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Open House

Hurricanes Raise Home Heating Costs; Mortgage Interest Deduction May Be Eliminated; Mold Bad For Health And Wallet; Mold Prevention Techniques

Aired October 22, 2005 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JACQUI JERAS, CNN METEOROLOGIST: I'm Jacqui Jeras in the CNN Weather Center, with the latest on Hurricane Wilma, a category 3 storm packing winds of 120 miles per hour. It's basically been stalled out over the Yucatan Peninsula, just to the south and west of Cancun.
It's starting a northerly drift now, and should be back over open water, we think, late tonight. It will weaken as long as it's over land, but once it gets back over water, it could intensify just a little bit, take a sharp right-hand turn, and accelerate in forward speed, making landfall across parts of Florida, we think, sometime on Monday.

We'll have another update less than an hour from now.

Right now, here's CNN's OPEN HOUSE.

GERRI WILLIS, CNN ANCHOR: We've got two very big stories taking aim at your wallet.

Hello, I'm Gerri Willis.

First, Hurricane Wilma. It's a powerful storm, the latest in a series of hurricanes that will raise your home heating costs.

Second, your mortgage deduction. Is it safe? A tax overhaul panel says it's just too big.

Let's begin with Hurricane Wilma.

Allan Chernoff is in Sanibel Island, Florida.

Alan, this storm is not expected to disrupt oil production as much as people thought initially, but what are you expecting?

ALLAN CHERNOFF, CNN CORRESPONDENT: Well, Gerri, of course, any storm in the Gulf of Mexico, which is right behind me, any storm there is not good for oil production. As you know, the forecasters have said that this hurricane is not supposed to go up near the main oil platforms. Nonetheless, it still does disrupt production somewhat. So certainly, it's not a good thing for oil.

WILLIS: Well, that's not good news. Natural gas production is also down. So what's the expectation for home heating bills this winter? CHERNOFF: Awful news, no question about it. At a minimum, consumers are going to be paying at least 30 percent more for their natural gas. And, as you know, natural gas is the most common fuel in the country.

Another factor to consider with this hurricane, 3 percent of the nation's supply of natural gas comes in a liquefied form, and that typically does come via vessels that use the Gulf of Mexico. So with this storm in the Gulf, those vessels cannot come into port.

WILLIS: Well, Allan, I'm sure you'll be keeping an eye on that. Thanks for being with us.

If you depend on that tax write-off from your mortgage -- and who doesn't -- listen up. There are new proposals that are looking to eliminate it. Yes, eliminate it. President Bush's tax overhaul commission is kicking around the idea. And though it's not in the president's hands yet, the plan is already under fire.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): This week, panel members agreed to present two alternatives, both of which would eliminate or limit most tax deductions, including the one homeowners love, the mortgage interest deduction.

Under the current system, all interest paid on mortgage loans smaller than $1 million is deductible. The new plans would replace that with a tax credit, and the credit would be limited to just 15 percent of the interest paid on much lower mortgages, averaging about $265,000, depending on where you live, and never exceeding about $312,000. That's far below the current million-dollar level.

All this has the mortgage industry up in arms. Lenders point out that the current system has helped push home ownership to almost 70 percent, and it's fueled the nation's economic recovery.

DOUG DUNCAN, MORTGAGE BANKERS ASSOCIATION: I'm a pretty strong believer in the common-sense level-headedness of middle America, and they seem pretty firmly attached to the benefits of the mortgage interest deduction.

WILLIS: Supporters of the new proposals disagree. They say tax credits are fairer than tax deductions. That's because deductions are worth more to those in higher tax bracket, while credits level the playing field.

Supporters also say the new plans create other savings for the middle class, like a greater tax break on home sales, the elimination of the alternative minimum tax, and lower income taxes.

These plans put three out of four Americans in the lowest tax bracket of 15 percent. It also lowers corporate tax rates.

JEFF KUPFER, PRESIDENT'S PANEL ON FEDERAL TAX REFORM: By making housing such a tax-favored investment, it really distort the amount of investment that goes into the housing market that could maybe go to other, more productive uses.

WILLIS: Even panel members acknowledge neither plan is expected to become law in their present form. But the president could use these ideas to propose a very different tax code that could have a big impact on homeowners.

(END VIDEOTAPE)

WILLIS: So let's get a reality check. Joining me now is Mark Zandi, chief economist with Economy.com.

Mark, welcome.

MARK ZANDI, CHIEF ECONOMIST, ECONOMY.COM: It's good to be with you.

WILLIS: You know, I know the market's insane, right? Prices are up almost 13 percent this year alone. Housing starts are up. Things are still crazy in this market. You say that maybe a change in the deduction makes some sense, because the market is so topsy-turvy.

ZANDI: Well, I think there's many reasons why we need to consider this. I think it's a good proposal. But one the reasons is that the housing market is crazy, through the roof, as you mentioned. And I think it needs to cool, and this is a logical way to get that market to cool.

WILLIS: Now, you talked to the folks in the industry at the National Association of Realtors and other places, and they say, when this has been studied before, because flat-taxes ideas have come up before, that prices were said to have been able to fall 20 percent if this kind of idea went through. Is that what you see in the future?

ZANDI: No, I think that's alarmist. I -- it depends on how the plan is implemented. If it's implemented over a long period of time, and phased in, I don't think we'll see those kinds of effects. And it's important to realize that real effects will be on very -- the high-income, very wealthy households with big mortgages. We're talking people with million-dollar mortgages, and that means really big homes.

So we're talking about the very high end of the housing market in very juiced-up areas of the country.

WILLIS: Well, that's an interesting point, because, let's face it, in California, the median price right now is over $500,000. These are people who, under the terms of this proposal, would pay much more in taxes. I've got to say, I think it affects more than just the very wealthy, the elite of this country. Aren't there middle-class Americans who might find themselves, in addition to having a very high mortgage, very high taxes too?

ZANDI: Yes, I think that's probably true, certainly depending on how -- where the cap is put, ultimately. But you need to put this into context. This is part of a broader tax reform plan, and the government gives us one hand, and takes us with another. And one of the reasons why we're even considering this is, we're going to scale back the alternative minimum tax, or change that.

And so people need to really think about this holistically, look at all the various tax changes that are going to occur, because even though they might lose on their home, they'll gain somewhere else.

WILLIS: Very quickly, is there a fairness issue here? There are people who have bought in in the last five years, often at the height of the market, paying top dollar. They're the people who are going to be most at risk here. And factored into that family budget is the idea that, You know what? I have a mortgage deduction.

ZANDI: Yes, but you know what? Those people who bought into housing have done extremely well, extraordinarily well, and we are overinvesting in housing. And I think people should realize that and begin to plan for the day when we don't have these tax advantages, at least not to the degree that we have today.

WILLIS: Mark Zandi, thanks for being with us.

ZANDI: It was a pleasure.

WILLIS: Coming up on OPEN HOUSE, massive mold. Why you need to take control of the problem before you need to take control of your home.

And later, our weekend project, preventing, detecting, and removing the stuff. We've got you covered.

First, your tip of the day.

(BEGIN VIDEO CLIP)

WILLIS (voice-over): Floods and flash floods happen in all 50 states. To get an idea of what your own flood risk is, simply go to www.floodsmart.gov. Click on Prepare. Click on What's your flood risk? and enter your home address. You'll instantly get a profile of the relative risk level to your property.

And that's your tip of the day.

(END VIDEO CLIP)

WILLIS: Musty odors, dark, fuzzy patches, and a host of allergic syndromes. Household mold can wreak havoc on your health and your wallet.

And with another hurricane on the way, the added moisture will make it worse.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): The real damage can appear in days, even weeks after flood and rainwaters recede. Or it could creep slowly into any place moisture is in the air.

Mold hides behind walls, in basements, and inside duct work, and there's no quick fix. Newer and more energy-efficient houses mean fewer drafts, but no place for the moisture to go.

DR. PETER ASHLEY, ENVIRONMENTAL SCIENTIST, HUD: So it's both materials and the tight construction, working together, to sometimes facilitate mold growth.

WILLIS: It's not known exactly how much mold costs Americans every year, but the problem may be growing. A few years ago, mold claims were almost unheard of. By 2002, insurers paid out more than $3 billion. This year, about 10,000 lawsuits are pending nationwide, and one study blames mold for the 300 percent growth in asthma, from the 1970s to the 1990s.

It's also a growing threat to your wallet. Most state regulators now allow insurance companies to exclude or limit claims for mold, leaving homeowners to shoulder most of the burden.

ROBERT HARTWIG, INSURANCE INFORMATION INSTITUTE: The homeowner has to take responsibility for maintenance of their own home, and that includes the cleanup of any mold that develops as a result of condensation. It also means taking preventative measures for your home to replace roofs and windows and doors and leaky pipes before they can lead to mold damage. If homeowner's policies were to become maintenance policies, they would be many times more expensive than they were today.

MELINDA BALLARD, POLICYHOLDERS AMERICA: In the past, mold was covered as long as it was a consequence of a covered water leak. And per usual, with the insurance industry, they absolutely will not pay claims if they don't have to, and figure out, weasel out of payment in any which way they can.

WILLIS: And just like mold itself, the controversy may continue to grow. There are still no official standards defining how much mold makes for a threat.

(END VIDEOTAPE)

WILLIS: Let's talk more with one of the people you just saw, Melinda Ballard. She's president of Policyholders America, a group she founded that helps consumers fight insurance companies.

Melinda, welcome.

BALLARD: Thank you.

WILLIS: Thanks for being with us.

This story is so fascinating, and I know it's fascinating to you even on a personal level. You're so interested in it because you went through it yourself. Tell us your story.

BALLARD: Well, I did go through it. And thank you for having me, Gerri. The -- and that's why this is, as you said, near and dear to my heart.

The -- in my particular situation, insurance delays on handling water damage caused massive mold growth in my residence, and it culminated in the bulldozing of a 10,000-square-foot home.

WILLIS: And we're looking at pictures of that right now. This isn't just any home, this is your home we're looking at.

Tell me, is this a common problem, the kinds of delays in payment that you experienced?

BALLARD: It is. And insurance companies make money when they delay payments to you. And evidently, they have had record profits in recent years, which is indicative of the fact that they certainly are quite good at making and -- at delaying claims payments.

At any rate, when water damage occurs, it is of critical import that the insurance company and the homeowner together resolve the issue quickly, so that this water damage, what could have been an inexpensive water damage claim, does not become an expensive mold problem. And the -- that is, I cannot stress how time is not on your side when it comes to any kind of water damage.

WILLIS: The longer you wait, the worse it gets with mold, obviously.

Let's talk a little bit about, though, people who are in the path of the hurricane this weekend. You know, they could be experiencing this. They could have a problem with this. What is your recommendation to those people who may find themselves fighting mold? Do they call their insurer? What do they do?

BALLARD: Well, in -- it depends on what the policy says. But if it's flood damage, let's take the FEMA-type claims away from the homeowner's insurance-type claims, because they're two different animals. In terms of flood damage claims, FEMA's policy is to cut four feet above the floodline, which is a preventive step, but that needs to happen almost immediately.

So be certain that you handle this problem immediately.

And if it's a homeowner's insurance claim, if, in many cases, if the damage is caused by driving wind and rain, that is covered under the policy. So any damage that is consequence to that, then, would be, or resulting from those driving wind and rain damage, is covered under the policy, and many times...

WILLIS: So obviously you're in a good shape if you've actually got some flood insurance.

I do want to get you to this point, because I think it's critical, and your experience bears on it. The insurance executive just said that in many cases, mold is the fault of the homeowners themselves. Do you believe that to be the case?

BALLARD: Well, I think he also believes in the tooth fairy.

We believe that there is certainly some burden, and sometimes a lot of burden, put on the homeowner. But in the cases, then claims, that I have been privy to, that is not the case. It's the insurance industry's delays took a inexpensive water damage claim and made it into a monster mold damage claim, increasing the cost 30-, 40-fold.

So it's a situation where I'm not seeing what he says. I'm not seeing that it's maintenance. Obviously, if you know you have a leak, if your toilet overflows, clean it up. I don't think -- that's Homeowners 101. I don't think anybody...

WILLIS: Right, right.

BALLARD: ... that owns a home would just let that occur without cleaning it up.

But in a frozen pipe situation, in a driving wind and rain situation, these are things that are not maintenance issues.

WILLIS: Right.

BALLARD: These are covered perils...

WILLIS: Right.

BALLARD: ... that are supposed to be covered.

WILLIS: Melinda, as usual, we thank you for your time. Thanks for being with us today.

BALLARD: Thanks, Gerri.

WILLIS: Coming up, attacking the mold problem in your home. What you need to do before it gets out of hand.

First, a jump on the mortgage numbers. You'll want to see these, the weekly snapshot.

(COMMERCIAL BREAK)

WILLIS: Welcome back to OPEN HOUSE.

Not every mold problem means tearing down the house. The key is finding the mold and destroying it before it grows out of control.

(BEGIN VIDEOTAPE)

WILLIS: Joining me now is Andrew Perel, an environmental lawyer and an expert on mold.

Andrew, how do you know if you've got a problem that's like what we saw before, that's going to grow to that? The problem is, that probably started as a small problem and then grew out of control. How do you find it? How do you detect it.

ANDREW PEREL, ENVIRONMENTAL LAWYER: Well, Gerri, there are a number of different things that you can do.

First and foremost, you should rely upon your senses. Your sense of smell is going to be indicative of a mold problem. When you step into a room such as this, and you smell mold, mildew, a funky kind of moisture, a heavy smell, you should look around.

Now, sight is very important too.

WILLIS: What am I looking for, and where do I look?

PEREL: Well, you want to look where water's going to be accumulating. Mold needs three things to survive. It needs moisture, water, food, and it needs the right temperature.

One good place to go is the bathroom, OK? You take your shower. It's extremely humid. Pools of water, it doesn't necessarily drain the right way.

WILLIS: I think that's what you've got going on here. You can see the water has pooled in these areas.

PEREL: This is an incredibly dangerous situation for mold. What you have here is, you have a pathway for the water for the shower to go behind the wall. Now, if we're looking at this wall here, these discolorations in the grout, this is all mold.

WILLIS: One cheap and easy way to get rid of mold is to simply scrub your walls with a mixture of chlorine bleach and water. You need about, well, a cup of bleach for every gallon of water.

Is there anything else you can use?

PEREL: Well, anything that has a chlorine base to it is going to be extremely effective. In addition, anything with a hydrogen peroxide base will be effective as well. So if you went into your medicine cabinet, took out your bottle of hydrogen peroxide and used that, that would be extremely effective. It will kill the mold.

WILLIS: So just a little bit of bleach is really cleaning this up. I'm surprised how quickly it worked.

PEREL: Now, one of the important things to do, Gerri, is, you see this -- the little circles? Those are the centers of the colonies, and you want to break up the colonies, because by breaking up the colonies, you're killing the spores of the mold.

WILLIS: Andy, you say that airborne mold is actually more dangerous than what we've seen in here.

PEREL: Absolutely. The health threat that you get from mold, for example, if this was Stachibotris (ph), which is the black mold, this surficial mold that you've just been cleansing is moist. It's moist from the humidity that comes from the shower. By being moist, it's adhered. It's not airborne. You're not inhaling it.

If it were to dry out and become airborne, and when you were cleaning it, you would have seen dust flying. The inhalation of that poses a significant health risk.

WILLIS: So here's what we learned again today, Andy. You have to find that mold. You have to get rid of it. And then you have to prevent it from coming back again.

PEREL: Absolutely, Gerri. I mean, you need to look for the telltale signs of where water infiltration is going to be in your home, whether in the bathroom, along the edges, like we've seen here, or outside the exterior, where you see algae or other types of growth.

Most importantly, you should follow your nose. You'll smell it.

WILLIS: I love that, follow your nose.

Andy, thanks for helping us out today.

PEREL: Thanks, Gerri. It's a pleasure.

WILLIS: Stay with us. OPEN HOUSE will be right back.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

WILLIS: Getting help after you get mold is hard. Insurers generally don't have to cover you for losses, and not all offer you coverage for what they call a covered peril, like a pipe that bursts.

So for that reason, it makes good sense to get flood insurance coverage. The National Flood Insurance Program covers mold damage and remediation up to the policy's limits.

Keep in mind, though, that those limits are low, just $250,000 for your home, and $100,000 for contents

What's more, you have to do everything you can to prevent the mold to get reimbursed.

Clearly, getting back is up hard, if not impossible. You're better off making sure you don't get mold in the first place.

One big culprit, central air conditioners. Over time, they get moldy, and prevention is easy and cheap. Just change your filters. The price is just $10 to $12 per filter. You know it's time to buy new ones when you can see through the filter when you hold it up to the light.

And avoid fiberglass filters. They are inefficient.

Also, prevent leaks by keeping your gutters clean, and make sure your downspouts drain well away from your home.

As usual, with most home safety issues, it's up to us to take the lead. And as much as we'd like to think there's an easy solution, the reality is, Ty Pennington and the folks from "Extreme Makeover," well, they're not coming to our house to help.

That's OK. OPEN HOUSE is here to help you sort out your problems.

We want to hear from you. Send us your comments, your questions, to openhouse@cnn.com.

Thanks for watching OPEN HOUSE. We'll see you here next Saturday.

Stay with CNN. The day's top stories are next.

Have a great weekend.

TONY HARRIS, CNN ANCHOR: Now in the news.

It's time to go again. Mandatory evacuations will resume today in the Florida keys ahead of Hurricane Wilma. They were suspended earlier when the storm slowed down a bit. A lot of people have already left the keys, along with some mainland residents.

Out with the old and in with the new. In Taunton, Massachusetts, workers hope to finish building a new dam out of boulders today. It'll replace a timbered dam that threatened to collapse last week, leading to mass evacuations.

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