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'Financial Security Watch'

Aired February 27, 2008 - 12:02   ET


I'm Gerri Willis.

All week during this hour we're focusing on what really matters to you and your money -- your house, your debt, your savings, your job. Now is the time to get your finances under control.

Over the next hour, we'll give you the tools, the tips and the strategies that will help you make sense of your money. Best of all, call in and we'll answer your questions live.

And here's the latest on your financial security.

Another day, another down sign for the housing market. The Commerce Department reports new home sales fell again last month to the slowest pace in 13 years. The median price of a new home dropping to its lowest level in more than three years.

And Federal Reserve chairman Ben Bernanke is on Capitol Hill today talking to the House Finance Committee. And he didn't exactly paint an optimistic picture. Bernanke warned about a period of slow economic growth in the wake of the mortgage meltdown and the credit crunch. He also spoke of higher inflation over the coming months and hinted at yet another possible rate cut.

And folks facing foreclosures shouldn't expect any additional assistance from Washington. President Bush threatening to veto a bill under debate in the Senate which would give more bargaining power to struggling homeowners who face foreclosure.

Now, one of the senators out in front supporting struggling homeowners from the beginning, Senator Chris Dodd of Connecticut. Senator Dodd is joining us now from the Russell rotunda in D.C.

Good to see you, Senator.

SEN. CHRIS DODD (D), CONNECTICUT: Good to see you, Gerri.

And I can't be remiss -- just hearing about Bill Buckley, who was a great friend of my parents, a resident of Connecticut for a long time. And whatever your political views, Bill Buckley was an American icon. A real loss for the country. And I just can't help but express my condolences to his family, a remarkable guy.

WILLIS: Thank you for weighing in on that, Senator. Let's get you to one of these issues that is so important to people right now who are struggling with mortgages. I know that you're supporting a bill, actually authored a bill, that would set up a very special federal agency that would actually buy some of the poorly-performing mortgages, as I understand it, from the banks who hold them.

Tell me more about how that would work.

DODD: Well, I'd love to tell you it was a great new idea. Like most ideas, they're not terribly new. And this one was tried actually in the Great Depression.

It was what they called a homeowner's Preservation Corporation idea, and that was to take highly-distressed mortgages, actually before they quite go into foreclosure, and buy them on bulk at an auction, at discounted prices. And therefore -- and then allow people to have a workout of a new mortgage arrangement, allow them to stay in.

I'm very pleased that people like the American Enterprise Institute, normally a fairly conservative economic group, along with other organizations, have strongly supported this idea. And I wouldn't create a whole new agency. I think you utilize existing platforms...

WILLIS: Right.

DODD: ... whether it's the FHA or the Fannie Mae or Freddie Mac. You've got good people there for a very limited amount of time, so you'd sunset this so it doesn't become a permanent operation.

WILLIS: Right.

DODD: And then figure out a way to do it.

WILLIS: Senator, I understand that you're saying that it may be only two to three years...

DODD: At best.

WILLIS: ... that this group would be together, but you said that this could cost $20 billion to $25 billion. Is this coming out of taxpayers' pockets?

DODD: Well, the idea would be that actually only administrative costs. The point is, everyone takes a haircut here -- the lender, obviously, as well as the borrower. And the idea would be -- in previous times when this idea has been tried, the cost of the federal government was almost negligible.

WILLIS: How come? How does it work out that way?

DODD: Well, because basically all you're doing is operating as a basis by which you're purchasing and putting people back in paying it back. So the only exposure you have is the original purchase, and then obviously having the homeowner pay back whatever that discounted price is, that's the cost.

And if you end up in some cases where they don't pay it back, then you end up with some cost. As long as they're paying it back, then the federal government gets their money back.

So, it worked very well in the past. There are a lot of details, and the devil is in the details that need to be worked out here.

WILLIS: Right.

DODD: And we're trying to do that. But it's an idea that we can offer to the -- by the way, owner-occupied, this is not for the speculator.

WILLIS: All right.

DODD: You have to be living in that home.


WILLIS: But Senator, let me interrupt you right here...

DODD: Yes, sure.

WILLIS: ... because I have an important question about this plan. I think it's fascinating, but I know there are going to be people out there who say, isn't this just a bailout for banks? Because the government would actually buy bank debt, right?

DODD: Well, in this way you could argue that, but obviously at a discounted price they're going to get a lot less than they might have otherwise planned on getting. And also, Gerri, it's very important to recognize that what's going on here is unprecedented, or at least unprecedented in recent time here.

I have got a city in Connecticut, Bridgeport, that may have as many as 6,000 foreclosures.


DODD: Almost 50,000 of them in the state of Connecticut last year. These numbers are going to mushroom and grow.

And remember this statistic, the ripple effect of this. If you have a neighborhood, a relatively stable neighborhood, where you have one foreclosure in one-eighth of a square mile, and every other homeowner in that block is current on their mortgage obligations, the value of every other home because of one foreclosure declines by almost $5,000 almost immediately. So while you could argue this is helping out that borrower and even maybe the lender, to some extent, by minimizing these foreclosures you're also stabilizing that neighborhood.

WILLIS: Well, we've seen that over and over again. Everybody seems to suffer when there's even one foreclosure in the neighborhood.

DODD: That's right.

WILLIS: We want to get you to something that's happening today. Ben Bernanke is obviously speaking, and he doesn't seem very upbeat about the economy. In fact, he says it continues to struggle. He's talked a lot about mortgage debt, the problems in the housing market.

How do you react to that? Do you feel like the Fed's going to be on economy watch or inflation watch?

DODD: Well, Ben Bernanke will be before the Senate Banking Committee, my committee, tomorrow.

First of all, let me commend him for his candor. I mean, it doesn't do any good to have the Fed chairman going up there pretending the problems are not there. So I respect him immensely for laying it out in very clear ways.

He's talking about the situation being slow at best, and maybe worse. And so that's -- first of all, to begin with an honest appraisal of where things are.

WILLIS: Right.

DODD: I also commend him for moving to sort of reduce these rates by 225 basis points, and the possibility more may come down the road. You could argue that it's maybe not been quite quick enough. I'm not going to get into that debate.


DODD: The fact is they've done that. I commend the Fed for the steps they've been taking here.

WILLIS: Senator...

DODD: And obviously it's going to be important that we come up with some other ideas here that will minimize these problems from mushrooming even further, and that's one of the things we're looking at.

WILLIS: You've certainly done that, sir. And we thank you for your time today.

DODD: Yes.

WILLIS: Thanks so much for joining us. We appreciate it.

DODD: You bet, Gerri. Thank you very much.

WILLIS: The folks on Capitol Hill are taking steps to help struggling homeowners, but are we seeing results from their actions? And is it enough?'s Poppy Harlow is with us.


Well, yes, foreclosure filings rose 57 percent in January from just a year ago. So a lot of people are asking, is the government really doing enough?

Now, there are a couple of proposals out there that are being kicked around in the House and Senate right now, but there's concern about how much good they're going to do. And I know you know this, Gerri -- what we have now are two programs aimed to help struggling borrowers, Project Lifeline and Hope Now.

Now, although Hope Now says it helped about 500,000 subprime borrowers during the second half of last year, the fact is, 33 more people -- 33 percent more people actually lost their homes during that period than the first six months of last year. So we want to know what you think.

Please log on to and answer our "Quick Vote" poll.

Here's our question today: Is the federal government doing enough to help struggling homeowners? Yes or no?

We'll be back at the end of the show with your answers -- Gerri.

WILLIS: Poppy, thank you for that.

We're here to help answer some of your questions about money. Give us a call at 866-792-3399. Now, that's 866-792-3399.

You can also e-mail us to And if you're at work, that might be the easier thing to do.

Now, we're going to get to your phone calls a little later in the show, and everybody that we put on the program will receive a copy of my new book. It's called "Home Rich." You see it right there.

And coming up next, you won't believe how much money you spend without even knowing it. We'll tell you all about the hidden fees and how to avoid them.

Plus, critical advice to help make sure you don't lose your job.

And we'll check in with Rick Sanchez, taking the financial pulse of America, when CNN's FINANCIAL SECURITY WATCH comes right back.

But first, here's today's "Reality Check."


WILLIS (voice over): According to the General Accounting Office, 750,000 Americans are victims of identity theft every year. Protect your identity by following a few simple rules.

Tear up or shred credit card statements, solicitations, and anything else that contains private information before disposing of them. Consider a locked home mailbox or a P.O. box. Criminals can snatch everything from credit card pitches to bill payments for most home mailboxes. The payee's name can be erased from checks stolen from bills using solvents.

So don't leave outgoing mail in your unlocked box. Mail them from a post office.

Avoid carrying our Social Security card with you, and don't put your Social Security number on your checks. This number is a target for identity thieves, because it will give them access to your bank accounts and your credit report.

And always be defensive with personal and financial information. Exercise caution when giving information over the phone until you have verified that the company calling is legitimate.

And if you've been a victim of identity theft, do something about it. File a report with the police. Contact the creditor for the account. And keep a record of all your efforts to clear the fraud.



WILLIS: Gas prices are on the minds of every American who drives a car, but some of those who really see the costs every single day are truck drivers.

CNN's Rick Sanchez is out for us all week feeling the pulse of America.

RICK SANCHEZ, CNN CORRESPONDENT: Gerri, this time we're going to be at the Patriot Truck Stop just outside of Atlanta. You can see behind me, truck after truck pulls into this place. This is where they come to get a break.

Now, these are the guys who are getting really hit by the fuel prices, but we're also going to talk to them about how it's affecting the rest of us, because of the price they have to pay. We'll have it for you.

WILLIS: Rick, thank you for that. We'll see you in a few minutes.

Two hundred and fifteen billion dollars, now that is a lot of money, and it's about how much people spend every single year on hidden fees. That's according to "Consumer Reports."

So, how much do you spend every year without even knowing it?

Bob Sullivan is the author of "Gotcha Capitalism." He's joining us from New York.

Great to see you. I love your book. It's just...

BOB SULLIVAN, "GOTCHA CAPITALISM": Thanks, Gerri. WILLIS: It's just full of fees that you may not know that you pay.

Tell me, what is the cost for each and every American?

SULLIVAN: Well, we did a survey for this book and found out that, on average, every American loses about $1,000 a year in these nickel-and-dime fees. One thousand dollars, and that does not include big-ticket purchases like home prices or retirement, where hidden fees really, really hurt.

WILLIS: They do add up with mortgages. That's for sure.

Let's start with some things we know we can fix. Credit cards, what are the hidden fees there?

SULLIVAN: Well, there's all sorts of hidden fees. And once you start making a mistake with your credit card, you make one small transgression, you're one day late, not only do you get hit with higher interest charges, which a lot of folks are familiar with, but a whole cascade of other things happen.

There's late fees, there's over limit fees. And by the way, those fees also end up added to our balance, so there's interest charges on them as well. And they can compound. So you can be over your credit limit month after month, and those fees can easily add $80 to $100 to your bill.

WILLIS: I know. Those interest rates can go up to 30 percent. It's appalling.

Let's go to cable TV. You say this is a real bait and switch arena.

SULLIVAN: Well, you know, look at an ad for cable TV and you're going to see the number $29.99 all over it with the tiny little asterisks in it, and I defy most folks to look at one of those postcards and find out what the real price is going to be six months down the road. It's remarkable.

And the small print on those things is so small. You know, they have a term for that. They call it mouseprint in the business, mouseprint, because only mice could actually read it. But even there, even in that tiny print, you'll never see the real price of the service.

WILLIS: I love mouseprint. That's awesome. I'm going to remember that. OK.

Let's talk about cell phones. Everybody has a cell phone, everybody pays the fees.


WILLIS: And talk about your mouseprint, there's some fine print there. Tell us what to watch out for. SULLIVAN: Well, there's a couple of things about cell phones that really irritate people, and one of them is often they don't work. And what happens when they don't work and you're in the middle of a contract? Let's say you move, or it just turns out that for some reason it no longer works very well along your commute -- you're stuck.

It's going to be $200 to get out of that contract, and there's really no way out of that. So that's a really serious hidden fee. And, you know, when you bring this phone home, you never quite know how well it's going to work because they don't really tell you if it works in your neighborhood or on your block.

But the other thing people need to watch out for is what I call the bust-out cell phone bill. And we've all had one of those. It's $60 a month, it's $60 a month, and suddenly it's $400 because you made a few more minutes than you thought, and they're $2 a minute. Or maybe your kid discovered premium text messaging which can cost $1 or $2 a piece.

WILLIS: Right.

SULLIVAN: So you really want to watch out for those huge cell phone bills.

WILLIS: Yes, that can be a total nightmare.

Let's talk just for a second here, how do I get these fees down? Is it just a matter of calling customer service and saying, I don't want to pay this anymore?

SULLIVAN: Well, I wish it were quite that simple, but complaining really is the key. In the book I have these sample letters and sample telephone scripts that people can use to start to fight back.

I think complaining is a lot like voting. And if we don't do it, we kind of get what we deserve. But you can't take no for an answer. A lot of these folks are trained -- the front line customer service folks are just trained to say no. It cost the company nothing to say no to you a few times.

WILLIS: Right.

SULLIVAN: So if you haven't heard "no" three or four times, you haven't even started asking yet.

WILLIS: Bob, what about letters? And if I do write a letter, who do I send it to? And what is the most effective way of writing that letter to get some help?

SULLIVAN: I think it's really important to find a person inside the company, an actual human being you can address the letter to, so it doesn't just end up in a general mailbox. I'm also a fan of email, by the way. Don't overlook that. You can get sometimes a lot more instant response from an email. WILLIS: Really?

SULLIVAN: And what I like to tell people -- yes.

WILLIS: I never would have thought that.

SULLIVAN: It depends. Yes, I've talked to folks within 20 minutes of sending an email to the right person inside a company, they'll get a phone call and they'll start to get action.

It's really all a matter -- it comes down to this -- you want to get treated like a person instead of a number.

WILLIS: That's right.

SULLIVAN: Inside every company there are people who care about customers. You have just got to find them.

WILLIS: Bob, I love that -- you want to be treated like a customer and not a number. Thank you so much for being with us today.

SULLIVAN: Thank you. Thank you.

WILLIS: All right. So we may or we may not be in recession, but one thing is absolutely clear -- many folks out there are afraid of losing their jobs. Important advice on how to make sure you keep yours, when CNN's FINANCIAL SECURITY WATCH comes right back.


WILLIS: Jobless claims for the last four weeks spiked to their highest level since the aftermath of Hurricane Katrina. Now more than ever, a day does not go by when there isn't a headline about another company, another corporation, cutting jobs.

Here to tell us how to recession-proof your job is Penelope Trunk. She's the author of "The Brazen Careerist," and she's joining us from Madison, Wisconsin.

Good to see you again, Penelope.


WILLIS: All right. So let's start with what I think is really interesting advice. A lot of people out there try to be generalists. They want to be everything to everybody in their company, but you say that's not the way to go.

TRUNK: Right, because when people are trying to recruit someone to a job, they're looking for someone to fill an exact job description. So if you don't peg yourself as an exact type of person, you don't fit anything.

So in a market where there are tons of jobs and not enough people to fill them, you're great as a generalist. But when there are tons of people applying for each job, to be the best fit you have to be a specialist. So now is the time to kind of retool your resume and make it more specialized.

WILLIS: Right. OK.

Well, you know, here is an important problem. I was in Detroit recently, and folks there wanted to move for jobs, but they really couldn't because they couldn't sell their houses.

TRUNK: Right.

WILLIS: What do you do about the issue of relocation if you're in an area where prices have gone down and you can't unload your house?

TRUNK: Well, I think you just have to reconsider what's a priority to you. I mean, you don't really have to relocate in order to get a job that's suitable for you.

WILLIS: It's up to you.

TRUNK: In each city there's something that's suitable for your personality type. And a lot of times it's just thinking out of the box and saying, what am I good at, what are my strengths? And there are a lot of industries that each person can go to. So in Detroit...

WILLIS: Well, let's talk about safe job sectors. Let's talk about some sectors that will offer opportunity for a lot of people no matter what the economy does. What do you suggest?

TRUNK: Health care, IT, advertising. And these are all sectors that you can be any type of person and get a job.

You don't have to be taking care of old people to be in health care. You can be an IT professional and go into health care. It's -- there are tons of opportunities in sectors that are booming, and you just have to kind of think about yourself as a versatile person, and you're more likely to be versatile.

WILLIS: Now, you know, sometimes people get laid off, right? And you say you should try to position yourself if you know what's coming.

It's not your fault. Look, they're downsizing, they're going to get rid of people. Maybe they're getting rid of your position.

You say you have got to think through that ahead of time. What do you do?

TRUNK: You take the time right now, instead of panicking and packing up your desk, take the time to get on a good project that you can put on your resume, because you're really only good as the resume you're going out with when you get laid off. And now is the time to be a superstar in one area, even if you have to do something outside of your job description.

Everyone would love to you do extra work. So do it now to put something good on your resume.

WILLIS: I love that idea.

And for young people out there who, maybe they're really worried about the job market, you say always, always, always have a mentor.

TRUNK: Yes, and when you're deciding, is this a good or bad job and should I hold off, especially in a market that's looking like a recession, look for the mentor. You don't have to have an amazing job. You can have an amazing mentor and you'll get amazing things from that job.

WILLIS: Well, I loved that interview.

Penelope, thank you so much for the great advice. We appreciate it.

TRUNK: Thanks.

WILLIS: So, don't forget to head over to to cast your vote on today's "Quick Vote" question, which is: Is the federal government doing enough to help struggling home owners? Yes or no?

We want to hear from you. And we'll be back with those results in just a little bit.

Coming up on CNN's FINANCIAL SECURITY WATCH, we're tuning turning the show over to you. Give us a call with your questions at 866-792- 3399. Get ought a pencil -- 866-792-3399.

And we'll check back with Rick Sanchez as he checks in on the pulse of America.

We're back after a quick check of your headlines.



News just in to CNN. Author and conservative commentator William F. Buckley is dead. "The National Review" founder died overnight at his home in Stamford, Connecticut. He reportedly had emphysema. Buckley was best known for his intellectual, political writings. He also hosted the long-running television show "Firing Line." Buckley was 82 years old.

I'm Don Lemon. Now CNN's FINANCIAL SECURITY WATCH with Gerri Willis.


We've all watched gas prices rise over the past few years and there's talk of record price this is summer. Let's put aside your car for a second and focus on truckers and the quickly rising costs of filling tanks of those big rigs. Now it may not seem like your problem, but it really is. Higher prices for truckers are passed along to you and the price tags of the goods they're carrying across the country. Rick Sanchez is talking with some of these folks live at The Patriots Truck Stop. He's in Forest Park, Georgia.


Hi there, Rick.

RICK SANCHEZ, CNN CORRESPONDENT: You know, I've got to tell you, Gerri, you think it's tough for most of us, cause we have to use our car occasionally. These folks have to be driving their trucks all day long. You wouldn't believe the stories that they're telling me.

We're joined here by some of these independent truckers. We're just outside of Atlanta. Gentlemen, thanks so much -- and lady, thanks so much for being with us and joining us to share your experiences.

How difficult is it right now given that the price of gas, including diesel, which is what you all use, is as high as it's ever been over the last couple of months? Anybody start us off?

UNIDENTIFIED MALE: It's ridiculous. Because, me, I have to -- I own my own truck, OK, and I have to pay the fuel prices and then I have to pay insurance, which costs me about $1,250 (ph) a year, it's $650 (ph) a month. And then I turn around and I buy fuel. And then when you haul the loads, OK, and then you fill up, once you fill up, it will only take you one run. I go to Zebulon, North Carolina . . .

SANCHEZ: How long does it take -- you know, people wonder, because we know how much it costs to fill up our tanks. What's it cost to fill up a tank on one of your truck?

UNIDENTIFIED MALE: About $700 to $800.

SANCHEZ: $700 to $800?

UNIDENTIFIED MALE: Yes, sir. Yes, sir.

UNIDENTIFIED MALE: This morning to fill my tanks would cost you right at $1,000, because I can hold 300 gallons. That's $3.60 a gallon.

SANCHEZ: Is that unheard of for you guys?


UNIDENTIFIED MALE: Oh, it's ridiculous.


UNIDENTIFIED MALE: If you -- just figure this way simple. It's $3.60 a gallon. If I put on 200 gallons of fuel, that's $720. Now 200 gallons of fuel is going to take me about 1,000 -- somewhere around 1,000 miles. And then I got to do it all over again. SANCHEZ: But no problem because the folks who are paying you to take their products across the country are making it up for you and they're giving you the money, right?






UNIDENTIFIED MALE: Let me tell you -- let me give you a good one here. I go from right here to Zebulon, North Carolina. I fill up my tank, right? You go to Zebulon, North Carolina. They pay me $800 to go there. And I just filled my tank up for $650.

SANCHEZ: All right. Well, then I have a question for you. Why are we seeing the prices at the grocery stores go up if you guys are saying you're paying for the extra costs of gas? Somebody's got to be . . .

UNIDENTIFIED MALE: Somebody's putting some money away somewhere, all right.

SANCHEZ: So you're saying your driving almost at a loss right now.


UNIDENTIFIED MALE: Basically. Now there are companies who do give a surcharge for fuel.


UNIDENTIFIED MALE: This is true. All of them do not.

SANCHEZ: But you guys right now . . .

UNIDENTIFIED MALE: Well that was the surcharge added in to that $800. That was with the surcharge.

SANCHEZ: Well, let me bring Aley (ph) into this. Aley, you're the one who owns and runs this particular truck stop here.


SANCHEZ: So you have control of the gas, right? You should be bringing down the prices so these poor guys don't have to pay so much. There's the guy who's to blame right there, right, fellows? Right? No?

UNIDENTIFIED MALE: It's bigger than him. It's bigger than him. UNIDENTIFIED MALE: No, absolutely not. We're just a face for the petroleum business here. It's people that bow (ph) us. It's me and all the retailers in this country right now. At most cases selling the fuel at one or two pennies below our cost.

SANCHEZ: So you're telling me you're taking a loss.

UNIDENTIFIED MALE: Absolutely. And we only live with what people come here and buy as soda or coffee or, you know, any other things but petroleum.

SANCHEZ: But here's what, Americans are sitting here listening to us have this conversation and they're thinking OK, if you're taking a loss and you're the one who drives the truck, you're taking a loss and you're the independent guy who sells them the gas, then somewhere down the line somebody's going to stand up and say, you know what, we need to be given, paid more, which means that carton of milk is going to cost more down the line. I mean, is my mouth wrong?

UNIDENTIFIED MALE: Well you figure, you know, us independents, we're the ones getting ran out of business because it's like this. OK, I still have to pay my insurance at $650 a month.

SANCHEZ: But is there -- what do you foresee in the future? What are you guys going to do? I'm hearing guys telling me here this morning, we're going out of business.

UNIDENTIFIED MALE: My truck has four payments left on it. I bought my truck brand new, so it's worth a little bit more than what I owe on it.

SANCHEZ: And you're going to do what?

UNIDENTIFIED MALE: So I'm thinking very seriously of just selling it and getting out. America needs to understand that it costs 60 cents a mile, 60 cents a mile. Now if America could think about having to pay 60 cents a mile to drive anywhere, they just wouldn't do it.

SANCHEZ: I got it. I got it. I'm getting there.

UNIDENTIFIED MALE: The oil companies -- I have logged into the largest, you know . . .

SANCHEZ: They're doing well, aren't they?

UNIDENTIFIED MALE: Profits in history.

SANCHEZ: They're doing well and that's got to be frustrating.

Guys, thanks so much. I'm being told in Atlanta that we're out of time. But this is a wonderful conversation. Thanks for giving people your perspective on this. We certainly appreciate it.

Gerri, take it back over to you.

WILLIS: Hey, Rick, thank you for that.

You know, I have a cousin who's a trucker and I feel their pain. She's having a tough time, too.

Up next, you're on. We have questions -- you have questions, that is, and we have answers. Your phone calls, your e-mails when CNN's FINANCIAL SECURITY WATCH comes right back.


WILLIS: Let's go back to Don Lemon with some developing news.

LEMON: We have some developing news, Gerri, from the baseball world and it involves Roger Clemens. Now we remember that testimony just two weeks ago in front of the Government Reform and Oversight Committee, him and his former trainer, Brian McNamee. Here's what we're learning.

We're learning that Congress will ask the Justice Department to investigate whether Roger Clemens made false statements under oath to a House committee and they're talking about that House committee that I just mentioned -- just some two weeks ago where he denied the use of steroids and HGH. These are accusations that came from one of his fellow teammates and also from his former trainer, Brian McNamee.

But again, Congress will ask the Justice Department to investigate whether Roger Clemens made false statements under oath to a House committee. Of course, we're reaching out to all sides on this, including Roger Clemens' attorneys, and we'll update you at the top of the hour in the CNN "Newsroom."

But that is breaking news from the basketball world. For now, Gerri, we throw it back to you.

WILLIS: Thank you, Don. CNN's FINANCIAL SECURITY WATCH is all about you and making sure you have the latest information on navigating that crazy world of managing your house, your job, your savings and your debt. So with that in mind, we want to turn to your phone calls and your e-mails and bring in John Ulzheimer of, Brad Inman of Inman News and personal finance expert and author Jean Chatzky.

Thanks to all of you for being here. Really glad you are. Thanks so much.

Let's go to our first caller, James in Kentucky.

James, what's your question?

CALLER: Yes, ma'am. I'm a single fellow and I make maybe like $8 an hour.


CALLER: OK. I want to buy a house, all right, but I'm wondering the best avenue for me to do that? How -- what programs I could go through or whatever.

WILLIS: Well, that's a great question. I think, you know, look, the market has been having tough times. Now is a great time to start looking for a house.

Brad, jump in here because I think this is the right time for first time home buyers, if you can get the loan, you may have a great opportunity.

BRAD INMAN, INMAN NEWS: Yes, it's the only silver lining in this cloud, Gerri, right now in this terrible housing market. The fact is that if you can qualify, rates are relatively low. You know, a fixed rate mortgages are around 6 percent. You can get a five, seven, 10- year adjustable for under 6 percent.

But it's very tough to get a loan right now. Lenders have really squeezed on credit. But the key thing is to go out and get pre- qualified and find out what you can afford.

And then the good news is, if you are pre-qualified, the inventory. We're up to 4 million homes on the market right now. There's never been a better time. And then negotiate hard because everyone will discount the price of what they're selling, whether it be a builder or an existing homeowner, because the market's so tough.

WILLIS: Let's go to our next caller.

Dan in Oregon, go right ahead.

CALLER: Yes. The federal government keeps cutting the interest rates on the -- how come the credit card companies don't cut the interest rates?

WILLIS: Jean, you want to jump in here.


The credit card companies will reduce your interest rates but you actually are going to have to call them and ask for that reduction. We've studied this, a number of different surveys. And about half the time, if you call your credit card company and you ask for a lower interest rate, they'll give it to you. But as far as waiting for those variable rates to fall, unfortunately, they tend to go down a lot more slowly than they tend to go up.

WILLIS: It's curious how that happens, huh, Jean?


WILLIS: All right. Let's get one of our e-mails in here from Sergio. He asks, "I have $30,000 in credit card debt. I have found myself transferring balances back and forth. I have always paid on time but it's stressful to make ends meet. I'm considering bankruptcy."


JOHN ULZHEIMER, CREDIT.COM: That's not a good position to be in when you're barely surviving or essentially treading water is what I call it. Bankruptcy is not necessarily always the worst option, but I think it should be always the last option.

WILLIS: I agree.

ULZHEIMER: If it's credit card debt, then he may be able to enter into a debt management plan with a legitimate consumer credit counseling service and have them negotiate a lower rate on his behalf and he'll make payments into the CCCS who will then distribute the funds to his credit card issuers. It saves his credit because they will continue to report that he has on-time payments and it will lower his interest payments over the next three to five years and hopefully he'll be out of the plan within three to five years and he'll be ready to rock and role.

WILLIS: Hey, Sergio, You might want to check that out.

Let's go on to the next e-mail. It's from Nelson and he asks, what can someone who's property was foreclosed on four months ago do to repair their credit?

Jean, you want to jump in on that one?

CHATZKY: Yes, the good news is, it's absolutely possible to make a big difference in a relatively short period of time. The credit agencies look at the last 24 months as the best indication of your behavior. So for the next two years, you need to pay your bills on time and I mean not even a day late. You need to reduce the amount of money that you have outstanding on your credit lines. We call this the utilization ratio. And essentially you want to see about 20 percent of your credit being used at any one time, no more. And you don't want to be out in the market looking for additional credit. At a time like this, that can take your score down a notch.

WILLIS: You know, I like paying my bills online because that way I know it's going to happen. I don't have to worry about it. That's just one more idea.

John, Brad, Jean, stick around. We have more of your phone calls, more of your e-mails coming up when FINANCIAL SECURITY WATCH continues.


WILLIS: CNN's FINANCIAL SECURITY WATCH is all about you and making sure you have the latest information on navigating the crazy world of your house, your job, your savings, your debt. Back now with John Ulzheimer, Brad Inman and Jean Chatzky.

First up, a question from Chad in California.

Chad. CALLER: Hi, My question is, if I put my property into short sale, would that effect my credit?

WILLIS: Great question. You know a short sale is when you find a buyer for your house but the buyer can't pay everything that is owed on the house and you have to go to the bank to ask for a little help.

John, how does that affect your credit?

ULZHEIMER: It definitely can affect your credit negatively, Gerri, and this is how. If the lender chooses to report to the credit reporting agencies that they have accepted a settlement for less than the full amount, then the credit score models will pick that up as being seriously negative. And even though a short sale isn't the only option to get out of underneath a mortgage, just be aware that it will follow you for the next seven years.

WILLIS: Well the good news is, of course, that Congress has decided that you don't have to pay taxes on that. So at least that's some cold comfort there.

Let's go to an e-mail, Joseph in Maryland. He says, "being a father of two college kids, how best can you teach your teenagers day- to-day financial know-how about credit cards, car loans, housing loans and banking?

Jean, this is right up your alley.

CHATZKY: Absolutely. I think the best way is to put some money into your kids' hands and then let them essentially sink or swim. We get into big, big trouble when we keep bailing out our kids from the time that they're 10, to 12, until the time they're in their 20s. And if you keep doing it while they're in college, they end up back on your couch, which is not something that any of us want.

So teach them what they need to know. Sit down with them. Fill out a credit card application. Go through with them the process of paying your bills online. As you've said, it's a fantastic idea. And then keep a watchful eye but don't bail them out if they get into trouble.

WILLIS: OK. Let's go to the next e-mail. We have Yna, I believe, in Virginia. She says, "we took out a 10-year interest-only ARM," not my favorite product, "at a 5.50 interest rate. We're not planning on staying for more than three more years in the house and plan on selling. Should we consider refinancing now to a fixed rate mortgage or do we have time to ride out the tide?"

Brad, you know, those interest-only ARMS can be tricky. What do you recommend that Yna do?

INMAN: Well, I'm like you, Gerri. I'm not a fan of them at all. But in this environment, it's a question of whether they can get qualified to refinance. If they can, they might want to go into a more conservative ARM of five-year where they're paying a little on the principle. And it might be a good move. If they know for sure they're going to only be there three years, interest rate ARM, you pretty much know what you're up against, assuming that the term in the loan is, you know, fits or matches the period you're going to be in the house.

But this is a good time if you got good credit and income to refinance. But I think she said she has a rate around 5 percent. It's going to be hard to beat that in this market with a safe and secure adjustable rate mortgage.

WILLIS: All right. Let's get in the last e-mail here. It's from Lucky who asks, "if my bank forecloses on my house, what would happen to my credit cards?"


ULZHEIMER: Well, here's the dilemma that Lucky faces. And he may not be so lucky. All credit card issuers can do what's called a universal review which essentially allows them to look at your entire credit history and modify the terms of the credit cards month to month if they choose to do so. So if his credit scores are damaged due to the foreclosure, then the credit card issuers can execute the default rate, which then would take the interest rate up to 29 percent, 343 percent, and he will see his minimum payments skyrocket.

WILLIS: So that's a very dangerous scenario.

Just a quick question, Brad, for you, because it comes out of today's news. Folks out there who are underwater in their mortgage, people who owe more than the house is worth, what is the first thing they should do?

INMAN: Well, right now, if you're in a situation that you're not facing foreclosure, you know, save money, pay your mortgage down, pay it religiously. You know, if you have -- I mean I heard, you know, cut your cable bill, don't go out, really focus on that mortgage. You don't want to face foreclosures. As we discussed in this hour what it does to your credit. So do everything you can.

The government, I think, is going to be slow here. Chris Dodd, Senator Dodd's recommendation today, if that works, that's a great role for the government to play intermediary to help homeowners. There's things coming your way. But in the interim, you really face this yourself and you've got to be really responsible about your finances to stay out from under the threat of foreclosure.

WILLIS: All right, baton down the hatches, that's what Brad says.

INMAN: That's it.

WILLIS: John, Brad and Jean, thank you so much for being with us today.

And every caller who spoke to us, whose question came in and we answered them, will receive a copy of my new book, "Home Rich." For more on "Home Rich," log on to

And, look, if you didn't get through today, make sure you e-mail us. It's or you can call us tomorrow. We'll be here tomorrow.

Time now to get the results of our quick vote poll. Is the federal government doing enough to help struggling homeowners? Back to the headquarters and Poppy Harlow.

Poppy, what is the verdict?


Well, it's pretty split. People across America logged on to our web site. Fifty-five percent say yes the government's doing enough, 45 percent said no. So foreclosure still on the mind of many homeowners across America, but it looks like a little bit more people think the federal government is stepping in and doing enough.

We're going to be back tomorrow with another question. So we'd like to you log on to our web site and answer and we'll be right here with you here tomorrow.

Thanks, Gerri.

WILLIS: Hey, Poppy, thanks for that.

Coming up on CNN's FINANCIAL SECURITY WATCH, it's a dangerous mix. Take a relationship, mix it with debt. The results, well, they're not always pretty. How to survive relationships intact, next.

And for more on your finances, check out's special report "Right on Your Money. Get tips on how to better manage and invest your money with video tutorials and interactive guides. You can also read or share I-Reports with others. That and a lot more at Check it out.


WILLIS: All right, love isn't easy. Managing your money, that's not easy either. Put the two together and you're asking for trouble. But mixing money and love doesn't have to be a negative. Carmen Wong- Ulrich is the author of "Generation Debt." She's joining us from New York.

Carmen, great to see you.


WILLIS: I'm good. But, you know, this is such a contentious issue between married couples, unmarried couples. It seems like we manage money so differently. How do we do it without arguing all of the time?

WONG-ULRICH: Yes, you know, there's a pullout this year that found that money is still the number one argument couples are having. So you really want to address your money issues early on because, you know, we don't like to mix romance and finances. But the fact of the matter is, as romance gets practical and we have to talk about finances. So the most important thing you can do is talk about it before the fights start.

WILLIS: OK. Well what about something you like to call financial infidelity. Now, you know, I was talking to some girlfriends the other day and we all sort of buy things, take them home and tell our spouse about it later. You say that's a terrible idea.

WONG-ULRICH: Well, it is to a point. It depends on how much of an effect it has on your relationship if you're both happy about it. But this same poll found that a quarter of Americans, both men and women, are hiding purchases from each other by shopping online.

WILLIS: The men do it, too?

WONG-ULRICH: Yes, men do is actually just as often. They just buy different things and they tend to hide their things in the office and we tend to hide it in the closet.

WILLIS: All right.

WONG-ULRICH: But you've got to just -- you've got to make sure you talk about it. And agree on a set amount that if you spend over that amount, you'll talk about it, but less than that, free reign.

WILLIS: You know, that's a good idea. Just a hurdle rate.


WILLIS: OK. Let's talk about a realistic budget. How do you come to terms with a realistic budget when you're working together as a couple?

WONG-ULRICH: You know, want you want to do is you want to approach your financial relationship, you know, as the partnership that -- you're partner's in love, be partners in money. And, you know, even if it makes sense to kind of approach it as a partnership business-wise. So both of you want to take your finances and agree which one of you is going to be better able to handle the finances. Maybe one of you is more organized or one of you doesn't get as freaked out or stressed out by the bills. Make that person and designate that person as the financial -- the household manager. And make sure that you meet more than once a month come bill time to kind of keep each other abreast of what's going on. But the best thing you can do is work out a system that works best for you.

WILLIS: What do you do when one spouse makes -- or one part of the couple makes more money than the other? You know, sometimes the wages are really unequal. Do you split the costs 50/50 or do you make some kind of concession for that?

WONG-ULRICH: You know, definitely not. I'm not a big fan of the 50/50 thing. That only works if each of you is bringing home 50 percent. I think you can really work out a proportion that works best for you. And, you know, gender roles play a big part of this. Women are now -- about 30 percent of women make more than their male partners. So, you know, you've got to kind of -- don't tiptoe around that sort of thing. Really talk about it and make sure that you're comfortable.

WILLIS: Carmen, I want to thank you for that. Great answers, fascinating conversation. I know everybody out there with a spousal (ph) unit is thinking, hmm. So thank you so much for that.

WONG-ULRICH: Thanks, Gerri.

WILLIS: And we want to thank you out there for joining us for CNN FINANCIAL SECURITY WATCH. We'll be back here tomorrow, same time, live at noon Eastern. More of your phone calls, more of your e-mails, plus a new push to get the credit card companies to shape up and important advice how to avoid foreclosure fraud.

Time now for your latest headlines in the CNN "Newsroom," which starts right now.

LEMON: Gerri Willis, thank you very much for that.

We have some news just in to the CNN "Newsroom." We're talking about Roger Clemens and the Justice Department. Here's what CNN has just learned.