the top of the hour. thank you very much. we are on top of the latest developments from afghanistan. we are also watching that october nor'easter. we'll tell you where that's headed. i'm alina cho. i'll be back at 10:00 a.m. eastern time. your "bottom line" starts right now. another housing rescue program by our count, the tenth attempt to help struggling homeowners, and that doesn't even include the homebuyer tax credit. will it work this time? good morning, i'm christine romans. president obama says he isn't waiting for lawmakers to make up their minds. big changes coming to student loans and how you refinance your underwater home. who will it help? and how fast? we take a look at what really changes for you and your family. let's start with housing. president obama this week announcing new efforts to help struggling homeowners again. the revamped home affordable refinance program, or h.a.r.p., aims to make it easier for

homeowners to refinance high-interest mortgages at these rock-bottom interest rates. who qualifies? homeowners who have mortgages backed by fannie mae and freddie mac. you must be current on your payments. and you'll now be able to refinance no matter how much you are under water on that home. this lifts a previous limit of 125% loan-to-home value ratio. the program also aims to streamline the refinancing process, please, and reduce and eliminate fees. i'm joined now by lynnette cox, bob molten and rick newman is the chief business correspondent for "u.s. news & world report." the white house says this could mean cheaper mortgage payments. >> some say as much as 1.7 million. it probably in practical terms will help a fraction of that. maybe 20%, 30% or so. if you look at the previous efforts, that's sort of the range, you know. we have high hopes and we want it to be able to help more, but frankly, even if it does help 1

million, we've got more than 5 million people who are out there in foreclosure, three months or more behind on their mortgages. so we've got a massive problem we're talking about. and this is just one little element that will help, but it will be a very, very modest impact. >> we've been saying that if there were a silver bullet to fire, we would have fired the silver bullet already. the administration says this is going to increase competition among banks to refinance. why would that be the case? why would banks be more likely to go ahead with it now? >> we see a lot of the larger banks that are out of the market. over the last year or two, we have a lot of smaller regional lenders that are stepping up to the plate, loosening their underwriting guidelines and being a lot more competitive on interest rates. this program will help about 1 million borrowers. there's 11 million people in this country that are under water. it's a small portion to get the whole problem remedied. there's more to come. >> does it move the needle, rick? >> i'm a little more optimistic than lynnette. i think this is a more coherent program than we've seen before. first of all, there have been so many plastic bullets fired that

it really accomplished nothing. i mean, we sort of know what doesn't work at this point. and when you look at the details of this program, it's very targeted. and it addresses a very real problem which is that the fed has pushed interest rates very, very low. but so many people can't take advantage of those interest rates. so what they're trying to do is just back more refinancing so that more people can take advantage of lower loans. >> why are the banks more likely to go this time? because they're not on the hook for a default of a property. >> because the government is now taking more of the risk and saying, look, if you skip some of these steps that are really turning a lot of people off, such as multiple appraisals and a lot of the fees, we'll stand behind the loan, and you're not on the hook if that refinance goes bad. >> i don't want to sound like oh, the pessimist of the group here -- >> i know, but it's been ten attempts. we haven't quite gotten it right yesterday. >> what's already happened in terms of the math. we've had about 900,000 homeowners helped under the existing program. frankly, only 100,000 of those, less than 10%, have had

mortgages that their loan-to-value ratio was not in that 80% to 100% range. so the people who have already gotten help, they weren't really severely under water. i know they've moved the cap, obviously, which has been a barrier, but it's yet to be seen whether or not competition is going to increase. i hope it does. you know, i want lenders to loosen the purse strings and to really, you know, to make a more competitive marketplace. that's a great thing for a homeowner. >> the key with this plan, too, you have to be on time with your mortgage payment the last six months. a lot of the big banks were recommending to homeowners not to be on time. make a late mortgage payment. and then you'll be eligible for, you know, some of the h.a.r.p. money. >> the modification. >> that doesn't make sense. so this plan that's coming out now, there's really two tiers to it. one is it's going to put more money into the economy. if the homeowner keeps it at a 30-year fixed. or two, they're going to accelerate the term from a 30-year to a 25, 20 or 15-year term.

that will accelerate the equity in the home. on the homeowner needs to make a decision before they sign up with the program. >> those things make this a more realistic program. and i think part of the problem is a lot of people don't know -- they're confused. they don't even know where to look for a program. i mean, we're seeing, i think, more of a good, like, promotional effort for this program. the details are on the web at the fhfa's website. they're getting better at saying click here to find out if your loan qualifies. so i think they may be able to reach more people who would benefit. >> do you have a recovering economy without a recovering housing market, or does it take a job market to recover before the housing market? >> i think it takes housing to recover, jobs to follow that and the whole economy is dependent e on those two things. >> it goes hand in hand. if you don't have a job, you can't get a mortgage. rates fixed at 4%, if they don't have employment, they can't qualify. if there are smudges in their employment history or smudges on their credit, they won't be able

to take advantage of the low rates. it's got to go hand in hand. >> and confidence about the job market will impact the housing market because folks who are thinking maybe my job isn't as secure as i'd like it to be, this isn't the time for me to trade up, buy a second home, get an investment property, move, relocate if it's going to be a problem for me to qualify for that mortgage i need. >> and people are nervous. they see the stock market go down. they don't want to buy a house. they have an inkling their job might not be stable. we're coming towards the end of the year when layoffs normally happen. >> rick, close this out for me. there will be critics who say the white house has never gotten it right. it's going to take a little bit of this and that and to and fro. it was a catastrophic housing decline. >> i think we need to give up the idea that there's going to be some big program that gets through congress that's going to solve the whole problem. what might make a difference is a bunch of baby steps that might at some point add up to a bigger step. if people think i have a little

recourse or wiggle room, it's going to take a lot of baby steps. roughly 12 million people in this country don't refinance their mortgage even though they qualify for it. are you rough them? we look at when refinancing makes sense to you and what you need to know to get the best terms. that's next. ♪ there's a place i dream about ♪ ♪ where the sun never goes out ♪ ♪ and the sky is deep and blue ♪ ♪ won't you take me american flight 280 to miami is now ready for boarding. ♪ there with you fly without putting your life on pause. be yourself. nonstop. american airlines. spark card from capital one. spark cash gives me the most rewards of any small business credit card. it's hard for my crew to keep up with 2% cash back on every purchase, every day. 2% cash back. that's setting the bar pretty high. thanks to spark, owning my own business has never been more rewarding.

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how do you determine if refinancing makes sense for you? bob and lynnette are back. bob, you've got a formula. what's your refinancing formula? >> it's very simple. you have to look at what it's going to cost you to refinance. if you have a $200,000 mortgage, and you are going from 6% to 4%, you're going to save about $200 a month. if it costs you $4,000 to close that refinance, you're going to be even at about 20 months. so you have to ask yourself, are you going to be in the house for 20 months? if the answer is yes, you refinance. if the answer is no, don't refinance, don't waste the money, don't spend the money. >> there you go. it also depends on how long you have on the term of the loan, right? >> exactly. >> the more time you have, the longer you think you'll be in the property, the more sense it makes to refinance. >> people who have 6% 30-year fixed are coming down to a

3.75%. they're knocking or 12, 13, 14 years off their mortgage. there's a lot to be said for that. >> but it doesn't magically happen overnight. you have to do steps to get ready for this process. >> that's right. you've got to get that credit together. that's one of the key points right now. check your fico credit score. myfico.com. get those credit reports. go to annualcreditreport.com. that's free to do that there, obviously. dispute any mistakes you have in the credit reports. spruce that stuff up. saving money. this matters, too. banks like to see cash reserves on hand. they don't want to feel like oh, we're going to lend to somebody who's cash strapped, living paycheck to paycheck or if they happen to lose their job, won't be able to make the mortgage payment and float it for three months. you have to do preparation. >> what are mistakes that people commonly make? >> the biggest by far and away is the failure to shop around. if i had one bit of advice. >> really? see, i'm thinking of doing this. i just called up the person who's got my mortgage. >> and i bet you were going to

go with your existing lender, right? >> that seems easy. >> and that's the path of least resistance and most expensive as well. get online. do comparison shopping. go to hsh.com. this is a great resource for your viewers. hsh.com. it's a free resource where you can mortgage comparison shop. you can find out the best rates and what's out there and available for you. you've got to make these banks compete for your business. your existing lender frankly doesn't have much motivation to lower your interest rate from, say, "x" to "x" minus 1%. they've already got you in a contract for 30 years or whatever, right? so make them compete. a mortgage broker is another option. somebody who can help you to shop around. do shop around. >> what are the mistakes people make? >> when people shop, and i agree, you should shop around, don't shop around with the company that's not local to your area. a lot of times people will find a great rate. it might be way out of state. it might be a company that's in the pid west and the properties here in the northeast. and when the company comes in to do the appraisal, they're not familiar with the area. and the appraisal comes in very

short. if you are going to shop around, try to stay with a lender that's local or get someone that's going to be referred to you. the best source to get a new mortgage is work with someone who's been in the business, understands the local market and knows how to get the deal done. the rate's important, but qualifying is even more important. >> and i should add also, when you're looking for a good rate, don't just look at the stated interest rate. factor in the apr, which is the interest rate plus the total cost of the loan, all the fees added in there. because people just think, oh, i saw this commercial on tv. and they said i could get a no-cost, you know, refinancing. it's not true. either it's going to be factored into your interest rate, but you're going to have some fees. >> if is sounds too good to be true. what are reasonable fees? does it depend on the size of the loan? >> it does correlate with the size of the loan. a lot of the fees are state regulated such as title insurance. then you have a bank toesh and the appraisal fee. >> it's like buying the house all over again, folks. >> not really. new york state mortgage recording taxes, you won't have to pay that again. it should be a lot less expensive. you do have to go through the

whole process like you did when you did buy the house. the larger the loan, the larger the fees. so if you have a house that's over $1 million, at praisal fee could be $1,000. razz if you have a house that's $400,000, the appraisal fee could be about $300. >> in general, you should expect four different types of fees. lender fees, title, escrow fees and government fees. you know what? it's going to be everything from, like he said, the appraisal fee to the application fee. >> do your math to make sure that you think you're going to be in this home. if you shorten the duration of the loan, you go to a 15-year, be sure you can handle those monthly payments for the next 15 years. you've got a solid income, but you could be save tens, if not hundreds of thousands of dollars in interest. so everyone should be looking into refinancing. >> that's right. >> absolutely. >> people that have a $200,000 monch with $167,000 value, if they take out a 15-year fixed in 3 1/2 year years, they would have amortized. if you take out another 30-year fixed mortgage, you're not going to amortize down to $160,000 for

ten years. so it's something to think about. >> the goal is, of course, to get all of that money working in the economy so there can be a housing market recovery and an economic recovery. lynnette? >> refinance when it's smart and when it makes sense. yes, check the break-even, but do it in accordance with your goals. if you're in your 50s, don't get another 30-year loan and you've already paid down ten years. refinance to a 20 or 15-year loan. if you're trying to pay off credit card debt and that's the reason you're refinancing, maybe not a smart strategy if you haven't controlled your spending problem or you don't know how to work a budget. page sure that your refinance suits your long-term goals. >> good advice. that's why we always have you on. lynnette and bob, thank you so much. nice to see you. epic student loan reform, but does it really address the rising cost of education? that's next. women men and uh pandas... elbows mmm [ male announcer ] wanchai ferry, try it yourself. it's this... the etrade pro platform.

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alongside health care reform was the most sweeping revamp of student loans in a generation.

that means important help for graduates starting in 2012. kevin kerry is the policy director with a nonpartisan think tank that looks at education issues. he joins us from washington. pay as you earn. an income-based repayment plan. loan payments will be capped at 10% of discretionary income starting in 2012. that's instead of the current law which is at 15%. this is going to happen earlier than they had thought. income-based repayment, nothing new, but you know what? many people don't take advantage of this. give us a little idea of what the president is doing here and whether this will really help people. >> well, i think the president recognizes there are a lot of students out there who are graduating from college into a tough economy. and they can't find the jobs they need to pay their loans back. you see it on occupy wall street with the signs of here's how much money i owe. so the plan that the president proposed this week says that students starting next year, had they graduate from college, will be able to apply for this

program. and if they qualify, if their income is low enough, their payments will be capped at 10% of their income. so they won't have to choose between paying their rent and paying their loans. >> and that's something that's going to put money hopefully back into the economy. that's the point. carmen wong ulrich is the author of "the real cost of living." the other part is consolidating federal loans. that options starts in january. that starts in january. the white house says about 5.8 million borrowers have a direct loan and a family educational loan having separate payments making it easier, frankly, to defau default. is this something borrowers couldn't have done in the first place? the white house is trying to put a spotlight on these programs. >> well, here is the thing. information wasn't out there. but the information as to the income based repayment program as to even the difference between subsidized and un subsidiz subsidized, it's not widely

enough known. b so a lot of this has existed. but in terms of how do you get the information out, the consumer protection bureau just launch add website and it has some tactics to compare financial aid pangs, what to do if you can't pay. but we've got the cost of college shooting up, the need for the degree shooting up. all this demand falls off the end because the jobs aren't there and wages have gone so far down. so something is going to have to get -- >> we don't address in any of this the rising cost of college. >> right. >> this is about how to pay, kevin, for something that is still the rising cost of college. that's still a problem at its core. you have a lot of people asking me, christine, if i can take out my loans and after college they'll be frich, anyway. should i push my kid off on the market? >> more and more, you have to

have some kind of proven degree in order to have a fighting chance at a good job. so it's important for people to go to college. they need to be able to afford college. the average cost of a four-year versus just went up this year. this is the elephant in the room. but if the price of college keeps going up, this will be a huge problem. >> yeah. and it does keep going up. even a public university, tuition has quad rooul ruineled. that's supposed to be your middle way class out. if you have private loans, housing we form, housing

programs haven't worked the way they wanted. will student loan reform really work? >> here is the thing. it only helps if you're a college student or a recent college grad. what about the $1 trillion of student loan debt that already exists? we have a solid ten years where you say quadrupled these rates. look at what people make in a year. what are we going to do about this ten-year generation of people who have this $1 trillion in outstanding loans. you cannot discharge them in bankruptcy. >> is there an income-based option for kids right now? >> absolutely. you can check if you qualify for this program. and it's 15% of your discretionary energy. and don't forget, if you have in the public sector, you get your

loans forgiven after ten years. make sure you look into that. >> kevin and carmen, thank you so much. nice to see both of you. really important information from your student loans, your career, your budget, your retirement. if you can't speak money, you're los lost. my good friend, alley shell see and i will have you speaking it in no time. last night? [ male announcer ] progresso. you gotta taste this soup.

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many of the money questions we cover on this show every week, you can find on the panls of a new book i wrote with my friend, ali velshi. >> we wanted to talk to you about savings. i hate the part with money. but ali likes to make money with his mope. i'm the conservative one and you're the aggressive one. >> yeah. and it's not like i have something against saving. but if this were 1952 and you could put your money in the bank and get 15%, that's one thing. but people who are savers can't get anything for their money

right now. and you've got to do something to get prosperous. that's right. we know the economy isn't favoring savers. there's no question about that. the a lot of people need to have a discussion about what you want your money to do for you and how the more aggressive person in the couple can help you grow your money and the more cautious person in the couple can make sure you're not going to lose your money. >> there's a space in between. the idea of investing doesn't mean you're throwing it all out there and you're risking everything you have. and the idea of being cautious doesn't mean you go to your local bank and sign up for 0.2% in interest. there's a space in between us. most people live, i think, in between. >> i do, too. you need to rebalance your who 1 k, you need to pay, invest in your retirement before your kids' college. but there's a lot of different things where you can find common ground no matter what you think about money or how you feel about money and try and protect it. >> but we both agree on one

thing. if you're paying interest, if you're paying 15% or 20% or more on a credit card, forget the conversation about paying on investing. your absolute best investment is aggressively paying off that debt. then you have that conversation about what you're investing in. >> and we agree, too. you have to live below your means. you can grow that wealth first through saving it but then by investing it in different ways. but it's all in there on how to speak money because we speak money on television every day. but we speak money very differently with different accents. i think we hear things differently from one another. >> we are able to understand each other. >> that's the point of our book. it's called how to speak money. your personal investment style is a reflection of who you are. >> what our book tells you, by the way, is how to understand the language of money. it's a language you cannot afford not to know, particularly in this environment. the book comes out very soon, november 8th. but it's l already available on kindle