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Open House

Mortgage Meltdown; Fair Conduct Act; Health Insurance Claims; Housing News; Energy Efficient Home

Aired October 06, 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 NEWS ANCHOR: Hello. I'm Gerri Willis and this is OPEN HOUSE the show that saves you money. Here's the latest on the mortgage meltdown. Democratic House and Senate leaders announced their plan to prevent foreclosures and they called on President Bush to appoint a special adviser to deal with the subprime mess. One senator called it a "national crisis" while another compared the loss of homes to the magnitude of Katrina.
And over in the House, a recently introduced bill calls for tweaks to the bankruptcy law that could save 600,000 homes from foreclosure. And Moodyseconomy.com reporting only one percent of adjustable rate mortgages, which reset to higher rates by the end of July, were modified. This, despite lenders promising to do their part to help struggling homeowners.

I wanted to take a closer look at how all of this is going to impact you, the consumer and the mortgage industry. Allen Fishbein is the director of Housing and Credit Policy for the Consumer Federation of America; and Kurt Pfotenhauer the senior vice president of Government Affairs for the Mortgage Bankers Association in Washington.

Hello to both of you.

ALLEN FISHBEIN, CONSUMER FEDERATION OF AMERICA: Good morning.

KURT PFOTENHAUER, MORTGAGE BANKERS ASSN: Good to be here.

WILLIS: Allen, I want to start with you. At this press conference this week with the Democratic leadership, very interesting, particularly in the view that Senator Chuck Schumer was just on this show this Spring talking about how important it is for the Congress to take action. I keep saying "press conferences," "hearings," where's the action?

FISHBEIN: Well, I think action has been slow in coming, but hopefully it is coming now. The crisis seems to continue to worsen. Over two million people have their homes at risk of losing them through foreclosure and every day of delay means more people will lose their homes.

WILLIS: I think something like on the order of 800,000 people, actually more, have gone into foreclosure since Congress started debating this issue and we keep waiting for something to happen.

Kurt, I want you to talk about one of the suggestions discussed yesterday, which is to have sort of a mortgage czar bringing together all these ideas and overseeing them. How does the mortgage industry responding to that?

PFOTENHAUER: Well look at, the good news was yesterday that the House and Senate leadership is engaged because there's some very important things that Congress can do to help give lenders and regulators more tools to help deal with this crisis.

The administration, in our experience, has been excellent. Secretary Paulson has been all over this issue, the White House, National Economic Policy Council, HUD. You know, the czar -- does the czar bring anything to it? I worry about getting too many cooks in the kitchen. But, my perception is that anyone who's shown up to help, can help. And we'll work with them.

WILLIS: Too many cooks in the kitchen. There's certainly enough regulators around for these banks and nonbanks. But let me ask you, Kurt, an important question, here. There is a bill pending which would tweak the bankruptcy law to allow bank judges -- bankruptcy judges, that is, to determine loan forgiveness, taking that decision out of the hands of bankers. What do you think of that?

PFOTENHAUER: This is a perfect example of Congress intending to do the right thing and doing, in fact, doing exactly the wrong thing. This bill, if it gets passes, and we hope it won't, will actually drive credit at the time when consumers need more of it. It's a bad idea.

WILLIS: It's a bad idea. Allen, you want to respond?

FISHBEIN: Well, I don't agree with that view. Right now, bankruptcy judges can fodify debt for all kinds of things, including second homes and homes by investors; they cannot do it for homes that are primary residence, in other words, the average homeowner. And we think that's an oversight, it's wrong, and it can easily be changed and hundreds of thousands of homeowners could save their homes as a result.

PFOTENHAUER: Look, there's a reason, though, that bankruptcy courts do this because bankruptcy courts treat second home like investments, which is what they are. When it's a primary residence, what you want to do is keep a quick recourse to the underlying collateral on the loan, because that's what keeps loan rates low and that's what keeps mortgage money available.

The problem we have today, frankly is that subprime borrowers don't have any options other than the FHA program because subprime money and a lot of jumbo prime money, so loans above conforming have left the marketplace. We need to pump liquidity into the marketplace, not remove it.

WILLIS: OK, well there's a lot of agreement on some of these proposals at least. But let's hear the laundry list of them from the Senate majority leader, Harry Reid, at this press conference this week.

(BEGIN VIDEO CLIP) SEN HARRY REID (D), MAJORITY LEADER: ...that's why Democrats demand the president join us in a few simple procedures we think will help a lot: Increased funding to prevent foreclosures, modernizing the FHA to create more options for subprime borrowers looking to refinance, temporary lifting portfolio caps on Fannie Mae and Freddie Mac to fuel the mortgage market, and appointing a federal coordinator to oversee the federal government's response to this crisis, just as he did in response to Hurricane Katrina.

(END VIDEO CLIP)

WILLIS: Allen, I need you to jump in here, now. What's your response to the list of this suggestions, doable?

FISHBEIN: Well, I think all of these are very doable and they would be helpful. But, I think the first line of response has to come from the industry, the industry that created the mess. And unfortunately, as you pointed out, the statistics are showing that lenders and investors are not stepping up to the plate and modifying loans in anywhere to the degree that needs that to occur.

WILLIS: Kurt, quick response.

PFOTENHAUER: Yeah Allen, Let me challenge you on that. I mean, that Moody's number was one percent of all subprime borrowers who are in adjustable rate products. It wasn't -- most of those borrowers are paying their loans on time. So, when we find that a consumer is in touch with the lender, the lender has every incentive, along with that borrower to avoid foreclosure, modifying loans...

WILLIS: Kurt, I'm going to have to leave it there. I really appreciate your help. I'm sure we'll have you guys back. It's a fascinating discussion. Thanks so much.

PFOTENHAUER: Glad to be a part of it, Gerri. Thank you.

FISHBEIN: Thank you.

WILLIS: Still ahead, move past the mortgage meltdown and find the hot real estate spots across the country. We'll have the inside story.

Then we'll explain how an insurance standoff in one state could make a big difference to your insurance down the road.

And we've all been there. What to do if your insurance claim is denied. Stick around, a lot of important tips ahead.

(BEGIN VIDEO CLIP)

WILLIS (voice-over): In order to find all the good stuff out there on the Internet you first have to stop by your favorite search engine.

Whether you use Google, Yahoo! Ask or Alta Vista, I've got some shortcuts that'll help you find that video in no time. First off, be precise. Narrow your search for computer by typing "Apple," "desktop" or even "iMac."

Next, instead of searching for used BMW convertible, search for "used BMW convertible."

Don't forget those Boolean search terms either: and, or, not. And then the wildcards. Many search engines employ symbols like these to find words like these. That's your tip of the day.

(COMMERCIAL BREAK)

WILLIS: Insurance companies and consumers are squaring off in Washington State. CNN's Drew Griffin reported this week on two Washington women who are involved in auto accidents and whose medical claims were denied by their insurance company.

(BEGIN VIDEO CLIP)

DREW GRIFFIN, CNN NEWS CORRESPONDENT: ...about to gouge the insurance?

MICHELLE TRIBBLE, ACCIDENT VICTIM: No, no I just wanted the medical bills paid because I didn't want my credit being hurt. I wasn't out to get money. I didn't really, you know, feel like I needed all that much, but I mostly wanted the medical bills paid.

(END VIDEO CLIP)

WILLIS: Both women ended up fighting their insurance companies in court over their claims. And after long court battles, both women won. Former insurance industry insiders tell CNN that insurance companies use prolonged court cases as part of a strategy to delay and deny claims. But, Robert Hartwig with the industry-backed Insurance Information Institute says insurance companies are simply trying to attack fraud, which he claimed, earlier this year, was rampant in minor accident cases.

(BEGIN VIDEO CLIP)

ROBERT HARTWIG, PRES INSURANCE INFO INST: ...insurers are trying to monitor costs. And every insurer is under the same pressure to do it.

(END VIDEO CLIP)

WILLIS: The struggles with insurance in Washington led to a new state law, the Fair Conduct Act. Now the law says if an insurance company refuses to pay an honest claim and loses in court, it could be forced to pay three times the value of the claim, plus attorney fees.

Now a group backed by insurance companies has successfully placed a referendum on the ballot to overturn the law. Washington citizens will vote on the referendum next month.

Now those folks in Washington State were having problems with their auto insurance, but what if you have problems with your health insurance not paying your claims? A recent study says that 115 million Americans will have some problem with their health insurance plan this year. And we all know how frustrating it is to have a claim denied. But, we're going to show you how to deal with it. Kevin Flynn is the profit Health Care Advocates in Philadelphia.

Welcome, Kevin.

KEVIN FLYNN, PRES, HEALTH CARE ADVOCATES: Hi, Gerri. How are you?

WILLIS: Before you call your insurer, is there a step to take before you do that?

FLYNN: There is one thing what you should do. Look at your policy and check the exclusions page in your policy. A common example is a gastric bypass. Many people will have this procedure and not know that it's actually exclusion from your policy terms. That is where you should start.

WILLIS: Well, you've to know what you are covered for, absolutely. All right, when you call your customer service department, what kinds of things should you be asking them?

FLYNN: First, ask them was the claim processed correctly. These claims are often have human intervention and we all make mistakes. So, if they come back and say, yes, it was processed correctly, the next thing what you want to ask is why was it denied. The statements from the insurance companies don't always tell you what the specific reason for the denial is and that's a very key issue when trying to get this overturned and paid.

WILLIS: Is it a good idea to get their reply in writing?

FLYNN: Absolutely. If they will give you a letter or something of that in writing, you want to do that. Because the last thing you want to have happen is you want to fight the wrong fight. They told you one thing that it was denied for this reason, you relied upon that only to find out later the reason was something else.

WILLIS: Does it make sense to use an emotional appeal when you're trying to fight this battle. It's easy enough to get upset, but does it work when you are trying to go head-to-head with an insurer?

FLYNN: Well, you're usually dealing with the customer service people on that end. And what you want to befriend them. Be their friend, because people scream at them all day long. So, try to keep your emotions controlled when speaking with them.

WILLIS: All right, and if you don't get what you want, can you call back and maybe get another customer service rep and have a better outcome?

FLYNN: Absolutely. Cust or service reps are people, they make mistakes and maybe they have something else to do at that time. You can call back and you can call back three and four times just to double check the answer which you were given.

WILLIS: Wow, that's great advice.

WILLIS: All right. I'm wondering, can you play one doctor against another? If you get a price you don't like or you're really trying to save money?

FLYNN: Absolutely. You will find that in different areas, different doctors will charge different prices. And example is in New York City, the price will be much more expensive for something than outside the city. The reason is, the cost of doing business, the rent, the overhead is much more expensive in the urban areas.

WILLIS: Kevin, great advice. Thanks so much for being with us.

FLYNN: Thank you.

WILLIS: All right. Despite all the negative housing news, there are hot places to buy right now. Let's get the inside scoop coming up next.

And why the streets of D.C. are turning green next week. But first, your mortgage numbers.

(COMMERCIAL BREAK)

WILLIS: Hey, it's not all gloom and doom out there in the housing industry. There are cities and towns across the country right now that are growing in value and quality of life. Best of all, they're affordable. Here to tell us about the best markets to keep an eye on over the next few years is Yahoo! real estate columnist and host of HGTV's "My House is Worth What?" Kendra Todd who you might know as the winner of "The Apprentice 3."

Kendra, welcome, good to see you.

KENDRA TODD, "MY HOUSE IS WORTH WHAT?": Oh, thanks for having me.

WILLIS: All right so, I love this idea, not all markets are doing poorly. And believe you me I hear from our viewers all the time about ones that are doing well. What are some of the earmarks of towns and cities that will continue doing well?

TODD: Well, there's a trend right now in the United States where people are migrating towards towns that have a very small town atmosphere that have booming, robust economies and a strong labor market and labor pool. So, you're seeing all over the country, there's about 20, I would say, areas throughout the nation that have double-digit appreciation right now. So yes, there are hot markets in the cooling real estate industry.

WILLIS: OK, good to know. Let's talk about some of these. Salt Lake City, Utah, you say it's affordable.

TODD: Salt Lake City, Utah is affordable, right now. And they're really being fueled by people leaving California. There's actually more people leaving the state of California right now than ever before in the state's history. And where are they going? To areas clustered around the Rocky Mountains, Salt Lake City is no exception, with 22 percent appreciation.

WILLIS: You know, it's no wonder because I think California's median price right now is $500,000 plus. So, people have to go somewhere else if they want to buy. Let's go to Washington State, which is another place for California refugees. Wenachi, Washington, tell me about that town.

TODD: Wenachi, Washington is in central Washington State. And they have experienced 25 percent appreciation over the last year. Not only are Californians moving there, but also retirees are leaving rain-plagued Seattle and they're heading inland. And they're really pushing prices upwards.

WILLIS: One of my favorites on here is Austin, Texas. You say it's good for people who want to be a landlord.

TODD: That's because the University of Texas at Austin, it boasts one of the largest college student populations. And there's actually a big discrepancy between the number of students enrolled and amount of available on-campus housing. The other fact is the state of Texas added more people than any other state last year, and Austin the crown jewel.

WILLIS: So, Charlotte, my stomping grounds in North Carolina, that state is on fire. I have to tell you.

TODD: It is.

WILLIS: You say it's great for retirement.

TODD: It's great for retirement. Charlotte, in particular, is the second largest banking hub in the entire country. So, you've got great commerce there, you have people moving there. They're moving down as far as they're buying down in price of homes, but they're moving up in value and quality of lifestyle.

WILLIS: Farmington, New Mexico. New Mexico is interesting because they've had some growth that's just not sustainable in some cities. But you say there are people in that state.

TODD: Farmington, New Mexico, has experienced 14 percent appreciation. The single largest source is California. It is so incredible there that people are turning down jobs because they cannot find housing. How about that?

WILLIS: Because there's not enough housing there?

TODD: There's not enough housing.

WILLIS: So it could be tough to find a place, but if you do, it's defiantly worth it.

TODD: That's right, levels of supply and demand are defiantly in favor of appreciation.

WILLIS: So, let's just go over what we learned here. So, big job growth, you are looking for that. What else are you looking for if you're looking for the one town, that one city that's going to continue to grow?

TODD: Well, you want to look for a smaller city that's got a booming economy because what you have is you have major headquarters that are moving to smaller areas. They're boosting the labor market, and there's a lot more demand for housing than supply. So, that's what you want to look for, that small town feel, but near an urban hub.

WILLIS: Kendra, thank you so much.

TODD: Thank you.

WILLIS: 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 project savings again check out our Web site. cnn.com/openhouse.

Is it time for you to turn your house green? We'll Check it out, next. But first, your "Local Lowdown."

(BEGIN VIDEOTAPE)

(voice-over): Forget Paris, head north of the border to Montreal. Wander the cobblestone streets of old Montreal. The historic city center is full of lively public squares, surrounded by restaurants, museums and shops.

And while you're there, explore the neogothic architecture of the Notre Dame Basilica. Notre Dame's twin towers have been a landmark in old Montreal since 1829 and the Basilica houses one of the largest pipe organs in the world.

But, don't stay in the old city for too long. Saint Lawrence Boulevard, known as "The Main" by Montrealers runs the entire length of the island. This famous boulevard is where you will find the city's trendiest shops and street fairs. That's your "Local Lowdown."

(END VIDEOTAPE)

(COMMERCIAL BREAK)

WILLIS: Twenty-six percent. That's amazing. Which is why 20 colleges and universities across the country have spent the past two years building and designing solar homes, so Americans could save energy. But, when will the typical American homeowner like you be ready to go solar? Reynolds Wolf checks it out.

(BEGIN VIDEOTAPE)

REYNOLDS WOLF, CNN NEWS CORRESPONDENT (voice-over): This is not your typical college classroom. The drill here is hands-on. Georgia Tech architecture and engineering students are building an 800-square- foot home powered by the sun.

AMELIA MENDEZ, GEORGIA TECH STUDENT: The first thing you'll notice is how light it is. And this is because of the Aerogel panels which we also have on the roof. So, as you can see in the day, you're not going to need any interior lighting.

WOLF: Aerogel is an ultra light insulating material, that's about 90 percent air. But the sun is the real star of the solar decathlon, a contest to create a comfortable, super energy efficient home.

MENDEZ: Here we have the solar panels. And they will be sitting on top of the House and orienting themselves toward the sun throughout the season. And we also will have shades underneath that orient themselves toward the sun during the day. So, together they make a system where it can either harness the light and create energy or block out the light so that we don't have to use much energy.

WOLF: Energy that's stored in these batteries for power at night.

(on camera): Now much of what's been assembled today has got to be taken apart, loaded up and sent to Washington, D.C., where they'll compete with some 20 other universities right on the Big Mall.

(voice-over): Now for the judges to take a shine to these homes, they have to prove their energy stamina with some real world workouts.

RACHEL VALADE, GEORGIA TECH STUDENT: From washing clothes to cooking meals to cooking meals to heating, cooling, even powering an electric car which has to be driven around while we're in D.C.

WOLF: The Department of Energy, sponsor of the competition, is expected to get quite a payback from some of the brainiest builders on the planet.

PROF RUCHI CHOUDHARY, GEORGIA TECH COLLEGE OF ARCHITECTURE: Because (INAUDIBLE) university, it uses all the resources, research labs, et cetera, faculty, and also trains students who are the ones who go out and work. So, that's a very clever way of getting a lot of work done in two years from as many people as possible.

WOLF: Now, some of these solar tools are right off the shelf, available now. What will it take for average consumers to build or even retrofit with solar? It probably won't be an environmental trigger, but rather an economic one.

PROF RUSSELL GENTRY, GEORGIA TECH OF ARCHITECTURE: Right now, you're paying 10 cents a kilowatt hour for your electric energy. Probably sometime within the next 10 to 15 years, that cost of the coal-powered energy is probably going to up go up to 15 or 20 cents a kilowatt and at that point the photovoltaic energy sources become cost competitive.

WOLF: The initial investment in solar is still pricey but the fuel itself clean, abundant and free. Reynolds Wolf, CNN, Atlanta.

(END VIDEOTAPE)

WILLIS: All right, before you start dreaming about installing solar panels, make sure your home gets a lot of sun. You'll get more bang for your buck if your home is in a region known for, well, sun more than clouds. Solar panels cost thousands of dollars, and it could take you 20 years to recoup your costs. But there are some federal and local rebates that can help you out. Check out dsireusa.org to see what's in your area.

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

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 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.

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