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Open House

Selling Your Home; Hispanic Home Buyers; Avoiding Foreclosure; Reverse Mortgages

Aired April 12, 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 Gerri Willis and this is OPEN HOUSE, the show that saves you money. We're going to show you how to sell your house in any type of market, plus ways to get out of foreclosure and why the answers to your debt, hey, they could be on the Internet.
The Senate has passed a major bill housing bill by a vote of 84-12. It provides $4 to purchase and rehab foreclosed homes, $6 billion in tax breaks for home builders and other companies, plus, a $7,000 tax credit for people who buy foreclosed properties.

Now, critics say the bill doesn't do enough for homeowners in trouble. Representative Charlie Rangle introduced a bill on Tuesday that addresses parts of the Senate bill Democrats found favorable and does away with the sections they didn't like, namely tax benefits for the industry. Representative Barney Frank has a plan on the table, as well. It would refinance at-risk borrowers into affordable mortgages. The price tag is big, $300 billion and works: The original lender writes down the value of individual mortgage loans to 85 percent of the current market value of the house. An FHA lender, that's a lender affiliated with the government, refinances the loan and the borrower gets a new mortgage at 90 percent of the appraised right now value. The other 10 percent goes to the borrower as equity. Now, most notable here, lenders choose who gets help, not the government or borrows themselves.

If you are in the market to sell your home right now, chances are you are having a tough time, but my next guest says there are ways to make money in my market. Jim Remley joins me now from Portland, Oregon, he's the author of "Sell Your Home in any Market."

Jim, come on, the worse market in 10 years. How do I do that?

JIM REMLEY, AUTHOR, "SELL YOUR HOME IN ANY MARKET": It is brutal, I'll tell you that. But, when I'm sitting with sellers I always tell them, you know, there's three keys to selling your home and in order of importance there's: price, product, and promotion. You got to have the right price and it's got to be competitive because there is so much out there, there's an oversupply of I inventory. Then you got to have the right product, in other words, you have to have a turnkey property. Buyers are terrible at visualization, they don't -- they're not going to look past outdated carpeting and outdated appliances. And then you've got to have the right promotion plan. In other words, you got to have your home exposed to the maximum number of buyers in the market. WILLIS: But Jim, a lot of people out there, you know, they have their houses on the market, if they price it today in a really bad market, by the time they get to the closing table the buyer could walk away because prices have fallen. What do you do if you're in that situation?

REMLEY: Well, when you start, make sure that you're basing your price on the sold comparables not the active comparables. In other words, what people are actually getting for their homes, because that's what's going to be appraised. Remember, appraisers are going to have to go out and appraise your home for the purchase price. And appraisers are becoming a lot more stringent in terms of what they are going to accept in terms of those comparables. So, make sure the value is really there. Also, be aggressive in terms of your pricing. If anything, you want to be a little bit ahead of your competition, not behind it, because if your home is overpriced today, in a declining market it's going to be more overpriced tomorrow, so get ahead of the curve not behind it.

WILLIS: Interesting stuff. So, you might have to price below market if you are in one of those really lousy markets.

REMLEY: You know, I was talking to an agent out in L.A., and he told me that he's recommending sellers to be 10 percent below the lowest priced property out there.

WILLIS: Ouch.

REMLEY: And why? Because, he's going to -- almost going to guarantee that the home is going to sell and you're going to get that appraisal.

WILLIS: You know, that's a great point. OK, real estate agents. They're very important right now and you've got to pick the best one. This is no time for somebody who is an order taker during the boom. You need somebody with experience. How do you find them?

REMLEY: Well, the key thing is to make sure you don't just interview one agent. You know, it's interesting 73 percent of sellers only interview one agent when they hire somebody. You don't want to do that. You want to treat this like a job interview. Remember, this is probably the largest financial asset that you own. So, make sure you have a list of questions you ask every single agent. And make sure you're not hiring based on personality. You're hiring somebody based on their professional attributes. Ask them things like...

WILLIS: And those are things like, what? They'd have a lot of experience in the marketplace? They've sold a lot of homes at your price point? They know the neighborhood really well?

REMLEY: Exactly. You want to make sure that you understand the marketing plan, is it in writing? Are they tech savvy? Do they have a personal Web site? Are they going to build a virtual tour for your property?

WILLIS: That's key. Right? Because buyers are using the Web. So, if your real estate agent doesn't know how to do that, you're sunk. REMLEY: Exactly right. You know, only six percent of buyers today come from print marketing, like newspapers and real estate guides, so you want to make sure that your agent is online and knows what they are doing.

WILLIS: All right, Jim Remley. His book is "Sell Your Home in any Market," a great tool for anybody out there trying to sell. Jim, thank you.

REMLEY: Thank you.

WILLIS: Coming up on OPEN HOUSE, protecting your rights under the Fair Housing Action. Is it working?

Then, your next loan could be just a click away, but it won't come from a bank. We'll explain. And how one woman saved her home by getting a reverse mortgage.

(COMMERCIAL BREAK)

WILLIS: The Fair Housing Act was supposed to stop home sellers and landlords from discriminating against homeowners. Everyone was suppose to have an equal house chance at housing, but 40 years after the bill was signed, I learned for many people it's simply not working.

(BEGIN VIDEOTAPE)

(voice over): In the spring of 1968, the United States was a nation divided by race.

(on camera): What was going on in the country? What was the tone?

REV JESSE JACKSON, CIVIL RIGHTS ACTIVIST: Segregated schools, by race. Segregated jobs and segregated housing.

WILLIS (voice over): African-Americans were regularly denied mortgages and prevented from renting in white neighborhoods which had better housing and schools. That caused blacks to march for fair housing laws aimed at ending discrimination.

JIM CARR, CO-EDITOR, "SEGREGATION, THE RISING COSTS FOR AMERICA: That marches to improve integration and were met often with an enormous amount of violence, simply because people didn't really understand what integrated communities might lead to.

WILLIS: Resistance was also felt in Congress where a bill aimed to ending discrimination against minorities wishing to buy or rent houses was stalled. That quickly changed after the assassination of Dr. King which sparked five days of widespread rioting.

CARR: Emotions, at the time, I think, suggested that this was not the time, now, to back down and do nothing.

WILLIS: King's death, in April of 1968, prompted Congress to pass the Fair Housing Act. But, 40 years later the National Fair Housing Alliance estimates almost four million violations against all minorities every year, including uncorporative real estate agents who put up roadblocks to keep minorities out of white neighborhoods. The John Marshall Law School in Chicago runs a fair housing legal clinic. They say discrimination today is more subtle and difficult to detect.

DAMIAN ORTIZ, JOHN MARSHALL LAW SCHOOL: Instead of talking to people when they call, they allow the answering machine to answer and let the people leave a message and try to determine if this person is white, black, or Hispanic.

WILLIS: The clinic routinely files lawsuits against management companies and landlords to discriminate often winning settlements for their clients. While progress has been made since 1968, Damian Ortiz says there is still work to be done

ORTIZ: And it's unfortunate that 40 years later we're still dealing with the same issues.

(END VIDEOTAPE)

WILLIS: Buying a home is a major part of the American dream, especially in the Hispanic community. Julie Stav is best-selling personal finance author and founder of "Two Dinero," a digital Spanish language personal finance magazine and she's joining us from California.

Welcome, Julie. Great to see you.

JULIE STAV, PERSONAL FINANCE EXPERT: Thank you very much for having me, Gerri.

WILLIS: You know, I've got a really serious question for you, here. When we look at the Hispanic community and how they have fared in the meltdown, they've taken it on the chair. You see so many people in the Hispanic community, they ended up with subprime loans when they could have gotten prime loans. What happened?

STAV: Well, for one, buying a home, owning a little piece of America is not just an American dream, it is our dream, too. As immigrants we come from countries where institutions go down overnight and we lose our money with it. So, we hold real estate very dear to our heart, because it is something tangible we can hold. That's No. 1. No. 2, we have, not just a language of money to learn when we come here, but we have the language of English, so we're dealing with two obstacles and really understanding what we are getting into.

WILLIS: Well, Julie, are you saying that some people misunderstood these mortgages, or do you think that they got mortgages hoisted off on them that maybe they didn't need or want or shouldn't have been sold to them?

STAV: Both. Sometimes we don't understand what we sign, but many times perhaps the institution sees us as way too eager to own the home without really realizing just just being able to buy it doesn't mean we can afford to keep it and live in it. WILLIS: You say everybody's so eager in your community to buy the home, obviously, you say Hispanics consider it as a sacred investment. Describe that.

STAV: Well, when you own a little piece of land, you own something tangible that you can pass on to your children. When we come from countries where the money that you put in a bank is not FDIC insured, is not safe, you own a land, and that's something nobody can take away from you, so when we come here, that's our dream. We want to own that little piece of earth that we can hold close to our heart and that nobody can take away no matter what happens and that we can pass it on to our children. When we see someone who can now show us, or at least tell us, that the dream is obtainable, the only question we ask is, where do I sign?

WILLIS: Right. Ang lot of people jump to those conclusions, frankly. Let's broaden our focus just a little but and talk about what's going on in the election. If you are any candidate out there who's really responding to concerns about the housing, the economy, the issues that are really No. 1 for everybody, including Hispanics right now.

STAV: Well, we have the same issues as everyone else and the economy is the plot in this novela, this soap opera. However, we also have the issue of immigration. The issue of why is it that we are able to give what they call an ITIN number that allowing us to buy property, to establish businesses, to invest, but it doesn't allow us to work. It allows us to pay taxes, that's why it exists. So, nobody is talking about those issues. I don't care if it is a Republican or Democrat; they're just staying away from that.

WILLIS: Interesting thought. You know, when we look at the election, obviously, many issues coming to the fore, do you think this is issue No. 1 in the Hispanic community?

STAV: No. 1 in surveys have been done, millions of dollars have been spent by companies all throughout the country and No. 1 for us is our children's education. No. 2 is our retirement, No. 3 is our home. So, go figure, that's exactly what you would want for your kids.

WILLIS: All right, Julie, thank you so much for that. We appreciate your time today.

STAV: My pleasure. Thank you for having me.

WILLIS: Still ahead on OPEN HOUSE, get a loan, pay off your debt on the Internet, but not from a bank. A lot of folks are doing it. We're going to tell you all about it.

And why reverse mortgages are becoming a way for some folks to avoid foreclosure.

(COMMERCIAL BREAK)

WILLIS: Well, as we all know, adjustable rate mortgages can mean trouble, ditto for high interest credit card bills. In fact, we just heard about adjustable rates shooting higher than 30 percent. So, where can we turn? Here's CNN's Reggie Aqui.

(BEGIN VIDEOTAPE)

REGGIE AQUI, CNN NEWS CORRESPONDENT (voice over): When the credit cards max out, when the banks say no, what then?

JOHN ULZHEIMER, CREDIT.COM: You can go to a payday lender a title lender, a pawnshop, you can hock your jewelry. These are all horrible options.

AQUI: Amy Vogt wasn't at that point. The head of a small music promotions company in Atlanta, she needed $10,000 to keep her business afloat.

AMY VOGT, PANDEMONIUM! PRODUCTIONS: Well, first I was using credit cards.

AQUI: Until she heard about prosper.com, a so-called peer-to-peer lending site. Borrowers post the reasons why they need money, everything from seeing grandma in Portugal to paying for a root canal.

VOGT: I really love the people-to-people aspect. I like that you could tell your story and people could decided whether your story touched them in some way.

AQUI: The lenders, regular people, not banks, look at the site's credit grade for each borrower, AA is the best, HR for high risk is the worst, then they decided if they'll find the loans and at what rate. Four-hundred-plus people wanted to help Amy.

VOGT: I was just, oh, man, how could I have not heard about this before?

CHRIS LARSON, PROSPER.COM CEO: Basically it's like an eBay for money and credit.

AQUI: Chris Larson is Prosper's CEO and co-founder. With more than 600,000 current members, His peer-to-peer lending site is by far America's largest.

LARSON: You know, we've seen a dramatic change in our marketplace at Prosper over the last year as the credit crunch has hit. And what we're seeing mostly is now very credit-worthy people coming to Prosper, which is quite a shift and we believe it's probably because things like home equity loans have really just gone away.

AQUI: But should you do it? John Ulzheimer of Credit.com says borrowers can't really lose, but he cautions lenders.

ULZHEIMER: This is not a game. This is not -- this should not be done without much thought. This should be something that when you put the money into their system you should be comfortable losing it.

(END VIDEOTAPE)

WILLIS: And Reggie Aqui from CNN.COM LIVE joins us live right now from Atlanta.

Hi, Reggie.

AQUI: Hi, Gerri.

WILLIS: All right, OK, I have to tell you. I have lots of questions about this. Look, if I'm having trouble with commercial banks, why would I go peer-to-peer? You know, look, there's no FDIC for this stuff, there's no insurance. No backup in case there's a problem.

AQUI: You're absolutely right and there is a risk here. That's what we have to let people know, but here's what the site says. They say it's a community where perhaps you can trust a person more than you can trust a nameless, faceless person who is behind the bank teller. So, the idea of this here is here to try to get people into communities, to trust each other and to hopefully get delinquency rates that aren't as high elsewhere.

WILLIS: Well, this isn't anything that the regular lenders have to worry about competing with their business, is it?

AQUI: Well, not yet, but I say that cautiously, because this is a brand new business. The most prominent site has only been up for two years. We're talking about, according to Online Banking Report, a situation where only two one-thousandenths of all the credit out there goes to peer-to-peer lending sites, so it's extremely small. It's a niche market, but it's growing very quickly. In 10 years, they're going to be up to $7.5 billion in loans.

WILLIS: All right, Reggie Aqui, thank you for that.

Live events, breaking news and they day's top stories, online, anytime, at cnn.com/live. As always, if you have ideas on how to save 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.

Up next, all about reverse mortgages and why they're providing some with a way out of foreclosure. We'll walk you through it when OPEN HOUSE comes right back.

(BEGIN VIDEOTAPE)

(voice over): Washington, D.C., famous this time of hear for its blooming cherry trees and this weekend marks the culmination of the 2008 Cherry Blossom Festival. Head to the parade, a long standing D.C. tradition. The Cherry Blossom Parade includes floats, balloons, and marching bands. Take a free tour with a park ranger or stroll the capital's famous Japanese blossoms on your own. Enjoy scenic views of the river, but be sure to stop by the United States Navy Memorial to witness the ceremonial blessing of the fleet.

And while you're in town, head to the Newseum. This weekend marks the opening of the most interactive museum. The museum includes two broadcast studios,15 theaters and 4-D time travel experience.

And that's your "Local Lowdown."

(END VIDEOTAPE)

(COMMERCIAL BREAK)

WILLIS: You've probably heard the term "reverse mortgages," it's a way to get money from your lender without having to pay it back right away. Reverse mortgages use to be a way that folks over the age of 62, hey, they could supplement their retirement years, but more and more it's a way for seniors to put off foreclosure. CNN's Deb Ferrick has the story.

(BEGIN VIDEOTAPE)

DEB FERRICK, CNN NEWS CORRESPONDENT (voice over): Arlevia Taylor was on the verge of losing her home. She is a senior citizen on a fixed income. She thought she had her loan on a permanent low fixed rate, only to learn two years later her rate had jumped from 6.9 to 9.9 percent.

ARLEVIA TAYLOR, SENOR CITIZEN HOMEOWNER: When I found out I had an adjustable rate, I cried for days.

FERRICK: Like many senior citizens who did not understand the fine print, Taylor says she was a victim of predatory lending.

BILL BRENNAN, ATLANTA LEGAL AID: Our sense is that there are hundreds if not millions of seniors who have been targeted for these bad loans.

FERRICK (on camera): All across the country.

BRENNAN: All across the country.

FERRICK (voice over): Bill Brennan, an attorney for Atlanta's Legal Aid Society, took on Taylor's case. He contacted the lenders and point-by-point accused them of giving Taylor a loan they knew she couldn't repay.

BRENNAN: She was senior homeowner living on low fixed income from Social Security and alimony. How is she going to pay higher payments unless her income would go up, which it's not going to do.

FERRICK: Brennan persuaded the lender not to foreclose but to take a payout generated by what's called a reverse mortgage, even though it was less than the $130,000 Taylor owed.

(on camera): You offered them $70,000, and what did they tell you?

BRENNAN: They accepted it.

FERRICK (voice over): Asked why, the company now chandelling the loan told CNN "we believe every party to a foreclosure loses, so our focus is on helping homeowners stay in their homes."

TAYLOR: To my reverse mortgage.

UNIDENTIFIED FEMALE: Congratulations.

FERRICK: With the reverse mortgage, the bank pays the homeowner and repayment is not made until the homeowner dies or moves out.

BRENNAN: This is an easy solution that gives a substantial amount of cash to the mortgage company and gives a sense of security and well being to the homeowner who can stay in her home for the rest of her life.

FERRICK: While it may sound win-win, mortgage experts say it's not for everyone.

JESSICA ATTIE, FORECLOSURE PREVENTION PROJECT: The house has to be sold to pay off the mortgage. So, somebody who's looking to leave their home to heirs is not really a good candidate for a reverse mortgage. And reverse mortgage can be very expensive.

FERRICK: Still, Legal Aid's Bill Brennan thinks the plan should be offered to all eligible seniors, like Arlevia Taylor facing foreclosure.

TAYLOR: I'm so happy. Let me tell you, today was my day.

(END VIDEOTAPE)

WILLIS: So, Deb is joins me now. You know, let's talk about the loans a little bit. Who is ultimately responsible for paying them?

FERRICK: Ultimately, it's the heirs. They've either got to sell the house, repay the loan, or refinance and keep the property. Alternatively, they can let it go into the foreclosure, but then at least you have the senior living there for the duration of that person's life.

WILLIS: You know, the beauty of these, though, is that if you are having trouble funding your retirement, it's a place to go to cash to find your retirement, I think more boomers will be using them, but they are confusing.

FERRICK: They're very confusing. We couldn't find one simple definition. We found 20 different definitions. And so, and again, it's case by case and you do have to be as careful taking out these kinds of mortgages as you do any other mortgage, it's not a magic bullet and that's one thing that seniors do have to keep in mind.

WILLIS: All right, so if you're a senior out there and you're worried about foreclosure, you may not have access to that attorney. What do you do?

FERRICK: Well, then you're going to have to go to your bank, you're going to have to have your children help you or whoever it is who's going to be ultimately responsible for taking care of the loan once you pass away.

WILLIS: All right, well thank you for that, Deb Ferrick, appreciate it. For more on how the news of this week affects your money, watch YOUR MONEY with Christine Romans and Ali Velshi, Saturdays at 1:00 p.m. and Sundays 3:00 p.m. Eastern. Hey, and Ali and I will be back all next week at 12:00 p.m. Eastern with "Issue No. 1" covering the issue many of you say is the most important to you, that's the economy.

Don't go anywhere, your top stories are next on the CNN NEWSROOM, have a great weekend.

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