Obama got sweetheart deal on home loan Update: Obama says it was competition

Barack Obama’s home loan has more questionable aspects than just the Tony Rezko connections, according to the Washington Post.  After ten years as a prominent Chicago politician and in his first year in the Senate, Obama got a $1.32 million loan below market rates without paying the normal extra fees — a rate which saved him $300 per month on his mortgage.  Obama managed to do this despite the extraordinarily large mortgage and his lack of history with the lender:

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.

Thus far, no evidence has arisen that the Obamas took advantage of a “Friends of Angelo” program, as Chris Dodd and Kent Conrad did with Countrywide.  However, the difference in rates — especially for such a large mortgage — gives the appearance of a political favor, at the very least.  Combined with the Tony Rezko’s financial involvement in the deal, at a time when Rezko had little income other than that from a shady Iraqi financier and fraudster, and it looks as though people in Chicago really wanted to see the Obamas move into that house.

Northern Trust has helped out Barack Obama in other ways, too.  According to the Post, their employees have donated $71,000 to Obama’s campaigns.   When Obama rejected public financing, were these donations the kind that he insisted represented the moral equivalent of the system he championed until he found that he could outraise and outspend his opponents?

Obama has spent plenty of time castigating credit lenders in this campaign for their capricious practices and bad management.  He has rung the populist bell, saying that ordinary Americans can’t get a break from lenders while the powerful play by different rules.  Now we know Obama has personal experience in that area, albeit on the other side of the equation than he implies with his rhetoric.

Update: Obama’s campaign has responded with the explanation that the newly-elected was so popular among lenders, they were competing for his business:

On The Washington Post story “Obama Got Discount Home Loan,” the campaign, through spokesman Ben LaBolt, tells The Bourbon Room that Barack Obama received a loan that “anyone with the Obamas’ financial profile could have gotten the same rate on that mortgage.”

LaBolt says the Obama family was flush with cash at the time they were loan shopping and that the bank in question, Northern Trust, sought their business by offering a lower mortgage rate and to respond to a competitive mortgage rate offered by another lender. LaBolt would not identify the lender “at this time.”

“There was a competitive offer from another bank and the Obamas had a substantial amount of cash to deposit in the bank,” LaBolt said. “Northern Trust made the loan for commercial reasons.”

Let’s assume this is true.  Doesn’t the basic lending rate also account for competition?  Northern Trust competes for every loan it gets; that’s the beauty of competition, which someone should explain to Maxine Waters and Maurice Hinchey.   More to the point, though, why were lenders lining up to give money at discount rates to the Obamas?  And who was this mysterious second lender that cut $300 a month from Northern Trust’s income stream?

And here’s another question: Can the lender identify (anonymously) any other borrower during the relevant time period that got the same favorable rate and, if so, what was the basis for setting the rate that low for the other borrower(s)?  Any other borrower, that is, who didn’t pay points or fees to get the lower rate, who didn’t have a big down payment, and who hadn’t been elected to public office?