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'Financial Security Watch'

Aired February 26, 2008 - 12:01   ET


All week during this hour we're focusing on what really matters to you and your money -- tour house, your debt, your savings and your job. Now is the time to get your finances under control.

Over the next hour we'll give you the tools, the tips and the strategies that will help you make sense of your money. Best of all, call in and we'll answer your question live right here in CNN FINANCIAL SECURITY WATCH.

Here's the latest today on your financial security.

Just when you think it can't get any worse, it does. Foreclosures jumped yet again last month. More than 45,000 homes were in some state of foreclosure. That's a 57 percent increase from last year.

And more down news on the housing front. The Case-Shiller index shows a nearly 9 percent decline in home prices in some of the nation's biggest cities in the fourth quarter of last year, making it the largest drop in the report's 20-year history.

The mortgage meltdown and the credit crunch are in the spotlight this week on Capitol Hill, starting with the debate on the Senate floor over proposed changes to bankruptcy.

CNN's Kathleen Koch is live on Capitol Hill with that story, and also with another important announcement about to take place -- Kathleen.

KATHLEEN KOCH, CNN CORRESPONDENT: Gerri, the sponsors of this measure say that they believe that it could help nearly 640,000 American families avoid foreclosure. The very controversial centerpiece of it is a measure that would allow judges to change the terms of home mortgages during bankruptcy proceedings.

Basically, they could reduce the mortgage to what the fair market value actually is. So, in other words, say a mortgage balance of some $200,000 could be reduced to what the home would actually sell for in today's market, $160,000.

Needless to say, bankers oppose this, oppose this vigorously. They say that they would end up having to raise interest rates for everyone to cover the additional risk they would face if bankruptcy judges could make these kinds of decisions. The Mortgage Bankers Association predicts that if this were to pass, that rates could go up, they predict, 1.5 percentage points. But lawmakers argue that bankers who helped create this situation, this problem, have got to be part of the solution.


SEN. RICHARD DURBIN (D), ILLINOIS: This fight between the banks, many of whom created this mess, and the innocent families that have been victimized by it, is exhibit A in this national debate. Protecting and rewarding those banks for their bad conduct is indefensible. Homeowners at risk of foreclosure are floating 50 feet from shore and the Bush administration has thrown them a 30-foot rope.


KOCH: Some other measures in this bill would give some $10 billion to local housing agencies to help them refinance shaky loans by issuing tax-exempt bonds. Another would give roughly $4 billion to community development block grants so the communities could take this money, they could buy foreclosed or abandoned properties, rehabilitate them, and then sell or rent them. And then there's another $200 million in there for counseling for distressed homeowners -- Gerri.

WILLIS: Well, Kathleen, thank you so much for that.

KOCH: You bet.

WILLIS: The mortgage meltdown is a big issue on the campaign trail, and today marks one week until what could be decisive primaries and caucuses in Ohio and Texas.

Here to break down all the election issues that matter to your money, we have on hand Roy Sekoff. He's the founding editor of the in Los Angeles. Jack Otter is deputy editor of "Best Life" magazine. He's joining us from New York. And Amy Holmes, Republican strategist and CNN contributor in Washington.

Guys, thanks so much for being with us today. We appreciate it.



WILLIS: All right. Well, let's start by talking about a poll that's out there today. This is a CNN poll, and it shows that people in Texas believe -- this is voters in Texas say that the number one issue is the economy.

All right, panel. Let's talk about who is best for the economy.

And Jack, I want to start with you.

OTTER: Certainly. Yes, Gerri. WILLIS: Which of the candidates would be best for the economy, do you think?

OTTER: Wow, that's a loaded question.

WILLIS: I don't think it's a loaded question.

OTTER: It's just...

WILLIS: Do you think that one of them would be better than the other?

OTTER: I guess I would have to say that Barack Obama would win by a nose for me, and that is because his platform is ever so slightly to the right of Hillary Clinton's. He's covering his tracks pretty well on that right now in Ohio, because that perhaps is the center of economic woe in this country right now with all the factory closures that have gone on. So I think he's shading to the left a little bit.

But most of his positions, and certainly his economic advisers, are a little bit to the right of Hillary's. And I think, one, in a general election, that's going to give him a big advantage, because...

WILLIS: Right.

OTTER: ... obviously he and McCain will be fighting for center. And number two, frankly, I think it's more realistic. He's a little more focused on market solutions, and in the end I think market solutions work better.

WILLIS: Right.

Let's talk a little bit to Amy here with the same question.

Amy, jump in here. What do you think?

AMY HOLMES, CNN CONTRIBUTOR: Well, obviously I think John McCain would be best for the economy. But I think we're talking about the Democratic primary.

I agree that Barack Obama, he does make some sort of -- some kind of reassuring noises that he'd be willing to work with Republicans. If you look at the health care issue, which he and Hillary are debating, you know, vociferously, his portion -- he says that she's willing to garnish wages. She's willing to use coercive measures to get universal health care, where he wants to lower costs. That's an area where he can work with Republicans who agree that health care costs need to be lowered.

If you look at, for example, global warming, I heard Barack Obama talking about how we need to get entrepreneurs and environmentalists together to come up with solutions that use technology and innovation. Again, that's an area where he can actually work with Republicans and conservatives to get that done.

So I would say that Barack Obama, by virtue of wanting to -- at least he claims reach out to the other side of the aisle, may be more effective when it comes to economic matters.

WILLIS: You know, Roy, one of the issues with the Democrats is that everybody says they're so close together, it's hard to tell them apart. What do you make of that?

SEKOFF: Well, absolutely. I mean, I think you would sort of need a microscope and tweezers to figure out the difference there.

I mean, you know, there is a tax credit here or a -- you know, a foreclosure fund there. But really, there is very, very little difference between them on economic issues, which is why we've seen this big focus on presentation over policy. Right? Which is why we're having all this discussion about words and speechifying and the silly season, you know, pictures of somebody in their Somali garb.

You know, this is...

HOLMES: Enough with the speeches and the big rallies. Hillary Clinton...

OTTER: I would jump in there, Gerri.

WILLIS: Please. Go right ahead.

OTTER: And I would say I see two key issues on the economy.

One is this idea that Amy referred to that Hillary would mandate that people buy health insurance. That's a big deal for people who are in that position, where the government is telling them, hey, you have to buy this.

And number two, I think that on dealing with the mortgage crisis, Barack Obama is clearly less inclined to get the government quite as heavily involved. The Clinton plan to freeze mortgage rates for five years, that's a big deal, and that would probably have a massive effect on the mortgage industry. Obama's stepping back from that a little bit.

WILLIS: All right. You know, everybody talks about the programs they want to launch and the money they want to spend, particularly Hillary Clinton and Obama. Let's talk about where the money is going to come from.

Jack, weigh in here. I mean, I hear expensive program, expensive program. Are there going to be higher taxes?

OTTER: Well, absolutely. I mean, Amy loves to quote the idea that you don't know how expensive health care's going to be until it is free. It gets a lot more expensive. That's a P.J. O'Rourke line. And she's absolutely right.

They want to get rid of the Alternative Minimum Tax. Well, that is a huge amount of money that has to be replaced somewhere. They are talking about lowering taxes on the middle class. Well, they're going to have to bump up taxes on everybody else if they're going to make up that money. HOLMES: And you know another quote that I love to repeat? Is Hillary's own quote where she said she had so many ideas that America can't afford them all.

WILLIS: All right, guys. I'm going to have to wrap it up right there.

I appreciate all of you jumping in and helping us today. Thanks so much for being with us.

HOLMES: Thank you.

SEKOFF: Certainly.

WILLIS: The economy is the number one issue in the presidential race. So how do Americans feel about the health of our economy?

Let's go over to our very own Poppy Harlow at the headquarters to get some answers.

Hi there, Poppy.


You're absolutely right. It's the number one issue in the presidential race, and it has people asking, are we in a recession? So how do Americans feel about the health of our economy? Well, the answer, not good.

Just this morning we got a reading on consumer confidence. The conference board's February survey that polls about 2,500 consumers across the nation showed the worst reading in 14 years. Keep in mind this is worse than after the dot-com bust, worse than after 911, and worse than after the U.S. invasion of Iraq in 2003.

Now, consumer confidence does measure everyday folks' feelings towards current and expected economic conditions. The idea here is basically, if consumers are optimistic they tend to spend more. So the increase in spending will inevitably stimulate the economy. So, when we get a very low reading like this one, it could point to penny pinching.

So, what's to blame for the battered U.S. market, the housing market, tighter credit, record oil prices? All to blame.

So we want to ask viewers, what do you think? It's as easy as logging on to our Web site on, answering our "Quick Vote" poll.

Here's the question: Do you believe the U.S. economy is in a recession? Yes or no?

We're going to be back at the end of the show with your answer.

WILLIS: Well, we are looking forward to that, Poppy. Thanks so much for helping us out. We're here to help answer some of your questions about money. Give us a call at 866-792-3399. One more time, 866-792-3399.

Hey, you can also send us an e-mail to Don't be shy. Get in on this.

You have a chance to get your phone calls, your e-mails answered. We'll do this a littler later in the show.

And I've got to tell you here, here's the exciting news. Everyone we put on the program will receive a copy of my new book, "Home Rich." Hey, it's actually on sale for the first time today.

Coming up, do not become a victim of mortgage fraud. Important tips coming up next.

And taking the pulse of America's economy. Rick Sanchez is on the case when CNN's FINANCIAL SECURITY WATCH comes right back.


WILLIS: You're looking at the latest foreclosure numbers out by RealtyTrac for January. Georgia ranks number seven on that list, but the state has another growing problem -- mortgage fraud.

Some folks in Georgia have had it with mortgage fraud and are confronting the issue head-on. Here's one homeowner's story.


WILLIS (voice over): Stone Mountain, Georgia, it looks like a typical upscale suburb. But, in 1996, stay-at-home mom Ann Fulmer got suspicious about strange doings in her neighborhood.

(on camera): What was going on in the neighborhood? What kind of activity? Were you worried? Concerned?

ANN FULMER, FIGHTING MORTGAGE FRAUD: Not at the beginning. It was just kind of odd.

People were paying way too much for houses, and then not bothering to move in, but UPS was regularly delivering packages there, which I found out later from the FBI was a likely indicator of drug trafficking activity. We had a shooting at one of these houses about a quarter mile away from my kids' elementary school.

WILLIS (voice over): As a former practicing lawyer concerned for her family's safety, Fulmer decided to investigate.

FULMER: It wasn't until I was able to get down to the courthouse and start looking at deed records and sanitation records and water records that I realized it wasn't just these, you know, 18 or 20 houses in my neighborhood, it was houses all over the county. And because I kept seeing the same names in these transactions over and over and over again...


WILLIS: Ann Fulmer discovered mortgage fraud in her own neighborhood, something called illegal flipping. So what is it? And what did she do about it? She's here now to share her story and to tell us how you can avoid becoming a victim.

Let's talk about illegal flipping. What does that mean? Because we know about flipping, right? We know about buying and selling houses, but this is something different.

FULMER: Exactly. It's perfectly legal to buy a house at a low price and sell it at a higher price in a rising market.

WILLIS: Right.

FULMER: It becomes an illegal criminal act if you buy a house at one price and then lie about its real value to sell it at a higher price.

WILLIS: Now, is this still going on? Because the market has changed so dramatically.

FULMER: Some -- there are still valuation issues. Flipping doesn't work, because in most markets we do have a declining situation now.

WILLIS: Right.

FULMER: But the fraudsters are pretty clever, and so they just come up with new ways of making the frauds work.

WILLIS: Well, if you are worried about fraud in your neighborhood, how do you spot it? How do you know that it's happening in your neighborhood? Are there signs? Are there red flags?

FULMER: Sure. If people are selling houses and you hear through the grapevine that they got more than they were asking, that would be a clue. If somebody buys a house and they don't move in and there is no renovations going on, that would be a clue. In some cases, if somebody buys a house, and they move in the middle of the night, and then you never see them again, that could be a clue.

WILLIS: And you saw this in your own neighborhood, right?

FULMER: Oh, yes. Yes. We saw people moving into $500,000 houses with everything they owned in 30-gallon hefty bags.

WILLIS: Let's talk about where this mortgage fraud is going on, because it is changing because the market's changed. Let's start with some of these loans that are going to senior citizens that are worrisome signal.

Talk to me about that.

FULMER: Well, reverse mortgages, the fraud combines elder abuse with the mortgage fraud in a lot of cases. And investigators are already hearing stories about settlement agents who were taking the money instead of giving it to the homeowner, about kids who are taking out mortgages that the parents don't know about, things like that.

WILLIS: OK. So what are signals though? Because, I mean, frankly, reverse mortgages can be a good thing for folks. So when do you know that it's not the right thing?

FULMER: If you start getting notices -- any time you get a notice from a lender that you don't have a relationship with, that's a big problem. I think it is probably -- like you check your credit score once a year? It's not a bad idea to check at the courthouse at least once a year to make sure you still own your house, because we are seeing cases where people have forged deeds, taken a house, taken title to it illegally, and then sold it, and you don't know until you are about to be evicted.

WILLIS: Wow. That is scary stuff.

OK. So if I do think there is a problem in my neighborhood or maybe my parents are having a problem, where do I go for help?

FULMER: If -- because it's a crime, you can report it to your local police or your local FBI office. A lot of times there are professionals involved. So if you think that the appraiser or the realtor or the mortgage broker was involved, there are state agencies that regulate those, and you should report those to your state regulator.

WILLIS: Ann, thank you so much for that. I appreciate your time today.

FULMER: Thank you, Gerri.

WILLIS: We'll be right back with you on Thursday to discuss foreclosure rescue scams. And the show is all about what you are going through and helping you to find solutions as it relates to your money.

Up next, Rick Sanchez is out taking the financial pulse of the public. He's chatting with folks during their lunch hour in Atlanta. Right there he is. We'll check in with him when CNN's FINANCIAL SECURITY WATCH comes right back.


WILLIS (voice over): Buying a home is exciting, but getting together loan documents can be overwhelming. Start gathering all the paperwork you'll need before you begin house hunting.

Here's a checklist with the essentials.

You'll need W-2s for the past three years, as well as pay stubs and bank statements for the past two months. And be prepared to show your last two federal tax returns.

Once you've found a place, you'll also need a purchase contract for the home and any receipts or deposits you may have already made on the property.

And don't forget to showcase your assets. Collateral is key in getting a loan. Be sure to include all savings accounts and investment accounts, properties and cars you currently own.



WILLIS: The state of your financial security isn't just in the numbers, it's about how you feel about your job, your house, your savings, and your debt.

We dispatched CNN's Rick Sanchez to take the pulse of how you're really feeling about the state of your money. Rick is live at The Varsity in Atlanta.

Rick, what are you hearing?

RICK SANCHEZ, CNN CORRESPONDENT: Well, you know, I've got to tell you, first of all, every city has a landmark. And this is the landmark. You know, the place where people will say to you, go down to that place, and then make a left? Well, this is that place.

So many different people have eaten here. Elvis Presley ate here. Presidents from Bill Clinton through the Bushes, and, in fact, Clark Gable ate here, you'll be happy to know.

We are here because we wanted to sit down and talk with some of the folks from Atlanta to really get a sense, because you are the ones who are really feeling the pinch. If you believe that there is a pinch, because some people are saying, you know what? I think it's the media that's making a bigger deal out of this than it actually is.

Do you feel that there is something going on right now with the economy that is personally affecting you?

Danny (ph), we're going to start with you. Go ahead.

UNIDENTIFIED MALE: Yes. It's the real estate market, because I'm a real estate developer and I build and sell houses. So, yes.

SANCHEZ: So let me ask you the question directly then. From one year ago to now, how are you seeing the difference?

UNIDENTIFIED MALE: My homes are on the market now nine months to a year. And I was selling them in 90 days a year ago.

SANCHEZ: From 90 days to nine months to a year?

UNIDENTIFIED MALE: Financing has changed incredibly. Now people are having a hard time getting people financed. I mean, just your average common guy who wants to buy a house, cannot buy a house now.

SANCHEZ: OK. Final question for you before we move on to some of the other folks. Do you think things will get better now that interest rates have been dropped and that we have a stimulus package? And if so, how soon?

UNIDENTIFIED MALE: I think so. I think the upcoming spring is going to be the telltale sign if it turns or not. If we're still slow by June, then it's going to get worse.

SANCHEZ: Pat, how are things affecting you right now? Now, you're living here in Georgia, right?

UNIDENTIFIED FEMALE: Right. Right. I live in (INAUDIBLE) County.

SANCHEZ: It's more expensive to go out an get gasoline, to buy a gallon of milk, to do a lot of things. I mean, we're seeing a lot of inflated costs.

How is that affecting you?

WILLIS: Well, we just lost Rick. We'll come back to him in a moment.

Buying and selling a home though can be intimidating. How to make sure you're getting the most out of your real estate broker.

And we're handing over control of the show to you, helping you answer questions about your money. Give us a call, 866-792-3399. You can also e-mail us, don't forget,

We're back right after your latest headlines.



DON LEMON, CNN CORRESPONDENT: To the hospital for atrial fibrillation. More on that at the top of the hour.

Now CNN FINANCIAL SECURITY WATCH. I'm Don Lemon. Back to Gerri Willis.


GERRI WILLIS, CNN ANCHOR: Welcome back to CNN's FINANCIAL SECURITY WATCH, where the entire focus is on your housing, your job, your debt and your savings. Now the big question everyone wants the answer to, are we in a recession? You have the chance to vote on that. Log on to, vote in our quick poll. Poppy Harlow is tracking your votes, all 18,000 of them so far, and we'll be back with the results in just a little bit.

You know, it is tough enough to buy a home or certainly to sell one and real estate brokers are supposed to make your life easier. So in this roller coaster of a market, if you're trying to buy or to sell, you need to make sure your real estate broker is really working for you. Pam Liebman is the CEO of the Corcoran Group. A real estate firm. And she's joining us now from New York.

Thanks so much for being here.


WILLIS: I want to take the pulse of the market first. What are you seeing? Is it getting any better? Are we still having trouble? Is the market going down?

LIEBMAN: Well, I think it varies from where you're talking about. Parts of the country are still experiencing prices that are falling. Others are seeing some stabilization. So it's very much market by market at this point.

WILLIS: All right. OK. A lot of people out there trying to sell. And, of course, your relationship with your real estate agent is key. Is there a list of questions you should be asking them when you're interviewing them?

LIEBMAN: Absolutely. This is a big decision for a lot of people and you want to make sure you have the right fit. So we suggest you talk to a couple of people and pick the one that you feel most comfortable with. And the questions you should ask are mainly, what are they going to do to help you sell your house quicker and for more money than anybody else? That's the big question.

WILLIS: OK. Well, obviously, the devil's in the details. You know, I hear out there that people are getting into bidding wars. That agents are saying, hey, you know, I'm going to sell your house for this amount of a money, the next agent says I'll sell it for more than that. You know, who do you believe? And should you allow yourself to get into one of these bidding wars?

LIEBMAN: No, you never make your decision based upon that. You need to trust the person you're working with. And if you feel as though they're just bidding for your listing, then you're starting off in a bad situation right away. Let's get some concrete data. Have they sold homes in your area? What are other things selling for? Show me the comparables. Show me the money. Don't just fall for the, I'll get you the highest price.

WILLIS: Right. And, of course, you should be talking to four or five folks at least, right?

LIEBMAN: Totally. Unless someone comes really highly recommended or there's a pre-existing trustful relationship, you should get out there, interview people and make sure that these people are going to add some value to the transaction. You're going to be paying them lots of money and they better be worth it.

WILLIS: You know, 80 percent of folks out there start their search on the web. It's an incredibly important tool. How do I make sure that my agent is up-to-date on that?

LIEBMAN: You should ask your agent what are they going to do, how are they going to present your property on the web? How many pictures are they going to take? Who's going to take the pictures? Is it just their assistant with a camera or do they hire a professional photographer? And how often do they update the pictures? Do they show your swimming pool in the middle of winter? You know, how much work do they really put into . . .

WILLIS: That would be a bad thing, right?

LIEBMAN: Very bad. You want it to show really well in pictures.

WILLIS: Of course, everybody out there is thinking about incentives. What incentives can I give to buyers that might encourage them to buy my home. When is too much? When are you going over the top? Should you be offering cash? Should you be helping with closing costs? What's the right answer?

LIEBMAN: You know, when a family is tight for some money, offering to ease their path with some help on the closing costs is very nice and can often help secure a deal. But you don't want to seem too desperate or give away the store. So you just have to think of something that will actually help you sell your house.

WILLIS: Pam, thank you for that. We appreciate your time.

LIEBMAN: You're welcome.

WILLIS: All right. Let's take you back right now to The Varsity and Rick Sanchez. We're glad to have him back. He is talking to folks about what issues they're dealing with.

Rick, we're glad to see you back.

RICK SANCHEZ, CNN CORRESPONDENT: Hey, thanks. Sorry about that. I think I stepped on a mike cord at some point. Well, maybe not.

Eighty years is how long this place has been here. So we wanted to gather up some folks and have a conversation with them. Raise your hand if you think the economy is not looking good right now. Raise your hand. Everybody agrees. OK.

Raise your hand again if you think we're actually in a recession. One, two -- yes, you agree?

UNIDENTIFIED MALE: I think we're headed towards a recession, because the way the economy is going right now, it seems as though the middle class is kind of fading out and everything is going either more money is going to the higher class, upper class, and less money is coming towards the lower class. And I think it has a lot to do with the fact of people taking on too much credit.

SANCHEZ: I think that definitely has something to do with it. I think most economists would agree with you.

But one of the things that comes into play, and that's one of the reasons I wanted to talk to you all is, worry. If as a consumer you're worried, you don't do what the market wants you to do. Are we worried? Raise your hand. Worried. So how do you live out your worry? How does it affect you? I'll put you on the spot here.

UNIDENTIFIED FEMALE: I make a lot of notes every day of things that I need to take care of. And if I need to call the bank, check on something, I watch my checking account. I balance my checkbook monthly.

SANCHEZ: But you're retired. You shouldn't have anything to worry about, right?

UNIDENTIFIED FEMALE: Right. But you never know. You got repairs on my home, which is paid for, but things still tear it up. Autos. Insurance goes up. Homeowner's insurance goes up. Auto insurance goes up. Groceries have went up. Medical bills. Gas.

SANCHEZ: So you're feeling the pinch every time you take out your pocketbook on your wallet. You feel it. You're effected.

Rick, you, too?


SANCHEZ: How do you see the difference? What do you do, by the way?


SANCHEZ: Nice talent (ph).

UNIDENTIFIED MALE: Yes, I used to be a home builder once myself. So I had to get out of it and go into another company (INAUDIBLE) and stuff like that. So I don't work for myself no more because the economy got so bad.

SANCHEZ: But here's what the -- you know, how do you effect what happens in a situation like this is, the more we talk about the economy being bad, you fear it's going to get worse, right? But you have to be realistic about it. We all wish the economy were doing great, right?

UNIDENTIFIED MALE: That's the big one (ph).

SANCHEZ: And I didn't pick you guys out as four people who were going to say the economy isn't doing good. I had no idea, right? But all four of you are saying you're feeling a pinch. OK.

Raise your hand if you're optimistic that by the end of the year things are going to look better. One, two. One, two. Two. Is that a one and a half there?

UNIDENTIFIED MALE: Kind of half way up there.

SANCHEZ: Thanks so much, Danny, I appreciate it. Rick. That's wonderful. Pat, thanks so much for taking time to talk to us.


There you have it. Some kind of consensus, I suppose.

Gerri, back over to you.

WILLIS: Rick, great stuff. Very interesting to see people tightening those purse strings and just really interesting to hear the voice of the people out there. We appreciate it.

Up next, we're turning the show over to you. Your questions about housing, debt, savings and jobs answered by our all-star panel. The number, write this down, 866-792-3399.


WILLIS: Now once again we want to give you the chance to speak up, to be heard and have your questions answered. Here to help us do that, Carmen Wong-Ulrich. She's the author of the book "Generation Debt." Mike Santoli of Barron's Online. And joining us again, Jack Otter, the deputy editor of "Best Life" magazine.

All right. Let's get our first caller in here. Burt in Ohio, go right ahead.

CALLER: Yes, we bought a house a little over a year ago and with basically nothing down, just the closing costs. There was a 75-25. The 75 was a 30-year mortgage 6.5 percent and the 25 is a second mortgage at 7.5 percent. And that's a 15-year mortgage and it balloons at the end of 15 years. My question is, I want to know as far as, you know, with the rates being a little lower now than what we did, you know, a little -- a year and a half ago, could we consolidate the two and have, you know, just one mortgage at a lower rate?

WILLIS: Well, Burt, I think that's a great idea if you want to get a new mortgage, roll those two loans together. I think that's probably a very good idea. Mortgage rates right now for a 30-year fixed loan, about 6 percent. As long as you have good credit, you should be able to get a really great loan. It's time to take action and that is probably the best action you can take. You certainly would reduce your mortgage rates. Thanks for the phone call, Burt.

Let's go on to Tom in Illinois.

Tom, do you have a question?

CALLER: Hi, Gerri. My name's Tom.


CALLER: And my question deals with the economic stimulus plan that's proposed for this spring. My wife and I have one dependent children and we made $43,000 last year. And after we filed our taxes and we itemized our deductions, we got everything back. So my question is, will we, with one dependent child, actually qualify for a tax rebate under the new stimulus plan, even though we got all of our taxes back? WILLIS: Great question, Tom. I'm going to turn it over to Carmen.

Carmen, what do you think?

CARMEN WONG-ULRICH, AUTHOR, "GENERATION DEBT": Yes, I think you probably will. Actually, you will because you're under the income ceiling. But you want to really look at, you know, when you filled out that W-2 initially for your jobs, you want to see what you put down in terms of exemptions. I think you have too many exemptions there. So what's happening is, is you're kind of letting the IRS take a loan out on you. Basically they're holding on to some of your money and giving you a refund. So reassess your taxes a little bit and pay a little bit less in taxes so that you don't get such a huge rebate.

WILLIS: All right. Great advice, Carmen. You know, I think that people probably want to think about how they're going to use that money. Why don't you guys jump in here. Jack, I prefer saving this money if you can. What do you think?

JACK OTTER, DEPUTY EDITOR, "BEST LIFE" MAGAZINE: Oh, you're absolutely right, Gerri. And at an income level of $43,000, you're eligible for a Roth IRA, which would probably be my first choice. This is an IRA account for retirement. The great thing about it is, that it grows tax-free until you withdraw it and you pay no capital gains taxes on it. It's really a great deal from the government.

WILLIS: Mike, I want to bring you in here. Of course, if everybody saves their money, it's probably not going to do what we expect for the economy. What do you think?

MIKE SANTOLI, BARRON'S ONLINE: Well, that is true. And I actually don't think we're at great risk of that happening. I mean, let's be honest, the propensity to spend, especially when people feel themselves to be a little bit short of monthly expenses, as we are right now, I don't think that's going to be a big impediment in the economic stimulus package getting back into the economy somehow. What I would say though is, your personal household finances are your own and you shouldn't be necessarily going out to spend as some kind of a public service, obviously.

WILLIS: Right. Exactly. I couldn't agree more.

Carmen, Mike and Jack, stick around. We're going to have more of your phone calls coming right up.

Plus, the last chance to vote in our quick poll. We're getting so many responses. Do you believe -- do you believe we're in a recession? Poppy Harlow with your results coming up next.



Roy Seacoff (ph) is the founding editor of in L.A. Jack Otter is the deputy editor of "Best Life" magazine. Amy Holmes (ph), a Republican strategist and CNN contributor in Washington.

We're going to take some phone calls right now. Let's start with Hamid in California.

Hamid, are you there?

CALLER: Yes. Good morning.

WILLIS: Tell us your question.

CALLER: My name is Hamid. Yes, I have a $500,000 loan with 4.6 percent interest. In matter of 11 months, this loan is going to kick into variable. When is the best time for me to refinance?

WILLIS: How long do you have until the loan resets, Hamid?

CALLER: I have another 10 months.

WILLIS: So you've got almost a year.

Jack, jump in here. Do you think it's time for Hamid to refi?

OTTER: My conservative answer would be, yes. You could play a game, wait a little bit, see if interest rates come down and maybe shave a couple .001 percentage points off the deal that you get. But I think the potential downside is a lot worse. So I'd be inclined to go ahead and refinance. Start the process now. Make it clear you want to lock in. And if mortgage rates take just even a slight dip in the next couple weeks, seize that moment and lock it in.

WILLIS: Yes, he's going to see a big jump here no matter what happens.

Carmen, what would you say?

WONG-ULRICH: You know, when it comes to refinancing, what everybody needs to do really is, besides get your credit all cleaned up, crunch some numbers for you and see, you know, some states have a lot higher closing costs and closing taxes, such as New York state, where I am. So you want to make sure that it makes financial sense for you. So make sure to go, you know, a free Web site like (ph) an see how much you'll save monthly, but also over the life of the loan.

WILLIS: Right. Exactly. Because there are costs to these loans. They don't come free.


WILLIS: As a matter of fact, typically it takes about a half percentage point to certainly a full percentage point before you start really seeing a big difference in your loan rates. And it makes sense, including the costs.

Mike, jump in here. You know, people are really struggling with the idea of, when do I get the new loan, how fast can I do it, but there's another issue we're not talking about here, and that's the fact that lenders are being very tight with their purse strings.

SANTOLI: Without a doubt. No, that is, in fact, the bigger economic risk, is not so much the individuals deciding whether to borrow or not, it's actually the creditors (ph) from the banks being able and willing to extend credit. They've already kind of tightened things up, as many people already know, with regard to credit card grace periods and minimum payments and things like that. So they're keeping things on a shorter leash. It's really a matter of checking to see whether you have access to that refinancing, rather than just deciding whether to do it or not.

WILLIS: Exactly. Exactly. The devil's in the details.

We want to go to an e-mail from Todd, I believe -- we don't have a state for Todd. Todd has a question. He asks, "I have some credit card debt that I could pay off with savings and 401(k) withdrawals. If I pay off my credit cards I could free up $400 a month. My rates are low but I do not know for how long. Should I keep my cash in case of a recession or pay them off?"

Boy, I've got to tell you, if you're thinking about paying off credit card debt with a loan from your 401(k), I vote no. You want to keep your money working for you so that when you get to retirement you have something to call on.

Carmen, do you agree?

WONG-ULRICH: Gerri, I absolutely, emphatically agree. I mean, if you're going to borrow from your 401(k), it is a little bit like stealing from yourself and your future. The tax benefits of a 401(k), you can't argue with that about how that compound interest is going to work. So definitely don't touch your 401(k). And I know you say you want to free up some money each month, but pay off that debt as soon as you can and then your money will be freed up.

WILLIS: And certainly you want to put together some kind of savings right now because, you know, look, most of us agree or believe that we're in a recession or close to one.

Jack, let's talk about savings. Right now is the time to have a net egg, right?

OTTER: Well, any time is the time to have a nest egg. But right now when times are uncertainty, certainly if you're at risk of a layoff, you ought to start taking dramatic steps to try to shave your expenses and put together a safety nest egg. So any time is time for savings, but now even more so.

WILLIS: Mike, jump in here. I know that you do a lot of thinking about the best moves now for folks. What would you advise people who are thinking about their situation right now, economy slowing down. What steps should they be taking?

SANTOLI: Well, obviously, everyone already is sort of working under the assumption, whether we are in a recession or not, that we probably are at risk of one. And I do think it is a matter of reigning in spending a little bit. More to the point, reigning in debt buildup. If you were relying on borrowing to actually plug a gap in your income an spending plan. That's the time to close that gap without a doubt. And I don't necessarily think it is, as you say, time to really tap the long-term retirement savings. But, you know, on a monthly basis, it's a matter of just tightening up.

WILLIS: It's a matter of tightening up and not tapping your long-term savings if you can help it, definitely.

I want to thank my panelists, Carmen Wong-Ulrich, Mike Santoli and Jack Otter. Thank you so much for being with us today. We really appreciate it.

And every caller we spoke to today will receive a copy of my new book. It's called "Home Rich." For more on "Home Rich," log on to And if you didn't get through today, make sure to e-mail us at or try again tomorrow. We'll be here.

Time now to get the results of our quick poll. And it was, do you believe the U.S. economy is in a recession?

Poppy Harlow, what's the verdict?


Well, yes, at the top of the show, we told you consumers across America are just growing more and more concerned about the health of our economy. In fact, the consumer confidence reading for February out this morning. The results, the weakest in 14 years.

People logged on to our web site. Here's what they said. It's pretty clear. Eighty percent of people think we are in a recession. Twenty percent think we are not. So clear evidence there that most Americans that logged on and across the country think we're in a recession.

Now keep in mind, the last official recession, as measured by the National Bureau of Economic Research, was from March 2001 until November 2001.

We'll have another question for you tomorrow on our quick poll. I'll see you then.

Gerri, back to you.

WILLIS: Poppy, thanks for that. As usual, the regular Americans are ahead of the economists.

Coming up next, add value to your home the right way. We'll go over the dos and the don'ts of picking a contractor when CNN's FINANCIAL SECURITY WATCH comes right back.


WILLIS: When you're investing in your home, you want to make sure you invest in the right projects. And, more importantly, the right contractor to make sure it all comes together. Ed Del Grande is a licensed contractor and host on and he's joining us from New York.

Ed, great to see you.

ED DEL GRANDE, HOST, HGTVPRO.COM: Great to be here, Gerri. And congratulations on your new book, by the way.

WILLIS: Oh, thank you so much, Ed.

Well, let's start with the advice here. You know, where do you look for a contractor? Where's a good place to go and where should you stay away from?

DEL GRANDE: Well, start at home. You can look in your neighborhood. Ask some friends, some family members who recently had work done. And you can also go down to your home center. And that's a great place because the contractors deals with the home centers. And look for a few names that keep coming up. And also, if they have a reputation for paying their bills on time, that's great. A contractor with good credit is usually a very good contractor.

WILLIS: It's not a bad idea, too, to run those names against any kind of consumer protection agency that your state might have to make sure they're on the up and up.

But you also say there's paperwork to watch out for. What kinds of licenses should I be looking for? I assume these guys have to file something with the state, right?

DEL GRANDE: Yes. Most good contractors are registered or licensed with the state. As a matter of fact, I have national (ph) licenses with the state of Rhode Island and I always carry mine with me. So always ask for a certificate of insurance and a license and you should get all the information you need on that contractor.

WILLIS: All right. You've got one right there, right?

DEL GRANDE: Right here. Here it is. Never leave without it. And it's that simple. You ask for it and the good contractor will always produce it.

WILLIS: Perfect. OK.

Well, you know, people get bids from contractors and they don't necessarily know how to deal with them very well. What's your recommendation?

DEL GRANDE: I say get no more than five bids because, remember, it's usually a pretty small contractor community in your area. And if word gets around that you're shopping with everybody, well, the contractor's talk amongst themselves and you may not get the attention or the real detailed bids. I say no less than three, but no more than five bids and then that way you'll be sure that you can weed out the ones you want. WILLIS: Now, you know, there are some folks out there who hire contractors and the contractors take the money and they run. How do you avoid getting one of those people?

DEL GRANDE: First of all, get everything in writing. And, you know, a lot of people do get things in writing, but when it comes time to sign the contract, that's when they drop the ball because they usually become friends by this point and they feel embarrassed. Sign that contract. Make sure there's detailed payments that you have to put in there. Usually it's about a third down, a third half-way through the job and then a third upon completion.

WILLIS: And the state regulates that first payment in many cases, we should mention that. You should check with your state to find out.

DEL GRANDE: Yes, each state's a little different.

WILLIS: Yes, exactly. So what else should I be thinking about when I'm hiring that contractor? Should I sign their contract willy- nilly? Do I need to have a lawyer look at it?

DEL GRANDE: Well, it's always good to have a lawyer look at it. But if you get a good contractor with a good reputation, usually you can do it on your own. Because, remember, it's very easy to break a contract. The contract is there to remind everyone what they said. And if you get two honest, good people working together, that contract will hold up.

WILLIS: That's what we're always looking for. And, Ed, we have it in you. Thanks so much for joining us today.

DEL GRANDE: Thank you.

WILLIS: We want to thank you for joining us for CNN FINANCIAL SECURITY WATCH. We'll be back here tomorrow, same time, live at noon Eastern Time. And we'll take more of your phone calls and we'll be answering your e-mails. Plus, a look at how high gas prices might go and how to survive debt in your relationship.

Time now for your latest headlines in the CNN "Newsroom," which starts right now.

LEMON: Ah, it sounds good on TV. Can you imagine, Betty, what it's like to be there. Talk about your musical overtures.