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Mass of Foreclosures in the Market; How to Save Big on Utility Bills; How to Land That First Job Out of College; Steer Clear of Mortgage Fraud

Aired April 17, 2010 - 09:30   ET

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

STEPHANIE ELAM, CNN HOST: Summer is almost here and so it's time to save bucks, I mean big buck on utility bills. The best up for grads will give your kids a leg up to land that first job out of college and we'll help you steer clear of mortgage fraud, how to spot a red flag. The show that saves you money starts, right now.

We begin this morning with housing. Bottom line, the Obama administration's mortgage modification program isn't keeping up with the mass of foreclosures in the market. Just under 170,000 homeowners have received long-term mortgage modifications under the plan since February and according to the Congressional Oversight Committee's latest report, some six million borrowers more than 60 days behind on their loans. For every borougher who avoided foreclosure through the Home Affordable Modification program last year, 10 families lost their homes to foreclosure.

So, here to break it down for us it Rick Newman, chief business correspondent for "U.S. News & World Report."

And Rick, you know, when you look at these numbers, the Obama administration saying they wanted to help four million people, but now it looks like they're only going to help about one million. Were their numbers overall just overzealous to begin with?

RICK NEWMAN, U.S. NEWS & WORLD REPORTS: Yeah, it's a really hard problem to solve. This is actually more different than bailing out the banks, believe it or not. There are at least six government programs trying to help people avoid foreclosure, the first in 2008 under the Bush administration. We've seen one re-do after another and now the latest program. Just an incredibly hard problem to solve.

ELAM: Yeah, and if you take a look at that mortgages delinquent for more than 30 days, we actually see that there's been a slight improvement. Right?

NEWMAN: Right. So, this is -- and part it's what's happening is the problem is kind of just working its way through the system. Obviously, the housing bust has been going on for three years at this point. A lot of people have already lost their homes. So, at some point it's going to work itself out. It's just taking way longer than we want and meanwhile what's happening in housing is severely affecting the rest of the economy. It's really slowing down the recovery that we're supposedly in right now. ELAM: So, does that mean then, because of these foreclosures, that the housing market couldn't stand on its own without some sort of stimulus.

NEWMAN: We're finding that out right about now, because the government is sort of backing out of these programs that it set up to subsidize housing and we're basically waiting to find out if the housing market can stand on its own.

I mean, to some extent, there's no way, because Fannie and Freddie, those are the big mortgage companies, are -- they're backing most of the mortgages that are written today, but the government's getting out of things and home buyer tax credit is ending, the Federal Reserve is stopping some of its programs. And we have to see if buyers are going say, yeah, I'm feeling comfortable enough about the economy, I'm going back into the market.

ELAM: Yeah, but if you take a look at the foreclosure numbers for 2010 we're still looking for a really high number, right?

NEWMAN: That's right's. So, it's not clear whether this has peaked yet and it's going to be a tough year, regardless. I mean to some extent, whether it's peaked is kind of irrelevant because there are just going to be a lot of foreclosures this year.

You know, a lot of people are in homes that they couldn't afford in the first place. That was a big problem to start with, and trying to help these people out is a really tough problem, because they really just still can't afford these properties. A lot of mortgages get reworked, people end up defaulting on them again. The redefault rate is like 50 percent. That tells you how tough the problem is.

ELAM: No, it's really true for a lot of people out there. So, does this mean from the buyers' side that they should be wary or should they look again into the market?

NEWMAN: Well, it's been a good time to buy a home and it might get better, because prices are probably going to keep coming down a little bit. But there's another really important thing to pay attention to, that's interest rates which are finally creeping up. And it looks like they are going to creep up kind of consistently over the couple year. Not spike, but they're going to go up. So, cheap money is not going to be here that much longer. If you can get out and afford to buy a house, it's now is the time to get out and start looking.

ELAM: And then you've also got to take into account the home buyers tax credit which...

NEWMAN: Expires in a few weeks.

ELAM: April 30.

NEWMAN: That's right. And as you point out, you have to have a deal done by then, or under contract, anyway. So, if you're thinking about it, now's the time to get out there. ELAM: So, there are some -- if you can do it, this is the time to do it, but it's still a dicey situation out there.

NEWMAN: Well, if you're in a home, yes. But if you're a buyer, it's looking pretty good.

ELAM: OK, good. Rick, thanks for coming in and helping explain this to us.

NEWMAN: Thanks.

ELAM: All right, and later in the program, we'll reveal the No. 1 neighborhood in the country when it comes to mortgage fraud. And we'll have tips, of course, on how to stop those red flags when it comes to shopping around for a loan.

But, right now, all you moms and dads out there, listen up. The kids are graduating and they need jobs. You probably don't want them sitting around the house. Right? So, we're going to help you help them land their first job. Rod Kurtz is executive editor or AOL Small Business.

ROD KURTZ, AOL SMALL BUSINESS: Get them a job.

ELAM: Yeah, you're already laughing about this. So, you know, there's a lot of parents are, oh boy, what are we going to do? So, how is the job market looking for the 2010 class?

KURTZ: Well, you know, there's panic out there. People see 10 percent unemployment; they think there are no jobs. We have to keep in mind you just need one good job. You just got to worry about yourself. So, I think there's a lot of panic out there. You know, this is a decade ago for me, I found myself in this position, but there are jobs out there. I was moderating a panel at an event for entrepreneurs this week and I said how many are hiring, this crowd of about 200 people. More than half said we're hiring.

ELAM: Really?

KURTZ: So, that's great to see. There are jobs out there.

ELAM: OK, so , but if there are jobs out there, perhaps you come out of college, you've got these big dreams of where you're going to work, but you're saying, think small?

KURTZ: Well, the thing you have to keep in mind is that the job you have out of college is probably not going to be the job you have the rest of your life. So, that's the good news. You can advance your career. But, to your point thinking small.

A lot of people get out of college, recent grads, and they think, I want to go work with a big Wall Street firm or I want to go work for the name brand corporation. The vast majority of new jobs in country are created by small and mid-sized companies. So, it's worth taking a look, not only because they're hiring but you can actually advance your career more quickly at a firm like this, you have more responsibility.

ELAM: And so then how much does it factor in, you higher education that you may or may not have?

KURTZ: Yeah, I think a lot of these smaller companies, you know, I worked with entrepreneurs at AOL small business, and they tell me that, you know, they look at the breadth of someone's resume, it's not just, oh, you went to college, fine, you're in the door. It's interesting experience, it's travel experiences, anything on your resume that can get a conversation going is going to go a long way because they look a deeper beyond just the piece of paper in front of them.

ELAM: OK, so I know you probably get this question a lot, but with sectors -- where are their job?

KURTZ: Well, not surprisingly, health care is obviously an industry that's poised for growth. Not just because what's going on in Washington, but we have an aging population. And they were saying jobs like that are hiring. You know, it's obviously a little more specialized. But we're looking at technology, of course the Web has changed the way business is done and there's a lot room there.

ELAM: So, what if you can't find a job in your chosen field? Should you just go take a job anywhere just to make the money?

KURTZ: I hate to say it, in an economy like this, any job is a good job, right now. Bills pile up very quickly, there are student loans. So, you got to, you know, open your options a little bit. Again, it's not going to be the job you have for the rest of your life. You want to make sure it's relevant that you can sort of grow and it's a part-time job, that I doesn't inhibit you from getting out and looking for your dream job.

ELAM: And looking for other ones. So, you also say that an internship after you graduate is not a bad thing?

KURTZ: Not at all. I have -- my career -- I have the career I have now because I took an internship after college. You know, more and more companies...

ELAM: Me too, actually, I have to say...

KURTZ: See, two success stories, right here.

ELAM: I did, too, after college.

KURTZ: And you know, the thing about it is, again, you have to look at the potential. If you're an employer and you're thinking about hiring, you're not hiring now, once the time comes to hire, who are you going to look at? You're going to look at the interns, the people who have already there that are having a trial run. And most internship are paid internships especially once you graduate from college. So, it's a way to get some money, way to get some experience, way to get a foot in the door.

ELAM: And one last quick note, you're saying networking is not all done online?

KURTZ: That's a problem. It's gotten easier than ever and it's really tainted the whole thing. I mean, there's definitely value to FaceBook and Twitter and LinkedIn when it comes to your career. But, nothing replaces a face-to-face connection. So, I think it's not about the volume of connections, it's the quality.

ELAM: I'm going to agree with you, Rod Kurtz.

KURTZ: There you go. We'll be friends on FaceBook.

ELAM: We'll be friends on FaceBook. (INAUDIBLE) later on. All right, Rod, thanks for coming in.

KURTZ: Good to see you.

ELAM: You too.

All right, according to a new. CNN Opinion Research Corporation poll, nearly three quarter of Americans think the U.S. government wastes a lot of our taxes. Only three percent say not much is wasted. Up next, we've got the list you'll want to hear. Five smart uses for your tax refund. You won't waste a penny.

(COMMERCIAL BREAK)

ELAM: All right, everyone's feeling the pinch. We all know that. And raises and bonuses are rare these days. That tax refund, then, may be your only big chance to put some extra money toward improving your financial situation. And our friends at "Kiplinger's Personal Finance," they've put a list together a list of five smart uses for that tax refund. Contributor editor Kim Lankford, she joins us now from Washington.

Kim, thanks so much for joining us. I'm sure that a lot of people out there thinking, ooh, this money's burning a hole in my checking account. What should I do? You say, on e of the first things to do is take a look at your credit card debt. Right?

KIM LANKFORD, KIPLINGER'S PERSONAL FINANCE: That's exactly right. And especially after this year when the new credit card laws took effect, jacked up their interest rate. So, you may be paying more in interest this year than you have been in the past, so pay down that credit card debt, if you have a credit card that you're paying 18 percent interest on, paying that off is like getting an 18 percent return guaranteed which is hard to get anywhere else. So, that should be your very first priority.

ELAM: And it also looks kind of pretty when you have that zero balance. You also talk a bit about the emergency fund. You know, what if those unexpected events happen? It's nice have that cushion there.

LANKFORD: That's right. And this last year so many people had to dip into their emergency funds, whether they lost their job or had suffered from a natural disaster or just didn't get that raise and bonus to cover some of those extra expenses that they usually have.

So, this is a great time to add that money. We usually recommend people have at least six months of essential expenses in their emergency fund, and if it looks like your job is in jeopardy over the next year, which unfortunately it is for some people, try to boost that emergency fund even more. This is a great painless way to help build that up if you've had to dip into in this year.

ELAM: Yeah, that's true. And then there's lot of people out there who may say, you know what, I have no credit card debt, I've got my cushion, all of these lucky, well-planned out people, you say that you can still take that money and put it towards the future, right? Take a look at retirement?

LANKFORD: That's correct. And if you qualify for a Roth IRA, that's an amazing way to save for retirement. You can put your money in now and then you can access it after age 59-1/2, totally tax-free. So, especially if you're young that can grow for the future for a very long time.

The other thing, it can kind of serve as an extra emergency fund, if you really need it. You can access those contributions tax and penalty-free any time. But put that money in, you can put $5,000 in for 2010. The 2009 deadline just passed, but for 2010, $5,000 or $6,000 if you're 50 or older.

ELAM: All right, and I have to ask you about this, too. I know some parents are, hmm I could help my kids pay for college. Is that a good way to do it?

LANKFORD: This is a great way, because it's so hard to juggle all of those different priorities that you have, whether it's saving for retirement, paying your own bills and saving for your kids' college and we always recommend people save for retirement first, because there's no scholarships for that. But this is a great way to put extra money and feel comfortable putting extra money away for your kids' college.

We recommend investing in a 529 plan, then they can use the money tax-free for college costs, and in many states you're going to get a state income tax deduction for that contribution. On Kiplinger.com we have great map that shows you all of the state income tax situations and some of our favorite plans. So, it's a great idea to look at that, see if you get a tax break at look our best...

ELAM: All right, Kim, thanks so much for that great advice. And know people are thinking about what they're going to do with the money. Kimberly Lankford, coming from us from "Kiplinger's Personal Finance."

All right, we've all gotten that sky-high out of control utility bill at least one time. Right? Well, this morning we're investigating the case of the $1,200 water bill. I'm not joking, I didn't make this up. How could something like that happen? And maybe your bill, maybe it's not that high, but would you like to slash your utility bills? Your "Weekend Project" coming up next. (COMMERCIAL BREAK)

ELAM: I've got kind of an odd question for you this morning. How often do you listen to your toilet? I know, think about that for a second. Well, if you don't, it could cost you big time on your next water bill. A Michigan water company says a Redford Township woman now owes them more than $1,200 -- $1,200. She told our affiliate WDIV that she doesn't go in her basement that often, that she never heard the toilet running and if she did, she would have gone down and put an end to it.

(BEGIN VIDEO CLIP)

JANET MCWILLIAMS, RECEIVED $1,200 WATER BILL: I knew I would have a larger bill, but I never expected a bill that was 40 times the normal amount I pay.

SAM DELLI, ROTO-ROUTER: You could be talking about 100 bathtubs of water that you're losing n.

UNIDENTIFIED FEMALE: In one week?

DELLI: Yeah. In one week.

(END VIDEO CLIP)

ELAM: OK, so we certainly don't want that to ever happen to you. In fact, you could be spending a lot less on your utilities month to month just by taking a few simple steps around the house and Lou Manfredini, he's a home improvement expert and ACE Hardware's Man and he's here to walk us through what he promises are some very simple changes.

You're saying these are easy things, right Lou?

LOU MANFREDINI, ACE HELPFUL HARDWARE MAN: Absolutely.

ELAM: Let's get through them quickly. And let's start off here with our first diagram here, the dual flush.

MANFREDINI: Right. So, this is a very popular thing in Europe, dual flush toilets have been around for a number of years. They're expensive, they're in the U.S. as well and if you were going to replace your toilet completely, you'd probably spend $200, $400. This system called the Hydroright is a replacement to the your flapper, $25. Five minutes, 10 minutes, maybe and you can create a dual flush toilet, meaning that for solids and liquids...

ELAM: So, up top you push the one.

MANFREDINI: For one.

ELAM: And at the bottom the second one...

MANFREDINI: For two. You can save up to 15,000 gallons of water out of one toilet. ELAM: And most of the flushes are liquids, anyway.

MANFREDINI: Correct, right, so this is a terrific item. It was invented by a plumber and so they really took it -- very simply, how to install it, it slides over the top, replaces your flapper.

ELAM: All right, let's go on to the shower, because in the shower you're saying you can save a lot there by just changing your showerhead?

MANFREDINI: Now, showers are a personal thing for people, how they feel. I mean, some like them to be blasting.

ELAM: I think toilets are too, but, yeah.

MANFREDINI: Exactly. And some like a nice, soft rain. But whatever, low flow shower heads, simple to install. It literally is righty tighty, lefty loosy. Many different manufacturers out there. The 2.2 mandated by the EPA, but there are also 1.5 gallons per minute and even .5. You can save a lot of money or water bills just by changing out a showerhead that he had can cost as little as $25.

ELAM: So, that's an easy one, too. All right, let's go from water to electricity. Tell me here about this power meter.

MANFREDINI: The power meter is an interesting one because a lot people sometimes wonder why is my electric bill so high? What's going on in my house that is causing the draw so much? This system, this meter, you can plug things in, it's called a Kill-O-Watt. You plug it in and it'll tell you exactly how much energy it's using.

So, that whole idea about vampire power, where if you have a cell phone charger plugged in, but the phone's not plugged in to it, it's still drawing. And so if you eliminate a lot of those things, those vampire draws and know what you're pulling in, you can lower your electric bill.

ELAM: That's a pretty good one. All right, I think a lot of people know that there's changes coming in the world of light bulbs. This one is really schnazzy (ph) looking. I haven't seen it before.

MANFREDINI: This is the new LED which has now come down in price. This is the future of lighting. CFLs are still out there, people are using them like crazy, but this will go the way of the incandescent bulb. In the next five to seven year, it'll all be LED. The cost has come down. They're doing the same things, you can dim them, the color temperature of the lighting, a lot of people didn't like LED because it was very blue. This is where it's going, and it's now become more affordable.

ELAM: And those costs are coming down and you can still dim them, so you can put them up in your bathroom, as well, and it'll be great.

MANFREDINI: And they literally will last 30,000 hours. ELAM: I have to say, with this next one here, with the programmable thermostat, my dad said get one of those when I bought my first place and he was so right.

MANFREDINI: Here's the thing, most people have them, but they're not using them. If you don't program them and actually put them to manipulate the temperature, every degree saves you three percent on your bill. By manipulating the temperature when you're under the covers or you're away at work, you can save up to 20 percent on your heating and cooling energy that's used to make you comfortable in your home.

ELAM: And it's a lot easier to get out of bed in a cold house if you have the heat come on first.

MANFREDINI: Exactly.

ELAM: Moving on. Let's take a look at the filters, because you say this is a good one?

MANFREDINI: Yeah, pleated filters. This twofold, the easier you make it for your forced air system to work the less energy it uses. By using pleated filters you capture more of the particulate in the air, so your indoor air quality is better as well. The key with these is they cost a little more, and you change them maybe every month or every six weeks, but you will benefit greatly from energy savings and air quality inside your home.

ELAM: Yeah, so if you have allergies that's a good thing, too.

MANFREDINI: Oh, yeah.

ELAM: Lou Manfredini, thank you so much.

MANFREDINI: My pleasure. Thank you.

ELAM: Helping people with their projects this weekend.

All right, still ahead, and we cannot stress how important this is, estate planning. Our legal eagle, Sunny Hostin joins us with a step-by-step guide to getting your affairs in order.

Plus, what you need to know right now about avoiding mortgage fraud.

(COMMERCIAL BREAK)

ELAM: OK. I'll admit it. this is a topic no one wants to deal with it, but the fact is, everyone needs to deal with it. Estate planning, it's complicated, it's unpleasant, but it could save your loved ones additional pain and frustration down the road. So, here to help us this morning is Sunny Hostin from "In Session," our sister network, Tru-TV.

Sunny, thank you so much for being here to help us flush this out. First of all, tell us why is life planning so important. SUNNY HOSTIN, IN SESSION ON TRU-TV: Well, it is really important because you don't want the state to deal with your property and your finances and what your children will get. You want to be able to plan that during your life, and as you mentioned, no one wants to deal with the "D" word, which is why I like to call it "life planning."

ELAM: Yeah, so let's start up with the first question, then. What do you need when trying to get your life plan in order, here?

HOSTIN: There are three simple documents that I think everyone should have. You should have a will, you should have a health proxy and you should have a power of attorney. Those are documents that while you may want to have a lawyer do them, you can actually do them yourself.

ELAM: OK, and then some people will say, why do I need a will? I don't have any assets?

HOSTIN: Well, you know, you really do -- most people do have assets. If you are under 50 and you've worked, and you have children, you own any property, you own anything that you want someone to have, then by all means, you should have a will. It's really about planning your life and having control.

ELAM: And so what is in this will, then?

HOSTIN: OK, there are a couple of basic, basic things. The will leave property to the people you choose. It will name a guardian. This is very, very important, Stephanie. It will name a guardian to help care for your minor children.

ELAM: That is huge.

HOSTIN: It is huge. And it will name someone to manage your property to leave to those children. Everyone wants to take care of their children and it will name an executor who carries out the terms of that will. Those are the very, very simple, simple things that you need.

ELAM: It's a part that should be in there. All right, so then what's a power of attorney?

HOSTIN: Power of attorney is a little more complicated, but I also think it's something that you need. A power of attorney will allow someone to basically administrate your will. It ensures that someone you trust will manage the many, many financial tasks that can arrive if you become incapacitated, if you become sick, as well, if you cannot speak for yourself. That person who should know and trust you will do it for you.

ELAM: Sunny Hostin, thank you so much for coming to break it down for us. I know it's difficult, but it's really important.

HOSTIN: Thank you.

ELAM: All right, fraud, I know, it's another dirty word, but so important you really know exactly how to spot mortgage fraud. It happens to the best of us. How to make sure it doesn't happen to you, next.

(COMMERCIAL BREAK)

ELAM: When we talk about the mortgage meltdown, cities that come to mind are places like Las Vegas, Orlando and Detroit. But, according to a new study out from First American CoreLogic, the No. 1 neighborhood for mortgage fraud is actually right here in our backyard. The fraudulent home loan rate in the nine square miles of South Jamaica, Queens, north of JFK Airport is four times the national level.

Mortgage fraud is a big problem everywhere and for you, your family and your friends, it's important you know how to spot it. Get references for real estate and mortgage professionals and make sure you check them. Make sure their licensed with the state, the county or the city and if buying a home, are wary of no money down, cash back at closing investment opportunities.

And do not, and I repeat, do not sign any blank documents or paperwork that contain inaccurate information. And make sure you thoroughly read and understand everything you're asked to sign. If you don't understand something, talk to your attorney and make sure everything is explained. If you're having trouble making your monthly mortgage payments, be wary of offers to save you from foreclosure. You could lose thousands of dollars in fees and end up losing your home anyway. So, something to keep in mind.

All right, we'll see you right back here next week for YOUR BOTTOM LINE, the show that saves you money, same time 9:30 a.m. Eastern on Saturday. And don't miss CNN's chief business correspondent, Ali Velshi on "YOUR MONEY" today at 1:00 p.m. Eastern and tomorrow at 3:00. But right now, it's time to check on your top stories on the CNN "NEWSROOM." Have a great weekend.