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Open House

Healthcare and the Campaign Trail; Mortgage Reform; Holiday Spending; Shopping Online

Aired November 10, 2007 - 09:30   ET


JOSH LEVS, CNN CORRESPONDENT: Their theory is that people have been eating ice cream wrong all these years. So, this guy actually got a patent on this thing. All right? You put your ice cream cone in that. It automatically rotates it for you, so you don't have to rotate it yourself and do all the work.
T.J. HOLMES, CNN ANCHOR: You just stick your tongue out and this thing rotates?

LEVS: In the patent description that was issued in 1999, it specifically says that this way you can create interesting patterns with your tongue in the ice cream.


HOLMES: Please move on (INAUDIBLE).

LEVS: I'm telling you, this stuff exists. Alright and finally, we want to show you this, the inventor of the sideways bicycle. Let's listen to what he has to say.


LEVS: I thought it will never work, you know, so it's a great antidote to just ride it because then it proves itself, but certainly slightly insane all the time.


LEVS: And people are actually buying this thing. He says you ride your bicycle as though you are on a horse and the movements on the saddle actually create it and you don't touch anything with your hands. A man out of England created something. I'm telling you, if they are buying this thing, they're going to buy the wedgie-proof underwear.

HOLMES: Look at that, it looks like he's getting a wedgie riding the thing.


HOLMES: Look at that.

NGUYEN: It does. That looks a little painful.

HOLMES: All right, we have to let this go, folks, even though we'd love to stay with you. OPEN HOUSE, Gerri Willis. Let's go.

GERRI WILLIS, HOST: Hello and welcome to OPEN HOUSE, the show that saves you money. I'm Gerri Willis.

A year from now, we'll have elected a new president to the White House, but in the next 360-odd days, you're going to hear a variety of candidates talking about a variety of issues. We want to focus on the issues that matter to you: The mortgage meltdown, credit crunch and, of course, healthcare.


SEN HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: Quality, affordable healthcare.




JUDY FORTIN, MEDICAL CORRESPONDENT (voice-over): Healthcare is a hot topic on the campaign trail. But will it be important enough for voters to drive them to the polls?

BILL SCHNEIDER, SENIOR POLITICAL ANALYST: Healthcare will, very likely, be the biggest domestic issue and it could be the biggest issue in the entire campaign, depending on what happens in Iraq.

FORTIN: Political analyst Bill Schneider says U.S. voters are worried about the escalating cost of healthcare and health insurance and they wonder if they can afford it.

SCHNEIDER: Well, they're going to ask one big question, they always ask this: What does it mean for me?

FORTIN: Other political analysts agree it's an important issue but don't necessarily believe healthcare concerns will convince traditional nonvoters to cast a ballot.

THOMAS MANN, SR. FELLOW, THE BROOKINGS INST.: Not so much in producing additional turnout in the election, but in leading many voters to view the political parties and the choice of their candidates through a healthcare lens.

FORTIN: A lens that will be more sharply focused as the 2008 election draws closer.


FORTIN: And Gerri, another very important factor many of these political analysts are talking about this election season: Millions of American voters are worried about losing their jobs. And if they lose their jobs, they say they'll probably lose their health coverage. With costs rising, many don't know if they can afford to pay for it on their own. Now, on the other hand, if voters feel secure in their jobs and they're happy with their coverage, they want assurances from candidates that they aren't going to lose anything they already have.

Gerri, back to you.

WILLIS: Judy, thank you so much for that.

Jeanne Cummings is the chief money correspondent with in Washington, D.C. She joins us to talk about these issues that are going to be affecting our wallets.

Welcome to the show, Jeanne.


WILLIS: All right, let's talk about healthcare. Voters are saying, 41 percent of them saying, hey, this is my issue. Republicans, Democrats, they have very different ideas on how to fix the escalating cost of healthcare. Help us understand what the differences are.

CUMMINGS: Well, broadly, the philosophical differences between the two parties are reflected in their approaches to healthcare. The Republicans rely upon tax breaks and market-driven forces to try to change the system, whereas the Democrats want to use the government more proactively to try to change the system. Broadly, both parties, leaders in both parties, Romney and Clinton and Obama and even Huckabee, are all talking about dealing with chronic care issues because it's pretty...

WILLIS: Yeah, let's talk about that for just a second. Chronic conditions. You know, you don't see much common ground in politics, but this is one of them. What do they mean? What is this common ground? How do they see a solution to this?

CUMMINGS: Well, there's a bipartisan group that has been talking with all of the campaigns on this issue. And basically, what it is you focus on -- you tweak the healthcare system to focus on diabetes, obesity, heart conditions. These are some of the big chronic illnesses that lead to trauma care and big expenses, whereas there have been studies and experiments in the states that show, if you can fix the system so it's designed to identify these illnesses early, enhance treatment early, then both the patient is better off and costs come down.

WILLIS: So Jeanne, it's all about preventative care it sounds like. Let's talk about mortgage reform for a second here. We have many, many suggestions out there, many bills in congress. A lot of the candidates themselves are saying, hey, we got to do something about this. That's the Democrats. The Republicans are saying nothing at all. What is their solution?

CUMMINGS: Well, right now, it appears as though most of the Republican candidates are hoping that the market will either fix itself or that some modest adjustments and programs that the Bush administration has put in place will ease this slip and settle the issue before they have to take office.

WILLIS: Hey, Jeanne, I got to ask you this. So, our e-mail indicates that people do not want to bail out. They don't want to pay for a bailout of people who had problems with their mortgage. Do you think this going to get Democrats in trouble who are suggesting that these people be bailed out?

CUMMINGS: Actually, if you look at the Democratic proposals, they are pretty targeted for that very reason. You are right, Gerri. There's a strong feeling out there in the electorate that these people took those loans in the lending industry, gave it to them and it's their problem and the taxpayers should not bail them out and that's why I don't think we will see a sort of savings and loan-style major bailout by the government.

WILLIS: Very interesting stuff. Jeanne Cummings, thanks for helping us out today.

CUMMINGS: You're welcome.

WILLIS: Another issue consumers will be worried about, the cost of energy. A CNN/opinion research poll says 63 percent of Americans say high gas prices are causing hardship for their family. And with oil prices setting records this week and gas topping out at $3 a gallon in many states, everybody wants some answers. So, here's what you need to know to save some money at the pump.

First off, you want to look at gas rebate cards. They can save you three percent to five percent on your gas purchases. But look at bank branded cards instead of cards you can only use at one kind of gas station.

And don't leave balances every month. The interest rate on these cards tend to be higher than most other credit cards. Cards suggest checking out Discover's Open Road and Chase's Perfect Card. Some good suggestions there.

Now, timing your visits to the gas station is another way to cut your cost. Fill up your tank on the way to work. Most gas stations change their pricing between 10:00 a.m. and noon local time. You won't see much change in price on the weekends other.

Finally, skip the premium octane. Hey, most cars will run just fine on regular.

Coming up on OPEN HOUSE, compensating factors. Why you absolutely need to know what these two words mean to you.

And then, holiday spending: How to avoid drowning yourself in debt and how to make hassle-free online shopping a reality. It's all ahead, but first, your "Tip of the Day."


WILLIS (voice-over): WiFi hotspots are popping up everywhere from airports to your local coffee shop. But be careful the next time you connect. These open networks don't use the necessary encryption to protect your PC from hackers. Protect your passwords, user names, and e-mails from snoopers nearby by using a VPN or virtual private network. A wireless VPN will encrypt all the information that you send and receive online.

And be sure to use a firewall. This will protect your PC from a break-in and can also shield spyware on your computer from making outbound connections.

Most important, make sure the hotspot is legitimate. Scammers have begun to set up hot spots in public locations in order to steal users' information. Ask an employee for the name of the hotspot before you logon. That's your tip of the day.


WILLIS: Welcome back. We've talked a lot about how mortgage lenders are tightening their purse strings and they're making it harder for folks to get loans. But there are two secret words that up your chances of getting a mortgage: Compensating factors. So what are they and how can they help you? Well, Lynnette Khalfani Cox is the author of "Your First Home" and she's here to help us.

Lynette, great to see you.

LYNNETTE KHALFANI COX, AUTHOR, YOUR FIRST HOME: Thank you, thanks for having me back on.

WILLIS: All right, compensating factors, what your talking about?

COX: Nobody's ever heard of this, right? Well, compensating factors are really positive attributes or pluses in your loan application that can offset any negatives that you might have.

WILLIS: Well, you know, I'm thinking, everybody thinks it boils down to the credit score and everybody thinks, if I don't have 700, forget it, I'm not going to get a good loan. But, you're saying it's not just about that.

COX: Absolutely not. You know, there's no question that lenders want you to have a decent credit score. Gone are the days where you could have a 540 credit score and still get a loan. If you do have so-so or kind of shaky credit, though, you can still get a mortgage by using compensating factors such as having cash reserves or other positive things in your loan application that will make a lender overlook those so-so credit records.

WILLIS: And you say that, hey, your boss can help you get a loan. Right?

COX: People don't know this, but one of the compensating factors that can offset again, something like poor credit is having a steady income stream or a long history with a certain employer. And, you know, it's the end of the year, but let's say you are in line to get a raise first of the year. You know you're going to get a merit-based increase or maybe a cost of living adjustment. Your boss can write you a letter attesting to the fact that you will get this increase, that it's not a qualified, you know, increase, you don't have to jump through any more hoops to get it and that can help you to qualify for a better loan.

WILLIS: We're not talking about a liar's loan, where you're really making up the numbers. This is something you can document?

COX: No. This is going to be documented. You're going to give them paycheck stubs, you'll going to give them maybe your W-2s, you're going to show them your tax records. Again, all those stated loans, those so-called ninja loans, no income, no job, no assets loan.

WILLIS: Nobody is giving those out anymore, right? And of course, length of time in your present apartment or house, that helps, too.

COX: All of those things help. It's called stability. Why do you think it is when employers look at you for a job applicant they say, how long were you at your last company. The same is true with banks, they want to know how long have you lived at your present apartment or the house you're in if you are trading into a new house. How long have you been on the job? They like to see stability, because that shows them a track record of somebody who's likely to be more reliable, trustworthy, a better credit risk.

WILLIS: Lynnette, you know, I think the thing that people don't know out there about how this business works. Everyone assumes that it's like people with green eye shades going over all the details.

COX: Line by line of your application.


COX: No.

WILLIS: You know what, it's a computer. It's a computer scoring system and if you know how to works, you can play the game. You can get the mortgage. As a matter of fact, you've got this funny story about people getting mortgages with -- reporting a dollar in income every year. How do they do that?

COX: This is an absolutely true story and I write about this in "Your First Home," my new book. A guys who's a mortgage broker told me about a client of his who put on the application that he had $1 a month in income? How could you possibly get approved for a loan like this? The trick is outrageously great compensating factors. In this guy's case, are the client actually put 60 percent down on the property that he wanted to purchase and he had an incredible amount of cash in the bank as cash reserves after the loan closed.

So, what happened here is that they used an automated underwriting system which practically every lender in this country uses.

WILLIS: Just what we were talking about. COX: That's correct. So, there are human beings at the front who make the final call, but the credit scoring system, the automated underwriting system essentially says, let's weigh and balance all the factors at play here.

WILLIS: All right, thank you so much for being with us, always great to see you.

Still ahead on OPEN HOUSE, buy all of those gifts this holiday season without destroying your finances, we'll show you how to do it.

Plus, smarter online shopping, the inside scoop is coming up.


WILLIS: If you are like most of us, you'll spend 900 buck this holiday season, much of it charged to a credit card. It's easy to do, but what's it doing to your credit score? John Ulzheimer is with He wrote, "You're nothing but a number."

Welcome. Good to see you. How are you doing, John?

JOHN ULZHEIMER, AUTHOR, YOU'RE NOTHING BUT A NUMBER: My pleasure. Thank you for having me. I'm great.

WILLIS: All right, job No. 1 this holiday season: Spend less money, right?

ULZHEIMER: Spend less money. The effect on your credit score is never good, but everyone is going to spend, we know that. So, be strategic. Don't overspend. Save that credit score. You may need it next year if you buy a home or refinance.

WILLIS: Right, for the big purchases. The debit card. You say use your debit instead of the credit card.

ULZHEIMER: Use your debit or check card. Most people spend 20 percent to 25 percent less because they know it's tied to the money that's in your checking account.

WILLIS: Well, you can't be spending money you don't have if you are taking it right out of your bank account, right?

ULZHEIMER: Exactly right.

WILLIS: OK, but there's one thing to know here. There are fewer protections with a debit card. If you have a problem with that product if you absolutely don't like who's selling it to you, any kind of problem you may have difficulty returning it or getting it back to the store, correct?

ULZHEIMER: That's the chance you take.

WILLIS: All right. Let's talk about -- what I think is so interesting that you say, when you're out there spending and you're going to do it on a credit card, you got to be careful about which credit card you use. What's the rule of thumb?

ULZHEIMER: Absolutely. Try to use the credit card that has the highest credit limit. What you want to avoid is making any one credit card look overly utilized or too close to the credit limit. So, if you're making major purposes this holiday season, try to use try to use the credit card that has the 10, 15, maybe even the $20,000 limit rather than the one that has the lower credit limit.

WILLIS: Because what that means there will be more money available, the credit scoring system will think you're doing a better job of managing your money, right?

ULZHEIMER: Absolutely. The credit scoring system likes to see huge separation between your balance and your credit limit.

WILLIS: OK. So, if I'm out there and, let's say, this is the year that I'm buying the fancy-schmancy TV. So, which card do I put it on. Big ticket purchases?

ULZHEIMER: Bit ticket purchases, you're going to want to avoid the in if-house financing offers, put it on the card with the highest credit limit. Something like their fancy-dancy television set is probably a $2,000 purchase. You don't want to put that on a credit card that's got a $3,000 or $4,000 credit limit.

WILLIS: Yeah, absolutely. OK, well let's talk about department store offers. You know, a lot of those department stores, they want you to take their credit card. They have high rates of interest. They push it on you at point of sale when you're buying merchandise. Good idea? Bad idea?

ULZHEIMER: Very, very bad idea. The retailers are very, very aggressive this year. We've seen 15 percent, 20 percent as the standard offer versus the 10 percent. They want to put their card in your pocket. The dilemma is every time you fill out an application, you are giving them permission to pull your credit reports, that can hurt your credit score for up to 12 months.

WILLIS: Wow, and you say if you decide you don't want it, don't go cancel it. Why?

ULZHEIMER: You've already done the damage. So, you might as well leverage the card to your benefit. Pay it on time. Use it sparingly. Don't revolve a balance because you are right, the interest rate on those retail store cards are in the 20 percent-plus range.

WILLIS: Crazy.

ULZHEIMER: Absolutely crazy.

WILLIS: All right, and so, average family out there has $9,500 in credit card debt. Your best advice to them right now?

ULZHEIMER: Attack the principal. Stop making the minimum payment. You're going to have that debt for decades if you are just depending on the minimum payment. Attack the principal, try like crazy to get that paid off before next season, next holiday season.

WILLIS: All right. John, great advice. We appreciate your time today.

ULZHEIMER: My pleasure, Gerri.

WILLIS: As always, if you have an idea on how to save money, send us an e-mail to And if you want to check out this "Project Savings" again, check out our Web site, We're not done saving you money yet. When we come back, we're watching your wallet, the best Web sites for online shopping, the best deals and some tricks of the trade. But first, your "Local Lowdown."


WILLIS (voice-over): Saint Louis, Missouri, named for King Louis IX of France, but you don't have to be a king to live like one in this city. Head to the Saint Louis zoo where you can view more than 6,000 exotic animals for absolutely no cost.

Attend a free show, the Shakespeare Festival of Saint Louis is free to audience members throughout its entire season and 1,500 free seats are available for the summer season of Broadway revival (INAUDIBLE).

And don't forget to stop by the Jefferson National Memorial expansion where you can visit the famous Saint Louis arch known as the "Gateway to the West," for an entrance fee of only $3.

That's your Local Lowdown."




UNIDENTIFIED SPEAKER: Eighty percent of consumers will purchase at least one item online this holiday season.


WILLIS: Well, I'm one of those. A recent poll said 34 percent of adults would rather do laundry -- laundry, than go shopping in a mall. Can you believe that? So, what's the solution? Shopping online, of course. Here's how to make your Web shopping experience as stress-free as possible. Beverly Goodman is here. She's a senior editor with "Smart Money" magazine.

Beverly, good to see you.


WILLIS: All right, so, you know, I love to shop online. But, I'm not sure I shop the best way. I typically use Froogle, Google's shopping bot, but you get a lot of answers back. What's the best way to find the absolute best Web sites to shop at?

GOODMAN: It really depends what you're looking for. The Web is overwhelmed with good shopping these days. So, if you're looking for very specific items, whether it's electronics or computers, things that have like really particular mechanisms that you can search for, you can go to either electronic sites or you can just use a comparison shopping site like Price Grabber and it's very easy to search.

If you're looking for something a little harder to describe like a sweater, a cashmere sweater, go through keyword searches and we suggest using a specialty retailer site, find exactly the sweater you want and then go to the price comparison site.

WILLIS: Well, that's very interesting. So, keyword filters. And do you buy anywhere or are there times that you say, hey, that's a Web site I don't know who that is, I'm not going to buy from them. That's the problem I have. I get out there and there are a million sites.

GOODMAN: Yeah, we recommend that you stick to either what you have already dealt with or recommendations from friends. That's not to malign something just because you haven't heard of it, but the truth is you never know and especially come holiday time you don't want any last-minute snafus.

WILLIS: Yeah, you got to be careful out there. OK, I get a lot of promotional e-mails. Are these gimmicks or are they worthwhile?

GOODMAN: They're definitely worthwhile. What you want to make sure is that you're getting the best promotional offer that is out there.

WILLIS: See now, here's where the problem is. You know, I think some people get really great discount coupons and I don't. I mean, what's up with that?

GOODMAN: Well, it might be where you shop. Some sites tend to give more discounts to loyal customers. Other sites tend to focus on the new customers. So, if you just want to sort of check out if you're getting the best deal, you can delete the cookies from your computer or just go sign up...

WILLIS: I have cookies? So, I can delete the cookies on my computer and then they won't know I've been there before and I'll get better deals in.

GOODMAN: Exactly, or you can just try another computer. Your friend's office computer or something like that.

WILLIS: Oh, tricky. I love that. OK, important question I know people want to know, shipping costs. You know, a lot of these Web sites, they completely cut out shipping costs. Who is doing it and when should I shop?

GOODMAN: At this point, in the year we recommend that people wait until after thanksgiving. The day after thanksgiving, shipping costs get cut and mid-December they come down even more and you also tend to get a lot of deals on accelerated shipping like overnight.

WILLIS: Great deals. So, your favorite Web site out there. Tell me your favorite site you want to share with us.

GOODMAN: Well, I'm partial to Bluefly because I like clothing shopping.

WILLIS: All right.

GOODMAN: And Bluefly is definitely one that puts a lot of money behind their marketing and figuring out who spends what and how to get new people in and people to spend more.

WILLIS: And it's not just for ladies anymore.

GOODMAN: That's true. Plenty of men's clothes on there, too.

WILLIS: Beverly, thank you so much for that, appreciate it.

You can hear much more about the impact of this week's money on your money on YOUR MONEY with Christine Romans and Ali Velshi coming up in a few hours at 1:00 p.m. Eastern, right here on CNN.

As always, we thank you for spending part of your Saturday with us. OPEN HOUSE will be back next week, right here on CNN. And you can catch us on HEADLINE NEWS every Saturday and Sunday at 3:30 p.m. Eastern Time. Don't go anywhere. Your top stories are next in the CNN NEWSROOM. Have a great weekend.