Preliminary notes on the Obama mortgage; Obama’s “sweetheart deal” (Updated 8x)

This will be RW’s 29th post about Obama’s “Rezko” house. Two recent events have brought the mortgage of Sen. Barack Obama (D-Ill.) and his wife, Michelle Obama, who took theirs out with Northern Trust on their Hyde Park townhouse, back into the news. First, Countrywide mortgage lenders is being sued in Illinois by Attorney General Lisa Madigan. Second, The Politico asked all 100 Senators “about their home mortgages in the wake of the revelations that Senators Chris Dodd (D-Conn) and Kent Conrad (D-ND) received special treatment from their lenders. In Obama’s case, he stated that he did not receive any such favors.”

Finally, a retired Illinois state employee, writing under the pseudonym “Richard Henry Lee”, in a July 1, 2008, article at American Thinker, shed some light on the Obama’s mortgage itself:

According to the mortgage documents which his campaign released, the Obamas obtained a $1.32 million mortgage from Northern Trust. … The Obamas’ loan documents (warning: large file) show that they received a 30 year fixed rate loan at an interest rate of 5.625% with no points. This interest rate is seems to be in line with the going rates for a Jumbo mortgage which are typically about 0.25 to 0.5% higher than a smaller, conventional mortgage. Freddie Mac lists an average rate of 5.58% for June 2005 and 0.6 points. Obama paid no points and given the jumbo differential, his rate is better than the average. The first payment is given as $7,598.67 presumably due August 1, 2005 which is consistent with the loan terms.

The second mortgage, dated November 25, 2005, is also a loan from Northern Trust, for an amount not to exceed $250,000. This appears to be a credit line for whatever purpose. It could have been used to purchase a 10 foot portion of the adjoining lot from Rita Rezko for $104,500 on January 11, 2006. There is no interest rate given for this credit line and it may be a variable rate.

Another unanswered question was who paid Obama’s 2005 property taxes. On May 5, 2008, RW wrote:

Cook County Tax Assessors’ Office shows that Sen. Obama’s 2005 assessed taxes were, as we already know, $21,729.03, and for the “current year”, 2006, $22,162.47, which had been paid in March and December 2007. The taxes for both years had been paid; there were no open years, back taxes due, or any additional taxes or special assessments noted.

Additionally, William Miceli is clearly identified on this tax document as the assessee for Sen. Obama’s entire real estate holding. In the upper righthand corner of the page is the handwritten notation “Assessee is with Miner, Barnhill & Galland PC @ 14 W Erie”, which is the law firm’s address.

We now learn from Lee that the mortgage documents show that William Miceli “signed the real estate documents on behalf of the trust,” making him the trustee, which explains why the property tax documents were to be sent to him and not Northern Trust.

However, we still do not know who paid those 2005 property taxes.

Regarding the interest rate negotiated by the Obamas, Lee writes:

The Obama’s declared mortgage interest deductions on their tax returns of $32,418 for 2005, $60,449 for 2006, and $57,838 for 2007. But their Northern Trust loan at the terms stated would have generated interest payments of about $30,871 for 2005, $73,395 for 2006 and $72,368 for 2007. For 2005, there would have been additional interest payments for their Hyde Park Condo which they sold on April 29, 2005 so even the 2005 deducted amount is low.

Using the mortgage interest deducted for 2006 and 2007, one can estimate an effective interest rate of about 4.6 to 4.65%, far below the stated interest rate in their loan documents of 5.625%, assuming no prepayment of the loan. After the Obamas got their loan, interest rates were increasing. See http://www.freddiemac.com/pmms/pmms30.htm and click on the link in the article for 30 year fixed rate mortgages. So there were no declining rates to take advantage of.

The Obama’s might have refinanced with an Adjustable Rate Mortgage whose rates are lower, but the loan documents released by the Obama campaign did not include an ARM mortgage. See http://www.freddiemac.com/pmms/pmms5.htm for a five year adjustable rate. For June 2005, it was 5.06, but would be higher for a jumbo.

It is of course possible that the Obamas were able to pay down their mortgage loan. His books were selling and Michelle had nearly tripled her income from the University of Chicago Hospital when her husband was elected a United States Senator. So the Obamas may have chosen to apply some of the windfall toward paying down the mortgage. It would have required about $240,000 in paydown for the reported mortgage interest to equal 5.625%.on the reduced principle.

But this calculation ignores any possible interest payments on their quarter million dollar line of credit, something they should not have needed if they had spare cash to pay down their mortgage.

It seems inconceivable that the Obamas simply forgot to include all the interest. Another possibility is that they skipped some payments, but that too seems unlikely. Maybe his campaign can explain this discrepancy.

Oh, Mr. “Lee”, have you not yet learned that with the Obamas every question answered just leads to another hall of mirrors?

Updates:

#1: Joe Stephens, Obama Got Discount on Home Loan. Campaign Defends Lower Rate as Lender Competition for Business, Washington Post, July 2, 2008; also posted at CBS News.

#2: Ed Morrissey, Obama got sweetheart deal on home loan, Hot Air, July 2, 2008.

#3: John Ruberry, Washington Post: Obama got discount on mortgage for his mansion, Marathon Pundit, July 2, 2008.

#4: Ed Lasky, The Obamas’ mortgage (cont.), American Thinker, July 2, 2008: “It is absurd for the Obama campaign to justify this beneficial by disclosing a large amount of funds that Northern Trust now holds for the Obamas when these amounts were earned and deposited substantially after the mortgage was placed and when their then current income and [assets] did not justify such a ‘competitive rate’.”

#5: Frank James, Did Obama get sweetheart mortgage?, The Swamp/Chicago Tribune, July 2, 2008.

#6: SusanUnPC, Chicago Billionaire Industrialist on Board of Obama’s Mortgage Provider, No Quarter, July 2, 2008. See RW/RBO article for information about Lester Crown.

#7: Barack Obama’s Crown Dynasty Connection (also General Dynamics, Crown Dynasty & Obama, LA Indymedia), February 24, 2007.

#8: Bill Dupray, Obama Received Sweetheart Loan Deal and Campaign Contributions from Illinois Bank, Patriot Room, July 2, 2008.