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Your Bottom Line

Making Home Affordable; Locking in Low Rates; Holiday "Gotcha" Charges; Credit Card Simplification; Shopping Safely Online

Aired December 05, 2009 -   ET

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

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Hello, I'm Gerri Willis and this is YOUR BOTTOM LINE, the show that saves you money. Today an update on the credit cardholder's bill of rights, what you need to know about the reform and what it'll mean for your wallet.

Staying safe online, more and more of us are shopping on the web these days. We'll show you how to best manage your identity when you do it.

And 'tis the season for job hunting? We'll tell you how to land holiday employment.

The show that saves you money starts right now.

Fearing more foreclosure fallout, the Obama administration announced more steps to get long-term help to troubled borrowers. The progress so far, well, disappointing. After 650,000 trial adjustments, less than two percent were made permanent after three months.

President Obama's new push on mortgages includes tougher requirements for servicers to participate including fines and sanctions, partnerships with organizations helping homeowners, more reporting requirements for loan servicers.

Mortgage relief problems though continue to mount including paperwork issues, not enough income to make payments, too much equity or savings and in some cases it's better for the banks, more lucrative to foreclose rather than modify.

So what needs to be done to make the president's plan work? John Taylor is the president and CEO of the National Community Reinvestment Coalition, he's joining us now from Washington.

John welcome. I know one of your prescriptions for success for this program would be to give bankruptcy judges more power. What should they be doing?

JOHN TAYLOR, PRESIDENT & CEO, NATIONAL COMMUNITY REINVESTMENT COALITION: Well, you know Gerri, everything in your portfolio, if you own a second house, a boat, all those things are protected in bankruptcy courts, but not the home. Even though it used to be, but Congress took that away a few decades back.

If we had the home protected in bankruptcy that would force these servicers and lenders who are reluctant to participate in the president's program to the table and force them to try to negotiate and figure out a way to fix these mortgages... WILLIS: Right.

TAYLOR: ... and keep people in their homes.

WILLIS: You know this is really controversial stuff, though, I know.

TAYLOR: Yes.

WILLIS: You also suggest using government bailout funds as a way to buy mortgages and then force some kind of new loans to be made. Now, how would that work?

TAYLOR: Ok, so the current system is a voluntary system, that the banks and the servicers have to voluntary agree to modify these loans. It's not working in spite of the best intentions and efforts of the administration.

So they got two avenues. We just talked about bankruptcy. The other one is to go in and purchase these loans, the government itself, at a discount, because the loans are no longer -- the securities are no longer worth what they once were when people invested.

WILLIS: Right.

TAYLOR: And then have the industry, the private industry refinance those because those mortgages are going to be reduced anywhere from 40 percent, 50 percent, 60 percent, that's what these things are selling today, their investment banks actually doing this.

WILLIS: So it will be a good deal for the government.

TAYLOR: It would be a good deal...

WILLIS: The government will then time them around.

TAYLOR: Yes.

WILLIS: And of course, this is really controversial stuff, particularly with the industry, which says hey, you know, we can't afford doing this. This isn't working for us.

Why has this program been so long in really catching fire? Why is it -- why are the bankers so reluctant to get involved?

TAYLOR: Well, I think there are a multitude of reasons. One of which is, you know, the value of properties have dropped so precipitously that, in order to get -- in order for the bank to reduce the mortgage to where it really fits the borrower's income, they have to reduce principle or interest.

WILLIS: Right.

TAYLOR: So many of them are sitting on the sidelines waiting for either a bailout, many of which already got bailouts for these banks.

WILLIS: Right. TAYLOR: Others are sitting there waiting for the market to change so that if they do move, at least if they foreclose or if they have to convert the property, sell the property, they'll get more for it. So a lot of them are sort of waiting to see what happens to the economy and it's not very helpful.

WILLIS: Well, John, a difficult response obviously and I appreciate your shedding some light on this today. Thank you so much.

TAYLOR: Thanks Gerri.

WILLIS: So is now the best time for a mortgage refi? Hey, just because you're underwater in your mortgage or unemployed it doesn't necessarily mean you can't qualify for a new loan.

Bob Moulton is the founder and CEO of Americana Mortgage. Bob, great to see you.

BOB MOULTON, PRESIDENT & CEO AMERICANA MORTGAGE GROUP: Great to see you, too, Gerri.

WILLIS: Well, let's get to the bottom line here. I want to show people the numbers on mortgage rates right now, 4.79 percent, check this out. You just don't see this very often, do you?

MOULTON: This is terrific.

W: Low, low, low.

MOULTON: We saw this at the end of last year this is at a 40-year low; rates are four and three quarters, no points for a 30-year fix. If a homeowner can save one percent on his mortgage on a $300,000 mortgage that's $200 a month in his pocket; if it costs him $4,000 to buy that rate down, he's even in 20 months. So if they stay in the house for at least 20 months they are going to be saving that money for almost 28 years.

WILLIS: So that's great news.

MOULTON: Great news.

WILLIS: How long are these rates going to stay this low?

MOULTON: It's hard to say, Gerri. I mean, that's always the magic question but rates trickle down and when they get real low they spike right up. So we can be at four and three and quarters for another week, two weeks, three weeks. If you like it, lock it, lock it for at least 45 or 60 days, because if rates turn the other way they will spike up very, very quickly.

WILLIS: Well, I think that's an interesting point. You can't wait is your point.

What kind of documentation do I need if I'm going out to get that mortgage today? You know, it takes awhile to get this stuff together. What should I get? MOULTON: Because of all the sins of our predecessors, I mean, the documentation is very intensive right now. Homeowners need to be timely and responsive and thorough. They should have one month of current pay stubs, two years of tax returns, three months of their bank statements and they should have a copy of their deed at the time of application for their loan officer.

WILLIS: Wow. Ok.

MOULTON: And their loan officers should do a little homework up front.

WILLIS: Yes, what about the credit score? Let's talk about that because that's been a real sticking point.

MOULTON: Credit score is critical.

WILLIS: You have to have a higher and higher number. What can you get away with these days?

MOULTON: Six eighty is the absolute lowest right now for a -- to get a good mortgage rate. Banks are looking for 700. We even have some lenders that are looking for as high as 720 or 740 on the credit score.

WILLIS: Wow.

MOULTON: If you're having problems with your credit, work as hard as you can to get up to at least the 700 level, contact the credit repair consultant, there are many that are available.

WILLIS: You've got to be careful doing that, who you talk to.

MOULTON: Who you talk to, correct.

WILLIS: I could go to a question though that I know is great in your bailiwick which is if I'm unemployed, can I still get a new loan? If I don't have a job and I don't have income, can I get a new loan?

MOULTON: It's going to be pretty much impossible to get a new loan. If you don't have a job you're best talking to your existing lender and asking them about a modification program. It's arduous to get through to the right person that can do the modification but without a job that's really your only way to get something done right now.

WILLIS: And let's also talk about being underwater. Because so many of us out there are actually, we owe more than the house is worth. If you want to cash in on these low rates, how do you do it, Bob?

MOULTON: Well, if you go into a couple Web sites, maybe Zillow (ph) or maybe Property Shark, check the value of your house. Another problem that we're facing in the industry right now is the new legislation that the regulators put in called the Home Value Code of Conduct and it's an arm's length to wait to have a managing company order an appraisal. And the appraisals are taking longer to release than we appreciate. The costs are more, they used to average $300, now about they're about $450 and the values really aren't coming in where the values should with the HVCC. So the whole of that will be appealed.

WILLIS: But you're saying that you should go to your existing lender, if possible, if you are underwater and you might get better treatment, right?

MOULTON: Correct, absolutely.

WILLIS: All right, Bob Moulton, thank you for that. We appreciate it.

MOULTON: Thanks, Gerri.

WILLIS: You may be starting to feel the pinch of your own mortgage payment. Remember, your monthly expenditure for a housing should be no more than a third of your income. If you feel like you're in over your head, maybe you've missed a single payment, maybe two, maybe more, don't worry. There is still time to get help.

The Department of Housing and Urban Development can provide you with a housing counselor in your area. Go to Hud.gov and click on the link for avoiding foreclosure. You can also call toll free 1-800-569-4287.

And hey, don't be afraid to talk to your lender. Respond to their phone calls and ask for help. They can choose to give you some breathing room on payments or even stretch your repayment schedule. Putting your head in the sand will simply delay the inevitable.

Lots more ahead, credit card checkup just in time for the holidays and where the extra jobs are these days, seasonal employment secrets next.

(COMMERCIAL BREAK)

WILLIS: You've seen the headlines, credit card reform is coming but when is the big question? So before you jump into a holiday spending spree with your credit card it's time to get a checkup on your credit.

John Ulzheimer is the president of consumereducationforcredit.com -- boy, that's mouthful. John welcome. What happened? We thought it was going to go into effect December 1st this new law that will protect consumers from credit card practices but it didn't.

JOHN ULZHEIMER, PRESIDENT OF CONSUMEREDUCATIONFORCREDIT.COM: It had momentum and the momentum, Gerri, seemed to fade away fairly quickly. The industry was adamant that the December 1st deadline did not give them sufficient time to program their systems to absorb all of these changes. They are terrified of class action lawsuits because of noncompliance with a card act.

The second reason that a lot of folks are not talking about, is one of the provisions of the card act prevents over-limit transactions from being approved at the register which would have cost the credit card issuers billions of dollars during the holiday shopping season. WILLIS: The biggest spending time of the year obviously.

ULZHEIMER: Right.

WILLIS: You said there is a loophole here with variable rates. Talk to me about that.

ULZHEIMER: That's exactly right. One of the provisions of the card act makes it more difficult for credit card issuers to increase your interest rates. However, if you have a variable rate which is tied to prime and index versus a fixed interest rate, then when the prime rate goes up, guess what happens to your credit card interest rate...

WILLIS: Right.

ULZHEIMER: ... it goes up as well.

WILLIS: Ok, all right, good to know.

Let's talk a little bit about what's going on in the marketplace right now which is everybody's running to the stores and fewer people as you say, they're going to use their credit cards. That's got to be good news, right?

ULZHEIMER: It's good news and it's bad news. It's good news because fewer people using credit cards means fewer people are getting into credit card debt which is good news. The bad news is, is that what is that -- what's the alternative? Debit cards. And debit cards are fine up until a point. They don't have the same protections that a credit card does and if you use your debit card, if you're traveling over the holiday season and you're renting cars or you're staying in hotels...

WILLIS: Right.

ULZHEIMER: ... they're going to hold a certain percentage of the money in your checking account because that's what a debit card is tied to and you don't want to bounce checks because you think the money is actually there and available when the reality is it's not.

WILLIS: It's very, very painful.

All right, let's talk about some tips for folks out there who are using their credit cards this season. What do you need to know, what should you be careful of?

ULZHEIMER: Well, look, I have been banging this drum for years. You should always use the credit card that has the highest credit limit. And the reason you want to do that is because credit scoring systems do not like to see balances approaching credit limits. It's that dreaded utilization word that we've always used.

So pick a card that's got a very, very high credit limit and do all of your shopping on that one card, do not spread balances across multiple cards because credit scoring models do not like to see multiple cards with a balance. Pick one, high credit limit, be done with it. WILLIS: Lots of deals out there for people who are signing up for new department store cards. That's just not a good idea, is it?

ULZHEIMER: They're very, very aggressive. They want new customers. They're willing to offer 10 percent to 20 percent off of your purchases in exchange for you signing up for a new credit card.

In reality what's happening is an unsophisticated way of applying for credit. You're not in a bank. You're not in a mortgage company. You're not on a car dealer's lot. You're standing there at a register.

The reality is you are, in fact, giving a lender permission to pull your credit reports which means credit inquiry, if the loan or if the account is approved that's a new credit card that goes on your credit reports. These things can damage your credit reports for up to 12 months. We'll be talking about it the holiday season next year.

WILLIS: And we'll talk to you before then again, John. Thanks for the help today. We really appreciate it.

ULZHEIMER: Always a pleasure.

WILLIS: A few weeks ago we asked if you'd ever actually read your credit card contract. It has key information about what you've agreed to. But most folks say they find the documents are too hard to read and it's printed in teeny, tiny type and frankly, it's just too hard to understand.

So we asked our Jessica Yellin about how some folks in Washington are looking to change these contracts.

(BEGIN VIDEO CLIP)

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT (voice-over): Americans swipe their credit cards 58 million times a day. But how many cardholders actually understand what they've signed up for?

Some in Congress are trying to get rid of the fine print in contracts like this one.

(on camera): Can you tell me what the annual percentage rate is? What the interest is?

UNIDENTIFIED MALE: I haven't a clue. Doesn't say.

UNIDENTIFIED MALE: You'd have to give me about an hour. But at the end of the hour I would say no.

(END VIDEO CLIP)

WILLIS: So obviously this is a huge problem.

At least one bank, though, has signed on to this one-page summary of rates, fees and payment information. Bank of America this week announced it will send its credit card clarity commitment letter to about 40 million current cardholders this month. And it will be available to new customers next year. This is their effort to, quote, "help customers understand their banking agreements."

Let's take a look. The first thing you can find here are interest rates. So whatever it is you're paying for purchases, balance transfers or cash advances, it's all right there. You'll see it right away.

The other thing to check out are the fees including annual fees, if you're paying any, transaction fees, late payment fees -- you name it -- insufficient fund fees. You'll be able to see that easily if you have a Bank of America card. However, the summary does not take the place of your credit card agreement. So you know what? At the end of the day you're going to have to still read the small print.

Up next we'd all like to earn some extra cash this time of year; how to best tailor your seasonal job search in a time of sky-high unemployment.

(COMMERCIAL BREAK)

WILLIS: Last year, retailers added just 384,000 jobs during the holiday season. That's the lowest in 20 years and almost half 2007's total. With even more seasonal applicants this year, how can you land that job and maybe hold on to it in the New Year?

Tom Musbach is the managing editor of Yahoo! HotJobs and joins us from San Francisco.

Tom great to see you.

TOM MUSBACH, MANAGING EDITOR YAHOO! HOTJOBS: Hi, Gerri. Thank you.

WILLIS: Let's talk about -- is it too late to get that retail job, and if it is, where else do I look?

MUSBACH: Well, the window is closing as we've getting further into December. So if you really want a seasonal job right now, while there are some retailers that might still be hiring, your best bet is to look beyond retail.

Make sure that you're looking at shipping companies, delivery companies; there may be warehouses that are fulfilling online purchases. Also think about catering companies and even temp jobs. We're seeing some increase in temp jobs now so temp jobs might be a good option for you, as well.

WILLIS: But, Tom, how do I find these? I mean, is this something I have to look at online? Is it better to do it in the real world?

MUSBACH: I would say do both. I mean, do look online, but these jobs require some legwork, so make sure that you get out there and look around at employers in your area. Target ones you'd like to work for and then call them up or stop by and ask if they're hiring. Look in the windows; see if there are jobs -- the help-wanted signs there.

WILLIS: The old-fashioned sign in the window, right.

MUSBACH: That's right.

WILLIS: Let's talk about how you make those jobs permanent because I think this is a real challenge for people. Yes, they like to have the job for two to three weeks during the holiday season but then they also want to have it permanent so they have income coming in all the time. How do you do that?

MUSBACH: One of the key things you need to do if you have one of these types of jobs is make sure you can be flexible. And that means be flexible in terms of the types of hours that you're available to work but also in terms of the type of work that you're willing to do. Because if you can demonstrate that, that's going to be really helpful to your value as an employee because a lot of these seasonal jobs are all about flexibility.

That's one of the big things that you can do to demonstrate value, and then perhaps parlay that into a job that's going to last longer beyond the holidays.

WILLIS: All right. Worst-case scenario: I can't even find a temporary job during the seasonal employment bingeing. Can I become my own boss? Is that an option here?

MUSBACH: Becoming your own boss is definitely an option. If you can think about and isolate skills that you have that meet a need within your community -- so whether it's preparing other people's taxes or baby sitting, house sitting during the holidays, pet sitting, dog walking or catering. These are types of jobs that you can do that might help you, you know, hold you in good stead until you can find a more permanent job if that's what you're looking for.

But that sort of entrepreneurial spirit is definitely going to help you in your job search because employers are going to be impressed that you are resourceful and that you've been productive in this time of unemployment.

WILLIS: Well, that's good news.

Tom, thank you so much for your help today.

MUSBACH: Sure, my pleasure. Thank you.

WILLIS: As the troubled economy continues to dominate headlines in 2009, Americans scoured the Web for any information they could point and click on. Just this week, Yahoo! released its list of the top ten economy-related searches for the year.

Coupons tops the list with unemployment and stimulus plan close behind; cash for clunkers was a popular search phrase, and student loans, hey, that's always a mainstay. Rounding up the top ten, IRS refunds, who doesn't like that, foreclosures, government jobs, Bernie Madoff and the health care bill.

Up next, more online goodness; we'll talk online safety for this holiday shopping season.

(COMMERCIAL BREAK)

WILLIS: Well, retailers did not have a case of the Mondays this week. Cyber Monday, which is the Monday after Black Friday when consumers jump on the Web -- don't they do this every day -- for holiday gifts, got a boost this year, a 14 percent jump in sales that's compared to last year. So if you are looking to avoid the mall crowds, and who is not. How can you keep your personal information safe when you're shopping online?

Mario Armstrong is a technology contributor to NPR and the founder of Techtechboom.com...

MARIO ARMSTRONG, TECHNOLOGY CONTRIBUTOR, NPR: That's right.

WILLIS: Welcome. And it's great to see you here, Mario.

ARMSTRONG: It's great to be here. I'm excited to be here. Thanks so much for having me in with you.

WILLIS: Let's talk about debit cards.

ARMSTRONG: Sure.

WILLIS: Because you have something surprising here to say. If you're shopping online, you say, don't use the debit card, but I'm trying to save money and make sure I don't rack up credit card fees.

ARMSTRONG: And I don't say it as elegant as you say it. I say, "Don't use your debit cards online." What, are you kidding me?

Really -- people think this is the right thing to do. They think it's convenient for them, but there's two problems with using a debit card.

Number one, it's directly tied to your bank account so it's directly tied to your current cash so that's an issue. And number two, it doesn't have the same credit card protections -- card protections that credit cards do when you make purchases.

WILLIS: All right. Another thing you tell me to do which I've done repeatedly is you say, "Don't store your credit card number on a Web site."

ARMSTRONG: No. And that makes...

WILLIS: Even if you use it a lot?

ARMSTRONG: I know, you want to go back and say you already have my information and make it one click and make it easy. But there's no reason to store your information on any particular e-commerce site. You just don't want to leave your data in someone else's hands. That data could end up becoming fraudulent or used in the wrong way.

WILLIS: How do I know the Web site is secure?

ARMSTRONG: Yes. A couple of steps to verify that. Number one, you want to look for the "s" in the Web address browser.

WILLIS: Https.

ARMSTRONG: The big "s" has to be there. Now that's not going to show up until you're at the credit card transaction page so you won't see this in the beginning stages of your purchase, but you will see it when it's time for you to put in any personal information or credit card information.

There's another way that you can also verify the identity of a Web site by actually clicking on the side of the Web site to see who it actually belongs to.

Many protections have been only about the transaction of my data going to a site. We've never really have had the opportunity to see is that site truly owned by Amazon or truly owned by New Egg (ph). And now we have those protections in place.

WILLIS: That's exciting. I like that. I want to talk about some of the scams out there.

ARMSTRONG: Yes.

WILLIS: Social networking. You say that there's a lot of stuff going on there if you're shopping this holiday season, beware. Help me out here.

ARMSTRONG: Big scams. Because Twitter is so new, Facebook is still new to a lot of folks and all of these things are happening. And what happens, Gerri, is maybe you get a note from a friend in Facebook. You may not notice but in that friend's note it may be for a great deal but it could be to a fraudulent link. And your friend thought it was fine information and passed it along and now you're clicking on this fraudulent link to this site.

Another thing that happens in Twitter, being that it's only 140 characters, the URLs, the Web site addresses, get shortened. So you don't know that someone is sending you, say, to a Lord & Taylor site because it's been shortened.

WILLIS: Tiny URL?

ARMSTRONG: Tiny URLs, so you want to reveal by using something called untinyurl.com and that will tell you the true source of where you're getting ready to end up by clicking on those links.

WILLIS: Forget the debit card, use your credit card, and don't fall for any offers that you know can't be true.

ARMSTRONG: Don't fall for those. And if you don't have a credit card, go with the prepaid gift cards. Those are great options for people that have no or low credit.

WILLIS: Thank you sir, Mario. Great information.

ARMSTRONG: Thanks Gerri. I appreciate it. WILLIS: As always, we thank you for spending part of your Saturday with us. YOUR BOTTOM LINE will be back next week right here on CNN. You can also catch us on HLN every Saturday and Sunday at 3:30 p.m. Eastern time. And you can hear much more about the impact of this week's news on your money. On "YOUR MONEY" with Christine Romans and Ali Velshi, Saturdays at 1:00 p.m. Eastern and Sundays at 3:00 right here on CNN.

Don't go anywhere. Your top stories are next in the "CNN NEWSROOM". Have a great weekend.