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Obama Got Discount on Home Loan - Where's George?/Where's Willy? Discussion
(shocker ...
Taken from The Washington Post, dated July 2, 2008
http://www.washingtonpost.com/wp-dyn...l?hpid=topnews)
Obama Got Discount on Home Loan
Campaign Defends Lower Rate as Lender Competition for Business
By Joe Stephens
Washington Post Staff Writer
Wednesday, July 2, 2008;
Page A03
Shortly after joining the U.S.
Senate and while enjoying a surge in income, Barack Obama bought a $1.65 million restored Georgian mansion in an upscale Chicago neighborhood.
To finance the purchase, he secured a $1.32 million loan from Northern Trust in Illinois.
The freshman Democratic senator received a discount.
He locked in an interest rate of 5.625 percent on the 30-year fixed-rate mortgage, below the average for such loans at the time in Chicago.
The loan was unusually large, known in banker lingo as a "super super jumbo." Obama paid no origination fee or discount points, as some consumers do to reduce their interest rates.
Compared with the average terms offered at the time in Chicago, Obama's rate could have saved him more than $300 per month.
Obama spokesman Ben LaBolt said the rate was adjusted to account for a competing offer from another lender and other factors.
"The Obamas have since had as much as $3 million invested through Northern Trust," he said in a statement.
Modest adjustments in mortgage rates are common among financial institutions as they compete for business or develop relationships with wealthy families.
But amid a national housing crisis, news of discounts offered to Sens.
Christopher J. Dodd (D-Conn.), chairman of the banking committee, and Kent Conrad (D-N.D) by another lender, Countrywide Financial, has brought new scrutiny to the practice and has resulted in a preliminary Senate ethics committee inquiry into the Dodd and Conrad loans.
Within Obama's presidential campaign organization, former Fannie Mae chief executive James A.
Johnson resigned abruptly as head of the vice presidential search committee after his favorable Countrywide loan became public.
The Obama campaign called the rate "consistent with Northern Trust policies, and it reflected the base rate set for that period discounted to address the competition for the account and other opportunities, such as personal financial services, that the relationship would bring to Northern Trust."
When the Obamas secured the loan, their income had risen dramatically.
Obama assumed his Senate seat in January 2005, with an annual salary of $162,100.
That same month, Random House agreed to reissue an Obama memoir, for which it originally paid $40,000, as part of a $2.27 million deal that included two future nonfiction books and a children's book.
Around the same time, the University of Chicago Hospitals promoted Michelle Obama to a vice president and more than doubled her pay, to $317,000.
The couple wanted to step up from their $415,000 condo.
They chose a house with six bedrooms, four fireplaces, a four-car garage and 5 1/2 baths, including a double steam shower and a marble powder room.
It had a wine cellar, a music room, a library, a solarium, beveled glass doors and a granite-floored kitchen.
The Obamas had no prior relationship with Northern Trust when they applied for the loan.
They received an oral commitment on Feb.
4, 2005, and locked in the rate of 5.625 percent, the campaign said.
On that date, HSH data show, the average rate in Chicago for a 30-year fixed-rate jumbo loan with no points was about 5.94 percent.
Jumbo loans are for amounts up to $650,000, but the Obamas' $1.32 million loan was so large that few comparables are available.
Mortgage specialists say that many high-end buyers pay cash.
Obama's Republican opponent, Sen.
John McCain, has no mortgages on properties he owns with his wife, Cindy, who is a multimillionaire.
Unlike Countrywide, where leaked internal e-mails documented a special discount program for friends of chief executive Angelo Mozilo, Northern Trust says it has no formal program to provide discounts to public officials.
Loan officers may consider a borrower's occupation when establishing an interest rate, the bank said.
"A person's occupation and salary are two factors;
I would expect those are two things we would take into consideration," said Northern Trust Vice President John O'Connell.
"That would apply to anyone seeking to get a mortgage at Northern Trust." He added that the rates offered to Obama were "consistent with internal Northern Trust rates at that time."
"The bottom line is, this was a business proposition for us," he said.
"Our business model is to service and pursue successful individuals, families and institutions."
O'Connell referred additional questions to the campaign.
Since 1990, Northern Trust employees have donated more than $739,000 to federal campaigns, including $71,000 to Obama, according to the Center for Responsive Politics.
Obama's house purchase has been a source of controversy.
In 2006, the Chicago Tribune reported that on the day of the closing, the wife of Obama's longtime friend and fundraiser Antoin "Tony" Rezko closed on an adjoining lot that had been the estate's side yard.
The Obamas bought the house for $300,000 less than the asking price of $1.95 million, while Rezko's wife, Rita, bought the neighboring lot for the full asking price of $625,000.
Rita Rezko later sold a portion of the undeveloped lot to the Obamas, enlarging the senator's yard.
Tony Rezko already had been linked to a grand jury investigation involving public corruption.
Last month, he was convicted of 16 counts in an influence-peddling scheme that reached the highest levels of Illinois state government.
Driving the recent debate is concern that public officials, knowingly or unknowingly, may receive special treatment from lenders and that the discounts could constitute gifts that are prohibited by law.
"The real question is: Were congressmen getting unique treatment that others weren't getting?" associate law professor Adam J.
Levitin, a credit specialist at Georgetown University Law Center, said about the Countrywide loans.
"Do they do business like that for people who are not congressmen?
If they don't, that's a problem."
Under financial disclosure rules, members of Congress are not obliged to disclose debts owed to financial institutions for personal residences.
Names of lenders and rates paid on mortgages sometimes can be determined by scrutinizing property transaction records.
In March, in response to media questions, Obama posted on his campaign Web site records related to his house purchase.
Last week, during debate on a bill to help homeowners caught in the foreclosure crisis, some members of the Senate ethics committee proposed an amendment to require that lawmakers disclose their mortgage lenders and loan terms in annual financial forms starting next year.
In Obama's case, he received a lower rate than the average offered at the time in Chicago for similarly structured jumbo loans.
He secured his final mortgage commitment on June 8, 2005, and during that week, rates on similar loans for which information is available averaged 5.93 percent, according to HSH Associates, which surveys lenders.
Another survey firm, Bankrate.com, placed the average at 6 percent.
"It's certainly safe to say that this borrower did better than average," said Keith Gumbinger, an HSH vice president, noting that consumer rates vary widely.
"It's a good deal."
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Quote: : Mike "It's certainly safe to say that this borrower did better than average," [italics added] said Keith Gumbinger, an HSH vice president, noting that consumer rates vary widely.
"It's a good deal." Shocker indeed.
. . Obama's credit was better than average given the advance he had for his book Audacity of Hope.
That he got a better deal that the average schmuck is no surprise at all.
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Quote: : Mike (shocker ...
The freshman Democratic senator received a discount.
He locked in an interest rate of 5.625 percent on the 30-year fixed-rate mortgage, below the average for such loans at the time in Chicago.
The loan was unusually large, known in banker lingo as a "super super jumbo." Obama paid no origination fee or discount points, as some consumers do to reduce their interest rates.
Compared with the average terms offered at the time in Chicago, Obama's rate could have saved him more than $300 per month.
Obama spokesman Ben LaBolt said the rate was adjusted to account for a competing offer from another lender and other factors.
"The Obamas have since had as much as $3 million invested through Northern Trust," he said in a statement.
The Obamas had no prior relationship with Northern Trust when they applied for the loan.
They received an oral commitment on Feb.
4, 2005, and locked in the rate of 5.625 percent, the campaign said.
On that date, HSH data show, the average rate in Chicago for a 30-year fixed-rate jumbo loan with no points was about 5.94 percent.
Unlike Countrywide, where leaked internal e-mails documented a special discount program for friends of chief executive Angelo Mozilo, Northern Trust says it has no formal program to provide discounts to public officials.
Loan officers may consider a borrower's occupation when establishing an interest rate, the bank said.
"The bottom line is, this was a business proposition for us," he said.
"Our business model is to service and pursue successful individuals, families and institutions."
"The real question is: Were congressmen getting unique treatment that others weren't getting?" associate law professor Adam J.
Levitin, a credit specialist at Georgetown University Law Center, said about the Countrywide loans.
"Do they do business like that for people who are not congressmen?
If they don't, that's a problem."
In Obama's case, he received a lower rate than the average offered at the time in Chicago for similarly structured jumbo loans.
He secured his final mortgage commitment on June 8, 2005, and during that week, rates on similar loans for which information is available averaged 5.93 percent, according to HSH Associates, which surveys lenders.
Another survey firm, Bankrate.com, placed the average at 6 percent.
"It's certainly safe to say that this borrower did better than average," said Keith Gumbinger, an HSH vice president, noting that consumer rates vary widely.
"It's a good deal."
Lower than average isn't quite as astounding as learning Obama received the absolute lowest rate for his loan, lower than anyone else has ever received.
Is there any evidence to support that Obama got a better offer than anyone else, or he simply got a lower than average rate?
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Quote: : Lower than average isn't quite as astounding as learning Obama received the absolute lowest rate for his loan, lower than anyone else has ever received.
Is there any evidence to support that Obama got a better offer than anyone else, or he simply got a lower than average rate?
Your 1st sentence seems to conflict with the 2nd.
And if another competitive, much less lower, offer was even offered.
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I don't think so.
1st sentence:
Lower than average isn't quite as astounding as learning Obama received the absolute lowest rate for his loan, lower than anyone else has ever received.
The article claimed Obama received a lower than average rate of interest, which I don't find terribly newsworthy, unless we learn Obama received the absolute lowest rate of interest ever issued by that lending organization, a rate at which the lending organization would make no money or very little money over the term of the loan, or at a rate absolutely no other customer was offered.
We simply don't know how many other customers of that lending agency were offered lower interest rates, if any, or if Obama got the lowest rate of interest obtainable at the time.
2nd sentence:
Is there any evidence to support that Obama got a better offer than anyone else, or he simply got a lower than average rate?
Obviously, a lower than average rate is one better than average, or of course, even better than a higher than average rate of interest, but my question was to the effect, is there any evidence Obama was offered, and he accepted, the absolute lowest rate offered by that lending institution, more specifically, at a rate lower than any other customer has been offered, and again, especially if it was a rate so far below market, it had to be a special favor to him.
Or if his rate simply was below average, yet still higher than other more favored customers.
I don't see the conflict.
Quote: : Your 1st sentence seems to conflict with the 2nd.
And if another competitive, much less lower, offer was even offered.
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Quote: : Shocker indeed.
. . Obama's credit was better than average given the advance he had for his book Audacity of Hope.
That he got a better deal that the average schmuck is no surprise at all.
This is just how it works for Chicago Demo.
Machine politicans.
No shocker at all to Illinoins who have watched the Dailey Machine keep most to all of the IL tax $s in Chicago for 30 years.
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Quote: : Mike (shocker ...
Taken from The Washington Post, dated July 2, 2008
http://www.washingtonpost.com/wp-dyn...l?hpid=topnews)
Obama Got Discount on Home Loan
Campaign Defends Lower Rate as Lender Competition for Business
By Joe Stephens
Washington Post Staff Writer
Wednesday, July 2, 2008;
Page A03
Shortly after joining the U.S.
Senate and while enjoying a surge in income, Barack Obama bought a $1.65 million restored Georgian mansion in an upscale Chicago neighborhood.
To finance the purchase, he secured a $1.32 million loan from Northern Trust in Illinois.
The freshman Democratic senator received a discount.
He locked in an interest rate of 5.625 percent on the 30-year fixed-rate mortgage, below the average for such loans at the time in Chicago.
The loan was unusually large, known in banker lingo as a "super super jumbo." Obama paid no origination fee or discount points, as some consumers do to reduce their interest rates.
Compared with the average terms offered at the time in Chicago, Obama's rate could have saved him more than $300 per month.
Obama spokesman Ben LaBolt said the rate was adjusted to account for a competing offer from another lender and other factors.
"The Obamas have since had as much as $3 million invested through Northern Trust," he said in a statement.
Modest adjustments in mortgage rates are common among financial institutions as they compete for business or develop relationships with wealthy families.
But amid a national housing crisis, news of discounts offered to Sens.
Christopher J. Dodd (D-Conn.), chairman of the banking committee, and Kent Conrad (D-N.D) by another lender, Countrywide Financial, has brought new scrutiny to the practice and has resulted in a preliminary Senate ethics committee inquiry into the Dodd and Conrad loans.
Within Obama's presidential campaign organization, former Fannie Mae chief executive James A.
Johnson resigned abruptly as head of the vice presidential search committee after his favorable Countrywide loan became public.
The Obama campaign called the rate "consistent with Northern Trust policies, and it reflected the base rate set for that period discounted to address the competition for the account and other opportunities, such as personal financial services, that the relationship would bring to Northern Trust."
When the Obamas secured the loan, their income had risen dramatically.
Obama assumed his Senate seat in January 2005, with an annual salary of $162,100.
That same month, Random House agreed to reissue an Obama memoir, for which it originally paid $40,000, as part of a $2.27 million deal that included two future nonfiction books and a children's book.
Around the same time, the University of Chicago Hospitals promoted Michelle Obama to a vice president and more than doubled her pay, to $317,000.
The couple wanted to step up from their $415,000 condo.
They chose a house with six bedrooms, four fireplaces, a four-car garage and 5 1/2 baths, including a double steam shower and a marble powder room.
It had a wine cellar, a music room, a library, a solarium, beveled glass doors and a granite-floored kitchen.
The Obamas had no prior relationship with Northern Trust when they applied for the loan.
They received an oral commitment on Feb.
4, 2005, and locked in the rate of 5.625 percent, the campaign said.
On that date, HSH data show, the average rate in Chicago for a 30-year fixed-rate jumbo loan with no points was about 5.94 percent.
Jumbo loans are for amounts up to $650,000, but the Obamas' $1.32 million loan was so large that few comparables are available.
Mortgage specialists say that many high-end buyers pay cash.
Obama's Republican opponent, Sen.
John McCain, has no mortgages on properties he owns with his wife, Cindy, who is a multimillionaire.
Unlike Countrywide, where leaked internal e-mails documented a special discount program for friends of chief executive Angelo Mozilo, Northern Trust says it has no formal program to provide discounts to public officials.
Loan officers may consider a borrower's occupation when establishing an interest rate, the bank said.
"A person's occupation and salary are two factors;
I would expect those are two things we would take into consideration," said Northern Trust Vice President John O'Connell.
"That would apply to anyone seeking to get a mortgage at Northern Trust." He added that the rates offered to Obama were "consistent with internal Northern Trust rates at that time."
"The bottom line is, this was a business proposition for us," he said.
"Our business model is to service and pursue successful individuals, families and institutions."
O'Connell referred additional questions to the campaign.
Since 1990, Northern Trust employees have donated more than $739,000 to federal campaigns, including $71,000 to Obama, according to the Center for Responsive Politics.
Obama's house purchase has been a source of controversy.
In 2006, the Chicago Tribune reported that on the day of the closing, the wife of Obama's longtime friend and fundraiser Antoin "Tony" Rezko closed on an adjoining lot that had been the estate's side yard.
The Obamas bought the house for $300,000 less than the asking price of $1.95 million, while Rezko's wife, Rita, bought the neighboring lot for the full asking price of $625,000.
Rita Rezko later sold a portion of the undeveloped lot to the Obamas, enlarging the senator's yard.
Tony Rezko already had been linked to a grand jury investigation involving public corruption.
Last month, he was convicted of 16 counts in an influence-peddling scheme that reached the highest levels of Illinois state government.
Driving the recent debate is concern that public officials, knowingly or unknowingly, may receive special treatment from lenders and that the discounts could constitute gifts that are prohibited by law.
"The real question is: Were congressmen getting unique treatment that others weren't getting?" associate law professor Adam J.
Levitin, a credit specialist at Georgetown University Law Center, said about the Countrywide loans.
"Do they do business like that for people who are not congressmen?
If they don't, that's a problem."
Under financial disclosure rules, members of Congress are not obliged to disclose debts owed to financial institutions for personal residences.
Names of lenders and rates paid on mortgages sometimes can be determined by scrutinizing property transaction records.
In March, in response to media questions, Obama posted on his campaign Web site records related to his house purchase.
Last week, during debate on a bill to help homeowners caught in the foreclosure crisis, some members of the Senate ethics committee proposed an amendment to require that lawmakers disclose their mortgage lenders and loan terms in annual financial forms starting next year.
In Obama's case, he received a lower rate than the average offered at the time in Chicago for similarly structured jumbo loans.
He secured his final mortgage commitment on June 8, 2005, and during that week, rates on similar loans for which information is available averaged 5.93 percent, according to HSH Associates, which surveys lenders.
Another survey firm, Bankrate.com, placed the average at 6 percent.
"It's certainly safe to say that this borrower did better than average," said Keith Gumbinger, an HSH vice president, noting that consumer rates vary widely.
"It's a good deal." ...yawn.
Joe
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From fivethirtyeight.com:
"It took more than four months, but something finally beat out the Vicki Iseman story for its sheer chutzpah and utter irresponsibility.
The culprit is this piece from the Washington Post, which alleges that Barack Obama received a "discount" on his 30-year home mortgage when he purchased his house in Hyde Park in 2005.
Obama's mortgage rate was 5.625 percent;
The Washington Post cites databases stating that the average rate on comparable properties was 5.93 percent.
So Obama's rate was 30 basis points better than the average.
However, the amount of the loan and the nature of the property are not the only factors that determine a mortgage rate.
Another major consideration is the creditworthiness of the borrower.
According to current rate Quote: s from myFICO.com, a borrower with very good credit can expect a mortgage rate about 30 basis points better than someone with pretty good credit, and a borrower with excellent credit can expect about a 50 basis point discount.
Unless the Washington Post has access to Obama's FICO score -- and unless it has rented an apartment to him, it probably doesn't -- it is missing a pretty important piece of information on what Obama's mortgage rate ought to have been.
What was Obama's FICO score?
I don't know, but considering that...
* Obama had just gotten a $2.27 million book deal from Random House -- about $1 million more than the value of the mortgage.
* The Obamas each had exceptionally secure jobs that paid them a combined annual salary of about $500,000 per year.
* The Obamas had just sold their condo, on which they had realized a $137,500 profit.
* The Obamas were prominent public figures whose political futures depended in part on maintaining a reputation for responsibility and trustworthiness.
* The Obamas are known to be relatively thrifty and have no credit card debt but substantial savings.
...I would think that the Obamas were exceptionally creditworthy.
So indeed, Obama received a "discount" -- the same discount that any borrower in his position would have received."
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Quote: : From fivethirtyeight.com:
"It took more than four months, but something finally beat out the Vicki Iseman story for its sheer chutzpah and utter irresponsibility.
The culprit is this piece from the Washington Post, which alleges that Barack Obama received a "discount" on his 30-year home mortgage when he purchased his house in Hyde Park in 2005.
Obama's mortgage rate was 5.625 percent;
The Washington Post cites databases stating that the average rate on comparable properties was 5.93 percent.
So Obama's rate was 30 basis points better than the average.
However, the amount of the loan and the nature of the property are not the only factors that determine a mortgage rate.
Another major consideration is the creditworthiness of the borrower.
According to current rate Quote: s from myFICO.com, a borrower with very good credit can expect a mortgage rate about 30 basis points better than someone with pretty good credit, and a borrower with excellent credit can expect about a 50 basis point discount.
Unless the Washington Post has access to Obama's FICO score -- and unless it has rented an apartment to him, it probably doesn't -- it is missing a pretty important piece of information on what Obama's mortgage rate ought to have been.
What was Obama's FICO score?
I don't know, but considering that...
* Obama had just gotten a $2.27 million book deal from Random House -- about $1 million more than the value of the mortgage.
* The Obamas each had exceptionally secure jobs that paid them a combined annual salary of about $500,000 per year.
* The Obamas had just sold their condo, on which they had realized a $137,500 profit.
* The Obamas were prominent public figures whose political futures depended in part on maintaining a reputation for responsibility and trustworthiness.
* The Obamas are known to be relatively thrifty and have no credit card debt but substantial savings.
...I would think that the Obamas were exceptionally creditworthy.
So indeed, Obama received a "discount" -- the same discount that any borrower in his position would have received." Between a Republican Presidential candidate with a half-million-dollar balance on his credit card, and an Administration that has outspent any in history, I guess that Republicans now consider fiscal responsibility - and the perks associated with it - to be unethical.
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