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Issue Number One

Record Gas Prices; Memorial Day Travel; Tenant Toss-Out; Foreclosure Bus Tour; Hollywood's Exports

Aired May 23, 2008 - 12:01   ET

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

GERRI WILLIS, CO-HOST: It's one of the biggest travel days of the year, and the most expensive as well. How record gas prices are hurting Memorial Day Weekend travelers. We'll help you separate gas fact from gas fiction.
Why renters are big victims of the mortgage meltdown, and why your personal opinion on the economy could push you to make all the wrong decisions about your money.

ISSUE #1 is the economy. ISSUE #1 starts right now.

Welcome to ISSUE #1. I'm Gerri Willis. Ali Velshi is taking a deserved day off.

It's a Memorial Day ritual: pack up the car, fill up the gas tank, and head out of town for a long three-day break. But that fill up the gas tank part is a whole lot more expensive this holiday weekend, especially with an unusually large 4-cent-a-gallon jump in just one day.

CNN Senior Correspondent Allan Chernoff is live on the New Jersey turnpike in Ridgefield.

Allan, this 4-cent-a-gallon rise, my goodness!

ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Gerri, it's getting nasty here. How would you like to have a Caddy Escalade? Well, maybe not with gas prices soaring near $4 a gallon.

John over here is driving to Upstate New York.

John, how are you dealing with the gas prices?

UNIDENTIFIED MALE: We're really struggling. I live out in New York, and New York's already over $4, like $4.50 a gallon. So I do a pit stop here in New Jersey, fill up here. And, you know, I'm trying to get the best prices I can out here.

CHERNOFF: Lots of people are doing that. How many? Come with me. Check this out.

John's getting filled up right now. We've got -- check this out -- probably about 50 vehicles lined up here by the New Jersey Turnpike.

Why? Well, the price over here, $3.72 a gallon. A relative bargain, especially in this region. Over in New York it's well over $4 a gallon at many stations. Nationwide, $3.87 a gallon.

The 16th consecutive record price nationwide, Gerri, that we've had. It's really nasty just before Memorial Day travel.

WILLIS: Well, Allan, maybe can you bring back a couple of gallons for me.

Thank you for that.

CHERNOFF: Definitely. Lots of people come here for gas. That's true.

WILLIS: We're going to check back in with you.

Now, those high gas prices are hitting all of us hard. For Americans, changing the way we live, it doesn't come easy. But record prices are beginning to have a real substantial effect on our lives.

Here's Ali Velshi.

(BEGIN VIDEOTAPE)

ALI VELSHI, CNN CORRESPONDENT (voice over): The great American love affair with the automobile may be diminishing in size. The reason? Oil prices. And as every driver knows, the huge run-up in the price of crude has meant big jumps at the gas pump.

Ford Motor announced Thursday that it's cutting back production of SUVs and pickup trucks this year to focus on smaller-sized passenger cars. Those gas-guzzling SUVs used to be the cash cow of Ford's production line. But on a conference call with investors, Ford says those days are over.

ALAN MULALLY, CEO, FORD MOTOR: We saw a real change in the industry demand for pickup trucks and SUVs in the first two weeks of May. It seemed to us that we reached a tipping point, where it seemed like this started to really move when we moved through around $3.50 gas.

VELSHI: And it's not just on the road. Consumers will be paying more to fly as well. American Airlines said Wednesday it will charge passengers $15 for the first checked back, and it's cutting domestic flights as it tries to cope with increased jet fuel prices.

The cost of crude is showing up on supermarket shelves. Vegetables, bread, anything that requires transportation, which is to say, just about everything you can buy.

UNIDENTIFIED MALE: Not only did the fuel charge go up, every price that is built on has gone up. At least 10 percent, 15 percent, 20 percent an item.

VELSHI (on camera): Don't expect the situation to get better any time soon. If Ford is right and this is a tipping point, it may well spread across the economy. And we're going to have to get used to paying more for just about everything. And don't expect crude prices to drop any time soon either. Some analysts are predicting that we could hit $150 a barrel within the next couple of months.

Ali Velshi, CNN, New York.

(END VIDEOTAPE)

WILLIS: Well, it's that time of day to weigh in on today's "Quick Vote" question. And that means it's time to see Poppy Harlow from cnnmoney.com.

Hi there, Poppy.

POPPY HARLOW, CNNMONEY.COM: Hey, Gerri.

Well, folks, are you sitting at work watching the clock? I know I'm not, but you might be. In just a little while, your Memorial Day Weekend kicks off.

You may be planning to get out of town, but if you do travel, how are you going to get to your destination? Here's our question today.

This Memorial Day Weekend, I plan to travel by car, plane, train, or even a stay-at-home on your couch?

Weigh in on cnnmoney.com. We'll check in with you later on the show.

It's rough for flyers, it's rough for drivers. I wonder if people are just going to camp out on their couch.

WILLIS: It's going to be interesting to see how people react to, you know, 4 cents a gallon in one day.

HARLOW: Overnight.

WILLIS: Just crazy. Just crazy.

Poppy, we'll talk to you later.

HARLOW: OK.

WILLIS: Now, if you're one of those folks driving this weekend, you'll want to save as much gas as you can. We've all heard of different ways to save gas, but our next guest says, hey, some of those methods are nothing but bull.

Rik Paul is an auto editor with "Consumer Reports." He joins us now.

Rik, good to see you.

RIK PAUL, AUTO EDITOR, "CONSUMER REPORTS": Hi, Gerri.

WILLIS: All right. Well, let's start with some of these gas- saving myths, like filling up in the morning with gas, you get more gas for the money.

True or false?

PAUL: Well, not according to our tests. What people say is that if you fill up in the cool morning you'll get more gas per gallon than in the hot afternoon. But in tests that we've run, we've seen very little fluctuation between morning and afternoon, and the reason is because most gas stations have their tanks underground where the temperature variation is much less than the air.

WILLIS: I love that. Lots of detail. I love that.

OK, what about -- you know, if I turn off my AC surely, surely I will save gas. Right?

PAUL: Well, we found that you'll save about one mile per gallon. But if you open your windows on the highway you're going to lose that one mile per gallon, too. So it's about a wash whether you use air conditioning or not on the highway. But basically, we recommend that if you really need the air conditioning, just use it, turn it on, because it's going to keep you more comfortable, more relaxed and more focused on the road.

WILLIS: Yes. I love AC. I have to admit it.

OK. Replacing air filters, good idea? Bad idea?

PAUL: A lot of people say that a dirty air filter will hurt your fuel economy a lot. Certainly, it's important to maintain your car, replace it if it gets clogged. But in our test we found that a dirty air filter does not affect your fuel economy. And the reason is because the engine automatically compensates the fuel for that less air that's coming through. So what we found is that because you have less of both, you're going to hurt your performance.

WILLIS: Of course it makes sense to change your oil filter probably.

Now, when it comes to things you should do to save on gas and save on money, one of the things you say is buy tires with lower resistance. Now, what does this mean?

PAUL: Low rolling resistance, yes. Some tires, it just takes more energy to roll them down the road than others. And in our test we found that that can make about a one-to-two-mile-per-gallon difference just there. Now, we don't focus only on low-rolling resistance. Look for a good all-around tire that has low-rolling resistance.

WILLIS: OK. That's something I've never heard before. I love that.

OK. You say minimize driving with a cold engine? What does that mean?

PAUL: Well, when you first turn on the car it's going through its most inefficient time. And so you want to minimize that.

Once the car gets up to full operating temperature, it's running at its most efficient. And so try to plan your errands or trips so you can do them all at once and not let your car cool down and then have to heat back up again each time.

WILLIS: It's an argument against doing a lot of errands in one big trip, I guess.

Of course, you also say reduce drag. So you shouldn't be carrying a load of bricks in your back trunk. Right?

PAUL: Well, certainly weight will hurt your fuel economy. Also, if you put, like, a rooftop carrier on your car, that will hurt economy. We saw in a Camry, you put a carrier on top of the car, and it dropped the fuel economy by about seven miles per gallon on the highway.

WILLIS: All right.

You say don't use premium if you don't have to. And this to me is kind of a no-brainer, because it's always more expensive. And does it really do anything to help your car?

PAUL: Most cars are designed to run just fine on regular gas. Putting premium into them does nothing more than cost you about 20 cents more per gallon. Some cars are -- they do recommend you run premium in them, and even on a lot of those you can get away with running regular, with just a slight decrease in power that most people are never going to notice.

WILLIS: Now Rik, this is a weekend where there are going to be a lot of people out there, a lot of people driving. Is there anything, any one single tip you could give folks to help them out this weekend to save as little as possible on gas?

PAUL: Slow down. Probably the biggest that we found that affects fuel economy on the highway is speed. And we again tested that Toyota Camry at 55, 65 and 75 miles per hour. And when we went to 65 from 55, we lost five miles per gallon. And we went another five miles per gallon when we went up to 75.

So, you know, if you can -- you have a little extra time, you have some patience, slow down. Take your time. You're going to save some money.

WILLIS: My mom always said don't drive like a maniac.

Rik Paul, thank you for that. We really appreciate your time today.

PAUL: Thank you.

WILLIS: Up next, why you may have a hard time unloading that SUV for a more fuel-efficient car.

Plus, a new way to lock in a price you pay for a gallon of gas.

And we'll tell you why renters are having a very tough time in this mortgage meltdown.

You're watching ISSUE #1.

(COMMERCIAL BREAK)

WILLIS: Happening right now on CNN, you are now getting the first look from inside the room where reporters are going through Senator John McCain's health records. This is in from Fountain Hill, Arizona. The three-time melanoma survivor appears cancer-free.

CNN chief medical correspondent Dr. Sanjay Gupta is inside the room right now reading those records, and as soon as he learns something new, he'll come out and report it to all of us right here on CNN.

And back to your economy and high gas prices. A lot of folks out there drive SUVs. And a good chunk of them like to unload them in favor of more gas-efficient cars. But here's the problem: few people want to buy them, and that includes car dealerships.

CNN's Chris Lawrence explains.

(BEGIN VIDEOTAPE)

CHRIS LAWRENCE, CNN CORRESPONDENT (voice over): It's been weeks since David Lobby (ph) put his truck on the market.

UNIDENTIFIED MALE: Nobody's offering what I want.

LAWRENCE: He wants out so he can buy a small car, but gas prices have sent SUV and truck sales plummeting.

UNIDENTIFIED MALE: I get a lot of calls. People are looking for a better price.

LAWRENCE: So what's flying off the lot now?

UNIDENTIFIED MALE: Chevy Impalas, Malibus, Fords, you know, cars that weren't that popular before.

LAWRENCE: Call it revenge of the nerds. But when comparing new to used, remember this -- last year the government adopted a new mileage formula to correct the exaggerated claims made when those old economy cars were first sold. Still, that hasn't stopped the run on four-cylinder cars.

(on camera): What do people say when they bring in SUVs like this Excursion and say, hey, this is what my truck is worth?

JORGE FERNANDEZ, WHOLESALE AUTO DEALER: When they find out what you think their truck is worth, they think you're trying to rip them off or something. Some '07s were worth $50,000, $60,000 just three, four months ago, and they're in the high 30s now. It's amazing. LAWRENCE (voice over): Some owners now owe $20,000 on a truck that's only worth $12,000. They're as upside down as a bad mortgage and think buying a small car will save them.

But what they might be doing is spending thousands of dollars to save hundreds.

LAWRENCE: Kelley Blue Book editor Jack Nerad says if the numbers are working against you, don't sell your big truck.

JACK NERAD, KELLEY BLUE BOOK EDITOR: Because if you make a trade, you're most often going to spend more to make that move than you would just sucking it up and paying the extra gasoline prices.

LAWRENCE (on camera): Some officials at Kelley Blue Book say we've really reached a tipping point. In the day of SUVs and trucks dominating the market, that's done.

Chris Lawrence, CNN, Los Angeles.

(END VIDEOTAPE)

WILLIS: OK. So here are some rules of thumb that will help you decide when it's time for to you downsize.

One, if you don't at least double your miles per gallon rating, it may not be worth your while to trade in your cars just to save money on gas.

Two, it doesn't make any sense to trade in your SUV to get a car that has a V-8 engine.

And finally, if you're upside down in your SUV, meaning you owe more than the car is worth, don't go out and finance a new vehicle. Trading in your SUV will only make sense if you're in the market for a new car anyway, or if you're constantly on the road.

It seems like every day gas prices are going up, and it almost makes you wish you could have stocked up on gas months ago when the prices were a whole lot lower. But now a somewhat new concept -- fuel banks where you can buy gas in advance at a set price.

More now from Boyd Huppert of our affiliate KARE in Minneapolis.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Well, just on the news last night they were talking $6 a gallon.

BOYD HUPPERT, REPORTER, KARE (voice over): To Rollie Schmidt, these cans of gas for his riding mower are like a hedge on the market.

ROLLIE SCHMIDT, ANNANDALE, MINNESOTA: This week's investment.

HUPPERT: They'll cover him for most of the summer.

SCHMIDT: If it keeps going like this, I'll be looking at $5 a gallon easy by the time I've got to fill up again.

UNIDENTIFIED FEMALE: And it's going to be for unleaded?

HUPPERT: It is the kind of logic that keeps bringing customers to the counter at St. Cloud's First Fuel Bank...

TOM WICKS, CONTRACTED AT $3.86 PER GALLON: It keeps going up.

HUPPERT: ... where Tom Wicks laid down more than $1,100 today to lock in 300 gallons of gas at today's prices.

WICKS: The last time I bought it, it was $2.15 a gallon, and I was very reluctant to pay ahead that amount. I wished I would have bought 10 times as much.

JIM FENEIS, CEO, FIRST FUEL BANKS: We set another tooth-rattling record overnight.

HUPPERT: Owner Jim Feneis knows bet than to give customers advice on buying ahead, especially in this market.

FENEIS: Right now we consider this market a freight train out of control without brakes, but yet it makes very little sense.

HUPPERT: Four hundred of his customers are still pumping contracted gas at less than $1 a gallon.

UNIDENTIFIED MALE: I should have bought $50,000 worth. Huh?

HUPPERT (on camera): That would have been good for the rest of your life.

(voice over): Rollie Schmidt wishes now he'd signed a contract, too.

SCHMIDT: A grand total of $187.35 to mow your lawn.

HUPPERT: His hedge on the market still hurts.

SCHMIDT: I'll have to go back and buy goats again. Let them keep the grass short.

(END VIDEOTAPE)

WILLIS: Wow. Wish I could do that. That was Boyd Huppert of our affiliate KARE in Minneapolis.

(BUSINESS REPORT)

WILLIS: Why your opinion on the state of our economy might lead you to make bad decisions on your money. We'll explain.

Then we'll tell you all about the hidden victims of the subprime mess.

And we want to help you on the help desk. Send us an e-mail. The address, issue1@cnn.com.

(COMMERCIAL BREAK)

WILLIS: Here's another sign of how high gas prices are changing Americans' lives. County employees in Oakland County, Michigan, seem pleased. I mean, they're very pleased at a plan to go to a four-day work week, down from five.

The plan was formally introduced just yesterday with an eye toward cutting workers' weekly commutes by 20 percent. Now they're still going to put in 40 hours every week. The author of the plan says fewer commutes will help reduce costs for his 1,500 public workers who are already struggling with higher health care costs and stagnant wages.

Wish we could do that here.

You hear reports all the time about the economy. We report on it every single day. But how you feel about the economy, about your own state of financial affairs, can have a very negative impact on how you manage your money.

Ric Edelman is the author of "Lies About Money," and he's joining us now from Washington.

Hey there, Ric.

RIC EDELMAN, AUTHOR, " THE LIES ABOUT MONEY": Great to be back with you.

WILLIS: All right. So let's talk about the basics here. How does this -- I want to call it economic pessimism -- really affect how people, how they use their money?

EDELMAN: Well, people are getting bombarded of course by the daily headlines. You folks do a great job of reporting what's going on. And unfortunately, some people take the daily news and try to translate that into a long-term investment strategy. The result is that they end up making the wrong decision at the wrong time.

WILLIS: Right. And so people now obviously, because the market has been down and very unpredictable, have been selling. And your point is what? The right response would be what, to buy?

EDELMAN: Exactly right. In other words, we need to do two things.

We need to recognize, first off, that today's news is not necessarily going to be tomorrow's news. In other words, the economy is an evolving, growing environment. What happens 20 years from now is going to be irrelevant to what's happening today, just as today has no bearing on what happened in 1987. Remember the crash of '87?

WILLIS: Right.

EDELMAN: That was 20 years ago. WILLIS: Right.

EDELMAN: It has no relationship to what's going on today. So we can't get caught up in today's headlines thinking that it's a precursor of what's going to be the case in 20 years. And that means you should not be pessimistic, you should not be selling your investments, you should not be...

WILLIS: Right. Well, Ric, you know, one of the things that you say that I think is so great, you say you've got to stop looking at your 401(k) returns. Is ignorance bliss here? I mean, how far do I go?

EDELMAN: Ignorance can be bliss. In other words, if it upsets you to look at how your 401(k) is doing, then don't look!

In other words, too often people look at their statement, they see the account going down, and it panics them and they sell. All you're doing is selling low. When the markets recover -- and they will eventually recover -- all you're going to do is miss out on that opportunity.

WILLIS: Right. Well, OK, but Ric, Ric, Ric, come on. This is great advice for people whose retirement is 20, 30, 40 years away.

EDELMAN: Right.

WILLIS: But if I'm going to retire in the next five years, I can't be looking somewhere else while my 401(k) is going in the toilet. Right?

EDELMAN: Yes, you can. And here's how.

You are absolutely right, Gerri, that we cannot have money invested exclusively in the stock market if we have a relatively short-term time horizon. And the answer there is that you shouldn't have all of your money in stocks.

You should instead be heavily diversified. Put your investments -- in our case, with our clients, we use 19 separate different asset classes and market sectors. Very broad-based diversification so that we're not making any big bets. And that's how you insulate your self- against short-term volatility.

WILLIS: All right. So we've talk about the asset side of the balance sheet. Now let's look at the debt side.

This is the real problem for so many Americans right now, they're saddled with credit card debt, mortgage debt, you name it.

How do you prioritize that debt?

EDELMAN: We have to recognize that, you know, it is a pretty vicious environment out there for a lot of folks. We have to basically hunker down and get through it. And here's how. We need to throw out as many extraneous expenses as possible so that we're minimizing our outflow, which enables us to preserve as much available cash as necessary. So if we run into a job loss or a medical problem or a marriage problem or the car breaking down, some kind of unexpected expense, we've got the cash on hand to get us through it. We need to recognize that in dramatic times like we have now, dramatic steps are sometimes needed.

WILLIS: I've never heard it put that way, minimizing your outflow. I like that a lot. OK.

What though if problems are so real in fact that you can't pay your bills presently? What do you do?

EDELMAN: Yes. If you're already in that mess, and you wish you'd already had the cash reserves but you don't, you need to do radical things. In other words, if you're already behind on your monthly mortgage, you just very well may need to be in a position of getting rid of that house.

Sell it, no matter what. Do whatever it takes to get out from under it. If you're running the risk of losing it anyway, let's minimize the damage as best we can.

So if you really are in a crisis environment, you've got to act accordingly and proactively. Don't bury your head in the sand.

WILLIS: I love that advice.

Ric, thank you so much for being with us today. Great help for folks out there who need it.

Up next, a huge 4-cent jump in the price of a gallon of gas. We'll see how folks are dealing with it for the holiday weekend.

Plus, if you rent your home or know somebody who does, an important story you'll want to pay attention to -- it's about the mortgage meltdown.

And send us an e-mail to issue1@cnn.com. The help desk is ahead.

This is ISSUE #1.

(COMMERCIAL BREAK)

GERRI WILLIS, CNN ANCHOR: Welcome back to ISSUE NUMBER ONE.

The price of gas may just be the biggest story of the year. It's definitely the story folks are talking about this Memorial Day weekend with a huge -- and I mean huge -- four cent jump in just one day. We'll see how drivers are dealing with it and head back out to senior CNN correspondent Allan Chernoff live on the New Jersey Turnpike.

Allan, I guess you're not finding anybody happy with this, right?

ALLAN CHERNOFF, CNN CORRESPONDENT: I'm feeling a lot of pain over here, Gerri. Just about every single driver. Here's the story from Joe.

What do you think of the prices?

UNIDENTIFIED MALE: Outrageous. They're kind of high.

CHERNOFF: But he's here in New Jersey. He lives in New York. Joe, you came here. This is a bargain, huh?

UNIDENTIFIED MALE: Yes, sure is. It's 50 cents cheaper, man.

CHERNOFF: $3.72 a gallon here along the New Jersey Turnpike. Can you believe that's a bargain? $3.72 a gallon. But what's going on is that people across the country are saying, hey, you know, I just simply cannot afford to be driving a lot this weekend because of what's happening with the gas prices.

Let's talk to some other folks over here and see if we can sneak in here. We've got a car full of people.

Lindsey, we were talking before. What's your plan for the weekend?

UNIDENTIFIED FEMALE: Oh, we're going to a wedding. So we're going to stay local.

CHERNOFF: You're staying local. Didn't even think about driving very far?

UNIDENTIFIED FEMALE: Oh, no, that's OK. Yes.

CHERNOFF: Especially when you have a minivan like this.

Gerri, you know, surveys from Deloitte & Touche and AAA show that many people are cutting their plans. The Deloitte & Touche survey, one quarter of all Americans have cut back on their plans for this coming weekend. It's tough out here.

Back to you.

WILLIS: Hey, Allan, I've got to ask you, are people driving with more folks in the car because of these prices? Are more folks loading into the same vehicle?

CHERNOFF: One, two -- how many we got here? Three. Three people in this vehicle over here. Certainly we're seeing the kids piled in. Although I have to tell you, there is a very large Lexus over here with the music pumping. One person at the driver's seat and that's it. All depends on who's behind that driver's seat.

WILLIS: I think you're right.

Allan, thank you for that.

Time now to get you caught up on all your latest headlines in the CNN "Newsroom."

Don Lemon, take it away.

DON LEMON, CNN CORRESPONDENT: Hello to you, Gerri.

And speaking of the roads, we want to tell you about an accident. This is just in to the CNN "Newsroom." This is just outside of Baltimore, Maryland. And it's in Glen Burnie, Maryland. It involves a tractor-trailer, four cars and a pickup truck near Baltimore. The Washington International Airport.

Now here's what we're being told by our affiliate WBAL there. They're telling us that at least six people are being sent to hospitals with injuries here. Again, it involved a tractor-trailer, four cars and a pickup truck. A multi-vehicle accident has closed the southbound lanes. That's Interstate 97 in Glen Burnie and they're rerouting people around that. But not exactly sure of the conditions of the people involved in this accident, but we'll update you at the top of the hour right here in the CNN "Newsroom." It's going to be a busy, busy time on the roads here.

Also we have some other things to tell you about. Some breaking news out of Texas. The Associated Press is reporting the state will appeal a court's ruling that state welfare officials acted illegally when they removed hundreds of children from a polygamist sect. Yesterday an appeals court ruled the state had failed to prove the children were in imminent danger, even though officials alleged teenage girls were being forced into marriages.

And at the top of the hour, Texas Child Protective Services plans a news conference to talk about all of this. They'll clear all of it up and answer all the questions that you have. We'll bring that to you as it happens right here in the CNN "Newsroom."

Three-time cancer survivor John McCain has released his medical records, together with a statement from his doctor saying the presidential hopeful is in excellent health. The records show McCain is cancer-free after three, separate removals of potentially deadly melanoma. He's also had a procedure to reduce an enlarged prostate and takes medication to control his cholesterol. McCain would be the oldest candidate ever elected president.

Florida voters upset about their votes not counting. Remember these ugly scenes from the 2000 election recount? Wow. That takes you back, doesn't it? Well, a new movie dramatizes those events and raises a question, could it happen again this time around? CNN legal analyst Jeffrey Toobin was a consultant on that film and he joins us to talk about it in the "Newsroom." That's in the 3:00 Eastern hour.

Meantime, I'm Don Lemon. Now back to ISSUE NUMBER ONE and Gerri Willis.

Hey, have a great Memorial Day weekend. Hope you have special plans.

WILLIS: Oh, you as well, Don. You know, three days, you can't beat that.

LEMON: Yes.

WILLIS: The mortgage meltdown is claiming casualties across the country. The latest wave, tenants. People who rent homes in good faith only to learn the property is in foreclosure and they have to leave. CNN's Thelma Gutierrez introduces us to renters who say they've been blind-sided.

(BEGIN VIDEOTAPE)

THELMA GUTIERREZ, CNN CORRESPONDENT, (voice over): These are the Nelsons. They live in Laguna Hills, California. Their rent -- $3,500 a month. This is the Nomaaea family in Palm Dale, California. Their rent -- $1,200 a month. Both families say they've paid the rent on time. That they have lease agreements. But in February, the Nelsons got a rude awakening when a realtor knocked on their door and told them the house was in foreclosure. So they confronted their landlord.

CHARLES NELSON, TENANT FACING EVICTION: This is in foreclosure? Well that's none of your business. I said, well beg your pardon, it is my business. I mean, is somebody going to knock at the door, throw me out here, throw my family out or what?

GUTIERREZ: The same thing happened to Fai Nomaaea, who was cleaning her yard when a man handed her a notice of foreclosure.

FAI NOMAAEA, TENANT FACING EVICTION: I was shocked. I didn't know what to do. My heart dropped. And then I said, how can I be moving. I just paid my rent. And he said he had nothing to do with it.

GUTIERREZ: It's happening to renters across the country who are paying their rents, only to find out the homeowner hasn't paid the mortgage.

How much money do you think you've paid to this person?

C. NELSON: Probably close to $30,000.

GUTIERREZ: $30,000.

C. NELSON: Correct.

GUTIERREZ: When Charles and Donna (ph) moved in, they didn't know the landlord was already behind in payments on the mortgage. As for their $7,700 security deposit -- that's gone, too.

DONNA NELSON, TENANT FACING EVICTION: Well my greatest fear is they knock on the door, that we'll have to move, you know, five, 10 days.

GUTIERREZ: To make matters worse, the Nelsons say they haven't even been told how long they have here.

So you don't know when you have to leave?

C. NELSON: There could be a knock on the door saying we've got 10 days, two weeks. I don't know.

GUTIERREZ: Fai says this is a tenant's worst nightmare. She's a single mother on a fixed income.

NOMAAEA: It's very hard and scared and, you know, I don't know what's going to happen the next day. I don't know if they're going to come to your door and, you know, tell us that, you know, we have to move and I don't have nowhere to go. And it's very hard for me to find a place.

GUTIERREZ: They have to find shelter for seven children. The most she can afford is $1,200 a month. That means uprooting her kids from their school and a neighborhood where they feel safe.

KEN CARLSON, LANDLORD-TENANT ATTORNEY: It's like being the undertaker during the plague.

GUTIERREZ: Ken Carlson is a landlord-tenant attorney.

CARLSON: This is the worst I've seen in my career. With the economy collapsing on top of all of these people.

GUTIERREZ: In most states, when a bank forecloses on a landlord, the tenant has no guarantee of being allowed to stay in the property. And neither the bank, nor the landlord, has a legal obligation to tell the tenant about the foreclosure. Charles Nelson doesn't know when his family will be evicted, but he has a message for the banks.

C. NELSON: Stop whining and complaining about how much money you've lost. You're dealing with human lives and their families here. Don't be so cold as to send somebody out that says "I don't know when you're going to move." Have a little more compassion for families.

GUTIERREZ: Families who live in limbo.

Thelma Gutierrez, CNN, Laguna Hills, California.

(END VIDEOTAPE)

WILLIS: Tough situation.

Up next, new numbers that show how we're faring in the mortgage meltdown.

Plus, we'll take you on a foreclosure bus tour.

And we'll tell you why the movies -- yes, the movies -- can help contribute to the economy.

You're watching ISSUE NUMBER ONE.

(COMMERCIAL BREAK)

WILLIS: New today, existing home sales fell 1 percent last month. That according to the National Association of Realtors. That is the eighth drop in the last nine months. And the median price of existing homes dropped 8 percent in a year. Ouch! A more than $17,000 decrease. It's now just over $202,000.

Now some home buyers are hoping to make a dent in those numbers with nearly 55,000 homes repossessed around the country last month. You know, there are a lot of opportunities out there if you're looking for a deal. Eager buyers are jumping into the market, taking a ride on a foreclosure bus tour. CNN's Kate Bolduan takes a look.

(BEGIN VIDEOTAPE)

CRISTIN PATTI, LONG & FOSTER REALTOR: As of right now, nobody's purchased these homes.

KATE BOLDUAN, CNN CORRESPONDENT, (voice over): Two-and-a-half hours, eight homes, 20 potential home buyers and one unique way to sell a house. On a bus.

PATTI: We will make an offer. There's definitely room to negotiate.

BOLDUAN: It's called a foreclosure bus tour. A first for this Virginia realtor in response to the flood of foreclosures.

PATTI: Foreclosures happen every day. Properties are still being sold on the courthouse steps. They're still being sold in the auction block. Right now we're just making the process more organized.

BOLDUAN: While the potential home buyers have very different ideas of what they're looking for, all have one thing in common.

UNIDENTIFIED FEMALE: It's a great opportunity.

YAMILEE DAMBREVILLE, INVESTOR: I believe that this is the perfect opportunity.

CHAD HESPELL, PROSPECTIVE HOME BUYER: I feel that we have an opportunity now to get a good bargain out there.

BOLDUAN: Like many people on the tour, Chad Hespell's looking to buy his first home.

HESPELL: I kind of look at it like buying a pair of jeans. I could go to a designer store and buy the jeans or I could go to like a Filene's Basement. So I kind of think of the bus tour as going to the Filene's Basement to get the best bargain for the same house.

BOLDUAN: Others say they're looking for the perfect investment.

DAMBREVILLE: I've invested in other things and I'm looking for that gold mine.

BOLDUAN: A gold mine. That remains to be seen. Long & Foster says the open house on wheels resulted in one sale and more homes in negotiation.

DAMBREVILLE: Unfortunately, with foreclosure, people are losing their homes and it's unfortunate. But the reality is, is this is an opportunity for us as investors to look into it.

BOLDUAN: The realtors here say they're already planning more foreclosure tours because they've received so many requests. They now want to tailor the tours to specific customer needs. Certain neighborhoods or tours just for investors, others just for first-time home buyers.

Kate Bolduan, CNN, Alexandria, Virginia.

(END VIDEOTAPE)

WILLIS: Up next, how Hollywood makes its contribution to the U.S. economy.

Plus, the Help Desk. Your chance to get your financial questions answered. Send us an e-mail to issue1@cnn.com.

You are watching ISSUE NUMBER ONE.

(COMMERCIAL BREAK)

WILLIS: All right. You asked for help and we're doing everything we can to deliver it. It's the Help Desk and we have the CNN Money team ready to go. Let's get right down to it. Donna Rosato is the senior writer with "Money" magazine. And our very own Stephanie Elam is a CNN business correspondent.

Welcome to you both.

Let's get right to those questions. Number one from Norman. He asks, "I'm wondering if it's a good idea to withdraw money from my 401(k) to pay my mortgage. I am currently unemployed and I see trouble coming to the point of not affording to pay my mortgage in the next three months."

Donna, this is happening so much now, especially since people had those adjustable rate mortgages that reset so high. What's your advice?

DONNA ROSATO, SENIOR WRITER, "MONEY": Never a good idea to withdraw money from your 401(k). You're going to get hit with a 10 percent penalty if you're under 59 and a half and you're going to have to pay taxes. So it's not a great idea. But if you don't have any other choice, that may be an option.

One thing to consider, contact your mortgage company. See if you can arrange for lower payments or some kind of agreement. And the Hope Now program, it might be worth calling. They have mortgage counselors. And you can call 888-995-HOPE. And they might be able to give you some advice.

WILLIS: Great idea, 888-995-HOPE is the phone number. You can also go to hud.gov. They also have counselors who can help you out.

Tracy asks, "how many gallons are in a barrel of oil? I'd like to figure out what gas should actually be a gallon, since a barrel is $135."

Now, Stephanie?

STEPHANIE ELAM, CNN BUSINESS CORRESPONDENT: This takes me back to like junior high, right? I see a big barrel and I'm counting out the gallons. Well the answer is, it's 42 gallons in a barrel. Now of that, you can make about 19 1/2 gallons of gas and other dissidents (ph). So based on that and what I've seen analyst saying . . .

WILLIS: Seems like you should get more.

ELAM: You should get -- right, like the huge thing and you're only getting that much out of it. So one analyst is saying, based on what we see then of oil being above $135, it's come back down a little bit now, that it probably should be about $4.50 a gallon for regular gas.

WILLIS: Ouch. Ouchie. Are you predicting higher gas prices, Miss Stephanie Elam?

ELAM: I sadly think that is the way we are going. Get out your sneakers!

WILLIS: All right. I'm glad a holiday is coming up.

Tom from Florida asks, "we bought a new home in 2007 and the developer did not inform us of a gun range in the back. Residents are walking away from their homes, but the developer is blocking people from selling or renting by changing the HOA rules." It's a homeowner's association. "Do we also walk away? I don't want to ruin my credit, but I can't sell, I can't rent and the gun range bothers me."

Donna, this is one of those things, if you buy a house, you need to know what the regulations are about property usage around you, right?

ROSATO: That's right. Well, first of all, if he walks away, it probably will hurt your credit. So you want to see what you can do before that. Maybe one thing you can do is contact your title company. See if that gun range encroached on your property. Maybe they can help you figure that out. But they might need a lawyer.

WILLIS: Did somebody break the law? Yes. Well, I think the problem is, generally speaking -- maybe it's not a gun range or maybe it's a freeway that's being instructed (ph). You need to know about land use before you buy. Understand what the plans are long range.

Let's take Dustin's question. He asks, "I am 21, a college student with a low wage, part-time job. A couple years ago, I had two credit cards and I ran up the credit cards. Now I haven't been able to pay my bill for months and it's ruining my credit. There is literally no way for me to pay this off. What can I do to resolve the situation, and is my credit rating salvageable?"

What do you think of this, Stephanie? This is an interesting case.

ELAM: Well, I mean, the thing of it is, yes, your credit rating can be salvaged. That's one good thing about your credit rating, you can improve it. It takes a lot of work. So, Dustin, in this case, you've got to pay something. And you -- to even start that plan, you've got to go ahead, talk to the creditors, work out something with them. I understand there's not a lot of income here, but something is better than nothing. If you're not paying anything, that just makes you a target and it makes your credit worse. So you've got to get on it.

WILLIS: Donna, weigh in here because so many people are in this situation.

ROSATO: Oh, I agree. But the worst thing you can do is put your head in the sand and not contact your credit card company. They want you to get some out (ph). So call them. You can probably work out a plan. Even a minimum payment will be better than nothing. And if you start paying, it's going to look better on your record than if you just blow it off.

WILLIS: Right.

ELAM: You can't run from it.

WILLIS: You can't run away. That's a good point.

ELAM: You've got to deal with it. Dealing with it head-on will help.

WILLIS: All right, guys, thanks so much for this. Donna Rosato from "Money" magazine, our very own Stephanie Elam.

Coming up next, how the Cannes Film Festival makes a contribution to the U.S. economy.

And don't forget to vote. The address, cnnmoney.com. The results coming up on ISSUE NUMBER ONE.

(COMMERCIAL BREAK)

WILLIS: It's time now to get the results of today's Quick Vote. More than 31,000 of you weighed in. For how you voted, let's check back in with Poppy Harlow from cnnmoney.com.

Hey, Poppy. What happened?

POPPY HARLOW, CNNMONEY.COM: Hey, Gerri.

Well, in a few hours you guys are going to get to leave the office and head out on a long weekend. Whether you're going away, we wanted to know how you're getting there. Our question this Memorial Day, plan to travel by -- car, plane, train, or you're staying at home. Eighty percent of you said you are staying at home. Only 1 percent or so said they're taking the train. Not many people flying or going by car either. Gerri.

WILLIS: I'm doing the same thing, I'm staying at home. But I'm looking forward to it. I'm sure you are, too. Have a great holiday.

HARLOW: I am. Thank you.

WILLIS: Thank you.

The Cannes Film Festival on the French Rivera wraps up this weekend. It's known as a playground for the rich and the famous but it's the festival's Marche Du Film behind the scenes that can be the most beautiful and have a positive impact on the U.S. economy. Brooke Anderson reports from Cannes.

(BEGIN VIDEOTAPE)

SHANNON BANAL, SENIOR V.P., BLEIBERG ENTERTAINMENT: This is Roman. He's our VP of sales. And right now he's in the middle a meeting selling our films.

BROOKE ANDERSON, CNN CORRESPONDENT, (voice over): The team from Los Angeles-based Bleiberg Entertainment is on a mission in Cannes, to sell its film to the world market.

BANAL: You're always making deals. A lot of the deals will be made on the beach, you know? It's just the way it goes.

ANDERSON: They are among the Hollywood wheelers an dealers at the Marche Du Film, the largest and most prestigious film market in the world, which runs parallel to but separate from the Cannes Film Festival.

PAUL DERGARABEDIAN, PRESIDENT, MEDIA BY NUMBERS: If you think of like the New York Stock Exchange and the bidding wars that go on over commodities and that kind of thing, that's what it's sort of like. And certainly there's a lot of money at stake.

ANDERSON: Transactions here at the Marche Du Film in France can translate into dollars and cents, not just for Hollywood, but the struggling U.S. economy in the form of jobs.

DAN GLICKMAN, CEO, MOTION PICTURE ASSOCIATION OF AMERICA: The film industry adds jobs, big chunk of jobs, as well as economic power to the American economy. I think the latest number was 1.3 million jobs directly and indirectly in the American film and related industry.

ANDERSON: The American movie business is one of a shrinking number of U.S. industries that enjoys a trade surplus with other countries. Its success abroad is putting a dent in the U.S. trade deficit, which topped $700 billion last year.

GLICKMAN: We, obviously, export way more movies to the world than we import. We bring in $9.5 billion, $10 billion from our balance of payments surplus. That's a big boost particularly at a time when the economy in this country is in murky times.

ANDERSON: Worldwide exposure is crucial to Hollywood. The top 10 American movies overseas last year earned more than $4 billion at the international box office. Far exceeding their take in the U.S. alone.

DERGARABEDIAN: American films, in particular, earn over 50 percent of their box office from the foreign marketplace. There are often films that would not make money but for the fact of the overseas grosses.

ANDERSON: The horror flick "Dance of the Dead" is among the films Bleiberg is trying to sell.

BANAL: It's entitle (ph) for your film to be here. It's entitled (ph) for them to sell here. There's nothing like Cannes.

ANDERSON: The American films here at the market could potentially benefit from the weak dollar because now those movies are more affordable for international distributors.

Reporting from the 61st Cannes Film Festival, Brooke Anderson, CNN, Cannes.

(END VIDEOTAPE)

WILLIS: For more ideas that will save you money, join us for "Open House" Saturday at 9:30 a.m. Eastern right here on CNN. And to see if the news of the week affects your wallet, check out "Your Money," Saturday's at 1:00 p.m. Eastern and Sunday's at 3:00.

ISSUE NUMBER ONE will be back here all next week, same time, 12:00 p.m. Eastern, right here on CNN, including a special Memorial Day edition focusing on the military and the economy.

Time now for your latest breaking news. CNN "Newsroom" with Don Lemon and Brianna Keilar starts right now.