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Staying Put: From Owners to Squatters; Keeping Your Home; Has Oscar Turned Red?; Chandra Levy Case Arrest
Aired February 21, 2009 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD, CNN ANCHOR: I'm Fredricka Whitfield from the CNN Center in Atlanta. Join us right now for a special hour in the CNN NEWSROOM.
All right. The president says his foreclosure prevention plan will help preserve the American dream for millions of American families. But some say the playing field is tilted. CNN's Candy Crowley looks at the fine print.
(BEGIN VIDEOTAPE)
CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT (voice-over): Those 627,000 people filing for unemployment benefits last week point to another harsh month. That's what worries bank President E. Hunt Burke about the president's mortgage rescue plan.
E. HUNT BURKE, BURKE & HERBERT BANK & TRUST CO. My biggest fear is the job losses that will come. We know what we've got to deal with right now. But this proposal, for instance, doesn't take into account, you know, a lot of future job losses, which could change the landscape all together.
CROWLEY: Pouring over the details of the president's plan, bankers and homeowners are finding some interesting details. For instance, unless a bank takes TARP funds in the future, the plan is voluntary. Banks don't have to restructure or refinance any loan. Though Burke thinks they will.
BURKE: A lot of it is self-preservation. If we foreclose on an individual, we now own a house that we can't sell, because the market's bad.
CROWLEY: Also causing a say-what, for high-risk homeowners whose loans are reduced to a third of their income, there is an enticement. Pay on time, and the federal government reduces your principle by a $1,000 every year for five years.
RICHARD BITNER, "CONFESSIONS OF A SUBPRIME LENDER: Mr. and Mrs. Taxpayer, you're having your cup of coffee this morning, we're talking about essentially your neighbor being compensated $1,000 for making his mortgage payment.
CROWLEY: The administration is stung by complaints that people who work the system and defaulted when the game went sour are being rewarded. Officials note, there will be strict criteria for eligibility, and in this game, everybody wins. SHAUN DONOVAN, HUD SECRETARY: We believe this plan will help to raise values of houses by $6,000 on average across this country. So this is important to do to stop foreclosures for everyone, not just those who are at risk.
CROWLEY: Burke and Herbert is Virginia's oldest bank and Burke says a conservative lender. No subprimes, no risky investments. Past-dues are up. Just a handful of foreclosures, but the books are solid. 20 banks, $1.7 billion in assets. No need for a government assist. But when customers complain the administration's plan is a handout to people with poor judgment, Hunt Burke disagrees.
BURKE: To fix this economy, we've got to start with housing and make this right, one way or another.
CROWLEY: Maybe it's not fair, he said, but that's not a good reason not to try to fix the problem. Candy Crowley, CNN, Washington.
(END VIDEOTAPE)
WHITFIELD: OK. So these days everyone is worried about their jobs, paying their bills, and keeping their homes. It's our focus this hour, right now in the NEWSROOM. We're going to be asking some pretty tough questions. And answering some of those questions, Ralph Roberts is the author of "Foreclosure Self-Defense for Dummies." He will be telling us about some comments and mistakes everyone can avoid.
Also personal finance columnist Terry Savage will elaborate on the president's plan. She is in Orlando. And Josh Levs is here taking your questions about your mortgage, foreclosure, and the value of your home. Welcome to all of you. And of course, we want to continue to encourage you to e-mail your questions, your comments at CNN.com.
All right to Terry, let me begin with you, who is this President Obama's plan actually for?
TERRY SAVAGE, SUN CHICAGO TIMES, PERSONAL FINANCE COLUMNIST: Well, the idea that it's for America. But the problem with it is that many people who have done the right thing, played by the rules, are going to wind up paying for some of their neighbors who either were greedy speculators or just unfortunate Americans who lost their jobs and now find they can't pay their home mortgages.
So there's pain for everybody. And there are a lot of people who don't see the benefit for themselves. I think the selling job is that the administration has to convince people that if we don't get this housing crisis fixed, we can't get the banking system fixed and we can't get the economy fixed. So it starts with trying to put a floor under these home values, which starts with not foreclosing into pressing the market further.
WHITFIELD: All right. So Ralph, you know, Terry is talking pain for everyone. But does this also mean relief for everyone? Even if it means for those who get it right away? Maybe others much later?
RALPH ROBERTS, "FORECLOSURE SELF-DEFENSE FOR DUMMIES" AUTHOR: First of all, thanks for having me on. I look forward to this. But we've been bailing out Wall Street. We've been bailing out insurance companies. We're bailing out states. We're bailing out cities. We need a bailout for Main Street. What everyone needs to realize is by bailing out your neighbor, it's going to protect your value. This had been a long time coming. Main Street's been paying for everything. It has nothing to stop. Main Street needs some help and this is what it's about. Stopping the foreclosures. Another 100 million people, we do not want them evicted from their homes.
WHITFIELD: OK. Josh, what kinds of questions are you getting and comments are you fielding already?
JOSH LEVS, CNN CORRESPONDENT: Yes. They apply (inaudible), we're just hearing right here. It's almost like we cannot pry this apart enough already, Fred. What people want to know is will it apply to them, in their very specific circumstances. Let me just give you an example. We'll zoom in on the board.
We're going to start with this one. Louis wrote us, "how are we to determine if we qualify for help under this plan. It was said that only mortgages serviced by Fannie and Freddie will be eligible, what about the responsible others who desperately needed the same help?" Good example right there to kick off, Fred.
WHITFIELD: All right. So Terry, how do you respond to that? Is it really mostly people who, you knew, have had to lean on Freddie and Fannie?
SAVAGE: Well, that's not exactly true. Freddie and Fannie will get a huge chunk of money to be able to participate in refinancing homes. And those people who are not more than - well the value of their mortgage is not more than five percent above the current market of the value the home, will have a chance to refinance through Freddie and Fannie. But just because you have a Freddie or Fannie mortgage doesn't mean you automatically participate, it's the way it looks now.
Fredricka, the rules will come out March 4th. There will be much more clarity around the issue of the amount underwater you can be. And then there will be another group of people who are clearly underwater, who may be able to be or who are clearly still paying their mortgages, who maybe helped by a subsidy to reduce their monthly payment to only 31 percent of their income. It's a very complex plan. It's not easy to tell you if you'll be able to get help until the rules come out in about 10 days.
LEVS: One thing we can say though is it's not as simple as Fannie and Freddie or no help at all. You might get help even if you have a smaller lender or another lender anywhere else. It's possible.
WHITFIELD: OK. And you know, Ralph, some of these problems that a lot of homeowners are in right now, might it be because of some real, I guess some mistakes that they may have overlooked that perhaps you want to send a warning out to other people? You don't want to make these mistakes.
ROBERTS: Well, one of the things that people got in trouble because they didn't understand the product they were getting. They got an adjustable rate mortgage that started at one percent. Kind of like a teaser rate. And then it just kept going up every 30 days, went up every 30 days or every six months, or every year. The American people, the Main Street of America did not understand what they were signing up for. And that's one of the reasons we're in a lot of trouble.
WHITFIELD: All right. So a lot of folks are listening to this dialogue and saying, wait a minute, my finances are in check. I'm paying my mortgage on time. A little bit more Ralph on what you were talking about earlier. Why is it that I have to help out my neighbor if I've been doing everything responsibly? We're going to delve into that topic. We got some e-mails that match up with that topic too when we come right back.
Meantime, throughout this hour, we are going to be giving you lots more details of the president's plan to do something about America's housing crisis.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: These neighborhoods are being devastated.
(END VIDEO CLIP)
WHITFIELD: Anger over the foreclosure crisis pouring out into the streets of Oakley, California. More than 165 people actually lost their homes or are facing possible foreclosures in this neighborhood alone last month alone. These protesters are vowing to stop the banks from taking anymore homes.
A lot of folks are looking at their personal finance situation saying, wait a minute. I'm not in trouble. I'm paying my mortgage on time. Why is it that I have to help finance my neighbors' troubles? Well Ralph Roberts is the author of "Foreclosure Self-Defense for Dummies" has some strong thoughts on that. Personal finance columnist Terry Savage as well and Josh Levs taking a lot of your questions.
There's the book authored by Ralph Roberts. All right. Ralph, let me begin with you. You touched on a bit earlier that in the long run, it really might affect your property values, and this is why you need to care even if your house is in order so to speak right now.
ROBERTS: Yes, what you need to realize is will cost the bank about $100,000 per house across the country to foreclose on them. When that house becomes a foreclosure, your neighbor didn't get help and they are evicted from the home, what happens is that piece of real estate is put back on the market as an R.E.O. or an oreo, not a cookie.
We're talking a piece of real estate that's going to be sold at a discount. Any time real estate is sold at a discount in your neighborhood, it's costing you more than helping save one family's home. So you need to get on this. We all need to help save America. We all need to take responsibilities. We all need to work together at keeping people's houses.
WHITFIELD: And Terry, do you see that some neighborhoods are more susceptible to this than others? Meaning property values being impacted immediately as soon as the house is listed as a foreclosure property?
SAVAGEG: You know, there's no doubt. And that was a very good argument for Americans being very concerned about this foreclosure crisis. There's no doubt that when a home is foreclosed in your neighborhood, it has an immediate impact on the value of your home. Even if you weren't planning to sell now, maybe or retiring or get a job transfer and move, those things impact your personal finances.
But I find it very, very difficult to take just one side of this argument. Because I know there are millions of Americans out there who are paying their mortgages. And maybe if we don't concentrate just on this one issue but take a step back, the real solution to the problem of people losing their homes has to do with jobs and economic growth. And part of what's gone wrong is the stimulus plan is proposed does some wonderful things for a lot of people who are in trouble.
But it doesn't do anything directly to get the economy growing again. And a growing economy can do more to solve this foreclosure problem than all of these plans that deal with issues like breaking contracts or subsidizing people who don't pay. Don't forget. On all those mortgage securities that were packaged up, sure some of them were sold around the world to hedge funds. But a lot of them are in the IRA accounts and in the mutual funds that many Americans own their retirement funds are getting interest from those mortgage contracts. When you reduce the interest, you know, you impact a lot of people. Government getting in the middle -
WHITFIELD: And isn't that the second tier of this housing plan? Perhaps you are OK, but this might give you an opportunity to refinance so that perhaps you can take advantage of the lower rates and pay off your home sooner.
SAVAGE: Well the question is - sure, lower rates in a free market give everybody a chance. And everybody who has some equity left in their home and a job and good credit to refinance. But who is going to decide by the way who gets these refinancings or these subsidies? Of course, if you're deeply underwater, and you're not helped. But many of the people who could pay some will be helped. How do they decide? And who decides -
WHITFIELD: Yes.
SAVAGE: ... who gets the mortgage interest rate subsidy? You know, we want to try and help, but this brings up a lot of problems that the plan creates rather than solve.
WHITFIELD: OK. Josh, what are some of the concerns of the folks who are e-mailing about being able to take advantage of this plan?
LEVS: They're actually picking right up on what Terry was is saying there. You know, Fred, they've heard the argument that you want to make sure the property values don't go down in your neighborhood therefore to support this plan in general. But let's zoom in. Because I want to show you a good example we got from Mark.
He says look "I have been out of work almost ten months. I work in construction. When times were good we saved our money." Look at this, when we built our house we stayed within our means. We still have over $50,000 in the bank and continue to pay our bills." His question is this "How is any of these package going to help someone like me?" And I tell you, he went on to say he's afraid that in a year he'll be out on the street and people who did not save the money will be the ones getting the government help. They are not seeing what's in this plan to help them if they saved. So this is for Ralph, what do we do?
WHITFIELD: Yes, Ralph, how do you answer that question?
ROBERTS: We got to look at, what does it matter who it benefits? You know does this help your neighbor now. We all got to fight. We're modifying the automotive companies. And I'm from Detroit. We need to do that. We modify the automotive, the people at the UAW are going to be taking pay cuts. So they're going to need a loan modification even more.
I know we're saying, you know, you're making your payment so this doesn't help you. We need - let's just modify the whole country would be the best thing instead of throwing all those money at Wall Street, like what we've been doing. Let's modify Main Street because America really needs it.
WHITFIELD: But what do you say to that gentleman who says I'm a little worried that I can afford what I'm doing right now. But next year, everyone knows how volatile the economy is right now. Next year he is saying, I'm a little worried that we'll actually be in our home and we're living within our means.
ROBERTS: What I'm going to tell him is I applaud you for making your payments and continue to do so. But as you find work, be ready to modify your loan. Because you can't modify a loan if you're not working but as soon as you get back to work, go fight for you and your family, keeping that roof over your house. And if you can make it more affordable, the more Main Street steps up and fight for help, the more affordable the home is going to be and the better it's going to be for the family, the neighborhood, the schools, the tax base and for all of us as Americans.
WHITFIELD: OK. What else, Josh?
LEVS: Yes, you know, playing off of this, I want to show you one more really quick one from Maile who wrote us this. "Who holds lenders accountable for bad decisions?" A lot of people telling us, Fred, you know what they say, maybe they see the argument why you should effectively with public money support people who didn't pay well, but in the end, will lenders be financially held accountable for the decisions they made here? They're asking that Fred.
WHITFIELD: Terry?
SAVAGE: Yes, that's part of the anger. I think and justifiable anger. Because yes, the shareholders of the banks are losing. You've look at the bank stocks, they are all trading for pennies, dollars. You know there are even talks that they may be nationalized. So that would wipe out the shareholders. Again, many of those are people who have shares in their retirement accounts. What really aggravates America, I think, is that the bank officers and employees receive their bonuses
Although you must know that many of them also lost their jobs. You know it never helps in America to turn one group against the other. That's not how America gets ahead. We can't define Main Street as people who are in bad trouble and people who are still paying their mortgages and pit them against each other? What we really need to do - on the other hand, we can't destroy what makes America great which is incentives. To work and to have your own home and to do the right thing.
We also recognize that this economy is just a mess. So we won't come up with an easy answer here. but people are justifiably turning on either side. Whether they're the people that works hard or the people that desperately need help and don't think they made a mistake, they probably didn't, many of them. They just lost a job in the auto industry.
WHITFIELD: Right. It's a terrible ripple effect.
SAVAGE: Right.
WHITFIELD: All right. Terry, Ralph, Josh, thanks so much. We're going to continue to take some of your e-mail questions, comments at CNN.com. Meantime, when we come back, how do you take advantage of the lowering interest rates? And is it really a buyer's market?
(COMMERCIAL BREAK)
WHITFIELD: A sign of the times. A Minnesota man who can't sell his house is taking to the streets, urging drivers to become buyers.
All right. So President Obama says that there will be tax credit, incentives, particularly if you are a first-time home buyer. But how do you get a loan in these days and times? Ralph Roberts is the author of "Foreclosure Self-Defense for Dummies." Personal finance columnist Terry Savage is with us as well from Orlando. Josh Levs also taking your question. Josh, let me begin with you. What are some of the e-mailers saying as it pertains to wanting to purchase. What are the obstacles.
LEVS: Yes, that's really interesting what they're saying. I'll tell you one quickly if you're just joining us. E-mail us at weekends@cnn.com. Also we have a conversation going on the Facebook page. Just search Josh Levs CNN. And if you're on Facebook, you can get your questions in there. And Fred, I want to start with this one.
Plan needed for those who can afford a house payment but need assistance with the down payment and stable low interest rate. I pulled this one out because a lot of people are saying, if the government would help with a down payment, that might be one way to get buying going. Maybe that gentleman on the street there might have some help. So let's hear about that a little bit. Is there anything to help coming up with that 10 percent or 20 percent down?
WHITFIELD: All right. Terry. Well, you know, that's how we got into this mess in the first place is people who didn't have the down payment and bought the home. And then the homes dropped in value. There is no incentive to stick around. Are you going to give the government 20 percent of the upside, or maybe are you going to give it to your neighbor whose tax is subsidized. The 20 percent the government gives you. This gets into a very convoluted situation again.
What we really need is economic growth. People having jobs, being able to save money, and therefore save up for a down payment. Because you know for first-time home buyers, and there are people who waited, who saved, now they're getting bargain prices and interest rates are relatively low. So we tend to focus on the squeaky wheel, which is very squeaky these days. I know I get e-mails. You know, I write for the "Chicago Sun Times." I happen to be down in Orlando for a conference but in Chicago I get e-mails all the time, from people who are really in trouble with their mortgages.
And we're giving them deservedly a lot of attention. What we don't hear from the people who are sitting on the sidelines, have saved some money, and are now getting and there are homes selling, getting bargains in the market. And Chicago is, you know, the home of the free markets. We like to see the markets work. We don't want the government owning the home. The American dream is to own your own home.
WHITFIELD: Yes. And talk about bargains. I mean, Ralph, it's incredible out there. I see just driving around Atlanta sometimes, you see homemade signs on the corners near, you know, lamp posts. They talk about, you know, we must sell on Sunday. Give us your best bid, your highest bid, et cetera. I mean it's pretty desperate for a lot of folks.
ROBERTS: It's a truly sad time for sellers. It is a great opportunity for buyers. And ma and pa(ph) investors across the country to invest -
WHITFIELD: So how do you, so to speak, take advantage of that if you are in the market of buying. Say you do have 20 percent of what you think you know, your price point is?
ROBERTS: You need to skip the 20 percent and 10 percent down. That's not going to save it.
WHITFIELD: What do you mean?
ROBERTS: We need to go look at the FAJ products where you can still get a house with a low down payment. People cannot save $40,000 to buy a $200,000 house. We've got to have -
WHITFIELD: But you can't get a loan. Most lenders will say we want to see 20 percent. Gone are the days of 10 percent.
ROBERTS: Well, there's still the FHA, which has been around forever. It's a great program. People need to look at lenders that work in the FHA arena. Because there are some great products out there that will help people get into a home and help people get into a home quickly.
WHITFIELD: All right. Josh, what are the e-mailers saying.
LEVS: Yes, let's keep going along these lines. It is a buyer's market. We keep hearing that, Fred, right? All the time. Let's zoom in on the board. This is a really good example. Wendell writes us and wanted to know if this is really a buyer's market for her. "I would like to purchase a home this year, but I have a student loan that is in default, but I am making payments on the loan. Is there anything I can do to make this go faster or do I need to wait?" That's a him, not her. Sorry.
But this is the idea. A lot of people have some debt. This one happens to have a student loan. How do you know if it's a buyer's market for you?
WHITFIELD: Ralph.
ROBERTS: You know, if your credit is bruised, there are other ways, get a lease option from a seller and do everything to repair your credit as quickly as you can so you become a homeowner as quickly as possible. But there are other ways to get there, being a tenant with an option to purchase something as the value goes up, it's something you should consider and look at.
SAVAGE: There were -
WHITFIELD: Go ahead, Terry.
SAVAGE: There will be, don't forget now, there are going to be a lot of homes on the market, sadly to say. And many of the banks that own that real estate or people that are trying to get out from under will rent to you at below market rates. And you may very well be able to work out a deal that a portion of your rent goes towards purchasing that home. Student loan debt is another huge burden that's going to impact America for many years to come.
I've written about that. The combination of both the mortgage and the student loan debt may not be the most sensible thing to do. Because as I said there will be some very good, cheap rentals for a while. And if home prices aren't going up right away, you don't have to worry about getting in on the next big home. All you need a great place to live at a cost you can afford, so you can save some money and pay down another debt.
LEVS: Do we hear some silver lining, isn't Fred? Some of that is good news. WHITFIELD: We're hearing that. Hopefully more right silver linings right after the short break, Terry, Ralph, and Josh. Thanks so much. We're continuing to take a lot of your e-mails at CNN.com.
(COMMERCIAL BREAK)
WHITFIELD: Happening right now in the news. A possible break in the eight-year-old murder case of Chandra Levy. Her mother tells CNN an arrest is imminent. A source close to the investigation actually confirming with CNN that the suspect is Ingmar Guandinique.
Chandra Levy disappeared in Washington back in 2001. Her remains were found in a D.C. park a year later. And Guandique has been arrested and actually charged and sentenced for two other murders that took place in the same park there in Washington, D.C. But officially, D.C. police still not confirming any charges have been filed against him. Merely that he is a person of interest and a possible suspect.
Meantime, coming up at 5:00 Eastern today, Don Lemon will be talking to Susan Levy, the mother of Chandra Levy.
A solemn memorial service today for Douglas Wielinski. He was killed when a commuter plane crashed into his home near Buffalo just last week. Passenger and 9/11 widow Beverly Eckert was also remembered at a separate service today. She, too, was among those who were killed.
President Obama, meantime, is promising to fatten your paycheck within weeks. In his weekly webcast, the president said he has told government workers to implement the stimulus bill tax cuts before April 1st. The president says the typical household will actually see an extra $65 a month.
All right. More on the economy and the mortgage mess.
Millions of Americans stand to lose their homes in the current mortgage crisis. So, if the bank forecloses on you, what would happen if you just refused to leave your home?
Drew Griffin from CNN's Special Investigations Unit takes a look.
(BEGIN VIDEOTAPE)
DREW GRIFFIN, CNN INVESTIGATIVE CORRESPONDENT (voice-over): The notices came to her home in April. Andrea Guice's bank foreclosed on her.
Behind in payments, out of work, a husband sick, she had nowhere to go. So she decided to follow the advice of her congresswoman and go nowhere. Guice is part of a new movement in the housing crisis -- squatters.
(on camera): For lack of a better term, you are kind of squatting in this house, aren't you?
ANDREA GUICE, FORECLOSED HOMEOWNER: Basically, yes. Yes.
GRIFFIN: Last resort?
GUICE: Last resort, yes.
GRIFFIN (voice-over): More than 4,000 properties were foreclosed on in Toledo's Lucas County last year. This year, it could be worse.
There's a county clerk whose full-time job is typing up and sending out foreclosure notices.
UNIDENTIFIED MALE: Tomorrow morning, these will be mailed out.
GRIFFIN: Elected officials are saying Toledo is not in a recession. It is a depression. It is this bleak backdrop that inspired Toledo Congresswoman Marcie Kaptur to take the floor of the House earlier this month to tell her constituents to stay put.
REP. MARCIE KAPTUR, (D), OHIO: So I say to the American people, you be squatters in your own homes. Don't you leave.
GRIFFIN: Captor says she's had it with government bailouts for Wall Street banks but nothing for homeowners. She is advocating for a legal revolution, a demand that not one of her constituents leaves their home without an attorney and a fight.
(on camera): Even if they've been foreclosed on, don't leave?
KAPTUR: If they've had no legal representation of a high quality? I tell them stay in their homes.
GRIFFIN (voice-over): Kaptur is behind a strategy called Produce the Note. Mortgages have been so divvied up on Wall Street that banks are having a hard time finding the original paperwork, adding a delay to foreclosures.
She is also pushing banks to rework loans, especially those banks getting bailouts and holding mortgages of folks getting tossed out.
KAPTUR: They are vultures. They prey on our property assets, and I guess the reason I'm so adamant on this is because I know property law and its power to protect the individual homeowner. And I believe that 99.9 percent of our people have not had good legal representation in this.
GRIFFIN: Without a lawyer, Andrea Guice bought a $147,000 home with nearly $40,000 down.
GUICE: I should have had an attorney. I really should have had the attorney. I did not know.
GRIFFIN: She admits she didn't read the paperwork, didn't learn, until it was too late, she had a subprime loan. Her payments of $883 a month jumped in a year to more than $1,500. When it did she, stopped paying.
(on camera): So they foreclosed on you?
GUICE: They foreclosed on me, yes.
GRIFFIN (voice-over): The law firm representing the bank in Guice's foreclosure declined comment to CNN. Another one to the banks, Guice believes holds her note, Wells Fargo, said it wouldn't comment on individual cases but tries to work with homeowners.
Backed by her congresswoman, Guice simply is not budging.
Drew Griffin, Toledo, Ohio.
(END VIDEOTAPE)
WHITFIELD: All right. From being a squatter in your foreclosed home, to debt, are you scarred for life if you do foreclose?
We've got a terrific panel with us now. Ralph Roberts is the a author of "Foreclosure Self-Defense for Dummies. Personal finance columnist Terry Savage also again with us. And Josh Levs also taking your questions.
So, Terry, what is the recourse? Are you kind of scarred for life?
TERRY SAVAGE, PERSONAL FINANCE COLUMNIST: Well, there's no question that your credit in the future will be impacted. It will not only affect your ability to buy another house, but things like...
WHITFIELD: Like ever?
SAVAGE: No, not forever. And there will be so many people in this situation that, of course, it will be far more common. And so, surely, if you can scrape together the next go-around that down payment, you'll get a chance again.
You know, we don't have debtors prisons in America. We give people a chance to start over. But we've got to clear the decks.
A lot of people aren't being forthcoming about this. You know, the banks haven't owned up to how much bad stuff they have on the books. People need to face up to the reality of their ability to afford this home anymore under the current circumstances. And a lot of games being played.
I said, oh, four or five years ago in a column that this housing bubble would burst, we would see nice middle income Americans with their possessions out on the front lawn being evicted.
WHITFIELD: Josh, what are other concerns or questions?
JOSH LEVS, CNN CORRESPONDENT: Yes. You know what? Let's jump right into what Terry was just saying right there, because a lot of people are asking -- you know what they want? They want a list. They want just, make it very simple for me.
Let us zoom back in on the board. Here's a good one from Sherida.
"What are the true consequences of foreclosure other than losing what credit I have?"
Is there a list? Is there -- can you tell us -- put credit aside for a second. What else is there?
WHITFIELD: Ralph?
SAVAGE: I'll give you one. This came to me from a reader of the "Chicago Sun-Times," who said the problem -- "We're going to be foreclosed next month." I said, "You've got to go out and look for a place to live, unless the bank will let you live in your house and sort of rent a little bit." And he said, "My wife and I have gone looking, and no one will rent to us with a foreclosure on our record."
That's the next generation of that problem.
WHITFIELD: Right. That's marked your credit.
So, Ralph, you know, what are those steps?
RALPH ROBERTS, AUTHOR, "FORECLOSURE SELF-DEFENSE FOR DUMMIES": You know, first of all, what Terry was just saying, no one would rent to you because of your bad credit, write a letter to the homeowner that owns the house. Tell them what happened in your situation. And I'm sure they might reconsider.
Instead of walking away or listening to a congresswoman telling you to break the law and be a squatter, 99 percent of us did not get a lawyer when we got our financing and bought our house. Go out and get your loan modified.
Sixty-five dollars a month might help some of us; OK? But wouldn't it be better to get your mortgage payment lowered by $600 so you truly have cash and money extra, you can go out to eat?
I write about this, saving the home, on keepmyhouse.com every single day. And I answer people's questions every single day. I want to help the Americans that want to keep their house to keep their house.
WHITFIELD: Josh?
LEVS: Yes. You know, it's interesting. We talk a lot in the singular about keeping your house. We've actually gotten a lot of e- mails and some Facebook postings from people who say they own a house, but they also had investment properties.
Let's zoom in for a second. I just saw this one, which is interesting, from Maria. This is on my Facebook page.
Basically, she says he owns her own home, along with two investment properties. And she has renters, but now she's still stuck paying the difference.
And the question is, should she consider foreclosure in a case like that? So the real question, I guess, boils down to this, if you have your home, and you're able to keep it, but you foreclosed on other homes that were investment properties, how will that affect you? WHITFIELD: Wait a minute. It sounds like she's asking for it to be her choice to foreclose? Is that how it works?
LEVS: On the ones that she's been renting out, because she would still own them.
WHITFIELD: Yes. All right.
Terry?
SAVAGE: Well, that's going to have a big impact. First of all, anything you do to damage your credit is going to sit there on your credit for a long time, seven years in the case of a foreclosure, 10 years for bankruptcy. And -- but the other thing is, you know why they amputate -- this is a terrible analogy, but they amputate certain limbs to keep people alive when they have gangrene? It's to keep the person alive.
So if you can't deal with these rental properties, you might be better off -- and of course your tenants are going to be in trouble. That will be a sad byproduct. But you might be better off letting those properties go to foreclosure so you can at least maintain the roof over your own head.
WHITFIELD: Gosh, that is astounding to hear.
LEVS: Wow. Yes.
WHITFIELD: OK. We're going to pick up on that, you know, the pros and cons of allowing the loss of your property due to foreclosure, when we come right back.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
PATTY LEWIS, IREPORTER: We do not overspend, like a lot of American citizens think that people, victims of foreclosures, do. We haven't been on vacation in 25 years. We don't go to the movies. Our house is our priority.
Jobs have been outsourced overseas for quite a few years, and that's a major problem. My husband would still be working if that wasn't the case.
Our voices need to be heard now.
(END VIDEO CLIP)
WHITFIELD: All right. That's iReporter Patty Lewis from Pennsylvania expressing frustration about the foreclosure rescue plan. She and many other Americans say the plan rewards people who haven't lived within their means.
So let's talk a lot more about this. Just before the break we were talking about consequences of foreclosure. And Terry, you said something that to me was quite surprising, because you said, you know what? If things are bad, if you can't make those payments, go ahead and foreclose.
SAVAGE: Well, I was talking about the woman who said that she had rental properties, that she could manage her own property, but not the -- she wasn't getting enough rent from her tenants to make the payments on her rental properties. And you know, a lot of tenants now are becoming victims. They pay their rent on time, but the owner defaults on the original property. It's very complicated.
WHITFIELD: Yes. But I guess I keep thinking about that seven-year baggage of foreclosure. It's on your credit report for seven years.
SAVAGE: Oh, yes. Well, any bad credit is going to be on your report. And people are going to feel the consequences not only, by the way, in getting the next mortgage, but life insurance rates, auto insurance rates will go up. Those kinds of negative credit -- things on your credit report do have an impact on you financially in many ways.
WHITFIELD: OK. Well, we only have a little bit of time.
And Josh, I know you've got tons more e-mails...
LEVS: We do.
WHITFIELD: ... that we can try and squeeze in. Let's do that.
LEVS: It actually plays right off of that. Let's zoom right into the board to get to it.
This one didn't want us using her name, but look, "I would like to know if my credit will change if I modify."
You know, Fred, a lot of people are asking us, is there fine print to going and doing refi?
WHITFIELD: What does that mean?
LEVS: If you modify your loan.
WHITFIELD: Oh.
LEVS: Is there something that in some way you don't realize right now it might actually affect you?
WHITFIELD: Ralph?
ROBERTS: Yes, ,absolutely. If you're going to delinquent, it's going to affect your credit. You're going to modify, it's going to probably be put on there.
We don't know what it's going to look like, but what I think could -- should happen in the future is, anybody's credit between 2008 and 2014, we don't count that against everybody. But modifying and keeping a roof over your house, and being able to take your family out to dinner, on going away in the summer on a vacation, if you bruise your credit while you're modifying, go have at it. I mean, you need to take care of your family more important than your credit.
WHITFIELD: You got another, Josh?
LEVS: I do, yes. You know, I really like this one because this is very pragmatic. This came in on the Facebook page, also at CNN. Check it out, Fred.
"Josh, blah, blah, blah."
WHITFIELD: "Blah, blah, blah"?
LEVS: "Bottom line it for us. Give me a Web site to visit to see if I can quality you refi to a lower late. Give us a solution."
"The stimulus that Obama signed is 407 pages long." It's actually longer. "Who is reading all that? Tell me exactly what I need to refi to a lower rate."
WHITFIELD: OK.
LEVS: So thanks to Tara for that.
WHITFIELD: Well, this is on you, then, Ralph. What do you need? What do you need to take to a lender so the lender says OK?
LEVS: And give them an upside (ph) too.
ROBERTS: Go to keepmyhouse.com and you can ask your questions. We have some people on our team that are literally reading the package and seeing what's out there.
If you don't try to get help, if you don't try for a modification, you're not going to get help. The only way to get help is to stand up, open your window up, and say, hey, I'm not going to take this anymore, and fight for you and your family. And keep the roof over your head. It's very important. It protects you, your family, the neighborhoods and the schools where you live.
LEVS: And really quickly, Terry, you have a Web site, too, I think?
SAVAGE: Yes -- no, I want to give you the toll-free number of Consumer Credit Counseling Services. They will have those rules: 800- 388-2227.
And I want to make one point. The banks tell me they want to modify loans and people don't pick up the phone, don't answer the mail.
I don't want you to fall for rip-offs for loan modifications, but if it's your lender, pick up the phone when they call or take that package. They say they're trying to do modifications and people just don't open the mail.
WHITFIELD: And real quick, you guys, you know, for those who maybe have received that default notice, is there anything they can do between receiving the default notice and imminent foreclosure? Can they quickly put their house on the market? Can they try to, you know, perhaps gain some of that money that they owe to foreclosure?
SAVAGE: You may do a short sell, which is sell for less than the house is worth, less than the amount of the mortgage. You may -- but the big thing is now, between now and March 4th, when all the rules are out, every banker, every loan department is going to be working on, how do we respond to people who call us?
Make those calls. Keep calling. If you get put on hold, ask for a supervisor. See if maybe you can qualify to hang on to your house. There will be opportunities.
WHITFIELD: OK. Great advice.
I didn't hear "blah, blah, blah" from you guys. I heard solutions, so that's good.
(LAUGHTER)
WHITFIELD: Ralph Roberts, the author of "Foreclosure Self-Defense for Dummies," and personal finance columnist often seeing her material in "Chicago Sun-Times" joining us today from Orlando, Terry Savage.
And Josh Levs, as always, thanks so much for fielding all of those questions and comments.
And we thank you, the viewer, also, for having an interest in this topic and keeping this discussion going. Appreciate it.
All right. We're going to talk other things. Non-economy, sort of, but still a little recession related. We're talking about Oscar gold, if it in any way is being tarnished by the recession. With the entire country seeing red, we hook ahead to those who will be sashaying down Oscar's red carpet tonight -- tomorrow night, actually.
(COMMERCIAL BREAK)
WHITFIELD: All right. In these tough economic times, a little escapism never hurts. Well, that won't be a problem tomorrow night. It is Oscars' big event, with all the big stars gracing the red carpet. But as CNN Entertainment Correspondent Kareen Wynter reports, it may be the lesser-known performers who actually go home winners.
(BEGIN VIDEOTAPE)
KAREEN WYNTER, CNN ENTERTAINMENT CORRESPONDENT (voice-over): Dramatic performances...
(BEGIN VIDEO CLIP, "FROZEN RIVER")
UNIDENTIFIED FEMALE: Put it down!
UNIDENTIFIED MALE: Are you going to sue me now too?
UNIDENTIFIED FEMALE: Put it down! (END VIDEO CLIP, "FROZEN RIVER")
(BEGIN VIDEO CLIP, "THE VISITOR")
RICHARD JENKINS, ACTOR: He was a good man, a good person.
(END VIDEO CLIP, "THE VISITOR")
(BEGIN VIDEO CLIP, "DOUBT")
VIOLA DAVIS, ACTRESS: Ask the man if he's good to my son.
(END VIDEO CLIP, "DOUBT")
WYNTER: ... from three Oscar-nominated actors who until now have hovered below the Academy's radar.
STEVE POND, OSCAR HISTORIAN: I think the real question is, why did it take Hollywood this long to give those actors roles that were worthy of their talent?
WYNTER: Meryl Streep had similar thoughts about her "Doubt" co-star and best supporting actress nominee Viola Davis.
MERYL STREEP, ACTRESS: The gigantically gifted Viola Davis. My God, somebody give her a movie!
WYNTER (on camera): She paid you the highest compliment, I believe, at the Screen Actors Guild Awards.
DAVIS: It was the highest compliment. And I love that woman.
WYNTER (voice-over): Frozen River's Melissa Leo is up for best actress for her role as a mother desperate to provide for her family. The 48-year-old has worked in the business for more than 20 years, both on the big and small screen.
(on camera): What kind of reaction do you get from people when they see you on the street?
MELISSA LEO, ACTRESS: An argument between a husband and a wife, and one of them will finally come over and come, "You're not, are you? My wife says you are, and I know you're not." Yes, that's me.
WYNTER (voice-over): Audiences may not know his name, but they likely recognize Richard Jenkin's face. He's nominated for best actor in "The Visitor." And his career spans three decades in both dramatic and comedic roles like "Step Brothers."
(BEGIN VIDEO CLIP, "STEP BROTHERS")
JENKINS: No television for a week.
UNIDENTIFIED MALE: What?
(END VIDEO CLIP, "STEP BROTHERS") WYNTER (on camera): This is your first acting nomination. Sum up what that's like, how that feels.
JENKINS: Something I never thought would happen. And you know, if you live long enough, you see everything.
WYNTER (voice-over): So, which of the trio stands the best chance of taking home the gold against big-name competition? Oscar historian Steve Pond is banking on Davis.
POND: In the supporting categories, especially supporting actress, the Academy often loves somebody who appears to come out of nowhere and knock it out of the park.
WYNTER: Win or lose, it's still a career grand slam for all three actors, who will always carry the title "Academy Award Nominee."
(END VIDEOTAPE)
WYNTER: And so, Fred, here we are on the heels, right, of Hollywood's biggest, most star-studded night. But you best believe that this industry is absolutely mindful of the economic times that we're in right now.
The people we've spoken to say, sure, you'll see some over-the-top gowns on the carpet and some lavish jewelry. But overall, it's going to be really scared down from the wardrobe, even to all the Oscar parties taking place around town.
WHITFIELD: Good.
WYNTER: And quickly, the Los Angeles County economic adviser we spoke with said this is a really important time, we shouldn't forget about that. That this event pumps about $150 million into this economy, the L.A. County economy alone. So if you scale everything down all together or get rid of it, you're putting limo drivers out of business, you're putting caterers out of work. So hopefully they'll be able to find that happy medium -- Fred.
WHITFIELD: Yes. Scale down Oscar, oxymoron to me. That just does not sound right. I'll believe it if I see it.
WYNTER: It doesn't, yes.
WHITFIELD: All right. Kareen Wynter, thanks so much. Appreciate it.
WYNTER: OK.
WHITFIELD: And of course, the Academy Awards are tomorrow night. CNN's entertainment correspondents will be bringing you all the action and, of course, the glamour, downplayed or not, from the red carpet.
Tune in Sunday night, 7:00 p.m. Eastern.
(COMMERCIAL BREAK)
WHITFIELD: I'm Fredricka Whitfield.
Tomorrow in the CNN NEWSROOM, my conversation with Judith Jamison, the artistic director of the Alvin Ailey American Dance Theater. The historic dance troop is celebrating its 50th anniversary, and thriving, while so many performing arts organizations are struggling.
(BEGIN VIDEO CLIP)
JUDITH JAMISON, ALVIN AILEY DANCE THEATER: What enlightens the heart, what makes me feel really good, is that some of those companies who are having problems now, their works are in our repertoire. So they are not dying. They're being spread around the world as we tour in Turkey and Romania, where we just came from, and the 26 cities that we're hitting to finish out the 50-city tour we're doing in honor of our 50th anniversary.
(END VIDEO CLIP)
WHITFIELD: Fantastic. The full interview of Judith Jamison, tomorrow at 2:00 Eastern Time.
I'm Fredricka Whitfield.
The next hour of the CNN NEWSROOM with Don Lemon begins right now.
