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Examining the President's Foreclosure Plan; President Obama Speaks About Wasteful Spending; World Court Issues Arrest Warrant for Sudan Head of State; St. Louis Left Out of Stimulus?
Aired March 04, 2009 - 10:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
HEIDI COLLINS, CNN ANCHOR: Help for homeowners. A new bailout plan just unveiled. Will it really help all of us? The economic recovery plan, and the first project is funded. It's a bridge. And some say it's a boondoggle.
And Wall Street sinks. Your retirement savings shrivel. Is it still wise to do nothing? It's Wednesday, March 4th, I'm Heidi Collins, you're in the CNN NEWSROOM.
Your money, your trust. They're at the center of events happening right now in Washington. At any moment, President Obama will speak on his plan to save you tens of billions of dollars. Also this hour, spending your billions. Treasury Secretary Timothy Geithner returns to Capitol Hill. His focus, next year's budget.
And truth in government. Did the Bush administration condone torture? A hearing into a possible investigation.
Our top story this morning, keeping Americans in their homes. The Obama administration unveils a rescue plan for homeowners on the edge of foreclosure. CNN personal finance editor Gerri Willis has the details, and Christine Romans is tackling the bigger question, will it work?
We're going to begin with Gerri this morning. Details, Gerri, on who qualifies for the president's foreclosure prevention plan.
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Yes. These are just coming out today, actually. The program is called "Making Homes Affordable" and it is a foreclosure prevention program, really, that is rolling out today, according to press releases the government is handing out, essentially they're going to have treasury representatives, representatives of the federal government going out across the country to talk to people about their mortgages, who is eligible for these programs, because the devil is in the details, and there are a lot of them.
It will help, for example, people with second mortgages, the problems with previous rescue programs, they didn't help people with second mortgages. Appraisals may not be required for all refinancing. That could be a very big deal. Let's break down now these programs, because there are two big ones. Let's look at the first initiative.
If you are you said water in your mortgage, you owe more than the house is worth, but you can't refinance because of the falling home prices, you can get some help here. Your loan has to be held by Fannie Mae or Freddie Mac, easy peasy way to find that out, call your lender, and they can tell you. You have to be employed, you have to have some income to actually get the help from this program, because you have to be able to cover the mortgage.
Also, this allows you to refinance into a loan with a lower monthly payment, or to avoid a rate reset. So the idea here is to bring down what you're paying each month. Bad news here, you don't get a principal reduction, there is no reduction in the total amount you owe, but you save money over the life of the loan because you're paying less interest.
The second initiative is for a different group of people, it's for people who are behind on their mortgage or at risk of losing their home. They're having really troubles here. This is your program if you are behind on payments. The mortgages is on your primary home, that means this is a house you live in, this isn't an investment, you're not flipping this house, this is your full-time residence. Your monthly mortgage bill is more than 31 percent of your monthly gross income. Why 31 percent? Because that's really the rule of thumb for affordability.
If you pay more than that, you're at risk of losing your house. Now what lenders out there will do for people in this situation, they'll lower interest rates and/or principal balances for a modification of your existing loan. So you'll get changes, bells and whistles to your loan, the maybe lengthen the time may be lengthened, some of your debt may be forgiven. It's estimated this will help three to four million homeowners avoid foreclosure.
Now, the first of those programs I mentioned actually ends in June 2010. There will be sunset dates for all of these. So be sure to get in there, and get your - make your phone call to your lender. Lenders, servicers, housing counselors will be the lead on this program. That's who you need to pick up the phone and call to make sure you get some sort of help. Heidi.
COLLINS: All right. Wow. People really are going to be trying to understand the details included here.
WILLIS: Right.
COLLINS: Thanks so much.
Gerri Willis, appreciate that. Now let's take a closer look at the plan and whether or not it will actually work. That's the big question. Of course Christine Romans, part of the CNN Money Team, she is joining us now from New York. Do you have the answer to this already?
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: We don't have the answer yet. And I can tell you what the goal of it is...
COLLINS: Sure.
ROMANS: And I can tell you a lot of people want to know whether this will help stem the declines in the housing market, or will it simply help seven to nine million people, as the government promises and wants, and that's - and that's a start. Keep in mind, you know, Gerri and I and others have been reporting about the - about the problems with foreclosures and the problems in the housing market for some time now. There are economists who say we're a little - we're behind this.
We're still behind the problem in the housing market. And, indeed, the most recent numbers are showing that more and more people are under water every day. A study by First American Core Logic found that 20 percent - 20 percent of homeowners in this country right now are under water on their loan. What does that mean? That means they owe more on the house than the house is even worth.
COLLINS: Right.
ROMANS: If they had to sell the house today, they would have to write a check when they walk in. Walk into the closing. I mean, they are under water. And it's a tough position to be in. As Gerri pointed out, this first plan would help people refinance who are under water. It's been something that's - not all people, keep in mind, but some people who are under water.
Now, I asked Rich Gamon (ph), an research smart economist on what he thinks about this, will this plan help the overall economy? Since I said, the problem here has been housing, that was where this all started. So does this work to solving the problem in the economy? And he said no. The problem was housing. Now the issue is joblessness. And if you are jobless, and that is spreading, this does not address your situation.
This is for people who can still be helped, not people who are in the throes of long-term unemployment here or potentially could be unemployed. So there's the issue there. Also, a couple people have been saying we know that modifications don't always help everyone. We know that there are certain number of people who even after they have a loan modification, six months out, they're - you know, they're behind again.
There are some interesting things in here in this plan, I think, in terms of rewards and incentives for people who keep paying on time. That's an interesting part of this that I haven't seen before. It may be in some of the other programs, but I just haven't seen it. But this is the most expansive set of rules and guidelines that we have seen yet, and so a lot of people are saying that they're pleased with that part of this. Whether it will help the overall economy, we just don't know. There's so many different moving parts, we just don't know.
But clearly, the government is putting an awful lot behind it, and they hope seven to nine million people will be - will be helped by this. Will qualify and be helped by this. So that's the biggest foreclosure mitigation plan we have seen so far.
COLLINS: OK. Christine Romans, again, we'll be sifting through all of the details. Sure do appreciate it. ROMANS: Sure.
COLLINS: From New York this morning.
The former leaders at Countrywide mortgage are now making money off the government's bailout. The "New York Times" reports the company's former president Stanford Kurland now buying up bad home loans from the federal government for pennies on the dollar. Countrywide popularized the use of those subprime loans blamed for bursting the housing bubble.
And a quick look at the Dow for you. Hey, that's kind of a foreign concept. A plus sign. Up double digits right there, just below $100 - 100 points, forgive me, 40 minutes into the trading day. Now resting the Dow Jones industrial average is at 6822. We'll keep our eye on it, of course.
Wall Street worries, though, have many investors wondering about what to do when they are thinking of retirement. And our next half hour, our financial expert answers your questions about your money and your 401(k). A lot of questions out there.
Britain's prime minister making the rounds in Washington. Gordon Brown already met with President Obama. And in the next hour, he addressed the joint session of Congress. During that speech, he is expected to announce Britain is making Senator Edward Kennedy an honorary knight. You can hear that right here on CNN.
Puerto Rico's governor says his government is bankrupt. Just two months into office, he says Puerto Rico's deficit is four times larger than expected at 3.2 billion. So more than 30,000 government jobs may be eliminated. That would be about 10 percent of the work force. Puerto Rico is also implementing salary cuts and pay freezes for government workers. Some union leaders are calling for protests this week.
And we want to let you know, of course, we are awaiting remarks from President Barack Obama. You're looking at a live shot there, inside the Eisenhower Executive Office Building. He'll be coming to the podium to talk a little bit about what they are calling a broken system of awarding contracts, talking about cutting down on government waste. That is the topic today. And once again, we will be bringing that to you, just as soon as it happens.
Snowplows, shovels and snowblowers have done the trick. They have managed to push most of the snow on the east coast out of way. Recent storms have added to the snow pack in California, but state water officials say it is too little, too late to fill the major reservoirs. And the state remains in a serious drought. Rob Marciano standing by. We are talking about this a little bit earlier in the show, Rob. They need more.
ROB MARCIANO, CNN, METEOROLOGIST: They do need more. They get a the lot of that water from snow pack, so they're about 80 percent or change, I think, after this week, that may very well be up to 90 percent. We'll see what the rest of the month holds. Twenty-two degrees currently in New York, 19 degrees in Boston, 26 in D.C. and 34 in Atlanta. We were below freezing across down parts of northern Florida this morning. So definitely feeling a little like January than - than March.
Check out some of these record lows, north Myrtle Beach, South Carolina, 21. Lynchburg, Virginia eight. Islip, New York there, in central Long Island, 5 degrees. So definitely a cold start to the day. It will remain chilly across the northeast. A bit of a warm upcoming tomorrow, and then right through the weekend. But the bigger story is really what's going on out west, a pretty big storm out here. What's going to happen today will be more in the way of showers and potentially thunderstorms.
We did have delays at Newark and at San Francisco a little bit earlier, but it looks like those have since been dropped. I think you may very well see some additional delays in San Francisco, maybe San Jose in Los Angeles later today. But you can see that the showers are pretty spotty. There will be more convective in nature, meaning they'll just bubble up throughout the afternoon and because of that might see some thunder and lightning as well, and the potential for hail with some of these showers and storms as they continue to formulate.
The air mass above is pretty cold, certainly cold enough to support snow at the higher elevations. Winter storm warnings posted again, two, three, maybe four feet of additional snow expected in the high Sierra today. 62 degrees in L.A., it will be 82 degrees in Phoenix. 78 degrees in Dallas and 67 degrees in Las Vegas.
Let's show you Vegas. There you go. KLAS is our affiliate out that way. A little bit of a haze, but the sun is just coming up over the strip. Temperatures there are in the 50s, and you'll get up into the mid to upper 60s. It will be a little bit of a breeze. Look at them pulling out the lens there, Heidi.
COLLINS: Yes, that's what we're watching.
MARCIANO: Well, that's - I mean, well you know, they're always up there, even though it's early in this Vegas, somebody is up and...
COLLINS: You can bet on that.
MARCIANO: Oh, no she didn't! Nice work. Nice little pun there. Tomorrow's high, if you care, Heidi, 81 degrees in Dallas and 78 degrees in Houston where they're having the rodeo. I know you pointed that out to me and you'll be putting your hat on and all the other gear.
COLLINS: Yes, my hat, boots. Yes. I do have those. All right. Anyway, sure do appreciate that, Rob. We'll check back later on.
MARCIANO: All right.
COLLINS: Meanwhile, not giving up hope. The Coast Guard has called off their search for three missing boaters. But friends of the men are going to keep looking. Missing are NFL players Marquis Cooper and Cory Smith, along with William Bleakly.
(BEGIN VIDEO CLIP)
BRUCE COOPER, FATHER OF MARQUIS COOPER: The Coast Guard can call off the search. But we will not give up hope that Marquis is out there fighting and trying to return.
(END VIDEO CLIP)
COLLINS: The Coast Guard rescued a fourth man on Monday. Their search yesterday turned up a cooler and a life vest. 16 miles from the overturned boat. The four men were fishing off Florida's gulf coast. Their boat was knocked over during bad weather on Saturday night.
Once again, this live picture for you inside the Eisenhower Executive Office building. Waiting for the president to come out. He's going to be speaking today about wasteful spending, talking in particular about trying to reform what he calls a broken system of awarding contracts. So specifically they are going to be talking about a couple of new ideas, and some - let's see. I guess it's actually the budget director who is going to work now with cabinet officials and agency heads to develop some new guidance on contracting, apparently going to be coming into play by the end of September, they say.
So we are watching very, very closely. For more details on exactly what this will mean. Once again, President Obama expected to speak any moment now on government waste. We'll bring it to you when it happens.
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ANNOUNCER: This is CNN, the most trusted name in news. Now back to the CNN NEWSROOM.
COLLINS: Quickly, as we await the president coming to the microphones, talking about wasteful spending today, we want to get this out to you, because we are just now learning the CNN NEWSROOM of a Supreme Court decision. They have decided to uphold a nearly $7 million award to a musician who actually lost her arm, because of a botched injection of a drug called Phenergan, it's an anti-nauseousal medication.
Sixty-three decisions Wednesday that the court rejected Wyeth Pharmaceuticals that federal approval of this drug, Phenergan, should have shielded the company from lawsuits like the one filed by this person Diane Levine of Vermont. What it means is - second in this term that rejected business group arguments that federal regulation effectively preempts consumer complaints under state law. And that is why this is important. In fact, we have CNN producer Bill Mears on the line with us. So Bill explain further why this is important? Why do we care about this ruling?
BILL MEARS, CNN PRODUCER: Well, it really means whether people can actually go into state court and actually sue drug companies for faulty product labeling.
COLLINS: Little guy versus the big guy.
MEARS: It does. The drug companies claim that because the federal government has oversight over drug labeling, drug safety that preempts or prevents anybody from calling it a state court to making the claim.
COLLINS: So moving forward, what does this mean to anybody who may have to take an injection of this anti nauseousal, this Phenergan.
MEARS: Well, it's just doesn't do with Phenergan, it can deal with any kind of prescription drug. I mean, it's one of the biggest cases the high court has addressed in years and the stakes are enormous. It really picks business interests against consumer advocates and trial lawyers who represent them.
COLLINS: So putting it in perspective for us, this is a huge deal.
MEARS: It is. The case deals with the Vermont musician who made a living playing the guitar, recording records, she lost an arm to gangrene from this common prescription drug, Phenergan, which was used to treat her nausea. Her arm was amputated below the elbow. She said her career was devastated and she suffered enormous physical and psychological problems since then.
COLLINS: All right. Very good. We sure do appreciate you bringing us perspective on this Supreme Court decision here. Very good. CNN producer Bill Mears for us today. Thanks so much, Bill.
Meanwhile, I want to get back to the shot inside the Eisenhower Executive Office Building there, waiting for President Obama to give some remarks on ways that he sees wasteful spending can be cut down on specifically talking about some government contracts here. So we will get to that just as soon as he arrives.
Killing, torture, rape. The atrocities in Darfur widely known for years, and now the World Court at the Hague has issued an arrest warrant for a sitting head of state. Sudan's president facing crimes of war crimes and crimes against humanity. We get the very latest from CNN's Robin Curnow in Johannesburg.
Good morning to you, Robyn.
ROBYN CURNOW, CNN CORRESPONDENT: Hi there. Well it is quite a remarkable decision, it's the first time a sitting president has been issued with an arrest warrant. Now, you might be surprised to know that many African leaders do not support this arrest warrant. They believe it's going to be detrimental to any peace process in Darfur. So the response here on the continent is one of negative activity toward this World Court giving this decision. They believe that peace and security in Darfur should be dealt with properly. They're worried also African leaders, about a possible backlash that the Sudanese government, Sudanese forces against international aid agencies, and, of course, those villages who are in camps and are vulnerable towards any violence.
So really a controversial decision here on the continent. And what is also important is that it's controversial, because the debate here in Africa is not just about support for Bashir. They say, listen, we agree that whoever is responsible for the crimes against humanity in Darfur should be brought to justice, but not just yet. African leaders say justice delayed, so indeed controversial discussions here in Africa after this landmark decision by the World Court.
COLLINS: All right. CNN's Robyn Curnow for us live this morning from Johannesburg. Thanks so much, Robyn. Appreciate that.
Once again, a look inside now at the Eisenhower Executive Office Building, we've been waiting for the president to arrive and make some comments about wasteful spending. We see him walking into the room now, and obviously several of his cabinet members standing behind him. Let's go ahead and listen in.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: If these were the best of times, a budget reform would be long overdue in Washington, and we have here some folks who have been working on these issues for a long time. But these are far from the best of times. By any measure, my administration inherited a fiscal disaster. When we walked in the door, we found a budget deficit of $1.3 trillion, the largest in American history.
And this fiscal burden has been compounded by the most severe economic crisis since the Great Depression. It's a crisis that requires us to take swift and aggressive action to put Americans back to work. And to make the long-delayed investments in energy, health care and education that can build a new foundation for growth.
As we get our economy moving, we must also turn the tide on an era of fiscal irresponsibility so that we can sustain our recovery, enhance accountability, and avoid leaving our children a mountain of debt. And that's why, even as we make the necessary investments to put our economy back on track, we're proposing significant changes that will help bring the yawning deficits we inherited under control.
We are cutting what we don't need to make room for what we do. The budget plan I outlined last week includes $2 trillion in deficit reduction. It reduces discretionary spending for nondefense programs, as a share of the economy that by more than 10 percent over the next decade to the lowest level in nearly half a century. I want to repeat that. I want to make sure everybody catches this.
Because I think sometimes the chatter on the cable stations hasn't been clear about this. My budget reduces discretionary spending for nondefense programs as a share of the economy by more than 10 percent over the next decade. And it will take it to the lowest level in nearly half a century.
In addition, today I'm announcing that part of this deficit reduction will include reforms in how government does business which will save the American people up to $40 billion each year. It starts with reforming our broken system of government contracting. There is a fundamental public trust that we must uphold. The American people's money must be spent to advance their priorities, not to line the pockets of contractors, or to maintain projects that don't work.
Recently, that public trust has not always been kept. Over the last eight years, the government spending on contracts has doubled to over half a trillion dollars. Far too often, the spending is plagued by massive cost overruns, outright fraud, and the absence of oversight and accountability. In some cases, contracts are awarded without competition. In others, contractors actually oversee other contractors. We are spending money on things that we don't need, and we are paying more than we need to pay. And that's completely unacceptable.
This problem cuts across the government. But I want to focus on one particular example, and that is the situation in defense contracting. Now, I want to be clear. As commander in chief, I will do whatever it takes to defend the American people. Which is why we have increased funding for the best military in the history of the world. We'll make new investments in 21st century capabilities to meet new strategic challenges.
And we will always give our men and women the - in uniform the equipment and the support that they need to get the job done. But I reject the false choice between securing this nation and wasting billions of taxpayer dollars. And in this time of great challenges, I recognize the real choice between investments that are designed to keep the American people safe, and those that are designed to make a defense contractor rich.
Last year, the Government Accountability Office, GAO, looked into 95 major defense projects and found cost overruns that totaled $295 billion. Let me repeat. That's $295 billion in wasteful spending. And this wasteful spending has many sources. It comes from investments in unproven technologies. It comes from lack of oversight. It comes from influence peddling and in defensible no bid contracts that have cost American taxpayers billions of dollars.
In Iraq, too much money has been paid out for services that were never performed, buildings that were never completed, companies that skimmed off the top. At home, too many contractors have been allowed to get away with delay after delay after delay in developing unproven weapons systems. It's time for this waste and inefficiency to end. It's time for a government that only invests in what works.
And what's encouraging is that there is broad, bipartisan consensus on behalf of reform, and we are committed to taking swift action that changes our system of contracting to save taxpayers money. So here are a couple of immediate steps we're going to take.
First, with the presidential memorandum that I'm signing, I am instructing my administration to dramatically reform the way we do business on contracts across the entire government. So starting today, Peter Orszag, my budget director will work with cabinet officials and agency heads to develop tough new guidelines on contracting by the end of September. We will stop outsourcing services that should be performed by the government, and open up the contracting process to small businesses.
We will end unnecessary, no-bid and cost-plus contracts that run up a bill that is paid by the American people. And we will strengthen oversight to maximize transparency and accountability. All together, these reforms can save the American people up to $40 billion each year.
Second, we must make investments to keep our country safe while cutting back on the waste and inefficiency that isn't. And that's why I'm so pleased to support the goals of the bipartisan effort on procurement reform that has been led by our own Carl Levin and John McCain in the senate. They have done extraordinary work trying to push this issue to the forefront. We want to see if we can partner with Senators McCain and Senator Levin to get this done as soon as possible.
And thanks to Secretary Gates, some of reforms that they have talked about are already beginning to take shape. And I've asked him to work with senators Levin and McCain on developing this legislation as it moves forward, and Bill Lynn who is heading up procurement issues at our White House as deputy secretary of defense is going to be leading the charge on this, as well.
I can assure you that this will be a priority for my administration. It's time to end the extra costs and long delays that are all too common in our defense contracting. We need to invest in technologies that are proven and cost effective. We need more competition for contracts and more oversight as they're carried out. If the system is ready to be developed, we shouldn't pour resources into it. And if a system is plagued by cost overruns, it should be reformed. No more excuses. No more delays. The days of giving defense contractors a blank check are over.
Now, none of this will be easy. We'll have to end old ways of doing business. We'll have to take on entrenched special interests. We'll have to break bad habits that have built up over years, but we can't keep spending good money after bad. All across America, families are making hard choices and now we're going to have to do the same. I can promise you that this is just a new way of doing business here in Washington, because the American people have every right to expect and to demand a government that is more efficient, more accountable and more responsible in keeping the public's trust.
And I also want to acknowledge a couple of congressmen. Congressmen Towns and Congressman Welsh who have been working diligently on this issue, and Claire McCaskill in the Senate who has been sharpening her pencils and working with GS across departments to see if we can make some significant reforms and improvements as well. And, again, thank you to senators McCain and Senators Levin for their outstanding leadership on this issue. We look forward to getting it done.
This is going to be just one more aspect of the kind of reform that's going to be critical in the months and years to come. Thank you, everybody. COLLINS: All right. President Barack Obama talking about government waste, specifically. Talking about government contracts and how they are awarded and for what projects. So there you have it.
Also, the White House promising that billions of dollars of your taxpayer-funded stimulus package are already at work. But some are wondering whether a project to repair a decaying bridge in rural Missouri is stimulus or bust.
Drew Griffin of our CNN's Special Investigations Unit takes us there.
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DREW GRIFFIN, CNN INVESTIGATIVE CORRESPONDENT (voice-over): We're headed to the nation's first project paid for by the nearly $800 billion stimulus bill. It's a bridge across the Osage River in Missouri.
Where's that? Fair to say that's part of the story.
(on camera): All right. Show me where we're going now. We're here, right?
(voice-over): Drive 40 miles south of Jefferson City, then take a left, 10 miles on a two-lane rural road, and we find your stimulus dollars at work -- a handful of truck drivers, a bulldozer, and a crumbling 75-year-old bridge near the tiny town of Tuscumbia, Missouri. It's about three hours from Missouri's second largest city, St. Louis, where the mayor is not happy about the bridge. He says stimulus money in his state is going to rural, far-flung projects almost forgotten until stimulus money started flowing from Washington.
MAYOR FRANCIS SLAY, ST. LOUIS, MISSOURI: This is an insult to the people of St. Louis. It's a violation of federal law, and I think that they're doing -- they're spending this money contrary to the intent of Congress.
GRIFFIN (on camera): Of more than $4 billion in stimulus money coming to the state of Missouri, $600 million will be spent on transportation projects, and the mayor of St. Louis says most of that money should be spent in high unemployment areas like St. Louis, putting people back to work. But the Department of Transportation in this state will spend just $2 million in this city, only enough, says the mayor, to repave a road.
(voice-over): The Missouri Department of Transportation says $200 million will be spent around St. Louis and says the projects are on a "worst is first" priority.
The Osage River Bridge tops that list, even though it's difficult to find on a map.
David Cochran (ph), the project manager here, says there's no doubt it needs replacing.
(on camera): So they're getting a two-year jump -- whoa, there's a perfect example.
UNIDENTIFIED MALE: This is the stuff that will come down.
GRIFFIN: That?
UNIDENTIFIED MALE: That came down there.
GRIFFIN (voice-over): Up the road, at the Red Oak Inn, owner Wes Horton says Missouri has been promising a new bridge for years. It's only the federal money, the Obama money, he says, that has suddenly got things going.
WES HORTON, OWNER, RED OAK INN: I think they ought to spend all their money on things like this instead of buying the bankers out.
GRIFFIN: There are will be 30 jobs here directly connected to this $8.5 million project. But like the Obama administration, Cochran says this one project will be a jobs multiplier: steel workers, concrete haulers, even the gas stations supplying fuel, an estimated 245 jobs created or saved from this one rural bridge.
Bunk, says university of Missouri economist, Michael Sykuta.
MICHAEL SYKUTA, UNIVERSITY OF MISSOURI ECONOMIST: There's been a lot of research done on the Great Depression. Most of that work and the general consensus of my economic report is that it didn't work. That there were a lot of people deployed, but it didn't create a net long-term growth in the economy.
GRIFFIN: St. Louis Mayor Francis Slay says the Osage River bridge project is just plain wrong in the middle of nowhere and nowhere on the road to recovery.
Drew Griffin, CNN, Tuscumbia, Missouri.
(END VIDEOTAPE)
COLLINS: Help for struggling homeowners. How to qualify for the president's foreclosure prevention plan. Got questions? We got answers.
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COLLINS: Keeping people in their homes. That's the goal of a new program being unveiled by President Obama. It sets aside $75 billion to help homeowners avoid foreclosure. For millions of struggling homeowners, it could mean lower interest rates.
Let's get down to the basics now. Who qualifies for the president's foreclosure prevention plan? Very important to understand that. CNN personal finance editor Gerri Willis is here with some answers. Hi, once again, Gerri.
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Hi, Heidi.
COLLINS: What we did here is we pulled these questions from the HUD Web site, Housing and Urban Development, of course. Clearly, we're not the ones -- the only ones, anyway, who are confused. So, let's get to the first one. It says this: "What help is available for borrowers who can stay current on their mortgage payments but have seen their homes decrease in value?"
WILLIS: All right.
COLLINS: Good question.
WILLIS: Yes, this is a great question. And these are people, lots of people across the country, their homes have reduced in value, they're making their payments, they're really worried. Under the plan announced today, eligible borrowers -- that's you out there who stayed current on your mortgages, but have been unable to refinance due to lower interest rates because your home has decreased in value -- may now have the opportunity to refinance into a 30- or 15-year fixed rate mortgage.
The good news today, you don't have to go out and pay for an appraisal. They're going to do it with other kinds of ways of evaluating home values instead of having an actual person come to your house. So if you're out there, you will be able to re-fi into a new loan.
COLLINS: OK. How do I know if I'm eligible?
WILLIS: All right. So, the rules are, you have to be current on your mortgage. You can't be late. But you can't refinance because of just falling home prices. You have to fit into a range of falling home prices. Your mortgage can't be less than 105 percent of your current mortgage value. The loans have to be held by Fannie Mae and Freddie Mac.
What does that mean? Well, simply ask your lender if it is. This speeds the process. This is the reason the government is doing it this way, because they have lots of info on these loans. Also, you have to have enough income to cover your mortgage payment. You can't be out of work.
COLLINS: Yes, that's a big one.
WILLIS: You're not eligible if you're a homeowner whose property values have dipped severely, putting you under water by more than 5 percent. You're out of luck. And by under water, I mean you owe more than the house is worth.
Those with jumbo mortgages, if you have a house -- a mortgage that's over $729,750, you do not qualify. You have to be under that limit. Go to hud.gov. At this site, you'll find guidelines about qualification, how to find your servicer. They've got the details on this program up right now. It just went up I think in the last 10 to 15 minutes. So you can really go online and find more details -- Heidi.
COLLINS: All right. Here's another frequently asked question, if you will. What help is available for borrowers who are at risk of foreclosure, either because they are behind on their mortgage or are struggling to make the payments.
WILLIS: This is the other program that the government is really giving details on today. If you're behind on your mortgage or struggling to keep your loans current, you can qualify for a loan modification. Now, under a modification, the interest rate on your loan could be lowered, or the principle balance you owe could be reduced.
Now, the government is offering mortgage lenders financial incentives, money to modify existing mortgages, and it helps that the majority of lenders will come onboard. But I have to tell you, we're going to have to wait and see how many of them do. But this is an important part of the program.
COLLINS: Yes, absolutely. All right. Trying to understand it all. Thanks so much, Gerri Willis, our personal finance editor.
COLLINS: On Wall Street, it's all about jobs this week. Friday, we get the big monthly employment report from the government. A separate report, though, out today may be an omen of what to expect. Susan Lisovicz on the floor of the New York Stock Exchange now with details. Hi there, Susan.
SUSAN LISOVICZ, CNN CORRESPONDENT: Hi, Heidi, and that omen is coming from ADP. This is the company that processes payrolls. It said that the U.S. economy lost just under 700,000 jobs in the private sector last month. So, we are seeing numbers that are getting worse, not better. And by the way, ADP also revised January numbers downward.
We're also seeing signs that this recession is broadening, because we're seeing smaller companies now getting hit harder. They tend to be very lean. They had been holding up, and so we're seeing that, as well. ADP says it expects downright gruesome numbers, employment numbers that is, over the next few months. And, of course, Friday we get the jobs report, a more inclusive report from the government. We're expecting the unemployment rate to tick higher to 7.9 percent from 7.6 percent.
As for stocks, they are ticking higher, for a change. The blue chips right now, certainly off their highs for the session, but right now, the Dow is up 71 points. The Dow Jones Industrial Average had been down 11 of the last 13 sessions. The Nasdaq, meanwhile, up 21 points -- Heidi.
COLLINS: OK. Last time around, you were sort of mentioning about bare market bottoms, and how they're usually found when the mood is terrible, really, really bleak. How does all that work?
LISOVICZ: Well, because you know, you simply -- things -- you start to look forward, Heidi. You start to look forward, and you see, for instance, maybe the declines are not getting as bad, or for instance, in the stock market that you just get to a point where, whether it's a capitulation or just a level that you find some sort of push, and that is what everyone is hoping for. But in the meantime, of course, this is no ordinary bear market. This is no ordinary recession. A number of people are calling it the great recession, and unlike the last two, we're seeing that broader, as well. It's not just white-collar professionals who are hit, financials, techs, that kind of thing. It's also blue-collar workers, for instance, in construction, hotel, retail, manufacturing.
And we're seeing those rising job losses translate to other areas. For instance, we've got bankruptcy filings that rose 29 percent in February. Ninety-eight thousand people filed for personal bankruptcy in that month alone. So, real pain.
But Ben Bernanke, speaking this week, said he believes the recession will end this year. Recovery will begin next year. And many other economists agree. Got to keep your eyes -- recovery will come.
COLLINS: And your fingers crossed.
LISOVICZ: Time line has been pushed back a little bit, but a lot of folks do see recovery within this year.
COLLINS: Let's keep talking about that. Let's make that happen. Meanwhile, as you stand there, Susan, we've gone to triple-digit gains now in the Dow Jones Industrial Averages, so once again watching those numbers very closely, just barely at 101. All right, Susan, thank you.
LISOVICZ: You're welcome.
COLLINS: Your 401(k) retirement savings disappearing right before your eyes. It's a big concern for millions of people. So we asked for your e-mails, and you asked so many good questions, we thought we would put some of them to an expert.
So joining me right now, financial planner June Walbert. Thank you, June, for being here and being a good sport on this, because we want to make sure that we answer as many questions as we possibly can.
The first one -- let's get straight to it, if we could -- from Laura. She wants to know this: "I am unemployed and currently collecting unemployment benefits. I will have to cash out my 401(k) very soon just to survive. I was wondering if the government has cut the early withdrawal penalties yet, or if there are any plans -- immediate plans to do so."
JUNE WALBERT, CERTIFIED FINANCIAL PLANNER: There's been talk about that, but nothing has been passed, so as it stands right now, the penalty would still apply. Obviously, this is a measure of last resort. So, if this is what she has to do, then consider rolling that 401(k) to an IRA. From either account, you can take a withdrawal for a 60-day period of time. There's that brief window in there.
But the difference is from an IRA, there's no mandatory tax. So, that means that Laura will have more to work with for a longer period of time, and will not have any taxes due until next April 15th. COLLINS: OK. Any down side to that, any catch? Because it feels like to me, boy, that's exactly what everybody should do.
WALBERT: Oh, well, the down side is that you're taking money out of your accounts that you have for the future...
COLLINS: Well, sure.
WALBERT: ... to fund expenses today.
COLLINS: Sure. I just mean in comparison to switching over to the IRA. If you know you're going to take the money out anyway.
WALBERT: Yes, no, I think I would go ahead and switch over to the IRA. One of the things that it does limit is if she gets another job soon, and we hope that she does, she could put that money right into the new employer's plan and retain borrowing power, where you don't have much borrowing power within an IRA, only for that 60-day window.
COLLINS: OK. Understood. I knew there might be just at least a little catch there. All right.
And from Wayne now. He wants to know this: "My 401(k) has lost about 50 percent in the last year. Was to use this for my daughter's college education." We've been hearing that from a lot of people. "Do I use what is left, or do I borrow and keep what is left invested?"
WALBERT: When it comes to kids' education, don't look at the 401(k). It's not meant for that. It's meant to fund retirement. There are plenty of other resources that you can look to, such as grants, scholarships, maybe student loans, maybe the kiddos can work and save during college.
COLLINS: There's an idea.
WALBERT: There we go, that's right. Put them to work. But you need to leave your retirement savings for what they're intended. And that is to fund retirement.
COLLINS: I'm trying to put my 8-year-old to work, right now. All right. This one, then: "I'm a recent college graduate currently working at my first job. Should I be contributing as much as I can to my 401(k), given the stock market lows?" That coming from Tina in New York.
WALBERT: Yes, Tina. Please do that. She's probably 22 or 23 years old with about a 40-year time horizon. That's a long time to let your money work for you. So, she should invest in the company employer -- the employer-provided retirement plan. That is particularly if there's a match.
Some businesses are cutting those matches right now, so she needs to keep an eye on that. An alternative is a Roth IRA. So that's after-tax money, and the growth can be withdrawn tax-free later on down the road in retirement. So, it's a wonderful thing. Bottom line, Heidi, save, save, save.
COLLINS: Yes, yes. Any chance you get. Very, very quickly, the last one from Paula. "My husband and I are at odds about what to do with our investments. We have two young children, 5 and 2, and have maxed out our 401(k) since we started working. At its peak, our 401(k)s were valued well above 300,000. They're now below 150,000. I'd like to protect what we still have, move our money to cash and get back in the market when it's on an upswing. But my husband thinks it's too late and that we need to ride it out."
WALBERT: Millions of Americans are having this conversation every night, because of the times that we're in. You know, they probably have a long time left in the work force because they have little kids, and therefore, a long time in the market. So I would consider compromising. That's what marriage is all about. So maybe rebalance to half conservative investments, half stocks, and then do that with future contributions, too. But my hat's off to them for having such great savings habits. Keep up the good work.
COLLINS: Marriage? Compromise? I thought the woman was always right. I don't know. All right, June Walbert, sure do appreciate that, and we will talk with you again, I'm sure, another time. Lots and lots of questions out there from everybody, it seems.
Viewers like you, in fact, are weighing in on the economic crisis. Our Josh Levs has a look ahead. Hey, Josh.
JOSH LEVS, CNN CORRESPONDENT: Still trying to recover from what you just said because I know my wife is somewhere applauding at the TV right now.
COLLINS: Love that.
LEVS: Love it. OK, I know she does.
So, let's check this out. We're hearing from you in every which way, We've got iReports, we've got Facebook, we've got e-mail and we're looking at a couple questions today which boil down ultimately to this: How much confidence do you have in the economy?
We are about to read your responses in just a couple minutes.
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COLLINS: The government has committed trillions of dollars to projects aimed at fixing the economy. Is any of this making you more confident? That's our question today. And our Josh Levs is hearing a lot from you this morning. Hi, Josh.
LEVS: Yes. It's really interesting, Heidi. I'm going to start off with what's going on iReport today. There's a discussion about this: Are you afraid to invest in the stock market? And one of our superstar iReporters, Chris Moro, spoke with some people about this, including Steve Sanders.
(BEGIN VIDEO CLIP) STEVE SANDERS, IREPORTER: I don't really invest except for my 401(k). And in that case, I don't really look at it, because I looked at it a few months ago, and it just looked awful, so I decided not to look at it anymore. And I feel more at ease. I just hope that it will go back up.
(END VIDEO CLIP)
LEVS: And we heard more of those last hour. You can weigh in at ireport.com. Meanwhile, let me show you a discussion we've got going over here on Facebook. We're asking you in general, broader view: Are you feeling more or less confident about the economy? There's a discussion going on right now at my Facebook page, Josh Levs CNN. You can join in.
Let me show you a few of the responses we got. Leslie says, "We should stay hopeful...I am confident...as they say...can't get much worse, right?"
Let's see over here. Evan: "I feel more confident simply knowing we have an administration that is willing to acknowledge the market needs to be more responsibly monitored. It's been too long that we have trusted in a free market that has, in reality, proven quite costly to the average citizen." Karen writes this: "We'll probably bounce back eventually, but seeing as I was just laid off and my former employer is filing for bankruptcy after eight months in business, and I don't even qualify for COBRA and even with a master's degree, I cannot find work, any work, I'm not as hopeful as Obama."
And let me show you one e-mail we got here from Eric. And we can end with this one. This is CNNnewsroom@cnn.com: "Do I feel more confident about the economy? Ha! I have a dual master's degree in international relations and global environmental policy, am a retired professional athlete and will be moving out of my home because I cannot afford the rent." That's from Eric Hanson.
Let's show you that graphic so we can tell you how you can weigh in, if you want to. The discussion will keep going all day on the Facebook page, Josh Levs CNN, about your confidence in this economy. Also keep those e-mails coming, CNNnewsroom@cnn.com. Heidi, as we were talking about earlier last hour, you know, it changes every day with these new plans. So, it's very interesting to kind of gauge that pulse of how people are feeling.
COLLINS: Yes. Absolutely. All right, well, keep them coming, like you said. Josh Levs, thank you.
LEVS: Thanks.
COLLINS: While the president pushes the economic recovery plan, he also begins to his big push for health care reform. New numbers suggest even more Americans are now living without insurance.
(COMMERCIAL BREAK)
COLLINS: Living without health insurance. The numbers are going up. A new Census Bureau report today shows almost 88 million Americans or one in three under the age of 65 were uninsured for parts of 2007 and 2008. Of that number, three in five were uninsured for nine months or more. And one-quarter were uninsured for the full 24 months during 2007 and 2008.
Now, we are following a developing story out of Orange County, Florida. Our affiliates in that area are reporting a possible break in the murder of a central Florida college student. Nicole Ganguza (ph) went missing in June 2008 while jogging in a park in Orange County. Her body was found the next day inside the park.
Today, local stations are reporting a suspect may be in custody. A search warrant was reportedly served this morning at a mobile home park. The woman's death has been connected to a suspect dubbed the "East Side Rapist." We'll stay on top of that story for you as it develops.
California's Proposition 8 gets a day in court tomorrow. The California Supreme Court is scheduled to hear oral arguments as they try to decide if there is a reason to overturn the same-sex marriage ban. Voters in California approved Prop 8 in November, sparking large demonstrations by opponents. Former federal prosecutor Ken Starr will argue in favor of the ban.
Well, that's it for now. I'm Heidi Collins. You can join me again tomorrow morning beginning at 9 a.m. Eastern. And for now, we're going to take a quick break. Be back with CNN NEWSROOM and Fredricka Whitfield.
