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News in November 2001

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    Trailer Home Sales Collapse As Repossessions Soar

    Hundreds of thousands of lower-income trailer-home owners face tough times ahead as the economy slows and the results of poor lending practices become evident.

    Trailers, also called manufactured homes, made up more than half of all new homes sold in 1997 and 1998. From 1991 to 1998, annual sales of the units more than doubled, from 174,000 to 374,000.

    But the wheels began coming off around the turn of the century, when it became clear that Green Tree Financial and other lenders had written hundreds of thousands of loans on terms that made it nearly impossible for the homeowners to meet their monthly payments. Tens of thousands have already defaulted and been evicted and it's expected that hundreds of thousands more will follow.

    Consumers who default on their loans not only lose their homes, they wind up with huge debts and ruined credit.

    The go-go years in manufactured homes were driven by loose accounting practices, inflated reports to investors and high-pressure sales tactics at the local level. Green Tree and other lenders began offering 30-year loans instead of the 15-year notes that had been standard in the business. The longer mortgage lowers the monthly payment slightly but more than doubles the cost of the loan.

    Many consumers who bought mobile homes looked only at the monthly payment and did not realize they were committing to a 30-year loan on a temporary structure, what accountants call a "wasting asset."

    Trailers are vehicles, after all, and they depreciate nearly as fast as cars and trucks, having practically no value after ten years, whereas traditional single-family homes nearly always appreciate, becoming more valuable as time goes by.

    With interest rates of 15 percent or more on 30-year loans, trailer home buyers wind up being "upside down," with a debt that far exceeds the value of their home. This makes it impossible for them to trade up to a largerr home, refinance or take out a second mortgage when their financial situation changes.

    Green Tree is now Conseco Finance, the lending arm of Conseco, a large financial services company headquartered in Indiana. Conseco now has serious problems of its own and is saddled with $26 billion in loans on trailer homes. It expects to take huge losses on the trailer loans and is also facing problems in its insurance division. Many Wall Street analysts are predicting the company will slide into bankruptcy later this year. Its stock is down 92 percent from its peak in 1998.

    The company says it is working with borrowers who run into trouble. But even so, it concedes that it will repossess one in five of the new trailer homes it finances, The New York Times reported. It expects a default rate of 50 percent on the loans it writes on repossessed homes.

    Meanwhile, sales have fallen back to 1990 levels. Only about 180,000 are expected to be sold this year. The resulting glut further erodes the resale value of existing units.

    Trailer Home Sales Collapse As Repossessions Soar...

    Poulan Pro, WEED EATER, Husqvarna and Jonsered Lawn Tractors Recalled

    Fuel Leak Hazard

    WASHINGTON, Nov. 16, 2001 -- WCI Outdoor Products is recalling about 35,000 lawn tractors to replace their 2-gallon fuel tanks. The tank in the lawn tractor can crack and leak fuel, posing a fire hazard.

    WCI has received 76 reports of the fuel tanks on these lawn tractors cracking. No injuries have been reported.

    The recall is being conducted in cooperation with the U.S. Consumer Product Safety Commission (CPSC).

    The recall involves lawn tractors sold under the brand names Poulan Pro, WEED EATER, Husqvarna and Jonsered. They have the manufacture ID number and serial date codes listed below, located under the tractor seat on the fender.

    MFG. ID Number
    SERIAL Date
    Service Repair Center
     Poulan Pro PR1742ST(A)(B)(C)(D)

     (800) 849-1297
     (800) 358-1097
     WEED EATER S165H42(A) (800) 849-1297
     Husqvarna YTH1542(A)(B)(C)
     (800) 438-7297
     Jonsered JNA1542(A)
     (877) 693-7729

    Department, home and hardware stores, including authorized dealerships of the brand names listed, sold the recalled tractors from November 2000 through September 2001 for between $1,000 and $2,000.

    Consumers should stop using these lawn tractors immediately and contact the appropriate service center listed above for a free repair. For more information, call WCI Outdoor Products Inc toll-free at (866) 284-8872 between 8:30 a.m. and 5:30 p.m. ET Monday through Friday.

    Poulan Pro, WEED EATER, Husqvarna and Jonsered Lawn Tractors Recalled...

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      Supreme Court Makes it Harder to Sue for ID Theft

      ID Theft Ruling

      November 14, 2001
      The Supreme Court has made it harder for victims of identity theft to recover damages from credit bureaus. The court ruled 9-0 that legal claims must be filed within two years of the time the mistake occurred, even if the victim doesn't learn of the error in that time.

      The case involved a lawsuit against TRW by a Southern California woman whose credit rating was stolen and used by a Las Vegas woman with a similar name.

      Justice Ruth Bader Ginsburg, writing for the court, said the language of the statute is quite clear and judges have no authority to ignore the intent of Congress, even if it seems more fair to do so.

      Consumer advocates decried the ruling, saying it gives the three big credit bureaus little incentive to be more diligent, and called on Congress to amend the law.

      "By limiting a consumer's right to sue credit bureaus, the court encourages an already mistake-ridden credit reporting system to keep up the bad work," said Ed Mierzwinski of US PIRG, a public interest research group.

      The high court ruling grew out of the case of Adelaide Andrews. In June 1993 she visited a doctor's office in Santa Monica and filled out a patient form that asked for her Social Security number and other information.

      The receptionist, Andrea Andrews, allegedly copied the number and took it with her when she moved to Las Vegas, where she used it to open accounts for herself. TRW did not notice the discrepancy in first name and birth date.

      Andrews discovered the error in 1995 when she applied to refinance her home. TRW eventually corrected her file but Andrews said the mistake caused her to pay a higher interest rate. She sued TRW in October 1996. The company argued her suit was filed too late, a position the Supreme Court upheld in its ruling.

      TRW has since sold its credit-reporting business to Experian. A company spokesman said the ruling illustrates the importance of consumers checking their credit records occasionally.

      Supreme Court Makes it Harder to Sue for ID Theft...

      Super FuelMAX Marketers Settle FTC Charges

      WASHINGTON, Nov. 9, 2001 -- The marketers of the Super FuelMAX automotive fuel-line magnet, advertised as providing dramatic fuel-saving and emissions-reducing benefits, have agreed to settle Federal Trade Commission charges that their claims were unsubstantiated.

      It's the latest in a series of cases involving unsubstantiated fuel economy and engine performance claims. The FTC previously halted allegedly deceptive advertising by the marketers of Dura Lube, Motor Up, Prolong, Valvoline, Slick 50, and STP engine treatments. Earlier this year, the agency sued Speedway Motorsports, Inc. and its Oil-Chem Research Corp. subsidiary to halt false and misleading advertising for zMax auto additives, including claims that zMax increases gas mileage by a minimum of 10 percent.

      The settlement would bar the Gadget Universe catalog and its CEO from misrepresenting the actual benefits or efficacy of any supposedly fuel-saving or emissions-reducing products for motor vehicles. It would also prohibit misrepresentations about testimonials, endorsements, tests, or research.

      According to the FTC complaint, Esrim Ve Sheva Holding Corp., doing business as Gadget Universe, and its CEO, Alexander Elnekaveh, advertised and sold Super FuelMAX through catalog sales and on their Internet site. Advertising for the device claimed, "Here's one the big oil companies don't want you to know about," "SAVE UP TO 27% ON GAS," and "The Super FuelMAX . . . clamps onto my fuel line, and two powerful neodymium conductors use the scientific principal of magnetic resonance to give me better fuel burn. A certified EPA laboratory reports an amazing 27% in increased mileage and 42% reduction in harmful pollutants." Graphics in the ads showed unruly fuel molecules lining up in straight columns and rows after passing through the Super FuelMAX.

      The marketers of the Super FuelMAX automotive fuel-line magnet have agreed to settle Federal Trade Commission charges that their claims were unsubstantiate...