Mortgage comparison calculator—Designed to help consumers compare the monthly payments and the amount of equity you will build in your home for several kinds of fixed- and adjustable-rate mortgages.
  • New Rules for Mortgage Transfers—New Federal Reserve rules help mortgage borrowers by notifying them when their loans are transferred to another company.
  • Mortgage resources—The Federal Reserve provides a variety of resources related to mortgages.

By Jackie Morgan, senior economic and financial education specialist, Nashville Branch

November 18, 2010