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Open House

Mortgage Crisis Solution; Investing in Real Estate; Couples Financial Bliss

Aired February 16, 2008 - 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 Geri Willis and this is OPEN HOUSE, the show that saves you money. Couples and debt, they often go hand in hand. We tell you how to avoid the love-debt triangle. Then, forget rebate checks to stimulate the economy, how about debit cards. Our very own Glenn Beck stops by to explain.
But first, to in an effort find solutions to the mortgage meltdown, the Bush administration, this week, revealed a new plan aimed at struggling homeowners. Under Project Lifeline, delinquent borrowers with all types of mortgages, not just subprime loans, would get an additional 30 days to work out the terms of their loans while the foreclosure is put on hold.

Now, the plan was put together by six of the nation's largest financial institutions, you can see them right here. Floyd Robinson is the president of the Consumer Real Estate and Insurances services group for the Bank of America, one of the lenders supporting Project Lifeline and he's joining us from Charlotte, North Carolina.

Floyd, welcome.

FLOYD ROBINSON, PRES CONSUMER REAL ESTATE & INS SERV: Hello, Geri.

WILLIS: Tell me by the Bank of America got involved with this?

ROBINSON: Well Gerri, it's a consumer issue and as you may know, Bank of America serves more than half of the consumer households in this country. We're also a major mortgage lender and as such, we're certainly aware of the criticalness of the crisis that our consumers are facing. So with that, we believe that being out in front and participating in providing a solution to these consumers is critically important.

WILLIS: Well, what will this plan do that the previous administration plan won't?

ROBINSON: Well, it's directed to more seriously delinquent consumers, those that are 90 days or more delinquent. It's an outreach by the six major servicers that you noted who serve more that 50 percent of the mortgages in this country. Our hopes are that if a customer is more than 90 days delinquent, they recognize they have a problem, that they'll reach out to us and we'll be able to provide individual assessments around their financial circumstances and provide solutions for them.

WILLIS: But is this window -- it is really a 30-day window. Is it enough time to really get anything done?

ROBINSON: Well, the 30 days is just a timeline that we've established to say that we need to stall the foreclosure process if that's actually underway and I would say to you that typically if we find that it takes longer than 30 days to come to a resolution for the consumer, that we would certainly take that additional time.

WILLIS: OK, this program has gotten a lot of criticism out there, one of the most critical is Bruce Marks. Let me read to you a comment from him. He says, and he's a consumer advocate, out there. He says, "It is a public relations gimmick and the only lifeline is for the administration. It's not a lifeline for the homeowner, it's creating false expectations with the inevitable result being foreclosure." Bruce Marks is CEO of a consumer advocate organization that's been helping folks in this situation. He's counseling folks there day to day. Is he wrong?

ROBINSON: Well, you know, that's Bruce's opinion. What I would say is what it is. And what it is is a consolidated outreach by major servicers in this country in addition to the initial Hope Now alliance that is going to provide, you know, resolution for a very difficult circumstance for our customers. So, I think if you think about the Hope Now alliance, what it did, Project Lifeline, the stimulus package that has been enacted, all of those collectively are moving in the right direction.

I think Secretary Paulson said earlier that there's not a single solution to this and I think we have got to look at all these things collectively and recognize we're iteratively walking ourselves towards what I hope will be the ultimate solution.

WILLIS: The ultimate solution. Floyd, thank you so much for that, we appreciate your time.

ROBINSON: Thank you.

WILLIS: Well, OK, now you've heard the industry perspective, let's take a look now at what this plan means to you and the economy. Mike Santoli is a senior editor of "Barrons," Carmen Wong-Ulrich is the author of "Generation Debt" and they're both joining us here.

Welcome guys, good to see you.

MIKE SANTOLI, BARRON'S ONLINE: Thank you.

CARMEN WONG-ULRICH, AUTHOR, GENERATION DEBT: Thank you.

What did you make of what flayed had to say?

WILLIS: All right, let me start with you, Mike. What do you make of what Floyd had to say about how well this program is going to work?

SANTOLI: Well, I think what his underscores is that everybody on both sides of the lender/debtor equation has an incentive to try to find a solution. Bank of America or any other lender doesn't want to suddenly start owning millions of homes that they foreclose upon in the next few years, I do think they want to slow down this snowballing problem. And so it seems like the decent gesture to try to get that done.

WILLIS: Snowballing problem, but is 30 days enough, Carmen, to really get things to work? I know people out there are just overwhelmed.

WONG-ULRICH: Well, I think the key here is, if you're looking at the consumer side, you're looking at how much help is this actually going to take? Well, look at the numbers, about one to two percent of mortgages are going to foreclosure. That's a small amount. And this Project Lifeline may only help 10 percent of those. So, the number it's going to help is really, really small and if they're looking to make this gesture of several other gestures coming, it's a good thing, but I think it needs to be more than that.

WILLIS: Mike, you know, I've seen numbers that are really shocking about the results from Hope Now. Just 10,000 people, really working through new loans out there, is there any hope that this could be more effective? Tons of people are going to be faced with foreclosure, facing higher rates on their resetting arms. Can this make a big difference?

SANTOLI: The big difference? No, the marginal difference, yes, I really do think it's all a matter of everyone agreeing that this was going to be an accelerating problem this year and into next year, hopefully not, but maybe. And this is going to potentially try to slow the worsening of the problem and the worsening of the economy.

WILLIS: Are lenders prepared to do this? Do they have what they need to make these changes?

SANTOLI: It would seem to me that once it gets up and running they would actually have the systems in place, at least I would hope. They're the ones that are basically on one side of the table agreeing to the terms.

WILLIS: Carmen, a lot of people don't want to pick up the phone, let's face it, you get behind on the mortgage, the last thing you want to do is talk to your lender.

WONG-ULRICH: Yeah, I mean, there's a lot of intimidation, a big intimidation factor. And I liken it to being, you know, with a doctor and you're the patient, there's an authority there, you know, mortgage lenders have some authority and they have a lot more information than you do, so a lot of people that signed on the dotted line and they regret that, they don't see themselves in a position of being a consumer, being a customer and working with the lender, instead they see this as this is someone I owe money to, I'm scared.

WILLIS: Mike, I've got to ask you this, you know, what we're experiencing, what we're seeing when we talk to people out in the marketplace, consumers, they're saying that lenders are so stingy now and so reticent to lend that it's difficult to get loans. Won't it require lenders to open up their purse strings to get this economy moving again?

SANTOLI: It will require that, the problem is that those lenders themselves are being pinched because of this credit market crisis. It's not necessarily that they've become stingy, that they don't want to help people work through problems and refinance their overdue mortgage loans, it's that they don't see themselves able to extend that capital out there. That's why you see the Federal Reserve cutting rates at the same time, trying to free up the credit market. That's what has to happen, really, before you can have a more wholesale solution.

WILLIS: And Carmen, pick up the phone, pick up the phone, pick up the phone, right?

WONG-ULRICH: Pick up the phone and try to work it out before you're in trouble, before you're even late for one month. And the lenders will try to work with you. And before you head into foreclosure, especially, because you may not make that 90-day window.

WILLIS: Mike, thanks so much for coming it. Carmen, stick around, we're going to come back to you.

Coming up on OPEN HOUSE, real estate revival. We'll take you to the housing markets that are still doing well despite the mortgage meltdown. Then, are debit cards the answer for juice up the economy? And for richer or poorer, how to avoid the couples debt trap.

(COMMERCIAL BREAK)

WILLIS: Well, while the housing market is trying to get back on its feet, there are some cities across the nation where you can still, still get a great deal on a home. Kendra Todd, is a real estate broker in Florida, she is the author and host of HGTV's "My House is Worth What?" and one of the winners of a little show you've probably heard of, "The Apprentice."

Good to see you, Kendra, again.

KENDRA TODD, MY HOUSE IS WORTH WHAT?: Thanks.

WILLIS: All right, let's talk about these markets, because I know people are really interested in them.

TODD: Washington is one of the statewide economies in the country.

WILLIS: But the northwest as a whole has done well.

TODD: Exactly. Well, it was largely overlooked during the housing boom and as a result those areas had a lot less far to fall. So, you know, they're about to hit bottom and come on up. Now, (INAUDIBLE) the driving force here is first-time home buyers, because there was an over speculation, and right now interest rates are low, first-time home buyers are still able to purchasing a home and they're driving up the resale values. WILLIS: Gorgeous pictures of that area. OK, let's talk about, let's go south and talk about Dallas, Fort Worth. You know, this is interesting because a lot of places in the country are really having economic difficulties, not this area, oil is booming.

TODD: Oh, it is booming big time, I mean, Dallas, Fort Worth is an area that's a hub for international trade, foreign investment. And over the next two decades we're going to have 6.4 million people moving there. They largely avoided the boom and bust cycle, didn't have a run-up in value, therefore, people are not able to borrow equity against their homes and get into an overleveraged situation.

WILLIS: And I'm thinking job, jobs, jobs.

TODD: That's right, double the national average, as a matter of fact.

WILLIS: Now, that's impressive. New Orleans, now, you know, we pay a lot of attention to New Orleans, they've had so many problems. Tell me, what is the situation there now?

TODD: You know, Gerri, it's such a hard market to predict and the reason it's one of my picks is because after the devastation caused in housing by Hurricane Katrina, the only place to go is up. One-third of the residents in New Orleans are still displaced. You've a crisis in affordable housing and rent has shot up 40 percent.

Now, New Orleans is divided into two markets, really, intact homes and flood damaged homes. The deals in '08 are going to be the flood damaged homes because you can buy them for 30 to 40 cents on the dollar.

WILLIS: Wow. You know, that's kind of -- you never know if that's really a great deal or not, because you don't know how far the damage is going.

Now, this is an interesting pick, Atlanta, Georgia. Now, all I hear from people in Atlanta is that all the houses are overpriced, but you say no?

TODD: Well, Atlanta is an interesting case because they did have some speculation, definitely some major building. Right now there's a lot of inventory on the market. In Atlanta, the deals are actually on the high end of the market. The $700,000 plus range, and I'll tell you why. Builders, it cost them $265 a square feet to build these large high-end homes. Right now you can buy them for $180 a square foot. So, whenever you're in a situation where you can buy a home for 60, 70 cents on the dollar in an area that's not in Florida that still has a lot further to fall, you've hit bargain basement prices. Rock bottom, buy now, cash in later.

WILLIS: How about Maui? We all want to go to Maui.

TODD: Who doesn't want to go to Maui? Well, you know, Hawaii is the single strongest state in real estate in the entire country, right now. WILLIS: They've got some advantages out there. They've got the ocean, the beach, the natural beauty.

TODD: Exactly. And so, what's happened is international and mainland investors are recognizing that because prices have plummeted, there's great deals now on waterfront and mountain properties, so the money is just pouring back into resort areas and all of the islands on Hawaii are really coming up in value.

WILLIS: All right, so if we had to summarize this, what do these places have in common, do you think? How would we find these on our own as we continue to look for deals out there?

TODD: What you want to do is keep your eye on areas that were largely overlooked during the housing boom, therefore with the bust, they don't have as far to fall. And you want to buy at or near rock bottom and you can't time it perfectly and if you try to, you might miss it. But in any market, you want to buy low, sell high.

WILLIS: Kendra, thank you so much for your time, today. We appreciate it.

Still ahead on OPEN HOUSE, the stimulus plan, political posturing or what's needed to jumpstart the economy and your bottom line. Our very own Glenn Beck stops by to sound off.

Then, couples in debt, what you need to know to get back into financial bliss. But first your mortgage members.

(COMMERCIAL BREAK)

WILLIS: The economic stimulus plan was signed into action by President Bush this week so you can expect to see rebate checks in May. So, will people spend the money, should they spend the money and will this plan succeed or it will be a complete failure? With answers to all these questions and more is a familiar face to CNN, joining us from his radio show studio, is Glenn Beck, the host of HEADLINE NEWS show called GLENN BECK.

Good to see you, Glenn.

GLENN BECK, HOST OF GLENN BECK: Gerri, I got to say, I mean, I don't think I have answers to any of those questions that you just posed.

WILLIS: Well, let's get some guesstimates.

BECK: OK, I'll guess.

WILLIS: OK, economic stimulus, you wrote in a recent column: bad idea, not going to work. Why not? I want to get a check.

BECK: I'm guessing you're not going to be qualified to get a check.

WILLIS: Could happen. I live in New York. BECK: Yeah. You got to make under, I think it's $75,000 a year. Most of the people who are getting checks, don't even pay income tax. I might be a little bit fuzzy on that fact, we should check that one. Again, no answers, here.

WILLIS: But, for couples the limit is higher. For couples the limit is higher, but you say it's not going to turn the economy around, right?

BECK: It will not turn the economy around. If it would turn the economy around, why would we be arguing about how much to spend? Why wouldn't we do this all the time? If spending money, having the government spend money, if it would work, why wouldn't we do it all the time?

Here's what it is going to do. It's going to take money -- because we don't have the $165 billion, we have to borrow it, so we're going to take the money from China. We're going to borrow it. And we're going to pay that back to them, or tell them that we'll pay it back to them with interest. Then we're going to take that money and we're going to give it to people, hoping that they will then go out and spend that. Well, what are you going to spend it on? Most likely, you're going to spend it on things that were made in China. So, the real economic stimulus is for China, not for the United States.

And beyond that, when I wrote this article, I got just torn apart by people on blogs that said: Oh, Glenn Beck, he's doesn't understand the common, he says they won't spend these checks. Let me tell you something, "AP" just did a survey, said 19 percent, only 19 percent of those who receive checks will actually go out and spend this. The rest of smart America will take this money and they will pay down their debt.

WILLIS: All right, let me get you to something else, here. Debit cards, you think this money should go to folks as debit cards. Explain.

BECK: Let me explain. I'm saying if you're going to spend the $165 billion, why not use a debit card? There's a lot of advantages to a debit card. First of all, we know the money will be spent, we can say, just like with FEMA, you can go out and you can spend it right away, but you have to spend it and there's a cutoff date. We take the money back, your debit card is no longer good in three weeks. That way that money rushes into the economy and gives you a little bit of a burst. I don't think it's going to work, but at least do that, and you can re-enforce...

WILLIS: There's a question of how well that worked with Katrina, though, right? I mean, a lot of folks were spending on stuff that sort of surprised the experts.

BECK: Yeah, but wait a minute. It doesn't matter what you spend it on now. Do you hear the government -- do you hear anyone from the feds saying, hey, we're going to spend these checks out to people, but make sure that they don't spend it on big screen TVs or hookers. They don't care, as long as it get into the economy.

WILLIS: We never talk about that on this show.

BECK: You've never had me on, that's why.

WILLIS: One thing I got to ask you about because you need to answer this. In your column you said the government should stay out of this. Isn't that the problem, the government's been out of it for so long, we have got a lot of fraud in the markets.

BECK: Oh, no, no, no, wait a minute, hang on just a second. We've got a ton of greed in the market. we've got a ton of greed in the banking system and we have got a ton of greed of people who bought houses that they couldn't afford. Everybody got greedy. Now the question is, what's the solution? I'm a dad. And as a dad, I know the best solution is always let your children feel the pain. If your children don't feel the pain of their mistakes, they will never learn from them. These banks and everybody else who were greedy have got to learn the lesson.

WILLIS: OK, Glenn Beck, feeling our pain and you can catch him every night at 7:00 p.m. and 9:00 p.m. Eastern on HEADLINE NEWS. Thank you.

BECK: Thanks, Gerri.

WILLIS: Still ahead: for richer or poorer, it's all about couples in debt. We'll tell you how to get in the green and stay in the green.

(COMMERCIAL BREAK)

WILLIS: OK, love isn't easy, managing your money isn't easy either, you put the two together and you're asking for trouble. But mixing money and love doesn't have to be a negative. Back with us Carmen Wong-Ulrich.

Good to see you, Carmen.

WONG-ULRICH: Thanks for having me.

WILLIS: All right, everybody fights about money, couples fight all the time. How do you keep from getting so contentious about this?

WONG-ULRICH: You know, they still do. PayPal recently came out with a survey that found that 60 percent of couples argue about money once a month. So, this is a regular argument that's happening with the majority of people.

WILLIS: It's worse that taking out the garbage?

WONG-ULRICH: Very much so. But you have to understand that money is a very emotional thing. So, it just makes sense that if you're in an emotional relationship that money is going to become an issue. And really what you have to do is talk about it early and often. WILLIS: Well, and people resist that, I think.

WONG-ULRICH: Yeah.

WILLIS: You know, we hear about cases, and I have to say I have been guilty of this myself, where you go, you buy something and you're afraid to say that you went out and bought something and you stash it away where it won't be seen. You call it financial infidelity.

WONG-ULRICH: It is a little bit of that, you know, and the same survey found that 22 percent of Americans both men and women hide things that they buy from each other by shopping online at work.

WILLIS: Hun, that never occurred to me.

WONG-ULRICH: So, you know, the computer has been enabling this sneaking around process, which isn't very sexy, by the way. You know, you really should be as open and transparent as you can about money, but the real basis of it is talking about it in the first place and having a joint financial plan together, so that you're not sneaking around.

WILLIS: Do you think it makes sense to separate accounts, though, or have them together?

WONG-ULRICH: You know, part of my advice is that if you really want to maintain some autonomy, but you want to be partners in money, as well, have a joint household account, a household budget and account that you manage all of the things you have to pay together, it's your household bills, but also things, plans like, say you have children. Your children's college education, that sort of stuff and then have separate accounts on the side for yourself?

WILLIS: For savings?

WONG-ULRICH: For savings and for your own spending money. You know, but if you're going to spend over a certain amount, maybe you agree to talk to each other about that, if you're going to blow, you know, $500 a pop, talk to each other about that, but not nickel and dime each other.

WILLIS: Communication is obviously the key. What if one partner makes a lot more money than the other?

WONG-ULRICH: That happens a lot, of course now, you know, a third of women actually make more money than their partners, so this is an increasing problem and gender issues fall into that a lot. What you can do is just make sure you're both comfortable with it. If you're dating and you see that one is more comfortable than the other, say a man is not happy that you make more than him, that is a warning sign that is a red flag. Pay attention to those things and talk through it.

WILLIS: So, how do you budget together?

WONG-ULRICH: You got to sit down, you have to sit down once a month and choose one of you that's the most responsible maybe, to manage the household budget, but make it a time to , once a month, to sit and talk to each other, inform the other one, if you're managing the budget, inform your partner where the money is going. Just make sure it's a conversation you have more than once a month.

WILLIS: And, of course, in an ongoing way you got to keep communicating over time, right?

WONG-ULRICH: Right, because, you know, life changes and money and lifestyle hook together, so, say you're having a baby, you're not working for awhile, finances are going to change. So, all of these life changes are a great time to reassess your money plans.

WILLIS: Reassessing money plans. Carmen, thank you so much for that.

WONG-ULRICH: Thanks, Gerri.

WILLIS: And if you want to see this "Project Savings" again, check out our Web site cnn.com/openhouse. And if you have an idea on how to save money, send us e-mail to openhouse@cnn.com.

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, 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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