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CNN Larry King Live
Presidential Politics: Aggressive Campaigns to Win the White House; Foreclosure Crisis Continues to Hit Hard
Aired July 30, 2008 - 21:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LARRY KING, HOST: Tonight, foreclosures -- they're at record levels and soaring.
How bad is it?
So bad that even an "Extreme Makeover" house is up for auction.
Are you living the nightmare?
If you're behind on payments, if you're drowning in debt, if you wonder how you'll ever climb out of the money mess, you can survive the crisis and even save your home.
Tough advice for tough times -- tune in and take charge of your financial future now on LARRY KING LIVE.
Before we talk about finances and helping you out, we'll talk about politics with two of the best in the business.
In New York is Paul Krugman, "The New York Times" op-ed columnist, professor of economics and international affairs at Princeton and the best-selling author. His books include "The Conscience of a Liberal."
And here in L.A. Ben Stein, commentator, economist, attorney, actor, television personality, best-selling author himself. His latest book, "How To Ruin the United States of America."
Gentlemen, an interesting day in politics, especially when a rap artist, Ludacris, makes headlines.
Watch.
(BEGIN VIDEO CLIP)
LUDACRIS, RAPPER & ACTOR (rapping): ... Give Luda a special pardon if I'm ever in the slammer. Better yet, put me in office, make me your vice president. Hillary hated on you so that (EXPLETIVE DELETED) is just irrelevant.
Now Jesse talking slick and apologizing for what? If you said it then you meant it. How you want it, (INAUDIBLE)?
Get off your (EXPLETIVE DELETED) black people. It's time to get out and vote, paint the White House black and I'm sure that's got them terrified. McCain don't belong in any chair unless he's paralyzed. Yes, I said it because Bush is mentally handicapped --
(END VIDEO CLIP)
KING: And in case you missed it, Paul, he did refer to Hillary Clinton as a female dog, or the slang term for that.
What's going on here?
PAUL KRUGMAN, COLUMNIST, "NEW YORK TIMES," ECONOMIST: Oh, gosh, you know, I'm not going to try to psychoanalyze rappers here. He's certainly not doing Obama a favor. But, you know, if you were going to judge people by some of their supporters, every politician is in a lot of trouble.
KING: Ben, the Obama campaign has condemned the song, calling it outrageously offensive.
Should Obama -- Ludacris is on his iPod. That's one of the people he listens to.
BEN STEIN, COMMENTATOR, ECONOMIST: Right. Right.
KING: Should he take it off?
STEIN: Oh, absolutely. It's insane. I mean this is a guy who saw a chance to get some publicity and to make himself even richer than he did at the expense of a very talented first African-American candidate for president -- major candidate. I think he should take it off. There's no excuse for this.
KING: Now, speaking of celebrities in politics, a McCain campaign ad features Obama, Paris Hilton and Britney Spears. It came out today.
Watch.
(BEGIN VIDEO CLIP, MCCAIN CAMPAIGN AD)
UNIDENTIFIED FEMALE: He's the biggest celebrity in the world, but is he ready to lead?
With gas prices soaring, Barack Obama says no to offshore drilling and says he'll raise taxes on electricity?
Higher taxes, more foreign oil -- that's the real Obama.
(END VIDEO CLIP)
KING: Now, Paul, he uses Paris and Britney in that ad to begin it.
Again, the same question, what's going on?
KRUGMAN: You know, what it really is saying is that McCain's got nothing. I mean they haven't got anything substantive to run on. You know, he's trying to say Obama's bad for the economy. It's, you know, we've had -- we've had a Republican administration for eight years. It hasn't done so well. You know, it might work. People -- you know, God knows, there's a little bit of maybe subliminal, you know, black man/white women. Who knows what they think is going to happen here.
But this is really a totally substance-free ad. They're saying we should not trust Obama because lots of people like him?
STEIN: No, I think they're saying that he's a celebrity and he's a beautiful person and he's a sort of a Hollywood swinger, but he has no depth as a politician. I don't like the ad, frankly, myself.
But he does have something to run on, Paul. I mean he has to run on the fact he has an extraordinary character. I mean he's a man who survived many years of horrifying captivity. He's a man who has been a brave, brave warrior for this country. He's a man whose son is fighting in Iraq and yet he never talks about it. This is a man of extraordinary character.
It's true, his platform is a tiny bit thin. But as a human being...
KRUGMAN: Well, you know, and...
STEIN: ...he's extremely impressive.
KRUGMAN: I have to say, whatever respect I had for McCain's character is being eroded by the kind of campaign he's running. This is -- you know, this was a pretty ugly ad. You know, this was saying oh, we're going to -- we're going to tar Obama with nothing except we're going to say he's...
STEIN: With what?
They're just saying...
KRUGMAN: ...celebrity stuff.
STEIN: They're saying he's a celebrity. Well, calling him a celebrity is not like a racist epithet.
KRUGMAN: Oh, come...
STEIN: I mean a celebrity is not really a bad thing. I'd like to tell you out here in Hollywood, people want to be called celebrities.
KRUGMAN: Yes, but this...
STEIN: So there's nothing bad about calling him a celebrity.
KRUGMAN: It's -- you know, the theme of the McCain campaign has come down...
STEIN: You're a celebrity, Paul.
KRUGMAN: Oh, boy. Yes. I get mistaken for Tom Friedman on and off. No, but the theme of the McCain campaign is he's not a regular guy, which is true. But, you know, McCain is not a regular guy either. And this is a ridiculous -- you know, we've got big problems in this country.
STEIN: But...
KING: One at a time.
KRUGMAN: ...and they're going to run on this basis?
STEIN: I think you put your finger on why it is a good ad, which I couldn't put my finger on right away. That is it. That's why McCain is campaigning in VFW halls and American Legion halls and in small towns. I think the message of the campaign is he is a regular guy and Obama is exotic.
KRUGMAN: But of course he isn't.
STEIN: And I think -- I think you put your finger on it very intelligently. That is the message. So there, you can't stand...
KRUGMAN: Well, no I mean it...
STEIN: ...I complimented you.
KRUGMAN: No, it's just...
STEIN: You're in shock because I complimented you.
KRUGMAN: Yes, I'm in shock because you complimented me. You know, this is -- this is a terrible thing. I mean this is, you know, the (INAUDIBLE)...
STEIN: Why is it terrible to...
KRUGMAN: Because this is...
STEIN: Why is it terrible to say McCain's a regular guy?
He is a regular guy.
KRUGMAN: But he isn't, actually. He's not a regular guy.
STEIN: Yes, he is (INAUDIBLE).
KRUGMAN: He wears $500 shoes. He's a...
STEIN: He's a brave, wonderful (INAUDIBLE)...
KRUGMAN: He's a multi-millionaire. He's, you know, no more -- you know, anybody who wants to be president is not a regular guy. This is
STEIN: But he's almost an all-American...
(CROSSTALK)
KING: All right, let's move on, guys.
KRUGMAN: This is crazy.
KING: Obama has already put out a response ad and discussed McCain's ad on the trail today.
KRUGMAN: Yes.
KING: And watch this.
(BEGIN VIDEO CLIP, OBAMA CAMPAIGN AD)
SEN. BARACK OBAMA (D), PRESUMPTIVE NOMINEE: You know, I don't pay attention to John McCain's ads. Although I do notice that he doesn't seem to have anything very positive to say about himself, does he?
He doesn't -- he seems to only be talking about me. You need to ask John McCain what he's for, not just what he's against.
(END VIDEO CLIP)
KING: Is it smart of Obama, Ben, to address the ad?
STEIN: I think he's got to address the ad. Somebody asked him about it. But, you know, I have to say, I'm really amazed at Paul diffidence. He has really nailed, I think, what this campaign is about.
Why is it -- Obama is there talking to 200,000 people in Berlin, getting everybody screaming for him in Berlin. And meanwhile, Mr. McCain is in small town America. That is what this campaign is going to be about.
KING: Are you saying McCain is, therefore, the favorite?
STEIN: No, not at all. But I think if McCain can press this campaign theme -- I'm a regular guy, I'm an all-American guy, I'm not an exotic, beautiful person like Obama -- I think it's a winning strategy.
KRUGMAN: No, it's...
KING: Paul has this -- all this started, Paul, too early?
KRUGMAN: Is it -- what? Sorry?
KING: Has it started too early?
KRUGMAN: You know, this is about -- as people point out, this is exactly the time of year when the swift boat thing against John Kerry started, right?
This is the time of year -- there's kind of a bit of a news lull. The Olympics haven't started yet. There's nothing substantive to run on.
So, no. This is exactly when you would expect this kind of thing to start happening and so it is. And, you know, as -- I will agree with Ben that this might be effective. It's utterly fake. McCain is no more a regular guy than any, you know, than any multimillionaire -- than any guy who's got -- who imagines that he ought to be president is. But it might work.
STEIN: But he...
KRUGMAN: So I think Obama's got to be effective.
STEIN: But he's the kind of guy who could be very comfortable in a little bar or restaurant in North Idaho. I was just telling Larry, I spent a week just now in North Idaho. I could easily see McCain walking into any of those places and they would all greet him. He'd slap them on the back. They'd talk about their time in the service.
And if he can get enough people in enough small towns to ban together and say that, he's got something going.
KRUGMAN: This is an illusion. It's an illusion. We were all told what a nice likable guy George Bush was. And, you know, he never was. This was just...
KING: All right, let me...
STEIN: But he won.
KRUGMAN: This is all fake.
KING: All right, let me get a break.
STEIN: But he won but he won twice.
KRUGMAN: (INAUDIBLE).
KING: Which of these candidates can get us out of the money mess and what are the gentlemen's thoughts on the vice presidency, next.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
OBAMA: To help end this housing crisis, I want to give additional tax deductions, mortgage interest rate deductions to homeowners who are not currently receiving them.
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: It seems to me the American dream is to keep people in their homes and we've got to address it and address it soon.
(END VIDEO CLIP)
KING: Which candidate, Paul, has the better solution to the home and -- the home crisis in this country? KRUGMAN: Well, you know, there's no -- you can't solve it, you can only mitigate it. And in terms of mitigating, you know, Obama's got more of an instinct that we've got to do something. He's more comfortable with economics. He's got a better team of advisers. McCain has admitted that he doesn't know much about economics. Now, he's denied having ever said it, but he did, in fact, say it. His close adviser until very recently was Phil Gramm, who says that we're just a bunch of whiners and that we're just having a "mental recession".
So, you know, I mean -- and the track record. Look, the track record has been that the economy has done a whole lot better under Democratic presidents than under Republican presidents for several decades. The two worst employment records since Harry Truman in -- that presidents have acclimated in terms of job growth, both presidents with the worst job records have been named George Bush.
It's kind of -- you know, history is on the side of believing that Obama is the guy who's going to do a better job of mitigating this.
KING: OK -- Ben.
STEIN: Look, George Bush, of course, inherited a recession from a fellow named Clinton, so he tried to get us out of that and succeeded very well for quite a long time. But there's no easy answer to this mortgage situation, this foreclosure situation. A heck of a lot of people bought houses they couldn't afford. That's the long and short of it. To have the taxpayers bail them all out...
KING: They passed that bill today, though. We're going to apparently bail them out.
STEIN: Well, we're going to bail out some of them. There are several million people who are approaching or in foreclosure. We're going to bail out a few hundred thousand of them.
But I don't see why, frankly, the ordinary taxpayer or guy driving a truck should pay more income tax or pass on a bigger national dealt to bail out some high roller who bought a house he couldn't afford. I'm very much opposed to bailing out people who bought houses they couldn't afford.
KING: Were you surprised Bush signed that bill?
STEIN: I was not surprised. Bush generally will sign anything. I mean he had a little bit of a fallback when he vetoed a couple of things. But he will generally sign anything.
But I'll tell you what, I think we've got to get Fannie and Freddie firmly in gear. We've got to say we stand behind them 100 percent. We've got to have the Fed and the Treasury say we stand behind all the big banks, we're not going to let hem fail. There is too much punitive activity by the Treasury and the Fed putting Wall Street on edge.
Let's stand behind them. Nothing is going to be allowed to fail of any size.
KING: Paul, are you saying a president can't do much?
KRUGMAN: No. I mean presidents can do, over time, quite a lot. But the -- you know, the fact of the matter -- and I'm going to shock Ben by agreeing with him a bit here.
Look, we had, by my rough estimate, about 25 million people bought houses that are now worth less than they were when they bought them. About 10 million people have got negative equity -- the house is worth less than their mortgage. That's going to rise. It might hit $20 million.
That's a -- that's going to cause a lot of pain no matter what you do. But you can mitigate it. You can try and be there for the people who are in real, real distress, which is what this bill partly does. You can try to make sure the financial system keeps going. It's amazing to me, again, to hear Ben and President Bush sort of going along with this. There's a line there's no atheists in foxholes and there's no free market advocates in financial crises. So everybody is saying, you know, we've got to keep this thing rolling.
And, you know, and then it's going to be a process. If we can get a good economic recovery going next year, if we can grab policies, a real, you know, stimulus policy that makes sure that people have jobs, that have incomes, that's going to cushion the blow some.
But, look, we've had a terrible -- we had the mother of all financial bubbles, as people have been saying.
STEIN: Well...
KRUGMAN: The housing bubble was enormous. And it's -- there's no way you can make it go away painlessly.
STEIN: And we also had a tremendous tech bubble under my friend and yours, Mr. Clinton. But they're bubbles. And it's a terrible problem that we don't have enough government supervision. I'm going to shock you and say there's a gigantic flaw in Republican policy, which is not believing in regulation. A few hundred million dollars worth of regulation would have avoided this entire problem of the credit meltdown. Maybe $20 million, $30 million of decent regulation would have avoided this entire problem in the credit meltdown. It's going to cost the taxpayers tens...
KRUGMAN: All right.
STEIN: ...maybe hundreds of billions of dollars. Supervision and regulation are not...
KRUGMAN: Then ask yourself which candidates is more likely...
STEIN: I agree that that's a flaw in Mr. McCain's platform. He should be saying we're going to be supervising people.
We're going to be the party of Teddy Roosevelt. We're not going to let the big boys on Wall Street suck the blood out of America and then walk home rich like rich fat pigs while the rest of America is suffering.
KING: OK. All right.
A couple of other quick things, gentlemen.
KRUGMAN: Yes. I think that's an Obama slogan. (INAUDIBLE).
KING: You found one for him, he found one for you.
KRUGMAN: Yes.
KING: Paul, if you were in the camps of these people, who would you recommend they select as vice president?
KRUGMAN: Oh, you know, I can't. You know, I would -- I've never been able to convince myself that it matters much. I think Obama probably needs somebody who's just going to be, you know, convey that -- actually, I would say he needs somebody who is going to look strong on the economy. And there's -- there's a certain lady who ran for president who would probably look pretty good on that, but I guess she's out of -- she's out of consideration right now.
KING: Who do you like, Ben?
Or who would you select?
STEIN: Well, I would say Mr. Pawlenty from Minnesota only, only...
KING: For McCain?
STEIN: For McCain, of course. For McCain. Only because Karl Rove told me he would make a good candidate. I don't know enough about it. But Karl Rove has forgotten way more than I knew. And if he thinks he's a good choice, fine.
But I would say if not Pawlenty, a real live wire Southerner. The Republicans have got to keep the South. They've got to do everything they can to keep Virginia and Florida. That's their only chance of winning.
KING: And so therefore Mitt Romney no?
STEIN: No, Mitt Romney, no. I like him, but I don't think he can be it.
KING: Paul do you -- other than Mrs. Clinton -- if she's out, who do you think the campaign...
KRUGMAN: You know, there's lots of good...
KING: ...Obama should pick?
KRUGMAN: There's lots of good people. I don't, you know, I'm having a really hard time. I looked at all of the people and they all seemed like a little bit of a letdown. But that's, you know, that's because -- that's why they're vice presidential choices.
I don't have a big -- by the way, let me say just about the -- Pawlenty, you know, we're having a little bit of a problem with infrastructure crisis. And I think people will raise the issue of the bridge that fell down. It's not entirely his fault, but he's not entirely blameless either.
STEIN: It's not his fault at all.
KRUGMAN: And it is going to be an issue. No, he neglected...
STEIN: He had nothing to do with it at all.
KRUGMAN: He neglected infrastructure spending. It's going to be an issue. So, you know...
KING: (INAUDIBLE) down.
KRUGMAN: But nobody's going to remember who the vice presidential nominees were for (INAUDIBLE)...
STEIN: And nobody's going to remember -- associate him with that bridge, either.
KING: Thank you both.
We'll have you back again quite a bit, because you're two terrific guests. And the two of you ought to go on the road -- Paul Krugman and Ben Stein.
What can you do to help yourself through these tough financial times?
Some answers after the break.
(COMMERCIAL BREAK)
KING: Foreclosure rates are up more than 100 percent since last year and filings are up 120 percent. Today, the president signed a massive bailout plan. Lawmakers call it the most significant housing legislation in a generation.
Two hundred and twenty thousand homes were lost to bank repossessions in the second quarter. That's a lot of families.
We have an outstanding panel.
In Dallas, Jeremy Brandt, founder and CEO of 1-800-CASH-OFFER. It's a real estate -- he's a real estate investor and short sale expert.
In Detroit is Glinda Bridgforth, financial adviser, personal finance coach. And her latest book is, "Girl, Get Your Credit Straight." Here in Los Angeles, Jeff Lewis, house flipper and real estate speculator, star of Bravo's hit docu-reality series, "Flipping Out."
And a return visit with John Assaraf, the entrepreneur and best- selling author. His most recent book, "The Answer: Grow Any Business, Achieve Financial Freedom and Live An Extraordinary Life," co-written with Murray Smith. He's co-founder of OneCoach, which provides small business coaching services.
Jeremy, is there a way out of this?
JEREMY BRANDT, REAL ESTATE INVESTOR, SHORT-SALE EXPERT: Well, I think that there is. And the answer is sit tight. You know, there's not a lot the government can do at this stage to change what's happening in the housing markets. So I think the real answer is to let it work itself out.
KING: Jeff, even if you're getting foreclosed?
JEFF LEWIS, HOUSE FLIPPER, REAL ESTATE SPECULATOR: Am I getting foreclosed?
KING: No, if anybody's getting foreclosed, sit tight?
LEWIS: Well, no. I think there's things that people can do. I read something very disturbing in that half -- half the people that are facing foreclosure, nobody even makes a phone call to the lender to try to work anything out.
KING: They just accept the notice?
LEWIS: Yes. I mean there's a lot of people that I think are living in denial. And I think that they -- they stop making the payments. They keep receiving the notices and they still don't do anything about it. And I'm encouraging people to call your lender and try to work something out.
But there is something -- there's a great agency out there. And it's the Neighborhood Works Organization. And it's non-profit organization. And they have counseling agencies all around the United States. And they have basically set up this non-profit organization where you can call if you are facing foreclosure and they will guide you. And they will go through it with you and they will talk to you about what to say to your lender.
KING: Glinda, I would gather the lender doesn't want to foreclose, does it?
GLINDA BRIDGFORTH, AUTHOR, "GIRL, GET YOUR CREDIT STRAIGHT": No, they don't want to foreclosure on consumers. But I also feel that -- yes, I agree that very often what happens is that consumers don't make the phone call. They don't start early enough trying to figure out the problem, trying to determine what needs to be done to avoid foreclosure. I think often it's fear. And what happens is that they just become paralyzed. They keep thinking that something is going to happen to turn things around. And ultimately they wait too late, until there's not a whole lot that can be done.
KING: John, is the bill today going to help a lot?
JOHN ASSARAF, CEO, ONECOACH, AUTHOR: I think it will. But the bill is not going to help everybody. Most Americans are either getting into foreclosure or are in foreclosure in a state of denial. And they don't want to look at the true facts. And as Jeff suggested, they've got to get real. That's number one.
Then they've got to understand what are the rules of the game?
Every single lender in the country has a different rule of the game. But on the 30th day -- or the day after the 30th day that you're in foreclosure, that becomes public knowledge and all of a sudden the bankruptcy attorneys call, the mortgage brokers call. And everybody who is associated with that industry is going to call you.
So people are feeling embarrassed. They've got doubts, fears, anxieties. They are feeling shameful and guilty. And that causes them, as one of our guests suggested, to get paralyzed.
And the first order is to get communicate, as Jeff suggested, communicate with the lender. Find out what the rules are and make some new plans.
KING: Jeremy, how did this happen?
BRANDT: Well, you know, I think it's a confluence of a lot of different things that all happened at once. You know, one of the biggest problems that we saw was people buying houses they couldn't afford. So there's a lot of people that had the dream of living in a very large house. And there were mortgage brokers that were happy to accommodate them in putting together a loan that maybe they should have never gotten into.
Part of the blame certainly lies on some of the real estate investors in the industry that were speculating, bidding up the prices of condos and houses on the coasts way more than the intrinsic value of that property.
KING: Why, Jeff, would a lender give money to a prospective homeowner who can't afford it?
LEWIS: I mean this is -- I mean, God, I wish we had the answer. But, you know, the fact is, is they were way too liberal giving out money. And now the problem -- now there's an even bigger problem, because now they're too strict. So they're -- I believe that they're killing the real estate market because we've -- I -- personally, I'm out in the trenches every day, Larry. I'm at open houses. I'm dealing directly with buyers.
And I see people with money in the bank that are credit worthy people that can't get loans unless they can put down 20 or 30 percent. Well, with the cost of living today, how is it possible for people to save 20 or 30 percent down payments? I've got -- I could sell my properties all day long for 10 percent down. The problem is, is you can't -- these people can't get the loans.
KING: Now, Glinda, you have some money tips. We're going to show the graphics here -- five steps to help.
Let's go through them, OK?
BRIDGFORTH: Well, I think very often that it is true that people were put into homes that they really couldn't afford. But I think that there's...
KING: OK, let's...
BRIDGFORTH: ...there's a financial responsibility that each person has. And so you have to look at...
KING: All right, let's go through your tips.
BRIDGFORTH: OK. You have to look at the...
KING: One, you say stop using...
BRIDGFORTH: ...consumer credit debt.
KING: You say stop using credit cards.
BRIDGFORTH: Right. Stop using the credit cards because what that does is if you're already in a hole, then it's going to put you deeper in a hole and have less money available to use to go toward your mortgage.
KING: Second, calculate the debt.
BRIDGFORTH: You want to add up what debt you owe, who do you owe the balance, the monthly payment, the interest rate, are you current, are you past due?
And once you add that up, then you're going to get an idea of how big picture is or how small the picture is, because some people don't owe as much as they think they do.
KING: All right. Create a spending plan.
BRIDGFORTH: Absolutely. Creating a spending plan, it's -- some people call it a spending plan. Some people call it a budget. I think it's important for you to anticipate what your needs are going to be in the upcoming months in terms of where your money needs to go.
KING: And track and modify spending.
BRIDGFORTH: Well, once you create the plan, then you also need to know how well did I do in sticking to the plan?
So you want to be able to determine how well you did and analyze it and then make the modifications that are necessary.
KING: Reduce expenses, increase income.
How do you increase income?
BRIDGFORTH: Oh, there -- in my book, "Girl, Get Your Credit Straight," I have a chapter with 101 ideas of how you can increase your income.
KING: OK.
BRIDGFORTH: So there are lots of different things that people can do. And it's important to do that.
KING: John, does all that make sense?
ASSARAF: It does make sense. The challenge is...
KING: Do we have the wherewithal to do it?
ASSARAF: Well, it makes sense from a logical perspective. But people don't do things that are logical. People do things that are emotional. And if they're not habitually doing those types of things, now we're adding new habits to their behavior patterns and that doesn't happen for more than two or three or four days.
So part of what I would add to that is get some help. Get some outside help, some counseling, so people can really help you.
You know, somebody who Jeff mentions is great. There's another company called propertysolutionsofamerica.com that are great individuals that will help people get the...
KING: It's out there.
ASSARAF: ...get them into.
KING: Help is out there?
ASSARAF: Help is out there. Absolutely.
BRIDGFORTH: Absolutely.
KING: Next, we're going to meet a family on the verge of losing their home.
Will they have a roof over their head next week or is it too late?
You're watching LARRY KING LIVE.
(COMMERCIAL BREAK)
KING: Are you on the verge of losing your home? That's our quick vote question tonight. Go to CNN.com/larryking right now and weigh in. Sad story now. We go to Tallahassee, Florida. Standing by, Pamela and Quentin Allen. The Allens are four months behind on their mortgage. With them is Dionne Meyers, their attorney and director of Flash, that's the Florida Attorneys Saving Homes. That's their baby, Haley.
How did you get behind, Quentin? What happened?
QUENTIN ALLEN, LATE ON HOME PAYMENTS: Well, I -- basically, the economy around here -- I was building residential homes. Around January, I lost all my contracts, any contract that I had. I -- basically, I lost -- that's pretty much what happened.
KING: Pamela, your home was built for you, right?
PAMELA ALLEN, LATE ON HOME PAYMENTS: Did you say was our home built for us?
KING: Yes.
P. ALLEN: No, it was not. We actually bought it.
KING: Oh, you bought it. I'm under a misapprehension then. You bought the home for how much money?
P. ALLEN: I think the house was listed at 175. After closing costs, financing, it was around 179.
KING: And you were both working? Quentin?
P. ALLEN: Yes.
Q. ALLEN: Yes.
KING: Both of you were working. When you had the baby, did you quit work, Pamela?
P. ALLEN: Well, I continued to work from home for quite some time. Then I looked into the cost of day care, which is -- a decent day care around here is 600 dollars a month. And we realized financially that it wasn't in our best interests to put her in day care, because I would be working to pay for day care.
KING: Did they advise you to refinance? Quentin?
P. ALLEN: We actually tried to refinance. We have a loan with Chase Home Finance. We called them before any of this -- before we started going downhill to tell them our situation. We then tried to refinance. They basically told us we did not have enough equity in our home and that we already had a good interest rate, and that there wasn't anything they could do for us. They did not offer us a repayment plan.
KING: Dionne, how close are they to foreclosure?
DIONNE MEYERS, FLORIDA ATTORNEYS SAVING HOMES: Well, Larry, they're about a couple weeks away. And it's really unfortunate. But Flash, Florida Attorneys Saving Homes, Larry, first started when our chief financial officer, Alex Cync (ph), approached the Florida board of governors on February 1st and said to the Bar, it takes a lawyer to solve the problem, the avalanche of foreclosure that's plaguing Florida.
I would say, Larry, almost immediately, the Florida Bar, the Florida Bar Foundation, Florida legal services, our office, the Real Property Probate and Trust Law Section of the Florida Bar, almost -- a little over 10,000 lawyers stepped up to the challenge, Larry.
On June 25th of this year, we launched our hotline. The whole purpose of Flash, Larry, is to save homeowners --
KING: What's going to happen to the Allens? What's going to happen to them?
MEYERS: What Flash has been able to accomplish, Larry, is pair this couple with an attorney, Attorney Sheron James (ph), who is going to help and negotiate on their behalf with the lender. We're hoping -- it's the goal of Flash, Larry, to save the home so that all of Florida's homeowners can be saved from this foreclosure crisis.
KING: Hold it a second. Jeremy Brandt, is that the way to do it?
BRANDT: Yes, I'm not familiar with the Flash --
KING: Hold it, I'm talking to Jeremy. I'm sorry, Jeff Lewis, who deals with these things all the time. Then I'll get to you, Jeremy. Is that the way to do it?
LEWIS: It's unfortunate to say, but it's a little late for these people. I'm really sorry to say that, but it's looking a little late for these people. We can use them as an example and hopefully get started much, much earlier in the process. I home to god something can happen for them, but I'm a little worried that's it's kind of like the final hour.
KING: You have a phone number?
LEWIS: I do. I have a counseling agency number, which is non- profit, which is 1-888-995-HOPE. You can also go online, at www.nw.org. You can at least try that route. I wanted to bring up something else. I have a friend of mine who lost her job for three months, could not make the payments on her condo. She called the lender. The lender said, we will not work with you until you come become behind in your payments.
She was very smart. She called her credit card companies. They deferred her credit card payments. She called Ford financial. They deferred her car payment. She was able to use the money she would normally use to pay the credit cards and her car payment, used it to make her condo payment, was able to save her condo and she got a job three months later.
KING: Jeremy, do you think our couple can be helped? BRANDT: Absolutely. I think the most important thing, which it sounds like they're in the process of doing, is talking to their bank, being very realistic about the situation, laying out the finances for them, and asking the bank to work out a repayment plan on the loan. It sounds like they originally contacted the bank before they were behind in payments. As you can imagine, the bank isn't very interested in doing anything when they think somebody is going to keep making payments on their loan.
KING: John?
ASSARAF: There's a potential problem with that as well. If the house is not worth as much as the mortgage is, and they defer their payments, the banks will actually tack on the difference between what the mortgage statement now, what the actual payment that they're going to make is to the actual loan. So they're going to have an increasing loan to value ratio. That's not a great scenario to be in unless you know for sure the property's going to go up.
KING: Quentin, do you think you're going to get through this?
Q. ALLEN: Yes, I certainly hope so.
P. ALLEN: We're very optimistic, Larry. We're very optimistic. We need a refinance that's going to lower our payments and then we would probably be out of this situation.
KING: Jeremy, thanks for being with us. The panel and others will be returning. Who's to blame if you can't pay your mortgage? We'll talk about it after the break.
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UNIDENTIFIED MALE: President Bush signed a massive rescue plan into law.
UNIDENTIFIED FEMALE: This bill is viewed as the most significant housing measure in decades.
UNIDENTIFIED MALE: Home prices that reported its steepest drop yet.
UNIDENTIFIED MALE: What started as a few bad mortgages is now a full-blown crisis.
(END VIDEO CLIP)
KING: Joining us now in phoenix is Larry Winget, self-described pit bull of personal development. Larry is the best selling author of "You're Broke Because You Want To Be." And in Washington, Barbara Ehrenreich, founder and director of United Professionals, whose mission is to protect and preserve the middle class. She's best- selling author, latest book is "This Land is Their Land, Reports From a Divided Nation. There you see its cover. Larry, can anything be done for the Allens?
LARRY WINGET, AUTHOR, "YOU'RE BROKE BECAUSE YOU WANT TO BE": I'm not sure. They are in trouble. They should have started much earlier, just like was already said. They're real close to being in a world of hurt and probably losing their home. If they had started earlier, which is what I suggest to everybody -- open up the lines of communications. People don't want you to lose your home. Your lender wants to help you. But they can't if you're dodging their calls and avoiding their letters and not talking to them.
The instant you think you're in trouble, get on the phone and talk to them. They'll help you.
KING: All right, Barbara, we have an unusual case. The biggest house ever made for ABC's "Extreme Makeover" just went into foreclosure. The family was given the house for free, used it for collateral on a 450,000 dollar loan. They can't make payments on that. How can you blame anyone but the family in something like that?
BARBARA EHRENREICH, AUTHOR, "THIS LAND IS THEIR LAND": Well, I guess that would be a very extreme case though. That's not the kind of -- that's not the kind of people the Allens that you just talked to though, who are ordinary, middle class, working class, whatever you want to call them, people who wanted to have a modest home. They're not talking about speculators or people who flip homes. We're talking about people who actually live in them, losing them, and having to tell their children, well, we're pulling out next week. We might have to leave the pets behind too, because we can't take them with us and we don't know where we'll be living after that.
KING: Who's responsible, Larry, if I don't make enough money, but the bank gives me a loan anyway?
WINGET: Well, I still think you're responsible. You're a big boy. When you sat down to sign those papers, you knew what your payment was going to be. Nobody held a gun to your head and forced you to sign the papers for that much money. Now there is a responsibility on the other side, of course, with the bank, saying, I shouldn't be giving you money you can't afford to pay. People should be responsible for their own lives.
This "Extreme Makeover" house, these people, oh, my goodness, of course they're to blame. And they are, I think, typical of what's going on in America.
EHRENREICH: No, I think you have to look here at the lenders, at the people who are doing this. Where's the personal responsibility for these guys? First of all, take the fact that a mortgage is typically about 30 pages. Who can really understand it? My daughter's a lawyer. She actually read it and she had trouble understanding it. Then we have the fact there are so many tricks, to the point of outright fraud, like being told in some cases, you got a fixed rate, but it was only fixed for two years; ha-ha.
You know, I really think we ought to look -- if we're looking for the villains here, at the perpetrators, we have to look at people like Angelo Mozilo, who was the CEO of Countrywide until a few months ago, who was making 70 million dollars a year, largely out of subprime mortgages that they knew were not going to be repaid. But they didn't care.
KING: Larry, true?
WINGET: I really can't -- I do think it comes down to personal responsibility. Of course there were banks doing bad things. Of course there were lenders. But overall, you have individuals that need to take personal responsibility. It's a cop-out to say I don't understand. when I -- I bought a lot of houses and they always sit down -- and I don't know where these people are buying homes, but I always had mortgage companies and title people who sat down and read everything, every bit, every one of those 30 page to me. They said, Larry, do you understand? I had to say, yes I do, and initial all along the way.
I don't understand where people are saying, I don't get it. Come on.
EHRENREICH: OK, I'm one of those. I have trouble with these things too. And I'm highly educated. But, you know, I think the mortgage companies, they knew all along that they were counting only on a steady rise in housing prices to make money off of this. Now when they -- when the individual lender makes a mistake that can ruin them, it's very tragic. We've seen that in the case of the Allens. But when a mortgage company does this systemically in hundreds of thousands of cases, they could ruin the economy, which I think is a much bigger problem.
KING: Barbara, we're going to have you back very soon, because you're eloquent on this. Larry will remain. Coming up, the consequences of foreclosure. Sadly they're a lot more than just losing the home. Don't go away.
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(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Boxing champ Evander Holyfield is weeks away from losing his Georgia mansion in a public auction. Ed McMahon risks foreclosure after falling 644,000 dollars behind on a 4.8 million dollar loan. Former baseball MVP Jose Canseco did forfeit his California home, citing cash flow problems due, in part, to costly divorces.
(END VIDEO CLIP)
KING: Our panel is Larry Winget in Phoenix, Glenda Bridgforth in Detroit, and here in Los Angeles, Jeff Lewis and John Assaraf. Glenda, what are the consequences, by the way, if you're foreclosed on? There are tax consequences, right?
BRIDGFORTH: Well, there are tax consequences, but what I'd really like to focus on, because my specialty is a holistic approach to dealing with finances, is what happens to the family. I think that because there are so many more divorces in our country now, and what people state is, the number one reason for divorce is because of money; I think the real reason is the number one cause of divorce in this country is the failure to communicate about money. So it really is something that I think the husband and the wife need to really be involved in.
KING: All right. But the question -- let me go back to the question, Jeff, what are the consequences of foreclosure?
LEWIS: I don't have a holistic approach. I actually am worried about the tax consequences. I think that people need to understand as well that the short pace, which they think they're saving their credit --
KING: -- less than the mortgage.
LEWIS: Yes, so basically, I have 300,000 mortgage, I get a 250,000 dollar offer on my house; the bank agrees to take a lesser loan amount for the house. People need to understand there will be tax consequences. You'll receive a 1099 at the end of the year for whatever the difference was, for what the mortgage amount was originally and what we actually paid off.
KING: You pay more in price than just the --
LEWIS: Right, which is another important point, because we've got people just walking away from their homes. They can afford to make the payments. But they're walking away from their homes because they owe 330 and the house is worth 250. They think they're going to walk away. The problem is they're going to get a 1099 at the end of the year from the bank and then they're going to have to file bankruptcy.
KING: Won't today's bill signed by the president help a lot of this? They're going to cover your money.
ASSARAF: It will help a lot of people, but not everybody. The other thing we need to talk about is the emotional consequences, the shame, the guilt, and the anxiety of going through a foreclosure or having gone through a foreclosure. What that does, a lot of people are going to get depressed. What do you do when you're depressed and you need to start your life over again? There's an emotional consequence that very few people are talking about, and these people are suffering big time.
That's why I'm saying, again, you've got to get the knowledge first of how do you navigate through these turbulent times and get help? Jeff provided a great number to call. Use that number and get some help so that you understand the rules of the game.
KING: Give that number again. Oh, it's 888-995-HOPE.
LEWIS: Absolutely.
KING: Larry, what happens when a house is foreclosed? Do they come to your house, does a sheriff come and remove everything? What happens?
WINGET: Well, it can get to that point where you will get an eviction notice and eventually a sheriff could show up and ask you to leave. I think most people bail out and move before that really happens, though. I think, sadly, though, Larry, as I listen to all of us talk, we are way too focused on what happens after foreclosure, instead of teaching what they could do before they go into foreclosure. And that's really the most important part.
We're not teaching people how to be fiscally responsible. They actually think they have the right to just walk away from their homes, and that's a good idea. What is going on in people's minds that they think that's OK, that that's a good, that you can just walk away when you owe money? They don't seem to understand that what they owe and the contract they signed, it's a contract. You owe that money. You're responsible.
And I see people being irresponsible. And we ought to teach people responsibility and let them feel some of the pain of their consequences.
KING: Glenda, do you agree?
BRIDGFORTH: Absolutely. I think there are also times when people don't even realize that they're going to be held responsible for the difference between what the house actually sells for and the balance that's owing on the property. So there's a tremendous amount of financial education that needs to take place, especially prior to a person purchasing a home. If we can do it then and walk them through the process so that they understand, then I think they'll be aware of what the consequences are if the unforeseen happens.
KING: We'll take a break and be right back with more. Don't go away.
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KING: If you have the wherewithal, by the way, our mentors here in Los Angeles all say, if you've got the wherewithal, buy now. Good time to buy.
We have an e-mail from Joe in Vancouver, Washington: "There are investors who offered to bail out an owner in foreclosure. How can we tell if they have the right solution and if we can trust them" -- John?
LEWIS: I think, number one, is you've got to look at their reputation. I would be speaking to some of their past clients and I would ask them, who have you helped before? Give me their phone numbers, let me give them a call so I can at least figure out whether you're telling the truth, whether you're blowing smoke in my face, and that's how I would do it.
KING: E-mail from Maria, Torrance, California: "My husband and I recently lost our home into foreclosure. The company promised us and our attorney to do a loan modification, then evaded our calls, sold our home right out from under us. Do we have any recourse legally to file a complaint against them" -- Larry?
WINGET: Well, you can file a complaint. It may not do you much good right now if they're that kind of company. I'd say, talk to an attorney. But if you're at that point, you may not be able to afford an attorney. Find out if it happened to somebody else. If there's enough of you that it happened to, you might have a little more strength. But if you're the only one -- and did they promise it in writing or did they just tell you that over the phone? A lot of people who work for mortgage companies say a lot of things over the phone. If you've got it in writing, you've got a little stronger case.
KING: E-mail from Donna in Alabama; "banks over-lent money on so many mortgages since 2005. Instead of taking a discount on their loan amounts, the banks are foreclosing and leaving houses vacant and run down. This hurts the neighborhood, drives prices and values of houses down even more. Why aren't banks taking the necessary discounts on these inflated loan amounts more quickly?"
LEWIS: God, if I knew that, I'd make millions, Larry. I'd love to know the reason why. These banks are so inefficient. There's so many situations where I see people really trying hard to negotiate with these lenders to do short pays, to sell their homes, and it's taking the banks nine months to get back to them.
ASSARAF: They've got a policy they've got to follow. So they're following policy. The individual on the other end of the phone or that receives your letter can't make those decisions. They're following a bureaucratic policy that has to be changed. That's part of the fundamental problems of the industry, is that they should be selling these homes back to the people.
KING: Gloria, don't we assume that a bank knows what it's doing and wants us to do well? Glinda, I'm sorry.
BRIDGFORTH: Yes. Well, I do think that we expect that banks are perfect and that they don't make mistakes. But I was in banking for a lot of years and I know that banks are run by individuals, so there are mistakes that are made. I do believe, also, that there are a lot of situations where the banks are over -- the employees of the banks are overloaded in terms of the work that they have to do. So they often let things slip through the cracks. So, unfortunately, it's the consumer that ends up paying the price.
KING: Is this --
BRIDGFORTH: I also think -- very quickly, I just wanted to say that I think people can also contact the Federal Trade Commission and file a complaint, because if there are enough people who have been -- who are complaining about a particular institution, then they will follow up on that.
KING: Larry, is buying a foreclosure always a good idea?
WINGET: Not always, especially if you don't know what you're doing. I think if you've got the money right now and you understand what's going on in the foreclosure industry, I think it's a great time to buy. It helps everyone out. It helps the banks. It helps our economy. It's good for the real estate industry. And the more people we can put to work in that business, like plumbers and contractors and electricians, it's good for everyone.
And it's a simple way to invest. It's a great place to put your money, if you've got the money.
KING: That number again, if you want help, 888-995-HOPE. Are you optimistic?
LEWIS: I am optimistic, very much so.
KING: Are you?
ASSARAF: Absolutely, I'll be buying real estate in the next six to 12 months.
KING: Glinda, are you optimistic?
BRIDGFORTH: I'm very optimistic.
KING: Are you optimistic, Larry?
WINGET: Absolutely.
KING: Wow, four to nothing, optimistic. Thank you all very, very much. Before we go, I want to tell you about George Carlin's new CD. It's from his last recorded concert in March. It's called "Bad For You." George takes on topics that can make people uncomfortable, religion, patriotism, and death. And as you know, George died in June. George, here's hoping you get the last laugh with this one.
And a special salute to my friend Ted Kennedy. You may have noticed, I'm wearing a blue wristband tonight. It says "Ted Strong" on it, acknowledging Ted's battle against and recovery from brain cancer. Keep up the good fight, Ted.
Still time to cast your quick vote, go to CNN.com/larryking and tell us, are you on the verge of losing your home? And while you're there, have a look at all of our great features. It won't cost you a thing. We don't foreclose on our viewers.
Time now for Campbell Brown and "A.C. 360" -- Campbell?
