In recent weeks we’ve seen some controversies, most notably surrounding Sens. Chris Dodd (D-Conn.) and Kent Conrad (D-N.D), in which certain politicians received dubious mortgage discounts, thanks to personal connections.
Based on the evidence, it looks like this is far more benign.
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.
The Washington Post clearly wants to characterize this as a serious story. It even adds a superfluous non sequitur, noting that the former Fannie Mae chief executive briefly served on Obama’s VP search committee in June, as if that has some relevance to the mortgage rate Obama received in 2005.
In this case, there’s less here than meets the eye. Nearly four years ago, Obama received a 30-year fixed rate of 5.625%. The average at the time was 5.93%. As such, it was a good deal, but not a sweetheart deal. Obama had received competing offers from another lender, and as a result, got a more competitive rate. As Oliver Willis, who used to work for a mortgage company, put it, “[T]he idea that the lender gives a few fractions of a percent to a borrower of a jumbo loan is about as common as breathing air.”
As controversies go, this is pretty thin. Obama got a legitimate mortgage, at a competitive rate. He didn’t try to conceal anything, and even posted the records related to his house purchase on his website.
The Post report added:
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.”
Given this, I’m a little surprised the Post even found this newsworthy enough to publish. There’s just nothing here.
As the Chicago Tribune’s Swamp blog concluded, “Obama’s political opponents will certainly try to make something out of this story. But contrary to the famous adage, not all smoke means there’s a fire.”