WashPost: Obama got discount on mortgage

The Washington Post reports that Democratic presidential candidate Barack Obama (pictured) received a discount on his home loan that saved him roughly $300 per month: "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."

More: "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 average terms offered at the time in Chicago, Obama's rate could have saved him more than $300 per month."

UPI leads with reaction from the Obama campaign: "Campaign officials and the financial institution involved say terms Sen. Barack Obama, D-Ill., received on his Chicago home mortgage were proper."

Andrew Sullivan blogs that the story is missing a key piece of information: Obama's FICO score. He quotes Nate Silver: "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 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."

News or not? You decide. Obviously I think it is. Financial information about candidates is news. How much money do they make? How much do they borrow? At what terms, and from whom? In a time of mortgage madness, what kind of mortgage do they carry? McCain's mortgage would be news too.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Associated Press

Comments

[Gene J]

Origination fees and discount points are seldom charged in the Chicago area. If the lenders try, you just ask to have it waived or go else where. Loans are very competitive around here.

I haven't paid either points or fees in the last 20 years and I am a nobody with a good FICO score.

[Another]

I do not see a problem here. Obama is probably an exceptionally good credit risk. At this much money financed, rates are negotiable for the right people.

I am not an Obama supporter, I just don’t see this as note worthy. Now if he were to default….

[manraygun]

Peter, where's your post on the McCains' unpaid property taxes? Gotta love the LA Times article headline "Cindy McCain catches up on La Jolla property tax". As if catching up were the story and not being in default. Go LA Times!

[chad]

The average rate was 5.93% and Obama got 5.625%. The thing about averages is, it's an average! Some people pay more and some people pay less based on their individual situation. He was buying a house with a $330,000 (20%) down payment. He had a book deal worth over $2m. He had $3m in assets at the bank that was giving him the mortgage. It's apparent to me that the bank saw him as a good credit risk and that he got a good rate.

Why aren't you blogging about the McCains not paying property taxes on their La Jolla home (one of seven that they own)? What about how one of McCain's key financial advisors, former Senator Phil Gramm, is partially responsible for the mortgage mess to begin with?

[tealeaf]

I'm not voting for Obama, but this is a distraction.

Let's talk issues.

[yours truly, Johnny Dollar]

Cover fire from the Obama Mamas.

[TakeFive]

"Why aren't you blogging about the McCains not paying property taxes on their La Jolla home..."

Uh, because it's not the same thing as taking a favor?

[whocares]

Variation about the average might explain this. But in the context of proven influence peddling with Chris Dodd and other Senators, its rash to sweep this under the rug. For President Obama has claimed for months he is all about change from Washington's bad ways. So he needs to address it. Especially given the 10's of thousands of people struggling with their own mortgage problems.

By the way, I have gotten breaks on my mortgages not just on points and fees but the all important interest rate. But only because I have banked substantial sums over a long time with the bank. Obama didn't do that yet he got a sweet deal. If he doesn't address this, the story will keep coming back, especially if the Senate turns out to have many more guilty of getting sweet deals from those they regulate.

[ARTHUR A ZIMMERMAN]

I would also be interested in the method of financing and the lendor for his purchase of the adjourning lot

[TomServo]

I can't imagine a less newsworthy story than this one.

Rich people with job secruity and public celebrity get discounted interest rates! Film at 11! And I'm far from an Obama fan...

[Rainman]

Why not blog about this story? It was published in a reputable newspaper and it involves the person who will probably be the next president of the United States. However, it seems like a real stretch. Obama got a slightly better rate because he was a better credit risk. That's capitalism. Is he supposed to take out a subprime loan just to make potential critics feel better?

[blr]

I'm sure he's generating $300 a minute at least in campaign donations, and while I realize that is not personal funding, how insignificant is $300 dollars a month when we're talking about somebody running for PRESIDENT OF THE UNITED STATES OF AMERICA.

[tew]

Enough of this crap. If there's not enough real news, just post less. What is the latest inside scoop on the back room bailout dealings in Washington? What are the frauds that are taking advantage of the confusion and misplaced compassion? How are local officials positioning themselves to take "community" bailout funds and distribute to cronies? This is the news we can't get from the mainstream press. This red meat about Obama is a distraction - typical junk food for the minds of the masses.

[Ace]

This blog is getting off topic lately. The name of the blog is LA Land. Let's get back to LA. I think we all know that gas prices are high and everyone in politics is a crook.

[John Player]

What a crock and a cop out. I have a high credit score too, but I didn't receive any special rates. My origination fees and points weren't waived either.

This guy is just what he appears. An elitest politician. He makes a few populist statements and every gushes over him. He is a fraud, and I pray that God will expose him for the hypocrit and fraud that he is.

[Alex Foley]

Chad,

Your point above is one of the best! Averages are poor indicators of significance. They’re a terrible way to tell whether or not a particular data point is out of the ordinary. That’s why statisticians never use an average alone to determine whether something is typical or not. HSH Associates (5.93%) and Bankrate.com (6.0%) were both quoted as sources for averages, but only a Vice President at HSH was given a chance to comment on whether or not the number was signficiantly lower:

“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.”

“A good deal”? What is the median? The range? Have they performed any statistical analysis on this? Unfortunately, I can’t get access to the same HSH numbers without paying for them. Timing is critically important here — the Obamas received a verbal commitment of their interest rate on February 4, 2005, according to the campaign, but did not receive the final commitment until June 6, 2005. Thanks to Google’s news archive, however, I was able to find three articles listing rates from February 2005: one from February 2, a second from February 9, and a third from February 23. From all three of these articles, we can see the mortgage rates in Chicago weekly from January 27 until February 23:

* January 27: 5.69%
* February 2: 5.74%
* February 9: 5.65%
* February 16: 5.68%
* February 23: 5.79%

Average mortgage rates for single-family homes … as compiled by bankrate.com. The rates are for 30-year, fixed-rate mortgages for 80 percent of the value of the house.

It should be noted that these numbers are most likely composites of all types of mortgages — jumbo mortgages, on average it seems, have higher rates than regular mortgages. But, this does call into question the fact that Mr. Obama’s mortgage was in any way out of the ordinary. In fact, it was right in-line with the ordinary.

[Doug W]

Of course it is news but it will be utterly ignored by an infatuated media. Obama can do no wrong as far as they are concerned. Look at how they've cut him a break on his relationship to that Chicago criminal Tony Rezko. This guy never drew a non-criminal breath but we're supposed to believe that all his dealings with Obama were of the honest sort. God, just how stupid can Americans get?

[john david]

Any reports so far about the 0% interest the McCain's are getting for their American Express Credit cards?
Balances were reported to be above $200,000.00.

How much money are they saving per month?
Any takers, Herr Viles?

[Pasadena'ed]

"Peter, where's your post on the McCains' unpaid property taxes? Gotta love the LA Times article headline "Cindy McCain catches up on La Jolla property tax". As if catching up were the story and not being in default. Go LA Times!"

Seriously. I've started to see what looks like bias as well the past few months. Way to ruin this blog, Peter.

[Ron]

My how the Obamites like to spin every time he gets caught not practicing what he preaches. The responses here are typical, blame the messenger, try to shift the focus to something McCain (or his wife) ostensibly did or simply write it off as no big deal.
The trouble is these responses don't answer the very real issues posed. Fact is the more we get to know Obama the more he seems just like another shrewd politician. Fact is he represents politics as usual.

[TakeFive]

Posted by: john david

"Any takers, Herr Viles?"
------
Godwin's Law (also known as Godwin's Rule of Nazi Analogies) is an adage formulated by Mike Godwin in 1990. The law states:

"As a Usenet discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches one."
-----
Is there any doubt Pete is wearing one of those digital brown shirts Al Gore warned us about, hidden under a snappy Dockers ensemble?

[Rich]

I'm not sure what your knowledge of mortgage interest rates or lock terms, but there is NO ONE on the face of the planet in residential lending that allows a borrower to "lock" a loan for over 360 days without paying an upfront fee. You can't use year old rates to justify rates a year later. Furthermore, at the time of this financing Northern Trust sold most of their JUMBO paper to Thornburg Financial---familiar with that name? It is one of those organizations that Sen. Dodd and his gang were supposed to be regulating.

The bottom line is that while Sen. Obama talks out of one side of his mouth about change he acts and behaves in an entirely different matter when it relates to his family and his dealings with people like Rezko.

However, I don't blame the guy. Why shouldn't have helped himself to the deal. No one seems to care so or takes a closer look at his dealings so he gets away with it. Give me that kind of deal. I would take it.

We have a governor in Illinois that ran under the same mantra.."to change politics as usual." I feel like I am watching a re-run...by the way although our Governor has not officially been indicted for anything everyone else around him has. I believe his administration is under investigation for dozens of alleged crimes.

Please wake up and take a closer look.

[bill i]

get a clue.... this guy is as opportunist as they come. Why don't you compare the loan to jumbo loans, not your standard 30 yr mortgage.

[Pioneer10]

Do people not understand basic math.

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.

5.94 was the average for a fixed rate jumbo. Considering the Chicago Real Estate Market at that time there was lots of people getting jumbo with all sorts of credit ratings. This doesn't saw what the average rate would be for example just taking away people with really good credit, bad credit, or average credit rating. This is a pretty shoddy article that really trying hard to pass muster.

In fact look at the second paragraph that I highlighted the rate they quote as "average" doesn't even apply to the super jumbo that Obama got as they didn't have enough to put together an average for the size of loan he got.

What's also wierd is they don't quite the average Northern Trust rate. NT is a bank for the wealthy and you'd think it would be noteworthy to know what rate they charge typically. Pathetic

[LK]

Non-news. He's rich, he's credit-worthy, he'll pay less. That's simple. Media needs to focus on real issues.