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Open House

Your ID: Exposed!; Mortgage Fraud; Growing Population Pushes City Limits; High-End Haunts for Halloween

Aired October 14, 2006 - 09:31   ET

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


GERRI WILLIS, CNN ANCHOR: If you're like me, you get all kinds of mortgage offers in the mail. How do these banks get your name and your personal information? Coming up, I will show you who's selling your info without your permission, and the risks you could face as a result.
That and much more ahead.

Get ready. It's time for OPEN HOUSE.

Buying a house is supposed to be a happy occasion, but there's the mortgage application process, the fear, the stress, the nerve- wracking experience. But now to add to that stress, we're learning from the Mortgage Bankers Association that your personal information might be getting in the wrong hands the minute you apply for a loan.

Ken Harney is a real estate columnist for "The Washington Post."

OK, Ken, how do these people get my personal information?

KENNETH HARNEY, REAL ESTATE COLUMNIST, "WASHINGTON POST": Well, Gerri, as soon as you make an application or even make an inquiry, sitting with a mortgage broker or with a lender, in order to give you a quote of a rate and fees, the lender or broker has to go and pull your credit from one of the three national credit bureaus.

WILLIS: Your credit report, right?

HARNEY: Exactly.

WILLIS: And how long does it take them to do all of this?

HARNEY: Well, once the -- you know, once they pull -- once they pull the credit and give you a quote, that is noted at each of the three national credit bureaus. That's Equifax, Experian and TransUnion.

WILLIS: Do they have my Social Security number? Do they know how much I'm trying to borrow?

HARNEY: Well, they don't know how much you're trying to borrow, but they -- and they don't sell your Social Security number, but they do sell to competing lenders, lenders who are competing with the lender you just applied to for a loan. And within 24 hours...

WILLIS: Wow. HARNEY: ... competing lenders are on your phone trying to sell you another mortgage, perhaps at a lower rate.

WILLIS: Ken, so within 24 hours a day I can be getting letters from other lenders who are just trading on this information they've gotten. Is this illegal?

HARNEY: Well, that's an interesting question. I think it's yet to be determined.

These prescreened lists -- is what the marketers call them -- they are legal. There is, you know, a federal sanction for that.

The trigger list situation, that's a little bit different. When a competing lender calls you up over your morning coffee and says, you know, we understand you're interested in getting a mortgage, we've got a better deal for you, that -- you know, it's questionable whether that fulfills the legal requirements for presenting you a full...

WILLIS: OK.

HARNEY: ... you know, serious offer of credit.

WILLIS: OK. Well, so let me get this straight. You're talking about a trigger list. I never heard that phrase before.

So, that is like a lead list for brokers, or how does it work? Who can get that? Can anybody get that?

HARNEY: No, not anybody, but these are hot leads for mortgage lenders. And they buy them at considerable cost. And, of course, they're hot, so they know you're about to, you know, get a mortgage. And so it's a more valuable sort of piece of information that they can have to market to.

WILLIS: So, Ken, how likely is it that these, you know, credit rating agencies might sell this information to an identity thief?

HARNEY: Well, I'm sure they will tell you that they take some precautions, but I question -- you know, when someone knows your credit card balances, that's one of the things they sell. When they know, you know, your address, your phone number, the size of your existing mortgage -- and they can figure out pretty much the value of your house -- when they've got this information I think that some of that is -- you know, could fall in the wrong hands.

WILLIS: Are there other risks besides just losing your identity? Which would be huge, obviously.

HARNEY: Well, I think the biggest risk actually is bait and switch. So let's say you've made an application and, you know, you've gotten a quote from a broker or from a lender. And now I come in with a low-ball offer, having received the information that you're in the market.

You know, in a 6.5 percent mortgage market, I just call you up and I'll say, well, we'll give you 6 percent. But will that actually ever occur? And will they come through and deliver that loan? I doubt it.

WILLIS: Yes, those rates on those letters look too good to be true, I've got to tell you.

HARNEY: Yes.

WILLIS: The good news here, though, is that people can opt out of these systems, right? How do they do that?

HARNEY: Well, there is a -- you know, a way to do it online. And you can also do it with a toll-free number.

WILLIS: OK. Well, we will definitely be telling our viewers about that.

Ken Harney, thanks so much for being with us today.

HARNEY: My pleasure.

WILLIS: Now, if you think all of that is bad, imagine finding out that you're on the hook for houses you didn't even know you owned. That's what one lawsuit claims happened to the folks of Martinsville, Virginia, 100 victims scammed out of $80 million.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Drive along Highway 220, through the rolling hills of southwest Virginia, and you will find the quiet town of Martinsville. It's a town filled with hard-working people like Kelvin Thompson.

Thompson and his family were going through a difficult time a couple of years ago. His wife, Brenda, was out of work. So when Brenda's hairdresser and a local minister approached him with a real estate investment plan where he didn't have to put up any money, it seemed like a good way to make a little extra.

KELVIN THOMPSON, VICTIM OF ALLEGED MORTGAGE FRAUD: I trusted them. I mean, I honestly -- I honestly trusted these people.

WILLIS: Kelvin signed some documents and waited for the promised money to come rolling in. But a year later, when he went to the bank for a loan to help buy Christmas gifts, he was stunned.

THOMPSON: I couldn't go to my credit union and borrow $1,000 because I have -- I have five foreclosures.

WILLIS: Thompson found he had somehow become the owner of five homes in Indianapolis. A lawsuit filed in June by Countrywide Home Loans alleges that Sharon Penn, who styled hair in her basement, and her mother, Beulah Penn (ph), the local minister, were involved in a mortgage fraud scheme, along with at least 14 others.

Countrywide claims people working with the bought home in Indianapolis and had them appraised for tens of thousands more than they were worth. Then, using false mortgage applications, they sold the homes to their unsuspecting recruits for the inflated price, pocketed the difference, and never told the members of their club anything about the sale.

So, the homes went into default, ruining the credit of all of the duped homeowners. Beulah (ph) and Sharon Penn declined our request for an interview. In a court-filed response to the lawsuit by Countrywide, in which she is named as a defendant, Sharon Penn denied all allegations of fraud.

Thompson is working with the mortgage companies to sell the homes and get rid of the debt. But his credit is ruined, and he says he can't find a lawyer to help fix it.

(END VIDEOTAPE)

WILLIS: OK. That's a terrible story. And you should know that mortgage fraud isn't one scam. It's actually referring to a host of different schemes.

Bottom line, though, most involve inflating the value of the property beyond what it's worth. The scammers pocket the difference. And because prices have gone up so much, though, it can be hard to tell when you've been targeted by a scam.

Now, for that reason you'll want to look for these red flags.

You think the price is too high: hire your own appraiser to make sure the price you are being quoted is fair. Get your own licensed home inspector, too, to give the property a thorough going over.

You're asked to sign a document with blanks. Refuse to sign until the documents are complete, and get copies.

Check to make sure that any down payment you make is correctly described in the mortgage documents.

And finally, be sure to review the title history of the property to make sure it hasn't been flipped. That is, bought or sold a number of times and the value pushed up higher each time.

Now, if you're worried you are a victim, the Department of Housing and Urban Development can hook you up with a local counselor. Their phone number is 800-569-4287, or you can go to hud.gov and click on "buying a home."

We'll have the Web site and the phone number to call to opt out of other offers on our Web site, CNN.com/OpenHouse.

Coming up on OPEN HOUSE, the growing population in the U.S. is pushing cities' limits. You will learn which areas can handle the heat and which ones might have a rocky road ahead.

And getting ready for Halloween without spending a whole lot of dough. "Weekend Project" will show you how to decorate your house for less, with style in mind.

But first your "Tip of the Day."

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Don't be one of the 10 million Americans who fall victim to identity theft each year. If you suspect fraud, act quickly to avoid damage to your finances and your reputation.

First, contact the FTC to report the situation by telephone at 1- 877-ID-THEFT, or online at FTC.gov.

If regular monthly bank statements or other important documents start missing from your mail, check with the post office to see if an identity thief submitted a change of address form.

Contact the Social Security administration if you suspect your Social Security number has been stolen.

And contact the IRS if you suspect improper use of your ID number in connection with tax violations.

That's your "Tip of the Day."

(END VIDEOTAPE)

(COMMERCIAL BREAK)

WILLIS: With the population hovering around 300 million, should we celebrate the nation's growth or worry about running out of space and resources?

Andres Duany is here to tell us which cities will thrive and which ones will crack under the population pressure.

Welcome, Andres. Good to see you.

ANDRES DUANY, ARCHITECT, URBAN THEORIST: Good morning.

WILLIS: So I think everybody gets the fact that there are a lot of people, there's a lot of congestion. But you say if city planners were on the ball we wouldn't have these problems.

DUANY: Oh, absolutely. It's the pattern, really. It's -- you know, there are -- there are places where people can live quite densely and pleasurably and where transit works. You know, the old traditional cities are marvelous places to live, and suburban sprawl, in fact, is the root cause of the -- of the traffic congestion, which is what's causing so much anxiety.

WILLIS: Well, let's look at some of these cities that might thrive or crack, starting with Vegas. You know, this is a city that's grown an incredible amount. So many workers moving there every year, yet there are limits to growth.

DUANY: Yes. Well, in that case it's the water. But, you know, the entire Sun Belt is subject to the same kind of -- the same kind of constraints. And the Northeast, at the same time, seems to be evacuating, or at least the northern cities.

WILLIS: OK. So, but do you -- what do you see for Vegas in the future?

DUANY: Well, you know, the natural limits of growth in -- even in a society in which we supplement -- in which we supplement growth with enormous infrastructure investments, eventually things wind down. You know, we're not as wealthy a country as we were in the last 50 years. We cannot keep building the highways the way we used to. We're now becoming, I would say, not a poor country, by any means, but certainly a country that has limits in how we allocate the wealth.

WILLIS: Well, let's move on to southern California, San Diego, L.A. I mean, these are areas that have grown and grown dramatically. They know all about sprawl.

What's next for those areas? Can they continue at this pace, or -- you know, affordability there is a major issue.

DUANY: Yes, it is. Well, it's difficult to generalize, because, you know, of course, they're the famous large cities, San Diego and L.A., and those cities have compact urban cores that are doing very well. But I think it's their suburbs are the ones that have a questionable future, particularly as fuel prices go up.

WILLIS: Right. You know, you have something interesting to say, I think, about the coasts. And Florida in particular. You say that these areas may not grow as much as they have in the past.

A lot of people have said that before, Andres. Why do you think it's particularly true now?

DUANY: Well, in this case, it's the current fear of hurricanes and the secondary effects of insurance -- insurance costs. They have, as you know, doubled, tripled, quadrupled in price.

I think a lot of people are looking beyond the fear of hurricanes, which, you know, has been around us for a long time, to the cost of doing business in such places. Now, this may be temporary. You know, we may have five, 10 seasons without any devastating hurricanes, and then we'll be back. But at the moment, I think people are hesitating in terms of where they invest.

WILLIS: I want to talk about a couple of places you really do like and think will grow in the future. I think this is surprising. New York City. I mean, haven't we tested the bounds there?

DUANY: Well, New York City, you know, is one of the great ecological places of the world. Most people who live in Manhattan consume 25 percent of the energy of those who live in the suburbs. You know, the Manhattanites live compactly, they walk, they don't have to drive around. And, you know, as energy becomes expensive, the premium of living in a city like Manhattan will make it less expensive to live there, but at the same time, more desirable. So the real estate may become more expensive.

WILLIS: That's my life right there, walking through the streets. But let me get you to a list of cities that you think are going to have trouble in the future.

Very quickly, the ones that are not going to survive the sprawl issues. Who's in trouble?

DUANY: Well, I don't know whether that's -- that might be a bit extreme, but I think cities like Orlando, for example, that are primarily -- primarily sprawl, I think, have a questionable future.

There are many cities that don't have a name, you know, that are all around the Sun Belt, you know the peripheries of Phoenix, the peripheries of Las Vegas, and so forth. You know, they're not precisely Las Vegas, which, of course, has that kind of historic core, but the edge cities everywhere may be -- may be in trouble, particularly in the Sun Belt.

WILLIS: Very interesting.

Andres, very controversial and very interesting. Thanks so much for joining us today.

Still ahead on OPEN HOUSE, Halloween is only a few weeks away. We'll tell you how to bring home the perfect pumpkin.

Plus, going all out for Halloween without breaking the bank. "Weekend Project" is next.

But first, "Trendspotting."

(BEGIN VIDEOTAPE)

WILLIS (voice-over): These days, buying a piece of furniture can mean a contribution to the environment.

PAULETTE COLE, CEO, ABC HOME: We aspire to offer the clients choices in ways to be able to invest with their dollars to effect change on our planet.

WILLIS: More and more household products are environmentally conscious and carry a social resonance beyond the simple cash-and- carry transaction.

COLE: Although we believe in the cause-related product, we push it back until it's accepted in a way that people are buying it with awareness and consciousness, really buying it because it's beautiful and it's serving their purpose.

WILLIS: Positive feedback is flowing in from consumers, businesses and environmental groups alike. One example of these products, those tacked with the "Good Wood" label.

COLE: It acknowledges that the product you are seeing is produced from responsibly managed forests (ph). We nurture people on a path to collect what really was inspiring to them and allowing them to be the thread in their own home rather than just be responsible to any particular moment in time or trend.

WILLIS: That's this week's "Trendspotting."

(END VIDEOTAPE)

(COMMERCIAL BREAK)

WILLIS: Halloween is only a few weeks away, and now is the time to start decorating your home. And we're not talking about the same old, same old. As you can see, this year it's all about gothic splendor.

Mayor Rus is the designer for "House & Garden." He's going to show you how you can splurge on extravagant design without busting your budget.

Hi, Mayor. You're scaring me here. You've got a lot of fun stuff.

MAYOR RUS, DESIGN EDITOR, "HOUSE & GARDEN": Yes.

WILLIS: We want to share some pictures first, though, because your magazine teamed up with Bergdorf Goodman...

RUS: Yes.

WILLIS: ... to design their windows this year for Halloween. There's some great items.

Look at these spider webs, though. They have -- they have crystals all over them. I've got to tell you, Mayor, I was just going to get a pumpkin and maybe some Silly String, but clearly I'm behind the curve on Halloween decorating.

RUS: Yes. Well, at "House & Garden" we're trying to take a more sophisticated look...

WILLIS: OK.

RUS: ... at the holiday and beyond the holiday. Some items that, you know -- that seem to work for Halloween but could work throughout the year.

WILLIS: These are beautiful. And this is the affordable alternative to what we just showed.

RUS: Well, these are actual spider webs. These -- these are made by Douglas Little (ph) who produced the entire shoot for "House & Garden" and the windows for Bergdorf. He clips these from olives trees with a stiffening agent under glass, felt-backed. They're of course one of a kind, and they're unbelievable beautiful.

WILLIS: So if I was going to do this on the cheap, how would I do it? RUS: Well, I mean, if you were going to do it on the cheap, I guess you could try to find your own spider web.

WILLIS: Or I could just get yarn, right?

RUS: But, you know, if you did -- if you did an environmental installation, you could do very inexpensive -- just chain that you get at any sort of craft store and drop little glass beads on it, and weave it yourself into a little corner of the house.

WILLIS: Wow. You know, I'm lucky to be able to carve a pumpkin.

Let's look at a few things here that are really different.

RUS: Yes.

WILLIS: We've got this absinthe thing.

RUS: Yes, that's another incredible little Douglas (ph) creation. It's an absence decanter. And absinthe, of course, is the green fairy. It's fermented worm wood.

WILLIS: Isn't it lethal?

RUS: I'm sure it's lethal at high doses. I haven't really tried it. It's lethal, and it's potentially illegal. We should look into that. But there is an alternative that they make now that is not...

WILLIS: Either.

RUS: But this thing is an incredible decorative object.

WILLIS: I like the skull.

RUS: A beautiful piece of glass.

WILLIS: Now, tell me about the scary monkey.

RUS: The monkey is a bronze sculpture from Blackman Cruise Studio (ph) in L.A., and it has a sort of (INAUDIBLE) look. I mean, it is sort of fearsome. But I could see that living in a garden room, somewhere, you know, where you'd want to, like, take a walk on the wild side, you can use it.

WILLIS: That's adorable.

RUS: It's a little spiky sterling silver thorn apple.

WILLIS: Can I find something like this at a flea market or...

RUS: Absolutely. Absolutely. One of the things that we say makes great holiday decor is clustered candlesticks and candelabra. Instead of flowers, just do a huge arrangement. And you can go to any flea market and find wonderful old things very inexpensively.

WILLIS: That's a lot of fun to do, too. It's a great outing for the kids, right?

RUS: Yes.

WILLIS: Mayor, thank you so much for being with us today. This was a ton of fun.

RUS: Thank you -- thanks.

WILLIS: As always, if you have an idea for a weekend project, send us an e-mail to OpenHouse@CNN.com. And you can watch past weekend projects on our Web site, CNN.com/open house.

Straight ahead, tips on picking the perfect pumpkin for your home when OPEN HOUSE comes right back.

But first your mortgage numbers.

(COMMERCIAL BREAK)

WILLIS: The pumpkin patch is going to be a little smaller this year, no kidding, thanks to heavy rains and high temperatures across the country. But here are some tips to help you spot the perfect pumpkin.

OK. First, run your lands along the pumpkin and try to feel out the soft patches. These soft spots could turn to mold in a matter of a few days. So you wouldn't want that one. And whoever would have thought that stem quality was a telling sign of a healthy pumpkin.

Look for green stems. This means the pumpkin was just recently picked from the vine.

And give it a rap or two. Make sure your pumpkin has a nice, full sound when you knock on it.

Once you take your pumpkin home, try to keep it away from frost or rain. This will increase its porch life.

And finally, hold your carving knives to get the most out of your jack-o'-lantern and its toothy grin. Don't carve it until a few days before Halloween.

If you have any questions or tips you want to share with your fellow OPEN HOUSE viewers, send us an e-mail to OpenHouse@CNN.com. And you'll find more on today's guests and topics on our Web site, CNN.com/OpenHouse.

As always, we thank you for spending part of your Saturday with us.

OPEN HOUSE will be back next week right here on CNN. And you can also catch us on "Headline News" every Saturday and Sunday at 5:30 p.m. Eastern Time.

Don't go anywhere. Your top stories are next in the "CNN NEWSROOM." Have a great weekend.

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