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Open House
Abandoned Property in Arizona; Subprime Mortgage Meltdown; Hispanics Targeted for Loans; The Best Mattress
Aired September 29, 2007 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I'm home, OK? I'm home, all right?
(END VIDEO CLIP)
BETTY NGUYEN, CNN ANCHOR: It is a scene that we never get tired of seeing, a father returning from war, surprising his kids in a tearful reunion.
DON LEMON, CNN ANCHOR: You've got to love this. Reporter Brian Duffy of our affiliate WOIO in Cleveland has this story of the family's very happy homecoming.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: Come on in.
BRIAN DUFFY, WOIO REPORTER (voice-over): This is as good as it gets. A Marine, Mike Epperson home to unsuspecting daughters.
MIKE EPPERSON, U.S. MARINE: I'm home, OK? I'm home, all right? Don't cry.
DUFFY: Too late. Every one at Saint Mary's School in Chardon was crying. And why not? Second grader Calely and fourth grader Caitlyn had their daddy home. Caitlyn could barely get through the best rendition of the "Star Spangled Banner" I'd ever heard.
A supervisor of amour repair in the First Battalion Second Marines, Mike Epperson, was away for seven months on his first tour. He'll have to go back to Iraq, but for today, it was a heart warming and wrenching return for his wife Jerilyn (ph) and two incredibly happy little girls.
M. EPPERSON: What we say in the Marine Corps, reach down and grab a hold and find that inner strength to keep you going. And that's what I had to do. I had to find that inner strength.
JERILYN EPPERSON, WIFE: It's very nice having him home, and just knowing that he's here and he's safe, that's all that matters.
M. EPPERSON: Don't cry.
DUFFY: The good kind of tears.
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LEMON: Who's crying now?
NGUYEN: I love that. I was. I was getting little tears.
LEMON: That's amazing.
NGUYEN: You can see how happy they were. And when she was singing that song and tearing up, almost broke my heart.
LEMON: Yeah, and you know what? You got to thank Mike Epperson for what he does there.
NGUYEN: Putting that together.
LEMON: No, Mike Epperson, the guy who went to Iraq, we thank them for everything they do and we're glad he's home.
NGUYEN: Oh yeah, absolutely. And coming in like that and allowing us to share that moment, we do appreciate it.
You know what? "OPEN HOUSE" is coming up with Gerri Willis and that starts right now.
GERRI WILLIS, HOST: Hello and welcome to OPEN HOUSE, the show that saves you money. I'm Gerri Willis.
We had several reports on the housing market this week and two views of prices. The National Association of Realtors says median home prices rose ever so slightly for the month of August to $224,500. Meanwhile, the S&P/Case Shiller Index, which tracks 20 metro areas, recorded its steepest drop in 16 years for the three months ended in July.
And there's another report. The latest government report shows that new home sales fell to a seven year low last month, all this as foreclosure numbers continue to soar. Arizona has been particularly hard it. More and more homeowners in that state, well, they're not waiting they're not waiting for the sheriff to walk around, they walk away from their homes, often leaving behind a mess for the communities to clean up.
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WILLIS (voice-over): These mosquitoes are a byproduct of the mortgage meltdown. But what does one have to do with the other?
In Gilbert, Arizona -- everything.
(on camera): So Liz, tell me about this neighborhood. How old is it? Who lives here?
LIZ MORGANROTH, ARIZONA REALTOR: The neighborhood is about 12 years old. You have a lot of working middle class families who live here who have been in the home since they were built.
WILLIS: So, it's been here a while, pretty stable, and yet I see one, two, three four for sale signs just on these two small streets.
MORGANROTH: I think a lot of that is people who bought in 2004 and 2005 for investment purposes. Now that there's so many houses on the market and their interest rates are adjusting, they can't get rents to cover it, so they're trying to sell.
WILLIS (voice-over): Those who can sell do, but more and more homeowners just walk away, unable to make their mortgage payments, they abandon their homes, often leaving behind more than just an empty house.
(on camera): Oh, it's really stinky in here.
MORGANROTH: That would be some pets that were left in the house.
WILLIS (voice-over): In this case, the landlord defaulted on the mortgage without even telling the renters who kept paying on time every month. When they were evicted, they decided to take some of the appliances for compensation.
MORGANROTH: There was someone in here who was frustrated they were leaving and they decided they didn't want to clean it up.
WILLIS (on camera): Oh my gosh, there's food all over the place. Just like junk, just thrown down and left.
MORGANROTH (voice-over): Liz is left with cleaning up the mess, usually at her expense, hoping she'll get compensated by the bank that owns the mortgage if the house sells. But the picture is bleak for many Maricopa County neighborhoods.
One in every 242 households was in foreclosure next month. That's up nearly 200 percent from a year ago. In neighboring Chandler, it's just as bad.
Greg Carr is a sergeant with Neighborhood Services of the police department. He's in charge of finding the owners of the abandoned homes and getting rid of those mosquitoes we told you about.
GREG CARR, NEIGHBORHOOD SERVICES SERGEANT: If you look along the side, you can see the larvae over here.
WILLIS: In Arizona, a neglected pool becomes an ideal breeding ground for West Nile Virus. Sergeant Carr and his inspectors try to avoid that.
CARR: We can't wait for somebody to get bit or stung or, you know, get sick while we try and find out who owns this. We have to get in here and take care of the problem right away.
WILLIS: One way to do that, mosquito eating fish.
CARR: That one's going to town already.
WILLIS: But mosquitoes aren't the only concern. Bruce and C.J. Knutson live two doors down and like many in this neighborhood; they are worried what an abandoned property will do to the value of their home.
BRUCE KNUTSON, LIVES NEXT TO ABANDONED PROPERTY: I think it's terrible and somebody ought to do something.
WILLIS: That somebody is Sergeant Carr.
CARR: We can always clean up the property. It's kind of satisfying, though when you can actually track down somebody that's aggressively trying to not be found, they're playing the system and then we do have some of those. And it's gratifying when you can go through your investigation process and find them and bring them into court and make them pay their fine or make them pay for the cleanup. That's justice.
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WILLIS: This isn't just a local Arizona problem. Last week, law enforcement officials from around the country met in Pittsburgh for a seminar on how to deal with abandoned properties.
Look, even if you've been current in your mortgage payments, you can still be impacted by foreclosures in your neighborhood. For every foreclosure in your immediate area, you lose about one percent of the values of your home.
So, for that reason, you want to help keep the place ship-shape, team up with neighbors to mow the lawn and pull weeds at abandon properties. Think about starting a neighborhood watch, you don't want to property next door to turn into an eyesore or a safety hazard.
If the foreclosed home is unsafe, call the police or sheriff's office, they'll stop in when a property's condition risks public health. And if you're at the brink of foreclosure, even in the process right now, ask for help. Contact the Home for Ownership Preservation Foundation at 888-995-hope. The Department of Housing and Urban Development can also set you up with a counselor. Call 800- 569-4287 to get assistance in your community.
Up next, why immigrants especially are feeling the pain of the mortgage meltdown. Then we're uncovering America. How one organization is working to help Latino homeowners. And how to turn your home into a money-making machine. But first, your "Tip of the Day."
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WILLIS: Maintaining a good credit score is critical. It means better rates on mortgages and loans. And some employers even scrutinize your credit score before they offer you a job. Among the many things you can do to improve your score, challenge any and all mistakes on file with credit reporting agencies. Seventy-nine percent of all credit reports contain some type of error. Write a letter to the credit reporting agency disputing their information, providing proof if you can. They must address your dispute within 30 days or remove the item. That's your "Tip of the Day."
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WILLIS: The subprime mortgage meltdown is having a major impact on one particular group, immigrants. Here legally and many sharing the American dream of owning a home. Now, more and more immigrants are finding themselves the target of predatory lending and facing foreclosure.
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WILLIS (voice-over): Isabel Frias arrived from the Dominican Republic 13 years ago. She dreamed of owning a home for herself and her three children.
ISABEL FRIAS, LOST HER DREAM HOME (through translator): The hope and the dream was always based on my kids. I've always wanted them to have a yard to play in.
WILLIS: It took a decade of hard work, but finally it came true. In early 2005, her then boyfriend introduced her to a friend in the mortgage industry.
FRIAS (through translator): And one day we sat down and he say that he could get us a loan.
WILLIS: Isabel got two loans totaling more than $300,000, far more than she should have qualified for on a $20,000 a year salary.
ANDREA BOPP STARK, ISABEL FRIAS' ATTY: She was making $10 an hour at the time she applied for that loan and that's what the application said, yet the loan was still funded.
FRIAS (through translator): The day of the closing, everything was done in English and everything was done in a rush.
WILLIS: A month later, the first mortgage bill arrived and it was $1,000 more than Isabel expected and more than she could afford. Like many immigrants, Isabel had unknowingly taken out a subprime loan, a loan for people with imperfect credit or few assets.
ARACELY PANAMENO, CTR. FOR RESPONSIBLE LENDING: For Latinos, specifically for the year 2005, 375,000 subprime mortgages went to Latinos and of those, we anticipate that 73,000 mortgages will fail. Their American dream, it turns into an American nightmare.
WILLIS: For Isabel, the nightmare began with that very first morning payment. It was a downward spiral, losing her boyfriend, her job, and finally, her home.
(on camera): Who do you blame?
FRIAS (through translator): Well, I'm not going to tell you that I gave the broker all the blame. I also have to blame myself because I was ignorant. I was too trusting. I did not seek out information. I did not educate myself. WILLIS (voice-over): The mortgage industry's lading consumer watchdog group isn't so sure.
PANAMENO: Documents are drafted in industry jargon and legal jargon that even for those of us who are college educated and who are fluent in English or native English speakers, it is difficult for us to understand.
WILLIS: Not surprisingly, the mortgage industry takes a different view.
MARC SAVITT, NATL. ASSN. OF MONTAGUE BROKERS: It's important to make sure that they are fully informed. And if they're not understanding the process, then they need to remove themselves from the table and make sure that they find somebody who can help them understand the process better.
WILLIS: Now that she's $80,000 in debt, Isabel certainly understands the process a whole lot better, but she's not sure whether she'll ever own a home again.
FRIAS (through translator): I hope to be able to buy a home some day. However, in the meantime, all I want to do is fix my credit, make sure I move forward, even if that means just renting an apartment and making sure my kids are OK.
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WILLIS: A tough story. The number of subprime loans and foreclosures among the Hispanic community continues to grow. Our next guest is trying to rebuild confidence in the mortgage industry among Hispanic homeowners. Tim Sandos is the president and CEO of the National Association of Hispanic Real Estate Professionals. He's coming to us from Denver.
Thanks for joining us, Tim.
TIM SANDOS, CEO, NAHREP: My pleasure, Gerri. Good to be here.
WILLIS: Well, you know, let's look at some of these numbers. Foreclosures expected to total $52 billion in the Hispanic community and it could be because Hispanics are twice as likely to get high cost loans. What's going on here -- Tim.
SANDOS: Well, from the clip that you just ran, I think you get a good indication of what is happening. A number of Hispanics did not have traditional credit and, therefore, the only thing they could qualify for in a home was the subprime loan, which could be closed quickly, but without the necessary background documents to confirm income and the like.
WILLIS: You say Hispanics performed better than their FICO scores indicate. What do you mean?
SANDOS: Well, the Federal Reserve just did a study where they took the actual FICO scores of individual Hispanics and measured those against what their actual performance is for payment history on loans. What they found is that Hispanics are much more likely to pay their home loans at a much better rate than the FICO score that they have would indicate. And that is because the FICO score is established on nontraditional credit and they do not have traditional credit like credit cards and the like to establish the score.
WILLIS: But you, sir, are fighting back. You have put into focus a code of trust. Tell me about this.
SANDOS: Well, the NAHREP code of trust is based on four principals. One, fostering ethical and responsible lending practices. No. 2, providing protections for consumers and protecting consumer choice. Three, full disclosure and four, accountability to individuals who are providing professional services to the individuals in the communities.
WILLIS: OK, so a lot going on there. And I understand, too, you're asking for bilingual documents. Why is that so important?
SANDOS: Well, as you showed in the clip before, many Hispanics are Spanish speaking only, and so they don't understand the tractions when they're handed to them in English. They're difficult for us to understand and for those of us who speak English, let alone those who have the challenge of language. So, if we provide language documents that describe both the process and the intent of the documents, we feel that people can make more informed choices.
WILLIS: Tim, thank you so much for being with us today. We really appreciate it.
SANDOS: Gerri, thank you so much.
WILLIS: How hanging a "for rent" sign in your window could get you some serious extra cash. Then, get a good night's sleep and save money. You'll love this one. But first, your mortgage numbers.
(COMMERCIAL BREAK)
WILLIS: With many people unable to sell their homes in this market, some are turning to the idea of renting. But becoming a landlord is no easy task. Jeff Taylor, AKA, Mr. Landlord, is the author of "The Landlord's Survival Guide" and he joins us from Norfolk, Virginia.
Good to see you, sir.
JEFFREY TAYLOR, AUTHOR, "THE LANDLORD'S SURVIVAL GUIDE": Good to be with you again, Gerri.
WILLIS: All right, there are a lot of anxious sellers out there and they're thinking, maybe I'm actually going to have to rent this thing out. What would you tell them to get prepared?
TAYLOR: Well, to get prepared, first, they might want to take a look at the numbers, analyze the numbers. They want to figure out how much their expenses would be. They can look at their mortgage, their insurance, their taxes and say that comes to $800 a month. I would also add in maybe another 10 percent to cover things, unexpected expenses, vacancies, maintenance and so if 800 was our number, we add another $80, that's about $880, for example. And then you want to take a look at about how much money you might be able to receive in rent.
You can check with our landlords in the area by looking in ads in the newspaper or calling (ph) for rent signs in the local area. And you want to see if your income will exceed your rental amount, the rental that you're -- the expenses that you're paying. And if the covers the expenses and maybe even have some extra, then you know you're at least going in the right direction in terms of making this work as a landlord.
But along with that, you also want to obtain rental forms, because when people are ready to rent and you have to have an application to give them, you have to be able to give them a lease if you decide to rent from them, you also want to know your state laws, very important so that you don't make costly mistakes. And you want to identify people who can be part of your success team in case you need them in the future.
WILLIS: That sounds like a good idea of success. Let me squeeze in here with a question, Jeff.
TAYLOR: Sure.
WILLIS: You know what I am always curious about? Do you tell the neighbors that you're going to rent out the house?
TAYLOR: Oh, yeah. I would strongly suggest that. And the reason being, they could be a great help to you. They can serve as a recruiter for you. They might recommend a friend or a coworker who might want to rent your property. And then once somebody moves in, they can serve as a spy for you so that they can tell you if something is going on that you need to be aware about, illegal activity or if somebody moves out in the middle of the night.
WILLIS: Great idea. So the neighbors are a part of this team you're describing, right?
TAYLOR: Yes, they are a part of your real estate success team, exactly.
WILLIS: Anybody else on that team?
TAYLOR: Oh, it would be a CPA, attorney, maintenance people that you might need to call on form time to time. You might even want to get in touch with the property manager in case you decide not to rent it yourself.
WILLIS: Well, that's a good idea. Now, how do you deal with complaints if I'm renting out my house.
TAYLOR: Complaints? Are you talking about from the current residents? WILLIS: From your renters.
TAYLOR: Yeah, well from the renters -- well, the key is to plan ahead. So you try to figure out what kind of problems you might have and then identify people who could be part of your success team who will be ready to handle the problem. For example, plumbing is one of the most common complaints that you get from a renter. So, you want to line up a plumber ahead of time so that when the resident needs help, you can call on somebody and it can be responded to quickly.
WILLIS: Great advice. Jeffrey Taylor. Hey, if you missed some of this, he has a Web site, MrLandlord.com. Thank you very much.
TAYLOR: You're welcome.
WILLIS: As always, if you want idea on how to save money, send us an e-mail to OpenHouse@cnn.com. And if you want to check out those project savings again, check out our Web site, cnn.com/openhouse.
Now, you don't want to miss what I've been up to.
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WILLIS: And coming up on OPEN HOUSE, how to pick the best mattress for your budget and your sleep style.
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(BEGIN VIDEOTAPE)
WILLIS (voice-over): San Francisco, home of the Golden Gate Bridge, bay views and cable cars. But, not to worry, you don't have to spend a penny to live it up in this town. Head to Fisherman's Wharf where you can visit the San Francisco Maritime National Historic Park. Exhibits on the history of maritime voyages on the bay are offered year-round at absolutely no cost.
Skip the cable car and take a walking tour. San Francisco city guides offer free tours from Chinatown to North Beach to Asbury. And be sure to stop by the cable car museum where you can get a glimpse into the history of San Francisco's famous transport for free. That's your local lowdown.
(END VIDEOTAPE)
(COMMERCIAL BREAK)
WILLIS: That is one ugly critter. You know, we spend a third of our lives in bed, but that doesn't mean it's always comfortable. So, if you're in the market for a new mattress, well, you've come to the right place. "Domino" magazine testing guru, Stephen Treffinger spent a year tossing and turning on mattress and he showed us some of the best mattresses for your budget. Take a look.
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WILLIS: I have lots of questions. OK, first of all, if I'm buying a new mattress, do I have to buy box springs?
STEPHEN TREFFINGER, DOMINO MAGAZINE: Not necessarily.
WILLIS: Oh, that's a money saver.
TREFFINGER: Yeah, you can definitely save money. Have a look at your box spring, if it's not cracked, warped, or the cover is, you know, intact, you can probably get another couple other years out of it.
WILLIS: Awesome. And coil count?
TREFFINGER: Right. Coil count, at this point, is something you don't really have to think about, 400 for a queen size is plenty. Over that, somebody's trying to tell you something and you don't really need it.
WILLIS: What brand is this?
TREFFINGER: This is Stearns and Foster, the mattress is called "Bagatelle Gardens" it's about $2,599 for the set.
WILLIS: And why is it worth $2,600?
TERFFINGER: Well, it's got a lot a lot of cushioning. You pay a lot for this giant pillow top, pretty fabric on the cover. You know, you might not care about that because it's going to be covered, but if that's important to you, you're paying for it.
TREFFINGER: It's really pretty. I have to say that. But you've got a kind of medium priced one over here.
TREFFINGER: In the market, this is pretty typical. This is one is from Sealy, it's a Posturepedic. It's $1,000 for the set. This, yeah that's pretty reasonable. And as opposed to a pillow top, this is the plush top. They just put some padding on the top and they quit it right on to the mattress. It's very comfortable especially if you like a firmer mattress. It's supportive, but you've got this little cushioning on the top.
WILLIS: OK, you've got a great solution for people who actually want to buy something just for the guest room or the kids. The kids don't know, right?
TREFFINGER: Guest room, kids rooms, country house, something where you don't want to pay a lot of money. IKEA has an entire line of mattresses, this is called a Hasselbeck, it's $698 for the set.
WILLIS: That's a deal, $698 for the set.
TREFFINGER: Yeah.
WILLIS: All right, this is the Sleep Number Bed. I heard so much about this.
TREFFINGER: Right, this is from Sleep Number, it's the 5,000. This one is about $1,899 for the set. It's not cheap, but it has the advantage of you can adjust it to the firmness or softness level that you really like. It's got that little remote control, airpumps...
WILLIS: So if you and your spouse or your friend...
TREFFINGER: Right, you can get it with two chambers. You can be like, you know, rock hard, your husband can like it super soft and you're still going to get along.
WILLIS: So Stephen, this is the gold plated bed.
TREFFINGER: Yeah, this is the one that should get your own maid with when it comes. It's $6,650.
WILLIS: How much?
TREFFINGER: $6,650.
WILLIS: It's almost $7,000.
TREFFINGER: From a company called Preston (ph)...
WILLIS: What can I buy? I can buy a motorcycle, I could buy a painting, I mean...
TREFFINGER: You could buy a small house, I know. It's all handmade, it's all natural materials, there's no foam, it's all made out of wool, cotton, flax and horsehair.
WILLIS: Horsehair? Is that a good thing?
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