Return to Transcripts main page

Open House

States Stepping In to Mortgage Crisis; Mortgage Fraud in Georgia; FTC Cracks Down on Deceptive Mortgage Ads; The Best Laptops

Aired September 15, 2007 - 09:30   ET

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

GERRI WILLIS, CNN ANCHOR: Welcome to OPEN HOUSE, the show that saves you money.
Here's the latest on the mortgage meltdown. Home values and sales will likely take a bigger hit than expected this year, according to the National Association of Realtors. The trade group sees a 3.7 percent decline in existing home prices in the third quarter of this year. That's compared to last year.

Now the northeast part of the U.S. is the only region to see a slight, and I mean very slight increase in the value of homes. But there is some good news. A week after a major House committee here on the subprime fallout occurs, the Senate approved a measure on Wednesday to provide $100 million to homeowners facing foreclosure.

Several states are taking mortgage meltdown matters into their own hands. We talked to Ohio Governor Ted Strickland a few weeks ago about his plans. And another state is taking action right now, Colorado.

John Suthers is the attorney general there.

Welcome, good to see you, attorney general.

JOHN SUTHERS, COLORADO ATTORNEY GENERAL: Thanks for having me, I appreciate it very much.

WILLIS: I know the numbers tell the story here. Colorado is what, No. 5 on the foreclosure list? Give us some more details.

SUTHERS: Well, the fact of the matter is we've had a lot of new home growth in Colorado over the last several years. We think that up to one-third of the home mortgages that have closed in the last five years have been subprime loans.

WILLIS: Wow. Let's talk about your efforts because you're really trying to get in front of this, particularly with mortgage brokers. You passed legislation there dealing with them. Does it come too late at this point? Why did it take so long and specifically what are you trying to do?

SUTHERS: Colorado is one of only two states until two years ago did not regulate mortgage brokers at all. Then we went to a registration scheme and last year we went to a full licensing scream. There's a question whether licensing brokers really significantly reduces mortgage fraud. We've passed statutes directed to that appraisal fraud. And we also did a foreclosure fraud protection act which has really reduced the number of people exploiting people in foreclosure.

WILLIS: That's a very big problem that we've reported here on OPEN HOUSE. I want to ask you about your foreclosure task force. You've subpoenaed several lenders and investigated many. Has anybody been forced to pay out money? What are the results of those investigations?

SUTHERS: We have several investigations undergoing, one of them involves 13 mortgage lenders. Because it's under investigation, I'm not going to be able to comment on the results. I think they will be made public fairly soon.

We have a state, local and federal task force that meets, discusses cases and basically decides who is going to do what. The federal government, the U.S. attorney has been very aggressive towards some of the document fraud and the brokers involved in that. My office has a couple of criminal investigations going on.

WILLIS: But those haven't concluded yet, correct? The criminal actions are not over yet, correct?

SUTHERS: Some are still pending, some have been concluded. We've had several successful federal prosecutions in Colorado. My state has also been involved in multi-state litigation. We were involved in the Ameriquest case, which was settled for $325 million nationally. That was the largest subprime lender in the United States.

There's a public education campaign that is a very big part of what we're doing in Colorado. We've got a foreclosure hotline where anybody in foreclosure can call and get advice about how to deal with the issues they're facing.

WILLIS: We appreciate your help today and wish you luck in combating mortgage fraud. Thank you so much.

Mortgage fraud can be found in every state, but it's running rampant in Georgia. Now, that state has been in the top five in mortgage fraud for the last five years. It got so bad in one community, one woman took matters into her own hands.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Stone mountain, Georgia. It looks like a typical upscale suburb. But in 1996, stay-at-home mom Ann Fulmer got suspicious about strange doings in her neighborhood.

(on camera): What was going on in the neighborhood? What kind of activity? Were you worried, concerned?

ANN FULMER, FOUND MORTGAGE FRAUD IN NEIGHBORHOOD: Not at the beginning. It was just kind of odd. But over time, it did become a matter of concern because the people who moved in started moving from one house to another house. People were paying way too much for houses and not bothering to move in, but UPS was regularly delivering packages there which I found out later from the FBI was a likely indicator of drug trafficking activity. We had a shooting at one of these houses about a quarter mile away from my kids' elementary school.

WILLIS (voice-over): As a former practicing lawyer decided for her family's safety, Fulmer decided to investigate.

FULMER: It wasn't until I was able to get down to the courthouse and start looking at the deed records and sanitation records and water records that I realized it wasn't just these 18 or 20 houses in my neighborhood, it was houses all over the county. Because I kept seeing the same names in these transactions over and over again ...

WILLIS: Fulmer uncovered a scam known as illegal flipping. It's carried out by a highly organized and professional team of criminals, usually including a real estate agent, appraiser, a fake buyer, loan officer and/or settlement agent.

Here's how it works. John Doe, a con-artist buys your home for $200,000, but then has home appraised for $400. Jane Doe, a second buyer, used a fake identity to get approved for a $400,000 loan. The loan officers approves the loan and just like that, the original owner gets their $200,000 in cash. John and Jane Doe, the loan officer and the settlement agent split the rest of the money and Jane Doe defaults on the mortgage. The home goes into foreclosure and the scammers move on to the next house.

(on camera): So they were really just robbing the bank.

FULMER: Absolutely. It's absolutely bank robbery without a gun.

WILLIS (voice-over): Such a pattern of foreclosures causes property value to go down after the inflated appraisals drive property taxes up. While Fulmer pleaded with law enforcement to act, she quietly investigated these shady deals.

(on camera): OK so Ann, this someone of the houses that was flipped, just down the street from you, right?

FULMER: That's right. And it was occupied by some of the flippers for about two years, which is terrifying.

WILLIS: Why?

FULMER: Because I was trying to get them arrested, I was trying to get them thrown out of the neighborhood and I was working with the FBI at that point and I was terrified that they were going to find out what I was doing.

WILLIS (voice-over): And they did. Since 2002, federal authorities arrested more than 15 of the flippers in Fulmer's neighborhood, with some sentenced to 30 years behind bars.

DAVID NAHMIAS, U.S. ATTORNEY: What Ann was able to do was to get us in law enforcement and people in the community generally to understand this was a problem devastating whole neighborhoods, whole communities and that the real victims were these individuals whose homes were being destroyed in value.

WILLIS: Ann now trains FBI agents and lenders with the company Interthink to represent the signs of mortgage fraud which cost lenders between $1 billion and $4 billion last year, according to the Mortgage Bankers Association. To date, Fulmer says she has helped put away more than 300 mortgage fraudsters.

(on camera): The moral of the story is that mortgage fraud can happen anywhere, right?

FULMER: It can and does happen anywhere. And that's one of the sad things that we see. We tend to think of it as a problem more in inner-city neighborhoods where the property prices are depressed and in old neighborhoods. But the fact is, it happens in those neighborhoods, in middle class suburbia and all the way up to and including up to multi-million dollar mansions in gated suburbia.

(END VIDEOTAPE)

WILLIS: Scary stuff. The FBI says mortgage fraud is one of the fastest white collar crimes in the country. So don't be a victim. Get to know how mortgage fraud works. Appraisers and bank officials are key to the process, since they're the ones who validate the inflated property price. Know who is vulnerable. Scammers tend to prey on older folks and first-time home buyers. States where mortgage fraud is most common: California, Florida, Illinois, Arizona and Nevada.

Recognize those red flags, like if your broker insists you use one specific lender, or your lender is trying to get you to commit to a loan that is much more than you can afford, take a closer look. If you're worried you might be a victim of mortgage fraud, call HUD at 1- 800-569-4287 or go to hud.gov.

Now what if I told you you could buy a better credit score right now? We'll explain.

Then no more excuses. We have reasons why some folks don't save for retirement and why you should start right now.

And get your hands on the first laptops without spending big bucks.

But first, your tip of the day. Save time and money during the December rush. Plan for the holidays now. Set up a holiday budget based on last year's expenses. That way, you won't feel the pinch when shopping season rolls around.

Or start shopping now. Shopping months ahead of time will allow you to make the most of sales and regular season prices. And be sure to pick the right plastic. If you're going to be using a credit card for your holiday purchases, be sure to choose wisely. Choose a car with a low interest rate and take care of any credit card debt you have right now rather than during the holiday frenzy when your monthly expenses will typically rise.

That's your tip of the day.

(COMMERCIAL BREAK)

WILLIS: The Federal Trade Commission is cracking down on what it says is deceptive mortgage advertising. More than 200 companies are being warned about their ads which may violate federal law by making deceptive claims. Now, the ads appeared everywhere, on the Internet, in newspapers, magazines, e-mails, regular mail and despite our calls to the FTC, a list of the companies involved has not yet been made available.

Now with the housing market going through a tough time and a credit crunch getting tighter, you need to have a strong credit score. What if you could buy a better credit score? Well, it's called piggybacking. But is it too good to be true? Check it out.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Alipio Estruch works as a mortgage broker and he wanted to become a real estate investor, buying homes in this Florida neighborhood where he lived. But his credit wasn't good enough.

ALIPIO ESTRUCH, CREDIT CLIENT: I had a couple of things I was dealing with that were bringing my scores down.

WILLIS: Estruch claims identity theft and too many credit inquiries made him unable to get the mortgage he wanted. A friend told him about a company that might be able to help, Instant Credit Builders. It's one of a number of new companies who offer a unique and controversial way to improve your credit. The company's Web site promises to raise your credit score in 90 days or less.

JOHN COATES, INSTANT CREDIT BUILDERS: Our goal is to help them get their lives back on track, help them get their lives into a position where they can afford to pay for their homes and their kids to college, save money for themselves.

WILLIS: Here is how it works. A client with poor credit contacts Instant Credit Builders and pays them a fee starting at $900 for their services. ICB gives part of the money, an average of $150 to a cooperating person who has good credit, a credit card or a line of credit that has been open for a long time with a history of on-time payment.

The person with good credit adds a person with poor credit as an authorized user on their account. Now the solid payment history of the credit history become part of the record of the person with poor credit and automatically boosts their score. ICB says the credit score can go up by an average of 30 to 45 points for each card the client is added to which can mean the difference between approval and denial of application for new credit.

(on camera): Instant Credit Builders said its found a loophole in the credit scoring formula that helps clients get a fresh start. But the lending industry says it's not a hoop hole. It's illegal.

GINNY FERGUSON, NATL. ASSN. OF MORTGAGE BROKERS: The biggest problem is it's fraud. It's putting people into credit grades that they do not deserve, often giving people access to mortgage credit who would not have access at all.

WILLIS (voice-over): And while the Federal Trade Commission would not comment on ICB in particular, it indicated a company engaging in this business could be violating the Federal Credit Repair Organizations Act. ICB says it's not breaking any laws.

Fair Isaac, the company that developed the FICO credit score says it will stop letting such users get a boost from the main user's credit cards. ICB says will continue to find ways around the credit scoring rules so it can help its clients. And Alipio Estruch is so happy with the company, he hopes to some day work for them.

(END VIDEOTAPE)

WILLIS: Well, of course, the best thing you can do is build good credit in your own name. You need to start saving money right now. That's right, immediately.

We'll tell you why you have no excuses anymore and how to get that cool, new laptop without blowing your budget. But first, your mortgage numbers.

(COMMERCIAL BREAK)

WILLIS: Excuses, excuses. We all make them, but when it comes to saving for your retirement, well, there is just no good reason not to. Jonathan Clements is a personal finance columnist for the "Wall Street Journal" and he is here to help us debunk some popular excuses for not saving.

Welcome Jonathan, good to see you.

JONATHAN CLEMENTS, WALL STREET JOURNAL: It's great to be with you, Gerri.

WILLIS: Now, is it really harder to save these days because it sure feels that way.

CLEMENTS: I don't know if it's harder to save these days. We've always had a problem with saving, whether it's a lack of self-control or because too much of our money is going towards health care and housing. Or maybe it's just we can't see beyond the end of the month, for whatever it is.

WILLIS: College costs, health care costs, you name it. But the big question here, how much do you save?

CLEMENTS: The old rule of thumb used to be you should save 10 percent of your pre-tax income each year. I think these days the number should be closer to 15 percent. You should really be endeavoring to supplement close to 15 percent of your pretax income every year.

WILLIS: Wow, ouch. Let's work through some of the excuses. I know folks in their 20s and 30s, they think, hey, retirement? You've got to be kidding me. I'm just getting out of college for the first time. Why would I even bother thinking about retirement?

CLEMENTS: Well, think about it this way. There are only two ways to make a portfolio grow. You can either sock away dollars or you can earn investment returns. The earlier you start socking away the dollars, the more help you're going to get from the financial market and so the less you end up having to sock away in the long run.

By contrast, if you put off saving for retirement until 35 or 40, it becomes really, really difficult to match enough money and suddenly you're looking at maybe having to save 20 to 25 percent of your income every year.

WILLIS: That's really hard, absolutely. The pain increases. I know a lot of people prior to maybe this year were counting on their home values increasing to be an important part of their retirement. This may not be the case.

CLEMENTS: Yeah. I'm not getting those e-mails any more about how I'm going to retire on the home. If you live in Manhattan and you're willing to move to a small town in the Midwest, yes, you can pick up a lot of home equity and it may pay for your retirement. But most of us aren't going to make that sort of move. We're going to stay in the same town or same city. We're not going to free up a lot of home equity and it's not going to pay for our retirement.

WILLIS: OK, so some people think they're going to bank on their great investments. You had a couple of great years in the market. You think wow, this is awesome. Forget about it, right?

CLEMENTS: Well, think about the great years we just had in the market, 2004, 2005, 2006. If you banked on those great gains, you say hey, I'm well on track to retirement. I'm going to cut back my savings, but wham, you get hit with a year like this one, suddenly because you weren't saving, you're behind the eight ball and, you know, you're going to need to suddenly save a lot more.

WILLIS: All right well great advice, Jonathan, thanks for helping us out today. And of course, we'll probably all be working in retirement. I'll be here with my walker on the set.

As always, if you have an idea on how to save money, send us an e-mail at OPENHOUSE@CNN.com. And if you want to check out this weekend project again, check out our Web site again at CNN.com/OPENHOUSE.

Learn how to find that perfect laptop without spending a ton of money. But first, your local lowdown.

Seattle, Washington, home of grunge music, rainy days and that little coffee place no one has ever heard of. But you can live it up in Seattle for free. Head to Pike Place Market where you can explore over 200 restaurants, shops and artist tables.

Don't miss the fish mongers who are famous around the world for throwing, that's right, throwing fish. Cast off on Lake Union. The center for wooden boats offers a public sail on a class wooden boat every Sunday for absolutely no cost. Be sure to stop at the Frye Art Museum. Admission to this intimate art space is always free and exhibits change regularly.

That's your local lowdown.

(COMMERCIAL BREAK)

WILLIS: All right, are you shopping for a new laptop for yourself, your business or your child? Well, you may be confused by all the choices out there, but in the end of course, the choice is yours.

Lance Ulanoff is the editor and chief of "PCMag." I feel like Vanna White today. I really do. But what are you paying for these things these days?

LANCE ULANOFF, PC MAGAZINE: Anywhere from $1,000 to all the way up to $2,500.

WILLIS: I see ads for $400 to $500 though, Lance.

ULANOFF: OK, but you know what? If you buy a $400 or $500 laptop, you're going to be dissatisfied because they will cut out things you will need. It won't have enough memory, it won't have enough storage. It won't have a good enough optical drive. You don't want to skimp on these things. In particular, don't skimp on RAM and don't skimp on hard drive space.

WILLIS: Well, you've covered the features that are an absolute yes. Let's get your recommendations because you've really test driven these things. You know all about them. People on a budget, what is the best solution?

ULANOFF: All right, Dell Inspiron 1420. And this guy is a $1,000 PC that really crams in a lot of stuff. It's 5.9 pounds, it does Vista Home Premium. And by the way, if someone offers you a laptop with Vista Basic, don't buy. Two gigabytes of RAM, Invidia graphics, which means discreet graphics, more power. It has a dual layer DVD burner in it. Basically, this is the great deal for that price.

WILLIS: OK, let's move on because we have a lot of them to cover.

ULANOFF: Yeah.

WILLIS: That one is $1,099, right?

ULANOFF: That's right.

WILLIS: Battery life, which is best on battery life? ULANOFF: OK, battery life is all the way over there.

WILLIS: Here?

ULANOFF: And that's a Fujitsu Lifebook T2010. And by the way, one of the reasons that's so good on battery life, it's so light. And it's got ultra low-power components inside of it, $1,599. Again, it does have 2 gigabytes of RAM. One of the really incredible things about this guy is that he will have up to nine hours of battery life.

WILLIS: Very nice. Best laptop for biz?

ULANOFF: You know, Lenovo has been making fantastic business laptops for so long. They were originally IBM. It's the think pad. This is the T61 widescreen. It is more expensive than any of the other here. It's about $2,500. You'll notice on there, it has a fingerprint reader and it's connected to trusted platform management. What this means is secure your data. That is critical for business. You get a really wide 14 inches screen and it is by the way, one of the best keyboards in the business and it's 5.4 pounds.

WILLIS: Awesome. Best for students?

ULANOFF: So the student laptop HP Pavilion DV2500T. Again, this has some real power. 5.3 pounds so you can carry it around, two gigahertz CPU. It's about $1,400. You still get 802.11 and wireless which by the way is critical when you're on campus because you're going to be connected wherever you are and by the way, at the fastest speed.

WILLIS: OK and a great price there, $1,400. All right, where are the Apples? I'm a big Apple fan.

ULANOFF: OK, so they use Intel CPUs, just like the PCs but they have the Mac OS and one of the reasons people love it is that they don't have to worry about viruses.

WILLIS: OK and price?

ULANOFF: It's about $1,250. But you've got to pay attention there. Remember I said two gigabytes? They do have a one gigabyte model, but I don't recommend that. It's cheaper, but go for the 2 gigabytes. You'll pay about $100 more, it's worth it.

WILLIS: Lance, thank you. Great job, appreciate your help.

You can hear much more about this impact of this week's news on your money on "YOUR MONEY" with Christine Romans and Ali Velshi, coming up in few hours at 1:00 p.m. right here on CNN.

Thank you for spending part of your Saturday with us. OPEN HOUSE will be back next week right here on CNN and you can catch us on Headline News every Saturday and Sunday at 3:30 p.m. Eastern time. Don't go anywhere, your top stories are next in the CNN NEWSROOM. Have a great weekend.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.voxant.com