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Open House

Bank of America Buying Countrywide; Economy Driving the Vote for President; Mortgage Meltdown Felt All Over the Nation; Is Generic Always Safe?; Your Kids and Finances

Aired January 12, 2008 - 09:30   ET

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

JOSH LEVS, CNN CORRESPONDENT: "The Japanese government joins the Australian government in calling for restraint from Greenpeace. Japan understands the concerns of the people who oppose whaling, but the fleet activities are perfectly legal and in accordance with the International Whaling Commissioner's conventions."
Now, just so you all understands, this controversy is over a certain type of whale being hunted. Greenpeace says the ships are after endangered humpback whales. Japan had planned to kill about 50, but last month they changed that and the so called scientific whaling is now supposed to concentrate on minky and fin whales, but Greenpeace says fin whales are also endangered, so what it boils down to is fin whales and these types of endangered whales, is Japan really going to be capturing and killing endangered whales.

BETTY NGUYEN, CNN ANCHOR: Well, my question is the endangered humpback whales, what do they want with them?

LEVS: Well, they say they're doing a scientific study and that ultimately a scientific study on how they live and what they need could mean that you can breed more and they can continue to exist. So, there's a possibility that that's ...

NGUYEN: So it could be for good?

LEVS: But a lot of people don't believe that.

NGUYEN: Gotcha. OK, thank you, Josh.

T.J. HOLMES, CNN ANCHOR: Thank you so much for explaining. And also, folks, coming up in the NEWSROOM, we're keeping an eye on this story about Marie Lauterbach, that missing Marine. This is the scene here, where they're actually searching the backyard, that is the home of the suspect and they're searching a shallow grave where they believe her body is. We're going to have the latest on this story for you at the top of the hour.

NGUYEN: But first, OPEN HOUSE with Gerri Willis starts right now.

GERRI WILLIS, CNN HOST: Hello, I'm Gerri Willis and this is OPEN HOUSE, the show that saves you money.

A major development in the mortgage meltdown this week. Bank of America is buying Countrywide, the nation's largest lender in a deal worth some $4 billion. It's a major deal that bails out a company on the verge of bankruptcy.

Now, if you have you have a Countrywide mortgage, and I hear from a lot of you who do, don't worry. As far as loans are concerned, an acquisition is better for consumers than a bankruptcy filing. Bank of America will likely take over Countrywide mortgages and there will be no difference in where payments go.

As I said, loans are bought and sold all the time, but you have rights when that happens. When the lender buys a mortgage loans, borrowers have to receive notice that their loan has changed hands within 15 days along with the new address to send payments to. You also have a grace period of 60 days to get your payment to the right place.

What's more, the terms of your loan can't change. If you managed to lock in a sweet five percent interest rate a few years ago, it will remain the same. And if you are one of those folks struggling with unmanageable adjustable rate loan terms, you may have a better chance negotiating with Bank of America than Countrywide.

Whatever you do, if you have a Countrywide mortgage, don't stop paying because of this week's news. Remember, your payments are an asset, no one's going to let them slide.

Other mortgage meltdown developments this week, existing home sales fell by a steeper than expected margin in November. That according to the National Association of Realtors. The NAR also pushed back its forecast for a housing price rebound to 2009. All of this as the threat of recession looms and some say we're in one already.

A December CNN poll showed that 29 percent of voters said the economy is the No. 1 issue driving their vote for president. So, will we hear another version of Bill Clinton's famous phrase, "it's the economy, stupid" for today's presidential candidates? CNN senior political analyst, Gloria Borger, she joins us now.

Gloria, great to see you.

GLORIA BORGER, CNN SR. POLITICAL ANALYST: Good to see you, Gerri.

WILLIS: All right is it back to "it's the economy, stupid" and if it is, why aren't more of these political candidates talking about it?

BORGER: Well, I think you're going to start hearing them talk about it more and more particularly now that the fields are getting narrower and narrower. As you head into the Michigan primary next week, that's a state that's really been hurting economically and you're going to see those Republican candidates, and the Democrats, start really talking about economic anxiety that Americans feel.

WILLIS: And what's the schism there, I mean, what tack to Republicans typically take and what do the Dem's typically say how to solve the problem? BORGER: Well, you know, the Republicans generally talk about less government interference, no government bailout and I think that what you're seeing on the Republican side is kind of interesting because you have got Mike Huckabee running, he's a populist, and he's saying you've got to vote for me because I remind you more of the guy you work with than the guy who laid you off. And he's got that in his TV ads and that is taking a direct shot at Mitt Romney, obviously. And McCain is running as a populist...

WILLIS: Let's talk about Huckabee, as long as you're on him. He's the guy who says, hey, let's get rid of the IRS. Now, that is a dramatic change. There's nobody else out there who is suggesting that.

BORGER: You know, that is dramatic and there are -- lots of candidates have different tax plans, he wants to get rid of the IRS, lots of conservatives don't like someone like Mike Huckabee because they say he's a big taxer. They don't like John McCain because he didn't vote for Ronald Reagan's tax cuts. Mitt Romney is sort of running as the conservative on the economy.

On the Democratic side more or less, they all agree everything is wrong and they're going to fix it, but they're not quite sure how.

WILLIS: Do they have the same solution?

BORGER: No, they don't. But the Democrats are kind of -- they don't disagree as much on these things as the Republicans do. Their voters are mostly anxiety voters saying you've just got to change the way we do business in Washington. The Republicans have a lot of nuance on the economic side because you've got your economic conservatives who don't want to tax, you've got those who don't want to spend, you've got those who don't want to do both.

Democrats on the other hand, like to spend money. They do for government programs. And they're willing, although they won't say it yet, to raise some taxes to pay for those programs. They don't want to continue Bush's tax cuts, for example.

WILLIS: Gloria, great information. Thank you so much for helping us out. I hope we have you back. Gloria Borger is part of the best political team on television. Thank you so much.

Up next on OPEN HOUSE, taking advantage of the mortgage meltdown. See how one real estate agent is turning a crisis into a business. Then the price of pills, we'll show you how to save on medication with our very own Dr. Sanjay Gupta. And kids and money. When and how you should talk to your children about finances.

(COMMERCIAL BREAK)

WILLIS: Shocks from the mortgage meltdown are being felt all over the nation. But, Stockton, California, is the hardest hit. Stockton has the highest foreclosure rate in the country. But instead of drowning in the city's misfortune, one real estate agent is turning a crisis into a business and trying to do his part to revive his hometown.

(BEGIN VIDEOTAPE)

UNIDENTIFIED PERSON: All right, welcome to the repo home tour.

THELMA GUTIERREZ, CNN CORRESPONDENT (voice-over): Armed with listing sheets and info on comparable properties, these buyers filled two boldly titled buss eager to find a deal among the hundreds of foreclosed properties in Stockton, California.

UNIDENTIFIED MALE: I'm (INAUDIBLE), I'm an investor.

JON HERNANDEZ, FIRST-TIME HOME BUYER: Jon and Alyssa Hernandez, first time home buyers.

UNIDENTIFIED FEMALE: I'm interested in looking at some property, as some investment property.

GUTIERREZ: Sweet music to the ears of realtor assessor, Diaz. He came up with the foreclosure tour idea when business had all but dried up this summer.

(on camera): Stockton, California ranks among the top five foreclosure markets in the country. Back in August, sales were flat, but the company owner says that when the foreclosure tour started about three months ago, sales went up more than 300 percent.

UNIDENTIFIED MALE: This house is list at the unbelievably low price at $224,900.

The asking price is 215.

UNIDENTIFIED MALE: We have Prince Cross (ph), it's price is $285.

GUTIERREZ (voice over): We went along on the tour to see if buyers are really ready to jump back into a market battered by the mortgage mess.

UNIDENTIFIED FEMALE: Hey, this is the one, I put a bid on it.

(CROSSTALK)

GUTIERREZ: The weekly tours are fast, in and out in under 10 minutes.

UNIDENTIFIED FEMALE: This is $105.

UNIDENTIFIED MALE: Oh yeah, that's cheap.

UNIDENTIFIED FEMALE: A builder cannot build for that.

GUTIERREZ: Is it really a deal. A comparable house in this neighborhood goes for about $329,000. The discount here $44,000 and some predict the freefall isn't over yet.

(on camera): Do you really think you're getting a deal?

UNIDENTIFIED MALE: Beyond a deal. They say that the nightmare is not over. You couldn't pick up stuff like this three years ago.

GUTIERREZ (on camera): You're going on a foreclosure tour. Does that feel a little bit strange?

HERNANDEZ: Not to me, it doesn't feel strange. To me, I feel that it actually, it represents a market that's out there for the home buyers that haven't had a chance to buy homes yet.

GUTIERREZ (voice over): Like the Noel (ph) family who say they found their first home, their dream home on the repo home tour. Foreclosed property, the Noels say they would not have been able to afford just last year.

(END VIDEOTAPE)

GUTIERREZ: Cesar (ph) Diaz says so far his company has closed 38 deals since September. He also says that the repos that are priced aggressively by the banks are getting multiple offers and Diaz says his tours have generated so much interest around the country that real estate companies from as far away as Michigan and Atlanta, to Riverside, California, have contacted him about starting their own repo home tours -- Gerri.

WILLIS: Thelma, great story, thanks for that.

Rick Sharga is with RealityTrac, a firm that tracks foreclosure trends across the country.

Rick, it's good to see you in the flesh. We usually talk on the telephone.

RICK SHARGA, REALITYTRAC: Long distance.

WILLIS: All right, let's talk about Stockton, California for just a second. What happened there?

SHARGA: Stockton had a lot of people overextending themselves and buying houses they couldn't afford with risky loans. When the loans reset, the houses weren't worth as much as they were when they bought the house and they all went sideways.

WILLIS: All right, so all of California is really suffering, you see problems across the board, there. Let's talk about all the markets across the country that are having problems and we're going to see these high foreclosures. Give us some ideas, here.

SHARGA: Well, California certainly is unique because of affordability issues. You're having similar issues in places like south Florida. Certainly areas like Nevada, Las Vegas and particularly states like Michigan and Ohio, the Rust Belt, they're different reasons that are driving a lot of the foreclosures, the underlying factors that raises all the boats is the subprime wave.

WILLIS: You know, this, as we just saw, spells opportunity for some people. Is now the time to jump in?

SHARGA: If you have financing or if you're sitting on cash, there's probably never been a better time to buy. If you can get a mortgage, the rates -- there was an estimate this morning, just this morning, that the rates that the rates are the lowest they have been in five years. So, the challenge right now is if you don't have really, really good credit, it's really, really hard to get traditional financing.

WILLIS: And the places you want to look, again, are where the foreclosure rates are in highest: Florida, California, Nevada, it's just a mirror image of the places that are having trouble, where the investors are going to eventually flock. Now do you see that folks are, you know, jamming these areas trying to pick up the deals and is now really the time or is it more like late 2008?

SHARGA: It's always dangerous to try and time the market bottom or a market top. The only way you know you hit the bottom is when prices go back up and by that time you have missed your mark. So, the prices have been depressed enough in a lot of these areas, so that if you have a longer term horizon, you almost can't lose on a purchase.

WILLIS: Wow, that sounds good. OK, let's talk about your outlook. Look forward in your crystal ball. What other areas might become ripe for foreclosures, great opportunities for investors?

SHARGA: There are already places that are good opportunities that will get better. We talked about Michigan and Ohio, a couple minutes ago, Indiana. Places in the Midwest where you have unemployment issues on top of some of the subprime issues, they're getting houses for 50, 60 cents on the dollar, right now, in places like that.

WILLIS: Yeah, I know in Detroit you can find houses that are cheaper than cars, right now. It's a pretty grim prospect. All right Rick, thanks for your time today, we really appreciate it.

SHARGA: My pleasure, good seeing you.

WILLIS: Still ahead on OPEN HOUSE, saving money on medication. CNN's Dr. Sanjay Gupta stops by with some important advice you won't want to miss.

Then, how to teach your children about finances. We'll talk about when you should start and how. But first, your mortgage numbers.

(COMMERCIAL BREAK)

WILLIS: One of the most expensive things in your budget can be medications, but the FDA says, hey, you can cut your prescription in half if you always use generic drugs over brand names. But, is it safe? CNN's chief medical correspondent, Dr. Sanjay Gupta, he's joining us today in Atlanta.

Great to see you, Sanjay. DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: Thanks for having me.

WILLIS: You know, I hear people say that they take these generics and they don't think they have the same effect, yet the government says they're exactly alike. Who's right?

GUPTA: Well, you know, if you ask the FDA and you talk specifically about generics in comparison to brand-name drugs they're going to look at several factors and try and draw a comparison. With regards to dosage and strength for example, with regards to safety and overall manufacturing standards, they say there is no difference. And as you said, that's exactly right.

But there is a difference in appearance, that's one thing, they're going to look different, that's a proprietary issue. But more than that, they don't necessarily have to use the same time released technology. So, the dosing that you're getting throughout the day of a particular medication may be a little bit different.

And you know, the other thing, Gerri, is exactly what you say is a lot of patient who is switch from a brand-name drug to a generic drug, whether it be an antidepressant or a staton (ph) drug, say it's not working as well and there's a lot of doctors out there, as we found out, who agree, they say they're not getting the same results sometimes from the generic drugs. So, the standards may be the same, but the end product seems to be a little bit different for at least some patients.

WILLIS: So, Sanjay, when do I know to use the generic and when to use the branded name version?

GUPTA: Well, you know, having said everything that we just said, generics can still be a very good alternative because they're cheaper and if generics work for you, then it can be a very good option for people. Generic manufacturers don't have to pay for patents, as we know. They don't have to pay for advertising because the drugs have already been out there for some time so they can pass on some of those savings to you, the consumer, and that potentially can be a good thing if trying to safe some money.

WILLIS: You know, is there a generic for every brand-name drug?

GUPTA: No, that's an interesting question. The way it works is that there's a certain a lot of time that a drug is under patent protection. On average it's about 17 years, after it comes out from under patent protection, it's a little bit up for grabs, so people can start making generic versions at that point. Not all drugs, even ones that are older than 17 years, have a generic counterpart, but a lot of them do now, Gerri, and this has been happening for a few decades.

WILLIS: Yeah, no kidding. Well, you know, I know people out there who cut pills in half to try to save money. Is that a good idea?

GUPTA: You know, It's not a bad idea and I get this question a lot. In fact, if you look closely at some of the pills, Gerri, you'll actually see that some of them are sort of scored up and down the middle and that is so that you can break that in half.

Now, obviously you don't want to do that without talking to your doctor, but it's actually not a bad idea if you have like a 40 milligram pill of something and you're supposed to take a 20 milligram pill, to break that in half as long as the pill is actually scored, it can be designed to do exactly that.

WILLIS: Wow, that's great.

GUPTA: That saves a little money, too.

WILLIS: Yeah, any other ways to save money, Sanjay?

GUPTA: Well, you know, generics, overall, I think are a pretty decent way to say money. But, you know, if you have a lot of medications that you're taking and you're not sure if you can get some of them in generics you can actually take the list prescription drugs to your doctor and say, look, here's the list, are there any generics that you think might actually work on this particular list. That's one way.

You can also shop around for the best drug prices, overall. Surprisingly, Gerri, people think this is sort of standard, each pharmacy, pharmacies can vary up to 20 percent to 40 percent in terms on what they charge for drugs. So, for you're somebody who has to buy medications every month, shop it around a little bit.

Also, there are uninsured and underinsured assistance programs. Co-pays can be a lot of money as we know. You can actually get sort of a tiered system sometimes or actually go to one of these assistance programs and the American Academy of Family Physicians have a little more information on that, Gerri.

WILLIS: That's great news. I have got some more Web sites here I want to mention to folks out there, because I know this is a critical issue for a lot of people. The Food and Drug Administration is at fda.gov, the Generic Pharmaceutical Corporation at gphaonline.org, and as you just said, the American Academy of Family Physicians at familydoctor.org and one more, get this one too, the Partnership for Prescription Assistance at pparx.org.

Sanjay, thank you so much for stopping by. Great information.

GUPTA: Thank you. Hope that helps. Thank you, Gerri.

WILLIS: Absolutely. And you can watch Sanjay every Saturday and Sunday on HOUSE CALL at 8:30 a.m. Eastern, right here on CNN.

As always if you have an idea on how to say money, send us an e- mail to openhouse@cnn.com. And if you want to check out this project savings again, check out our Web site cnn.com/openhouse.

Coming up, how and when to teach your children about money. We'll break it down for you, but first your "Local Lowdown." (BEGIN VIDEOTAPE)

WILLIS (voice over): Silicon Valley in California is the nation's leading high-tech hub. It first got its name because of the large number of computer related industries in the area. Today, Silicon Valley is most known for its innovations in software and Internet technology.

Home to companies such Google, Hewlett Packard, Adobe Systems and Yahoo, Silicon Valley's inventions span from the laser printer to TiVo and just down the road in San Francisco this week, Map World held it's annual conference expo.

(INAUDIBLE) you can check out the latest in map technology exhibit their own products and even sign up for the always anticipated keynote address by Steve Jobs. Good luck getting into that one.

That's your "Local Lowdown."

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN GRAPHIC)

High school seniors averaged 53 percent on a financial knowledge test.

(END GRAPHIC)

WILLIS: With the economy suffering your savings may be taking a hit, as well, so when you're trying to budget in these though time, hey, it may be time to teach your kids about money, as well. Janet Bodnar is the deputy editor of "Kiplinger's Personal Finance" and she's in Washington, D.C.

Jenna, thanks for join us.

JANET BODNAR, KIPLINGER'S PERSONAL FINANCE: Oh, my pleasure.

WILLIS: All right, you know, the big problem here is at what age do kids even understand the word budget?

BODNAR: Oh, adults don't even understand the word budget and that's why you have to do stealth budgeting with kids. Instead of sitting down with your kids and saying, well, today we're going to do a budget, children, and we're going to show you how to spend your money.

I think the best thing you can do with kids is give them a certain amount of money that they control. For younger kids this would be an allowance, for older kids, obviously it would be money that they earn from a job. But they have certainly financial responsibilities with that money and they have to decide how to parcel it out and that is budgeting. WILLIS: All right, let's drill down by age group. Because you really do this differently with different aged children, so five and under. How do I talk to them about budgeting?

BODNAR: That's the concrete stage of money management. Right? They don't understand exactly how much $5 is or how far it will go. But they know, or they can learn that money can be exchanged for other things. So, you can do things like having them save money in a fun savings bank.

Put money in a vending machine to buy things. Go to a dollar store and exchange their money for something in a dollar store, so that they're realizing that they have this money, they can buy something with it and then it's gone.

WILLIS: OK, just the basics. And you know, this is an important thing at this age. How do you teach them no, how do they come to understand, no, you can't afford that, no we don't have the money for that? That seems to be a real hurdle at that age.

BODNAR: Well, I think you just say no. I mean, parents need to have confidence in themselves. Their kids, no matter what their ages are, are going to listen to the parents as long as the parents have confidence in what they're saying...

WILLIS: Janet, parents don't have confidence, that's just the problem. You know, a recent study showed that most of them don't even want to talk to their kids about money.

BODNAR: Well, I'm here to tell you, I'm the expert, I have written about this subject, my book is "Raising Money Smart Kids" and I think, and I've raised, I think, three of my own money start kids and I will assure you that, in fact, parents do have power, no matter what age their kids are, they will listen to you, they have more influence than their kids peers and you even have more influence than the media. It is important to start early with small steps that you can build on this as the kids get older.

WILLIS: Let's go to six to 11, because we want to cover some very specific ground, here today. If you have kids six to 11, what should you talk to them about?

BODNAR: This is premo allowance years, these are the years when they actually do have an allowance, they have money of their own, they have to make certain decisions on how they're going to spend it. And that's when the real budgeting comes in here. Because if they're getting $5 or $6 or $7 a week, do they want to blow it at the mall with their friends or do they want to save that money because they want to buy a pair of jeans that costs $50 or $100 bucks or they want to buy a concert ticket or something like that.

So, they have to be make some decisions. You just have to be clear on what their responsibilities are so that they know what you're going to purchase and what's on their dime.

WILLIS: Janet, we can go on and on. We have so much good information from you, we really appreciate your time. Thanks so much.

BODNAR: Oh, my pleasure.

WILLIS: You can hear much more about the impact of this week's news on your money on YOU MONEY with Christine Romans and Ali Velshi, Saturdays at 1:00 p.m. Eastern and Sundays at 3:00, 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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