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Open House

Trailers Still A Problem For Katrina Evacuees; Keep Your Property Taxes Down By Reviewing Your Property Assessment; Best Mortgage Deals; Picking Good Valentine's Day Gifts

Aired February 11, 2006 - 09:30   ET

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

BETTY NGUYEN, CNN ANCHOR: Here's what happening right now in the news. Israeli Prime Minister Ariel Sharon is out of emergency surgery, and we are awaiting news from doctors at the top of the hour on his condition, so you want to stay tuned for that. The 77-year-old Israeli prime minister was rushed into surgery after a CT scan showed damage to his digestive tract.
TONY HARRIS, CNN ANCHOR: More protests against the cartoon depiction of the Prophet Muhammad today. But in this demonstration in London's Trafalgar Square, British Muslims tried to quash the violence that's erupted at similar displays throughout the Middle East. Meanwhile, Denmark has withdrawn its ambassadors from its embassies in Iran and Indonesia, citing, quote, "serious and concrete threats."

NGUYEN: On the 27th anniversary of his country's Islamic revolution, Iran's president ramps up his nuclear rhetoric. Mahmoud Ahmadinejad issued a veiled threat to walk away from the nuclear nonproliferation treaty. Now, this in light of his nation's referral to the U.N. Security Council.

HARRIS: Time zone differences may prevent relatives of September 11 terrorist attack victims from seeing the trial of Zacarias Moussaoui. Congress mandated that a closed circuit broadcast of court proceedings be organized for the families, but the trial is being held on the East Coast, and a judge says the sites recommended for the viewing in California are infeasible.

Those are the headlines.

"OPEN HOUSE" with Gerri Willis starts right now.

GERRI WILLIS, CNN ANCHOR: It's the weekend before Valentine's Day. And you'll want to hear our do's and don'ts for making it right.

Good morning. I'm Gerri Willis.

But first up, some very serious problems still plaguing New Orleans six months after the hurricanes. Some folk there is have waited months for housing, even though empty trailers are right there in plain sight.

Also, a little later, how not to get fleeced with out-of-control closing costs and mortgage rates.

Let's start with those trailers. (BEGIN VIDEOTAPE)

SUSAN ROESGEN, CNN GULF COAST CORRESPONDENT (voice-over): In St. Bernard Parish, it has come to this. Fed up with waiting for FEMA to pay for trailers the parish ordered days after the hurricane, the St. Bernard Parish Council says enough is enough.

JOEY DI FATTA, ST. BERNARD'S PARISH COUNCILMAN: don't want our citizenry to have to wait for some paper pusher in Washington to get it right. We got it right here.

UNIDENTIFIED FEMALE: Fifty-nine Packenham (ph) Avenue, which is going to be me.

ROESGEN: Armed with addresses of some of the people in the parish who seem to need a trailer most, Councilman Joey di Fatta led his fellow council members in liberating five trailers that were supposed to stay on this lot.

They didn't call it stealing, but FEMA has not paid for these trailers, so the parish doesn't have the right to take them. The contractor who brought the trailers to St. Bernard let the council members on the lot and even helped them haul the trailers away.

JIM MCGUIRE, TRAILER CONTRACTOR: Somebody's going to have to see sooner or later, somebody willing to do something. I'm willing to get the ball going by giving them the trailers.

ROESGEN: The parish ordered 6,000 trailers from Jim McGuire's company. And McGuire wants FEMA to pay $16,500 for each. But FEMA is balking at the price. The FEMA housing officer for the state of Louisiana, Steve DeBlasio, says FEMA usually pays just $10,500, although he could not provide documentation to support that figure.

DeBlasio told CNN, "It's not a matter of another million dollars. We can't get involved with some middleman. We generally deal with the manufacturers." And, he says, by taking trailers without authorization, the council "will further complicate the issue," saying, "If FEMA can't put a bar code on the trailers, FEMA won't pay for trailers that leave the lot without one."

UNIDENTIFIED MALE: I would imagine they want the door facing their house.

ROESGEN: But that didn't stop the council members from commandeering the trailers, giving them to people who had just about given up on ever seeing one.

DENISE TERREBONE, RESIDENT: Amen! Carry me. Please, don't throw me over, carry me.

Oh, wow, praise God?

ROESGEN: In St. Bernard Parish, five new trailers are now five people's homes. But thousands of other people are still waiting. And if this act of civil disobedience got FEMA's attention, that's just what the parish council wants.

JUDY HOFFMEISTER, ST. BERNARD'S PARISH COUNCILWOMAN: I'd like the people to -- of America to look at me, my face. We are God- fearing, patriotic, flag-waving, taxpaying Americans. My face could be your face in the next disaster, so we need the help of all America.

ROESGEN: Susan Roesgen, CNN, Chalmette, Louisiana.

(END VIDEOTAPE)

WILLIS: That's just crazy.

Now, those trailers may be a welcome sight to those who lost their homes. But are they a good idea in the first place?

Matt Fellowes joins us now from the Brookings Institution.

Matt, welcome.

MATT FELLOWES, BROOKINGS INSTITUTION: Thanks for having me.

WILLIS: OK, so your point here is that, you know, trailers themselves are not a good idea, that the federal government, in all of its wisdom, is going after the wrong solution in the first place. Why?

FELLOWES: Well, the reality is that trailers usually don't make sense for most people in the long run, even if they seem like a good idea in the short run. And a big reason here why that's the case is because they take money off the table in investments in long-term permanent housing, because they're just so incredibly expensive.

WILLIS: Expensive, and you also say that it takes a long time to get them set up.

FELLOWES: That's right. So FEMA wants to house up to 135,000 of the about 750,000 households that are displaced by Katrina. We're now five and a half months since Katrina hit, and only 70,000 households are living in trailers. So they take an incredibly long time to build, and then install, and then maintain.

WILLIS: That's not a good batting average. I know everybody's frustrated with this. And you actually have a solution that you think is better. What is it?

FELLOWES: Well, I think really what should happen here is that there should be more focus on the long-term housing needs. It's important to remember that people can just stay in trailers for 18 months. If they don't find alternative housing within 18 months, they're going to be evicted or evacuated all over again.

WILLIS: But Matt, that's not what happens as a practical matter. You look at Florida, where they've had a ton of hurricanes. People live in those trailers for years.

FELLOWES: That's right. And so what you have then is the federal government ending up footing the bill for these trailers for years to come, and they're not focused then on finding long-term permanent housing. And what that leads then is to clusters of these communities, where...

WILLIS: Tell us about those, because I think there's a lot of questions out there about FEMAville. And that's what the local government people are saying they don't want to have happen, frankly, in their area.

FELLOWES: Yes. And a reason -- as a consequence of that attitude, we're seeing that very few trailers are being installed in New Orleans in particular, because no one wants them in their back yard. And so what usually ends up happening is that they're placed in cornfields or in suburbs or rural areas, where there are people living in these communities not connected to jobs, schools, grocery stores, or transportation.

So you take a lot of desperate people, you put them together in a cornfield with very few opportunities to get ahead...

WILLIS: And it's not a good situation...

FELLOWES: It...

WILLIS: ... not pretty at all. In fact, we've run some stories about some of these places being rife with crime.

FELLOWES: That's right. And we've seen that in Florida, where Hurricane Charley produced thousands and thousands of displaced households, and many of those people are still living today in trailers, where there's high crime rate, high unemployment rate, and very low opportunity to get ahead.

WILLIS: Well, again, Matt, what's your solution?

FELLOWES: Well, the solution here, I think, is that, A, we focus on finding appropriate rental housing for these displaced households, B, that we focus on building long-term permanent housing. Federal government, local government should be talking to Toll Brothers, other developers working on building long-term housing ...

(CROSSTALK)

WILLIS: Well, Matt, how can you believe the federal government is going to be able to run a national rental program when they can't even get a few trailers down to New Orleans?

FELLOWES: Well, they're already running -- they've already placed over 650,000 households in rental apartments around the country. So they do have much better or much higher batting average with that program.

WILLIS: Well, let me ask you this, because one of the big stories coming out of New Orleans, of course, was the fact that people did not want to leave their homes, even as the storms were bearing down on them. So why do you think they should have to leave now, after the storm? Shouldn't we leave them where they are? Shouldn't we come up with solutions that are local?

FELLOWES: Well, the point is that most of these households aren't located in New Orleans, and want to return to New Orleans. So trailers aren't necessarily addressing the needs of the people that are there, or only the needs of the people that are there.

There's over 750,000 displaced households from Hurricane Katrina. The city only has about 130,000 people in it. It had a pre-Katrina population of about 440,000. So you're talking about the bulk of housing needs existing from people that live outside of New Orleans today.

WILLIS: Well, it's a sad story. We appreciate your commentary. Thank you so much.

FELLOWES: Thank you.

WILLIS: Now, if your home is in a flood zone, you'll want to listen up. President Bush sent his budget to Congress this week, calling for cuts in the National Flood Insurance Program. Specifically, the Bush plan begins to phase out subsidies for second homes and for properties that are destroyed by a flood and rebuilt over and over and over again.

And I have an update on another story. The eminent domain case we've been following out of New London, Connecticut, adding insult to injury. The mayor of the town told residents fighting the seizure of their homes that they could stay put.

But there is a catch. Redevelopment will continue around their homes. That means they have to sell their houses to the city and then rent them back. So much for compromising. We'll have more on this story next week, when we talk more about eminent domain.

Coming up on OPEN HOUSE, home buyer beware. I'll show you how not to get fleeced when it comes to closing costs and mortgage rates.

And later, sweets for your sweetie. The right choice for the right relationship this Valentine's Day.

But first, your tip of the day.

(BEGIN VIDEO CLIP)

WILLIS: Keep your property taxes down by reviewing your property assessment. You may just find that your home is overassessed.

First, figure out if your assessment is accurate, fair, and on par with similar homes in your neighborhood. You can do that by simply talking to your neighbors, or visiting the town or city's assessment office.

If you think your home is overassessed, you can appeal it in court, and your chances are winning are good.

Act quickly, be aware of deadlines, and find out how much time you have to file an appeal.

And for more information on how to fight an assessment, go to the National Taxpayers Union at www.ntu.org.

And that's your tip of the day.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

WILLIS: OK, it's often the last thing you think about when you're buying a house. But maybe it should be the first.

Closing costs and other real estate fees can really add up. And most home buyers are in such a rush to close that they can get taken for a ride.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): A few thousand dollars doesn't seem like a lot to pay for a transaction that has run into the hundreds of thousands of dollars. But most home buyers end up paying too much in closing costs because they don't know how the system works.

In a lengthy investigation for "Money" magazine, Stephen Gandel found that in some places, closing costs are double the national average.

Minneapolis won the prize for the highest cost.

STEPHEN GANDEL, "MONEY" MAGAZINE: Well, the problem in Minneapolis is that the local market is dominated by two large brokers, and those brokers tend to be full service. And when you have full-service firms, firms that offer mortgage brokers and title agents, you have the incentive to steer your customers to your in- house services, which tend to be more expensive.

WILLIS: Wherever you live, you may face unreasonably high costs. But you can get those services on your own and for less money.

The trick is to start early and shop around. Look for a low-rate mortgage and a title agent before closing comes around.

When it is time to look through the final paperwork, add up all your fees and question the ones that don't make sense.

GANDEL: What you should do is, you've got to go over your good- faith estimate, which your -- the lender is required to give you within three days of applying for the loan. Go through, look to see what they're charging you. Tell me what the "document processing fee" (INAUDIBLE). If that's for copying a dozen pieces of paper, don't charge me 300 bucks for that.

So you got to go over all these fees, ask them exactly what they're charging you for. And if they can't tell you and make you feel comfortable that you're getting your money's worth with that charge, you got to say, you guys, take this off, or I'm walking.

(END VIDEOTAPE)

WILLIS: Home buyers can also get fleeced when it comes to their mortgage rates. So how do you make sure you're getting the very best deal?

Joining me now is Jack Guttentag, professor emeritus at the Wharton School of Business. He tracks mortgage industry practices.

Professor, welcome.

JACK GUTTENTAG, MORTGAGE EXPERT: Glad to be here, Gerri.

WILLIS: This is one of those subjects that's really near and dear to my heart, because I've been through it myself. I know how hard it is. Consumer advocates are always saying, If you want a good price on something, just shop around. But when it comes to mortgages, it's really hard to do that.

GUTTENTAG: It really is. The mortgage market is something of a minefield for shoppers.

WILLIS: It definitely is. Let's talk about some of the problems.

You can never, if you are looking at mortgages from a variety of different banks, you can never compare apples and apples, it's always apples and oranges. Why is that?

GUTTENTAG: Well, there are a couple of reasons. One problem is market volatility. The mortgage market is tied in to other capital markets now. And so rates change frequently. In fact, mortgage lenders reset their prices every morning. And sometimes they reset them during the day. And what that means...

WILLIS: So they do change all the time. But is that the reason why I get quoted one rate, and then, when it comes to sign on the dotted line, they give me a completely different number?

GUTTENTAG: Well, that's another problem. The rates bouncing around means that it's very difficult to shop one lender on Monday and another lender on Tuesday, because you may not be in the same market Monday and Tuesday.

But there's another problem in this market that I call nichefication.

WILLIS: What's that?

(CROSSTALK)

GUTTENTAG: ... well, that means that every deal is sort of different in some way from every other deal. The market is nichefied. The prices depend on a large number of factors, like the type of property, the borrower's credit, the purpose of the loan. Many, many things go into the determination of the price. And as a result of that, it takes quite a bit of work to find the right price for a particular customer.

WILLIS: All right. Well, let's...

GUTTENTAG: So if you call up someone then, and ask for a price, you're not going to get anything that is likely to be the right price for you.

WILLIS: Well, then, how do I know?

GUTTENTAG: Well, that's -- that gets sort of the second point. How do you navigate this market? You have to spend enough time providing the right information to the loan provider to get an accurate price.

WILLIS: All right, well, let's...

(CROSSTALK)

WILLIS: Go right ahead, professor.

GUTTENTAG: Yes. Well, I was going to say that there's another problem, which is price complexity. You don't have one price for a mortgage like you have a price for a refrigerator or a TV set.

WILLIS: Well, that's right. But let's look at the problem from the consumer point of view. What I really want is the lowest price, the lowest interest rate possible available to me and my situation. So how do I do that? You've got something called the mushroom rule. What does that mean?

GUTTENTAG: The mushroom rule means that you select a loan provider the way you would go out and find a wild mushroom. You don't try to identify the poisonous toadstools. What you do is, you try to identify the few good ones that you know are safe to eat.

And that leads to my cardinal rule about dealing in this market, which is, don't respond to solicitations. That doesn't mean that everyone who solicits is a predator, but all the predators in this market solicit heavily. And so if you respond to a solicitation, your chances of getting a predator are higher than if you throw a dart at the Yellow Pages.

WILLIS: All righty, then. Well, professor, great advice. Don't go for the solicitations, make sure you weigh all the offers.

Thank you so much for your help today.

Coming up on OPEN HOUSE, love is in the air. Make this Valentine's Day special for that special someone.

But for a cheap thrill, here are the mortgage numbers.

(COMMERCIAL BREAK)

WILLIS: Are you a little worried about the message of your Valentine's Day gift? Is lingerie too much? When will flowers do?

Well, here's what you need to know.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Valentine's Day, it can strike fear in your heart. You could send the wrong message.

The trick, says dating expert Jeff Cohen, know where you stand.

JEFF COHEN, DATING RELATIONSHIP EXPERT: The first identifier of the relationship is what you're calling each other. Do you say that we're seeing each other? Do you say that we're boyfriend and girlfriend? Or are you all the way up to being engaged and you're using fiance? That's a good way to tell just how serious the gift should be.

WILLIS: The people we found agree.

UNIDENTIFIED FEMALE: I think going out to a nice dinner is really the best way to celebrate if you're a brand-new relationship.

UNIDENTIFIED MALE: If you're having sex, you get some lingerie, chocolate, you know.

UNIDENTIFIED MALE: If you want it bad enough, and you'll do whatever it takes, essentially. But absolutely, get her something. Don't be the loser.

UNIDENTIFIED FEMALE: I sent flowers to him first. I was concerned when I first sent flowers, like, Well, we've only been dating a few months. Is it too much? But sometimes you just have to take that chance.

WILLIS: Flowers? Sure. Chocolates can make all kinds of statements too.

JACQUES TORRES: This is -- I'm interested. I don't want to invest too much, but I'm interested.

We also have the, I want to kiss you. This is a big message, big fat sexy lips. This is the one. I want to kiss you, the French kiss here. It's coming up.

I want to get some action, that's the one here. And every time you pull a chocolate out, you have a message. "Kiss me in bed." Wow, this one go pretty fast.

Then we have the little house. This is the Love Shack. And this is a longer relationship.

WILLIS: It's that kind of thinking that helps you move things along.

GUTTENTAG: You want to use Valentine's Day at least to meet expectations, but it's also a good chance, if you're trying to accelerate the relationship, to do something extra.

WILLIS: Of course, that doesn't mean the same thing to men and women.

TORRES: In Valentine, that's very interesting, woman's come the day before, or two day before, and they know what they're going to pick. They know the flavor, they have a very good idea of what is going on.

Men's come the last day, the last four hours of the store is open. They come with a $50 bill, a $100 bill. And they say, I want for $50 of chocolate. They have no idea what it is, they don't what they're going to get.

But men's usually doesn't plan. Woman's plan that. So it's very funny for us to see the difference between the two. It's very entertaining.

WILLIS: As for the lonely hearts...

GUTTENTAG: It's a total secret that Valentine's Day is really the best day for singles. Any club you go to, any bar, you're guaranteed to meet other singles. I know lots of people who met someone on Valentine's Day. And that became their first date together.

WILLIS: And even staying home alone doesn't have to be so bad.

TORRES: We also have something for the broken heart, called The House of Broken Hearts, or, Love Sucks. So some people doesn't like Valentine. We have something for them. The house is closed, and the house is broken. This is a sad one. But, you know, we need to cater to everyone.

WILLIS: Whatever you do, do something.

GUTTENTAG: If you ignore the holiday, you're definitely headed for relationship trouble.

UNIDENTIFIED MALE: Walk in the house empty-handed. The worst thing you could do. Don't stand there empty handed and say, What day is today? You know, you got to make sure you know what's going on.

(END VIDEOTAPE)

WILLIS: So whatever you do, don't do that.

I'll be back with my final tip right after this.

(COMMERCIAL BREAK)

WILLIS: One more tip about keeping your closing costs in line.

When you're at the closing table, that's when you have the most leverage. If you see a fee or added cost you didn't expect, you can threaten to walk away. The ball is really in your court. And few lenders will give up the deal for the sake of a few hundred dollars in fees.

And finally, if you're going classic this Valentine's Day with roses, well, you sure better understand the colors, because they all have a different meaning.

Here's your tip sheet. According to ftd.com, red roses means, I love you. White roses say, You're heavenly. Pink roses stand for grace and gentility, and sending yellow roses, well, that's a sign of happiness.

OK, so if you're still trying to make up your mind about a second date, stick with the pale-colored roses, because that means your pal's been (ph) not ready for the engagement ring.

We want to hear from you. Send us your comments, your questions to OPEN HOUSE at cnn.com.

And you'll find more on today's guests and topics on our Web site. That's cnnmoney.com/openhouse.

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

The day's top stories are next on CNN SATURDAY.

Have a great weekend.

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